Exhibit 10.13.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made as of June 18, 1999, by
and among XL Capital Ltd ("AXL"), Dasher Acquisition Corp. ("ACQUISITION"), NAC
Re Corporation ("NAC RE") and NAC Reinsurance Corporation ("NAC") (collectively,
NAC Re and NAC shall be referred to as the "COMPANY" or the "EMPLOYER"), and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ("EXECUTIVE").
W I T N E S S E T H
WHEREAS, as of June 10, 1998, the Company and the Executive entered into
an employment agreement (the "AGREEMENT"); and
WHEREAS, XL, Acquisition and the Company have entered into an Agreement
and Plan of Merger (the "MERGER AGREEMENT"); and
WHEREAS, XL, Acquisition and the Company wish to have the Executive
continue his employment under the Agreement through the consummation of the
merger transactions contemplated by the Merger Agreement (such consummation date
hereafter referred to as the "CIC DATE") and thereafter, as modified in certain
respects, and the Executive wishes to continue such employment.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
parties hereto hereby agree to continue Executive's employment in accordance
with the terms of the Agreement, which continues in full force and effect, and
hereby amend and restate the Agreement in its entirety as follows effective as
of the CIC Date:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms shall have the following meanings when used in this
Agreement with initial capital letters:
(a) "ANNUAL INCENTIVE PLAN" shall mean: (i) prior to the CIC Date, the NAC
Re Corp. Amended and Restated Annual Incentive Plan ("NAC RE AIP") as referred
to in Exhibit 10.11 of the NAC Re Corp. 1997 Annual Report on Form 10-K ("FORM
10-K"); following the CIC Date and prior to February 28, 2002, either the NAC Re
AIP or the annual incentive plan maintained by XL for its senior executives ("XL
AIP"), as designated by the Executive prior to November 1 of each year; and
(iii) on or after February 28, 2002, the XL AIP.
-2-
(b) "BOARD" shall mean, prior to the CIC Date, the Board of Directors of
NAC Re Corp., and following the CIC Date, the Board of Directors of XL and the
Board of Directors of XL America, Inc.
(c) "CAUSE" shall mean Executive's willful breach of duty in the course of
his employment or Executive's habitual neglect of his employment duties in a
manner that materially impacts the business or reputation of Employer unless
such breach or neglect is of a nature that reasonably can be corrected and is
corrected within sixty (60) days following written notice to Executive in
respect thereof. For purposes of this Section 1(c), no act or failure to act on
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that his action or
omission was in the best interest of Employer. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to Executive and an opportunity for Executive,
together with Executive's counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, Executive was guilty of conduct set
forth above in this Section 1(c) and specifying the particulars thereof in
detail.
(d) "CHANGE IN CONTROL" shall mean, through the CIC Date, a change in
control of NAC Re Corp. A Change in Control of NAC Re Corp. shall be deemed to
have occurred on the CIC Date.
In the event XL has, as of the CIC Date, or thereafter enters into, with
any of its senior executives agreements with respect to the change in control of
XL which provide for greater benefits than due under Section 7(c) hereof in such
situation on a change in control of XL, a similar agreement shall be offered to
Executive to receive such amounts in lieu of the amounts due hereunder.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(f) "COMMON STOCK," prior to the CIC Date, shall mean the common stock,
ten cents (104) par value, of NAC Re Corp., and after the CIC Date, shall mean
the common stock, one cent ($.01) par value, of XL Capital Ltd.
(g) "COMPENSATION" shall mean the sum of (i) Executive's annual base
salary pursuant to Section 5(a) hereof and (ii) Executive's annual bonus at
target pursuant to Section 5(b) hereof.
(h) "COMPENSATION COMMITTEE" shall mean the Compensation Committee of the
Board.
-3-
(i) "DISABILITY" shall mean permanent and total disability as such term is
defined in the Employer's long term disability plan in effect on the Effective
Date. Any question as to the existence of Disability upon which Executive and
Employer cannot agree shall be determined by a qualified independent physician
selected by Executive (or, if Executive is unable to make such selection, such
selection shall be made by any adult member of Executive's immediate family or
Executive's legal representative), and approved by Employer, said approval not
to be unreasonably withheld. The determination of such physician made in writing
to Employer and to Executive shall be final and conclusive for all purposes of
this Agreement.
(j) "EFFECTIVE DATE" shall mean June 10, 1998. This Amendment and
Restatement of the Employment Agreement shall be effective as of the CIC Date.
(k) "FINAL AVERAGE COMPENSATION" shall mean Executive's highest average
annual Compensation earned during any consecutive thirty-six (36) complete
months (or lesser actual period of receiving Compensation) during the period of
sixty (60) complete months (or lesser actual period of receiving Compensation)
immediately preceding Executive's termination of employment with Employer.
(l) "GOOD REASON" shall mean, for all purposes other than with respect to
all restricted Common Stock which has been issued to Executive but is unvested
as of the CIC Date and all options to acquire Common Stock or stock appreciation
rights ("SARS") which have been granted to Executive but remain unvested as of
the CIC Date (the "EXECUTIVE EQUITY RIGHTS"), the occurrence, without (other
than with respect to (iv)) Executive's express written consent, of any of the
following circumstances:
(i) the assignment to Executive of any duties inconsistent with his
offices and status as of the Effective Date (or any offices and status to
which Executive has been promoted at the time), or a substantial
diminution in the nature or status of Executive' s responsibilities (other
than as the result of the Company no longer being a public company);
(ii) the failure of Employer to retain Executive as Chief Executive
Officer of NAC Re or in any other capacities set forth in Section 2 hereof
or a failure to maintain Executive as the most senior executive with
regard to the operations of XL, Employer and their affiliates in North
America with the powers, authorities and duties commensurate with such
positions, subject to Executive's obligations to report to the CEO of XL
(in his capacity as Executive Vice President of XL), the Board of
Employer, the Board of Directors of XL and the Board of Directors of XL
America, Inc.;
-4-
(iii) a reduction in Executive's annual base salary as in effect on
the Effective Date, on January 1, 1999, or as the same may be increased
from time to time;
(iv) an election by the Executive, on at least 30 days' written
notice given at any time after July 31, 2001, to terminate his employment
between September 1, 2001, and February 28, 2002 inclusive, for any reason
(or no reason);
(v) the relocation of the office in which Executive is located on
the Effective Date to a location more than forty-five (45) miles
therefrom;
(vi) a material reduction in the aggregate benefits and compensation
provided to Executive under employee pension and welfare benefit plans and
incentive compensation, stock option and stock ownership plans from that
which existed immediately prior to the CIC Date, or a failure to provide
cash and equity incentives at a level comparable to similarly situated
executives of XL;
(vii) the failure of Employer to obtain a satisfactory agreement
from any successor (other than any successor resulting from the
transactions contemplated by the Merger Agreement) to assume and agree to
perform this Agreement, as contemplated in Section 11 hereof;
(viii) termination of Executive's employment as a result of his
death or Disability prior to March 1, 2002;
(ix) any purported termination of Executive's employment by Employer
for Cause for which Executive is not given notice of such termination in
accordance with Section 1(c) hereof; for purposes of this Agreement, no
such purported termination shall be effective;
(x) any other material breach of this Agreement by Employer or XL,
including but not limited to any material breach of Section 2(b) hereof;
(xi) ▇▇▇▇▇ ▇'▇▇▇▇ ceasing to be Chief Executive Officer of XL, ▇▇▇▇▇
▇'▇▇▇▇ not being Chief Executive Officer of the parent entity in the group
of entities controlling, controlled by, or under common control with XL,
or Executive being required to report to anyone other than the Chief
Executive Officer of XL (in Executive's capacity as Executive Vice
President of XL), the Board of the Employer, the Board of Directors of XL
or the Board of Directors of XL America, Inc.;
(xii) the failure of either Employer or XL to make normal equity
grants to Executive for 1999 in accordance with past practices of NAC Re
and XL, as the case may be, based on Executive's level of position;
provided, however, that such
-5-
XL grant may be reduced by a number of shares equal to the product of (A)
the number of shares subject to the 1999 NAC Re grant (as converted to XL
options) multiplied by (B) a fraction, the numerator of which shall be the
number of days from the date of the 1999 XL grant through the first
anniversary of the 1999 NAC Re grant and the denominator of which shall be
365.
Notwithstanding anything in this Section 1(l) to the contrary, neither of
the following shall constitute "GOOD REASON": (A) any diminution of duties
resulting from the fact that NAC Re ceases to be a publicly traded, independent
reinsurance company as a result of the consummation of the transactions
contemplated by the Merger Agreement, and (B) any change in duties resulting
from failure to continue the Executive as Co-Chairman, or Chairman, of the
management committees specified in Section 2(d) of this Agreement if such
committees are discontinued, provided that he is offered similar titles and
responsibilities with the replacements (if any) therefor.
Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder. Executive may terminate his employment for Good Reason (other than
pursuant to paragraphs (ii), (iv) (v) or (viii), with regard to which the
remainder of this paragraph shall not apply) only if Executive shall provide the
Company with not less than sixty (60) days' written notice of intent to
terminate for Good Reason, which notice shall set forth in reasonable detail the
facts and circumstances claimed to provide the basis for Executive's termination
for Good Reason, and the Company shall not have cured or remedied its violation
within sixty (60) days following its receipt of such written notice. If within
sixty (60) days following the date on which such notice of termination is given,
Employer notifies Executive that a dispute exists concerning the grounds for
termination, the date of termination for determining the timing of any
obligation under this Agreement shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties or by
arbitration pursuant to Section 15 hereof; provided, further, that the date of
termination shall be extended by a dispute only if such notice of dispute is
given in good faith and Employer pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, Employer
will continue to pay Executive his full Compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, annual base
salary) and continue Executive as a participant in all other incentive
compensation, benefit and insurance plans in which Executive was participating
when the notice giving rise to the dispute was given, until the dispute is
finally resolved in accordance with this Section 1(1), unless resolution of such
dispute is unreasonably delayed by Executive. Amounts paid under this Section
1(1) are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement.
-6-
Notwithstanding the above, for all purposes relating to the Executive
Equity Rights (as such term is defined in this Section 1(l), the definition of
"GOOD REASON" shall not be amended as of the CIC Date but shall remain as
defined prior to this amendment and restatement, which definition is set forth
in Appendix "A" to this Amended and Restated Employment Agreement.
(m) "GRANT DATE" shall mean the date on which the Board or the
Compensation Committee approves the grant of a non-qualified option to purchase
Common Stock (or a stock appreciation right) or the award of restricted Common
Stock to Executive
(n) "LONG-TERM INCENTIVE PLAN" shall mean: (i) with respect to grants made
thereunder prior to the CIC Date, the NAC Re Corp. Long-Term Incentive Plan
("NAC RE LTIP") as referred to in Exhibit 10.12 to the Form 10-K; (ii) with
respect to grants made thereunder following the CIC Date and prior to February
28, 2002, either the NAC Re LTIP or the long-term incentive plan maintained by
XL for its senior executives ("XL LTIP"), as designated by Executive prior to
November 1 of each year; and (iii) with respect to grants made thereunder on or
after February 28, 2002, the XL LTIP.
(o) "TERM" shall mean the term provided in Section 4 hereof.
(p) "CIC DATE" shall mean the consummation date of the merger transactions
referred to in the Merger Agreement.
(q) "MATERIAL CAUSE" shall mean Executive's willful (as defined in Section
1(c)) actions or inactions intended to result in material damage to XL or the
Employer. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Material Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board
at a meeting of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with Executive's
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, Executive was guilty of conduct set forth above in this Section
1(q) and specifying the particulars thereof in detail.
(r) "MERGER AGREEMENT" shall mean the Agreement and Plan of Merger among
XL Capital Ltd ("XL"), NAC Re Acquisition Corp. ("ACQUISITION"), and NAC Re
Corporation ("NAC RE") dated as of February 15, 1999.
2. EMPLOYMENT; DUTIES.
(a) Commencing on the CIC Date, Executive shall be employed as the
Employer's, XL's and their affiliates' most senior executive with regard to
property and casualty
-7-
insurance and reinsurance operations in North America (subject to his
obligations to report to the CEO of XL (in his capacity as Executive Vice
President of XL), the Board of the Employer, the Board of XL and the Board of XL
America, Inc.), including but not limited to: (a) Chief Executive Officer,
President and Chairman of the Board of NAC Re, and (in his discretion) of its
principal operating subsidiaries; (b) Executive Vice President of XL; (c)
President and CEO of XL America, Inc.; and (d) Co-chairman of the XL Reinsurance
Executive Management Board and Chairman of the XL North American Insurance
Executive Management Board (with continuation in these chairmanships subject to
future changes in XL's business and management structures, provided he is given
similar titles and responsibilities with the replacements, if any, therefor.
(b) As CEO of XL America, Inc., Executive will have management and profit
and loss responsibility for all current and future North American property and
casualty insurance and reinsurance operations and related service businesses
except to the extent that all or part of such responsibility is allocated to
other executives of XL or its subsidiaries with the express written consent of
Executive. As CEO of XL America, Inc. and NAC Re, Executive will have full
management and supervisory responsibility for all current and future employees
of XL America, Inc. and NAC Re and NAC Re's principal operating subsidiaries,
except to the extent such responsibilities are reasonably delegated to others or
shared with individuals outside of NAC Re or XL America, Inc., respectively,
with the express written consent of Executive.
3. DIRECTORSHIPS. Executive has been appointed to, and shall continue to
serve on, the Boards of Directors of NAC Reinsurance Corporation, Greenwich
Insurance Company, and Indian Harbor Insurance Company. It is agreed that
Executive will be considered for membership on the XL Board of Directors if the
current practice of restricting membership to one member of management is
revised.
4. TERM. The term of this Agreement shall commence on the Effective Date
and shall continue through June 30, 2003, unless terminated earlier pursuant to
Section 7 hereof.
5. COMPENSATION AND BENEFITS DURING THE TERM.
(a) Base Salary: Executive's annual base salary shall be FIVE HUNDRED AND
FIFTEEN THOUSAND DOLLARS ($515,000.00), and shall be SIX HUNDRED AND TWENTY-FIVE
THOUSAND DOLLARS ($625,000), effective January 1, 1999, and shall be reviewed
annually for increase commencing March 2000 in conjunction with normal salary
administration.
(b) Annual Bonus Opportunity. During the Term, Executive shall participate
in the Annual Incentive Plan at the following levels of annual base salary
earned during
-8-
each such year based on corporate performance in accordance with the terms of
the Annual Incentive Plan and the determination of the Compensation Committee:
(i) NAC Re AIP: 45% (0-90% opportunity);
(ii) XL AIP: comparable to that of other senior
executives of comparable position at XL.
(c) Long-Term Bonus Opportunity: During the Term, Executive shall
participate in the Long-Term Incentive Plan at the following target levels of
annual base salary earned during the applicable performance period; provided,
however, that for any performance period in which Executive has not received
annual base salary during the entire period, annual base salary during any
partial year shall be annualized:
(i) NAC Re LTIP: prior to January 1, 1999 - 55% (0-110%
opportunity); effective with respect to
measurement periods ending after
January 1, 1999 - 60% (0-120%
opportunity);
(ii) XL LTIP: comparable to that of other senior
executives of comparable position at XL.
(d) Special Stock Option Grant:
(i) On or prior to the Effective Date, Executive shall be granted
stock appreciation rights ("SARS"), which will automatically convert into
non-qualified options on November 11, 1998, with respect to one hundred
and twenty five thousand (125,000) shares of Common Stock, twenty percent
(20%) of which shall vest on each of the five (5) anniversaries of the
Grant Date, provided that Executive is employed by Employer on those
dates. The exercise price of the foregoing SARs shall be the fair market
value of a share of Common Stock on the Grant Date.
(ii) Nothing herein shall have the effect of modifying or
superseding the terms of any SARs or stock option grants or restrictive
stock grants to which the Executive may be entitled pursuant to his prior
employment contract.
(iii) Options or SARs granted pursuant to this Agreement shall be
subject to the terms and conditions of the Company's stock option plans
and shall expire, unless exercised, ten (10) years following the Grant
Date.
-9-
(iv) Upon the consummation of the merger transactions contemplated
by the Merger Agreement, each outstanding stock option into which an SAR
granted under this section shall have been converted, and all other
outstanding SAR, stock option, or restricted stock grants then held by
Executive or to which he may then be entitled pursuant to a prior
employment contract, shall be deemed to constitute an option or other
equity grant with respect to common stock of XL Capital, Ltd upon the
terms set forth in Section 1.6 of the Merger Agreement.
To the extent necessary to cause the condition set forth in Section 6.1(g)
of the Merger Agreement to be satisfied, the Executive hereby waives the rights
he may have, if any, to receive a lump sum cash amount with respect to any
outstanding Stock Options.
(e) Annual Stock Option Grant: Executive shall be given the opportunity to
be granted additional options or SARs with respect to shares of Common Stock
with an underlying market value at the time of grant of 100-125% of Executive's
annual base salary at the time of grant in accordance with and commencing upon
Employer's next regular grant of options following the Effective Date; provided,
however, that nothing contained in this Section 5(f) shall confer upon Executive
any right to such additional options or SARs. Following the CIC Date, any
opportunity for a grant of options or other equity grants, including grants of
SARs and restricted stock, will be in respect of common stock of XL Capital Ltd,
in accordance with the terms set forth in Section 1.6 of the Merger Agreement
and the relevant plans and policies of XL applicable to senior executives of XL
at a level comparable to Executive; provided, however, that nothing contained in
this Section 5(e) shall confer upon Executive any right to such options or other
equity grants.
(f) Supplemental Retirement Benefit:
(i) If Executive's employment terminates with Employer and its
affiliates on or after his attaining age fifty (50), Executive shall be
paid a lifetime annual retirement benefit, commencing within thirty (30)
days following the date of such retirement, equal to fifty percent (50%)
of Executive's Final Average Compensation, reduced by benefits from any
defined benefit pension plans maintained by Employer or its affiliates and
any defined benefit pension plans maintained by any previous employers.
Any retirement benefit that is payable prior to age sixty (60) shall be
reduced by five percent (5%) per year for each year prior to age sixty
(60); e.g. at age fifty (50) the benefit would equal twenty five percent
(25%) of Executive's Final Average Compensation. The benefit will be paid
to Executive for his lifetime and, upon his death, fifty percent (50%) of
his benefit will be paid to his surviving spouse, if any, for her
lifetime. In the event of the Executive's death after age fifty (50) but
prior to retirement, a benefit shall be paid to the Executive's surviving
spouse, if any, for her lifetime
-10-
equal to the benefit which would have been payable to the spouse assuming
Executive had retired the day preceding the date of death and then died.
(ii) If Executive's employment terminates with Employer and its
affiliates during the term of this contract but prior to his attaining age
fifty (50), for the purpose of allowing Executive to vest in the
retirement benefit as set forth in (i) above, Employer or its affiliates
shall provide Executive with additional service credit, in addition to
actual service credit for purposes of determining the eligibility for the
retirement benefit in subsection (i), above, equal to four (4) years
service credit plus service credit equal to the greater of three (3) years
credit or credit for the balance of the contract term. In the event of
Executive's death during the term of this contract but prior to attaining
age fifty (50), a benefit shall be paid to the Executive's surviving
spouse, if any, assuming the Executive had terminated employment the day
preceding the date of his death and then died.
(iii) (1) If Executive's employment terminates with Employer and its
affiliates due to his Disability, a supplemental disability benefit shall
be payable under the terms of this Agreement. The amount of such
supplemental disability benefit shall equal the difference between (x)
fifty percent (50%) of Executive's Final Average Compensation and (y) the
benefit received by Executive under the long term disability plan of
Employer or its affiliates. Such supplemental benefit shall be payable at
the same time and under the same terms as the long term disability plan
benefit. This supplemental disability benefit shall cease when benefits
under the long term disability plan cease.
(iv) (2) Upon cessation of disability benefits at age sixty-five
(65), the Executive will become eligible for a retirement benefit under
paragraph (i) of this Section 5 (f). In the event supplemental disability
benefits cease prior to age (65) and the Executive does not return to work
with the Company or its affiliates, for purposes of this Section 5 (f) the
Executive shall be considered to have terminated employment or died, as
appropriate, as of the date supplemental disability benefits ceased.
(v) The calculation of the benefits payable pursuant to this Section
5(f) shall be performed by the actuary for the defined benefit pension
plan(s) of the Employer or its affiliates, if any, otherwise by an
independent actuary selected by the Employer or its affiliates, whose
calculation shall be final and binding on all persons. The benefits
payable pursuant to this Section 5(f) shall be unfunded and the Executive
will not be considered to have received a taxable economic benefit prior
to the time at which benefits are actually payable hereunder. Accordingly,
the Employer or its affiliates shall not be required to segregate any of
its assets for the benefit of the Executive
-11-
and the Executive shall have only a contractual right against the Employer
or its affiliates for the benefits payable hereunder.
(g) Relocation: Employer has relocated Executive to New Canaan,
Connecticut in accordance with Employer's relocation policy. As such, Employer
has agreed to pay to Executive a mortgage subsidy of $20,260 per year through
December 2002. Employer shall pay to Executive, with respect to any payments in
connection with relocation that are subject to federal, state or local taxation,
an additional amount so that Executive shall incur no such taxes with respect to
such payments.
(h) Pension and Welfare Benefit Programs: Executive shall be entitled to
participate, on a basis and to the extent consistent with Executive's senior
executive position (and on a basis no less favorable than other senior
executives), in any employee pension or welfare benefit plan, employee stock
purchase plan and other so-called fringe benefit programs from time to time in
effect for the benefit of employees of Employer generally and/or for any group
of employees of which Executive is a member, provided that Executive meets the
eligibility requirements of any such plan or program. Executive shall continue
to receive short-term and long-term disability coverage, life insurance, medical
insurance and dental insurance reasonably comparable to that in effect as of the
Effective Date.
(i) Other Executive Benefits: (1) During the Term, Employer shall (i)
provide Executive with an automobile of a make and model commensurate with
Executive's position and shall pay all costs of insurance, maintenance and
operation for such automobile; (ii) provide Executive with reasonable financial
planning and tax services; and (iii) reimburse Executive for reasonable club
dues and initiation fees at a club of Executive's choice which is important to
the conduct of the business of Employer and which is used for business purposes.
(2) During the Term, Employer shall, subject to Executive's
reasonable cooperation in doing so, obtain and pay all costs of a life insurance
policy in the amount of $4,000,000 with respect to which Executive shall be the
insured and shall have the right to designate a beneficiary, and shall fully
gross up Executive for any income tax on the provision of such life insurance
and the gross-up payment.
(3) During the Term through February 28, 2002, Employer, through
insurance or out of its own assets, shall provide that Executive shall receive a
lump sum payment of $4,000,000 at such time as he shall incur a Disability for
the first time and shall fully gross up Executive for any income taxes on the
providing of such benefit (other than on the payment of the benefit) and the
gross-up payment.
(j) VACATION: During the Term, Executive shall be entitled to no less than
five (5) weeks paid vacation per year.
-12-
(k) SIGNING BONUS: Upon the execution of this Amended and Restated
Employment Agreement and consummation of the merger transaction contemplated by
the Merger Agreement, Executive shall be entitled to a special sign-on bonus in
the amount of $1,000,000, which shall be paid as soon as practicable thereafter.
6. OTHER ACTIVITIES. During the Term, Executive is expected to devote to
Employer's business his full business time and attention so as to assure full
and efficient performance of Executive's duties hereunder. During the Term,
Executive shall not, without Employer's prior written consent, engage or
participate, directly or indirectly, in any other business as a sole proprietor,
partner, employee, officer, shareholder, trustee, paid advisor or paid
consultant or accept appointment or election as a director or in any other
fiduciary or honorary capacity in any other business, venture or project;
provided, however, that nothing in this Agreement shall preclude Executive from
devoting nonbusiness time and efforts to charitable, social and civic matters to
the extent that such activities do not interfere with Executive's performance of
his duties under this Agreement and provided, further, however, that Executive
shall not be precluded from making investments as described in the proviso to
the first sentence of Section 8(a) hereof.
7. TERMINATION. Executive's employment under this Agreement may be
terminated by Employer at any time without prior notice, subject to the
requirement of prior notice if such termination is for Cause. Executive's
employment under this Agreement may be terminated by Executive upon not less
than two (2) months' prior notice, other than in the case of termination on
account of Executive's unforeseen health problems, Disability or Good Reason. If
Executive's employment under this Agreement is terminated, the following
provisions shall apply:
(a) Termination of Employment after February 28, 2002 by Employer for a
Reason other than Cause or by Executive for Good Reason: If, before the end of
the Term and after February 28, 2002, Employer terminates Executive's employment
for a reason other than Cause, or if Executive terminates employment on account
of Good Reason, Employer shall pay to Executive, within thirty (30) days
following the date of such termination, a lump sum amount equal to the sum of
(i) Executive's then annual base salary plus (ii) the amounts that would be paid
to Executive under the Annual Incentive Plan and the Long-Term Incentive Plan at
Executive's targets for the year or performance period, as the case may be,
during which such termination occurs, which sum is multiplied by three (3).
(b) Termination of Employment after February 28, 2002, by Employer for
Cause, by Executive other than for Good Reason, or on account of Death or
Disability, or at any time by Employer for Material Cause: If Executive's
employment is terminated (i) after February 28, 2002, by Employer for Cause, by
Executive other than for Good Reason, or on account of Executive's death or
Disability, or (ii) by Employer at any time for Material Cause,
-13-
Executive, or his estate in the case of his death, shall receive from Employer,
within thirty (30) days following the date of termination, a lump sum amount
equal to Executive's annual base salary which is accrued but unpaid as of the
date of termination and any amounts, if any, due under Sections 5(i)(2) and (3)
hereof.
(c) Termination of Employment as a result of Death or Disability, by
Employer other than for Cause or Material Cause, or by Executive for Good
Reason, in each case prior to March 1, 2002: (1) If, prior to March 1, 2002,
Executive's employment is terminated as a result of death or Disability, by
Employer other than for Material Cause, or by Executive for Good Reason,
Employer shall pay to Executive, within thirty (30) days following such
termination, a lump sum amount equal to the sum of (w) Executive's annual base
salary which is accrued but unpaid as of the date of termination, plus (x) the
portions, if any, of amounts under the Annual Incentive Plan and Long-Term
Incentive Plan that were earned by Executive but unpaid as of the date of
termination, which, in the event bonuses are discretionary, will be determined
in good faith, without regard to the termination, based on the level of bonuses
for comparable executives, plus (y) the greater of 2.99 and the number of years
including fractions thereof, remaining from the CIC Date until June 30, 2003,
times the sum of (I) Executive's then annual base salary plus (II) the amounts
that would be paid to Executive under the Annual Incentive Plan and the
Long-Term Incentive Plan at Executive's targets as in effect immediately prior
to the CIC Date, as increased until the date of payment of the amount described
above in this Section 7(c)(y), at an annual compounded rate of 8%, plus (z) any
amounts, if any, due under Sections 5(i)(2) and (3) hereof. In no event shall
the sums of (I) and (II) be less than $1,218,250.
(2) In addition, if, prior to March 1, 2002, Executive's employment
is terminated by Employer other than for Cause (but not as a result of death or
Disability) or by Executive for Good Reason, Executive shall vest in all issued
but unvested restricted Common Stock and granted but unvested options to acquire
Common Stock or stock appreciation rights then held by Executive. The parties
acknowledge that solely for purposes of this Section 7(c)(2) (but not any other
part of this Section 7), Executive's rights to terminate for Good Reason
pursuant to Section (l)(iv) of Appendix A as a result of the consummation of the
merger transactions contemplated by the Merger Agreement are not waived and
shall continue throughout the Term.
(d) Non-Exclusivity of Rights: Nothing in this Agreement shall prevent or
limit Executive's present or future participation in any benefit, bonus,
incentive, or other plan or program provided by Employer for which Executive may
qualify, nor shall this Agreement limit or otherwise affect rights that
Executive may have under any stock option or other agreements with Employer.
Amounts or benefits that are vested or that Executive is otherwise entitled to
receive under any plan or program of Employer at, or subsequent to, the date of
termination of Executive's employment shall be payable in accordance with such
plan or pro-
-14-
gram; provided, however, that any compensation and benefits received by
Executive pursuant to this Agreement shall be in lieu of (but, if necessary to
give effect to this provision, shall be reduced by) any and all compensation and
benefits that Executive is entitled to receive or may become entitled to receive
under any reduction in force or severance pay plan, program or practice that
Employer now has in effect or may hereafter put into effect and shall be applied
toward satisfying any severance pay and benefits required under federal or state
law to be paid or provided to Executive.
(e) Excise Tax Gross Up: If an excise tax under Section 4999 of the Code
or any comparable tax that is in excess of ordinary federal income taxes, as may
be in effect from time to time, is imposed on amounts paid to Executive
hereunder, or otherwise in connection with or relating to the transactions
contemplated by the Merger Agreement or any future transaction involving XL or
its affiliates, then Executive shall be reimbursed by Employer in an amount
equal to such excise tax and any further tax due on amounts reimbursed
hereunder, upon request, at th1e time Executive is required to make a payment
thereof.
8. NON-COMPETITION; CONFIDENTIAL INFORMATION.
(a) Executive agrees that during the Term, and if Executive's employment
is terminated by Executive other than for Good Reason, for a period of twelve
(12) months following the date of termination of this Agreement, Executive shall
not (i) engage anywhere within the geographical areas in which NAC Re Corp. and
its subsidiaries or affiliates (for purposes of this Section 8, the "NAC RE
GROUP") have conducted their business operations as of the Effective Date or at
any time prior to the date of termination of Executive's employment directly or
indirectly, alone or as a shareholder, principal, agent, partner, officer,
director, employee or consultant of any other organization, in the business
conducted by the NAC Re Group as a material component of its reinsurance
operations, in direct competition with the NAC Re Group; provided, however, that
it is acknowledged and agreed that this Section 8(a)(i) does not prohibit
Executive from engaging in the reinsurance business where the Executive is only
incidentally engaged in any activity which is a material component of the
operations of the NAC Re Group; and Executive further agrees that during the
Term, and if Executive's employment is terminated by Executive other than for
Good Reason, for a period of twenty-four (24) months following the date of
termination of this Agreement Executive shall not (ii) divert to any competitor
of the NAC Re Group any customer of the NAC Re Group; provided, however, that
Executive may invest in stocks, bonds, or other securities of any similar
business (but without otherwise participating in such similar business) if (A)
such stocks, bonds, or other securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the Exchange
Act; and (B) his investment does not exceed, in the case of any class of the
capital stock of any one issuer, one percent (1%) of the issued and outstanding
shares, or, in the case of other securities, one percent (1%) of the aggregate
principal amount thereof issued and outstanding. If at any time the provisions
of
-15-
this Section 8 shall be determined to be invalid or unenforceable, by reason of
being vague or unreasonable as to area, duration or scope of activity, this
Section 8 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 agrees that this Section 8, as so amended, shall
be valid and binding as though any invalid or unenforceable provision had not
been included herein. Nothing in this Section 8 shall prevent or restrict
Executive from engaging in any business or industry other than those designated
herein in any capacity.
(b) Executive also agrees that, during the Term, and if Executive's
employment is terminated by Executive other than for Good Reason, for a period
of twenty-four (24) months following the date of termination of this Agreement,
Executive shall not solicit any officer, employee or consultant of the NAC Re
Group to leave their employ for other employment;
(c) Executive shall not at any time after the date of termination of
employment reveal to anyone other than authorized representatives of the NAC Re
Group, or use for Executive's own benefit, any trade secrets, customer
information or other information that has been designated as confidential by the
NAC Re Group or is understood by Executive to be confidential without the
written authorization of the Board in each instance, unless such information is
or becomes available to the public or is otherwise public knowledge or in the
public domain for reasons other than Executive's acts or omissions.
(d) If Executive materially breaches any of the obligations under this
Section 8, Employer shall have no further compensation or benefit obligations
pursuant to this Agreement or pursuant to the Annual Incentive Plan or the
Long-Term Incentive Plan but shall remain obligated for compensation and
benefits for periods prior to such breach as provided in any other plans,
policies or practices then applicable to Executive in accordance with the terms
thereof. Executive hereby acknowledges that Employer's remedies at law for any
breach of Executive's obligations under this Section 8 would be inadequate, and
Executive and Employer agree that in addition to any other remedies provided for
herein or otherwise available at law, temporary and permanent injunctive relief
may be granted in any proceeding which may be properly brought by Employer to
enforce the provisions of this Section 8 without the necessity of proof of
actual damages.
9. NO MITIGATION OBLIGATION; NO SET-OFF OR COUNTERCLAIMS. In no event
shall Executive be obligated to seek other employment by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement.
Any amounts that may be earned by Executive other than from Employer shall not
reduce Employer's obligation to make any payments hereunder. The amounts payable
by Employer hereunder shall not be subject to any right of set-off that Employer
may assert against Executive.
-16-
10. TAXES. Employer may withhold from any amounts payable under this Agreement
all federal, state, city, or other taxes as Employer is required to withhold
pursuant to any law, regulation or ruling. Executive shall bear all expense of,
except as otherwise contemplated herein, and be solely responsible for, all
federal, state, local or foreign taxes due with respect to any payment received
hereunder.
11. SUCCESSORS AND BINDING AGREEMENT.
(a) Employer will require any successor, whether direct or indirect, by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of Employer, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that Employer is
required to perform it. Failure of Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to compensation from Employer in the
same amount and on the same terms as Executive would be entitled hereunder if
Executive had terminated his employment for Good Reason following a Change in
Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date on which
Executive's employment with Employer was terminated. As used in this Agreement
"Employer" shall include any successor to Employer's business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. Except as provided above, Employer may not assign this
Agreement. As of the CIC Date, XL agrees to guarantee payment of the obligations
of the Employer under this Agreement. Such guarantee shall be a guarantee of
payment, not collections. With respect to such guarantee, XL and Executive agree
to resolve any disputes as provided in Section 15 hereof and as part of the same
arbitration in which Executive and Employer participate.
(b) This Agreement shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive dies while
any amount is still payable hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or, if there is no such designee,
to Executive's estate.
12. NOTICES. For the purpose of this Agreement notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, provided that all notices to Employer
shall be directed to the attention of the Office of the General Counsel of NAC
Re Corp., or to such other address as either party may have furnished to the
other in
-17-
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt:
Employer:
NAC Re Corp.
Office of the General Counsel
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Executive:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
XL Capital Ltd or Dasher Acquisition Corp.:
XL Capital Ltd
Cumberland House
One Victoria Street
▇▇▇▇▇▇▇▇ ▇▇ 11 Bermuda
Attn: General Counsel
13. GOVERNING LAW. The validity, interpretation, construction, and
performance of this Agreement shall be governed by and construed in accordance
with the substantive laws of the State of New York, without giving effect to the
principles of conflict of laws of such State, to the extent not preempted by
applicable federal law.
14. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
15. ARBITRATION. Any dispute arising out of or in any way relating to this
Agreement or Executive's employment with Employer, including, without
limitation, any claims Executive may assert under the Age Discrimination in
Employment Act of 1967, as amended, shall be resolved by arbitration in
Connecticut through the Stamford, Connecticut office of the American Arbitration
Association in accordance with the Model Employment Arbitration Procedures of
the American Arbitration Association except to the extent such provisions are
modified as hereinafter provided. The arbitration proceeding shall be conducted
-18-
by three (3) arbitrators. Executive and Employer shall each designate one (1)
arbitrator, each of whom shall be an attorney admitted to practice in one or
more states who has ten (10) or more years of experience in employment matters,
and the arbitrators so selected shall thereafter designate a third arbitrator
(who shall be a member of the National Academy of Arbitrators) by mutual
agreement. The arbitrators shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this Agreement other
than a benefit specifically provided under or by virtue of this Agreement. The
decision of the arbitrators shall be final and binding on Employer and
Executive. Employer and Executive shall each pay their own legal fees associated
with arbitration proceedings hereunder, but the fees of the arbitrators and any
other costs associated with such arbitration proceedings shall be shared
equally, provided, however, that in connection with any arbitration arising out
of the failure of Employer to pay all or any part of the payments due hereunder
on account of a termination prior to January 1, 2002, Employer shall reimburse
Executive his legal fees and disbursements, as well as his share of the cost of
the arbitrators and the other arbitration costs, if Executive should prevail on
any material matter in the arbitration.
16. MERGER. This Agreement (coupled with other ancillary written
agreements to which Employer and Executive are a party such as stock option and
restricted stock agreements) expresses in full the understanding of Employer and
Executive, and all promises, representations, understandings, arrangements and
prior agreements with regard to Executive's employment by Employer are merged
herein.
17. WAIVER. Failure by either party hereto to insist upon strict adherence
to any one or more of the covenants or terms contained herein, on one or more
occasions, shall not be construed to be a waiver nor deprive such party of the
right to require strict compliance with the same thereafter.
18. AMENDMENTS. No amendments hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by all parties hereto.
19. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
20. INDEMNIFICATION. XL and the Employer shall indemnify and hold
Executive harmless to the fullest extent permitted by applicable law with regard
to any action or inaction taken by Executive as a director or officer of
Employer or XL or the affiliates of either following the CIC Date. XL and
Employer shall cover Executive under director and officer liability insurance to
the highest level either covers any other officer or director following the CIC
Date and both during and after the Term hereof, so long as Executive may be
subject to any liability for actions or inactions he took following the CIC Date
while a director or offi-
-19-
cer of Employer or XL or affiliates of either, but no longer than six (6) years
following the end of the Term except as to any claim made prior thereto. In
addition, each of XL and Employer agree that the Executive shall be entitled to
the rights, benefits and remedies afforded under Section 5.11 of the Merger
Agreement and may enforce the same against XL and the Employer.
-20-
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Employment Agreement to be executed as of the year and day first above
written, to be effective as of the CIC Date, and this Amended and Restated
Employment Agreement shall in no event take effect in the event of the
termination and abandonment of the Merger Agreement.
XL Capital Ltd NAC Re Corporation
By: By:
------------------------ ------------------------
Dasher Acquisition Corp. NAC Reinsurance Corporation
By: By:
------------------------ ------------------------
----------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
APPENDIX "A"
As stated in Section 1(l) of the Agreement, for all purposes with respect
to the Executive Equity Rights (as such term is defined in Section 1(l) of the
Agreement), the definition of "GOOD REASON" shall remain as set forth in Section
1(l) of the Agreement prior to the execution of this Amended and Restated
Employment Agreement, which definition is set forth below:
A(l) "GOOD REASON" shall mean the occurrence, without Executive's
express written consent, of any of the following circumstances unless, in
the case of paragraphs (i), (vi), (vii), (viii) or (ix), such
circumstances are fully corrected within sixty (60) days following
Executive's written notice to Employer in respect thereof:
A(i) the assignment to Executive of any duties inconsistent
with his offices and status as of the Effective Date (or any offices
and status to which Executive has been promoted at the time), or a
substantial diminution in the nature or status of Executive's
responsibilities;
A(ii) the failure of Employer to retain Executive as Chief
Executive Officer of NAC Re Corp. or to appoint Executive as
Chairman of the Board as set forth in sections 2 and 3 hereof;
A(iii) a reduction in Executive's annual base salary as in
effect on the Effective Date, on January 1, 1999 or as the same may
be increased from time to time;
A(iv) in the event of a Change in Control, any circumstances
in which Executive is not Chief Executive Officer of a publicly
traded, independent reinsurance company; for the purposes of this
provision, "independent reinsurance company" is deemed to mean that
a single shareholder or group, other than an investment advisor
holding shares for others, does not own 20% or more of the Company's
stock;
A(v) the relocation of the office in which Executive is
located on the Effective Date to a location more than forty-five
(45) miles therefrom;
A(vi) a material reduction in the aggregate benefits and
compensation provided to Executive under Employer's employee pension
and welfare benefit plans and incentive compensation, stock option
and stock ownership plans;
A-1
A(vii) the failure of Employer to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 11 hereof;
A(viii) the failure to Employer to offer to renew Executive's
employment contract, within eighteen (18) months preceding its
expiration, with terms which are at least as favorable as those set
forth herein; or
A(ix) any purported termination of Executive's employment by
Employer for Cause for which Executive is not given notice of such
termination in accordance with Section 1(c) hereof; for purposes of
this Agreement, no such purported termination shall be effective.
"EXECUTIVE'S continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance constituting Good Reason
hereunder. In the event of a termination of Executive's employment by Executive
for Good Reason, Executive shall provide Employer not less than sixty (60) days'
notice of such termination. Such notice shall indicate that such termination is
for Good Reason and shall set forth in reasonable detail the facts and
circumstances claimed to provide the basis for Executive's termination for Good
Reason. If within sixty (60) days following the date on which such notice of
termination is given, Employer notifies Executive that a dispute exists
concerning the grounds for termination, the date of termination for determining
the timing of any obligation under this Agreement shall be the date on which the
dispute is finally determined, either by mutual written agreement of the parties
or by arbitration pursuant to Section 15 hereof; provided, further, that the
date of termination shall be extended by a dispute only if such notice of
dispute is given in good faith and Employer pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, Employer will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, annual base salary) and continue Executive as a participant in all other
incentive compensation, benefit and insurance plans in which Executive was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with this Section 1(l), unless
resolution of such dispute is unreasonably delayed by Executive. Amounts paid
under this Section 1(l) are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement."
A-2
