Execution Copy
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is
entered into as of the 22nd day of May, 1998 (the "Effective Date"), by and
between PENNCORP FINANCIAL GROUP, INC., a Delaware corporation (the "Company"),
and Xxxxx X. Xxxxxxxxx (the "Executive").
IN CONSIDERATION of the mutual covenants and agreements
hereinafter set forth, Company and Executive agree as follows:
1. Agreement Term.
The term of this Agreement shall be the period commencing on
the Effective Date and ending on the 21st day of May, 2000 (the "Agreement
Term"). Concurrently with the execution of this Agreement, the parties hereto
are entering into an Executive Retention Agreement attached hereto as Exhibit A
(the "Retention Agreement"). All capitalized terms that are used but not defined
herein shall have the respective meanings ascribed to such terms in the
Retention Agreement.
2. Employment.
(a) Employment by the Company. Executive agrees to be employed
by Company for the Agreement Term upon the terms and subject to the conditions
set forth in this Agreement. Throughout the Agreement Term, Executive shall
serve as Executive Vice President, Chief Administrative Officer and General
Counsel of Company and be responsible for the general management of the
administrative affairs of Company, and serve as a member of Company's Operating
Committee.
(b) Performance of Duties. Throughout the Agreement Term,
Executive shall faithfully and diligently perform Executive's duties in
conformity with the directions of the Executive Committee of the Board of
Directors of Company ("Board"), consistent with his position as an Executive
Vice President, Chief Administrative Officer and General Counsel of Company and
as a member of Company's Operating Committee.
(c) Place of Performance. During the Agreement
Term, Executive shall be based at Company's principal executive offices in
Bethesda, Maryland. Company shall not request or require Executive to relocate
his principal place of employment outside of an 18 mile radius of Bethesda,
Maryland.
3. Compensation and Benefits.
(a) Base Salary. Company agrees to pay to Executive a base
salary at the annual rate of $400,000, as increased from time to time by the
Board ("Base Salary"), payable in installments consistent with the Company's
payroll practices. For the remaining period of the Agreement Term beginning on
December 1, 1999 ("Remaining Term") the Base Salary shall be automatically
adjusted by multiplying the annual Base Salary in effect for the immediately
preceding month by a fraction, the numerator of which is the Consumer Price
Index for All Urban Consumers for the U.S. City Average published by the
Department of Labor ("CPI-U") as of November 30, 1999, and the denominator of
which is the CPI-U as of the end of the calendar month preceding the Effective
Date.
(b) Annual Incentive Award. Provided that Executive is still
employed by Company on the last day of each Bonus Period (as defined below), no
later than the April 15th following the end of each of the 1998 and 1999 Bonus
Periods and the 15th day after the end of the last
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Bonus Period, Company shall pay a cash bonus to Executive for such Bonus Period
equal to the Guaranteed Bonus, plus any Target Bonus and Supplemental Bonus,
that is payable for such Bonus Period (together, "Incentive Bonuses"); provided,
however, that all Incentive Bonus amounts for the last Bonus Period (which is
less than 12 full months) shall be multiplied by the Pro-Rata Factor (as defined
below). For purposes of this Section 3(b):
(i) the "Guaranteed Bonus" shall be $200,000;
(ii) the "Target Bonus" shall be $200,000,
and shall be payable if the performance criteria set forth
in Exhibit I are achieved; and
(iii) the "Supplemental Bonus" shall be
$200,000, and shall be payable if the performance criteria
set forth in Exhibit II are achieved.
At the beginning of the Remaining Term, the Incentive Bonus amounts set forth
above shall be automatically adjusted for the then current Bonus Period by
multiplying the Incentive Bonus amounts set forth above by a fraction, the
numerator of which is the CPI-U as of November 30, 1999, and the denominator of
which is the CPI-U as of the end of the calendar month preceding the Effective
Date.
A "Bonus Period" shall be each of the following periods: (i)
the full 1998 calendar year (which is also Company's fiscal year); (ii) the full
1999 calendar year; and (iii) the period beginning January 1, 2000 and ending on
the date of expiration of the Agreement Term.
The "Pro-Rata Factor" for the last Bonus Period (which is less
than 12 full months) shall mean a fraction, the numerator of which is the number
of calendar days in such Bonus Period, and the denominator of which is 365.
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(c) Long-Term Incentive Award. As soon as practicable after
the Effective Date, Company shall grant to Executive a phantom stock award
("Stock Award") that entitles Executive to receive, at the end of the Agreement
Term, an amount equal to the excess of (i) the Fair Market Value (as defined
below) of 450,000 shares of Common Stock of Company ("Stock") as of the Stock
Award Termination Date (as defined below), over (ii) the Fair Market Value of
the Stock as of the date of execution of this Agreement (as defined below). The
Stock Award shall be payable at the Stock Award Settlement Date (as defined
below) in cash or shares of Stock (subject to applicable tax withholding and,
only if the Stock Award is to be paid in shares of Stock, subject to stockholder
approval no later than the 1999 annual meeting of stockholders of Company), as
elected by Executive; provided, however, that the Stock Award shall be forfeited
if Executive has voluntarily terminated his employment with Company without Good
Reason, or Company has terminated Executive's employment with Company for Cause,
before the end of the Agreement Term.
The number of shares of Stock subject to the Stock Award shall
be adjusted appropriately to reflect each change (if any) in the outstanding
Stock by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, reorganization, stock split, reverse stock split, share
combination, share exchange, or any other change in capital structure of or by
the Company.
The "Stock Award Termination Date" shall mean the earliest of
(A) the last day of the Agreement Term, (B) the date of a Change in Control
after which shares of the Stock are or will be no longer traded on the New York
Stock Exchange (a "Trading-Ending Change in Control"), or (C) the date
immediately preceding the date, upon or after the termination of Executive's
employment under this Agreement other than by Company for Cause or by Executive
without Good Reason, on which Company receives written notice from
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Executive of final valuation of the Stock Award (the "Valuation Notice Date").
Fair Market Value" shall mean:
(i) "as of the date of execution of this Agreement,"
the price for a share of Stock paid by Securitas Capital, LLC and Risk
Capital Reinsurance in a pending private placement of Stock by Company
or if, for any reason, that placement is not consummated, the price
agreed upon by Company and Executive; and
(ii) on the last day of the Agreement Term or on the
Valuation Notice Date, the average of the closing prices of a share of
Stock, as reported on the New York Stock Exchange for the ten trading
days ending on the last day of the Agreement Term or on the Valuation
Notice Date, as the case may be (or if such day is not a trading day,
on the preceding trading day).
In the event of a Trading-Ending Change in Control, however, instead of the
definition in the preceding clause (ii), "Fair Market Value" shall mean the
highest per share consideration (as cash or, if not as cash, the cash or fair
market value thereof) received for a share of Stock in the Trading-Ending Change
in Control transaction.
The "Stock Award Settlement Date" means, as applicable, the
last day of the Agreement Term, the date of a Trading-Ending Change in Control,
or 15 days after the Valuation Notice Date.
(d) Expiration Payments and Benefits. At the expiration of the
Agreement Term (regardless of any then existing circumstance addressed by the
Retention Agreement that may be inconsistent herewith), if Executive has not
voluntarily terminated his employment with Company without
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Good Reason and Company has not terminated Executive's employment with Company
for Cause, Executive shall, in addition to the compensation provided elsewhere
in this Agreement, be entitled to the payments and benefits provided in Section
3.1 of the Retention Agreement, which shall be determined and paid as if
Executive's employment with Company had been terminated by Executive for Good
Reason or by Company without Cause, regardless of whether any such termination
has occurred ("Expiration Pay"); provided, however, that no Expiration Pay shall
be provided or payable hereunder if Executive has otherwise become entitled to
and has received (i.e., under Section 8(b) of this Agreement or the terms of the
Retention Agreement) the payments and benefits provided in Section 3.1 of the
Retention Agreement.
If Executive is still employed at the end of the Agreement
Term, or upon any termination of employment other than a termination by Company
for Cause or by Executive without Good Reason, the outstanding principal
balance, together with any accrued and unpaid interest thereon, that is owed to
Company by Executive under the three loans to Executive in the form of
Promissory Notes dated September 8, 1998, September 30, 1997 and March 5, 1998,
shall be forgiven and waived by Company, and Company shall deliver to Executive
the original Promissory Notes marked "paid" (or with another xxxx indicating
evidence of payment in full), and Executive shall receive an additional payment
from Company in an amount such that, after payment by Executive of all taxes
imposed upon Executive as a result of such loan forgiveness (and such additional
payment), Executive will retain a net after-tax benefit that is equal to the
amount of such loan forgiveness.
4. Employee Benefit Programs.
During the Agreement Term, but not after an earlier
termination of employment (except as stated in the Retention Agreement),
Executive shall be entitled to
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participate in all employee pension and welfare benefit plans and programs made
available to the senior-level executives of Company or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any plans that
supplement the above-listed types of plans or programs, whether funded or
unfunded.
5. Reimbursement of Business and Other Expenses.
Executive is authorized to incur reasonable travel and
business expenses that are consistent with his position and incurred in carrying
out his duties and responsibilities under this Agreement, and Company shall
promptly reimburse him for all such travel and business expenses incurred in
connection with carrying out the business of the Company, subject to reasonable
documentation in accordance with the reasonable policies of Company.
6. Perquisites.
During the Agreement Term, Executive shall be entitled to
participate in all of Company's executive fringe benefits in accordance with the
terms and conditions of such arrangements as are in effect from time to time for
the senior-level executives of Company. Executive is also entitled to
reimbursement from Company of up to $5,000 for each of calendar years 1998,
1999, and 2000 (without proration) for tax, financial planning, and other
professional services.
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7. Vacation.
Executive shall be entitled to 6 weeks' paid vacation each
calendar year, which vacation shall be earned on a pro-rata basis for each day
during the calendar year that Executive is employed by Company. In the event
that Executive does not use all of his vacation time during an applicable
calendar year, he shall be entitled to carry forward such unused vacation time;
provided, however, that only four weeks of unused vacation time (including all
previously carried forward unused vacation time) may be carried forward from any
one calendar year to the next calendar year. Company shall pay Executive any
earned and unused vacation at the end of the Agreement Term or, if earlier, upon
the termination of Executive's employment.
8. Termination of Employment. (a) Executive may terminate his
employment with Company for any (or no) reason, and any termination of
employment by Executive shall not be deemed a breach of this Agreement. Company
may also terminate Executive's employment with Company prior to the expiration
of the Agreement Term.
(b) If Executive terminates his employment with
Company for Good Reason, or if Company terminates Executive's employment with
Company without Cause, Executive shall be entitled to any payments and benefits
provided pursuant to the terms of the Retention Agreement in addition to (but
without duplication) any amounts to be paid or provided to Executive under the
terms of this Agreement. If Executive terminates his employment with Company
without Good Reason, or if Company terminates Executive's employment for Cause,
then Company shall pay to Executive, within 30 days of the date of such
termination, only (i) the Base Salary and any earned and unused vacation accrued
through the date of such termination, and (ii) any expenses that have not been
reimbursed in accordance with Section 5 herein.
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(c) In the event of any termination of employment under this
Section 8, Executive shall be under no obligation to seek other employment, and
there shall be no offset against amounts due to Executive under this Agreement
on account of any remuneration attributable to any subsequent employment
(including, without limitation, any self- employment) that he may obtain.
9. Confidentiality; Assignment of Rights.
(a) During the Agreement Term and thereafter, Executive shall
not disclose to anyone or make use of any trade secret or proprietary or
confidential information of Company, including such trade secret or proprietary
or confidential information of any customer or other entity to which Company
owes an obligation not to disclose such information, which he acquires during
the Agreement Term, including but not limited to records kept in the ordinary
course of business, except (i) as such disclosure or use may be required or
appropriate in connection with his work as an employee of Company or (ii) when
required to do so by a court of law, by any governmental agency or authority
having supervisory authority over the business of Company or by any governmental
agency or authority or administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information.
(b) Executive hereby sells, assigns and transfers to Company
all of his right, title and interest in and to all inventions, discoveries,
improvements and copyrightable subject matter (the "Rights") which during his
employment by Company are made or conceived by him, alone or with others and
which are within or arise out of any general field of Company's business or
arise out of any work he performs or information he receives regarding the
business of Company while employed by Company. During his employment by Company,
Executive shall fully disclose to Company as
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promptly as available all information known or possessed by him concerning the
rights referred to in the preceding sentence, and upon request by Company and
without any further remuneration in any form to him by Company, but at the
expense of Company, execute all applications for patents and for copyright
registration, assignments thereof and other instruments and do all things which
Company may deem necessary to vest and maintain in it the entire right, title
and interest in and to all such Rights.
10. Noncompetition; Nonsolicitation.
(a) Executive covenants and agrees that he shall not directly
or indirectly engage in a Competitive Activity (as defined below) while employed
by Company hereunder.
"Competitive Activity" shall mean any activity engaged in by
Executive, whether as an employee, consultant, principal, agent, officer,
director, partner or shareholder (except as a less than one percent shareholder
of a publicly traded company or a less than five percent shareholder of a
privately held company), which is competitive with Company. For this purpose, an
activity "which is competitive with Company" shall mean a business that is
primarily involved in the acquisition of life insurance companies.
(b) Executive covenants and agrees that he shall not directly
or indirectly solicit Company's or any of its subsidiaries' (i) employees during
the 18-month period following the date of the termination of his employment by
Company hereunder and (ii) agents, brokers and/or policyholders during the
Agreement Term.
(c) The parties acknowledge that in the event of a breach of
Sections 10(a) or (b) above, Company shall not have an adequate remedy at law.
Accordingly, in the event of any breach of Sections 10(a) or (b) above, Company
shall be entitled to such equitable and injunctive relief as may
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be available to restrain Executive and any business, firm, partnership,
individual, corporation or entity participating in the breach from the violation
of the provisions of Sections 10(a) or (b) above. Nothing in this Agreement
shall be construed as prohibiting Company from pursuing any other remedies
available at law or in equity for breach of Sections 10(a) or 10(b) above,
including the recovery of damages.
11. Indemnification.
(a) Company agrees that if Executive is or becomes a party, or
is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether brought by or in the right of the Company or otherwise
("Proceeding"), by reason of the fact that (whether before or after the
Effective Date) he is or was a director, officer or employee of Company or is or
was serving at the request of Company as a director, officer, member, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including (without limitation) service with respect to employee
benefit plans, whether or not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving as a director, officer,
member, employee or agent, Executive shall be indemnified and held harmless by
Company to the fullest extent legally permitted or authorized by Company's
certificate or articles of incorporation or bylaws (or other applicable
governing documents) or resolutions of the Board (or other applicable governing
body) or the stockholders of Company or, if greater, by the laws of the State of
Delaware or any other applicable state of organization or formation, against all
cost, expense, liability and loss (including, without limitation, attorneys'
fees, judgments, costs of appeal, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
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Executive in connection therewith, and such indemnification shall continue as to
Executive even if he has ceased to be a director, member, employee or agent of
Company or other entity and shall inure to the benefit of Executive's heirs,
executors and administrators. In this Section 11, (i) each reference to
"Company" (other than for the purpose of any notice) shall include, without
limitation, all entities that are subsidiaries and affiliates of Company, and
(ii) all obligations of Company shall be joint and several as to all entities
included in such definition of "Company." Company shall pay or provide such
indemnification to Executive in connection with a Proceeding within 60 days
after written request by Executive for that indemnification. During that 60-day
period, Executive shall have an opportunity to be heard and to present evidence
in connection with the consideration by the board of directors, independent
legal counsel, or stockholders, as the case may be, of any findings required by
applicable law in connection with that indemnification request. Company shall
also advance to Executive all reasonable costs and expenses incurred by him
(including, without limitation, all reasonable fees and costs of counsel
selected by Executive, and all other indemnifiable liabilities covered by this
paragraph (a)) in connection with a Proceeding within 30 days after written
request by Executive for such advance. Such request shall include an undertaking
by Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses. In the event Company does not properly indemnify or advance expenses
to Executive in accordance with the terms of this paragraph (a) (including,
without limitation, the time period set forth above), Executive shall be
entitled to bring an action or proceeding against Company in any state or
federal court in Xxxxxxxxxx County, Maryland, in accordance with Section 19
hereof, or before a panel of arbitrators in accordance with Section 20 hereof,
to enforce Company's indemnification or expense-advancement obligations, and (in
either case) Executive shall be
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reimbursed by Company for the reasonable costs and expenses (including, without
limitation, reasonable attorneys fees and costs) of any successful enforcement
of Company's indemnification or expense-advancement obligations.
(b) Neither the failure of Company (including, without
limitation, its board of directors, independent legal counsel or stockholders)
to have made any determination that indemnification of Executive is proper
because he has met the applicable standard of conduct, nor a determination by
Company (including, without limitation, its board of directors, independent
legal counsel or stockholders) that Executive has not met such applicable
standard of conduct, shall create a presumption that Executive has not met the
applicable standard of conduct or shall be a defense to any action or proceeding
to enforce Company's indemnification or expense-advancement obligations. Company
shall have the burden of proof in establishing that Executive has not met the
applicable standard of conduct. The termination of any Proceeding by judgment,
court order, settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Executive did not
meet the applicable standard of conduct. Where Executive is entitled to
indemnification under this Section 11 for a portion of the indemnifiable
liabilities described in paragraph (a) of this Section 11, but not for the total
amount of liabilities of that kind, Company shall nevertheless indemnify
Executive for such portion of the indemnifiable liabilities to which Executive
is entitled.
(c) Executive's rights provided in this Section 11 shall not
be exclusive of any other rights of indemnification or advancement of expenses
(or any similar rights) that Executive may have against Company or under any
liability insurance covering Executive.
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(d) Company agrees to continue and maintain one or more
directors' and officers' liability insurance policies that cover Executive (with
reputable and financially sound insurers) at a level that is commercially
reasonable (in light of Company's business and the risks of litigation or
claims) and not less than the level of coverage provided as of the Effective
Date, and otherwise to the fullest extent Company provides such coverage for any
of its other executive officers.
(e) Without limiting the generality of Section 17 hereof, the
rights of indemnity and advancement of expenses in favor of Executive in this
Section 11 shall continue and survive any expiration or termination of this
Agreement or Executive's ceasing to be a director, officer, or employee of
Company.
12. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors, heirs (in the case of Executive)
and permitted assigns. No rights or obligations of Company under this Agreement
may be assigned or transferred by Company (including, without limitation, by
merger, consolidation, or other operation of law) except that such rights or
obligations may be assigned or transferred pursuant to a merger or consolidation
in which Company is not the continuing or surviving entity, or the sale or
liquidation of all or substantially all of the assets of Company, to one or more
entities that have the financial and other ability to perform Company's
obligations under this Agreement; provided, however, that the assignee or
transferee is the successor to all or substantially all of the assets of Company
and such assignee or transferee assumes the liabilities, obligations and duties
of Company under this Agreement, either contractually or as a matter of law. No
rights or obligations of Executive under this Agreement may be assigned or
transferred by Executive other
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than his rights to compensation and benefits, which may be transferred only by
will or operation of law, except as provided in Section 18 below.
13. Representation.
Company represents and warrants that it is fully authorized
and empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. Executive represents that he knows of no
agreement between him and any other person, firm or organization that would be
violated by the performance of his obligations under this Agreement.
14. Entire Agreement.
This Agreement and the Retention Agreement contain the entire
understanding and agreement between the parties concerning the subject matter
hereof and supersede all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the parties with
respect thereto. Nothing in this Agreement impairs or otherwise adversely
affects any of Executive's rights to or under any stock option or restricted
stock agreements with Company (or any of its subsidiaries or affiliates) in
effect on the Effective Date.
15. Amendment or Waiver.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by Executive and an authorized
officer of Company (other than Executive). No waiver by either party of any
breach by the other party of any condition or provision contained in this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any
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waiver must be in writing and signed by Executive or an authorized officer of
Company (other than Executive), as the case may be.
16. Severability.
In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable
for any reason, in whole or in part, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect to the
fullest extent permitted by law.
17. Survivorship.
The respective rights and obligations of the parties hereunder
shall survive any termination of the Executive's employment or the expiration of
the Agreement Term to the extent necessary to the intended preservation of such
rights and obligations.
18. Beneficiaries/References.
Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death or
incompetence by giving Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
19. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Maryland without reference to
principles of conflict of laws.
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Jurisdiction and venue of any action or proceeding relating to this Agreement
shall be exclusively in state or federal courts in Xxxxxxxxxx County, Maryland.
20. Resolution of Disputes.
Any disputes arising under or in connection with this
Agreement (other than injunctive or equitable relief sought to enforce Sections
9 or 10 hereof, or any enforcement of Executive's rights under Section 11, which
may (if Executive so elects) be brought in any court having jurisdiction in
accordance with this Agreement) shall, at the election of Executive or Company,
be resolved by binding arbitration in accordance with the terms and procedures
provided in Section 5.1 of the Retention Agreement.
21. Notices.
Any notice given to a party shall be in writing and shall be
deemed to have been given when delivered personally or by courier, or upon
receipt if sent by certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the party concerned at the address indicated below
or to such changed address as such party may subsequently give such notice of:
If to Company: PennCorp Financial Group, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
If to Executive: Xxxxx X. Xxxxxxxxx
0 Xxxxxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
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22. Headings.
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
23. Counterparts.
This Agreement may be executed in two or more counterparts.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement on this 23rd day of July, 1998.
PENNCORP FINANCIAL GROUP, INC.
/s/Xxxxx Xxxxx
-------------------------------------
Name: Xxxxx Xxxxx
Title: Chairman, President and CEO
/s/Xxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxxx
