Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of September 18,
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2000, is made and entered into by and between Scottish Reassurance, Inc., a
Delaware corporation (the "Company"), and Xxxxx X. Xxxxxxxx (the "Executive").
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WITNESSETH:
WHEREAS, the Executive has agreed to serve as President and Chief Operating
Officer of the Company and is expected to make major contributions to the short-
and long-term profitability, growth and financial strength of the Company; and
WHEREAS, the Company wishes to employ the Executive, and the Executive is
willing to be employed by the Company, both on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
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following terms have the following meanings when used in this Agreement
with initial capital letters:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
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(b) "Base Pay" means the Executive's annual base salary rate as in effect
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from time to time, as set forth in Section 5(a).
(c) "Board" means the Board of Directors of the Company.
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(d) "Cause" means that the Executive shall have committed any of the
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following:
(i) an intentional act of fraud, embezzlement or theft in connection
with his duties or in the course of his employment with the
Company or any Subsidiary;
(ii) intentional wrongful damage to any material property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary; or
(iv) conviction of a felony or other crime involving moral
turpitude;
and any such act shall have been materially harmful to the Company. For
purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed "intentional" if it was due primarily to an error
in judgment or negligence, but shall be deemed "intentional" only if done
or omitted to be done by the Executive not in good faith and without
reasonable belief that his action or omission was in the best interest of
the Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" hereunder unless and until there
shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the Board
then in office at a meeting of the Board called and held for such purpose,
after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to have
counsel present at such meeting), to be heard before the Board, finding
that, in the good faith opinion of the Board, the Executive had committed
an act constituting "Cause" as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any
such determination.
(e) "Change in Control" means the occurrence of any of the following
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events:
(i) the Company or Parent is merged or consolidated or reorganized
into or with another corporation or other legal person, and as
a result of such merger, consolidation or reorganization less
than a majority of the combined voting power of the then-
outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by
the holders of Ordinary Shares immediately prior to such
transaction;
(ii) the Company or Parent sells or otherwise transfers all or
substantially all of its assets to any other corporation or
other legal person, and less than a majority of the combined
voting power of the then outstanding securities of such
corporation or person immediately after such sale or transfer
is held in the aggregate by the holders of Ordinary Shares
immediately prior to such sale or transfer;
(iii) the Parent files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Act
disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a
change in control of the Parent has or may have occurred or
will or may occur in the future pursuant to any then existing
contract or transaction; or
(iv) if during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors
cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the
Company's shareholders, or in the case of the Parent, the
Parent's shareholders, of each Director first elected during
such period was approved by a vote of at least two-thirds of
the Directors then still in office who were Directors at the
beginning of any such period.
Notwithstanding the foregoing provisions of Paragraph (iii) above, a
"Change in Control" shall not be deemed to have occurred for purposes of
this Agreement: (i) solely because (A) the Parent, (B) a Subsidiary or (C)
any Parent-sponsored employee stock ownership
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plan or other employee benefit plan of the Parent either files or becomes
obligated to file a report or proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Act, disclosing
beneficial ownership by it of shares, or because the Parent reports that a
change of control of the Parent has or may have occurred or will or may
occur in the future by reason of such beneficial ownership; or (ii) solely
because of a change in control of any Subsidiary other than Scottish
Reassurance, Inc.
(f) "Competitive Activity" means the Executive's participation, without
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the written consent of an officer of the Company, in the management of
any business enterprise if such enterprise engages in substantial and
direct competition with the Company. "Competitive Activity" will not
include the mere ownership of securities in any such enterprise and
the exercise of rights appurtenant thereto.
(g) "Director" means a member of the Board.
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(h) "Employee Benefits" means the perquisites, benefits and service credit
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for benefits as provided under any and all employee retirement income
and welfare benefit policies, plans, programs or arrangements in which
senior officers of the Company are entitled to participate, including
without limitation any stock option, performance share, performance
unit, stock purchase, stock appreciation, savings, pension,
supplemental executive retirement, or other retirement income or
welfare benefit, deferred compensation, incentive compensation, group
or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self insured by the Company or a
Subsidiary), disability, salary continuation, expense reimbursement
and other employee benefit policies, plans, programs or arrangements
that may now exist or may be adopted hereafter by the Company or a
Subsidiary.
(i) "Incentive Pay" means an annual bonus, incentive or other payment of
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compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any year or other period pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement (whether or not
funded) of the Company or a Subsidiary, or any successor thereto.
(j) "Ordinary Shares" means the ordinary shares, par value $.01 per share,
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of the Company.
(k) "Parent" means Scottish Annuity & Life Holdings, Ltd.
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(l) "Retirement Plans" means the retirement income, supplemental executive
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retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service
credit for benefits for senior officers of the Company now existing or
hereafter adopted.
(m) "Subsidiary" means an entity in which the Company directly or
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indirectly beneficially owns 50% or more of the outstanding Voting
Stock.
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(n) "Term" means the period commencing as of the date of this Agreement
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and expiring on the second anniversary of this Agreement; provided,
however, that commencing on the second anniversary of the date of this
Agreement and each anniversary thereafter, the term of this Agreement
will automatically be extended for an additional one year unless, not
later than 90 days before any such anniversary date, the Company or
the Executive shall have given written notice that it or the
Executive, as the case may be, does not wish to have the Term
extended.
(o) "Termination Date" means the date on which the Executive's employment
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is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive
if the termination is pursuant to Section 6(b)).
(p) "Voting Stock" means securities entitled to vote generally in the
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election of directors.
2. Employment. The Company hereby agrees to employ the Executive, and the
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Executive hereby agrees to be employed with the Company for the Term, upon
the terms and conditions herein set forth.
3. Positions and Duties.
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(a) During the Term, the Executive will serve in the positions of
President and Chief Operating Officer of the Company, or such other
position as may be agreed upon by the Company and the Executive, and
will have such duties, functions, responsibilities and authority as
are (i) reasonably assigned to him by the Board, consistent with the
Executive's positions as the Company's President and Chief Operating
Officer or (ii) assigned to his office in the Company's articles of
association. The Executive will report directly to the Board.
(b) During the Term, the Executive will be the Company's full-time
employee and, except as may otherwise be approved in advance in
writing by the Board, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or
other disability, the Executive will devote substantially all of his
business time and attention to the performance of his duties to the
Company. Notwithstanding the foregoing, the Executive may (i) subject
to the approval of the Board, serve as a director of a company,
provided such service does not constitute a Competitive Activity, (ii)
serve as an officer, director or otherwise participate in purely
educational, welfare, social, religious and civic organizations, (iii)
serve as an officer, director or trustee of, or otherwise participate
in, any organizations and activities with respect to which the
Executive's participation was disclosed to the Company in writing
prior to the date hereof and (iv) manage personal and family
investments.
4. Place of Performance. In connection with his employment during the Term,
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unless otherwise agreed by the Executive, the Executive will be based at
the Company's
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principal executive offices in Charlotte, North Carolina. The Executive
will undertake normal business travel on behalf of the Company.
5. Compensation and Related Matters.
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(a) Annual Base Salary. During the Term, the Company will pay to the
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Executive an annual base salary of not less than US $250,000, which
annual base salary may be increased (but not decreased) from time to
time by the Board (or a duly authorized committee thereof) in its sole
discretion, payable at the times and in the manner consistent with the
Company's general policies regarding compensation of executive
employees. The Board may from time to time authorize such additional
compensation to the Executive, in cash or in property, as the Board
may determine in its sole discretion to be appropriate.
(b) Signing Bonus. The Company hereby agrees to pay the Executive a US
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$50,000 signing bonus upon execution of this Agreement.
(c) Relocation Expenses. The Company hereby agrees to pay for the
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reasonable and necessary relocation expenses of the Executive,
including, but not limited to, costs for moving of household goods.
(d) Annual Incentive Compensation. If the Board (or a duly authorized
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committee thereof) authorizes any cash incentive compensation or
approves any other management incentive program or arrangement, the
Executive will be eligible to participate in such plan, program or
arrangement under the general terms and conditions applicable to
executive and management employees. The annual cash incentive
compensation paid to the Executive will be paid in accordance with the
Company's annual incentive compensation plan. Nothing in this Section
5(e) will guarantee to the Executive any specific amount of incentive
compensation, or prevent the Board (or a duly authorized committee
thereof) from establishing performance goals and compensation targets
applicable only to the Executive. Presently however, the Company
expects the initial incentive annual bonus will range from 25% to 50%
of the Executive's Base Pay.
(e) Retirement Account. During the Term, the Company shall fund a
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retirement account for the Executive in an amount not less than 10% of
Executive's Base Pay for each year during the Term. The Company shall
provide for the Executive and his dependents medical and health care
benefits standard for executive officers of the Company.
(f) Executive Benefits. In addition to the compensation described in
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Sections 5(a) and 5(b), the Company will make available to the
Executive and his eligible dependents, subject to the terms and
conditions of the applicable plans, including without limitation the
eligibility rules, participation in all Company-sponsored employee
benefit plans including all employee retirement income and welfare
benefit policies, plans, programs or arrangements in which senior
executives of the Company participate, including any stock option,
stock purchase, stock
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appreciation, savings, pension, supplemental executive retirement or
other retirement income or welfare benefit, disability, salary
continuation, and any other deferred compensation, incentive
compensation, group and/or executive life, health, medical/hospital or
other insurance (whether funded by actual insurance or self-insured by
the Company), expense reimbursement or other employee benefit
policies, plans, programs or arrangements, including without
limitation financial counseling services or any equivalent successor
policies, plans, programs or arrangements that may now exist or be
adopted hereafter by the Company.
(g) Expenses. The Company will promptly reimburse the Executive for all
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business expenses the Executive incurs in order to perform his duties
to the Company under this Agreement in a manner commensurate with the
Executive's position and level of responsibility with the Company, and
in accordance with the Company's policy regarding substantiation of
expenses.
(h) Options. The Company shall grant Executive, upon the execution of
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this Agreement, an option ("Option") to purchase up to 75,000 Ordinary
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Shares of Scottish Annuity & Life Holdings, Ltd. ("Option Agreement"),
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such Option to be exercisable at a per share price equal to the Market
Value Per Share (as defined in the Scottish Annuity & Life Holdings,
Ltd.'s Second Amended and Restated 1998 Stock Option Plan) on the date
of grant and to be governed by the option agreement, a form of which
is attached hereto as Exhibit A.
(i) Executive shall accrue paid vacation at the rate of four weeks per
annum, in accordance with the Company's standard vacation policy.
6. Termination Following the Date of this Agreement.
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(a) The Executive's employment may be terminated by the Company during the
Term and the Executive shall be entitled to the severance compensation
provided by Section 7 unless such termination is the result of the
occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, the Executive; or
(iii) Cause.
If, during the Term, the Executive's employment is terminated by the Company or
any Subsidiary other than pursuant to Section 6(a)(i), 6(a)(ii) or 6(a)(iii),
the Executive will be entitled to the benefits provided by Section 7 hereof.
(b) The Executive may terminate employment with the Company during the
Term with the right to severance compensation as provided in Section 7
upon the occurrence of one or more of the following events (regardless
of whether any
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other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially
equivalent office or position, of or with the Company (or any
successor thereto by operation of law of or otherwise), which
the Executive held pursuant to, and upon the date of, this
Agreement;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties
attached to the position with the Company which the Executive
held pursuant to, and upon the date of, this Agreement, (B) a
reduction in the aggregate of the Executive's Base Pay received
from the Company and any Subsidiary or (C) the termination or
denial of the Executive's rights to Employee Benefits or a
reduction in the scope or value thereof, unless such reduction
is applicable to all employees of the Company on a pro rata
basis, any of which is not remedied by the Company within 30
calendar days after receipt by the Company of written notice
from the Executive of such change, reduction or termination, as
the case may be;
(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has
been made in good faith and in all events will be presumed to
have been made in good faith unless otherwise shown by the
Company by clear and convincing evidence) that a change in
circumstances has occurred following this Agreement, including,
without limitation, a change in the scope of the business or
other activities for which the Executive was responsible
immediately prior to the date of this Agreement, which has
rendered the Executive substantially unable to carry out, has
substantially hindered the Executive's performance of, or has
caused the Executive to suffer a substantial reduction in, any
of the authorities, powers, functions, responsibilities or
duties attached to the position held by the Executive pursuant
to, and upon the date of, this Agreement, which situation is
not remedied within 30 calendar days after written notice to
the Company from the Executive of such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or
substantially all of its business and/or assets, unless the
successor or successors (by liquidation, merger, consolidation,
reorganization, transfer or otherwise) to which all or
substantially all of its business and/or assets have been
transferred (by operation of law or otherwise) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 13(a);
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(v) A Change in Control has occurred and Executive, within one year
thereafter, gives the notice of termination of his employment
with the Company contemplated in this Section 6(b); or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any
successor thereto which is not remedied by the Company within
30 calendar days after receipt by the Company of written notice
from the Executive of such breach.
(c) If the Executive terminates this Agreement other than pursuant to
Section 6(b), the Executive shall reimburse to the Company a pro rata
share of the signing bonus and relocation expenses according to the
following schedule:
(i) If the Executive terminates this Agreement prior to the
expiration of 6 months, the Executive shall reimburse 75% of
the signing bonus and relocation expenses to the Company;
(ii) If the Executive terminates this Agreement prior to the
expiration of 12 months, the Executive shall reimburse 50% of
the signing bonus and relocation expenses to the Company; and
(iii) If the Executive terminates this Agreement prior to the
expiration of 18 months, the Executive shall reimburse 25% of
the signing bonus and relocation expenses to the Company.
(d) A termination by the Company pursuant to Section 6(a) or by the
Executive pursuant to Section 6(b) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company or any Subsidiary providing Employee
Benefits, which rights shall be governed by the terms thereof.
7. Severance Compensation.
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(a) If the Company shall terminate the Executive's employment during the
Term other than pursuant to Section 6(a)(i), 6(a)(ii) or 6(a)(iii), if
the Executive shall terminate his employment pursuant to Section 6(b),
or if the Company shall give Executive written notice not later than
90 days prior to the second anniversary or any subsequent anniversary
of this Agreement of nonrenewal of this Agreement, the Company shall
pay to the Executive the amount specified herein upon the later of (i)
five business days after the Termination Date or date of expiration of
this Agreement, as the case may be, (ii) the effective date of a
release executed by the Executive and the Company in the form attached
hereto as Exhibit B or (iii), at the Executive's option, a date later
than the dates specified in clauses (i) and (ii). In lieu of any
further payments to the Executive for periods subsequent to the
Termination Date or such expiration date, except in the event of a
termination by the Executive of his employment pursuant to Section
6(b)(v), the Company shall make a lump sum payment (the "Severance
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Payment"), in an amount equal to 200% of the sum of (i) an amount
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equal to the aggregate annual
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Base Pay (at the highest rate in effect for any year prior to the
Termination Date) and (ii) the aggregate Incentive Pay (based upon the
greatest amount of Incentive Pay paid or payable to the Executive for
any year prior to the Termination Date). If the Executive shall
terminate his employment pursuant to Section 6(b)(v), his Severance
Payment shall be an amount equal to 300% of the sum of the amounts
described in clauses (i) and (ii) of the immediately preceding
sentence of this Section 7(a).
(b) There shall be no right of set-off or counterclaim in respect of any
claim, debt or obligation against any payment to or benefit for the
Executive provided for in this Agreement.
(c) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment required to be made hereunder on
a timely basis, the Company shall pay interest on the amount thereof
at an annualized rate of interest equal to the then-applicable
interest rate prescribed by the Pension Benefit Guarantee Corporation
for benefit valuations in connection with non-multiemployer pension
plan terminations assuming the immediate commencement of benefit
payments.
8. Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary notwithstanding, in the
event that this Agreement shall become operative and it shall be
determined (as hereafter provided) that any payment (other than the
Gross-Up payments provided for in this Section 8) or distribution by
the Company or any of its affiliates to or for the benefit of the
Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or by
reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, performance share,
performance unit, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be
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subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") (or any successor
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provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, being hereafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to
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receive an additional payment or payments (collectively, a "Gross-Up
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Payment"); provided; however, that no Gross-Up Payment shall be made
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with respect to the Excise Tax, if any, attributable to (i) any
incentive stock option, as defined by Section 422 of the Code ("ISO")
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granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment
shall be in an amount such that, after payment by the Executive of all
taxes (including any interest or
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penalties imposed with respect to such taxes), including any Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payment.
(b) Subject to the provisions of Section 8(f), all determinations required
to be made under this Section 8, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether
a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, if any, shall be
made by a nationally recognized accounting firm (the "Accounting
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Firm") selected by the Executive in his sole discretion. The Executive
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shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive
within 30 calendar days after the Termination Date, if applicable, and
any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is
payable by the Executive, the Company shall pay the required Gross-Up
Payment to the Executive within five business days after receipt of
such determination and calculations with respect to any Payment to the
Executive. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that
the Executive has substantial authority not to report any Excise Tax
on his federal, state or local income or other tax return. As a result
of the uncertainty in the application of Section 4999 of the Code (or
any successor provision thereto) and the possibility of similar
uncertainty regarding applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the
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calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to Section
8(f) and the Executive thereafter is required to make a payment of any
Excise Tax, the Executive shall direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to
submit its determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any such
Underpayment shall be promptly paid by the Company to, or for the
benefit of, the Executive within five business days after receipt of
such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, record and documents in the
possession of the Company or the Executive, as the case may be,
reasonably requested by the Accounting Firm, and-otherwise cooperate
with the Accounting Firm in connection with the preparation and
issuance of the determinations and calculations contemplated by
Section 8(b). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and
the Executive.
(d) The federal, state and local income or other tax returns filed by the
Executive shall be prepared and filed on a consistent basis with the
determination of the
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Accounting Firm with respect to the Excise Tax payable by the
Executive. The Executive shall make proper payment of the amount of
any Excise Payment, and at the request of the Company, provide to the
Company true and correct copies (with any amendments) of his federal
income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with
the applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If prior to the
filing of the Executive's federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five business days pay to the Company the
amount of such reduction.
(e) The fees and expenses of Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Section 8(b) shall be borne by the Company. If such fees and expenses
are initially paid by the Executive, the Company shall reimburse the
Executive the full amount of such fees and expenses within five
business days after receipt from the Executive of a statement therefor
and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as practicable
but no later than 30 business days after the Executive actually
receives notice of such claim and the Executive shall further apprise
the Company of the nature of such claim and the date on which such
claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following
the date on which he gives such notice to the Company and (ii) the
date that any payment of amount with respect to such claim is due. If
the Company notified the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive
shall:
(i) provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by
the Company;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating
to such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 8(f), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 8(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and xxx for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to settle or contest as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(f), the Executive receives any refund
with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(f)) promptly
pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto).
If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(f), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such denial or refund prior to the expiration of 30
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of any
such advance shall offset, to the extent thereof, the amount of Gross-
Up Payment required to be paid by the Company to the Executive
pursuant to this Section 8.
9. No Mitigation Obligation. The Company hereby acknowledges that it will be
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difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date and that the
noncompetition covenant in Section 10 will further limit the employment
opportunities for the Executive. In addition, the Company acknowledges that
its severance pay plans applicable in general to its salaried employees do
not provide for mitigation, offset or reduction of any severance payment
received thereunder. Accordingly, the payment of the severance compensation
by the Company to
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the Executive in accordance with the terms of this Agreement is hereby
acknowledged by the Company to be reasonable, and the Executive will not be
required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
10. Competitive Activity; Confidentiality; Nonsolicitation.
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(a) The Executive acknowledges that during the course of his employment
with the Company the Executive will learn business information
valuable to the Company and will form substantial business
relationships with the Company's clients. To protect the Company's
legitimate business interests in preserving its valuable confidential
business information and client relationships, the Executive shall not
without the prior written consent of the Company, which consent shall
not be unreasonably withheld, (i) engage in any Competitive Activity
during the Term and (ii) if the Executive shall have received or shall
be receiving benefits under Section 7, engage in any Competitive
Activity for a period ending on the first anniversary of the
Termination Date or date of expiration of this Agreement, as the case
may be.
(b) During the Term, the Company agrees that it will disclose to Executive
its confidential or proprietary information (as defined in this
Section 10(b)) to the extent necessary for Executive to carry out his
obligations to the Company. The Executive hereby acknowledges the
Company has a legitimate business interest in protecting its
confidential and proprietary information and hereby covenants and
agrees that he will not without the prior written consent of the
Company, during the Term or thereafter (i) disclose to any person not
employed by the Company, or use in connection with engaging in
competition with the Company, any confidential or proprietary
information of the Company or (ii) remove, copy or retain in his
possession any Company files or records. For purposes of this
Agreement, the term "confidential or proprietary information" will
include all information of any nature and in any form that is owned by
the Company and that is not publicly available (other than by
Executive's breach of this Section 10(b)) or generally known to
persons engaged in businesses similar or related to those of the
Company. Confidential or proprietary information will include, without
limitation, the Company's financial matters, customers, employees,
industry contracts, strategic business plans, product development (or
other proprietary product data), marketing plans, and all other
secrets and all other information of a confidential or proprietary
nature. For purposes of the preceding two sentences, the term
"Company" will also include any Subsidiary (collectively, the
"Restricted Group"). The foregoing obligations imposed by this Section
----------------
10(b) will not apply (i) during the Term, in the course of the
business of and for the benefit of the Company, (ii) if such
confidential or proprietary information will have become, through no
fault of the Executive, generally known to the public or (iii) if the
Executive is required by law to make disclosure (after giving the
Company notice and an opportunity to contest such requirement).
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(c) The Executive hereby covenants and agrees that during the Term and for
one year thereafter Executive will not, without the prior written
consent of the Company, which consent shall not unreasonably be
withheld, on behalf of Executive or on behalf of any person, firm or
company, directly or indirectly, attempt to influence, persuade or
induce, or assist any other person in so persuading or inducing, any
employee of the Restricted Group to give up employment or a business
relationship with the Restricted Group.
(d) The Executive agrees that on or before the Termination Date the
Executive shall return all Company property, including without
limitation all credit, identification and similar cards, keys and
documents, books, records and office equipment. The Executive agrees
that he shall abide by, through the Termination Date, the Company's
policies and procedures for worldwide business conduct.
11. Legal Fees and Expenses. It is the intent of the Company that the
-----------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to
be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any
other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other
action or proceeding designed to deny, or to recover from, the Executive
the benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time to
time to retain counsel of Executive's choice at the expense of the Company
as hereafter provided, to advise and represent the Executive in connection
with any such interpretation, enforcement or defense, including without
limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship
with such counsel, and in that connection the Company and the Executive
agree that a confidential relationship shall exist between the Executive
and such counsel. Without respect to whether the Executive prevails, in
whole or in part, in connection with any of the foregoing, the Company will
pay and be solely financially responsible for any and all attorneys, and
related fees and expenses incurred by the Executive in connection with any
of the foregoing.
12. Withholding of Taxes. The Company may withhold from any amounts payable
--------------------
under this Agreement all federal, state, city or other taxes as the Company
is required to withhold pursuant to any applicable law, regulation or
ruling.
13. Successors and Binding Agreement.
--------------------------------
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all
or substantially all of
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the business or assets of the Company, by agreement in form and
substance reasonably satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to
the same extent the Company would be required to perform if no such
succession had taken place. This Agreement will be binding upon and
inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or
indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the "Company"
for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 13(a) and 13(b). Without limiting the
generality or effect of the foregoing, the Executive's right to
receive payments hereunder will not be assignable, transferable or
delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by Executive's will or by the laws
of descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section 13(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
14. Notices. For all purposes of this Agreement, all communications, including
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without limitation notices, consents, requests or approvals, required or
permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by, or three business days after
having been sent by an internationally recognized overnight courier service
such as FedEx or UPS, addressed to the Company (to the attention of the
Chief Executive Officer of the Company) at its principal executive office
and to the Executive at his principal residence, or to such other address
as any party may have furnished to the other in writing and in accordance
herewith, except that notices of changes of address shall be effective only
upon receipt.
15. Governing Law. The validity, interpretation, construction and performance
-------------
of this Agreement will be governed by and construed in accordance with the
substantive laws of the state of North Carolina, without giving effect to
the principles of conflict of laws.
16. Validity. If any provision of this Agreement or the application of any
--------
provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable
15
or otherwise illegal will be reformed to the extent (and only to the
extent) necessary to make it enforceable, valid or legal.
17. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance
with any condition or provision of this Agreement to be performed by such
other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to
the subject matter hereof have been made by either party which are not set
forth expressly in this Agreement. References to Sections are references to
Sections of this Agreement.
18. Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed to be an original but all of which together
will constitute one and the same agreement.
19. Entire Agreement. This Agreement sets forth the entire understanding
----------------
between the Company and the Executive, and all oral or written agreements
or representations, express or implied, with respect to the subject matter
of this Agreement are set forth in this Agreement. All prior employment
agreements, understandings and obligations (whether written, oral, express
or implied) between the Company and the Executive are, without further
action, terminated as of the date of this Agreement and are superseded by
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
/s/ Xxxxx X. Xxxxxxxx
----------------------------------------------
Xxxxx X. Xxxxxxxx
SCOTTISH REASSURANCE, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Director
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