Exhibit 10.15
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of January 1, 2001 (the "Effective Date"),
by and between ESG Re Limited, a Bermuda corporation (the "Corporation"), and
▇▇▇▇ C Head III ("Executive").
The Corporation, on behalf of itself and its shareholders, wishes to retain
Executive as an integral part of the management of the Corporation.
IT IS, THEREFORE, AGREED:
1. TERM OF AGREEMENT. This Agreement shall be effective as of the Effective
Date, and shall continue until December 31, 2001, unless earlier
terminated pursuant to Section 6 or the next sentences (the "Employment
Period"). The Employment Period may be terminated by either party after
January 1, 2001, upon thirty (30) days written notice to the other party.
Except as otherwise stated pursuant to this Employment Agreement, the
benefits stated in Sections 4C, 4D and 4E shall continue through December
31, 2001. Notwithstanding anything to the contrary, the Employment Period
may not be terminated during the pendency of any agreed upon or threatened
Change of Control. During the period of any agreed upon or threatened
Change of Control, the Employment Period shall be extended automatically
without further notice by either party for additional periods of one (1)
year each at the same Compensation stated in Sections 4A through 4G
inclusive. If (i) the Employment Agreement is terminated by the
Corporation and (ii) the Corporation wishes to retain the services of the
Executive in any capacity, conditional upon termination of the Employment
Agreement, the Corporation and the Executive shall enter into such
additional agreements for such services satisfactory to the Corporation
and the Executive.
2. EMPLOYMENT. The Corporation hereby agrees to continue Executive in its
employ for the Employment Period.
3. POSITION AND DUTIES.
A. As of the date hereof, Executive is employed, and during the
Employment Period Executive shall continue to be employed as Chief
Executive Officer of the Corporation, and reports and shall continue
to report to the Board of Directors of the Corporation (the
"Board"). Executive shall perform those duties and responsibilities
inherent in such position, including such duties as the Board shall
assign. Such duties shall be performed substantially outside of the
US. Executive agrees to devote such portion (which both Executive
and the Corporation agree shall be less than 100%) of his business
time, effort, attention, energies and skills to the business and
interests of the Corporation as are necessary for the operation of
the
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Corporation. During the Employment Period, Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be consistent with
those of the Chief Executive Officer of a publicly traded
corporation, and the Corporation agrees that no individual will
serve in a capacity or with a title superior to that of Executive,
and that Executive shall report directly and exclusively to the
Board.
B. Excluding periods of vacation, sick leave and Disability (as
hereinafter defined) to which Executive is entitled, Executive
agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Corporation and,
to the extent necessary to discharge the responsibilities assigned
to Executive hereunder, to use Executive's reasonable best efforts
to perform faithfully and efficiently such responsibilities.
Executive may pursue other business activities, in any capacity
whatsoever, as long as the pursuit of such activities does not
violate this Agreement or Executive's fiduciary obligations to the
Corporation. It is expressly understood and agreed that to the
extent that any such activities have been conducted by Executive
prior to a Change in Control (as hereinafter defined), the continued
conduct of such activities (or the conduct or activities similar in
nature and scope thereto) subsequent to the Change in Control shall
not thereafter be deemed to interfere with the performance of
Executive's responsibilities to the Corporation.
4. COMPENSATION.
A. BASE SALARY. During the Employment Period, as consideration for
services rendered, the Corporation shall pay to Executive a base
salary of $650,000 payable in twelve equal monthly instalments for
each year of the Employment Period, as adjusted as described in the
following sentence ("Base Salary"). During the Employment Period,
Base Salary shall be reviewed by the Board (or the Compensation
Committee thereof) at least annually and may be increased at the
discretion of the Board or the Compensation Committee. Any increase
in Base Salary shall not serve to limit or reduce any other
obligation to Executive under this Agreement. Executive's Base
Salary may not be reduced after any such increase.
B. Long Term Incentives.
(i) On the Effective Date, the Company will grant to the Executive
a Stock Option under the 1997 Stock Option Plan for 375,000
shares of Common stock, with an exercise price equal to the
fair market value on the date of grant. This award will vest
as follows: 50% on January 15, 2002, 25% on January 15, 2003
and 25% on January 15, 2004,
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regardless of continued employment status on each subsequent
vest date. The option will remain exercisable for a 10 year
period, regardless of continued employment status.
(ii) On the Effective Date, the Company will grant to the Executive
a Stock Option under the 1997 Stock Option Plan for 100,000
shares of Common stock, with an exercise price equal to the
fair market value on the date of grant. This award will be
100% vested upon grant and exercisable at any time, in whole
or in part, for a 10 year period, regardless of continued
employment status.
(iii) In addition, the Restricted Stock (as defined in the letter
agreement between the Corporation and the Executive dated as
of September 1, 1999) shall vest as to 87,500 shares of
Corporation common stock on each of April 1, 2001; April 1,
2002; and April 1, 2003, regardless of whether the Executive
is an officer or director of the Corporation on such date.
(iv) Upon a Change of Control of the Corporation, all restrictions
on any unvested Restricted Stock awards shall lapse
immediately and all unvested stock options shall vest
immediately.
C. BONUS AND INCENTIVE PROGRAMS. Executive shall receive an annual
bonus in respect of the fiscal year of the Corporation ending
December 31, 2001, in such amount as shall be determined by the
Board or by the Compensation Committee of the Board. In addition to
the Base Salary and bonus payable as hereinabove provided. Executive
shall be entitled to participate during the Employment Period in all
incentive programs applicable to other key executives of the
Corporation.
D. WELFARE BENEFIT AND RETIREMENT PLANS. During the Employment Period,
Executive and/or Executive's family, as the case may be, shall be
provided with and shall receive employee benefits including, but not
limited to, medical, dental, prescription, savings, pension and
retirement plans, which are generally offered to all senior
executives of the Corporation. The life and disability coverages
provided to Executive under the terms of the Employment Agreement
made as of September 1, 1999, between the parties will remain in
effect during the Employment Period of this Employment Agreement. In
lieu of such welfare benefit and retirement plan participation,
Executive may elect annually, at his option, instead to receive a
cash payment equal to the value of such benefits. Regardless of the
Base Salary, Executive actually receives in any year of the
Employment Period, his participation in any employee benefit plans
offered by the Corporation shall be based on a notional Base Salary
of $440,000 per year, (the "Notional Base Salary").
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Immediately prior to any Change of Control, any deferred
compensation arrangements due the Executive (including the amounts
payable in the trust agreement between ESG Re Ltd and the Bermuda
Trust Company dated July 17, 2000) shall be immediately vested and
paid to the Executive.
E. OFFICE AND SUPPORT STAFF. During the Employment Period, Executive
shall be entitled to an office and secretarial and other assistance
outside of the United States consistent with his position.
F. EXPENSES. During the Employment Period, Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred
by Executive in the performance of his duties hereunder.
G. VACATION. During the Employment Period, Executive shall be entitled
to the same annual vacation time provided to other senior executives
of the Corporation.
5. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall be deemed to have taken place if:
A. Individuals who, on the date hereof, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the date hereof, whose election or nomination for
election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of the Corporation in which such
person is named as a nominee for director, without written objection
to such nomination) shall be an Incumbent Director; PROVIDED,
HOWEVER, that no individual initially elected or nominated as a
director of the Corporation as a result of an actual or threatened
election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or
on behalf of any person other than the Board shall be deemed to be
an Incumbent Director;
B. Any "Person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) (an "Acquiring
Person") is or becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
of the Corporation representing 20% or more of the combined voting
power of the Corporation's then outstanding securities eligible to
vote for the election of the Board (the "Voting Securities");
PROVIDED, HOWEVER, that the event described in this paragraph (B)
shall not be deemed to be a Change in
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Control by virtue of any of the following acquisitions: (i) by the
Corporation or any subsidiary of the Corporation in which the
Corporation owns more than 50% of the combined voting power of such
entity (a "Subsidiary"), (ii) by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
Subsidiary, (iii) by any underwriter temporarily holding the
Corporation's Voting Securities pursuant to an offering of such
Voting Securities, (iv) pursuant to a Non-Qualifying Transaction (as
defined in paragraph C immediately below), or (v) pursuant to any
acquisition by Executive or any group of persons including Executive
(or any entity controlled by Executive or any group of Persons
including Executive); Notwithstanding the foregoing, if any Person
who would otherwise be an Acquiring Person has acquired from
Executive or from any group of Persons including Executive (or from
any entity controlled by the Executive or by any group of Persons
including Executive), after the date of this Agreement, Voting
Securities of the Corporation constituting 5% or more of the
combined voting power of the Corporation's then outstanding Voting
Securities, then no Change of Control shall be deemed to have
occurred under this Section 5B unless or until such Acquiring Person
is or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 50% or more of the
combined voting power of the Corporation's then outstanding Voting
Securities.
C. The consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the
Corporation or any of its Subsidiaries that requires the approval of
the Corporation's stockholders, whether for such transaction or the
issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business
Combination: (i) more than 50% of the total voting power of (A) the
corporation resulting from such Business Combination (the "Surviving
Corporation"), or (B) if applicable, the ultimate parent corporation
that directly or indirectly has beneficial ownership of 100% of the
voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by the
Corporation's Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is
represented by shares into which the Corporation's Voting Securities
were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same
proportion as the voting power of the Corporation's Voting
Securities among the holders thereof immediately prior to the
Business Combination, (ii) no Person (other than the employee
benefit plan (or related trust) sponsored or maintained by the
Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 20% or more of the
total voting power of the outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (iii) at least a
majority of the members of the board of
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directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation
of the Business Combination were Incumbent Directors at the time of
the Board's approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination
which satisfies all of the criteria specified in (i), (ii) and (iii)
above shall be deemed to be a "Non-Qualifying Transaction");
D. A sale of all or substantially all of the Corporation's assets;
E. The stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation; or
F. Such other events as the Board may designate.
Notwithstanding the foregoing, a Change of Control of the Company shall
not be deemed to occur solely because any person acquires beneficial
ownership of more than 20% of the Corporation's Voting Securities as a
result of the acquisition of the Corporation's Voting Securities by the
Corporation which reduces the number of the Corporation's Voting
Securities outstanding; PROVIDED, THAT if after such acquisition by the
Corporation such person becomes the beneficial owner of additional Voting
Securities of the Corporation that increases the percentage of outstanding
Voting Securities of the Corporation beneficially owned by such person, a
Change in Control of the Corporation shall then occur.
6. TERMINATION: This Agreement shall terminate under the following
circumstances:
A. DEATH OR DISABILITY. This Agreement and the Employment Period shall
terminate automatically upon Executive's death. The Corporation may
terminate this Agreement, after having established Executive's
Disability (pursuant to the definition of "Disability" set forth
below), by giving to Executive written notice of its intention to
terminate Executive's employment. In such a case, Executive's
employment with the Corporation shall terminate effective on the
180th day after receipt of such notice (the "Disability Effective
Date"), provided that, within 180 days after such receipt, Executive
shall not have returned to full performance of Executive's duties.
For purposes of this Agreement "Disability" means personal injury,
illness or other cause which, after the expiration of not less than
180 days after its commencement, renders Executive unable to perform
his duties with substantially the same level of quality as
immediately prior to such incident and such disability is determined
to be total and permanent by a physician selected by the Corporation
or its insurers and acceptable to Executive or Executive's legal
representative (such agreement as to acceptability not to be
withheld unreasonably).
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B. WITH OR WITHOUT CAUSE. The Corporation may terminate Executive's
employment with or without "Cause". The Employment Period shall
immediately end upon a termination by the Corporation with Cause.
For purposes of this Agreement, "Cause" means (i) the willful and
continued failure of Executive to perform substantially his duties
with the Corporation (other than any such failure resulting from
Executive's incapacity due to physical or mental illness or any such
failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Corporation or delivering a Notice
of Termination for Good Reason to the Corporation) after a written
demand for substantial performance is delivered to Executive by the
Board which specifically identifies the manner in which the Board
believes that Executive has not substantially performed Executive's
duties and Executive has failed to cure such failure to the
reasonable satisfaction of the Board within ninety (90) days of his
receipt of such demand, (ii) the willful engaging by Executive in
gross misconduct which is demonstrably and materially injurious to
the Corporation or its affiliates, or (iii) Executive's conviction
(which conviction is no longer appealable) of, or pleading guilty
to, a felony involving moral turpitude or the property of the
Corporation. For purpose of this paragraph B, no act or failure to
act by Executive shall be considered "willful" unless done or
omitted to be done by Executive in bad faith and without reasonable
belief that Executive's action or omission was in the best interests
of the Corporation or its affiliates. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by
the Board or based upon the advice of counsel for the Corporation
shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of the
Corporation. Cause shall not exist unless and until the Corporation
has delivered to Executive, along with the Notice of Termination for
Cause, a copy of a resolution duly adopted by three-quarters (3/4)
of the entire Board (excluding Executive if Executive is a Board
member) at a meeting of the Board called and held for such purpose
(after reasonable notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board an event set
forth in clauses (i) and (ii) above has occurred and specifying the
particulars thereof in detail. The Board must notify Executive of
any event constituting Cause within ninety (90) days following the
Board's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
C. WITH OR WITHOUT GOOD REASON. Executive's employment may be
terminated by Executive with or without Good Reason. The Employment
Period shall immediately end upon a termination by Executive with or
without Good Reason. For purposes of this Agreement, "Good Reason"
means:
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(i) (a) any change in the duties or responsibilities (including
reporting responsibilities) of Executive that is inconsistent
in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the
Corporation immediately prior to the Effective Date or at any
time thereafter (including any material and adverse diminution
of such duties or responsibilities), or (b) a material and
adverse change in Executive's titles or offices (including his
position as Chief Executive Officer) with the Corporation;
(ii) any failure by the Corporation to comply with any of the
provisions of Section 4 of this Agreement;
(iii) any purported termination by the Corporation of Executive's
employment otherwise than as permitted by this Agreement, it
being understood that any such purported termination shall not
be effective for any purpose of this Agreement; or
(iv) any failure by the Corporation to comply with and satisfy
Section 11C of this Agreement by causing any successor to the
Corporation to expressly assume and agree to perform this
Agreement with Executive, to the full extent set forth in said
Section 11C;
provided that a termination by Executive with Good Reason shall be
effective only if, within thirty (30) days following the delivery of a
Notice of Termination for Good Reason by Executive to the Corporation, the
Corporation has failed to cure the circumstances giving rise to Good
Reason to the reasonable satisfaction of Executive. For purposes of this
Section 6C, a good faith determination made by Executive that a "Good
Reason" for termination has occurred, and has not been adequately cured,
shall be conclusive and binding.
D. EXPIRATION OF THE EMPLOYMENT PERIOD. This Agreement shall terminate
upon the expiration of the Employment Period.
E. NOTICE OF TERMINATION. Any termination by the Corporation with or
without Cause or by Executive with or without Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12E of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of Executive's employment under the provision so indicated and (iii)
if the termination date is other than the date or receipt of such
notice, specifies the proposed termination date.
7. OBLIGATIONS OF THE CORPORATION UNDER TERMINATION.
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A. DEATH. If Executive's employment is terminated by reason of
Executive's death, this Agreement shall terminate without further
obligations to Executive's legal representatives, other than (i)
those death benefits provided by the Corporation to which Executive
is entitled at the date of Executive's death, and (ii) a pro-rata
Bonus for the Fiscal Year in which such death occurs equal to the
product of X * Y (such product referred to below as the "Pro-Rata
Bonus"), where:
X = the greater of (a) the largest Bonus paid to the Executive in
the two years preceding the date of termination, (b) the Bonus
which would have been paid to Executive in respect of the
calendar year in which termination occurs if the Corporation
attained its budgeted financial performance for such year, as
reasonably determined by the Compensation Committee of the
Board, and (c) $550,000 (the "Highest Bonus"); and
Y = the number of days elapsed in such year preceding the date of
termination divided by 365.
B. DISABILITY. If Executive's employment is terminated by reason of
Executive's Disability, this Agreement shall terminate on the
Disability Effective Date without further obligations to Executive,
other than (i) those benefits provided by the Corporation to which
Executive is entitled as of the Disability Effective Date, and (ii)
the Pro-Rata Bonus.
C. CAUSE OR WITHOUT GOOD REASON. If Executive's employment shall be
terminated (i) by the Corporation with Cause, or (ii) by Executive
without Good Reason, the Corporation shall pay Executive his Base
Salary through the date of termination and shall have no further
obligations to Executive under this Agreement.
D. WITHOUT CAUSE OR WITH GOOD REASON. If Executive's employment shall
be terminated (i) by the Corporation without Cause or (ii) by
Executive with Good Reason, the Corporation shall pay to Executive
in a lump sum in cash within three (3) days after the date of
termination the aggregate of the following amounts:
a. to the extent not theretofore paid, Executive's Base Salary
through the date of termination plus any Bonus amounts which
have become payable and any accrued vacation pay;
b. a Pro-Rata Bonus for the Fiscal Year in which the date of
termination occurs;
c. Executive's Base Salary for the greater of: (x) the reminder
of the Employment Period, and (y) one (1) year;
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d. the Highest Bonus for the greater of: (x) the remainder of the
Employment Period, and (y) one (1) year;
e. the present lump sum value of benefits which would have
accrued under any qualified and nonqualified retirement plan
(including any deferred compensation arrangements) of the
Corporation in which Executive participates or could
participate at the date of termination, had Executive remained
employed for the remainder of the Employment Period, assuming
that Executive would have continued for such period to earn a
Base Salary at the rate of $440,000 per year at the date of
termination and be paid the Highest Bonus on each date during
such period that the Bonus typically had been paid prior to
the date of termination.
E. CHANGE IN CONTROL. Upon a threatened Change of Control, the
Corporation and the Executive shall agree upon a mutually acceptable
additional lump sum payment.
In addition, upon a termination or resignation of Executive in accordance
with Section 7D or E, the Corporation shall continue to provide welfare
benefits to Executive and his family for the remainder of the Employment
Period at least equal to those which were being provided to them in
accordance with Section 4D at any time within the six-month period ending
on the date of termination, or shall allow Executive to elect instead to
receive a lump sum cash payment equal to the value of such welfare
benefits. If Executive elects to continue plan participation for the
remainder of the Employment Period, to the extent that the benefits
provided for in this Section 7E are not permissible after termination of
employment under the terms of the benefit plans of the Corporation then in
effect, the Corporation shall pay to Executive in a lump sum cash within
thirty (30) days after the date of termination an amount equal to the
after-tax cost to Executive of acquiring on a non-group basis, for the
remainder of the Employment Period, those benefits lost to Executive
and/or Executive's family as a result of Executive's termination.
8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Corporation or
any of its affiliated companies and for which Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as Executive
may have under any stock option or other agreements with the Corporation
or any of its affiliated companies. Amounts which are vested benefits or
which Executive is otherwise entitled to receive under any plan or program
of the Corporation or any of its affiliated companies at or subsequent to
the date on which Executive's employment is terminated shall be payable in
accordance with such plan or program. Anything herein to the contrary
notwithstanding, if Executive becomes entitled to payments
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pursuant to Section 7D or E hereof, the Executive agrees to waive payments
under any severance plan or program of the Corporation.
9. NONDISCLOSURE: NONSOLICITATION.
A. Executive shall not, without the Corporation's prior written
consent, disclose or use any non-public confidential information of
or relating to the Corporation, whether disclosed to or learned by
Executive during the course of his employment or otherwise, so long
as such information is not publicly known or available, except for
such disclosures as are required by law or in connection with
Executive's performance of services to the Corporation hereunder.
Executive further agrees that he shall not make any statements at
any time that disparage the reputation of the Corporation or any of
its affiliates. For purposes of this Section 9, the term "affiliate"
of the Corporation includes the Board, any and all Committees of the
Board (the "Committees") and any and all individual members of
either the Board or any of the Committees, in their capacity as
such, and any employee or officer of the Corporation.
B. Executive hereby covenants and agrees that, during the Employment
Period, he shall not attempt to influence, persuade or induce, or
assist any other person in so influencing, persuading or inducing,
any employee or customer of the Corporation to give up, or to not
commence, employment or a business relationship with the
Corporation.
C. Executive acknowledges and agrees that the remedy at law available
to the Corporation for breach of any of his obligations under
Section 9A or B of this Agreement would be inadequate, and that
damages flowing from such a breach may not readily be susceptible to
being measured in monetary terms. Accordingly, Executive
acknowledges, consents and agrees that, in addition to any other
rights or remedies which the Corporation may have at law, in equity
or under this Agreement, upon adequate proof of his violation of any
provision of Section 9 of this Agreement, the Corporation shall be
entitled to immediate injunctive relief and may obtain a temporary
order restraining any threatened or further breach, without the
necessity of proof of actual damage.
D. Executive acknowledges and agrees that the covenants set forth in
Section 9A and B of this Agreement are reasonable and valid in
geographical and temporal scope and in all other respects. If any of
such covenants or such other provisions of this Agreement are found
to be invalid or unenforceable by a final determination of a court
of competent jurisdiction (i) the remaining terms and provisions
hereof shall be unimpaired and (ii) the invalid or unenforceable
term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and
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that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
10. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION.
A. If it is determined (as hereafter provided) that any payment or
distribution by the Corporation to or for the benefit of 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, 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 subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (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
excise tax (such tax or taxes, together with any such interest and
penalties, are hereafter collectively referred to as the "Excise
Tax"), then Executive will be entitled to receive an additional
payment or payments (a "Gross-Up Payment") in an amount such that,
after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Gross-Up payment, Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
B. Subject to the provisions of Section 10F hereof, all determinations
required to be made under this Section 10, including whether an
Excise Tax is payable by Executive and the amount of Excise Tax and
whether a Gross-Up Payment is required and the amount of such
Gross-Up Payment, will be made by a firm of certified public
accountants nationally recognized in the United States (the
"Accounting Firm") selected by Executive in his sole discretion.
Executive will direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the
Corporation and Executive within 15 calendar days after the date of
the Change in Control or the Date of Executive's termination of
employment, if applicable, and any other such time or times as may
be requested by the Corporation or Executive. If the Accounting Firm
determines that any Excise Tax is payable by Executive, the
Corporation will pay the required Gross-Up Payment to Executive
within five business days after receipt of such determination and
calculations. If the Accounting Firm determines that no Excise Tax
is payable by Executive, it will, at the same time as it makes such
determination, furnish Executive with an opinion that he has
substantial authority not to report any Excise Tax on his federal,
state, local income or other tax return. Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment will be
binding upon the Corporation and Executive. As a result of the
uncertainty in the application
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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 Corporation should have been made (an
"Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Corporation exhausts or fails
to pursue its remedies pursuant to Section 10F hereof and Executive
thereafter is required to make a payment of any Excise Tax,
Executive will 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 Corporation and
Executive as promptly as possible. Any such Underpayment will be
promptly paid by the Corporation to, or for the benefit of,
Executive within five business days after receipt of such
determination and calculations.
C. The Corporation and Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the
possession of the Corporation or Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise
co-operate with the Accounting Firm in connection with the
preparation and issuance of the determination contemplated by
Section 10B hereof.
D. The federal, state and local income or other tax returns filed by
Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax
payable by Executive. Executive will make proper payment of the
amount of any Excise Tax. If prior to the filing of 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, Executive will within
five business days pay to the Corporation the amount of such
reduction.
E. The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Sections 10B and D hereof will be borne by the Corporation. If such
fees and expenses are initially advanced by Executive, the
Corporation will reimburse Executive the full amount of such fees
and expenses within five business days after receipt from Executive
of a statement therefore and reasonable evidence of his payment
thereof.
F. Executive will notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Corporation of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10
business days after Executive actually receives notice of such claim
and Executive will further apprise the Corporation of the nature of
such claim and the date on which such claim
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is requested to be paid (in each case, to the extent know by
Executive). Executive will 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 Corporation and (ii) the
date that any payment of amounts with respect to such claim is due.
If the Corporation notifies Executive in writing prior to the
expiration of such period that it wishes to contest such claim,
Executive will:
(i) provide the Corporation with any written records or documents
in his possession relating to such claim reasonably requested
by the Corporation;
(ii) take such action in connection with contesting such claim as
the Corporation will 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 Corporation;
(iii) co-operate with the Corporation in good faith in order
effectively to contest such claim; and
(iv) permit the Corporation to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Corporation will bear and pay directly
all costs and expenses (including interest and penalties) incurred
in connection with such contest and will indemnify and hold harmless
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
10F, the Corporation will control all proceedings taken in
connection with the contest of any claim contemplated by this
Section 10F 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 that
Executive may participate therein at his own cost and expense) and
may, at its option, either direct Executive to pay the tax claimed
and ▇▇▇ for a refund or contest the claim in any permissible manner,
and 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 Corporation
will determine; provided, however, that if the Corporation directs
Executive to pay the tax claimed and ▇▇▇ for a refund, the
Corporation will advance the amount of such payment to Executive on
an interest-free basis and will indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with
respect to
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such advance; and PROVIDED FURTHER, HOWEVER, that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which the contested amount
is claimed to be due is limited solely to such contested amount.
Furthermore, the Corporation's control of any such contested claim
will be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive will 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 Executive of an amount advanced by the
Corporation pursuant to Section 10F hereof, Executive receives any
refund with respect to such claim, Executive will (subject to the
Corporation's complying with the requirements of Section 10F hereof)
promptly pay to the Corporation the amount of such refund (together
with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Corporation pursuant to Section 10F hereof, a
determination is made that Executive will not be entitled to any
refund with respect to such claim and the Corporation does not
notify 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 will be forgiven and will not be
required to be repaid and the amount of such advance will be offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid pursuant to this Section 10.
11. SUCCESSORS.
A. This Agreement is personal to Executive and without the prior
written consent of the Corporation shall not be assignable by
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives.
B. This Agreement shall inure to the benefit of and be binding upon the
Corporation and its successors.
C. The Corporation 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 the Corporation
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required
to perform it if no such succession had taken place. As used in this
Agreement, "Corporation" shall mean the Corporation as hereinbefore
defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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13. MISCELLANEOUS.
A. This Agreement shall be governed by and construed in accordance with
the laws of Bermuda without reference to principles of conflict of
laws. The parties hereto agree that exclusive jurisdiction of any
dispute regarding this Agreement shall be the courts located in New
York, New York. The Corporation shall directly pay the fees and
expenses of counsel and other experts retained by Executive in
enforcing this Agreement, as they may be incurred, provided that
Executive shall be required to reimburse the Corporation for any
amounts so paid unless at least one matter in dispute is decided in
favor of Executive.
B. In the event of any termination of Executive's employment hereunder,
Executive shall be under no obligation to seek other employment or
otherwise mitigate the obligations of the Corporation under this
Agreement, and there shall be no offset against amounts due
Executive under this Agreement on account of amounts purportedly
owing by Executive to the Corporation. Any amounts due to Executive
under this Agreement upon termination of employment are considered
to be reasonable by the Corporation and are not in the nature of a
penalty.
C. The captions of this Agreement are not part of the provisions hereof
and shall no force or effect.
D. This Agreement may not be amended or modified otherwise than by a
written agreement executive by the parties hereto or their
respective successors and legal representatives.
E. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, or by facsimile or nationally recognized overnight courier
service, addressed as follows:
IF TO EXECUTIVE:
▇▇▇▇ C Head III
1330 Avenue of the Americas - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
16
IF TO THE CORPORATION:
ESG Re Limited
C/o European Specialty Insurance (Ireland) Limited
2nd Floor
▇▇/▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇
Attention: General Counsel
Facsimile: 353-1-675-0280
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
F. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
G. The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
H. This Agreement contains the entire understanding of the Corporation
and Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, Executive has hereunto set his hand and the
Corporation has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
-----------------------
▇▇▇▇ C Head III
ESG Re Limited
By: /s/ ▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
Title: Chief Administrative Officer
& Company Secretary
17