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EMPLOYMENT AGREEMENT
AGREEMENT made the 9th day of February, 1998 between INTERCARGO
CORPORATION, a Delaware corporation (hereinafter referred to as "Intercargo" or
"Employer") and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (hereinafter referred to as the "Employee").
WHEREAS, Intercargo is an insurance holding company which itself or
through its related or affiliated entities, sells and/or underwrites surety
bonds (including U.S. customs bonds), marine cargo insurance, errors and
omissions insurance and other lines, and through its own agencies, independent
agencies and/or various sub-producers sells the said insurance products of
Intercargo and of its related or affiliated entities and of other insurance
companies, and engages in such other lawful business which it may pursue from
time to time:
WHEREAS, Employee wishes to be employed by Intercargo to perform
management and executives services for it and subsidiaries; and
WHEREAS, Employee is willing to be employed by Intercargo, and
Intercargo is willing to employ Employee, on the terms and conditions
hereinafter set forth.
WHEREAS, Intercargo and Employee agree that this Agreement will
supersede the terms and conditions of any and all prior understandings and past
practices between them regarding employment, whether written or oral.
NOW, THEREFORE, intending to be legally bound and in consideration of
the mutual covenants contained herein and other valuable consideration, the
receipt of which is hereby acknowledged, Intercargo and Employee hereby agree as
follows:
1. TERM. The term of this Agreement (the "Term") shall commence on the
date hereof and, subject to the terms and conditions contained herein,
shall continue for a period of one (1) year. Thereafter, should
Employee wish to remain employed and should Intercargo wish to continue
to employ Employee, this Agreement shall continue and have full force
and effect, except that either party, subject to the provisions of
paragraphs 4, 5 and 6 herein, may terminate the Agreement for any
reason and at anytime, with 30 days' written notice to the other party.
The provisions of sections 7 through 12 shall survive termination.
2. DUTIES AND PLACE OF EMPLOYMENT.
(a) Employee shall serve as Senior Vice President of Intercargo
Corporation, Senior Vice President of Intercargo Insurance
Company, and President of Intercargo Insurance Company Hong
Kong Ltd., including administrative, sales, marketing, other
executive services and other duties which may be assigned by
the President of Intercargo. Initially, the Employee have the
responsibilities and goals set forth on Exhibit A attached
hereto. Employee shall faithfully, industriously and the best
of his ability and talent perform all duties that may be
required of and from him. Employee agrees to devote
substantially all of his business time and attention (except
for permitted vacation periods, reasonable time to pursue
passive personal investments and reasonable periods of
illness) to the business and affairs of Intercargo and its
subsidiaries.
(b) Employee while in the United States shall be permitted to
maintain office facilities in and perform his duties in and
from New York and New Jersey offices as well as Schaumburg,
Illinois.
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3. COMPENSATION. For all the services to be rendered by Employee
hereunder, Intercargo agrees to pay Employee:
(a) BASE SALARY.
i. An annual salary of Two Hundred Thousand Dollars
($200,000.00), payable periodically in accordance
with Intercargo's regular compensation payment
schedule;
ii. Employee shall be entitled to an annual salary review
beginning in January 1999; however, whether Employee
shall receive any increase in salary is in the
discretion of the President of Intercargo and subject
to approval of the Compensation Committee of the
Board of Directors.
(b) BONUS. Employee shall be eligible to participate in any
Executive Incentive Compensation Plan ("Plan") for calendar
years 1998 and beyond as a Vice President. The current Plan is
set forth on Exhibit B which is attached hereto. The Employer
reserves the right to amend, replace or terminate the Plan in
its sole discretion. Whether Employee shall receive a bonus at
any time shall be in the sole discretion of the President of
Intercargo subject to approval of the Compensation Committee
of the Board of directors.
(c) EMPLOYEE BENEFITS. Employee shall be entitled to benefits
under and in accordance with the terms and conditions of any
pension or profit sharing plan, disability income plan, group
insurance plan, hospital and surgical benefit plan, or any
other incentive, retirement or employee benefit plan for which
senior executive employees of Intercargo generally are
eligible. Nothing herein, however, shall be construed to
either create an employee benefit if none presently exists or
prevent the alteration or termination of an employee benefit
for similarly situated employees of Intercargo.
(d) VACATION: TIME OFF. Employee shall be entitled to take such
holidays and sick leave as Intercargo may reasonably
determine, consistent with the performance of his duties
hereunder and the then current policies of Intercargo in
respect to such matters. Notwithstanding any current policies
of Intercargo with respect to vacation, however, Employee
shall be entitled to four weeks vacation "annually." Annually
shall be defined by the term year. Employee may "carry over"
up to two weeks of unused vacation days to the following
contract year. In no event, however, shall employee be
entitled to accumulate a total of more than two weeks of time
from prior contract years.
(e) EXPENSES. Intercargo agrees to pay reasonable expenses of
Employee incurred in connection with Employee's execution of
his duties hereunder, including regular travel expenses
between Employee's home in New Jersey and Schaumburg,
Illinois.
(f) AUTOMOBILE. Employee shall be entitled to an Intercargo leased
automobile or an auto allowance not to exceed $750 per month.
(g) COMPANY LEASED APARTMENT. Intercargo agrees to provide you
with a company-leased apartment for your use during your
periods "in residence" in Schaumburg, Illinois.
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(h) STOCK OPTIONS. In consideration of this Agreement and pursuant
to Intercargo Corporation's Non-Qualified and Incentive Stock
Option Plan dated July 28, 1987, as amended, (the "Plan"),
Employee shall be issued an award agreement dated as of the
date of this Agreement (the "Award Agreement"), granting
Employee the option rights to acquire 20,000 shares of common
stock of Intercargo ("Common Stock"). The Award Agreement
shall provide that the stock options exercise rights shall
vest at a rate of 4,000 shares on each anniversary of this
Agreement in the years 1999, 2000, 2001, 2002, and 2003
provided that Employee is employed by Intercargo at such
times, and may otherwise be exercisable thereafter within the
maximum period allowed by applicable law and the terms of the
Plan. The purchase price for a share of Common Stock under the
Award Agreement shall be based on the closing market price on
the date you commence your employment with Intercargo.
4. TERMINATION.
(a) FOR CAUSE. During the initial term of this Agreement, Employer
may terminate this Agreement and immediately discharge
Employee for the following reasons: violation or the
provisions of paragraphs 7 or 8 herein; failure satisfy
mutually agreed upon reasonable goals for operating results or
performance standards ("financial cause"); breach of any
material covenants or agreements under this Agreement; failure
of Employee to conduct all of his activities, both business
and personal, with full ethical and moral propriety;
conviction of a crime or moral turpitude, or conduct
constituting fraud, dishonesty or non-disability substance
abuse; provided, however, that during the first year of this
Agreement, termination for "financial cause" as set forth
above shall not be considered "for cause." Any termination by
Employer pursuant to this paragraph shall be made by Employer
in its sole discretion, but shall be made reasonably and in
good faith. In the event of termination for cause, Employer
shall have no further financial obligation to Employee except
as may be required by law.
(b) WITHOUT CAUSE. In the event of termination by the Employer of
the Employee's employment for any reason other than for cause,
disability or death (all as defined herein), Employee shall
receive one year's compensation in periodic installments in
accordance with Intercargo's regular compensation plan.
5. TERMINATION UPON DISABILITY. If Employee is unable to perform the
essential functions of his or her position by reason of illness or
incapacity for a period in excess of any absence authorized by
Employer, but not less than six (6) months or, in the event of a
disability as defined under the American with Disabilities Act which
materially interferes with Employee's ability to perform the essential
tasks of his responsibilities, even with Employer's reasonable
accommodation of Employee's disability (unless reasonable accommodation
would present undue hardship to Employer) , this Agreement shall be
terminated. Employee shall be entitled to participate in Employer's
long-term disability program, to the extent Employee is qualified and
entitled.
6. TERMINATION UPON DEATH DURING EMPLOYMENT. If Employee dies during the
term of this employment, this Agreement shall terminate and Employer
shall pay to the estate of Employee the compensation which would
otherwise be payable to Employee up to the date of Employee's death,
subject to the right of Employer to set-off any amounts due and owing
by Employee to Employer.
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7. CONFIDENTIALITY: NON-SOLICITATION OF EMPLOYEES: NON-DISPARAGEMENT.
For purposes of this paragraph 7, and paragraphs 8 through 12, the term
Intercargo shall include Intercargo and all related and affiliated entities, and
references to Intercargo shall also be deemed references to such related and
affiliated entities as the context may require.
From and after the date hereof,
(a) Employee will maintain in confidence and will not, directly or
indirectly, use, publish or otherwise disclose to any
competitor of Intercargo or other third party, except as
required by law or as may be expressly permitted by
Intercargo, any trade secrets, confidential, proprietary, and
other non-public information of a similar nature belonging to
Intercargo or to which Intercargo has any rights
("Confidential Information"), except to the extent, if any,
that any such information is or becomes generally known or is
readily ascertainable by proper means, whether or not such
Confidential Information is in written or electronic form, or
exists as "know how" or as knowledge gained through his
employment by Intercargo. However stored or maintained, such
confidential Information includes, but is not limited to,
proprietary technical and business information relating to any
non-public financial information, business or product plans or
costs, existing or prospective customers or customer lists,
pricing data or other terms of sales, customer requirements,
buying history or underwriting or risk assessment information,
the identity of agents or customers or prospective agents or
customers, products, coverages, the terms of any reinsurance,
fronting or other agreements of Intercargo, and policy forms.
(b) Employee will not solicit or induce, either directly or
through others, any employees of Intercargo to terminate such
relationship, or make contact with any such employees with the
principal purpose of violating this section;
(c) Employee shall not disparage the business, employees, officers
or directors of Intercargo; and
(d) All duties and obligations set forth herein shall be in
addition to those which exist by common law or statute.
Employee's obligations under this Agreement with respect to
Confidential Information shall extend to information belonging
to any client, vendor or customer of Intercargo and by their
agents and employees to be Confidential.
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8. NON-COMPETITION: NON-SOLICITATION OF CUSTOMERS AND AGENTS.
(a) Employee shall not for 12 months following his separation from
Intercargo for any reason ("Restricted Period"), call upon, or
solicit through any independent agent, any person, entity or
business who was an existing insured of Intercargo at any time
during the period commencing sixty (60) months prior to
Employee's separation from Intercargo's employment through the
end of the Restricted Period for the purpose of selling to or
through such customers or agents any insurance coverages or
surety bonds of a type offered by Intercargo during such
period. The term "existing or prospective customers" of
Intercargo as used in this paragraph shall be defined and
construed to mean any and all persons, corporations,
partnerships, firms, associations, businesses or other
entities for whom or through whom Intercargo engages in the
business of providing insurance, surety bonds or conducting
related business or for whom or through whom Intercargo
actively sought or seeks to engage in such business during the
period commencing sixty (60) months prior to Employee's
separation from Intercargo's employment through the end of the
Restricted Period and shall include agents and subagents of
Intercargo notwithstanding that such persons or entities may
have been induced to become customers and/or agents and given
their patronage to Intercargo by the efforts and solicitations
of Employee, or someone on his behalf.
(b) Employee shall not, during the Restricted Period, directly or
indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to
or participate in or be connected with, as an officer,
employee, partner, agent, stockholder, consultant, independent
contractor or otherwise, any individual, partnership, firm,
corporation, proprietorship, association or other business
organization or entity which causes the diversion of the
business of Intercargo to competitors.
The restrictions in this paragraph 8 shall be limited to any county of
any state of the United States or any comparable jurisdiction of any
foreign country in which Intercargo, directly or through subsidiaries
or independent agencies or subproducers during the Term of this
Agreement or the Restricted Period, has been or is engaged in the
business described in the Recitals or this paragraph.
9. EMPLOYEE ACKNOWLEDGEMENT. Employee has carefully considered the nature
and extent of the restrictions upon him and the rights and remedies
conferred upon Intercargo under this Agreement, and hereby acknowledges
and agrees that the same is reasonable in time and territory, are
designed to eliminate competition which otherwise would be unfair to
Intercargo, do not stifle the inherent skill and experience of
Employee, do not operate as a bar to Employee's sole means of support,
are fully required to protect the legitimate interest of Intercargo and
do not confer a benefit upon Intercargo disproportionate to the
detriment of the Employee.
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10. EXTENSION OF DURATION. In addition to the remedies Intercargo may seek
and obtain pursuant to paragraph 12 hereof, the restrictions of
paragraphs 7 and 8 shall be extended by any and all periods during
which the Employee shall have been found by a court possessing personal
jurisdiction over Employee to have been in violation of the covenants
in paragraphs 7 and 8.
11. JUDICIAL MODIFICATION. The parties hereby agree that if the scope or
enforceability of the covenants in paragraphs 7 and 8 hereof are in any
way disputed at any time, a court or other trier of fact may modify and
enforce said covenants to the extent that it believes them to be
reasonable under circumstances existing at that time.
12. INJUNCTIVE RELIEF. Employee acknowledges that compliance with the
restrictive covenants herein is necessary to protect the business and
good will of Intercargo, and that a breach of these restrictions will
cause irreparable damage to Intercargo for which monetary damages may
not be adequate. Consequently, Employee agrees that in the event that
he breaches or threatens to breach any of the restrictive covenants
contained herein, Intercargo shall be entitled to both (i) a temporary,
preliminary and/or permanent injunction in order to prevent the
continuation of such harm, and (ii) money damages insofar as they can
be determined. Notwithstanding any of the foregoing, nothing in this
Agreement shall be construed to prohibit Intercargo or Employee from
also pursuing any other remedy, the parties having agreed that all
remedies are to be cumulative. As money damages for the period of time
during which Employee violates the restrictive covenants, Intercargo
shall be entitled to recover the amount of fees, compensation or other
remuneration earned by Employee as a result of any such breach.
13. NOTICES. Any and all notices required or permitted to be given under
this Agreement will be sufficient if furnished in writing, sent by
personal delivery, telex, telecopier or certified mail, return receipt
requested, to the applicable address set forth below (or such other
address as may from time to time be designated by notice by any party
hereto for such purpose):
To Employee: ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To Intercargo: Intercargo Corporation
Attn: President
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Notice shall be deemed given, if by personal delivery, on the
date of such delivery or, if by telex or telecopy, on the
business day following receipt of answer back or telecopy
confirmation or, if by certified mail, on the date shown on
the applicable return receipt.
14. MISCELLANEOUS.
(a) Except for other documents referenced in this Agreement, this
written Agreement contains the sole and entire Agreement
between the parties, and supersedes any and all other
agreements between them.
(b) The waiver by either party of a breach of any provision of
this Agreement, shall not operate as, or be construed a waiver
of any subsequent breach thereof. No waiver or modification of
this Agreement or of any covenant, condition or limitation
herein contained shall be valid unless in writing and duly
executed by the party to be charged therewith.
(c) In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision
thereof and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been
contained herein.
(d) In any action, special proceedings or other proceedings that
may be brought arising out of, in connection with, or by
reason of this Agreement, the laws of the State of Illinois
shall be applicable and shall govern to the exclusion of the
law of any other forum without regard to the jurisdiction in
which the action or special proceeding may be instituted.
(e) The section headings contained herein are inserted for each of
reference only and shall not control or affect the meanings or
construction of the provisions hereof.
(f) This Agreement shall be binding on and inure to the benefit of
the respective parties and their respective heirs, legal
representatives, successors and assigns.
IN WITNESS WHEREOF, Intercargo has hereunto caused this Agreement
to be executed by its duly authorized officers and the Employee has hereunto set
his hand, all being done in duplicate originals with one being delivered to each
party on the 9th day of February, 1998.
Executed at Schaumburg, Illinois on the date first above written.
INTERCARGO CORPORATION EMPLOYEE
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------- ----------------------
Its: President ▇▇▇▇▇▇ ▇▇▇▇▇▇
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EXHIBIT A
INITIAL RESPONSIBILITIES:
1. Complete operational responsibility for day to day management,
staffing, profitability and growth of the non-U.S. underwriting
operations. At present, this consists of the London branch office of
Intercargo Insurance Company; our Hong Kong subsidiary; and the
"joint-venture" with ▇▇▇▇▇▇ in Singapore.
2. Development of a strategy to expand our international underwriting
operations in Asia, Europe and South America so as to generate at least
$50 million U.S. in gross written premium annually by December 31,
2000.
3. New product development on a worldwide basis so as to introduce at
least three new products annually.
4. Management of U.S. exporter's package product introduction and
product line.
5. Additional underwriting management and marketing management
responsibility as assigned by the President of Intercargo Corporation.
POSITION REPORTS TO: President of Intercargo Corporation
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EXHIBIT B
EXECUTIVE INCENTIVE COMPENSATION PLAN
PART I
In order to provide meaningful and objective incentives for exceptional
executive performance which inures to the benefit of shareholders in the form of
greater earnings and equity accumulation, the following table shall represent
the allowable maximum bonus levels to be paid.
Pre Bonus
Return on beginning equity Maximum bonus allotments
-------------------------- ------------------------
0-10.00% Up to 10% at the discretion
of the Compensation
Committee
12.50% 12.50%
14.00% 15.00%
15.50% 20.00%
17.00% 25.00%
18.00% 30.00%
19.00% 37.50%
20.00% 45.00%
21.00% 52.50%
22.00% 60.00%
23.00% 67.50%
24.00% 75.00%
25.00% 82.50%
26.00% 90.00%
27.00% 100.00%
All return on equity (▇▇▇) percentages are to be considered as thresholds of
achievement and there will be no interpolation of bonus percentage limitation
for fractional increases in return on equity. If ▇▇▇ is below 10%, distribution
of the bonus allotment shall be at the discretion of the Compensation Committee.
Return on equity (▇▇▇) for all eligible persons shall be defined as net
operating income of Intercargo Corporation on a GAAP basis after tax but without
the inclusion of extraordinary capital gains or losses arising from acquisition
or sale of,
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merger, reorganization or recapitalization of any operating entity divided
by Intercargo Corporation equity at the beginning of the measurement year.
Subject to the foregoing, the President shall be responsible for administration
of the plan in conformity with the following guidelines.
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PART II
Section 1. Eligibility. All officers and the Chief Financial Officer shall
be eligible for bonuses pursuant to the Plan.
Section 2. Measurement. The measurements shall include overall company
performance, individual quantitative departmental goals and intangible or
qualitative objectives. The relative weight of these measurements will vary by
position as follows:
Weighted % of total bonus measurement
Return of Equity Departmental Intangible
Chairman/President 70% 30%
Underwriters/Sales/Other Vice 30% 50% 20%
Presidents
Chief Financial Officer 50% 50%
Basic guidelines for establishing these objectives are as follows:
Departmental Goals. Individual performances will be measured based on function.
Underwriters will be measured based on underwriting gain ratios. Underwriters
should never be held directly accountable for volume as it undermines
underwriting policy and rates for the sake of volume. The individual departments
will be assigned underwriting gain ratio objectives based on historical and
industry standards. These ratios will include direct costs of the department but
will be adjusted to remove general and executive overhead. In this manner, they
are compelled to at least consider volume issues in order to cover direct costs
but are not being held accountable for costs beyond their control. This will
result in different underwriting gain ratio goals for different departments.
Marketing will be measured on sales/budget goals.
Intangibles. Some departments such as accounting do not have such easily
measured results. Measurements here might involve timeliness, lack of penalties,
cost of administration, investment income optimization, effective tax rate and,
reduction of accounting and legal fees. While tax rate and investment yield
might seem to be capable of quantitative review, it must be recognized that the
playing field is subject to rapidly changing outside factors.
Other important intangibles include departmental management, political
development, crisis intervention, complaint avoidance or resolution,
identification of underwriting or operational issues and the implementation of
cost effective/shareholder beneficial solutions.
Intangibles are to be agreed upon annually and must include at least 4 items
encompassing strategic long-term plans and administrative issues. This should
include both personal and departmental personnel improvements goals. What
constitutes fulfillment is to be also agreed. No item requiring less than 90
days to accomplish is to be included.
This section is intended to compel management to focus on itself and its systems
rather than dollars and cents. It is quality oriented objective as opposed to
quantity and is no less valuable to the long term health and competitiveness of
the company.
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Section 3. Mechanics. The final operation of the plan is limited at all times by
the ▇▇▇ factor. Total executive bonuses cannot exceed that percentage of
compensation established by the ▇▇▇ factor. Since it is unlikely that all
eligible personnel would receive maximum ratings on the departmental goals and
intangibles, the end cost will certainly be less than the ▇▇▇ factor would
allow.
The mathematics are as follows.
(a) The ▇▇▇ factor establishes a limiting percentage of compensation
available for bonuses.
(b) The ▇▇▇ factor is multiplied times the weighted percentage given to
▇▇▇, departmental goals or intangibles.
(c) In the case of departmental goals or intangibles, this resulting
percentage is multiplied times the performance/achievement matrix which
has been established.
(d) All results are multiplied by the individual's base salary.
For example, assume (1) ▇▇▇ is 17%, which permits up to 20% of base
compensation as the upper limit for bonuses. (2) Underwriter scores 80%
on departmental and 60% on intangibles. (3) Base salary is $100,000.
The computation is:
▇▇▇ + Departmental Intangibles
▇▇▇ x weight x salary ▇▇▇ x weight x perf x salary ▇▇▇ x weight x perf x salary
.20 x .30 x $100,000 .20 x .50 x .8 x $100,000 .20 x .2 x .6 x $100,000
= $6,000 = $8,000 = $2,400
Total bonus for this individual would be $16,400.
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Section 4. Term. The plan will be in effect for calendar years 1992 through 1995
after which time the plan shall be subject to review. The plan is subject to
review and interruption or termination if the ratio of base salaries of eligible
employees to total expenses or base salaries to net income exceeds levels
approved for the 1992 budget.