Common use of Purpose and Background Clause in Contracts

Purpose and Background. The purpose of this Agreement is to provide the Executive with certain cash severance payments and welfare benefits in the event that the Executive becomes unemployed as a result of a change in control of the Division and, thus, has no employment with the Company or its affiliates, or with the Person that acquires the Division or that Person's affiliates. This Agreement is intended to provide the Executive with no payments or benefits in the event that the Executive remains employed by the Company or any of its affiliates, or becomes employed by the Person that acquires the Division or such Person's affiliates. On the date of this Agreement, the Executive is employed by either the Company or by one of the Company's affiliates that is involved in the operations of the Division. The provisions of this Agreement that provide for the Company to have rights or obligations or to take actions with respect to the Executive's employment shall be interpreted to mean that either the Company or the Company's affiliate that actually employs the Executive shall have such rights and obligations and may take such actions. Generally, this Agreement contemplates that, if the Executive is employed by the Company or any of its affiliates with respect to the Division immediately prior to the occurrence of a change in control of the Division, a two-year trigger period will begin to run. During such two-year period, if the Executive becomes unemployed under certain specified circumstances, then either the Company or the Person that acquired the Division will provide the Executive with the payments and benefits required by this Agreement. Thus, two events must happen before the Executive is entitled to payments or benefits under this Agreement: (i) there must have actually occurred a change in control of the Division or the Company, and (ii) the Executive's employment must be terminated with respect to the Company and its affiliates without the Executive being offered employment with the Person that acquires the Division or any of its affiliates. This Agreement is intended to provide the Executive with financial assistance in the event that the Executive becomes unemployed, but it is not intended to provide the Executive with a bonus. By way of example, assume that the Executive is presently employed by Fortis Benefits Insurance Company, which is an affiliate of the Company, with respect to the Fortis Family Division, which is indirectly controlled by the Company. Also assume that all of the assets of the Fortis Family Division are sold to a third party not affiliated with the Company. Such sale would be a change in control of the Division. If the Executive's employment with respect to the Division continues, even though the Executive is then employed by the Person that acquired the Division or one of its affiliates rather than the Company or one of its affiliates, for at least two years after the change in control date, then the Executive would not be entitled to any payments or other benefits under this Agreement. However, if the Executive's employment with respect to the Division terminates under the conditions specified in this Agreement within two years after the change in control date, the Executive would be entitled to an amount of severance that generally is a multiple of his or her annual base salary plus short-term bonus, paid in installments and subject to certain offsets if the Executive becomes re-employed. The multiple that is applicable to the Executive is set forth in this Agreement and is related to the Executive's current position with the Company. The Board of Directors of Fortis, Inc. (the "Board") believes that providing the Executive with such assurance of financial assistance in circumstances of a change in control will cause the Executive to have less personal uncertainty in connection with any such possible loss of employment. The Executive should, therefore, have less distraction in the performance of his or her duties for the Company, and both the Executive and the Company benefit. Thus, the Board believes that it is in the best interests of the Company and its shareholders for the Company to enter into this Agreement. Certain capitalized terms that are used throughout this Agreement are defined in Section 1 below. This "Purpose and Background" preamble is intended to assist in understanding the Agreement, but it is qualified in its entirety by reference to the more precise and specific provisions of the Agreement as set forth below. IN CONSIDERATION OF THE MUTUAL PROMISES SET FORTH HEREIN, THE PARTIES AGREE AS FOLLOWS: