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Exhibit 2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated July 1, 1998, between Gryphon Holdings Inc.,
a Delaware corporation (the "Company"), and Xx. Xxxx X. Xxxx (the "Executive").
WHEREAS, the Company wishes to secure for itself and its subsidiaries
the services of the Executive as a key senior executive officer, and the
Executive desires to serve in the employ of the Company upon the terms and
conditions hereinafter provided.
NOW THEREFORE BE IT AGREED AS FOLLOWS:
1. Employment, Duties and Acceptance.
1.1. Employment by the Company. The Company hereby agrees that upon
the acquisition of all of the issued and outstanding capital
stock of The First Reinsurance Company of Hartford ("First
Re"), it will employ the Executive, for itself and its
subsidiaries, to serve as an Executive Vice President of the
Company, as Vice Chairman of Gryphon Insurance Group Inc.
("GIG") and as President and CEO of First Re, Oakley
Underwriting Agency, Inc. ("Oakley") and F/I Insurance Agency,
Incorporated ("F/I"). In his role as Vice Chairman of GIG, the
Executive will be the senior executive in charge of a Chicago
based profit center that will have exclusive authority within
GIG for all non-program professional liability business,
except for Architects' and Engineers' E&O business. In
addition, the Executive shall perform such other executive
duties for the Company and its subsidiaries not inconsistent
with the Executive's foregoing positions as he may be
authorized or directed to perform from time to time by the
Company.
1.2. Acceptance of Employment by the Executive. The Executive
agrees to accept such employment and shall render the services
described above. The Executive shall devote his full business
time and energies to the business of the Company and those of
its subsidiaries and to faithfully and diligently perform his
duties hereunder, subject to illness, vacations and personal
affairs consistent with Company policies for its executives
generally. The preceding sentence shall not preclude Executive
from serving on the Board of Directors (or comparable
governing body) of other business enterprises or from
participating in the affairs of any governmental, educational
or other charitable institutions with the prior permission of
the Company (permission to serve on the Boards of Directors
listed on Exhibit A hereto having already been given by the
Company).
1.3. Place of Employment. The Executive's place of employment shall
be at 00 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 or such
other location of the principal office of the aforementioned
profit center in the Chicago metropolitan area, subject to
such travel as the rendering of the services hereunder may
require. Office space, furnishings, support staff and
facilities and other office amenities will be provided by the
Company for the Executive's place of employment at least
comparable to those provided to the Executive at the
aforementioned address prior to commencement of this
Employment Agreement.
1.4. Service as Director. During the term of his employment
hereunder, the Executive shall be, and serve as, a member of
the Board of Directors of each of the Company's subsidiaries
listed in Section 1.1 and the Company agrees to elect or
appoint, or cause the election or appointment, of Executive to
membership on such Boards of Directors as needed to carry out
the foregoing commitment. In addition, the Executive will be
elected as soon as practical after the date hereof to the
Board of Directors of the Company. Upon the expiration of the
Executive's initial term as a Director of the Company and
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each term thereafter, so long as the Executive remains
employed hereunder, the Company shall cause the Executive to
be included in the slate of nominees recommended that year by
the Board for election as Directors of the Company by the
shareholders.
2. Term of Employment. The term of the Executive's employment under this
Employment Agreement shall commence on the date of the acquisition of
First Re, Oakley and F/I by the Company (the "Commencement Date") and
shall continue until terminated by either party on thirty days prior
written notice (the "Term").
3. Compensation
3.1. Salary. As compensation for all services to be rendered
pursuant to this Employment Agreement, the Company shall pay
the Executive, during the Term, a base salary of $300,000 per
annum, payable in installments in accordance with the payroll
policies of the Company as in effect from time to time for its
executives generally, less such deductions as shall be
required to be withheld by applicable law and regulations. The
foregoing base salary may be increased from time to time at
the discretion of the Board of Directors of the Company.
3.2. Annual Bonus. In addition to the salary set forth in Section
3.1 hereof, the Executive shall be entitled to participate in
the Company's annual bonus incentive plan for members of its
senior management subject to the terms and conditions of such
plan.
3.3. Stock Options. Promptly following the acquisition of First Re,
Oakley and F/I by the Company, the Executive shall be granted,
subject to the approval of the Compensation Committee of the
Company, options to purchase 45,000 shares of Common Stock of
the Company under the Company's 1993 Stock Option Plan, as
amended. Twenty-five percent (25%) of the foregoing options
shall be incentive stock options and seventy-five percent
(75%) shall be non-qualified options.
3.4. Benefits. The Executive shall be permitted during the Term, to
participate in any life insurance, health, disability, pension
and other benefit programs which may be available to other
executives of the Company generally, on the same terms and
subject to the same conditions as such other executives. The
Executive shall be entitled to paid vacation and all customary
holidays each year during the Term in accordance with the
Company's policies as the same may be modified from time to
time on the same terms as other executives, except to the
extent that First Re elects to maintain separate though
comparable programs for its employees. In such event,
Executive shall participate in such programs. For purposes of
the foregoing benefits, any service requirements relative to
such benefits shall treat employment service with Dearborn
Risk Management Inc. or First Re prior to your employment
hereunder as the equivalent of service with the Company.
3.5. Expenses. Subject to such policies as may from time to time be
established by the Company's Board of Directors for the
Company's executives generally, the Company shall pay or
reimburse the Executive for all reasonable expenses actually
incurred or paid by the Executive during the Term in the
performance of the Executive's services under this Employment
Agreement upon presentation of expense statements or vouchers
or such other supporting information as it may require of
other senior executive officers of the Company. The Company
also will provide the Executive, at Company expense, with (i)
a new car, leased by the Company (with an equivalent purchase
price of not more than $50,000) or, at Executive's choice,
(ii) a car currently under lease to First Re and acceptable to
the Executive, with the Company paying in either case all
related gasoline, maintenance and insurance expenses. The
Company will reimburse the Executive during
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the Term for his membership dues in the clubs listed on
Exhibit B or such other clubs as may be substituted by mutual
agreement of the parties for the original clubs.
4. Definitions. For the purpose of Section 5 of this Agreement, the
following terms shall be defined as follows:
4.1. Cause. "Cause" means:
A. the determination by a majority of the Board of
Directors of the Company (the "Board"), other than
the Executive, that the Executive has failed to
perform his duties to the Company (other than as a
result of death or Disability, as hereinafter
defined), which failure amounts to an intentional and
extended neglect of the Executive's duties hereunder;
B. the commission by the Executive of an act of fraud or
embezzlement against the Company or the determination
by a majority of the Board of Directors, other than
the Executive, that the Executive has willfully taken
actions injurious to the business or prospects of the
Company; or
C. the Executive's conviction of any felony or a
misdemeanor involving moral turpitude.
4.2. Constructive Termination. "Constructive Termination" means the
occurrence of one or more of the following events: (i) without
the Executive's express written consent, the assignment to the
Executive of any duties or the reduction of the Executive's
duties, either of which results in a significant diminution in
the Executive's position or responsibilities with the Company,
GIG, First Re or Oakley in effect immediately prior to such
assignment, or the removal of the Executive from such position
and responsibilities; (ii) a material reduction by the Company
in the base compensation of the Executive as in effect
immediately prior to such reduction or a material reduction by
the Company in the kind or level of employee benefits to which
the Executive is entitled immediately prior to such reduction
with the result that the Executive's overall benefits package
is significantly reduced, unless any such reduction applies
generally to all employees at the Executive's level; (iii) the
relocation of the Executive to a facility or a location more
than fifty (50) miles from the Executive's then present
location, without the Executive's express written consent; or
(iv) any purported termination by the Company for which the
grounds relied upon are not valid; provided that, in each
case, the Executive has given the Company written notice
stating the Executive's intention to resign for reason of
Constructive Termination citing the reason(s), and the Company
has not cured the Constructive Termination within fifteen (15)
days after receipt of such notice.
4.3. Disability. "Disability" means that the Executive is unable by
reason of accident or illness (including mental illness) to
perform the material duties of the Executive's regular
position with the Company and is not expected to recover from
such disability within a reasonable period of time. If at any
time the Executive or the Company claims that the Executive is
disabled, a physician acceptable to both the Company and the
Executive (which acceptance will not be unreasonably withheld)
will be appointed by the Company to examine the Executive. The
Executive will cooperate fully with the physician. If the
physician determines that the Executive is disabled, the
physician will certify to the Company that the Executive is
disabled. The physician's determination will be conclusive.
The Company will pay the physician's fee.
4.4. Person. "Person" means an individual, partnership, joint stock
company, corporation, trust or unincorporated organization, a
government or agency or political subdivision
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thereof, or any "person" as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934.
4.5. Change in Control. "Change in Control" shall be deemed to
occur when any Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the Company's
then outstanding voting stock.
5. Termination Benefits. Upon the Executive's termination of employment,
the Executive shall be entitled to receive severance and other benefits
as follows:
5.1. Severance Pay.
A. Involuntary Termination; Constructive Termination. If
the Company terminates the Executive's employment
other than for Cause or Disability, or if the
Executive resigns as a result of a Constructive
Termination, then, in lieu of any severance benefits
to which the Executive may otherwise be entitled
under any Company severance plan or program, the
Executive shall be entitled to severance benefits as
follows:
(i) Except as provided in subsection 5.1.A.(ii)
hereof, the Company will make monthly
payments to the Executive as severance pay
for a period of six (6) to twelve (12)
months (the exact number of months to be
determined by the Board of Directors at the
time of termination) from the date of
termination, provided, that the Executive as
a condition of such payments complies with
the Executive's obligations under Section 6
hereof. Each monthly payment will be equal
to one (1) month of the Executive's base
salary at the rate in effect immediately
prior to the date of termination and will be
paid on or before the first day of the
month.
(ii) Subsection 5.1.A.(i) notwithstanding, if the
date of termination of employment occurs
within twenty-four (24) months after a
Change in Control, the Company will pay the
Executive, in a single lump sum, an amount
equal to 36 months base salary, at the rate
in effect immediately prior to the date of
termination, such amount to be paid within
30 days after such date of termination;
provided, however, that in the event the
Company's independent auditors determine
that such payments would be treated as
"excess parachute payments" within the
meaning of Section 280G of the Internal
Revenue Code of 1986, or any successor
provision, such payments shall be reduced by
the minimum amount necessary to avoid such
treatment. The amount of any such reduction
shall be calculated by the Company's
independent auditors and such calculations
shall be provided, in writing, to the
Executive not later than 20 days after the
date of termination of employment.
B. Other Termination. If the Executive's employment
terminates for any reason other than as described in
Section 5.1.A. above, including by reason of the
Executive's death, Disability, termination by the
Company for Cause or resignation other than for
Constructive Termination, then the Executive shall be
entitled to receive severance, if any, and any other
benefits only as may then be established under the
Company's existing severance and benefit plans and
policies at the time of such termination.
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5.2. Health and Life Insurance. If the Executive's employment
terminates as described in subsection 5.1.A.(i) above, the
Executive will receive Company-paid medical and life insurance
as provided to such Executive immediately prior to the
Executive's termination of employment. If the Executive's
medical and life insurance coverage included the Executive's
dependents immediately prior to the Executive's termination,
such dependents shall also be covered at the Company's
expense. Company-paid coverage referred to above shall
continue as long as the monthly payments continue under
subsection 5.1.A.(i). For purposes of the continuation health
coverage required under Section 4980B of the Internal Revenue
Code of 1986, as amended ("COBRA"), the date of the
"qualifying event" giving rise to the Executive's COBRA
election period (and that of the Executive's "qualifying
beneficiaries") shall be the date of termination.
5.3. No Mitigation. The Executive shall not be required to mitigate
the amount of any payment contemplated by this Employment
Agreement (whether by seeking new employment or in any other
manner). The Executive's payments under this Agreement shall
not be affected by payments received from any future employer,
except that the Company's obligation to provide medical and
life insurance under Section 5.2. shall terminate to the
extent the Executive receives substantially equivalent
benefits from another employer.
6. Confidentiality; Covenant Not to Solicit.
6.1. Acknowledgment. The Executive acknowledges that (i) the
Company, which for the purposes of this Section 6 includes all
of the subsidiaries and affiliates of the Company, whether now
existing or as may be acquired, formed or incorporated during
the Executive's employment hereunder, is engaged in the
business of property and casualty insurance and reinsurance
and may become engaged during the period during which the
Executive is employed by the Company in certain other
businesses through the acquisition thereof or otherwise
(collectively the "Business"); (ii) the Business is conducted
throughout the United States and Canada; (iii) his work for
the Company has given him, and will continue to give him,
access to trade secrets of, and confidential information
concerning, the Company; and (iv) the agreements and covenants
contained in this Section 6 are essential to protect the
Business and goodwill of the Company.
6.2. Confidential Information. During the term of the Executive's
employment with the Company and for the period ending two
years thereafter, the Executive shall keep secret and retain
in strictest confidence, and shall not use for the benefit of
himself or others, all confidential matters of the Company
(other than such matters in the public domain and other than
general knowledge of the Executive relating to the Business),
including without limitation, trade secrets, client lists,
details of client or consultant contracts, pricing policies,
operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans,
new personnel acquisition plans and research projects of the
Company learned by the Executive heretofore or hereafter. All
memoranda, notes, lists, records and other documents or papers
(and copies thereof), including such items stored in computer
memories, on microfiche or by any other means, made or
compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, are and shall be the
Company's property and shall be delivered to the Company
promptly upon the termination of the Executive's employment
(whether such termination is for Cause or otherwise) or at any
other time on request of the Company.
6.3. Non-Solicitation. During the term of the Executive's
employment with the Company and for a period ending two years
thereafter, the Executive shall not: (i) solicit or initiate
any other action which is intended to induce any other
employee of the Company to
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terminate employment with the Company, or (ii) solicit, or
disclose to any person the identity of, any of the Company's
clients, customers, policyholders, vendors, consultants or
agents in order to induce any such party to terminate its
existing business relationship with the Company.
7. Enforcement. In the event of the breach by the Executive of any of the
provisions of Section 6, the Company, in addition to other rights and
remedies existing in its favor, may apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive
relief in order to enforce, or prevent any violations of, the
provisions hereof.
8. Employment At-Will. The Executive shall be deemed an "At-Will" employee
of the Company. Nothing in this Agreement shall be construed to confer
upon the Executive any right with respect to continuation of employment
by the Company, nor shall it interfere in any way with the Company's
right to terminate the Executive's employment at any time, with or
without Cause.
9. Successors and Assigns. This Agreement and the rights and obligations
of the parties hereto will bind and inure to the benefit of any
successor or successors of the Company by reorganization, merger or
consolidation and any assignee of all or substantially all of its
business and properties which assignee shall as a condition of such
assignment assume all of the Company's obligations hereunder. This
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators and successors or assignees of the parties
hereto; provided, however, that neither this Agreement nor any rights
or benefits hereunder may be assigned by the Company or by the
Executive without the prior written consent of the other party.
10. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality, or
unenforceability will not affect any other provision, but this
Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been
contained herein.
11. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the
other shall be in writing and delivered in person or by courier,
telegraphed, telexed or by facsimile transmission (in each such case to
be effective on the date of receipt) or mailed by certified mail,
postage prepaid, return receipt requested (such mailed notice to be
effective on the date such receipt is acknowledged), as follows:
(a) If to the Executive:
c/o The First Reinsurance Company of Hartford
00 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
(b) If to the Company:
Gryphon Holdings Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn.: Xxxxxx X. Coffee, Esq.
Facsimile: 000-000-0000
or to such other place as either party may designate by written notice to the
other.
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12. Waivers. If either party should waive any breach of any provision of
this Agreement, he or it will not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of
this Agreement.
13. Complete Agreement: Amendments. This Agreement is the entire agreement
of the parties with respect to the subject matter hereof and may not be
amended, except by written instrument approved by resolution of the
Board of Directors of the Company and executed by the parties.
14. Headings. The headings of the sections hereof are inserted for
convenience only. They are not a part of nor do they affect the meaning
of the sections.
15. Governing Law. This Agreement will be interpreted and enforced in
accordance with the laws of the State of Illinois as applied to
agreements between Illinois residents made and performed within
Illinois.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GRYPHON HOLDINGS INC.
By:
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Xxxxxxx X. Xxxxx
President & Chief Executive Officer
EXECUTIVE:
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Xxxx X. Xxxx
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