EXHIBIT 10.Y
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and
entered into as of the date of the Acquisition (as defined below)
between TACK ACQUISITION COMPANY, a Delaware corporation (the
"ACQUISITION COMPANY"), and XXXX X. XXXXXXXXX, an individual
resident of the State of Connecticut (the "EXECUTIVE").
WHEREAS White Mountains Insurance Group, Ltd., a Bermuda company
("WHITE MOUNTAINS"), has entered into an agreement to purchase (the
"ACQUISITION") CGU Corporation, a Delaware corporation ("CGU"), through the
Acquisition Company, a subsidiary of White Mountains; and
WHEREAS the Acquisition Company wishes to employ the Executive and the
Executive wishes to accept such employment on the following terms and conditions
effective as of January 1, 2001.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties hereto hereby agree
as follows:
SECTION 1. EMPLOYMENT. The Acquisition Company hereby employs the
Executive and the Executive accepts employment by the Acquisition Company, on
the terms and conditions contained in this Agreement.
SECTION 2. TERM. The employment of the Executive pursuant hereto shall
commence on January 1, 2001 (the "COMMENCEMENT DATE"), and shall remain in
effect until terminated by the Executive upon 30 days' prior written notice to
the Acquisition Company or by the Acquisition Company upon 30 days' prior
written notice to the Executive; provided, however, that if this Agreement shall
be terminated by the Executive, the Acquisition Company shall have the option to
hire the Executive as an investment consultant for a period of one month,
commencing with the first day following such termination, and thereafter for
successive one-month periods not to exceed 12 months in aggregate, on terms and
conditions to be determined by the parties hereto upon the exercise of such
option; provided, however, that the Executive shall receive compensation for his
services as a consultant at a rate of no less than $80,000 per month.
Notwithstanding any of the foregoing provisions to the contrary, if the
Acquisition shall not occur prior to March 31, 2001, or any later date
determined by the parties to the Acquisition to be necessary for any regulatory
approval of the Acquisition as may be required, this Agreement shall not take
effect unless the parties hereto mutually agree otherwise. The period of time
between the Commencement Date and the termination of this Agreement pursuant to
its terms is herein referred to as the "AGREEMENT TERM".
SECTION 3. DUTIES AND EXTENT OF SERVICE. During the Agreement Term,
the Executive shall be employed by the Acquisition Company in an executive
capacity as mutually agreed upon by the Executive and the Acquisition Company,
and shall be responsible for managing the investment and the allocation of the
assets and capital of CGU. The Executive shall conduct any activities in
connection with his responsibilities hereunder in accordance with
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general guidelines mutually agreed upon from time to time between the Executive
and the Chief Executive Officer of the Acquisition Company (the "CEO") and the
Executive shall report directly to the CEO. The Executive shall devote his full
business knowledge, skill, time and effort to the performance of his duties for
the Acquisition Company and the promotion of its interests (except as provided
in Section 8 hereof). The conduct of the Executive's responsibilities hereunder
shall be performed at such place or places as the interests, needs, businesses
or opportunities of the Acquisition Company shall require; provided, however,
the Executive shall not be required to change his residence from Connecticut to
any other location and shall continue to perform his responsibilities hereunder
while residing in Connecticut and traveling to Boston, Massachusetts, as
necessary, where CGU's headquarters are located, and traveling to Hanover, New
Hampshire, where White Mountains' visiting executive offices are located.
SECTION 4. BASE SALARY. During the Agreement Term, the Executive shall
be paid a base salary (the base salary each year is hereinafter referred to as
the "BASE SALARY") at a rate of $400,000 per annum (the "INITIAL SALARY"),
subject to annual review; provided, however, that the Base Salary shall not be
reduced below the Initial Salary at any time during the Agreement Term.
SECTION 5. INCENTIVE COMPENSATION. (a) The Executive may receive an
annual bonus (the "BONUS") of up to 200% of the Base Salary, to be determined
based on the achievement of specific objectives established by the Board of
Directors of the Acquisition Company (the "BOARD") on an annual basis. The
target bonus for the Executive shall be 50% of the Base Salary. The Bonus for
any year shall be paid at the same time bonuses are paid to other executives of
the Acquisition Company.
(b) From time to time during the Agreement Term, the Executive shall
be granted a number of performance shares of White Mountains equal to no less
than 75% of the number of such performance shares granted to Xxx Xxxxxxxx, or
his successor, based on the same goals and subject to the same terms and
conditions established for the other management executives of the Acquisition
Company, specifically the CEO and Xx. Xxxxxxxx, or his successor.
SECTION 6. FRINGE BENEFITS. The Executive shall be entitled to
participate, to the extent eligible, in such medical, dental, disability, life
insurance, deferred compensation and other benefit plans (such as pension and
profit sharing plans) as the Acquisition Company shall maintain for the benefit
of employees generally, on the terms and subject to the conditions set forth in
such plans from time to time during the Agreement Term. The Executive shall also
be entitled to vacation time and sick leave in accordance with the Acquisition
Company's policies in existence from time to time during the Agreement Term for
other executives of the Acquisition Company.
SECTION 7. EXPENSES. The Acquisition Company shall reimburse the
Executive promptly for all reasonable expenses incurred by the Executive in
accordance with the Acquisition Company's policy in connection with the
Executive's performance of his responsibilities hereunder, including expenses
incurred in respect of the Executive's travel to and
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from his home, or to and from his business office, in Connecticut to and from
Boston, Massachusetts, or to and from Hanover, New Hampshire.
SECTION 8. PROSPECTOR PARTNERS AND AFFILIATES. Notwithstanding any
provision herein to the contrary, the Executive shall have the right to continue
his ownership and active involvement with the investment management and other
activities of (i) Prospector Associates, L.L.C. ("PROSPECTOR ASSOCIATES"), (ii)
Prospector Partners, L.L.C. ("PROSPECTOR PARTNERS"), including the investment
management of Prospector Partners Fund, L.P., Prospector Partners Small Cap
Fund, L.P., Prospector Offshore Fund (Bermuda), Ltd., and any other fund and any
separate account that it shall have been managing on the date of this Agreement
or that it shall manage during the Agreement Term (hereinafter any such funds
shall collectively be referred to as the "FUNDS" and individually referred to as
a "FUND" and any such accounts shall collectively be referred to as the
"SEPARATE ACCOUNTS" and individually referred to as a "SEPARATE ACCOUNT"), and
(iii) his ownership interests and investment management activities in connection
with the Connecticut Fund Business (as hereinafter defined), so long as the
Executive continues to devote the requisite time required to discharge his
responsibilities hereunder. Additionally, the Executive shall have the right to
delegate tasks necessary or desirable in connection with his performance of his
responsibilities and duties hereunder to employees of Prospector Partners. In
consideration of the foregoing, the Acquisition Company and the Executive agree
as follows:
(a) BUSINESS OPPORTUNITIES. During the Agreement Term, the Executive
shall use his best efforts to determine when an investment opportunity
meets the criteria of the Acquisition Company as well as any of the Funds
or Separate Accounts. In the event that the Executive makes such a
determination, each Fund and Separate Account shall first be given the
opportunity to invest in such opportunity to the extent such opportunity
shall be consistent with the policies of such Fund or Separate Account,
and, after any such investments shall be made, the Acquisition Company
shall be given the opportunity to invest in such opportunity. Upon the sale
of any interest in any such investment opportunity in which the Acquisition
Company and any Fund or Separate Account shall have invested, the proceeds
of such sale shall be distributed to such Funds, Separate Accounts and the
Acquisition Company as mutually agreed upon to be equitable at the time of
such sale.
(b) INDEMNIFICATION. The Executive, each other member or employee of
Prospector Partners or Prospector Associates, each of the Funds and each
Separate Account (hereinafter collectively referred to as the
"INDEMNITEES") shall be indemnified and held harmless by the Acquisition
Company and by White Mountains, jointly and severally, from and against any
and all loss, liability and expense, not to exceed, in aggregate, $2
million (including all attorneys' fees, judgments, fines and amounts paid
or to be paid in settlement), including but not limited to all loss,
liability and expense in respect of any Federal or State governmental
regulation imposed on or applied to any of the Indemnitees incurred or
suffered as a result of this Agreement or in connection with the
Executive's performance of his responsibilities hereunder; provided,
however, that this paragraph (i) shall apply only to the first occurrence
of any loss, liability and expense for which the Executive shall request
compensation from the Acquisition Company
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and/or White Mountains for the Indemnitees and (ii) shall not apply to any
loss, liability or expense resulting from the gross negligence or willful
misconduct of the Executive, any member or any employee or affiliate of
Prospector Partners or Prospector Associates.
The "CONNECTICUT FUND BUSINESS" shall mean the business activities of the
Connecticut Fund Business Entities (as hereinafter defined) in respect of
investments under the Connecticut Insurance Reinvestment Act No. 97-292. The
"CONNECTICUT FUND BUSINESS ENTITIES" shall include: (i) Insurance Capital
Partners, LLC; (ii) Xxxxxxxx Capital Partners, LLC; (iii) Prospector Capital
Management, LLC; (iv) Prospector Partners CT Fund Investment Management, LLC;
and (v) Prospector Capital Management II, LLC.
SECTION 9. NONDISCLOSURE. The parties hereto agree that during the
course of the Executive's employment by the Acquisition Company, the Executive
will have access to, and will gain knowledge with respect to the Acquisition
Company's Confidential Information (as defined below). The parties acknowledge
that unauthorized disclosure or misuse of such Confidential Information would
cause irreparable damage to the Acquisition Company. Accordingly, the Executive
agrees to the nondisclosure covenants in this Section 9. The Executive agrees
that he shall not (except as may be required by law), without the prior written
consent of the Acquisition Company during his employment with the Acquisition
Company under this Agreement and thereafter for so long as it remains
Confidential Information, use or disclose, or knowingly permit any unauthorized
person to use, disclose or gain access to, any Confidential Information;
provided, however, that the Executive may disclose Confidential Information to a
person to whom disclosure is reasonably necessary or appropriate in connection
with the performance by the Executive of his duties under this Agreement. Upon
termination of this Agreement for any reason, the Executive shall return to the
Acquisition Company the original and all copies of all documents and
correspondence in his possession relating to the business of the Acquisition
Company or any of its affiliates, including but not limited to all Confidential
Information, and shall not be entitled to any lien or right of retention in
respect thereof. "CONFIDENTIAL INFORMATION" shall mean all information (whether
or not in written form) that relates to the regular business activities of the
Acquisition Company, any of its affiliates or their respective operations,
products or services, and which is not known to the public generally, including
but not limited to technical information or reports; trade secrets; unwritten
knowledge and "know-how"; business strategies and philosophies; client or
consumer lists; client service records or consumer product records; premium
volume records; investment records; investment and risk management strategies;
product development, marketing and sales strategies; market surveys; marketing
plans; profitability analyses; long-range plans; information relating to
premiums, fees, competitive strategies and new product or service development;
information relating to any forms of compensation and other personnel-related
information; contracts; and underwriter or trading partners lists.
SECTION 10. SEVERANCE. If this Agreement shall be terminated for any
reason, the Executive shall be entitled to: (i) a lump sum cash payment of any
portion of the Base Salary for the year in which such termination occurs that
shall not have been received by the Executive prior to such termination; (ii)
any annual bonus awarded but not yet paid; and (iii) a cash payment equal to the
market value of any performance shares of White Mountains previously
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granted to the Executive under paragraph (b) of Section 5 hereof, the applicable
performance period of which shall not then have ended, pro rated based on the
achievement of or the progression toward previously established specific
performance criteria for that portion of such performance period that shall
precede such termination.
SECTION 11. TERMINATION; SURVIVAL. This Agreement shall terminate upon
the earlier of (i) the termination by the Executive of the Executive's
employment and (ii) the termination by the Acquisition Company of the
Executive's employment. Notwithstanding the foregoing, Sections 9, 10 and 12
hereof shall survive the termination of this Agreement.
SECTION 12. MISCELLANEOUS. (a) This Agreement shall inure to the
benefit of (i) the Executive and his executors, administrators, heirs, personal
representatives and permitted assigns, (ii) the Acquisition Company and its
successors and permitted assigns and (iii) White Mountains and its successors
and permitted assigns; provided, however, that except as provided herein, the
Executive shall not be entitled to assign or delegate any of his rights or
obligations hereunder without the prior written consent of the Acquisition
Company.
(b) This Agreement shall be deemed to be made in, and in all respects
shall be interpreted, construed and governed by and in accordance with, the laws
of the State of New York, without regard to the conflicts of law principles of
such State. No provision of this Agreement or any related document shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or drafted such provision.
(c) This Agreement constitutes the entire agreement between the
Acquisition Company and the Executive with respect to the Executive's employment
by the Acquisition Company and, effective as of the Commencement Date,
supersedes all prior agreements, if any, whether written or oral, between them,
relating to the Executive's employment by the Acquisition Company.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
TACK ACQUISITION COMPANY,
by
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Name:
Title:
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Xxxx X. Xxxxxxxxx
White Mountains Insurance Group,
Ltd., as to the provisions of
paragraph (b) of Section 5 hereof,
paragraph (b) of Section 8 hereof
and Sections 10 and 12 hereof:
WHITE MOUNTAINS INSURANCE GROUP,
LTD.,
by
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Name:
Title:
Prospector Partners, L.L.C., and
Prospector Associates, L.L.C., as
to the provisions of Section 8
hereof:
PROSPECTOR PARTNERS, L.L.C.,
by
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Name:
Title:
PROSPECTOR ASSOCIATES, L.L.C.,
by
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Name:
Title:
