[LETTERHEAD OF THE XXXXXX GROUP INC.]
March 21, 1997
Mr. Xxx Xxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx Xxxxxxxx, Xxxxxxxxx
00000
Dear Xxx,
RE: EMPLOYMENT AGREEMENT
-------------------------
Further to our conversations in New Orleans on Tuesday and Wednesday February 18
and 19, 1997 and subsequent conversations with Xxx Xxxxxxxx and myself I am
pleased to submit our proposal outlining the terms for an employment agreement
between yourself, the Xxxxxx Group Inc., Xxxxxx Group International, Inc.
(hereinafter collectively referred to as "Xxxxxx") and a wholly-owned life
insurance subsidiary (the "Company"), The Company will own or control, and
operate all life insurance operations presently owned, or hereafter acquired, by
Xxxxxx.
1. You will be employed as President and Chief Executive Officer of the
Company. Your employment will be deemed to commence March 17, 1997.
2. In order to facilitate consolidation of the life insurance operations and
start-up of the Company it is agreed that you will relocate to the
metropolitan New Orleans, Louisiana area and operate from the offices of
First Capital Life Insurance Co. At 0000 Xxxxxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxx.
The Company will reimburse all reasonable relocation costs including normal
sales commissions actually paid on the sale of your home located in Lookout
Mountain, Tennessee, moving costs,. furniture storage, etc. In addition,
the Company will reimburse the reasonable costs of temporary housing in New
Orleans and reasonable costs of travel between New Orleans and Chattanooga,
Tennessee until your home is sold or for a period of six months after
commencement of employment, whichever occurs first. Original receipts or
invoices will be provided by you in support of all such reimbursement
claims. Xxxxxx or the Company may require that you subsequently relocate
your normal office to
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a location other than the metropolitan New Orleans area, in which case the
Company will again provide reimbursement for reasonable location and
temporary housing costs.
3. Your agreed duties and responsibilities will be those described in the
attached Job Description (Schedule "A").
4. Your compensation (in U.S. dollars) will consist of the following:
(a) A beginning initial base bi-weekly salary of $7,693.00 ($200,000
annual equivalent) payable on the Company's normal payroll basis.
Your bi-weekly salary for 1998 will be $9,615.00 ($250,000 annual
equivalent). For 1999 and subsequent years your salary will be
subject to review on January 1 of each year with any adjustments
subject to the sole discretion of Xxxxxx.
(b) Inclusion in all Xxxxxx fringe benefit programs provided to Executives
of Xxxxxx with duties and responsibilities comparable to yourself,
including: Group Life Insurance, Accidental Death and Dismemberment
Insurance, 401(K), Dental, Medical and Long Term Disability. Costs of
these benefits are to be shared between you and the Company in the
same manner as with Xxxxxx Executives of similar ranking. These
benefits will be effective upon commencement of employment. In the
event that Xxxxxx or the Company is unable to obtain waiver of a
qualification period for any of the benefits provided the Company will
reimburse your reasonable out-of-pocket costs to secure similar
benefits. Specifically, Xxxxxx'x executive medical plan requires a
non-waivable 90 day waiting period. Consequently, the Company will
reimburse you for the costs of your existing medical plan during this
period.
(c) Four weeks vacation per annum. The Company acknowledges and agrees to
your vacation planned for August 27 to September 14, 1997.
(d) Reasonable operating expenses for your automobile including gas, oil,
insurance and maintenance, contingent upon your presentation of
original receipts or invoices in support.
(e) Upon your becoming an employee of Xxxxxx, senior management of Xxxxxx
is prepared to recommend to the Compensation Committee of the Board of
Directors that you be granted a stock option under and in accordance
with the Employee Stock Option Plan (United States) of The Xxxxxx
Group Inc. with respect to 50,000 common shares of The Xxxxxx Group
Inc. common stock, vesting in equal annual amounts of 10,000 shares
per year over a five year period at a share price which is the market
price of the shares at the close of trade on the day before the
subject stock option agreement is executed. If this recommendation is
approved by the Compensation Committee, the terms and conditions of
these stock options will be set forth in a formal stock option
agreement with provisions in accordance with the Employee Stock Option
Plan (United States) or as may be required by the Compensation
Committee, and the formal stock option agreement will control all
aspects of the options including, but not limited to, vesting,
exercise and termination. The stock option grant provided in this
clause (e) is
3
further subject to shareholder approval at the next annual general
meeting of The Xxxxxx Group Inc. which is presently scheduled for
May 15, 1997.
(f) You will be eligible to participate in a bonus program similar to that
offered to Executives of Xxxxxx. For reference purposes your target
bonus is 40% of your prorated annual salary based on performance
criteria to be established solely by Xxxxxx. At the election of
Xxxxxx these bonuses may be paid in cash or stock options of
equivalent value.
It is further understood that there is no guarantee of a bonus
applicable to any year succeeding Xxxxxx'x 1997 fiscal year, and any
subsequent annual fiscal year bonus entitlement shall be solely at
Xxxxxx'x discretion.
The granting of the stock options referred to in 5(e) and (f) are
subject to the signing of a formal option agreement. This option
agreement, as with all other currently issued stock option
agreements, will be subject to approval by disinterested
shareholders at the next TLGI shareholders' meeting (presently
scheduled for May 15, 1997) and no options may be exercised prior
to this approval.
(g) Supplementary incentive compensation - Upon formation or acquisition
of the Company, LGII agrees to contribute the operations of its
existing life insurance companies to the Company and to execute, and
to cause the Company to execute, and deliver the Equity Incentive
Agreement attached hereto as "Schedule B".
5. The Company will provide a cellular telephone and appropriate computer
equipment for business purposes.
6. The Company will reimburse you for reasonable and prudent expenses incurred
directly in relation to your duties, upon presentation of original receipts
or invoices in support thereof.
7. This Agreement may be terminated by Xxxxxx or the Company for cause at any
time by providing written notice. "Cause" shall include: gross negligence;
dishonesty; incompetence; your material failure or inability to perform
your duties and responsibilities hereunder; any activity or inactivity by
you that materially and adversely affects the business operations of Xxxxxx
or the Company or its affiliates; or any other material breach by you of
this Agreement.
This Agreement may be terminated at any time by either party without cause,
on six months written notice. In the event of termination by Xxxxxx or the
Company, the Company shall provide normal salary and fringe benefits for
six months from the date of notice.
8. In consideration of the stock option benefit provided to you in paragraph
5(e) herein, you covenant as follows: upon termination of this Agreement
by either party for any reason you will not, directly or indirectly, for a
period of twelve (12) months from termination, compete with Xxxxxx or the
Company in the funeral, cemetery, pre-need life insurance or
4
related businesses anywhere in the United States or Canada. In
providing this covenant you acknowledge that the activities of Xxxxxx
and the Company extend across the United States and Canada; that Xxxxxx
and the Company are engaged in an intensely competitive industry; that
Xxxxxx and the Company's main competitors seek acquisitions and operate
competing businesses throughout the United States and Canada; and that
your employment duties and knowledge cover both the United States and
Canada.
"Compete" includes serving as an employee, shareholder, officer, director,
consultant or advisor, directly or indirectly, and includes the giving of
financial assistance or acting as broker, directly or indirectly.
"Business" includes either directly or indirectly, research or negotiation
for acquisition, development or operation of funeral homes, cemeteries and
related businesses, including but not limited to the related businesses of
funeral and cemetery insurance of an types.
9. With respect to your duties and responsibilities on behalf of the Company:
(a) At all times you will act in the best interests of the Company; you
will engage in no activity which is detrimental or prejudicial to the
Company, its reputation, or its business;
(b) At no time will you represent, directly or indirectly, parties or
interests that are prejudicial to or in conflict with the best
interests of the Company, its operations or Xxxxxx'x acquisition
program;
(c) You will at all times act honestly and faithfully in carrying out the
Company's policies and instructions;
(d) You will at all times represent the Company in a professional manner
and use your best efforts to promote the Company's interests.
10. During the currency of this Agreement and following its termination you
will at all times keep strictly confidential all internal, private
information, data, materials and knowledge relating to Xxxxxx and the
Company or their respective businesses; nor during such times will you make
any unauthorized use of any proprietary information, data or analysis of
Xxxxxx or the Company, or of specific corporate opportunities developed or
in the process of development by Xxxxxx or the Company.
11. Any dispute concerning the content or effect of this letter agreement or
the terms and conditions or any other aspect of your employment with Xxxxxx
or the Company shall be resolved through binding, compulsory, private
arbitration and both you and the Company and Xxxxxx hereby consent to such
arbitration and waive any right to pursue litigation in any court
concerning your employment.
12. This letter outlines the understanding of Xxxxxx and the Company as to the
terms and conditions of our agreement with yourself. To confirm your
acceptance of and agreement with the employment proposal as outlined in
this letter, please sign both copies and return one copy for our records.
The remaining copy is for your files. This mutually signed
5
letter will then constitute the employment agreement between yourself,
Xxxxxx and the Company.
We look forward to you joining our organization and assuming a leadership role
in the growing of our pre-need life insurance business.
Yours truly,
THE XXXXXX GROUP INC. and
XXXXXX GROUP INTERNATIONAL, INC.
and the COMPANY
Per /s/ XXXX XXXXXX
--------------------------------------------
Xxxx Xxxxxx
Senior Vice President and Chief Financial Officer
ACCEPTED AND AGREED as of this 31st day of March, 1997.
/s/ XXX XXXXX /s/ XXXXXXXX X. XXXXX
-------------------------------- -----------------------------------
Xxx Xxxxx Witness
SCHEDULE B
AMENDED AND RESTATED
EQUITY INCENTIVE AGREEMENT
THIS AMENDED AND RESTATED EQUITY INCENTIVE AGREEMENT (this
"Agreement"), dated as of September 24, 1998 is entered into by and between
Xxxxxx Life Insurance Group, Inc., a Delaware corporation having its principal
offices at 0000 Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxx 00000 (the "Company"),
Xxxxxx Group International, Inc., a Delaware corporation having its principal
place of business at 0000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000 ("LGII")
and Xxxxxx Xxxxx, an individual residing at 000 Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxx 00000 (the "Executive").
WITNESSETH
WHEREAS, LGII and the Executive have entered into an Employment
Agreement, dated as of March 17,1997, by and between the Company and the
Executive (the "Employment Agreement"), which sets forth the terms and
conditions upon which the Company will employ the Executive;
WHEREAS, LGII is the owner of all the issued and outstanding capital
stock of the Company;
WHEREAS, the Company desires to provide the Executive with additional
incentive compensation related to the financial performance of the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the Company and the Executive
hereby agree as follows:
1. AWARD OF PERCENTAGE INTEREST. In consideration of the
Executive's services to the Company and the delivery of the Participation
Payment by the Executive to LGII pursuant to Section 2 hereof, LGII shall
establish an account in the name of the Executive on the books and records of
LGII (the "Account") and credit the Account with an amount equal to 9.86% of
the Company's Book Value (as hereinafter defined) (as adjusted from time to
time hereunder, the "Percentage Interest"), which Percentage Interest may be
exercised from time to time in accordance with the terms and conditions
hereof. The award of Percentage Interest shall be entered an the LGII's books
and records as a grant of deferred compensation to the Executive and shall
not constitute the Executive as the owner or holder of shares of Common Stock
of the Company or any equity interest therein.
The term "Company's Book Value" shall mean the total net worth,
calculated in accordance with generally accepted accounting principles in
Canada ("Canadian GAAP"), of the Company, Mayflower National Life Insurance
Company. Security Industrial Insurance Company, First Capital Life Insurance
Company of Louisiana, National Capital Life Insurance Company, and
subsidiaries of each of the above companies, without double counting and
subject to adjustment per Section 4 hereof in the case of future
acquisitions. After completion of an anticipated
reorganization involving all of the above companies, it is expected that the
consolidated net worth of the Company will equal the Company's Book Value.
2. PARTICIPATION PAYMENT. In exchange for the right to receive the
Percentage Interest, the Executive shall deliver to LGII a note in the form
attached as EXHIBIT A hereto in the original principal amount of Ten Million
Dollars ($10,000,000), subject to adjustment as set forth therein (the "Note").
3. VESTING OF PERCENTAGE INTEREST. The Executive's right to
exercise the Percentage Interest hereunder for a Cash Award (as hereinafter
defined and determined by Section 6 hereof) shall be fully vested.
4. ADJUSTMENT OF PERCENTAGE INTEREST. (a) The Percentage
Interest deemed to be owned by Executive and the principal amount of the
Promissory Note shall be adjusted, based on the Company's XXX for the fiscal
year ended December 31, 2001, as set forth on EXHIBIT B attached hereto. In
the event that the Executive ceases for any reason to be employed by the
Company during the period commencing January 1, 1999 and ending December 31,
2001, the Percentage Interest deemed to be owned by Executive and the
principal amount of the Promissory Note shall be adjusted, based on the
Company's XXX for the previous fiscal year (determined as of the end of the
fiscal year immediately preceding the date that Executive ceases for any
reason to be employed by the Company) extrapolated to December 31, 2001, as
set forth on EXHIBIT B hereto. For purposes of this Agreement, "XXX" shall
mean the Company's return on equity expressed as a percentage, (i) the
numerator of which is earnings before state and federal income taxes and
bonuses for such fiscal year and (ii) the denominator of which is the sum of
(A) the consolidated shareholders equity of the Company as of the last day of
the prior fiscal year of the Company and its subsidiaries as shown on the
consolidated financial statements of the Company ("Book Value"), plus (B) the
product of (x) the increase in Book Value for such fiscal year attributable
to capital contributions, times (y) a fraction the numerator of which is the
number of days in such fiscal year which have elapsed since the date of such
capital contribution and the denominator of which is 365, in every case
determined in accordance with Canadian GAAP.
(b) If during the term of this Agreement, LGII or any affiliate of
LGII shall purchase a life insurance company or life insurance assets of a
company or a line of business thereof (an "Acquisition"), LGII shall cause
the Company to purchase such Acquisition from LGII or such affiliate at a
fair market value as determined in good faith by the Board of Directors of
LGII. In the event such purchase would not be allowed by applicable
regulatory matters or would cause the Company's A.M. Best rating to be
lowered below "B" as a result of such purchase, LGII will contribute such
Acquisition to the Company as a contribution of capital equal to the fair
market value of such Acquisition as determined in good faith by the Board of
Directors of LGII (the "Affiliate Contribution"). In the event that LGII
contributes such Acquisition to the Company as a contribution of capital, the
Executive shall have the option to maintain up to his Percentage Interest by
electing to make an additional participation payment to LGII in an amount
equal to the product of the Percentage Interest, or part thereof, times the
amount of the Affiliate Contribution. Such payment shall be made by an
increase in the principal amount of the Promissory Note. In the event that
the Executive shall not elect to maintain up to his Percentage Interest, his
Percentage Interest shall be reduced to the percentage determined (i) by the
product
2
of (x), the Percentage Interest immediately prior to such Affiliate
Contribution, times (y), the Book Value immediately prior to such Affiliate
Contribution plus the additional participation payment (if any) made by the
Executive to LGII, (ii) divided by the Book Value immediately following such
Affiliate Contribution. In the event that Executive's Percentage Interest is
reduced pursuant to the previous sentence, the Percentage Interest, referred
to on EXHIBIT B, which applies for the fiscal year ended December 31, 2001,
shall be reduced proportionately.
(c) If the financial statements of the Company are impacted by
litigation relating to funeral policies written prior to March 17, 1997, both
the numerator and the denominator of the XXX calculation in Section 4(a)
above shall be equitably adjusted to eliminate all uninsured costs associated
with such litigation including, without limitation, all attorneys fees, costs
and expenses (including any interest thereon) and all costs and expenses
associated with a settlement or judgment (including any interest thereon).
The Company's Book Value shall also be adjusted on an equitable basis for
purposes of making the calculations and determinations pursuant to this
Agreement to eliminate the effect of such charges on the Company's Book Value.
5. EXERCISE OF PERCENTAGE INTEREST. The Executive may exercise, or
LGII may require the Executive to exercise, his Percentage Interest for a Cash
Award on the following basis:
(a) In the event that the Executive ceases for any reason to be
employed by the Company, he, or his legal representative, if applicable, shall
exercise all but not less than all of the Percentage Interest held by the
Executive.
(b) At any time after December 31, 2001, or in the event that the
Executive ceases for any reason to be employed by the Company, LGII may require
the Executive, or his legal representative, if applicable, to exercise all or
any part of the Percentage Interest then held by the Executive.
(c) At any time after December 31, 2001, Executive, or his legal
representative, if applicable, may exercise all or any part of the Percentage
Interest then held by Executive.
(d) Immediately prior to any merger or consolidation with, or sale of
all or substantially all the assets or Common Stock of the Company, to any other
person not affiliated with LGII, LGII may require the Executive, or his legal
representative, if applicable, to exercise all but not less than all of the
Percentage Interest held by Executive.
(e) If neither party requests an exercise of the Percentage Interest
before January 1, 2003, the XXX goals, Promissory Note amounts, and the
Percentage Interest shown in Exhibit B for the year 2001 will remain in effect.
6. DETERMINATION OF CASH AWARD.
(a) The cash award payable to the Executive upon exercise of the
Percentage Interest hereunder (each, a "Cash Award") shall be equal to (i)
the product of (x) the Book Value,
3
times (y) Percentage Interest or part thereof being exercised by Executive,
plus (ii) an amount equal to (x) the product of (A) the aggregate amount of
cash dividends declared and paid by the Company on its outstanding common
stock (other than Extraordinary Dividends (as defined below) declared and
paid pursuant to section 6(b) hereof) during the term of this Agreement, (B)
times the Percentage Interest deemed to be owned by Executive at the time of
payment of such dividend, times (y) the percentage of the Percentage Interest
being exercised by Executive, less (iii) the principal amount of and accrued
interest on the Promissory Note times the percentage of the Percentage
Interest being exercised by the Executive, in each case determined as of the
Calculation Date, plus (iv) an amount equal to 113,917 plus interest thereon
at the rate of 9% per annum calculated from the date hereof until the date of
the Cash Award. For purposes of this Agreement, "Calculation Date" shall
mean the last day of the last full month immediately preceding the exercise
of the Percentage Interest.
(b) In the event of a sale of assets by the Company outside the
ordinary course of business and the declaration and payment of an
Extraordinary Dividend resulting from such sale of assets to the shareholders
of the Company, LGII, simultaneously with the payment of such Extraordinary
Dividend, shall reduce the principal amount of the Promissory Note in an
amount equal to such Extraordinary Dividend times the Percentage Interest
deemed to be owned by the Executive at the time of payment of such
Extraordinary Dividend. The term "Extraordinary Dividend" shall mean any
payment from the Company to LGII that results in a decrease in the book value
of the Company, including, without limitation, any payment made as a result
of the Company's sale of substantially all of the assets of, or all of the
capital stock of, First Capital Life Insurance Company of Louisiana.
(c) In the event of any exercise being made hereunder, the Company
shall provide as promptly as practicable to the Executive (i) its audited
financial statements and operating statements in respect of the last two (2)
consecutive fiscal periods or such shorter period for which audited
financials are available, (ii) unaudited financial statements and operating
statements, as of the Calculation Date, prepared on a basis consistent with
the audited financial statements and operating statements, and (iii) a
statement demonstrating the calculation of the applicable Cash Award to be
paid to the Executive in connection with the exercise of such Percentage
Interest (each, a "Cash Award Statement"). The calculation of the amount of
the Cash Award, as set forth in the Cash Award Statement, shall be conclusive
and binding upon the parties hereto except for any fraud or error discovered
within thirty (30) days of the making of such reports.
(d) Although LGII may, in its discretion, make such provision as
it deems advisable for funding the ultimate payment of such Cash Award, no
assets of the Company shall be segregated for that purpose or held in trust
for the benefit of the Executive, it being the intention that the Cash Award
shall constitute at all times a general unsecured obligation of the Company.
(e) On June 25, 1997, the insurance companies paid $6,885,100 of
dividends to LGII. On December 2, 1997, LGII made a capital contribution of
$6,885,100 to the Company. Since the insurance group has an average
investment yield of 7%, the lost investment income for
4
1997 was $213,173, which for the purposes of this Agreement will be treated
as a 1997 dividend, with the Executive's Percentage Interest to be paid when
a Cash Award is made.
7. EXERCISE OF PERCENTAGE INTEREST UPON TERMINATION FOLLOWING A
CHANGE IN CONTROL.
(a) In the event of (i) the occurrence of a Change in Control (as
defined herein), and (ii) the occurrence of a Triggering Event (as defined
herein), prior to January 1, 2000, Executive shall have an immediate right to
exercise the Percentage Interest for a Cash Award. For purposes of this
Section 7(a), Executive shall be deemed to own a Percentage Interest equal to
the greater of 9.86% or such Percentage Interest that would result using
Exhibit B and an average XXX for the six months prior to exercise.
(b) The term "Change in Control" shall mean the occurrence of any of
the following events:
(i) The Xxxxxx Group, Inc. ("TLGI") is merged, consolidated or
reorganized into or with another corporation or other legal person,
and as a result of such merger, consolidation or reorganization less
than two-thirds of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors
("Voting Stock") of such corporation or person immediately after such
transaction are held in the aggregate by the holders of Voting Stock
of TLGI immediately prior to such transaction;
(ii) TLGI sells or otherwise transfers all or substantially all
of its assets to another corporation or other legal person, and as a
result of such sale or transfer less than two-thirds of the combined
voting power of the then-outstanding Voting Stock of such corporation
or person immediately after such sale or transfer is held in the
aggregate by the holders of Voting Stock of TLGI immediately prior to
such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act), other than Xxxxxxx X. Xxxxxx, a person including
Xxxxxxx X. Xxxxxx, or a person whose beneficial ownership of Voting
Stock of TLGI is shared with Xxxxxxx X. Xxxxxx, has become the
beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of securities representing 25% or more of the combined
voting power of the then-outstanding Voting Stock of TLGI;
(iv) TLGI files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form
or report or item
5
therein) that a change in control of TLGI has occurred or will occur
in the future pursuant to any then-existing contract or transaction;
or
(v) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the
directors of TLGI cease for any reason to constitute at least a
majority thereof; PROVIDED, HOWEVER, that for purposes of this
clause (v) each director who is first elected, or first nominated
for election of TLGI's stockholders, by a vote of at least
two-thirds of the directors of TLGI (or a committee thereof) then
still in office who were directors of TLGI at the beginning of any
such period will be deemed to have been a director of TLGI at the
beginning of such period.
Notwithstanding the foregoing provisions, unless otherwise determined in a
specific case by majority vote of the Board, a "Change in Control" shall
not be deemed to have occurred solely because (A) TLGI, (B) an entity in
which TLGI directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock (a "Subsidiary"), or (C) any TLGI-sponsored
employee stock ownership plan or any other employee benefit plan of TLGI or
any Subsidiary either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1,
Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein) under the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of 25% or otherwise, or because
TLGI reports that a change in control of TLGI has occurred or will occur in
the future by reason of such beneficial ownership.
(c) The term "Triggering Event" shall mean:
(i) The Company's termination of Executive other than as a
result of Cause (as defined herein), the Executive's death, or
permanent disability within the meaning of and the actual receipt of
benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control;
(ii) The Executive's termination of his employment because of
the failure to elect or reelect or otherwise maintain Executive in the
office or the position or a substantially equivalent office or
position of or with the Company to that which the Executive held
immediately prior to a Change in Control, or the removal of Executive
as a director of the Company (or any successor thereto) if Executive
shall have been a director of the Company immediately prior to the
Change in Control; or
(iii) (A) a significant adverse change in the nature or scope
of the authorities, powers, functions, responsibilities or duties
attached to the position with the Company which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay (as defined herein) and
Incentive Pay (as defined herein) other than a reduction based on
objective performance criteria, or (C) the termination or denial of
the Executive's
6
rights to Employee Benefits (as defined herein) or a reduction in
the scope or value thereof, any of which is not remedied by the
Company within 10 calendar days after receipt by the Company of
written notice from Executive of such change, reduction or
termination, as the case may be.
(d) The term "Cause" shall mean that the Executive shall have
committed:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company or any Subsidiary;
(ii) intentional wrongful damage to property of the Company or
any Subsidiary;
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary; or
(iv) intentional wrongful engagement in any Competitive
Activity; and any such act shall have been materially harmful to the
Company. For purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not
in good faith and without reasonable belief that his action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than two-thirds of the Board of
Directors of the Company ("Board") then in office at a meeting of the
Board called and held for such purpose, after reasonable notice to the
Executive and an opportunity for the Executive, together with his
counsel (if the Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good faith
opinion of the Board, the Executive had committed an act constituting
"Cause" as herein defined and specifying the particulars thereof in
detail. Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such
determination.
(e) The term "Base Pay" shall mean the Executive's annual base salary
at a rate not less than the Executive's annual fixed or base compensation as in
effect for Executive immediately prior to the occurrence of a Change in Control
or such higher rate as may be determined from time to time by the Board or a
committee thereof.
(f) The term "Employee Benefits" shall mean the perquisites,
benefits and service credit for benefits as provided under any and all
employee retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement, or other
retirement income or
7
welfare benefit, deferred compensation, incentive compensation, group or
other life, health, medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company), disability, salary
continuation, expense reimbursement and other employee benefit policies,
plans, programs or arrangements that may now exist or any equivalent
successor policies, plans, programs or arrangements that may be adopted
hereafter by the company, providing prerequisites, benefits and service
credit for benefits at least as great in the aggregate as are payable
thereunder prior to a Change in Control.
(g) The term "Incentive Pay" shall mean an annual amount equal to
not less than the greatest aggregate annual bonus, incentive or other
payments of cash compensation, in addition to Base Pay, made or to be made in
regard to services rendered in any calendar year during the three calendar
years immediately preceding the year in which the Change in Control occurred
pursuant to any bonus, incentive, profit-sharing, performance, discretionary
pay or similar agreement, policy, plan, program or arrangement (whether or
not funded) of the Company, or any successor thereto providing benefits at
least as great as the benefits payable thereunder prior to a Change in
Control.
8. CLOSING . The Closing of the transactions contemplated by an
exercise of the Percentage Interest hereunder (each, a "Closing") shall be
completed within thirty (30) days of the delivery of the Cash Award Statement.
Notwithstanding Section 6 above, the payment of all or any portion of the amount
payable under Section 6 above will be deferred to the extent that any amount
payable under Section 6 when added to any other compensation received or to be
received by Executive (or otherwise accrued with respect to Executive) in the
same calendar year, would not be deductible by the Company by reason of
section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
but in no event greater than the total amount payable under Section 6. The
deferred amount shall become payable on the earlier of (i) December 31 of the
first succeeding calendar year in which such amount, when added to all other
compensation received or to be received by Executive (or otherwise accrued with
respect to Executive) in such calendar year, would not be non-deductible by the
Company by reason of section 162(m) of the Code or (ii) the first December 31 on
which Executive is not employed by the Company or an affiliate of the Company.
The Company, exercising reasonable judgment, shall make all determinations under
this paragraph. Any amount deferred under this paragraph shall accrue interest
at 9% per annum if payment of such amount is deferred beyond thirty days from
delivery of the Cash Award Statement.
9. NO EXTRAORDINARY CHARGES. LGII covenants and agrees that during
the term of this Agreement, it will not make extraordinary intercompany charges
to the Company other than (i) intercompany charges customarily made to
subsidiaries of LGII, including insurance company subsidiaries of LGII, in
accordance with past practices, and (ii) intercompany charges for the direct
benefit of the Company and its subsidiaries.
10. NON-ALIENABILITY OF BENEFITS. Except as permitted by this
Agreement, no right or interest of the Executive shall, without the written
consent of LGII, be assignable or transferable in any manner or be subject to
alienation, anticipation, sale, pledge, encumbrance or other legal process or in
any manner liable for or subject to the debts or liabilities of the Executive.
If the Executive shall attempt to or shall transfer, assign, alienate,
anticipate, sell,
8
pledge or otherwise encumber his benefits hereunder or any part hereof, or if by
reason of his bankruptcy or other event happening at any time such benefits
would devolve upon anyone else or would not be enjoyed by him, then LGII, in its
discretion, may terminate his interest in any such benefit to the extent LGII
considers necessary or advisable to prevent or limit the effects of such
occurrence. Notwithstanding the foregoing, nothing herein shall prevent
Executive from disposing of the proceeds of any Cash Award after the date of any
such Cash Award.
11. AMENDMENT OR MODIFICATION WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification or waiver
is authorized by the Board of Directors of LGII and the Company and is agreed to
in writing, signed by the Executive and by an officer of LGII and the Company
thereunto duly authorized. Except as otherwise specifically provided in this
Agreement, no waiver by any party hereto of any breach by any other party hereto
or any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of a subsequent breach of such condition or
provision of this Agreement or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.
12. WITHHOLDING TAXES. LGII or the Company shall have the right to
deduct from all compensation payments made pursuant to this Agreement such
federal, state and local taxes as are required to be withheld by LGII or the
Company in respect of such payments.
13. NO CONTINUED EMPLOYMENT. This Agreement shall not confer upon
Executive any right with respect to continuance of employment with the Company
nor shall it interfere in any way with any right such Executive or the Company
would otherwise have to terminate such Executive's employment.
9
IN WITNESS WHEREOF, the Executive and LGII and the Company, by a duly
authorized officer of LGII and the Company, respectively, have executed this
Equity Incentive Agreement as of the 24th day of September, 1998.
XXXXXX GROUP INTERNATIONAL, INC. XXXXXX LIFE INSURANCE GROUP, INC.
By: /s/ XXXX XXXXXX By: /s/ XXXX XXXXXX
------------------------ ------------------------------
Name: Xxxx Xxxxxx Name: Xxxx Xxxxxx
---------------------- ----------------------------
Title: Title:
---------------------- ---------------------------
/s/ XXXXXX XXXXX
------------------------------------
XXXXXX XXXXX
EXHIBIT A
PROMISSORY NOTE
---------------
Dated: September 24, 1998 Amount: $10,000,000.00
FOR VALUE RECEIVED, the undersigned hereby promises to pay to or to the order
of Xxxxxx Group International, Inc., at 0000 Xxxxxxx Xxx., Xxxxxxx, XX X0X
0X0, the sum of Ten Million Dollars ($10,000,000.00), as adjusted pursuant to
the provisions of that certain Equity Incentive Agreement, dated as of
September 24, 1998, by and between the undersigned, Xxxxxx Life Insurance
Group, Inc. and Xxxxxx Group International, Inc. (the "Agreement") with
interest accruing on the principal amount from February 12, 1998 through the
time of repayment, at a rate of 9% per annum, simple interest, payable upon
payment of this Promissory Note pursuant to the terms and conditions set
forth in the Agreement with interest for any partial year to be calculated on
the basis of 365 days per year; provided that, notwithstanding the repayment
provisions aforesaid, this Promissory Note shall be payable solely by
reduction, from time to time, of any Cash Award pursuant to Section 6(a)(iii)
of the Agreement; and further provided that this note shall be without
personal recourse and shall be payable as provided in the Agreement.
/s/ XXXXXX XXXXX
---------------------------------
XXXXXX XXXXX
