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EXHIBIT 10.6
Employment Agreement with
Xxxxxx X. Xxxxx
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of January 8, 1998 by and between
Annuity and Life Re (Holdings), Ltd., a Bermudian corporation (the "Company"),
Annuity and Life Reassurance, Ltd., a subsidiary of the Company organized under
the laws of Bermuda to engage in worldwide life and annuity reinsurance (the
"Operating Company"), and Xxxxxx X. Xxxxx (hereinafter called the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is contemplating an initial public
offering or a private placement of its Common Shares in excess of $100 million
(the "IPO"); and
WHEREAS, the Company and the Operating Company desire that the
Employee serve as Senior Vice President and Chief Underwriter of the Company
and the Operating Company and the Employee is willing to serve in such
capacities; and
WHEREAS, if the IPO has not been completed prior to May 31,
1998, both Company and the Employee desire the option to terminate this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:
Section: 1. Employment.
Effective as of February 1, 1998, the Company and the
Operating Company will employ the Employee and the Employee will perform
services for the Company and the Operating Company on the terms and conditions
set forth in this Agreement and for the period ("Term of Employment") specified
in Section 3 hereof.
Section: 2. Duties.
The Employee, during the Term of Employment, shall serve the
Company as its Senior Vice President and Chief Underwriter. The Employee shall
also serve as Senior Vice President and Chief Underwriter of the Operating
Company. The Employee shall be based at the Operating Company's headquarters
in Bermuda, other than for periodic travel in the ordinary course of business.
The Employee shall have such duties and responsibilities as are assigned to him
by the Boards of Directors of the Company and the Operating Company
commensurate with his positions as Senior Vice President and Chief Underwriter
of the Company and the Operating Company.
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The Employee shall perform his duties hereunder faithfully and
to the best of his abilities and in furtherance of the business of the Company,
and shall devote his full business time, energy, attention and skill to the
business of the Company and to the promotion of its interests except as
otherwise agreed by the Company.
The Employee warrants and represents that he is free to enter
into this Agreement and is not restricted by any prior or existing agreement
and the Company and the Operating Company may rely on such representation in
entering into this Agreement.
Section: 3. Term of Employment.
The initial Term of Employment of this Agreement shall be the
period commencing on February 1, 1998 and ending on the third anniversary of
the IPO. At the end of the initial Term of Employment, and on each anniversary
thereof, the Term of Employment shall automatically be extended for one
additional year, unless the Company or the Employee shall have given written
notice to the other that it does not wish to extend this Agreement at least
three months in advance.
Section: 4. Salary.
The Employee shall receive, as compensation for his duties and
obligations to the Company and the Operating Company, a salary at the annual
rate of $200,000, payable in substantially equal installments in accordance
with the Operating Company's payroll practice. It is agreed between the
parties that the Company shall review the base annual salary annually and in
light of such review may, in the discretion of the Board of Directors of the
Company (but shall not be obligated to), increase such base annual salary
taking into account any change in the Employee's then responsibilities,
increases in the cost of living, performance by the Employee, and other
pertinent factors.
Upon consummation of the IPO, the Company shall contribute
monthly ten percent of the base monthly salary of the Employee to a retirement
plan for the benefit of the Employee.
Section: 5. Bonus.
During the Term of Employment, the Employee shall, subject to
and effective upon the consummation of the IPO, participate in the Company's
Incentive Compensation Plan, a summary of which is attached hereto as Exhibit
A, and will be eligible for an annual cash bonus of up to two times his annual
salary based on performance targets as determined in accordance with the terms
of the Plan.
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The Employee shall receive, upon the consummation of the IPO,
a one-time cash bonus advance of $25,000 (the "Advance Bonus"). Such Advance
Bonus shall be an advance of and deducted from the annual cash bonus for the
1998 year to which the Employee may be entitled in February 1999 under the
Company's Incentive Compensation Plan.
Section: 6. Options.
(a) Initial Options. The Company shall grant to the
Employee, subject to and effective as of the consummation of the IPO, options
(the "Initial Options") to purchase at a price per share equal to the price per
share in the IPO, .7 of one percent of the Company's ordinary shares issued in
the IPO (the "Ordinary Shares"), but not to exceed an aggregate value of $2.8
million (valued at the IPO per share price). Thirty three and one-thirds
percent (33 1/3%) of the Initial Options shall become exercisable after the
first anniversary of the IPO, 33 1/3% of the Initial Options shall become
exercisable after the second anniversary of the IPO, and an additional 33 1/3%
of the Initial Options shall become exercisable after the third anniversary
thereof. In addition, no Initial Option may be exercised after the earlier of
(A) the date that is (i) ninety (90) days following the termination of the
Employee's employment for any reason other than death, disability or Serious
Cause (as defined in Section 11), or (ii) six (6) months after the termination
of the Employee's employment by reason of death or disability or (iii) the date
upon which the Employee's employment is terminated for Serious Cause; or (B)
the tenth anniversary of the IPO date.
The consideration for the Ordinary Shares purchased upon
exercise of the Initial Options may be paid in cash or by any other method
permitted by the terms of the Company's Initial Option Plan. The issuance of
any Ordinary Shares pursuant to the Initial Options shall in all events be
subject to all applicable securities laws and the Employee shall enter into any
agreement reasonably requested by the Company in order to ensure that all such
issuances are in full compliance therewith. The Employee shall not have any of
the rights and privileges of a shareholder of the Company with respect to the
Ordinary Shares issuable upon any exercise of Initial Options unless and until
his name is entered into the register of members of the Company in respect of
such Ordinary Shares. If there is any change in the number or nature of
outstanding shares of the Company's capital stock by reason of a share
dividend, recapitalization, merger, consolidation, scheme of arrangement, share
split, combination or exchange, share repurchase or otherwise, which in any
such case has a dilutive or anti-dilutive effect on the Ordinary Shares, the
number of Ordinary Shares subject to each outstanding Initial Option, the
exercise price thereof and/or other terms thereof shall be appropriately
adjusted by the Board of Directors of the Company (or any committee thereof),
whose determination shall be
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conclusive, so as to restore the option holder to his rights thereunder.
(b) Other Options. During the Term of Employment, the
Employee shall, subject to the consummation of the IPO, be eligible to be
granted options (in addition to the Initial Options) to purchase Ordinary
Shares at such price and subject to such terms as provided by the Company's
Initial Stock Option Plan, in the sole discretion of the Board of Directors of
the Company.
Section: 7. Employee Benefits.
During the Term of Employment the Employee shall, subject to
the consummation of the IPO, be entitled to participate in all employee benefit
programs of the Company, as such programs may be in effect from time to time,
including without limitation, pension and other retirement plans, profit
sharing plans, group life insurance, accidental death and dismemberment
insurance, hospitalization, surgical and major medical coverage, sick leave
(including salary continuation arrangements), long term disability, holidays
and vacations.
Section: 8. Business Expenses.
All reasonable travel and other expenses incidental to the
rendering of services by the Employee hereunder shall be paid by the Company
and if expenses are paid in the first instance by the Employee, the Company
will reimburse him therefor upon presentation of proper invoices; subject in
each case to compliance with the Company's reimbursement policies and
procedures.
Section: 9. Housing and Travel Expenses.
Effective upon consummation of the IPO, the Company shall
provide to the Employee the sum of $8,333.00 monthly as an allowance to cover
the expenses of housing in Bermuda and for his personal travel.
Section: 10. Vacations and Sick Leave.
The Employee shall be entitled to reasonable vacation and
reasonable sick leave each year (beginning with 1998), in accordance with
policies of the Company, as determined by the Board of Directors, provided,
however, that the Employee shall be entitled to a minimum of 4 weeks vacation
per year.
Section: 11. Termination.
(a) In the event of Serious Cause, as defined below, the
Company may terminate the Employee's employment and the Term
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of Employment upon written notice of such termination stating the Serious Cause
upon which the Company relies for its termination. The Employee's employment
and the Term of Employment shall be terminated effective as of the date
specified in such notice, which shall in no event be earlier than the effective
date of such notice as provided in Section 20.
"Serious Cause" shall mean (i) the willful and continued
failure by the Employee to perform substantially his duties hereunder, other
than by reasons of health, after demand for substantial performance is
delivered by the Company that identifies the manner in which the Company
believes the Employee has not substantially performed his duties, (ii) the
Employee shall have been indicted by any federal, state or local authority in
any jurisdiction for, or shall have pleaded guilty or nolo contendere to, an
act constituting a felony, (iii) the Employee shall have habitually abused any
substance (such as narcotics or alcohol), or (iv) the Employee shall have (A)
engaged in acts of fraud, material dishonesty or gross misconduct in connection
with the business of the Company or (B) committed a material breach of this
Agreement.
(b) The Employee may terminate his employment and the
Term of his Employment in the event of Good Reason, as defined below, upon 30
days' prior written notice of such termination stating the Good Reason upon
which the Employee relies for his termination. The Employee's employment and
the Term of Employment shall be terminated effective as of the date specified
in such notice, which in no event shall be earlier than the effective date of
such notice as provided in Section 20.
"Good Reason" shall mean (i) a substantial reduction in the
Employee's salary, (ii) the demotion of the Employee, (iii) a material
reduction of the Employee's duties hereunder, or (iv) a material breach of this
Agreement by the Company.
(c) In the event of termination of the Employee's
employment and the Term of Employment by the Company for Serious Cause or by
the Employee without Good Reason, the Employee shall forfeit all bonus amounts
for the then current fiscal year, except for the Advance Bonus paid upon
consummation of the IPO, and the Company shall be liable to the Employee only
for (i) any accrued but unpaid salary, (ii) any accrued but unpaid bonus from a
prior fiscal year, and (iii) reimbursement of business expenses incurred prior
to the date of termination.
(d) In the event of the death, retirement or disability
of the Employee, the Employee's employment and Term of Employment shall be
terminated as of the date of such death, retirement or disability and the
Company shall pay the Employee, or the Employee's estate or legal
representative, as appropriate, (i) any accrued but unpaid salary, (ii) any
earned but unpaid
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bonus from a prior fiscal year, (iii) reimbursement of business expenses
incurred prior to the date of termination, (iv) travel and housing allowances
under Section 9 for six months after the date of termination, and (v)
reasonable relocation expenses from Bermuda to the United States. The date of
the Employee's disability shall be deemed to be the last day of the sixth month
during which the Employee has been unable to carry out his position as provided
below.
"Disability" shall mean the Employee's inability, for reasons
of health, to carry out the functions of his position for a total of 6 months
during any 12 month period of this Agreement. "Retirement" shall mean
retirement from employment upon attaining age 65 or such earlier age agreed to
by the Company.
In addition, in such event, if the Company's Ordinary Shares
are not then publicly traded, the Company shall have the right to call any or
all of the Ordinary Shares of the Company owned by the Employee within six (6)
months of death, retirement or disability, and the Employee, the Employee's
estate or legal representative, whichever is appropriate, shall have the right
to put any or all of the Employee's Ordinary Shares to the Company within
twelve (12) months after death or within six (6) months after retirement or
disability. The price at which such put or call is exercisable shall be equal
to the appraised value, in each case measured as of the date of termination.
(e) If the Company should (i) terminate the Term of
Employment and the Employee's employment herein without Serious Cause; or (ii)
if the Employee should terminate the Term of Employment and his employment
hereunder for Good Reason, the Company shall continue to pay the Employee his
base salary for a period of one year from such termination. In addition, the
Employee shall be entitled to (A) any accrued but unpaid salary, (B) any earned
but unpaid bonus from a prior fiscal year, (C) reimbursement of business
expenses incurred prior to the date of termination, and (D) travel and housing
allowances under Section 9 for six months after the date of termination, and
(E) reasonable relocation expenses from Bermuda to the United States.
(f) In the event of the liquidation of the Company or in
the event that the Board of Directors elects to discontinue permanently
operating the Company, the Term of Employment and the Employee's employment
herein shall be terminated as of the date of such liquidation or discontinuance
and the Company shall pay the Employee (i) any accrued but unpaid salary, (ii)
any earned but unpaid bonus from a prior fiscal year, (iii) unreimbursed
business expenses incurred prior to the date of termination, (iv) travel and
housing allowances under Section 9 for two months after the date of
termination, and (v) reasonable relocation expenses from Bermuda to the United
States. In addition, the
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Employee shall be entitled to receive one year's base salary from the date on
which the Employee's employment is terminated.
(g) Notwithstanding any other provision of this
Agreement, if the IPO has not been consummated by May 31, 1998, either the
Employee or Company may terminate the Employee's employment and the Term of
Employment upon 30 days' written notice, in which event the Company shall be
liable to the Employee only for such amounts as would be payable upon a
termination described in Section 11(c).
Section: 12. Change of Control.
(a) Notwithstanding any other provision contained herein,
the Employee's Initial Options and other options issued under the Company's
share option plans that are not then exercisable shall become exercisable (and
be deemed to be vested) on the date on which a Change of Control of the Company
occurs. In addition, restricted Ordinary Shares granted under any of the
Company's share option plans shall immediately vest upon a Change of Control of
the Company.
(b) If (i) the employment of the Employee is terminated
by the Company (or successor thereto) without Serious Cause or (ii) the
Employee terminates employment with the Company (or successor thereto) for Good
Reason, within the period commencing on the date that a Change of Control is
formally proposed to the Company's Board of Directors and ending on the first
anniversary of the date on which such Change of Control occurs, then the
Employee shall be entitled to receive (in lieu of the benefits described in
Section 11): (1) any accrued but unpaid salary, (2) a lump sum payment equal
to two times such Employee's annual base salary as of the date of termination,
(3) any accrued but unpaid bonus from a prior fiscal year, (4) reimbursement of
business expenses incurred prior to the date of termination, (5) travel and
housing allowances under Section 9 for one year following the date of
termination, (6) reasonable relocation expenses from Bermuda to the United
States, together with (7) a gross-up of any income taxes payable by the
Employee by reason of such payments occurring in connection with a change of
control.
The Employee shall not be entitled to any benefits or other
entitlements under this section unless a Change of Control actually occurs.
(c) A "Change of Control" of the Company shall be deemed
to have occurred if, following consummation of the IPO (i) any "person" (as
such term is defined in Section 3(a)(9) and as used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), excluding the
Company or any of its subsidiaries, a trustee or any fiduciary holding
securities under
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an employee benefit plan of the Company or any of its subsidiaries, an
underwriter temporarily holding securities pursuant to an offering of such
securities or a corporation owned, directly or indirectly, by shareholders of
the Company in substantially the same proportion as their ownership of the
Company, is or becomes the "beneficial owner" (as defined in rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ("Voting Securities"); (ii) during any period of not
more than two years, individuals who constitute the Board of Directors of the
Company (the "Board") as of the beginning of the period and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (i) or (iii) of
this sentence) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at such time or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (iii) the shareholders of the
Company approve a merger, consolidation or reorganization or a court of
competent jurisdiction approves a scheme of arrangement of the Company, other
than a merger, consolidation, reorganization or scheme of arrangement which
would result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 50% of
the combined voting power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger, consolidation,
reorganization or scheme of arrangement; or (iv) the shareholders of the
Company approve a plan of complete liquidation of the Company or any agreement
for the sale of substantially all of the Company's assets.
(d) The provisions of this Section 12 shall only apply
following the consummation of an IPO.
Section: 13. Agreement Not to Compete.
(a) The Employee hereby covenants and agrees that at no
time during the Term of Employment nor for a period of (i) one year immediately
following the termination of the Employee's employment by the Company without
Serious Cause or by the Employee for Good Reason or (ii) two years following
the termination of the Employee's employment for any other reason, will he for
himself or on behalf of any other person, partnership, company or corporation,
directly or indirectly, acquire any financial or beneficial interest in (except
as provided in the next sentence) any entity engaged in any business similar to
the business engaged in by the Company or the
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Operating Company at the time of such termination of employment.
Notwithstanding the preceding sentence, the Employee shall not be prohibited
from owning less than one (1%) percent of any publicly traded corporation,
whether or not such corporation is in competition with the Company or the
Operating Company. Additionally,the Employee will not become employed by any
non-United States entity engaged in a similar business. Furthermore, the
employee will not enter into competition with the Company or Operating Company
for a period of two years following termination. For purposes of this
Employment Agreement, "competition" will mean soliciting business from any
clients of the Company and/or Operating Company. Clients of the Company and/or
Operating Company are those companies for whom the Company and/or Operating
Company has reinsured business during the Employee's period of employment under
this agreement.
(b) The Employee hereby covenants and agrees that, at all
times during the Term of Employment and for a period of two years immediately
following the termination thereof, the Employee shall not directly or
indirectly employ or seek to employ any person or entity employed at that time
by the Company or any of its subsidiaries, or otherwise encourage or entice
such person or entity to leave such employment.
(c) This Section 13 shall be null and void if the Board
of Directors elects to discontinue permanently Company operations or if the IPO
has not been consummated by May 31, 1998.
Section: 14. Confidential Information.
(a) The Employee agrees to keep secret and retain in the
strictest confidence all confidential matters which relate to the Company or
any affiliate of the Company, including, without limitation, customer lists,
client lists, trade secrets, pricing policies and other business affairs of the
Company and any affiliate of the Company learned by him from the Company or any
such affiliate or otherwise before or after the date of this Agreement, and not
to disclose any such confidential matter to anyone outside the Company or any
of its affiliates, whether during or after his period of service with the
Company, except as may be required in the course of a legal or governmental
proceeding. Upon request by the Company, the Employee agrees to deliver
promptly to the Company upon termination of his services for the Company, or at
any time thereafter as the Company may request, all Company or affiliate
memoranda, notes, records, reports, manuals, drawings, designs, computer files
in any media and other documents (and all copies thereof) relating to the
Company's or any affiliate's business and all property of the Company or any
affiliate associated therewith, which he may then possess or have under his
control.
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Section: 15. Remedy.
(a) Should the Employee engage in or perform, either
directly or indirectly, any of the acts prohibited by Sections 13 or 14 hereof,
it is agreed that the Company shall be entitled to full injunctive relief, to
be issued by any competent court of equity, enjoining and restraining the
Employee and each and every other person, firm, organization, association, or
corporation concerned therein, from the continuance of such violative acts.
The foregoing remedy available to the Company shall not be deemed to limit or
prevent the exercise by the Company of any or all further rights and remedies
which may be available to the Company hereunder or at law or in equity.
(b) The Employee acknowledges and agrees that the
covenants contained in this Agreement are fair and reasonable in light of the
consideration paid hereunder, and the invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof. If any provision hereof is
determined to be invalid or unenforceable by a court of competent jurisdiction,
the Employee shall negotiate in good faith to provide Company with protection
as nearly equivalent to that found to be invalid or unenforceable and if any
such provision shall be so determined to be invalid or unenforceable by reason
of the duration or geographical scope of the covenants contained therein, such
duration or geographical scope, or both, shall be considered to be reduced to a
duration or geographical scope to the extent necessary to cure such invalidity.
Section: 16. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit
of the Employee, his heirs, executors, administrators and beneficiaries, and
the Company, the Operating Company and their successors and assigns.
Section: 17. Governing Law.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without reference to
rules relating to conflicts of law.
Section: 18. Entire Agreement.
This Agreement constitutes the full and complete understanding
and agreement of the parties and supersedes all prior understandings and
agreements as to employment of the Employee. This Agreement cannot be amended,
changed, modified or terminated without the written consent of the parties
hereto.
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Section: 19. Waiver of Breach.
The waiver by either party of a breach of any term of this
Agreement shall not operate nor be construed as a waiver of any subsequent
breach thereof.
Section: 20. Notices.
Any notice, report, request or other communication given under
this Agreement shall be written and shall be effective upon delivery when
delivered personally, by Federal Express or by fax.
Unless otherwise notified by any of the parties, notices shall
be sent to the parties as follows:
To Employee: Xxxxxx Xxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxx X0-X
Xxxxxxxxx, XX 00000
With a
Copy to:
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To the
Company: Annuity and Life Reassurance, Ltd.
c/o Conyers Xxxx & Xxxxxxx
Xxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
Xxxxxxxx XX-CX
Section: 21. Severability.
If any one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
Section: 22. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as on the day and year first above written.
/s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx Xxxxx
Annuity and Life Re (Holdings), Ltd.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
Annuity and Life Reassurance, Ltd.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
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Exhibit A
Initial Cash Bonus Plan
20% of the Company's consolidated pretax earnings from normal
operations in excess of a benchmark return on equity (such benchmark is
expected to be set at approximately 8%), as determined by the Board of
Directors in accordance with Generally Accepted Accounting Principles,
consistently applied, shall be available for all senior executives. All
determinations by the Board of Directors shall be final and conclusive for all
purposes of the Plan.
