EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of November 20, 2001 (the "EFFECTIVE
DATE") by and between Axis Specialty Limited, a Bermuda corporation (together
with its successors and assigns, the "COMPANY"), and Xxxx X. Xxxxxxx (the
"EXECUTIVE").
WHEREAS, the Company wishes the Executive to serve as its President and
Chief Executive Officer and as a member of its Board of Directors (the
"BOARD"), and of the Executive Committee of the Board (the "EXECUTIVE
COMMITTEE"), under the terms and conditions of this Agreement;
WHEREAS, the Executive is willing to serve in such positions under such
terms and conditions;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (the "PARTIES") agree as follows:
1. TERM OF EMPLOYMENT. The Executive's term of employment under this
Agreement (the "TERM") shall commence as of the Effective Date and shall
continue through the close of business on the third anniversary of the Effective
Date, subject to earlier termination as provided in Section 8 below. Thereafter,
UNLESS either Party gives notice in writing to the other at least 365 days prior
to the then-scheduled expiration date that the Term is not to be extended, the
Term shall automatically be extended for successive one-year periods, such
extended Term to remain subject to termination prior to its then-scheduled
expiration date as provided in Section 8 below.
2. POSITIONS, DUTIES AND RESPONSIBILITIES.
(a) GENERAL. The Executive shall serve throughout the Term as
President and Chief Executive Officer and as a member of the Board and of the
Executive Committee, with all responsibilities and authorities normally
associated with those positions in a company of the size and nature of the
Company. The Executive shall report directly to the Board. The Executive's
employment under this Agreement shall be performed outside the United States.
The amount of time the Executive spends in Bermuda and Europe shall be such time
as is reasonably necessary to perform his responsibilities and services
hereunder, except for the amount of time necessary for him to attend meetings of
the Board and of committees of the Board of which he is a member. It is
understood that the Executive will not redomicile to Bermuda but that he expects
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to maintain a resident in Bermuda. The Executive shall devote substantially all
of his business time and efforts to the business and affairs of the Company and
its Affiliates (an "Affiliate" of any person means any entity that controls, is
controlled by, or is under common control with, such person).
(b) PERMITTED ACTIVITIES. Anything herein to the contrary
notwithstanding, nothing shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other corporations or the boards
of a reasonable number of trade associations and/or charitable organizations,
(ii) engaging in charitable, community and other business affairs and (iii)
managing his personal investments and affairs, provided such activities do not,
in his reasonable judgment, materially interfere with the proper performance of
his responsibilities and duties hereunder.
3. BASE SALARY. The Executive shall, during the Term, be paid a Base
Salary by the Company at an annual rate of no less than US$1,000,000.00, payable
in accordance with the regular payroll practices applicable to senior executives
of the Company, but no less frequently than monthly; PROVIDED, that, only for
purposes of calculating the Base Salary payable hereunder, the Term shall be
deemed to have commenced as of October 1, 2001. Such Base Salary shall be
subject to review for increase at the discretion of the Board (or a committee
thereof). The Base Salary may not be decreased, at any time or for any purpose,
during the Term.
4. ANNUAL BONUS. In addition to the Base Salary provided for in Section 3
above, the Executive may be awarded such annual bonuses as may be determined by
the Board (or a committee thereof), based on whatever incentive plans or
programs have been adopted by the Company for its senior executives as well as
on the performance of the Executive and of the Company; PROVIDED, HOWEVER, in no
event shall the annual bonus be less than 75% of the annual Base Salary
hereunder. Any such annual bonus shall, unless otherwise required under a plan
or program applying to senior executives generally, be paid in cash in a lump
sum promptly following determination thereof.
5. EQUITY AWARDS.
(a) INITIAL AWARDS. Concurrently with the execution of this
Agreement, the Company and the Executive shall enter into a Share Purchase
Option Agreement, covering 253,139 common shares of the Company, par value
US$0.10 (the "COMMON STOCK"), in the form attached hereto as Exhibit A (the
"OPTION AGREEMENT"), such grant representing 1.5% of the outstanding shares of
Common Stock as of the date hereof.
(b) SUBSEQUENT AWARDS. Beginning in calendar year 2002, the
Executive shall be eligible during the Term to receive additional equity grants
and awards, on terms and
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conditions that are appropriate in light of his positions, his performance and
the performance of the Company, all as determined by the Board (or a committee
thereof) in its discretion.
6. EMPLOYEE BENEFIT PROGRAMS. During the Term, the Executive shall be
entitled to participate in all employee benefit plans and programs, including,
without limitation, (a) health and welfare plans and (b) pension plans and
programs in which senior executives of the Company are eligible to participate
(the "BENEFIT PROGRAMS"). To the extent that the Executive is not eligible to
participate in any Benefit Program, he shall be provided with the after-tax
economic equivalent of the coverages and benefits provided under such program in
which he is unable to participate. In addition, if necessary, the Executive
shall be provided interim coverage until such time as the Company has adopted a
program of employee benefit coverages. Interim coverage may be provided through
purchase of separate insurance contracts, through self-insurance or, to the
extent the Executive is permitted to continue to maintain on a contributory
basis the benefits he presently receives from other sources, by reimbursing the
Executive for the cost thereof on a basis that keeps the Executive whole after
taxes.
7. EXPENSE REIMBURSEMENT AND FRINGE BENEFITS.
(a) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse
the Executive for all reasonable out-of-pocket travel expenses, entertainment
expenses and other expenses incurred by him in connection with his employment
under this Agreement, such reimbursement to be paid promptly after he submits
reasonable documentation with respect to such expenses. This shall include,
without limitation, reimbursement of any such expenses for air fare (which the
Executive shall be entitled to on a first-class basis including flights on the
Concorde, if available), hotel accommodations and meals. It is understood that
the Executive shall be entitled to such air fare for the purpose of commuting
between London, England and Bermuda in connection with the performance of his
duties under Section 2(a) above. The Company shall also promptly reimburse the
Executive for all costs and expenses (including, without limitation, attorneys'
fees and other charges of counsel) incurred in connection with negotiating and
documenting this Agreement and related arrangements.
(b) FRINGE BENEFITS. In addition to compensation and benefits as
set forth elsewhere in this Agreement, the Executive shall be entitled to
participate during the Term in any and all of the fringe benefits made available
to senior executives of the Company in accordance with the terms and conditions
then applicable to participating senior executives generally. In all events, the
Executive shall be entitled during the Term to the following:
(i) reimbursement or payment of the cost (including
initiation fees and annual dues) of membership in two clubs in Bermuda or
London;
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(ii) reimbursement or payment of air fare for up to 14
round-trip first-class non-business trips per year by the Executive or
members of his family between London, England and Bermuda or between
Bermuda or London, England and New York, New York or Newark, New Jersey
(the benefit under this Section 7(b)(ii) being in addition to any
reimbursement of airfare described in Section 7(a) above);
(iii) reimbursement or payment of the cost of financial and
tax planning, and of tax return preparation, such reimbursement not to
exceed US$10,000 per year;
(iv) a housing allowance for a residence in Bermuda equal to
US$15,000 per month or such lesser amount agreed to by the Executive; and
(v) use of a luxury automobile at the Company's expense
(including, without limitation, the payment of all costs of fuel, a driver,
maintenance thereof and insurance thereon (except to the extent such costs
would not be reimbursement policies of the Company applicable to senior
executives generally).
8. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH.
(i) In the event that the Executive dies during the Term, the Term
shall expire as of the date of his death and the Executive's designated
beneficiary (or, in the absence of such a designation, the estate or other
legal representative of the Executive) shall be entitled to:
(A) the Executive's Base Salary, at the rate in effect
immediately prior to his death, through the end of the month in which
the Executive dies during the year of termination;
(B) a lump sum amount equal to one year's Base Salary at
the rate in effect immediately prior to his death;
(C) a separation bonus for the year of death (with the term
"SEPARATION BONUS" meaning an amount no less than the greater of (x)
US$1,000,000 and (y) the highest amount awarded to the Executive as an
annual bonus for any of the three years (or such lesser number of
years he has then been employed) immediately preceding the year in
which termination occurs);
(D) to the extent the Option Shares are not already vested
and exercisable, immediate vesting and exercisability, as of the date
of death, for all
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outstanding Option Shares scheduled to vest on or before the first
anniversary of such date, with the Option (as defined in the Option
Agreement) to remain exercisable as to all vested Option Shares for
the lesser of (x) one year following the date of death and (y) the
remainder of its maximum stated term, after which the Option shall
expire;
(E) vesting and exercisability, as the case may be, for all
other equity awards, including any restricted shares or stock options,
in accordance with their terms; and
(F) any other benefits described in Section 8(f) below.
(b) TERMINATION DUE TO DISABILITY.
(i) Either Party may terminate the Executive's employment under
this Agreement prior to the then-scheduled expiration of the Term due to
his Disability by providing 15 days' prior written notice to the other
party, in which event the Term shall expire and the Executive shall be
entitled to:
(A) the Base Salary, at the rate in effect immediately
prior to the date of termination, through the end of the month in
which the Executive's employment terminates due to Disability;
(B) a lump sum amount equal to one year's Base Salary at
the rate in effect immediately prior to such termination;
(C) a Separation Bonus for the year of termination;
(D) to the extent the Option Shares are not already vested
and exercisable, immediate vesting and exercisability, as of the date
of termination, for all outstanding Option Shares scheduled to vest on
or before the first anniversary of such date, with the Option (as
defined in the Option Agreement) to remain exercisable as to all
vested Option Shares for the lesser of (x) one year following the date
of termination and (y) the remainder of its maximum stated term, after
which the Option shall expire;
(E) vesting and exercisability, as the case may be, for all
other equity awards, including any restricted shares or stock options,
in accordance with their terms;
(F) disability benefits in accordance with any applicable
Company plans, programs, policies or agreements;
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(G) continued coverage for 12 months under all Benefit
Programs (or their equivalent as provided in Section 6 above) in which
the Executive was participating immediately prior to the date of
termination; PROVIDED, HOWEVER, that to the extent the Company is
unable to continue such coverage, the Company shall provide the
Executive with economically equivalent benefits determined on an
after-tax basis and, PROVIDED FURTHER that any such continued coverage
shall be offset by comparable coverage provided to the Executive in
connection with subsequent employment or other service; and
(H) any other benefits described in Section 8(f) below.
For purposes of this Agreement, "DISABILITY" shall mean that the Executive
has been unable to substantially perform his duties hereunder, due to
physical or mental incapacity, for 180 consecutive days.
(c) TERMINATION FOR CAUSE.
(i) The Executive's employment under this Agreement, and
the Term, may be terminated by the Board for Cause prior to the
then-scheduled expiration of the Term. For this purpose, "CAUSE" shall
mean:
(A) conviction of the Executive of a felony involving moral
turpitude, or
(B) the Executive, in carrying out his duties for the
Company under this Agreement, has been guilty of gross neglect or
gross misconduct resulting, in either case, in material economic harm
to the Company; PROVIDED, HOWEVER, that no act, or failure to act, by
the Executive shall constitute Cause if the Executive believed in good
faith that such act, or failure to act, was in, or not opposed to, the
interests of the Company.
Anything herein to the contrary notwithstanding, the Executive shall not be
terminated for "Cause," within the meaning of clause (B) of this Section
8(c)(i), unless written notice stating the basis for the termination is
provided to the Executive and he is given 15 days to cure the neglect or
conduct that is the basis of such claim and, if he fails to cure such
neglect or conduct, the Executive has an opportunity to be heard before the
full Board of the Company within 15 days following the end of such cure
period and, within five (5) days after such hearing, there is a unanimous
vote of all disinterested members of the Board to terminate him for Cause.
(ii) In the event of a termination for Cause in accordance
with Section 8(c)(i) above, the Executive shall be entitled only to (A) the
Base Salary, at the rate in
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effect at the date of termination, through the date on which termination
for Cause occurs, (B) continued eligibility for medical benefit for 12
months pursuant to the Benefit Programs, provided that the Executive must
pay the full premiums for any such coverage and (C) any other benefits
described in Section 8(f) below.
(d) TERMINATION WITHOUT CAUSE OR WITH GOOD REASON.
(i) Anything in this Agreement to the contrary
notwithstanding, the Executive's employment under this Agreement may be
terminated, by prior written notice by the terminating party to the other
party, prior to the then-scheduled expiration of the Term by the Company
without Cause, or by the Executive with "GOOD REASON" (as defined in
Exhibit B), as provided in this Section 8(d), in which event the Term shall
expire. A termination due to Disability in accordance with Section 8(b)
above, or for Cause in accordance with Section 8(c) above, shall not be
deemed a termination without Cause or with Good Reason to which this
Section 8(d) applies.
(ii) Except in certain circumstances in connection with a
Change in Control as provided in Section 8(d)(iii) below, in the event that
the Executive's employment is terminated prior to the then-scheduled
expiration of the Term (x) by the Company without Cause or (y) by the
Executive with Good Reason, the Term shall expire and the Executive shall
be entitled to:
(A) the Base Salary through the date of termination at the
rate in effect immediately prior to the date of termination;
(B) a lump sum amount equal to two years' Base Salary at
the rate in effect immediately prior to such termination;
(C) a Separation Bonus for the year of termination;
(D) an amount no less than the greater of (x) $1,000,000
and (y) the highest amount awarded to the Executive as an annual bonus
for any of the three years (or such lesser number of years he has then
been employed) immediately preceding the year in which termination
occurs;
(E) to the extent the Option Shares are not already vested
and exercisable, immediate vesting and exercisability, as of the date
of termination, for all outstanding Option Shares scheduled to vest on
or before the first anniversary of such date, with the Option (as
defined in the Option Agreement) to remain exercisable as to all
vested Option Shares for the lesser of (x) one year following the date
of termination and (y) the remainder of its maximum stated term, after
which the Option shall expire;
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(F) vesting and exercisability, as the case may be, for all
other equity awards, including any restricted shares or stock options,
in accordance with their terms;
(G) continued coverage for 12 months under all Benefit
Programs (or their equivalent as provided in Section 6 above) in which
the Executive was participating immediately prior to the date of
termination; PROVIDED, HOWEVER, that to the extent the Company is
unable to continue such coverage, the Company shall provide the
Executive with economically equivalent benefits determined on an
after-tax basis and, PROVIDED FURTHER that any such continued coverage
shall be offset by comparable coverage provided to the Executive in
connection with subsequent employment or other service; and
(H) any other benefits described in Section 8(f) below.
(iii) In the event that the Executive's employment herein is
terminated by the Company without Cause, or by the Executive for Good
Reason, in either case in anticipation of, or within the 12-month period
following, a Change in Control (as defined in Exhibit C), the Term shall
expire and the Executive shall be entitled to:
(A) the benefits described in Section 8(d)(ii)(A), (C), (F)
and (H) above;
(B) a lump sum amount equal to two year's Base Salary at
the rate in effect immediately prior to such termination;
(C) an amount no less than two (2) times the greater of
(x) US$1,000,000 and (y) the highest amount awarded to the Executive
as an annual bonus for any of the three years (or such lesser number
of years he has then been employed) immediately preceding the year in
which a Change in Control occurs;
(D) to the extent the Option Shares are not already vested
and exercisable, immediate vesting and exercisability, as of the date
of termination, for all outstanding Option Shares scheduled to vest on
or before the third anniversary of such date, with the Option (as
defined in the Option Agreement) to remain exercisable as to all
vested Option Shares for the lesser of (x) one year following the date
of termination and (y) the remainder of its maximum stated term, after
which the Option shall expire; and
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(E) continued coverage for 24 months under all Benefit
Programs (or their equivalent as provided in Section 6 above) in which
the Executive was participating immediately prior to the date of
termination; PROVIDED, HOWEVER, that to the extent the Company is
unable to continue such coverage, the Company shall provide the
Executive with economically equivalent benefits determined on an
after-tax basis and, PROVIDED FURTHER that any such continued coverage
shall be offset by comparable coverage provided to the Executive in
connection with subsequent employment or other service.
(e) VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
voluntarily terminate his employment under this Agreement, by prior written
notice to the Company, before the then-scheduled expiration of the Term, in
which event (x) the Term shall expire as of the date specified by the Executive
and (y) the Executive shall receive the same rights and benefits as applicable
to a termination by the Board for Cause in accordance with Section 8(c) above. A
voluntary termination under this Section 8(e) shall not be deemed a breach of
this Agreement. Neither a termination of the Executive's employment due to
Disability in accordance with Section 8(b) above, nor a termination of the
Executive's employment by the Executive for "Good Reason" in accordance with
Section 8(d) above, shall be deemed to be a voluntary termination within the
meaning of this Section 8(e).
(f) MISCELLANEOUS.
(i) On any termination of the Term, the Executive shall be
entitled to:
(A) the balance of any annual, long-term or other incentive
award earned (but not yet paid) prior to such termination;
(B) reimbursement of any business or other expenses
pursuant to Section 7 above; and
(C) any other rights, compensation and/or benefits as may
be due the Executive in accordance with the terms and provisions of
any agreements, plans or programs of the Company, including this
Agreement (but in no event shall the Executive be entitled to
duplicative rights, compensation and/or benefits).
(ii) All amounts due under this Section 8 shall be paid (A)
50% in a lump sum promptly following the date of termination and (B)
50% in a lump sum on the first anniversary of the date of termination,
PROVIDED, that the Company shall pay interest at a rate of one-year
LIBOR plus one percent (with such rate being determined as of the date
of termination) on (x) the amount in clause (B) of this
Section 8(f)(ii), with such interest accruing from the date of
termination until such amount is actually paid to the Executive and
(y) any amount that is due
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under this Agreement but remains unpaid (without regard to the
circumstances or reasons for the Company not paying such amount), with
interest accruing from the date such payment is due until such amount
is actually paid to the Executive.
(iii) For purposes of this Agreement, in the event there is a
reduction in Base Salary that would constitute the basis for a
termination for Good Reason pursuant to Section 8(d) above, then "Base
Salary" shall mean the Base Salary in effect immediately prior to any
such reduction.
(g) MITIGATION; OFFSET. In the event of any termination of his
employment under this Agreement, the Executive shall have the duty to mitigate
the obligations of the Company under this Agreement by seeking other employment,
and the Company may reduce any amounts (including, but not limited to, any
compensation, benefits or other entitlements) it is required to pay or provide
under this Section 8, and any benefits due under the Benefit Programs after
termination of the Executive's employment, by the amounts (including, but not
limited to, any compensation, benefits or other entitlements) the Executive
receives or derives from any subsequent employment that he may obtain. The
Executive shall notify the Company in writing of the date of commencement of any
subsequent employment that would affect the Company's obligations pursuant to
this Section 8. In the event that he fails so to notify the Company or he
receives any amounts from a subsequent employer that the Company would be
entitled to offset against its obligations pursuant to this Section 8(g), the
Executive shall promptly reimburse the Company for the excess payment paid or
the cost of the excess benefit provided by it. Any amounts due under this
Section 8 are considered to be reasonable by the Company and not in the nature
of a penalty.
(h) NOTICE PROVISIONS. In the event written notice of termination
has been given under this Section 8, no subsequent notice of termination,
whether written or otherwise, shall become effective until and unless the prior
notice ceases to be effective, PROVIDED, HOWEVER, that (i) in the case of a
notice of termination for Cause, such notice shall be deemed to cease to be
effective upon cure or a failure to terminate upon a unanimous vote of all
disinterested members of the Board as provided in Section 8(c) above and (ii) in
the case of a notice of a voluntary termination by the Executive, such notice
shall be deemed to cease to be effective 30 days following notice of such
termination.
9. NONCOMPETITION, NONSOLICITATION, CONFIDENTIALITY AND
NON-DISPARAGEMENT.
(a) NONCOMPETITION. For a period of 12 months after termination of
his employment, the Executive shall not, directly or indirectly, whether as an
employee, consultant, partner, principal, agent, distributor, representative or
stockholder (except as a less than one percent stockholder or other equity
holder of a publicly traded entity or a less than five percent stockholder or
other equity holder of a privately held entity), engage in any activities within
the
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Xxxxxx Xxxxxx, Xxxxxx Xxxxxxx or Bermuda if such activities involve, to a
material extent, insurance or reinsurance of entities or exposures that are
materially competitive with the businesses that (i) are then being conducted by
the Company or any subsidiary and (ii) were during the Executive's employment
either being conducted by, or being actively developed by, the Company or any
subsidiary. Notwithstanding the foregoing, any activity that is approved by the
Board shall not be deemed to violate the provisions of this Section 9(a).
(b) NONSOLICITATION. For a period of 12 months after termination
of his employment, the Executive shall not, except in connection with carrying
out his duties for the Company or any subsidiary or otherwise at the written
request of the Company, (i) encourage any employee of the Company or any
subsidiary to leave the employ of the Company or any subsidiary, (ii) hire or
use the services of any employee of the Company or any subsidiary, and (iii)
solicit or cause another person or entity to solicit any customers or brokers of
the Company or any subsidiary to terminate or otherwise adversely modify their
relationship with the Company or any such subsidiary; PROVIDED that clause (i)
and clause (ii) of this Section 9(b) shall only apply to individuals employed by
the Company or any subsidiary at any point during the one-year period
immediately preceding the date of termination of Executive. Nothing in this
Section 9(b) shall prevent the Executive from providing employment references
for such employees.
(c) CONFIDENTIALITY. The Executive covenants that he shall not,
without the prior written consent of the Board or of a person authorized by the
Board, disclose to any person, other than in connection with performing his
duties for the Company, any confidential proprietary information about the
Company or its business, unless and until such information has become known to
the public generally or within any industry in which the Company conducts
business (other than as a result of unauthorized disclosure by the Executive) or
unless (i) such disclosure is in confidence to an attorney for the purpose of
obtaining legal advice, (ii) such disclosure is in connection with any
litigation, arbitration or mediation involving this Agreement or other
agreements or arrangements involving the Parties, including, but not limited to,
the enforcement of this Agreement or such other agreements or arrangements or
(iii) the Executive is required to disclose such information (whether or not in
connection with a disclosure required in clause (ii)) by law or by any court,
arbitrator, mediator or administrative or legislative body (including any
committee thereof) with apparent jurisdiction to order the Executive to disclose
or make accessible any information.
(d) NON-DISPARAGEMENT. The Executive shall not willfully or
knowingly make any public statement that would disparage or defame the Company.
The Company shall not, and shall cause each of the executives and directors of
the Company not to, willfully or knowingly make any public statement that would
disparage or defame the Executive. Notwithstanding the foregoing, nothing in
this Section 9(d) shall prevent any person from
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(i) responding publicly to any incorrect, disparaging or defamatory public
statement to the extent reasonably necessary to correct or refute such public
statement or (ii) making any truthful statement to the extent (x) such
disclosure is in confidence to an attorney for the purpose of obtaining legal
advice, (y) such disclosure is in connection with any litigation, arbitration or
mediation involving this Agreement or other agreements or arrangements involving
the Parties, including, but not limited to, the enforcement of this Agreement or
such other agreements or arrangements or (z) the Executive is required to
disclose such information (whether or not in connection with a disclosure
required in clause (y)) by law or by any court, arbitrator, mediator or
administrative or legislative body (including any committee thereof) with
apparent jurisdiction.
(e) SCOPE. For purposes of this Section 9, the Company shall be
deemed to include any entity that (i) is an Affiliate both during the Term and
at the time in question and (ii) is an Affiliate organized after the Term for
the purpose of holding the assets owned by the Company during the Term and/or
operating the business of the Company conducted during the Term. The covenants
set forth in this Section 9, except as provided in Section 9(a) and (b) above,
shall be without limitation as to time and geographic application.
10. INDEMNIFICATION.
(a) During the Term and at all times thereafter, if the Executive
is made a party, is threatened to be made a party, or reasonably anticipates
being made a party, to any Proceeding by reason of the fact that he is or was a
director, officer, member, employee, agent, manager, trustee, consultant or
representative of the Company or any Affiliate or is or was serving at the
request of the Company or any Affiliates, or in connection with his employment
hereunder, as a director, officer, member, employee, agent, manager, trustee,
consultant or representative of another Person, or if any Claim is made, is
threatened to be made, or is reasonably anticipated to be made, that arises out
of or relates to the Executive's employment in any of the foregoing capacities,
then the Executive shall promptly be indemnified and held harmless to the
fullest extent permitted or authorized by the Bye-laws of the Company, or if
greater, by applicable law, against any and all costs, expenses, liabilities and
losses (including, without limitation, attorneys' fees, judgments, interest,
expenses of investigation, penalties, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) incurred or suffered by the Executive
in connection therewith or in connection with seeking to enforce his rights
under this Section 10(a), and such indemnification shall continue as to the
Executive even if he has ceased to be a director, officer, member, employee,
agent, manager, trustee, consultant or representative of the Company or other
Person, without limitation in time, and shall inure to the benefit of the
Executive's heirs, executors and administrators. The Executive shall be entitled
to prompt advancement of any and all costs and expenses (including, without
limitation, attorneys, fees and other charges of counsel) incurred by him in
connection with any such
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Proceeding or Claim, or in connection with seeking to enforce his rights under
this Section 10(a), any such advancement to be made within 15 days after he
gives written notice, supported by reasonable documentation, requesting such
advancement. Such notice shall include, to the extent required by applicable
law, an undertaking by the Executive to repay the amount advanced, on an
after-tax basis (that is, net of any applicable taxes), if he is ultimately
determined not to be entitled to indemnification against such costs and
expenses. Nothing in this Agreement shall operate to limit or extinguish any
right to indemnification, advancement of expenses, or contribution that the
Executive would otherwise have (including, without limitation, by agreement or
under applicable law). For purposes of this Agreement, "CLAIM" shall mean any
claim, demand, request, investigation, dispute, controversy, threat, discovery
request, or request for testimony or information, "PERSON" shall mean any
individual, corporation, partnership, limited liability company, joint venture,
trust, estate, board, committee, agency, body, employee benefit plan or other
person or entity and "PROCEEDING" shall mean any actual, threatened, or
reasonably anticipated, action, suit or proceeding, whether civil, criminal,
administrative, investigative, appellate, formal, informal or other.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by the Executive under Section 10(a) that indemnification of the
Executive is proper because he has met the applicable standard of conduct, nor a
determination by the Company (including its board of directors, independent
legal counsel or stockholders) that the Executive has not met such applicable
standard of conduct, shall create a presumption that the Executive has not met
the applicable standard of conduct.
(c) The Executive shall, during his employment with the Company,
including as a director, and for at least six years thereafter, be covered by a
directors' and officers' liability insurance policy (or policies) on terms and
conditions no less favorable to him in any respect than those then applying to
any other present or former director or officer of the Company, but in all
events, the minimum aggregate coverage obtained by the Company, under which the
Executive is a covered person, shall be in an amount no less than US$50,000,000.
11. EXCISE TAX ADJUSTMENT PAYMENTS.
(a) PAYMENTS. In the event that any payment or benefit provided to
or for the benefit of the Executive in connection with this Agreement, any other
agreement or arrangement to which he and the Company are parties, his employment
with the Company, or the termination of such employment, other than any payment
pursuant to this Section 11(a) (a "PAYMENT"), is subject to (x) the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor to such Section or (y) any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest and
penalties, being
13
hereinafter collectively referred to as the "EXCISE TAX"), then the Executive
shall be entitled to receive from the Company, within 15 days following the
determination described in Section 1l(b) below and no later than such Excise
Tax is due to be paid, through withholding or otherwise, an additional payment
("EXCISE TAX ADJUSTMENT PAYMENT") in an amount such that after payment by the
Executive of all applicable U.S. Federal, state, local and other taxes and all
applicable non-U.S. taxes (each computed at the maximum marginal rates and
including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, the
Executive retains an amount of the Excise Tax Adjustment Payment equal to the
Excise Tax imposed upon the Payment.
(b) DETERMINATIONS. All determinations required to be made under
this Section 11, including whether an Excise Tax Adjustment Payment is required
and the amount of such Excise Tax Adjustment Payment, shall be promptly made by
a "big five" accounting firm (the "ACCOUNTING FIRM"), selected by the Company
with the Executive's approval (which approval shall not be unreasonably withheld
or delayed). The Accounting Firm shall provide detailed supporting calculations
to the Company and the Executive within 15 business days of the date of the
Payment to which the Excise Tax Adjustment Payment relates. As a result of the
uncertainty in the application of Section 4999 of the Code (or any successor to
such Section) at the time of any initial determination hereunder, it is possible
that (x) certain Excise Tax Adjustment Payments will not have been made that
should have been made (an "UNDERPAYMENT"), or (y) certain Excise Tax Adjustment
Payments will have been made that should not have been made (an "OVERPAYMENT"),
consistent with the calculations required to be made hereunder. In the event of
an Underpayment, such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive. In the event of an Overpayment, such
Overpayment shall be promptly repaid to the Company on an after-tax basis.
12. RESOLUTION OF DISPUTES. Any dispute between the Parties, including,
without limitation, any dispute arising out of or relating to this Agreement or
any other agreement or arrangement to which the Executive and the Company are
parties, the Executive's employment with the Company, or the termination of such
employment, shall be resolved by confidential arbitration in New York City in
accordance with the Commercial Arbitration Rules (and not the National Rules for
Resolution of Employment Disputes) of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. All costs associated with any such
arbitration, including all attorneys' fees and other legal expenses, shall be
paid by the Company.
13. WITHHOLDING. Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company hereunder to
the Executive shall be subject to tax withholding to the extent required by
applicable law, treaty or regulation. In lieu of withholding
14
such amounts, in whole or in part, the Company may accept, in its sole
discretion, such other provision for payment of required tax withholding as the
Executive may reasonably request.
14. REPRESENTATIONS.
(a) The Company represents and warrants that (i) it is fully
authorized by action of its Board (and of any other person or body whose action
is required) to enter into this Agreement and to perform its obligations under
it, (ii) the Board has approved or, prior to March 15, 2002, will approve (A)
the transfer of all or any portion of the Option (as defined in the Option
Agreement) as permitted pursuant to Paragraph (i) of the Option Agreement and
(B) upon exercise of the Option (or any portion thereof), the registration of
the shares in the name of such transferee, (iii) the officer signing this
Agreement on its behalf is duly authorized to do so, (iv) the execution,
delivery and performance of this Agreement by it does not violate any applicable
law, regulation, order, judgment or decree or any agreement, plan, bye-law,
charter provision or corporate governance document to which it is a party or by
which it is bound and (v) upon the execution and delivery of this Agreement by
the Parties, this Agreement shall be a valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally.
(b) The Executive represents and warrants that, to the best of his
knowledge and belief, (i) delivery and performance of this Agreement by him does
not violate any applicable law, regulation, order, judgment or decree or any
agreement to which the Executive is a party or by which he is bound, (ii) he
does not and will not during his employment with the Company or any Affiliate
knowingly possess in tangible form, or knowingly use in connection with carrying
out his duties under this Agreement, any confidential or proprietary information
of a prior employer or other person the possession or use of which is restricted
by any prior employment agreement or other agreement by which he is bound and
(iii) upon the execution and delivery of this Agreement by the Parties, this
Agreement shall be a valid and binding obligation of the Executive, enforceable
against him in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
15. ENTIRE AGREEMENT. This Agreement, together with its Exhibits (which
form a part of this Agreement for all purposes), contains the entire agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto; PROVIDED,
HOWEVER, that the Executive's entitlements as a founder of the Company shall be
understood not in any way to be affected by the provisions of this Agreement.
In the event of any inconsistency between any provision of this Agreement and
any provision of any plan, program, policy, arrangement, bye-law, charter
document, corporate governance
15
document, or agreement of the Company or any of its Affiliates, the provisions
of this Agreement shall control to the extent that they are more favorable to
the Executive unless the Executive otherwise agrees in a writing that expressly
refers to the provision of this Agreement whose control he is waiving.
16. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
and assigns. No rights or obligations of the Executive under this Agreement may
be assigned or transferred by the Executive other than his rights to
compensation and benefits hereunder, which may be transferred by will or
operation of law subject to the limitations of this Agreement. The Parties
recognize that the Executive also may transfer his rights under the Option
Agreement to the extent therein provided. No rights or obligations of the
Company under this Agreement may be assigned or transferred by the Company
except that such rights or obligations may be assigned or transferred pursuant
to an amalgamation, reconstruction, merger or consolidation in which Company is
not the continuing entity, or a sale or liquidation of all, or substantially
all, of the business and assets of the Company, provided that the assignee or
transferee is the successor to all, or substantially all, of the business and
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law.
17. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
unless such amendment is agreed to in writing, signed by the Executive and by a
duly authorized officer of the Company. No waiver by any person of any breach of
an other person of any condition or provision of this Agreement shall be deemed
a waiver of a similar or dissimilar condition or provision at the same or any
prior or subsequent time. Any waiver must be in writing and signed by, or on
behalf of, the waiving person.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given (a) when
delivered personally or (b) on the second business day after the day on which it
is sent by recognized courier with delivery acknowledged by written receipt or
(c) on the fifth business day after it is sent by certified or registered mail,
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as such Party may
subsequently by similar process give notice of:
If to the Company: AXIS Specialty Limited
000 Xxxxx Xxx Xxxx
Xxxxxxxx, XX 00, Bermuda
Attn: Xxxxxx Xxxx
16
If to the Executive: Xxxx X. Xxxxxxx
Del House
Wilderness Ave.
Sevenoaks, Kent
TN150 EA
United Kingdom
19. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
20. SURVIVORSHIP. The respective rights and obligations of the Parties
shall survive any termination of the Executive's employment under this Agreement
to the extent necessary to the intended preservation of such rights and
obligations.
21. BENEFICIARIES/REFERENCES. The Executive shall be entitled, to the
extent permitted under applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit hereunder following the
Executive's death by giving the Company written notice thereof. In the event of
the Executive's death or a judicial determination of his incompetence,
references in this Agreement to the Executive shall be deemed, where
appropriate, to refer to his beneficiaries, estate or other legal
representative.
22. GOVERNING LAW. This Agreement shall be governed, construed and
enforced in accordance with its express terms, and otherwise in accordance
with the laws of Bermuda without reference to the principles of conflicts of
law.
23. HEADINGS. The headings of the Sections of this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
24. COUNTERPARTS AND FASCIMILE. This Agreement may be executed in one or
more counterparts. Signatures delivered by facsimile shall be deemed effective
for all purposes to the extent permitted under applicable law.
17
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
AXIS SPECIALTY LIMITED
By: /s/ Xxxxxx X Xxxxxxxx Xx
--------------------------------
Name: Xxxxxx X Xxxxxxxx Xx
------------------------------
Title: Chairman
-----------------------------
THE EXECUTIVE
/s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
18
EXHIBIT A
SHARE PURCHASE OPTION AGREEMENT
AGREEMENT, made and entered into as of November 20, 2001 (the "GRANT DATE")
by and between Axis Specialty Limited, a Bermuda corporation (together with its
successors and assigns, the "COMPANY") and Xxxx X. Xxxxxxx (the "OPTION
HOLDER").
WHEREAS, the Company and the Option Holder (the "PARTIES") have
concurrently entered into an agreement (the "EMPLOYMENT AGREEMENT") pursuant to
which the Option Holder is to serve the Company as Chairman of its Board of
Directors and as Chairman of the Executive Committee of that Board; and
WHEREAS, the Company has decided to grant the option described below to the
Option Holder as an inducement to accept such positions and as a performance
incentive;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the Parties
agree as follows:
(a) GRANT. The Company hereby unconditionally grants to the Option Holder,
effective as of the Grant Date, the right and option to purchase 253,139 shares
(the "OPTION SHARES") of the voting common shares of the Company, par value
US $O.10 (the "COMMON STOCK"), on the terms and conditions hereinafter set forth
(the "OPTION").
(b) PURCHASE PRICE. Except as otherwise provided in Paragraph (i) below,
the purchase price of the Option Shares subject to the Option (the "OPTION
PRICE") shall be: US $100.00 per Share.
(c) TERM OF THE OPTION. The Option shall have a term commencing on the
Grant Date and continuing through the tenth anniversary of such date (the
"OPTION PERIOD") and shall be exercisable, at any time, during the Option Period
as provided in Paragraph 9(d) below.
(d) VESTING AND EXERCISABILITY. The Option shall vest, and become
exercisable as to one-third of the Option Shares on each of the first, second
and third anniversaries of the Grant Date, PROVIDED THAT the Option shall vest,
and become exercisable, on certain terminations of the Optionee's employment
with the Company under the Employment Agreement to the extent set forth in
Section 8 of the Employment Agreement. Except to the extent otherwise provided
in Section 8 of the Employment Agreement, the Option shall expire on any
termination of the Option Holder's employment with the Company. The Option shall
be exercisable by the Option Holder, or in the event of his death or his
judicially determined incompetence, by his estate or other legal representative,
or, to the extent the Option is transferred, in whole or in part, in accordance
with the provisions of Paragraph (i) below, by a transferee of the Option Holder
(a
19
"TRANSFEREE"). As hereinafter used, the term "OPTION HOLDER" shall include the
Option Holder's estate, other legal representative or Transferee, as
appropriate.
(e) EXERCISE OF THE OPTION. In order to exercise the Option, the Option
Holder shall submit to the Company an instrument in writing specifying the
number of Option Shares in respect of which the Option is being exercised,
accompanied by payment, in a manner reasonably acceptable to the Company, of the
aggregate Option Price for the Option Shares in respect of which the Option is
being exercised. A share certificate, or certificates, representing the
purchased Option Shares shall then promptly be delivered to the Option Holder;
PROVIDED, HOWEVER, that the Company shall not be obligated to deliver any Option
Shares hereunder if the delivery of such Option Shares would violate the
provisions of any applicable law, in which event the Company shall, as soon as
practicable, take whatever action it reasonably can so that such Option Shares
may be delivered without resulting in such violation of law.
(f) STATUS OF OPTION SHARES. Option Shares purchased pursuant to any
exercise of the Option shall, upon delivery to the Option Holder, rank equally
in all respects with the other shares of the voting Common Stock, but shall not
carry any option or other right to subscribe for additional shares of Common
Stock.
(g) RIGHTS AS SHAREHOLDER. The Option Holder shall not, by virtue of the
Option, be entitled to any rights of a shareholder of the Company, either at law
or equity, and the grant of the Option shall not confer on the Option Holder any
right with respect to continuance of his employment the Company nor shall such
grant interfere in any way with the right of the Company to terminate the Option
Holder's employment at any time. Notwithstanding the foregoing, in the event
that the Option Holder purchases Option Shares pursuant to an exercise of the
Option, the Option Holder shall enjoy, with respect to such Option Shares,
"tag-along" rights, "put" rights, exchange rights, registration rights, rights
with respect to securities of any "Designated Subsidiary" (as defined in the
Company's Bye-Laws) and other comparable rights on the most favorable basis
provided for each such right to any other holder of Common Stock.
(h) RECAPITALIZATIONS AND ADJUSTMENTS. In the event of any merger,
consolidation, reorganization, recapitalization, spin-off, split-up,
combination, reconstruction, amalgamation, share exchange, liquidation,
dissolution, share split, share dividend, other distribution of securities or
other property in respect of shares or other securities, or other change in
corporate structure or capitalization affecting the rights or value of the
securities then subject to this Option Agreement, the Company shall promptly
make appropriate adjustment(s) in the number and/or kind of securities subject
to this Option Agreement and/or in the Option Prices and/or in other terms and
conditions of this Option Agreement, and/or the Company shall promptly make
appropriate provision(s) for supplemental payments of cash, securities and/or
other property, in each case so as to avoid dilution or enlargement of the
rights of the Option Holder and of the after-tax economic opportunity and value
represented by this Option Agreement. If an event
20
occurs that may require an adjustment (or other action) pursuant to the
preceding sentence, the Company shall promptly deliver to the Option Holder a
certificate that specifies (x) the event in question and (y) either the
action(s) being taken or the reasons why the Company believes no action is
needed.
(i) NONASSIGNABILITY AND TRANSFERABILITY. The Option may not be assigned
or otherwise transferred, disposed of or encumbered by the Option Holder, in
whole or in part, except: (i) by will or the laws of descent and distribution or
(ii) by the Option Holder to members of "the Option Holder's immediate family",
to a trust established for the exclusive benefit of one or more members of "the
Option Holder's immediate family" and/or the Option Holder, or to a partnership
pursuant to which the only partners are one or more members of "the Option
Holder's immediate family" and/or the Option Holder. For purposes of this
Agreement, "THE OPTION HOLDER'S IMMEDIATE FAMILY" shall mean the initial Option
Holder's children, stepchildren, grandchildren, parents, spouse, siblings
(including half brothers and sisters), and in-laws, and includes relationships
arising because of legal adoption. The Company represents and warrants that its
Board has approved the transfer of all or any portion of the Option to and the
exercise thereof by Option Holder's immediate family or trust or partnership as
permitted by this Paragraph (i) and the registration of any Option Shares to be
delivered upon exercise of the Option in the name of any Option Holder to whom
the Option may be transferred pursuant to this Paragraph (i).
(j) OBLIGATIONS AS TO SHARE CAPITAL. The Company agrees that it shall at
all times maintain authorized and unissued share capital sufficient to fulfill
all of its obligations under this Agreement.
(k) RESTRICTIONS ON TRANSFER OF OPTION SHARES. Neither the Option Shares
nor any interest in them may be sold, assigned, pledged, hypothecated,
encumbered or in any other manner transferred or disposed of, in whole or in
part, except in compliance with the terms, conditions and restrictions as set
forth in the Bye-Laws of the Company, applicable United States federal and state
securities laws or any other applicable laws or regulations and the terms and
conditions of this Agreement. Each certificate for Option Shares delivered upon
exercise of the Option, unless at the time of exercise such Option Shares are
registered under the Securities Act of 1933, shall bear the following legend or
such other legend as the Company reasonably deems appropriate:
"These securities have not been registered under the
United States Securities Act of 1933, as amended. These
securities cannot be offered, transferred or sold unless (i) a
registration statement under such Act is in effect with respect
to such securities or a written opinion from counsel reasonably
acceptable to Atlas Specialty Limited (the "Company") is obtained
to the effect that no such registration is required, and (ii) the
transferee is approved by
21
applicable regulatory authorities, if such approval is required
and (iii) simultaneously the appropriate number of shares of any
Designated Subsidiary (as such term is defined in the Bye-Laws of
the Company and only if the Board of Directors of the Company has
constituted any entity a Designated Subsidiary) is offered,
transferred or sold together with each share represented hereby
that is proposed to be offered, transferred or sold. The Company
reserves the right to refuse the transfer of such securities
until such conditions have been fulfilled. Sections 68 through 70
of the Company's Bye-Laws contain other significant restrictions
on transfers of shares of the Company."
Any certificate delivered at any time in exchange or substitution for any
certificate bearing such legend or such other legend reasonably deemed
appropriate by the Company shall also bear such legend unless, in the opinion of
counsel for the Company, the securities represented thereby need no longer be
subject to the restriction contained herein. The provisions of this Paragraph
(n) shall be binding upon all subsequent holders of certificates bearing the
above legend.
(l) WITHHOLDING. The Option Holder agrees to make appropriate arrangements
with the Company for satisfaction of any applicable tax withholding
requirements, or similar requirements, arising out of this Agreement.
(m) INCORPORATION OF PROVISIONS. Sections 11, 12, 14, 15, 16 (first and
third sentences only), 17, 18, 19, 20, 21 (second sentence only), 22, 23 and 24
of the Employment Agreement (relating, respectively, to excise tax adjustment
payments, resolution of disputes, representations, integration and
inconsistencies, assignability, amendments or waivers, notices, severability,
beneficiaries/references, governing law, headings and counterparts) shall be
deemed incorporated into this Agreement as if fully set forth herein, with all
references to the Executive in such Sections being deemed to be references to
the Option Holder. All capitalized terms not defined in this Share Purchase
Option Agreement shall have the meanings set forth in the Employment Agreement.
22
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
AXIS SPECIALTY LIMITED
By: /s/ Xxxxxx X Xxxxxxxx Xx
--------------------------------
Name: Xxxxxx X Xxxxxxxx Xx
Title: Chairman
THE OPTION HOLDER
/s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
23
EXHIBIT B
GOOD REASON
For purposes of this Agreement, "GOOD REASON" shall mean the occurrence of
any of the following (without the Executive's express prior written consent and
without full cure within ten days of the Executive giving notice to the Company
or the Board, as the case may be, requesting cure):
(i) (A) The assignment to the Executive of duties materially
inconsistent with the Executive's positions and responsibilities as
set forth in Section 2 of the Employment Agreement; (B) any material
reduction in the Executive's authorities or responsibilities; or (C)
any removal of the Executive from, or any failure to elect or
reelect the Executive to, the positions of President and Chief
Executive Officer or as a member of the Board or of the Executive
Committee, except in connection with a termination of the
Executive's employment (w) by the Company (whether for Cause or
without Cause), (x) by either Party for Disability, (y) by the
Executive voluntarily or (z) as a result of the Executive's death;
(ii) (A) Any reduction in the Executive's Base Salary or (B) following
any Change in Control, failure to pay the Executive an annual bonus
in an amount no less than the greater of (x) US$1,000,000 and (y)
the largest amount awarded to the Executive as an annual bonus for
any of the three years (or such lesser number of years he has then
been employed) immediately preceding the year in which a Change in
Control occurs and, if applicable, failure to calculate such bonus
in a manner as favorable to the Executive as that used to calculate
the most recent annual bonus paid to the Executive prior to the
Change in Control;
(iii) The failure by the Company to obtain the specific assumption of this
Agreement by any successor to, or assign of, the Company or any
person acquiring all or substantially all of the Company's business
or assets;
(iv) Any material breach by the Company or any of its Affiliates of any
of its material obligations to the Executive or members of his
family, under this Agreement or otherwise; or
24
(v) Requiring the Executive to be based at any office or location in
violation of Section 2(a) of the Employment Agreement, except for
travel reasonably required in the performance of the Executive's
duties.
25
EXHIBIT C
CHANGE IN CONTROL
"CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) any "PERSON," as such term is used as of the Effective Date in
Sections 3(a)(9) and 13(d) of the United States Securities Exchange Act of 1934,
becomes a "BENEFICIAL OWNER," as such term is used in Rule l3d-3 promulgated
under that act, of 30% or more of the Voting Stock of the Company, measured
either by number of shares or by voting power;
(ii) the majority of the Board consists of individuals other than
"INCUMBENT DIRECTORS," which term means the members of the Board on the
Effective Date; provided that any person becoming a director subsequent to such
date whose election or nomination for election was supported by two-thirds of
the directors who then comprised the Incumbent Directors shall be considered to
be an Incumbent Director;
(iii) the Company adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;
(iv) all or substantially all of the assets or business of the Company is
disposed of pursuant to an amalgamation, merger, consolidation or other
transaction (unless the shareholders of the Company immediately prior to such
merger, consolidation or other transaction beneficially own, directly or
indirectly, in substantially the same proportion as they owned the Voting Stock
of the Company, all of the Voting Stock or other ownership interests of the
entity or entities, if any, that succeed to the business of the Company); or
(v) the Company combines with another entity and is the surviving entity
but, immediately after the combination, the shareholders of the Company
immediately prior to the combination hold, directly or indirectly, 50% or less
of the Voting Stock of the combined entity, measured either by number of shares
or by voting power (there being excluded from the Voting Stock held by such
shareholders, but not from the Voting Stock of the combined entity, any shares
received by Affiliates of such other entity in exchange for Voting Stock of such
other entity).
For purposes of the foregoing, "VOTING STOCK" shall mean capital stock of any
class or classes having general voting power under ordinary circumstances, in
the absence of contingencies, to elect members of a board of directors (or
equivalent governing person or body) and "AFFILIATE"
26
of any person shall mean any person that controls, is controlled by, or is under
common control with, such person.
27
