EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of January 6, 1999, by and between THE
ST. XXXX COMPANIES, INC., a Minnesota corporation (the "Company"), and Xxxxx X.
Xxxxxxxxx (hereinafter called the "Executive").
WHEREAS, the Company desires to employ the Executive and the
Executive is willing to serve as an employee of the Company, subject to the
terms and conditions of 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
During the Term of Employment, as defined in Section 2 hereof,
the Company shall employ the Executive, and the Executive shall perform services
for the Company, on the terms and conditions set forth in this Agreement.
Section 2. TERM OF EMPLOYMENT
The Term of Employment of this Agreement shall be the period
commencing January 30, 1999 (the "Commencement Date") and ending on December 31,
2002; PROVIDED, that commencing on January 1, 2001 and on each subsequent
January 1, the Term of Employment shall automatically be extended for an
additional year, unless, no later than 90 days before each such anniversary,
either party provides notice to the other party of an intention not to
extend, and PROVIDED FURTHER, that the Term of Employment and this Agreement
may be sooner terminated if the Executive's employment is terminated pursuant
to Section 7 hereof.
Section 3. DUTIES
During the Term of Employment, the Executive shall serve as the
President and Chief Operating Officer of the Company and shall have such duties
and responsibilities as are assigned to him by the Chairman and Chief Executive
Officer of the Company and/or the Board of Directors of the Company (the
"Board"). The Executive shall report directly to the Chairman and Chief
Executive Officer of the Company. The Executive shall be elected as a member of
the Board as of the Commencement Date and shall serve on the Board during the
Term of Employment.
Section 4. CASH AND CERTAIN STOCK BASED COMPENSATION
(a) BASE SALARY. The Executive shall receive, as compensation
for his duties and obligations to the Company, a salary at the annual rate of
$850,000. Executive's annual salary shall be payable in substantially equal
installments in accordance with the Company's payroll practice. The Board shall
review the annual salary annually and in light of such review may, in its
discretion, increase such base annual salary taking into account any change in
Executive's then responsibilities, performance by the Executive, and other
pertinent factors. (Such base annual salary, as it may be increased from time
to time, is referred to hereinafter as the "Base Salary".)
(b) ANNUAL BONUS. The Executive shall be eligible for an annual
cash bonus pursuant to the terms of the Company's incentive plans for each
fiscal year of the Company during the Term of Employment with a target level of
85% of Base Salary, as determined by the Compensation Committee of the Board
(the "Compensation Committee").
(c) INCENTIVE AWARDS. The Company shall grant the Executive on
the Commencement Date options to purchase 375,000 shares of the Company's common
stock (the "Performance Stock Options") pursuant to the terms of the Company's
1994 Stock Incentive Plan (the "1994 Plan"). Except as otherwise provided
herein, if the Executive remains an employee of the Company until at least
December 2, 2000, (i) 50% of the
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Performance Stock Options shall vest on the later of such date or the date the
daily closing price of the Company's common stock on the New York Stock Exchange
during any 20 consecutive trading days exceeds $50 per share and (ii) an
additional 50% of the Performance Stock Options shall vest on the later of
December 2, 2000 or the date the daily closing price of the Company's common
stock on the New York Stock Exchange during any 20 consecutive trading days
exceeds $55 per share. To the extent that the Performance Stock Options either
have not become exercisable or have not been exercised by the Executive on or
prior to December 1, 2001, such Performance Stock Options shall expire.
In addition, on the Commencement Date, the Company shall make an
award of 30,000 shares of restricted stock pursuant to the terms of the 1994
Plan (the "Restricted Stock"). The Restricted Stock shall vest in three equal
installments commencing on the first anniversary of the Commencement Date (and
all restrictions on such portion of the Restricted Stock shall then lapse, other
than as required by applicable law) if the Executive is employed by the Company
on such anniversary; provided, however, that all such Restricted Stock may vest
at an earlier date as specified in this Agreement.
Section 5. OTHER BENEFIT AND COMPENSATION PROGRAMS AND PLANS
(a) EMPLOYEE BENEFIT PROGRAMS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
of the Company in effect from time to time for employees and senior executive
officers of the Company.
(b) EXECUTIVE COMPENSATION PLANS. In addition to the
compensation, the Performance Stock Options and the Restricted Stock provided
for in Section 4 hereof and the employee benefit programs provided for in
paragraph (a) of this Section, the Executive shall be entitled to participate in
the Company's executive compensation plans, as presently in effect or as they
may be modified or added to by the Company from time to time. It is expected
that the annual target grant of stock options would cover 130,000 shares of the
Company's common stock and that the first grant thereof would be made in
February or March of 1999 when grants are generally made to other senior
executives of the Company.
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(c) VACATIONS AND SICK LEAVE. The Executive shall be entitled
to vacation and sick leave each year, in accordance with the Company's policies
in effect from time to time, provided, however, that the Executive shall be
entitled to a minimum of five weeks vacation per year.
(d) EXPENSES. The Company shall reimburse the Executive for
reasonable expenses and disbursements in carrying out his duties and
responsibilities under this Agreement, in accordance with the Company's
established policies.
(e) PENSION CREDIT. For purposes of the calculations of pension
benefits under the Company's Benefit Equalization Plan, the Company shall credit
the Executive with five years of service as of the Commencement Date. The
Executive shall be fully vested in the benefits accrued under the Company's
Benefit Equalization Plan during the Term of Employment.
(f) LEVERAGED STOCK PURCHASE PROGRAM. As soon as practicable
following the Commencement Date, the Company shall provide the Executive with an
opportunity to participate in the Company's Special Leveraged Stock Purchase
Program for the purpose of purchasing shares of the common stock of the Company,
subject to a maximum loan amount of $2,500,000.
Section 6. PAYMENTS RELATING TO CHANGE OF EMPLOYMENT
(a) CASH BONUS. In consideration of the Executive's entering
into this Agreement and serving as an employee of the Company, within five days
from the Commencement Date, the Company will pay the Executive the sum of
$1,000,000 to replace the estimated 1998 incentive award to which the Executive
would have been entitled had he continued in employment with his prior employer.
(b) EQUITY AWARDS. In addition, in consideration of the
Executive's entering into this Agreement and serving as an employee of the
Company, on the Commencement Date the Company shall grant the Executive (i)
options to purchase 125,000 shares of the Company's common stock (the
"Replacement Stock Options")
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pursuant to the terms of the 1994 Plan which shall vest in full as of the first
anniversary of the Commencement Date and (ii) 85,000 shares of restricted stock
pursuant to the terms of the 1994 Plan (the "Replacement Restricted Stock")
which shall vest in full on the third anniversary of the Commencement Date (and
all restrictions on such Replacement Restricted Stock shall then lapse, other
than as required by applicable law) in each case if the Executive is then
employed by the Company; provided, however, that all such Replacement Stock
Options and Replacement Restricted Stock may vest at an earlier date as
specified in this Agreement.
(c) SUPPLEMENTAL RETIREMENT BENEFITS. The Executive represents
that he may be entitled to certain benefits under the Supplemental Benefit
Equalization Plan of his prior employer. In the event that the prior employer
refuses to pay all or a portion of such benefits to the Executive or contests
the Executive's entitlement to such benefits, the Company shall reimburse
Executive on a current basis for all reasonable legal fees and expenses, if any,
incurred by the Executive in seeking to enforce his rights to payments of such
benefits.
Section 7. TERMINATION
(a) TERMINATION FOR CAUSE. In order to terminate the employment
of Executive for Cause, the Company must deliver to Executive a Notice of
Termination given within ninety (90) days after the Board both (i) has actual
knowledge of conduct or an event allegedly constituting Cause, and (ii) has
reason to believe that such conduct or event could be grounds for Cause. For
purposes of this Agreement a "Notice of Termination" shall mean a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the membership of the Board, excluding Executive, at a meeting called for the
purpose of determining that Executive has engaged in conduct which constitutes
Cause (and at which Executive had a reasonable opportunity, in consultation with
his counsel, to be heard before the Board prior to such vote).
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For purposes of this Agreement "Cause" shall mean (A) the
Executive is convicted of, or has plead guilty or NOLO CONTENDERE to, a felony
involving intentional conduct; (B) the Executive is convicted of, or has plead
guilty or NOLO CONTENDERE to any lesser crime or offense involving the illegal
use or conversion of property of the Company or its subsidiaries; (C) the
willful and continued failure by the Executive to perform substantially his
duties with the Company (other than any such failure resulting from incapacity
due to physical or mental illness or Disability) after a demand for substantial
performance is delivered to the Executive by the Company which specifically
identifies the manner in which the Company believes the Executive has not
substantially performed his duties and which provides the Executive with an
opportunity to cure by substantially performing his duties; (D) the Executive
engages in willful misconduct in carrying out his duties with the Company (which
shall not be deemed to include any action taken by the Executive in good faith
in the best interest of the Company); or (E) the Executive engages in actions in
his business or personal life which demonstrably harm the reputation or damage
the good name of the Company.
In the event of termination of the Executive's employment by the
Company for Cause, the Executive shall only be entitled to:
(w) any accrued but unpaid Base Salary through his date of
termination;
(x) any earned but unpaid bonus from a prior fiscal year;
(y) reimbursement of reasonable business expenses incurred prior
to the date of termination; and
(z) other or additional benefits, if any, in accordance with (i)
the applicable employee benefit programs of the Company referred to in
Section 5(a) and (ii) Section 6(c).
(b) DEATH OR DISABILITY. In the event of the death or
Disability of the Executive, the Executive's employment shall be terminated as
of the date of such death or Disability and the Executive, or the Executive's
estate or legal representative, as appropriate, shall be entitled to the amounts
referred to in paragraph (a) of this Section,
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together with (x) any applicable amounts under the Company's executive
compensation plans referred to in Section 5(b) and (y) full vesting in the
Replacement Stock Options and Replacement Restricted Stock referred to in
Section 6(b). In addition, in the event of the Executive's Disability, the
Executive shall receive service credit under the Company's Benefit Equalization
Plan from the date of his termination of employment pursuant to this Section
7(b) through the end of the Term of Employment (determined as if no extensions
thereof occurred after such termination of employment).
For purposes of this Agreement, "Disability" shall mean "total
and permanent disability", as defined in the Company's long-term disability plan
for senior executives (or such other Company-provided long-term disability
benefit plan sponsored by the Company in which Executive participates at the
time the determination of Disability is made).
(c) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If the
Company should terminate the Executive's employment other than for Cause, or in
the event the Executive terminates employment for Good Reason, the Company shall
pay the Executive, in a lump sum within ten (10) days following his termination
of employment, an amount equal to three times the sum of (i) the Executive's
highest Base Salary during the 12-month period prior to his termination of
employment and (ii) the average of the annual bonus payable to the Executive for
each of the two fiscal years of the Company (or the bonus for the 1999 fiscal
year if the Executive's employment is terminated prior to December 31, 2000)
during the Term of Employment preceding the fiscal year in which his termination
of employment occurs; provided, however, that in the event that the Executive's
employment is terminated pursuant to this Section 7(c) prior to December 31,
1999, the Executive's target bonus in the year of termination shall be
substituted for purposes of this clause (ii). The Executive shall also be
entitled to:
(A) the amounts referred to in paragraph (a) of this Section;
(B) any applicable amounts to which he is entitled under the
Company's executive compensation plans referred to in Section 5(b) including the
full vesting of
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annual stock options granted to the Executive after the date hereof;
(C) continued participation in the medical, dental,
hospitalization and group life insurance coverage plans of the Company ("Welfare
Plans") in which he was participating on the date of the termination of his
employment until the earlier of:
(x) the end of the 36-month period following his termination of
employment; and
(y) the date, or dates, he receives coverage and benefits under
the plans and programs of a subsequent employer;
PROVIDED, HOWEVER, if the Executive cannot continue to participate in the
Company's Welfare Plans, the Company shall otherwise provide such benefits on
the same after-tax basis as if continued participation has been permitted; and
PROVIDED FURTHER, HOWEVER, nothing herein shall be deemed to limit any amounts
or benefits to which the Executive is otherwise entitled under the terms of any
benefit plans of the Company as in effect from time to time;
(D) Full vesting in the Replacement Stock Options and the
Replacement Restricted Stock referred to in Section 6(b);
(E) Full vesting of the Restricted Stock referred to in Section
4(c);
(F) The Performance Stock Options referred to in Section 4(c)
shall become exercisable by the Executive on December 2, 2000 (but not prior
thereto) (i) with respect to 50% of such Performance Stock Options if the $50
target price referred to in Section 4(c) has been achieved prior to the
Executive's termination of employment and (ii) with respect to the remaining 50%
of such Performance Stock Options if the $55 target price referred to in Section
4(c) has been achieved prior to the Executive's termination of employment;
provided, however, that all other terms and conditions applicable to the grant
of the Performance Stock Options shall continue to apply; and
(G) The Executive shall receive outplacement services at the
Company's expense for a period of up to one year following the date of
termination of employment in accordance with the policies of the Company as in
effect from time to time.
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Executive must, within ninety (90) days after the Executive has
actual knowledge of the occurrence of an event or circumstances which would give
him reason to believe constitutes Good Reason, give thirty (30) days prior
written notice of his intent to terminate employment for Good Reason which
notice sets forth the event or circumstances believed to constitute Good Reason.
Upon receipt of such notice, the Company shall have ten (10) days to cure its
conduct, to the extent such cure is possible.
For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express written consent):
(i) a reduction in the amount of the Executive's then current
Base Salary;
(ii) (A) the removal of or failure to elect or reelect the
Executive as President or Chief Operating Officer of the Company prior to
May 7, 2002 (other than for Cause or as a result of the election of the
Executive as Chairman or Chief Executive Officer of the Company), or (B)
the failure by the Company to elect the Executive as Chairman or Chief
Executive Officer of the Company on May 7, 2002 or on an earlier date in
the event that the current Chairman and Chief Executive Officer of the
Company is no longer serving in such capacities, it being understood that
if the current Chairman and Chief Executive Officer continues to serve as
Chairman in the Board's discretion, the Executive shall have Good Reason
hereunder if he is elected to serve as Chief Executive Officer.
(iii) the assignment to the Executive of duties or
responsibilities which are materially inconsistent with his then current
position; and
(iv) any requirement by the Company that the Executive relocate
to Company headquarters which are more than 50 miles from where such
headquarters are located on the Commencement Date.
(d) TERMINATION WITHOUT GOOD REASON. In the event of a
termination of employment by the Executive without Good Reason (other than a
termination due to death
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or Disability), the Executive shall have the same entitlements as provided in
paragraph (a) of this Section for termination for Cause.
(e) CHANGE IN CONTROL. In the event of a Change in Control of
the Company (as such term is defined in the Company's Special Severance Policy
(the "Policy"), the Executive shall be entitled to the benefits provided under
the Policy if his employment terminates under the circumstances provided under
the Policy or the severance compensation and benefits provided in Section (c) of
this Section, whichever is greater. Notwithstanding anything contained in the
Policy to the contrary, if the Executive is required, pursuant to Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), to pay (through
withholding or otherwise) an excise tax on "excess parachute payments" (as
defined in Section 280G of the Code) by reason of the Change in Control of the
Company, the Company shall pay the Executive the minimum amount necessary to
place the Executive in the same after-tax financial position that he would have
been in if he had not incurred any excise tax liability under Section 4999 of
the Code.
Section 8. NO MITIGATION
The Executive shall not be required to mitigate the amount of any
payments or benefits provided for in Section 7(c) or 7(e) hereof by seeking
other employment or otherwise and no amounts earned by the Executive shall be
used to reduce or offset the amounts payable hereunder, except as otherwise
provided in Section 7(c).
Section 9. NONCOMPETITION AND NONSOLICITATION
(a) The Executive hereby covenants and agrees that at no time
during the period of his employment nor for a period of two years following the
termination thereof for any reason will he, without the prior written consent of
the Board, 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), provide consulting
services to, be employed by, or own, manage, operate or control any
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business which is in competition with a business engaged in by the Company or
any of its subsidiaries or affiliates in any state of the United States or in
any foreign country in which any of them are engaged in business at the time of
such termination of employment for as long as they carry on a business therein.
Notwithstanding the preceding sentence, the Executive shall not be prohibited
from owning less than five (5%) percent of any publicly traded corporation,
whether or not such corporation is in competition with the Company.
(b) The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of two years
immediately following termination for any reason, the Executive shall not,
without the prior written consent of the Board, solicit or take any action to
cause the solicitation of any person who as of that date was a client, customer,
policyholder, vendor, consultant or agent of the Company to discontinue
business, in whole or in part with the Company.
(c) The Executive hereby covenants and agrees that, at all
times during the period of his employment and for a period of one year
immediately following the termination thereof for any reason, the Executive
shall not, without the prior written consent of the Board, employ or seek to
employ any person 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.
(d) Notwithstanding the foregoing, paragraphs (a), (b) and (c)
of this Section 9 shall not apply to the Executive in the event that the
Executive's employment is terminated for any reason within the two-year period
following a Change in Control of the Company, within the meaning of the Policy
referred to in Section 7(e).
(e) It is the intention of the parties hereto that the
restrictions contained in this Section be enforceable to the fullest extent
permitted by applicable law. Therefore, to the extent any court of competent
jurisdiction shall determine that any portion of the foregoing restrictions is
excessive, such provision shall not be entirely void, but rather shall be
limited or revised only to the extent necessary to make it enforceable.
Specifically, if any court of competent jurisdiction should hold that any
portion of the foregoing
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description is overly broad as to one or more states of the United States or one
or more foreign jurisdictions, then that state or states or foreign jurisdiction
or jurisdictions shall be eliminated from the territory to which the
restrictions of paragraph (a) of this Section applies and the restrictions shall
remain applicable in all other states of the United States and foreign
jurisdictions.
Section 10. CONFIDENTIAL INFORMATION
The Executive agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to the Company, its
subsidiaries and affiliates, including, without limitation, customer lists,
client lists, trade secrets, pricing policies and other business affairs of the
Company, its subsidiaries and affiliates learned by him from the Company or any
such subsidiary or 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 subsidiaries or affiliates, whether during or after
his period of service with the Company, except (i) as such disclosure may be
required or appropriate in connection with his work as an employee of the
Company or (ii) when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information. The Executive agrees to give the Company advance written notice of
any disclosure pursuant to clause (ii) of the preceding sentence and to
cooperate with any efforts by the Company to limit the extent of such
disclosure. Upon request by the Company, the Executive 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, subsidiary 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 subsidiary's or affiliate's business and all
property of the Company
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or any subsidiary or affiliate associated therewith, which he may then possess
or have under his direct control, other than personal notes, diaries, rolodexes
and correspondence.
Section 11. REMEDY
Should the Executive engage in or perform, either directly or
indirectly, any of the acts prohibited by Sections 9 or 10 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 Executive 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.
Section 12. ARBITRATION.
Any dispute among the parties hereto, except as provided by
Section 11 of this Agreement, shall be settled by final and binding arbitration
in Minneapolis/St. Xxxx, Minnesota, in accordance with the then effective rules
of the American Arbitration Association, and judgment upon the award rendered
may be entered in any court having jurisdiction thereover.
Section 13. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of
the heirs and representatives of the Executive and the assigns and successors of
the Company, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Executive (except by
will or by operation of the laws of intestate succession) or by the Company
except that the Company shall be required to assign this Agreement to any
successor (whether by purchase or otherwise) to all or substantially all of the
assets or businesses of the Company, unless otherwise requested by the
Executive.
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Section 14. REPRESENTATIONS
The Company represents and warrants that it is fully authorized
and empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any material agreement to
which it is a party or by which it is bound. The Executive represents that he
is not a party or bound by any agreement that would be violated by the
performance of his obligations under this Agreement.
Section 15. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Minnesota, without reference to rules
relating to conflicts of law.
Section 16. ENTIRE AGREEMENT
This Agreement constitutes the full and complete understanding
and agreement of the parties with respect to the subject matter hereof and
supersedes all prior understandings and agreements as to employment of the
Executive by the Company. This Agreement cannot be amended, changed, modified
or terminated without the written consent of the parties hereto.
Section 17. 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. Any waiver must be in writing and signed by the Executive or an
authorized officer of the Company, as the case may be.
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Section 18. SURVIVORSHIP
The respective rights and obligations of the parties hereunder
shall survive any termination of the Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
Section 19. NOTICES
Any notice, report, request or other communication given under
this Agreement shall be written and shall be effective upon delivery personally
or when sent by certified or registered mail, postage prepaid, return receipt
requested.
Unless otherwise notified by any of the parties, notices shall be
sent to the parties as follows:
To the Company:
The St. Xxxx Companies, Inc.
000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: General Counsel
With a copy to:
The St. Xxxx Companies, Inc.
000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: Senior Vice President, Human Resources
To the Executive:
Xxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
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Section 20. 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 21. HEADINGS
The headings of the sections contained in 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.
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE ST. XXXX COMPANIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
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