EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EXECUTIVE
EMPLOYMENT AGREEMENT, dated as of the 28th day of July ,
2008, is between United National Insurance Company, a Pennsylvania
corporation with its principal offices in Bala Cynwyd, PA (the
“Company”) and J. Scott Reynolds, an individual
residing at 20619 Bethel Church Road, Cornelius, NC 28031 (the
“Executive”).
WHEREAS ,
the Company desires that Executive be employed by the Company in
the capacity of President of United National Group, as that Group
is defined herein; and
WHEREAS ,
the parties desire to enter into this Agreement to set forth the
terms and conditions of Executive’s employment.
NOW ,
THEREFORE , in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the receipt of which is mutually acknowledged, the
Company and the Executive agree as follows:
1. TERM
OF EMPLOYMENT; RENEWAL. The Company agrees to employ the
Executive and the Executive accepts employment with the Company for
the period commencing as of July 28, 2008 (the
“Effective Date”) and ending on December 31, 2011
(such initial period, as extended below, shall be referred to as
the “Employment Term”). The term of this Agreement will
automatically renew at the expiration of the then current term for
an additional one-year period unless, at least one hundred and
twenty (120) days prior to the expiration date of the then
current term, either party shall give written notice of non-renewal
to the other, in which event this Agreement shall terminate at the
end of the term then in effect. To the extent that the Executive
continues employment with the Company or any Affiliate (as defined
below) following the expiration of the Term, and without having
reached agreement on a new written agreement, the Executive shall
be an employee at will and none of the provisions of this Agreement
shall apply other than Sections (6) and(7) hereof.
2. POSITION AND DUTIES. The Executive shall serve as
the President of the Company’s United National Group,
reporting to the President and Chief Executive Officer
(“CEO”) of United America Indemnity Group, Inc.
(“UAIGI”) and shall have such authority and duties,
consistent with such position, as may from time to time be
specified by the CEO or the Board of Directors of United America
Indemnity, Ltd. (“UAI Board”). “United National
Group” shall, as herein referenced, constitute the program
operations of United National Insurance Company, Diamond State
Insurance Company, United National Specialty Insurance Company,
United National Casualty Insurance Company, Penn-America Insurance
Company, Penn-Star Insurance Company and Penn-Patriot Insurance
Company. At the request of the CEO or UAI Board, the Executive
shall also serve, without additional compensation, as an officer or
director of any Affiliates of the Company that are involved in the
business of the Company and/or its Affiliates. For purposes hereof,
an “Affiliate” means any company that is controlled by,
under common control with, or that controls the Company. The
Executive’s principal place of business shall be in North
Carolina, subject to business travel and travel to the
Company’s principal executive offices in Bala Cynwyd,
Pennsylvania.
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3. ENGAGEMENT IN OTHER EMPLOYMENT. The Executive shall
devote his business time, energies and talents to the business of
the Company and shall comply with each of the Company’s
corporate governance and ethics guidelines, conflict of interests
policies and code of conduct applicable to all Company employees or
senior executives as adopted by the UAI Board from time-to-time.
The Executive first shall obtain the consent of the UAI Board in
writing before engaging in any other business or commercial
activities, duties or pursuits. Notwithstanding the foregoing,
nothing shall preclude the Executive from (i) engaging in
charitable activities and community affairs and (ii) managing
his personal investments and affairs.
(a) ANNUAL
DIRECT SALARY. During the term of this Agreement, as compensation
for services rendered to Company under this Agreement while
Executive is employed with the Company, the Executive shall be
entitled to receive from the Company an annual direct salary of not
less than $350,000 per year, subject to all applicable federal,
state and/or local tax and other withholdings, commencing as of
Executive’s date of employment (the “Annual Direct
Salary”). Executive’s Annual Direct Salary shall be
payable in substantially equal biweekly installments, and shall be
prorated for any partial employment period. The Annual Direct
Salary shall be reviewed by the CEO and/or UAI Board in April of
each year this Agreement is in effect, commencing with calendar
year 2009, and may be adjusted in the discretion of the CEO and/or
UAI Board after taking into account the prevailing market value of
the position and the then current pay increase practice of the
Company. In no event shall the Annual Direct Salary be decreased
without the express written consent of the Executive.
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(i)
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In
respect of the remainder of 2008, Executive shall be eligible to
receive a bonus opportunity of $225,000 based on the achievement by
the Company (in whole or in part, as the case may be) of accident
year targets and other measures of performance as recommended by
the Chairman of UAI, Ltd. and as approved by the UAI Board with
such bonus to be paid in cash on or before March 15, 2009 if
Executive is employed and in good standing as of such
date.
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(ii)
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In
respect of each full calendar year (commencing with the 2009
accident year, determined in accordance with generally accepted
accident year insurance accounting methodology consistently applied
(and verified by the Company’s independent auditors)) during
which Executive served as the Company’s President during the
entirety of such year (Bonus Year), the Company shall provide
Executive with a bonus opportunity of $450,000 (Annual Bonus)
determined, awarded, and paid as follows:
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(1) One-third
(1/3) of each Annual Bonus shall be satisfied by the issuance of
restricted shares of Class A Stock, as of March 15 of the
year following the Bonus Year, with such issuance
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conditioned on
(x) the Executive being actively employed in good standing by
the Company as of such date (or if such date is not a business day,
the immediately preceding business day) (valued for this purpose at
the closing price of the Class A Stock on the last trading day
of the relevant Bonus Year as reported in the Wall Street
Journal ) and (y) the achievement by the Company for such
Bonus Year (in whole or in part, as the case may be) of accident
year targets and other measures of performance as recommended by
the Chairman of UAI, Ltd. and as approved by the UAI Board. Such
restricted shares shall vest and become transferable on each of the
first four (4) anniversaries of the issuance thereof, provided
that vesting of such shares shall cease at such time as
(1) Executive resigns from the Company, (2) Executive is
terminated by the Company for Cause, or (3) Executive does not
comply with the restrictive covenants and obligations set forth in
Section (7) herein, along with his obligations, if applicable,
under any release which he is required to provide in favor of the
Company and those under any separation agreement to which he is
party with the Company and/or its Affiliates (collectively, the
“Post-Termination Obligations”). (The terms of the
Restricted Shares shall be otherwise subject to the UAI Ltd. form
of “Restricted Share Agreement” attached hereto). With
respect to the grant and vesting of the bonus restricted shares or
the payment of the cash portion of the bonus as provided for below,
the UAI Board’s good faith determination as to the
satisfaction of any accident year targets and/or target performance
measures shall be final and binding.
(2) Two-thirds
(2/3) in the form of a cash payment, to be paid to the Executive on
or before March 15 following the applicable Bonus Year,
subject to the achievement by the Company for such Bonus Year of
accident year targets and other performance measures as recommended
by the Chairman of UAI, Ltd. and as approved by the UAI Board,
provided that the Executive is employed in good standing as of such
payment date.
(3) If the
Executive remains employed in good standing through the expiration
of the Employment Term and is otherwise in compliance with the
terms of this Agreement, he may, upon thirty (30) days’
prior written notice to the Company prior to the expiration of the
Employment Term, elect to accelerate the vesting of any then
unvested restricted shares previously granted pursuant to this
Section 4(b) (“End of Employment Term Acceleration
Notice”), in which case he shall be subject to the provisions
of Sections (6) and (7) hereof [including, but not
limited to, Section 7(g)], by (and pursuant to) which Sections
Executive otherwise acknowledges he is bound during and after the
conclusion of his employment with the
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Company. All
unvested restricted shares Executive elects to accelerate and vest
pursuant to this Section 4(b)(3) shall be free and clear of
all restrictions; provided, however, that said shares shall be held
in book-entry form by the Company, and shall be non-transferable by
Executive, until expiration of the 12-month period referenced in
Section (7) herein.
(c) EQUITY
INCENTIVE AWARDS. Provided that the Executive is actively employed
in good standing by the Company at the time of the next meeting of
the UAI Board, the CEO shall recommend to the UAI Board that the
Executive be granted an award of 100,000 Class A common shares
of UAI. 10,000 of the Class A common shares shall vest
immediately and the remainder will vest in one-fourth equal
installments on each anniversary date of the Executive’s
commencement of employment, provided that he is employed in good
standing as of such date and his employment has not been terminated
for any reason. Attached hereto is the form of Restricted Stock
Agreement, and such award shall be subject to the terms and
conditions of the Company’s form of agreement and the
Shareholding Guidelines in Section 5(d) below. During the
Employment Term, the Executive may be eligible to receive
additional equity incentive awards in UAI, Ltd. as determined by
the Board in its sole discretion. Such equity incentive awards
shall be subject to any exercise, vesting or other restrictions
imposed on such restricted stock awards by the Board in its
discretion.
(d) CHANGE
OF CONTROL. Upon a change of control of UAI, Ltd. as defined in the
Annex attached hereto, all unvested restricted shares and unvested
options held by the Executive shall accelerate and vest in full
(and thereafter become exercisable).
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5.
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FRINGE BENEFITS, VACATION TIME,
EXPENSES, PERQUISITES AND SHAREHOLDING GUIDELINES.
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(a) EMPLOYEE
BENEFIT PLANS. The Executive shall be entitled to participate in or
receive benefits under all corporate employment benefit plans
, including , but not limited to , any pension
plan, savings plan, medical or health-and-accident plan or
arrangement generally made available by the Company to similarly
situated executives as a group, subject to and on a basis
consistent with the terms, conditions and overall administration of
such plans and arrangements.
(b) The
Executive shall be entitled to the number of paid vacation days in
each calendar year determined by the Company from time to time for
its senior executive officers, but not less than four
(4) weeks in any calendar year (prorated in any calendar year
during which the Executive is employed hereunder for less than the
entire such year in accordance with the number of days in such
calendar year during which he is so employed). The Executive shall
also be entitled to all paid holidays, sick days and personal days
given by the Company to its senior executive officers.
(c) During
the term of his employment hereunder, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by him (in accordance with the policies and
procedures established by the Company from time to time)
in
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performing
services hereunder, provided that the Executive properly accounts
, therefore , in accordance with Company
policy.
(d) SHAREHOLDING
GUIDELINES. The Company’s goal is for the Executive to
acquire Class A common shares of UAI with a value of no less
than two times his “Annual Compensation” (as defined
below), or such higher amount as may be required by the Board
pursuant to share ownership guidelines adopted with respect to the
Company’s senior executive team. Such value shall include
vested and exercisable “in the money” share options,
assuming their exercise for the underlying shares. The Executive
agrees that the Class A common shares of UAI granted pursuant
to Section 4(c) and such shares as may be awarded in the future
shall not be transferable (other than for estate planning purposes
where the ultimate beneficiary of the transfer is a member of
executive’s immediate family) unless and until Executive has
achieved this ownership goal. For purposes of this
Section 5(d), “Annual Compensation” shall be the
Base Salary plus the Annual Bonus payable upon the achievement of
accident year targets and other measures of performance as
recommended by the Chairman of UAI, Ltd. and as approved by the UAI
Board.
6. PROTECTION OF COMPANY INFORMATION. During the period
of his employment, or at any later time following the termination
of his employment for any reason, the Executive shall hold in a
fiduciary capacity for the benefit of the Company and its
affiliates, and shall not, without the written consent of the
Board, knowingly disclose to any person, other than an employee of
the Company or a person to whom disclosure is reasonably necessary
or appropriate in connection with the performance by the Executive
of his duties as an executive of the Company, or use for any
purpose other than to perform his duties hereunder, any
“Confidential Information” of the Company or any of its
Affiliates obtained by him while in the employ of the Company. The
Confidential Information protected by this provision shall include
all computer software and files, policy expirations, telephone
lists, customer lists, prospect lists, marketing information,
information regarding managing general agents, pricing policies,
contract forms, customer information, copyrights and patents, the
identity of Company and Affiliate employees, Company and Affiliate
books, records, files, financial information, business practices,
policies and procedures, underwriting policies and practices of the
Company and of any Affiliate of the Company, information about all
services and products of the Company and its Affiliates, names of
users or purchasers of the products or services of the Company or
its affiliates, methods of promotion and sale and all information
which constitutes trade secrets under the law of any state in which
the Company or any of its Affiliates does business. No information
shall be treated as Confidential Information if it is generally
available public knowledge at the time of disclosure or use by
Executive, provided that information shall not be deemed to be
publicly available merely because it is embraced by general
disclosures or because individual features or combinations thereof
are publicly available. The Executive agrees that any breach of the
restrictions set forth in this Section will result in irreparable
injury to the Company and/or its Affiliates for which there is no
adequate remedy at law and the Company and its Affiliates shall, in
addition to any other remedies available to them, be entitled to
injunctive relief and specific performance in order to enforce the
provisions hereof and shall be entitled to recover its
attorneys’ fees and costs incurred in connection with seeking
such relief or otherwise as a result of a breach by the Executive
of the terms of this section. Notwithstanding the foregoing
provisions, if the Executive is required to disclose any such
confidential or proprietary information pursuant to applicable law
or a subpoena
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or court order,
the Executive shall promptly notify the Company , in writing
, of any such requirement so that the Company or the
appropriate affiliate may seek an appropriate protective order or
other appropriate remedy or waive compliance with the provisions
hereof. The Executive shall reasonably cooperate with the Company
to obtain such a protective order or other remedy. If such order or
other remedy is not obtained prior to the time the Executive is
required to make the disclosure, or the Company waives compliance
with the provisions hereof, the Executive shall disclose only that
portion of the confidential or proprietary information which he is
advised by counsel that he is legally required to so disclose. All
records, files, memoranda, reports, customer lists, drawings,
plans, documents and the like that the Executive uses, prepares or
comes into contact with during the course of the Executive’s
employment shall remain the sole property of the Company and/or its
affiliates, as applicable. The Executive shall execute and deliver
the Company’s standard “work for hire” agreement
regarding ownership by the Company of all rights in its
confidential and business materials.
7. RESTRICTIVE COVENANTS.
(a) NON-COMPETITION
AGREEMENT. The Executive acknowledges and agrees that the insurance
business and operations of the Company and its Affiliates are
national in scope, and that the Company and its Affiliates operates
in multiple locations and business segments in the course of
conducting its business. In consideration of this Agreement, the
Executive covenants and agrees that during his employment with the
Company, and for a period of twelve (12) months following the
termination of such employment for any reason, the Executive shall
not (i) engage, whether as owner, manager, operator, agent,
employee, consultant or otherwise, directly or indirectly, in any
insurance related business competitive with the business of the
Company or its Affiliates (including, without limitation, any
insurance business that is comprised of similar lines of products
or coverage or that derives revenues or premiums from similar
marketing or production techniques or through the use of a Producer
or Producers, ((as defined below)) (or any reinsurance business
providing services to the foregoing) (a “Competitive
Business”), (ii) engage, whether as an owner, manager,
operator, agent, employee, consultant or otherwise, directly or
indirectly, in any insurance related business with a Producer or
Producers (as defined below) of the Company or its Affiliates, or
(iii) use any information obtained in the course of the
Executive’s employment by the Company for the purpose of
notifying individuals of the Executive’s willingness to
provide services after such termination in competition with the
Company or in breach of this Agreement. Ownership of less than 5%
of the securities of any publicly traded company will not violate
this Section 7(a) . Notwithstanding the foregoing, upon
Executive’s termination of employment by the Company for any
reason, Executive may resume employment by AmWINS Group, Inc.
without violating this Section 7(a). “Producer” or
“Producers” shall mean managing general agents,
wholesale general agents, and other wholesale and/or retail
producers, brokers or distributors of property and casualty
insurance business underwritten by the Company.
In the event
that this paragraph or paragraph (c ) below shall be determined by
any court of competent jurisdiction to be unenforceable in part by
reason of its being too great a period of time or covering too
great a geographical area, or as a result of the scope of any
prohibition or restriction on post-termination activity being too
broad, it shall be in full force and in effect as to that period of
time or geographical area or scope of post-termination activity
determined to be
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reasonable by
the court. To the extent the Executive violates the provisions of
th
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