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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
(dated as of September 1, 2006)
AGREEMENT, made and entered into as of the date first above
written, by and between, XL Capital Ltd, a Cayman Islands
corporation (the
"Company"), X.L. Global Services, Inc. ("XLGS"), and MICHAEL C.
LOBDELL (the
"Executive").
WHEREAS, the Company and Executive each desire Executive
become employed by the Company and XLGS and to memorialize the
terms and
conditions of such employment by a written agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the
Company, XLGS, the Guarantors (as hereinafter defined) and the
Executive (the
"Parties") agree as follows:
1. EMPLOYMENT.
The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for the term of this
Agreement as
set forth in Section 2, below, in the position and with duties
and
responsibilities set forth in Section 3, below, and upon such
other terms and
conditions as are hereinafter stated.
2. TERM OF EMPLOYMENT.
The stated term of employment under this Agreement shall
commence on the date first above written (the "Date of the
Agreement") and shall
continue through the close of business on the first anniversary
of the Date of
the Agreement, subject to earlier termination as provided in
Section 8, below,
and extension as provided in the next succeeding sentence. On
the first
anniversary of the Date of the Agreement and on each anniversary
thereafter, the
stated term of employment shall be automatically extended for an
additional one
year unless the Company gives notice in writing to the Executive
or the
Executive gives notice in writing to the Company at least six
months prior to
such anniversary that the term is not to be so extended.
3. POSITIONS, DUTIES AND RESPONSIBILITIES.
(a) GENERAL. The Executive shall be employed as the
Chief Executive - Global Business Services of the Company. In
such position, the
Executive shall have the duties, responsibilities and authority
normally
associated with the office, position and titles of such an
officer of an
insurance, reinsurance and financial services company, or
holding company, whose
shares are publicly traded in the United States. Such duties
shall include
responsibility for overall execution and service delivery across
the XL group of
companies; direct management and oversight of Company's
infrastructure and
project management, including IT
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systems and technology, procurement, real estate, facilities,
outsourcing and
offshoring. In carrying out his duties and responsibilities, the
Executive shall
report to the Company's Chief Executive Officer (the "CEO").
During the term of
this Agreement, the Executive shall devote his full business
time to the
business and affairs of the Company, provided that the Executive
may manage his
personal and family passive investments, be involved with and
serve on boards
and advisory committees of charitable, professional, trade and
civic
organization, and with the consent of the CEO, serve on for
profit boards and
advisory committees provided that the foregoing activities in
the aggregate do
not materially interfere with Executive's performance of his
duties. Executive's
service on the advisory board of DataSynapse Inc. is hereby
approved.
(b) PERFORMANCE OF SERVICES. The Executive's services
under this Agreement, which are global in nature, shall be
performed at the
location or locations reasonably requested by the Company;
PROVIDED, HOWEVER,
that Executive's principal place of business shall be in the
Stamford,
Connecticut area. Executive acknowledges that certain services
may be required
to be performed outside the United States and in accordance with
the guidelines
established by the Company from time to time for the location of
the performance
of services on behalf of the Company and its subsidiaries. The
Executive
acknowledges that the Company may require the Executive to
travel to the extent
such travel is reasonably necessary to perform the services
hereunder and that
such travel may be extensive.
4. BASE SALARY.
The Executive shall be paid a Base Salary by the Company of
no
less US$600,000.00, payable in accordance with the Company's
regular pay
practices. Such Base Salary shall be subject to annual review in
accordance with
the Company's practices for executives as in effect from time to
time and may be
increased (but not decreased) at the discretion of the
Compensation Committee of
the Company Board (the "Compensation Committee").
5. BONUSES.
In addition to the Base Salary provided for in Section 4,
above, the Executive shall be eligible for an annual cash bonus
under the
Company's Annual Incentive Compensation Plan as in effect from
time to time,
with a bonus target of at least 125% of your Base Salary. The
Executive may be
awarded such annual bonuses thereunder as may be approved by the
Compensation
Committee based on corporate, individual and business unit
performance measures,
as appropriate, established or approved from time to time, by
the Compensation
Committee. Any annual bonus shall be paid in cash in a lump sum
no later than
March 15 following the year for which the annual bonus is paid,
unless deferred
at the Executive's option in accordance with the provisions of
any applicable
deferred compensation plan of the Company or it subsidiaries in
effect from time
to time and in compliance with Section 409A of the United States
Internal
Revenue Code of 1986, as amended (the "Code"). Nothing in this
Section 5 shall
confer upon the Executive any right to a minimum annual
bonus.
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6. EMPLOYEE BENEFIT PROGRAMS.
During the term of the Executive's employment under this
Agreement, the Executive shall be entitled to participate in all
employee
benefit programs of the Company as are in effect from time to
time and in which
similarly situated senior executives of the Company are eligible
to participate.
7. BUSINESS EXPENSE REIMBURSEMENT, FRINGE BENEFITS. During
the term of the Executive's employment under this Agreement, the
Executive shall
be entitled to participate in the Company's travel and
entertainment expense
reimbursement programs and its executive fringe benefit plans
and arrangements,
all in accordance with the terms and conditions of such
programs, plans and
arrangements as in effect from time to time as applied to the
Company's
similarly situated executives.
8. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH. In the event the Executive
dies
during the term of employment hereunder, the Executive's spouse,
if the spouse
survives the Executive, (or, if the Executive's spouse does not
survive him, the
estate or other legal representative of the Executive) shall be
entitled to
receive the Base Salary as provided in Section 4, above, at the
rate in effect
at the time of Executive's death, to be paid in accordance with
the Company's
regular payroll practices through the end of the sixth month
after the month in
which the Executive dies. In addition to the above, the estate
or other legal
representative of the Executive shall be entitled to:
(i) any annual bonus awarded in accordance with the
Company's
bonus program but not yet paid under Section 5, above, to be
paid at
the time such bonus would otherwise be due under the
applicable
program, and reimbursement of business expenses incurred prior
to death
in accordance with Section 7 above,
(ii) within 45 days after the date of death, a pro rata
bonus
for the year of death in an amount determined by the
Compensation
Committee, but in no event less than a pro rata portion of
the
Executive's average annual bonus for the immediately preceding
three
years (or the period of the Executive's employment with the
Company, if
less),
(iii) the rights under any options to purchase equity
securities of the Company or other rights with respect to
equity
securities of the Company, including any restricted stock or
other
securities, held by the Executive determined in accordance with
the
terms thereof,
(iv) for a period of six months following the Executive's
death, continued medical benefit plan coverage (including dental
and
vision benefits if provided under the applicable plans) for
the
Executive's dependents, if any, under the Company's medical
benefit
plans upon substantially the same terms and conditions
(including cost
of coverage to the dependents) as is then in existence for
other
executives during the coverage period;
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PROVIDED, THAT, if the Executive's dependents cannot continue
to
participate in the Company plans providing such benefits, the
Company
shall otherwise provide such benefits on substantially the
same
after-tax basis as if continued participation had been
permitted, and
(v) the vested accrued benefits, if any, under the employee
benefit programs of the Company, as provided in Section 6,
above,
determined in accordance with the applicable terms and
provisions of
such programs.
(b) TERMINATION DUE TO DISABILITY. In the event the
Executive's employment hereunder is terminated due to his
disability, which
shall mean that Executive has been unable to perform his
material duties due to
illness or injury for a continuous twenty-six (26) week period,
as determined
under the Company's long-term disability plan, the Executive
shall be entitled
to, subject to Subsection 25 hereof,:
(i) the Base Salary as provided in Section 4, above, through
the end of the sixth month after the month in which the
Executive's
employment terminates due to disability, to be paid in
accordance with
the Company's regular payroll practices,
(ii) any annual bonus awarded in accordance with the
Company's
bonus program but not yet paid under Section 5, to be paid at
the time
such bonus would otherwise be due under the applicable program,
and
reimbursement of business expenses incurred prior to termination
of
employment in accordance with Section 7 above,
(iii) within 45 days after the date of termination, a pro
rata
bonus for the year of termination in an amount determined by
the
Compensation Committee, but in no event less than a pro rata
portion of
the Executive's average annual bonus for the immediately
preceding
three years (or the period of the Executive's employment with
the
Company, if less),
(iv) the rights under any options to purchase equity
securities of the Company or other rights with respect to
equity
securities of the Company, including any restricted stock or
other
securities, held by the Executive, determined in accordance with
the
terms thereof,
(v) for a period of six months following the termination of
the Executive's employment, continued medical benefit plan
coverage
(including dental and vision benefits if provided under the
applicable
plans) for the Executive (and the Executive's dependents, if
any) under
the Company's medical benefit plans upon substantially the same
terms
and conditions (including cost of coverage to the Executive) as
is then
in existence for other executives during the coverage period;
PROVIDED,
THAT, if the Executive cannot continue to participate in the
Company
plans providing such benefits, the Company shall otherwise
provide such
benefits on substantially the same after-tax basis as if
continued
participation had been permitted; PROVIDED FURTHER, HOWEVER,
that, in
the event the Executive becomes reemployed with another employer
and
becomes eligible to receive medical benefits from such employer,
the
medical benefits described herein shall immediately cease,
and
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(vi) the vested accrued benefits, if any, under the employee
benefit programs of the Company, as provided in Section 6
above,
determined in accordance with the applicable terms and
provisions of
such programs.
Until the occurrence of such a Disability Termination the
Executive shall continue to receive his full compensation and
benefits.
(c) TERMINATION FOR CAUSE.
(i) The employment of the Executive under this Agreement may
be terminated by the Company for Cause, such termination to be
effective upon
the Company giving the Executive written notice of termination
in accordance
with the provisions of this Agreement. For this purpose, "Cause"
shall mean:
(A) conviction of the Executive of a felony involving moral
turpitude, dishonesty or laws to which the Company or its
Affiliates
are subject in connection with the conduct of its or their
business;
(B) the Executive, in carrying out his duties for the
Company
under this Agreement, has been guilty of (1) willful misconduct
of a
material nature or (2) substantial and continual refusal by
the
Executive to perform the duties assigned to the Executive
pursuant to
the terms hereof; PROVIDED, HOWEVER, that any act or failure to
act by
the Executive shall not constitute Cause for purposes of this
Section
8(c)(i)(B) if such act or failure to act was committed, or
omitted, by
the Executive in good faith and in a manner he reasonably
believed to
be in the overall best interests of the Company, as the case may
be.
The determination of whether the Executive acted in good faith
and that
he reasonably believed his action to be in the Company's overall
best
interest, as the case may be, will be in the reasonable judgment
of the
General Counsel of the Company or, if the General Counsel shall
have an
actual or potential conflict of interest, the Compensation
Committee;
or
(C) the Executive's continued willful refusal to obey any
lawful policy or requirement duly adopted by the Company Board
and the
continuance of such refusal after receipt of written notice.
(ii) In the event of a termination for Cause under Section
8(c)(i), above, the Executive shall be entitled only to:
(A) Base Salary as provided in Section 4, above, at the rate
in effect at the time of his termination of employment for
Cause,
through the date on which termination for Cause occurs, to be
paid in
accordance with the Company's regular payroll practices,
(B) the rights under any options to purchase equity
securities
of the Company or other rights with respect to equity securities
of the
Company, including any restricted stock or other securities,
held by
the Executive, determined in accordance with the terms thereof,
and
(C) the vested accrued benefits, if any, under employee
benefit programs of the Company, as provided in Section 6,
above, and
reimbursement of properly incurred unreimbursed business
expenses under
the business expense reimbursement program as described in
Section 7,
above, determined in accordance with the applicable terms
and
provisions of such employee benefit and expense reimbursement
programs;
PROVIDED that
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the Executive shall not be entitled to any such benefits unless
the
terms and provisions of such programs expressly state that
the
Executive shall be entitled thereto in the event his employment
is
terminated for Cause (as defined in this Agreement or
otherwise).
(d) TERMINATION WITHOUT CAUSE.
(i) Anything in this Agreement to the contrary
notwithstanding, the Executive's employment may be terminated by
the Company
without Cause as provided in this Section 8(d). A termination
due to death or
disability, as described in Section 8(a) or (b), above, or a
termination for
Cause, as described in Section 8(c), above, shall not be deemed
a termination
without Cause under this Section 8(d). For the avoidance of
doubt, if a notice
of non-renewal of this Agreement pursuant to Section 2 is issued
by the Company
and, within six (6) months thereafter, a written notice is
issued (x) by the
Company to the Executive of its intention to terminate the
employment
relationship with Executive at the end of the Term or (y) by the
Executive to
the Company of Executive's intention to terminate the employment
relationship
with the Company at the end of the Term, the termination of the
Executive's
employment at the end of the Term shall be considered a
termination by the
Company without Cause hereunder.
(ii) in the event the Executive's employment is terminated
by
the Company without Cause (x) prior to a Change in Control
(other than as
provided in the last paragraph of Section 8(d)(iii), in which
case the
provisions of Section 8(d)(iii) shall apply in lieu of this
Section 8(d)(ii)) or
(y) following the Post-Change Period (as hereinafter defined),
the Executive
shall be entitled to:
(A) Base Salary as provided in Section 4, above, at the rate
in effect at the time of his termination of employment without
Cause,
through the date on which termination without Cause occurs, to
be paid
in accordance with the Company's regular payroll practices,
(B) provided the Executive executes and does not revoke a
general release of claims against the Company and its affiliates
in
substantially the form of Exhibit C hereto, a cash lump sum
payment
made, subject to Section 25 hereof, within 30 days after
termination of
employment equal to (x) two times the Executive's annual Base
Salary,
at the annual rate in effect in accordance with Section 4,
above,
immediately prior to such termination and (y) one times the
higher of
the targeted annual bonus for the year of such termination, if
any, or
the average of the Executive's annual bonus payable by the
Company for
the three years immediately preceding the year of termination
(or such
shorter period during which the Executive has been employed by
the
Company),
(C) any annual bonus awarded in accordance with the
Company's
bonus program but not yet paid under Section 5, above, to be
paid,
subject to Section 25 hereof, at the time such bonus would
otherwise be
due under the applicable program, and reimbursement of
business
expenses incurred prior to termination of employment in
accordance with
Section 7 above,
(D) the rights under any options to purchase equity
securities
of the Company or other rights with respect to equity securities
of the
Company, including any restricted stock or other securities,
held by
the Executive, determined in accordance with the terms
thereof,
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(E) for a period of twenty-four months following the
termination of the Executive's employment, continued medical
benefit
plan coverage (including dental and vision benefits if provided
under
the applicable plans) for the Executive (and the Executive's
dependents, if any) under the Company's medical benefit plans
upon
substantially the same terms and conditions (including cost of
coverage
to the Executive) as is then in existence for other executives
during
the coverage period; PROVIDED, THAT, if the Executive cannot
continue
to participate in the Company plans providing such benefits
because of
underwriting or plan provisions or if such participation would
cause
the Executive to be taxed on the benefits under Internal Revenue
Code
Section 105(h), the Company shall otherwise provide such
benefits on
substantially the same after-tax basis as if continued
participation
had been permitted; PROVIDED, HOWEVER, that, in the event the
Executive
becomes reemployed with another employer and becomes eligible
to
receive medical benefits from such employer, the medical
benefits
described herein shall immediately cease, and further provided,
that
all providing of benefits and payments hereunder shall be done
in
compliance with Section 25 hereof, and
(F) the vested accrued benefits, if any, under the employee
benefit programs of the Company, as provided in Section 6
above,
determined in accordance with the applicable terms and
provisions of
such programs.
(iii) In the event the Executive's employment is terminated
by
(x) the Company without Cause within the twenty-four month
period following a
Change in Control (as defined in Exhibit A hereto) (the
"Post-Change Period") or
(y) the Executive terminates his employment for "Good Reason"
(as defined in
Exhibit B hereto) during the Post-Change Period, the Executive
shall be entitled
to the following, paid in the case of amounts set forth in (A),
(B), (C) and (D)
below, subject to Section 25 hereof, within 30 days after
termination of
employment:
(A) Base Salary as provided in Section 4, above, at the rate
in effect at the time of his termination of employment, through
the
date on which termination occurs,
(B) a cash lump sum payment equal to two times the
Executive's
annual Base Salary, at the rate in effect in accordance with
Section 4,
above, or immediately prior to such termination or Change in
Control,
whichever is greater,
(C) a cash lump sum payment equal to two times the average
annual bonus awarded to the Executive by the Company in the
three years
prior to the year in which the Change in Control occurs (or
shorter
period during which the Executive had been employed by the
Company);
PROVIDED such bonuses shall he at least equal to the targeted
annual
bonus, if any, for the year of such termination,
(D) an amount equal to (i) the higher of (x) the bonus
actually awarded to the Executive by the Company for the
year
immediately preceding the year in which the Change in Control
occurs or
(y) the targeted amount of bonus, if any, that would have been
awarded
to the Executive in respect of the year in which the termination
of
employment occurs, multiplied by (ii) a fraction, the numerator
of
which is the number of months or fraction thereof in which
the
Executive was employed by the Company in the year of termination
of
employment, and the denominator of which is 12,
(E) options to purchase equity securities of the Company or
other rights with respect to equity securities of the Company
held by
the Executive shall immediately vest
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in full and shall continue to be exercisable for three years
from the
date of termination of employment, notwithstanding the
Executive's
termination of employment, or the original full term of the
option or
other right, if shorter,
(F) for a period of twenty-four months following the
termination of the Executive's employment, continued medical
benefit
plan coverage (including dental and vision benefits if provided
under
the applicable plans) for the Executive (and the Executive's
dependents, if any) under the Company's medical benefit plans
upon
substantially the same terms and conditions (including cost of
coverage
to the Executive) as is then in existence for other executives
during
the coverage period; PROVIDED, THAT, if the Executive cannot
continue
to participate in the Company plans providing such benefits
because of
underwriting or plan provisions or, if such participation would
cause
the Executive to be taxed in the benefits under Internal Revenue
Code
Section 105(h), the Company shall otherwise provide such
benefits on
substantially the same after-tax basis as if continued
participation
had been permitted; PROVIDED, HOWEVER, that, in the event the
Executive
becomes reemployed with another employer and becomes eligible
to
receive medical benefits from such employer, the medical
benefits
described herein shall immediately cease, and further provided,
that
all providing of benefits and payments hereunder shall be in
compliance
with Section 25 hereof, and
(G) full and immediate vesting under the Company's
retirement
plans as of the date of termination, to the extent permitted
by
applicable law; PROVIDED, HOWEVER, that if such full and
immediate
vesting cannot be provided under a retirement plan under
applicable
law, then economically equivalent benefits, determined on an
after tax
basis to the Executive, shall be provided through arrangements
outside
the applicable retirement plan in compliance with Section 25
hereof.
Anything in this Agreement to the contrary notwithstanding,
the Executive shall be entitled to the benefits described in
(A)-(G) above, if
the Executive's employment with the Company is terminated by the
Company (other
than for Cause) within one year prior to the date on which a
Change in Control
occurs, and it is reasonably demonstrated that such termination
(i) was at the
request of a third party who has taken steps reasonably
calculated or intended
to effect the Change in Control or (ii) otherwise arose in
connection with or
anticipation of the Change in Control; PROVIDED, HOWEVER, that
in such event,
amounts will be payable hereunder only following the Change in
Control (and,
subject to Section 25, within 10 days thereafter).
(iv) If, in situations where Section 8(d)(iii) does not
apply,
at any time during the term of the Executive's employment
hereunder, duties are
assigned to the Executive that are materially inconsistent with
his position as
described in Section 3 herein, or the Company does not cure any
material breach
by it of any provision of Sections 3 through 7 of this Agreement
within 30
calendar days following written notice of same by the Executive
(which written
notice must be given within 30 calendar days after such breach),
the Executive
shall have the right to terminate his employment within 30
calendar days of the
Company's failure to rescind such assignment in accordance with
the proviso
below or of such failure to cure a breach, as the case may be,
and such
termination shall be deemed a termination by the Company without
Cause under
Section 8(d)(ii), above, PROVIDED, in the case of assignment of
inconsistent
duties that are materially inconsistent with those set for in
Section 3, the
Executive shall have given the Company
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written notice of his decision within 30 calendar days of such
assignment and
shall not, within 30 calendar days thereafter, have had the
assignment of
inconsistent duties rescinded.
(e) VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive
may
voluntarily terminate his employment prior to the expiration of
the term of this
Agreement upon at least three months' prior written notice to
the Company. Such
termination shall constitute a voluntary termination and, except
as provided in
Section 8(d)(iii) or Section 8(d)(iv), above, in such event the
Executive shall
be limited to the same rights and benefits as applicable to a
termination by the
Company for Cause as provided in Section 8(c), above. A
voluntary termination in
accordance with this Section 8(e) shall not be deemed a breach
of this
Agreement. A termination of the Executive's employment due to
disability or
death as described in Section 8(b) or 8(a), above, a termination
by the
Executive which the Executive is entitled to treat as a
termination by the
Company pursuant to Section 8(d), above, or a termination by the
Executive under
Section 8(d)(iv), above, shall not be deemed a voluntary
termination within the
meaning of this Section 8(e).
9. EXCISE TAX PAYMENTS.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that (i)
any payment or
distribution made, or benefit provided (including, without
limitation, the
acceleration of any payment, distribution or benefit or
accelerated vesting or
exercisability of any award) by the Company any acquirer or any
party related to
the Company or the acquirer to or for the benefit of the
Executive (whether paid
or payable or distributed or distributable pursuant to the terms
of this
Agreement or otherwise, but determined without regard to any
additional payments
required under this Section 9) (a "Payment") would be subject to
the excise tax
imposed by Section 4999 of the Code (or any successor provision
or similar
excise tax), or any interest or penalties are incurred by the
Executive with
respect to such excise tax (such excise tax, together with any
such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), (ii)
the aggregate amount of the Executive's Parachute Payments (as
defined in
Section 280G(b)(2)(A) of the Code) is less than 3.25 times the
Executive's Base
Amount (as defined in Section 280G(b)(3)(A) of the Code), and
(iii) no such
Payment would be subject to the Excise Tax if the payments set
forth in Section
8(d)(iii)(B) and (C) hereof were each reduced by up to 20
percent, then the
payments set forth in Section 8(d)(iii)(B) and (C) will each be
reduced to the
smallest extent possible (and in no event by more than 20
percent in the
aggregate) such that no Payment is subject to the Excise
Tax.
(b) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that (i)
the aggregate
amount of the Executive's Parachute Payments equals or exceeds
3.25 times the
Executive's Base Amount, (ii) the aggregate amount of the
Executive's Parachute
Payments is less than 3.25 times the Base Amount but one or more
Payments would
be subject to the Excise Tax even if the payments set forth in
Section
8(d)(iii)(B) and (C) hereof were each reduced by 20 percent, or
(iii)
notwithstanding a reduction in payments pursuant to Section 9(a)
above, an
Excise Tax is payable by the Executive on one or more Payments,
then, in any
such case, Payments shall not be reduced and the Executive shall
be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that
after payment by the Executive of all taxes (including any
income or Excise Tax)
imposed upon the Gross-Up Payment and
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any interest or penalties imposed with respect to such taxes,
the Executive
retains from the Gross-Up Payment an amount equal to the Excise
Tax imposed upon
the Payments.
(c) Subject to the provisions of Section 9(d), all
determinations required to be made under this Section 9,
including determination
of whether a Gross-Up Payment is required and of the amount of
any such Gross-Up
Payment, shall be made by a nationally recognized public
accounting firm
selected by the Company (the "Accounting Firm") which shall
provide detailed
supporting calculations both to the Company and the Executive
within l5 business
days of the date of termination of the Executive's employment,
if applicable, or
such earlier time as is reasonably requested. The initial
Gross-Up Payment, if
any, as determined pursuant to this Section 9(c), shall be paid
to the Executive
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