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Execution Copy
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of June 28, 2007
between
Scottish Holdings, Inc. (the "Company") and Jeffrey M. Delle
Fave (the
"Employee") (together, the "Parties").
WHEREAS, the Employee and the Company are parties to an
employment
dated August 15, 2005, as amended September 1, 2006 (the "2005
Employment
Agreement");
WHEREAS, the Parties wish to establish the terms of
Employee's
continued employment with the Company upon the terms and
conditions set forth
herein which supersede the terms of 2005 Employment Agreement,
and all other
agreements with respect to the subject matter hereof;
Accordingly, the Parties agree as follows:
1. Employment and Acceptance. The Company shall employ the
Employee,
and Employee shall accept employment, subject to the terms of
this Agreement,
effective as of May 7, 2007 (the "Effective Date").
2. Term. Subject to Section 5 of this Agreement, the
Employee's
employment with the Company shall be "at will." As used in this
Agreement, the
"Term" shall refer to the period beginning on the Effective Date
and ending on
the date the Employee's employment terminates in accordance with
Section 5. In
the event of the Employee's termination of employment during the
Term, the
Company's obligation to continue to pay all base salary, as
adjusted, bonus and
other benefits then accrued shall terminate except as may be
provided for in
Section 5 of this Agreement.
3. Duties and Title.
3.1 Title. The Company shall employ the Employee to render
exclusive and full-time services to the Company and its
subsidiaries. The
Employee shall serve in the capacity of Executive Vice
President, Tax, and shall
report solely and directly to the Chief Financial Officer of
Scottish Re Group
Limited. The Employee shall also serve during the Term in
executive positions
for one or more of the Company's subsidiaries and affiliates for
no additional
consideration.
3.2 Duties. The Employee will have such authority and
responsibilities and will perform such executive duties as are
customarily
performed by an Executive Vice President, Tax of a company in
similar lines of
business as the Company and its subsidiaries or as may be
assigned to Employee
by the Chief Financial Officer of Scottish Re Group Limited. The
Employee will
devote all his full working-time and attention to the
performance of such duties
and to the promotion of the business and interests of the
Company and its
subsidiaries.
3.3 Location. The Employee shall perform his full-time
services
to the Company and its subsidiaries in the Company's Charlotte,
NC office;
provided that the Employee shall be required to travel as
necessary to perform
his duties hereunder.
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4. Compensation and Benefits by the Company. As compensation for
all
services rendered pursuant to this Agreement, the Company shall
provide the
Employee the following during the Term:
4.1 Base Salary. During the Term, the Company will pay to
the
Employee an annual base salary of $375,000, payable in
accordance with the
customary payroll practices of the Company. The Company agrees
to review such
compensation not less frequently than annually during the Term.
The Base Salary
as increased from time to time shall be referred to herein as
"Base Salary."
4.2 Bonuses. During the Term, the Employee shall be eligible
to
receive an annual bonus ("Bonus") under a plan established by
the Company in the
amount determined by the Board of Directors of the Company (the
"Board") based
upon achievement of performance measures established by the
Company and approved
by the Board. The Employee's target bonus shall be 75% of Base
Salary (the
"Target Bonus"). Notwithstanding the foregoing, (x) for the
calendar year ending
on December 31, 2007, Employee shall receive a Bonus of not less
than $325,000
(the "2007 Bonus") and (y) for the calendar year ending on
December 31, 2008,
Employee shall receive a Bonus of not less than fifty percent
(50%) of his then
current Base Salary (the "2008 Bonus"). The Employee's Bonus
shall be payable at
such times and in the manner consistent with the Company's
policies regarding
compensation of executive employees. The Bonus with respect to
any calendar year
shall be paid no earlier than January 1 and no later than June
30 of the
following calendar year.
4.3 Participation in Employee Benefit Plans. The Employee
shall
be entitled during the Term, if and to the extent eligible, to
participate in
all of the applicable benefit plans of the Company, which may be
available to
other senior executives of the Company. The Company may at any
time or from time
to time amend, modify, suspend or terminate any employee benefit
plan, program
or arrangement for any reason without the Employee's consent if
such amendment,
modification, suspension or termination is consistent with the
amendment,
modification, suspension or termination for other executives of
the Company.
Notwithstanding the foregoing, the Employee will continue to
participate in the
Company's Exec-U-Care plan (or other comparable benefit plan or
plans sponsored
by the Company) through the second anniversary of the Effective
Date, subject to
the terms of such plan and applicable law.
4.4 Equity Compensation. The Company will grant the Employee
stock options to purchase 225,000 ordinary shares of an
affiliate of the Company
at an exercise price equal to fair market value (the "Stock
Options") pursuant
to the terms and conditions set forth in the equity incentive
compensation plan
established by the Company or an affiliate of the Company (the
"Equity Incentive
Plan"). The Stock Options will be subject to the terms of the
Equity Incentive
Plan and any applicable agreements thereunder as determined from
time to time by
the Board.
4.5 Retention Bonus. The Company shall pay the Employee a
retention bonus in an aggregate amount of $1,485,000 (the
"Retention Bonus"),
payable as follows: (x) by June 30, 2007, a lump sum payment
equal to fifty
percent (50%) of the Retention Bonus; (y) by September 30, 2007,
a lump sum
payment equal to twenty-five percent (25%) of the Retention
Bonus; and (z) by
December 31, 2007, a lump sum payment equal to the final
twenty-five percent
(25%) of the Retention Bonus. The Company's obligations to pay
the
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Retention Bonus are not subject to the Employee's continued
employment with the
Company through such payment dates.
4.6 Expense Reimbursement. During the Term, the Employee
shall
be entitled to receive reimbursement for all appropriate
business expenses
incurred by him in connection with his duties under this
Agreement in accordance
with the policies of the Company as in effect from time to
time.
4.7 Club Dues and Expenses. The Company hereby agrees to
reimburse Employee for club dues and expenses up to $6,000 per
calendar year in
accordance with the Company's policy regarding substantiation of
expenses.
4.8 Vacation and Holidays. Employee shall be entitled to
four
(4) weeks of paid vacation per annum, in accordance with the
Company's vacation
policy.
4.9 Indemnification. The Holdings' Indemnification Agreement
(the "Indemnification Agreement") attached as Exhibit A to the
2005 Employment
Agreement will continue in full force and effect in accordance
with the terms of
the Indemnification Agreement.
4.10 Legal Fees.
(a) The Company shall pay or reimburse the Employee for all
reasonable attorneys' fees and costs (not to exceed $15,000)
incurred by the
Employee in connection with advice pertaining to and negotiation
of this
Agreement upon presentation to the Company of bills for such
services and such
other supporting information as the Company may reasonably
require.
(b) If it should appear to Employee that the Company has
failed to comply with any of its obligations under this
Agreement or in the
event that the Company or any other person takes or threatens to
take any action
to declare this Agreement void or unenforceable, or institutes
any litigation or
other action or proceeding designed to deny, or to recover from,
Employee the
benefits provided or intended to be provided to Employee
hereunder, the Company
irrevocably authorizes Employee from time to time to retain
counsel of
Employee's choice at the expense of the Company as hereafter
provided, to advise
and represent Employee in connection with any such
interpretation, enforcement
or defense, including without limitation the initiation or
defense of any
litigation or other legal action, whether by or against the
Company or any
Director, officer, stockholder or other person affiliated with
the Company, in
any jurisdiction. Notwithstanding any existing or prior
attorney-client
relationship between the Company and such counsel, the Company
irrevocably
consents to Employee's entering into an attorney-client
relationship with such
counsel, and in that connection the Company and Employee agree
that a
confidential relationship shall exist between Employee and such
counsel. Without
respect to whether Employee prevails, in whole or in part, in
connection with
any of the foregoing, the Company will pay and be solely
financially responsible
for any and all attorneys, and related fees and expenses
incurred by Employee in
connection with any of the foregoing; provided that, in regard
to such matters,
the Employee has not acted in bad faith or with no colorable
claim of success.
Such payments shall be made within five (5) business days after
delivery of
Employee's written requests for payment, accompanied by such
evidence of fees
and expenses incurred as the Company may reasonably require.
Notwithstanding the
foregoing
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provisions of this Section 4.10(b), the obligations of the
Company under this
Section 4.10(b) shall not exceed, in the aggregate, $50,000.
5. Termination of Employment.
5.1 Termination of Employment other than for Cause. Upon a
termination of this Agreement and the Employee's employment with
the Company for
any reason other than by the Company for Cause (as defined
below), the Employee
shall be entitled to receive the following (the "Accrued
Benefits"):
(a) the Employee's accrued but unpaid Base Salary and
benefits set forth in Sections 4.1 and 4.3, if any, to the date
of termination;
(b) the unpaid portion of the Bonus, if any, relating to
the calendar year prior to the calendar year of the Employee's
termination;
(c) if such termination of employment occurs during either
of the calendar years ending on December 31, 2007 and December
31, 2008, a
pro-rata portion of the 2007 Bonus or 2008 Bonus, as applicable,
through the
date the Employee's employment terminates, payable in accordance
with Section
4.2;
(d) a lump sum payment equal to the unpaid portion of the
Retention Bonus, if any; and
(e) expenses reimbursable under Section 4.6 incurred but
not yet reimbursed to the Employee to the date of
termination.
Notwithstanding the foregoing, if the Employee is a
"specified
employee," as such term is defined in Section 409A of the
Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder
(the "Code")
payments to be made pursuant to Sections 5.1(c) and (d) shall be
made no earlier
than six (6) months following the date the Employee's employment
terminates.
5.2 Termination of Employment By The Company For Cause. Upon
a
termination by the Company for Cause (as defined below), the
Employee shall be
entitled to receive all of the Accrued Benefits set forth in
Paragraph 5.1,
except that Employee will not be entitled to receive a pro-rata
portion of the
Bonus set forth in to Section 5.1(c), above.
For the purposes of this Agreement, "Cause" as determined by the
Board
(or its designee), with respect to conduct during the Employee's
employment with
the Company, whether or not committed during the Term, (i)
commission of a
felony by Employee; (ii) acts of dishonesty by Employee
resulting or intending
to result in personal financial gain or enrichment at the
expense of the Company
or its subsidiaries; (iii) Employee's material breach of his
obligations under
this Agreement; (iv) conduct by Employee in connection with his
material duties
hereunder that is fraudulent, unlawful or grossly negligent; (v)
engaging in
personal conduct by Employee (including but not limited to
employee harassment
or discrimination, the use or possession at work of any illegal
controlled
substance) which seriously discredits or damages the Company or
its
subsidiaries; (vi) contravention of specific, reasonable,
lawful, material
direction from the person or entity to whom the Employee reports
or continuing
failure to adequately
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perform the material duties to be performed by Employee under
the terms of
Section 3.2 of this Agreement or (vii) breach of the Employee's
covenants set
forth in Section 7 below before termination of employment;
provided, that, the
Employee shall have fifteen (15) days after notice from the
Company to cure the
deficiency leading to the Cause determination (except with
respect to (i)
above), if curable. A termination for "Cause" shall be effective
immediately (or
on such other date set forth by the Company).
5.3 No Mitigation; No Offset. The Employee shall be under no
obligation to seek other employment after his termination of
employment with the
Company and the obligations of the Company to the Employee which
arise upon the
termination of his employment pursuant to this Section 5 shall
not be subject to
mitigation or offset.
5.4 Removal from any Boards and Position. If the Employee's
employment is terminated for any reason under this Agreement, he
shall be deemed
to resign (i) if a member, from the Board or board of directors
of any
subsidiary of the Company or any other board to which he has
been appointed or
nominated by or on behalf of the Company and (ii) from any
position with the
Company or any subsidiary of the Company, including, but not
limited to, as an
officer of the Company and any of its subsidiaries.
6. Certain Additional Payments by the Company.
6.1 Anything in this Agreement to the contrary
notwithstanding,
in the event that it shall be determined (as hereafter provided)
that any
payment (other than the Gross-Up payments provided for in this
Section 6) or
distribution by the Company, Holdings or any of their affiliates
to or for the
benefit of the Employee, whether paid or payable or distributed
or distributable
pursuant to the terms of this Agreement or otherwise pursuant to
or by reason of
any other agreement, policy, plan, program or arrangement,
including without
limitation any stock option, performance share, performance
unit, stock
appreciation right or similar right, or the lapse or termination
of any
restriction on or the vesting or exercisability of any of the
foregoing (a
"Payment"), would be subject to the excise tax imposed by
Section 4999 of the
Code by reason of being considered "contingent on a change in
ownership or
control" of the Company or Holdings, within the meaning of
Section 280G of the
Code, or any similar tax imposed by state or local law, or any
interest or
penalties with respect to such tax (such tax or taxes, together
with any such
interest and penalties, being hereafter collectively referred to
as the "Excise
Tax"), then the Employee shall be entitled to receive an
additional payment or
payments (collectively, a "Gross-Up Payment"). The Gross-Up
Payment shall be in
an amount such that, after payment by the Employee of all taxes
(including any
interest or penalties imposed with respect to such taxes),
including any Excise
Tax imposed upon the Gross-Up Payment, the Employee retains an
amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payment. For purposes
of determining the amount of the Gross-Up Payment, the Employee
will be
considered to pay (x) federal income taxes at the highest rate
in effect in the
year in which the Gross-Up Payment will be made and (y) state
and local income
taxes at the highest rate in effect in the state or locality in
which the
Gross-Up Payment would be subject to state or local tax, net of
the maximum
reduction in federal income tax that could be obtained from
deduction of such
state and local taxes.
6.2 Subject to the provisions of Section 6.6, all
determinations
required to be made under this Section 6, including whether an
Excise Tax is
payable by the Employee and the amount of such Excise Tax and
whether a Gross-Up
Payment is required to be
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paid by the Company to the Employee and the amount of such
Gross-Up Payment, if
any, shall be made by a nationally recognized accounting firm
(the "Accounting
Firm") selected by the Employee in his sole discretion. The
Employee shall
direct the Accounting Firm to submit its determination and
detailed supporting
calculations to both the Company and the Employee within thirty
(30) calendar
days after the Date of Termination, if applicable, and any such
other time or
times as may be requested by the Company or the Employee. If the
Accounting Firm
determines that any Excise Tax is payable by the Employee, the
Company shall pay
the required Gross-Up Payment to the Employee within five (5)
business days
after receipt of such determination and calculations with
respect to any Payment
to the Employee or to the Internal Revenue Service on the
Employee's behalf. If
the Accounting Firm determines that no Excise Tax is payable by
the Employee
with respect to any material benefit or amount (or portion
thereof), it shall,
at the same time as it makes such determination, furnish the
Company and the
Employee an opinion that the Employee has substantial authority
not to report
any Excise Tax on his federal, state or local income or other
tax return. As a
result of the uncertainty in the application of Section 4999 of
the Code and the
possibility of similar uncertainty regarding applicable state or
local tax law
at the time of any determination by the Accounting Firm
hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Company
should have been made (an "Underpayment"), consistent with the
calculations
required to be made hereunder. In the event that the Company
exhausts or fails
to pursue its remedies pursuant to Section 6.6 and the Employee
thereafter is
required to make a payment of any Excise Tax, the Employee shall
direct the
Accounting Firm to determine the amount of the Underpayment that
has occurred
and to submit its determination and detailed supporting
calculations to both the
Company and the Employee as promptly as possible. Any such
Underpayment shall be
promptly paid by the Company to, or for the benefit of, th
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