EMPLOYMENT AGREEMENT

 

                              EMPLOYMENT AGREEMENT

 

     This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 1, 2005,

is made and entered into by and between Scottish Holdings, Inc., a company

formed and existing under the laws of the State of Delaware (the "Company") and

Gary Dombowsky (the "Executive").

 

                                   WITNESSETH:

 

     WHEREAS, the Company desires to obtain the Executive's management and

executive services by directly engaging Executive as Executive Vice President

Chief Operating Officer of the Company;

 

     WHEREAS, in order to induce the Executive to serve in such position, the

Company desires to provide the Executive with compensation and other benefits on

the terms and conditions set forth in this Agreement; and

 

     WHEREAS, the Executive is willing to accept such employment and perform

services for the Company, on the terms and conditions hereinafter set forth.

 

     NOW, THEREFORE, in consideration of the agreements and covenants herein and

other good and valuable consideration, the receipt and sufficiency of which are

hereby acknowledged, the parties hereto covenant and agree as follows:

 

     1.    Certain Defined Terms.

 

     In addition to terms defined elsewhere herein, the following terms have the

following meanings when used in this Agreement with initial capital letters:

 

     (a.) "Act" means the Securities Exchange Act of 1934, as amended.

 

     (b.) "Board" means the Board of Directors of the Company.

 

     (c.) "Change in Control" means the occurrence during the Term of any of the

          following events:

 

          (i.)    the acquisition by any individual, entity or group, within

                 the meaning of Section 13(d)(3) or 14(d)(2) of the Act (a

                 "Person"), including as a result of a Business Combination

                 (as defined in Section (c)(iii)), of beneficial ownership,

                 within the meaning of Rule 13d-3 promulgated under the Act,

                 of 25% or more of the combined voting power of the then

                 outstanding Voting Stock of Scottish Re Group Limited (the

                 "Parent Company"); provided, however, that for purposes of

                 this

 

 

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                  Section 1(c)(i), the following acquisitions shall not

                 constitute a Change in Control: (A) any acquisition by the

                 Parent Company of Voting Stock of the Parent Company, or (B)

                 any acquisition of Voting Stock of the Parent Company by any

                 employee benefit plan (or related trust) sponsored or

                 maintained by the Parent Company or any Subsidiary; or

 

          (ii.)   individuals who, as of the date hereof, constitute the

                  Board of Directors of the Parent Company (the "Incumbent

                 Board" (as modified by this Section 1(c)(ii))) cease for

                 any reason to constitute at least a majority of the Parent

                 Company's Board; provided however, that any individual

                 becoming a Director subsequent to the date hereof whose

                 election, or nomination for election by the Parent

                 Company's shareholders, was approved by a vote of at least

                  two-thirds of the Directors then comprising the Incumbent

                 Board (either by a specific vote or by approval of the

                 proxy statement of the Parent Company in which such person

                 is named as a nominee for director, without objection to

                 such nomination) shall be deemed to have been a member of

                 the Incumbent Board, but excluding, for this purpose, any

                 such individual whose initial assumption of office occurs

                 as a result of an actual or threatened election contest

                 (within the meaning of Rule 14a-11 of the Act) with respect

                 to the election or removal of Directors or other actual or

                 threatened solicitation of proxies or consents by or on

                 behalf of a Person other than the Parent Company's Board;

                 or

 

          (iii.) consummation of a reorganization, merger or consolidation,

                 a sale or other disposition of all or substantially all of

                 the assets of the Parent Company, or other transaction

                 (each, a "Business Combination"), unless, in each case,

                 immediately following such Business Combination, either

                 (A)(I) the individuals and entities who were the beneficial

                 owners of Voting Stock of the Parent Company immediately

                 prior to such Business Combination beneficially own in the

                 aggregate, directly or indirectly, more than 50% of the

                 combined voting power of the then outstanding shares of

                 Voting Stock of the entity resulting from such Business

                 Combination (including, without limitation, an entity which

                 as a result of such transaction owns the Parent Company or

                 all or substantially all of the Parent Company's assets

                 either directly or through one or more subsidiaries), (II)

                  no Person (other than the Parent Company, such entity

                 resulting from such Business Combination, or any employee

                 benefit plan (or related trust) sponsored or maintained by

                 the Parent Company, any subsidiary or such entity resulting

                 from such Business Combination, or any employee benefit

                 plan (or related trust) sponsored or maintained by the

                 Parent Company, any Subsidiary or such entity resulting

                  from such Business Combination)

 

 

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                 beneficially owns, directly or indirectly, 25% or more of

                 the combined voting power of the then outstanding shares of

                  Voting Stock of the entity resulting from such Business

                 Combination, and (III) at least a majority of the members of

                 the Board of Directors of the entity resulting from such

                 Business Combination were members of the Incumbent Board at

                 the time of the execution of the initial agreement or of the

                 action of the Parent Company Board providing for such

                 Business Combination, or (B) the same as Section

                  1(c)(iii)(A), except in clause (I), substituting "one-third"

                 for "50%" and in clause (III), substituting "two-thirds" for

                 "a majority"; or

 

          (iv.)   approval by the shareholders of the Parent Company of a

                 complete liquidation or dissolution of the Parent Company,

                 except pursuant to a Business Combination that complies

                 with clause (A) or (B) of Section 1(c)(iii).

 

     (d.) "Competitive Activity" means the Executive's participation, without

          the written consent of the Board, in the management of any business

          enterprise if such enterprise engages in substantial and direct

          competition with the Company and such enterprise engages in

          substantial and direct competition with the Company if such

          enterprise's sale of any product or service competitive with any

          product or service of the Company amounted to 10% of such enterprise's

          net sales for its most recently completed fiscal year. "Competitive

          Activity" shall not include (i) the mere ownership of securities in

          any such enterprise and the exercise of rights appurtenant thereto or

          (ii) participation in the management of any such enterprise other than

          in connection with the competitive operations of such enterprise.

 

     (e.) "Director" means a member of the Board.

 

     (f.) "Ordinary Shares" means the ordinary shares, par value $0.01 per

          share, of the Parent Company.

 

     (g.) "Subsidiary" means an entity in which the Parent Company directly or

          indirectly beneficially owns 50% or more of the outstanding Voting

          Stock.

 

     (h.) "Total Cash Compensation" means the sum of the (i) highest annual Base

          Salary in effect during the Term; and (ii) highest annual Incentive

          Bonus (as set forth in Section 6(b)) earned during the prior fiscal

          year.

 

     (i.) "Voting Stock" means securities entitled to vote generally in the

          election of directors.

 

 

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2.    Employment.

 

     The Company hereby agrees to employ Executive, and Executive hereby agrees

to be employed with the Company for the Term, upon the terms and conditions

herein set forth.

 

3.    Term.

 

     The term of employment under this Agreement (the "Initial Term") shall

commence on January 1, 2005 ("Commencement Date") and subject to earlier

termination pursuant to Section 7, expire on the second anniversary of the

Commencement Date, this Agreement will automatically be renewed for successive

one-year periods (the "Additional Term"), subject to earlier termination

pursuant to Section 7, unless either party provides written notice of

non-renewal to the other pursuant to Section 13, for the Company at least ninety

(90) days and the Executive at least thirty (30) days, prior to the end of the

Initial Term or any Additional Term. The Initial Term and any Additional Term

shall be referred to under this Agreement as the "Term"; provided, however, that

if a Change in Control occurs during the Term (as determined without regard to

this clause), then the Term shall include the period ending on the first

anniversary of the first occurrence of a Change in Control.

 

4.    Positions and Duties.

 

     (a.) During the Term, Executive will serve in the position of Executive

          Vice President Chief Operating Officer of the Company, or such other

          position as may be agreed upon by the Company and the Executive, and

          will have such duties, functions, responsibilities and authority as

          are (i) reasonably assigned to him by the Chief Executive Officer,

          consistent with Executive's position as Executive Vice President Chief

           Operating Officer or (ii) assigned to his office in the Company's

          charter documents. Executive will report directly to the Chief

          Executive Officer.

 

     (b.) During the Term, Executive will be the Company's full-time employee

           and, except as may otherwise be approved in advance in writing by the

          Board, and except during vacation periods and reasonable periods of

          absence due to sickness, personal injury or other disability,

          Executive will devote substantially all of his business time and

          attention to the performance of his duties to the Company.

          Notwithstanding the foregoing, Executive may (i) subject to the

          approval of the Board, serve as a director of a company, provided such

          service does not constitute a Competitive Activity, (ii) serve as an

          officer, director or otherwise participate in purely educational,

          welfare, social, religious and civic

 

 

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          organizations, (iii) serve as an officer, director or trustee of, or

          otherwise participate in, any organizations and activities with

          respect to which Executive's participation was disclosed to the

          Company in writing prior to the date hereof and (iv) manage personal

          and family investments.

 

5.    Place of Performance.

 

     In connection with his employment during the Term, Executive will be based

at the Company's principal executive offices or Denver, Colorado; provided,

however, that Executive agrees and acknowledges that in view of the nature of

the Company's business operations, Executive may be required in the performance

of his duties to undertake substantial travel on behalf of the Company and, if

necessary, requested to relocate to another executive office of the Company.

 

6.    Compensation and Related Matters.

 

     As compensation and consideration for the performance by Executive of his

obligations pursuant to this Agreement, Executive shall be entitled to the

following:

 

     (a.) Base Salary. During the Term, the Company shall pay Executive an

          annual base salary ("Base Salary") of $275,000, payable at the times

          and in the manner consistent with the Company's policies regarding

          compensation of executive employees. The Company agrees to review such

          compensation not less frequently than annually during the Term. Once

          increased, the Base Salary may not be decreased. The Base Salary as

           increased from time to time shall be referred to herein as "Base

          Salary".

 

     (b.) Incentive Bonus. For each calendar year that begins during the Term,

          the Company shall pay a cash bonus to Executive based on

          pre-established performance goals established by the Board. Any

          Incentive or Discretionary Bonus shall be payable at the times and in

          the manner consistent with the Company's policies regarding

          compensation of executive employees.

 

      (c.) Guaranteed Bonus. For the calendar year ending on December 31, 2005,

          Executive shall receive a guaranteed minimum bonus equal to $100,000

          (the "Guaranteed Bonus") payable on December 31, 2005.

 

     (d.) Executive Benefits. During the Term, the Company will make available

          to Executive and his eligible dependents, participation in all

          Company-sponsored employee benefit plans including all employee

          retirement income and welfare benefit policies, plans, programs or

          arrangements in which senior executives of the Company participate, or

          any equivalent

 

 

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          successor policies, plans, programs or arrangements that may now exist

          or be adopted hereafter by the Company.

 

     (e.) Club Dues and Expenses. The Company hereby agrees to reimburse

          Executive for club dues and expenses up to $5,000 per calendar year in

          accordance with the Company's policy regarding substantiation of

          expenses. The Company also agrees to provide Executive membership at

          Ballantyne Country Club. Such membership limited only by the terms and

          conditions of the Company's corporate membership with Ballantyne

          Country Club.

 

     (f.) Expenses. The Company will promptly reimburse Executive for all

          reasonable business expenses Executive incurs in order to perform his

          duties to the Company under this Agreement in a manner commensurate

          with Executive's position and level of responsibility with the

          Company, and in accordance with the Company's policy regarding

          substantiation of expenses.

 

     (g.) Vacation and Holidays. Executive shall be entitle to 20 days of paid

          vacation per annum, in accordance with the Company's vacation policy.

 

     (h.) Tax Abatement. Upon Executive's relocation during the Term to a

          jurisdiction which provides for taxation on personal income, the

          Company shall provide tax abatement assistance up to 75% in year one,

          50% in year two, 25% in year three and no further tax abatement for

          years after year three.

 

     (i.) Initial Equity Compensation Grant. The Company shall grant Executive

          an option (the "Option") to purchase 5,000 Ordinary Shares of

          Holdings. Additionally, the Company shall grant Executive 2,300

          restricted shares (the "Restricted Shares") of Holdings. Any grant to

          Executive under the 2004 Equity Incentive Compensation Plan shall be

          subject to the terms and conditions of the plan as well as the

          performance requirements expressly adopted by the Holdings' Board

          and/or Compensation Committee. A copy of the 2004 Equity Incentive

          Compensation Plan is attached hereto as Exhibit A.

 

 

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7.    Termination.

 

     (a.) Termination by the Company with Cause. The Company shall have the

          right to terminate Executive's employment at any time with Cause by

          providing a Notice of Termination to Executive in accordance with

          Section 7(g) not more than sixty (60) days after the Board's actual

          knowledge of the Cause event, and such termination shall not be deemed

          to be a breach of this Agreement. For purposes of this Agreement,

          "Cause" shall mean: (i) habitual drug or alcohol use which impairs

          Executive's ability to perform his duties hereunder; (ii) Executive's

          conviction during Term by a court of competent jurisdiction, or a

          pleading of "no contest" or guilty to an arrestable criminal offense

          resulting in the imposition of a custodial sentence; (iii) Executive's

           engaging in fraud, embezzlement or any other illegal conduct with

          respect to the Company which acts are materially harmful to, either

          financially, or to the business reputation of the Company; (iv)

          Executive's willful breach of Section 9 hereof; (v) Executive's

          continued failure or refusal to perform his duties hereunder (other

          than such failure caused by Executive's Disability), after a written

          demand for performance is delivered to Executive by the Board that

          specifically identifies the manner in which the Board believes that

          Executive has failed or refused to perform his duties; or (vi)

          Executive otherwise breaches any material provision of this Agreement

           which is not cured, if curable, within thirty (30) days after written

          notice thereof. No act or failure to act on the part of Executive

          shall be deemed "intentional" if it was due primarily to an error in

          judgment or negligence, but shall be deemed "intentional" only if done

          or omitted to be done by Executive not in good faith and without

          reasonable belief that his action or omission was in the best interest

          of the Company.

 

     (b.) Death. In the event Executive dies during the Term, his employment

          shall automatically terminate effective on the date of his death, such

          termination shall not be deemed to be a breach of this Agreement, and

          the Company shall pay or provide to the Executive's beneficiaries or

          estate, as appropriate, as soon as practicable after the Executive's

          death, the amounts and benefits provided for in Section 8(d).

 

     (c.) Disability. In the event Executive shall suffer from a mental or

          physical disability which shall have prevented him from performing his

          material duties hereunder for a period of at least ninety (90)

          non-consecutive days within any 365 day period, the Company shall have

           the right to terminate Executive's employment for "Disability", such

          termination to be effective upon giving of notice thereof to the

          Executive in accordance with Section 7(g) hereof, such termination

          shall not be deemed to be a breach of this

 

 

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          Agreement, and the Company shall provide to the Executive the amounts

          and benefits provided for in Section 8(d). Executive's employment

          hereunder shall terminate effective on the 30th day after receipt of

          such notice by Executive (the "Disability Effective Date"); provided

          that Executive shall not have returned to full-time performance of his

          duties hereunder within thirty (30) days following receipt of such

          notice.

 

     (d.) Good Reason.

 

          i.    Executive may terminate his employment with the Company for "Good

               Reason" and such termination shall not be deemed to be a breach

               of this Agreement. Executive shall have Good Reason if Executive

               has knowledge that one of the events described in Section

               7(d)(ii) has occurred without Executive's written consent and (A)

               if the event is not curable, Executive gives a Notice of

               Termination to the Company pursuant to Section 7(g) within sixty

               (60) days after having knowledge of the event, or (B) if the

               event is curable, (I) Executive gives written notice to the

               Company thereof in accordance with Section 13 within sixty (60)

               days after having knowledge of the event, (II) such event has not

               been cured with thirty (30) days after the Executive gives notice

                of the event to the Company, and (III) Executive gives a Notice

               of Termination to the Company in accordance with Section 7(g)

               within thirty (30) days after the expiration of the Company's

               30-day cure period.

 

          ii.   For purposes of this Agreement, "Good Reason" shall mean (A)

               prior to a Change in Control, (I) a failure by the Company to

               comply with any material provision of this Agreement; (II) the

               liquidation, dissolution, merger consolidation or reorganization

               of the Company or all of its business and/or assets, unless the

               successor(s) assume all duties and obligations of the Company

               pursuant to Section 12(a); or (III) upon the provision of notice

               by the Company under Section 3 of non-renewal of the Agreement,

               and (B) on or after a Change in Control, (I) any of the events

               set forth in Section 7(d)(ii)(A); (II) any material and adverse

               change to Executive's duties or authority which are inconsistent

               with his title and position set forth herein; (III) a diminution

               of Executive's title or position; (IV) the relocation of

                Executive's office; (V) a reduction in Executive's Base Salary;

               or (VI) a material reduction of Executive's benefits provided

               pursuant to Section 6 other than a reduction permitted under

               terms and conditions of the applicable Company policy or benefit

               plan.

 

 

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     (e.) Without Good Reason. Executive may voluntarily terminate his

          employment with the Company without Good Reason by giving written

          notice to the Company as provided in Section 7(g). Such notice must be

          provided to the Company at least thirty (30) days prior to such

          termination. Such Termination shall not be deemed to be a breach of

          this Agreement.

 

     (f.) Without Cause. This Company shall have the right to terminate

          Executive's employment hereunder without Cause by providing written

          notice to Executive as provided in Section 7(g), and such termination

          shall not be deemed to be a breach of this Agreement. "Without Cause"

          shall mean for any reason other than Cause, Death or Disability, as

          provided in Sections 7(a), 7(b) and 7(c).

 

     (g.) Notice of Termination.

 

           (i.)   Any termination of Executive's employment by the Company

                pursuant to Section 7(a), 7(c) or 7(f), or by Executive

                pursuant to Section 7(d) or 7(e), shall be communicated by a

                Notice of Termination to the other party hereto in accordance

                with this Section 7(g) and Section 13. For purposes of this

                Agreement, a "Notice of Termination" means a written notice

                that (A) indicated the specific termination provision in this

                Agreement relied upon, (B) to the extent applicable, sets

                forth in reasonable detail the facts and circumstances claimed

                to provide a basis for termination of the Executive's

                employment under the provision so indicated and (C) if the

                Date of Termination (as defined in Section