EMPLOYMENT AGREEMENT
This EMPLOYMENT
AGREEMENT (the "Agreement"), dated as of February 1, 2005,
is made and entered into by and between
Scottish Re Group Limited (the
"Company") and Hugh T. McCormick (the
"Executive").
W I T N E S S E T H:
WHEREAS, the
Company desires to ensure that it retains the Executive's
management and executive services by
directly engaging Executive as its
Executive Vice President - Corporate
Development;
WHEREAS, in order to induce
the Executive to continue 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 Scottish Re Group Limited, a
Cayman Islands, British West Indies 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 1(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 the Company; provided, however, that for
purposes of this Section 1(c)(i), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition
by the Company of Voting Stock of the
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Company, or (B) any acquisition of Voting Stock of The Company
by any employee benefit plan (or related trust) sponsored or
maintained by The Company or any Subsidiary; or
(ii) individuals who,
as of the date hereof, constitute the Board
(the "Incumbent Board," (as modified by this Section
1(c)(ii))) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a Director subsequent to the date hereof whose
election, or nomination for election by the shareholders of
The Company, 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
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
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 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
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
Company or all or substantially all of the assets of The
Company either directly or through one or more subsidiaries),
(II) no Person (other than The Company, such entity resulting
from such Business Combination, or any employee benefit plan
(or related trust) sponsored or maintained by The Company, any
Subsidiary or such entity resulting from such Business
Combination) 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
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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 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 Company of a complete
liquidation or dissolution of The Company, except pursuant to
a Business Combination that complies with clause (A) or (B) of
Section 1(c)(iii).
(d) "Code" means the Internal Revenue
Code of 1986, as amended.
(e) "Competitive Activity" means the
Executive's participation, without
the written consent of the Board of the Company, 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 sales 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 and if
the
Company's net sales of said product or service amounted to 10% of
the
Company'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.
(f) "Director" means a member of the
Board.
(g) "Ordinary Shares" means the
ordinary shares, par value $0.01 per
share, of The Company.
(h) "Subsidiary" means an entity in
which The Company directly or
indirectly beneficially owns 50% or more of the outstanding
Voting
Stock.
(i) "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 three
(3)
fiscal years.
(j) "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 February 1, 2005 ("Commencement
Date") and subject to earlier
termination pursuant to Section 7, expire
on the third anniversary of the
Commencement Date; provided, however, that
commencing on the third 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 15 at least ninety (90) 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 second 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 - Corporate Development 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
of
the Company, consistent with Executive's position as the
Company's
Executive Vice President - Corporate Development or (ii) assigned
to
his office in the Company's Corporate Charter. Executive will
report
directly to the Chief Executive Officer of the Company.
(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 of the Company, 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 of the Company, 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
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civic 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, unless otherwise agreed
by Executive, Executive will be based at
the Company's executive offices in
Charlotte, North Carolina; 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.
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 US $500,000, 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. 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 after December 31,
2004, the Company shall pay a cash bonus to Executive based
upon
pre-established performance goals established by the Company
(the
"Incentive Bonus"). For the calendar years ending on December 31,
2005
and December 31, 2006, Executive shall receive a guaranteed
minimum
Incentive Bonus equal to $300,000. Any Incentive Bonus shall be
payable at the times and in the manner consistent with the
Company's
policies regarding compensation of executive employees.
(c) 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,
including any stock option, stock purchase, stock appreciation,
savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, disability, salary
continuation,
and any other deferred compensation, incentive compensation,
group
and/or executive life,
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health, medical/hospital or other insurance, expense reimbursement
or
other employee benefit policies, plans, programs or
arrangements,
including without limitation financial counseling services or
any
equivalent successor policies, plans, programs or arrangements
that
may now exist or be adopted hereafter by the Company.
(d) 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.
(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. In addition to the above allowance, the Company also
agrees
to provide
Executive membership at Ballantyne Country Club. Such
membership is limited only by the terms and conditions of the
Company's corporate membership with Ballantyne Country Club.
(f) Vacation and Holidays. Executive
shall be entitled to four (4) weeks
of paid vacation per annum, in accordance with the Company's
vacation
policy.
(g) Indemnification. The Executive
shall be offered an opportunity to
enter into The Company' Indemnification Agreement substantially in
the
form attached hereto as Exhibit A effective as of the
Commencement
Date.
(h) Signing Bonus. The Company shall
pay Executive a $200,000 signing
bonus upon execution of this Agreement.
(i) Relocation expenses. The Company
shall reimburse the Executive for his
reasonable relocation costs to Charlotte, North Carolina, in
accordance with the Company's Relocation Policy.
(j) Initial Equity Compensation Grant.
The Company shall grant Executive
an option (the "Option") to purchase 50,000 Ordinary Shares of
the
Company. Additionally, the Company shall grant Executive 50,000
restricted shares (the "Restricted Shares") of The Company
(collectively the "Grants"). Additionally, 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
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Company' Board and/or Compensation Committee. A copy of the
2004
Equity Incentive Compensation Plan is attached hereto as Exhibit
B.
(k) Initial Legal Fees. The Company
shall pay all reasonable attorneys'
fees and costs incurred by the Executive in connection with
advice
pertaining to and negotiation of this Agreement.
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 Company'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 or her duties hereunder;
(ii)
Executive's conviction during the 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 10 hereof; (v)
Executive's
willful and continued failure or refusal to perform his
material
duties hereunder (other than such failure caused by Executive's
Disability), after a written demand for performance is delivered
to
Executive by the Company that specifically identifies the manner
in
which the Company believes that Executive has failed or refused
to
perform his duties, which is not cured, if curable, within thirty
(30)
days after written notice thereof; 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).
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(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 one-hundred
eighty
(180) 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 the 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
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 15 within sixty (60)
days after having knowledge of the event, (II) such event has
not
been cured within 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 14(a); (III) upon the provision of notice
by
the Company under Section 3 of non-renewal of the Agreement; or
(IV) on or after November 29, 2009, 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
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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; or (VII) for any reason, or without reason.
(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 15. For purposes of this Agreement, a
"Notice of Termination" means a written notice that (A)
indicates
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 7(h)) is other than the date of receipt of such notice,
specifies the Date of Termination. The failure by the Executive
or the Company to set forth in the Notice of Termination any
fact
or circumstance that contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the
Company,
respectively, hereunder or preclude the Executive or the
Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or Company's rights hereunder.
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(ii) Any Notice of Termination by the Company for Cause shall
be
ratified by a resolution duly adopted by the affirmative vote
of
not less than two-thirds of the Board of the Company then in
office (excluding, for this purpose, the Executive, if the
Executive is then a member of the Board) at a meeting of the
Board of the Company called and held for such purpose, after
reasonable
notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses
to
have counsel present at such meeting), to be heard before the
Board of the Company, finding that, in the good faith opinion
of
the Board of the Company, the Executive had committed an act
constituting "Cause" as defined in Section 7(a) and specifying
the particulars thereof in detail.
(h) Date of Termination. "Date of
Termination" means (i) if the
Executive's employment is terminated by the Company for Cause or
by
the Executive for Good Reason, the date of receipt of the Notice
of
Termination or any later date specified therein (but not more
than
thirty (30) days thereafter), as the case may be (although such
Date
of Termination shall retroactively cease to apply if the
circumstances
providing the basis of termination for Cause or Good Reason are
cured
in accordance with Section 7(a) or 7(d) of this Agreement, as the
case
may be), (ii) if Executive's employment is terminated by the
Company
other than for Cause or Disability, the Date of Termination shall
be
the date set forth in the Notice of Termination (iii) if
Executive's
employment is terminated by Executive without Good Reason, the Date
of
Termination shall be the date set forth in the Notice of
Termination,
but
no sooner than thirty (30) days after such Notice of
Termination
is received by the Company and (iv) if Executive's employment
is
terminated by reason of death or Disability, the Date of
Termination
shall be the date of the Executive's death or the Disability
Effective
Date, as the case may be.
8. Compensation upon
Termination.
If the Company
or Executive terminates the Executive's employment during
the Term, the Company shall pay to the
Executive the amount(s) set forth below
in a lump sum in cash upon the later of (i)
five (5) business days after the
Date of Termination or date of expiration
of this Agreement, as the case may be,
(ii) the effective date of a release (if a
release is required by this Section
8) or (iii) at the Executive's option, a
date later than the dates specified in
clauses (i) and (ii).
(a) Compensation upon Termination for
Cause or Without Good Reason. In the
event of termination of Executive's employment by the Company
for
Cause or by the Executive without Good Reason, the Company shall
pay
the Executive his accrued, but unpaid Base Salary, accrued
vacation
pay
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and unpaid business expenses through the Date of Termination
(the
"Compensation Payments"), and the Executive shall be entitled to
no
other compensation, except as otherwise due to the Executive
under
applicable law. The Executive shall not be entitled to the payment
of
any bonus or other incentive compensation for any portion of
the
fiscal year in which such termination occurs.
(b) Compensation upon Termination by
the Company Without Cause or upon
Termination by the Executive for Good Reason. Subject to Section
8(c),
in the event of the termination of the Executive's employment by
the
Company without Cause or upon termination of the Executive's
employment by the Executive for Good Reason, the Company shall pay
the
Executive the Compensation Payments. In addition, conditioned
upon
receipt of the Executive's release of claims substantially in the
form
attached hereto as Exhibit C, subject to such changes as may be
required to preserve the intent thereof for changes in applicable
law,
the Company shall pay or provide to the Executive (i) as
severance
pay, an amount equal to the sum of the Total Cash Compensation
that
Executive would have received during the remaining Term of the
Agreement, such amount to be calculated from the date the
Executive's
employment was terminated to the date that is the third anniversary
of
the Commencement Date (the "Severance Calculation Period"),
(ii)
earned, but unpaid Incentive Bonus for the year of termination,
as
determined in the good faith opinion of the Company based upon
the
relative achievement of performance targets through the Date of
Termination (the "Termination Bonus"), and (iii) the welfare
benefits
set forth in Section 8(f). Notwithstanding the foregoing provisions
of
this Section 8(b), (x) where the Severance Calculation Period is
for
twelve (12) calendar months or less, the Company shall pay the
Executive under Section 8(b)(i) an amount equal to the sum of two
(2)
full years' Total Cash Compensation, (y) upon termination by
the
Executive for Good Reason due to Section 7(d)(ii)(A)(III)
(Company's
notice of non-renewal of the Agreement), the Company shall pay
the
Executive under Section 8(b)(i) an amount not less than two (2)
full
years' Total Cash Compensation, and (z) any right of the Executive
to
receive termination payments and benefits under Secti
