EMPLOYMENT AGREEMENT
AGREEMENT, made December 20, 1995, by and between FINANCIAL SECURITY
ASSURANCE HOLDINGS LTD., a New York corporation (the "Company") and MICHAEL
DJORDJEVICH (the "Executive").
RECITALS
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WHEREAS, the Company, FSACG Inc. and Capital Guaranty Corporation
("Capital") have entered into a merger agreement dated as of August 18, 1995
(the "Merger Agreement") pursuant to which a merger Capital shall become a
wholly owned subsidiary of the Company;
WHEREAS, Executive is currently the Chairman and Chief Executive
Officer of Capital;
WHEREAS, the Company desires that Executive serve as the Vice Chairman
of the Company and desires to provide Executive with compensation and other
benefits on the terms and conditions set forth in this Agreement;
WHEREAS, Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment.
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1.1 Position. Subject to the terms and conditions of this Agreement,
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the Company agrees to employ Executive during the term hereof as its sole Vice
Chairman, and Executive hereby accepts employment as the sole Vice Chairman of
the Company, and agrees to devote his full working time and efforts, to the best
of his ability, experience and talent, to the performance of services, duties
and responsibilities in connection therewith. Executive shall perform such
duties and exercise such powers, commensurate with his position, as the Vice
Chairman as the Board of Directors of the Company (the "Board") shall from time
to time delegate to him.
1.2 Directorship. Executive shall be nominated to serve on, and the
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Company shall make its best efforts to assure his election to, the Company's
Board in accordance with the provisions of Section 5.6 of the Merger Agreement.
As a member of the Company's Board, Executive shall serve as Chairman of the
Finance Committee of the Board and as a member of the Underwriting Committee of
the Board. Executive shall also be a member of the Office of the Chairman.
2. Term of Employment. Executive's term of employment under this
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Agreement shall commence upon the day (the "Commencement Date") following
closing date of the Merger (the "Closing Date") and, subject to the terms
hereof, shall terminate on the earlier of (i) December 31, 1996 or (ii)
termination of Executive's employment pursuant to this Agreement (alternatively,
the "Termination Date").
3. Compensation.
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3.1 Salary. The Company shall pay Executive a base salary ("Base
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Salary") at an annual rate of $425,000. Executive shall be entitled to a salary
increase on November 1, 1996, which shall be no less than the average rate of
salary increase for the top five executives of the Company (other than the
Executive) for the last preceding fiscal year. Base Salary shall be payable in
equal periodic installments in accordance with the ordinary payroll practices of
the Company.
3.2 Annual Bonus. The Company shall pay to Executive an incentive
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bonus ("Bonus"), with respect to the fiscal year ending December 31, 1996. The
Bonus in respect of fiscal year 1996 shall be one of the top five bonuses paid
in such year by the Company or any of its subsidiaries, and in no event shall be
less than $200,000. The Bonus for each fiscal year shall be paid in cash when
bonuses are paid generally to other senior executives of the Company;
provided, however, that the Bonus in respect of fiscal year 1996 shall be paid
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no later than thirty days after the expiration of the Term.
4. Stock Options and Other Equity Awards.
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4.1 Assumed Options. On the Closing Date, Executive's options with
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respect to shares of common stock of Capital shall be converted to options to
acquire stock of the Company ("Assumed Options") on the basis set forth in
Section 1(b)(i) of Exhibit C to the Merger Agreement. Assumed Options held by
Executive shall vest in equal installments over a twelve-month period commencing
on the Commencement Date.
4.2 Other Equity Awards. With respect to fiscal year 1996 of the
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Company, Executive shall be entitled to receive equity awards on the same basis
and at the same times as other senior executives of the Company; provided, that
in no event shall Executive be granted fewer equity awards than the average
number of equity awards granted to the top five executives of the Company (other
than the Executive) in such fiscal year (the "Average Grant"), except that in
the event that senior executives of the Company are granted equity awards in
fiscal year 1996 with performance or vesting periods in excess of one year,
Executive's grant with respect to such awards may be adjusted by multiplying the
Average Grant by a fraction the numerator of which is 1 and the denominator of
which is the number of years with respect to which the Average Grant is made.
Executive's grant of such an equity award shall fully vest no later than
December 31, 1996.
5. Employee Benefits.
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5.1 Employee Benefit Programs, Plans and Practices. During the term of
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his employment hereunder, Executive shall be eligible to participate in all
employee benefit programs, plans and practices (commensurate with his positions
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company generally makes available
to its senior executives.
5.2 Vacation and Fringe Benefits. Executive shall be entitled to no
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less than the number of paid vacation days customarily accorded senior
executives of the Company in each calendar year. In addition, Executive shall be
entitled to the perquisites and other fringe benefits generally made available
to all members of the Management Committee of the Company.
5.3 Directors' and Officers Insurance. During the term of this
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Agreement, the Company shall keep in effect a standard policy of directors' and
officers' liability insurance for officers and directors of the Company, which
shall cover Executive in such capacity, with coverage levels no less than the
levels in effect on the Commencement Date.
6. Expenses. Executive is authorized to incur reasonable expenses in
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carrying out his duties and responsibilities under this Agreement, including,
without limitation, expenses for travel and similar items related to such duties
and responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of appropriately itemized and
approved (consistent with the Company's policy) accounts of such expenditures.
7. Offices. Executive shall be based in San Francisco, California
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where his principal services for the Company shall be performed. The Company
shall maintain an office commensurate with Executive's position with full-time
secretarial assistance in San Francisco. In addition, the Company shall provide
Executive with a secondary office on the executive floor of the Company's
offices in New York, New York with accommodations consistent with Executive's
status and duties with the Company. Executive shall travel as reasonably
required consistent with the provisions of this Section 7.
8. Termination of Employment.
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8.1 Termination Without Cause or for Good Reason. (a) If Executive's
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employment is terminated by the Company without Cause, or if Executive
terminates his employment for Good Reason, Executive shall be entitled to
receive (i) a severance payment (the "Severance Payment") in an amount equal to
the sum of (A) Executive's annual Base Salary as in
effect on the Date of Termination and (B) an amount equal to the executive's
Bonus for the fiscal year preceding Executive's termination, multiplied by a
fraction, the numerator of which is the number of days elapsed in the Company's
fiscal year on the date of Executive's termination and the denominator of which
is 365, (ii) a payment in respect of accrued but unused vacation days (the
"Vacation Payment") and (iii) compensation earned but not yet paid (including
any Bonus payments) (the "Compensation Payment"). In addition, the Company shall
provide Executive, for a period of one year following Executive's termination,
with all welfare benefits to which Executive provided to Executive under Section
5.1 hereof on the same terms and conditions as such benefits were provided to
Executive on the day prior to Executive's date of termination.
(b) For purposes of this Agreement, "Good Reason" shall mean any of
the following (without Executive's express prior written consent):
(i) the assignment to Executive by the Company of duties
materially inconsistent with his position, duties,
responsibilities, titles or offices as set forth in Section
1 hereof;
(ii) the removal from or the failure to be elected to and to
continue in the positions set forth in Section 1.2 hereof;
(iii) the failure of the Company to perform any of its other
obligations under this Agreement; or
(iv) a relocation of Executive's principal office to a location
outside of a radius of 30 miles from its location on the
date of this Agreement.
(c) For purposes of this Agreement, "Cause" shall mean gross
misconduct by the Executive in the performance of his duties and
responsibilities under this Agreement.
8.2 Permanent Disability. If the Executive becomes disabled to an
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extent which would entitle him to long term benefits under the Company's
long-term disability benefit plans applicable to senior executive officers as in
effect on the date hereof) ("Permanent Disability"), the Company or Executive
may terminate Executive's employment and Executive shall be entitled to the
following:
(i) the Bonus in respect of the fiscal year in which his
termination occurs, prorated by a fraction, the numerator of
which is the number of days elapsed in the Company's fiscal
year on the date of Executive's termination and the
denominator of which is 365;
(ii) the Vacation Payment and the Compensation Payment; and
(iii) such payments under applicable plans or programs, including
but not limited to those referred to in Section 5.1 hereof,
to which he is entitled pursuant to the terms of such plans
or programs.
8.3 Death. In the event of the termination of Executive's employment
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due to death during the term hereof, Executive's estate or designated
beneficiaries shall be entitled to the payments and benefits enumerated in
Section 8.2(i)-(iii) hereof.
8.4 Voluntary Termination by Executive; Discharge for Cause. (a) In
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the event that Executive's employment is terminated (i) by the Company for Cause
or (ii) by Executive other than for Good Reason or other than as a result of the
Executive's Permanent Disability or death, prior to the Termination Date (a
"Voluntary Termination"), Executive shall be entitled to receive the
Compensation Payment and the Vacation Payment. In addition, in the event of a
Voluntary Termination, Executive shall also be entitled to a severance payment
in an amount equal to the sum of (i) one-half of Executive's annual base Salary
as in effect on Executive's date of termination and (ii) an amount equal to the
Executive's Bonus for the fiscal year preceding Executive's termination,
multiplied by a fraction, the numerator of which is the number of days elapsed
in the Company's fiscal year on the date of Executive's termination and the
denominator of which is 365.
(b) Termination of Executive by the Company for Cause shall be made by
delivery to Executive of a notice from the Chairman of the Company setting forth
in reasonable detail the basis for such termination.
8.5 Termination After Expiration of Term. If after the expiration of
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the term of this Agreement, the Company terminates Executive's employment
without Cause or Executive
terminates his employment for Good Reason, Executive shall be entitled to a
severance payment in an amount equal to Executive's annual Base Salary as in
effect on the date of Executive's termination. In addition, the Company shall
provide Executive, for a period of one year following Executive's termination,
with all welfare benefits to which Executive provided to Executive under Section
5.1 hereof on the same terms and conditions as such benefits were provided to
Executive on the day prior to Executive's date of termination.
8.6 Timing of Payments. All payments hereunder in respect of
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Executive's termination (including, without limitation, the Severance Payment,
the Vacation Payment and the Compensation Payment) shall be paid by the Company
to Executive within 30 days after the termination of Executive's employment. All
amounts due to Executive under any provision of this Section 8 shall only be
payable upon Executive's execution of the standard form of waiver and
termination agreement of the Company.
8.7 Offset for Other Severance Payments. The amount of any payment due
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to Executive under any provision of this Section 8 shall be reduced by the
amount of any severance payment made to Executive under any severance plan or
program of the Company.
9. Notices. All notices or communications hereunder shall be in
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writing, addressed as follows:
To the Company:
Bruce E. Stern
Financial Security Assurance Holdings Ltd.
350 Park Avenue
New York, New York 10022
To Executive:
Michael Djordjevich
74 Arguello Circle
San Rafael, California 94901
with a copy to:
Kenneth C. Edgar, Jr.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
10. Separability; Legal Fees. If any provision of this Agreement shall
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be declared to be invalid or unenforceable by a court of competent jurisdiction,
in whole or in part, such invalidity or unenforceability shall not affect the
remaining provisions hereof which shall remain in full force and effect. Each
party shall bear the costs of any legal fees and other fees and expenses which
may be incurred in respect of enforcing its respective rights under this
Agreement.
11. Assignment. This contract shall be binding upon and inure to the
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benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except for payments due under Section 8.3, which may
be transferred by will or by operation of the laws of intestate succession)
or by the Company, except that the Company may assign this Agreement to any
successor (whether by merger, purchase or otherwise) to all or substantially
all of the stock, assets or businesses of the Company, if such successor
expressly agrees to assume the obligations of the Company hereunder.
12. Amendment. This Agreement may only be amended by written agreement
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of the parties hereto.
13. Nondisclosure of Confidential Information. (a) Executive shall
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not, without the prior written consent of the Company, use, divulge, disclose or
make accessible to any other person, firm, partnership, corporation or other
entity any Confidential Information pertaining to the business of the Company or
any of its affiliates, except (i) while employed by the Company, in the business
of and for the benefit of the Company, or (ii) when required to do so by a court
of competent jurisdiction, by any governmental agency having supervisory
authority over the business of the Company, or by any administrative body or
legislative body (including a committee thereof) with purported or apparent
jurisdiction to order Executive to divulge, disclose or make accessible such
information. For purposes of this Section 13(a), "Confidential Information"
shall mean non-public information concerning the Company's financial data,
strategic business plans, product development (or other proprietary product
data), customer lists, marketing plans and other non-public, proprietary and
confidential information of the Company, its affiliates or its customers, that
is not otherwise available to the public.
(b) Executive agrees that any breach of the covenants contained in
this Section 13 would irreparably injure the Company. Accordingly, Executive
agrees that the Company may, in addition to pursuing any other remedies it may
have in law or in equity, obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further violation of this
Agreement by Executive.
14. Limitation on Payments. If any amount payable to Executive
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pursuant to the Agreement or any other payment, which is deemed to constitute a
"parachute payment" as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), would result in the imposition on Executive of an
excise tax under Section 4999 of the Code the amounts payable under paragraph 8
hereof shall be reduced by the smallest amount necessary to avoid the imposition
of such excise tax; but such amounts shall be reduced only if, by reason of such
reduction, the Net After Tax Benefit (as hereinafter defined) for Executive
shall exceed the Net After Tax Benefit if such reduction were not made. The
foregoing calculations shall be made, at the Company's expense. Net After Tax
Benefit means the sum of (i) the total amounts payable to Executive under the
Agreement, plus (ii) all other payments and benefits which Executive receives or
is entitled to receive from the Company that would constitute a Parachute
Payment, less (iii) the amount of federal, state and local income taxes payable
with respect to the foregoing calculated at the maximum marginal income tax rate
for each year in which the foregoing shall be paid Executive, less (iv) the
amount of excise taxes imposed with respect to the payments and benefits
described in (i) and (ii) above by Section 4999 of the Code.
15. Beneficiaries; References. Executive shall be entitled to select
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(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
16. Survivorship. The respective rights and obligations of the parties
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hereunder shall survive any termination of this Agreement to the extent
necessary to the intended
preservation of such rights and obligations. The provisions of this Section 16
are in addition to the survivorship provisions of any other section of this
Agreement.
17. Governing Law. This Agreement shall be construed, interpreted and
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governed in accordance with the laws of the State of New York, without reference
to rules relating to conflicts of law.
18. Withholding. The Company shall be entitled to withhold from
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payment any amount of withholding required by law.
19. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which will be deemed an original.
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
By /s/ Robert P. Cochran
Name: Robert P. Cochran
Title: President and Chief Executive
Officer
/s/ Michael Djordjevich
MICHAEL DJORDJEVICH