EMPLOYMENT AGREEMENT
Exhibit 10.61
THIS AGREEMENT (the “Agreement”) made effective as of the 15th day of December, 2002 (the “Effective Date”) by and between ERIE INDEMNITY COMPANY, a Pennsylvania corporation with its principal place of business at Erie, Pennsylvania (the “Company”), and XXXXXXX X. XXXXX (the “Executive”);
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those held, exercised or assigned to the Executive as of the Effective Date. The Executive shall devote the Executive’s knowledge, skill and all of the Executive’s professional time, attention and energies (reasonable absences for vacations and illness excepted), to the business of the Company in order to perform such assigned duties faithfully, competently and diligently. It is understood and agreed between the parties that the Executive may (i) engage in charitable and community activities, including serving on boards of directors or trustees of and holding other leadership positions in non-profit organizations unless the objectives and requirements of such positions are determined by the Board of Directors to be inconsistent with the performance of the Executive’s duties hereunder, and, (ii) manage personal investments, so long as such activities do not interfere or conflict with the Executive’s performance of responsibilities and obligations hereunder. It is expressly agreed that any such activities engaged in by the Executive as of the Effective Date shall not thereafter be deemed to interfere with the Executive’s obligations and responsibilities hereunder. The Executive agrees that the approval of the Board of Directors or a committee thereof shall be required before the Executive first accepts a position as director of any for-profit corporation after the date hereof.
(c) Employee Benefit Plans. The Executive and the Executive’s “dependents,” as that term may be defined under the applicable employee benefit |
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plan(s) of the Company, shall be included, to the extent eligible thereunder and subject to the terms of the plans (including any provisions for changing the level of or termination of benefits thereunder), in all plans, programs and policies which provide benefits for Company employees and their dependents on a basis commensurate with the Executive’s position and authorities, duties, powers and responsibilities including, without limitation, health care insurance, health and welfare plans, pension and retirement plans, group life insurance plans, split dollar life insurance plans, short and long-term disability plans, survivors’ benefits, executive supplemental benefits, holidays and other similar or comparable benefits made available to the Company’s employees and senior executive officers (hereinafter, such plans, programs and policies shall be collectively referred to as the “Erie Benefit Plans”). Such plans, programs and policies shall include, but are not limited to, the Erie Insurance Group Retirement Plan for Employees, the Erie Insurance Group Employee Savings Plan, the Erie Insurance Group Deferred Compensation Plan, the Erie Insurance Group Split Dollar Life Insurance Plan, the Erie Insurance Group Supplemental Executive Retirement Plan, and the Erie Insurance Group Health Protection, Prescription Drug, Dental Assistance and Vision Care Plans. |
(e) Expenses and Working Facilities. The Executive is hereby authorized to incur, and shall be reimbursed by the Company for, any and all reasonable and necessary business related expenses, including, but not limited to, expenses for business travel, entertainment, gifts and similar matters, which expenses are incurred by the Executive on behalf of the Company or any of its subsidiaries, upon presentation of itemized accounts of such expenses in accordance with Company policies. The Executive shall be furnished during the term of this Agreement with offices and other working facilities in the Company’s principal executive offices located in Erie, Pennsylvania (or other location of the principal executive offices within the Erie metropolitan area) and secretarial and other assistance suitable to the Executive’s position and adequate for the performance of duties hereunder. |
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entitled to fewer vacation days than under the Company’s vacation policy as in effect on the Effective Date) and to absences because of illness or other incapacity, and shall also be entitled to such other absences, whether for holiday, personal time, conventions, or for any other purpose, as are granted to the Company’s other senior executive officers or as are approved by the Board of Directors or the Committee, which approval shall not be unreasonably withheld.
5. Termination. The Executive’s employment hereunder may be terminated only as follows:
(1) | The deliberate and intentional breach of any material provision of this Agreement, which breach Executive shall have failed to cure within thirty (30) days after Executive’s receipt of written notice from the Company specifying the specific nature of the Executive’s breach; | |||||
(2) | The deliberate and intentional engaging by Executive in gross misconduct that is materially and demonstrably |
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inimical to the best interests, monetary or otherwise, of the Company; or | ||||||
(3) | Conviction of a felony or conviction of any crime involving moral turpitude, fraud or deceit. |
For purposes of this definition, no act, or failure to act, on the Executive’s part shall be considered “deliberate and intentional” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interest of the Company.
(1) | Material breach of any material provision of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after Company’s receipt from the Executive or the Executive’s agent of written notice specifying in reasonable detail the nature of the Company’s breach; | |||||
(2) | The assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position (including any reduction of the Executive’s status and reporting requirements), authority, duties, powers or responsibilities with the Company as contemplated by Section 2 of this Agreement, or any other action by the Company, including the removal of the Executive from or any failure to reelect or reappoint the Executive to the office(s) specified in Section 2 or a commensurate office(s) (other than for Cause), which results in a diminution of the Executive’s authority, duties, position, responsibilities or status, excluding for this purpose any isolated, insubstantial and inadvertent action respecting the Executive not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of written notice from the Executive to the Company; | |||||
(3) | The Company’s relocation of the Executive out of the Company’s principal executive offices or the relocation of the Company’s principal executive offices to a location outside the Erie, Pennsylvania metropolitan area, except for |
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required short-term travel on the Company’s behalf to the extent necessary for the Executive to carry out his normal duties in the ordinary course of business; | ||||||
(4) | The failure of the Company to obtain the assumption in writing of its obligations to perform this Agreement by any successor as provided in Section 14 hereof not less than five days prior to a merger, consolidation or sale as contemplated in Section 14; or | |||||
(5) | A reduction in the overall level of compensation of the Executive. For purposes of this subsection 5, the following shall not constitute a reduction in the overall level of compensation of the Executive: (i) changes in the cash/stock mix of compensation payable to the Executive; (ii) a reduction in the overall level of compensation of the Executive resulting from the failure to achieve corporate, business unit and/or individual performance goals established for purposes of incentive compensation for any year or other period; provided that the aggregate short-term incentive opportunity, when combined with the Executive’s base salary, provides, in the aggregate, an opportunity for the Executive to realize at least the same overall level of compensation as was paid in the immediately prior year or period at target performance levels; and provided, further, that such target performance levels are reasonable at all times during the measurement period, taking into account the fact that one of the purposes of such compensation is to incent the Executive; (iii) reductions in compensation resulting from changes to any Erie Benefit Plan (provided that such changes are generally applicable to all participants in such Erie Benefit Plan); and (iv) any combination of the foregoing. |
(g) Death. The Executive’s employment under this Agreement shall terminate upon the Executive’s death. |
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(h) Mutual Written Agreement. This Agreement and the Executive’s employment hereunder may be terminated at any time by the mutual written agreement of the Executive and the Company. |
(1) | Three (3) times the following: (A) the highest annual base salary paid or payable to the Executive in the then current year or any one (1) of the three (3) calendar years preceding Executive’s termination of employment hereunder; plus (B) an amount equal to the sum of the Executive’s highest award(s) under the Company’s Annual Incentive Plans for any one (1) of the three (3) calendar years preceding the date of the termination of Executive’s employment hereunder (such total is referred to herein as “Covered Compensation”). Such payment to the Executive by the Company shall be paid in a lump sum unless the Executive elects, and so notifies the Company in writing prior to the termination of the Executive’s employment hereunder, to receive such payment in three (3) equal annual installments. The lump sum or first payment, as the case may be, shall be paid within sixty (60) days after the date of the termination of the Executive’s employment hereunder; | |||||
(2) | Any awards or other compensation to which the Executive is entitled under any of the Company’s compensation plans or Erie Benefit Plans to the extent not covered in subsection (1) hereof; | |||||
(3) | Any award to which the Executive would be entitled under the Company’s Long-Term Incentive Plan as in effect on December 16, 1997, calculated under the provision of that Plan as if the Executive ceases to be an Employee of the |
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Company by reason of death, disability or normal retirement; | ||||||
(4) | Continuing coverage for all purposes (including eligibility, coverage, vesting and benefit accruals, as applicable), for a period of three (3) years after the date of the termination of Executive’s employment hereunder, to the extent not prohibited by law, for the Executive and the Executive’s eligible dependents under all of the Erie Benefit Plans in effect and applicable to Executive and the Executive’s eligible dependents as of the date of termination. In the event that the Executive and/or the Executive’s eligible dependents, because of the Executive’s terminated status, cannot be covered or fully covered under any or all of the Erie Benefit Plans, the Company shall continue to provide the Executive and/or the Executive’s eligible dependents with the same level of such coverage in effect prior to termination, payable from the general assets of the Company if necessary. Notwithstanding the foregoing, the Executive may elect (by giving written notice to the Company prior to the termination of employment hereunder), on a benefit by benefit basis, to receive in lieu of continuing coverage, cash in an amount equal to the present value (using a 6.5% discount rate over three years) of the projected cost to the Company of providing such benefit for such three year period. The aggregate amount of cash to which the Executive is entitled pursuant to the preceding sentence shall be payable by the Company to the Executive within sixty (60) days after the date of the termination of Executive’s employment hereunder; and | |||||
(5) | For a period of three (3) years after the date of the termination of Executive’s employment hereunder, such perquisites as are made available to the Executive as of the date of the termination of Executive’s employment hereunder. |
The Executive’s subsequent death, disability or attainment of age 65 or any other age shall in no way affect or limit the Company’s obligations under this Section 6(a).
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The Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking employment or otherwise, nor shall any amounts received from employment or otherwise by the Executive offset in any manner the obligations of the Company hereunder except as specifically provided in Section 6(d) hereof.
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(a) The Company shall: |
(1) | Pay the Executive’s accrued salary and any other accrued benefits under Sections 3(a), (b), and (c) hereof; | |||||
(2) | Reimburse the Executive for expenses already incurred in accordance with Section 3(e) hereof; | |||||
(3) | Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any Erie Benefit Plan of which the Executive or any of the Executive’s dependents is or was a participant or as otherwise required by law; | |||||
(4) | Pay the Executive and the Executive’s beneficiaries any compensation and/or provide the Executive or the Executive’s eligible dependents any benefits, as the case may be, due pursuant to Section 6 or Section 7 hereof; and | |||||
(5) | Unless the employment of the Executive is terminated by the Company for Cause, pay the Executive or the Executive’s beneficiaries the full amount or amounts accrued under the Supplemental Executive Retirement Plan of the Company (the “SERP”) as in effect on the Effective Date (or as such benefits may be enhanced by subsequent amendments or supplements to such SERP), as though, solely for purposes of determining any otherwise applicable actuarial reduction factors, the event of the termination of Executive’s employment hereunder or expiration of this Agreement occurred on the Executive’s Normal Retirement Date as defined in such SERP. Accrued benefits under the SERP shall be fully vested and nonforfeitable upon such termination (including termination on account of the Executive’s death) or expiration. Any reductions in SERP benefits that would otherwise apply pursuant to Section 10.1 of the Company’s Retirement Plan for Employees (or pursuant to any successor provision of such plan or any successor plan) relating to Section 415(b) of the Code shall not be applicable for purposes hereof. No further approval by the Board of Directors or the Committee with respect to payments under the SERP in accordance with the preceding |
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sentences shall be required. Unreduced payments may begin at age 55, but in no event would payments be made under this Section 8(a)(5) before the Executive reaches age fifty-five (55). The Company shall purchase for the Executive, naming the Executive and/or the Executive’s designee the owner, a paid up annuity, from an insurer reasonably acceptable to the Executive but in any event having an A.M. Best rating of A+ or better (or other comparable rating), that will pay to the Executive an amount equal to the benefit to which the Executive would otherwise be entitled under the SERP and payable at the times such SERP benefit would be payable in accordance with the provisions hereof. Upon the purchase and delivery to the Executive of such an annuity, the Executive shall release the Company from any further obligation under the SERP. The Company further agrees to pay the Executive immediately upon termination, a cash payment (the “Tax Gross-up”) equal to the sum of the following: (i) all taxes (federal, state, local, and payroll taxes) incurred and due and owing by the Executive, arising from the cost of the annuity purchased by the Company to meet the requirements of this Section 8(a)(5), and (ii) any such taxes incurred and due and owing with respect to the amount paid in (i). | ||||||
(6) | Continue to remain bound by the terms of Section 12 hereof. |
(b) The Executive shall remain bound by the terms of Sections 9 and 13 hereof for a period of thirty six (36) months after the expiration of the Agreement by its terms; provided, that the Executive shall not be bound by the terms of Section 9(b) after the termination of employment (other than a termination of the Executive by the Company for Cause) if such termination occurs after the expiration of this Agreement by its terms. |
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rights and duties under an agency agreement with the Company shall not constitute a breach of this Section 9(b). |
10. Resolution of Differences Over Breaches of Agreement. Except as otherwise provided herein, in the event of any controversy, dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Executive’s employment with the Company, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Executive agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Erie, Pennsylvania in accordance with this Section 10 and the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). The matter shall be heard and decided, and awards rendered by a panel of three (3) arbitrators (the “Arbitration Panel”). The Company and the Executive shall each select one arbitrator from the AAA National Panel of Commercial Arbitrators (the “Commercial Panel”) and AAA shall select a third arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. Except as provided in Section 11 hereof, each party shall bear sole responsibility for all expenses and costs incurred by such party in connection with the resolution of any controversy, dispute or claim in accordance with this Section 10.
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17. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania. |
(c) Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience of reference only and shall not constitute a part of this Agreement. |
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ATTEST: | ERIE INDEMNITY COMPANY | |||||||||
/s/ | Xxx X. Xxx Xxxxxx Xxx X. Xxx Xxxxxx Secretary |
By: | /s/ | F. Xxxxxxx Xxxx F. Xxxxxxx Xxxx Chairman of the Board |
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WITNESS: | ||||||||||
/s/ | Xxxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx Executive Secretary |
/s/ | Xxxxxxx X. Xxxxx (SEAL) Xxxxxxx X. Xxxxx 0000 Xxxxxxxxx Xx. Xxxx, XX 00000 |
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