EXHIBIT 10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is effective this 18th day of August, 2003,
by and between CERES GROUP, INC., a Delaware corporation, referred to in this
Agreement as "Employer," and XXXXXXX X. XXXXXXX, referred to in this Agreement
as "Employee."
RECITALS:
Employer is engaged in the insurance business and maintains its
corporate office in the City of Strongsville, Ohio; and
Employer wished to employ Employee, and Employee wishes to be employed
by Employer on the terms, covenants and conditions set forth in this Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
Employer hereby employs Employee and Employee hereby accepts such
employment upon the terms, covenants and conditions hereinafter set forth.
1. SERVICES. Employer shall employ Employee as Executive Vice
President and Chief Operating Officer of Employer's major
medical division, solely subject to the supervision and
pursuant to the assignments, advices and directions of
Employer. Employee's duties and responsibilities shall include
duties and responsibilities as are customarily performed by
one holding such a position for Employer and/or other similar
businesses or enterprises.
Employee shall devote all Employee's time, attention,
knowledge, and skill solely and exclusively to the business
and interest of Employer, and Employer shall be entitled to
all of the benefits, emoluments, profits or other issues
arising from or incident to any and all work, services and
advice of Employee, and Employee expressly agrees that during
the term of this Agreement, Employee will not be interested,
directly or indirectly, in any form, fashion or manner, as
partner, officer, director, 5% or more stockholder, advisor,
employee or in any other form or capacity, in any other
business similar to Employer's business or any allied trade.
Employee represents and warrants to Employer that his
employment hereunder and compliance with the terms and
conditions of this Agreement will not conflict with or result
in the breach of any agreement or obligation to which he is a
party or may be bound.
2. TERM AND TERMINATION. The duration of employment pursuant to
this Agreement shall be for a period of two (2) years,
commencing on August 18, 2003 through August 17, 2005;
provided, however, that this Agreement shall automatically
renew for succeeding one (1) year terms, unless the Employer
provides Employee with at least sixty (60) days' advance
written notice that this Agreement and Employee's employment
shall terminate as of the close of business on August 1 of the
then-current original or renewal termination date (as the case
may be).
Termination without cause. Regardless of any provisions of
this Agreement to the contrary, or which could be construed to
the contrary, in the event that (a) Employer chooses to
terminate this Agreement upon sixty (60) days' advance written
notice prior to the end of the initial term or then-current
renewal term, (b) Employee's annual salary is reduced, or (c)
Employee shall leave the employment of Employer at any time
other than as a voluntary quit or for "cause" (as defined
below) or Employee's employment is terminated in connection
with a "change of control" (as defined below), this Agreement
shall terminate and Employee shall be entitled to severance
pay equal to twelve (12) months of Employee's then-current
annual salary (less normal administrative deductions), payable
in twelve (12) equal monthly installments. Such payments shall
be in lieu of any other payments from Employer, including,
without limitation, severance or termination payments
contained herein or otherwise and Employer shall have no
further liability or obligation to Employee for compensation
or benefits.
"Change of Control." In the event that Employee's employment
is terminated in connection with a "change of control" of
Employer, Employee shall be entitled to receive cash
compensation equal to eighteen (18) months of Employee's
then-current annual salary (less normal administrative
deductions), payable in lump sum within thirty (30) days of
such "change of control." Such payment shall be in lieu of any
other payments from Employer, including, without limitation,
severance or termination payments contained herein or
otherwise and Employer shall have no further liability or
obligation to Employee for compensation or benefits.
"Change of control" shall mean the occurrence of any of the
following events:
(i) a tender offer shall be made and consummated for
the ownership of 50.1% or more of the outstanding
voting securities of Employer;
(ii) Employer shall be merged or consolidated with
another corporation and, as a result of such
merger or consolidation, less than 50.1% of the
outstanding voting securities of the surviving or
continuing corporation shall be owned in the
aggregate by the former stockholders of Employer
as the same shall have existed immediately prior
to such merger or consolidation; or
(iii) Employer shall sell substantially all of its
operating assets to another corporation which is
not a wholly-owned subsidiary;
(iv) a person, within the meaning of Section 3(a)(9) or
of Section 13(d)(3) (as in effect on the date
hereof) of the Exchange Act shall acquire, other
than by reason of inheritance, (50.1%) or more of
the outstanding voting securities of Employer
(whether directly, indirectly, beneficially or of
record).
In determining whether a Change of Control has occurred,
gratuitous transfers made by a person to an affiliate of
such person (as determined by the Board of Directors of
Employer), whether by gift, devise or otherwise,
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shall not be taken into account. For purposes of this
Agreement, ownership of voting securities shall take
into account and shall include ownership as determined
by applying the provisions of Rule 13d-3(d)(1)(i) as in
effect on the date hereof pursuant to the Exchange Act."
Termination for "cause." Notwithstanding any other provisions
of this Agreement to the contrary, Employee's employment and
this Agreement may be terminated by the Employer at any time
without further compensation or severance pay or fringe
benefits for "cause."
For purposes of this paragraph, "cause" shall mean if Employee
(a) has refused, failed or neglected to perform duties or
render services hereunder or has performed or rendered them
incompetently; (b) has been dishonest or committed a fraud or
breach of trust or engaged in illegal or wrongful conduct
substantially detrimental to the business or reputation of
Employer; (c) has developed or pursued interests substantially
adverse to Employer; (d) has been charged with, indicted for,
or convicted of, a crime that constitutes a felony; or (e) has
otherwise materially breached this Agreement.
If, in the opinion of the Board of Employer, Employee's
employment shall become subject to termination for "cause,"
the Board shall give Employee written notice to that effect
which notice shall describe the matter or matters constituting
such "cause." In the case of clauses (b) and (d) above, such
notice shall constitute notice of termination of Employee's
employment and Employee's employment will terminate
immediately. In the case of clauses (a), (c) and (e) above,
if, within 15 days of receipt of such notice, Employee has not
substantially eliminated, resolved or cured each such matter
or matters to the satisfaction of the Board in its sole
discretion, then Employer shall have the right to give
Employee notice that Employee's employment will terminate
immediately.
Voluntary Quit. Notwithstanding any other provision of this
Agreement, Employee shall have the right to voluntarily quit
Employee's employment and terminate this Agreement by giving
sixty (60) days' advance written notice to Employer at the
address provided herein. Notwithstanding any other provision
of this Agreement, if Employee shall so voluntarily quit and
terminate this Agreement, Employer shall have no further
obligations pursuant to the terms of this Agreement, except to
pay to Employee accrued salary to the date of termination.
In the event Employee voluntarily terminates his employment
with Employer during the first twelve (12) months of
employment, Employee shall reimburse Employer, on a pro rata
basis, all relocation benefits previously paid to him.
Employee will also reimburse Employer, on a pro rata basis,
the amount of Employee's Signing Bonus, as defined in Section
3.
3. COMPENSATION.
Base Compensation. During this Agreement, Employer shall pay
Employee (according to Employer's normal payroll procedures)
and Employee agrees to
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accept from Employer, in full payment for services under this
Agreement, a salary set by the Board of Directors and Employee
shall receive annual reviews and merit increases. Employee's
initial salary shall be $200,000 per annum.
Signing Bonus. Upon execution of this Agreement, Employer
shall pay Employee a one-time signing bonus of $25,000.00 (the
"Signing Bonus").
Bonuses. Employee shall also participate in Employer's bonus
plan for officers or such other incentive compensation or
plans as may be established by the Board of Directors of
Employer (the "Officer Bonus Plan"). Employee's bonus shall be
payable as soon as it reasonably can be determined.
Notwithstanding the foregoing, Employee shall be entitled to
defer the receipt of his salary and/or bonus pursuant to
procedures adopted or plans maintained by Employer.
Expenses. During the four (4) months of the initial term of
this Agreement (unless extended by the Board in its sole
discretion), Employee is authorized to incur reasonable
expenses for travel between his current home in South Beloit,
Illinois and Employer's headquarters in Strongsville, Ohio.
Employer shall reimburse Employee for such expenses after
receipt of a written statement from Employee that itemizes
such expenses in reasonable detail, together with all receipts
related to such expenses.
If, at the direction of the Board, Employee relocates and
moves his home near Employer's headquarters, Employer would
reimburse Employee for the costs of such relocation in
accordance with Employer's existing relocation policy,
including normal expenses associated with the sale of
Employee's home.
In the event Employee sells his home in Illinois and has not
closed on his home in Ohio, Employer agrees that it will
reimburse Employee for the cost of temporary housing in Ohio
for a total of two (2) months, not to exceed $2,000.00 per
month.
In addition, Employer agrees that it will reimburse Employee
for any and all necessary, customary and usual business
expenses incurred by Employee, subject to Employer's
then-current policies regarding such expenses.
Benefits. In addition to the above salary and reimbursement,
Employee shall be provided all fringe benefits on the same
basis that Employer normally provides to a regular full-time
employee holding Employee's position with Employer, including,
but not limited to, health/dental insurance, life insurance,
holidays, paid time off ("PTO") (etc.). Employee will be
entitled to four (4) weeks of PTO per year.
Options. Upon approval by the Compensation Committee, Employer
shall grant to Employee a nonqualified option to purchase
fifty thousand (50,000) shares of Employer's common stock
pursuant to Employer's 1998 Key Employee Share Incentive Plan
("Share Option"). The Share Option shall have an exercise
price equal to the closing price on the first day of
employment. All of the shares underlying the Share Option
shall vest on the third anniversary of the effective date of
this Agreement if Employee is still employed by Employer on
such date;
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provided, however, the shares shall also vest in full upon a
"change of control" of Employer as that term is defined in
Section 2 above. The Share Option shall expire ten (10) years
from the date of this Agreement. The Share Option shall be on
the terms and conditions contained in a Nonqualified Stock
Option Agreement in the form attached hereto as Annex A.
4. COVENANTS.
Non-Disclosure. During Employee's employment by Employer,
Employee will enjoy access to Employer's "confidential
information" and "trade secrets." For the purposes of this
Agreement, "confidential information" shall mean information
which is not publicly available including, without limitation,
information concerning customers, material sources, suppliers,
financial projections, marketing plans and operation methods,
Employee's access to which derives solely from Employee's
employment with Employer. For purposes of this Agreement,
"trade secrets" shall mean Employer's processes, methodologies
and techniques known only to those employees of Employer who
need to know such secrets in order to perform their duties on
behalf of Employer. Employer takes numerous steps, including
these provisions, to protect the confidentiality of its
confidential information and trade secrets, which it considers
unique, valuable and special assets.
Employee, recognizing Employer's significant investment of
time, effort and money in developing and preserving its
confidential information and trade secrets, shall not, during
his employment hereunder and for a period of three (3) years
after the end of Employee's employment hereunder, use for his
direct or indirect personal benefit any of Employer's
confidential information or trade secrets. During the term of
this Agreement and for a period of three (3) years after the
end of Employee's employment hereunder, Employee shall not
disclose to any person any of Employer's confidential
information or trade secrets.
Non-Competition. During Employee's employment hereunder and,
in the event of a change of control or termination of
Employee's employment for any reason other than for "cause"
(under Section 2) or a voluntary quit, for a period of one (1)
year, Employee shall not engage, directly or indirectly,
whether as an owner, partner, employee, officer, director,
agent, consultant or otherwise, in any location where Employer
or any of its subsidiaries is engaged in business after the
date hereof and prior to the termination of Employee's
employment, in a business the same or similar to, any business
now, or at any time after the date hereof and prior to
Employee's termination, conducted by Employer or any of its
subsidiaries, provided, however, that the mere ownership of 5%
or less of the stock of a company whose shares are traded on a
national securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotation System
shall not be deemed ownership which is prohibited hereunder.
Non-Solicitation. Employee agrees that regardless of any
termination of this Agreement, during or at the end of this
Agreement or any renewal thereof, Employee will not, for a
period of one (1) year thereafter, (i) hire, retain or recruit
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any of Employer's insurance agents for the purpose of
performing services for Employee or another insurance company,
or (ii) contact or solicit, directly or indirectly, any
person, firm or entity connected with Employer, including its
customers or clients, for the purpose of diverting work or
business from the Employer.
No termination of this Agreement shall terminate the rights
and obligations of the parties under this Section, but such
rights and obligations shall serve such termination in
accordance with the terms of this Section.
5. NON-DISPARAGEMENT. Following the termination of this Agreement
for any reason, Employee hereby agrees and acknowledges that
Employee will continue to have a duty of loyalty to Employer,
and to the officers, directors, shareholders and employees of
Employer, and in recognition of that duty of loyalty, Employee
agrees that Employee shall not indulge in any conduct which
may reflect adversely upon, nor make any statements
disparaging of, Employer, or the officers, directors,
shareholders or employees of Employer.
6. REMEDIES. Employee agrees that the remedy at law for any
violation or threatened violation by Employee of Sections 4
and 5 will be inadequate and that, accordingly, Employer shall
be entitled to injunctive relief in the event of a violation
or threatened violation without being required to post bond or
other surety. The foregoing remedies shall be in addition to,
and not in limitation of, any other rights or remedies to
which Employer is or may be entitled at law, or in equity, or
under this Agreement.
7. DEATH. Notwithstanding any other provisions of this Agreement,
this Agreement shall be deemed automatically terminated upon
death of the Employee. In such event, Employer shall pay to
Employee's personal representative or executor any
compensation accrued but unpaid as of such date. Upon the
payment of such accrued compensation, Employer shall have no
further obligations under this Agreement, including, but not
limited to, an obligation to pay a salary, severance or
termination pay or any other form of compensation, or to
provide any further fringe benefits of any kind or nature.
8. ENTIRE AGREEMENT. This written Agreement contains the sole and
entire agreement between the parties and shall supersede any
and all other agreements, whether oral or written, between the
parties. The parties acknowledge and agree that neither of
them has made any representation with respect to the subject
matter of this Agreement or any representations inducing its
execution and delivery, except such representations as are
specifically set forth in this writing, and the parties
acknowledge that they have relied on their own judgment in
entering into the same. The parties further acknowledge that
any statements or representations that may have been made by
either of them to the other are void and of no effect and that
neither of them has relied on such statements or
representations in connection with its dealings with the
other.
9. CONFIDENTIALITY. The terms of this Agreement are to be
confidential, and Employee shall disclose its terms only to
Employee's attorney, tax advisor and/or
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spouse, if any, subject to disclosure that may be necessary to
comply with applicable law or in the event of a dispute
leading to mediation and/or arbitration.
10. WAIVER/MODIFICATION. It is agreed that no waiver or
modification of this Agreement or of any covenant, condition
or limitation contained in it shall be valid unless it is in
writing and duly executed by the party to be charged with it,
and that no evidence of any waiver or modification shall be
offered or received in evidence in any proceeding, arbitration
or litigation between the parties arising out of or affecting
this Agreement, or the rights or obligations of any party
under it, unless such waiver or modification is in writing,
duly executed as above. The parties agree that the provisions
of this paragraph may not be waived, except by a duly executed
writing.
11. ARBITRATION. If a dispute of any kind arises from or relates
in any manner to this Agreement or the breach thereof, and if
such dispute cannot be settled through direct discussions, the
parties agree to endeavor to first settle the dispute in an
amicable manner by mediation administered by and through the
American Arbitration Association in accordance with its
Commercial Mediation Rules before resorting to arbitration.
Thereafter, any unresolved controversy or claim arising from
or relating to this Agreement or breach thereof shall be
settled by arbitration administered by and through the
American Arbitration Association in accordance with its
Commercial Arbitration Rules, provided however that only one
arbitrator shall be appointed, which arbitrator shall be an
attorney licensed in the State of Ohio or an active or retired
judge, having experience in employment contracts, and judgment
on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.
12. GOVERNING LAW. The parties agree that it is their intention
and covenant that this Agreement be construed in accordance
with and under and pursuant to the laws of the State of Ohio.
13. SUCCESSORS AND ASSIGNS. Employee may not assign any rights or
obligations under this Agreement without the prior written
consent of Employer. This Agreement shall be binding upon and
inure to the benefit of Employee and his lawful heirs,
guardians, executors, administrators, and permitted successors
and assigns.
Employer may not assign any rights or obligations under this
Agreement without the prior written consent of Employee except
to the surviving corporation in connection with a merger or
consolidation involving Employer or to the purchaser of assets
in connection with a sale of all or substantially all of its
assets, so long as the assignee expressly assumes Employer's
rights or obligations. This Agreement shall be binding upon
and inure to the benefit of Employer and its permitted
successors and assigns.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to
this Agreement, except as provided in this Section 13.
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14. RETURN OF PROPERTY. Upon termination of this Agreement for any
reason, Employee shall immediately return any property of
Employer, including, but not limited to, any equipment, credit
cards, advertising materials, booklets, training guides or any
other such similar information, materials or documents that
Employee has in Employee's possession or control.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an
original but all of which together will constitute one and the
same instrument.
16. SEVERABILITY. If any clause, paragraph, or section of this
Agreement be held invalid or unenforceable, the remaining
provisions of this Agreement shall not be affected thereby and
shall be valid and remain enforceable to the extent permitted
by law. Moreover, if any one or more of the provisions in this
Agreement shall for any reason by held to be excessively broad
as to duration, geographical scope, activity, or subject, it
shall be construed by limiting and reducing it, so as to be
enforceable to the extent compatible with then applicable law.
17. NOTICES: All notices required to be provided under the terms
of this Agreement shall be sent by United States mail,
certified, return receipt requested, and to the following
addresses:
TO EMPLOYER:
Ceres Group, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
TO EMPLOYEE:
Xxxxxxx X. Xxxxxxx
00000 Xxxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
ACKNOWLEDGMENT BY EMPLOYEE: BY SIGNING THIS AGREEMENT, I AFFIRM THAT I
HAVE CAREFULLY READ AND CONSIDERED ALL OF THE TERMS AND CONDITIONS OF
THIS AGREEMENT AND THAT SUCH TERMS AND CONDITIONS ARE UNDERSTOOD,
ACCEPTED AND AGREED.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER: EMPLOYEE:
CERES GROUP, INC. XXXXXXX X. XXXXXXX
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------- -----------------------------
Printed Name: Xxxxx X. Xxxxxxx Printed Name: Xxxxxxx X. Xxxxxxx
---------------------------- -------------------
Its: Executive Vice President and Chief
------------------------------------
Financial Officer
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