EXHIBIT 10.1
XXXXXX X. XXXXX, XX.
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the 19th day of May 1999, between
TRIGON INSURANCE COMPANY, a Virginia corporation (the "Company"), and XXXXXX X.
XXXXX, XX., of Richmond, Virginia ("Executive").
R E C I T A L S
The Company and Executive are parties to an Employment Agreement
dated as of December 12, 1990 (the "Prior Agreement") and to an Executive
Continuity Agreement dated as of September 16, 1998 (the "Executive Continuity
Agreement"). Executive was elected Chief Executive Officer of the Company
effective April 28, 1999. The parties desire to enter into this Agreement to
replace the Prior Agreement and to provide for the coordination and integration
of this Agreement with the Executive Continuity Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties agree as follows:
ARTICLE I
EMPLOYMENT
I.1 Employment. The Company hereby employs Executive as President and
Chief Executive Officer of the Company. Executive shall have the powers, duties,
and responsibilities that are customary to the position of Chief Executive
Officer. Subject to approval by the Board, Executive shall select the officers
of the Company and each of its affiliates. Executive shall devote his full
business time and efforts to the business and affairs of the Company and its
affiliates; provided, however, that this provision shall not preclude Executive
from serving as a director of any other corporation or other organization
involving no conflict of interest with the interests of the Company. All such
directorships shall be disclosed to and reviewed by the Executive Committee of
the Company.
-1-
1.2 At Will Employment. Executive's employment hereunder is at
will. Executive may resign at any time, and the Company may discharge
Executive at any time, with or without cause.
ARTICLE II
COMPENSATION AND BENEFITS
2.1 Base Salary. Executive's base salary for 1999 has been determined
by the Board of Directors upon recommendation from the Human Resources
Committee.
2.2 Incentive Compensation. Executive shall also be eligible to
participate in the Company's Annual Incentive Plan, Long Term Performance Plan,
Stock Option Plan, and other incentive plans and programs that may be maintained
by the Company.
2.3 Annual Reviews. Effective each January 1 during the term of this
Agreement, the Chairpersons of the Executive and Human Resources, Compensation
and Employee Benefits Committees will review Executive's performance as Chief
Executive Officer and will recommend to the Board such annual increase in base
salary as may be appropriate and in accordance with the Company's regular salary
administration program. The Board will determine such annual increase in base
salary.
2.4 Participation in Employee Benefit Plans. While employed by the
Company, Executive shall be entitled to participate in the Company's
Non-Contributory Retirement Program, Supplemental Retirement Program, the
Employees' Thrift Plan, the split-dollar life insurance program, the group
health insurance program, the group term life insurance program, and the
disability insurance program. In addition, the Company shall provide to
Executive an automobile and gasoline allowance, tax and financial planning
services, and reimbursement for club dues and other business expenses.
-2-
ARTICLE III
DISABILITY
3.1 Supplemental Disability Payment. If Executive becomes disabled
while employed by the Company and is entitled to receive benefits under the
Company's Long-Term Disability Program, then the Company will pay to Executive a
Monthly Supplemental Disability Benefit (as hereinafter defined) for so long as
Executive is entitled to receive disability payments under the Company's
Long-Term Disability Program (or under any similar disability program maintained
by the Company). The amount of the Monthly Supplemental Disability Benefit shall
be equal to the difference between (i) one-twelfth (1/12) of sixty percent (60%)
of Executive's annual base salary for the year in which Executive becomes
disabled and (ii) the amount of the monthly disability benefit payable to
Executive under the Company's Long-Term Disability Program.
ARTICLE IV
SEVERANCE PAYMENT
4.1 Severance Payment.
-----------------
(a) If the Company terminates Executive's employment for any
reason (other than termination by reason of Executive's disability), then the
Company will pay to Executive the Severance Payment as defined in Section 4.1(b)
below. If Executive resigns, dies or becomes disabled, then he shall not be
entitled to the Severance Payment.
(b) The term Severance Payment shall mean a payment in cash equal
to three times the Applicable Compensation of Executive as defined in Section
4.1(c) below.
(c) The term Applicable Compensation of Executive shall mean the
highest amount of compensation (as defined in Section 4.1(d) below) earned by
Executive for any one of the three full calendar years ended immediately
preceding the termination of Executive's employment.
-3-
(d) The Compensation earned by Executive for any calendar year
shall mean (i) the amount of Executive's annual base salary for such calendar
year, without any reduction for any amounts that Executive may have deferred
under the Company's 401(k) Plan, 401(k) Restoration Plan, Deferred Benefit Plan
for Officers, or otherwise, (ii) the amount of any cash bonus or cash incentive
award (annual, long-term, or otherwise) that is earned for a period of
performance ending in such calendar year, even though such bonus or award may be
paid after such calendar year, and (iii) the fair market value (determined as of
the date of the award) of any bonus or incentive award (annual, long-term, or
otherwise) that is made in property other than cash and that is earned for a
period of performance ending in such calendar year, even though such bonus or
award may be made after such calendar year. For purposes of clause (iii) of the
preceding sentence, (i) the granting or vesting of stock options shall not be
deemed to be a bonus or incentive award, and (ii) in the case of any bonus or
incentive award made in restricted stock of the Company, the fair market value
of such stock shall be determined without regard to the restriction.
ARTICLE V
NON-COMPETITION
5.1 Covenant Not to Compete. If Executive's employment with the Company
terminates for any reason, Executive agrees that he will not, prior to the
expiration of three (3) years following the termination of his employment,
become an officer, director, or employee of, or consultant to, or 10% or more
owner of, any entity that competes with the Company in any business in which the
Company is engaged as of the date of the termination of Executive's employment.
Executive agrees that in the event of a breach by Executive of this covenant not
to compete, the Company's remedies at law will be inadequate and that the
Company will be entitled to appropriate equitable relief, including an
injunction restraining such breach. If Executive so requests, the Executive
Committee is authorized to determine, by written communication to Executive,
that a particular activity that Executive proposes to engage in does not
constitute competition with the Company within the meaning of this paragraph,
and such determination shall be conclusive and binding on the parties to this
Agreement.
-4-
ARTICLE VI
WELFARE BENEFITS
6.1 As used in this Agreement, "Welfare Plan" means any health plan,
dental plan, disability plan, survivor income plan, life insurance plan or other
welfare benefit plan as defined in Section 3(1) of the Employee Retirement
Income Security Act of 1974, currently or hereafter made available by the
Company in which the Executive is eligible to participate.
6.2 If the Company terminates Executive's employment for any reason
(other than termination by reason of Executive's disability), then the Company
will, subject to the provisions of Section 6.3, continue the coverage of
Executive and his dependants under all Welfare Plans in which they participated
immediately before the termination of Executive's employment for a period of
three years following the termination of Executive's employment.
6.3 Notwithstanding Section 6.2, (i) if the Company amends or
terminates any Welfare Plan in which Executive is participating in a manner that
is generally applicable to all executives of the Company, then such amendment or
termination shall also be applicable to Executive, (ii) Executive shall continue
to contribute to the cost of the Welfare Plans on substantially the same basis
as he did before the termination of his employment, (iii) if Executive's
continued participation in any Welfare Plan is not possible because of the terms
of the plan or any provision of law, then the Company will at its expense
provide Executive with an alternative benefit of substantially equal value and
utility through cash payments, an alternative insurance arrangement, or
otherwise, and (iv) the obligation of the Company to continue Executive's
coverage under any Welfare Plan shall cease if Executive becomes covered under a
welfare plan sponsored by a subsequent employer that provides substantially
equal or greater benefits.
-5-
6.4 If Executive's employment is terminated by the Company, then in
lieu of the welfare benefits provided for in Section 6.2, Executive may, at his
option, elect to receive a lump sum amount in cash such that, after Executive
pays any taxes on such lump sum amount, Executive will retain on an after-tax
basis an amount equal to the present value of such benefits. Any such election
must be made by Executive by written notice provided to the Company within 60
days after the date on which Executive's employment is terminated. Present value
shall be determined using a discount rate equal to the Federal mid-term rate
under Section 1274(d) of the Code.
ARTICLE VII
ADDITIONAL PAYMENT FOR EXCISE TAXES
7.1 If Executive receives any amount from the Company, pursuant to
this Agreement or otherwise, that is determined to be an "excess parachute
payment" subject to the excise tax imposed by ss. 4999 of the Internal Revenue
Code, then the Company will pay to Executive an additional amount (herein
referred to as a "Gross-Up Payment") such that, after Executive has paid all
federal and state income and excise taxes imposed on such excess parachute
payment and on such Gross-Up Payment, Executive will retain an after-tax amount
equal to the amount that Executive would have retained if such excise tax had
not been imposed.
7.2 When Executive's employment with the Company terminates, the
amount of any Gross-Up Payment that the Company is required to pay under Section
7.1 shall be determined by the independent certified public accounting firm then
regularly employed by the Company. Within 15 business days following the
termination of Executive's employment, or earlier if requested by the Company,
the accounting firm shall deliver to the Company and Executive a report
calculating in reasonable detail the amount of any Gross-Up Payment required by
Section 7.1. The amount of the required Gross-Up payment as so determined by the
accounting firm shall be binding on the Company and Executive, and within 10
business days following receipt of the report from the accounting firm, the
Company will pay the required Gross-Up Payment to Executive. If the accounting
firm determines that no Gross-Up Payment is required because no excise tax is
payable by Executive, it shall furnish Executive a written opinion to that
effect. All fees and expenses of the accounting firm shall be paid by the
Company.
-6-
7.3 Because of uncertainties in the application of ss. 4999 of the
Internal Revenue Code, it is possible that the amount of the Gross-Up Payment as
initially determined by the accounting firm pursuant to Section 7.2 may be
inadequate to comply with the requirements of Section 7.1. If at any time
Executive is required to pay any additional excise tax not covered by the
initial Gross-Up Payment, then the Company will immediately pay to Executive an
additional Gross-Up Payment so that the requirements of Section 7.1 are complied
with.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination of Prior Agreement. This Agreement supersedes the
Prior Agreement, and the Prior Agreement is hereby terminated effective as of
the date hereof.
8.2 Coordination with Executive Continuity Agreement. If Executive's
employment with the Company terminates under circumstances that constitute a
Compensable Termination within the meaning of the Executive Continuity
Agreement, then this Agreement shall be terminated effective as of the date on
which Executive's employment terminates, neither party to this Agreement shall
have any obligation to the other hereunder, and Executive shall be entitled to
the benefits due to him under the Executive Continuity Agreement. If Executive's
employment terminates under circumstances that do not constitute a Compensable
Termination within the meaning of the Executive Continuity Agreement, then this
Agreement shall remain in full force and effect.
8.3 Legal Fees. If any dispute arises in connection with this
Agreement or the enforcement or interpretation of Executive's rights under this
Agreement, the Company shall pay all reasonable legal fees and expenses incurred
by Executive in connection with such dispute, irrespective of the outcome of
such dispute.
-7-
8.4 Rights Not Exclusive. Executive's rights under this Agreement
are not exclusive, and nothing in this Agreement shall limit any rights that
Executive may have under any other plan, contract, arrangement, custom, policy,
practice or program of the Company.
8.5 Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally or mailed, registered
or certified mail, as follows:
(a) If to the Company, to:
Chairman of the Executive Committee
Trigon Insurance Company
0000 Xxxxxxx Xxxx Xxxx
Post Office Box 27401
Xxxxxxxx, Xxxxxxxx 00000
(b) If to Executive, to his last address shown
on the records of the Company.
8.6 Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, representatives,
and successors, including, without limitation, any person acquiring directly or
indirectly all or substantially all of the assets of the Company, whether by
merger, consolidation, sale, or otherwise, but neither this Agreement nor any
right hereunder may be otherwise assigned or transferred by either party hereto.
8.7 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Virginia.
8.8 Amendment. This Agreement may be amended only by a written
instrument signed by the parties hereto.
-8-
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
TRIGON INSURANCE COMPANY
By: --------------------------------
Xxxxxx X. Xxxx, Chairperson
Human Resources, Compensation
and Employee Benefits Committee
--------------------------------
XXXXXX X. XXXXX, XX.
-9-
