Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement"), is made this
15th day of December, 2003 with certain changes to be effective upon the
effective date (the "Effective Date") of the registration statement registering
under the Securities Act of 1933 the initial public offering (the "Initial
Public Offering") of the common stock of ProCentury Corporation (the "Company"),
by and between the Company and Xxxxxx X. Xxxxxxx ("Executive").(1)
RECITALS
Whereas, the Company desires to employ Executive as its Chief Executive
Officer and President as well as the Chairman of the Board of Directors of the
Company, and Executive desires to be so employed under the terms and conditions
hereinafter set forth for a period through at least the second anniversary of
the Effective Date.
STATEMENT OF AGREEMENT
Now, therefore, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Executive agree as follows:
SECTION 1
EMPLOYMENT AND DUTIES
1.1 DUTIES AND POSITION. During the term of this Agreement,
Executive shall provide services to the Company in accordance with this
Agreement in the capacities of Chief Executive Officer and President of the
Company as well as the Chairman of the Board of Directors of the Company (the
"Board") and as an executive officer, in the capacities identified on Exhibit A,
of one or more Affiliates (as that term is defined in Section 5.4) of the
Company; provided, however, that at the request of the Board at any time and
from time to time, Executive shall serve in such other capacity or capacities,
of at least equal standing and dignity as Chief Executive Officer and President
of the Company as well as the Chairman of the Board and, with respect to any
Affiliate of the Company, of at least equal standing and dignity as the
positions identified on Exhibit A; and provided further that Executive shall
serve as chief executive officer of any Affiliate of the Company that is
required to file periodic reports pursuant to section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended ("the Exchange Act") and of any
Affiliate that, as a result of any reorganization involving the Company, is an
entity controlling the Company or the assets or operations that were the
Company's immediately prior to such reorganization. Executive shall report
directly to the Board and shall perform such duties and responsibilities
consistent with his positions as shall be assigned to him by the Board.
Executive shall serve as director of the board of directors of each operating
subsidiary that is an Affiliate controlled by the Company.
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(1) Sections 2.2 and 2.3 shall have no force or effect until the Effective Date.
1.2 STANDARD OF PERFORMANCE. Executive shall faithfully perform
the duties assigned to him pursuant to this Agreement. Executive agrees to abide
by the Company's rules, regulations, policies and practices as they are
presently in force and as they may be revoked, adopted or modified at any time
and from time to time during the term of this Agreement.
1.3 TIME DEVOTED TO THE COMPANY. Executive shall be required to
devote substantially full time and attention to his duties under this Agreement.
Subject to the obligations of Executive pursuant to Section 4.5 hereof and the
immediately preceding sentence, Executive may engage in any other activity,
whether for pecuniary gain or not, which does not materially interfere with his
obligations under this Agreement.
SECTION 2
COMPENSATION AND BENEFITS
2.1 BASE SALARY. The Company agrees to pay or cause to be paid to
Executive for Executive's services during the term of this Agreement an annual
base salary at the gross rate prior to all taxes and other withholdings of not
less than $284,000.00(2).(3) The base salary will be subject to annual review
and may be adjusted from time to time under the direction of the Board (or, if
the Board so directs, its Compensation Committee) considering factors such as
Executive's performance, compensation of similar executives of similarly sized
companies and other pertinent factors (the "Base Salary"). The Base Salary shall
be payable to Executive in accordance with the then current payment policies of
the Company for its employees.
2.2 PERFORMANCE BASED INCENTIVE BONUS. Executive shall be entitled
to an annual performance based cash incentive bonus in an amount up to 50
percent of the Base Salary (the "Bonus"). The Bonus shall be earned and paid in
accordance with the Company's performance based incentive compensation plan (the
"Incentive Plan"); provided, however, that with respect to Executive, the
"Performance Period" shall be the calendar year beginning with the 2004 calendar
year and continuing for each calendar year thereafter, and the Performance Goals
for each Performance Period shall include maintaining, to the extent within the
control of the Company's management, the Company's rating by A.M. Best Company
(which is currently A-). A copy of the Performance Goals as so established shall
be provided to Executive. The Bonus shall be payable as provided in the
Incentive Plan. The Performance Goals for 2004 shall be as set forth in Exhibit
B. Notwithstanding the forgoing, with the express approval by the Board after
review of Executive's performance for the Performance Period, the actual amount
of Incentive Award may exceed 50 percent of the Base Salary for such Performance
Period,
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(2) Increased by an amount to reimburse Executive for the annual cost of the
leased automobile and country club dues currently being paid by the Company that
Executive agrees to assume and pay out of his Base Salary hereafter.
(3) Until the Effective Date, each Executive will remain at his current base
salary. If and when the Initial Public Offering becomes effective prior to
January 1, 2005, the base salary will become as stated herein, and the
difference between the base salary as stated herein and the actual base salary
paid for the period prior to the Effective Date shall be paid as soon as
possible after the Effective Date.
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provided that the amount of any such excess shall be paid in shares of
Stock or other property having a Fair Market Value equal to such excess.(4)
2.3 STOCK OPTIONS AND RESTRICTED STOCK. The Company shall grant to
Executive effective as of the Effective Date non-qualified stock options (to be
known as the "IPO Options") to purchase, and awards of restricted stock (to be
known as the "IPO Restricted Stock") for, an aggregate number of shares of the
Company's no par value common stock equal to 0.65 percent of the Shares that
will be outstanding immediately following the Effective Date, with 70 percent of
such Shares (rounded to the nearest 100 and being an estimated 36,400 Shares)
being in the form of Stock Options and 30 percent of such Shares (rounded to the
nearest 100 and being an estimated 15,600 Shares) being in the form of
Restricted Stock under the Company's 2003 Stock Option and Award Plan (the
"Stock Option Plan"). The IPO Options shall be at an exercise price equal to the
fair market value of the Shares as determined by the offering price in the
Initial Public Offering. The Shares subject to the IPO Options shall vest over
three years of service and the shares of IPO Restricted Stock shall vest over
four years of service after the Effective Date. The grant of the IPO Options and
the IPO Restricted Stock and the exercise of the IPO Options shall be subject to
all of the terms and conditions of the Stock Option Plan. Notwithstanding the
forgoing, to the extent not contrary to applicable law, all of the IPO Options
shall become fully vested and remain exercisable pursuant to their respective
terms for the remainder of their respective Exercise Periods , and all unvested
Shares, if any, of the IPO Restricted Stock shall become fully vested, effective
upon termination of Executive's employment by reason of death, discharge by the
Company pursuant to 3.4(a) other than for Cause, resignation by Executive
pursuant to Section 3.4(b) for Good Reason, termination by resignation or
discharge for any reason other than Cause upon or after a Change in Control, or
"retirement" or "disability" within the meaning of the Stock Option Plan; and
all options granted after or in addition to the IPO Options, all shares of
Restricted Stock awarded after or in additional to the IPO Restricted Stock, and
any and all other awards to Executive pursuant to the Stock Option Plan shall be
subject to such terms and conditions as shall be determined at the time of any
such award under the direction of the Board pursuant to the Stock Option Plan.
The Company shall exercise best efforts to register with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, the issuance
of shares of stock issued pursuant to the Stock Option Plan and to satisfy the
current public information requirements of Rule 144(c) for purpose of allowing
Executive to resell such shares. (5)
2.4 BENEFITS. In addition to the compensation to be paid under
this Agreement, the Company shall provide to, or for the benefit of, Executive
the following employee benefits:
(a) Participation in retirement or welfare benefit plans, if any,
which are made available from time to time to the salaried
employees of the Company or its Affiliates, to the extent that
Executive is eligible to participate therein pursuant to the
terms and conditions of such plans.
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(4) This provision shall have no force or effect until the Effective Date. Until
then, Executive shall be entitled to an annual bonus pursuant to the current
bonus plan
(5) This provision shall have no force or effect until the Effective Date.
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(b) Participation in health, disability and other insurance plans,
if any, which are made available from time to time to the
salaried employees of the Company or its Affiliates, to the
extent that Executive is eligible to participate therein
pursuant to the terms and conditions of such plans.
(c) At the option of Executive, (1) whole life insurance on the
life of Executive in an amount equal to 2.5 times Executive's
Base Salary, the premiums for which shall be timely paid by
the Company for so long as Executive remains employed with the
duties and position described in Section 2.1, provided that
Executive is insurable at reasonable prevailing rates; or (2)
additional benefits specified by Executive at an annual cost
to the Company equal to the annual premium that would
otherwise be payable for such life insurance. If Executive is
not insurable at reasonable prevailing rates, then the Company
shall not be obligated to provide life insurance coverage
pursuant to Section 2.4(c)(1), but shall be obligated to
provide additional benefits pursuant to Section 2.4(c)(2) at
an annual cost to the Company equal to such reasonable
prevailing rates. The beneficiary of the life insurance policy
covering the life of Executive (the "Policy") shall be
Executive's spouse or such other person(s) as Executive shall
designate in writing to the insurance company. The owner of
the Policy shall be the Company. The Company shall not borrow
against the cash surrender value of such Policy nor cause the
value thereof to become subject to any lien. If Executive's
employment is terminated pursuant to Section 3.3, 3.4(a),
3.5(a), 3.5(b), of this Agreement, or "Qualified Retirement"
as defined in the Incentive Plan, Executive shall have the
election, at his option, to require the Company (A) to assign
the Policy to Executive, provided that Executive shall be
responsible for paying or reimbursing the Company for all
premiums and other policy charges which are or become due and
payable, in the case of terminations pursuant to Section 3.3
or 3.5(a), unless otherwise agreed, on or after the date of
termination of Executive's employment, and in the case of
terminations pursuant to Section 3.4(a) or 3.5(b) or
"Qualified Retirement" as defined in the Incentive Plan, on or
after the date that severance benefits cease to be payable
pursuant to Section 3.6(c), or (B) to cancel the Policy or to
permit it to lapse, and to pay the cash value of the Policy,
in the case of terminations pursuant to Section 3.3 or 3.5(a),
unless otherwise agreed, as of Executive's date of termination
to Executive, and in the case of terminations pursuant to
Section 3.4(a) or 3.5(b) or "Qualified Retirement" as defined
in the Incentive Plan, as of the date that severance benefits
cease to be payable pursuant to Section 3.6(c); provided,
however, that if it is determined by the Company upon the
advice of legal counsel that this election would be an
extension of credit in the form of a personal loan within the
meaning of section 13(k) of the Exchange Act, the election
provided in this sentence shall be null and void. The option
granted by Section 2.4(c) may be exercised at one or more
times during the term of Executive's employment, with
Executive having the right to select either the insurance or
additional benefit, so long as the total cost to the Company
during each year and in the aggregate does not exceed the cost
that the Company
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would have realized had Executive elected whole life insurance
at the time of the Effective Date. (6)
(d) Sick leave in accordance with the policies of the Company in
effect from time to time.
(e) Reasonable vacation time consistent with past practice or as
otherwise approved by the President for other officers or by
the Board.
(f) Such other benefits as may be approved by the Board or
appropriate oversight committee of the Board on a case-by-case
basis for proper business purpose.
2.5 REIMBURSEMENT OF BUSINESS EXPENSES. Executive shall be
entitled to receive reimbursement for, or payment of, the legitimate business
expenses incurred by Executive on behalf of the Company in accordance with the
Company policy in effect from time to time, including meals, lodging,
transportation and other travel expenses.
SECTION 3
TERM OF AGREEMENT; TERMINATION
3.1 TERM. This Agreement shall become effective on the date first
written above and shall continue in force until terminated in accordance with
this Section 3. Executive's employment with the Company pursuant to this
Agreement shall terminate concurrently with the termination of this Agreement.
3.2 TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate automatically upon the death of Executive.
3.3 TERMINATION BY MUTUAL AGREEMENT. This Agreement may terminate
at any time upon the mutual agreement of the Company and Executive.
3.4 TERMINATION BY THE COMPANY.
(a) The Company may terminate Executive's employment under this
Agreement at any time, without Cause (as defined in Section 3.4(c)), upon thirty
(30) days prior written notice of termination to Executive. The Company, in its
sole discretion but without derogation to any rights of Executive under Section
2, may place Executive on administrative leave during the thirty (30) day notice
period.
(b) The Company may terminate Executive's Employment under this
Agreement with Cause immediately upon written notice of termination to
Executive, unless a later termination date is specified in the notice.
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(6) This provision shall have no force or effect until the Effective Date.
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(c) For the purposes of this Agreement, "Cause" for termination
shall exist if Executive is:
(1) Convicted of, or pleads guilty or nolo contendere to, in a
court of competent jurisdiction, a felony amounting to
embezzlement, fraud, theft or other act of dishonesty harming
the Company or any employee, supplier, customer or other
person doing business with the Company;
(2) Convicted of, or pleads guilty or nolo contendere to, in a
court of competent jurisdiction, a felony resulting in death
or substantial bodily or psychological harm to, or other act
of moral turpitude harming, any person;
(3) Barred or suspended for a period of more than 60 days by any
court or regulatory agency of competent jurisdiction from
performing employment duties for, engaging in any activities
on behalf of, or otherwise being associated with, the Company;
(4) Found liable by any court of competent jurisdiction for
conduct undertaken with deliberate intent to cause harm or
injury, or undertaken with reckless disregard to the harm or
injury that would be caused, to the Company or any employee,
supplier, customer or other person doing business with the
Company other than conduct taken pursuant to advice of legal
counsel to the Company; or
(5) Found by the Company pursuant to Section 5.13 to have failed
to exercise reasonable efforts to properly perform any of
Executive's obligations under this Agreement or any direction
of the Board consistent with this Agreement within 10 business
days after receipt of written notice specifying each such
obligation or direction to be so perform, provided, however,
that the refusal to perform an obligation or direction should
not constitute "Cause" if Executive in good faith reasonably
believes that such obligation or direction is not legal,
ethical or moral and Executive so notifies the Board of his
belief.
3.5 TERMINATION BY EXECUTIVE.
(a) Executive may terminate his employment under this Agreement at
any time without Good Reason (as defined in Section 3.5(c) below) upon thirty
(30) days prior written notice to the Company. The Company, in its sole
discretion but without derogation to any rights of Executive under Section 2,
may place Executive on administrative leave during the thirty (30) day notice
period.
(b) Executive may terminate his employment under this Agreement,
upon fifteen (15) days prior written notice to the Company, if he resigns for
Good Reason; provided that Executive shall not resign pursuant to this Section
3.5(b) if, prior to the expiration of the fifteen (15) day notice period, the
Company causes the facts or events giving rise to the Good Reason for
resignation to no longer exist and provides evidence of a form and nature
satisfactory to Executive that such facts or events no longer and will not in
the foreseeable future exist. The Company, in its sole discretion but without
derogation to any rights of Executive under Section 2, may place Executive on
administrative leave during the fifteen (15) day notice period. Notwithstanding
anything to the contrary contained herein, Executive shall not be required to
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perform any act stated in his written notice of resignation as Good Reason for
his resignation for the period beginning with the giving of such written notice
and ending with the effective date of the termination of his employment.
(c) Executive shall be considered to have resigned for Good Reason
if:
(1) Executive ceases to hold the positions and titles of Chief
Executive Officer, President and Chairman of the Board as
contemplated by Section 1.1 of this Agreement;
(2) Executive is assigned, without his consent, authority or
responsibility materially inconsistent with the authority and
responsibility contemplated by Section 1.1 of this Agreement,
including without limitation any material diminution of his
authority and responsibility or change in reporting
requirements;
(3) Executive's Base Salary is reduced, or there is any material
delay in the payment of Executive's Base Salary, or there is
any material reduction in the nature and amount of benefits
(including benefits under the Incentive Plan or the Stock
Option Plan or any successor plans thereto) theretofore
provided to Executive pursuant to Section 2;
(4) Any requirement is imposed for Executive to reside or travel
outside of the Columbus, Ohio area, other than on travel
reasonably required to carry out Executive's obligations under
this Agreement and consistent with past practice;
(5) Executive becomes disabled to the extent that he cannot, with
reasonable accommodation, effectively perform the requirements
of his position for a period of three consecutive months
(which determination shall be made by a physician of
Executive's choice who is reasonably acceptable to the
Company);
(6) The Company commits a material breach of this Agreement (other
than breaches which may be covered by some other subsection of
this Section 3.5(c)), which breach is not cured within thirty
(30) days after written notice thereof is given by Executive;
(7) For so long as Executive remains employed with the duties and
position described in Section 2.1, Executive and Messrs. Xxxx
Xxxxxxx, Xxxxxxx Xxxx, Xx., Xxxxxxxxxxx X. Xxxx, so long as
each of them remains employed by the Company or its Affiliate,
do not continue to constitute a majority of directors of, or
otherwise control, the board of directors of each operating
subsidiary that is an Affiliate controlled by the Company; or
(8) For as long as he is Chief Executive Officer as contemplated
by Section 1.1 of this Agreement, Executive fails, at the end
of any term as director of the Board, to be nominated by the
Board or any nominating committee of the Board for election as
director of the Board for a succeeding term.
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(d) A Change in Control shall be deemed to have occurred if there
is:(7)
(1) A purchase or other acquisition in any one or more
transactions by any person, entity or group of persons (within
the meaning of section 13(d)(3) or 14(d)(2) of the Exchange
Act or any comparable successor provisions), directly or
indirectly, which results in the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of such person, entity or group of persons equaling fifty
percent (50%) or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors ("Voting Securities");
excluding, however, any acquisition (A) by the Company or any
person controlled by the Company or the Board of Directors of
the Company, (B) by any employee benefit plan or related trust
sponsored or maintained by the Company, (C) by Executive; or
(D) by another group including Executive, but only if
Executive and other executives of the Company control such
group;
(2) A change, within any rolling two-year period beginning with
any date on or after the Effective Date, in the composition of
the Board such that the individuals who constitute the Board
(the "Incumbent Board") at the beginning of such rolling
period cease for any reason to constitute at least a majority
of the Board; provided, however, that for purposes of this
definition, any individual who becomes a member of the Board
after the Effective Date, whose election, or nomination for
election, by the Company's security-holders was approved by a
vote of at least a majority of those individuals who are
members of the Board and who were also members of the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board; and provided, however,
that any such individual whose initial assumption of office
occurs as a result of or in connection with either an actual
or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board
shall not be so considered as a member of the Incumbent Board;
(3) A merger, reorganization or consolidation to which the Company
is a party or a sale or other disposition of all or
substantially all of the assets of the Company (each, a
"Corporate Transaction"); excluding however, any Corporate
Transaction pursuant to which (A) persons who were security
holders of the Company immediately prior to such Corporate
Transaction own (solely because of their Voting Securities
owned immediately prior to such Corporate Transaction)
immediately thereafter more than 50 percent of the combined
voting power entitled to vote in the election of directors of
the then outstanding securities or the company surviving the
Corporate Transaction and (B) individuals who constitute the
Incumbent Board will immediately after the consummation of the
Corporate Transaction constitute at least a majority of the
members of the board of directors of the company surviving
such Corporate Transaction; or
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(7) Notwithstanding anything to the contrary contained herein, a Change in
Control shall not be deemed to have occurred as a result of the issuance of
securities pursuant to the contemplated Initial Public Offering.
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(4) Approval by the security-holders of the Company of a plan of
complete liquidation or dissolution of the Company.
3.6 COMPENSATION UPON TERMINATION. In addition to any employee
benefits to which Executive is entitled pursuant to Section 2.4 and any
reimbursement of business expenses pursuant to Section 2.5 (with respect to
which Executive and the Company shall reasonably cooperate), Executive shall be
entitled to the following upon termination of Employment under this Agreement:
(a) In the event that the Company discharges Executive pursuant to
Section 3.4(b) for Cause, or Executive resigns (other than for
Good Reason) pursuant to Section 3.5(a), Executive shall be
entitled to receive and the Company shall cause to be paid (1)
any earned but unpaid Base Salary through the effective date
of termination and (2) any award for which a Bonus was earned
under the Incentive Plan for any Performance Period which
ended prior to the effective date of termination but was not
theretofore paid to Executive.
(b) In the event that Executive's employment is terminated by
death, Executive's estate or personal representative shall be
entitled to receive and the Company shall cause to be paid (1)
any earned but unpaid Base Salary through the date of
Executive's death; (2) any award for which a Bonus was earned
under the Incentive Plan for any Performance Period which
ended prior to the effective date of termination but was not
theretofore paid to Executive; (3) continued payment of
Executive's then current Base Salary for the ninety (90) day
period following the date of his death; (4) an amount equal to
the Target Incentive Award established for Executive under the
Incentive Plan for the then current Performance Period had
Executive's employment not been terminated and had Executive
satisfied all Performance Goals established with respect to
such Performance Period, multiplied by a fraction the
numerator of which is the number of days in the then current
Performance Period under the Incentive Plan occurring prior to
and including the date of Executive's death, and the
denominator of which is the number of days of the whole
Performance Period; and (5) continued benefits (to the same
extent and at the same level as were provided by the Company
to Executive's family members immediately prior to Executive's
death) under the health insurance plan(s) referenced in
Section 2.4(b), for the ninety (90) day period following the
date of termination, and, to the extent permitted pursuant to
such health insurance plan(s), for such longer period as to
which Executive's beneficiaries pay the cost of coverage
thereof. Except as otherwise agreed to between Executive's
estate or personal representative and the Company, all such
amounts (other than health benefits continued pursuant to
Section 3.6(b)(5) above, which shall be payable in accordance
with the terms of the applicable plan) shall be paid by the
Company in a lump sum within thirty (30) days after the date
of Executive's death.
(c) (1) Except as provided in Section 3.6(c)(2) below, in the
event that the Company discharges Executive pursuant
to Section 3.4(a) other than for Cause or Executive
resigns pursuant to Section 3.5(b) for Good Reason,
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Executive shall be entitled to receive and the
Company shall cause to be paid (A) any earned but
unpaid Base Salary through the date of termination;
(B) any award for which a bonus was earned under the
Incentive Plan for any Performance Period which ended
prior to the effective date of termination but was
not theretofore paid to Executive; (C) continued
payment of Executive's then current Base Salary for
the twelve (12) month period following the date of
termination or, if the date of termination is after
the Effective Date, but before the first anniversary
of the Effective Date, of the Initial Public
Offering, for the number of months following the date
of termination through the month including the second
anniversary of the Effective Date;(8) (D) an amount
equal to the product of (i) the Target Incentive
Award established for Executive under the Incentive
Plan for the then current Performance Period had
Executive's employment not been terminated and had
Executive satisfied all Performance Goals established
with respect to such Performance Period, multiplied
by (ii) a fraction, the denominator of which shall be
twelve (12) and the numerator of which shall be
twelve (12) unless the date of termination is after
the Effective Date, but before the first anniversary
of the Effective Date, of the Initial Public
Offering, in which event the numerator shall be the
number of months following the date of termination
through the month including the second anniversary of
the Effective Date;(9) and (E) continued benefits (to
the same extent and at the same benefit level as were
provided by the Company to Executive immediately
prior to termination) under the retirement and
welfare benefit plans referenced in Section 2.4(a),
the health, disability and other insurance plans
referenced in Section 2.4(b), and the Policy
referenced in Section 2.4(c), for the twelve (12)
month period following the date of termination, and,
to the extent permitted pursuant to such health
insurance plan(s), for such longer period as to which
Executive's beneficiaries pay the cost of coverage
thereof; provided, that if any such plans are
terminated, or benefits thereunder reduced or
eliminated, during such twelve (12) month period, or
if, as a result of termination or otherwise,
Executive ceases to be eligible to participate in any
such plans during such twelve (12) month period, the
Company shall provide to Executive substitute
benefits which are no less favorable to Executive
than those received by Executive under such
plan(s)(10). Subject to Section 3.8, and except as
otherwise agreed to between Executive and the
Company, all such amounts (other than the amounts
referenced in Section 3.6(c)(1)(C), which shall be
paid in accordance with the then current payment
policies of the Company for its employees, and the
Continuation Benefits referenced in Section
3.6(c)(2), which shall be payable in accordance with
the terms of the applicable benefit plan), shall be
paid by the Company in a lump sum within thirty (30)
days after the date of Executive's discharge or
resignation.
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(8) This clause shall have no force or effect until the Effective Date.
(9) This clause shall have no force or effect until the Effective Date.
(10) This clause shall have no force or effect until the Effective Date.
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(2) Notwithstanding anything to the contrary in Section
3.6(C)(1) above, in the event that (A) a Change in
Control occurs and (B) within the twelve (12) month
period immediately following the date on which the
Change in control occurs, (i) the Company discharges
Executive pursuant to Section 3.4(a) other than for
Cause or (ii) Executive resigns pursuant to Section
3.5(b) for Good Reason, Executive shall be entitled
to receive and the Company shall cause to be paid in
lump-sum and within thirty (30) days of Executive's
termination of employment an amount equal to ((a))
any earned but unpaid Base Salary through the date of
termination; ((b)) any award for which a bonus was
earned under the Incentive Plan for any Performance
Period which ended prior to the effective date of
termination but was not theretofore paid to
Executive; (C) the product of two (2) times
Executive's then current Base Salary at the date of
termination; (iv) the product of two (2) times the
Target Incentive Award established for Executive
under the Incentive Plan for the then current
Performance Period had Executive's employment not
been terminated and had Executive satisfied all
Performance Goals established with respect to such
Performance Period. In addition, Executive shall be
entitled to continued benefits (to the same extent
and at the same benefit level as were provided by the
Company to Executive immediately prior to
termination)(the "Continuation Benefits") under the
retirement and welfare benefit plans referenced in
Section 2.4(a), the health, disability and other
insurance plans referenced in Section 2.4(b), and the
Policy referenced in Section 2.4(c), for the twenty
four (24) month period following the date of
termination, and, to the extent permitted pursuant to
such health insurance plan(s), for such longer period
as to which Executive's beneficiaries pay the cost of
coverage thereof; provided, that if any such plans
are terminated, or benefits thereunder reduced or
eliminated, during such twenty four (24) month
period, or if, as a result of termination or
otherwise, Executive ceases to be eligible to
participate in any such plans during such twenty four
(24) month period, the Company shall provide to
Executive substitute benefits which are no less
favorable to Executive than those received by
Executive under such plan(s). Subject to Section 3.8,
and except as otherwise agreed to between Executive
and the Company, all such amounts (other than the
amounts referenced in Section 3.6(c)(2)(C), which
shall be paid in accordance with the then current
payment policies of the Company for its employees,
and the Continuation Benefits, shall be paid by the
Company in a lump sum within thirty (30) days after
the date of Executive's discharge or resignation. 11
(d) Except as otherwise provided in Section 3.6(b) or 3.6(c),
Executive's right, upon and after the termination of his
employment under this Agreement pursuant to this Section 3 or
otherwise, to receive any benefit under the plans, if any, in
which Executive is entitled to participate pursuant to Section
2.4 shall be determined under the provisions of those plans.
-----------------------
(11) This provision shall have no force or effect until the Effective Date.
11
3.7 NOTICES. Any termination of Executive's employment for which
notice of termination is required to be given pursuant to this Section 3 shall
be communicated in a writing which shall indicate the specific provision in this
Section 3 relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated.
3.8 GENERAL RELEASE. Notwithstanding anything in this Section 3 or
otherwise to the contrary, at the election of the Company no amount shall be
payable under this Section 3 in excess of (a) any earned but unpaid Base Salary
through the date of Executive's death; (b) any award under the Incentive Plan
which was earned pursuant to the terms and conditions of such plan prior to the
effective date of termination but was not theretofore paid to Executive, unless
Executive (or his personal representative or trustee of his estate, in the case
of his disability or death) executes a general release of known claims (in form
and containing provisions reasonably required by the Company), provided,
however, that any such general release shall be mutual with respect to known
claims of the Company against Executive and known claims of Executive against
the Company.
3.9 NO MITIGATION. In the event of the termination of Executive's
employment hereunder for any reason, Executive shall have no obligation to
mitigate damages.
SECTION 4
CONFIDENTIALITY AND NON-COMPETITION
4.1 CONFIDENTIAL INFORMATION. Except as otherwise provided in
Section 4.2, the term "Confidential Information" shall mean all trade secrets
and confidential and proprietary information of the Company, whether in written
or oral, tangible or intangible form, including, without limitation, the
following:
(a) The whole or any portion or phase of any data or information
relating to the Company's processes or techniques relating to
its business, whether or not copyrighted, copyrightable,
patented or patentable, (1) which is or has been disclosed to
Executive or about which Executive became or shall become
aware of as a consequence of, or through or during Executive's
employment with the Company; (2) which has value to the
Company; and (3) which is not generally known by others;
(b) Any software, programs, calculations, instructions or other
intellectual property and embodiments thereof of any media,
including electro magnetic, and in any form, including source
code and object code, whether or not copyrighted,
copyrightable, patented or patentable;
(c) Business plans, marketing concepts and marketing and sales
information of the Company;
(d) Financial, pricing and/or credit information regarding the
Company or customers and/or suppliers of the Company;
12
(e) The names, addresses, policy expiration dates and telephone
numbers of customers, agents and/or suppliers of the Company;
(f) The internal corporate policies and procedures of the Company;
(g) Any information of any nature whatsoever that gives the
Company the opportunity to obtain any advantage over its
competitors who do not have access to or use of such
information; and
(h) Any other information designated by the Company as
confidential or proprietary at the time of its disclosure to
Executive.
The term "Confidential Information" also shall include all trade secrets and
confidential and proprietary information of any customer, agent, supplier, or
prospective customer, agent or supplier of the Company, whether in written or
oral, tangible or intangible form, which have been disclosed to the Company
pursuant to the Company's agreement to maintain the confidentiality of such
information.
4.2 EXCLUDED INFORMATION. Notwithstanding anything in Section 4.1
to the contrary, the term "Confidential Information" shall not include any data
or information that (a) is voluntarily disclosed by the Company or has otherwise
become generally known to the insurance industry (except for such public
disclosure that has been made by or through Executive or by a third person with
the knowledge of Executive without authorization by the Company); (b) has been
independently developed and disclosed by parties other than Executive or the
Company to the public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to the
Company; or (c) otherwise enters the public domain through lawful means.
4.3 CONFIDENTIALITY AGREEMENT. Executive agrees and acknowledges
that the Confidential Information is the property of the Company, and that such
information is sensitive, confidential and important and is furnished by the
Company to Executive under the terms and conditions of this Agreement. Executive
shall keep the Confidential Information (whether obtained prior to or after the
date of this Agreement) strictly confidential during the term of this Agreement
and at all times thereafter provided, however, that Executive may disclose
Confidential Information in the performance of his employment to the extent that
he reasonably believes such disclosure is necessary or convenient, in his sole
discretion, in order to perform his duties.
4.4 RETURN OF COMPANY PROPERTY. Executive agrees that upon
termination of this Agreement, Executive shall immediately surrender to the
Company, without request, or, at the Company's request and in the Company's sole
discretion, destroy or cause to be destroyed all memoranda, notes, reports,
documents, software and disks and all copies and other reproductions and
extracts thereof, including those prepared by Executive, which are in
Executive's possession or under his control and which contain or are derived
from Confidential Information.
13
4.5 COVENANT NOT TO COMPETE OR SOLICIT. Executive shall not,
directly or indirectly, do any of the following during the term of this
Agreement and for a period of twelve (12) months or, if longer, the entire
period for which Executive is entitled to (i) payments of Base Salary or Target
or other Incentive Awards or (ii) other benefits pursuant to Section 3 other
than payments and benefits pursuant to Section 3.6(c)(2) after a Change in
Control:
(a) Be employed by, serve as consultant or independent contractor
to, directly or indirectly beneficially own any equity or
similar interest in (except as the holder of not more than one
percent (1%) of the voting securities of any publicly traded
entity or as a shareholder of the Company or any successor
thereto), or otherwise engage in, any property and casualty
insurance company business that directly competes with any
insurance company subsidiary of the Company in the continental
United States, Canada or the Bahamas;
(b) Solicit or cause to be solicited, directly or indirectly, any
property and casualty wholesale agents under contract with the
Company for any purpose (other than, during the term of this
Agreement, as an employee of the Company on behalf of the
Company), without the prior written consent of the Company,
which written consent specifically refers to this Agreement;
or
(c) Solicit or cause to be solicited, directly or indirectly, or
in any way be responsible for, an offer of employment to any
employee of the Company by any other person.
The restrictions contained in this Section 4.5 shall cease to apply to, and
shall not bind, Executive in the event that the Company fails to timely and
completely pay all amounts due and owing to Executive pursuant to Section 3.6 of
this Agreement. For the purposes of the preceding sentence, the Company will be
deemed to have failed to timely and completely pay all amounts due and owing to
Executive pursuant to Section 3.6 if the Company fails (other than as the result
of a prior breach of this Section 4.5 by Executive) to make any such payment to
Executive within ten (10) days of its due date.
4.6 ADDITIONAL COVENANTS. During the term of this Agreement,
Executive shall not take advantage of any Company opportunity without first
offering the opportunity with full disclosure of material facts to the Company
and receiving notice that the Company has declined such opportunity. For this
purpose, "Company opportunity" means any opportunity to engage in a business
activity: (a) of which Executive becomes aware (1) by virtue of Executive's
relationship with, or in connection with performing functions in the business
of, or in using facilities or other resources of the Company; and (2) under
circumstances that should reasonably lead Executive to believe that the person
offering the opportunity expects it to be offered to the Company; or (b) which
Executive knows is closely related to a business in which the Company is engaged
or expected to engage.
4.7 REMEDIES FOR BREACH. Executive agrees that, in the event of
any breach or threatened breach of any provision of this Section 4 by Executive,
the Company shall be entitled to a temporary restraining order and other
temporary or permanent injunctive relief, provided that the Company has shown
irreparable harm. No remedy conferred upon the Company by this
14
Agreement is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Agreement or now or hereafter existing at
law, in equity or by statute.
4.8 REASONABLENESS OF RESTRICTIONS. Executive agrees and
understands that there are significant business reasons for the restrictions
contained in this Agreement and that such restrictions are reasonable and
necessary to protect legitimate business interests of the Company. Without
limiting the generality of the foregoing, Executive agrees and understands that
because the Company may sell its products, technology and services nationally
and internationally, the geographic scope of Executive's agreement not to
compete with the Company is both reasonable and necessary.
4.9 SEVERABILITY. If any provision of this Section 4 is held
invalid, illegal or unenforceable, the remaining provisions shall continue in
full force and effect. If any provision of this Section 4 is for any reason held
to be excessively broad as to time, duration, geographic scope, activity or
subject, it shall be construed, by limiting and reducing it, so as to be
enforceable to the extent permitted by applicable law.
4.10 SCOPE OF SECTION 4. As used in this Section 4, the term the
"Company" shall include all Affiliates of the Company.
SECTION 5
MISCELLANEOUS
5.1 INDEMNIFICATION. The Company shall indemnify Executive if he
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, without limitation, an action by or in the right of
the Company) by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, trustee, officer, employee, partner, joint venturer or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees and expenses),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action, suit or
proceeding, had no reasonable cause to believe his conduct was unlawful. No
indemnification shall be made in respect of any derivative claim, issue or
matter as to which Executive shall have been adjudged to be liable to the
Company unless, and only to the extent that, the court in which such action,
suit or proceeding was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the case,
Executive is fairly and reasonably entitled to indemnity for such expenses.
Expenses (including reasonable attorneys' fees and expenses) incurred in
defending any civil or criminal action, suit or proceeding referred to in this
Section shall be paid by the Company in advance of the final disposition of such
action, suit or proceeding upon receipt of an
15
undertaking by or on behalf of Executive to repay such amount, unless it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in this Section. The indemnification provided by this
Section shall not be deemed exclusive of any other rights to which Executive may
be entitled under the common law, the Ohio corporate law or the charter
documents of the Company or any agreement, vote of its shareholders or
directors, or otherwise, both as to action in his official capacity or as to
action in another capacity while holding such office.
5.2 KEY MAN LIFE INSURANCE; COLI. Executive agrees to cooperate
with the Company in connection with, and consent to the placement of, "key man"
or other corporate owned insurance on Executive's life by the Company, provided
that, except as provided in Section 2.4(c), nothing herein shall require the
Company to obtain or maintain any such insurance on Executive's life.
5.3 BREACH OF AGREEMENT BY COMPANY. The Company agrees that, in
the event of any breach or threatened breach of this Agreement by the Company,
Executive shall be entitled to any appropriate remedy in law or in equity. No
remedy conferred upon Executive by this Agreement is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law, in equity or by statute. The
Company shall pay all legal expenses (including reasonable attorney's fees and
expenses) and other damages incurred by Executive as the result of or in
connection with any breach of this Agreement by the Company. The Company is
aware that, following a Change in Control, the Board or a shareholder of the
Company may cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute, litigation seeking to have this Agreement
declared unenforceable, or may take, or attempt to take, other action to deny
Executive the benefits intended under this Agreement. In these circumstances,
the purpose of this Agreement could be frustrated. It is the intent of the
Company that Executive not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to Executive hereunder, nor be bound to
negotiate any settlement of his rights hereunder under threat of incurring such
expenses. Accordingly, (a) if following a Change in Control (1) Executive
concludes that the Company has failed to comply with any of its obligations
under this Agreement or (2) the Company or any other person on behalf of the
Company or any shareholder or Affiliate of the Company takes any action to
declare this Agreement void or unenforceable, or institutes any litigation or
other legal action designed to deny, diminish, or recover from Executive the
benefits intended to be provided to Executive hereunder, and (b) if Executive
has complied with all of his obligations under this Agreement, the Company
irrevocably authorizes Executive from time to time to retain counsel of his
choice at the expense of the Company as provided in this 5.3, to represent
Executive in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to Executive's
entering into an attorney-client relationship with such counsel, and in that
connection, the Company and
16
Executive agree that a confidential relationship shall exist between Executive
and such counsel. The reasonable fees and expenses of counsel selected from time
to time by Executive as hereinabove provided shall be paid or reimbursed to
Executive by the Company on a regular periodic basis upon presentation by
Executive of a statement or statements prepared by such counsel in accordance
with its customary practices (provided that such statements need not contain
descriptions of the services performed). The payment of such fees and expenses
shall not be contingent upon the success of such counsel. Executive shall repay
to the Company all such amounts paid by the Company under this Section, and the
Company shall not be obligated to make further payments hereunder, in connection
with a contest originated by Executive if the trier of fact in such contest
determines that Executive's claim was patently frivolous.
5.4 AFFILIATES. As used in this Agreement, an entity shall be
deemed to be an Affiliate of another entity if it controls, is controlled by or
is under common control with the other entity, where "control" means the power
to vote not less than ten percent (10%) of the voting securities of an entity.
5.5 NO CONFLICT. Executive represents that the performance by
Executive of all the terms of this Agreement, as an Executive of the Company,
has not, does not and will not breach any agreement as to which Executive is or
was a party and which requires Executive to keep any information in confidence
or in trust. Executive has not entered into, and will not enter into, any
written or oral agreement in conflict herewith.
5.6 NOTICES. Any and all notices required to be given under this
Agreement shall be given, and be deemed given, as follows: (a) by personal
delivery which shall be deemed given when delivered; (b) by U. S. first-class
mail, postage prepaid, which shall be deemed given the third (3rd) day after
deposit; or (c) by telecopy (if telecopy number is listed) with confirmation of
receipt which shall be deemed given when sent. Any such notice shall be
addressed, if to the Company at its principal place of business (attn: Chief
Operating Officer) and, if to Executive at his most current home address on
record with the Company for payroll and other corporate purposes, unless a
different address for notice purposes is designated by Executive in a written
notice complying with and referring to this Section 5.6.
5.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without regard to
conflict of law principles.
5.8 AMENDMENT AND WAIVER. This Agreement shall not be amended or
modified, and none of the provisions hereof shall be waived, except in a writing
signed on behalf of the Company and by Executive or, in the case of a waiver, on
behalf of the party making a waiver. In the event that any obligation, agreement
or covenant contained in this Agreement should be breached by either party and
thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
5.9 SECTION HEADINGS. Section headings contained in this Agreement
are for convenience only and shall not be considered in construing any provision
hereof.
17
5.10 ASSIGNMENT. This Agreement is personal to Executive and
Executive may not assign or delegate any of his rights or obligations hereunder.
Subject to the foregoing, this Agreement shall inure to the benefit of and be
binding upon Executive and the Company and their respective heirs,
administrators, executors, successors and assigns, including successive as well
as immediate heirs, administrators, executors, successors and assigns.
5.11 ENTIRE AGREEMENT. This Agreement terminates, cancels and
supersedes all previous written and oral employment agreements or other
agreements relating to the relationship of Executive with the Company entered
into between the parties hereto. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter of this
Agreement. Executive is represented by independent legal counsel or has had the
opportunity to retain independent legal counsel to represent Executive's
interests. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring any party by virtue
of authorship of any of the specific provisions of the Agreement. EXECUTIVE
ACKNOWLEDGES THAT, BEFORE PLACING HIS SIGNATURE HEREUNDER, HE HAS READ ALL OF
THE PROVISIONS OF THIS AGREEMENT, AND HAS THIS DAY RECEIVED A COPY HEREOF.
5.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such invalidity or unenforceability without
thereby rendering invalid or unenforceable the remaining terms and provisions
hereof or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
5.13 DISPUTE RESOLUTION.
(a) Notwithstanding any provision herein to the contrary, any
determination of (1) whether Cause for termination or Good
Reason for resignation exists and (2) whether something
"materially" affects anything, or is "substantially" or
"reasonably" or "effectively" done, or is "material" or
"reasonable," as such terms are used in this Agreement, shall
be made in the first instance by the Board or one of its
appropriate oversight committees.
(b) Any controversy, claim or dispute arising out of or relating
to this Agreement or the breach, termination, enforceability
or validity of this Agreement, including the determination of
the scope or applicability of the agreement to arbitrate set
forth in this Section 5.13(b) and any dispute of any
determination by the Company pursuant to Section 5.13(a),
shall be determined exclusively by binding arbitration in the
City of Columbus, Ohio. The arbitration shall be governed by
the rules and procedures of the American Arbitration
Association (the "AAA") under its Commercial Arbitration Rules
and its Supplementary Procedures for Large, Complex Disputes;
provided that persons eligible to be selected as arbitrators
shall be limited to attorneys-at-law each of whom (i) is on
the AAA's Large, Complex Case Panel or a Center for Public
Resources ("CPR") Panel of Distinguished Neutrals, or has
professional credentials comparable to those of the
18
attorneys listed on such AAA and CPR Panels and (ii) has
actively practiced law (in private or corporate practice or as
a member of the judiciary) for at least 15 years in the State
of Ohio concentrating in either general commercial litigation
or general corporate and commercial matters. Any arbitration
proceeding shall be before one arbitrator mutually agreed to
by the parties to such proceeding (who shall have the
credentials set forth above) unless the amount in question
exceeds $100,000, in which event, the mediation shall be by a
panel of three mediators or, if the parties are unable to
agree to the arbitrator(s) within 15 business days of the
initiation of the arbitration proceedings, then by the AAA. No
provision of, nor the exercise of any rights under, this
Section 5.13(b) shall limit the right of any party to request
and obtain from a court of competent jurisdiction in the State
of Ohio, County of Franklin (which shall have exclusive
jurisdiction for purposes of this Section 5.13) before, during
or after the pendency of any arbitration, provisional or
ancillary remedies and relief including injunctive or
mandatory relief or the appointment of a receiver. The
institution and maintenance of an action or judicial
proceeding for, or pursuit of, provisional or ancillary
remedies shall not constitute a waiver of the right of any
party, even if it is the plaintiff, to submit the dispute to
arbitration if such party would otherwise have such right.
Each of the parties hereby submits unconditionally to the
exclusive jurisdiction of the state and federal courts located
in the County of Franklin, State of Ohio for purposes of this
provision, waives objection to the venue of any proceeding in
any such court or that any such court provides an inconvenient
forum and consents to the service of process upon it in
connection with any proceeding instituted under this Section
5.13 in the same manner as provided for the giving of notice
under this Agreement. Judgment upon the award rendered may be
entered in any court having jurisdiction. The parties hereby
expressly consent to the nonexclusive jurisdiction of the
state and federal courts situated in the County of Franklin,
State of Ohio for this purpose and waive objection to the
venue of any proceeding in such court or that such court
provides an inconvenient forum. The arbitrator(s) shall award
recovery of all costs (including attorneys' fees,
administrative fees, arbitrators' fees and court costs) to the
prevailing party. No arbitrator shall have power, by award or
otherwise, to vary any of the provisions of this Agreement.
SIGNATURES
In Witness Whereof, the parties have executed this Agreement as of the
date set forth above.
THE COMPANY: EXECUTIVE:
PROCENTURY CORPORATION
/s/ Xxxxxxx X. Xxxx /s/ Xxxxxx X. Xxxxxxx
-------------------------------- ---------------------------------
Xxxxxxx X. Xxxx, Chief Financial Xxxxxx X. Xxxxxxx
Officer and Treasurer
19
EXHIBIT A
EXECUTIVE'S POSITIONS FOR SUBSIDIARIES
Member of the Board of Directors, Chairman of the Board, and Chief Executive
Officer of each subsidiary
EXHIBIT B
PERFORMANCE GOALS FOR 2004
X.X.X (*) BONUS AS A % OF TARGET NET INCOME
--------- ---------------------- ----------
Under
BONUS THRESHOLD 14.50% 0% Less than 11,527,500
------------------------------------------------------------------------------------------------------
14.50% 15% 11,527,500
15.75% 30% 12,521,250
GOOD PERFORMANCE 17.00% 45% 13,515,000
18.25% 60% 14,508,750
19.50% 75% 15,502,500
------------------------------------------------------------------------------------------------------
20.75% 90% 16,496,250
EXCELLENT PERFORMANCE 22.00% 100% 17,490,000
23.25% 110% 18,483,750
------------------------------------------------------------------------------------------------------
24.50% 120% 19,477,500
25.75% 130% 20,471,250
OUTSTANDING PERFORMANCE 27.00% 140% 21,465,000
28.25% 150% 22,458,750
Over Greater than
28.25% Discretionary 22,458,750
------------------------------------------------------------------------------------------------------
* Return on Equity (X.X.X) based on average equity in 2004 ($79.5MM)
