EXHIBIT 10
SEPARATION AGREEMENT
This Separation Agreement (this "Agreement") by and between ProCentury
Corporation, an Ohio corporation (the "Company"), and Xxxx X. Xxxxxxx ("Xx.
Xxxxxxx") has been executed on the dates set forth on the signature page and
shall be effective and no longer subject to revocation at the close of business
on the seventh day following the date that Xx. Xxxxxxx executes this Agreement
(the "Effective Date"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Employment Agreement (defined
below).
WHEREAS, Xx. Xxxxxxx is the Executive Vice President, Chief Operating
Officer and a director of the Company and party to an Executive Employment
Agreement with the Company dated December 15, 2003 (the "Employment Agreement");
and
WHEREAS, the parties have determined that Xx. Xxxxxxx'x employment will
terminate in accordance with the Employment Agreement and the Company will
retain the services of Xx. Xxxxxxx as a consultant for the period and on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Termination of Employment and Other Positions. Both parties agree that
Xx. Xxxxxxx'x employment by the Company as Executive Vice President, Chief
Operating Officer and any and all other positions will terminate, effective as
of the Effective Date, and Xx. Xxxxxxx shall resign as a director, officer and
employee (as applicable) of the Company and each subsidiary of the Company of
which Xx. Xxxxxxx serves in any such capacity, by executing and delivering to
the Company a letter of resignation substantially in the form of Appendix A
hereto. Xx. Xxxxxxx and the Company agree and acknowledge that this Agreement
sets forth the parties' mutual understanding with respect to the termination of
Xx. Xxxxxxx'x employment and all other positions with the Company and its
subsidiaries and that such termination shall be deemed to arise pursuant to
Section 3.4(a) of the Employment Agreement. Xx. Xxxxxxx hereby waives, pursuant
to Section 5.8 of the Employment Agreement, his right to receive thirty (30)
days prior written notice of such termination under Section 3.4(a) and Section
3.7 of the Employment Agreement. The parties agree that Xx. Xxxxxxx shall remain
an employee of the Company until the close of business on the Effective Date and
that except as otherwise provided under Section 2 below, all employee benefits
provided to Xx. Xxxxxxx through the Company will cease at the Effective Date.
2. Severance Benefits.
(a) The Company shall pay to Xx. Xxxxxxx the following amounts as
provided by Section 3.6(c)(1) of the Employment Agreement, in each case, in
accordance with such Section:
(i) any earned but unpaid Base Salary through the Effective
Date, which the parties agree is equal to the annual rate of $259,000 ("Current
Base Salary"), and any award for which a bonus was earned under the Incentive
Plan for the Performance Period ending December 31, 2004 which has not been paid
to Xx. Xxxxxxx;
(ii) continued payment of Xx. Xxxxxxx'x Current Base Salary
through April 30, 2006 (the "Severance Termination Date");
(iii) $145,688, representing the Target Incentive Award
provided for under Section 3.6(c)(1)(D) of the Employment Agreement;
(iv) continued benefits (to the same extent and at the same
benefit level as were provided by the Company to Xx. Xxxxxxx immediately prior
to the Effective Date) under: (A) the retirement and welfare benefit plans
referenced in Section 2.4(a) of the Employment Agreement, and (B) the health,
disability and other insurance plans referenced in Section 2.4(b) of the
Employment Agreement; in each case, for the twelve (12) month period following
the Effective Date; and to the extent permitted pursuant to such health
insurance plans, for such longer period as to which Xx. Xxxxxxx'x beneficiaries
pay the cost of coverage thereof; provided, that if any such plans are
terminated, or benefits thereunder reduced or eliminated, during such 12 month
period, the Company shall provide to Xx. Xxxxxxx substitute benefits which are
no less favorable to Xx. Xxxxxxx under such plans; and
(v) $10,600, representing the aggregate amount for the twelve
(12) month period following the Effective Date of the additional benefits
referenced in Section 2.4(c) of the Employment Agreement, which Xx. Xxxxxxx has
elected to receive in the form of a cash payment, pursuant to Section 2.4(c)(2)
of the Employment Agreement.
(b) The parties agree that notwithstanding the provisions set forth
in the Employment Agreement, such amounts shall be payable by the Company to Xx.
Xxxxxxx as follows: (i) the payments set forth in Section 2(a)(i) and Section
2(a)(iii) above shall be paid in a lump sum within thirty (30) days after the
Effective Date; (ii) the payments set forth in Section 2(a)(ii) above shall be
paid in accordance with the then current salary payment policies of the Company
for its employees, (iii) the right to receive any benefit under the plans, if
any, in which Xx. Xxxxxxx is entitled to participate pursuant to Section 2.4(a)
and (b) of the Employment Agreement, as provided in Section 2.1(a)(iv) above,
shall be determined under the provisions of those plans; and (iv) the additional
benefits payable to Xx. Xxxxxxx pursuant to Section 2.4(c)(2) of the Employment
Agreement, as provided in Section 2.1(a)(v) above, shall be payable in a lump
sum on the Severance Termination Date.
(c) In accordance with Section 2.3 of the Employment Agreement, the
Stock Option Plan, and the agreements entered into thereunder with respect to
the option to purchase 49,800 common shares granted to Xx. Xxxxxxx (the "IPO
Options") and the 25,300 restricted common shares awarded to Mr. Marazaa (the
"IPO Restricted Stock" and, together with the IPO Options, the "IPO Awards"),
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
as set forth in the agreements granting to Xx. Xxxxxxx the IPO Options and all
unvested
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Shares of the IPO Restricted Stock shall become fully vested, effective as of
the Effective Date. The Company shall have the right to withhold from the
amounts otherwise payable to Xx. Xxxxxxx on the Effective Date an amount
adequate to satisfy any tax withholding obligations of the Company arising in
connection with the IPO Awards. Xx. Xxxxxxx agrees to comply with all applicable
federal or state securities laws in connection with his ownership and
disposition of the Company's securities, including but not limited to the laws,
rules and regulations regarding trading while aware of, or in possession of,
material non-public information and the reporting provisions of Section 16 of
the Securities Exchange Act of 1934, as amended.
3. Consulting Services. For no additional consideration beyond the amounts
payable pursuant to Section 2 above, Xx. Xxxxxxx agrees to perform such
consulting, advisory and related services to and for the Company or its
subsidiaries as may be reasonably requested from time to time by the Company's
Chief Executive Officer (the "Consulting Services") for a period of ninety (90)
days following the Effective Date (the "Consulting Period"). Xx. Xxxxxxx agrees
to devote a reasonable amount of time to and otherwise to use his best efforts
in the performance of the Consulting Services under this Agreement. Xx. Xxxxxxx
shall cooperate with the Company's personnel, shall not interfere with the
conduct of the Company's business and shall observe all rules, regulations and
policies of the Company applicable to its employees while he is on Company
property. Xx. Xxxxxxx shall perform all Consulting Services under this Agreement
as an "independent contractor" and not as an employee or agent of the Company.
Xx. Xxxxxxx is not authorized to assume or create any obligation or
responsibility, express or implied, on behalf of, or in the name of, the Company
or to bind the Company in any manner.
4. Covenants. Xx. Xxxxxxx understands and acknowledges the reasonableness
and necessity of, and agrees to remain bound by, the provisions of Section 4 of
the Employment Agreement, including without limitation, his obligations
regarding confidential information, Company property, nonsolicitation and
noncompetition. Xx. Xxxxxxx agrees to return all Company property required to be
returned to the Company pursuant to Section 4.4 of the Employment Agreement on
or prior to the Effective Date. With respect to the provisions of Section 4.5
and Section 4.6 of the Employment Agreement, the parties agree that such
provisions shall terminate on the Severance Termination Date, unless, in the
case of Section 4.5, such provisions are earlier terminated in accordance
therewith.
5. Termination of Employment Agreement. The parties agree that the
Employment Agreement shall terminate and have no further force and effect as of
the Effective Date, except as follows: (a) to the extent such Sections are
referenced in Section 2 hereof, Sections 2.3, 2.4 and 3.6 of the Employment
Agreement shall remain in effect until the Severance Termination Date; and (b)
Sections 4, 5.1 and 5.4 of the Employment Agreement will remain in effect in
accordance with the terms thereof and Section 4 of this Agreement.
6. No Disparagement.
(a) Xx. Xxxxxxx agrees to refrain from making any disparaging oral
or written statements to the public, or any third party, about any Employer
Released Party (as hereinafter defined), his employment with the Company, or any
general matter concerning any Employer Released Party's reputation, standing in
the business community, or business practices, or the
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reputation, standing in the business community, or business practices of any
present or former officers, directors, members, employees, consultants or
independent contractors of any Employer Released Party.
(b) The Company agrees to refrain from making any disparaging oral
or written statements to the public, or any third party, about Xx. Xxxxxxx, his
employment with the Company, or any general matter concerning his reputation,
standing in the business community, or business practices.
7. Releases.
(a) Xx. Xxxxxxx, for himself and his heirs, personal
representatives, successors and assigns, forever releases, remises and
discharges the Company and each of its past, present, and future officers,
directors, shareholders, members, employees, trustees, agents, representatives,
affiliates, successors and assigns (collectively the "Employer Released
Parties") from any and all claims, claims for relief, demands, actions and
causes of action of any kind or description whatsoever, known or unknown,
whether arising out of contract, tort, statute, treaty or otherwise, in law or
in equity, which Xx. Xxxxxxx now has, has had, or may hereafter have against any
of the Employer Released Parties from the beginning of his employment with the
Company to the Effective Date, arising from, connected with, or in any way
growing out of, directly or indirectly, Xx. Xxxxxxx'x employment by the Company,
Xx. Xxxxxxx'x service as Executive Vice President, Chief Operating Officer and
director of the Company, the services provided by Xx. Xxxxxxx to the Company, or
any transaction prior to the Effective Date and all effects, consequences,
losses and damages relating thereto, including, but not limited to, all claims
arising under the Civil Rights Acts of 1866 and 1964, the Fair Labor Standards
Act of 1938, the Equal Pay Act of 1963, the Age Discrimination in Employment Act
of 1967, the Rehabilitation Act of 1973, the Older Workers Benefit Protection
Act of 1990, the Americans With Disabilities Act of 1990, the Civil Rights Act
of 1991, the Family and Medical Leave Act of 1993, the Consolidated Omnibus
Budget Reconciliation Act ("COBRA"), Title 4112 of the Ohio Revised Code, and
all other federal or state laws governing employers and employees; provided,
however, that nothing in this Section 7 will bar, impair or affect the
obligations, covenants and agreements of the Company set forth in this
Agreement.
(b) The Company and each of its past, present, and future officers,
directors, shareholders, members, employees, trustees, agents, representatives,
affiliates, successors and assigns (collectively the "Employer Releasing
Parties") forever releases, remises and discharges Xx. Xxxxxxx and each of his
heirs, personal representatives, successors and assigns (collectively, the
"Released Parties"), from any and all claims, claims for relief, demands,
actions and causes of action of any kind or description whatsoever, whether
arising out of contract, tort, statute, treaty or otherwise, in law or in
equity, which any of the Employer Releasing Parties now have or has had and
which is known or unknown to such Employer Releasing Party as of the Effective
Date, against any of the Released Parties from the beginning of Xx. Xxxxxxx'x
employment with the Company or its affiliates to the Effective Date, arising
from, connected with, or in any way growing out of, directly or indirectly, Xx.
Xxxxxxx'x employment by the Company or any of its affiliates, Xx. Xxxxxxx'x
service as Executive Vice President, Chief Operating Officer and
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director of the Company and as a director, officer and employee (as applicable)
of any affiliate of the Company, the services provided by Xx. Xxxxxxx to the
Company or any of its affiliates, or any transaction prior to the Effective Date
and all known effects, consequences, losses and damages relating thereto.
8. Covenant Not to Xxx. Except where such agreement is contrary to law or
public policy, each party agrees that it will not now or hereafter commence or
initiate any claim or charge of employer discrimination with any governmental
agency or xxx the other party concerning any claims relating to Xx. Xxxxxxx'x
employment or resignation of employment with the Company, except as the same may
affect such party's rights with respect to the enforcement of this Agreement.
This Agreement may be pleaded as a full and complete defense to, and may be used
as a basis for injunction against, any action or proceeding either party may
institute, prosecute, or maintain in breach of this Agreement.
9. Acknowledgment. By entering into this Agreement, and in connection with
Xx. Xxxxxxx'x release of claims and covenant not to xxx set forth in Sections 7
and 8 hereof, Xx. Xxxxxxx acknowledges that:
(a) Xx. Xxxxxxx is knowingly and voluntarily entering into this
Agreement;
(b) No promise or inducement has been offered to Xx. Xxxxxxx except
as set forth herein;
(c) This Agreement is being executed by Xx. Xxxxxxx without reliance
upon any statements by the Company or any of its representatives concerning the
nature or extent of any claims or damages or legal liability therefor;
(d) This Agreement has been written in understandable language, and
all provisions hereof are understood by Xx. Xxxxxxx;
(e) Xx. Xxxxxxx has been advised in writing to consult with an
attorney prior to executing this Agreement;
(f) Xx. Xxxxxxx has had a period of at least twenty-one (21) days
within which to consider this Agreement before accepting the same and, by
signing this Agreement earlier than twenty-one (21) days following receipt of
it, Xx. Xxxxxxx acknowledges that he has knowingly and voluntarily waived the
twenty-one (21) day period and has accelerated the date when he may commence
receipt of the severance payments identified in Section 2 above following
expiration of the revocation period referenced in Section 10(g) below; and
(g) Xx. Xxxxxxx has the right to revoke this Agreement for a period
of seven (7) days following his execution hereof, and this Agreement will not
become effective or enforceable until such seven (7) day period has expired.
Should Xx. Xxxxxxx desire to revoke this Agreement, Xx. Xxxxxxx must
notify the Company in accordance with Section 10 hereof prior to the close of
business on the seventh (7th)
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day following the date when he signs this Agreement. If Xx. Xxxxxxx declines to
accept the terms of this Agreement or, having accepted them, effectively revokes
his acceptance thereof, this Agreement will have no force or effect and neither
its terms nor any of the discussions of the parties relative to its negotiation
will be admissible in evidence in any proceeding brought by or on behalf of Xx.
Xxxxxxx against the Company or any other person.
10. Legal Fees. The Company shall pay all legal expenses (including
reasonable attorney's fees and expenses) and other damages incurred by Xx.
Xxxxxxx as the result of or in connection with any breach of this Agreement by
the Company; provided, however, that Xx. Xxxxxxx 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 Xx. Xxxxxxx if the trier of fact in such contest determines that
Xx. Xxxxxxx'x claim was patently frivolous.
11. Notice. 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: President) and, if to Xx.
Xxxxxxx, at the address set forth on the signature page hereto, unless a
different address for notice purposes is designated by Xx. Xxxxxxx in a written
notice complying with and referring to this Section 10.
12. 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 Xx. Xxxxxxx 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.
13. 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.
14. Entire Agreement. This Agreement and any attachments hereto, together
with the Employment Agreement, Incentive Plan, Stock Option Plan and agreements
entered into between Xx. Xxxxxxx and the Company thereunder, represents the
entire agreement between the parties regarding the matters contained herein and
has been entered into by Xx. Xxxxxxx with a full understanding of its terms,
with an opportunity to consult with counsel and without inducement or duress.
This Agreement may not be changed orally, and any written change or amendment
must be signed and accepted by the Company. If any provision in this Agreement
is found to be unenforceable, all other provisions shall remain fully
enforceable. This Agreement may be executed in counterparts, each of which shall
be considered an original, but all of which together shall constitute one and
the same instrument.
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15. Binding Nature of Agreement. This Agreement shall be binding on Xx.
Xxxxxxx'x heirs, legal representatives, administrators, executors, and assigns,
and shall inure to the benefit of any successors and assigns of the Employer
Released Parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.
READ CAREFULLY - THIS DOCUMENT CONTAINS A RELEASE.
PROCENTURY CORPORATION
Dated: January 21, 2005
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Xxxxxx X.Xxxxxxx
President and Chief Executive
Officer
Dated: January 21, 2005
/s/ Xxxx X. Xxxxxxx
-----------------------------
XXXX X. XXXXXXX
Address: ____________________
_____________________________
_____________________________
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APPENDIX A
To the Board of Directors
ProCentury Corporation
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxx 00000
Attention: President
Gentlemen:
I, Xxxx X. Xxxxxxx, hereby resign as Executive Vice President, Chief
Operating Officer, Secretary and as a member of the Board of Directors of
ProCentury Corporation and as a director, officer and employee, as applicable,
of each subsidiary of ProCentury Corporation.
Dated: ________, 2005
____________________________
Xxxx X. Xxxxxxx
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