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EXHIBIT 10(5)
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of this 22nd day of
September, 1994, by and among UNIVERSAL SURETY HOLDING CORP. (the "Parent") a
Texas corporation, UNIVERSAL SURETY OF AMERICA (the "Company" or the
"Employer"), a Texas insurance corporation, CAPSURE FINANCIAL GROUP, INC.
("CFG"), an Oklahoma corporation, CAPSURE HOLDINGS CORP. ("Capsure"), a Delaware
corporation, and XXXX XXXX, JR. (the "Employee").
RECITALS
1. CFG, as Buyer, entered into a Stock Purchase Agreement dated
July 26, 1994 (the "Purchase Agreement"), with the Parent and the Employee, as
Seller, pursuant to which CFG agreed to purchase, and Employee agreed to sell,
all of his authorized, issued and outstanding shares of stock of Parent.
2. The Purchase Agreement provides for the Employee to enter into
this Agreement, and all parties hereto acknowledge that this Agreement fulfills
their respective obligations with respect to the requirement for this Agreement
under the Purchase Agreement.
3. The Company, as Employer, desires to employ the Employee and the
Employee, as Employee, desires to be employed under the terms of the Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment.
(a) For the term indicated in Section 2 hereof, the Company
employs the Employee, and the Employee accepts such employment and agrees to act
as an employee of the Company, all in accordance with the terms provided herein.
(b) The Employee is hereby employed as President and Chief
Executive Officer, and he agrees to perform such duties as are commensurate with
such office and as are consistent with past practice, subject at all times to
the direction, approval and control of the Board of Directors of the Company.
During the term of this Agreement, the Employee shall continue to serve as
President and Chief Executive Officer of the Company. In such capacity, subject
to such direction, approval and control of the Board of Directors of the Company
at all times the Employee shall be in complete charge of all of the day to day
operations and management of the Company, as well as any of its direct or
indirect subsidiaries, and shall have full authority and responsibility for
setting strategic direction, formulating and carrying out the business plans,
administration and policies of the Company. In general, but subject to such
direction, approval or control, the Employee shall continue to perform the
duties previously performed by him commensurate with the past practices of the
Employee and the
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Company. In this connection, the Employee's responsibilities, duties and powers
shall include, but are not limited to:
(i) developing, establishing and implementing
strategic plans and policies;
(ii) maintaining an effective organization of the
Company, and in this connection, he may select (subject to the
election of officers by the Board of Directors of the
Company), control, supervise and terminate, directly or
through delegation, the employees of the Company, and set
their salaries and bonuses;
(iii) leading the operational planning process of the
Company;
(iv) setting and maintaining the underwriting and
marketing philosophies of the Company;
(v) maintaining current knowledge of developments in
the fidelity and surety bond industry and liaison with
reinsurers; and
(vi) representing the Company periodically at select
industry gatherings and in Company activities.
(c) The Employee agrees that during the term of his employment
hereunder he shall serve the Company diligently and faithfully and will devote
substantially all of his work time, skill, effort and energy, during normal
business hours, during the first three (3) years of this Agreement to the
conduct of the business of the Company and substantial amounts of time
thereafter as required to operate the business of the Company. The determination
of "substantially all" of the Employee's work time, skill, effort and energy
shall be made with respect to an annual period of employment.
(d) The Parent agrees that, so long as the Employee is
employed under this Agreement, all voting rights held, directly or indirectly,
by the Parent, its nominees or assignees, shall all be voted in favor of the
Employee to be nominated to the Board of Directors of the Company, to be elected
to such Board at each meeting of its stockholders at which the class of
Directors to which the Employee is assigned is to be elected.
(e) The Parent and the Employee agree that the Board of
Directors of the Company shall consist of at least seven (7) members. The Parent
shall have the right to nominate and elect all but one (1) of the Directors for
the Company and the Employee shall have the right to be a Director of the
Company. The Parent agrees to vote all its shares of the Company in favor of the
election of the Employee to the Board of the Company.
(f) The Parent and the Company agree that, so long as the
Employee is employed under this Agreement, the Parent's nominees and assignees
constituting the Board of
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Directors of the Company shall all vote in favor of the election of Employee as
President and Chief Executive Officer of the Company, the appointment of
Employee to any Executive or similar Committee of the Board of Directors of the
Company and the Board of Directors of the Company shall also consider any
potential officers of the Company nominated by Employee, subject, in all cases
to the ultimate responsibility of the Board of Directors under the law.
2. Term of Employment.
(a) The term of the Employee's employment hereunder shall
commence on the day first written above and continue for a period of six (6)
years from the date hereof, unless sooner terminated as provided below. Upon the
expiration of the original term, Employee's employment by Employer shall
thereafter continue from month to month on the same terms and conditions, with
either party then having the right to terminate said employment upon ninety (90)
days prior written notice to the other.
(b) The employment of Employee pursuant to this Agreement may be
terminated upon the occurrence of any of the following:
(i) at any time by mutual written agreement between Employee
and the Company;
(ii) immediately upon the death of Employee;
(iii) by either the Company or Employee due to the disability
of Employee. Disability shall mean that Employee has been unable to
perform his duties by reason of illness or incapacity for six (6)
months in the aggregate during any twelve (12) month period;
(iv) upon a good faith determination by a majority vote of the
Board of Directors of the Company that the termination of this
Agreement is necessary by reason of a final determination by the
Commissioner of Insurance of the State of Texas (or by any other
insurance department having jurisdiction over the Company or any
subsidiary or affiliate) that Employee must be removed or disqualified
from acting as an officer of the Company; or
(v) by the Company at any time for "cause" determined by a
majority vote of the Board of Directors of the Company upon the giving
of notice to Employee setting forth the basis of such termination. The
Board of Directors shall give written notice to Employee setting forth
the basis of such termination and shall provide Employee an opportunity
to appear before the Board of Directors either before or after such
termination is effective, as the Board may elect. For the purposes of
this Agreement, the term "cause" shall be limited to:
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(A) the engaging of Employee in conduct materially
injurious to the Company unless Employee engaged in
such conduct (i) in good faith and reasonably
believed such conduct to be in or not opposed to the
best interests of the Company or (ii) at the request
or direction of the Board of Directors of the
Company;
(B) the habitual absence of the Employee or the
continued and wilful inattention and neglect by
Employee of the material duties to be performed by
him (other than by reason of illness or engaging in
activities otherwise permitted or required under this
Agreement) and which inattention and neglect does not
cease within thirty (30) days after written notice
thereof, specifying the details of such conduct, is
given to Employee; and
(C) the conviction of Employee of, or plea of nolo
contendere to, a felony or of a crime involving moral
turpitude under state or federal law.
Upon a termination for cause pursuant to this Section 2(b)(v),
the Company shall pay to the Employee his base salary through
the date of termination and shall have no other obligation to
provide compensation or benefits to the Employee pursuant to
this Agreement.
(c) The employment of the Employee pursuant to this Agreement may also
be terminated at any time by the Employer, without good and sufficient cause, in
which case if such termination shall occur prior to December 31, 1999, the
Employer shall pay the Employee, within thirty (30) days of said termination,
one lump sum payment representing the discounted present value (using an
interest rate equal to that offered at the U.S. Treasury auction, first
preceding the date of termination of the Employee's employment, of Treasury
Notes or Bills with a maturity date closest to December 31, 1999) of the balance
of the base salary that Employer would have paid the Employee from the date of
such termination through December 31, 1999 as if the Employee's employment had
not been so terminated assuming the base salary paid to the Employee in the
twelve (12) months preceding such termination remained constant for the
remainder of the period prior to December 31, 1999.
(d) The Employee's obligation to render services hereunder may be
terminated by the Employee if the Employee's "circumstances of employment shall
have changed" (as hereinafter defined), such termination to be known also as
termination for "good reason". In such event the Employee shall specify by
written notice to the Company the event or reason relied on for such
termination, and if such event or reason shall not have been cured within thirty
(30) days thereafter, the Employee's employment hereunder shall be deemed
terminated. Within thirty (30) days after the Employee's employment is
terminated following a termination for "good reason", the Company shall pay
Employee a lump sum payment
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representing the discounted (discounted at the rate existing as of such
termination for Treasury Bills/Notes having a maturity concurrent with the sixth
anniversary of the date of this Agreement) balance of the base salary that the
Employer had paid the Employee from the date of such termination through the
sixth anniversary of the date of this Agreement assuming the base salary paid to
the Employee in the twelve (12) months preceding such termination remained
constant for the remainder of the term of this Agreement. The parties agree that
the Employee shall not be under any duty to mitigate damages under this
Agreement and such defense shall not be interposed in any legal proceedings
among the parties. Provided the Employee has not violated and is not violating
the terms and conditions of Sections 6 and 7 hereof, compensation or other
income earned by the Employee after termination of the Employee's employment
hereunder shall not reduce payments to be made to the Employee under this
Section 2(d).
(e) The Employee's "circumstances of employment shall have changed"
shall mean any of the following:
(i) Notice by the Board of Directors of the Parent or the
Company to the Employee of termination of his employment, or this
Agreement for any reason whatsoever, other than pursuant to Section
2(b) or 2(c);
(ii) failure of the Parent to nominate and vote for the
Employee in the position as provided in Section 1(d) and 1(e) above;
(iii) reduction in the base salary being paid to the Employee
by the Company, or withdrawal from him of any material fringe benefits
or perquisites (including participation in current or future stock
option or stock appreciation plans) provided to him under this
Agreement or otherwise available to other senior corporate officers of
the Company;
(iv) a change in the Employee's place of employment without
his written consent as above described in Section 5(b) below, or
requirements or demands of Employee to perform services which would
make the continuance of his principal residence and home life in
Houston, Texas unreasonably difficult or inconvenient for him; and
(v) other material and adverse changes in Employee's
conditions of employment imposed on him by the Parent or the Company
(including, without limitation, a material and adverse change in the
duties of the Employee as described herein) or any material breach by
the Company of the provisions of this Agreement; provided, however,
that it shall not be considered or deemed to be a material adverse
change in the duties of the Employee for the Company to appoint an
interim chief executive officer (with all duties and responsibilities
held by the Employee pursuant to this Agreement), in the event that the
Employee is unable to perform his duties as a result of any disability.
For purposes of this Section 2(e)(v), disability shall mean the
Employee's inability
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to perform his duties by reason of illness and incapacity, but without
regard to the period of time of such inability to perform or
incapacity.
(f) The Employee's obligation to render services hereunder may be
terminated by the Employee following an event of a Change in Control (as
hereinafter defined). Upon a termination by the Employee following a Change in
Control pursuant to this Section 2(f), the Company shall pay to the Employee his
base salary through the date of termination and shall have no other obligation
to provide compensation or benefits to the Employee pursuant to this Agreement.
For the purposes of this Agreement, a Change in Control shall mean the sale or
transfer of at least 51% of the voting power of the Company to any person or
entity not owned or controlled by Capsure or any affiliate of Capsure; provided,
however, that a public offering of any securities of the Company shall not be
included within the definition of a Change in Control
3. Compensation.
(a) The Company shall pay Employee a base salary at the rate of Two
Hundred Fifty Thousand Dollars ($250,000.00) for each 12-month period hereunder,
payable according to the Company's regular payroll policy. The Company, through
its Board of Directors, will confer with the Employee in good faith, at least
annually, to review the base salary to be paid the Employee for the then fiscal
year with a view to increasing (but not decreasing) the base salary based upon
the performance of the Employee in relationship to the goals and performance of
the Company and prevailing business and competitive conditions. To the extent
that the Employee's base salary is increased, the new amount shall become the
Employee's base salary and shall not thereafter be reduced. The base salary
excludes any bonus or other employee benefits or perquisites to which the
Employee is entitled and, when adjusting the Employee's salary, the Board of
Directors, or any other body or group of persons responsible for setting the
Employee's base salary, shall not take into consideration the value of any
employee benefits, or Contingent Payment (as defined in Section 2.2 of the
Purchase Agreement). The Company's obligation to pay the Employee the base
salary during the term hereof may be extinguished only upon a termination of the
Employee's employment in accordance herewith, and subject to the provisions of
this Agreement.
(b) The Company shall consider, and may pay to Employee, a bonus
annually, such bonus to be determined by, and at the sole discretion of, the
Compensation Committee of the Board of Directors of Capsure.
(c) The compensation payable hereunder shall be subject to all
applicable withholding taxes, other normal payroll deductions and any other
amounts required by law to be withheld.
(d) Capsure shall deliver to Employee concurrently with its execution
and delivery of this Agreement an option agreement providing for the purchase of
75,000 shares of Capsure Holdings Corp. common stock in the form attached hereto
as Exhibit A.
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4. Expenses. Employer will reimburse Employee in accordance with
Employer's standard policy guidelines for the reasonable and necessary expenses
incurred by Employee in the normal course of Employer's business.
5. Benefits.
(a) During the term of this Agreement, the Employee shall be
entitled to participate in all employee benefit programs, including health
insurance programs, which are established for the Employer's employees similarly
situated to the Employee. The Employee shall also be entitled to paid annual
vacation time commensurate with past practices of the Employee and the Company.
During the term of this Agreement, the Employee covenants and agrees to
cooperate with the Company in order that the Company, or any of its affiliates,
may obtain key man life insurance in an amount acceptable to the Company or such
affiliate. In addition to any and all other benefits and vacation provided to
the Employee hereunder, in accordance with the past practices between the
Employee and the Company, the Company shall continue to provide the Employee
with such additional benefits and perquisites previously provided to him by the
Company (including, without limitation, participation in any fringe or employee
benefit program provided generally to senior executive officers of the Company,
or otherwise presently provided to the Employee, and medical, life and
disability insurance, including payment of the premiums of a $500,000 "split
dollar" life insurance policy issued on the Employee's life, first class travel
and accommodations, sick pay plans, and continued use of the Company owned
automobile currently provided to the Employee, including maintenance, insurance
and related costs, (provided that the Company shall have no obligation to
provide a replacement thereof) and payment or reimbursement for other expenses
in furtherance of the Company's business).
(b) During the term of this Agreement, the Employee's office
shall be customary to his position and shall be located in the principal
executive offices of the Company, both of which shall be located in, Houston,
Texas. In connection with his employment by the Company, the Employee shall not
be required to directly or indirectly relocate or transfer his principal
residence from Houston, Texas.
(c) Each of CFG, the Parent and the Company will indemnify,
defend and hold harmless the Employee, and his personal or legal representatives
or other successors, to the fullest extent permitted by the laws of their
respective states of incorporation, and the Employee shall be entitled to the
protection of all insurance policies which CFG, the Parent and the Company may
acquire and maintain generally for the benefit of their directors and officers,
against all costs, charges and expenses (including, but not limited to,
attorneys' fees and other legal expenses) whatsoever incurred or sustained by
the Employee or his personal or legal representatives in connection with any
action, suit or proceeding to which he (or his personal or legal representatives
or other successors) may be made a party by reason of his being or having been a
director, employee or officer of any of Capsure, the Parent or the Company and
their respective subsidiaries and affiliates, or those acts or omissions
relating thereto, all during the term hereof, to the extent permitted by the
laws of the respective states. If the existing certificates of incorporation and
bylaws of CFG, the Parent and the Company
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do not at any time during the term of this Agreement provide for indemnity of
the Employee to the fullest extent permitted by the laws of its state of
incorporation, CFG, the Parent and the Company will use reasonable efforts to
amend such certificates of incorporation and bylaws so as to provide
indemnification to the fullest extent permitted by applicable law.
6. Non-Competition. The Employee acknowledges that the services he will
render to the Company are special, unique, of high quality and of unusual
character and therefore are of peculiar value to the Company. In addition, the
Employee acknowledges that the Company's business is highly competitive, and
through his employment by the Company he is given access to, and will use,
unique and confidential information which must be available exclusively to the
Company in order to preserve the value of its business. Accordingly, the
Employee agrees that during the term of employment under this Agreement and for
a five (5) year period from the date of termination hereunder (the "Non-Compete
Period"), he will not, anywhere in the United States of America, either
separately, jointly or in association with others, directly or indirectly, as an
officer, director, consultant, agent, employee, owner, partner, stockholder
(except for a minority stockholding of a publicly traded company in which the
Employee shall not participate in management) or otherwise:
(a) establish, engage in, become economically interested in or
work on behalf of any business in fidelity, surety, errors and omissions
liability or other lines of insurance underwritten by the Company or any of the
affiliates of the Company and which competes with the business of the Company or
such affiliates; or
(b) solicit or service any party who is or was a customer,
agent or supplier of the Company or any affiliates of the Company for any
purpose relating to, and in competition with, the lines of insurance
underwritten by the Company or any of the affiliates of the Company; or
(c) solicit for employment any person who is or was an
employee of the Company.
Notwithstanding the foregoing, the Non-Compete Period shall be reduced
to a period of two (2) years following termination of the Employee's employment
hereunder in the event the Employee (i) is terminated without cause pursuant to
Section 2(c) hereof, (ii) terminates his employment in the event "circumstances
of employment shall have changed" pursuant to Section 2(d) hereof, or (iii)
terminates his employment pursuant to Section 2(f) hereof following a Change in
Control of the Company.
7. Nondisclosure.
(a) The Employee acknowledges that business information and
techniques developed or acquired by the Company are among its most valuable
assets and that the Employee heretofore has and during the term hereof will have
access to such information and techniques. Consequently, in order to further
protect the legitimate interests of the Company, the Employee hereby agrees that
he will not at any time, without the express written consent
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of the Company: (i) disclose, directly or indirectly, any Confidential
Information to anyone outside the employ of the Company and its affiliates; or
(ii) use, directly or indirectly, any Confidential Information for the benefit
of anyone other than the Company and its affiliates.
(b) The term "Confidential Information" as used herein
means all information of a business or technical nature disclosed to, learned or
developed by the Employee, in the course of his employment by the Company, which
information relates to the business of the Company, the business of any customer
or supplier of the Company, or the business of any other person, firm or
corporation which consults with or is in any way affiliated with the Company.
(c) The Employee's obligations under this section 7 shall
survive his employment by the Company and shall terminate with regard to any
Confidential Information only when it ceases to be Confidential Information.
8. Remedies. Both parties recognize that the services to be rendered by
the Employee are unique in character and that a breach by the Employee of the
terms and conditions of this Agreement would irreparably harm the Company and
that the remedies at law would not be adequate compensation to the Company for
such breach. Accordingly, in the event of any such breach, in addition to all
other remedies available to it in law, the Company shall be entitled to have an
injunction issued by any court of competent jurisdiction enjoining and
restraining the Employee and each and every party concerned therewith from doing
any act in violation of any provisions of this Agreement. For purposes of this
Section and Sections 6 and 7 hereof, the term "Company" shall include the
Company, its subsidiaries and other affiliates and their respective successors
and assigns. The term "affiliate" as used herein includes any entity
controlling, controlled by or under common control with the Company.
9. Miscellaneous.
(a) The parties hereto agree that the time period, the
geographical area and the scope of the restrictions contained in Section 6
hereof are reasonable, but are also divisible and severable; and further, in the
event any of said provisions are held to be invalid or unenforceable by a court
of competent jurisdiction, such invalidity or unenforceability shall have no
effect on the validity or enforceability of any other provision hereof and such
provisions as are held invalid or unenforceable shall be deemed modified to the
extent necessary to make them valid and enforceable.
(b) In any court proceeding brought to enforce this Agreement,
the prevailing party shall be reimbursed by the non-prevailing party for his or
its reasonable attorneys' fees and the other expenses of such proceeding.
(c) This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof.
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(d) The provisions and terms of this Agreement shall be
governed and construed according to the laws of the State of Delaware. The
parties irrevocably consent to the personal jurisdiction of and the propriety of
venue in the courts located in the State of Delaware and of any state or federal
court located in Delaware in connection with any permitted action or proceeding
arising out of or related to this Agreement.
(e) If any dispute, claim or controversy shall arise between
the Employee, on the one hand, and any one or more of the other parties, on the
other hand, as to any issue whatsoever, other than the determination of
disability, the same shall be referred to and settled by the following
"arbitration" procedure which may be requested upon the application of any
interested party: It is agreed the arbitration hearings, if any, shall be held
in the State of Texas, or such other place as may be agreed upon by the parties,
and any such dispute, claim or controversy shall be referred to and settled by
such arbitration in accordance with, but not under the auspices of, the
Commercial Arbitration Rules ("Rules") of the American Arbitration Association
("AAA") then in effect (which Rules are incorporated herein by reference as
though set forth at length herein other than those with respect to the number of
arbitrators) and any decision or order or finding rendered by a panel of three
(3) arbitrators ("arbitrators"), of whom one is chosen by Capsure, one is chosen
by the Employee and the third is chosen by the arbitrators chosen by Capsure and
the Employee, shall be final and conclusive upon the parties hereto and
judgement upon the award, finding or decision rendered may be entered in the
Court of the forum, state or federal, having jurisdiction. It is expressly
agreed between the parties hereto that whether or not the Rules of the AAA shall
provide for a discovery procedure, such discovery procedure is hereby granted
and permitted in the said arbitration proceedings and the parties may apply to
the arbitrators for the enforcement of any form of discovery which would be
permitted by the laws of the State of Texas and their award or decision in
respect of such discovery shall be final and binding.
The arbitrators, if they deem that the matter requires it, are
authorized to award to the party whose contention is sustained such sums as they
or a majority of them shall deem proper to compensate it or him for the time and
expense incident to the proceedings and, if the arbitration was demanded without
reasonable cause, then they may also award damages for delay, if any. The
arbitrators shall determine their own reasonable compensation in accordance with
such AAA Rules, and, unless otherwise provided by agreement, shall assess the
cost and charges of the proceedings equally to both parties unless the
arbitrators shall find an issue raised by either party was unreasonable or
frivolous and that therefore the costs of the arbitration or any portion thereof
shall be borne by the said party.
(f) Any notices required or permitted hereunder shall be in
writing and shall be deemed to have been given when (i) personally delivered, or
(ii) forty-eight (48) hours after deposit in the U.S. mail, postage prepaid,
certified or registered mail, or (iii) the next business day when sent by
overnight courier (such as Federal Express, or (iv) when confirmed by the sender
by telephone when sent by facsimile transmission, and sent to the following
addresses:
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If to the Employee: Xxxx Xxxx, Jr.
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: 713/722-4601
with a copy to: Thompson, Coe, Cousins
& Irons L.L.P.
000 Xxxxxxxx Xxxxx
00xx Xxxxx
Xxxxxx, Xxxxx 00000-0000
Facsimile No.: 214/871-8209
Attention: Xxxxx X. Xxxxx, Xx.
If to the Company,
Parent, CFG or
Capsure: c/o Capsure Financial Group, Inc.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Facsimile No.: 404/843-5598
Attention: Xxxxx X. Xxxxxxxxx
With a copy to: Xxxxxxxxx & Xxxxxxxxxxx, P.C.
Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: 312/454-0335
Attention: Xxxxx X. Xxxxxxxxxxx
or to such other address or addresses as the parties may from time to time
specify by notice in writing to the other parties, given in the manner provided
in this Section.
(g) The rights and obligations of the Company under this
Agreement may be assigned by the Company to any affiliate of or successor in
interest to the Company with the consent of the Employee, which consent shall
not be unreasonably withheld. This Agreement shall not be assignable by the
Employee. Subject to the foregoing, this Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and upon their respective
heirs, personal representative, successors and assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COMPANY:
UNIVERSAL SURETY OF AMERICA
By: / s / Xxxx Xxxx, Jr.
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Its: President
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PARENT:
UNIVERSAL SURETY HOLDING CORP.
By: / s / Xxxx Xxxx, Jr
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Title: President
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CAPSURE FINANCIAL GROUP, INC.
By: / s / Xxxxx X. Xxxxxxxxx
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Title: President
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CAPSURE HOLDINGS CORP.
By: / s / Xxxxx X. Xxxxxxxxx
-------------------------------------
Title: President
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EMPLOYEE:
/ s / Xxxx Xxxx, Jr.
-----------------------------------------
XXXX XXXX, JR.
