Exhibit 10.4
NORTH EAST INSURANCE COMPANY
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of January 1, 1998 between NORTH EAST
INSURANCE COMPANY, a Maine corporation (the "Company"), and XXXXXX X. XXXXX
(the "Executive").
WHEREAS, the Company wishes to obtain the continued services of the
Executive; and
WHEREAS, the Executive wishes to continue in employment with the
Company on the terms herein provided;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements of the parties herein contained, the parties hereto (the
"Parties") agree as follows:
1. Term. Subject to the provisions for termination hereinafter
provided, the Executive's employment hereunder shall be for a term (the
"Employment Term") commencing on January 1, 1998 (the "Employment Date")
and ending on December 31, 1999 (the "Termination Date").
2. Positions and Duties. During the Employment Term the Executive
shall serve as Chief Operating Officer of the Company. The Executive shall
report to the President of the Company (the "President ") and perform such
employment duties, consistent with his position, as are specified by the
President, with duties and responsibilities including, but not limited to,
primary general supervision and authority over the internal business and
affairs of the Company and such additional duties as may be assigned from
time to time by the President. The Executive shall devote his full
productive time, energy and ability to the proper and efficient conduct of
the Company's business. The Executive may (i) devote reasonable periods of
time to passive investment of his personal assets, and (ii) engage in
community activities (including, with the Board's consent, service on one
or more boards of nonprofit institutions) so long as such activities do not
interfere with the performance of his obligations hereunder. The Executive
shall observe and comply with all lawful and reasonable rules of conduct
set by the Board for executives of the Company, and shall endeavor to
promote the business, reputation and interests of the Company.
3. Salary. For his services hereunder the Company shall pay the
Executive a base salary of One Hundred Twenty Thousand Dollars ($120,000)
per annum (the "Base Salary"). After 1998, Base Salary shall be increased
annually to reflect the increase, if any, in the cost of living for such
year versus 1998, as measured by the CPI. For purposes hereof, "CPI" shall
mean the United States Bureau of Labor Statistics Consumer Price Index All
Urban Consumers (CPI-U), (1982 - 4 = 100) Base Year, or any comparable
successor index designated by such agency.
4. Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by him in the course of
his employment by the Company hereunder, as per Company policies currently
in effect, provided that the Executive properly accounts therefor.
5. Other Benefits. During his employment the Executive shall be
entitled to:
(a) participate in the Company's benefit plans and
arrangements on terms at least as favorable as the terms generally
applicable to senior management from time to time;
(b) the exclusive use of an automobile to be provided by the
Company during the term of his employment; and
(c) up to four (4) weeks paid vacation in any calendar year.
6. Renewal of Agreement.
(a) Renewal. If the Executive gives the Company notice of his
willingness to renew this Agreement, then the Agreement shall be
deemed renewed for an additional two-year period unless the Company
gives the Executive notice of its intention not to renew the
Agreement. To be effective, such notice must be given in writing by
the Executive or the Company (as the case may be) at least one
hundred twenty (120) days or ninety (90) days, respectively, prior to
the Termination Date. Any such renewal of this Agreement shall extend
the Employment Term and Termination Date under this Agreement by two
(2) years.
(b) Non-Renewal Payment. If, prior to the Termination Date,
the Company does not offer the Executive employment with the Company
for the period commencing immediately after the Termination Date
under terms and conditions at least as favorable to the Executive as
those contained herein, including, but not limited to, the terms and
conditions of Sections 2 through 6 hereof, then, the Executive shall
be entitled to a payment of One Hundred Twenty Thousand Dollars
($120,000) (the "Non-Renewal Payment"); provided, however, that
should the Executive's employment with the Company be terminated
prior to the Termination Date under the terms of Section 7 herein,
this Section 6 shall have no effect, and the Executive shall not be
entitled to the Non-Renewal Payment. The Company shall pay the Non-
Renewal Payment in twelve (12) equal monthly installments to commence
within ten (10) business days following the Termination Date.
7. Termination of Employment. The Executive's employment by the
Company pursuant hereto is subject to termination during the Employment
Term only as follows:
(a) Death. The Executive's employment shall terminate as of
the date of his death, in which case:
(i) The Company shall pay to the Executive's estate the
Base Salary accrued through the date of the Executive's death;
(ii) All other compensation and benefits shall be as
determined under the terms and conditions of any applicable
plans, programs or other coverages maintained by the Company.
(b) Disability. The Company may terminate the Executive's
employment due to disability, as determined under the Company's long-
term disability plan as in effect from time to time, in which case:
(i) The Company shall continue to pay the Base Salary
for one year following termination of employment, such period
ending on the last day of the payroll period during which the
first anniversary of such termination occurs;
(ii) All other compensation and benefits shall be as
determined under the terms and conditions of any applicable
plans, programs or other coverages maintained by the Company.
(c) Termination by the Company Without Cause or Termination
by the Executive for Good Reason. The Company may terminate the
Executive's employment without Cause, as defined below, and the
Executive may terminate his employment for Good Reason, as defined
below. In either case:
(i) The Company shall pay the Executive One Hundred
Twenty Thousand Dollars ($120,000) in twelve equal monthly
payments to commence within ten (10) business days following
the Termination Date;
(ii) Medical, hospitalization and any other health
benefits, as applicable on the date of termination of the
Executive's employment, shall continue to be provided until the
earlier of (i) the six month anniversary of termination of the
Executive's employment, or (ii) the date the Executive is
entitled to comparable benefits under any plan maintained by a
subsequent employer of the Executive; and
(iii) All other compensation and benefits shall be as
determined under the terms and conditions of any applicable
plans, programs or other coverages maintained by the Company.
(d) Termination by the Company for Cause. The Company shall
be entitled to terminate the Executive's employment at any time under
this Section 7(d), by written notice to the Executive if it has
"Cause" to do so, which shall mean:
(i) The Executive's indictment for or plea of nolo
contendere to, (A) a felony, or (B) a misdemeanor materially
injurious to the Company;
(ii) The Executive's continued substantial neglect of
duties, after written notice and an opportunity to correct;
(iii) Gross misconduct in the performance of duties
hereunder, materially injurious to the reputation, business or
operation of the Company; or
(iv) The issuance of an order from an insurance
regulatory body of any state or other jurisdiction in which the
Company does business that (A) finds that the Executive
violated statutory requirements of applicable insurance laws or
regulations, and (B) prohibits the Executive from exercising
any material portion of his duties as Chief Operating Officer
of the Company.
If the Company terminates the Executive's employment for Cause, the
Executive's Base Salary and other benefits shall be paid through the date
of termination and the Executive shall have no further rights to
compensation or benefits other than as determined by the terms of any
applicable plan or program.
The Executive must be notified in writing of any termination of his
employment for Cause. The Executive shall then have the right, exercisable
only within ten (10) days following receipt of such notice, to file a
written request for review by the Company. In such case, the Executive
shall be given the opportunity to be heard, personally or through counsel,
by the President and members of the Board who are not employees (the
"Independent Directors") and a majority of the Independent Directors and
the President must thereafter confirm that such termination is for Cause.
If the Directors do not provide such confirmation, the termination shall be
treated as other than for Cause.
If, following a termination of the Executive's employment for reasons
other than Cause, the President or the Independent Directors become aware
of facts clearly demonstrating the existence, at the time of such
termination, of grounds for terminating the Executive's employment for
Cause, such termination shall be treated as a termination for Cause,
subject to the Executive's right to be heard, and to have such
determination confirmed, as provided immediately above. Such right of post-
effective termination for Cause shall be deemed waived unless written
notice of the basis therefor is given to the Executive (i) within one year
from the Termination Date of his employment or (ii) by June 30 of the
calendar year following the year in which such termination occurred,
whichever is later.
(e) Termination by the Executive for Good Reason. The
Executive shall be entitled to terminate his employment at any time
under this Section 7(e) by written notice to the Company if he has
"Good Reason" to do so, which shall mean (i) the Company's breach of
this Agreement, including, but not limited to: (A) a breach of this
Agreement caused by the Company's attempt to reduce the Executive's
compensation; (B) the Company's attempt to remove the Executive from
the position of Chief Operating Officer, or (ii) a move of the
Company's headquarters to a location more than 50 miles from
Portland, Maine.
(f) Voluntary Termination of Employment. The Executive may
terminate employment voluntarily, in which case the Base Salary and
other benefits shall be paid through the date of termination and the
Executive shall have no further rights to compensation or benefits
other than as determined by the terms of any applicable plan or
program.
8. Confidential Information. (a) The Executive recognizes that the
services to be performed by him hereunder are special, unique and
extraordinary and that, by reason of his employment with the Company, he
may acquire Confidential Information (as hereinafter defined) concerning
the operation of the Company the use or disclosure of which would cause the
Company substantial, irreparable loss and damage which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
the Executive agrees that he shall not (directly or indirectly) at any
time, whether during or after the Employment Term:
(i) knowingly use for an improper personal benefit any
Confidential Information that he may learn or has learned by reason
of his employment with the Company or
(ii) disclose any such Confidential Information to any person
except (A) in the good faith performance of his obligations to the
Company hereunder, (B) in connection with the enforcement of his
rights under this Agreement or (C) with the prior consent of the
Board.
As used herein "Confidential Information" includes information with
respect to the Company's facilities and methods, trade secrets and other
intellectual property, systems, patents and patent applications,
procedures, manuals, confidential reports, financial information, business
plans, prospects or opportunities, personnel information or lists of
customers and suppliers; provided, however, that such term shall not
include any information which is or becomes generally known or available
publicly other than as a result of disclosure by the Executive which is not
permitted as described in clause (ii) above.
(b) The Executive confirms that all Confidential Information is the
exclusive property of the Company. All business records, papers and
documents and electronic materials kept or made by the Executive relating
to the business of the Company which comprise Confidential Information
shall be and remain the property of the Company during the Employment Term
and all times thereafter. Upon the termination of his employment with the
Company or upon the request of the Company at any time, the Executive shall
promptly deliver to the Company, and shall retain no copies of, any written
or electronic materials, records and documents made by the Executive or
coming into his possession concerning the business or affairs of the
Company and which constitute Confidential Information.
9. Non-Competition. (a) During the term of his employment and for
the period commencing on the date the Executive's employment terminates and
ending on the first anniversary thereof (the "Restricted Period"), the
Executive shall not (i) directly or indirectly, for his own account or for
the account of others, as an officer, director, stockholder, owner,
partner, employee, promoter, consultant, manager or otherwise participate
in the promotion, financing, ownership, operation, or management of, or
assist in or carry on through a proprietorship, corporation, partnership or
other form of entity, within Maine or any other state in which the Company
was conducting, or was actively planning to conduct, the business of
insurance (the "Business") as of the date of such termination of
employment, (ii) solicit or contact in an effort to do business with any
person who was a customer or agent of the Company during the period of the
Executive's employment, or any affiliate of any such person, if such
solicitation or contact is directly or indirectly in competition with the
Company, or (iii) interfere in a similar manner with the business of the
Company. Nothing in this Section 9 shall prohibit the Executive from
acquiring or holding any issue of stock or securities of any person that
has any securities registered under Section 12 of the Securities Exchange
Act of 1934 as amended, listed on a national securities exchange or quoted
on the automated quotation system of the National Association of Securities
Dealers, Inc. so long as (x) the Executive is not deemed to be an
"affiliate" of such person as such term is used in paragraphs (c) and (d)
of Rule 145 under the Securities Act of 1933, as amended, and (y) the
Executive, members of his immediate family or persons under his control do
not own or hold more than five percent (5%) of any voting securities of any
such person.
(b) During the Restricted Period, the Executive shall not, whether
for his own account or for the account of any other person (excluding the
Company), (i) solicit or induce any of the Company's employees to leave
their employment with the Company or to accept employment with anyone else
or (ii) hire any such employees.
(c) The Executive has carefully read and considered the provisions
of this Section 9 and, having done so, agrees that the restrictions set
forth in this Section 9 (including the Restricted Period, the scope of
activity to be restrained and the geographical scope) are fair and
reasonable and are reasonably required for the protection of the interests
of the Company, its officers, directors, employees, creditors and
shareholders. The Executive understands that the restrictions contained in
this Section 9 may limit his ability to engage in a business similar to the
Company's business, but acknowledges that he will receive sufficiently high
remuneration and other benefits from the Company hereunder to justify such
restrictions.
10. Breach of Section 8 or Section 9. The Executive acknowledges
that a breach of any of the covenants contained in Section 8 or Section 9
hereof may result in material, irreparable injury to the Company for which
there is not adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such
a breach, any payments remaining under the terms of this Agreement shall
cease and the Company shall be entitled to obtain a temporary restraining
order and a preliminary or permanent injunction restraining the Executive
from engaging in activities prohibited by Section 8 or Section 9 hereof or
such other relief as may be required to enforce any of the covenants
contained in Section 8 or Section 9 hereof.
11. Arbitration. The Parties agree that any controversy or claim
arising out of or relating to this Agreement, or the breach of any
provision hereof, or the terms or conditions of employment, including
whether such controversy or claim is arbitrable, and excepting any claim or
controversy arising out of the provisions of Section 8 or Section 9 hereof,
shall be settled by arbitration in the City of Portland, Maine, in
accordance with the rules for commercial arbitration of the American
Arbitration Association as in effect at the time a demand for arbitration
under the rules is made, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The
decision of the arbitrators, including determination of the amount of any
damages suffered, shall be conclusive, final and binding on both Parties,
their heirs, executors, administrators, successors and assigns. The cost of
arbitration incurred by either Party shall be borne by that party unless
otherwise determined by the arbitrators.
12. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Executive, his
spouse, his estate or beneficiaries, shall be subject to withholding of
such amounts relating to taxes as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Company may, in its sole
discretion, accept other provisions for payment of taxes, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
13. Assignability; Binding Nature. This Agreement is binding upon,
and shall inure to the benefit of, the Parties hereto and their respective
successors, heirs, administrators, executors and assigns. No rights or
obligations of the Executive under this Agreement may be assigned or
transferred by the Executive except that (a) his rights to compensation and
benefits hereunder may be transferred by will or operation of law, subject
to the limitations of this Agreement, and (b) his rights under employee
benefit plans or programs may be assigned or transferred in accordance with
such plans, programs. No rights or obligations of the Company under this
Agreement may be assigned or transferred except that such rights or
obligations may be assigned or transferred by operation of law in the event
of a merger or consolidation in which the Company is not the continuing
entity, or the sale or liquidation of all or substantially all of the
assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a
matter of law.
14. Entire Agreement. This Agreement contains the entire agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations, and
undertakings, whether written or oral, between the Parties with respect
thereto.
15. Notice. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered by hand or mailed by
United States overnight express mail, or nationally recognized private
delivery service on an overnight basis, return receipt requested, postage
prepaid. All such notices to the Executive shall be marked clearly
"Personal and Confidential."
If to the Executive:
Office Address: Xxxxxx X. Xxxxx
North East Insurance Company
000 Xxxxx Xxxx
Xxxxxxxxxxx, Xxxxx 00000
Home Address: 00 Xxxxx Xxxx Xxxx
Xxxxxx, Xxxxx 00000
If to the Company: North East Insurance Company
000 Xxxxx Xxxx
Xxxxxxxxxxx, Xxxxx 00000
Attn: Secretary
With a Copy to: Chair -- Compensation Committee
c/o North East Insurance Company
000 Xxxxx Xxxx
Xxxxxxxxxxx, Xxxxx 00000
Notices may also be sent to such other address as either Party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
16. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer of the
Company as may be specifically designated by the Board. No waiver by either
Party at any time of any breach by the other Party of, or compliance with,
any condition or provision of this Agreement to be performed by such other
Party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either Party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the
laws of the State of Maine.
17. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
18. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date and year first above written.
NORTH EAST INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxx Date: 11/18/98
Title: Secretary
The Executive:
/s/ Xxxxxx X. Xxxxx Date: 10/01/98
