EMPLOYMENT AGREEMENT
EXHIBIT
10.8
This
EMPLOYMENT AGREEMENT (“Agreement”) is made as of January 1, 2006, by and between
PICO Holdings, Inc., a diversified investment company formed under the laws
of
the state of California (“Company”), and Xxxx X. Xxxx (“Employee”).
RECITALS
1. The
Company believes it is prudent and appropriate to attempt to increase
shareholder value through strategic investments, acquisitions, business
combinations, realization of market value of existing assets and acquisitions
of
assets or companies below market value and in certain circumstances, below
book
value.
2. The
Company believes that Employee possesses unique skills, knowledge, and
experience and has demonstrated such skills, knowledge and experience in
pursuing the Company’s goals.
3. The
Company believes that it is imperative that it be able to rely upon Employee’s
skills and services for a reasonable time in the future.
4. Employee
has been President and Chief Executive Officer and a Director of the Company
since November 20, 1996, a Director of its predecessor company since December
10, 1993, and President and Chief Executive Officer of its predecessor since
July 15, 1995.
5. Employee
has been instrumental in reorganizing the Company’s Board of Directors,
management, and corporate structure.
6.
Employee
entered into a four-year Employment Agreement with the Company effective
December 31, 1997. A further Employment Agreement was entered into for the
period of January 1, 2002 through December 31, 2005. The Employment Agreement
contained herein shall take effect on January 1, 2006.
AGREEMENT
In
consideration of the foregoing, and of their mutual promises contained herein,
the parties agree and intend to be legally bound as follows:
1.
Employment
and Term.
The
Company hereby engages Employee, and Employee hereby accepts such engagement,
on
the terms and conditions set forth herein, for a five-year period commencing
on
January 1, 2006.
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2. Duties.
Employee
is engaged in the position of President and Chief Executive Officer. Employee
shall perform faithfully and diligently the duties customarily performed by
persons in the position for which Employee is engaged, and such other similar
and related duties as the Board of Directors of the Company shall reasonably
assign to Employee from time to time. The duties of Employee shall encompass
but
not necessarily be limited to the following areas and activities:
A. To
analyze the activities and operations of the Company and its subsidiaries and
affiliates and make recommendations to achieve greater operating
efficiencies.
B. To
conduct activities on behalf of the Company and its subsidiaries and affiliates
including but not limited to investigating opportunities for consolidation,
making recommendations for internal financial restructuring, and searching
for
potential merger and acquisition candidates.
C. To
analyze the investment portfolios of the Company and its subsidiaries and
affiliates and make recommendations to achieve higher yield and a greater
overall return.
D. To
fulfill the duties of the Company’s President and Chief Executive Officer as
defined by the Company’s By-Laws.
E. To
strictly comply with the Company’s Code of Ethics as adopted by the Board of
Directors of the Company on October 17, 2003.
Employee
will devote such time and efforts to completing his duties as is reasonably
necessary to maximize the success of the Company’s business.
3.
Compensation.
A. Base
Salary.
During
the term of this Agreement, as compensation for the proper and satisfactory
performance of all duties to be performed by Employee hereunder, Company shall
pay to Employee a base salary of $1,075,000.00 per year, payable in accordance
with the normal payroll practices of the Company, less required deductions
for
state and federal income tax withholding, social security and other required
payroll taxes. The base salary shall be revised annually with the first
adjustment occurring on January 1, 2006, in the same percentage applicable
to
the Company’s other staff members, in an amount deemed adequate to provide for
cost of living, subject to Committee approval, based on several major
compensation indices.
B. Incentive
Award.
In
addition, Employee shall be eligible to receive an annual incentive award based
on the growth of the Company’s book value per share (adjusted for any book value
impact by ⅞ of all stock appreciation rights--related expenses net of tax)
during the fiscal year, above a threshold. The threshold above which incentives
are earned is 80% of the S&P 500 annualized total return for the five
previous years, (but no less than 0). If the increase in book value per share
exceeds this threshold, the incentive award shall be equal to 5% of such excess
multiplied by the number of shares outstanding at the beginning of the fiscal
year. The incentive award shall be paid in cash, less applicable tax
withholdings.
C. Employee
Benefits.
Employee shall be entitled to the standard employee benefit package made
available to employees of the Company, subject to the terms, conditions and
restrictions stated in that package and the applicable benefit plan documents.
Notwithstanding the preceding sentence, the termination payments available
under
this Agreement shall be in lieu of any standard severance benefits payable
to
Employee under the severance program available generally to employees of
Company. Company shall have the right at any time to prospectively amend, modify
or eliminate employee benefits, which changes shall become effective
immediately.
D. Payments
by Affiliates.
All
compensation, fees or other remuneration payable to Employee by any affiliate
of
the Company shall be waived or if paid, remitted to the
Company.
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4.
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Termination.
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If
Employee’s services under this Agreement are terminated by the Company for any
reason other than cause or the death or disability of Employee, prior to January
1, 2008, Employee shall be paid a lump sum equal to $3,225,000.00 (less
applicable tax withholdings). If Employee’s services are terminated by the
Company for any reason other than cause or the death or disability of Employee
on or after January 1, 2008 and prior to December 31, 2010, Employee shall
be
paid a lump sum equal to $3,225,000.00 (less applicable tax withholdings) minus
the amount previously paid to Employee under Section 3.A. of this Agreement
from
January 1, 2008 to the date of termination. In addition to the amount set forth
above, Employee shall receive the pro rata portion of the annual incentive
award
that would have been payable to Employee under Section 3.B. of this Agreement
for the year in which termination of employment occurs. The portion payable
to
Employee shall be equal to the incentive award payable for the full year of
termination times a fraction, the numerator of which is the increase in book
value per share at the date of termination and the denominator of which is
the
increase in book value per share at December 31 for the year of termination.
The
incentive award shall be paid in cash, less applicable tax withholdings, within
2-1/2 months after the end of the year of termination.
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5.
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Death
or Disability of Employee.
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In
the
event Employee terminates employment as a result of death or permanent and
total
disability (as determined by the Board of Directors of the Company in its sole
discretion) prior to January 1, 2008, a lump sum shall be paid to Employee
or to
the person designated by Employee to receive death benefits hereunder, in an
amount equal to $3,225,000.00 (less applicable withholding taxes). In the event
Employee terminates employment as a result of death or permanent and total
disability on or after January 1, 2008 and prior to December 31, 2010, Employee
or the person designated by Employee to receive death benefits hereunder shall
be paid a lump sum in an amount equal to $3,225,000.00 (less applicable
withholding taxes) minus the amount previously paid to Employee under Section
3.A. of this Agreement from January 1, 2008 to the date of termination of
employment. In addition to the amount set forth above, Employee shall receive
the pro rata portion of the annual incentive award that would have been payable
to Employee under Section 3.B. of this Agreement for the year in which
termination of employment occurs. The portion payable to Employee shall be
equal
to the incentive award payable for the full year of termination times a
fraction, the numerator of which is the increase in book value per share at
the
date of termination and the denominator of which is the increase in book value
per share at December 31 of the year of termination. The incentive award shall
be paid in cash, less applicable tax withholdings, within 2-1/2 months after
the
end of the year of termination. If no person has been designated by Employee
to
receive death benefits hereunder, payment shall be made to Employee’s surviving
spouse (if any) or to Employee’s estate if Employee is not married at the time
of death.
| 6. |
Termination
by Employee
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In
the
event Employee terminates employment for any reason prior to December 31, 2010,
Company shall make a lump sum payment to Employee in the amount (less applicable
tax withholdings) of $500,000.00 if Employee terminates employment during
calendar year 2006. Such lump sum amount shall decrease by $100,000.00 each
calendar year thereafter.
| 7. |
Non-Solicitation
of Employees
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Employee
agrees that for a period of one (1) year following termination of employment,
Employee will not solicit any officer or key employee of the Company or its
subsidiaries or affiliates for employment.
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8.
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Golden
Parachute Limitation.
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To
the
extent that any payment to Employee under this Agreement taken together with
any
other payments made to Employee constitutes an “excess parachute payment” within
the meaning of Internal Revenue Code Section 280G, payments to employee will
be
reduced to the extent necessary to eliminate any excess parachute payment.
Employee may direct which payments to reduce to meet the
requirements.
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9.
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Confidentiality.
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Both
during the term of his engagement by the Company and thereafter, Employee shall
not, without the prior written consent of the Company, or as required by the
order of any court or administrative agency with jurisdiction, divulge to any
third party, or use for his own benefit or for any purpose other than the
exclusive benefit of the Company, any confidential information concerning its
business and affairs obtained by him during the term of his engagement; it
being
the intent hereof that Employee shall not so divulge or use any such information
which is unpublished or not readily available to the general public. Nothing
contained in this Section 9 shall restrict Employee’s ability to make such
disclosures during the course of his employment as may be necessary or
appropriate to the effective and efficient discharge of his duties to the
Company under this Agreement.
10. Other
Agreements.
Employee
represents and warrants to the Company that there is no agreement between him
and any other person, firm or corporation concerning the performance of services
under this Agreement or which in any way might prevent Employee from performing
his obligations under this Agreement. Nothing shall be interpreted as precluding
Employee from seeking or performing other employment or consulting work.
11. Assignment.
This
Agreement may not be assigned by either party without the prior written consent
of the other.
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12.
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Waiver
of Breach.
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Failure
to insist upon strict compliance with any of the terms, promises or conditions
of this Agreement shall not be deemed a waiver of such terms, promise or
condition, nor shall any waiver or relinquishment of any right or power
hereunder at any one or more times be deemed a waiver or relinquishment of
such
right or power, unless specifically stated.
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13.
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Severability.
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The
invalidity or unenforceability of any provisions hereof shall in no way affect
the validity or enforceability of any other provision.
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14.
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Modification.
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This
Agreement cannot be amended, changed, modified, or discharged except by an
agreement in writing signed by both the Company and Employee. In the event
the
Company determines that modifications may be necessary to facilitate compliance
with the requirements of Internal Revenue Code Section 409A, the Company and
Employee shall cooperate to adopt such modifications.
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15.
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Governing
Law.
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This
Agreement and the performance of this Agreement shall be governed by the laws
of
the state of California.
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16.
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Captions.
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The
captions at the beginning of the several sections of this Agreement are not
part
of the context hereof but are only guides or labels to assist in locating and
reading such sections. They should be given no effect in construing this
Agreement.
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17. Binding
Effect.
Except
as
otherwise herein expressly provided, this Agreement shall inure to the benefit
of and be binding upon the Company, its successors and assigns, and Employee,
his heirs, executors, administrators and legal representatives, provided that
the rights and obligations of Employee or the Company hereunder may not be
delegated or assigned except as provided in Section 12 hereof.
18. Entire
Agreement.
This
Agreement contains the entire agreement of the parties with respect to the
subject matter hereof, and no representations, inducements, promises or
agreements, oral or written, between the parties, not embodied herein shall
have
any force or effect.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective
on
the
date
first written above.
PICO
HOLDINGS, INC.
/s/
Xxxxx X. Xxxxxx
Name
General
Counsel and Secretary
Title:
EMPLOYEE:
/s/
Xxxx X. Xxxx
Xxxx
X.
Xxxx
