Exhibit 10.4b
XXXXXXX X. XXXXXXX
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made and entered into
between XXXXXXX X. XXXXXXX ("Conaton") and THE MIDLAND COMPANY ( "Midland").
W I T N E S S E T H:
Midland desires to engage Conaton to render the consulting services
subject to the terms and conditions of this Agreement because of Conaton's
valuable experience in operating the business. Conaton is willing to perform
such consulting services for the fees and upon and subject to the terms and
conditions set forth in this Agreement. Accordingly, Midland and Conaton
agree as follows:
1. Term. The term of this Agreement (the "Term") shall be for a
period of 5.75 years commencing on April 1, 2000 and expiring on December 31,
2005 (the "Expiration Date").
2. Consulting Services. During the term of this Agreement,
Conaton's duties include, at the request of Midland: (a) consulting with
officers of Midland during regular business hours, and (b) promoting the good
will of Midland by being available to attend and attending insurance-related
conferences and functions as a representative of Midland. Conaton shall
devote only such time and attention to the business of Midland as may be
reasonably necessary to perform Conaton's duties under this Agreement, up to a
maximum of twenty (20) hours per month.
3. Consulting Fees.
a. Fee. In consideration of the consulting services to be
performed by Conaton, Midland agrees to pay to Conaton
the following annual amounts:
Year Consulting
------ ------------
2000 $300,000
2001 $300,000
2002 $250,000
2003 $200,000
2004 $100,000
2005 $ 50,000
Midland shall pay such amounts in equal monthly installments on or before the
fifteenth (15th) of each month.
b. Other Consideration. Conaton shall receive additional
consideration as follows:
i. The Midland Health Insurance Plan shall be
available at normal employee rates during the Term and after the
Term. Conaton's coverage shall be secondary to Medicare after
he reaches age 65, and Conaton's spouse shall be covered until
she reaches age 65 at which time her coverage shall be secondary
to Medicare;
ii. During the Term, a car shall be provided by
Midland consistent with the program in effect at the
commencement of this Agreement;
iii. Use of the Midland plane shall be available
secondary to Midland's business use;
iv. During the Term, Midland shall continue to pay
club dues for the clubs Conaton was a member (and Midland was
paying such dues for such clubs) at the commencement date of
this Agreement;
v. No director fees shall be paid during the Term;
vi. Any existing stock options or stock grants of
Conaton may be exercised at the earlier of the normal expiration
date during the Term or for a period of three (3) years after
the later of (x) the Expiration Date of this Agreement or (y)
the date of retirement of Conaton as a member of the Board of
Directors. Any future awards while a director during (or after
the Term) will be equal to the stock awards of an outside
director;
vii. Midland shall provide Conaton with an office in
headquarters building during the Term;
viii. During the Term, Midland shall provide payment
for Conaton's estate planning and annual tax preparation
consistent with the current level of fees that were being paid
at the commencement date of this Agreement; and
ix. On April 1, 2001, Midland shall provide for the
payment in a single lump sum of Conaton's benefit from the
Nonqualified Self-Directed Retirement Plan, and an additional
payment equal to 45.6% of the benefit to provide for the payment
of any federal, state and local income tax due on the payment of
the benefit.
4. Proprietary Property; Confidential Information. For purposes of
this Agreement, the following definition shall be used:
a. Proprietary Property. The term "Proprietary Property"
includes any and all ideas, creations, developments,
improvements, inventions, trade secrets, patents,
copyrights, trademarks, trade names, logos, processes,
computer programs, databases, spread sheets,
documentation, models, methodologies, strategies,
material works or authorship, know-how and methods of
applying and putting into practice any such items that
are created, developed or discovered by or for Midland
or are acquired or licensed on a proprietary technical
information generally known in the business in which
Midland operates, even if disclosed to Conaton or known
or developed by Conaton as a consequence of or through
Conaton's performance of services under this Agreement.
b. Confidential Information. The term "Confidential
Information" includes any and all information which
relates to Midland's products and services (including
their development, marketing and sale), the financial,
marketing and other aspects of Midland's operations, and
the intellectual property and business and other rights
which it owns, licenses or otherwise has the right to
use, which is not generally known outside Midland (other
than to Midland's customers or suppliers or other third
parties in connection with their business with Midland)
and which is disclosed or accessible to or known or
developed by Conaton as a consequence of or through
Conaton's performance of services hereunder or prior
performance of services for Midland. It includes, but
is not limited to, memoranda, files, books and records,
financial and accounting methodologies, catalogs, lists
of customers or prospects, price lists, advertising and
promotional materials, packaging design, business plans,
operating policies and manuals, internal controls,
policies, procedures and guidelines, and other business
information and records used in the conduct of business
(whether intangible - including written documents,
magnetic tapes, disks or other media - or intangible
form), agreements and understandings between Midland and
third parties, and trade secrets, software and other
licenses, source codes and object codes, designs,
drawings, plans and other such information and rights,
intangible or otherwise, whether or not such information
comes within the term "Proprietary Property".
c. Rights to Proprietary Property. Conaton agrees that,
except as Midland may otherwise expressly agree in
writing, (i) Conaton shall have no rights and shall
acquire no rights to any Proprietary Property that
comes, or has come, within Conaton's knowledge or
possession through or as a consequence of Conaton's
performance of services hereunder or prior to the
effective time of this Agreement, and (ii) any
information or other property that is, or has been,
invented, created, discovered, written, developed,
furnished or produced by Conaton, solely or jointly,
wholly or partly, while performing services for Midland
hereunder or prior to the effective time of this
Agreement or with information proprietary to Midland
(the "Developments"), shall be the exclusive property of
Midland, and Conaton shall have no right, title or
interest of any kind in and to the Developments,
including any results or proceeds therefrom. Conaton
hereby sells, transfers and assigns to Midland all
right, title and interest which Conaton may be deemed to
have in and to the Developments, including the right to
patent, register copyrights for or obtain legal
protection for the Developments, and agrees to
communicate promptly and disclose to Midland, in such
from as Midland requests, all information, details and
data pertaining to any Developments. At any time during
or subsequent to the term of this Agreement, upon the
request and at the election and expense of Midland,
Conaton will patent, register copyrights for or obtain
other legal protection for, or permit Midland to patent,
register copyrights for or obtain other legal protection
for, any Developments and execute any and all
assignments, instruments of transfer, or other documents
that Midland deems necessary or appropriate to transfer
to Midland all rights in or to the Developments or to
evidence Midland's ownership of such rights or any of
them.
d. Use and Disclosure. Except as may be otherwise
expressly authorized in writing by Midland, Conaton
shall not use any Proprietary Property or Confidential
Information except for the benefit of Midland and shall
not disclose any Confidential Information to any other
person. As used in this Agreement, unless the context
otherwise requires the term "person" includes, but is
not limited to, any individual, partnership,
association, firm, corporation, trust, unincorporated
organization, joint venture or other entity. This
restriction on use and disclosure applies without
limitation as to time or place.
e. Applicability to Midland and its Affiliates. For
purposes of this Section 4, and Sections 5, 6 and 7 of
this Agreement, references to Midland shall be deemed to
include Midland and any corporations or other business
entities affiliated with it.
5. Midland Property. Following the Expiration Date of this
Agreement, Conaton shall promptly return to Midland all property of Midland in
the possession or control of Conaton (and any and all copies thereof) including,
without limitation, all Proprietary Property and Confidential Information.
6. Non-Competition. During the period commencing on the date of
this Agreement and ending five (5) years after the expiration of this Agreement
(the "Restricted Period"), Conaton shall not, either on Conaton's own account or
for any other person or entity, directly or indirectly, (a) engage in any
activities or render any services which are similar or reasonably related to
those performed for or rendered to or on behalf of Midland during the term of
this Agreement or the two-year period preceding the date of this Agreement
(together, the "Extended Term"), to any business which competes with Midland in
any place where Midland is engaged or, to the knowledge of Conaton, intends to
engage in business or (b) owns a greater than five percent equity interest in or
be connected with the management, operation or control of any such business, but
the foregoing shall not be deemed to exclude Conaton from acting as a director,
officer or employee of or a consultant to other business for the benefit of
Midland with the consent of Midland's Board of Directors.
7. Non-Solicitation. During the Restricted Period, Conaton shall
not directly or indirectly: (a) attempt to induce, or assist others to attempt
to induce, any person who was or was actively negotiating to become a customer
of Midland at any time during the Extended Term, to reduce or terminate such
customer's business with Midland or to direct any of its business that is then
being or may be done with Midland to any other person; (b) attempt to induce, or
assist others to attempt to induce, any employee of Midland to terminate his or
her employment with Midland; and (c) whether in an individual capacity or as the
owner, partner, employee or agent of any entity, employ or offer employment to
any person who is or was employed by Midland during the Extended Term unless
such person shall cease to have been employed by Midland in any capacity for a
period of at least one year.
8. Survival. Sections 4, 5, 6, 7, 8 and 9 shall survive the
termination of this Agreement. In the event Midland is acquired or merges with
another entity, this Agreement shall survive unless otherwise agreed to in
writing by Midland and Conaton.
9. Remedies for Breach of Agreement. If Conaton commits a breach
or threatens to commit a breach of any of the provisions of this Agreement,
Midland shall have the right to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction without having to
prove the inadequacy of the available remedies at law or irreparable injury, it
being acknowledged and agreed to between Midland and Conaton that any such
breach or threatened breach will cause irreparable injury to Midland and that
money damages may not provide an adequate remedy to Midland. In addition,
Midland may take and pursue all such other actions and remedies as may be
available to Midland at law or in equity and shall be entitled to such damages
as Midland can show Midland has sustained by reason of such breach, together
with court costs and attorneys' fees.
10. Expenses. Midland agrees to reimburse Conaton for all his
reasonable out-of-pocket expenses incurred by Conaton in connection with the
performance of the duties under this Agreement.
11. Title: Relationship of Parties. Conaton may hold himself out
as a consultant to Midland. Conaton is retained by Midland only for the
purposes and to the extent set forth in this Agreement, and Conaton's relation
to Midland under this Agreement shall be that of an independent contractor and
not that of an employee, partner or joint venturer. Conaton acknowledges that
he is solely responsible for all withholding, social security and other taxes
with respect to the consulting fees paid to him under this Agreement.
12. Independent Judgment. Nothing in this Agreement shall be
construed to interfere with or otherwise affect the rendering of services by
Conaton under this Agreement in accordance with Conaton's independent and
professional judgment and in accordance with Conaton's own means and mode of
performance.
13. Indemnity. Each party ("Indemnifying Party") agrees to
indemnify and hold harmless the other party (the "Injured Party") from and
against any damages, liabilities, actions, suits or other claims and from
reasonable attorneys' fees and costs incurred by the Injured Party in defending
against same with respect to the discharge of the Injured Party's duties and
responsibilities under this Agreement unless such liability arose out of the
Injured Party's gross negligence.
14. Rabbi Trusts. The obligations under this Agreement (i) shall
accelerate, (ii) shall be entirely funded upon a Change of Control, as defined
in the Consulting Agreements Rabbi Trust (the "Rabbi Trust"), through the Rabbi
Trust and as prescribed in Rev. Proc. 92-64, and (iii) shall be paid within
thirty (30) days of the effective date of the Change of Control. No other
provisions shall be made with respect to segregating assets of the Company for
payment of any distributions under this Agreement except as may be required by
the Rabbi Trust. The right of Conaton or his designated beneficiary to receive
a distribution under this Agreement shall be an unsecured claim against the
general assets of Midland, and neither Conaton nor a designated beneficiary
shall have any rights in or against any specific assets of Midland. All amounts
to be paid to fulfill the obligations under this Agreement shall constitute
general assets of Midland and may be disposed of by Midland at such time and
for such purposes as it may deem appropriate.
15. Tax Gross-Up Payment.
a. Amount of Payment. In the event of a Change of Control,
benefits under any plan or other agreement including
this Agreement in which Conaton participates are
accelerated and distributed prior to the time such
benefits would otherwise have been distributed under
such plan, Midland shall pay Conaton the following
additional amounts (the "Gross-Up Payment"):
i. The amount of the Excise Tax, if any, imposed on
Conaton by Section 4999 of the Internal Revenue Code of 1986.
ii. The amount of any federal, state and local
income tax due to any payments to Conaton under i above.
iii. After the payments are made in i and ii above,
an additional amount shall be paid to Conaton grossing up all
payments made pursuant to this Section 16 such that the
additional amount paid is sufficient to pay the Excise Tax and
the federal, state and local income taxes being reimbursed in i
and ii above.
b. Calculation of Payment. For purposes of determining the
amount of the Gross-Up Payment payable pursuant to a
above, Conaton shall be deemed to pay (i) federal income
taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up
Payment is made; and (ii) state and local income taxes
at the highest marginal rate of taxation in the calendar
year in which the Gross-Up Payment is made (but based on
the rates of taxation of the states and localities with
respect to which the Gross-Up Payment will be taxable),
net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and
local taxes.
c. Payment is an Estimate. The Gross-Up Payment provided
for in this Section 16 shall be an estimate. Midland
will cause its independent auditors to make an estimate
of the liability and Gross-Up Payment within 60 days of
the Change of Control (a copy of which is to be
furnished to Conaton as soon as possible), and Midland
shall pay to Conaton the Gross-Up Payment in cash in a
lump sum within 30 days of such estimate. In the event
that the amount of the estimated Excise Tax and other
tax liability exceeds the amount of the actual Excise
Tax and other tax liability, Conaton shall promptly
repay the portion of the Gross-Up Payment attributable
to the reduced Excise Tax and other tax liability, and
such excess shall constitute a loan by Midland to
Conaton, payable on the 5th day after demand by Midland
(together with interest from the date Conaton received
the Gross-Up Payment at the rate provided in Section
1274(b)(2)(B) of the Code).
d. Subsequent IRS Review. In the event the Internal
Revenue Service subsequently makes a determination
resulting in an Excise Tax and other tax liability in
excess of the estimate as determined by Midland's
auditors, Conaton shall promptly notify Midland, and
Midland shall have the right at its expense, to contest
and participate. If any additional Excise Tax and other
tax liability is assessed in respect of Conaton by the
Internal Revenue Service, such additional Excise Tax and
other tax liability, plus any penalties and interest
assessed, shall be paid to Conaton by Midland (together
with an amount sufficient for all other federal, state
and local taxes on the additional Excise Tax and the
payments provided for in this Section 16) within 10 days
of the date that the Internal Revenue Service makes such
an assessment.
e. Interpretation. The interpretation of matters relating
to the Gross-Up Payment shall be made by tax counsel
selected by Midland's independent auditors and
acceptable to Conaton.
16. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between Midland and
Conaton with respect to the subject matter of this Agreement and constitutes the
sole and only agreement between Midland and Conaton with respect to the subject
matter. No change or modification of this agreement shall be valid or binding
upon Midland and Conaton unless the change or modification is in writing and
signed by Midland and Conaton.
17. Legal Construction. If any provision of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable for
any reason, such invalid or unenforceable provisions shall not affect the
validity or enforceability of the remaining provisions of this Agreement which
shall remain in full force and effect.
18. Parties Bound. This Agreement shall be binding upon and shall
inure to the benefit of Midland and Conaton and their respective successors and
assigns. Conaton shall not assign any of its rights under this Agreement
without the prior written consent of Midland. Midland shall not assign any of
its rights under this Agreement to any person or entity without the prior
written consent of Conaton.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same agreement.
20. Governing Law. This Agreement shall be governed by, construed
under, and enforced in accordance with the laws of the State of Ohio.
21. Headings; Gender; Number. The headings contained in this
Agreement are for convenience only and shall not be construed as substantive
provisions of this Agreement. Singular words shall include the plural and
plural words shall include the singular, unless the context requires otherwise.
22. Other Activities. Conaton may get involved in other activities
which do not materially interfere from a time standpoint with the duties of
Conaton hereunder.
23. Effective Date. This Consulting Agreement shall be dated as of
July 1, 2000, to be effective as of the first day of the Term of this Agreement.
This Agreement restates and thereby supersedes any Consulting Agreement
previously executed by the parties, and the parties agree that any prior
Consulting Agreement shall be of no further effect.
/s/Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
The Midland Company
By: /s/Xxxx X. Xxx Xxxxxx
Its: Executive Vice President
