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EXHIBIT 10.9
EMPLOYMENT CONTINUITY AGREEMENT
This Agreement made as of October 28, 1996, by and between NORTH EAST
INSURANCE COMPANY, a Maine corporation with its principal place of business in
Scarborough, Maine (the "Company"), and Xxxxxx X. Xxxxx ("Officer"), of
Portland, Maine.
WHEREAS, the Officer has been employed by the Company since November 14,
1977 and is presently serving in the capacity of Senior Vice President; and
WHEREAS, the Company desires to assure itself of the continued employment
and sound judgment of the Officer in the event of any potential change in
control of the Company;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged by each of the parties, the Officer and the
Company agree as follows:
1. TERM OF THE AGREEMENT AND RENEWAL. The term of this Agreement shall be for
a period beginning on the date hereof and ending December 31, 1999, provided
that on January 1, 2000, and on each anniversary thereof (a "Renewal Date"),
this term shall automatically be extended for one year unless at least one (1)
year prior to any such Renewal Date, either party shall have given written
notice to the other that such renewal shall not take place. Such notice may be
given by the Company only upon the affirmative vote of the Board of Directors or
a duly authorized committee thereof. Notwithstanding any provision above, this
Agreement shall remain effective for so long as necessary to enforce all rights
accrued and obligations arising prior to the end of the Term.
2. "CHANGE IN CONTROL EVENT." Each of the following events shall constitute a
"Change in Control Event" for purposes of this Agreement:
a. Any person acquires or holds beneficial ownership of stock
representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding stock. Notwithstanding the above, if
any person, prior to attaining beneficial ownership equaling or
exceeding such level, has entered into an agreement approved by the
affirmative vote of at least two-thirds of the Directors then in
office and providing for restrictions on such person's acquisition of
Company stock and other matters involving control of the Company (a
"Standstill Agreement"), then, so long as such Standstill Agreement is
in effect and has not been breached by such person, neither such
person's beneficial ownership of Company stock nor that of any
affiliate of such person shall constitute a Change in Control.
For purposes of this Agreement, "beneficial ownership" shall be
determined in accordance with Regulation 13D under the Securities
Exchange Act of 1934, or any similar successor regulation or rule; and
the term "person" shall include, without limitation, any individual,
corporation, limited liability company, partnership, trust or
association, or any group or combination thereof.
b. Within any twenty-five (25) month period, individuals who were Outside
Directors at the beginning of such period, together with any other
Outside Directors serving as directors of the Company pursuant to
nominations approved or ratified by a majority of the Outside
Directors in office immediately prior to such respective elections,
cease to constitute a majority of the board of directors of the
Company.
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For purposes of this Agreement, an "Outside Director" as of a
given date shall mean a member of the Company's board of directors who
(x) is not then a beneficial owner of stock representing twenty
percent (20%) or more of the combined voting power of the then
outstanding stock of the Company and not an officer, director or
affiliate of any such owner, (y) has been a director of the Company
throughout the six (6) month period prior to such date and (z) has not
been an employee of the Company at any time during the six (6) month
period prior to such date.
c. The Company ceases to be a reporting company pursuant to Section 13(a)
of the Securities Exchange Act of 1934 or any similar successor
provision.
d. The Company's shareholders approve:
(i) Any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of Company common stock would be
converted into cash, securities or other property, other than a
merger or consolidation of the Company in which the holders of
the Company's common stock immediately prior to the merger or
consolidation own, directly or indirectly, in the aggregate a
majority of each class of stock entitled to vote for the election
of directors of the surviving corporation (or the equivalent
controlling interest in any surviving entity other than a
corporation) immediately after the merger or consolidation; or
(ii) Any sale, lease, exchange, liquidation or other transfer (in
one transaction or a series of transactions) of all or
substantially all of the assets of the Company.
3. RIGHTS UPON INVOLUNTARY TERMINATION OF EMPLOYMENT. If, within twelve (12)
months after the occurrence of a Change in Control Event, the Company terminates
the Officer's employment for any reason other than Good Cause as defined in
Paragraph 6, or if the Officer voluntarily terminates employment for Good Reason
as defined in Paragraph 4, the Company shall provide the Officer with the
following:
a. Within thirty (30) days of such termination, a lump sum cash payment
in an amount equal to two hundred percent (200%) of the Officer's
annual base salary in effect upon the date of the Change in Control
Event plus any profit-sharing award made to the Officer in respect to
the most recently completed calendar year.
b. The continuation of the Officer's participation and the participation
of his dependents (to the extent they were participating prior to this
termination of employment) in the Company's health, life, disability
and other employee benefit plans, programs and arrangements as
applicable to the Officer on the date of the Change in Control Event
(excluding any Retirement Plan or 401(k) Plan) for a period of
twenty-four (24) months after such termination as if he were still
employed during such period; provided, however, if such participation
in any such plan, program or arrangement is specifically prohibited by
the terms thereof, the Company shall provide the Officer (and his
dependents) with benefits substantially similar to those which he was
entitled to receive under such plan, program or arrangement
immediately prior to his termination of employment. For purposes of
this Paragraph 3(b), any employee benefit determined with reference to
the Officer's compensation or earnings shall be based on his annual
base salary in effect upon the date of the Change in Control Event
unless otherwise provided under the terms of the applicable employee
benefit plan, program or arrangement.
4. DEFINITION OF TERMINATION BY THE OFFICER FOR GOOD REASON. For purposes of
this Agreement, termination by the Officer of his employment for "Good Reason,"
except upon the Officer's express written consent otherwise, shall mean:
a. The assignment of duties to the Officer which result in his having
significantly less authority or responsibility than he had prior to
the Change in Control Event; or
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b. The Officer's removal from, or any failure to re-elect him to, any
position he held immediately prior to the Change in Control Event with
either the Company or any majority-owned subsidiary; or
c. A reduction of the Officer's annual base salary or benefits in effect
on the date of the Change in Control Event or as the same may be
increased from time to time thereafter; or
d. The relocation of the Company's principal executive offices to a place
outside of the greater Portland, Maine, area, or the Company's
transferring or assigning the Officer to a place of employment other
than its principal executive offices, except for required business
travel to an extent substantially consistent with his business travel
obligations immediately prior to the Change in Control Event; or
e. The company's failure to provide the Officer with substantially the
same health, life and other employee benefit plans, programs and
arrangements (specifically including the Company's stock plans and
compensation and incentive plans, as the same may be amended in the
future), and substantially the same perquisites of employment, as
provided to him immediately prior to the Change in Control Event or as
the same may be increased thereafter; or
f. The Company's failure to provide the Officer with substantially the
same support staff as provided to him immediately prior to the Change
in Control Event; or
g. The Company's failure to obtain from any successor a satisfactory
agreement to assume and perform the terms of this Agreement; or
h. Breach of this Employment Continuity Agreement or any Employment
Agreement between the Officer and the Company by the Company.
5. RIGHTS UPON A VOLUNTARY TERMINATION OF EMPLOYMENT.
a. If the Officer remains in active employment through the last day of
the sixth full calendar month following the occurrence of a Change in
Control Event (the Stay On Date), but then voluntarily terminates his
employment, other than for Good Reason as defined in Paragraph 4,
within 90 days after the Stay On Date, the Company shall, subject to
the provisions of Paragraph 5(b) below, provide the Officer with the
following:
(i) Within thirty (30) days of such termination of employment, a
lump sum cash payment in an amount equal to fifty percent (50%)
of the Officer's annual base salary in effect upon the date of
the Change in Control Event.
(ii) No later than the end of the sixth full calendar month
following such termination of employment, a second lump sum cash
payment in an amount equal to fifty percent (50%) of the
Officer's annual base salary in effect upon the date of the
Change in Control Event.
(iii) Continuation of benefits and rights as described in
Paragraph 3(b) above, except that the period described in
Paragraph 3(b) shall be twelve (12) months.
b. If the Officer terminates employment under this Paragraph 5, then, in
return for his rights hereunder, he agrees that for the period
extending through the sixth full calendar month following his
termination of employment (the "Restricted Period"), the Officer 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 business
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entity or otherwise, the business of property and casualty insurance
(the "Business"), in any place in which the Company is conducting or
is actively planning to conduct Business as of the date of such
termination, (ii) solicit or contact in an effort to do business with
any person who was a customer of the Company during the term of this
Agreement, or any affiliate of any such person, if such solicitation
or contact is in competition with the Company, or (ii) whether for his
own account or for the account of any other person (excluding the
Company), solicit or induce any of the Company's employees to leave
their employment with the Company or accept employment with anyone
else or hire any such employees. A breach of any of the covenants
contained in this Paragraph 5(b) may result in material, irreparable
injury to the Company for which there is no 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 rights to
compensation hereunder shall be forfeited and the Company shall be
entitled to injunctive relief.
6. TERMINATION FOR GOOD CAUSE. Notwithstanding the provisions of Paragraph 5
hereof, the Company retains the right to terminate the Officer for "Good Cause,"
in which event he shall not be entitled to receive any payment or benefits
pursuant to this Agreement. "Good Cause" shall mean:
a. The Officer's conviction, by a court of competent jurisdiction, of or
the Officer's plea of nolo contendere to a crime adversely reflecting
on his honesty, trustworthiness or fitness to carry out the
responsibilities of his position with the Company in other respects;
b. A willful breach by him of any material duty or obligation imposed
upon him under the terms of his employment, as those terms existed
immediately prior to any Change in Control Event, and his failure to
cure such breach within thirty (30) days after receiving written
notice thereof from the Company; or
c. The Officer's continued substantial neglect of duties, after written
notice from the Board and an opportunity to correct.
7. NOTICES. Any and all notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when deposited in the
United States mails, certified or registered mail, postage prepaid and addressed
as follows:
To the Officer: Xxxxxx X. Xxxxx
00 Xxxxxxxx Xx.
Xxxxxxxx, XX 00000
To the Company: North East Insurance Company
000 Xxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Either party may change by notice to the other the address to which notices to
it are to be addressed.
8. APPLICABLE LAW, TAXES, BINDING AGREEMENT, SEVERABILITY, CONSTRUCTION. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Maine, except as to any matter which is preempted by federal law.
Notwithstanding anything to the contrary herein contained, the Company may
withhold from any amounts payable under this Agreement all federal, state or
other taxes or assessments which may be required by applicable statute or
regulation to be withheld. This Agreement shall be binding upon and inure to the
benefit of the Officer, his heirs, assigns, executors and legal representatives;
and the Company, its successors and assigns.
If any provision of this Agreement shall be held invalid or unenforceable
by a court of competent jurisdiction, the remainder of this Agreement shall not
be affected thereby.
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The Outside Directors shall have the authority to construe and interpret
this Agreement on behalf of the Company, and any such determination by the
Outside Directors shall be conclusive on the Company.
9. LIMITATIONS ON AMOUNTS TO BE RECEIVED. If it is determined that part or all
of the compensation and benefits to be paid to the Officer under this Agreement
will result in a loss of deduction to the Company under Section 280G of the
Internal Revenue Code of 1986 as amended (the "Code"), the following limitation
shall apply:
If the aggregate present value of such parachute payments (the "Parachute
Amount") equals or exceeds 2.99 times the Officer's "Base Amount" as defined in
Section 280G of the Code, then the amounts otherwise payable to or for the
benefit of the Officer pursuant to this Agreement, and taken into account in
calculating the Parachute Amount (the "Termination Payments"), shall be reduced,
to the extent necessary so that the Parachute Amount is equal to 2.99 times the
Officer's "Base Amount." The Company shall retain a qualified independent
advisor in order to make any determination or calculations necessary in applying
the above-described limitations.
10. EXECUTION OF FURTHER DOCUMENTS. In the event the Officer receives payments
or benefits pursuant to the terms hereof and the Company's independent counsel
deems it necessary for the Company to receive a release or other acknowledgment,
the Officer agrees to execute any such document, as may be reasonably required
as a condition of his receipt of such payment or benefits.
11. AMENDMENT AND WAIVER. This Agreement may be amended only in writing, by the
parties hereto, and no condition or provision of this Agreement may be waived
except in writing. Waiver by either party at any time of the other party's
breach of, or failure to comply with, any condition or provision of this
Agreement to be performed by such other party shall not be deemed a waiver of
any other provision or condition at the same time or of any provision or
condition at any prior or subsequent time, unless specifically stated therein.
12. FUNDING. This Agreement shall not be construed to create or require the
Company to create a Trust or to otherwise act to fund the amounts payable
hereunder.
13. ASSIGNMENT. Except as required by law, the right to receive payments
hereunder shall not be subject to alienation, assignment, garnishment,
attachment, execution or levy of any kind, and any attempt to cause such
payments to be so subject shall not be recognized by the Company.
14. NO ADDITIONAL EFFECT. Except as expressly provided herein, nothing
contained herein shall be construed to provide the Officer with any specific
period of employment, right to be retained in the service of the Company or
other rights, nor shall this Agreement be construed to otherwise limit the
rights of the Company to discharge or take other action with respect to the
Officer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
NORTH EAST INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxx
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Its President/CEO
/s/ Xxxxxx Xxxxx
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Officer: Xxxxxx X. Xxxxx
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