EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated the 31 day of December, 1996, between
ROCKWOOD CASUALTY INSURANCE COMPANY, a Pennsylvania insurance corporation with
offices at 000 Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxx 00000 (the "Company"), and
XXXX X. XXXXXX ("Employee").
W I T N E S S E T H:
1. Employment and Term. The Company hereby employs Employee as President
and Chief Executive Officer of the Company, and Employee hereby accepts such
employment, on the terms and conditions set forth herein, for a term of three
(3) years, commencing on the date hereof, unless sooner terminated or extended
as herein provided. The term of this Agreement and Employee's employment
hereunder shall be automatically renewed for additional periods of one (1) year
unless written notice to the contrary shall be given by either party to the
other, not less than ninety (90) days before the end of the initial or any
renewal term (the initial term plus any renewals thereof shall be referred to
herein as the "Term"), in which case this Agreement shall terminate at the end
of such term, and neither party hereto shall thereafter have any further rights
or obligations hereunder except the obligations of Employee under Sections 3(b),
(c) and (d) hereof and any obligations of the Company under Sections 5, 6 and 7
hereof. The date upon which this Agreement and Employee's employment hereunder
shall terminate, whether pursuant to the terms of this Section 1, or pursuant to
any other provision of this Agreement, shall hereinafter be referred to as the
"Termination Date."
2. Compensation. (a) For the performance by Employee of his duties in
accordance with this Agreement after the date hereof, including services as an
officer, director and/or member of committees of the Company or any subsidiaries
or Affiliates (as hereinafter defined) of the Company, the Company shall pay
Employee (i) a salary at the rate of One Hundred Fifty Thousand Dollars
($150,000.00) per annum for the period commencing on the date hereof and
terminating on March 31, 1997 and (ii) a salary at the rate of One Hundred
Sixty-two Thousand Seven Hundred and Five Dollars ($162,705.00) per annum for
the period commencing April 1, 1997, with annual adjustments thereafter as set
out below (such annual salary pursuant to clause (i) or (ii), "Base Salary"),
payable in periodic installments in accordance with the Company's regular
payroll practices, as in effect from time to time. Within one hundred and twenty
(120) days after the end of each fiscal year of the Company, Employee's salary
shall be reviewed and may be increased at the discretion of the Board of
Directors of the Company ("Board of Directors"). Employee's Base Salary or such
other salary as may be payable to Employee by action of the Board of Directors,
is hereinafter called "Salary." For purposes of this Agreement, "Affiliates"
shall mean, with respect to the Company, other persons or entities that
directly, or indirectly through one or more intermediaries, control or are
controlled by or are under common control with the Company.
(b) Within one hundred and twenty (120) days after the end of each fiscal
year of the Company, Employee may, in the absolute discretion of the Board of
Directors, receive from the Company a bonus based on the performance of the
Company during the preceding fiscal year.
3. Duties and Restrictions. (a) During the term of this Agreement,
Employee shall perform all duties and services incident to his position as
President and Chief Executive Officer of the Company and such other reasonable
duties and services as may from time to time be assigned to him by the Board of
Directors. Employee shall devote his full and exclusive time, attention and best
efforts to the business of the Company and its Affiliates. Employee hereby
accepts such employment and agrees he shall devote his full skill, abilities and
productive time to the performance of his duties under this Agreement, and he
shall not, without the prior consent of the Board of Directors, render to any
third party any services for compensation or which would interfere with the
performance of his duties hereunder.
(b) Employee will not at any time:
(i) during the term of this Agreement or thereafter, reveal, divulge
or make known to any person, firm or corporation or use for his personal
benefit, directly or indirectly, any confidential or proprietary
information received by him during the course of his employment or prior
to the commencement thereof. For purposes of this paragraph 3(b)(i)
confidential and proprietary information shall be defined to mean (1) all
historical and pro forma projections of loss ratios incurred by the
Company and any of its Affiliates, (2) all historical and pro forma
actuarial data relating to the Company and any of its Affiliates, (3)
historical and pro forma financial results and projections for the Company
and its Affiliates, (4) all information relating to the Company's or its
Affiliates' systems and software (other than the portion thereof provided
by the vendor to all purchasers of such systems and software) and (5) all
other information relating to the financial, business or other affairs of
the Company and its Affiliates, that is not available to the general
public or generally known or available within the industry; or
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(ii) during the term of this Agreement, reveal, divulge or make
known to any person, firm or corporation, or use for his personal benefit,
directly or indirectly, the name or names of any of the customers of the
Company or of any of its Affiliates, nor will he reveal, divulge or make
known, to any person, firm or corporation, or use for his personal
benefit, directly or indirectly, any trade secrets or any knowledge or
information, or any fact concerning any business methods or operational
purposes engaged in by the Company or its Affiliates (collectively,
"Privileged Information"); provided, however, the restrictions set forth
in this paragraph 3(b)(ii) shall not apply to Employee following the
termination of his employment with the Company or its Affiliates with
respect to any Privileged Information known or made generally available to
the general public or within the industry.
(c) Employee will not at any time during the term of this Agreement, and
for a period of two (2) years thereafter in the event Employee's employment is
terminated pursuant to Section 4, 5, 6 or 7(a) hereof or upon the expiration of
the term of this Agreement in accordance with Section 1 hereof, engage in or
have any interest in, directly or indirectly, any business which engages,
directly or indirectly, in the business of underwriting workers' compensation
insurance within any State in which the Company, or any of its Affiliates, is
licensed to write insurance, whether as principal, director, officer, employee,
consultant, partner, stockholder, director, trustee or manager of any competing
corporation, association, firm or business or otherwise, or directly or
indirectly solicit, interfere with, or endeavor to entice away from the Company
or any of its Affiliates any of their customers or employees. The restrictions
contained in this subsection 3(c) shall not prevent the purchase or ownership by
Employee of not more than three percent (3%) of the securities of any class of
any corporation, whether or not such corporation is engaged in any competitive
business, which are publicly traded on any securities exchange or any "over the
counter" market. Employee will not, for a period of one (2) years following the
Termination Date, employ or associate in any manner in a business relationship
with, any person who was an employee of the Company or any Affiliate at any time
during the term of Employee's employment hereunder.
(d) Any and all writings, inventions, improvements, processes, procedures
and/or techniques which Employee may make, conceive, discover or develop, either
solely or jointly with any other person or persons, at any time during the term
of this Agreement or during the term of his employment or association with the
Company or any Affiliate, whether during working hours or at any other time, and
whether upon the request or suggestion of the Company or otherwise, which relate
to or may be useful in connection with any business now or hereafter during the
term of
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this Agreement carried on or actively developed by the Company or any Affiliate,
including developments or expansions of its present fields of operations, shall
be the sole and exclusive property of the Company. Employee shall make full and
prompt disclosure to the Board of Directors of all such writings, inventions,
improvements, processes, procedures and techniques and shall take all actions
and shall execute all documents requested by the Board of Directors to vest the
absolute title thereto in the Company. Employee shall not be entitled to receive
any additional compensation or reimbursement with respect to such writings,
inventions, improvements, processes, procedures and techniques.
(e) Employee acknowledges that the restrictions contained in paragraphs
(b) and (c) of this Section 3 are reasonable and necessary in order to protect
the legitimate interests of the Company, in view of the nature of the business
in which the Company and its Affiliates are engaged and the substantial equity
interest of Employee in the Company. If any provision contained in Paragraph (b)
or (c) of this Section 3 is adjudged unreasonable in any proceeding, then such
provision shall be deemed modified by reducing the period of time during which
such provision is applicable and/or, if applicable, the geographic area to which
such provision applies, to the extent necessary for such provision to be
adjudged reasonable and enforceable.
4. Termination For Cause. This Agreement may be terminated by the Company
"for cause" at any time, by written notice to Employee, for any of the following
reasons:
(a) If Employee shall willfully violate the provisions of Section 3
of this Agreement, or shall willfully fail to comply with any other term
or condition of this Agreement or shall grossly neglect his duties
hereunder;
(b) If Employee shall (i) be convicted of a felony or a crime
involving moral turpitude (meaning a crime that includes the commission of
an act of gross depravity, dishonesty or bad morals), or (ii) commit an
act of dishonesty, fraud or embezzlement against the Company;
(c) If the Company's operating results are substantially below
budget which shall mean 50% or less of the amount set forth on Attachment
1 hereto;
(d) If Employee shall not have accomplished his annual performance
objectives, as established annually by the Company's management and
approved by the Board of Directors; or
(e) If Employee fails to comply for any reason with a directive of
the Board of Directors determined to be in the best
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interest of the Company and its shareholders. In the event of a
disagreement between the Board of Directors and Employee with respect to a
directive of the Board of Directors that leads to a termination for cause
under this paragraph (e), Employee may request and receive a hearing with
an appropriate committee consisting of members of the Board of Directors of
Front Royal, Inc., the holder of all the outstanding capital stock of the
Company.
In the event of termination pursuant to paragraph (a), (b) or (e) of this
Section 4, then Employee's Salary and right to receive any fringe benefits
pursuant to Section 8 hereof shall terminate on the Termination Date fixed in a
written notice from the Company, which shall be no earlier than the date of such
notice.
In the event of termination pursuant to paragraph (c) or (d) of this
Section 4, then Employee shall be entitled to receive:
(i) an amount equal to Employee's Base Salary in effect as of the
Termination Date for a period of twenty-four (24) months after the
Termination Date, payable in accordance with the terms of Section 2
hereof;
(ii) the continuation at the Company's expense of coverage under all
plans, insurance policies and other fringe benefits described in Section 8
hereof, for a period of twelve (12) months after the Termination Date; and
(iii) any amounts payable to Employee through the Termination Date
pursuant to Sections 9 and 10 hereof.
Thereafter, notwithstanding anything to the contrary contained in this
Agreement, the Company shall have no further obligations to Employee, except as
provided in any stock option or other bonus or incentive plan to which Employee
is entitled, and Employee shall have no further rights hereunder.
5. Termination by Employee. (a) If Employee shall terminate his employment
hereunder without the prior written consent of the Board of Directors, other
than by expiration of the term hereof in accordance with Section 1 hereof, the
Company shall have no further obligations to Employee and Employee shall have no
further rights hereunder (other than in accordance with the terms, policies and
practices then in effect with regard to applicable benefit plans of the
Company).
(b) In the event Employee elects to have the term of this Agreement
expire, upon the Termination Date, the Company shall have no further obligations
to Employee and Employee shall have no further rights hereunder (other than in
accordance with
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the terms, policies and practices then in effect with regard to applicable
benefit plans of the Company).
6. Expiration or Termination Without Cause. The Company may terminate this
Agreement at any time without cause or may elect to have the term of this
Agreement expire. In the event that the Company terminates this Agreement
without cause or elects to have the term of this Agreement expire, Employee
shall be entitled to receive:
(i) an amount equal to Employee's Base Salary in effect as of the
Termination Date for a period of twenty-four (24) months after the
Termination Date, payable in accordance with the terms of Section 2
hereof;
(ii) the continuation at the Company's expense of coverage under all
plans, insurance policies and other fringe benefits described in Section 8
hereof, for a period of twenty-four (24) months after the Termination
Date; and
(iii) any amounts payable to Employee through the Termination Date
pursuant to Sections 9 and 10 hereof.
7. Termination by Reason of Disability or Death. (a) If, on account of
physical or mental disability, Employee shall fail or be unable to perform his
assigned duties in any material respect for a period of (i) sixty (60)
consecutive days, or (ii) an aggregate of ninety (90) days during any twelve
(12) month period, the Company may, at its option, thereafter terminate this
Agreement and Employee's employment hereunder upon giving at least thirty (30)
days written notice to Employee.
(b) If Employee dies during the term hereof, this Agreement shall
automatically terminate on the date of his death.
(c) In the event that this Agreement and Employee's employment are
terminated in accordance with this Section 7, then after the Termination Date
the Company shall have no further obligations hereunder, except that, in the
event of a termination pursuant to paragraph (a) above, Employee shall be
entitled to the benefits described in Section 6 hereof.
8. Fringe Benefits. The Company shall provide at the Company's expense to
Employee during the term of the Agreement:
(a) a medical insurance plan covering Employee, his spouse and his
minor children and a disability income insurance policy, which insurance
plans and policies shall be at least comparable to such plans and policies
provided to the Company's other senior executive personnel;
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(b) full participation in all other fringe benefits provided to the
Company senior executive personnel, which fringe benefits may include, in
the sole discretion of the Board of Directors, a pension plan, a profit
sharing plan, a stock option plan and/or a stock participation plan; and
(c) an automobile or automobile allowance commensurate with
Employee's position and responsibilities and, if and to the extent
consistent with the Company's policy in effect from time to time,
reimbursement for automobile insurance and maintenance.
9. Vacation. Employee shall be entitled, for each year during the term
hereof, to vacation time to be taken at such time or times as shall be mutually
convenient to the Company and Employee.
10. Other Expenses. During the term of this Agreement, Employee shall be
entitled to be reimbursed for all reasonable business expenses incurred by him
in connection with the performance of his duties hereunder upon the timely
submission and approval of appropriate vouchers therefor, to the Chief Financial
Officer of the Company.
11. Representation by Employee. Employee represents and warrants that he
is not under any obligation, contractual or otherwise, to any person, firm or
corporation that is inconsistent with this Agreement and his employment
hereunder and that he is free to enter into and perform the terms of this
Agreement.
12. Uniqueness of Services. Employee acknowledges that the services to be
rendered under the provisions of this Agreement are of a special, unique and
extraordinary character and that it would be difficult or impossible to replace
such services and that, by reason thereof, Employee agrees and consents that if
he violates any of the provisions of this Agreement, the Company, in addition to
any other rights and remedies available under this Agreement or otherwise, shall
be entitled to an injunction to be issued by a tribunal of competent
jurisdiction restricting Employee from committing or continuing any violation of
this Agreement.
13. Notices. Any notices provided for or permitted by this Agreement shall
be in writing and shall be deemed to have been duly given when delivered in
person or three (3) days after it is deposited in a United States Postal
Depositary, postage prepaid, registered or certified mail, return receipt
requested, addressed to the party for whom intended at such party's address set
forth below or to such other address as such party may designate by
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notice in writing given in the manner provided by this Section 13, or when
actually received by the party for whom such notice was intended if sent by any
other means:
To Employee: Xxxx X. Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
To the Company: Rockwood Casualty Insurance Company
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Chairman of the Board
14. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement and understanding between Employee and the Company with respect to the
subject matter hereof and shall supersede any and all other prior agreements and
understandings, whether oral or written, relating thereto or to the employment
of Employee by the Company. This Agreement may not be rescinded, modified or
amended except by an instrument in writing signed by the parties hereto and any
provision hereof may not be waived except by an instrument in writing signed by
the party hereto against whom any such waiver is sought to be enforced. The
waiver by the Company of a breach by Employee of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach by
Employee.
15. Partial Invalidity. The invalidity or unenforceability, by statute,
court decision or otherwise, of any term or condition of this Agreement shall
not affect the validity or enforceability of any other term or condition hereof.
16. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the
Commonwealth of Pennsylvania.
17. Assignability. This Agreement may not be assigned by Employee, and all
of its terms and conditions shall be binding upon and inure to the benefit of
Employee and his heirs and legal representatives and the Company with its
successors. Successors of the Company shall include, without limitation, any
corporation or corporations acquiring, directly or indirectly, all or
substantially all of the assets of the Company whether by merger, consolidation,
purchase or otherwise and such successor shall thereafter be deemed the
"Company" for purposes hereof.
18. Captions. The caption headings in this Agreement are for convenience
of reference only and are not intended and shall not be construed as having any
substantive effect.
19. Survival. The obligations imposed upon Employee and the rights granted
to the Company in subsections 3(b), (c) and
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(d) hereof and the rights granted to Employee in Sections 5, 6 and 7 hereof
shall survive the termination or expiration of this Agreement for any reason
whatsoever and, at the election of the Company, may be specifically enforced by
it.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duty executed as of the day and year first above written.
ROCKWOOD CASUALTY INSURANCE COMPANY
By:___________________________________________
Name:
Title:
______________________________________________
Xxxx X. Xxxxxx
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Attachment 1
Rockwood Casualty Insurance Company
Net Income Before Parent Company
Fiscal Year Overhead Charges
----------- ----------------
1997 $5,977,000.00
1998 $6,261,000.00
1999 $6,777,000.00
