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Exhibit 10A
EMPLOYEE RETENTION AGREEMENT
BETWEEN
XXXXXX X. XXX
AND
MERCHANTS MUTUAL INSURANCE COMPANY
DATED: MAY 31, 1999
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EMPLOYEE RETENTION AGREEMENT
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This AGREEMENT ("Agreement"), dated as of May 31, 1999, is by
and between XXXXXX X. XXX, residing at 000 Xxxxxxxxx Xxxx, Xxxxxxx, Xxx Xxxx
00000 (the "Executive") and MERCHANTS MUTUAL INSURANCE COMPANY, a New York
mutual insurance company with its principal office at 000 Xxxx Xxxxxx, Xxxxxxx,
Xxx Xxxx 00000 (the "Company").
RECITALS:
WHEREAS, the Company is responsible for managing the business
of Merchants Group, Inc. ("MGI") and MGI's wholly-owned subsidiary, Merchants
Insurance Company of New Hampshire, Inc. ("MNH"), under a Management Agreement
dated September 29, 1986 by and among the Company, MGI and MNH (the "Management
Agreement"); and
WHEREAS, MGI has given notice to the Company that it will
terminate the Management Agreement no later than at the end of the required
five-year notice period; and
WHEREAS, the Executive is a key employee of the
Company; and
WHEREAS, the Executive and the Company are parties to an
Employment Agreement dated as of June 1, 1994 (the "Employment Agreement"); and
WHEREAS, the Employment Agreement expires according to
its terms on May 31, 2000; and
WHEREAS, the Company believes that the Executive's continued
employment with the Company beyond the expiration date of the Employment
Agreement will enhance the Company's ability to continue to manage the business
of the Company, MGI and MNH throughout the period prior to the effective date of
the termination of the Management Agreement; and
WHEREAS, the Company believes that the Executive's continued
employment with the Company will be in the collective best interests of the
Company, MGI and MNH; and
WHEREAS, the Company believes that by extending certain
additional financial incentives to the Executive it will assist the Company in
retaining the services of the Executive throughout the period prior to the
effective date of the termination of the Management Agreement; and
WHEREAS, the Executive and the Company desire to terminate the
Employment Agreement and replace it with this Agreement in order to provide for
such financial incentives.
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NOW, THEREFORE, in consideration of the promises and the
mutual agreements herein contained, the adequacy and sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. TERMINATION OF EMPLOYMENT AGREEMENT.
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The Employment Agreement is hereby terminated and
superceded in its entirety by this Agreement.
2. EMPLOYMENT.
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During the Protection Period, as such term is
defined in paragraph 3 below, the Company shall continue to employ the Executive
as its President and Chief Executive Officer, as such positions may be defined
from time to time in the Company's By-Laws or, if not so defined, as such
positions may be defined by the Company's Board of Directors. In return, the
Executive shall devote all of his business time, attention, skill and efforts to
the faithful performance of his duties as President and Chief Executive Officer.
In connection with his employment hereunder, the Executive shall be based at the
principal office of the Company in Buffalo, New York.
3. PROTECTION PERIOD.
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The "Protection Period" shall be that period of
time from the date of this Agreement through and including
December 31, 2003.
4. REGULAR COMPENSATION.
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For the performance of his duties under this
Agreement during the Protection Period the Company shall pay the Executive a
fixed annual salary of at least $260,000 ("Initial Annual Salary"). The
Executive's annual salary shall be subject to annual review by the Compensation
Committee of the Board of Directors of the Company, subject to approval by the
Company's Board of Directors, but shall not be reduced without his written
consent below the Initial Annual Salary during the Protection Period. The
Executive's salary shall be payable semi-monthly or otherwise in accordance with
the Company's customary practice for its other executives. Notwithstanding the
foregoing, the Executive shall be entitled to defer the receipt of his salary
and/or bonus pursuant to procedures adopted or plans maintained by the Company.
5. ADDITIONAL BENEFITS.
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(a) The Executive shall be eligible to participate
in and receive benefits under any incentive
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compensation plan or arrangement, any stock option or other stock-based plan,
any defined benefit retirement plan, defined contribution retirement plan,
supplemental retirement plan, health and dental plan, disability plan, survivor
income plan, and life insurance plan or other employee benefit or compensation
plan or arrangement (collectively, "Benefit Plans"), made available by the
Company to all of its senior executives from time to time, subject to and on a
basis consistent with the terms, conditions and overall administration of such
Benefit Plans.
(b) The Executive shall be entitled to paid vacations
in accordance with the Company's customary vacation practice (provided that the
Executive shall receive at least four (4) weeks vacation per year) and all paid
holidays given by the Company to its other senior executives.
(c) In addition to his annual salary, the Executive
shall be entitled to receive fringe benefits and perquisites given by the
Company to its senior executives.
(d) The Company shall promptly pay (or reimburse the
Executive for) all reasonable expenses incurred by him in the performance of his
duties hereunder, including business travel and entertainment expenses. The
Executive shall furnish to the Company such receipts and records as the Company
may require to verify the foregoing expenses.
6. TERMINATION BENEFITS.
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(a) The purpose of this paragraph 6 is to provide the
Executive with certain benefits in the event it is necessary or advisable for
the Company, through no fault of the Executive, to either terminate the
Executive's employment or eliminate his position. In order to give effect to
this purpose, the Executive shall receive certain payments and benefits from the
Company if there is a "Termination of Employment," as that term is defined
below, during the Protection Period subject to the following terms and
conditions.
(b) "Termination of Employment" is defined to mean
the termination of the Executive's full-time employment with the Company for any
reason other than (i) the Executive's death, (ii) the Executive's "total
disability" (as defined in paragraph 7(e) below), (iii) the Executive's
voluntary termination of employment with the Company, (iv) the termination of
the Executive's employment by the Company for "good cause" (as defined in
paragraph 7(b) below), or (v) the termination of the Executive's employment by
the Company as a result of the Company's determination in its sole judgment that
the Executive has either (A) repeatedly failed to perform the duties and
assignments given to him or (B) consistently failed to perform the duties and
assignments given to him in a manner that is
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acceptable to the Company, based on the level and quality of performance
expected from an experienced executive at the Executive's level in the Company.
(c) If there is a Termination of Employment prior to
June 1, 2000, the Executive or his duly designated beneficiary shall be entitled
to the following benefits:
A. All unpaid salary through the date of
Termination of Employment plus credit for any
vacation earned but not taken through the date of
Termination of Employment and the amount of any bonus
which has been awarded but not paid under any bonus
plan together with reimbursement for expenses not
previously reimbursed through the date of
termination, all of which will be paid immediately.
B. As a severance benefit, the Executive shall be
entitled to an amount equal to two (2) times the
aggregate annual compensation (consisting of base
salary and incentive compensation) paid to the
Executive by the Company during the calendar year
preceding the date of termination. This amount, less
all proper payroll deductions, must be paid to the
Executive immediately in a lump sum discounted by an
interest rate equal to the prime rate then quoted by
Chemical Bank, N.A. assuming that payment would
otherwise have been made ratably in equal
semi-monthly installments over the period of time
through May 31, 2000.
Termination by the Company under this paragraph 6(c) shall have no effect upon
the Executive's other rights, including but not limited to rights under Benefit
Plans.
(d) If there is a Termination of Employment during the
Protection Period but subsequent to May 31, 2000, the Executive or his duly
designated beneficiary will continue to receive his gross bi-weekly salary in
effect on the date of Termination of Employment, subject to all required
withholding taxes, in the form of salary continuation ("Salary Continuation"),
during each of the thirty-four (34) months following the date of Termination of
Employment (the "Salary Continuation Period").
(e) In addition to the Salary Continuation provided under
paragraph 6(d) above, during the Salary Continuation Period the Company shall
maintain in full force for the Executive's and his family's benefit, all life
insurance, health and accident insurance, and disability and medical
reimbursement plans in which the Executive and his family were entitled to
participate immediately prior to the date of Termination of Employment, under
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the same terms as are made available during the Salary Continuation Period to
other executive employees of the Company from time to time, if the continued
participation of the Executive and his family in such plans is possible under
the general terms and provisions of such plans, programs and arrangements. The
costs of the Executive's and his family's continued participation in such
insurance and reimbursement plans shall be allocated between the Company and the
Executive in the same proportion as such costs were allocated prior to the date
of Termination of Employment. If the Executive's or his family's continued
participation is not possible, the Company shall reimburse the Executive for his
cost in obtaining comparable coverage, subject to a maximum reimbursement during
the Salary Continuation Period equal to 10% of the Executive's base annual
salary for the calendar year preceding the date of Termination of Employment.
For purposes of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"),
the qualifying event that begins the Executive's period of coverage shall be
considered to occur on the last day for which health coverage is provided during
the Salary Continuation Period and for which the Company contributes to the
costs of such coverage pursuant to this paragraph 6(e).
(f) This paragraph 6 shall not be applicable to any
Termination of Employment following a "change in control" as defined in
paragraph 7(c) of this Agreement.
(g) The payments and benefits provided for in paragraphs 6(c),
(d) and (e) shall be in lieu of any other severance payments the Executive might
otherwise be entitled to from the Company whether in this Agreement, under any
employment agreement, or under a severance plan or policy maintained by the
Company for employees of Executive's rank and seniority.
(h) The Executive shall not be considered to be an employee of
the Company during the Salary Continuation Period for purposes of accruing any
benefits under the Company's 401(k) retirement plan, or any other retirement,
pension, profit sharing, savings or incentive or bonus plan maintained,
sponsored or administered by the Company ("Retirement or Bonus Plans") or under
the Company's vacation policy. During the Salary Continuation Period the
Executive shall not be entitled to any contribution by the Company on his behalf
or to his account under any Retirement or Bonus Plans nor shall he be entitled
to accrue any benefits under the Company's vacation policy.
7. CHANGE IN CONTROL PAYMENTS.
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(a) If during the Protection Period there is a "change in
control" and within two (2) years thereafter (i) the employment of the Executive
is terminated by the Company for other than "good cause" or the death or "total
disability" of the Executive or (ii) the Executive shall declare his employment
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terminated for "good reason," then the Executive shall be
entitled to the following:
A. All unpaid salary through the date of
termination of employment plus credit for any
vacation earned but not taken through the date of
termination of employment (as permitted by the
Company's policy on vacations) together with
reimbursement for expenses not previously reimbursed
through the date of termination, all of which will be
paid immediately subject to all required withholding
taxes.
B. As a severance benefit, the Executive shall be
entitled to an amount equal to his current base
annual salary ("X") plus the annual average of all
incentive compensation paid to the Executive by the
Company during the three (3) calendar years preceding
the date of termination or such portion of that
period during which Executive was an employee ("Y"),
multiplied by two and nine-tenths [2.9] ("Severance
Benefit"). The Severance Benefit will equal (X + Y)
multiplied by 2.9.
C. This Severance Benefit, less all proper
payroll deductions, shall be paid immediately to the
Executive in a lump sum.
D. In addition to the Severance Benefit, the
Executive shall be entitled to continued
participation for thirty-four (34) months following
the date of the termination of his employment, in all
life insurance, health and accident insurance,
disability and medical reimbursement plans, programs
and arrangements in which the Executive and his
family were entitled to participate immediately prior
to the date of a "change in control," if the
continued participation of the Executive and his
family in such plans, programs and arrangements is
possible under the general terms and provisions of
such plans, programs and arrangements. The costs of
the Executive's and his family's continued
participation in such plans, programs and
arrangements shall be allocated between the Company
and the Executive in the same proportion as such
costs were allocated prior to the date of the
termination of his employment. If the Executive's or
his family's continued participation is not possible,
the Company shall reimburse the Executive at the end
of each month during the thirty-four (34) month
period for his
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cost in obtaining comparable coverage, subject to a
maximum reimbursement during each month equal to 2%
of the Executive's base annual salary for the
calendar year preceding the date of the termination
of his employment. For purposes of COBRA, the
qualifying event that begins the Executive's period
of coverage shall be considered to occur on the last
day for which health coverage is provided and for
which the Company contributes to the costs of such
coverage pursuant to this paragraph 7(a)D. The
Company's obligations under this paragraph 7(a)D.
with respect to life, health, accident and disability
coverage shall be suspended with respect to any such
coverage at any time that the Executive is eligible
for comparable coverage from another employer.
The parties agree that the payments provided
for in this paragraph 7(a) shall be liquidated damages which are in lieu of any
other severance payments that the Executive would otherwise be entitled to under
this Agreement or under any severance plan or policy that would apply to him but
for this Agreement, and the Company agrees that the Executive shall not be
required to mitigate his damages by seeking other employment or otherwise.
(b) "Good cause" shall mean (i) the Executive's
dishonesty, fraud or breach of trust, or substantial misconduct in the
performance of or substantial nonperformance of his duties as an employee of the
Company, (ii) any act or omission by the Executive that results in a felony
conviction or in a regulatory body with jurisdiction over the Company removing
the Executive from office or requesting or recommending the suspension or
removal of the Executive or taking punitive action against the Executive, or
(iii) a material breach by the Executive of paragraphs 8 or 9 of this Agreement.
(c) For purposes of this Agreement, a "change in
control" shall have occurred if, after the date of this
Agreement:
A. Any person (as such term is used in Section
13(d) or Section 14(d)(2) of the Securities Exchange
Act of 1934, as amended, and the rules and
regulations thereunder and including any affiliate or
associate of such person, as defined in Rule 12b-2
under said Act, and any person acting in concert with
such person), directly or indirectly acquires or
becomes the beneficial owner of (within the meaning
of Rule 13d-3 under said Act), or otherwise becomes
entitled to vote, stock of the Company or MGI or MNH
(hereinafter referred to individually as a
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"Merchants Company" and collectively as the
"Merchants Companies") with 25% or more of the voting
power entitled to be cast at elections for directors
(excluding any acquisition of stock in one Merchants
Company by another Merchants Company or the voting of
stock in one Merchants Company by another Merchants
Company); or
B. There occurs any merger or consolidation of a
Merchants Company (excluding any merger or
consolidation of one Merchants Company with another)
or any sale, lease or exchange of all or any
substantial part of the assets of any of the
Merchants Companies and their subsidiaries to any
other person, excluding any of the Merchants
Companies, and (i) in the case of a merger or
consolidation, the holders of the outstanding stock
of any of the Merchants Companies entitled to vote in
elections of directors ("voting stock") immediately
before such merger or consolidation hold less than
50% of the voting stock of the survivor of such
merger or consolidation or its parent; or (ii) in the
case of any such sale, lease or exchange, neither the
Company nor either of the other Merchants Companies
or the Merchants Companies as a group owns at least
50% of the voting stock of the other person; or
C. During any period of two (2) consecutive
years, individuals who at the beginning of such
period constitute the entire Board of Directors of
any of the Merchants Companies shall cease for any
reason to constitute a majority thereof, unless the
election or the nomination for the election by that
company's shareholders or policyholders of each new
Director was approved by a vote of at least
two-thirds of the Directors then still in office who
were Directors at the beginning of the period.
(d) "Good reason" shall mean any of the following
subsequent to a "change in control" (i) the requirement that the Executive
relocate his principal place of business to a location that is more than 25
miles from the Executive's principal place of business immediately prior to the
date of a "change in control," (ii) any assignment to the Executive without his
express written consent of any material duties, functions, authority or
responsibilities with respect to any of the Merchants Companies other than those
duties, functions, authority and responsibilities assigned to the Executive by
the Company prior to the "change in control," or any material limitation or
expansion without the Executive's express written consent of the material
duties, functions, authority and responsibilities
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assigned to the Executive by the Company prior to the "change in control," any
such assignment, limitation or expansion being deemed a continuing breach of
this Agreement, (iii) a reduction in the Executive's then annual salary paid by
any of the Merchants Companies or (iv) failure by the Company to obtain the
assumption of, and the agreement to perform, this Agreement by any successor or
assign as contemplated in paragraph 13 hereof, and such relocation described in
the foregoing clause (i), such assignment, limitation or expansion described in
the foregoing clause (ii), reduction described in the foregoing clause (iii) or
failure described in the foregoing clause (iv) is not cured within thirty (30)
days after receipt by the Company of written notice from the Executive
describing such event, or (v) any removal of the Executive from, or any failure
to re-designate or re-elect the Executive to the position he held immediately
prior to the "change in control"; provided that in any event set forth above in
this subparagraph 7(d), the Executive shall have elected to terminate his
employment under this Agreement upon not less than sixty (60) days' advance
written notice to the Company, given, except in the case of a continuing breach,
within three calendar months after (A) failure to be so elected or re-elected,
or such removal, or (B) expiration of the thirty-day cure period with respect to
such event. An election by the Executive to terminate his employment given under
the provisions of this paragraph 7(d) shall not be deemed a voluntary
termination of employment by the Executive for the purpose of this Agreement or
any plan or practice of the Company.
(e) "Total disability," as used herein, shall mean
total disability as defined in any long-term disability plan sponsored by the
Company in which the Executive participates, or, if there is no such plan or it
does not define such term, then it shall mean the physical or mental incapacity
of the Executive which prevents him from substantially performing his duties as
an employee of the Company for a period of at least 180 days and the incapacity
is expected to be permanent and continues for the remainder of the Executive's
life.
(f) The payments provided for in this paragraph 7 are
in lieu of any payments provided for in the Employment Agreement or in any
severance agreement or similar agreement between the Executive and the Company
which is dated prior to the date of this Agreement ("Severance Agreement"). This
Agreement hereby voids, terminates and supersedes the Employment Agreement and
any such Severance Agreement and the Executive hereby acknowledges that the
Employment Agreement and any such Severance Agreement are hereby terminated and
he no longer has any rights or benefits thereunder.
8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
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The Executive will not at any time use or disclose
to any third party any confidential information or trade secrets
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relating to the business of any of the Merchants Companies, including business
methods and techniques, research data, marketing and sales information, agent
lists, underwriting and claims procedures, investment strategies, reinsurance
arrangements, agent compensation plans, pricing data, and any other information
concerning the business of any of the Merchants Companies, their manner of
operation, their plans, or other information not disclosed to the general public
or known in the insurance industry, except for disclosure in the course of the
Executive's duties hereunder, or disclosure required by any law, rule,
regulation or court order, or disclosure which the Executive reasonably believes
would subject him or any of the Merchants Companies to liability if not made.
This covenant will survive the termination of this Agreement.
9. COVENANT NOT TO COMPETE.
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(a) The Executive shall not "compete," as that term
is defined in paragraph 9(c) below, with any of the Merchants Companies while
employed by the Company.
(b) If the Executive is receiving Salary Continuation
payments under paragraph 6(d) of this Agreement, he shall not compete with any
of the Merchants Companies during the first ninety (90) days of the Salary
Continuation Period, nor shall he "solicit," as that term is defined in
paragraph 9(d) below, any employee of the Company for a period of six (6) months
after his last day of employment with the Company, unless he shall have received
prior written approval from the Company.
(c) As used in this paragraph 9, the term "compete"
means the direct or indirect ownership, management, operation or control of, or
participation in the ownership, management, operation, or control of, or the
holding of the position of an officer, employee, partner, director, consultant
or similar positions, or the holding of any financial interest in, or the giving
of any aid or assistance to anyone else in the conduct of, any business that is
engaged in a property-casualty insurance business that offers substantially any
of the same lines of insurance and coverages offered, or proposed to be offered,
by any of the Merchants Companies at the time of the Executive's withdrawal from
or termination of employment with the Company, in any of the geographic markets
in which any of the Merchants Companies is then conducting business. Ownership
of stock of MGI or of one percent (1%) or less of the voting stock of any other
publicly held corporation shall not constitute a violation of this paragraph 9.
(d) As used in paragraph 9(b) above, the term
"solicit" shall mean the solicitation of any employee of the Company for the
purpose of hiring or engaging such employee to work for or otherwise assist any
person who does or intends to compete with any of the Merchants Companies.
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(e) In addition to any other remedies that the
Company may have in law or in equity for a breach of the Executive's covenants
set forth in this paragraph 9, the Company may also cancel its obligations to
pay to the Executive any monies and other benefits otherwise due to the
Executive under this Agreement.
10. ENTIRE AGREEMENT.
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The terms and provisions of this Agreement
constitute the entire agreement between the parties and supersede any previous
oral or written communications, representations, or agreements with respect to
the subject matter hereof, including without limitation the Employment
Agreement.
11. NOTICE.
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Any notices given hereunder shall be in writing
and shall be given by personal delivery or by certified or registered mail,
return receipt requested, addressed to the addressee at the address set forth at
the head of this Agreement or such other address that such addressee has duly
notified the other party to forward notices to hereunder.
12. SEVERABILITY.
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The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision had been omitted.
13. COMPANY ASSIGNMENT.
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The Company may not assign this Agreement, except
that the Company's obligations hereunder shall be binding legal obligations of
any successor to all or substantially all of the Company's business by purchase,
merger, consolidation, or otherwise. The Company shall require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. Any
failure of the Company to obtain such agreement prior to the effectiveness of
any such succession or assignment shall be a material breach of this Agreement.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
paragraph 13 or which otherwise
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becomes bound by all the terms and provisions of this Agreement
by operation of law.
14. NO ASSIGNMENT BY EXECUTIVE.
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No interest of the Executive or the Executive's
spouse or any other beneficiary under this Agreement, or any right to receive
any payments or distributions hereunder, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other alienation or
encumbrance of any kind, nor may such interest or right to receive a payment or
distribution be taken, voluntarily or involuntarily, for the satisfaction of the
obligations or debts of, or other claims against, the Executive or the
Executive's spouse or other beneficiary, including claims for alimony, support,
separate maintenance, and claims in bankruptcy proceedings.
15. BENEFITS UNFUNDED.
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All rights of the Executive and the Executive's
spouse or other beneficiary under this Agreement shall at all times be entirely
unfunded, and no provision shall at any time be made with respect to segregating
any assets of the Company for payment of any amounts due hereunder. Neither the
Executive nor the Executive's spouse or other beneficiary shall have any
interest in or rights against any specific assets of the Company, and the
Executive and the Executive's spouse or other beneficiary shall have only the
rights of a general unsecured creditor of the Company.
16. WAIVER.
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No waiver by any party at any time of any breach
by another party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of any
other provisions or conditions at the same time or at any prior or subsequent
time.
17. PAYMENTS IN EVENT OF DEATH.
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Upon the death of the Executive all amounts due
and payable to the Executive pursuant to this Agreement shall be paid to the
person or persons designated by him as his beneficiary or beneficiaries on the
Form of Designation of Beneficiary attached hereto as Exhibit A, or if no such
person is designated then to his devisee, legatee or other designee, or in their
absence to his estate.
18. REDUCTION OF PARACHUTE PAYMENTS
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AND EXCESSIVE EMPLOYEE REMUNERATION.
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(a) In the event that a determination is made by
legal counsel for the Company that (i) the Executive would,
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except for this paragraph 13, be subject to the excise tax provisions of Section
4999 of the Internal Revenue Code of 1986 (the "Code"), or any successor
sections thereof, as a result of a "parachute payment" (as defined in Section
280G(b)(2)(A) of the Code) made by the Company to the Executive pursuant to this
Agreement or any other agreement, plan or arrangement, or (2) a federal income
tax deduction would not be allowed to the Company for all or a part of such
payments by reason of Section 280G(a) of the Code (or any successor provision),
the payments to which the Executive would otherwise be entitled hereunder shall
be reduced, eliminated, or postponed in such amounts as are required to reduce
the aggregate "present value" (as defined in Section 280G(d)(4) of the Code) of
such payments to one dollar less than an amount equal to three times the
Executive's "base amount" (as defined in Sections 280G(b)(3)(A) and 280G(d)(1)
and (2) of the Code), to the end that the Executive is not subject to tax
pursuant to such Section 4999 and no deduction is disallowed by reason of such
Section 280G(a). To achieve such reduction in aggregate present value, the
Executive shall determine which item or items payable hereunder shall be
reduced, eliminated, or postponed, the amount of each such reduction,
elimination, or postponement, and the period of each postponement. The Company
shall direct its legal counsel to review the payments made to the Executive and
shall provide to the Executive such information as is reasonably necessary for
the Executive to make the determinations contemplated in this paragraph.
(b) In the event that a determination is made by
legal counsel for the Company that the Company would not be allowed to deduct
remuneration payable to the Executive as a result of the limits imposed by
Section 162(m) of the Code, or any successor sections thereof, the payments to
which the Executive would otherwise be entitled hereunder shall be reduced,
eliminated, or postponed in such amounts as are required to avoid the limits
imposed by Section 162(m). The procedures set forth in paragraph 18(a) to
accomplish such reduction, elimination or postponement shall apply to this
paragraph 18(b).
19. APPLICABLE LAW.
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This Agreement shall be construed and interpreted
in accordance with the internal substantive laws of the State of New York
without taking into account its laws on the conflict of law.
20. ARBITRATION.
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The Company and the Executive shall attempt to
resolve between them any dispute which arises hereunder. If they cannot agree
within ten (10) days after either party submits a demand for arbitration to the
other party, then the issue shall be submitted to arbitration with each party
having the right to appoint one (1) arbitrator and those two (2) arbitrators
mutually
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selecting a third arbitrator. The rules of the American Arbitration Association
for the arbitration of commercial disputes shall apply and the decision of 2 of
the 3 arbitrators shall be final. The arbitrators must reach a decision within
ninety (90) days after the selection of the third arbitrator. The arbitration
shall take place in Buffalo, New York. The arbitrators shall apply New York law.
21. AMENDMENT.
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This Agreement shall be amended only by a written
document signed by each party hereto.
22. EMPLOYEE-AT-WILL.
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Notwithstanding any provision in this Agreement,
the Executive will remain an at-will employee of the Company, whose employment
may be terminated by the Company at any time subject to the Executive's rights
to receive the benefits specifically provided in this Agreement, as applicable.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first above written.
THE EXECUTIVE:
/s/ Xxxxxx X. Xxx
---------------------------------
XXXXXX X. XXX
MERCHANTS MUTUAL INSURANCE COMPANY
By /s/ Xxxxxxxx X. Xxxxx, Xx.
----------------------------------
XXXXXXXX X. XXXXX, XX.,
CHAIRMAN OF THE
COMPENSATION COMMITTEE
- 14 -
16
EXHIBIT A
FORM OF DESIGNATION OF BENEFICIARY
In the event of the death of the undersigned, the undersigned
hereby designates the following person or persons as his beneficiary or
beneficiaries for the receipt of any payments due to the undersigned under the
Employee Retention Agreement between the undersigned and Merchants Mutual
Insurance Company:
Primary Beneficiary
or Beneficiaries:
-----------------
___________________________________
___________________________________
Contingent Beneficiary
or Beneficiaries:
-----------------
___________________________________
___________________________________
Dated: _________________ ______________________________
XXXXXX X. XXX
