EXHIBIT 10.25
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement")
is effective January 1, 2004, by and among Meadowbrook, Inc., and Meadowbrook
Insurance Group, Inc., (hereinafter referred to as the "Company"), and Xxxxxx X.
Xxxxxx (hereinafter referred to as the "Executive").
RECITALS:
WHEREAS, the Company and the Executive desire to set forth their
respective rights and obligations in connection with the employment of the
Executive by the Company by entering into a contract of employment;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and understandings contained herein, the parties hereto
agree as follows:
AGREEMENT:
1. EMPLOYMENT. The Company agrees to employ the Executive during the
Employment Term (as such term is hereinafter defined in Paragraph 5) and the
Executive hereby accepts such employment by the Company, subject to the terms
and conditions hereinafter set forth and the Company's Associate Manual
(hereinafter referred to as the "Manual"). To the extent that the terms and
Conditions of this Agreement conflict with the Manual, this Agreement shall
control. This Agreement establishes the terms of Executive's employment and the
payments to which the Executive is entitled during such employment and upon
termination of employment. Nothing in this Agreement changes the at-will status
of the Executive's employment. The Company retains the right to terminate
Executive's employment with the Company for any reason and at any time and the
Executive retains the same right.
2. RESPONSIBILITIES AND DUTIES. The Executive shall be employed as the
Company's President and Chief Executive Officer or in such other position(s) and
with such responsibilities and duties as the Board of Directors of the Company
may from time to time determine. The Executive shall devote his full working
time to the performance of his responsibilities and duties hereunder.
3. COMPENSATION. In consideration of the performance by Executive of
his obligations during the Employment Term, the Company will during the
Employment Term pay the Executive:
(A) BASE SALARY. A base salary of not less than $37,500
per month (hereinafter referred to as "Base Salary").
Such Base Salary shall be payable in accordance with
the normal payroll practices of the Company then in
effect. Any increases in the Base Salary shall be
determined by the Company.
(B) DISCRETIONARY BONUS. A discretionary bonus targeted
at a minimum of fifty percent (50%) of Executive's
Base Salary (hereinafter referred to as the
"Discretionary Bonus"). This Discretionary Bonus may
be paid at the sole discretion of the Company and
will be based on attainment of:
(1) Corporate Goals (growth & profit);
(2) Profit Center Goals; and
(3) Personal Goals and Objectives.
The Company and the Executive shall annually review and establish the
Discretionary Bonus target and the bonus formula described in Section
3(B)(1)-(3).
(C) STOCK OPTIONS. The Executive has been, and shall
continue to be, eligible for the stock options, in
accordance with the terms and conditions of the 1995
and 2002 Stock Option Plans of Meadowbrook Insurance
Group, Inc. In the event of any Change in Control,
all stock options previously granted to the Executive
shall become exercisable by the Executive.
(D) LONG TERM INCENTIVE PLAN. The Executive shall be
eligible for restricted stock awards and performance
bonus awards under the Meadowbrook Insurance Group,
Inc. Long Term Incentive Plan.
(E) DEMAND NOTE - NON-RECOURSE. The Demand Note between
the Company and Executive and his spouse, dated
November 9, 1998, shall continue to be deemed a
non-recourse loan with the Company's sole legal
remedy in the event of a default being the
reclamation of the shares of Meadowbrook Insurance
Group, Inc., pledged pursuant to the Stock Pledge
Agreement, dated November 9, 1998. In the event of a
termination of Executive's employment by the Company
without Cause or as a result of any purchaser
acquiring fifty percent (50%) or more of the
outstanding shares of the Company, then (i) this
Demand Note shall be cancelled and deemed paid in
full; and (ii) the Executive shall be entitled to
retain his shares of Company stock pledged pursuant
to the Stock Pledge Agreement, dated November 9,
1998, or, at the Executive's discretion, sell these
shares back to the Company at the then current market
price or their book value, whichever is greater.
(F) SEVERANCE.
(1) WITHOUT CAUSE TERMINATION OR
TERMINATION FOR GOOD REASON. In the
event that prior to a Change in
Control, Executive's employment is
terminated by the Company during
the Employment Term without Cause
or terminated by the Executive for
Good Reason, then the Company shall
make the following payments to the
Executive:
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(i) Executive shall be paid a
severance equal to
twenty-four (24) months of
his existing Base Salary.
This severance shall be
paid bi-monthly in
accordance with the
Company's regular payment
schedule of its employees.
(ii) The Executive shall also
be entitled to payment of
a pro rata share of such
portion of the
Discretionary Bonus for
the year in which his
employment terminates that
is based on Company
performance criteria. Such
pro rata portion shall be
determined by a fraction,
the numerator of which is
the number of days in the
year that the Executive is
employed by the Company
and the denominator of
which is 365. Such payment
shall be made no later
than the February 28 of
the calendar year
immediately following the
year in which Executive's
employment terminates.
(iii) The Company shall also pay
the Executive an amount
equal to the premiums
payable by the Executive
in the event the Executive
elects continuation
coverage pursuant to the
Consolidated Omnibus
Budget Reconciliation Act
of 1985 ("COBRA"). Such
payments shall cease upon
the earlier of eighteen
(18) months of
continuation coverage or
the cessation of the
Executive's and the
Executive's family
members' rights to COBRA
continuation coverage. The
Company shall make such
payments directly to the
party to whom premiums are
payable at such times as
they are due under COBRA.
(2) TERMINATION FOLLOWING CHANGE IN
CONTROL. In the event that
following a Change in Control,
Executive's employment is
terminated by the Company during
the Employment Term without Cause
or terminated by the Executive for
Good Reason, then the Company shall
make the following payments to the
Executive:
(i) The Company shall make a
single lump sum payment to
Executive equal to two (2)
times the sum of the
Executive's existing
annual Base Salary and the
Executive's target
Discretionary Bonus,
subject to repayment by
the Executive upon the
Executive's breach of his
covenant to not compete
with the
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Company or to solicit
Company employees as
provided in Section 7. The
Company shall make such
payment within ten (10)
days following the date
the Executive's employment
terminates.
(ii) The Executive shall also
be entitled to payment of
a pro rata share of such
portion of the
Discretionary Bonus for
the year in which his
employment terminates that
is based on Company
performance criteria. Such
pro rata portion shall be
determined by a fraction,
the numerator of which is
the number of days in the
year that the Executive is
employed by the Company
and the denominator of
which is 365. Such payment
shall be made no later
than the February 28 of
the calendar year
immediately following the
year in which Executive's
employment terminates.
(iii) The Company shall also pay
on Executive's behalf an
amount equal to the
premiums payable by the
Executive in the event the
Executive elects
continuation coverage
pursuant to the
Consolidated Omnibus
Budget Reconciliation Act
of 1985 ("COBRA"). Such
payments shall cease upon
the earlier of eighteen
(18) months of
continuation coverage or
the cessation of the
Executive's and the
Executive's family
members' rights to COBRA
continuation coverage. The
Company shall make such
payments directly to the
party to whom premiums are
payable at such times as
they are due under COBRA.
(3) FOR CAUSE TERMINATION.
(i) For purposes of this
Agreement, "Cause" shall
mean:
(a) the failure by the
Executive to obey the
reasonable and lawful
orders of the Board of
Directors of the
Company or his direct
supervisor;
(b) misconduct by the
Executive that is
materially injurious
to the Company; or
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(c) the Executive engaging
in dishonest
activities injurious
to the Company.
(ii) Should the Executive's
employment be terminated
by the Company for Cause
during the Employment
Term, this Agreement shall
be terminated forthwith
without notice or payment
in lieu thereof and the
Executive shall not be
entitled to receive any
other consideration
(beyond consideration
accrued to the date of
dismissal that is owing
but not yet paid) from the
Company.
(iii) Further, in the event the
Executive's employment is
terminated by the Company
during the Employment Term
for Cause:
(a) Executive shall be
paid no severance
payments;
(b) The Demand Note
between the Company
and Executive and his
spouse, dated November
9, 1998, shall be
cancelled and
considered paid in
full; and
(c) The Executive and his
spouse shall forfeit
the shares of
Meadowbrook Insurance
Group, Inc., pledged
pursuant to the Stock
Pledge Agreement,
dated November 9,
1998, or at the
Company's discretion
sell these shares back
to the Company for the
total sum of one
dollar ($1.00).
(G) CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall be deemed to have taken
place upon:
(1) The acquisition by any individual,
entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of
1934, as amended (the "Exchange
Act")) (a "Person") of beneficial
ownership (within the meaning of
Rule 13d-3 promulgated under the
Exchange Act) of 35% or more of
either (a) the then outstanding
shares of common stock of the
Company (the "Outstanding Company
Common Stock") or (b) the combined
voting power of the then
outstanding voting securities of
the Company entitled to vote
generally in the election of
directors (the "Outstanding Company
Voting
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Securities"); provided, however,
that for purposes of this
subparagraph 1, the following
acquisitions shall not constitute a
Change in Control: (i) any
acquisition directly from the
Company, (ii) any acquisition by
the Company, (iii) any acquisition
by any employee benefit plan (or
related trust) sponsored or
maintained by the Company or any
corporation controlled by the
Company, or (iv) any acquisition by
any corporation pursuant to a
transaction which complies with
clauses (a), (b) and (c) of
subparagraph 3 of this Section (G);
or
(2) Individuals who, as of the date
hereof, constitute the Board of
Directors of the Company (the
"Incumbent Board") cease for any
reason to constitute at least a
majority of the Board of Directors;
provided, however, that any
individual who becomes a director
subsequent to the date hereof and
whose election, or nomination for
election by the Company's
shareholders, was approved by a
vote of at least a majority of the
directors then comprising the
Incumbent Board (either by a
specific vote or by approval of the
proxy statement of the Company in
which such person is named as a
nominee for director, without
written objection to such
nomination) shall be deemed to be a
member of the Incumbent Board;
provided, further, that
notwithstanding the immediately
preceding proviso, any individual
whose initial assumption of office
occurs as a result of an actual or
threatened election contest with
respect to the election or removal
of directors or other actual or
threatened solicitation of proxies
or contests by or on behalf of a
Person, other than the Board of
Directors of the Company, shall not
be deemed to be a member of the
Incumbent Board; or
(3) Consummation of a reorganization,
merger, share exchange or
consolidation or sale or other
disposition of all or substantially
all of the assets of the Company (a
"Business Combination"), in each
case, unless, following such
Business Combination: (a) all or
substantially all of the
individuals and entities who were
the beneficial owners,
respectively, of the Outstanding
Company Common Stock and
Outstanding Company Voting
Securities immediately prior to
such Business Combination
beneficially own, directly or
indirectly, more than 65% of,
respectively, the then outstanding
shares of common stock and the
combined voting power of the then
outstanding voting securities
entitled to vote generally in
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the election of directors, as the
case may be, of the corporation
resulting from such Business
Combination (including, without
limitation, a corporation which as
a result of such transaction owns
the Company or all or substantially
all of the Company's assets either
directly or through one or more
subsidiaries) in substantially the
same proportions as their
ownership, immediately prior to
such Business Combination, of the
Outstanding Company Common Stock
and Outstanding Company Voting
Securities, as the case may be; (b)
no Person (excluding any
corporation resulting from such
Business Combination or any
employee benefit plan (or related
trust) of the Company or such
corporation resulting from the
Business Combination) beneficially
owns, directly or indirectly, 35%
or more of, respectively, the then
outstanding shares of common stock
of the corporation resulting from
such Business Combination or the
combined voting power of the then
outstanding voting securities of
such corporation except to the
extent that such ownership existed
prior to the Business Combination;
and (c) at least a majority of the
members of the board of directors
of the corporation resulting from
such Business Combination were
members of the Incumbent Board
immediately prior to the time of
the execution of the initial
agreement, or of the action of the
Board of Directors of the Company,
providing for such Business
Combination; or
(4) Approval by the stockholders of the
Company of a complete liquidation
or dissolution of the Company.
(H) GOOD REASON. Executive will be deemed to
have terminated his employment for "Good
Reason" if he tenders his resignation to the
Company within six (6) months following the
occurrence of any one or more of the
following, without Executive's prior written
consent and the Executive have not entered
into a written agreement that replaces this
Agreement: (i) Executive is not reelected to
or is removed President and Chief Executive
Officer of the Company; (ii) the Company
fails to vest Executive with or removes from
him the duties, responsibilities, authority
or resources that he reasonably needs to
competently perform his duties as President
and Chief Executive Officer of the Company;
(iii) the Company changes the primary
location of Executive's employment to a
place that is more than 50 miles from
Southfield, Michigan; (iv) the Company
otherwise commits a material breach of its
obligations under this Agreement and fails
to cure the breach within 30 days after
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Executive gives the Company written notice of the
BREACH; or (v) the Company gives notice that it will
not renew this Agreement pursuant to Section 5 below.
4. OTHER BENEFITS. The Executive shall also be entitled to such
additional benefits as outlined in the Manual during the Employment Term or
severance period, with the exception of 401(k) participation during the
severance period.
5. EMPLOYMENT TERM. The period of the Executive's employment by the
Company under this Agreement (the "Employment Term") shall commence on January
1, 2004 and shall continue through December 31, 2006 (or such later date as
provided below) or the earliest date on which any of the following events
occurs:
(A) the death or retirement of the Executive;
(B) the date on which the Company discharges the
Executive by reason of the Executive's Total
Disability. For purposes of this Agreement, "Total
Disability" shall have the same meaning as used in
the Manual and consistent with the Long Term
Disability Benefits of the Company;
(C) a mutual written agreement between the Company and
the Executive regarding an early termination date; or
(D) the date on which the Company terminates the
Executive's employment for Cause as recited in
Section 3(F)(3).
Either party hereto may elect not to renew this Employment Agreement by giving
the other party written notice on or before December 31, 2004, and annually
thereafter. If written notice of the election not to renew this Agreement is not
provided on or before December 31, 2004, and annually thereafter, the Employment
Term shall automatically be extended for an additional one (1) year period.
6. CONFIDENTIAL INFORMATION AGREEMENT. Executive agrees that the
Confidential Information Agreement executed by him and dated March 9,1987 (the
"Confidential Information Agreement"), which includes, not by way of limitation,
covenants not to compete with the Company and covenants to refrain from
soliciting employees to leave the Company's employment, shall remain in full
force and effect.
7. COVENANT NOT TO COMPETE OR SOLICIT EMPLOYEES. In the event severance
becomes payable to Executive following a Change in Control, Executive, in
addition to the restrictive covenants contained in the Confidential Information
Agreement, agrees to the restrictive covenants of this Section:
(A) Executive agrees that, for two years following the
termination of Executive's employment under
circumstances described in Section 3(F)(2), he will
not, without the Company's prior written consent,
directly
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or indirectly Compete with the Company or any of its
subsidiaries. For the purposes of Section:
(1) "Compete" means directly or
indirectly owning, managing or
operating a Competitor which
solicits or obtains business of the
Company, or directly or indirectly
serving as an employee, officer or
director of or a consultant to a
Competitor which solicits or
obtains business of the Company, or
soliciting or inducing any employee
or agent of the Company to
terminate employment with the
Company or any of its subsidiaries
and become employed by a
Competitor.
(2) "Competitor" means any person,
firm, partnership, corporation,
trust or other entity that owns,
controls or is an insurance company
or a similar financial services
company (a "Financial Services
Company").
(B) In the event that a successor to the Company succeeds
to or assumes the Company's rights and obligations
under this Agreement, Section 7(A) will apply only to
the Company as it existed immediately before the
succession or assumption occurred and will not apply
to any of the successor's other offices.
(C) Section 7(A) will not prohibit Executive from
directly or indirectly owning or acquiring any
capital stock or similar securities that are listed
on a securities exchange or quoted on the Nasdaq or
NYSE and do not represent more than 5% of the
outstanding capital stock of any Financial Services
Company.
(D) Executive agrees that a violation of this Section 7
would result in direct, immediate and irreparable
harm to the Company, and in such event, agrees that
the Company, in addition to their other rights and
remedies, would be entitled to injunctive relief
enforcing the terms and provisions of this Section 7
and a return to the Company of any severance payments
under Section 3(F)(2). The terms of this Section are
intended to be in addition to any restrictions
contained in the Confidential Information Agreement.
8. BINDING EFFECT; ASSIGNMENT. The Company may assign this Agreement to
any of its affiliates or their successors or assigns. This Agreement shall be
binding upon and shall inure to the benefit of the Company, its affiliates and
their successors and assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Executive. Neither this Agreement nor any
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right or interest hereunder shall be assignable or transferable by the
Executive, his beneficiaries or legal representatives.
9. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
10. NOTICES. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand (including by courier), mailed by registered or certified mail, postage
prepaid (return receipt requested), or sent by facsimile transmission, as
follows:
If to the Executive: If to the Company:
To the address on file MEADOWBROOK, INC
with the Company's Attn: Human Resources
Human Resources 00000 Xxxxxxxxx Xxxx, Xxxxx 000
Department as the Xxxxxxxxxx, XX 00000
Executive's home address.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or, if mailed upon receipt thereof; provided,
however, that any notice or communication changing any of the addresses set
forth above shall be effective and deemed given only upon its receipt.
11. SEVERABILITY. If any provision of this Agreement, or any
application thereof to any circumstance, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
12. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Michigan, excluding any choice of law
rule requiring application of the law or any other jurisdiction. Any action
arising out of or relating to this Agreement, its performance, enforcement or
breach, will be venued in the Circuit Court for the County of Oakland, State of
Michigan.
13. ENTIRE AGREEMENT. This Agreement and the Confidential Information
Agreement, which is incorporated herein by reference, sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements, written or oral,
between them as to such subject matter. Further, this Agreement continues in
effect the modifications and amendments to the Demand Note between the
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Company and Executive and his spouse, dated November 9, 1998, and the Stock
Pledge Agreement between the Company and Executive and his spouse, dated
November 9, 1998, such modifications and amendments having been made by the
employment agreement among the parties as of June 1, 2001, as subsequently
amended by the parties as of June 15, 2002.
14. HEADINGS. The headings contained herein are solely for the purpose
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and effective as of the date first written above.
MEADOWBROOK INSURANCE GROUP, INC.
____________________________________________
By: Xxxxxx X. Xxxxx
Its: Chairman
MEADOWBROOK, INC.
____________________________________________
By: Xxxxxx X. Xxxxx
Its: Vice Chairman
____________________________________________
Xxxxxx X. Xxxxxx
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