EMPLOYMENT AGREEMENT
Exhibit 10.8
Execution Copy
April 2, 2009
April 2, 2009
This Employment Agreement (the “Agreement”) is made and entered into by and between
ProAssurance Corporation, a Delaware corporation (“ProAssurance”) and Xxxxx X. Xxxxx , an
individual (the “Executive”) as of April 2, 2009 (the “Commencement Date”). This Agreement is
offered by ProAssurance in order to secure the continued employment of Executive upon the
completion of the conversion of Podiatry Insurance Company of America (“PICA”) into a stock
insurance company and the purchase of its stock by ProAssurance as contemplated in the Stock
Purchase Agreement dated October 28, 2008 (the “Stock Purchase Agreement”). Capitalized terms not
otherwise defined herein shall have the meaning attributed to them in the Stock Purchase Agreement.
ProAssurance and the Executive, each intending to be legally bound by the terms hereof, agree as
follows:
1. Employment Term. ProAssurance hereby employs Executive, and Executive accepts
employment, upon the terms and conditions of this Agreement for a term of thirty-six (36) months
running from the Commencement Date to and including April 2, 2012 (the “Term”). Executive shall
be employed by ProAssurance or by one of its direct or indirect subsidiaries provided that
ProAssurance shall at all times remain obligated to the Executive as set forth in this Agreement.
Immediately upon the expiration of the Term, unless otherwise provided in Section 9 of this
Agreement, ProAssurance and Executive shall execute the Release and Severance Compensation
Agreement in the form attached hereto as Exhibit C (the “Severance Agreement”) which shall govern
the relationship of ProAssurance and Executive from and after the Term and shall supersede this
Agreement in its entirety.
2. Offices; Directorship; Other Activities.
2.1 Office and Duties. From and after the Effective Date, Executive shall serve as
Chief Executive Officer of PICA. Executive shall have the duties and authority as are prescribed
by the bylaws of PICA for such office, such other duties and responsibilities as have customarily
been performed by the Chief Executive Officer, and other duties and responsibilities as may be
assigned to him by PICA Board of Directors (the “Board”) and the Chief Executive Officer of
ProAssurance, provided that such assignments are customary and appropriate for the Chief Executive
Officer of PICA. During the Term of this Agreement, Executive shall report directly to the Board
and the Chief Executive Officer of ProAssurance. Executive shall be given such authority as is
appropriate to carry out his duties.
2.2 Efforts and Other Activities. During the Term, except for periods of vacation,
sick leave, personal leave granted by the Board, or leave to which the Executive is entitled under
law, Executive shall devote reasonable attention and time to the business and affairs of
ProAssurance to the extent necessary to discharge his duties under this Agreement. With the prior
approval of the Board, Executive may serve as a director or trustee of other corporations or
businesses which do not compete with ProAssurance or its subsidiaries. Executive may also serve
on civic, trade or charitable boards or committees. Executive may invest in real estate for
his own account or become a passive partner or passive stockholder in any corporation,
partnership or other venture; provided that Executive may not invest in any business that does
business with, or competes with, the Company except for investment in a business where Executive’s
percentage of ownership is insignificant. Executive may invest in mutual funds or similar
investment vehicles in which Executive does not provide active management services. Executive may
deliver lectures, fulfill speaking engagements or teach at educational institutions and may manage
personal investments, provided that such activities do not materially interfere with Executive’s
responsibilities to ProAssurance.
2.3 Place of Business. Executive’s services shall be performed primarily at the
headquarters of PICA located at 0000 Xxxxxxxx Xxxx., Xxxxxxxx, XX 00000 in Xxxxxxxxxx County,
Tennessee.
3. Compensation and Benefits.
3.1 Base Salary. ProAssurance will pay to Executive a base salary at the rate of
$447,200 per annum for the calendar year ending December 31, 2009, which amount shall include any
base salary paid by PICA from January 1, 2009 to the Commencement Date (“Base Salary”). The annual
Base salary will be increased by $30,339 as shown on Schedule 3.1 to reflect the monetized value of
company paid automobile use and county club dues currently paid by PICA on behalf of Executive and
prorated for the period after the Commencement Date. Base Salary will be payable in periodic
installments in accordance with ProAssurance’s customary practices for executive officers. Amounts
payable will be reduced by standard withholding and other authorized deductions. For calendar
years beginning after December 31, 2009, ProAssurance shall review Executive’s Base Salary at least
annually and the Base Salary shall be subject to increase, at the discretion of ProAssurance but
not less than four percent (4%) per annum, effective on the date salary adjustments are made for
other senior executive officers of ProAssurance consistent with past practice. Base Salary shall
not be reduced at any time without the express written consent of Executive.
3.2 Annual Incentive Compensation.
(a) For 2009, if not previously paid by PICA, ProAssurance will pay Executive an annual bonus
of up to 50% of the Base Salary based on the results for the calendar year ending December 31,
2008. The criteria for this bonus will be based on goals previously established by the PICA Board.
Executive acknowledges that PICA has paid all amounts due under this Section 3.2(a).
(b) For calendar years beginning after December 31, 2009, Executive shall be eligible for
annual incentive compensation of up to 50% of Base Salary paid to the Executive based on objective
corporate performance criteria established by the PICA Board and the CEO of ProAssurance.
(c) For calendar years beginning after December 31, 2009, Executive shall be eligible for
long-term equity compensation grants as determined by the Compensation Committee of the
ProAssurance Board of Directors.
2
(d) The incentive compensation for each calendar year will be paid at such time as annual
incentive compensation is paid to ProAssurance’s senior executive officers consistent with past
practice but not later than March 15 in the next succeeding calendar year; provided that payment of
such annual incentive compensation shall be subject to and conditioned upon Executive’s employment
with ProAssurance on the payment date.
3.3 Retention Bonus. Effective with 30 days after the Effective Time, ProAssurance
shall pay to Executive a retention bonus in the amount of $400,000 to be paid one-half in cash and
one-half in ProAssurance common stock valued as of the NYSE closing price on the Closing Date.
3.4
Pre-existing Retirement Provisions: Pursuant to Section 7.5(e) of the Stock
Purchase Agreement dated October 28, 2008, ProAssurance agreed that PICA would satisfy any
retirement payments or obligations pursuant to Executive’s prior Employment Agreement with PICA
dated July 20, 2000, as amended through the Commencement Date of this Agreement. ProAssurance and
Executive agree that PICA has fully satisfied its obligations to Executive as set forth below and
there are no further obligations owing to Executive pursuant to the Employment Agreement dated July
20, 2000, as amended, or otherwise in accordance with the following:
X. XXXX has contributed $600,000 to the Nonqualified Supplemental Deferred
Compensation Plan (the “Plan”) of PICA Management Resources that has been used by
the Plan to purchase three deferred annuities from New York Life (contract no.
52021264, issue date July 16, 2002 in the initial amount of $200,000; contract no.
52039456, issue date May 15, 2003 in the initial amount of $150,000; contract no.
52077551, issue date September 14, 2004 in the initial amount of $150,000) and one
certificate of deposit from U S Bank dated July 7, 2005 in the initial amount of
$100,000. These items, and any future substitution or reinvestment, and the
interest earned thereon, will be paid to Executive upon his separation from service
according to the provisions of the Plan.
B. During 2009 and prior to the Commencement Date, PICA has paid to executive
$150,000 in full satisfaction of PICA’s obligation to retain Executive as a
consultant and Board member after his retirement.
3.5 Other Savings and Retirement Plans. Except as specifically provided herein,
Executive shall be entitled to participate in all savings and retirement plans, practices, policies
and programs applicable generally to other executive officers of ProAssurance. The current savings
and retirement plans, all of which may be terminated or amended by the Board of Directors of
ProAssurance, include the Executive Non-Qualified Excess Plan and Trust, the Amended and Restated
ProAssurance Corporation Stock Ownership Plan, and the ProAssurance Group Savings and Retirement
Plan. Executive shall also be permitted to defer cash compensation into the PICA Deferred
Compensation Plan during such time period as the Plan is permitted to receive new contributions.
3.6 Welfare Benefit Plans. Executive shall be eligible for participation in and shall
receive all benefits under welfare benefit plans (including group health, disability and life
3
insurance plans and programs) as shall be in effect from time to time, to the extent
applicable to other executive officers of ProAssurance.
3.7 Fringe Benefits. Executive shall be entitled to fringe benefits comparable to
those provided to senior executive officers of ProAssurance.
3.8 Reimbursement of Expenses. Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Executive in accordance with the policies,
practices and procedures generally applicable to senior executive officers of ProAssurance.
3.9 Office and Support Staff. Executive shall be entitled to an office in keeping
with his position as Chief Executive Officer of PICA and to personal secretarial and other
assistants as shall be (i) reasonably necessary to perform his duties hereunder, and (ii) not be
less than the office and clerical support provided to other senior executive officers of
ProAssurance.
3.10 Vacations and Leave.
(a) During the Term, at such reasonable times as the Board shall permit, Executive shall be
entitled, without loss of pay, to be absent from the performance of his duties under this
Agreement. In addition, Executive shall be entitled to annual vacation in accordance with policies
established by ProAssurance for senior executive officers of ProAssurance.
(b) Executive shall be entitled to sick leave (without loss of pay) in accordance with
ProAssurance’s policies in effect from time to time, and other personal and family leave as may be
provided by law.
3.11 Continuing Education and Professional Dues and Fees. ProAssurance will pay the
annual dues and/or fees necessary for the Executive to maintain his license to practice Podiatry in
the states in which he is currently admitted. ProAssurance shall reimburse Executive for
reasonable expenses paid by Executive in connection with his attendance at professional seminars,
courses or conferences to fulfill continuing education or licensing requirements necessary for
Executive to maintain his license to practice podiatry . ProAssurance shall pay dues and fees for
Executive to maintain his membership in the Podiatric professional associations of which Executive
is currently a member.
3.12 Conflict. In the event of any conflict between this Agreement and the terms of
any benefit, severance, deferred compensation, incentive or similar plan or agreement in which the
Executive is or becomes a participant during the Term (other than a stockholder-approved plan or
ERISA plan), the provisions of this Agreement shall apply unless the Executive makes specific
written election otherwise, but Executive shall not be entitled to duplicative payments or
benefits.
4. Termination of Employment.
4.1 Death or Disability. Executive’s employment shall terminate upon the Executive’s
death or Disability during the Term. For purposes of this Agreement, “Disability” means a serious
injury or illness that requires Executive to be under regular care of a licensed medical
4
physician and renders the Executive incapable of performing the essential function of the
Executive’s position for twelve (12) consecutive months as determined by the Board of Directors of
ProAssurance in good faith and upon receipt of and in reliance on competent medical advice from one
or more individuals selected by said Board of Directors, who are qualified to give professional
medical advice. Executive will submit to such medical or psychiatric examinations and tests as
such medical professional deems necessary to make any determination of Executive’s Disability and
consent to such medical professional sharing the results of such examination with a representative
of the Board.
4.2 Termination by ProAssurance with Cause. ProAssurance may terminate the
Executive’s employment during the Term for Cause. For purposes of this Agreement, the term “Cause”
means: (i) the Executive has been convicted in a federal or state court of a crime classified as a
felony; (ii) action or inaction by the Executive (A) that constitutes embezzlement, theft,
misappropriation or conversion of assets of ProAssurance or its subsidiaries which alone or
together with related actions or inactions involve assets of more than a de minimus amount or that
constitutes intentional fraud, gross malfeasance of duty, or conduct grossly inappropriate to
Executive’s office, and (B) such action or inaction has adversely affected or is likely to
adversely affect the business of ProAssurance or its subsidiaries, taken as a whole, or has
resulted or is intended to result in a direct or indirect gain or personal enrichment of Executive
to the detriment of ProAssurance; or (iii) Executive has been grossly inattentive to, or in a
grossly negligent manner failed to competently perform, Executive’s job duties and the failure was
not cured within 45 days after written notice from ProAssurance. Any termination of Executive’s
employment by ProAssurance for Cause shall be communicated by a Notice of Termination (as defined
in Section 4.5 below) to the Executive, which Notice of Termination shall be in writing and shall
set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under this provision. Executive shall not be deemed to
have been terminated for Cause unless and until (x) he receives a Notice of Termination from
ProAssurance; (y) he is given the opportunity to be heard before the Board of Directors of
ProAssurance ; and (z) the said Board finds in its good faith opinion, the Executive was guilty of
the conduct set forth in the Notice of Termination.
4.3 Termination by Executive for Good Reason. Executive may terminate his employment
with ProAssurance for Good Reason. For purposes of this Agreement, “Good Reason” shall constitute
any of the following circumstances if they occur without the Executive’s express written consent
during the Term: (i) if the Board shall refuse or fail to reelect Executive to the office of Chief
Executive Officer of PICA or should change the duties and responsibilities of Executive in a manner
that is a material diminution of the duties and responsibilities of the Chief Executive Officer;
(ii) ProAssurance shall require that the Executive’s primary location of employment be more than
100 miles from the location of PICA’s principal offices as of the Commencement Date; (iii) a
material reduction in the Executive’s Base Salary as set forth in Section 3.1 hereof; or (iv) a
material breach by ProAssurance of any provision of this Agreement. Executive must provide
ProAssurance with a Notice of Termination no later than 45 calendar days after Executive knows or
should have known that Good Reason has occurred. Following delivery of Executive’s Notice of
Termination, ProAssurance shall have 45 calendar days to rectify the circumstances causing the Good
Reason. If ProAssurance fails to rectify the events causing Good Reason within said 45 day period,
or if ProAssurance delivers to Executive written notice stating that the circumstances cannot or
shall not be rectified, Executive shall be
5
entitled to assert Good Reason and terminate employment as of the expiration of the 45 day
period after delivery of the Executive’s Notice of Termination. Should Executive fail to provide
the required Notice of Termination in a timely manner, Good Reason shall not be deemed to have
occurred as a result of the event. The Term shall not be deemed to have expired during the notice
period, however, as long as Executive has provided Notice of Termination within the Term.
4.4 Termination by Executive for Health Reasons. Executive may terminate his
employment at any time during the Term of this Agreement if, in the opinion of the Executive, his
health status no longer permits him to fulfill his duties under this Agreement. ProAssurance
agrees to accept the opinion of the Executive without objection.
4.5 Notice and Date of Termination. Any termination by ProAssurance, or by Executive,
shall be communicated by Notice of Termination to the other party given in accordance with Section
10 hereof. For purposes of this Agreement, a “Notice of Termination” is a written notice which
indicates the specific termination provision in this Agreement relied upon and sets forth such
additional information as may be required in Section 4.2, Section 4.3 or Section 4.4 hereof, to
the extent applicable. The “Date of Termination” means (i) if Executive’s employment is terminated
by ProAssurance for Cause, the Date of Termination shall be as of the date of Executive’s receipt
of ProAssurance’s Notice of Termination; (ii) if Executive’s employment is terminated by Executive
for Good Reason, the Date of Termination shall be the last day of the 45 day period after delivery
of Executive’s Notice of Termination; (iii) if Executive’s employment is terminated by reason of
death of the Executive, the date of death shall be the Date of Termination; (iv) if the Executive’s
employment is terminated by reason of Disability, the Date of Termination shall be the date of
determination of Disability by the Board of Directors of ProAssurance ; (v) if the Executive’s
employment is terminated by ProAssurance other than for Cause, death, or Disability , the Date of
Termination shall be the date of receipt of the Notice of Termination by Executive; or (vii) if the
Executive terminates his employment other than for Good Reason, including termination by the
Executive for Health Reasons, the Date of Termination shall be date of receipt of the Notice of
Termination by ProAssurance.
4.6 Resignation. Effective on the Date of Termination, Executive resigns as an
officer and director of ProAssurance, PICA and all subsidiaries of each.
5. Certain Benefits Upon Termination.
5.1 Accrued Salary and Benefits. Executive shall be entitled to receive the following
upon any termination of employment: (i) accrued and unpaid Base Salary as of the Date of
Termination (ii) accrued vacation and sick leave, if any, on Date of Termination in accordance with
the then current policy of ProAssurance with respect to terminated employees generally; and (iii)
vested benefits under the employee benefit plans of ProAssurance or PICA in which the Executive
was a participant on the Date of Termination, which vested benefits shall be paid or provided in
accordance with the terms of said employee benefit plans.
6
5.2 Severance Benefits.
(a) If, (I) during the Term, (x) ProAssurance terminates the employment of Executive for any
reason other than Cause, death or Disability or (y) Executive terminates his employment with
ProAssurance for Good Reason, or (z) this Agreement is automatically terminated upon a Change of
Control (as provided in Section 8.2 hereof), and (II) the Executive signs the release form that is
attached to this Agreement as Exhibit A (the “Release”) within sixty (60) days after either the
Date of Termination or the effective date of the Change of Control, whichever is applicable, the
Executive shall receive: (i) an amount equal to a sum of the amounts payable as Base Salary from
the Date of Termination to the end of the Term at the then current rate; (ii) an amount equal to
three times Base Salary at the then current rate; and (iii) payment of Executive’s monthly COBRA
premiums for continued health and medical insurance for the shorter of eighteen (18) months or the
until the Executive no longer has coverage under COBRA (the “Severance Benefits”). Subject to the
delivery of the executed Release by Executive, the Severance Benefits shall be paid in cash or good
funds in equal monthly installments during the Restricted Period (as defined in Section 6.1 hereof)
commencing on the fifteenth day of the calendar month that occurs not less than seven (7) days
after the execution of the Release and ending on the first day of the last full calendar month in
the Restricted Period; provided that the obligation of ProAssurance to pay such Severance Benefits
to the Executive after termination of employment shall be subject to termination as herein provided
in the event Executive violates the covenants under Section 6.1 hereof; and provided further that
the payment of such Severance Benefits shall be payable by ProAssurance in lump sum on the
automatic termination of this Agreement upon a Change of Control; and provided further that the
payment of the Severance Benefits shall be accelerated in the event of the Death or Disability of
the Executive and paid to the Estate of the Executive within 30 days after receipt by ProAssurance
of notice as set forth in Section 10 and, if not earlier delivered by Executive, the Release
executed by the Estate of the Executive. ProAssurance shall withhold from any amounts payable
under this Agreement all federal, state, city or other income and employment taxes that shall be
required. Notwithstanding the foregoing, if the Executive is a “specified employee” within the
meaning of Code Section 409A(a)(2)(b)(i), the payment schedule for Severance Benefits shall be
modified or adjusted to provide that no payments shall be made until the expiration of six (6)
months following the Date of Termination. In the event that payments are so delayed, a lump sum
payment of the accumulated unpaid amounts attributable to the six (6) month period shall be made to
Executive on the first day of the seventh month following the Date of Termination. This six month
delay shall not apply to any Severance Benefits which are not subject to the requirements of
Section 409A of the Code by reason of (i) their being separation pay upon an involuntary separation
from service or their being paid on account of a Change of Control and (ii) their otherwise meeting
the requirements and limitations of the regulations under the above referenced Code section. In no
event shall the aggregate amount of Severance Benefits be reduced as a result of such modification
or adjustment.
(b) If during the Term, Executive terminates his employment with ProAssurance for Health
Reasons pursuant to Section 4.4 and the Executive signs the release form that is attached to this
Agreement as Exhibit A (the “Release”) within sixty (60) days after the Date of Termination
Executive shall receive: (i) an amount equal to one-year of the Base Salary at the then current
rate, and (ii) payment of Executive’s monthly COBRA premiums for continued health and medical
insurance for the shorter of twelve (12) months or the until the Executive no
7
longer has coverage under COBRA (the “Severance Benefits”). Subject to the delivery of the
executed Release by Executive, the Severance Benefits shall be paid in cash or good funds in equal
monthly installments during the Restricted Period (as defined in Section 6.1 hereof) commencing on
the fifteenth day of the calendar month that occurs not less than seven (7) days after the
execution of the Release and ending on the first day of the last full calendar month in the
Restricted Period; provided that the obligation of ProAssurance to pay such Severance Benefits to
the Executive after termination of employment shall be subject to termination as herein provided in
the event Executive violates the covenants under Section 6.1 hereof; and provided further that the
payment of such Severance Benefits shall be payable by ProAssurance in lump sum on the automatic
termination of this Agreement upon a Change of Control; and provided further that the payment of
the Severance Benefits shall be accelerated in the event of the Death or Disability of the
Executive and paid to the Estate of the Executive within 30 days after receipt by ProAssurance of
notice as set forth in Section 10 and, if not earlier delivered by Executive, the Release executed
by the Estate of the Executive. ProAssurance shall withhold from any amounts payable under this
Agreement all federal, state, city or other income and employment taxes that shall be required.
Notwithstanding the foregoing, if the Executive is a “specified employee” within the meaning of
Code Section 409A(a)(2)(b)(i), the payment schedule for Severance Benefits shall be modified or
adjusted to provide that no payments shall be made until the expiration of six (6) months following
the Date of Termination. In the event that payments are so delayed, a lump sum payment of the
accumulated unpaid amounts attributable to the six (6) month period shall be made to Executive on
the first day of the seventh month following the Date of Termination. This six month delay shall
not apply to any Severance Benefits which are not subject to the requirements of Section 409A of
the Code by reason of (i) their being separation pay upon an involuntary separation from service or
their being paid on account of a Change of Control and (ii) their otherwise meeting the
requirements and limitations of the regulations under the above referenced Code section. In no
event shall the aggregate amount of Severance Benefits be reduced as a result of such modification
or adjustment.
(c) ProAssurance shall fund the obligation to pay Severance Benefits under this Section 5.2 by
depositing in escrow an amount equal to the sum of the amounts payable to Executive hereunder (the
“Escrow Funds”) with a financial institution with total assets of more than One Billion Dollars
($1,000,000,000) as escrow agent (the “Escrow Agent”). The Escrow Funds shall be the property of
ProAssurance and shall be held, invested, and distributed by the Escrow Agent in accordance with
the following provisions. At the time of delivery of the Escrow Funds, the Escrow Agent shall
acknowledge receipt of the Escrow Funds and agree to be bound by the provisions of this Agreement
in a separate written document. The Escrow Agent shall invest the Escrow Funds in a money market
account for the benefit of Executive and Escrow Agent shall distribute the earnings to Executive
with each monthly installment. Unless and until the Escrow Agent receives notice from ProAssurance
that Executive has breached this Agreement, the Escrow Agent shall distribute the Escrow Funds to
the Executive in the same number of equal monthly installments as the number of whole calendar
months in the Restricted Period (as defined in Section 6.1 hereof). The monthly installments shall
be distributed to Executive on the date the initial installment is due and on the first day of each
calendar month in the Restricted Period together with accrued and undistributed earnings of the
Escrow Fund except that payment of the Severance Benefits may be accelerated and the balance paid
in lump sum upon delivery of written notice to the Escrow Agent by ProAssurance that the Severance
Benefits are due to be accelerated hereunder. If ProAssurance delivers written notice to the
8
Escrow Agent and the Executive that Severance Benefits payable to Executive are subject to
termination under Section 6.2 of this Agreement, the Escrow Agent shall distribute the balance of
the Escrow Funds and accrued and undistributed earnings thereon to ProAssurance unless the Escrow
Agent receives a written notice of objection from Executive within 15 days after delivery of
ProAssurance’s notice. If Executive provides timely notice of objection, Escrow Agent shall hold
the Escrow Funds until it receives written notice of distribution from the arbitrator appointed
pursuant to Section 11 hereof or a joint written notice of distribution from Executive and
ProAssurance. Failure of Executive or ProAssurance to deliver notice to the Escrow Agent as herein
provided shall not be a waiver of any of their respective rights under this Agreement.
(d) Executive shall not be entitled to receive Severance Benefits under this Agreement if
employment with ProAssurance is terminated by reason of the death of the Executive or the
Disability of the Executive as defined in Section 4.1(a); or by reason of termination of employment
by ProAssurance with Cause as defined in Section 4.2; or by reason of termination of employment by
the Executive unless the employment is terminated for Good Reason as defined in Section 4.3 hereof
or for a Health Reason as defined in Section 4.4 hereof. However, if employment with ProAssurance
is terminated by reason of the death of the Executive or the Disability of the Executive as defined
in Section 4.1(a), Executive shall be entitled to receive severance benefits as set forth in the
Release and Severance Compensation Agreement attached hereto as Exhibit C; and for this purpose
only, the Severance Agreement shall be deemed to incept simultaneously with the qualifying event
and shall be incorporated herein by this reference such that the Executive shall have the full
benefit of the severance benefits payable upon death or Disability of Executive as provided in the
Severance Agreement.
(e) The Executive shall be under no duty or obligation to seek or accept other employment and
shall not be required to mitigate the amount of severance benefits provided under this Agreement by
seeking employment or otherwise.
5.3 Parachute Payment Tax Reimbursement.
(a) If any payment or benefit within the meaning of Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the “Code”), to Executive for his benefit paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, his employment with ProAssurance or a Change of Control (as defined in Section
8.1(d) hereof) (a “Payment” or “Payments”), will be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with such interest and penalties are collectively referred to
as the “Excise Tax”), then the Executive will be entitled to receive an additional payment (a
"Gross Up Payment”). The amount of the Gross Up Payment will be such that after payment by the
Executive of all taxes (including any interest or penalties, other than interest and penalties
imposed by reason of the Executive’s failure to file a timely tax return or pay taxes shown due on
his return, imposed with respect to such taxes and the Excise Tax), including any Excise Tax
imposed upon the Gross Up Payment, the Executive retains an amount of the Gross Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) An initial determination as to whether a Gross Up Payment is required pursuant to this
Agreement and the amount of such Gross Up Payment shall be made by the
9
income tax accountants of ProAssurance. The tax accountants shall provide their determination
(“Determination”) together with detailed supporting calculations and documentation to ProAssurance
and the Executive within a reasonable time after the Date of Termination and if the tax accountants
determine that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to any Payment or Payments. Within ten days of the delivery of
the Determination to the Executive, the Executive shall have the right to dispute the
Determination. The Gross Up Payment, if any, as determined pursuant to this Section 5.3(b) shall
be paid by ProAssurance to the Executive within 30 days of the receipt of the Determination, but in
no event later than the end of the Executive’s tax year next following the year the Executive
remits the related taxes. The existence of the Dispute shall not in any way affect the Executive’s
right to receive Gross Up Payments in accordance with the Determination. Upon the final resolution
of a Dispute, ProAssurance shall promptly pay the Executive any additional amount required by such
resolution. If there is no Dispute, the Determination shall be binding, final and conclusive upon
ProAssurance and the Executive subject to the application of subparagraph (c) below.
(c) Notwithstanding anything contained in this Agreement to the contrary, if according to the
Determination an Excise Tax will be imposed on any Payment or Payments, ProAssurance shall pay to
applicable government taxing authority as Excise Tax withholding, the amount of the Excise Tax that
ProAssurance has actually withheld from the Payment or Payments.
6. Non-Competition.
6.1 Non-Competition; Nonsolicitation of Employee. The Executive will not during the
Restricted Period (herein defined):
(a) become Employed by a Competitor Company that offers, sells or markets medical professional
liability insurance in the primary market area of the Companies, except that Executive may be
employed with a Competitor Company so long as and on the condition that the Executive does not
participate in the medical professional liability insurance business of the Competitor Company; or
(b) solicit or induce any employees of the Companies to leave such employment or accept
employment with any other person or entity, or solicit or induce any insurance agent of the
Companies to offer, sell or market medical professional liability insurance for a competitor
company in the primary market area of the Companies;
“Companies” means any company that is a direct or indirect subsidiary of ProAssurance, now or
in the future, and any other company that has succeeded to the business of any of the Companies.
“Competitor Company” means an insurance company, insurance agency, business, for profit or not
for profit organization (other than the Companies) that provides, or offers to provide medical
professional liability insurance to health care providers.
10
“Employed” includes activities as an owner, proprietor, employee, agent, solicitor, partner,
member, manager, principal, shareholder (owning more than 1% of the outstanding stock), consultant,
officer, director or independent contractor.
“Health care providers” means physicians, dentists, podiatrists, chiropractors, physician
assistants, nurse practitioners, other individual health care providers and hospital and other
institutional health care providers.
“Medical professional liability insurance” means medical malpractice insurance and
reinsurance, and equivalent self-insured services such as administration of self-insured trusts,
claims management services and risk management services for health care providers. “Medical
professional liability insurance” does not include services provided as an employee of a health
care provider if such services are rendered solely for the purpose of servicing medical
professional liability risk of the employer or that of its employees.
“Primary market area” means any state in which the Companies derived more than $15 million in
direct written premiums from the sale of medical professional liability insurance to health care
providers in the most recent complete fiscal year prior to the Date of Termination and any state in
which the Companies have on the Date of Termination a plan for expansion of marketing activities
for the sale of medical professional liability insurance in that state which is likely to result in
direct written premiums from the sale of medical professional liability insurance of more than $15
in the 18 months following the Date of Termination.
“Restricted Period” means a period of 36 months from the Date of Termination.
6.2 Remedies for Breach. If the Executive is deemed to have materially breached the
non-competition covenants set forth in Section 6.1 of this Agreement, ProAssurance may, in addition
to seeking an injunction or any other remedy they may have, withhold or cancel any remaining
payments of Severance Benefits due to the Executive pursuant to Section 5.2 of this Agreement.
ProAssurance shall give prior or contemporaneous written notice of such withholding or cancellation
of payments in accordance with Section 5.2 hereof. If the Executive violates any of these
restrictions, the Companies shall be further entitled to an immediate preliminary and permanent
injunctive relief, without bond, in addition to any other remedy which may be available to
ProAssurance.
6.3 Reasonableness of Restrictions. ProAssurance and Executive agree that the
restrictions in this Agreement are fair and reasonable in all respects, including the geographic
and temporal restrictions, and that the benefits described in this Agreement, to the extent any
separate or special consideration is necessary, are fully sufficient consideration for the
Executive’s obligations under this Agreement.
6.4 Confidentiality. Executive will remain obligated under any confidentiality or
nondisclosure agreement with the Companies (or any of them) that is currently in effect or to which
the Executive may in the future be bound. In the event that the Executive is at any time not the
subject of a separate confidentiality or nondisclosure agreement with the Companies (or any of
them), Executive expressly agrees that Executive shall not use for the Executive’s personal
benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit
11
of any person, firm, association or company any confidential or competitive material or
information of the Companies or their subsidiaries, including without limitation, any information
regarding insureds or other customers, actual or prospective, and the contents of their files;
marketing, underwriting or financial plans or analyses which is not a matter of public record;
claims practices or analyses which are not matters of public record; pending or past litigation in
which the Companies have been involved and which is not a matter of public record; and all other
strategic plans, analyses of operations, computer programs, personnel information and other
proprietary information with respect to the Companies which are not matters of public record.
Executive shall return to the Companies promptly, and in no event later than the Date of
Termination, all items, documents, lists and other materials belonging to the Companies or their
subsidiaries, including but not limited to, credit, debit or service cards, all documents, computer
tapes, or other business records or information, keys and all other items in the Executive’s
possession or control.
7. Indemnification. In addition to any indemnification required by law, under the
Certificate of Incorporation or Bylaws of ProAssurance or any of the Companies (as defined in
Section 6.1 hereof), or under a policy of insurance owned by ProAssurance or the Companies,
ProAssurance shall provide the Executive indemnification under the terms and conditions of the
Indemnification Agreement attached hereto as Exhibit B, which is the same Indemnification Agreement
provided to other senior executives of ProAssurance. The Indemnification Agreement shall be
executed and effective as of the Commencement Date.
8. Change of Control.
8.1 Definitions. For purposes of this Agreement, the following terms have the
meanings set forth below:
(a) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(b) “Person” is used as such term is used for purposes of Section 13(d) or 14(d) of the
Exchange Act.
(c) “Beneficial Ownership” is used as such term is used within the meaning of Rule 13d-3
promulgated under the Exchange Act.
(d) “Change of Control” shall mean the occurrence during the Term of any one of the following
events:
(i) an acquisition of the voting securities of ProAssurance or PICA by any Person, immediately
after which such Person has Beneficial Ownership of more than 50.1% of the combined voting power of
ProAssurance’s or PICA’s then outstanding voting securities;
(ii) a merger, consolidation or reorganization involving ProAssurance or PICA in which an
entity other than ProAssurance or PICA (as applicable) is the surviving entity or in which
ProAssurance or PICA (as applicable) is the surviving entity and the stockholders of ProAssurance
or PICA (as applicable) immediately preceding such transaction will own less than 50.1% of the
outstanding voting securities of the surviving entity; or
12
(iii) the sale or other disposition of substantially all of the assets of ProAssurance or PICA
(as defined in the regulations under Section 409A of the Code); or
(iv) the disposition of PICA by ProAssurance so that it is no longer a direct or indirect
subsidiary of ProAssurance.
The transactions as described in (i), (ii) (iii) and (iv) shall be referred to as “Change of
Control Transactions.” In no event shall a Change of Control be deemed to have occurred, with
respect to Executive, if the Executive is part of a purchasing group which consummates a Change of
Control Transaction. The Executive shall be deemed “part of a purchasing group” for purposes of
the preceding sentence if the Executive is an equity participant or has agreed to become an equity
participant in the purchasing company or group except for passive ownership of less than 5% of the
stock of the purchasing company or ownership of equity participation in the purchasing company or
group as a result of the conversion or exchange of Common Stock Beneficially Owned by Executive.
8.2. Effect of Change of Control. If a Change of Control occurs, this Agreement shall
be deemed automatically terminated and the Executive shall be entitled to the payments required in
Section 5.1 and Section 5.2 hereof.
9. Continuity of Employment. If this Agreement remains in force on the last
day of the Term and has not been earlier terminated pursuant to Section 4.2, 4.4, 4.6 or 8 hereof,
the Severance Agreement attached hereto as Exhibit C shall become effective as of the date of
expiration of the Term and Executive and ProAssurance agree to execute the Severance Agreement as
required in Section 1 hereof. In the event of the death or Disability of the Executive, the Release
and Severance Compensation Agreement attached hereto as Exhibit C shall become immediately
effective in accordance with the provisions of Section 5.2(d) hereof and severance benefits shall
be payable to Executive (or his estate) as provided in the Severance Agreement.
10. Notice. For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or commercial courier or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses as set forth below or to such
other address as one party may have furnished to the other in writing in accordance herewith.
Notice to the Executive:
Xxxxx X. Xxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
0000 Xxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
13
and
000 Xxxxxxxx Xxx Xx. X.
Xxxxxxxxx, XX 00000-0000
Xxxxxxxxx, XX 00000-0000
Notice to the Companies:
Street Address:
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: CEO with copy to Corporate Secretary
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: CEO with copy to Corporate Secretary
11. Arbitration. ProAssurance and Executive agree that final and binding arbitration
shall be the sole recourse to settle any claim or controversy arising out of or relating to a
breach or the interpretation of this Agreement, except as either party may be seeking injunctive
relief. Either party may file a demand for arbitration. The arbitration shall be held at a
mutually agreeable location, and shall be subject to and in accordance with the Employment
Arbitration Rules of the American Arbitration Association then in effect; provided that if the
location cannot be agreed upon the arbitration shall be held in Birmingham, Alabama. The
arbitrator may award any and all remedies allowable by the cause of action subject to the
arbitration, but the arbitrator’s sole authority shall be to interpret and apply the provisions of
this Agreement. In reaching its decision the arbitrator shall have no authority to change or
modify any provision of this Agreement or other written agreement between the parties. The
arbitrator shall have the power to compel the attendance of witnesses at the hearing. Any court
having jurisdiction may enter a judgment based upon such arbitration. All decisions of the
arbitrator shall be final and binding on the parties without appeal to any court. Upon execution
of this Agreement, the Executive shall be deemed to have waived any right to commence litigation
proceedings regarding this Agreement outside of arbitration or injunctive relief without the
express consent of ProAssurance. ProAssurance shall pay all arbitration fees and the arbitrator’s
compensation. If the Executive prevails in the arbitration proceeding, ProAssurance shall
reimburse to the Executive the reasonable fees and expenses of Executive’s personal counsel for his
or her professional services rendered to the Executive in connection with the enforcement of this
Agreement.
12. Miscellaneous.
(a) Except insofar as this provision may be contrary to applicable law, no sale, transfer,
alienation, assignment, pledge, collateralization or attachment of any benefits under this
Agreement shall be valid or recognized by ProAssurance.
14
(b) This Agreement and the exhibits attached hereto set forth the entire agreement between the
parties with respect to the matters set forth herein and supersedes in their entirety any prior
written or oral agreements or understandings between Executive and PICA or ProAssurance regarding
the subject matter of this Agreement. This Agreement may not be modified or amended except by
written agreement intended as such and signed by all parties.
(c) This Agreement shall benefit and be binding upon the parties and their respective
directors, officers, employees, representatives, agents, heirs, successors, assigns, devisees, and
legal or personal representatives.
(d) ProAssurance, from time to time, shall provide government agencies with such reports
concerning this Agreement and copies thereof as may be required by law, and shall provide Executive
with such disclosure concerning this Agreement as may be required by law or as ProAssurance may
deem appropriate.
(e) Executive and ProAssurance respectively acknowledge that each of them has read and
understand this Agreement, that they have each had adequate time to consider this Agreement and
discuss it with each of their attorneys and advisors, that each of them understands the
consequences of entering into this Agreement, that each of them is knowingly and voluntarily
entering into this Agreement, and that they are each competent to enter into this Agreement.
(f) If any provision of this Agreement is determined to be unenforceable, at the discretion of
ProAssurance the remainder of this Agreement shall not be affected but each remaining provision
shall continue to be valid and effective and shall be modified so that it is enforceable to the
fullest extent permitted by law.
(g) This Agreement will be interpreted as a whole according to its fair terms. It will not be
construed strictly for or against either party.
(h) Except to the extent that federal law controls, this Agreement is to be construed
according to Delaware law.
13. PICA Joinder. PICA has joined in this Agreement to evidence its consent to the employment
of Executive in the capacity set forth herein and its agreement to be jointly responsible for the
obligations of ProAssurance hereunder.
[Signatures on following page.]
15
IN WITNESS WHEREOF, the parties have duly executed this Agreement on April 2, 2009 to be
effective as of the Commencement Date.
| EXECUTIVE: |
||||
| /s/ Xxxxx Xxxxx | ||||
| Xxxxx X. Xxxxx | ||||
| PROASSURANCE CORPORATION |
||||
| By: | /s/ Xxxxxx X. Xxxxx | |||
| Xxxxxx X. Xxxxx | ||||
| Its President | ||||
| PODIATRY INSURANCE COMPANY OF AMERICA |
||||
| By: | /s/ Xxxx X. Xxxxxxx | |||
| Its Sr. V.P. and COO | ||||
16
Schedule 3.1
Executive’s annual base rate of compensation paid by PICA on behalf of Executive immediately
preceding the Effective Date including the monetized value of company paid automobile use and
country club dues:
2008 Base Salary |
$ | 430,000.08 | ||
4% Merit Increase |
17,200.00 | |||
Auto Adjustment |
22,052.00 | |||
Country Club Adjustment |
8,287.00 | |||
Current 2009 Salary |
$ | 477,539.08 | ||
EXHIBIT A
RELEASE
[To be used if Termination of Employment occurs during the Term of the Employment Agreement]
This Release of Claims (“Release”) is between ProAssurance Corporation (“ProAssurance”), and
any successor company that has assumed the Agreement to which this Release was an attachment (all
such organizations being referred to in this Release as the “Companies”) and Xxxxx X. Xxxxx
(“Executive”).
The Companies and Executive have agreed to terminate their employment relationship. To effect
an orderly termination, the Executive, and the Companies are entering into this Release.
1. For the purposes of this Release, “Date of Termination” is the effective date of
Executive’s termination of employment from Companies. Executive hereby waives any and all rights
Executive may otherwise have to continued employment with or re-employment by the Companies or any
parent, subsidiary or affiliate of Companies.
2. Effective with the Date of Termination, Executive is relieved of all duties and obligations
to the Companies, except as provided in this Release or any applicable provisions of the Employment
Agreement between Companies and Executive, effective as of April 2, 2009 (“Agreement”), which
survive termination of the employment relationship.
3. Executive agrees that this Release, the Agreement and the Severance Benefits provided under
the Agreement are confidential and shall not be disclosed or published directly or indirectly to
third persons, except as necessary to enforce its terms, by Executive or to Executive’s immediate
family upon their agreement not to disclose the fact or terms of this Release, or to Executive’s
attorney, financial consultant or accountant, except that Executive and the Companies may disclose,
as necessary, (i) the fact that Executive has terminated Executive’s employment with the Companies,
and (ii) the terms of this Agreement and Severance Benefits as required under the securities laws
and regulations and the listing requirements of any stock exchange or national market system and as
otherwise required by law.
4. Any fringe benefits that Executive has received or currently is receiving from the
Companies or its affiliates shall cease effective with the Date of Termination, except as otherwise
provided for in this Release, in the Agreement or by law.
5. The parties agree that the terms contained and payments provided for in the Agreement are
compensation for and in full consideration of Employee’s release of claims under this Release, and
Executive’s confidentiality, non-compete, non-solicitation and non-disclosure agreements contained
in the Agreement.
6. The Executive shall be under no duty or obligation to seek or accept other employment and
shall not be required to mitigate the amount of the Severance Benefits (as defined and provided
under the Agreement) by seeking employment or otherwise, provided, however, that the Executive
shall be required to notify the Companies if the Executive becomes
A-1
covered by a health or dental care program providing substantially similar coverage, at which
time health or dental care continuation coverage provided under the Agreement shall cease.
7. Executive waives, releases, and forever discharges the Companies and each of their direct
or indirect parents, subsidiaries, affiliates, and any partnerships, joint ventures or other
entities involving or related to any of the Companies, their parents, subsidiaries or affiliates,
and all present or former employees, officers, agents, directors, successors, assigns and attorneys
of any of these corporations, persons or entities (all collectively referred to in this Release as
the “Released”) from any and all claims, charges, suits, causes of action, demands, expenses and
compensation whatsoever, known or unknown, direct or indirect, on account of or growing out of
Executive’s employment with and termination from the Companies, or relationship or termination of
such relationship with any of the Released, or arising out of related events occurring through the
date on which this Release is executed. This includes, but is not limited to, claims for breach of
any employment contract; handbook or manual; any express or implied contract; any tort; continued
employment; loss of wages or benefits; attorney fees; employment discrimination arising under any
federal, state, or local civil rights or anti-discrimination statute, including specifically any
claims Executive may have under the federal Age Discrimination in Employment Act, as amended, 29
USC §§ 621, et seq.; emotional distress; harassment; defamation; slander; and all other
types of claims or causes of action whatsoever arising under any other state or federal statute or
common law of the United States. Notwithstanding anything in this Release to the contrary, nothing
in this Release shall be construed to waive, release or discharge the Companies from making any
payments or providing any benefits due to Executive in accordance with the terms of the Agreement
after the Date of Termination.
8. The Executive does not waive or release any rights or claims that may arise under the
federal Age Discrimination in Employment Act, as amended, after the date on which this Release is
executed by the Executive.
9. The Executive acknowledges and agrees that Executive has been advised in writing by this
Release, and otherwise, to CONSULT WITH AN ATTORNEY before Executive executes this Release.
10. The Executive agrees that Executive received a copy of this Release prior to executing the
Agreement, that this Release incorporates the Companies’ FINAL OFFER; that Executive has been given
a period of at least twenty-two (22) calendar days within which to consider this Release and its
terms and to consult with an attorney should Executive so elect.
11. The Executive shall have seven (7) calendar days following Executive’s execution of this
Release to revoke this Release. Any revocation of this Release shall be made in writing by the
Executive and shall be received on or before the time of close of business on the seventh calendar
day following the date of the Executive’s execution of this Release at ProAssurance’s address at
000 Xxxxxxxxx Xxxxx, P. O. Box 590009, Birmingham, Alabama 35259-0009, Attention: Chairman, or such
other place as the Companies may notify Executive in writing. This Release shall not become
effective or enforceable until the eighth (8th) calendar day following the Executive’s
execution of this Release.
A-2
12. Executive and the Companies acknowledge that they have read and understand this Release,
that they have had adequate time to consider this Release and discuss it with their attorneys and
advisors, that they understand the consequences of entering into this Release, that they are
knowingly and voluntarily entering into this Release, and that they are competent to enter into
this Release.
13. This Release shall benefit and be binding upon the parties and their respective directors,
officers, employees, agents, heirs, successors, assigns, devisees and legal or personal
representatives.
14. This Release, along with the Agreement, sets forth the entire agreement between the
parties at the time and date these documents are executed, and fully supersedes any and all prior
agreements or understandings between them pertaining to the subject matter in this Release. This
Release may not be modified or amended except by a written agreement intended as such, and signed
by all parties.
15. Except to the extent that federal law controls, this Release is to be construed according
to the law of the state of Delaware.
16. If any provision of this Release is determined to be unenforceable, at the discretion of
ProAssurance the remainder of this Release shall not be affected but each remaining provision or
portion shall continue to be valid and effective and shall be modified so that it is enforceable to
the fullest extent permitted by law.
17. To signify their agreement to the terms of this Release, the parties have executed it on
the date set forth opposite their signatures, or those of their authorized agents, which follow.
| EXECUTIVE | ||||||||||
Dated: |
||||||||||
| PROASSURANCE CORPORATION | ||||||||||
Dated:
|
By: | |||||||||
A-3
THIS Agreement is made effective as of the 2nd day of April, 2009, by and between ProAssurance
Corporation, a Delaware corporation (the “Company”), and Xxxxx X. Xxxxx (“Indemnitee”).
Recitals
WHEREAS, the Company has adopted Bylaws (the “Bylaws”) which provide for the indemnification
of the directors, officers, agents, and employees of the Company in accordance with Section 145 of
the General Corporation Laws of Delaware (the “State Statute”);
WHEREAS, the State Statute provides that it is not exclusive, and thus contemplates that
contracts may be entered into between the Company and the members of its Board of Directors and
Officers and employees of the Company with respect to the indemnification of such individuals;
WHEREAS, developments with respect to the terms, cost and availability of directors’ and
officers’ liability insurance (“Liability Insurance”) have raised questions regarding the adequacy
and reliability of the protection afforded to directors and officers thereby; and
WHEREAS, in order to resolve such questions and thereby induce the Indemnitee to continue to
perform services on behalf of the Company, the Company has determined and agreed to enter into this
contract with the Indemnitee.
Agreement
NOW, THEREFORE, in consideration of and for the Indemnitee’s agreement to serve as a director,
associate committee member, officer, employee or agent of the Company, and to render service on
behalf of the Company, the parties agree as follows:
1. Liability Insurance. The Company, as of the date of this Agreement, has acquired a
Liability Insurance policy. The Company shall use reasonable efforts to maintain Liability
Insurance during the term of this Agreement, but shall not be required to continue to maintain
Liability Insurance if in the sole business judgment of the directors then in office, (i) the
premium cost for such insurance is excessive, (ii) the premium cost for such insurance is not
reasonably related to the amount of coverage provided, of (iii) the coverage provided by such
insurance is so limited by its terms and exclusions or otherwise that sufficient benefit is not
derived therefrom.
2. Indemnity. The Company agrees to indemnify and reimburse Indemnitee to the full
extent authorized and permitted by the provisions of the Bylaws of the Company and the laws of the
State of Delaware, and by any amendment thereof, authorizing or permitting such indemnification
which is adopted after the date hereof.
B-1
3. Additional Indemnity.
(a) Subject only to the exclusions set forth in Section 4 hereof, the Company shall indemnify
and reimburse Indemnitee under any circumstances where Indemnitee was or is a party or is
threatened to be made a party to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and whether formal or informal, including
an action by or in the right of the corporation, by reason of the fact that he or she is or was a
director, associate committee member, officer, employee, or agent of the Company, or is or was
serving at the request of the Company as a director, associate committee member, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, against reasonable expenses, including
attorneys’ fees, judgments, penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit, or proceeding, if Indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company or its shareholders or policyholders, and with respect to a criminal
action or proceeding, if Indemnitee had no reasonable cause to believe his or her conduct was
unlawful. The termination of an action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Company or its shareholders or
policyholders, and, with respect to a criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
(b) The indemnification provided shall extend to all expenses and circumstances for which
indemnification is permitted under paragraph 3(a) above, that arise:
(i) During the term of this Agreement based upon the activities of Indemnitee
prior to or during the term of this Agreement; and,
(ii) Subsequent to the term of this Agreement based upon the activities of
Indemnitee prior to or during the term of this Agreement.
(c) The term “Company” shall for purposes of this Agreement include ProAssurance Corporation
and its direct and indirect majority-owned subsidiaries.
4. Limitations on Indemnity. No indemnity pursuant to Section 3 hereof shall be paid
by the Company:
(a) except to the extent the aggregate of losses to be indemnified hereunder exceed the amount
of such losses for which Indemnitee is indemnified either: pursuant to Section 2 hereof; pursuant
to an Indemnification Agreement with any parent, subsidiary or affiliate of the Company; or,
pursuant to any Liability Insurance purchased and maintained by the Company pursuant to Section 1
hereof;
(b) in respect to remuneration paid to Indemnitee if it shall be determined by a final
judgment or other final adjudication that such remuneration was in violation of law;
B-2
(c) on account of any suit in which judgment is rendered against Indemnitee for an accounting
of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state, or local statutory law;
(d) on account of Indemnitee conduct which is finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct;
(e) if indemnification is prohibited by applicable law of the State of Delaware;
(f) for a claim, issue, or matter in which Indemnitee has been found liable to the Company
unless and only to the extent that the Court of Chancery in Delaware or the court in which the
action or suit was brought has determined upon application that, despite the adjudication of
liability but in view of all circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnification for the expenses which the court considers proper; or
(g) if a final decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful.
5. Term of Agreement. The original term of this Agreement shall be the twelve month
period immediately following the date of this Agreement. This Agreement shall renew for successive
one year terms unless sooner terminated upon termination of Indemnitee’s position as an officer,
director or employee of the Company or upon delivery of written notice of termination by the
Company to the Indemnitee not less than 60 days prior to the date of termination stated in the
notice. Notwithstanding anything in this Agreement to the contrary, the indemnification provided
pursuant to this Agreement shall survive the termination of this Agreement with respect to all
actions or inactions occurring or alleged to have occurred prior to or during the term of this
Agreement, and this Agreement shall remain binding upon the Company with respect to the covered
activities of Indemnitee occurring or alleged to have occurred prior to or during the term of this
Agreement.
6. Notification and Defense of Claim. Promptly after receipt by Indemnitee of notice
of the commencement or threatened commencement of any action, suit or proceeding, Indemnitee will,
if a claim in respect thereof is to be made against the Company under this Agreement, notify the
Company of the commencement thereof; but the omission so to notify the Company will not relieve it
from any liability which it may have to Indemnitee otherwise than under this Agreement. With
respect to any such action, suit or proceeding as to which Indemnitee notifies the Company of the
commencement thereof:
(a) The Company will be entitled to participate therein at its own expense; and
(b) Except as otherwise provided below, to the extent that it may wish, the Company jointly
with any other indemnifying party similarly notified will be entitled to assume the defense
thereof, with counsel selected by the Company and consented to by Indemnitee, which consent shall
not be unreasonably withheld. After notice from the Company to Indemnitee of its election so to
assume the defense thereof, the Company will not be liable to
B-3
Indemnitee under this Agreement for any legal or other expenses subsequently incurred by
Indemnitee in connection with the defense thereof other than reasonable costs of investigation or
as otherwise provided below. Indemnitee shall have the right to employ his own counsel in such
action, suit or proceeding but the fees and expenses of such counsel incurred after the notice from
the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless
(i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) a conflict of
interest between the Company and Indemnitee exists in the conduct of the defense of such action; or
(iii) the Company shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the reasonable fees and expenses of counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Company or as to which a conflict of interest exists between the
Company and Indemnitee.
The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid
in settlement of any action or claim effected without its written consent. The Company shall not
settle any action or claim in any manner that would impose any penalty or limitation on Indemnitee
without Indemnitee’s written consent. Neither the Company nor Indemnitee will unreasonably
withhold its consent to any proposed settlement.
7. Payment of Indemnity. Any indemnification or advance shall be made promptly and in
any event within forty-five (45) days, upon the written request of the director, officer, employee
or agent of the Company, unless a determination is reasonably and promptly made that such director,
officer, employee or agent failed to meet the applicable standard of conduct set forth in Section 3
hereof or that such director, officer or employee is not entitled to indemnity under Section 4
hereof. Such determination shall be made (l) by the Board of Directors by a majority vote of a
quorum consisting of disinterested directors, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (4) by the stockholders. If the request for indemnification
involves an action, suit or proceeding that arises from the merger, consolidation, reorganization,
liquidation, sale of all or substantially all of the assets, or other extraordinary transaction of
the Company, the inquiry and resolution thereof required by this Section 7, at the option of the
person seeking indemnification, shall be made by a neutral person mutually acceptable to the
Company and the person seeking indemnification. If no disposition of such claim for
indemnification is made within forty-five (45) days, a favorable determination of entitlement to
indemnification shall be deemed to have been made. The expenses (including attorney’s fees)
incurred by the person seeking indemnification in connection with successfully establishing such
person’s right to indemnification, in whole or in part, shall also be indemnified by the Company.
8. Repayment of Expenses. Indemnitee agrees that he or she will reimburse the Company
for all reasonable expenses paid by the Company in defending any civil or criminal action, suit or
proceeding against Indemnitee in the event and only to the extent that it shall be ultimately
determined that Indemnitee is not entitled to be indemnified by the Company hereunder. The
undertaking to reimburse the Company for expenses is made pursuant to the requirements of the State
Statute. It is understood and agreed that no advances or payments
B-4
made to the Indemnitee hereunder shall be accounted for or treated as a loan from the Company
to the Indemnitee.
9. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into this Agreement and
assumed the obligations imposed on the Company hereby in order to induce Indemnitee to serve and/or
continue to serve the Company, and acknowledges that Indemnitee is relying upon this Agreement in
continuing to serve in such capacity.
(b) In the event Indemnitee is required to bring any action to enforce rights and/or to
collect moneys due under this Agreement and is successful in such action, Company shall reimburse
Indemnitee for all of Indemnitee’s reasonable fees and expenses in bringing and pursuing such
action.
10. Separability. Each of the provisions of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof shall be held to be
invalid or unenforceable under applicable federal or state law or for any other reason, such
invalidity or unenforceability shall not affect the validity or enforceability of the other
provisions hereof.
11. Governing Law; Binding Effect; Amendment; Notice.
(a) This Agreement shall be interpreted and enforced in accordance with the laws of the State
of Delaware without effect to its conflict of law provisions, except to the extent that the
provisions of the Xxxxxxxx-Xxxxx Act of 2002 and other federal laws preempt the applicable state
law to the enforceability or interpretation of this Agreement.
(b) This Agreement shall be binding upon Indemnitee and upon the Company, its successors and
assigns, and shall inure to the benefit of the Indemnitee, his heirs, personal representatives and
assigns and to the benefit of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this Agreement shall be
effective unless in writing signed by both parties hereto.
(d) Any notice required to be given hereunder shall be deemed given when deposited with the
United States Postal Service, postage prepaid, addressed to the person to receive notice at its
address below, or such other address as may have theretofore been specified by such person in a
notice pursuant hereto, or delivered in person to that person (or an executive officer thereof in
the case of the Company).
12. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration, in Birmingham, Alabama, in
accordance with the Commercial Arbitration rules of the American Arbitration Association, except
that the arbitrator(s) shall be required to be familiar with the laws of the State of Delaware as
they relate to this Agreement. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof.
B-5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day
and year first above written.
| PROASSURANCE CORPORATION (the “Company”) 000 Xxxxxxxxx Xxxxx Xxxxxxxxxx, Xxxxxxx 00000 |
||||||
| By: | ||||||
Its President |
||||||
| (“Indemnitee”) | ||||||
| Signature | ||||||
| Address | ||||||
B-6
PRA
Final Draft
EXHIBIT C
RELEASE AND SEVERANCE COMPENSATION AGREEMENT
[Becomes effective at the end of the Term of the Employment Agreement.]
[Becomes effective at the end of the Term of the Employment Agreement.]
THIS RELEASE AND SEVERANCE COMPENSATION AGREEMENT (the “Agreement”) is made and entered into
effective* [the “Effective Date”], between and among ProAssurance
Corporation, a Delaware corporation (“ProAssurance”) and Xxxxx X. Xxxxx, an individual (the
“Executive”). ProAssurance and its direct and indirect subsidiaries including Podiatry Insurance
Company of America (“PICA”) are hereinafter collectively referred to as the “Companies.”
RECITALS:
Executive is currently employed as Chief Executive Officer of PICA at the Companies’ offices
in Xxxxxxxxxx County, Tennessee, which is Executive’s primary location of employment on date of
this Agreement. ProAssurance has offered to expand protection to the Executive in the form of
severance benefits payable on termination of employment under certain circumstances in
consideration of Executive’s agreement to continue his employment with the Companies. ProAssurance
and Executive have entered into this Agreement to evidence the terms and conditions for payment of
severance benefits upon termination of Executive’s employment with the Companies.
AGREEMENT
NOW, THEREFORE, These Premises Considered, and in consideration of the mutual covenants and
promises in this Agreement, the sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) “Annual Base Salary” of the Executive shall be defined as the Executive’s annual base rate
of compensation in effect as of the Date of Termination (herein defined), but in no event less than
the greater of: (A) the Executive’s annual base rate of compensation in effect as of the
Commencement Date of the Employment Agreement (herein defined), including the adjustment to reflect
the monetized value of company paid automobile and country club dues paid by PICA prior to the
Commencement Date; or (B) the Executive’s annual base rate of
| * | The Effect Date shall be immediately upon termination of the Employment Agreement dated April 2, 2009 by and between ProAssurance Corporation and Xxxxx X. Xxxxx unless the Employment Agreement was terminated pursuant to Sections 4.2, 4.4, 4.6 or 8 thereof. |
C-1
compensation in effect as of the end of the last calendar quarter preceding the Date of
Termination
(b) “Beneficial Ownership” is used as such term is used within the meaning of Rule 13d-3
promulgated under the Exchange Act.
(c) “Board” means the Board of Directors of ProAssurance either acting as a full Board or
through its Compensation Committee.
(d) “Cause” means: (i) the Executive has been convicted in a federal or state court of a crime
classified as a felony; (ii) action or inaction by the Executive (A) that constitutes embezzlement,
theft, misappropriation or conversion of assets of the Companies which alone or together with
related actions or inactions involve assets of more than a de minimus amount or that constitutes
intentional fraud, gross malfeasance of duty, or conduct grossly inappropriate to Executive’s
office, and (B) such action or inaction has adversely affected or is likely to adversely affect the
business of the Companies, taken as a whole, or has resulted or is intended to result in a direct
or indirect gain or personal enrichment of Executive to the detriment of the Companies; or (iii)
Executive has been grossly inattentive to, or in a grossly negligent manner failed to competently
perform, Executive’s job duties and the failure was not cured within 45 days after written notice
from ProAssurance.
(e) “Code” means the Internal Revenue Code of 1986, as amended
(f) “Change of Control” shall mean the occurrence of any one of the following events during
the term of this Agreement:
(i) an acquisition of the voting securities of ProAssurance or PICA by any Person, immediately
after which such Person has Beneficial Ownership of more than 50.1% of the combined voting power of
ProAssurance’s or PICA’s then outstanding voting securities;
(ii) a merger, consolidation or reorganization involving ProAssurance or PICA in which an
entity other than ProAssurance or PICA (as applicable) is the surviving entity or in which
ProAssurance or PICA (as applicable) is the surviving entity and the stockholders of ProAssurance
or PICA (as applicable) immediately preceding such transaction will own less than 50.1% of the
outstanding voting securities of the surviving entity; or
(iii) the sale or other disposition of substantially all of the assets of ProAssurance or PICA
(as defined in the regulations under Section 409A of the Code); or
(iv) the disposition of PICA by ProAssurance so that it is no longer a direct or indirect
subsidiary of ProAssurance.
In no event shall a Change of Control be deemed to have occurred, with respect to Executive,
if the Executive is part of a purchasing group which consummates a Change of Control Transaction.
The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence
if the Executive is an equity participant or has agreed to become an equity participant in the
purchasing company or group (except for ownership of less than 5% of the stock of the purchasing
company).
C-2
(g) “Change of Control Transaction” means any of the transactions as described in
subparagraphs (i), (ii) and (iii) of Section 1(f) hereof.
(h) “Disability” means a serious injury or illness that requires Executive to be under regular
care of a licensed medical physician and renders the Executive incapable of performing the
essential function of the Executive’s position for twelve (12) consecutive months as determined by
the Board in good faith and upon receipt of and in reliance on competent medical advice from one or
more individuals selected by the Board, who are qualified to give professional medical advice.
Executive will submit to such medical or psychiatric examinations and tests as such medical
professional deems necessary to make any determination of Executive’s Disability and consent to
such medical professional sharing the results of such examination with a representative of the
Board.
(i) “Date of Termination” means (i) if Executive’s employment is terminated by Executive for
any reason other than death or Disability, the Date of Termination shall be the last day of
employment of Executive; (ii) if Executive’s employment is terminated by reason of death of the
Executive, the date of death shall be the Date of Termination; (iii) if the Executive’s employment
is terminated by reason of Disability, the Date of Termination shall be the date of determination
of Disability by the Board; or (iv) if Executive’s employment is terminated by ProAssurance for any
reason, the Date of Termination shall be the last day of employment of Executive unless otherwise
provided in Section 6 hereof.
(j) “Employment Agreement” means the Employment Agreement between Executive and ProAssurance,
dated April 2, 2009.
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(k) “Good Reason” shall constitute any of the following circumstances if they occur without
the Executive’s express written consent during the term of this Agreement: (i) a material
diminution in the Executive’s authority, duties or responsibilities such that Executive no longer
holds a position with executive level responsibilities consistent with the Executive’s position of
Chief Executive Officer of PICA; (ii) the Companies require a material change in the Executive’s
primary location of employment of more than 100 miles from the location of the Executive’s primary
location of employment on date of this Agreement; (iii) the Companies materially reduce the
Executive’s incentive compensation opportunities and employee benefits to a level that is less than
is provided to other executives of comparable rank with the Companies; (iv) a material breach by
the Companies of any provision of this Agreement; (v) a material reduction by the Companies in the
Executive’s Annual Base Salary (herein defined); (vi) the death or Disability of the Executive; or
(vii) the election of Executive to terminate his employment with the Companies pursuant to Section
3(g) hereof.
(l) “Severance Benefits” means the payments and other benefits to be provided to the Executive
under Section 3(a) hereof.
2. Term of Agreement.
(a) This Agreement shall continue in effect for an initial period commencing on the Effective
Date and ending on [36 months thereafter] (the “Term”)
C-3
(b) During the Term of this Agreement, Executive shall be entitled to compensation for his
services as an employee of the Companies on substantially the same terms as set forth in Section 3
of the Employment Agreement.
3. Severance Benefits.
(a) If (A) during the Term of this Agreement the Companies terminate the employment of
Executive for any reason other than Cause, or the Executive terminates employment with the
Companies for Good Reason, and (B) the Executive executes the Release that is attached to and
incorporated in this Agreement (“Release”) within sixty (60) days after the Date of Termination, or
in the event of death if Executive’s estate executes the Release within a reasonable time, the
Executive shall receive the following benefits:
(i) An amount equal to the Severance Term Factor times the Executive’s Annual Base Salary;
(ii) For purposes of this subparagraph (a), the Severance Term Factor shall be the number 36
minus the number of full calendar months that have elapsed since the Effective Date (and counting
the month in which the Effective Date occurs as a full calendar month for this purpose) divided by
12.
(iii) Payment of the Executive’s monthly COBRA premiums for continued health and dental
insurance coverage for the shorter of the following: (A) the expiration of the Term; (B) eighteen
(18) months from the Date of Termination; (C) until the Executive no longer has coverage under
COBRA; or (D) until the Executive becomes eligible for substantially similar coverage under a
subsequent employer’s group health plan; and
(iv) Outplacement services that are customary to Executive’s position.
(b) Subject to the delivery of the executed Release by Executive, the Severance Benefits
described in subparagraphs (i) of Section 3(a) hereof shall be paid in cash or good funds in equal
monthly installments during the Restricted Period (as defined in Section 7 hereof) commencing no
later than the fifteenth day of the calendar month that occurs not less than seven (7) days after
the execution of the Release and ending on the first day of the last full calendar month in the
Restricted Period; provided that the payment of the Severance Benefits shall, at the option of the
Executive, or in the event of death, his estate, be accelerated in the event of the death or
Disability of the Executive and paid to the estate of the Executive within 30 days after receipt by
ProAssurance of notice as set forth in Section 10 and, if not earlier delivered by Executive, the
Release executed by the Estate of the Executive; and provided further that the obligation of the
Companies to pay such Severance Benefits to the Executive shall be subject to termination as herein
provided in the event the Executive violates the covenants under Section 7 hereof. The Companies
shall withhold from any amounts payable under this Agreement all federal, state, city or other
income and employment taxes that shall be required. Notwithstanding the foregoing, if the
Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(b)(i), the
payment schedule for Severance Benefits shall be modified or adjusted to provide that no payments
shall be made until the expiration of six (6) months following the Date of Termination. In the
event that payments are so delayed, a lump sum
C-4
payment of the accumulated unpaid amounts attributable to the six (6) month period shall be
made to Executive on the first day of the seventh month following the Date of Termination. This
six month delay shall not apply to any Severance Benefits which are not subject to the requirements
of Section 409A of the Code by reason of their being separation pay upon an involuntary separation
from service and their meeting the requirements and limitations of the regulations under the above
referenced Code section. In no event shall the aggregate amount of Severance Benefits be reduced
as a result of such modification or adjustment.
(c) The outplacement services included in the Severance Benefits shall be provided to the
Executive promptly after the execution of the Release but not later than the end of the calendar
year following the year in which the Date of Termination occurred.
(d) The Executive shall be entitled to the following in addition to and not in limitation of
the Severance Benefits: (i) accrued and unpaid base salary as of the Date of Termination; (ii)
accrued vacation and sick leave, if any, on Date of Termination in accordance with the then current
policy or plan of the Companies with respect to terminated employees generally; and (iii) vested
benefits under the Companies’ employee benefit plans in which the Executive was a participant on
Date of Termination, which vested benefits shall be paid or provided for in accordance with the
terms of said employee benefit plans.
(e) The Executive shall not be entitled to receive Severance Benefits if employment with the
Companies is terminated by reason of termination of employment by the Executive without Good Reason
(herein defined) or by reason of termination of employment by the Companies with Cause.
(f) The Executive shall be under no duty or obligation to seek or accept other employment and
shall not be required to mitigate the amount of the Severance Benefits provided under the Agreement
by seeking employment or otherwise; provided, however, that the Executive shall be required to
notify the Companies if the Executive becomes covered by a health or dental care program providing
substantially similar coverage, at which time health or dental care continuation coverage provided
under this Agreement shall cease.
(g) Notwithstanding any provisions of this Agreement and this Section 3 to the contrary, the
Executive may unilaterally and of his own accord terminate his employment relationship with the
Companies during the Term by delivery of notice to ProAssurance in accordance with Section 10
hereof. In the event the Executive elects to terminate employment with the Companies pursuant to
this subparagraph (g), the Executive shall be deemed to have terminated his employment for Good
Reason and shall be entitled to Severance Benefits pursuant to Section 3(a) hereof, and neither
Executive nor the Companies shall be required to comply with the provisions of Section 5 hereof;
provided that if the Companies deliver a notice of termination for Cause under Section 6 hereof
which sets forth reasons for termination for Cause that occurred prior to the date of delivery of
Executive’s notice of termination pursuant to this subparagraph (g) and the Executive’s employment
is terminated for Cause for the reasons set forth in said notice of termination for Cause, the
employment of the Executive shall be deemed to have been terminated by the Companies for Cause, and
not by the Executive for Good Reason, and the Executive shall not be entitled to any Severance
Benefits hereunder
C-5
4. Parachute Payment Tax Reimbursement.
(a) If any payment or benefit within the meaning of Section 280G(b)(2) of the Code to
Executive for his benefit paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise in connection with, or arising out of, Executive’s employment with the
Companies or a Change of Control (a “Payment” or “Payments”) will be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with such interest and penalties are
collectively referred to as the “Excise Tax”), then the Executive will be entitled to receive an
additional payment (a “Gross Up Payment”). The amount of the Gross Up Payment will be such that
after payment by the Executive of all taxes (including any interest or penalties, other than
interest and penalties imposed by reason of the Executive’s failure to file a timely tax return or
pay taxes shown due on his return, imposed with respect to such taxes and the Excise Tax),
including any Excise Tax imposed upon the Gross Up Payment, the Executive retains an amount of the
Gross Up Payment equal to the Excise Tax imposed upon the Payments. The Executive shall be deemed
to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar
year for which the Excise Tax is to be paid.
(b) An initial determination as to whether a Gross Up Payment is required pursuant to this
Agreement and the amount of such Gross Up Payment shall be made by the Compensation Committee or
the Board of Directors of ProAssurance. In making such determination, the value of any non-cash
benefits or any deferred payment or benefit shall be determined in accordance with the principles
set forth in Sections 280G(d)(3) and (4) of the Code. ProAssurance shall provide the determination
(“Determination”) together with detailed supporting calculations and documentation to the Executive
within a reasonable time after the Date of Termination but not later than March 15 in the calendar
year following the year in which the Date of Termination occurred. If ProAssurance determines that
no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish
the Executive with an opinion of its income tax accountant or tax counsel to the effect that no
Excise Tax will be imposed with respect to any Payment or Payments. Within ten days of the
delivery of the Determination to the Executive, the Executive shall have the right to dispute the
Determination. The Gross Up Payment, if any, as determined pursuant to this Section 4(b) shall be
paid by the Companies to the Executive within 20 days of the receipt of the Determination, but in
no event later than the end of the tax year next following the year the Executive remits the
related taxes. The existence of the Dispute shall not in any way affect the Executive’s right to
receive Gross Up Payments in accordance with the Determination. Upon the final resolution of a
Dispute, the Companies shall promptly pay the Executive any additional amount required by such
resolution. If there is no Dispute, the Determination shall be binding, final and conclusive upon
the Companies and the Executive.
5. Good Reason for Termination. In the event that Executive desires to terminate
employment with the Companies for Good Reason (other than for death or Disability or notice under
Section 3(g) hereof), the Executive must provide the Companies with written notice no later than 45
calendar days after the Executive knows or should have known that Good Reason has occurred.
Following the Executive’s notice, the Companies shall have 45 calendar days to rectify the
circumstances causing the Good Reason. If the Companies fail to rectify the event(s) causing the
Good Reason within the 45 day period after the Executive’s notice, or if any of the
C-6
Companies delivers to the Executive written notice stating that the circumstances cannot or
shall not be rectified, the Executive shall be entitled to assert Good Reason and terminate
employment on or before 90 days after the delivery of the Executive’s notice. Should Executive
fail to provide the required notice in a timely manner, Good Reason shall not be deemed to have
occurred as a result of that event. The term of this Agreement shall not be deemed to have expired
during the notice period, however, as long as the Executive has provided notice within the term.
6. Cause. If the Executive’s employment relationship with the Companies is terminated
by the Companies for Cause, the Executive shall not be eligible for Severance Benefits and all
rights of the Executive and obligations of the Companies under this Agreement shall expire. Any
termination of the Executive’s employment by the Companies for Cause shall be communicated by a
notice of termination to the Executive. The notice of termination shall be a written notice
indicating the specific termination provision of this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under this provision. In the event the Executive disputes the basis for
termination for Cause, Executive may elect to bypass the claims procedure set forth in Section 11
hereof and file for settlement of the dispute in arbitration as provided in Section 12 hereof, in
which event the Date of Termination shall be deemed to occur on the date determined by the
arbitrator; provided that if the arbitrator rules in favor of the Executive, the time for the
execution of the Release under Section 3(a) hereof shall be extended until sixty (60) days after
the decision by the arbitrator, and in such event, the Executive shall be paid Severance Benefits
after the execution of the Release as provided in Section 3(b) hereof and shall be reimbursed for
any COBRA premiums that were paid by Executive in the interim period (but not exceeding the maximum
period specified under Section 3(a) hereof) between the termination of employment for COBRA
purposes and the Date of Termination as determined by the arbitrator .
7. Non-Competition; Nonsolicitation of Employee. The Executive will not during the
Restricted Period (herein defined):
(a) become Employed by a Competitor Company that offers, sells or markets medical professional
liability insurance in a Primary Market Area of an Insurance Subsidiary, except that Executive may
be employed with a Competitor Company so long as and on the condition that the Executive does not
participate in the medical professional liability insurance business of the Competitor Company; or
(b) solicit or induce any employees of the Companies to leave such employment or accept
employment with any other person or entity, or solicit or induce any insurance agent of an
Insurance Subsidiary to offer, sell or market medical professional liability insurance for a
Competitor Company in a Primary Market Area of an Insurance Subsidiary.
For purposes of this Section 7 only, the following terms shall have the meanings set forth
below:
“Companies” has the meaning set forth in the initial paragraph of this Agreement.
C-7
“Competitor Company” means an insurance company, insurance agency, business, for profit or not
for profit organization (other than the Companies) that provides, or offers to provide medical
professional liability insurance to health care providers.
“Employed” includes activities as an owner, proprietor, employee, agent, solicitor, partner,
member, manager, principal, shareholder (owning more than 1% of the outstanding stock), consultant,
officer, director or independent contractor.
“Health care providers” means physicians, dentists, podiatrists, chiropractors, physician
assistants, nurse practitioners, other individual health care providers and hospital and other
institutional health care providers.
“Insurance Subsidiary” means any direct or indirect subsidiary of ProAssurance that offers
medical professional liability insurance or non-risk bearing products and services related to
underwriting, claims or risk management, or indemnification for medical professional liability.
“Medical professional liability insurance” means medical malpractice insurance and
reinsurance, and equivalent services such as administration of self-insured trusts, claims
management services and risk management services for health care providers. “Medical professional
liability insurance” does not include services provided as an employee of a health care provider if
such services are rendered solely for the purpose of servicing medical professional liability risk
of the employer or that of its employees.
“Primary Market Area” means any state in which the Insurance Subsidiaries derived more than
$15 million in aggregate revenues from the sale of medical professional liability insurance and
non-risk bearing medical professional liability services or products to health care providers in
the most recent complete fiscal year prior to the Date of Termination.
“Restricted Period” means a period of a period of twenty-four (24) months from Date of
Termination.
(c) If the Executive is deemed to have materially breached the non-competition covenants set
forth in Section 7 of this Agreement, the Companies may, in addition to seeking an injunction or
any other remedy they may have, withhold or cancel any remaining payments or benefits due to the
Executive pursuant to Section 3 of this Agreement. The Companies shall give prior or
contemporaneous written notice of such withholding or cancellation of payments in accordance with
Section 3 hereof. If the Executive violates any of these restrictions, the Companies shall be
further entitled to an immediate preliminary and permanent injunctive relief, without bond, in
addition to any other remedy which may be available to the Companies.
(d) Both parties agree that the restrictions in this Agreement are fair and reasonable in all
respects, including the geographic and temporal restrictions, and that the benefits described in
this Agreement, to the extent any separate or special consideration is necessary, are fully
sufficient consideration for the Executive’s obligations under this Agreement.
8. Confidentiality. Executive will remain obligated under any confidentiality or
nondisclosure agreement with or policy of the Companies (or any of them) that is currently in
C-8
effect or to which the Executive may in the future be bound. In the event that the Executive
is at any time not the subject of a separate confidentiality or nondisclosure agreement with the
Companies (or any of them), Executive expressly agrees that Executive shall not use for the
Executive’s personal benefit, or disclose, communicate or divulge to, or use for the direct or
indirect benefit of any person, firm, association or company any confidential or competitive
material or information of the Companies or their subsidiaries, including without limitation, any
information regarding insureds or other customers, actual or prospective, and the contents of their
files; marketing, underwriting or financial plans or analyses which is not a matter of public
record; claims practices or analyses which are not matters of public record; pending or past
litigation in which the Companies have been involved and which is not a matter of public record;
and all other strategic plans, analyses of operations, computer programs, personnel information and
other proprietary information with respect to the Companies which are not matters of public record.
Executive shall return to the Companies promptly, and in no event later than the Date of
Termination, all items, documents, lists and other materials belonging to the Companies or their
subsidiaries, including but not limited to, credit, debit or service cards, all documents, computer
tapes, or other business records or information, keys and all other items in the Executive’s
possession or control.
9. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Companies and Executive and their respective devisees, heirs, legal or personal
representatives, successors and assigns. Notwithstanding the foregoing, this Agreement is personal
to the Executive and the rights and obligations hereunder may not be assigned by Executive without
the prior written consent of ProAssurance.
10. Notice. For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand or commercial courier or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses as set forth below or to such
other address as one party may have furnished to the other in writing in accordance herewith. In
the event of the Death or Disability of the Executive, any notices required to be given by the
Executive may be made by the Estate, spouse, or personal representative of the Executive.
Notice to the Executive:
0000 Xxxxxxx Xx.
Xxxxxxxxxxx, XX 00000
and
000 Xxxxxxxx Xxx Xx. X.
Xxxxxxxxx, XX 00000-0000
Xxxxxxxxxxx, XX 00000
and
000 Xxxxxxxx Xxx Xx. X.
Xxxxxxxxx, XX 00000-0000
C-9
Notice to the Companies:
| ProAssurance Corporation Mailing Address: P. O. Box 590009 Birmingham, Alabama 35259-0009 Attention: CEO: cc Secretary |
Street Address: 000 Xxxxxxxxx Xxxxx Xxxxxxxxxx, Xxxxxxx 00000 |
11. Claims Procedure.
(a) The administrator for purposes of this Agreement shall be ProAssurance (“Administrator”),
whose address is 000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000; Telephone: (000) 000-0000. The
“Named Fiduciary” as defined in Section 402(a) (2) or ERISA, also shall be ProAssurance.
ProAssurance shall have the right to designate one or more employees of the Companies as the
Administrator and the Named Fiduciary at any time, and to change the address and telephone number
of the same. ProAssurance shall give the Executive written notice of any change in the
Administrator and Named Fiduciary, or in the address or telephone number of the same.
(b) The Administrator shall make all determinations as to the right of any person to receive
benefits under the Agreement. Any denial by the Administrator of a claim for benefits by the
Executive (“the claimant”) shall be stated in writing by the Administrator and delivered or mailed
to the claimant within ten (10) days after receipt of the claim, unless special circumstances
require an extension of time for processing the claim. If such an extension is required, written
notice of the extension shall be furnished to the claimant prior to the termination of the initial
10-day period. In no event shall such extension exceed a period of ten (10) days from the end of
the initial period. Any notice of denial shall set forth the specific reasons for the denial,
specific reference to pertinent provisions of this Agreement upon which the denial is based, a
description of any additional material or information necessary for the claimant to perfect the
claim, with an explanation of why such material or information is necessary, and any explanation of
claim review procedures, written to the best of the Administrator’s ability in a manner that may be
understood without legal or actuarial counsel.
(c) A claimant whose claim for benefits has been wholly or partially denied by the
Administrator may request, within ten (10) days following the receipt of such denial, in a writing
addressed to the Administrator, a review of such denial. The claimant shall be entitled to submit
such issues or comments in writing or otherwise, as the claimant shall consider relevant to a
determination of the claim, and the claimant may include a request for a hearing in person before
the Administrator. Prior to submitting the request, the claimant shall be entitled to review such
documents as the Administrator shall agree are pertinent to the claim. The claimant may, at all
stages of review, be represented by counsel, legal or otherwise, of the claimant’s choice. All
requests for review shall be promptly resolved. The Administrator’s decision with respect to any
such review shall be set forth in writing and shall be mailed to the claimant not later than ten
(10) days following receipt by the Administrator of the claimant’s request unless special
circumstances, such as the need to hold a hearing, require an extension of time for processing, in
which case the Administrator’s decision shall be so mailed not later than twenty (20) days after
receipt of such request.
C-10
12. Arbitration. The parties to this Agreement agree that final and binding
arbitration shall be the sole recourse to settle any claim or controversy arising out of or
relating to a breach or the interpretation of this Agreement, except as either party may be seeking
injunctive relief. Either party may file for arbitration. A claimant seeking relief on a claim
for benefits, however, must first follow the procedure in Section 11 hereof and may file for
arbitration within sixty (60) days following claimant’s receipt of the Administrator’s written
decision on review under Section 11(c) hereof, or if the Administrator fails to provide any written
decision under Section 11 hereof, within 60 days of the date on which such written decision was
required to be delivered to the claimant as therein provided. The arbitration shall be held at a
mutually agreeable location, and shall be subject to and in accordance with the arbitration rules
then in effect of the American Arbitration Association; provided that if the location cannot be
agreed upon the arbitration shall be held in either Birmingham, Alabama, or Chicago, Illinois,
whichever location is closer to the principal office where the Executive was employed on the Date
of Termination. The arbitrator may award any and all remedies allowable by the cause of action
subject to the arbitration, but the arbitrator’s sole authority shall be to interpret and apply the
provisions of this Agreement. In reaching its decision the arbitrator shall have no authority to
change or modify any provision of this Agreement or other written agreement between the parties.
The arbitrator shall have the power to compel the attendance of witnesses at the hearing. Any
court having jurisdiction may enter a judgment based upon such arbitration. All decisions of the
arbitrator shall be final and binding on the parties without appeal to any court. Upon execution
of this Agreement, the Executive shall be deemed to have waived any right to commence litigation
proceedings regarding this Agreement outside of arbitration or injunctive relief without the
express consent of ProAssurance. The Companies shall pay all arbitration fees and the arbitrator’s
compensation. If the Executive prevails in the arbitration proceeding, the arbitrator may require
the Companies to reimburse the Executive for the reasonable fees and expenses of Executive’s
personal counsel for his or her professional services rendered to the Executive in connection with
the enforcement of this Agreement.
13. Miscellaneous.
(a) Except insofar as this provision may be contrary to applicable law, no sale, transfer,
alienation, assignment, pledge, collateralization or attachment of any benefits under this
Agreement shall be valid or recognized by the Companies.
(b) This Agreement is an unfunded deferred compensation arrangement for a member of a select
group of the Companies’ management and any exemptions under ERISA, as applicable to such
arrangement, shall be applicable to this Agreement. Nothing in this Agreement shall require or be
deemed to require the Companies or any of them to segregate, earmark or otherwise set aside any
funds or other assets to provide for any payments made or required to be made hereunder.
(c) It is understood acknowledged and agreed that Executive is and will be an “at
will’“employee of any one or more of the Companies. Nothing in this Agreement shall be deemed to
create an employment agreement between the Executive and the Companies or any of them providing for
Executive’s employment for any fixed duration, nor shall it be deemed to modify or undercut the
Executive’s at will employment status with the Companies.
C-11
(d) It is understood and agreed by the Companies and Executive that the terms of this
Agreement relating to the payment of Severance Benefits are intended to comply in all respects with
the requirements of Code Section 409A. For purposes of determining whether Severance Benefits may
be payable to an Executive in compliance with Code Section 409A, the Executive’s employment will be
considered as having been terminated for purposes of this Agreement if the parties reasonably
anticipate either (i) that Executive will no longer perform any services for the Companies or (ii)
that the level of bona fide services performed for the Companies (whether as an employee or
independent contractor) will permanently decrease to no more than 20% of the average level of bona
fide services performed by Executive over the immediately preceding 36-month period (or the full
period of services to the Companies if Executive has been providing services to the Companies for
less than 36 months).
(e) Neither the provisions of this Agreement nor the severance benefits provided hereunder
shall reduce any amounts otherwise payable, or in any way diminish the Executive’s rights as an
employee of the Companies, whether existing now or hereafter, under any benefit, incentive,
retirement, stock option, stock bonus or stock purchase plan, or any employment agreement or other
plan or arrangement.
(f) This Agreement sets forth the entire agreement between the parties with respect to the
matters set forth herein and supersedes in their entirety any prior written or oral agreements or
understandings between Executive and the Companies regarding the subject matter of this Agreement.
This Agreement may not be modified or amended except by written agreement intended as such and
signed by all parties.
(g) The Companies, from time to time, shall provide government agencies with such reports
concerning this Agreement as may be required by law, and shall provide Executive with such
disclosure concerning this Agreement as may be required by law or as the Companies may deem
appropriate.
(h) Executive and the Companies respectively acknowledge that each of them has read and
understand this Agreement, that they have each had adequate time to consider this Agreement and
discuss it with each of their attorneys and advisors, that each of them understands the
consequences of entering into this Agreement, that each of them is knowingly and voluntarily
entering into this Agreement, and that they are each competent to enter into this Agreement.
(i) If any provision of this Agreement is determined to be unenforceable, at the discretion of
ProAssurance the remainder of this Agreement shall not be affected but each remaining provision
shall continue to be valid and effective and shall be modified so that it is enforceable to the
fullest extent permitted by law. Moreover, in the event this Agreement is determined to be
unenforceable against any of the Companies, it shall continue to be valid and enforceable against
the other Companies.
(j) This Agreement will be interpreted as a whole according to its fair terms. It will not be
construed strictly for or against either party.
(k) Except to the extent that federal law controls, this Agreement is to be construed
according to Delaware law.
C-12
IN
WITNESS WHEREOF, the parties have duly executed this Agreement on this ___ day of
, 20___.
| EXECUTIVE: | ||||||
| PROASSURANCE CORPORATION | ||||||
| By: | ||||||
C-13
RELEASE IN CONJUNCTION WITH SEVERANCE COMPENSATION
This Release of Claims (“Release”) is between ProAssurance Corporation (“ProAssurance”), for
itself and for its subsidiaries and any successor company that has assumed the Agreement to which
this Release was an attachment (all such organizations being referred to in this Release as the
“Companies”) and Xxxxx X. Xxxxx (“Executive”).
The Companies and Executive have agreed to terminate their employment relationship. To effect
an orderly termination, the Executive, and the Companies are entering into this Release.
1. Executive hereby waives any and all rights Executive may otherwise have to continued
employment with or re-employment by the Companies or any parent, subsidiary or affiliate of
Companies.
2. Effective with the Date of Termination, Executive is relieved of all duties and obligations
to the Companies, except as provided in this Release or any applicable provisions of the Release
and Severance Compensation Agreement between Companies and Executive, effective as of
(“Agreement”), which survive termination of the employment relationship. Unless otherwise
specifically defined herein, capitalized terms shall have the meaning attributed to them in the
Agreement.
3. Executive agrees that this Release, the Agreement and the Severance Benefits provided under
the Agreement are confidential and shall not be disclosed or published directly or indirectly to
third persons, except as necessary to enforce its terms, by Executive or to Executive’s immediate
family upon their agreement not to disclose the fact or terms of this Release, or to Executive’s
attorney, financial consultant or accountant, except that Executive and the Companies may disclose,
as necessary, (i) the fact that Executive has terminated Executive’s employment with the Companies,
and (ii) the terms of this Agreement and Severance Benefits as required under the securities laws
and regulations and the listing requirements of any stock exchange or national market system and as
otherwise required by law.
4. Any fringe benefits that Executive has received or currently is receiving from the
Companies or its affiliates shall cease effective with the Date of Termination, except as otherwise
provided for in this Release, in the Agreement or by law.
5. The parties agree that the terms contained and payments provided for in the Agreement are
compensation for and in full consideration of Employee’s release of claims under this Release, and
Executive’s confidentiality, non-compete, non-solicitation and non-disclosure agreements contained
in the Agreement.
6. The Executive shall be under no duty or obligation to seek or accept other employment and
shall not be required to mitigate the amount of the Severance Benefits (as defined and provided
under the Agreement) by seeking employment or otherwise, provided, however, that the Executive
shall be required to notify the Companies if the Executive becomes
C-14
covered by a health or dental care program providing substantially similar coverage, at which
time health or dental care continuation coverage provided under the Agreement shall cease.
7. Executive waives, releases, and forever discharges the Companies and each of their direct
or indirect parents, subsidiaries, affiliates, and any partnerships, joint ventures or other
entities involving or related to any of the Companies, their parents, subsidiaries or affiliates,
and all present or former employees, officers, agents, directors, successors, assigns and attorneys
of any of these corporations, persons or entities (all collectively referred to in this Release as
the “Released”) from any and all claims, charges, suits, causes of action, demands, expenses and
compensation whatsoever, known or unknown, direct or indirect, on account of or growing out of
Executive’s employment with and termination from the Companies, or relationship or termination of
such relationship with any of the Released, or arising out of related events occurring through the
date on which this Release is executed. This includes, but is not limited to, claims for breach of
any employment contract; handbook or manual; any express or implied contract; any tort; continued
employment; loss of wages or benefits; attorney fees; employment discrimination arising under any
federal, state, or local civil rights or anti-discrimination statute, including specifically any
claims Executive may have under the federal Age Discrimination in Employment Act, as amended, 29
USC §§ 621, et seq.; emotional distress; harassment; defamation; libel; slander; and all
other types of claims or causes of action whatsoever arising under any other state or federal
statute or common law of the United States. Notwithstanding anything in this Release to the
contrary, nothing in this Release shall be construed to waive, release or discharge the Companies
from making any payments or providing any benefits due to Executive in accordance with the terms of
the Agreement after the Date of Termination
8. The Executive does not waive or release any rights or claims that may arise under the
federal Age Discrimination in Employment Act, as amended, after the date on which this Release is
executed by the Executive.
9. The Executive acknowledges and agrees that Executive has been advised in writing by this
Release, and otherwise, to CONSULT WITH AN ATTORNEY before Executive executes this Release.
10. The Executive agrees that Executive received a copy of this Release prior to executing the
Agreement, that this Release incorporates the Companies’ FINAL OFFER; that Executive has been given
a period of at least twenty-two (22) calendar days within which to consider this Release and its
terms and to consult with an attorney should Executive so elect.
11. The Executive shall have seven (7) calendar days following Executive’s execution of this
Release to revoke this Release. Any revocation of this Release shall be made in writing by the
Executive and shall be received on or before the time of close of business on the seventh calendar
day following the date of the Employee’s execution of this Release at ProAssurance’s address at 000
Xxxxxxxxx Xxxxx, P. O. Box 590009, Birmingham, Alabama 35259-0009, Attention: President: cc
Secretary, or such other place as the Companies may notify Executive in writing. This Release shall
not become effective or enforceable until the eighth (8th) calendar day following the
Executive’s execution of this Release.
C-15
12. Executive and the Companies acknowledge that they have read and understand this Release,
that they have had adequate time to consider this Release and discuss it with their attorneys and
advisors, that they understand the consequences of entering into this Release, that they are
knowingly and voluntarily entering into this Release, and that they are competent to enter into
this Release.
13. This Release shall benefit and be binding upon the parties and their respective directors,
officers, employees, agents, heirs, successors, assigns, devisees and legal or personal
representatives.
14. This Release, along with the attached Agreement, sets forth the entire agreement between
the parties at the time and date these documents are executed, and fully supersedes any and all
prior agreements or understandings between them pertaining to the subject matter in this Release.
This Release may not be modified or amended except by a written agreement intended as such, and
signed by all parties.
15. Except to the extent that federal law controls, this Release is to be construed according
to the law of the state of Delaware.
16. If any provision of this Release is determined to be unenforceable, at the discretion of
ProAssurance the remainder of this Release shall not be affected but each remaining provision or
portion shall continue to be valid and effective and shall be modified so that it is enforceable to
the fullest extent permitted by law.
17. To signify their agreement to the terms of this Release, the parties have executed it on
the date set forth opposite their signatures, or those of their authorized agents, which follow.
| EXECUTIVE | ||||||
Dated: |
||||||
| PROASSURANCE CORPORATION | ||||||
Dated:
|
By: | |||||
| Its: | ||||||
C-16
