UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM
8-K
_____________________
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
report (Date of earliest event reported): December 17, 2008
EMPLOYERS
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in its Charter)
_____________________
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NEVADA
(State
or Other Jurisdiction of
Incorporation)
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001-33245
(Commission
File Number)
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04-3850065
(I.R.S.
Employer Identification No.)
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10375
Professional Circle
Reno,
Nevada
(Address
of Principal Executive Offices)
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89521
(Zip
Code)
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Registrant's
telephone number including area code: (888)
682-6671
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No
change since last report
(Former
Name or Address, if Changed Since Last
Report)
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_____________________
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Section
5 – Corporate Governance and Management
Item 5.02. Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
These
executives were parties to employment agreements that needed to be amended no
later than December 31, 2008 to comply with deferred compensation legislation
under section 409A of the Internal Revenue Code of 1986, as amended (the
"Code"). In addition, the existing employment agreements with Messrs.
Ormsby, Welch and Yocke and Ms. Nelson were scheduled to expire on December 31,
2008. In light of the requirement to amend the agreements with all of
the executives, and in the interests of keeping these agreements substantially
similar in form, either Employers Holdings or Employers Insurance, as
applicable, entered into new agreements with each of the
executives.
The
following description summarizes the employment agreements for these executives;
however, the summaries do not purport to be complete and are qualified in their
entirety by reference to the copies of the employment agreements, each of which
are attached hereto and incorporated by reference herein.
Employment Agreement with
Douglas D. Dirks
The term
of Mr. Dirks' employment agreement will commence on January 1, 2009 and will
continue for four years until December 31, 2012, thereafter to renew
automatically for successive two-year periods, unless either he or Employers
Holdings gives written notice to the other party no later than six months prior
to the expiration of the initial term or any successive term, as applicable, of
an intent not to renew the agreement or the agreement is terminated earlier in
accordance with its terms.
During
the term of his employment agreement, Mr. Dirks will receive an annual base
salary of not less than $675,000, subject to review and
adjustment. Mr. Dirks also will receive an annual incentive based on
his and Employers Holdings' performance, as determined in the sole discretion of
the board of directors of Employers Holdings (the "Board") or a committee
thereof, with a minimum target percentage of 70% of his annual base
salary. In addition, to the extent not duplicative of other benefits
provided by the employment agreement, Mr. Dirks will be entitled to (i) the
compensation and benefits that are provided generally to other senior officers
of Employers Holdings at a level determined in the sole discretion of the Board
or a committee thereof, (ii) all perquisites generally provided from time to
time to other similarly situated officers of Employers Holdings and (iii) an
automobile allowance of $1,300 per month, life
insurance
in an amount equal to three times Mr. Dirks' base salary and an annual executive
physical examination as part of Employers Holdings' executive wellness
program.
If,
during the term of his employment agreement, Mr. Dirks' employment is terminated
other than for (a) death, (b) disability or (c) by Employers Holdings for cause,
in each case, other than either during the 24-month period following a change in
control of Employers Holdings or during the six-month period prior to, but in
connection with, a change in control of Employers Holdings, then he will be
entitled to (i) severance payment equal to two times his base salary payable in
bi-weekly installments for 24 months and (ii) continued medical, dental and
vision insurance coverage for 18 months following the termination
date.
If,
during the term of his employment agreement, Mr. Dirks terminates his employment
for good reason or his employment is terminated for any reason other than (a)
death, (b) disability or (c) by Employers Holdings for cause, in each case,
either within 24 months following a change in control of Employers Holdings or
within six months prior to, but in connection with, a change in control of
Employers Holdings, then he will be entitled to receive (i) a lump sum cash
payment equal to three times the sum of (x) his base salary and (y) the average
of the annual bonus amounts he earned for the three years preceding the year in
which the change in control occurs or, if the termination date is before January
1, 2010, the average of the annual bonus amounts he earned in 2007 and 2008, and
(ii) continued medical, dental and vision insurance coverage for 18 months
following the termination date. In addition, if Mr. Dirks will be
subject to a golden parachute excise tax imposed under section 4999 of the Code,
then he will be entitled to payment in an amount that is necessary to place Mr.
Dirks in the same after-tax financial position that he would have been in if he
had not been subject to this excise tax (the "Gross-Up
Payment"). However, if payments and benefits to which Mr. Dirks is
entitled by reason of the change in control do not exceed 110% of the largest
amount that would result in no portion of these benefits and compensation being
subject to the excise tax, then Mr. Dirks will not be entitled to a Gross-Up
Payment, and instead his payments and benefits will be reduced so that he is not
subject to the excise tax.
In
exchange for the severance compensation and other benefits, if Mr. Dirks or
Employers Holdings terminates Mr. Dirks' employment for any reason other than
his death or disability (whether or not during the term of his employment), Mr.
Dirks will be subject to certain non-competition and non-solicitation
restrictions for 24 months after the termination date, in addition to other
restrictive covenants. Additionally, Mr. Dirks will be required to
sign a global release of liability. Moreover, if Mr. Dirks'
employment is terminated (a) during the term of his agreement by him for other
than good reason, death or disability, or (b) following the expiration of the
term (by either him or Employers Holdings) for any reason other than (i) by
Employers Holdings for cause or (ii) by reason of his death or disability, then
Mr. Dirks will be entitled to non-competition payments equal to two times his
base salary payable in bi-weekly installments for 24 months following his
termination of employment. If the non-competition provisions in his
employment agreement are nonenforceable, however, then Mr. Dirks will not be
entitled to any unpaid non-competition payments.
Employment Agreement with
Martin J. Welch
The term
of Mr. Welch's employment agreement will commence on January 1, 2009 and will
continue for three years until December 31, 2011, thereafter to renew
automatically for
successive
two-year periods, unless either he or Employers Insurance gives written notice
to the other party no later than six months prior to the expiration of the
initial term or any successive term, as applicable, of an intent not to renew
the agreement or the agreement is terminated earlier in accordance with its
terms.
During
the term of his employment agreement, Mr. Welch will receive an annual base
salary of not less than $420,000, subject to review and
adjustment. Mr. Welch also will receive an annual incentive based on
his and Employers Insurance's performance, as determined in the sole discretion
of the board of directors of Employers Insurance or a committee thereof, with a
minimum target percentage of not less than 70% of his annual base
salary. In addition, to the extent not duplicative of other benefits
provided by the employment agreement, Mr. Welch will be entitled to (i)
compensation and benefits that are provided generally to other senior officers
of Employers Insurance at a level determined in the sole discretion of the board
of directors of Employers Insurance or a committee thereof, (ii) all perquisites
generally provided from time to time to other similarly situated officers of
Employers Insurance and (iii) an automobile allowance of $1,200 per month, life
insurance in an amount equal to three times Mr. Welch's base salary and an
annual executive physical examination as part of Employers Insurance's executive
wellness program.
If,
during the term of his employment agreement, Mr. Welch terminates his employment
for good reason or his employment is terminated for other than (a) death, (b)
disability or (c) by Employers Insurance for cause, in each case, other than
either during the 18-month period following a change in control of Employers
Insurance or during the six-month period prior to, but in connection with, a
change in control of Employers Insurance, Mr. Welch will be entitled to (i)
severance payment equal to one times his base salary payable in bi-weekly
installments for 12 months and (ii) continued medical, dental and vision
insurance coverage for 12 months following the termination date.
If,
during the term of Mr. Welch's employment agreement, he terminates his
employment for good reason or his employment is terminated for any reason other
than (a) death, (b) disability or (c) by Employers Insurance for cause, in each
case, either within 18 months following a change in control of Employers
Insurance or within six months prior to, but in connection with, a change in
control of Employers Insurance, Mr. Welch will be entitled to receive (i) a lump
sum cash payment equal to two times the sum of (x) his base salary and (y) the
average of the annual bonus amounts earned by Mr. Welch for the three years
preceding the year in which the change in control occurs or, if the termination
is before January 1, 2010, the average of the annual bonus amounts earned by Mr.
Welch in 2007 and 2008, and (ii) continued medical, dental and vision insurance
coverage for 18 months following the date of termination. In
addition, if Mr. Welch will be subject to a golden parachute excise tax imposed
under section 4999 of the Code, then he will be entitled to a Gross-Up
Payment. However, if payments and benefits to which Mr.
Welch is entitled by reason of the change in control do not exceed 110% of the
largest amount that would result in no portion of these benefits and
compensation being subject to the excise tax,
then Mr.
Welch will not be entitled to a Gross-Up Payment, and instead his payments and
benefits will be reduced so that he is not subject to the excise
tax.
In
exchange for the severance compensation and other benefits, if Mr. Welch or
Employers Insurance terminates Mr. Welch's employment for any reason other than
his death or disability (whether or not during the term of his employment), Mr.
Welch will be subject to non-competition restrictions for 12 months and
non-solicitation restrictions for 18 months after the termination date in
addition to other restrictive covenants. Additionally, Mr. Welch will
be required to sign a global release of liability. Moreover, if Mr.
Welch's employment is terminated (a) during the term of his agreement by him for
other than good reason, death or disability or (b) following the expiration of
the term (by either him or Employers Insurance) for any reason other than (i) by
Employers Insurance for cause or (ii) by reason of his death or disability, then
Mr. Welch will be entitled to non-competition payments equal to two times his
base salary payable in bi-weekly installments for 12 months following his
termination of employment. Finally, if following the one-year
anniversary of the date of termination of Mr. Welch's employment, (x) Mr. Welch
continues to satisfy the restrictions in the non-competition covenant in his
employment agreement and (y) Mr. Welch's employment had been terminated whether
or not during the term for any reason other than by Employers Insurance for
cause, by reason of his death or disability or by him for good reason,
then: (A) if his termination had occurred during the term, he will
continue to receive the severance payments and health insurance medical benefits
described above generally starting from the one-year anniversary of his
termination of employment, and (B) if such termination occurred after the term,
Mr. Welch will continue to receive the non-competition payments and benefits
described above generally starting from the one-year anniversary of his
termination of employment, in either case, for the shorter of an additional six
months or until Mr. Welch engages in activities that no longer satisfy the
restrictions in the non-competition covenant. If the non-competition
provisions in his employment agreement are nonenforceable, however, then Mr.
Welch will not be entitled to any unpaid non-competition payments or
benefits.
Employment Agreements with
Lenard T. Ormsby, Ann W. Nelson and William E. Yocke
The term
of each of these employment agreements will commence on January 1, 2009 and will
continue for three years until December 31, 2011, thereafter to renew
automatically for successive two-year periods, unless either the executive or
Employers Holdings gives written notice to the other party no later than six
months prior to the expiration of the initial term or any successive term, as
applicable, of an intent not to renew the agreement or the agreement is
terminated earlier in accordance with its terms.
During
the terms of their employment agreements, each of Mr. Ormsby, Ms. Nelson and Mr.
Yocke will receive an annual base salary of $355,000, $235,000
and $365,000, respectively, subject to review and adjustment. The
executives will also be entitled to an annual incentive during the term of the
agreements, based on the executive's and Employers Holdings' performance, as
determined in the sole discretion of the Board or a committee
thereof. The amount of their minimum annual incentive target
percentage will be not less than the following percentages of the respective
executive's base salary: 45% for each of Ms. Nelson and Mr. Ormsby and 55% for
Mr. Yocke. Furthermore, to the extent not duplicative of the specific
benefits granted by his or her employment agreement, each executive will be
entitled
to (i)
the compensation and benefits provided generally to senior officers of Employers
Holdings at a level determined in the sole discretion of the Board or a
committee thereof, (ii) all perquisites provided to other similarly situated
officers of Employers Holdings and (iii) an automobile allowance of $1,200 per
month, life insurance in an amount equal to three times the executive's base
salary and an annual executive physical examination as part of Employers
Holdings' executive wellness program.
If,
during the term of his or her employment agreement, an executive terminates his
employment for good reason or his or her employment is terminated for any reason
other than (a) death, (b) disability or (c) by Employers Holdings for cause, in
each case, other than either during the 18-month period following a change in
control of Employers Holdings or during the six-month period prior to, but in
connection with, a change in control of Employers Holdings, the executive will
receive (i) severance payment equal to one and a half times his or her base
salary payable in bi-weekly installments for 18 months and (ii) continued
medical, dental and vision insurance coverage for 18 months following the
termination date.
If,
during the term of his or her employment agreement, an executive terminates his
or her employment for good reason or his or her employment is terminated for any
reason other than (a) death, (b) disability or (c) by Employers Holdings for
cause, in each case, either within 18 months following a change in control or
within six months prior to, but in connection with, a change in control, the
executive will receive (i) a lump sum cash payment equal to two times the sum of
(x) the executive's base salary and (y) the average of the annual bonus amounts
earned by the executive for the three years preceding the year in which the
change in control occurs or, if the termination date is before January 1, 2010,
the average of the annual bonus amounts earned by the executive in 2007 and
2008, and (ii) continued medical, dental and vision insurance coverage for 18
months following the termination date. In addition, if the executive
will be subject to a golden parachute excise tax imposed under section 4999 of
the Code, then the executive will be entitled to a Gross-Up
Payment. However, if payments and benefits to which the executive is
entitled by reason of the change in control do not exceed 110% of the largest
amount that would result in no portion of these benefits and compensation being
subject to the excise tax, then the executive will not be entitled to a Gross-Up
Payment, and instead the executive's payments and benefits will be reduced so
that the executive is not subject to the excise tax.
In
exchange for the severance compensation and the other benefits, if the executive
or Employers Holdings terminates the executive's employment for any reason other
than the executive's death or disability during the term of his or her
employment agreement, then the executive will be subject to certain
non-competition and non-solicitation restrictions for 18 months after the
termination date in addition to other restrictive
covenants. Additionally, the executive will be required to sign a
global release of liability.
Section
9 – Financial Statements and Exhibits
Item
9.01. Financial Statements and Exhibits.
(d) Exhibits.
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10.1
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Employment
Agreement by and between Employers Holdings, Inc. and Douglas D. Dirks,
dated December 17, 2008 and effective as of January 1,
2009.
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10.2
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Employment
Agreement by and between Employers Holdings, Inc. and Ann W. Nelson, dated
December 17, 2008 and effective as of January 1,
2009.
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10.3
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Employment
Agreement by and between Employers Holdings, Inc. and Lenard T. Ormsby,
dated December 17, 2008 and effective as of January 1,
2009.
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10.4
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Employment
Agreement by and between Employers Insurance Company of Nevada and Martin
J. Welch, dated December 17, 2008 and effective as of January 1,
2009.
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10.5
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Employment
Agreement by and between Employers Holdings, Inc. and William E. Yocke,
dated December 17, 2008 and effective as of January 1,
2009.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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EMPLOYERS
HOLDINGS, INC.
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By:
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/s/
Lenard T. Ormsby
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Name:
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Lenard
T. Ormsby
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Title:
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Legal
Officer and General Counsel
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Dated: December
23, 2008
Exhibit
Index
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Exhibit
No.
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Exhibit
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10.1
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Employment
Agreement by and between Employers Holdings, Inc. and Douglas D. Dirks,
dated December 17, 2008 and effective as of January 1,
2009.
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10.2
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Employment
Agreement by and between Employers Holdings, Inc. and Ann W. Nelson, dated
December 17, 2008 and effective as of January 1, 2009.
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10.3
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Employment
Agreement by and between Employers Holdings, Inc. and Lenard T. Ormsby,
dated December 17, 2008 and effective as of January 1,
2009.
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10.4
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Employment
Agreement by and between Employers Insurance Company of Nevada and Martin
J. Welch, dated December 17, 2008 and effective as of January 1,
2009.
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10.5
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Employment
Agreement by and between Employers Holdings, Inc. and William E. Yocke,
dated December 17, 2008 and effective as of January 1,
2009.
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Exhibit
10.1
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this “Agreement”) by and between Employers Holdings, Inc.,
a Nevada corporation (the “Company”) and Douglas D. Dirks (the “Employee”) is
entered into as of the 17th day of December, 2008, effective as of January
1, 2009 (the “Effective Date”).
RECITALS
A. The Employee has knowledge and
experience applicable to the position of Chief Executive Officer.
B. The Company desires to continue to
employ the Employee to perform certain services for the Company, its parent, if
any, and their respective subsidiaries and affiliates (the “Company
Affiliates”), as may be required or requested of the Employee in his position as
Chief Executive Officer, and the Employee desires to continue to be so employed
by the Company and to perform such services for the Company and the Company
Affiliates.
In
consideration of the premises above and mutual covenants and promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are mutually acknowledged, the parties agree as follows:
TERMS
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1.
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Employment.
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The Company agrees to continue to
employ the Employee and the Employee accepts such continued employment upon the
terms and conditions specified herein. The Employee agrees to continue to devote
substantially all of his time and effort during working hours in the performance
of the duties called for herein and agrees that any other non-employment related
duties (i.e., industry related groups, service on boards, etc.) will not be
allowed to materially interfere with the performance of the duties called for
herein.
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2.
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Term.
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The term of this Agreement shall
commence on the Effective Date, and continue for four (4) years (the “Initial
Term”), until December 31, 2012, and, thereafter, shall automatically renew for
successive two (2) year periods (each, an “Additional Term;” the Initial Term
and any Additional Terms, collectively the “Term”), unless either party gives
written notice to the other no later than six (6) months prior to expiration of
the Initial Term or any Additional Term, as applicable, of an intent not to
renew this Agreement; subject, however to earlier termination of the Employee's
employment with the Company in accordance with this Agreement (the “Termination
Date”). The expiration of this Agreement at the end of the Term, in
and of itself, shall not constitute, nor be construed or interpreted as, a
termination of the Employee's
1
employment
that would make him eligible for benefits or payments under Section 7
below. This Agreement shall expire upon the termination of the
Employee's employment for any reason, subject to the provisions of subsection
10(h) below.
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3.
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Services and
Duties.
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The Employee shall continue to serve as
Chief Executive Officer and shall perform such duties as may be assigned by the
Board of Directors of the Company (the “Board”) from time to time. At
the request of the Board, the Employee shall also serve as a director of the
Company and/or one or more of the Company Affiliates at no additional
compensation. The Employee agrees that upon the termination of his
employment with the Company, he shall resign from the Board and any and all
boards of the Company Affiliates effective on the Termination Date.
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4.
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Compensation and
Benefits.
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(a)
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During the term of this Agreement,
the Company shall pay
to the Employee an annual salary of not less than $675,000 (“Base Salary”), which amount shall be paid
according to the Company’s regular payroll practices. The
Company agrees to review the Base Salary on an annual basis and adjust
the salary to comply
with the executive compensation policy in effect at the time of the
review. Any increase made to the annual salary will establish
the new Base Salary for the Employee. All payments made
pursuant to this Agreement, including but not limited to this subsection
4(a), shall be reduced by and
subject to withholding for all federal, state, and local taxes and any
other withholding required by applicable laws and
regulations.
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(b)
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The Company will provide an annual incentive (the
“Annual
Incentive”) to the Employee during the Term
based on the Employee’s and the Company’s performance, as determined by
the Board (or a committee thereof) in its sole
discretion. In this regard, the Board (or a committee thereof)
shall set
an annual
incentive target
of not less than
seventy percent (70%) of Base Salary, and the Annual Incentive shall be paid in
accordance with the Company’s regular practice for its senior
officers, as in effect from time to time. To the extent not duplicative of
the specific benefits provided herein, the Employee shall
be eligible to participate in all incentive compensation, retirement,
supplemental retirement, and deferred compensation plans, policies and
arrangements that are provided generally to other senior officers of the
Company at a level (in terms of the
amount and types of benefits and incentive compensation that the Employee
has the opportunity to receive and the terms thereof) determined in the
sole discretion of the Board (or a committee
thereof).
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2
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(c)
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The Employee agrees that
the amounts payable
and benefits provided under this Agreement, including but not limited to
any amounts payable or benefits provided under this Section 4 and Section 7 constitute good,
valuable and separate consideration for the non-competition,
assignment and
release of liability provisions contained herein. The Employee
acknowledges that he is aware of the effect of the non-competition,
assignment and release of liability provisions contained herein and agrees
that the amounts payable and benefits provided under this Agreement, including
but not limited to the amounts payable and benefits provided under
this Section 4 and
Section 7, if
any, constitute
sufficient consideration for his agreement to these
provisions.
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(d)
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In addition to the compensation
called for in this
Agreement, the Employee shall be entitled to receive any and all employee benefits and perquisites generally
provided from time to time to other similarly situated officers of the
Company as well as the benefits and
perquisites listed on “Exhibit A” attached hereto and incorporated
herein by this reference.
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5.
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Insurance.
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The Employee agrees to submit to a
physical examination at a reasonable time as requested by the Company for the
purpose of the Company’s obtaining life insurance on the life of the Employee
for the benefit of the Company; provided, however, that the Company shall bear
the costs for such examinations and shall pay all premiums on any life insurance
obtained as a result of such examinations. The Employee further
agrees to submit to drug testing in accordance with the Company's policies and
procedures.
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6.
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Termination.
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(a)
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The Company, at any time, may
terminate this Agreement and the Employee's employment
immediately for
“Cause”. Cause is defined
as:
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(i)
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A material breach of this
Agreement by
the Employee;
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(ii)
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Failure or inability of
the Employee to obtain or maintain any
required licenses or
certificates;
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(iii)
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Willful violation by the Employee of any law, rule or
regulation, including but not limited to any material insurance law or
regulation, which
violation may, as determined by the Company, adversely affect the ability
of the Employee to perform his duties
hereunder or may subject the Company to liability or negative publicity; or
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(iv)
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Conviction or commission of or the entry of a guilty plea or
plea of no contest
to any felony or to any other crime involving moral
turpitude.
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3
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(b)
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The Employee may terminate this
Agreement and his
employment with the Company immediately for “Good Reason,” which shall mean the occurrence
of any of the events described in subsections 6(b)(i), (ii)
or (iii) below
with respect to which
the Employee has notified the Company of the existence thereof within no
more than ninety (90) days of the initial existence thereof
and which is not cured by the Company
within thirty (30) days of the Company’s receipt of written notice from the
Employee of the events alleged to constitute such Good Reason:
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(i)
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A material diminution in the
Employee’s base compensation;
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(ii)
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A material diminution in the
Employee’s authority, duties or
responsibilities;
or
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(iii)
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Any other action or inaction that
constitutes a material breach by the Company of this Agreement (as may be amended
from time to time).
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In addition, the Employee may terminate
this Agreement and his employment with the Company at any time for any other reason or for no reason, but such termination shall not
constitute termination for “Good Reason.”
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(c)
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The Company may also terminate
this Agreement and
the Employee's employment upon the occurrence of one or more
of the following events or reasons, subject to applicable law (or, in the case of subsection
6(c)(i) below, termination of this Agreement and the Employee's employment
will be automatic):
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(i)
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Death of the Employee;
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(ii)
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The Employee is deemed to be disabled
in accordance with the policies of the Company or the law or if the Employee is unable to perform the
essential job functions of the Employee’s position with the Company, with
or without reasonable accommodation, for a period of more than 100
business days in any 120 consecutive business day period. The Employee is entitled to any and all
short term or long term disability programs, like any other employee, in
accordance with the terms of such programs and the
policies of the
Company;
or
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(iii)
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At any time for any other reason or no reason in the sole and absolute
discretion of the
Company.
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4
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7.
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Payments Upon
Termination.
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(a)
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Qualifying
Termination and Severance Pay. If the Company terminates the Employee's employment prior to the expiration of the Term but other than during the CIC Period (as defined
below) for any reason
other than
as specified above in subsection
6(a) for Cause, subsection 6(c)(i) by reason of the death of the Employee, or subsection 6(c)(ii) for disability, or if the
Employee terminates his
employment for Good Reason pursuant to subsection 6(b), the Employee shall receive the following
severance pay (the “Severance Pay”):
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(i)
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In lieu of any further salary
payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, an amount equal to two (2) times Base Salary, payable in equal bi-weekly installments on
the Company’s regular payroll
dates as in effect on
such Termination Date, for twenty-four (24) months following the Termination Date, commencing with the payroll date applicable to the first full payroll period
following the Termination Date; provided, however, that such
payments shall be delayed to the extent required under Section
25 below. The payments shall be subject to normal
payroll deductions.
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(ii)
|
Continuation of the medical, dental and vision insurance coverage in effect on
the Termination Date for a period of eighteen (18) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying the
employee portion, including dependents if applicable, of the premium during
such eighteen (18)
month period, provided that the Employee elects to continue such
insurance coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended (“COBRA”). The Employee is solely responsible for taking the
actions necessary to exercise his rights under COBRA for the insurance
coverage the
Employee has in
effect, including
coverage for
dependents if applicable, on the Termination Date.
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(b)
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Severance
Pay as Liquidated Damages. The parties agree, in the event of
a material
breach of this
Agreement by the Company, following which the Employee
terminates his employment, that actual damages are
speculative and that the amount of the Severance Pay or, if applicable, the CIC Severance
Pay (as defined
below) set forth
herein is liquidated damages and is a reasonable estimate of what damages
would be for a material breach of this
Agreement.
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5
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(c)
|
Conditions
to Severance Pay
,
CIC Severance Pay
or Non-Competition Pay. The Employee agrees and acknowledges that the following
must be satisfied by the Employee before he is entitled to the Severance
Pay or, if applicable, the CIC Severance
Pay provided for
herein or the
Non-Competition
Pay as defined and described in subsection 10(a):
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(i)
|
That the Employee returns any and all equipment, software,
data, property and information of the Company and the Company
Affiliates, including
documents and records or copies thereof relating in any way to any
proprietary information of the Company or any of the Company Affiliates whether prepared by the Employee
or any other person or entity. That the Employee further agrees that he
shall not retain any proprietary information of the Company or any of the Company
Affiliates after the
Termination
Date;
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(ii)
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That the Employee executes a Global Release of Liability, in
a form to be
determined by the Company in its sole discretion, which releases the Company and the Company
Affiliates from liability for any and all
claims, complaints and causes of
action, whether based in law
or equity, arising
from, related
to or associated with
the Employee’s employment by the Company or under this Agreement and that such release has become
effective and non-revocable. That the Employee further acknowledges and
agrees that he has not made and will not make any assignment of
any claim, cause or right of action, or any right of any kind whatsoever,
arising from, related
to or associated with
the employment of the
Employee by the
Company; and
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(iii)
|
That the Employee reaffirms the covenants contained
herein, in writing,
including, but not limited to, the covenants set forth in Section 10.
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Notwithstanding anything in this
Agreement to the contrary,
in any case where the first and last days of the applicable release and nonrevocability periods provided for in the Global Release of
Liability (the “Applicable Release Period”) are in two separate taxable years, any
payments required to be made to the Employee under this Agreement that are treated as deferred
compensation for purposes of Section 409A (as defined below) shall be made in the later taxable year,
as soon as practicable, but
in no event later than thirty (30) days following the conclusion of the
Applicable Release Period.
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(d)
|
Voluntary
Termination by the Employee. The Employee may terminate
his
employment and
this Agreement for
reasons other than those identified in subsection 6(b) upon not less than
sixty (60) days prior written notice.
If the Employee terminates
his employment and
this Agreement
pursuant to this subsection 7(d), he shall be entitled only to the
following:
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6
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(i)
|
Any unpaid salary through the
Termination
Date;
and
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(ii)
|
Payment for any accrued and unused
vacation as of the
Termination Date.
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(e)
|
Qualifying
Change in Control Termination. If, before the expiration of the
Term, the Company terminates
the Employee's
employment within the period commencing six (6) months prior
to and ending twenty-four (24) months following
a Change in Control
(as defined below), such period referred to herein as
the “CIC
Period,” for any reason other than as specified above in subsection 6(a) for Cause, subsection 6(c)(i) for the death of the Employee, or subsection 6
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(i)
|
In lieu of any further salary payments to the
Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, a lump sum cash payment equal to three (3) times the sum of (A) Base Salary
and (B) the average of the annual bonus amounts earned by the
Employee for the three (3) years preceding the year in which the Change in Control occurs; provided, however, that if the
Termination Date occurs prior to January 1, 2010, then (B)
shall instead
be the average of
the annual bonus
amounts earned by the Employee in 2007 and 2008. Such payment shall be made as soon
as practicable (but in no event later than sixty (60) days) following the Termination Date; provided, however, that such
payments shall be delayed to the extent required under Section
25 below;
and
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(ii)
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Continuation of the medical, dental and
vision insurance coverage in effect on
the Employee's
Termination Date for a period of
eighteen (18) months following the Termination Date
with the Company
paying the employer
portion of the premium and the Employee paying the
employee
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7
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portion, including dependents if
applicable, of the
premium during such
eighteen (18)-month period, provided that the
Employee elects to continue such insurance coverage under COBRA. The
Employee is solely
responsible for taking the actions necessary to exercise his rights under
COBRA for the insurance coverage the Employee has in effect, including
coverage for
dependents if
applicable, on the Termination
Date.
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(f)
|
Definition
of Change in Control.
For purposes of this Agreement,
a “Change in Control” shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
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(i)
|
Any one person, or more than one
person acting as a group, acquires ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than 50% of the total fair market
value or total voting power of the stock of the Company;
or
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(ii)
|
Any one person, or more than one person
acting as a group, acquires (or has acquired during the
twelve (12)-month period ending on the date
of the most recent acquisition by such person or persons) ownership of
stock of the Company possessing 35% or more of the total voting
power of the stock of the Company;
or
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(iii)
|
A majority of members of the Board is replaced during any
twelve (12)-month period by directors whose
appointment or election is not endorsed by a majority of the members of
the Board before the date of the
appointment or election;
or
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(iv)
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Any one person or group acquires
(or has acquired
during the immediately preceding twelve (12)-month period ending on the
date of the most recent acquisition) assets of the Company with an
aggregate gross fair market value of not less than forty percent (40%) of
the aggregate gross fair market value of the assets of the
Company immediately prior to such acquisition. For this
purpose, gross fair market value shall mean the fair value of the affected
assets determined without regard to any liabilities associated with such
assets.
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Notwithstanding the foregoing, (1) a “Change in Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated
transactions immediately following which the holders of the common stock of the
Company immediately prior
to such transaction or series of transactions continue to have substantially the
same proportionate ownership in an entity that owns all or substantially all of the
assets of the Company immediately following such transaction or series of
8
transactions, and (2) a “Change in Control” shall not be deemed to have occurred as result of
any secondary offering of
Company common stock to the general public through a registration statement
filed with the Securities and Exchange Commission. The Board shall determine whether a Change in Control has
occurred hereunder in a manner consistent with the provisions of Section
409A.
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(g)
|
No
Duplication of Payments or Benefits. Notwithstanding any
provision of this
Agreement to the
contrary, the
Employee shall not be eligible to receive any payments or
benefits under both subsections 7(a) and 7(e); but rather, to the extent the
conditions set forth in subsection 7(a) and subsection 7(e) are satisfied, the Employee
shall be eligible to receive benefits under only subsection 7(e).
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(h)
|
Golden
Parachute (Section
280G) Excise
Taxes.
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(i)
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Subject to subsection 7(h)(ii) below, if it is determined that any payment or benefit received or
to be received by the Employee, whether pursuant to this
Agreement or otherwise (the “Severance Payments”), is a “parachute payment” within the meaning of
section 280G of the Internal Revenue Code (the
“Code”) (all such payments and benefits,
including the Severance Payments as applicable, but excluding the Gross-Up
Payment (as defined below) being hereinafter called “Total Payments”) that will be subject (in whole or part)
to the tax imposed
under section 4999 of the Code (the
“Excise Tax”), then the Company shall pay to
the Employee on or as soon as practicable
following the day on which the Excise Tax is remitted by the Employee (but not later than the end of
the taxable year following the year in which the Excise Tax is
incurred and subject
to the provisions set forth in Section 25 below, including if applicable,
the Six Month Delay (as defined in such section)) an additional amount (the
“Gross-Up Payment”) such that the net amount
retained by the Employee, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total
Payments.
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(ii)
|
In the event that the amount of
the Total Payments does not exceed 110% of the largest amount that would
result in no portion of the Total Payments being subject to the Excise Tax
(the “Safe Harbor”), the non-cash portion of the Total Payments
shall first be
reduced (if necessary, to zero), and the cash portion of the Total Payments shall thereafter be reduced (if
necessary, to zero) so that the amount of the Total Payments is equal to
the Safe Harbor.
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9
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(iii)
|
For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (A) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel
(“Tax
Counsel”) selected by the Board in existence immediately prior to
the Change in Control, does not constitute a
“parachute
payment” within the
meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (B) the Severance Payments shall be
reduced only to the
extent necessary so that the Total Payments (other than those referred to
in clause (A)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code
or are otherwise not
subject to disallowance as deductions by reason of section 280G of the Code, in the
opinion of Tax Counsel, and (C) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Company's independent
auditor in
accordance with the
principles of sections 280G(d)(3) and (4) of the
Code. If the Employee disputes the Company's
calculations (in whole or in part), the reasonable opinion of Tax Counsel
with respect to the matter in dispute shall
prevail.
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(iv)
|
If the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Employee shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus
that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Employee to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction) plus interest
on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. If
the Excise Tax is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make
an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Employee with respect to
such excess) at the time that the amount of such excess is finally
determined.
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(v)
|
The Employee and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount
of liability for Excise Tax with respect to the Total
Payments. The Company also shall pay to the Employee all legal
fees and expenses incurred by the Employee in connection with any tax
audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder.
Such payments shall be made within sixty (60)
business days after
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10
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delivery of the Employee's written
request for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require (but in no event shall any
such payment be made after the end of the calendar year
following the calendar year in which the expenses were incurred), provided
that no such payment shall be made in respect of fees or expenses incurred
by the Employee after the later of the tenth (10th) anniversary of the
effective date of the Employee's
termination with the Company or the Employee's death and, provided
further, that, upon the Employee’s “separation from
service” (as such
term is defined under Section 409A) with the Company, in no event shall
any additional such payments be made prior to the
date that is six (6) months after the date of the Employee’s “separation from
service” to the
extent such payment delay is required under section 409A(a)(2)(B) of the
Code.
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8.
|
Licensing.
|
The Employee has obtained and
possesses, or will obtain and possess, and will maintain throughout the Term
hereof, all licenses, approvals, permits, and authorization (the “Licenses”)
necessary to perform the Employee’s duties hereunder (if any). Any
costs, attorneys’ fees, investigation fees or other expenses incurred in
connection with obtaining or maintaining such Licenses shall be borne by the
Company, provided that payment of such fees or costs by the Company shall be
made no later than the end of the year following the year in which the expenses
were incurred. The Employee warrants that the Employee is fully
eligible, under all standards and requirements, to obtain, possess, and maintain
such Licenses and that the Employee will commit no acts during the Term hereof
that would jeopardize or eliminate the Employee’s ability to possess or maintain
such Licenses.
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9.
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Rules and
Regulations.
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The Employee shall observe, enforce,
and comply with the policies, philosophies, strategies, rules, and regulations
of the Company, as they may be promulgated and/or modified from time to time,
and shall carry out and perform the orders, directions, and policies of the
Company, as they may be stated and/or amended from time to time, either orally
or in writing. A violation of this Section 9 by the Employee is a
material breach of this Agreement.
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10.
|
Restrictive
Covenants.
|
In consideration of the amounts payable
and benefits provided under Section 4, and, if applicable, Section 7 and
subsection 10(a), the other compensation paid hereunder, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the parties, the parties agree to the following provisions of this Section
10:
11
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(a)
|
Non-Competition. The Employee understands and agrees that the
Company and the
Company Affiliates do business throughout the State of
Nevada and other states. The Employee further understands and agrees
that he is a high ranking officer of the Company and will have access to
confidential and trade secret information and goodwill of the Company and the Company Affiliates that will allow the Employee to unfairly compete with the
Company and the
Company Affiliates justifying this restriction.
If the Employee's
employment is
terminated (by either
the Employee or the Company), whether or not during the
Term, for any reason other than
as specified above in subsection 6(c)(i) by reason of the death of the Employee, or
subsection 6(c)(ii) for disability, then for a period of twenty-four (24)
months commencing on the date of such termination of
employment,
the Employee agrees that, without the written
permission of the Company, he will not engage (whether as owner, partner,
controlling stockholder, controlling investor, employee, director, adviser, consultant, or otherwise)
in any business that is in direct competition with the business being conducted by the Company or
any of the
Company
Affiliates as of the date the Employee terminates
employment, in Nevada
or in any other state in which the
Company is conducting such business (the “Non-Compete Area”) as of the date the Employee terminates
employment; provided
that if the Employee's employment is terminated (x) during the Term by the
Employee for any reason other than (I) as specified above in subsection
6(b) for Good Reason, (II) as specified above
in
subsection
6(c)(i) by reason of death, or (III) as specified above
in subsection
6(c)(ii) by reason of disability, or (y) following the expiration of the Term (by either the Employee or the
Company) for any reason other than as
specified above in
subsection
6(a) by the Company for “Cause,” in subsection 6(c)(i) by reason of
the death of the Employee, or subsection 6(c)(ii) for
disability, then the
Employee shall be entitled to, in lieu of any further salary
payments to the Employee for periods subsequent to such termination of
employment and in
lieu of any severance benefit otherwise payable to the Employee, an amount
(the “Non-Competition Pay”) equal to two (2) times Base Salary, payable in equal bi-weekly
installments on the Company’s regular payroll dates as in
effect on such
termination date, for twenty-four (24) months following
such termination date, commencing with the payroll
date applicable to the first full payroll period following such termination date; provided, however, that such
payments shall be delayed to the extent required under
Section 25 below. The payments
shall be subject to normal payroll deductions. Notwithstanding anything in this
Agreement to the contrary, if the non-competition provision in this subsection 10(a)
is, or at any time
becomes,
nonenforceable, then
the Employee shall not be entitled to any unpaid Non-Competition Pay that would otherwise be due under
this subsection
10(a).
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(b)
|
Non-Solicitation. Without limiting the generality
of the foregoing, the
Employee agrees that
for a period of
twenty-four (24)
months following the
Employee's
termination of employment (for any reason, by either the
Employee or the Employer), he will not, without the prior
written consent of the Company, directly or indirectly solicit or attempt
to solicit, within
the Non-Compete Area, any business from any person or entity that the
Company or any of the
Company Affiliates called upon, solicited, or
conducted business with as of such
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12
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termination date, any persons or entities that
have been customers of the Company or any of the Company Affiliates
or recruit any person
who has been or is an employee of the Company or any of the Company
Affiliates, during
the preceding one
(1)-year period from
such termination date. In addition, the Employee agrees that he shall
not directly or
indirectly solicit or encourage any employee of the Company or any of the Company
Affiliates to go to
work for or with the
Employee for a period
of one
(1)-year following
such termination date.
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(c)
|
In the event the Employee violates subsection 10(a) or 10(b), the applicable period of time during which the respective restriction
applies will automatically be extended for
the period of time from which the Employee began such violation until he
permanently ceases such violation. If any provision of this covenant is invalid in
whole or in part, it will be limited, whether as to time, area covered, or
otherwise as and to the extent required for its validity under the
applicable law and as so limited, will be
enforceable.
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(d)
|
Confidential
Information.
The Employee acknowledges that he has had or
will have access to the confidential information of the Company and the
Company
Affiliates
(including, but not limited to, records regarding sales, price and cost
information, marketing plans, customer names, customer lists, sales techniques,
distribution plans or procedures, and other material relating to the
business conducted by
the Company and the Company Affiliates), proprietary, or trade secret
information (the “Confidential
Information”), and
agrees never to use
the Confidential Information other than for the sole benefit of the
Company and the
Company Affiliates and further agrees to never
disclose such Confidential Information (except as may be required by
regulatory authorities or as may be required by law) to any entity or person that
is not an officer or employee of the Company or a Company Affiliate
at the time of such
disclosure (unless at
such time such Confidential Information is subject to a policy of the
Company or a Company
Affiliate restricting
disclosure to
non-officers), in which case disclosure shall
be limited solely to officers of the Company or the applicable Company
Affiliate at the time
of such disclosure, without the prior written consent of the Company.
The Employee further acknowledges that this covenant to maintain
Confidential Information is necessary to protect the goodwill and
proprietary interests of the Company and the Company
Affiliates and the
restriction against the disclosure of Confidential Information is
reasonable in light
of the consideration and other value the Employee has received or will
receive pursuant to this Agreement and otherwise pursuant to his
employment by the Company.
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(e)
|
From and following the Employee's termination of employment, the Employee agrees to cooperate with the Company and the Company Affiliates
in any litigation,
administrative proceeding, investigation or audit involving any matters
with which the
Employee has
knowledge of from his employment with the Company. The Company shall reimburse
the
Employee for reasonable
expenses,
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13
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|
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including reasonable compensation for services
rendered at his
hourly rate of compensation as of such termination date, incurred in providing such
assistance and approved by the Company. The Company shall reimburse the
Employee for such
expenses incurred in
accordance with the policies and procedures of the Company, but in no event no later than the end of the year
following the year in which the expenses were incurred.
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(f)
|
In the event of a violation of
this Section 10, the Company and the Company
Affiliates shall be
entitled to any form of relief at law or equity, and the parties agree and
acknowledge that injunctive relief is an appropriate, but not exclusive,
remedy to enforce the provisions hereof. The existence of any claim
or cause of action of
the
Employee against the
Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense of the Company’s enforcement of the covenants set
forth in this Section 10. The Employee hereby submits to the
jurisdiction of the
courts of the State of Nevada and federal courts therein for the purposes
of any actions or proceedings instituted by the Company to enforce its
rights under this Agreement, to seek money damages or seek injunctive
relief. The Employee further acknowledges and agrees
(i) that the obligations contained in
Section 10 of this Agreement are necessary to protect the
interests of the Company and the Company
Affiliates,
(ii) that the restrictions contained herein
are fair, do not
unreasonably restrict
the
Employee's further
employment and business opportunities, and are commensurate with the
compensation arrangements set out in this Agreement and (iii) that such compensation arrangements
constitute separate consideration for the obligations set
forth in this Section
10. The covenants contained in Section
10 shall each be construed as an agreement independent of any other
provisions of this Agreement. Both parties intend to make the
covenants of Section 10 binding only to the extent that it may be
lawfully done under
existing applicable laws. If a court of competent
jurisdiction decides any part of any covenant is overly broad, thereby
making the covenant unenforceable, the parties agree that such court shall
substitute a reasonable, judicially enforceable limitation in place of the
offensive part of the covenant and as so modified the covenant shall be as
fully enforceable as set forth herein by the parties themselves in the
modified form.
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(g)
|
The Employee acknowledges that it is possible
that the corporate
structure of the Company could change during the term of this Agreement.
The Employee hereby acknowledges and affirms
that the Company may assign its rights under this Agreement, including but not limited to its
rights to enforce the covenants set forth in subsections 10(a), 10(b) and
10(c), to a
third-party without the approval of or additional consideration to
the
Employee.
The Employee acknowledges and agrees that the
consideration called for herein is good and sufficient consideration for
the Company's right
to assign its rights under this
Agreement.
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14
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(h)
|
Subsections 10(a) through
(g), inclusive, of this Agreement
shall survive either termination of the employment relationship
and/or termination of this Agreement
for the full period set forth in subsections 10(a) through (g),
inclusive.
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11.
|
Work for
Hire.
|
The Employee agrees that any work,
invention, idea or report that he produces or that results from or is suggested
by the work the Employee does on behalf of the Company or any of the Company
Affiliates is “work for hire” (hereinafter referred to as “Work”) and will be
the sole property of the Company. The Employee agrees to sign any
documents, during or after employment that the Company deems necessary to
confirm its ownership of the Work, and the Employee agrees to cooperate with the
Company to allow the Company to take advantage of its ownership of such
Work.
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12.
|
Assignment of
Agreement.
|
The Employee agrees that his services
are unique and personal and that, accordingly, the Employee may not assign his
rights or delegate his duties or obligations under this Agreement. The Company
may assign its rights, duties, and obligations under this Agreement to any
successor to its business. This Agreement shall inure to the benefit
of and be binding upon the Company’s successors and assigns.
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13.
|
Indemnification of the
Employee.
|
The Company shall indemnify the
Employee and hold him harmless for acts or decisions made by him in good faith
while performing services for the Company or any of the Company Affiliates to
the maximum extent allowed by law. The Company shall also use its
reasonable efforts to obtain coverage for him under any insurance policy now in
force or hereinafter obtained during Term covering the officers and directors of
the Company against lawsuits, subject to the business judgment of the
Board. The Company shall pay all expenses, including attorneys’ fees
of an attorney selected and retained by the Company to represent the Employee,
actually and necessarily incurred by the Employee in connection with the defense
of such act, suit, or proceeding and in connection with any related appeal,
including the cost of court settlements, provided that, to the extent required
by Section 409A, any such payment by the Company shall be made no later than the
end of the year following the year in which the expenses were
incurred.
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14.
|
Notices.
|
Any notice, document, or other
communication (hereinafter “Notice”) which either party may be required or may
desire to give to the other party shall be in writing, and any such notice may
be given or delivered personally or by mail or facsimile. Any such
notices given or delivered personally shall be given or delivered by hand to an
officer of the entity to which they are being given or delivered or the
individual, as the case may be, and shall be deemed given or
15
delivered
when so given or delivered by hand. Any such notices given or
delivered by facsimile will be deemed given or delivered upon receipt by the
sender of a successful facsimile transmission to the facsimile number below, and
any such notices given or delivered by mail shall be deemed given or delivered
three (3) days after it is deposited in the U.S. mail, certified or registered
mail, return receipt requested, with all postage and fees prepaid, addressed to
the person or entity in question as follows:
If
to the Employee:
Douglas
D. Dirks
To
the address (or facsimile number, if applicable) on record with the
Company
If
to the Company:
General
Counsel
Employers
Holdings, Inc.
10375
Professional Circle
Reno, Nevada 89521-4802
Fax: (775)
886-1854
or,
in either case, to such other address as either party may have previously
notified the other pursuant to the provisions of this Section 14.
|
15.
|
Severability.
|
In the event that any provision hereof
shall be declared by a court of competent jurisdiction to be void or voidable as
contrary to law or public policy, such declaration shall not affect the
continuing validity or enforceability of any other provisions hereof insofar as
it may be reasonable and practicable to continue to enforce such other provision
in the absence of the provision which shall have been declared to be void and
voidable.
|
16.
|
Remedy for
Breach.
|
Both parties recognize that the
services to be performed by the Employee are special and unique. The
Company will have the right to seek and obtain damages and any available
equitable remedies for the Employee’s breach of this Agreement. The
Employee's remedy for any breach of this Agreement is strictly limited to the
Severance Pay or CIC Severance Pay, as the case may be, called for
herein.
16
|
17.
|
Mitigation of
Damages.
|
The Employee shall not be required to
mitigate damages or the amount of any payment provided under this Agreement by
obtaining other employment or otherwise after the termination of employment
hereunder, and any amounts earned by the Employee, whether from self-employment
or other employment shall not reduce the amount of any Severance Pay or CIC
Severance Pay, as the case may be, called for herein.
|
18.
|
Attorneys' Fees and
Costs.
|
In any claim or dispute between the
parties arising out of or associated with this Agreement or the breach hereof or
otherwise arising out of or associated with the Employee’s employment by the
Company, the prevailing party shall be entitled to recover all reasonable
attorneys' fees, expenses, and costs thereof or associated therewith, provided
that, to the extent required by Section 409A, any such payment by the Company
shall be made no later than the end of the year following the year in which such
fees, expenses and costs were incurred. The term “prevailing party”
means the party obtaining substantially the relief sought via litigation or
through an action in arbitration.
|
19.
|
Integration, Amendment, and
Waiver.
|
This Agreement and such other written
agreements referenced in this Agreement, constitute the entire agreement between
the parties pertaining to the subject matter contained in it except as expressly
provided herein, and supersedes all prior agreements, representations,
assurances, and understandings of the parties, including any prior employment
agreements. No amendment of, addition to, or modification of this
Agreement shall be binding unless executed in writing by the
parties. Any term or provision of this Agreement may be waived in a
signed writing at any time by the party that is entitled to the benefit thereof,
provided, however, that any waiver shall apply only to the specific event or
omission waived and shall not constitute a continuing waiver. Any
term or provision of this Agreement may be amended or supplemented at any time
by a written instrument executed by all the parties hereto.
|
20.
|
Captions.
|
The captions and section headings of
this Agreement are for convenience and reference only, and shall have no effect
on the interpretation or construction of this Agreement.
|
21.
|
Applicable
Law.
|
The substantive laws of the State of
Nevada shall govern the validity, construction, interpretation, performance, and
effect of this Agreement.
17
|
22.
|
Arbitration.
|
Any controversy, cause of action or
claim related to or arising out of or in connection with the Employee’s
employment with the Company, including but not limited to termination of such
employment or under this Agreement, other than an action to enforce the
provisions of Section 10 herein or the breach thereof, shall be settled by
arbitration according to the rules of the American Arbitration Association
applicable to disputes arising in Nevada and under Nevada law. Any
party to the arbitration may enter judgment upon the award rendered by the
arbitrator in any court having jurisdiction thereof. The arbitrator
shall not be entitled to amend or alter the terms of this
Agreement. Notwithstanding this Section 22, the Company shall be
entitled to seek any available equitable remedy for enforcement of provisions of
this Agreement.
|
23.
|
Authorization.
|
The Company and the Employee,
individually and severally, represent and warrant to the other party that it has
the authorization, power and right to deliver, execute and fully perform the
obligations under this Agreement in accordance with its terms. The Employee
represents and warrants to the Company that there is no restriction or
limitation, by reason of this Agreement or otherwise, upon the Employee’s right
or ability to enter into this Agreement and fulfill his obligations under this
Agreement.
|
24.
|
Acknowledgment.
|
The Employee acknowledges that he has
been given a reasonable period of time to study this Agreement before signing
it. The Employee certifies that he has fully read, has received an
explanation of, and completely understands the terms, nature, and effect of this
Agreement. The Employee further acknowledges that he is executing
this Agreement freely, knowingly, and voluntarily and that the Employee’s
execution of this Agreement is not the result of any fraud, duress, mistake, or
undue influence whatsoever. In executing this Agreement, the Employee
does not rely on any inducements, promises, or representations by the Company or
any person other than the terms and conditions of this Agreement.
25. Section 409A.
Notwithstanding
anything to the contrary in this Agreement, the payment of consideration,
compensation, and benefits pursuant to this Agreement shall be interpreted and
administered in a manner intended to avoid the imposition of additional taxes
under section 409A of the Code and the regulations and guidance promulgated
thereunder (“Section 409A”). Notwithstanding any provision to the contrary in
this Agreement or otherwise, no payment or distribution under this Agreement or
otherwise that constitutes an item of “deferred compensation” under Section 409A
and becomes payable by reason of the termination of the Employee’s employment
hereunder shall be made to the Employee unless and until the termination of the
Employee’s employment constitutes a “separation from service” (as such term is
defined in Section 409A).
18
In
addition, no such payment or distribution of deferred compensation shall be made
to the Employee prior to the earlier of (a) the expiration of the six (6) month
period (the “Six Month Period”) measured from the date of the Employee’s
“separation from service” (as such term is defined in Section 409A), and (b) the
date of the Employee’s death, if the Employee is deemed at the time of such
separation from service to be a “specified employee” within the meaning of that
term under Section 409A (the “Six Month Delay”) and if such delayed commencement
is otherwise required to avoid an “additional tax” under section 409A(a)(1)(B)
of the Code. All payments and benefits that are delayed pursuant to the
immediately preceding sentence shall be paid to the Employee in a lump sum upon
expiration of such six (6) month period (or if earlier, upon the Employee’s
death).
Notwithstanding
the foregoing provisions, to the extent permitted under Section 409A, any
separate payment or benefit under this Agreement or otherwise shall not be
“deferred compensation” subject to Section 409A and the Six Month Delay to the
extent provided in the exceptions in Treasury Regulation section 1.409A-1(b)(4)
and (b)(9) and any other applicable exception or provision under Section
409A. Further, each individual installment payment that becomes
payable under this Agreement and each payment of the Severance Pay or if
applicable, the CIC Severance Pay or the Non-Competition Pay pursuant to
subsection 10(a) shall be a “separate payment” under Section
409A. Specifically, to the extent the provisions of Treasury
Regulation section 1.409A-1(b)(9) are applicable to the Severance Pay or if
applicable, the CIC Severance Pay or the Non-Competition Pay pursuant to
subsection 10(a), the portion of such pay set forth in respectively, subsection
7(a)(i), subsection 7(e)(i) or subsection 10(a) above that is less than the
limit prescribed under Treasury Regulation section 1.409A-1(b)(9)(iii)(A) (or
any successor provision) (the “Delayed Amount”) shall be payable to the Employee
in the manner prescribed in subsection 7(a)(i), subsection 7(e)(i) or subsection
10(a), as applicable, without regard to the Six Month
Delay. Following the Six Month Delay, (1) to the extent applicable,
the Employee shall receive a lump sum cash payment equal to the Severance Pay,
CIC Severance Pay or the Non-Competition Pay pursuant to subsection 10(a), as
applicable, he otherwise would have received during the Six Month Period (absent
the Six Month Delay) less the Delayed Amount and (2) the Employee shall receive
the remainder of his Severance Pay, CIC Severance Pay or the Non-Competition Pay
pursuant to subsection 10(a), as applicable, in the manner prescribed by
subsection 7(a), subsection 7(e) or subsection 10(a), as
applicable.
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date.
|
COMPANY:
|
EMPLOYEE:
|
|||||
|
By:
|
By:
|
|||||
|
/s/
Robert J. Kolesar
|
|
/s/
Douglas D. Dirks
|
|
|||
|
Name:
Robert J. Kolesar,
Chairman
of the Board
|
Name:
Douglas D.
Dirks
|
|||||
19
Appendix
A
Perquisites
1.
Automobile Allowance in the amount of $1,300.00 per month
2.
Annual Executive Physical Examination as a part of the Company’s executive
wellness program
3.
Life Insurance as a part of the Company’s group life insurance program in an
amount equal to three (3) times the Employee’s Base Salary
20
Exhibit
10.2
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this “Agreement”) by and between Employers Holdings, Inc.,
a Nevada corporation (the “Company”) and Ann W. Nelson (the “Employee”) is
entered into as of the 17th day of December, 2008, effective as of January
1, 2009 (the “Effective Date”).
RECITALS
A. The Employee has knowledge and
experience applicable to the position of Executive Vice President, Corporate and
Public Affairs.
B. The Company desires to continue to
employ the Employee to perform certain services for the Company, its parent, if
any, and their respective subsidiaries and affiliates (the “Company
Affiliates”), as may be required or requested of the Employee in her position as
Executive Vice President, Corporate and Public Affairs, and the Employee desires
to continue to be so employed by the Company and to perform such services for
the Company and the Company Affiliates.
In
consideration of the premises above and mutual covenants and promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are mutually acknowledged, the parties agree as follows:
TERMS
|
1.
|
Employment.
|
The Company agrees to continue to
employ the Employee and the Employee accepts such continued employment upon the
terms and conditions specified herein. The Employee agrees to continue to devote
substantially all of her time and effort during working hours in the performance
of the duties called for herein and agrees that any other non-employment related
duties (i.e., industry related groups, service on boards, etc.) will not be
allowed to materially interfere with the performance of the duties called for
herein.
|
2.
|
Term.
|
The term of this Agreement shall
commence on the Effective Date, and continue for three (3) years (the “Initial
Term”), until December 31, 2011, and, thereafter, shall automatically renew for
successive two (2) year periods (each, an “Additional Term;” the Initial Term
and any Additional Terms, collectively the “Term”), unless either party gives
written notice to the other no later than six (6) months prior to expiration of
the Initial Term or any Additional Term, as applicable, of an intent not to
renew this Agreement; subject, however to earlier termination of the Employee's
employment with the Company in accordance with this Agreement (the “Termination
Date”). The expiration of this Agreement at the end of the Term, in
and of itself, shall not constitute, nor be construed or interpreted as, a
termination of the Employee's employment that would make her eligible for
benefits or payments under Section 7 below. This Agreement shall
expire upon the termination of the Employee's employment for any reason, subject
to the provisions of subsection 10(h) below.
1
|
3.
|
Services and
Duties.
|
The Employee shall continue to serve as
Executive Vice President, Corporate and Public Affairs and shall perform such
duties as may be assigned by the Chief Executive Officer from time to
time. At the request of the Board of Directors of the Company (the
“Board”), the Employee shall also serve as a director of the Company and/or one
or more of the Company Affiliates at no additional compensation. The
Employee agrees that upon the termination of her employment with the Company,
she shall resign from the Board and any and all boards of the Company Affiliates
effective on the Termination Date.
|
4.
|
Compensation and
Benefits.
|
|
(a)
|
During the term of this Agreement,
the Company shall pay to the Employee an annual salary of not less than
$235,000 (“Base
Salary”), which
amount shall be paid
according to the Company’s regular payroll practices. The
Company agrees to review the Base Salary on an annual basis and adjust the
salary to comply with the executive compensation policy in effect at the
time of the review. Any increase made to the annual salary
will establish the new Base Salary for the Employee. All
payments made pursuant to this Agreement, including but not limited to
this subsection 4(a), shall be reduced by and subject to withholding for
all federal, state, and local taxes and any other
withholding required by applicable laws and
regulations.
|
|
|
(b)
|
The Company will provide an annual
incentive (the “Annual Incentive”) to the Employee during the Term
based on the Employee’s and the Company’s performance, as determined by the Board (or a
committee thereof) in its sole discretion. In this regard, the
Board (or a committee thereof) shall set an annual incentive target of not
less than forty-five percent (45%) of Base Salary, and the Annual
Incentive shall be paid in accordance with the
Company’s regular practice for its senior
officers, as in effect from time to time. To the extent not duplicative of
the specific benefits provided herein, the Employee shall be eligible to
participate in all incentive compensation, retirement, supplemental
retirement, and deferred compensation plans, policies and arrangements
that are provided generally to other senior officers of the Company at a
level (in terms of the amount and types of benefits and incentive
compensation that the Employee has the opportunity to
receive and the terms thereof) determined in the sole discretion of the
Board (or a committee thereof).
|
|
|
(c)
|
The Employee agrees that the
amounts payable and benefits provided under this Agreement, including but
not limited to any
amounts payable or benefits provided under this Section 4 and Section 7
constitute good, valuable and separate consideration for the
non-competition, assignment and release of liability
provisions
|
2
|
contained herein. The Employee
acknowledges that she
is aware of the effect of the non-competition, assignment and release of
liability provisions contained herein and agrees that the amounts payable
and benefits provided under this Agreement, including but not limited to
the amounts payable and benefits provided under
this Section 4 and Section 7, if any, constitute sufficient consideration
for her agreement to these provisions.
|
||
|
(d)
|
In addition to the compensation
called for in this Agreement, the Employee shall be entitled to
receive any and all
employee benefits and perquisites generally provided from time to time to
other similarly situated officers of the Company as well as the benefits
and perquisites listed on “Exhibit A” attached hereto and incorporated
herein by this reference.
|
|
5.
|
Insurance.
|
The Employee agrees to submit to a
physical examination at a reasonable time as requested by the Company for the
purpose of the Company’s obtaining life insurance on the life of the Employee
for the benefit of the Company; provided, however, that the Company shall bear
the costs for such examinations and shall pay all premiums on any life insurance
obtained as a result of such examinations. The Employee further
agrees to submit to drug testing in accordance with the Company's policies and
procedures.
|
6.
|
Termination.
|
|
(a)
|
The Company, at any time, may
terminate this Agreement and the Employee's employment immediately for
“Cause”. Cause is defined
as:
|
||
|
(i)
|
A material breach of this
Agreement by the Employee;
|
||
|
(ii)
|
Failure or inability of the Employee to
obtain or maintain any required licenses or
certificates;
|
||
|
(iii)
|
Willful violation by the Employee
of any law, rule or regulation, including but not limited to any material
insurance law or regulation, which violation may, as determined by the
Company, adversely affect the ability of the Employee to perform her
duties hereunder or may subject the Company to liability or negative
publicity; or
|
||
|
(iv)
|
Conviction or commission of or the
entry of a guilty plea or plea of no contest to any felony
or to any other crime involving moral
turpitude.
|
||
3
|
(b)
|
The Employee may terminate this
Agreement and her employment with the Company immediately for
“Good
Reason,” which shall
mean the occurrence of any of the following events with respect to which the
Employee has notified the Company of the existence thereof within no more
than ninety (90) days of the initial existence thereof and which is not
cured by the Company within thirty (30) days of the Company’s receipt of written notice from the Employee of
the events alleged to constitute such Good
Reason:
|
||
|
(i)
|
A material diminution in the
Employee’s base
compensation;
|
||
|
(ii)
|
A material diminution in the
Employee’s authority, duties or
responsibilities; or
|
||
|
(iii)
|
Any other action or inaction that
constitutes a material breach by the Company of this Agreement (as may be
amended from time to time).
|
||
|
(c)
|
The Company may also terminate
this Agreement and the Employee's employment upon the occurrence of
one or more of the
following events or reasons, subject to applicable law (or, in the case of
subsection 6(c)(i) below, termination of this Agreement and the Employee's
employment will be automatic):
|
||
|
(i)
|
Death of the
Employee;
|
||
|
(ii)
|
The Employee is deemed to be disabled in
accordance with the policies of the Company or the law or if the Employee
is unable to perform the essential job functions of the
Employee’s position with the Company, with
or without reasonable accommodation, for a period of more than 100 business days in
any 120 consecutive business day period. The Employee is entitled to any
and all short term or long term disability programs, like any other
employee, in accordance with the terms of such programs and the policies
of the Company;
or
|
||
|
(iii)
|
At any time for any other reason
or no reason in the sole and absolute discretion of the
Company.
|
||
|
7.
|
Payments Upon
Termination.
|
|
(a)
|
Qualifying
Termination and Severance Pay. If the Company
terminates the Employee's employment prior to the expiration
of the Term but other than during the CIC Period (as defined below) for
any reason other than as specified above
in
|
4
|
subsection 6(a) for Cause,
subsection 6(c)(i) by reason of the death of the Employee, or
subsection 6(c)(ii)
for disability, or if the Employee terminates her employment for Good
Reason pursuant to subsection 6(b), the Employee shall receive the
following severance pay (the “Severance Pay”):
|
|||
|
(i)
|
In lieu of any further salary
payments to the Employee for periods subsequent to
the Termination Date and in lieu of any severance benefit otherwise
payable to the Employee, an amount equal to one and one half (1 ½) times Base Salary, payable in
equal bi-weekly installments on the Company’s regular payroll dates as in effect on such
Termination Date, for eighteen (18) months following the
Termination Date, commencing with the payroll date applicable
to the first full payroll period following the Termination
Date; provided,
however, that such payments shall be delayed to the extent
required under Section 25 below. The payments shall be subject
to normal payroll deductions.
|
||
|
(ii)
|
Continuation of the medical,
dental and vision insurance coverage in effect on the Termination Date for
a period of eighteen
(18) months following the Termination Date with the Company paying the
employer portion of the premium and the Employee paying the employee
portion, including dependents if applicable, of the premium during such
eighteen (18) month period, provided that the Employee elects to
continue such insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended (“COBRA”). The Employee is solely
responsible for taking the actions necessary to exercise her rights under
COBRA for the insurance coverage the Employee
has in effect, including coverage for dependents if applicable, on the
Termination Date.
|
||
|
(b)
|
Severance
Pay as Liquidated Damages. The parties agree, in
the event of a material breach of this Agreement by the Company with respect to which the
Employee has given notice and that is not cured, in either case, in
accordance with subsection 6(b), following which the Employee terminates
her employment for Good Reason, that actual damages are speculative and
that the amount of the Severance Pay or, if
applicable, the CIC Severance Pay (as defined below) set forth herein is
liquidated damages and is a reasonable estimate of what damages would be
for a material breach of this Agreement.
|
||
|
(c)
|
Conditions
to Severance Pay
or CIC Severance Pay. The Employee agrees
and acknowledges that the following must be satisfied by the Employee
before she is entitled to the Severance Pay or, if applicable, the CIC
Severance Pay provided for
herein:
|
||
5
|
(i)
|
That the Employee returns any and all equipment, software,
data, property and information of the Company and the Company
Affiliates, including
documents and records or copies thereof relating in any way to any
proprietary information of the Company or any of the Company
Affiliates whether prepared by the Employee
or any other person or entity. That the Employee further agrees that
she shall not retain any
proprietary information of the Company or any of the Company
Affiliates after the
Termination
Date;
|
||
|
(ii)
|
That the Employee executes a Global Release of Liability, in
a form to be
determined by the Company in its sole discretion, which releases the Company and the Company
Affiliates from liability for any and all
claims, complaints and causes of
action, whether based in law or
equity, arising
from, related
to or associated with
the Employee’s employment by the Company or under this Agreement and that such release has become
effective and non-revocable. That the Employee further acknowledges and
agrees that she has not made and
will not make any
assignment of any claim, cause or right of action, or any right of any
kind whatsoever, arising from, related to or associated with the employment
of the Employee by the Company;
and
|
||
|
(iii)
|
That the Employee reaffirms the covenants contained
herein, in writing,
including, but not limited to, the covenants set forth in Section 10.
|
||
|
Notwithstanding anything in this
Agreement to the contrary, in any case where the first and
last days of the applicable release and nonrevocability
periods provided for in the Global Release of
Liability (the
“Applicable Release
Period”) are in two separate taxable
years, any payments required to be made to the Employee under this Agreement that are treated as deferred
compensation for purposes of Section 409A (as defined below) shall be made in the later taxable
year, as soon as
practicable, but in no event later than thirty (30) days following the conclusion of the
Applicable Release Period.
|
|||
|
(d)
|
Voluntary
Termination by the Employee. The Employee may terminate
her employment and this Agreement for reasons other
than those identified in subsection 6(b) upon not less than
sixty (60) days prior written notice.
If the Employee terminates
her employment and this Agreement pursuant to this
subsection
7(d), she shall be entitled only to the
following:
|
||
|
(i)
|
Any unpaid salary through the
Termination
Date;
and
|
||
|
(ii)
|
Payment for any accrued and unused
vacation as of the
Termination Date.
|
||
6
|
(e)
|
Qualifying
Change in Control Termination. If, before the expiration of the
Term, the Company terminates the Employee's
employment within the period commencing six (6) months prior
to and ending eighteen (18) months following a Change in
Control (as defined
below), such period referred to herein as
the “CIC
Period,” for any reason other than as specified above in subsection
6(a) for Cause, subsection 6(c)(i) for the death of the Employee, or subsection 6(c)(ii) for disability, or if the
Employee terminates her employment and this Agreement for Good Reason pursuant to subsection 6(b), the Employee shall receive the severance
pay set forth in
subsections (i) and (ii) below (the “CIC Severance Pay”), provided that if the
Employee’s employment is
terminated during the
six (6) month period
prior to a Change in
Control, the Employee
shall be
entitled to CIC
Severance Pay only if such termination (x) was by the Company other than for Cause but
at the request or direction of
any person that has entered into an agreement
with the Company the consummation of which would constitute a Change in
Control, (y) was by the Employee for Good Reason and the circumstance or event
that constitutes Good
Reason occurred at the request or direction of such
person or (z) was by the Company without Cause and
the Employee reasonably demonstrates that such termination
was otherwise in
connection with or in anticipation of a Change in Control; and if the Employee is not
entitled to CIC Severance Pay hereunder, then the Employee's termination of employment will not be deemed to
have occurred during the CIC Period for purposes of subsection 7(a):
|
||
|
(i)
|
In lieu of any further salary
payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, a lump sum cash payment equal to two (2) times the sum of (A) Base Salary and (B) the
average of the
annual bonus amounts
earned by the Employee for the three (3) years preceding the year in which the Change in Control occurs; provided, however, that if the
Termination Date occurs prior to January 1, 2010, then (B) shall instead be the average of the annual bonus
amounts earned by the Employee in 2007 and 2008. Such payment shall be made as soon
as practicable (but in no event later than sixty (60) days) following the Termination Date; provided, however, that
such payments shall
be delayed to the extent required under Section 25 below; and
|
||
|
(ii)
|
Continuation of the medical, dental and
vision insurance coverage in effect on
the Employee's
Termination Date for a period of
eighteen (18) months following the Termination Date with the Company paying the
employer portion of the premium and the Employee paying the employee
portion, including dependents if applicable, of the premium during
such eighteen
(18)-month period, provided that the
Employee elects to continue such insurance coverage under COBRA.
The Employee is solely responsible for taking the actions necessary to
exercise her rights
under
|
||
7
|
COBRA for the insurance coverage
the Employee has in effect, including coverage for dependents if applicable, on the
Termination
Date.
|
||||
|
(f)
|
Definition
of Change in Control.
For purposes of this Agreement,
a “Change in Control” shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
|
|||
|
(i)
|
Any one person, or more than one
person acting as a
group, acquires ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than 50% of the total fair market
value or total voting power of the stock of the Company;
or
|
|||
|
(ii)
|
Any one person, or more than one person acting as a
group, acquires (or has acquired during the twelve (12)-month period ending on the date
of the most recent acquisition by such person or persons) ownership of
stock of the Company possessing 35% or more of the total
voting power of the
stock of the
Company;
or
|
|||
|
(iii)
|
A majority of members of the
Board is replaced during any
twelve (12)-month period by directors whose
appointment or election is not endorsed by a majority of the members of
the Board before the date of the
appointment or
election;
or
|
|||
|
(iv)
|
Any one person or group acquires (or has
acquired during the immediately preceding twelve (12)-month period ending
on the date of the most recent acquisition) assets of the Company with an
aggregate gross fair market value of not less than forty percent (40%)
of the aggregate gross fair market value of the assets of the Company
immediately prior to such acquisition. For this purpose, gross
fair market value shall mean the fair value of the affected assets
determined without regard to any liabilities associated
with such assets.
|
|||
|
Notwithstanding the foregoing, (1)
a “Change in Control” shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the holders of the common
stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in an entity that owns all or substantially all of
the assets of the Company immediately following such
transaction or series of transactions, and (2) a “Change in Control” shall not be deemed to have occurred as
result of any
secondary offering of Company common stock to the general public through a
registration statement filed with the Securities and Exchange
Commission. The
Board
|
||||
8
|
shall determine whether a Change
in Control has occurred hereunder in a manner consistent with the
provisions of Section 409A.
|
||||
|
(g)
|
No
Duplication of Payments or Benefits. Notwithstanding any
provision of this Agreement to the contrary, the Employee shall not be eligible
to receive any payments or benefits under both subsections 7(a) and 7(e); but rather, to the extent the
conditions set forth in subsection 7(a) and subsection 7(e) are satisfied, the Employee shall be eligible to
receive benefits under only subsection 7(e).
|
|||
|
(h)
|
Golden
Parachute (Section
280G) Excise
Taxes.
|
|||
|
(i)
|
Subject to subsection 7(h)(ii) below, if it is determined that any payment or benefit received or
to be received by the Employee, whether pursuant to this
Agreement or otherwise (the “Severance Payments”), is a “parachute payment” within the meaning of
section 280G of the Internal Revenue Code (the
“Code”) (all such payments and benefits,
including the Severance Payments as applicable, but excluding the Gross-Up
Payment (as defined below) being hereinafter called
“Total Payments”) that will be subject (in whole or part)
to the tax imposed
under section 4999 of the Code (the
“Excise Tax”), then the Company shall pay to
the Employee on or as soon as practicable
following the day on which the Excise Tax is remitted by the Employee (but not later than the end of
the taxable year following the year in which the Excise Tax is
incurred and subject
to the provisions set forth in Section 25 below, including if applicable,
the Six Month Delay (as defined in such section)) an additional amount (the
“Gross-Up Payment”) such that the net amount
retained by the Employee, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total
Payments.
|
|||
|
(ii)
|
In the event that the amount of
the Total Payments does not exceed 110% of the largest amount that would
result in no portion of the Total Payments being subject
to the Excise Tax (the “Safe Harbor”), the non-cash portion of the Total Payments
shall first be
reduced (if necessary, to zero), and the cash portion of the Total Payments shall thereafter be reduced (if
necessary, to zero)
so that the amount of the Total Payments is equal to the Safe
Harbor.
|
|||
|
(iii)
|
For purposes of determining
whether any of the Total Payments will be subject to the Excise Tax and
the amount of such Excise Tax, (A) no portion of the Total Payments
shall be taken into
account which, in the opinion of tax counsel (“Tax
Counsel”) selected by the Board in existence immediately prior to
the Change in Control, does not constitute
a
|
|||
9
|
“parachute payment” within the meaning of section
280G(b)(2) of the
Code, including by
reason of section 280G(b)(4)(A) of the Code, (B) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments (other
than those referred to in clause (A)) in their entirety constitute
reasonable compensation for services actually rendered within the
meaning of section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as deductions by reason of
section 280G of the Code, in the
opinion of Tax Counsel, and (C) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Company's independent
auditor in
accordance with the
principles of sections 280G(d)(3) and (4) of the
Code. If the Employee disputes the Company's
calculations (in whole or in part), the reasonable
opinion of Tax Counsel with respect to the matter in dispute shall
prevail.
|
|||
|
(iv)
|
If the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Employee shall repay to the Company, at
the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income
and employment taxes imposed on the Gross-Up Payment being repaid by the
Employee to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income or employment tax
deduction) plus interest on the amount of
such repayment at 120% of the rate provided in section 1274(b)(2)(B) of
the Code. If the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the Employee
with respect to such excess) at the
time that the amount of such excess is finally
determined.
|
||
|
(v)
|
The Employee and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the
existence or amount
of liability for Excise Tax with respect to the Total
Payments. The Company also shall pay to the Employee all legal
fees and expenses incurred by the Employee in connection with any tax
audit or proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be
made within sixty (60) business days after delivery of the Employee's
written request for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably
may require (but in no event shall any such payment be made after the
end
|
||
10
|
of the calendar year following the
calendar year in which the expenses were incurred), provided that no such
payment shall be made in respect of fees or expenses incurred by the
Employee after the later of the tenth (10th) anniversary of the effective
date of the Employee's termination with the Company or the Employee's
death and, provided further, that, upon the Employee’s “separation from
service” (as such term is defined under
Section 409A) with the Company, in no event shall any additional such
payments be made prior to the date that is six (6) months after the date
of the Employee’s “separation from
service” to the
extent such payment delay is required under section 409A(a)(2)(B)
of the Code.
|
|
8.
|
Licensing.
|
The Employee has obtained and
possesses, or will obtain and possess, and will maintain throughout the Term
hereof, all licenses, approvals, permits, and authorization (the “Licenses”)
necessary to perform the Employee’s duties hereunder (if any). Any
costs, attorneys’ fees, investigation fees or other expenses incurred in
connection with obtaining or maintaining such Licenses shall be borne by the
Company, provided that payment of such fees or costs by the Company shall be
made no later than the end of the year following the year in which the expenses
were incurred. The Employee warrants that the Employee is fully
eligible, under all standards and requirements, to obtain, possess, and maintain
such Licenses and that the Employee will commit no acts during the Term hereof
that would jeopardize or eliminate the Employee’s ability to possess or maintain
such Licenses.
|
9.
|
Rules and
Regulations.
|
The Employee shall observe, enforce,
and comply with the policies, philosophies, strategies, rules, and regulations
of the Company, as they may be promulgated and/or modified from time to time,
and shall carry out and perform the orders, directions, and policies of the
Company, as they may be stated and/or amended from time to time, either orally
or in writing. A violation of this Section 9 by the Employee is a
material breach of this Agreement.
|
10.
|
Restrictive
Covenants.
|
In consideration of the amounts payable
and benefits provided under Section 4, and, if applicable, Section 7 and
subsection 10(a), the other compensation paid hereunder, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the parties, the parties agree to the following provisions of this Section
10:
|
(a)
|
Non-Competition. The Employee understands and agrees that the
Company and the
Company Affiliates do
business throughout the State of Nevada and other states. The Employee further understands and agrees
that she is a high ranking officer of
the Company and will
have access to confidential and trade secret information and goodwill of the Company and the Company Affiliates
that
will
|
11
|
allow the Employee to unfairly compete with the
Company and the
Company Affiliates justifying this restriction.
If the Employee's
employment is
terminated (by either
the Employee or the Company), during the Term, for any reason other than
as specified above in subsection 6(c)(i) by reason of the death of the Employee, or
subsection 6(c)(ii) for disability, then for a period of eighteen (18) months commencing on the Termi
nation Date, the Employee agrees that, without the written
permission of the Company, she will not engage (whether as
owner, partner, controlling stockholder, controlling investor, employee,
adviser, consultant,
or otherwise) in any business that is in direct competition with the
business being conducted by the Company or
any of the
Company
Affiliates as of the Termination
Date, in Nevada
or in any other state in which the
Company is conducting such business (the “Non-Compete Area”) as of the Termination Date.
|
||
|
(b)
|
Non-Solicitation. Without limiting the generality
of the foregoing, the
Employee agrees that
for a period of eighteen (18) months following the Employee's termination of
employment (for any
reason, by either the
Employee or the Employer), she will not, without the prior
written consent of the Company, directly or indirectly solicit or attempt
to solicit, within the Non-Compete Area, any business from any person or
entity that the Company or any of the Company Affiliates
called upon,
solicited, or conducted business with as of such termination date, any persons or entities that
have been customers of the Company or any of the Company Affiliates
or recruit any person
who has been or is an employee of the Company or any of the Company
Affiliates, during
the preceding one
(1)-year period from
such termination date. In addition, the Employee agrees that she shall not directly or
indirectly solicit or encourage any employee of the Company or any of the Company Affiliates to go to work for or with
the
Employee for a period
of one
(1)-year following
such termination date.
|
|
|
(c)
|
In the event the Employee violates subsection 10(a) or 10(b), the applicable period of time during which the respecti
ve restriction applies will automatically be extended for
the period of time from which the Employee began such violation until
she permanently ceases such
violation. If any provision of this covenant
is invalid in whole or in part, it will be limited, whether as
to time, area
covered, or otherwise as and to the extent required for its validity under
the applicable law and as so limited, will be
enforceable.
|
|
|
(d)
|
Confidential
Information.
The
Employee acknowledges
that she has had or will have access to
the confidential information of the Company and the
Company
Affiliates
(including, but not limited to, records regarding sales, price and cost
information, marketing plans, customer names, customer lists, sales
techniques, distribution plans or procedures, and other material relating to the
business conducted by
the Company and the Company Affiliates), proprietary, or trade secret
information (the “Confidential
Information”), and
agrees never to use the Confidential Information other than for the sole
benefit of the Company and the
|
|
12
|
Company Affiliates and further agrees to never
disclose such Confidential Information (except as may be required by
regulatory authorities or as may be required by law) to any entity or
person that is not an officer or employee of the Company or a Company Affiliate
at the time of such
disclosure (unless at
such time such Confidential Information is subject to a policy of the
Company or a Company
Affiliate restricting
disclosure to non-officers), in which case disclosure shall
be limited solely to
officers of the
Company or the
applicable Company Affiliate at the time of such disclosure,
without the prior written consent of the Company. The Employee further acknowledges that this
covenant to maintain Confidential Information is necessary to
protect the goodwill
and proprietary interests of the Company and the Company
Affiliates and the
restriction against the disclosure of Confidential Information is
reasonable in light of the consideration and other value the Employee has
received or will receive pursuant to this
Agreement and
otherwise pursuant to her employment by the
Company.
|
||
|
(e)
|
From and following the Employee's termination of employment, the Employee agrees to cooperate with the
Company and the
Company Affiliates in
any litigation, administrative proceeding,
investigation or audit involving any matters with which the Employee has knowledge of from
her employment with the Company.
The Company shall reimburse
the
Employee for
reasonable expenses, including reasonable compensation for
services rendered at her hourly rate of compensation
as of such termination date, incurred in providing such
assistance and approved by the Company. The Company shall reimburse the
Employee for such expenses incurred in accordance with the policies
and procedures of the
Company, but in no event no later than the end of the year
following the year in which the expenses were incurred.
|
|
|
(f)
|
In the event of a violation of
this Section 10, the Company and the Company
Affiliates shall be
entitled to any form of relief at law or equity, and the
parties agree and acknowledge that injunctive relief is an appropriate,
but not exclusive, remedy to enforce the provisions hereof. The existence of any claim or
cause of action of the Employee against the Company, whether
predicated on this
Agreement or otherwise, shall not constitute a defense of the
Company’s enforcement of the covenants set
forth in this Section 10. The Employee hereby submits to the
jurisdiction of the courts of the State of Nevada and federal courts
therein for the
purposes of any actions or proceedings instituted by the Company to
enforce its rights under this Agreement, to seek money damages or seek
injunctive relief. The Employee further acknowledges and agrees
(i) that the obligations contained in
Section 10 of this
Agreement are
necessary to protect the interests of the Company and the Company
Affiliates,
(ii) that the restrictions contained herein
are fair, do not
unreasonably restrict the Employee's further employment and business
opportunities, and
are commensurate with the compensation arrangements set out in this
Agreement and
(iii) that such compensation arrangements
constitute separate consideration for the obligations set forth in this
Section 10.
The covenants contained in Section
10 shall each
be
|
13
|
construed as an agreement independent of any other
provisions of this Agreement. Both parties intend to make the
covenants of Section 10 binding only to the extent that it may be lawfully
done under existing applicable laws. If a court of competent jurisdiction decides any part of
any covenant is overly broad, thereby making the covenant unenforceable,
the parties agree that such court shall substitute a reasonable,
judicially enforceable limitation in place of the offensive part of the
covenant and as so modified the covenant
shall be as fully enforceable as set forth herein by the parties
themselves in the modified form.
|
||
|
(g)
|
The Employee acknowledges that it is possible
that the corporate structure of the Company could change during the term
of this Agreement.
The Employee hereby acknowledges and affirms
that the Company may assign its rights under this Agreement, including but not limited to its
rights to enforce the covenants set forth in subsections 10(a), 10(b) and
10(c), to a
third-party without
the approval of or additional consideration to the Employee. The Employee acknowledges and agrees that the
consideration called for herein is good and sufficient consideration for
the Company's right to assign its rights under this
Agreement.
|
|
|
(h)
|
Subsections 10(a) through
(g), inclusive, of this Agreement
shall survive either termination of the employment relationship
and/or termination of this Agreement
for the full period set forth in subsections 10(a) through
(g),
inclusive.
|
|
11.
|
Work for
Hire.
|
The Employee agrees that any work,
invention, idea or report that she produces or that results from or is suggested
by the work the Employee does on behalf of the Company or any of the Company
Affiliates is “work for hire” (hereinafter referred to as “Work”) and will be
the sole property of the Company. The Employee agrees to sign any
documents, during or after employment that the Company deems necessary to
confirm its ownership of the Work, and the Employee agrees to cooperate with the
Company to allow the Company to take advantage of its ownership of such
Work.
|
12.
|
Assignment of
Agreement.
|
The Employee agrees that her services
are unique and personal and that, accordingly, the Employee may not assign her
rights or delegate her duties or obligations under this Agreement. The Company
may assign its rights, duties, and obligations under this Agreement to any
successor to its business. This Agreement shall inure to the benefit
of and be binding upon the Company’s successors and assigns.
14
|
13.
|
Indemnification of the
Employee.
|
The Company shall indemnify the
Employee and hold her harmless for acts or decisions made by her in good faith
while performing services for the Company or any of the Company Affiliates to
the maximum extent allowed by law. The Company shall also use its
reasonable efforts to obtain coverage for her under any insurance policy now in
force or hereinafter obtained during Term covering the officers and directors of
the Company against lawsuits, subject to the business judgment of the
Board. The Company shall pay all expenses, including attorneys’ fees
of an attorney selected and retained by the Company to represent the Employee,
actually and necessarily incurred by the Employee in connection with the defense
of such act, suit, or proceeding and in connection with any related appeal,
including the cost of court settlements, provided that, to the extent required
by Section 409A, any such payment by the Company shall be made no later than the
end of the year following the year in which the expenses were
incurred.
|
14.
|
Notices.
|
Any notice, document, or other
communication (hereinafter “Notice”) which either party may be required or may
desire to give to the other party shall be in writing, and any such notice may
be given or delivered personally or by mail or facsimile. Any such
notices given or delivered personally shall be given or delivered by hand to an
officer of the entity to which they are being given or delivered or the
individual, as the case may be, and shall be deemed given or delivered when so
given or delivered by hand. Any such notices given or delivered by
facsimile will be deemed given or delivered upon receipt by the sender of a
successful facsimile transmission to the facsimile number below, and any such
notices given or delivered by mail shall be deemed given or delivered three (3)
days after it is deposited in the U.S. mail, certified or registered mail,
return receipt requested, with all postage and fees prepaid, addressed to the
person or entity in question as follows:
If
to the Employee:
Ann
W. Nelson
To
the address (or facsimile number, if applicable) on record with the
Company
If
to the Company:
Chief
Executive Officer
Employers
Holdings, Inc.
10375
Professional Circle
Reno, Nevada 89521-4802
Fax: (775)
886-5499
15
or,
in either case, to such other address as either party may have previously
notified the other pursuant to the provisions of this Section 14.
|
15.
|
Severability.
|
In the event that any provision hereof
shall be declared by a court of competent jurisdiction to be void or voidable as
contrary to law or public policy, such declaration shall not affect the
continuing validity or enforceability of any other provisions hereof insofar as
it may be reasonable and practicable to continue to enforce such other provision
in the absence of the provision which shall have been declared to be void and
voidable.
|
16.
|
Remedy for
Breach.
|
Both parties recognize that the
services to be performed by the Employee are special and unique. The
Company will have the right to seek and obtain damages and any available
equitable remedies for the Employee’s breach of this Agreement. The
Employee's remedy for any breach of this Agreement is strictly limited to the
Severance Pay or CIC Severance Pay, as the case may be, called for
herein.
|
17.
|
Mitigation of
Damages.
|
The Employee shall not be required to
mitigate damages or the amount of any payment provided under this Agreement by
obtaining other employment or otherwise after the termination of employment
hereunder, and any amounts earned by the Employee, whether from self-employment
or other employment shall not reduce the amount of any Severance Pay or CIC
Severance Pay, as the case may be, called for herein.
|
18.
|
Attorneys' Fees and
Costs.
|
In any claim or dispute between the
parties arising out of or associated with this Agreement or the breach hereof or
otherwise arising out of or associated with the Employee’s employment by the
Company, the prevailing party shall be entitled to recover all reasonable
attorneys' fees, expenses, and costs thereof or associated therewith, provided
that, to the extent required by Section 409A, any such payment by the Company
shall be made no later than the end of the year following the year in which such
fees, expenses and costs were incurred. The term “prevailing party”
means the party obtaining substantially the relief sought via litigation or
through an action in arbitration.
|
19.
|
Integration, Amendment, and
Waiver.
|
This Agreement and such other written
agreements referenced in this Agreement, constitute the entire agreement between
the parties pertaining to the subject matter contained in it except as expressly
provided herein, and supersedes all prior agreements, representations,
assurances, and understandings of the parties, including any prior employment
agreements. No
16
amendment
of, addition to, or modification of this Agreement shall be binding unless
executed in writing by the parties. Any term or provision of this
Agreement may be waived in a signed writing at any time by the party that is
entitled to the benefit thereof, provided, however, that any waiver shall apply
only to the specific event or omission waived and shall not constitute a
continuing waiver. Any term or provision of this Agreement may be
amended or supplemented at any time by a written instrument executed by all the
parties hereto.
|
20.
|
Captions.
|
The captions and section headings of
this Agreement are for convenience and reference only, and shall have no effect
on the interpretation or construction of this Agreement.
|
21.
|
Applicable
Law.
|
The substantive laws of the State of
Nevada shall govern the validity, construction, interpretation, performance, and
effect of this Agreement.
|
22.
|
Arbitration.
|
Any controversy, cause of action or
claim related to or arising out of or in connection with the Employee’s
employment with the Company, including but not limited to termination of such
employment or under this Agreement, other than an action to enforce the
provisions of Section 10 herein or the breach thereof, shall be settled by
arbitration according to the rules of the American Arbitration Association
applicable to disputes arising in Nevada and under Nevada law. Any
party to the arbitration may enter judgment upon the award rendered by the
arbitrator in any court having jurisdiction thereof. The arbitrator
shall not be entitled to amend or alter the terms of this
Agreement. Notwithstanding this Section 22, the Company shall be
entitled to seek any available equitable remedy for enforcement of provisions of
this Agreement.
|
23.
|
Authorization.
|
The Company and the Employee,
individually and severally, represent and warrant to the other party that it has
the authorization, power and right to deliver, execute and fully perform the
obligations under this Agreement in accordance with its terms. The Employee
represents and warrants to the Company that there is no restriction or
limitation, by reason of this Agreement or otherwise, upon the Employee’s right
or ability to enter into this Agreement and fulfill her obligations under this
Agreement.
|
24.
|
Acknowledgment.
|
The Employee acknowledges that she has
been given a reasonable period of time to study this Agreement before signing
it. The Employee certifies that she has fully read, has received an
explanation of, and completely understands the terms, nature, and effect of this
Agreement. The Employee further acknowledges that she is executing
this Agreement freely, knowingly, and
17
voluntarily
and that the Employee’s execution of this Agreement is not the result of any
fraud, duress, mistake, or undue influence whatsoever. In executing
this Agreement, the Employee does not rely on any inducements, promises, or
representations by the Company or any person other than the terms and conditions
of this Agreement.
|
25.
|
Section
409A.
|
Notwithstanding
anything to the contrary in this Agreement, the payment of consideration,
compensation, and benefits pursuant to this Agreement shall be interpreted and
administered in a manner intended to avoid the imposition of additional taxes
under section 409A of the Code and the regulations and guidance promulgated
thereunder (“Section 409A”). Notwithstanding any provision to the contrary in
this Agreement or otherwise, no payment or distribution under this Agreement or
otherwise that constitutes an item of “deferred compensation” under Section 409A
and becomes payable by reason of the termination of the Employee’s employment
hereunder shall be made to the Employee unless and until the termination of the
Employee’s employment constitutes a “separation from service” (as such term is
defined in Section 409A).
In
addition, no such payment or distribution of deferred compensation shall be made
to the Employee prior to the earlier of (a) the expiration of the six (6) month
period (the “Six Month Period”) measured from the date of the Employee’s
“separation from service” (as such term is defined in Section 409A), and (b) the
date of the Employee’s death, if the Employee is deemed at the time of such
separation from service to be a “specified employee” within the meaning of that
term under Section 409A (the “Six Month Delay”) and if such delayed commencement
is otherwise required to avoid an “additional tax” under section 409A(a)(1)(B)
of the Code. All payments and benefits that are delayed pursuant to the
immediately preceding sentence shall be paid to the Employee in a lump sum upon
expiration of such six (6) month period (or if earlier, upon the Employee’s
death).
Notwithstanding
the foregoing provisions, to the extent permitted under Section 409A, any
separate payment or benefit under this Agreement or otherwise shall not be
“deferred compensation” subject to Section 409A and the Six Month Delay to the
extent provided in the exceptions in Treasury Regulation section 1.409A-1(b)(4)
and (b)(9) and any other applicable exception or provision under Section
409A. Further, each individual installment payment that becomes
payable under this Agreement and each payment of the Severance Pay or if
applicable, the CIC Severance Pay shall be a “separate payment” under Section
409A. Specifically, to the extent the provisions of Treasury
Regulation section 1.409A-1(b)(9) are applicable to the Severance Pay or if
applicable, the CIC Severance Pay, the portion of such severance pay set forth
in respectively, subsection 7(a)(i) or subsection 7(e)(i) above that is less
than the limit prescribed under Treasury Regulation section
1.409A-1(b)(9)(iii)(A) (or any successor provision) (the “Separation Pay
Amount”) shall be payable to the Employee in the manner prescribed in subsection
7(a)(i) or subsection 7(e)(i), as applicable, without regard to the Six Month
Delay. Following the Six Month Delay, (1) to the extent applicable,
the Employee shall receive a lump sum cash payment equal to the Severance Pay or
CIC Severance Pay, as applicable, she otherwise would have received during the
Six Month Period (absent the Six Month Delay) less the Separation Pay Amount and
(2) the Employee shall receive the remainder of his Severance Pay or CIC
Severance Pay, as applicable, in the manner prescribed by subsection 7(a) or
subsection 7(e), as applicable.
18
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date.
|
COMPANY:
|
EMPLOYEE:
|
|||||
|
By:
|
By:
|
|||||
|
/s/
Douglas D. Dirks
|
|
/s/ Ann W. Nelson |
|
|||
|
Name:
Douglas D. Dirks
|
Name:
Ann W. Nelson
|
|||||
| Chief Executive Officer | ||||||
19
Appendix
A
Perquisites
1.
Automobile Allowance in the amount of $1,200.00 per month
2.
Annual Executive Physical Examination as a part of the Company’s executive
wellness program
3.
Life Insurance as a part of the Company’s group life insurance program in an
amount equal to three (3) times the Employee’s Base Salary
20
Exhibit
10.3
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this “Agreement”) by and between Employers Holdings, Inc.,
a Nevada corporation (the “Company”) and Lenard T. Ormsby (the “Employee”) is
entered into as of the 17th day of December, 2008, effective as of January
1, 2009 (the “Effective Date”).
RECITALS
A. The Employee has knowledge and
experience applicable to the position of Executive Vice President, Chief Legal
Officer and General Counsel.
B. The Company desires to continue to
employ the Employee to perform certain services for the Company, its parent, if
any, and their respective subsidiaries and affiliates (the “Company
Affiliates”), as may be required or requested of the Employee in his position as
Executive Vice President, Chief Legal Officer and General Counsel, and the
Employee desires to continue to be so employed by the Company and to perform
such services for the Company and the Company Affiliates.
In
consideration of the premises above and mutual covenants and promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are mutually acknowledged, the parties agree as follows:
TERMS
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1.
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Employment.
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The Company agrees to continue to
employ the Employee and the Employee accepts such continued employment upon the
terms and conditions specified herein. The Employee agrees to continue to devote
substantially all of his time and effort during working hours in the performance
of the duties called for herein and agrees that any other non-employment related
duties (i.e., industry related groups, service on boards, etc.) will not be
allowed to materially interfere with the performance of the duties called for
herein.
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2.
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Term.
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The term of this Agreement shall
commence on the Effective Date, and continue for three (3) years (the “Initial
Term”), until December 31, 2011, and, thereafter, shall automatically renew for
successive two (2) year periods (each, an “Additional Term;” the Initial Term
and any Additional Terms, collectively the “Term”), unless either party gives
written notice to the other no later than six (6) months prior to expiration of
the Initial Term or any Additional Term, as applicable, of an intent not to
renew this Agreement; subject, however to earlier termination of the Employee's
employment with the Company in accordance with this Agreement (the “Termination
Date”). The expiration of this Agreement at the end of the Term, in
and of itself,
1
shall
not constitute, nor be construed or interpreted as, a termination of the
Employee's employment that would make him eligible for benefits or payments
under Section 7 below. This Agreement shall expire upon the
termination of the Employee's employment for any reason, subject to the
provisions of subsection 10(h) below.
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3.
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Services and
Duties.
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The Employee shall continue to serve as
Executive Vice President, Chief Legal Officer ad and General Counsel and shall
perform such duties as may be assigned by the Chief Executive Officer from time
to time. At the request of the Board of Directors of the Company (the
“Board”), the Employee shall also serve as a director of the Company and/or one
or more of the Company Affiliates at no additional compensation. The
Employee agrees that upon the termination of his employment with the Company, he
shall resign from the Board and any and all boards of the Company Affiliates
effective on the Termination Date.
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4.
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Compensation and
Benefits.
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(a)
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During the term of this Agreement,
the Company shall pay to the Employee an annual salary of not less than
$355,000 (“Base Salary”), which amount shall be paid according to the
Company’s regular payroll practices. The
Company agrees to review the Base Salary on an annual basis and adjust the
salary to comply with the executive compensation policy in effect at the
time of the review. Any increase made to the annual salary will
establish the new Base Salary for the Employee. All payments
made pursuant to this Agreement, including but not limited to this
subsection 4(a), shall be reduced by and
subject to withholding for all federal, state, and local taxes and any other withholding
required by applicable laws and
regulations.
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(b)
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The Company will provide an annual incentive (the
“Annual
Incentive”) to the
Employee during the Term based on the Employee’s and the Company’s performance, as determined by
the Board (or a
committee thereof) in its sole discretion. In this regard, the Board (or a committee thereof)
shall set
an annual
incentive target of
not less than forty-five percent (45%) of Base Salary, and the Annual Incentive shall be paid in
accordance with the
Company’s regular practice for its senior
officers, as in effect from time to time. To the extent not duplicative of
the specific benefits provided herein, the Employee shall be eligible to
participate in all incentive compensation, retirement, supplemental retirement, and
deferred compensation plans, policies and arrangements that are provided
generally to other senior officers of the Company at a level (in terms of
the amount and types of benefits and incentive compensation that the
Employee has the opportunity to receive and
the terms thereof) determined in the sole discretion of the
Board (or a committee
thereof).
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(c)
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The Employee agrees that the
amounts payable and benefits provided under this Agreement, including but
not limited to any amounts payable or benefits provided under
this Section 4 and
Section 7 constitute
good, valuable and separate consideration for the non-competition,
assignment and release of liability provisions contained herein. The
Employee acknowledges that he is aware of the effect of the non-competition,
assignment and release of liability provisions contained herein and agrees
that the amounts payable and benefits provided under this Agreement,
including but not limited to the amounts payable and benefits provided
under this Section 4 and Section
7, if
any, constitute
sufficient consideration for his agreement to these
provisions.
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(d)
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In addition to the compensation
called for in this Agreement, the Employee shall be entitled to
receive any and all employee benefits and perquisites generally provided from time
to time to other similarly situated officers of the Company as well as the benefits and
perquisites listed on “Exhibit A” attached hereto and incorporated
herein by this reference.
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5.
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Insurance.
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The Employee agrees to submit to a
physical examination at a reasonable time as requested by the Company for the
purpose of the Company’s obtaining life insurance on the life of the Employee
for the benefit of the Company; provided, however, that the Company shall bear
the costs for such examinations and shall pay all premiums on any life insurance
obtained as a result of such examinations. The Employee further
agrees to submit to drug testing in accordance with the Company's policies and
procedures.
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6.
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Termination.
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(a)
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The Company, at any time, may terminate this
Agreement and the
Employee's employment immediately for “Cause”. Cause is defined
as:
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(i)
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A material breach of this
Agreement by the
Employee;
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(ii)
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Failure or inability of
the Employee to obtain or maintain any
required licenses or certificates;
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(iii)
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Willful violation by the Employee of any law, rule or
regulation, including but not limited to any material insurance law or
regulation, which violation may, as determined by the Company, adversely
affect the ability of the Employee to perform his duties hereunder or may subject
the Company to liability or negative publicity; or
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(iv)
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Conviction or commission of or the entry of a guilty plea or plea of no
contest to
any felony or
to any other crime involving moral
turpitude.
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(b)
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The Employee may
terminate this
Agreement and his
employment with the Company immediately for “Good Reason,” which shall mean the occurrence
of any of the following
events with respect
to which the Employee has notified the Company of the existence thereof
within no more than ninety (90) days of the initial
existence thereof and which is not cured by the Company
within thirty (30) days of the Company’s receipt of written notice from the
Employee of the events alleged to constitute such Good Reason:
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(i)
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A material diminution in the
Employee’s base compensation;
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(ii)
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A material diminution in the
Employee’s authority, duties or
responsibilities;
or
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(iii)
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Any other action or inaction that
constitutes a material breach by the Company of this Agreement (as may be amended
from time to time).
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(c)
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The Company may also terminate this Agreement
and the Employee's
employment upon the
occurrence of one or more of the following events or reasons, subject to applicable
law (or, in the case
of subsection 6(c)(i) below, termination of this Agreement and the
Employee's employment
will be automatic):
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(i)
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Death of the Employee;
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(ii)
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The Employee is deemed to be disabled
in accordance with the policies of the Company or the law or if the Employee is unable to perform the
essential job functions of the Employee’s position with the Company, with or without
reasonable accommodation, for a period of more than 100 business days in
any 120 consecutive business day period. The Employee is entitled to any and
all short term or long term disability programs, like any other employee,
in accordance with
the terms of such
programs and the policies of the
Company;
or
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(iii)
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At any time for any other reason or no reason in the sole and absolute
discretion of the Company.
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7.
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Payments Upon
Termination.
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(a)
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Qualifying
Termination and Severance Pay. If the Company terminates the Employee's employment prior to the expiration of the Term but other than during the CIC Period (as defined
below) for any reason
other than as
specified above in
subsection 6(a) for Cause, subsection 6(c)(i) by reason of the death of the Employee, or subsection 6(c)(ii
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(i)
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In lieu of any further salary
payments to the
Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, an amount equal to one and one half (1 ½) times Base Salary, payable in equal bi-weekly installments on
the Company’s regular payroll dates as in effect on such Termination
Date, for eighteen (18) months following the Termination Date, commencing with the payroll date applicable to the first full payroll period
following the Termination Date; provided, however, that such
payments shall be
delayed to the extent required under Section 25 below. The payments shall be subject to normal
payroll deductions.
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(ii)
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Continuation of the medical, dental and
vision insurance
coverage in effect on the Termination Date for a period of eighteen (18) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying the
employee portion, including dependents if applicable, of the premium during
such eighteen (18)
month period, provided that the Employee elects to continue such
insurance coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended (“COBRA”). The Employee is solely responsible for
taking the actions necessary to exercise his rights under COBRA for the
insurance coverage
the Employee has in effect,
including coverage
for dependents if
applicable, on the Termination Date.
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(b)
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Severance
Pay as Liquidated Damages. The parties agree, in the event of
a material
breach of this
Agreement by the Company with respect to which the Employee has given
notice and that is
not cured, in either
case, in accordance
with subsection 6(b), following which the Employee
terminates his employment for Good Reason, that actual damages are
speculative and that the amount of the Severance Pay or, if applicable, the CIC Severance
Pay (as defined below) set forth herein is liquidated
damages and is a reasonable estimate of what damages would be for a
material breach of this
Agreement.
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5
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(c)
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Conditions
to Severance Pay or CIC Severance Pay. The Employee agrees and acknowledges
that the following must be satisfied by the Employee before he is entitled
to the Severance Pay or, if applicable, the CIC Severance
Pay provided for
herein:
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(i)
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That the Employee returns any and all equipment, software,
data, property and information of the Company and the Company
Affiliates, including
documents and records or copies thereof relating in any way to any
proprietary information of the Company or any of the Company
Affiliates whether prepared by the Employee
or any other person
or entity. That the Employee further agrees that he
shall not retain any proprietary information of the Company or any of the Company
Affiliates after the
Termination
Date;
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(ii)
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That the Employee executes a Global Release of Liability, in
a form to be determined by the Company in
its sole discretion,
which releases the
Company and the
Company Affiliates from liability for any and all
claims, complaints and causes of
action, whether based in law or equity,
arising from, related
to or
associated with
the Employee’s employment by the Company or under this Agreement and that such release has become
effective and non-revocable. That the Employee further acknowledges and
agrees that he has not made and will not make any assignment of any claim,
cause or right of
action, or any right of any kind whatsoever, arising from, related to or associated with the employment
of the Employee by the Company;
and
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(iii)
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That the Employee reaffirms the covenants contained herein,
in writing, including, but not limited to, the covenants set forth in Section 10.
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Notwithstanding anything in this
Agreement to the contrary,
in any case where the first and last days of the applicable release and nonrevocability periods provided for in the Global Release of
Liability (the “Applicable Release Period”) are in two separate taxable years, any
payments required to be made to the Employee under this Agreement that are treated as deferred
compensation for purposes of Section 409A (as defined below) shall be made in the later taxable
year, as soon as practicable, but in no event
later than thirty (30) days following the conclusion of the
Applicable Release Period.
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(d)
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Voluntary
Termination by the Employee. The Employee may terminate
his employment and
this Agreement for
reasons other than those identified in subsection 6(b) upon not less than
sixty (60) days prior written notice.
If the Employee terminates
his employment and
this Agreement
pursuant to this subsection 7(d), he shall be entitled
only to the
following:
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(i)
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Any unpaid salary
through the
Termination
Date;
and
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(ii)
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Payment for any accrued and unused
vacation as of the
Termination Date.
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(e)
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Qualifying
Change in Control Termination. If, before the expiration of the
Term, the Company terminates the
Employee's employment within the period commencing six (6) months prior
to and ending eighteen (18) months following a Change in
Control (as defined
below), such period referred to herein as
the “CIC
Period,” for any reason other than as specified above in subsection
6(a) for Cause, subsection 6(c)(i) for the death of the Employee, or subsection 6(c)(ii) for disability, or if the
Employee terminates his employment and this
Agreement for
Good
Reason pursuant to
subsection
6(b), the Employee shall receive
the severance pay set
forth in subsections (i) and (ii) below (the “CIC Severance Pay”), provided that if the
Employee’s employment is
terminated during the
six (6) month period
prior to a Change in
Control, the Employee
shall be entitled to
CIC Severance Pay only if such termination (x) was by the Company other than for Cause but
at the request or direction of
any person that has entered into an agreement
with the Company the consummation of which would constitute a Change in
Control, (y) was by the Employee for Good Reason and the circumstance or
event that constitutes Good Reason
occurred at the request or direction of such
person or (z) was by the Company without Cause and
the Employee reasonably demonstrates that such termination
was otherwise in
connection with or in anticipation of a Change in Control; and if the Employee is not
entitled to CIC Severance Pay hereunder, then the Employee's termination of employment will not be deemed to
have occurred during the CIC Period for purposes of subsection
7(a):
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(i)
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In lieu of any further salary
payments to the
Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, a lump sum cash payment equal to two (2) times the sum of (A) Base Salary
and (B) the average
of the annual bonus
amounts earned by the
Employee for the three (3) years preceding the year in which the Change in Control occurs; provided, however, that if the
Termination Date occurs prior to January 1, 2010, then (B)
shall instead
be the average of the
annual bonus amounts earned by the Employee in 2007 and
2008. Such payment shall be made as soon
as practicable (but in no event later than sixty (60) days) following the Termination Date; provided, however, that such
payments shall be delayed to the extent required under Section
25 below;
and
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(ii)
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Continuation of the medical, dental and
vision insurance coverage in effect on
the Employee's
Termination Date for a period of
eighteen (18) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying the
employee
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portion, including dependents if
applicable, of the
premium during such
eighteen (18)-month period, provided that the
Employee elects to continue such insurance coverage under COBRA. The
Employee is solely responsible for taking the actions necessary to
exercise his rights under COBRA for the insurance coverage the Employee
has in effect, including coverage for dependents if applicable, on the
Termination Date.
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(f)
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Definition
of Change in Control.
For purposes of this Agreement,
a “Change in Control” shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
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(i)
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Any one person, or more than one
person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or total
voting power of the stock of the Company;
or
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(ii)
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Any one person, or more than one person
acting as a group, acquires (or has acquired during the twelve (12)-month period ending on the date
of the most recent acquisition by such person or persons) ownership of
stock of the Company possessing 35% or more of the total voting
power of the stock of the Company;
or
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(iii)
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A majority of members of the
Board is replaced during any twelve (12)-month period by directors whose
appointment or election is not endorsed by a majority of the members of
the Board before the date of the
appointment or election;
or
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(iv)
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Any one person or group acquires (or has
acquired during the immediately preceding twelve (12)-month
period ending on the date of the most recent acquisition) assets of the
Company with an aggregate gross fair market value of not less than forty
percent (40%) of the aggregate gross fair market value of the assets of
the Company immediately prior to such
acquisition. For this purpose, gross fair market value shall
mean the fair value of the affected assets determined without regard to
any liabilities associated with such
assets.
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Notwithstanding the foregoing, (1) a
“Change in Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated
transactions immediately following which the holders of the common stock of the
Company immediately prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity that owns all or substantially all of the
assets of the Company immediately following such transaction or series of
8
transactions, and (2) a “Change in Control” shall not be deemed to have occurred as result of
any secondary offering of
Company common stock to the general public through a registration statement
filed with the Securities and Exchange Commission. The Board shall determine whether a
Change in Control has
occurred hereunder in a manner consistent with the provisions of Section
409A.
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(g)
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No
Duplication of Payments or Benefits. Notwithstanding any
provision of this
Agreement to the
contrary, the
Employee shall not be eligible to receive any payments or benefits under both subsections 7(a) and 7(e); but rather, to the extent the
conditions set forth in subsection 7(a) and subsection 7(e) are satisfied, the Employee
shall be eligible to receive benefits under only subsection 7(e).
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(h)
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Golden
Parachute (Section
280G) Excise
Taxes.
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(i)
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Subject to subsection 7(h)(ii) below, if it is determined that any payment or benefit received or
to be received by the Employee, whether pursuant to this
Agreement or otherwise (the “Severance Payments”), is a “parachute payment” within the meaning of section 280G of the Internal Revenue Code (the
“Code”) (all such payments and benefits,
including the Severance Payments as applicable, but excluding the Gross-Up
Payment (as defined below) being hereinafter called
“Total Payments”) that will be subject (in whole or part)
to the tax imposed
under section 4999 of the Code (the
“Excise Tax”), then the Company shall pay to
the Employee on or as soon as practicable
following the day on which the Excise Tax is remitted by the Employee (but not later than the end of the taxable
year following the year in which the Excise Tax is
incurred and subject
to the provisions set forth in Section 25 below, including if applicable,
the Six Month Delay (as defined in such section)) an additional amount (the
“Gross-Up Payment”) such that the net amount
retained by the Employee, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total
Payments.
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(ii)
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In the event that the amount of
the Total Payments does not exceed 110% of the largest amount that would
result in no portion of the Total Payments being subject to the Excise Tax
(the “Safe Harbor”), the non-cash portion of the Total Payments
shall first be
reduced (if necessary, to zero), and the cash portion of the Total Payments shall thereafter be reduced (if
necessary, to zero) so that the amount of the Total Payments is equal to
the Safe Harbor.
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(iii)
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For purposes of
determining whether any of the Total Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (A) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel
(“Tax
Counsel”) selected by the Board in existence immediately
prior to the Change
in Control, does not constitute a
“parachute
payment” within the
meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (B) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments (other
than those referred to in clause (A)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as deductions by reason of
section 280G of the Code, in the
opinion of Tax Counsel, and (C) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Company's
independent auditor
in accordance with
the principles of sections 280G(d)(3) and (4) of the
Code. If the Employee disputes the Company's
calculations (in whole or in part), the reasonable opinion of Tax Counsel
with respect to the matter in dispute shall
prevail.
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(iv)
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If the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Employee shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion
of the Gross-Up Payment attributable
to such reduction (plus that portion of the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income and employment taxes
imposed on the Gross-Up Payment being repaid by the Employee to the
extent that such repayment results in a
reduction in Excise Tax and/or a federal, state or local income or
employment tax deduction) plus interest on the amount of such repayment at
120% of the rate provided in section 1274(b)(2)(B) of the
Code. If the Excise Tax is determined to exceed the
amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable
by the Employee with respect to such excess) at the time that the amount
of such excess is finally
determined.
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(v)
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The Employee and the Company shall
each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax
with respect to the Total Payments. The Company also shall pay
to the Employee all legal fees and expenses incurred by the
Employee in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment
or benefit provided hereunder. Such payments shall be made within sixty
(60) business days after
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delivery of the Employee's written
request for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require (but in no event shall any
such payment be made after the end of the calendar year following the calendar year in which
the expenses were incurred), provided that no such payment shall be made
in respect of fees or expenses incurred by the Employee after the later of
the tenth (10th) anniversary of the effective date of the Employee's
termination with the Company or the
Employee's death and, provided further, that, upon the
Employee’s “separation from
service” (as such
term is defined under Section 409A) with the Company, in no event shall
any additional such payments be made prior to the date that is six (6) months after
the date of the Employee’s “separation from
service” to the
extent such payment delay is required under section 409A(a)(2)(B) of the
Code.
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8.
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Licensing.
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The Employee has obtained and
possesses, or will obtain and possess, and will maintain throughout the Term
hereof, all licenses, approvals, permits, and authorization (the “Licenses”)
necessary to perform the Employee’s duties hereunder (if any). Any
costs, attorneys’ fees, investigation fees or other expenses incurred in
connection with obtaining or maintaining such Licenses shall be borne by the
Company, provided that payment of such fees or costs by the Company shall be
made no later than the end of the year following the year in which the expenses
were incurred. The Employee warrants that the Employee is fully
eligible, under all standards and requirements, to obtain, possess, and maintain
such Licenses and that the Employee will commit no acts during the Term hereof
that would jeopardize or eliminate the Employee’s ability to possess or maintain
such Licenses.
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9.
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Rules and
Regulations.
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The Employee shall observe, enforce,
and comply with the policies, philosophies, strategies, rules, and regulations
of the Company, as they may be promulgated and/or modified from time to time,
and shall carry out and perform the orders, directions, and policies of the
Company, as they may be stated and/or amended from time to time, either orally
or in writing. A violation of this Section 9 by the Employee is a
material breach of this Agreement.
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10.
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Restrictive
Covenants.
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In consideration of the amounts payable
and benefits provided under Section 4, and, if applicable, Section 7 and
subsection 10(a), the other compensation paid hereunder, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the parties, the parties agree to the following provisions of this Section
10:
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(a)
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Non-Competition. The Employee understands and agrees that the
Company and the
Company Affiliates do
business throughout the State of Nevada and other states.
The Employee further understands and agrees
that he is a high ranking officer of the Company and will have access to
confidential and trade secret information and goodwill of the Company and the Company Affiliates
that will
allow the Employee to unfairly compete with the
Company and the
Company Affiliates justifying this restriction.
If the Employee's
employment is
terminated (by either
the Employee or the Company), during the Term, for any reason other than
as specified above in subsection 6(c)(i) by reason of the death of the Employee, or
subsection 6(c)(ii) for disability, then for a period of eighteen (18) months commencing on the Termination Date, the Employee agrees that, without the written
permission of the Company, he will not engage (whether as owner,
partner, controlling stockholder, controlling investor, employee, adviser,
consultant, or otherwise) in any business that is in direct competition
with the business being conducted by the Company or
any of the
Company
Affiliates as of the Termination
Date, in Nevada
or in any other state in which the
Company is conducting such business (the “Non-Compete Area”) as of the Termination Date.
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(b)
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Non-Solicitation. Without limiting the generality
of the foregoing, the
Employee
agrees that for a
period of eighteen (18) months following the Employee's termination of
employment (for any
reason, by either the Employee or the Employer), he will not, without the prior
written consent of the Company, directly or indirectly solicit or
attempt to solicit,
within the Non-Compete Area, any business from any person or entity that
the Company or any of
the Company Affiliates called upon, solicited, or
conducted business with as of such termination date, any persons or entities that
have been customers
of the Company or any
of the Company Affiliates or recruit any person who has been
or is an employee of the Company or any of the Company
Affiliates, during
the preceding one
(1)-year period from
such termination date. In addition, the Employee agrees that he shall not directly or
indirectly solicit or encourage any employee of the Company or any of the Company
Affiliates to go to
work for or with the
Employee for a period
of one
(1)-year following
such termination date.
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|
|
(c)
|
In the event the Employee violates subsection 10(a) or 10(b), the applicable period of time during which the respective restriction
applies will automatically be extended for
the period of time from which the Employee began such violation until he
permanently ceases such violation. If any provision of this covenant
is invalid in whole or in part, it will be limited, whether as to time,
area covered, or otherwise as and to the extent required for its validity
under the applicable law and as so limited, will be
enforceable.
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(d)
|
Confidential
Information.
The
Employee acknowledges
that he has had or will have access to the confidential
information of the
Company and the Company Affiliates (including, but not limited to,
records regarding sales, price and cost information, marketing plans,
customer names,
customer lists, sales techniques, distribution plans or procedures, and
other material relating to the business
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12
|
|
|
conducted by the Company and the
Company Affiliates),
proprietary, or trade secret information (the “Confidential
Information”),
and agrees never to
use the Confidential Information other than for the sole benefit of the
Company and the
Company Affiliates and further agrees to never
disclose such Confidential Information (except as may be required by
regulatory authorities or as may be required by law) to any entity
or person that is not an officer or employee of the Company or a Company Affiliate
at the time of such
disclosure (unless at
such time such Confidential Information is subject to a policy of the
Company or a Company
Affiliate restricting disclosure to
non-officers), in which case disclosure shall
be limited solely to officers of the Company or the applicable Company
Affiliate at the time
of such disclosure, without the prior written consent of the Company.
The Employee further acknowledges that this
covenant to maintain Confidential Information is necessary to protect the
goodwill and proprietary interests of the Company and the Company
Affiliates and the
restriction against the disclosure of Confidential Information is
reasonable in light
of the consideration and other value the Employee has received or will
receive pursuant to this Agreement and otherwise pursuant to his
employment by the Company.
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|
|
(e)
|
From and following the Employee's termination of employment, the Employee agrees to cooperate with the
Company and the
Company Affiliates in
any litigation, administrative proceeding, investigation or audit
involving any matters with which the Employee has knowledge of from his
employment with the Company. The Company shall reimburse the Employee for reasonable expenses,
including reasonable
compensation for services rendered at his hourly rate of
compensation as of
such termination date, incurred in providing such
assistance and approved by the Company. The Company shall
reimburse the
Employee for such expenses incurred in accordance with the policies
and procedures of the Company, but in no event no later than the end of the year
following the year in which the expenses were incurred.
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|
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(f)
|
In the event of a violation of
this Section 10, the
Company and the
Company Affiliates
shall be entitled to any form of relief at law or equity, and the parties
agree and acknowledge that injunctive relief is an appropriate, but not
exclusive, remedy to enforce the provisions hereof. The existence of any claim or cause of
action of the
Employee against the
Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense of the Company’s enforcement of the covenants set
forth in this Section 10. The Employee hereby
submits to the
jurisdiction of the courts of the State of Nevada and federal courts
therein for the purposes of any actions or proceedings instituted by the
Company to enforce its rights under this Agreement, to seek money damages
or seek injunctive relief. The Employee further acknowledges and agrees
(i) that the obligations contained in
Section 10 of this Agreement are necessary to protect the
interests of the Company and the Company
Affiliates,
(ii) that the restrictions contained herein
are fair, do not
unreasonably restrict
the
Employee's further
employment and business opportunities, and are commensurate with
the
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13
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|
|
compensation arrangements set out
in this Agreement and
(iii) that such compensation arrangements
constitute separate consideration for the obligations set forth in this Section
10. The covenants contained in Section
10 shall each be construed as an agreement independent of any other
provisions of this Agreement. Both parties intend to make the
covenants of Section 10 binding only to the extent that it may be lawfully done under
existing applicable laws. If a court of competent
jurisdiction decides any part of any covenant is overly broad, thereby
making the covenant unenforceable, the parties agree that such court shall
substitute a reasonable, judicially enforceable limitation
in place of the offensive part of the covenant and as so modified the
covenant shall be as fully enforceable as set forth herein by the parties
themselves in the modified
form.
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(g)
|
The Employee acknowledges that it is
possible that the
corporate structure of the Company could change during the term of this
Agreement. The Employee hereby acknowledges and affirms
that the Company may assign its rights under this Agreement, including but not limited to its
rights to enforce the
covenants set forth in subsections 10(a), 10(b) and
10(c), to a
third-party without the approval of or additional consideration to
the
Employee.
The Employee acknowledges and agrees that the
consideration called for herein is good and sufficient
consideration for the
Company's right to assign its rights under this
Agreement.
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(h)
|
Subsections 10(a) through
(g), inclusive, of this Agreement
shall survive either termination of the employment relationship
and/or termination of this Agreement
for the full period set forth in subsections 10(a) through
(g),
inclusive.
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11.
|
Work for
Hire.
|
The Employee agrees that any work,
invention, idea or report that he produces or that results from or is suggested
by the work the Employee does on behalf of the Company or any of the Company
Affiliates is “work for hire” (hereinafter referred to as “Work”) and will be
the sole property of the Company. The Employee agrees to sign any
documents, during or after employment that the Company deems necessary to
confirm its ownership of the Work, and the Employee agrees to cooperate with the
Company to allow the Company to take advantage of its ownership of such
Work.
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12.
|
Assignment of
Agreement.
|
The Employee agrees that his services
are unique and personal and that, accordingly, the Employee may not assign his
rights or delegate his duties or obligations under this Agreement. The Company
may assign its rights, duties, and obligations under this Agreement to any
successor to its business. This Agreement shall inure to the benefit
of and be binding upon the Company’s successors and assigns.
14
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13.
|
Indemnification of the
Employee.
|
The Company shall indemnify the
Employee and hold him harmless for acts or decisions made by him in good faith
while performing services for the Company or any of the Company Affiliates to
the maximum extent allowed by law. The Company shall also use its
reasonable efforts to obtain coverage for him under any insurance policy now in
force or hereinafter obtained during Term covering the officers and directors of
the Company against lawsuits, subject to the business judgment of the
Board. The Company shall pay all expenses, including attorneys’ fees
of an attorney selected and retained by the Company to represent the Employee,
actually and necessarily incurred by the Employee in connection with the defense
of such act, suit, or proceeding and in connection with any related appeal,
including the cost of court settlements, provided that, to the extent required
by Section 409A, any such payment by the Company shall be made no later than the
end of the year following the year in which the expenses were
incurred.
|
14.
|
Notices.
|
Any notice, document, or other
communication (hereinafter “Notice”) which either party may be required or may
desire to give to the other party shall be in writing, and any such notice may
be given or delivered personally or by mail or facsimile. Any such
notices given or delivered personally shall be given or delivered by hand to an
officer of the entity to which they are being given or delivered or the
individual, as the case may be, and shall be deemed given or delivered when so
given or delivered by hand. Any such notices given or delivered by
facsimile will be deemed given or delivered upon receipt by the sender of a
successful facsimile transmission to the facsimile number below, and any such
notices given or delivered by mail shall be deemed given or delivered three (3)
days after it is deposited in the U.S. mail, certified or registered mail,
return receipt requested, with all postage and fees prepaid, addressed to the
person or entity in question as follows:
If
to the Employee:
Lenard
T. Ormsby
To
the address (or facsimile number, if applicable) on record with the
Company
If
to the Company:
Chief
Executive Officer
Employers
Holdings, Inc.
10375
Professional Circle
Reno, Nevada 89521-4802
Fax: (775)
886-5499
15
or,
in either case, to such other address as either party may have previously
notified the other pursuant to the provisions of this Section 14.
|
15.
|
Severability.
|
In the event that any provision hereof
shall be declared by a court of competent jurisdiction to be void or voidable as
contrary to law or public policy, such declaration shall not affect the
continuing validity or enforceability of any other provisions hereof insofar as
it may be reasonable and practicable to continue to enforce such other provision
in the absence of the provision which shall have been declared to be void and
voidable.
|
16.
|
Remedy for
Breach.
|
Both parties recognize that the
services to be performed by the Employee are special and unique. The
Company will have the right to seek and obtain damages and any available
equitable remedies for the Employee’s breach of this Agreement. The
Employee's remedy for any breach of this Agreement is strictly limited to the
Severance Pay or CIC Severance Pay, as the case may be, called for
herein.
|
17.
|
Mitigation of
Damages.
|
The Employee shall not be required to
mitigate damages or the amount of any payment provided under this Agreement by
obtaining other employment or otherwise after the termination of employment
hereunder, and any amounts earned by the Employee, whether from self-employment
or other employment shall not reduce the amount of any Severance Pay or CIC
Severance Pay, as the case may be, called for herein.
|
18.
|
Attorneys' Fees and
Costs.
|
In any claim or dispute between the
parties arising out of or associated with this Agreement or the breach hereof or
otherwise arising out of or associated with the Employee’s employment by the
Company, the prevailing party shall be entitled to recover all reasonable
attorneys' fees, expenses, and costs thereof or associated therewith, provided
that, to the extent required by Section 409A, any such payment by the Company
shall be made no later than the end of the year following the year in which such
fees, expenses and costs were incurred. The term “prevailing party”
means the party obtaining substantially the relief sought via litigation or
through an action in arbitration.
|
19.
|
Integration, Amendment, and
Waiver.
|
This Agreement and such other written
agreements referenced in this Agreement, constitute the entire agreement between
the parties pertaining to the subject matter contained in it except as expressly
provided herein, and supersedes all prior agreements, representations,
assurances, and understandings of the parties, including any prior employment
agreements. No
16
amendment
of, addition to, or modification of this Agreement shall be binding unless
executed in writing by the parties. Any term or provision of this
Agreement may be waived in a signed writing at any time by the party that is
entitled to the benefit thereof, provided, however, that any waiver shall apply
only to the specific event or omission waived and shall not constitute a
continuing waiver. Any term or provision of this Agreement may be
amended or supplemented at any time by a written instrument executed by all the
parties hereto.
|
20.
|
Captions.
|
The captions and section headings of
this Agreement are for convenience and reference only, and shall have no effect
on the interpretation or construction of this Agreement.
|
21.
|
Applicable
Law.
|
The substantive laws of the State of
Nevada shall govern the validity, construction, interpretation, performance, and
effect of this Agreement.
|
22.
|
Arbitration.
|
Any controversy, cause of action or
claim related to or arising out of or in connection with the Employee’s
employment with the Company, including but not limited to termination of such
employment or under this Agreement, other than an action to enforce the
provisions of Section 10 herein or the breach thereof, shall be settled by
arbitration according to the rules of the American Arbitration Association
applicable to disputes arising in Nevada and under Nevada law. Any
party to the arbitration may enter judgment upon the award rendered by the
arbitrator in any court having jurisdiction thereof. The arbitrator
shall not be entitled to amend or alter the terms of this
Agreement. Notwithstanding this Section 22, the Company shall be
entitled to seek any available equitable remedy for enforcement of provisions of
this Agreement.
|
23.
|
Authorization.
|
The Company and the Employee,
individually and severally, represent and warrant to the other party that it has
the authorization, power and right to deliver, execute and fully perform the
obligations under this Agreement in accordance with its terms. The Employee
represents and warrants to the Company that there is no restriction or
limitation, by reason of this Agreement or otherwise, upon the Employee’s right
or ability to enter into this Agreement and fulfill his obligations under this
Agreement.
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24.
|
Acknowledgment.
|
The Employee acknowledges that he has
been given a reasonable period of time to study this Agreement before signing
it. The Employee certifies that he has fully read, has received an
explanation of, and completely understands the terms, nature, and effect of this
Agreement. The Employee further acknowledges that he is executing
this Agreement freely, knowingly, and
17
voluntarily
and that the Employee’s execution of this Agreement is not the result of any
fraud, duress, mistake, or undue influence whatsoever. In executing
this Agreement, the Employee does not rely on any inducements, promises, or
representations by the Company or any person other than the terms and conditions
of this Agreement.
25. Section 409A.
Notwithstanding
anything to the contrary in this Agreement, the payment of consideration,
compensation, and benefits pursuant to this Agreement shall be interpreted and
administered in a manner intended to avoid the imposition of additional taxes
under section 409A of the Code and the regulations and guidance promulgated
thereunder (“Section 409A”). Notwithstanding any provision to the contrary in
this Agreement or otherwise, no payment or distribution under this Agreement or
otherwise that constitutes an item of “deferred compensation” under Section 409A
and becomes payable by reason of the termination of the Employee’s employment
hereunder shall be made to the Employee unless and until the termination of the
Employee’s employment constitutes a “separation from service” (as such term is
defined in Section 409A).
In
addition, no such payment or distribution of deferred compensation shall be made
to the Employee prior to the earlier of (a) the expiration of the six (6) month
period (the “Six Month Period”) measured from the date of the Employee’s
“separation from service” (as such term is defined in Section 409A), and (b) the
date of the Employee’s death, if the Employee is deemed at the time of such
separation from service to be a “specified employee” within the meaning of that
term under Section 409A (the “Six Month Delay”) and if such delayed commencement
is otherwise required to avoid an “additional tax” under section 409A(a)(1)(B)
of the Code. All payments and benefits that are delayed pursuant to the
immediately preceding sentence shall be paid to the Employee in a lump sum upon
expiration of such six (6) month period (or if earlier, upon the Employee’s
death).
Notwithstanding
the foregoing provisions, to the extent permitted under Section 409A, any
separate payment or benefit under this Agreement or otherwise shall not be
“deferred compensation” subject to Section 409A and the Six Month Delay to the
extent provided in the exceptions in Treasury Regulation section 1.409A-1(b)(4)
and (b)(9) and any other applicable exception or provision under Section
409A. Further, each individual installment payment that becomes
payable under this Agreement and each payment of the Severance Pay or if
applicable, the CIC Severance Pay shall be a “separate payment” under Section
409A. Specifically, to the extent the provisions of Treasury
Regulation section 1.409A-1(b)(9) are applicable to the Severance Pay or if
applicable, the CIC Severance Pay, the portion of such severance pay set forth
in respectively, subsection 7(a)(i) or subsection 7(e)(i) above that is less
than the limit prescribed under Treasury Regulation section
1.409A-1(b)(9)(iii)(A) (or any successor provision) (the “Separation Pay
Amount”) shall be payable to the Employee in the manner prescribed in subsection
7(a)(i) or subsection 7(e)(i), as applicable, without regard to the Six Month
Delay. Following the Six Month Delay, (1) to the extent applicable,
the Employee shall receive a lump sum cash payment equal to the Severance Pay or
CIC Severance Pay, as applicable, he otherwise would have received during the
Six Month Period (absent the Six Month Delay) less the Separation Pay Amount and
(2) the Employee shall receive the remainder of his Severance Pay or CIC
Severance Pay, as applicable, in the manner prescribed by subsection 7(a) or
subsection 7(e), as applicable.
18
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date.
|
COMPANY:
|
EMPLOYEE:
|
|||||
|
By:
|
By:
|
|||||
| /s/ Douglas D. Dirks |
|
/s/ Lenard T. Ormsby |
|
|||
|
Name:
Douglas D. Dirks
Chief Executive Officer
|
Name:
Lenard T.
Ormsby
|
|||||
19
Appendix
A
Perquisites
1.
Automobile Allowance in the amount of $1,200.00 per month
2.
Annual Executive Physical Examination as a part of the Company’s executive
wellness program
3.
Life Insurance as a part of the Company’s group life insurance program in an
amount equal to three (3) times the Employee’s Base Salary
20
Exhibit
10.4
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this “Agreement”) by and between Employers Insurance
Company of Nevada, a Nevada corporation (the “Company”) and Martin J. Welch (the
“Employee”) is entered into as of the 17th day of December, 2008, effective
as of January 1, 2009 (the “Effective Date”).
RECITALS
A. The Employee has knowledge and
experience applicable to the position of President and Chief Operating
Officer.
B. The Company desires to continue to
employ the Employee to perform certain services for the Company, its parent, if
any, and their respective subsidiaries and affiliates (the “Company
Affiliates”), as may be required or requested of the Employee in his position as
President and Chief Operating Officer, and the Employee desires to continue to
be so employed by the Company and to perform such services for the Company and
the Company Affiliates.
In
consideration of the premises above and mutual covenants and promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are mutually acknowledged, the parties agree as follows:
TERMS
|
1.
|
Employment.
|
The Company agrees to continue to
employ the Employee and the Employee accepts such continued employment upon the
terms and conditions specified herein. The Employee agrees to continue to devote
substantially all of his time and effort during working hours in the performance
of the duties called for herein and agrees that any other non-employment related
duties (i.e., industry related groups, service on boards, etc.) will not be
allowed to materially interfere with the performance of the duties called for
herein.
|
2.
|
Term.
|
The term of this Agreement shall
commence on the Effective Date, and continue for three (3) years (the “Initial
Term”), until December 31, 2011, and, thereafter, shall automatically renew for
successive two (2) year periods (each, an “Additional Term;” the Initial Term
and any Additional Terms, collectively the “Term”), unless either party gives
written notice to the other no later than six (6) months prior to expiration of
the Initial Term or any Additional Term, as applicable, of an intent not to
renew this Agreement; subject, however to earlier termination of the Employee's
employment with the Company in accordance with this Agreement (the “Termination
Date”). The expiration of this Agreement at the end of the Term, in
and of itself,
1
shall
not constitute, nor be construed or interpreted as, a termination of the
Employee's employment that would make him eligible for benefits or payments
under Section 7 below. This Agreement shall expire upon the
termination of the Employee's employment for any reason, subject to the
provisions of subsection 10(h) below.
|
3.
|
Services and
Duties.
|
The Employee shall continue to serve as
President and Chief Operating Officer and shall perform such duties as may be
assigned by the Chief Executive Officer from time to time. At the
request of the Board of Directors of the Company (the “Board”), the Employee
shall also serve as a director of the Company and/or one or more of the Company
Affiliates at no additional compensation. The Employee agrees that
upon the termination of his employment with the Company, he shall resign from
the Board and any and all boards of the Company Affiliates effective on the
Termination Date.
|
4.
|
Compensation and
Benefits.
|
|
|
(a)
|
During the term of this Agreement,
the Company shall pay to the Employee an annual salary of not less than
$420,000 (“Base Salary”), which amount shall be paid
according to the Company’s regular payroll practices. The
Company agrees to
review the Base Salary on an annual basis and adjust the salary to comply
with the executive compensation policy in effect at the time of the
review. Any increase made to the annual salary will establish
the new Base Salary for the Employee. All payments made
pursuant to this Agreement, including but not limited to this subsection
4(a), shall be reduced by and
subject to withholding for all federal, state, and local taxes and any
other withholding required by applicable laws and regulations.
|
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(b)
|
The Company will provide an annual incentive (the
“Annual
Incentive”) to the
Employee during the Term based on the Employee’s and the Company’s performance, as determined by
the Board (or a committee thereof) in its sole
discretion. In this regard, the Board (or a committee thereof)
shall set
an annual
incentive target of
not less than seventy
percent (70%) of Base Salary, and the Annual Incentive shall be paid in
accordance with the Company’s regular practice for its senior
officers, as in effect from time to time. To the extent not duplicative of
the specific benefits provided herein, the Employee shall be eligible to
participate in all incentive compensation, retirement, supplemental
retirement, and deferred compensation plans, policies and
arrangements that are
provided generally to other senior officers of the Company at a level (in
terms of the amount and types of benefits and incentive compensation that
the Employee has the opportunity to receive and the terms thereof)
determined in the sole discretion of the Board (or a committee
thereof).
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2
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|
(c)
|
The Employee agrees that the
amounts payable and benefits provided under this Agreement, including but
not limited to any amounts payable or benefits provided under this Section 4 and Section 7 constitute
good, valuable and
separate consideration for the non-competition, assignment and release of
liability provisions contained herein. The Employee acknowledges that he
is aware of the effect of the non-competition, assignment and release of
liability provisions contained herein and agrees that
the amounts payable and benefits provided under this Agreement, including
but not limited to the amounts payable and benefits provided under
this Section 4 and
Section 7, if
any, constitute
sufficient consideration for his agreement to these
provisions.
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(d)
|
In addition to the compensation
called for in this Agreement, the Employee shall be entitled to
receive any and all employee benefits and perquisites generally
provided from time to time to other similarly situated officers
of the
Company as well as the benefits and
perquisites listed on “Exhibit A” attached hereto and incorporated
herein by this reference.
|
|
5.
|
Insurance.
|
The Employee agrees to submit to a
physical examination at a reasonable time as requested by the Company for the
purpose of the Company’s obtaining life insurance on the life of the Employee
for the benefit of the Company; provided, however, that the Company shall bear
the costs for such examinations and shall pay all premiums on any life insurance
obtained as a result of such examinations. The Employee further
agrees to submit to drug testing in accordance with the Company's policies and
procedures.
|
6.
|
Termination.
|
|
|
(a)
|
The Company, at any time, may
terminate this Agreement and the Employee's employment
immediately
for “Cause”. Cause is defined
as:
|
|
|
(i)
|
A material breach of this
Agreement by the
Employee;
|
|
|
(ii)
|
Failure or inability of
the Employee to obtain or maintain any
required licenses or
certificates;
|
|
|
(iii)
|
Willful violation by the Employee of any law, rule or
regulation, including
but not limited
to any material
insurance law or regulation, which violation may, as determined by the
Company, adversely affect the ability of the Employee to perform his duties
hereunder or may subject the Company to liability or negative publicity; or
|
3
|
|
(iv)
|
Conviction or commission of or the entry of a guilty plea or plea of no
contest to
any felony or
to any other crime involving moral
turpitude.
|
|
|
(b)
|
The Employee may terminate this
Agreement and his
employment with the Company immediately for “Good Reason,” which shall mean the occurrence
of any of the events described in subsections 6(b)(i),
(ii) or (iii) below with respect to which the Employee
has notified the Company of the existence thereof within no more than
ninety (90) days of the initial existence thereof and which is not cured by the Company
within thirty (30) days of the Company’s receipt of written notice from the
Employee of the events alleged to constitute such Good Reason:
|
|
|
(i)
|
A material diminution in the
Employee’s base compensation;
|
|
|
(ii)
|
A material diminution in the Employee’s authority, duties or
responsibilities;
or
|
|
|
(iii)
|
Any other action or inaction that
constitutes a material breach by the Company of this Agreement (as may be amended
from time to time).
|
In addition, the Employee may terminate
this Agreement and his
employment with the Company at any time for any other reason or for no reason,
but such termination shall not constitute termination for “Good Reason.”
|
|
(c)
|
The Company may also terminate
this Agreement and
the Employee's employment upon the occurrence of one or more of the
following events or
reasons, subject to applicable
law (or, in the case
of subsection 6(c)(i) below, termination of this Agreement and the
Employee's employment will be automatic):
|
|
|
(i)
|
Death of the Employee;
|
|
|
(ii)
|
The Employee is deemed to be disabled in accordance
with the policies of the Company or the law or if the Employee is unable to perform the
essential job functions of the Employee’s position with the Company, with
or without reasonable accommodation, for a period of more than 100 business days in any 120
consecutive business day period. The Employee is entitled to any and
all short term or long term disability programs, like any other employee,
in accordance with the terms of such programs and the
policies of the
Company;
or
|
4
|
|
(iii)
|
At any time for any other reason or no reason in the sole and absolute
discretion of the Company.
|
|
7.
|
Payments Upon
Termination.
|
|
|
(a)
|
Qualifying
Termination and Severance Pay. If the Company terminates the Employee's employment prior to the expiration of the Term but other than during the CIC Period (as defined
below) for any reason
other than as
specified above in
subsection 6(a) for Cause, subsection 6(c)(i) by reason of the death of the Employee, or subsection 6(c)(ii
|
|
|
(i)
|
In lieu of any further salary
payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance benefit otherwise
payable to the Employee, an amount equal to one (1) times Base Salary, payable in equal bi-weekly installments on
the Company’s regular payroll
dates as in effect on
such Termination Date, for twelve (12) months following the Termination Date, commencing with the payroll date applicable to the first full payroll period
following the Termination Date; provided, however, that such
payments shall be delayed to the extent required under Section
25 below. The payments shall be subject to normal payroll
deductions.
|
|
|
(ii)
|
Continuation of the medical, dental and
vision insurance
coverage in effect on the Termination Date for a period of twelve (12) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying
the employee portion, including dependents if applicable, of the premium during
such twelve (12) month period, provided
that the Employee elects to continue such
insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”). The Employee is solely responsible for
taking the actions necessary to exercise his rights under COBRA for the
insurance coverage the Employee has in effect,
including coverage
for dependents if
applicable, on the
Termination Date.
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(b)
|
Severance
Pay as Liquidated Damages. The parties agree, in the event of
a material
breach of this
Agreement by the Company, following which the Employee
terminates his employment, that actual damages are
speculative and that the amount of the Severance
Pay or, if applicable, the CIC Severance
Pay (as defined below) set forth herein is liquidated
damages and is a reasonable estimate of what damages would be for a
material breach of this
Agreement.
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5
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(c)
|
Conditions
to Severance Pay, CIC
Severance
Pay
or Non-Competition
Pay. The Employee agrees and acknowledges
that the following must be satisfied by the Employee before he is entitled
to the Severance Pay or, if applicable, the CIC Severance
Pay provided for
herein or the
Non-Competition
Pay as defined and described in subsection 10(a):
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(i)
|
That the Employee returns any and all equipment, software,
data, property and information of the Company and the Company
Affiliates, including
documents and records or copies thereof relating in any way to
any proprietary
information of the Company or any of the Company
Affiliates whether prepared by the Employee
or any other person or entity. That the Employee further agrees that he
shall not retain any proprietary information of the Company or any of the Company Affiliates after the Termination Date;
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(ii)
|
That the Employee executes a Global Release of Liability, in
a form to be
determined by the Company in its sole discretion, which releases the Company and the Company
Affiliates from liability for any and all
claims, complaints and causes of
action, whether based in law or equity,
arising from, related
to or associated with
the Employee’s employment by the Company or under this Agreement and that such release has become
effective and non-revocable. That the Employee further acknowledges and
agrees that he has not made and will not make any assignment of any claim,
cause or right of action, or any right of any kind whatsoever, arising
from, related
to or associated with
the employment of the
Employee by the
Company;
and
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(iii)
|
That the Employee reaffirms the covenants contained herein,
in writing, including, but not limited to, the covenants set forth in Section 10.
|
Notwithstanding anything in this
Agreement to the contrary,
in any case where the first and last days of the applicable release and nonrevocability periods provided for in the Global Release of
Liability (the “Applicable Release Period”) are in two separate taxable years, any
payments required to be made to the Employee under this Agreement that are treated as deferred compensation for purposes
of Section 409A (as defined below) shall be made in the later taxable year,
as soon as practicable, but
in no event later than thirty (30) days following the conclusion of the
Applicable Release Period.
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(d)
|
Voluntary
Termination
by the Employee. The Employee may terminate
his employment and
this Agreement for
reasons other than those identified in subsection 6(b) upon not less than
sixty (60) days prior written notice.
If the Employee terminates
his employment and
this Agreement pursuant to this
subsection
7(d), he shall be entitled
only to the
following:
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6
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(i)
|
Any unpaid salary through the
Termination
Date;
and
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(ii)
|
Payment for any accrued and unused
vacation as of the
Termination Date.
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(e)
|
Qualifying
Change in Control Termination. If, before the expiration of the
Term, the Company terminates the
Employee's employment within the period commencing six (6) months prior
to and ending eighteen (18) months following a Change in
Control (as defined
below), such period referred to herein
as the “CIC Period,” for any reason other than as specified above in subsection
6(a) for Cause, subsection 6(c)(i) for the death of the Employee, or subsection 6(c)(ii) for disability, or if the
Employee terminates his employment for Good Reason pursuant to subsection 6(b), the Employee shall receive
the severance pay set
forth in subsections (i) and (ii) below (the “CIC Severance Pay”), provided that if the
Employee’s employment is
terminated during the
six (6) month period
prior to a Change in
Control, the Employee shall be entitled to CIC Severance
Pay only if such termination (x) was by the Company other than for Cause but
at the request or direction of
any person that has entered into an agreement
with the Company the consummation of which would constitute a Change in Control,
(y) was by the Employee for Good Reason and the circumstance or event
that constitutes Good
Reason occurred at the request or direction of such
person or (z) was by the Company without Cause and
the Employee reasonably demonstrates that such termination
was otherwise in
connection with or in anticipation of a Change in Control; and if the Employee is not
entitled to CIC Severance Pay hereunder, then the Employee's termination of employment will not be deemed to
have occurred during the CIC Period for purposes of
subsection 7(a):
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(i)
|
In lieu of any further salary
payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, a lump sum cash payment equal to two (2) times the sum of (A) Base Salary
and (B) the average
of the annual bonus
amounts earned by the Employee for the three (3) years preceding the year in which the Change in Control occurs; provided, however, that if the
Termination Date occurs prior to January 1, 2010, then (B)
shall instead
be the average of the
annual bonus amounts earned by the Employee in 2007 and 2008. Such payment shall be made as soon
as practicable (but in no event later than sixty (60) days) following the Termination Date; provided, however, that such payments
shall be delayed to the extent required under Section 25 below;
and
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7
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|
(ii)
|
Continuation of the medical, dental and
vision insurance coverage in effect on
the Employee's
Termination Date for a period of
eighteen (18) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying the
employee portion, including dependents if applicable, of the premium during
such eighteen
(18)-month period, provided that the
Employee elects to
continue such insurance coverage under COBRA. The Employee is solely
responsible for taking the actions necessary to exercise his rights under
COBRA for the insurance coverage the Employee has in effect, including
coverage for
dependents if
applicable, on the
Termination Date.
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(f)
|
Definition
of Change in Control.
For purposes of this Agreement,
a “Change in Control” shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:
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(i)
|
Any one person, or more
than one person
acting as a group, acquires ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than 50% of the total fair market
value or total voting power of the stock of the Company;
or
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(ii)
|
Any one person, or more than one person acting
as a group, acquires (or has acquired during the twelve (12)-month period ending on the date
of the most recent acquisition by such person or persons) ownership of
stock of the Company possessing 35% or more of the total
voting power of the
stock of the
Company;
or
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(iii)
|
A majority of members of the
Board is replaced during any
twelve (12)-month period by directors whose
appointment or election is not endorsed by a majority of the members of
the Board before the date of the
appointment or
election;
or
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(iv)
|
Any one person or group acquires (or has
acquired during the immediately preceding twelve (12)-month period ending
on the date of the most recent acquisition) assets of the Company with an
aggregate gross fair market value of not less than forty percent (40%) of the
aggregate gross fair market value of the assets of the Company immediately
prior to such acquisition. For this purpose, gross fair market
value shall mean the fair value of the affected assets determined without
regard to any liabilities associated with
such assets.
|
Notwithstanding the foregoing, (1) a
“Change in Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated
8
transactions immediately following which
the holders of the common
stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the
assets of the Company immediately following such transaction or
series of transactions, and (2) a “Change in Control” shall not be deemed to have occurred as result of
any secondary offering of
Company common stock to the general public through a registration statement
filed with the Securities
and Exchange Commission. The Board shall determine whether a
Change in Control has occurred hereunder in a manner consistent with the
provisions of Section 409A.
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(g)
|
No
Duplication of Payments or Benefits. Notwithstanding any
provision of
this
Agreement to the
contrary, the
Employee shall not be eligible to receive any payments or benefits under
both subsections 7(a) and 7(e); but rather, to the extent the
conditions set forth in subsection 7(a) and subsection 7(e) are satisfied, the Employee
shall be eligible to
receive benefits under only subsection 7(e).
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(h)
|
Golden
Parachute (Section
280G) Excise
Taxes.
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(i)
|
Subject to subsection 7(h)(ii) below, if it is determined that any payment or benefit received or
to be received by the Employee, whether pursuant to this Agreement or
otherwise (the
“Severance
Payments”), is a “parachute payment” within the meaning of
section 280G of the Internal Revenue Code (the
“Code”) (all such payments and benefits,
including the Severance Payments as applicable, but excluding the Gross-Up
Payment (as defined below) being hereinafter called
“Total Payments”) that will be subject (in whole or part)
to the tax imposed
under section 4999 of the Code (the
“Excise Tax”), then the Company shall pay to
the Employee on or as soon as practicable following the day on
which the Excise Tax is remitted by the Employee (but not later than the end of
the taxable year following the year in which the Excise Tax is
incurred and subject
to the provisions set forth in Section 25 below, including if applicable, the Six Month
Delay (as defined in such section)) an additional amount (the
“Gross-Up Payment”) such that the net amount
retained by the Employee, after deduction of any Excise
Tax on the Total Payments and any federal, state and local
income and employment
taxes and Excise Tax
upon the Gross-Up Payment, shall be equal to the Total
Payments.
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(ii)
|
In the event that the amount of
the Total Payments does not exceed 110% of the largest amount that would
result in no portion of the Total Payments being subject to the Excise Tax (the
“Safe Harbor”), the non-cash portion of the Total Payments
shall first be
reduced (if necessary, to zero), and the cash portion of the Total Payments shall thereafter be reduced (if
necessary, to zero) so that the amount of the Total Payments is equal to
the Safe Harbor.
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9
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|
(iii)
|
For purposes of determining
whether any of the Total Payments will be subject to the Excise Tax and
the amount of such Excise Tax, (A) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel
(“Tax
Counsel”) selected by the Board in existence immediately prior to
the Change in Control, does not constitute a
“parachute
payment” within the
meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (B) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments (other
than those referred to in clause (A)) in their entirety constitute
reasonable compensation for services actually rendered within
the meaning of
section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as deductions by reason of
section 280G of the Code, in the
opinion of Tax Counsel, and (C) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall
be determined by the Company's independent
auditor in
accordance with the
principles of sections 280G(d)(3) and (4) of the
Code. If the Employee disputes the Company's
calculations (in whole or in part), the reasonable opinion of Tax Counsel with respect
to the matter in dispute shall
prevail.
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(iv)
|
If the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Employee shall repay to the Company,
at the time that the
amount of such reduction in Excise Tax is finally determined, the portion
of the Gross-Up Payment attributable to such reduction (plus that portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Employee to the extent that such
repayment results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction) plus interest on the amount of
such repayment at 120% of the rate
provided in section 1274(b)(2)(B) of the Code. If the Excise
Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest, penalties
or additions payable by the Employee with respect to such excess) at the
time that the amount of such excess is
finally determined.
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(v)
|
The Employee and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount
of liability for Excise Tax with respect to the Total
Payments. The Company also shall pay to the Employee all legal
fees and expenses incurred by the Employee in connection with any tax
audit or proceeding to the extent attributable to the application of
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10
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|
|
section 4999 of the Code
to any payment or benefit provided
hereunder. Such payments shall be made within sixty (60) business days
after delivery of the Employee's written request for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably
may require (but in no event shall any
such payment be made after the end of the calendar year following the
calendar year in which the expenses were incurred), provided that no such
payment shall be made in respect of fees or expenses incurred by the
Employee after the later of the tenth
(10th) anniversary of the effective date of the Employee's termination
with the Company or the Employee's death and, provided further, that, upon
the Employee’s “separation from
service” (as such
term is defined under Section 409A) with the Company, in no event
shall any additional such payments be made prior to the date that is six
(6) months after the date of the Employee’s “separation from
service” to the
extent such payment delay is required under section 409A(a)(2)(B) of
the
Code.
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8.
|
Licensing.
|
The Employee has obtained and
possesses, or will obtain and possess, and will maintain throughout the Term
hereof, all licenses, approvals, permits, and authorization (the “Licenses”)
necessary to perform the Employee’s duties hereunder (if any). Any
costs, attorneys’ fees, investigation fees or other expenses incurred in
connection with obtaining or maintaining such Licenses shall be borne by the
Company, provided that payment of such fees or costs by the Company shall be
made no later than the end of the year following the year in which the expenses
were incurred. The Employee warrants that the Employee is fully
eligible, under all standards and requirements, to obtain, possess, and maintain
such Licenses and that the Employee will commit no acts during the Term hereof
that would jeopardize or eliminate the Employee’s ability to possess or maintain
such Licenses.
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9.
|
Rules and
Regulations.
|
The Employee shall observe, enforce,
and comply with the policies, philosophies, strategies, rules, and regulations
of the Company, as they may be promulgated and/or modified from time to time,
and shall carry out and perform the orders, directions, and policies of the
Company, as they may be stated and/or amended from time to time, either orally
or in writing. A violation of this Section 9 by the Employee is a
material breach of this Agreement.
|
10.
|
Restrictive
Covenants.
|
In consideration of the amounts payable
and benefits provided under Section 4, and, if applicable, Section 7 and
subsection 10(a), the other compensation paid hereunder, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the parties, the parties agree to the following provisions of this Section
10:
11
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|
(a)
|
Non-Competition. The Employee understands and agrees that the Company
and the Company
Affiliates do
business throughout the State of Nevada and other states. The Employee further understands and agrees
that he is a high ranking officer of the Company and will have access to
confidential and trade secret information and goodwill of the Company and the Company Affiliates
that will allow
the
Employee to unfairly
compete with the Company and the Company Affiliates
justifying this
restriction. If the Employee's
employment is
terminated (by either
the Employee or the
Company), whether or
not during the Term,
for any reason other than as specified above in subsection 6(c)(i) by reason of the death of the Employee, or
subsection 6(c)(ii) for disability, then for a period of twelve (12) months commencing on the
date of such termination of
employment,
the
Employee agrees that,
without the written permission of the Company, he will not engage (whether
as owner, partner, controlling stockholder, controlling investor,
employee, director,
adviser, consultant,
or otherwise) in any
business that is in direct competition with the business being conducted by the Company or
any of the
Company
Affiliates as of the date the Employee terminates
employment, in Nevada
or in any other state in which the
Company is conducting
such business (the “Non-Compete Area”) as of the date the Employee terminates
employment
(collectively, the “Non-Competition
Activities”); provided that if the Employee's
employment is
terminated (x) during the Term by the Employee
for any reason other
than (I) as specified above in subsection 6(b) for Good Reason, (II) as
specified above in subsection 6(c)(i) by reason of death, or (III) as
specified above in
subsection 6(c)(ii) by reason of disability, or
(y) following the expiration of the Term, (by either the Employee or the
Company) for any reason other than as specified above in subsection 6(a)
by the Company for “Cause,” in subsection 6(c)(i) by reason
of the death of the Employee, or subsection 6(c)(ii) for
disability, then the Employee shall
be entitled
to, in lieu of any further salary
payments to the Employee for periods subsequent to such termination of
employment and in
lieu of any severance benefit otherwise payable to the Employee, an amount
(the “Non-Competition Pay”) equal to one (1 times Base Salary payable in equal bi-weekly
installments on the Company’s regular payroll dates as in
effect on such termination date, for twelve (12) months following such termination date, commencing with the payroll
date applicable to the first full payroll period following such termination date; provided, however, that such
payments shall be delayed to the extent required under Section
25 below. Notwithstanding anything in this
Agreement to the contrary, (1) if the non-competition provision
in this subsection
10(a) is, or at any time becomes, nonenforceable, then the Employee shall
not be entitled to any unpaid Non-Competition Pay that would otherwise be due under
this subsection 10(a)
and (2) if following the one-year anniversary of the date of
termination of
the
Employee’s employment, the Employee has not and does not engage in the
Non-Competition Activities and (A) his employment had been terminated whether or not during the Term, for any reason other than as
specified above in subsection 6(a) for Cause, subsection 6(c)(i) by reason of
the death of the Employee, or subsection 6(c)(ii) for disability, or if
the Employee had
terminated his employment for Good Reason
pursuant to subsection 6(b), then (A) if such termination occurred
during
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12
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|
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the Term, the Company shall continue to pay
the Severance Pay described in subsection
7(a)(i) commencing with the payroll date
applicable to the first full payroll period following such one-year
anniversary and
to provide the
COBRA benefits
described in
subsection 7(a)(ii), and (B) if such termination occurred
after the Term, the Company shall continue to
pay the Non-Competition Pay described in
this subsection 10(a) commencing with the payroll date
applicable to the first full payroll period following such one-year anniversary, in either case, for the shorter
of an additional six months or until the Employee engages in any Non-Competition
Activities. All payments described
herein shall be
subject to normal payroll deductions.
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(b)
|
Non-Solicitation. Without limiting the
generality of the
foregoing, the
Employee agrees that
for a period of eighteen (18) months following the Employee's termination of
employment (for any
reason, by either the Employee or the Employer), he will not, without the prior
written consent of the Company, directly or indirectly solicit or
attempt to solicit, within the Non-Compete Area, any business from any
person or entity that the Company or any of the Company Affiliates
called upon,
solicited, or conducted business with as of such termination date, any persons or entities that have been
customers of the Company or any of the Company Affiliates
or recruit any person
who has been or is an employee of the Company or any of the Company
Affiliates, during
the preceding one
(1)-year period from
such termination date. In addition, the Employee agrees that he shall not directly
or indirectly solicit or encourage any employee of the Company or any of the Company
Affiliates to go to
work for or with the
Employee for a period
of one
(1)-year following
such termination date.
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(c)
|
In the event the Employee violates subsection 10(a) or 10(b), the applicable period of time during which the respective restriction
applies will automatically be extended for
the period of time from which the Employee began such violation until
he permanently ceases
such violation. If any provision of this covenant
is invalid in whole or in part, it will be limited, whether as to time,
area covered, or otherwise as and to the extent required for its validity
under the applicable law and as so limited, will be
enforceable.
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(d)
|
Confidential
Information.
The
Employee acknowledges
that he has had or will have access to the confidential
information of the
Company and the Company Affiliates (including, but not limited to,
records regarding sales, price and cost information, marketing
plans, customer names, customer lists, sales techniques, distribution
plans or procedures, and other material relating to the business conducted by the Company
and the Company Affiliates), proprietary, or trade secret
information (the
“Confidential
Information”), and
agrees never to use the Confidential Information other than for the sole
benefit of the Company and the Company Affiliates
and further agrees to
never disclose such Confidential Information (except as may be
required by
regulatory authorities or as may be
|
13
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|
|
required by law) to any entity or
person that is not an officer or employee of the Company or a Company Affiliate
at the time of such
disclosure (unless at
such time such Confidential Information is subject to a policy of the Company or a Company
Affiliate restricting
disclosure to non-officers), in which case disclosure shall
be limited solely to officers of the Company or the applicable Company
Affiliate at the time
of such disclosure, without the prior written consent of the Company. The Employee further acknowledges that this
covenant to maintain Confidential Information is necessary to protect the
goodwill and proprietary interests of the Company and the Company
Affiliates and the
restriction against the disclosure of Confidential Information
is reasonable in light of the consideration and other value the Employee
has received or will receive pursuant to this Agreement and otherwise pursuant to his
employment by the Company.
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(e)
|
From and following the Employee's termination of employment, the Employee agrees to cooperate with the
Company and the
Company Affiliates in
any litigation, administrative proceeding, investigation or audit
involving any matters with which the Employee has knowledge of from his
employment with the
Company. The Company shall reimburse
the
Employee for
reasonable expenses, including reasonable compensation for services
rendered at his
hourly rate of compensation as of such termination date, incurred in providing such
assistance and approved by the Company. The Company shall reimburse the
Employee for such expenses incurred in accordance with the policies
and procedures of the Company, but in no event no later than the end of the year
following the year in which the expenses were incurred.
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(f)
|
In the event of a violation of this
Section 10, the Company and the Company
Affiliates shall be
entitled to any form of relief at law or equity, and the parties agree and
acknowledge that injunctive relief is an appropriate, but not exclusive,
remedy to enforce the
provisions hereof. The existence of any claim or
cause of action of the Employee against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense
of the Company’s enforcement of the covenants set
forth in this Section
10. The Employee hereby submits to the
jurisdiction of the courts of the State of Nevada and federal courts
therein for the purposes of any actions or proceedings instituted by the
Company to enforce its rights under this Agreement, to seek
money damages or seek
injunctive relief. The Employee further acknowledges and agrees
(i) that the obligations contained in
Section 10 of this Agreement are necessary to protect the
interests of the Company and the Company
Affiliates,
(ii) that the restrictions contained herein are
fair, do not
unreasonably restrict the Employee's further employment and business
opportunities, and are commensurate with the compensation arrangements set
out in this Agreement
and (iii) that such compensation arrangements
constitute separate
consideration for the obligations set forth in this Section 10. The covenants contained in Section
10 shall each be construed as an agreement independent of any other
provisions of this Agreement. Both parties intend to make the
covenants of Section
10 binding only to the extent
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14
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|
|
that it may be lawfully done under
existing applicable laws. If a court of competent
jurisdiction decides any part of any covenant is overly broad, thereby
making the covenant unenforceable, the parties agree that such court shall substitute a
reasonable, judicially enforceable limitation in place of the offensive
part of the covenant and as so modified the covenant shall be as fully
enforceable as set forth herein by the parties themselves in the modified
form.
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(g)
|
The Employee acknowledges that it is possible
that the corporate structure of the Company could change during the term
of this Agreement. The Employee hereby acknowledges and affirms
that the Company may assign its rights under this Agreement, including but not limited to its rights to enforce
the covenants set forth in subsections 10(a), 10(b) and
10(c), to a
third-party without the approval of or additional consideration to
the
Employee.
The Employee acknowledges and agrees that the
consideration called for herein is good and sufficient
consideration for the Company's right to assign its rights under this
Agreement.
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(h)
|
Subsections 10(a) through
(g), inclusive, of this Agreement
shall survive either termination of the employment relationship
and/or termination of this Agreement for the full
period set forth in subsections 10(a) through
(g),
inclusive.
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11.
|
Work for
Hire.
|
The Employee agrees that any work,
invention, idea or report that he produces or that results from or is suggested
by the work the Employee does on behalf of the Company or any of the Company
Affiliates is “work for hire” (hereinafter referred to as “Work”) and will be
the sole property of the Company. The Employee agrees to sign any
documents, during or after employment that the Company deems necessary to
confirm its ownership of the Work, and the Employee agrees to cooperate with the
Company to allow the Company to take advantage of its ownership of such
Work.
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12.
|
Assignment of
Agreement.
|
The Employee agrees that his services
are unique and personal and that, accordingly, the Employee may not assign his
rights or delegate his duties or obligations under this Agreement. The Company
may assign its rights, duties, and obligations under this Agreement to any
successor to its business. This Agreement shall inure to the benefit
of and be binding upon the Company’s successors and assigns.
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13.
|
Indemnification of the
Employee.
|
The Company shall indemnify the
Employee and hold him harmless for acts or decisions made by him in good faith
while performing services for the Company or any of the Company Affiliates to
the maximum extent allowed by law. The Company shall also use its
reasonable
15
efforts
to obtain coverage for him under any insurance policy now in force or
hereinafter obtained during Term covering the officers and directors of the
Company against lawsuits, subject to the business judgment of the
Board. The Company shall pay all expenses, including attorneys’ fees
of an attorney selected and retained by the Company to represent the Employee,
actually and necessarily incurred by the Employee in connection with the defense
of such act, suit, or proceeding and in connection with any related appeal,
including the cost of court settlements, provided that, to the extent required
by Section 409A, any such payment by the Company shall be made no later than the
end of the year following the year in which the expenses were
incurred.
|
14.
|
Notices.
|
Any notice, document, or other
communication (hereinafter “Notice”) which either party may be required or may
desire to give to the other party shall be in writing, and any such notice may
be given or delivered personally or by mail or facsimile. Any such
notices given or delivered personally shall be given or delivered by hand to an
officer of the entity to which they are being given or delivered or the
individual, as the case may be, and shall be deemed given or delivered when so
given or delivered by hand. Any such notices given or delivered by
facsimile will be deemed given or delivered upon receipt by the sender of a
successful facsimile transmission to the facsimile number below, and any such
notices given or delivered by mail shall be deemed given or delivered three (3)
days after it is deposited in the U.S. mail, certified or registered mail,
return receipt requested, with all postage and fees prepaid, addressed to the
person or entity in question as follows:
If
to the Employee:
Martin
J. Welch
To
the address (or facsimile number, if applicable) on record with the
Company
If
to the Company:
Chief
Executive Officer
Employers
Insurance Company of Nevada
10375
Professional Circle
Reno, Nevada 89521-4802
Fax: (775)
886-5499
or,
in either case, to such other address as either party may have previously
notified the other pursuant to the provisions of this Section 14.
16
|
15.
|
Severability.
|
In the event that any provision hereof
shall be declared by a court of competent jurisdiction to be void or voidable as
contrary to law or public policy, such declaration shall not affect the
continuing validity or enforceability of any other provisions hereof insofar as
it may be reasonable and practicable to continue to enforce such other provision
in the absence of the provision which shall have been declared to be void and
voidable.
|
16.
|
Remedy for
Breach.
|
Both parties recognize that the
services to be performed by the Employee are special and unique. The
Company will have the right to seek and obtain damages and any available
equitable remedies for the Employee’s breach of this Agreement. The
Employee's remedy for any breach of this Agreement is strictly limited to the
Severance Pay or CIC Severance Pay, as the case may be, called for
herein.
|
17.
|
Mitigation of
Damages.
|
The Employee shall not be required to
mitigate damages or the amount of any payment provided under this Agreement by
obtaining other employment or otherwise after the termination of employment
hereunder, and any amounts earned by the Employee, whether from self-employment
or other employment shall not reduce the amount of any Severance Pay or CIC
Severance Pay, as the case may be, called for herein.
|
18.
|
Attorneys' Fees and
Costs.
|
In any claim or dispute between the
parties arising out of or associated with this Agreement or the breach hereof or
otherwise arising out of or associated with the Employee’s employment by the
Company, the prevailing party shall be entitled to recover all reasonable
attorneys' fees, expenses, and costs thereof or associated therewith, provided
that, to the extent required by Section 409A, any such payment by the Company
shall be made no later than the end of the year following the year in which such
fees, expenses and costs were incurred. The term “prevailing party”
means the party obtaining substantially the relief sought via litigation or
through an action in arbitration.
|
19.
|
Integration, Amendment, and
Waiver.
|
This Agreement and such other written
agreements referenced in this Agreement, constitute the entire agreement between
the parties pertaining to the subject matter contained in it except as expressly
provided herein, and supersedes all prior agreements, representations,
assurances, and understandings of the parties, including any prior employment
agreements. No amendment of, addition to, or modification of this
Agreement shall be binding unless executed in writing by the
parties. Any term or provision of this Agreement may be waived in a
signed writing at any time by the party that is entitled to the benefit thereof,
provided, however, that any
17
waiver
shall apply only to the specific event or omission waived and shall not
constitute a continuing waiver. Any term or provision of this
Agreement may be amended or supplemented at any time by a written instrument
executed by all the parties hereto.
|
20.
|
Captions.
|
The captions and section headings of
this Agreement are for convenience and reference only, and shall have no effect
on the interpretation or construction of this Agreement.
|
21.
|
Applicable
Law.
|
The substantive laws of the State of
Nevada shall govern the validity, construction, interpretation, performance, and
effect of this Agreement.
|
22.
|
Arbitration.
|
Any controversy, cause of action or
claim related to or arising out of or in connection with the Employee’s
employment with the Company, including but not limited to termination of such
employment or under this Agreement, other than an action to enforce the
provisions of Section 10 herein or the breach thereof, shall be settled by
arbitration according to the rules of the American Arbitration Association
applicable to disputes arising in Nevada and under Nevada law. Any
party to the arbitration may enter judgment upon the award rendered by the
arbitrator in any court having jurisdiction thereof. The arbitrator
shall not be entitled to amend or alter the terms of this
Agreement. Notwithstanding this Section 22, the Company shall be
entitled to seek any available equitable remedy for enforcement of provisions of
this Agreement.
|
23.
|
Authorization.
|
The Company and the Employee,
individually and severally, represent and warrant to the other party that it has
the authorization, power and right to deliver, execute and fully perform the
obligations under this Agreement in accordance with its terms. The Employee
represents and warrants to the Company that there is no restriction or
limitation, by reason of this Agreement or otherwise, upon the Employee’s right
or ability to enter into this Agreement and fulfill his obligations under this
Agreement.
|
24.
|
Acknowledgment.
|
The Employee acknowledges that he has
been given a reasonable period of time to study this Agreement before signing
it. The Employee certifies that he has fully read, has received an
explanation of, and completely understands the terms, nature, and effect of this
Agreement. The Employee further acknowledges that he is executing
this Agreement freely, knowingly, and voluntarily and that the Employee’s
execution of this Agreement is not the result of any fraud, duress, mistake, or
undue influence whatsoever. In executing this Agreement, the Employee
18
does
not rely on any inducements, promises, or representations by the Company or any
person other than the terms and conditions of this Agreement.
25. Section 409A.
Notwithstanding
anything to the contrary in this Agreement, the payment of consideration,
compensation, and benefits pursuant to this Agreement shall be interpreted and
administered in a manner intended to avoid the imposition of additional taxes
under section 409A of the Code and the regulations and guidance promulgated
thereunder (“Section 409A”). Notwithstanding any provision to the contrary in
this Agreement or otherwise, no payment or distribution under this Agreement or
otherwise that constitutes an item of “deferred compensation” under Section 409A
and becomes payable by reason of the termination of the Employee’s employment
hereunder shall be made to the Employee unless and until the termination of the
Employee’s employment constitutes a “separation from service” (as such term is
defined in Section 409A).
In
addition, no such payment or distribution of deferred compensation shall be made
to the Employee prior to the earlier of (a) the expiration of the six (6) month
period (the “Six Month Period”) measured from the date of the Employee’s
“separation from service” (as such term is defined in Section 409A), and (b) the
date of the Employee’s death, if the Employee is deemed at the time of such
separation from service to be a “specified employee” within the meaning of that
term under Section 409A (the “Six Month Delay”) and if such delayed commencement
is otherwise required to avoid an “additional tax” under section 409A(a)(1)(B)
of the Code. All payments and benefits that are delayed pursuant to the
immediately preceding sentence shall be paid to the Employee in a lump sum upon
expiration of such six (6) month period (or if earlier, upon the Employee’s
death).
Notwithstanding
the foregoing provisions, to the extent permitted under Section 409A, any
separate payment or benefit under this Agreement or otherwise shall not be
“deferred compensation” subject to Section 409A and the Six Month Delay to the
extent provided in the exceptions in Treasury Regulation section 1.409A-1(b)(4)
and (b)(9) and any other applicable exception or provision under Section
409A. Further, each individual installment payment that becomes
payable under this Agreement and each payment of the Severance Pay or if
applicable, the CIC Severance Pay or the Non-Competition Pay pursuant to
subsection 10(a) shall be a “separate payment” under Section
409A. Specifically, to the extent the provisions of Treasury
Regulation section 1.409A-1(b)(9) are applicable to the Severance Pay or if
applicable, the CIC Severance Pay or the Non-Competition Pay pursuant to
subsection 10(a), the portion of such pay set forth in respectively, subsection
7(a)(i), subsection 7(e)(i) or subsection 10(a) above that is less than the
limit prescribed under Treasury Regulation section 1.409A-1(b)(9)(iii)(A) (or
any successor provision) (the “Delayed Amount”) shall be payable to the Employee
in the manner prescribed in subsection 7(a)(i), subsection 7(e)(i) or subsection
10(a), as applicable, without regard to the Six Month
Delay. Following the Six Month Delay, (1) to the extent applicable,
the Employee shall receive a lump sum cash payment equal to the Severance Pay,
CIC Severance Pay or the Non-Competition Pay pursuant to subsection 10(a), as
applicable, he otherwise would have received during the Six Month Period (absent
the Six Month Delay) less the Delayed Amount and (2) the Employee shall receive
the remainder of his Severance Pay, CIC Severance Pay or the Non-Competition Pay
pursuant to subsection 10(a), as applicable, in the manner prescribed by
subsection 7(a), subsection 7(e) or subsection 10(a), as
applicable.
19
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date.
|
COMPANY:
|
EMPLOYEE:
|
|||||
|
By:
|
By:
|
|||||
| /s/ Douglas D. Dirks |
|
/s/ Martin J. Welch |
|
|||
|
Name: Douglas
D. Dirks
Chief Executive
Officer
|
Name:
Martin J.
Welch
|
|||||
20
Appendix
A
Perquisites
1.
Automobile Allowance in the amount of $1,200.00 per month
2.
Annual Executive Physical Examination as a part of the Company’s executive
wellness program
3.
Life Insurance as a part of the Company’s group life insurance program in an
amount equal to three (3) times the Employee’s Base Salary
Exhibit
10.5
EMPLOYMENT
AGREEMENT
This
Employment Agreement (this “Agreement”) by and between Employers Holdings, Inc.,
a Nevada corporation (the “Company”) and William E. Yocke (the “Employee”) is
entered into as of the 17th day of December, 2008, effective as of January
1, 2009 (the “Effective Date”).
RECITALS
A. The Employee has knowledge and
experience applicable to the position of Executive Vice President and Chief
Financial Officer.
B. The Company desires to continue to
employ the Employee to perform certain services for the Company, its parent, if
any, and their respective subsidiaries and affiliates (the “Company
Affiliates”), as may be required or requested of the Employee in his position as
Executive Vice President and Chief Financial Officer, and the Employee desires
to continue to be so employed by the Company and to perform such services for
the Company and the Company Affiliates.
In
consideration of the premises above and mutual covenants and promises set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are mutually acknowledged, the parties agree as follows:
TERMS
|
1.
|
Employment.
|
The Company agrees to continue to
employ the Employee and the Employee accepts such continued employment upon the
terms and conditions specified herein. The Employee agrees to continue to devote
substantially all of his time and effort during working hours in the performance
of the duties called for herein and agrees that any other non-employment related
duties (i.e., industry related groups, service on boards, etc.) will not be
allowed to materially interfere with the performance of the duties called for
herein.
|
2.
|
Term.
|
The term of this Agreement shall
commence on the Effective Date, and continue for three (3) years (the “Initial
Term”), until December 31, 2011, and, thereafter, shall automatically renew for
successive two (2) year periods (each, an “Additional Term;” the Initial Term
and any Additional Terms, collectively the “Term”), unless either party gives
written notice to the other no later than six (6) months prior to expiration of
the Initial Term or any Additional Term, as applicable, of an intent not to
renew this Agreement; subject, however to earlier termination of the Employee's
employment with the Company in accordance with this Agreement (the “Termination
Date”). The expiration of this Agreement at the end of the Term, in
and of itself, shall not constitute, nor be construed or interpreted as, a
termination of the Employee's employment that would make him eligible for
benefits or payments under Section 7 below. This Agreement shall
expire upon the termination of the Employee's employment for any reason, subject
to the provisions of subsection 10(h) below.
1
|
3.
|
Services and
Duties.
|
The Employee shall continue to serve as
Executive Vice President and Chief Financial Officer and shall perform such
duties as may be assigned by the Chief Executive Officer from time to
time. At the request of the Board of Directors of the Company (the
“Board”), the Employee shall also serve as a director of the Company and/or one
or more of the Company Affiliates at no additional compensation. The
Employee agrees that upon the termination of his employment with the Company, he
shall resign from the Board and any and all boards of the Company Affiliates
effective on the Termination Date.
|
4.
|
Compensation and
Benefits.
|
|
|
(a)
|
During the term of this Agreement,
the Company shall pay to the Employee an annual salary of not less than
$365,000 (“Base Salary”), which amount shall be paid
according to the Company’s regular payroll practices. The
Company agrees to review the Base Salary on an annual basis and adjust the
salary to comply with the executive compensation policy in effect at the
time of the review. Any increase made to the annual salary will
establish the new Base Salary for the
Employee. All payments made pursuant to this Agreement,
including but not limited to this subsection 4(a), shall be reduced by and
subject to withholding for all federal, state, and local taxes and any
other withholding required by applicable laws and
regulations.
|
|
|
(b)
|
The Company will provide an annual incentive (the
“Annual
Incentive”) to the
Employee during the Term based on the Employee’s and the Company’s performance, as determined by
the Board (or a committee thereof) in its sole
discretion. In this regard, the Board (or a committee thereof)
shall set
an annual
incentive target of
not less than fifty-five percent (55%) of Base Salary, and the Annual Incentive shall be paid in
accordance with the Company’s regular practice for
its senior officers,
as in effect from time to time. To the extent not duplicative of
the specific benefits provided herein, the Employee shall be eligible to
participate in all incentive compensation, retirement, supplemental
retirement, and deferred compensation plans, policies and
arrangements that are provided generally to other senior officers of the
Company at a level (in terms of the amount and types of benefits and
incentive compensation that the Employee has the opportunity to receive
and the terms thereof) determined in the sole
discretion of the Board (or a committee
thereof).
|
|
|
(c)
|
The Employee agrees that the
amounts payable and benefits provided under this Agreement, including but
not limited to any amounts payable or benefits provided under this Section 4 and Section 7 constitute good,
valuable and separate consideration for the non-competition, assignment
and release of liability provisions contained herein. The Employee
acknowledges that he is aware of the effect of the non-competition,
assignment and
release of liability provisions
|
2
|
|
|
contained herein. The Employee
acknowledges that he is aware of the effect of the non-competition,
assignment and
release of liability provisions contained herein and agrees that the
amounts payable and benefits provided under this Agreement, including but
not limited to the amounts payable and benefits provided under
this Section 4 and
Section 7, if
any,
constitute sufficient
consideration for his agreement to these
provisions.
|
|
|
(d)
|
In addition to the compensation
called for in this Agreement, the Employee shall be entitled to
receive any and all employee benefits and perquisites generally
provided from time to time to other similarly situated officers
of the Company as well as the benefits and
perquisites listed on “Exhibit A” attached hereto and incorporated
herein by this reference.
|
|
5.
|
Insurance.
|
The Employee agrees to submit to a
physical examination at a reasonable time as requested by the Company for the
purpose of the Company’s obtaining life insurance on the life of the Employee
for the benefit of the Company; provided, however, that the Company shall bear
the costs for such examinations and shall pay all premiums on any life insurance
obtained as a result of such examinations. The Employee further
agrees to submit to drug testing in accordance with the Company's policies and
procedures.
|
6.
|
Termination.
|
|
|
(a)
|
The Company, at any time, may
terminate this Agreement and the Employee's employment immediately for “Cause”. Cause is defined
as:
|
|
|
(i)
|
A material breach of this
Agreement by the
Employee;
|
|
|
(ii)
|
Failure or inability of
the Employee to obtain or maintain any
required licenses or
certificates;
|
|
|
(iii)
|
Willful violation by the Employee of any law, rule or regulation,
including but not
limited to any
material insurance law or regulation, which violation may, as determined
by the Company, adversely affect the ability of the Employee to perform his duties
hereunder or may subject the Company to liability or negative publicity; or
|
|
|
(iv)
|
Conviction or commission of or the entry of a guilty plea or plea of no
contest to
any felony or
to any other crime involving moral
turpitude.
|
3
|
|
(b)
|
The Employee may terminate this
Agreement and his
employment with the Company immediately for “Good Reason,” which shall mean the occurrence
of any of the following
events with respect
to which the Employee has notified the Company of the existence thereof
within no more than ninety (90) days of the initial existence
thereof
and which is not cured by the Company
within thirty (30) days of the Company’s receipt of written notice from the
Employee of the events alleged to constitute such Good Reason:
|
|
|
(i)
|
A material diminution in the
Employee’s base compensation;
|
|
|
(ii)
|
A material diminution in the Employee’s authority, duties or
responsibilities;
or
|
|
|
(iii)
|
Any other action or inaction that
constitutes a material breach by the Company of this Agreement (as may be amended
from time to time).
|
|
|
(c)
|
The Company may also terminate
this Agreement and
the Employee's
employment upon the
occurrence of one or more of the following events or reasons, subject to applicable
law (or, in the case
of subsection 6(c)(i) below, termination of this Agreement and the
Employee's employment will be automatic):
|
|
|
(i)
|
Death of the Employee;
|
|
|
(ii)
|
The Employee is deemed to be disabled
in accordance with the policies of the Company or the law or if the Employee is unable to perform the
essential job functions of the Employee’s position with the Company, with
or without reasonable accommodation, for a period of more than
100 business days in any 120 consecutive business day period. The Employee is entitled to any and
all short term or long term disability programs, like any other employee,
in accordance with the terms of such programs and
the policies of the
Company;
or
|
|
|
(iii)
|
At any time for any other reason or no reason in the sole and absolute
discretion of the Company.
|
|
7.
|
Payments Upon
Termination.
|
|
|
(a)
|
Qualifying
Termination and Severance Pay. If the Company terminates the Employee's employment prior to the expiration of the Term but other than during the CIC Period (as defined
below) for any reason
other than as
specified above
in
|
4
|
|
|
subsection 6(a) for Cause, subsection 6(c)(i) by reason of the death of the Employee, or subsection 6(c)(ii) for disability, or if the Employee terminates his employment for
Good Reason pursuant
to subsection
6(b), the Employee shall receive
the following severance pay (the “Severance Pay”):
|
|
|
(i)
|
In lieu of any further salary
payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, an amount equal to one and one half (1 ½) times Base Salary, payable in equal bi-weekly installments on
the Company’s regular payroll
dates as in effect on
such Termination
Date, for eighteen (18) months following the Termination Date, commencing with the payroll date applicable to the first full payroll period
following the Termination Date; provided, however, that such
payments shall be delayed to the extent required under Section 25 below. The payments shall be subject to normal
payroll deductions.
|
|
|
(ii)
|
Continuation of the medical, dental and
vision insurance
coverage in effect on the Termination Date for a period of eighteen (18) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying the
employee portion, including dependents if applicable, of the premium during
such eighteen (18)
month period, provided that the Employee elects to continue such
insurance coverage
under the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended (“COBRA”). The Employee is solely responsible for
taking the actions necessary to exercise his rights under COBRA for the
insurance coverage the Employee has in
effect,
including coverage
for dependents if
applicable, on the Termination Date.
|
|
|
(b)
|
Severance
Pay as Liquidated Damages. The parties agree, in the event of
a material
breach of this
Agreement by the Company with respect to which the Employee
has given notice and that is not cured, in either case, in accordance with subsection 6(b), following which the Employee
terminates his employment for Good Reason, that actual damages are
speculative and that the amount of the Severance Pay or, if applicable, the CIC
Severance Pay (as
defined below) set
forth herein is liquidated damages and is a reasonable estimate of what
damages would be for a material breach of this
Agreement.
|
|
|
(c)
|
Conditions
to Severance Pay or CIC Severance Pay. The Employee agrees and acknowledges
that the following
must be satisfied by the Employee before he is entitled to the Severance
Pay or, if applicable, the CIC Severance
Pay provided for
herein:
|
5
|
|
(i)
|
That the Employee returns any and all equipment, software,
data, property and information of the Company and the Company
Affiliates, including
documents and records or copies thereof relating in any way to any
proprietary information of the Company or any of the Company
Affiliates whether prepared by the Employee
or any other person or entity. That the Employee further agrees that he shall not
retain any proprietary information of the Company or any of the Company
Affiliates after the
Termination
Date;
|
|
|
(ii)
|
That the Employee executes a Global Release of Liability, in
a form to be
determined by the Company in its sole discretion, which releases the Company and the Company
Affiliates from liability for any and all
claims, complaints and causes of
action, whether based in law or equity,
arising from, related
to or associated with
the Employee’s employment by the Company or under this Agreement and that such release has become
effective and non-revocable. That the Employee further acknowledges and
agrees that he has not made and will not make any assignment of any claim,
cause or right of action, or any right of any kind whatsoever, arising
from, related
to or associated with
the employment of the
Employee by the
Company;
and
|
|
|
(iii)
|
That the Employee reaffirms the covenants contained herein,
in writing, including, but not limited to, the covenants set forth in Section 10.
|
Notwithstanding anything in this Agreement
to the contrary, in any
case where the first and last days of the applicable release and nonrevocability periods provided for in the Global Release of
Liability (the “Applicable Release Period”) are in two separate taxable years, any payments required to
be made to the
Employee under this Agreement that are treated as deferred
compensation for purposes of Section 409A (as defined below) shall be made in the later taxable year,
as soon as practicable, but
in no event later than
thirty (30) days following
the conclusion of the Applicable Release Period.
|
|
(d)
|
Voluntary
Termination by the Employee. The Employee may terminate
his employment and
this Agreement for
reasons other than those identified in subsection 6(b) upon not less than sixty (60) days prior written notice.
If the Employee terminates
his employment and
this Agreement
pursuant to this subsection 7(d), he shall be entitled
only to the
following:
|
|
|
(i)
|
Any unpaid salary through the
Termination
Date;
and
|
|
|
(ii)
|
Payment for any accrued and unused
vacation as of the
Termination Date.
|
6
|
|
(e)
|
Qualifying
Change in Control Termination. If, before the expiration of the
Term, the Company terminates the
Employee's employment within the period commencing six (6) months prior
to and ending eighteen (18) months following a Change in
Control (as defined
below), such period referred to herein as
the “CIC
Period,” for any reason other than as specified above in subsection
6(a) for Cause, subsection 6(c)(i) for the death of the Employee, or subsection 6(c)(ii) for disability, or if the
Employee terminates his employment and this
Agreement for
Good
Reason pursuant to
subsection
6(b), the Employee shall receive
the severance pay set
forth in subsections (i) and (ii) below (the “CIC Severance Pay”), provided that if the Employee’s employment is
terminated during the
six (6) month period
prior to a Change in
Control, the Employee
shall be entitled to
CIC Severance Pay only if such termination (x) was by the Company other than for Cause but
at the request or direction of any person that has entered into an agreement
with the Company the consummation of which would constitute a Change in
Control, (y) was by the Employee for Good Reason and the circumstance or event
that constitutes Good
Reason occurred at the request or direction of such
person or (z) was by the Company without Cause and
the Employee reasonably demonstrates that such termination
was otherwise in
connection with or in anticipation of a Change in Control; and if the Employee is not
entitled to CIC
Severance Pay hereunder, then the Employee's termination of employment will not be deemed to
have occurred during the CIC Period for purposes of subsection
7(a):
|
|
|
(i)
|
In lieu of any further salary
payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance
benefit otherwise payable to the Employee, a lump sum cash payment equal to two (2) times the sum of (A) Base Salary
and (B) the average
of the annual bonus
amounts earned by the Employee for the three (3) years preceding the year in which the Change in Control occurs; provided, however, that if the
Termination Date occurs prior to January 1, 2010, then (B)
shall instead
be the average of the
annual bonus amounts earned by the Employee in 2007 and 2008. Such payment shall be made as soon as
practicable (but in
no event later than sixty (60) days) following the Termination Date; provided, however, that such
payments shall be delayed to the extent required under Section
25 below;
and
|
|
|
(ii)
|
Continuation of the medical, dental and vision insurance coverage in effect on
the Employee's
Termination Date for a period of
eighteen (18) months following the Termination Date
with the Company
paying the employer portion of the premium and the Employee paying the
employee portion, including dependents if
applicable, of the
premium during such
eighteen (18)-month period, provided that the
Employee elects to continue such insurance coverage under COBRA. The
Employee is solely responsible for taking the actions necessary to
exercise his rights
under COBRA for the insurance coverage the Employee has in effect,
including coverage
for dependents if
applicable, on the Termination
Date.
|
7
|
|
(f)
|
Definition
of Change in Control.
For purposes of this Agreement,
a “Change in Control” shall be deemed to have
occurred if the event
set forth in any one of the following paragraphs shall have
occurred:
|
|
|
(i)
|
Any one person, or more than one
person acting as a group, acquires ownership of stock of the Company that, together with stock held by
such person or group, constitutes more than 50% of the total
fair market value or total voting power of the stock of the Company;
or
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(ii)
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Any one person, or more than one person
acting as a group, acquires (or has acquired during the twelve (12)-month period ending on the date
of the most recent
acquisition by such person or persons) ownership of stock of the
Company possessing 35% or more of the total voting
power of the stock of the Company;
or
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(iii)
|
A majority of members of the
Board is replaced during any
twelve (12)-month period by
directors whose
appointment or election is not endorsed by a majority of the members of
the Board before the date of the
appointment or election;
or
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(iv)
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Any one person or group acquires (or has
acquired during the immediately preceding twelve (12)-month period ending
on the date of the
most recent acquisition) assets of the Company with an aggregate gross
fair market value of not less than forty percent (40%) of the aggregate
gross fair market value of the assets of the Company immediately prior to
such acquisition. For this purpose, gross fair market
value shall mean the fair value of the affected assets determined without
regard to any liabilities associated with such
assets.
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Notwithstanding the foregoing, (1) a
“Change in Control” shall not be deemed to have
occurred by virtue of the
consummation of any transaction or series of integrated transactions immediately
following which the holders of the common stock of the Company immediately prior
to such transaction or series of transactions continue to have
substantially the same proportionate ownership in
an entity that owns all or substantially all of the
assets of the Company immediately following such transaction or series of
transactions, and (2) a “Change in Control” shall not be deemed to have occurred as
result of any secondary offering of Company common
stock to the general public through a registration statement filed with the
Securities and Exchange Commission. The Board
8
shall determine whether a Change in
Control has occurred hereunder in a manner consistent with the provisions of Section
409A.
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(g)
|
No
Duplication of Payments or Benefits. Notwithstanding any
provision of this
Agreement to the
contrary, the
Employee shall not be eligible to receive any payments or benefits under
both subsections 7(a) and 7(e); but rather, to the extent the
conditions set forth in subsection 7(a) and subsection 7(e) are satisfied, the Employee
shall be eligible to receive benefits under only subsection 7(e).
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(h)
|
Golden
Parachute (Section
280G) Excise
Taxes.
|
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(i)
|
Subject to subsection 7(h)(ii) below, if it is determined that any payment or benefit received or
to be received by the Employee, whether pursuant to this
Agreement or otherwise (the “Severance Payments”), is a “parachute payment” within the meaning of
section 280G of the Internal Revenue Code (the “Code”) (all such payments and benefits,
including the Severance Payments as applicable, but excluding the Gross-Up
Payment (as defined below) being hereinafter called
“Total Payments”) that will be subject (in whole or part)
to the tax imposed under section 4999 of the Code (the
“Excise Tax”), then the Company shall pay to
the Employee on or as soon as practicable
following the day on which the Excise Tax is remitted by the Employee (but not later than the end of
the taxable year following the year in which the Excise Tax is
incurred and subject
to the provisions set forth in Section 25 below, including if applicable,
the Six Month Delay (as defined in such section)) an additional amount (the
“Gross-Up Payment”) such that the net amount
retained by the
Employee, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total
Payments.
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(ii)
|
In the event that the amount of
the Total Payments
does not exceed 110% of the largest amount that would result in no portion
of the Total Payments being subject to the Excise Tax (the “Safe Harbor”), the non-cash portion of the Total Payments
shall first be
reduced (if necessary, to zero), and the cash portion of the Total Payments shall thereafter be reduced (if
necessary, to zero) so that the amount of the Total Payments is equal to
the Safe Harbor.
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(iii)
|
For purposes of determining
whether any of the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (A) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel
(“Tax
Counsel”) selected by the Board in existence immediately prior to
the Change in Control, does not constitute
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9
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|
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a “parachute payment” within the meaning of section
280G(b)(2) of the
Code, including by reason of section 280G(b)(4)(A) of the Code, (B) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments (other
than those referred
to in clause (A)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning
of section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as deductions by reason of
section 280G of the Code, in the opinion of Tax
Counsel, and
(C) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Company's
independent auditor
in accordance with
the principles of sections 280G(d)(3) and (4) of the
Code. If the Employee disputes the Company's
calculations (in whole or in part), the reasonable opinion of Tax Counsel
with respect to the matter in dispute shall
prevail.
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(iv)
|
If the Excise Tax is finally
determined to be less than the amount taken into account hereunder
in calculating the Gross-Up Payment, the Employee shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being
repaid by the Employee to the extent that such repayment results in a
reduction in Excise Tax and/or a federal,
state or local income or employment tax deduction) plus interest on the
amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. If the Excise Tax is determined to
exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest,
penalties or additions payable by the Employee with respect to such
excess) at the time that the amount of such excess is finally
determined.
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(v)
|
The Employee and the Company shall
each reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total Payments. The Company also
shall pay to the Employee all legal fees and expenses incurred by the
Employee in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999
of the Code to any payment or benefit provided hereunder. Such payments
shall be made within sixty (60) business days after delivery of the
Employee's written request for payment
accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require (but in no event shall any such payment be
made after the end
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10
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of the calendar year following the
calendar year in which the expenses were incurred), provided that
no such payment shall be made in respect of fees or expenses incurred by
the Employee after the later of the tenth (10th) anniversary of the
effective date of the Employee's termination with the Company or the
Employee's death and, provided further, that,
upon the Employee’s “separation from
service” (as such
term is defined under Section 409A) with the Company, in no event shall
any additional such payments be made prior to the date that is six (6)
months after the date of the Employee’s “separation from
service” to the
extent such payment delay is required under section 409A(a)(2)(B) of the
Code.
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8.
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Licensing.
|
The Employee has obtained and
possesses, or will obtain and possess, and will maintain throughout the Term
hereof, all licenses, approvals, permits, and authorization (the “Licenses”)
necessary to perform the Employee’s duties hereunder (if any). Any
costs, attorneys’ fees, investigation fees or other expenses incurred in
connection with obtaining or maintaining such Licenses shall be borne by the
Company, provided that payment of such fees or costs by the Company shall be
made no later than the end of the year following the year in which the expenses
were incurred. The Employee warrants that the Employee is fully
eligible, under all standards and requirements, to obtain, possess, and maintain
such Licenses and that the Employee will commit no acts during the Term hereof
that would jeopardize or eliminate the Employee’s ability to possess or maintain
such Licenses.
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9.
|
Rules and
Regulations.
|
The Employee shall observe, enforce,
and comply with the policies, philosophies, strategies, rules, and regulations
of the Company, as they may be promulgated and/or modified from time to time,
and shall carry out and perform the orders, directions, and policies of the
Company, as they may be stated and/or amended from time to time, either orally
or in writing. A violation of this Section 9 by the Employee is a
material breach of this Agreement.
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10.
|
Restrictive
Covenants.
|
In consideration of the amounts payable
and benefits provided under Section 4, and, if applicable, Section 7 and
subsection 10(a), the other compensation paid hereunder, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the parties, the parties agree to the following provisions of this Section
10:
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(a)
|
Non-Competition. The Employee understands and agrees that the
Company and the
Company Affiliates do
business throughout the State of Nevada and other states. The Employee further understands and agrees that he
is a high ranking officer of the Company and will have access to
confidential and trade secret information and goodwill of the Company and the Company Affiliates
that will
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11
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allow the Employee to unfairly compete with the
Company and the Company Affiliates
justifying this
restriction. If the Employee's
employment is
terminated (by either
the Employee or the Company), during the Term, for any reason other than
as specified above in subsection 6(c)(i) by reason of the death of the Employee, or subsection
6(c)(ii) for disability, then for a period of eighteen (18) months commencing on the Termination Date
, the Employee agrees that, without the written
permission of the Company, he will not engage (whether as owner, partner,
controlling
stockholder, controlling investor, employee, adviser, consultant, or
otherwise) in any business that is in direct competition with the
business being conducted by the Company or
any of the
Company
Affiliates as of the Termination
Date, in Nevada
or in any other state in which the
Company is conducting such business (the “Non-Compete Area”) as of the Termination Date.
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(b)
|
Non-Solicitation. Without limiting the generality
of the foregoing, the
Employee agrees that
for a period of eighteen (18) months following the Employee's termination of
employment (for any
reason, by either the Employee or the Employer), he will not, without the prior
written consent of the Company, directly or indirectly solicit or attempt
to solicit, within the Non-Compete Area, any business from any person or
entity that the Company or any of the Company Affiliates
called upon,
solicited, or conducted business with as of such termination date, any persons or entities that
have been customers of the Company or any of the Company
Affiliates
or recruit any person
who has been or is an employee of the Company or any of the Company
Affiliates, during
the preceding one
(1)-year period from
such termination date. In addition, the Employee agrees that he shall not directly
or indirectly solicit
or encourage any employee of the Company or any of the Company
Affiliates to go to
work for or with the
Employee for a period
of one
(1)-year following
such termination date.
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(c)
|
In the event the Employee violates subsection 10(a) or 10(b), the applicable period of time during which the respective restriction
applies will automatically be extended for
the period of time from which the Employee began such violation until he
permanently ceases such violation. If any provision of this covenant
is invalid in whole
or in part, it will be limited, whether as to time, area covered, or
otherwise as and to the extent required for its validity under the
applicable law and as so limited, will be
enforceable.
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(d)
|
Confidential
Information.
The
Employee acknowledges
that he has had or
will have access to the confidential information of the Company and the
Company
Affiliates
(including, but not limited to, records regarding sales, price and cost
information, marketing plans, customer names, customer lists, sales
techniques,
distribution plans or procedures, and other material relating to the
business conducted by
the Company and the Company Affiliates), proprietary, or trade secret
information (the “Confidential
Information”), and
agrees never to use the Confidential Information other than for the sole
benefit of the Company and the
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12
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Company Affiliates and further agrees to never
disclose such Confidential Information (except as may be required by
regulatory authorities or as may be required by law) to any entity or
person that is not an
officer or employee
of the Company or a
Company Affiliate at
the time of such disclosure (unless at such time such
Confidential Information is subject to a policy of the Company or a Company
Affiliate restricting
disclosure to non-officers), in which case disclosure shall be
limited solely to officers of the Company or the applicable Company
Affiliate at the time
of such disclosure, without the prior written consent of the Company.
The Employee further acknowledges that this
covenant to maintain
Confidential Information is necessary to protect the goodwill and
proprietary interests of the Company and the Company
Affiliates and the
restriction against the disclosure of Confidential Information is
reasonable in light of the consideration and other value the Employee has
received or will receive pursuant to this Agreement and otherwise pursuant to his
employment by the Company.
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(e)
|
From and following the Employee's termination of employment, the Employee agrees to cooperate with the
Company and the
Company Affiliates
in any litigation,
administrative proceeding, investigation or audit involving any matters
with which the
Employee has
knowledge of from his employment with the Company. The Company shall reimburse
the
Employee for
reasonable expenses, including reasonable compensation for services
rendered at his
hourly rate of compensation as of such termination date, incurred in providing such
assistance and approved by the Company. The Company shall reimburse the
Employee for such expenses incurred in accordance with the policies
and procedures of the Company, but in no event no later than the end of the year
following the year in which the expenses were incurred.
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(f)
|
In the event of a violation of
this Section 10, the Company and the Company
Affiliates shall be entitled to any form of
relief at law or equity, and the parties agree and acknowledge that
injunctive relief is an appropriate, but not exclusive, remedy to enforce
the provisions hereof. The existence of any claim or
cause of action of the Employee against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense
of the Company’s enforcement of the covenants set
forth in this Section 10. The Employee hereby submits to the
jurisdiction of the courts of the State of Nevada and federal courts
therein for the purposes of any actions or proceedings instituted by the
Company to enforce its rights under this Agreement, to seek money damages
or seek injunctive relief. The Employee further acknowledges and agrees
(i) that the obligations contained in
Section 10 of this Agreement are necessary to protect the
interests of the Company and the Company
Affiliates,
(ii) that the restrictions contained herein
are fair, do not
unreasonably restrict the Employee's further employment and business
opportunities, and are commensurate with the compensation arrangements set
out in this Agreement
and (iii) that such compensation arrangements
constitute separate consideration for the obligations set forth in this
Section 10.
The covenants contained in Section 10
shall each be
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13
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construed as an agreement independent of any other
provisions of this Agreement. Both parties intend to make the
covenants of Section 10 binding only to the extent that it may be lawfully
done under existing applicable laws. If a court of competent
jurisdiction decides any part of any covenant is overly broad, thereby
making the covenant unenforceable, the parties agree that such court shall
substitute a reasonable, judicially enforceable limitation in place
of the offensive part
of the covenant and as so modified the covenant shall be as fully
enforceable as set forth herein by the parties themselves in the modified
form.
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(g)
|
The Employee acknowledges that it is possible
that the corporate structure of the Company could change during the term of
this Agreement. The Employee hereby acknowledges and affirms
that the Company may assign its rights under this Agreement, including but not limited to its
rights to enforce the covenants set forth in subsections 10(a), 10(b) and 10(c), to a third-party without the
approval of or additional consideration to the Employee. The Employee acknowledges and agrees that the
consideration called for herein is good and sufficient consideration for
the Company's right to assign its rights under this
Agreement.
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(h)
|
Subsections 10(a) through
(g), inclusive, of this Agreement
shall survive either termination of the employment relationship
and/or termination of this Agreement
for the full period set forth in subsections 10(a) through
(g), inclusive.
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11.
|
Work for
Hire.
|
The Employee agrees that any work,
invention, idea or report that he produces or that results from or is suggested
by the work the Employee does on behalf of the Company or any of the Company
Affiliates is “work for hire” (hereinafter referred to as “Work”) and will be
the sole property of the Company. The Employee agrees to sign any
documents, during or after employment that the Company deems necessary to
confirm its ownership of the Work, and the Employee agrees to cooperate with the
Company to allow the Company to take advantage of its ownership of such
Work.
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12.
|
Assignment of
Agreement.
|
The Employee agrees that his services
are unique and personal and that, accordingly, the Employee may not assign his
rights or delegate his duties or obligations under this Agreement. The Company
may assign its rights, duties, and obligations under this Agreement to any
successor to its business. This Agreement shall inure to the benefit
of and be binding upon the Company’s successors and assigns.
14
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13.
|
Indemnification of the
Employee.
|
The Company shall indemnify the
Employee and hold him harmless for acts or decisions made by him in good faith
while performing services for the Company or any of the Company Affiliates to
the maximum extent allowed by law. The Company shall also use its
reasonable efforts to obtain coverage for him under any insurance policy now in
force or hereinafter obtained during Term covering the officers and directors of
the Company against lawsuits, subject to the business judgment of the
Board. The Company shall pay all expenses, including attorneys’ fees
of an attorney selected and retained by the Company to represent the Employee,
actually and necessarily incurred by the Employee in connection with the defense
of such act, suit, or proceeding and in connection with any related appeal,
including the cost of court settlements, provided that, to the extent required
by Section 409A, any such payment by the Company shall be made no later than the
end of the year following the year in which the expenses were
incurred.
|
14.
|
Notices.
|
Any notice, document, or other
communication (hereinafter “Notice”) which either party may be required or may
desire to give to the other party shall be in writing, and any such notice may
be given or delivered personally or by mail or facsimile. Any such
notices given or delivered personally shall be given or delivered by hand to an
officer of the entity to which they are being given or delivered or the
individual, as the case may be, and shall be deemed given or delivered when so
given or delivered by hand. Any such notices given or delivered by
facsimile will be deemed given or delivered upon receipt by the sender of a
successful facsimile transmission to the facsimile number below, and any such
notices given or delivered by mail shall be deemed given or delivered three (3)
days after it is deposited in the U.S. mail, certified or registered mail,
return receipt requested, with all postage and fees prepaid, addressed to the
person or entity in question as follows:
If
to the Employee:
William
E. Yocke
To
the address (or facsimile number, if applicable) on record with the
Company
If
to the Company:
Chief
Executive Officer
Employers
Holdings, Inc.
10375
Professional Circle
Reno, Nevada 89521-4802
Fax: (775)
886-5499
15
or,
in either case, to such other address as either party may have previously
notified the other pursuant to the provisions of this Section 14.
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15.
|
Severability.
|
In the event that any provision hereof
shall be declared by a court of competent jurisdiction to be void or voidable as
contrary to law or public policy, such declaration shall not affect the
continuing validity or enforceability of any other provisions hereof insofar as
it may be reasonable and practicable to continue to enforce such other provision
in the absence of the provision which shall have been declared to be void and
voidable.
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16.
|
Remedy for
Breach.
|
Both parties recognize that the
services to be performed by the Employee are special and unique. The
Company will have the right to seek and obtain damages and any available
equitable remedies for the Employee’s breach of this Agreement. The
Employee's remedy for any breach of this Agreement is strictly limited to the
Severance Pay or CIC Severance Pay, as the case may be, called for
herein.
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17.
|
Mitigation of
Damages.
|
The Employee shall not be required to
mitigate damages or the amount of any payment provided under this Agreement by
obtaining other employment or otherwise after the termination of employment
hereunder, and any amounts earned by the Employee, whether from self-employment
or other employment shall not reduce the amount of any Severance Pay or CIC
Severance Pay, as the case may be, called for herein.
|
18.
|
Attorneys' Fees and
Costs.
|
In any claim or dispute between the
parties arising out of or associated with this Agreement or the breach hereof or
otherwise arising out of or associated with the Employee’s employment by the
Company, the prevailing party shall be entitled to recover all reasonable
attorneys' fees, expenses, and costs thereof or associated therewith, provided
that, to the extent required by Section 409A, any such payment by the Company
shall be made no later than the end of the year following the year in which such
fees, expenses and costs were incurred. The term “prevailing party”
means the party obtaining substantially the relief sought via litigation or
through an action in arbitration.
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19.
|
Integration, Amendment, and
Waiver.
|
This Agreement and such other written
agreements referenced in this Agreement, constitute the entire agreement between
the parties pertaining to the subject matter contained in it except as expressly
provided herein, and supersedes all prior agreements, representations,
assurances, and understandings of the parties, including any prior employment
agreements. No
16
amendment
of, addition to, or modification of this Agreement shall be binding unless
executed in writing by the parties. Any term or provision of this
Agreement may be waived in a signed writing at any time by the party that is
entitled to the benefit thereof, provided, however, that any waiver shall apply
only to the specific event or omission waived and shall not constitute a
continuing waiver. Any term or provision of this Agreement may be
amended or supplemented at any time by a written instrument executed by all the
parties hereto.
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20.
|
Captions.
|
The captions and section headings of
this Agreement are for convenience and reference only, and shall have no effect
on the interpretation or construction of this Agreement.
|
21.
|
Applicable
Law.
|
The substantive laws of the State of
Nevada shall govern the validity, construction, interpretation, performance, and
effect of this Agreement.
|
22.
|
Arbitration.
|
Any controversy, cause of action or
claim related to or arising out of or in connection with the Employee’s
employment with the Company, including but not limited to termination of such
employment or under this Agreement, other than an action to enforce the
provisions of Section 10 herein or the breach thereof, shall be settled by
arbitration according to the rules of the American Arbitration Association
applicable to disputes arising in Nevada and under Nevada law. Any
party to the arbitration may enter judgment upon the award rendered by the
arbitrator in any court having jurisdiction thereof. The arbitrator
shall not be entitled to amend or alter the terms of this
Agreement. Notwithstanding this Section 22, the Company shall be
entitled to seek any available equitable remedy for enforcement of provisions of
this Agreement.
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23.
|
Authorization.
|
The Company and the Employee,
individually and severally, represent and warrant to the other party that it has
the authorization, power and right to deliver, execute and fully perform the
obligations under this Agreement in accordance with its terms. The Employee
represents and warrants to the Company that there is no restriction or
limitation, by reason of this Agreement or otherwise, upon the Employee’s right
or ability to enter into this Agreement and fulfill his obligations under this
Agreement.
|
24.
|
Acknowledgment.
|
The Employee acknowledges that he has
been given a reasonable period of time to study this Agreement before signing
it. The Employee certifies that he has fully read, has received an
explanation of, and completely understands the terms, nature, and effect of this
Agreement. The Employee further acknowledges that he is executing
this Agreement freely, knowingly, and
17
voluntarily
and that the Employee’s execution of this Agreement is not the result of any
fraud, duress, mistake, or undue influence whatsoever. In executing
this Agreement, the Employee does not rely on any inducements, promises, or
representations by the Company or any person other than the terms and conditions
of this Agreement.
25. Section 409A.
Notwithstanding
anything to the contrary in this Agreement, the payment of consideration,
compensation, and benefits pursuant to this Agreement shall be interpreted and
administered in a manner intended to avoid the imposition of additional taxes
under section 409A of the Code and the regulations and guidance promulgated
thereunder (“Section 409A”). Notwithstanding any provision to the contrary in
this Agreement or otherwise, no payment or distribution under this Agreement or
otherwise that constitutes an item of “deferred compensation” under Section 409A
and becomes payable by reason of the termination of the Employee’s employment
hereunder shall be made to the Employee unless and until the termination of the
Employee’s employment constitutes a “separation from service” (as such term is
defined in Section 409A).
In
addition, no such payment or distribution of deferred compensation shall be made
to the Employee prior to the earlier of (a) the expiration of the six (6) month
period (the “Six Month Period”) measured from the date of the Employee’s
“separation from service” (as such term is defined in Section 409A), and (b) the
date of the Employee’s death, if the Employee is deemed at the time of such
separation from service to be a “specified employee” within the meaning of that
term under Section 409A (the “Six Month Delay”) and if such delayed commencement
is otherwise required to avoid an “additional tax” under section 409A(a)(1)(B)
of the Code. All payments and benefits that are delayed pursuant to the
immediately preceding sentence shall be paid to the Employee in a lump sum upon
expiration of such six (6) month period (or if earlier, upon the Employee’s
death).
Notwithstanding
the foregoing provisions, to the extent permitted under Section 409A, any
separate payment or benefit under this Agreement or otherwise shall not be
“deferred compensation” subject to Section 409A and the Six Month Delay to the
extent provided in the exceptions in Treasury Regulation section 1.409A-1(b)(4)
and (b)(9) and any other applicable exception or provision under Section
409A. Further, each individual installment payment that becomes
payable under this Agreement and each payment of the Severance Pay or if
applicable, the CIC Severance Pay shall be a “separate payment” under Section
409A. Specifically, to the extent the provisions of Treasury
Regulation section 1.409A-1(b)(9) are applicable to the Severance Pay or if
applicable, the CIC Severance Pay, the portion of such severance pay set forth
in respectively, subsection 7(a)(i) or subsection 7(e)(i) above that is less
than the limit prescribed under Treasury Regulation section
1.409A-1(b)(9)(iii)(A) (or any successor provision) (the “Separation Pay
Amount”) shall be payable to the Employee in the manner prescribed in subsection
7(a)(i) or subsection 7(e)(i), as applicable, without regard to the Six Month
Delay. Following the Six Month Delay, (1) to the extent applicable,
the Employee shall receive a lump sum cash payment equal to the Severance Pay or
CIC Severance Pay, as applicable, he otherwise would have received during the
Six Month Period (absent the Six Month Delay) less the Separation Pay Amount and
(2) the Employee shall receive the remainder of his Severance Pay or CIC
Severance Pay, as applicable, in the manner prescribed by subsection 7(a) or
subsection 7(e), as applicable.
18
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date.
|
COMPANY:
|
EMPLOYEE:
|
|||||
|
By:
|
By:
|
|||||
| /s/ Douglas D. Dirks |
|
/s/ William E. Yocke |
|
|||
|
Name:
Douglas D. Dirks
Chief Executive
Officer
|
Name:
William E.
Yocke
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19
Appendix
A
Perquisites
1.
Automobile Allowance in the amount of $1,200.00 per month
2.
Annual Executive Physical Examination as a part of the Company’s executive
wellness program
3.
Life Insurance as a part of the Company’s group life insurance program in an
amount equal to three (3) times the Employee’s Base Salary
20