Exhibit 10.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 15,
1997, is made and entered into by and between Farmers Group, Inc., a Nevada
corporation (the "Company") and Xxxx X. Xxxxx (the "Executive").
The Executive is presently employed by the Company.
The Board of Directors of the Company (the "Board") recognizes that the
Executive's contribution to the growth and success of the Company has been
substantial. The Company, on behalf of itself and its stockholders, desires
to continue to attract and retain well-qualified executive and key personnel
who are an integral part of the management of the Company, such as the
Executive, and to assure itself of continuity of management. The Executive is
willing to commit himself to continue to serve the Company, on the terms and
conditions herein provided.
In order to effect the foregoing, the Company and the Executive wish to
enter into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants
and agreements of the parties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue to serve
the Company, on the terms and conditions set forth herein.
2. Term. This Agreement shall commence on the date set forth above
(the "Commencement Date") and shall expire on the last day of the
twenty-fourth (24th) month immediately following the Commencement
Date, unless further extended or sooner terminated as hereinafter
provided. In no event, however, shall the term of the Executive's
employment hereunder extend beyond the date of the Executive's
actual retirement in accordance with the Company's retirement
policies in effect on the date hereof.
Notwithstanding the foregoing, (a) if a Potential Change in
Control shall have occurred during the Initial Term or any
Extended Term, the term of this Agreement shall be extended and
shall continue in effect through the last day of the twenty-fourth
(24th) month immediately following the date on which such
Potential Change in Control occurred and (b) if a Change in
Control shall have occurred during the Initial Term or any
Extended Term, the term of this Agreement shall be extended and
shall continue in effect through the last day of the
twenty-fourth (24th) month immediately following the date on which
such Change in Control occurred; provided that, if such Potential
Change in Control is abandoned prior to the occurrence of a Change
in Control, this Agreement shall expire in accordance with the
provisions hereof, without regard to such extension.
3. Position and Duties. The Executive shall continue to serve in his
current position and shall have such responsibilities, duties and
authority as he may have as of the date hereof (or any position to
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which he may be promoted after the date hereof) and as may from
time to time be assigned to the Executive by the Board that are
consistent with such responsibilities, duties and authority. The
Executive shall devote substantially all his working time and
efforts to the business and affairs of the Company.
4. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall continue to be
based in his current location, except for required travel on the
Company's business to an extent substantially consistent with
the duties of the Executive.
5. Compensation and Related Matters.
(a) Compensation. During the period of the Executive's
employment hereunder, the Company shall pay to the
Executive an annual amount equal to the Executive's Cash
Compensation at a rate not less than the rate in effect as
of the date hereof or such higher rate as may from time to
time be determined by the Board, such compensation to be
paid in such installments as are customary from time to
time for executive officers of the Company. This
compensation may be increased from time to time in
accordance with normal business practices of the Company
and, if so increased, shall not thereafter during the term
of this Agreement be decreased. Such compensation shall
not be deemed exclusive and shall not prevent the Executive
from participating in any other compensation or benefit
plan of the Company. The Cash Compensation payments
(including any increased salary payments) hereunder shall
not in any way limit or reduce any other obligation of the
Company hereunder, and no other compensation, benefit or
payment hereunder shall in any way limit or reduce the
obligation of the Company to pay the Executive's Cash
Compensation hereunder.
(b) Expenses. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive
prompt reimbursement for all reasonable and customary
expenses incurred by the Executive in performing services
hereunder, including all expenses of travel and living
expenses while away from home on business or at the request
of and in the service of the Company; provided that, such
expenses are incurred and accounted for in accordance with
the policies and procedures established by the Company.
(c) Other Benefits. The Executive shall be entitled to
continue to participate in all Company and Parent
compensation, incentive, welfare or benefit plans or
arrangements, as well as any plan or arrangement whereby
the Executive may acquire securities of the Company or
Parent in effect on the date hereof in which the Executive
is participating, or subsequent plans or arrangements
providing the Executive with substantially similar benefits
thereunder, including without limitation the Company's
Employees' Profit Sharing and Savings Plan, Employees'
Pension Plan, Farmers Stock Incentive Plan, Employees'
Stock Ownership Plan, the Farmers Executive Incentive
Program (the "EIP"), the Premier Award Unit Plan (the
"Premier Plan") and any other plan or arrangement to
receive and exercise stock options or stock appreciation
rights, supplemental pension plan, insured medical
reimbursement plan, automobile benefits, executive
financial planning, group life insurance plan, personal
catastrophe liability insurance, medical, dental, accident
and disability plans (each a "Benefit Plan"). The
Executive shall be entitled to participate in or
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receive benefits under any Benefit Plan made available by
the Company in the future to its executives and key
management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of
such plans and arrangements. Nothing paid to the Executive
under any Benefit Plan presently in effect or made available
in the future shall be deemed to be in lieu of the salary
payable to the Executive pursuant to paragraph (a) of this
Section. Any payments or benefits payable to the Executive
hereunder in respect of any calendar year during which the
Executive is employed by the Company for less than the
entire such year shall, unless otherwise provided in the
applicable Benefit Plan be prorated in accordance with the
number of days in such calendar year during which he is
so employed.
(d) Vacations. The Executive shall be entitled to no less than
the number of vacation days in each calendar year, and to
compensation in respect of earned but unused vacation days,
determined in accordance with the Company's vacation policy
as in effect on the date hereof.
(e) Services Furnished. The Company shall furnish the
Executive with office space, stenographic assistance and
such other facilities and services as shall be suitable to
the Executive's position and adequate for the performance
of his duties as set forth in Section 3 hereof.
6. Termination. Without prejudice to Section 2 hereof, the
Executive's employment hereunder may be terminated without any
breach of this Agreement only under the following circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. If, (i) as a result of the Executive's
incapacity due to physical or mental illness, the Executive
shall have been absent from his duties with the Company on
a full-time basis for the entire period of six (6)
consecutive months, and within thirty (30) days after
written "Notice of Termination" (as defined in Section 12
below) is thereafter given by the Company (which may occur
before or after the end of such six month period) the
Executive shall not have returned to the performance of his
duties hereunder on a full-time basis, or (ii) the
Executive becomes eligible for benefits under the Company's
long-term disability plan or any successor plan, the
Company may terminate this Agreement and the Executive's
employment hereunder for "Disability."
(c) Cause. The Company may, in writing and without prior
notice, terminate the Executive's employment hereunder for
Cause (except as otherwise provided in clause (iv) of
subsection 13(d)(iv)). Notwithstanding the foregoing, the
Executive shall have the right to contest his termination
for Cause (for purposes of this Agreement) by mediation in
accordance with the provisions of this Agreement as set
forth in Section 17 herein.
(d) Termination by the Executive. The Executive may terminate
his employment hereunder for Good Reason. For purposes of
any determination regarding the existence of Good Reason,
any claim by the Executive that Good Reason exists shall be
presumed to be
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correct unless the Company establishes to the then existing
Compensation Committee of the Board that Good Reason does
not exist.
7. Compensation During Disability or Upon Termination.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical
or mental illness ("Disability Period"), the Executive
shall continue to receive his full salary at the rate then
in effect for such period until his employment is
terminated pursuant to Section 6(b) hereof; provided that,
payments so made to the Executive during the Disability
Period shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any
such payment under disability benefit plans of the Company
or under the Social Security disability insurance program,
and which amounts were not previously applied to reduce any
such payment.
(b) If the Executive's employment is terminated by his death,
the Company shall pay any amounts due to the Executive
under Section 5 through the date of his death in accordance
with Section 11(b).
(c) If the Executive's employment is terminated by the Company
for Cause or by the Executive for other than Good Reason,
the Company shall pay the Executive his full salary through
the Date of Termination at the rate in effect at the time
Notice of Termination is given and the Company shall have
no further obligations to the Executive under this
Agreement.
(d) If (1) in breach of this Agreement, the Company shall
terminate the Executive's employment other than for
Disability pursuant to Section 6(b) or for Cause (it being
understood that a purported termination for Disability
pursuant to Section 6(b) or for Cause which is disputed and
finally determined not to have been proper shall be a
termination by the Company in breach of this Agreement) or
(2) the Executive shall terminate his employment for Good
Reason, then, subject to the provisions of Section 10
hereof, the Company shall:
(i) pay the Executive his full annual base salary through
the Date of Termination at the rate in effect at the
time Notice of Termination is given and all other
unpaid amounts, if any, to which the Executive is
entitled as of the Date of Termination under any
Benefit Plan at the time such payments are due;
(ii) subject to the provisions of Section 9 hereof, in
lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination,
pay as liquidated damages to the Executive an amount
equal to the Executive's Cash Compensation (as defined
below), times a fraction the numerator of which is the
number of months remaining in the then current term of
the Agreement, and the denominator of which is twelve
(12), such payment to be made in a lump sum in cash,
on or before the fifth day following the Date of
Termination;
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(iii) subject to the provisions of Section 9 hereof,
arrange to provide the Executive for two (2) years
(or such shorter period as Executive may elect), with
disability, life, accident and health insurance
substantially similar to those insurance benefits
which Executive is receiving immediately prior to the
Notice of Termination (including coverage for
dependents at the same per person cost as the
Executive is then paying); provided that, benefits
otherwise receivable by Executive pursuant to this
subsection 6 (d)(iii) shall be reduced to the extent
comparable benefits are actually received by the
Executive during such two (2) year period following
his termination (or such shorter period elected by
the Executive), and any such benefits actually
received by Executive shall be reported by him to the
Company;
(iv) subject to the provisions of Section 9 hereof, pay
the Executive a benefit under the Premier Plan (or
other long term incentive plan) as if he had
terminated employment by reason of his retirement
(without regard to whether the Executive has, and
without deeming the Executive to have, reached his
normal retirement age) and as if any remaining
performance criteria and any time period of service
requirement had been waived; and
(v) subject to the provisions of Section 9 hereof, pay to
the Executive a single lump sum payment equal to the
excess of (x) over (y), where (x) is equal to the
present lump sum value of the combined pension
benefits that the Executive would receive under the
Employees' Pension Plan (the "Pension Plan"), taking
into account Article XV thereof, the Employee
Benefits Restoration Plan (the "Restoration Plan")
and providing supplemental pension benefits
(collectively, the "Plans"), at his earliest benefit
commencement date under the Pension Plan computed by
increasing, in the case of each Plan, the number of
years of credited service actually taken into account
under each Plan as of the date of his termination of
employment, or, if earlier, the termination of the
Pension Plan, by two (2) years, and (y) is equal to
the present lump sum value of the combined pension
benefits actually payable to the Executive on his
earliest benefit commencement date under the Pension
Plan (taking into account Article XV thereof), the
Restoration Plan and the Agreement based, in the case
of each Plan, on the actual number of years of
credited service actually taken into account under
each Plan as of the date of his termination of
employment, or, if earlier, the termination of the
Pension Plan. The foregoing lump sum present value
amount, shall be computed using the actuarial factors
under the Pension Plan in effect on the date of the
Executive's termination of employment or, if earlier,
the termination of the Pension Plan.
Notwithstanding the foregoing, in the event the Executive does not have two (2)
full years remaining until the Executive's mandatory-retirement date under the
Company's retirement policies, for purposes of this Section 7, the minimum two
(2) year period set forth above shall automatically be reduced to the number of
years and/or partial years (measured by months) remaining until such
Executive's retirement. For example, if Executive terminated his employment
for Good Reason six months before mandatory retirement, the minimum two (2)
year period set forth above would be reduced from 2 to 1.5. For purposes of
this Agreement, the mandatory retirement age of an Executive shall be 65.
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8. Indemnification for Excise Tax.
(a) Notwithstanding any other provisions of this Agreement, in
the event that any of the payments or benefits received or
to be received by the Executive in connection with a
"change in control" (as defined in Section 280G of the
Code) (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company,
any Person whose actions result in a change in control or
any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment,
being hereinafter referred to as the "Total Payments") will
be subject to the Excise Tax, the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, 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.
(b) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount
of such Excise Tax, (i) all of the Total Payments shall be
treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the
Executive and selected by the accounting firm which was,
immediately prior to the change in control, the Company's
independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b)(4)(A) of
the Code, (ii) all "excess parachute payments" within the
meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax
Counsel, such excess parachute payments (in whole or in
part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)
(B) of the Code) in excess of the Base Amount allocable to
such reasonable compensation, or are otherwise not subject
to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if
there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section
8), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and
local taxes.
(c) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay
to the Company, within five (5) business days following the
time that the amount of such reduction in the 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
Executive, to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment
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taxes, plus interest on the amount of such repayment at
120% of the rate provided in section 1274(b)(2)(B) of the
Code. In the event that 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 Executive with respect to such
excess) within five (5) business days following the time
that the amount of such excess is finally determined. The
Executive 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.
(d) Preparation of Tax Return. The Company, at its expense,
agrees to supply the Executive with advice from competent
tax counsel as to whether said Executive must reflect and
pay an excise tax under Sections 280G and 4999 of the Code
on the filing of any federal income tax return of said
Executive relating to the period or periods in which said
Executive received payments or benefits under this
Agreement which may result in the imposition of such an
excise tax. If such tax counsel advises that such excise
tax must be reflected and paid on such tax return, said
Executive agrees to so reflect and pay such tax at which
time the Company will reimburse said Executive in
accordance with this Section 8. If such tax counsel
advises that such excise tax need not be reflected and paid
on such tax return, said Executive agrees to prepare and
file his tax return in accordance with such advice. In
either case the Company shall indemnify said Executive in
accordance with Section 8(a) of this Agreement for any
subsequent assessment of excise taxes made by the Internal
Revenue Service under Section 4999 of the Code in
accordance with the provisions of this Section 8.
(e) Duty to Cooperate. The Executive agrees promptly to notify
the Company in the event of any audit by the Internal
Revenue Service ("IRS") in which the IRS asserts that any
excise tax should be assessed against said Executive and to
cooperate with the Company in contesting (at the Company's
expense) any such proposed assessment. Said Executive
agrees not to settle or compromise any such assessment
without the Company's consent. If said Executive's failure
to settle a proposed assessment with respect to such excise
tax ("Proposed Assessment") at the direction of the Company
is the reason his overall audit cannot be finally resolved,
then said Executive may demand that the Company consent to
settle the Proposed Assessment. If the Company does not
settle the Proposed Assessment, or consent to allow said
Executive to settle, within sixty (60) days, the Company
shall indemnify and hold harmless said Executive from any
additional interest or penalties resulting from the delay
in finally resolving the audit.
9. Effect of Agreement on Other Contractual Rights. The provisions
of this Agreement, and any payment provided for hereunder, shall
not reduce any amounts otherwise payable, or in any way diminish
the Executive's existing rights, or rights which would accrue
solely as a result of the passage of time, under any Benefit Plan
or other contract, plan or arrangement.
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10. Restrictive Covenants.
(a) During the term of this Agreement, Executive shall not,
directly or indirectly, without the prior written consent
of the Company, provide consultative service to (with or
without pay), own, manage, operate, join, control,
participate in, or be connected with (as a stockholder,
partner, officer, director, employee or otherwise) any
business, individual, partner, firm, corporation, or other
entity that directly or indirectly competes with the
Company (a "Competitor of the Company"); provided that, the
"beneficial ownership" by Executive, either individually or
as a member of a "group," as such terms are used in Rule
13d of the General Rules and Regulations Exchange Act, of
not more than five percent (5%) of the voting stock of any
publicly held corporation shall not be a violation of this
Agreement.
(b) Confidential Information. Executive acknowledges that in
his employment hereunder he occupies a position of trust
and confidence. During the term of the Agreement and for
all periods thereafter, Executive shall not, except as may
be required to perform his duties hereunder or as required
by applicable law, and except for information which is or
becomes publicly available other than as a result of a
breach by the Executive of the provisions hereof, disclose
to others or use, whether directly or indirectly, any
Confidential Information. Executive acknowledges that such
Confidential Information is specialized, unique in nature
and of great value to the Company, and that such
information gives the Company a competitive advantage. The
Executive agrees to deliver or return to the Company, at
the Company's request at any time or upon termination or
expiration of his employment or as soon thereafter as
possible, all documents, computer tapes and disks, records,
lists, data, drawings, prints, notes and written
information (and all copies thereof) furnished by the
Company or prepared by the Executive during the term of his
employment by the Company.
(c) Business Diversion. During the term of this Agreement and
any Severance Period thereafter, Executive shall not,
directly or indirectly, influence or attempt to influence
customers or suppliers of the Company to divert their
business to any Competitor of the Company.
(d) Nonsolicitation. Executive recognizes that he will possess
confidential information about other employees of the
Company, relating to, among other things, their education,
experience, skills, abilities, compensation and benefits,
and inter-personal relationships with suppliers and
customers of the Company. Executive recognizes that the
information he will possess about these other employees is
not generally known, is of substantial value to the
Company and will be acquired by him because of his business
position with the Company. Executive agrees that, during
the term of this Agreement and for one (1) year thereafter,
he will not, directly or indirectly, solicit or recruit any
employee of the Company for the purpose of being employed by
him or by any other person on whose behalf he is acting as
an agent, representative or employee and that he will not
convey any such confidential information or trade secrets
about other employees of the Company.
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11. Successors; Binding Agreement.
(a) In connection with any agreement to which it is a party, the
Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of
the Company, by agreement in form and substance satisfactory
to the Executive, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to
compensation from the Company in the same amount and on the
same terms as he would be entitled to hereunder if he
terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the
Date of Termination. As used in this Agreement, "Company"
shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this
Section 11 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal
representatives, executors, administrators, successors,
heirs, distributees, devises and legatees. If the
Executive should die while any amounts are still payable to
him hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the
Executive's estate.
12. Notice/Notice of Termination. For purposes of this Agreement,
notices and all other communications provided for in the Agreement
shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, as follows: if to the
Company - Farmers Group, Inc., 0000 Xxxxxxxx Xxxxxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Secretary; and if to the
Executive at the address specified at the end of this Agreement.
Notice may also be given at such other address as either party may
have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only
upon receipt. Any purported termination of the Executive's
employment by the Company or the Executive hereunder shall be
communicated by a Notice of Termination to the other party as set
forth herein. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate
those specific termination provisions in this Agreement relied
upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision of Sections 6(b),
(c) and (d) hereof.
13. Definitions. Terms not otherwise defined in this Agreement shall
have the meanings set forth in this Section 13.
(a) Beneficial Owner. "Beneficial Owner" shall have the meaning
of such term as defined in Rule 13d-3 of the Exchange Act.
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(b) Cash Compensation. "Cash Compensation" shall mean the sum
of (x) the average of the final three (3) year's base salary
of the Executive, and (y) an amount equal to the sum of (i)
the average of the final three (3) year's cash bonus paid to
the Executive under the EIP or any other bonus plan of the
Company, for any of the fiscal years ended during the term
of this Agreement, and (ii) the average of the amounts
allocated to the Executive under the Employee's Profit
Sharing and Savings Trust for such years.
(c) Cause. "Cause" shall mean: (i) the commission of a felony
(other than driving while intoxicated or while under the
influence of alcohol or drugs), (ii) the engaging by
Executive in misconduct involving dishonesty which is
injurious to the Company, monetarily or otherwise or which
is inimical to the effective performance of the Executive's
duties, (iii) a willful dereliction of duty or intentional
and malicious conduct contrary to the best interests of the
Company or its business if such dereliction of duty or
misconduct is not corrected within thirty (30) days after
written notice hereof from the Company, (iv) a refusal to
perform reasonable services customarily performed by the
Executive (other than by reason of a Disability); unless
such refusal, if capable of being corrected, is corrected
within thirty (30) days after written notice thereof from
the Company, or (v) the Executive's engaging in conduct that
violates the Restrictive Covenants set forth in Section 10
hereof.
(d) Change in Control. A "Change in Control" of the Company
shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
(other than Parent) representing 30% or more of the
combined voting power of the then outstanding
securities of the Company, excluding any Person who
becomes such a Beneficial Owner in connection with a
transaction described in clause (x) of paragraph (iv)
below; or
(ii) members of the public become the Beneficial Owners,
directly or indirectly, of securities of the Company
(other than Parent) representing 60% or more of the
combined voting power of the then outstanding
securities of the Company; or
(iii) the following individuals cease for any reason to
constitute a majority of the number of directors of
the Board then serving: individuals who, on the date
hereof, constitute such board and any new director
(other than a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a
consent solicitation, relating to the election of
directors of the Company) whose appointment or
election by such board or nomination for election by
stockholders was approved or recommended by a vote of
at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof
or whose appointment, election or nomination for
election was previously so approved or recommended; or
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(iv) there is consummated a merger or consolidation of the
Company, Parent or any direct or indirect subsidiary
of the Company with any other corporation, other than
(x) a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior to such merger or consolidation
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity or any parent
thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under
an employee benefit plan of Parent, the Company or
any subsidiary of the Company, at least 60% of the
combined voting power of the securities of the Company
or such surviving entity or any parent thereof
outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation
effected to implement a recapitalization of Parent or
the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not
including in the securities Beneficially Owned by such
Person, any securities acquired directly from the
Company, other than in connection with the acquisition
by the Company or its affiliates of a business)
representing 30% or more of the combined voting power
of the Company's then outstanding securities; or
(v) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or
disposition by the Company of all or substantially all
of the assets of the Company, other than a sale or
disposition by the Company of all or substantially all
of the assets of the Company, to an entity, at least
60% of the combined voting power of the voting
securities of which are owned by stockholders of the
Company in substantially the same proportions as their
ownership of the Company immediately prior to such
sale.
(e) Confidential Information. "Confidential Information" shall
mean information about the Company and its respective
suppliers, clients and customers that is not disclosed by
the Company for financial reporting purposes and that was
learned by Executive in the course of his employment
hereunder, including (without limitation) proprietary
knowledge, trade secrets, market research, data, formulae,
information and supplier, client and customer lists and all
papers, resumes, and records (including computer records) of
the documents containing such Confidential Information.
(f) Date of Termination. "Date of Termination" shall mean (i)
if the Executive's employment is terminated by his death,
the date of his death, (ii) if the Executive's employment
is terminated pursuant to subsection (b) above, thirty (30)
days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day
period), (iii) if the Executive's employment is terminated
pursuant to subsection (c) above, the date specified in the
Notice of Termination, and (iv) if the Executive's
employment is terminated for any other reason, the date on
which a Notice of Termination is given; provided that, if
within thirty (30) days after any Notice of Termination is
given the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning
the termination, the Date of
12
Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of
the parties or by a final judgment, order or decree of a
court of competent jurisdiction (the time for appeal there
from having expired and no appeal having been perfected).
(g) Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934 as amended from time to time and as now
or hereafter construed, interpreted and applied by
regulations, rulings and cases.
(h) Good Reason. The Executive's termination of employment with
the Company shall be deemed for "Good Reason" if it occurs
within twelve (12) months of any of the following without
the Executive's express written consent:
(i) the assignment to the Executive by the Company of
duties inconsistent with, or a substantial adverse
alteration in the nature or status of, Executive's
responsibilities as of the date hereof;
(ii) a reduction by the Company in the Executive's annual
Cash Compensation as in effect on the date hereof or
as in effect from time to time if such amounts are
increased during the term of this Agreement;
(iii) any failure by the Company to continue in effect
without substantial change any Benefit Plan, or the
taking of any action by the Company which would
adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any
such Benefit Plan (including a more than 10% reduction
from the highest percentage of available EIP award
paid in the three (3) immediately preceding calendar
years to the Executive) or deprive the Executive of
any material fringe benefit currently enjoyed by the
Executive unless an equitable substitute arrangement
(embodied in an ongoing substitute or alternative
Benefit Plan) has been made for the benefit of the
Executive with respect to the Benefit Plan in
question;
(iv) any material breach by the Company of any provision of
this Agreement which, if capable of being rectified by
the Company, is not rectified within thirty (30) days
of notice (which notice specifies the nature of such
breach);
(v) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the
Company; or
(vi) any purported termination of the Executive's
employment by the Company which is not effected
pursuant to a Notice of Termination satisfying the
requirements of Section 12 below, and for purposes of
this Agreement, no such purported termination shall be
effective.
(i) Parent. "Parent" shall mean the ultimate controlling
parent of the Company.
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(j) Person. "Person" shall have the meaning of such term as
used in Section (3)(a)(9) of the Exchange Act.
(k) Potential Change in Control. A "Potential 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) the Company, Parent or any Person publicly announces
an intention to take or to consider taking actions
which, if consummated, would constitute a Change in
Control;
(ii) in connection with the purchase of the voting
securities of the Company, any person, or group of
persons, file or are required to file, an application
seeking approval of insurance regulatory authorities
relative to the acquisition of control of a domestic
insurer or reciprocal exchanges;
(iii) the Company or Parent enters into an agreement, the
consummation of which would result in the occurrence
of a Change in Control;
(iv) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (other than
Parent) representing 15% or more of either the then
outstanding shares of common stock of the Company or
the combined voting power of the then outstanding
securities of the Company (not including in the
securities beneficially owned by such Person or any
securities acquired directly from the Company).
For purposes of this Agreement, a Potential Change in
Control shall be deemed to have been abandoned if, prior to
a Change in Control (and provided that no Change in Control
occurs within 180 days thereafter), (A) in connection with
a Potential Change in Control described in (k)(i) above, an
announcement is made recanting such intention, (B) in
connection with a Potential Change in control described in
(k)(ii) above such approval is formally rejected, (C) in
connection with a Potential Change in Control described in
(k)(iii) above, such agreement is abandoned prior to
consummation, (D) in connection with a Potential Change in
Control described in (k)(iv) above, such Person ceases to
be a Beneficial Owner, directly or indirectly, of
securities of the Company representing 15% or more of such
securities; or (E) the Board adopts a resolution to the
effect that, for purposes of this Agreement, such Potential
Change in Control has been abandoned.
14. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Executive and the Company. No
waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by either party which
are not set forth expressly in this agreement.
14
15. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
17. Mediation. Before any party commences an action for damages or
other relief (except injunctive relief that is sought by the Company
for an alleged violation of Section 10 of this Agreement), Executive
and the Company agree to submit any dispute, claim or controversy
arising out of or relating to this Agreement, including the breach,
termination or validity thereof (a "Dispute") to non-binding
mediation. The mediation provided for in this Section shall occur
before a retired judge who shall be selected by the parties from
JAMS/Endispute. If the parties are unable to agree upon a mediator,
a mediator will be selected from JAMS/Endispute pursuant to its
applicable rules then in existence. The mediation shall occur
within 45 days following the appointment of the mediator. In
connection with the mediation, each party shall bear his or its own
attorneys' fees and costs and the mediator's fee shall be paid in
equal shares by the parties to the mediation. Notwithstanding the
foregoing, the Company shall be entitled to seek a restraining order
or injunction in any court of competent jurisdiction to prevent any
continuation of any violation of the provisions of Section 10 of the
Agreement and the Executive hereby consents that such restraining
order or injunction may be granted without the necessity of the
Company's posting any bond and, provided further that, the Executive
shall be entitled to seek specific performance of his right to be
paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
18. Controlling Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed and enforced in
accordance with laws of the State of California (excluding its
conflict of laws, principles, statutes or other similar laws)
including all matters of construction, validity, performance and
enforcement.
19. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein
and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any
party hereto; and any prior agreement of the parties hereto in
respect of the subject matter contained herein is hereby terminated
and cancelled.
15
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.
FARMERS GROUP, INC., a Nevada corporation
By: /s/ Xxxxx X. Xxxx
-------------------------------
Name: Xxxxx X. Xxxx
Title: Senior Vice President and
General Counsel
Xxxx X. Xxxxx
/s/ Xxxx X. Xxxxx
------------------------------
(Signature)
Xxxx X. Xxxxx
------------------------------
(Name)
