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EXHIBIT 10.16(2)
EMPLOYMENT AGREEMENT
WHEREAS, GGS Management Holdings, Inc. (the "Company") has entered into a
Stock Purchase Agreement dated as of January 31, 1996 by and among the Company,
GS Capital Partners II, L.P. ("GSCP"), ▇▇▇▇▇▇ International Group, Inc. ("SIG")
and Goran Capital Inc. ("Goran") (the "Stock Purchase Agreement"), and it is a
condition to the Closing (all capitalized terms used and not defined herein
shall have the meanings ascribed to them in the Stock Purchase Agreement) that
(i) the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("you" or the "Executive") enter into this
Employment Agreement and (ii) the Company, GSCP, SIG and Goran enter into a
Stockholder Agreement substantially in the form of Exhibit B to the Stock
Purchase Agreement (the "Stockholder Agreement").
WHEREAS, the Company considers it essential to its best interests and the
best interests of its stockholders to employ the Executive, upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Executive desires to be employed by the Company, upon the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
below, the parties agree as follows:
1. Term of Agreement. This Agreement shall commence as of the Closing Date
and shall continue in effect until the fifth anniversary of the Closing
Date (the "Initial Term"); provided, however, that unless terminated
earlier pursuant hereto, the term of this Agreement shall automatically be
extended without further action of either party for additional one year
periods (each such one year period, a "Renewal Period") unless, not later
than six months prior to the end of the then effective term, either the
Company or the Executive shall have given written notice that such party
does not intend to extend this Agreement (the period beginning on the
Closing Date and ending on expiration or termination of the Executive's
employment hereunder being referred to herein as the "Employment Period").
2. Terms of Employment. During the Initial Term and any Renewal Period, you
agree to be a full-time employee of the Company serving in the position of
Executive Vice President of the Company and further agree to devote
substantially all of your working time and attention to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities associated with your position as Executive Vice President
of the Company, to use your best efforts to perform faithfully and
efficiently such responsibilities. In addition, you agree to serve in such
other capacities or offices to which you may be duly assigned, appointed or
elected from time to time (but not in diminution of your status as a senior
executive officer of the Company). Nothing herein shall prohibit you from
devoting your time to civic and community activities or managing personal
investments, as long as the foregoing do not interfere with the performance
of your duties hereunder. You shall be entitled to serve on the Board of
Directors of the Company until removed from such office pursuant to the
Stockholder Agreement.
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3. Compensation.
(i) Base Salary. Executive shall receive base salary pursuant to
this Agreement during the Employment Period in bi-weekly
installments in an amount which shall be mutually agreed to by
and between Executive and the Company; provided, however, that
Company shall, at all times during the Initial Term, agree that
Executive's Base Salary shall be at an annualized rate of at
least $150,000 per annum (as such sum is mutually agreed to from
time to time, "Base Salary"). Executive shall receive bi-weekly
installments of Base Salary during the Initial Term and any
Renewal Period (in each case on a pro-rated basis if employment
pursuant to this Agreement is for less than a full calendar year
during any portion of the Initial Term or a Renewal Period).
Executive's Base Salary shall be reviewed at least annually by
the Board of Directors of the Company during the first calendar
quarter of each year and in the event that Executive's Base
Salary shall be increased, Executive shall receive a lump sum
catch-up payment (subjective to all applicable withholdings) in
an amount necessary to compensate Executive as if the increased
Base Salary had become effective on January 1 of the applicable
year; provided, however, that no catch-up payment shall be made
to Executive for any increase in Base Salary occurring during
1996. Notwithstanding any other provision of this Agreement,
Executive's Base Salary shall be increased during each year of
this Agreement by a percentage which shall be at least equal to
or greater than the increase in the Consumer Price Index
applicable for such year.
(ii) Bonus. The bonus paid to Executive shall be determined in
accordance with the terms contained in Exhibit A hereto and any
bonus due Executive for any calendar year or any portion of a
year ending on December 31, shall be paid no later than April 15
of the next succeeding year.
(iii) Other Expenses. The Company shall reimburse you for all
reasonable travel, entertainment and other business expenses
incurred by you during the Employment Period in the performance
of your responsibilities under this Agreement promptly upon
receipt of written substantiation of such expenses in accordance
with the policies of the Company in respect thereto. You shall
be entitled to reimbursement of all reasonable travel expenses
incurred by you for your spouse to accompany you on any business
trip where it is expected or appropriate that spouses will
accompany the participants.
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(iv) Benefits. You shall be entitled, at the expense of the
Company, to participate in employee benefit and fringe benefit
plans and programs (including life, health, disability and
officer indemnity insurance and retirement plans) generally made
available by the Company to other senior executives and shall be
entitled to paid vacation in an amount which is commensurate
with other executive vice presidents of similarly situated
property and casualty companies. Nothing in this Agreement
shall restrict the right of the Company to amend, modify or
terminate any such benefits.
(v) Automobile. The Company shall furnish Executive (at no cost to
Executive) with an automobile (including all maintenance
therefore) which is in keeping with automobiles historically
driven by Executive.
4. Termination of Employment. Unless earlier terminated, the Executive's
employment pursuant to this Agreement shall terminate upon the earliest
to occur of any of the following:
(i) The Executive and the Company mutually agree that the employment
of the Executive shall terminate;
(ii) The Executive's retirement;
(iii) The Executive's death or Disability ("Disability" means any
physical or mental impairment, infirmity or incapacity rendering
the Executive substantially unable to perform his duties
hereunder for any 120 days in the aggregate out of any 365 day
period); or
(iv) The Company terminates the Executive's employment for Cause
("Cause" means (a) the Executive being convicted in the United
States of America, any state therein, or the District of
Columbia, or in Canada or any Province therein (each, a "Relevant
Jurisdiction"), of a crime for which the maximum penalty may
include imprisonment for one year or longer (a "felony") or the
Executive having had entered against him or consenting to any
judgment, decree or order (whether criminal or otherwise) based
upon fraudulent conduct or violation of securities laws, (b) the
Executive being indicted for, charged with or otherwise the
subject of any formal proceeding (criminal or otherwise) in
connection with any felony, fraudulent conduct or violation of
securities laws, in a case brought by a law enforcement or
securities regulatory official, agency or authority in a Relevant
Jurisdiction, (c) any consolidated balance sheet of Goran, a
Canadian insurance holding company, is required by the
independent certified public accountants of Goran to be restated
in a manner that results in the reported consolidated
shareholders' equity of Goran and its subsidiaries being reduced
by an amount equal to 10% or more of such reported consolidated
shareholders' equity, (d) the Executive engaging in fraud, or
engaging in any unlawful conduct relating to the Company or its
business, in either case as determined under the laws of any
Relevant Jurisdiction, (e) the Executive breaching any provision
of this
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Agreement or (f) gross negligence or willful misconduct by the
Executive in the performance of his duties hereunder).
5. Compensation Upon Termination. Upon termination of your employment with
the Company, payments of bases salary, bonus, or other compensation
and/or benefits provided to the Executive by the Company pursuant to this
Agreement or otherwise, shall be paid in accordance with the Company's
policies then in effect; provided however, that upon termination by
reason of death, you shall also be entitled to have your then base salary
continue to be paid (on the regular payment dates) for a period of six
months after the Date of Termination.
6. Location. Your services shall be performed at the Company's current
headquarters location in Indianapolis, Indiana, or at such other place
within a fifty-mile radius of such current location as the Board may from
time to time deem appropriate. If you shall be otherwise temporarily
relocated in connection with an acquisition by the Company or its
subsidiaries, you shall be reimbursed for reasonable expenses for housing
at such location and for your spouse to visit such location from time to
time. If you shall be otherwise permanently relocated, you shall be
reimbursed for your reasonable moving expenses. Notwithstanding the
foregoing, you shall be required to travel to the extent necessary to the
performance of your responsibilities under this Agreement.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the signature page of
this Agreement, provided, that all notices to the Company shall be
directed to the attention of the Board with copies to the Secretary of
the Company, or to such other address as either party may have furnished
to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
8. Noncompetition. In consideration of the Company's entering into this
Agreement and the compensation and benefits to be provided by the Company
to you hereunder, and further in consideration of your exposure to
proprietary information of the Company, you agree as follows;
(i) Until the date of termination or expiration of your employment
for any reason (the "Date of Termination"), you agree not to
enter into competitive endeavors and not to undertake any
commercial activity which is contrary to the best interests of
the Company or its affiliates, including, directly or indirectly,
becoming an employee, consultant, owner (except for passive
investments of not more than one percent of the outstanding
shares of, or any other equity interest in, any company or entity
listed or traded on a national securities exchange or in an
over-the-counter securities market), officer, agent or director
of, or otherwise participating in the management, operation,
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control or profits of (a) any firm or person engaged in the
operation of a business engaged in the acquisition of insurance
businesses engaging in the business of providing insurance,
including reinsurance, relating to nonstandard automobile
insurance and related forms of insurance or (b) any firm or
person which either directly competes with a line or lines of
business of the Company accounting for five percent (5%) or more
of the Company's gross sales, revenues or earnings before taxes
or derives five percent (5%) or more of such firm's or person's
gross sales, revenues or earnings before taxes from a line or
lines of business which directly compete with the Company.
Notwithstanding any provision of this Agreement to the contrary,
you agree that your breach of the provisions of this Section
8(i) shall permit the Company to terminate your employment for
Cause.
(ii) If your employment is terminated by you, or by reason of your
Disability, or by the Company for Cause, then, for two years
after the Date of Termination, you agree not to become, directly
or indirectly, an employee, consultant, owner (except for
passive investments of not more than one percent of the
outstanding shares of, or any other equity interest in, any
company or entity listed or traded on a national securities
exchange or in an over-the-counter securities market), officer,
agent or director of, or otherwise to participate in the
management, operation, control or profits of, any firm or person
which directly competes with a business of the Company which at
the Date of Termination produced any class of products
accounting for five percent (5%) or more of the Company's gross
sales, revenues or earnings before taxes or which at the Date of
Termination derived five percent (5%) or more of such firm's or
person's gross sales, revenues or earnings before taxes.
(iii) You acknowledge and agree that damages for breach of the
covenant not to compete in this Section 8 will be difficult to
determine and will not afford a full and adequate remedy, and
therefore agree that the Company shall be entitled to an
immediate injunction and restraining order (without the
necessity of a bond) to prevent such breach or threatened or
continued breach by you and any persons or entities acting for
or with you, without having to prove damages, and to all costs
and expenses (if a court or arbitrator determines that the
Executive has breached the covenant not to compete in this
Section 8), including reasonable attorneys' fees and court
costs, in addition to any other remedies to which the Company
may be entitled at law or in equity; provided, however, that in
the event that a court or arbitrator finally determines that the
Executive has not breached the covenant not to compete in this
Section 8 after an action or suit is brought by the Company with
respect thereto, the Company shall pay all costs and expenses,
including reasonable attorney's fees and court costs, incurred
by the Executive in defending against such action or suit. You
hereby waive any and all defenses you may have on the ground of
lack of jurisdiction or competence of the court to grant such
injunction, restraining order or other equitable relief you and
the Company agree that the provisions of this covenant not to
compete are reasonable and necessary for the operation of the
Company and its
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subsidiaries. However, should any court or arbitrator determine
that any provision of this covenant not to compete is
unreasonable, either in period of time, geographical area, or
otherwise, the parties agree that this covenant not to compete
should be interpreted and enforced to the maximum extent which
such court or arbitrator deems reasonable.
9. Non-solicitation. During the Employment Period and for a period of two
years thereafter, the Executive shall not interfere with the Company's
or any of its subsidiaries' relationships with, or endeavor to entice
away from the Company or any of its subsidiaries, or hire, any person
who at any time during the Employment Period was an employee or
customer of the Company or any of its subsidiaries or otherwise had a
material business relationship with the Company or any of its
subsidiaries.
10. Confidentiality.
(i) You agree and understand that as a result of your position with
the Company, you have been and will be exposed to and have
received and will receive information relating to the
confidential affairs of the Company, including but not limited
to, technical information, business and marketing plans,
strategies, customer information, other information concerning
the Company's products, promotions, development, financing,
expansion plans, business policies and practices, information
concerning the principals of any of the businesses of the
Company, and other forms of information considered by the
Company to be confidential and in the nature of trade secrets.
You agree that during the Employment Period and thereafter,
you will keep such information confidential and not disclose
such information, either directly or indirectly, to any third
person or entity without the prior written consent of the
Company and you confirm that such information is the exclusive
property of the Company and its affiliates. You agree to hold
as the Company's property all memoranda, books, papers,
letters and other data and all copies thereof or therefrom, in
any way relating to the business of the Company and its
affiliates, whether made by you or otherwise coming into your
possession and, on termination or expiration of your
employment, or on demand of the Company at any time, to
deliver the same to the Company.
(ii) Any ideas, processes, characters, productions, schemes, titles,
names, formats, policies, adaptations, plots, slogans,
catchwords, incidents, treatment, and dialogue which you may
conceive, create, organize, prepare or produce during the
period of your employment and which ideas, processes, etc.
relate to any of the businesses of the Company, shall be owned
by the Company and its affiliates whether or not you should in
fact execute an assignment thereof to the Company, but you
agree to execute any assignment thereof or other instrument or
document which may be reasonably necessary to protect and
secure such rights to the Company.
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11. Arbitration.
(i) Except as contemplated by Section 8(iii) hereof, any dispute or
controversy arising under or in connection with this Agreement
that cannot be mutually resolved by the parties to this
Agreement and their respective advisors and representatives
shall be settled exclusively by arbitration in Indianapolis,
Indiana before one arbitrator of exemplary qualifications and
stature, who shall be selected jointly by an individual to be
designated by the Company and an individual to be selected by
you, or if such two individuals cannot agree on the selection of
the arbitrator, who shall be selected by the American
Arbitration Association.
(ii) The parties agree to use their best efforts to cause (a) the two
applicable individuals set forth in the preceding Section 11(i),
or, if applicable, the American Arbitration Association, to
appoint the arbitrator within thirty days of the date that a
party hereto notifies the other party that a dispute or
controversy exists that necessitates the appointment of an
arbitrator, and (b) any arbitration hearing to be held within
thirty days of the date of selection of the arbitrator and, as a
condition to his or her selection, such arbitrator must consent
to be available for a hearing at such time.
12. Stock Options. The Executive shall be granted options for shares of
capital stock of the Company pursuant to the Company's 1996 Stock Option
Plan (the "Option Plan").
(i) With respect to any shares issued pursuant to such options in
accordance with the Option Plan, the Executive will be entitled
to unlimited piggyback registration rights in connection with
any offering of shares by the Company pursuant to an effective
registration statement under the Securities Act of 1933, on a
pari passu basis with any other stockholders of the Company
having piggyback registration rights (other than ▇▇▇▇▇▇
International Group, Inc. and GS Capital Partners II, L.P., and
their respective affiliates and transferees, who will have
priority over the Executive), subject to the Executive entering
into appropriate agreements relating to hold-back periods, legal
opinions and similar issues.
(ii) The options granted to the Executive pursuant to the Option Plan
shall become Vested Options (as defined in the Option Plan)
automatically upon a Company Sale (as defined in the Stock
Purchase Agreement).
(iii) Immediately prior to an Initial Public Offering (as defined in
the Option Plan), the Executive shall be entitled to purchase
the shares of capital stock of the Company subject to any option
that is an Unvested Option held by the Executive at a price per
share equal to the exercise price set forth with respect to such
option in the Option Plan; provided, however, that all shares
purchased pursuant to such options shall be restricted shares,
subject to the same provisions, restrictions and limitations,
including, without limitation, the provisions, restrictions and
limitations relating to vesting,
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forfeiture and transferability, to which such options that are
Unvested Options are subject pursuant to the Option Plan not
taking into account this Section 12(iii).
13. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officers as may be specifically
designated by the Board. 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 expressly set forth in this Agreement (or in the Stockholder
Agreement). The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Indiana.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations
of the Company under Sections 5 and 11 and your obligations under
Sections 8, 9, 10 and 11 hereof shall survive the expiration or
termination of the Employment Period and this Agreement.
14. Validity. The invalidity or unenforceability of any provision 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.
15. Enforceability. The covenants set forth in Sections 8, 9 and 10 shall
be construed as independent of any of the other provisions contained in
this Agreement and shall be enforceable as aforesaid, notwithstanding
the existence of any claim or cause of action of the Executive against
the Company or any of its subsidiaries, whether based on this Agreement
or otherwise. In the event that any of the provisions of Sections 8, 9
or 10 should ever be adjudicated to exceed the time or other limitations
permitted by applicable law, then such provisions shall be deemed
reformed in any jurisdiction to the time or other limitations permitted
by applicable law.
16. Board Action. In the case of any provision of this Agreement which
requires or is subject to any action, approval or policy of, or
determination or notice by, (i) the Board, such action, approval,
policy, determination or notice may be effected by the GSCP Designees
(as defined in the Stockholder Agreement) or (ii) the Company, shall be
subject, in addition, to the consent of the GSCP Designees.
17. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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18. Entire Agreement. This Agreement (and the Stockholder Agreement)
contain the entire agreement by the parties with respect to the matters
covered herein and supersede any prior agreement (including, without
limitation, any prior employment agreement), condition, practice,
custom, usage and obligation with respect to such matters insofar as any
such prior agreement, condition, practice, custom, usage, or obligation
might have given rise to any enforceable right.
IN WITNESS WHEREOF, the parties have executed this Agreement this
____day of __________, 1996.
Address:
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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GGS MANAGEMENT HOLDINGS, INC.
Address: By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Vice President & Secretary
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EXHIBIT A
BONUS PLAN FOR ▇▇▇▇ ▇. ▇▇▇▇▇▇
The Bonus Plan will be based on the following criteria:
1. GGS must make all interest and principal payments on a timely basis and pass
all covenant tests during the fiscal year for any bonus payment to be made.
2. If all interest and principal interest payments are met and covenant tests
passed, the following payment schedule will be used:
% of GGS Plan* % of Bonus Bonus Total Compensation
-------------- ---------- ----- ------------------
less than 80% 0% $0 $150,000
80% 25% $18,750 $168,750
85% 30% $22,500 $172,500
90% 35% $26,250 $176,250
95% 50% $37,500 $187,500
96% 60% $45,000 $195,000
97% 70% $52,500 $202,500
98% 80% $60,000 $210,000
99% 90% $67,500 $217,500
100% 100% $75,000 $225,000
* Note: Plan refers to operating income (excluding realized gains on fixed
income portfolio and any realized gains on the equity securities in excess
of a 7.5% return on the equity portfolio including dividends) in the GGS
projections as shown below.
4/30/96-
12/31/96 1997 1998 1999 2000 2001 2002
-------- ---- ---- ---- ---- ---- ----
Operating $8,982 $23,793 $28,730 $33,167 $38,397 $43,924 $49,948
Income
3. Performance exceeding plan will be rewarded at the Board's discretion.
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