Exhibit 10.39
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is effective as of the 9th day of July, 2002
by and between CERES GROUP, INC., a Delaware corporation, referred to in this
Agreement as "Employer," and XXXXXX X. XXXXXX, referred to in this Agreement as
"Employee."
RECITALS:
Employer is engaged in the insurance business and maintains its
corporate office in the City of Strongsville, Ohio; and
Employer wishes to employ Employee, and Employee wishes to be employed
by Employer, on the terms and conditions set forth in this Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
Employer hereby employs Employee and Employee hereby accepts such
employment upon the terms and conditions hereinafter set forth.
1. SERVICES. Employer shall employ Employee as its President and
Chief Executive Officer. Subject to the direction and
authorization of Employer's board of directors ("Board"),
Employee shall have such duties, responsibilities, and
authorities as are commensurate for presidents/chief executive
officers of public companies of similar size in the same
industry.
The Board will nominate and, pursuant to Section 2.3 of
Employer's bylaws, elect Employee to fill a vacancy on the
Board promptly following the resignation of Xxxxxx X. Xxxx,
which is expected on the date of this Agreement. It is
contemplated that, in connection with each annual meeting of
stockholders of Employer during the term of this Agreement
that coincides with the expiration of Employee's term of
office on the Board, the Board will nominate Employee for
election as a member of the Board. Despite the foregoing,
Employee will resign as a member of the Board upon the
termination of this Agreement for any reason whatsoever and to
that end, contemporaneously with the execution of this
Agreement, with effect as of the termination of Employee's
employment pursuant to this Agreement, Employee will resign as
a member of the Board of Employer by executing and delivering
to Employer a letter of resignation in the form of Annex A
hereto.
Employee, subject to the direction and control of the Board,
shall have all power and authority commensurate with his
position as Employer's president/chief executive officer and
necessary to perform his duties hereunder. Employer agrees to
provide to Employee such assistance and work accommodations as
are suitable to the character of his position with Employer
and adequate for the performance of his duties. Employee shall
devote his entire employable time, attention and best efforts
to the business of Employer, and shall not, without the
consent of the Board, during the term of this Agreement be
actively engaged in any other
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business activity, whether or not such business activity is
pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing Employee from
serving on boards of processional, community, civic,
educational, charitable and corporate organizations on which
he presently serves or may choose to serve, or from managing
his personal investments. For purposes of this Agreement,
"entire employable time" shall mean the normal work week for
individuals in executive management positions with Employer.
Employee represents and warrants to Employer that his
employment hereunder and compliance with the terms and
conditions of this Agreement will not conflict with or result
in the breach of any agreement or obligation to which he is a
party or may be bound.
2. TERM AND TERMINATION. The initial term of this Agreement shall
be for a period of two (2) years, commencing on the date of
this Agreement and expiring at 5:00 p.m.on July 8, 2004;
provided, however, that this Agreement shall automatically
renew for succeeding one (1) year terms, unless Employer
provides Employee with at least ninety (90) days' advance
written notice that this Agreement and Employee's employment
shall terminate as of the close of business on July 8th of the
initial or then-current renewal term (as the case may be).
TERMINATION WITHOUT CAUSE. Regardless of any provisions of
this Agreement to the contrary, or which could be construed to
the contrary, in the event that (a) Employer chooses to
terminate this Agreement upon ninety (90) days' advance
written notice prior to the end of the initial or then-current
renewal term or (b) Employee shall leave the employment of
Employer at any time other than as a voluntary quit or for
"cause" (as defined below) or Employee's employment is
terminated in connection with a "change of control" (as
defined below), this Agreement shall terminate and Employee
shall be entitled to severance pay equal to eighteen (18)
months of Employee's then-current base compensation less the
Signing Bonus (as defined in Section 3 below), plus any
bonus(es) paid to Employee at the end of the fiscal year
immediately preceding such termination, payable in eighteen
(18) equal monthly installments on the first day of each
month. Such payments shall be in lieu of any other payments
from Employer, including, without limitation, severance or
termination payments contained herein or otherwise and
Employer shall have no further liability or obligation to
Employee for compensation or benefits.
CHANGE OF CONTROL. Upon the occurrence of a "qualifying
termination" (as defined below) following a "change of
control" (as defined below) of Employer, Employee shall be
entitled to receive cash compensation equal to two (2) years
of Employee's then-current base compensation less the Signing
Bonus (as defined in Section 3 below), plus (a) the average
annual bonus paid to Employee in the last two fiscal years
immediately preceding such termination plus (b) any additional
discretionary bonus as may be determined by the Board in its
sole discretion, payable in a lump sum. Such payment shall be
in lieu of any other payments from Employer, including,
without limitation, severance or termination payments
contained herein or otherwise and Employer shall have no
further liability or obligation to Employee for compensation
or benefits.
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"Change of control" shall mean the occurrence of any of the
following events:
(i) a tender offer shall be made and consummated
for the ownership of 50.1% or more of the
outstanding voting securities of Employer;
(ii) Employer shall be merged or consolidated
with another corporation and, as a result of
such merger or consolidation, less than
50.1% of the outstanding voting securities
of the surviving or continuing corporation
shall be owned in the aggregate by the
former stockholders of Employer as the same
shall have existed immediately prior to such
merger or consolidation; or
(iii) Employer shall sell substantially all of its
assets to another person or entity which is
not a wholly-owned subsidiary;
(iv) a person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) (as in effect
on the date hereof) of the Exchange Act
shall acquire, other than by reason of
inheritance, (50.1%) or more of the
outstanding voting securities of Employer
(whether directly, indirectly, beneficially
or of record).
In determining whether a "change of control" has
occurred, gratuitous transfers made by a person to an
affiliate of such person (as determined by the Board
of Employer), whether by gift, devise or otherwise,
shall not be taken into account. For purposes of this
Agreement, ownership of voting securities shall take
into account and shall include ownership as
determined by applying the provisions of Rule
13d-3(d)(1)(i) of the Exchange Act as in effect on
the date hereof.
A "qualifying termination" shall occur only if:
(i) a "change of control" (as defined above)
occurs; and
(ii) (A) Employee voluntarily terminates his
employment hereunder; or
(B) within 12 months after the "change
of control," Employer terminates
Employee's employment other than for
"cause" (as defined below); or
(C) within 12 months after the "change
of control," Employer materially
changes Employee's duties and
responsibilities or assigns any
duties or responsibilities that are
materially inconsistent with
Employee's position and Employee
voluntarily terminates his
employment hereunder; or
(D) within 12 months after the "change
of control," Employer requires
Employee to change his location of
employment,
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currently Cleveland, Ohio and Employee
voluntarily terminates his employment
hereunder.
TERMINATION FOR "CAUSE." Notwithstanding any other provisions
of this Agreement to the contrary, Employee's employment and
this Agreement may be terminated by the Employer at any time
without further liability or obligation for compensation or
severance pay or fringe benefits for "cause."
For purposes of this paragraph, "cause" shall mean if Employee
(a) has refused, failed or neglected to perform duties or
render services hereunder or has performed or rendered them
incompetently; (b) has been dishonest or committed a fraud or
breach of trust or has engaged in illegal or wrongful conduct
substantially detrimental to the business or reputation or
Employer; (c) has developed or pursued interests substantially
adverse to Employer; (d) is indicted for, or convicted of, a
crime that constitutes a felony; or (e) has otherwise
materially breached this Agreement.
If, in the opinion of the Board of Employer, Employee's
employment shall become subject to termination for "cause,"
the Board shall give Employee written notice to that effect
which notice shall describe the matter or matters constituting
such "cause." In the case of clauses (b) and (d) above, such
notice shall constitute notice of termination of Employee's
employment and Employee's employment will terminate
immediately. In the case of clauses (a), (c) and (e) above,
if, within 15 days of receipt of such notice, Employee has not
substantially eliminated, resolved or cured each such matter
or matters to the satisfaction of the Board in its sole
discretion, then Employer shall have the right to give
Employee notice that Employee's employment will terminate
immediately.
VOLUNTARY QUIT. Notwithstanding any other provision of this
Agreement, Employee shall have the right to voluntarily quit
Employee's employment and terminate this Agreement by giving
ninety (90) days' advance written notice to Employer at the
address provided herein. Except as provided in (ii)(A), (C) or
(D) in this Section 2 in "Change of Control" in the definition
of a "Qualifying Termination," if Employee shall so
voluntarily quit and terminate this Agreement, Employer shall
have no further obligations pursuant to the terms of this
Agreement, except to pay to Employee accrued salary to the
date of termination.
3. COMPENSATION.
SIGNING BONUS. Employer shall pay to Employee a signing bonus
in the amount of $300,000.00 (the "Signing Bonus"), less
applicable taxes.
BASE COMPENSATION. During this Agreement, Employer shall pay
Employee (according to Employer's normal payroll procedures)
and Employee agrees to accept from Employer, in full payment
for services under this Agreement, an annual base compensation
of $600,000.00. The Board may review Employee's base
compensation from time to time during the term of this
Agreement and, at its
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discretion, may increase Employee's base compensation based
upon his performance and other relevant factors.
BONUS. Employer may pay to Employee such cash bonus(es), if
any, in an amount up to 100% of base compensation per calendar
year, as may be determined by the Board in its sole discretion
from time to time. At the sole discretion of the Board, such
bonus(es) may be part of Employer's bonus plan for officers or
such other incentive compensation or plans as may be
established by the Board of Employer. Notwithstanding the
foregoing, Employee shall be entitled to defer the receipt of
his salary and/or bonus pursuant to procedures adopted or
plans maintained by Employer.
OPTIONS. Upon execution of this Agreement, Employer shall
grant to Employee a nonqualified option to purchase one
hundred thousand (100,000) shares of Employer's common stock
pursuant to Employer's 1998 Key Employee Share Incentive Plan
("Share Option"). The Share Option shall have an exercise
price equal to Three dollars and Ninety cents ($3.90). All of
the shares underlying the Share Option shall vest on the third
anniversary of the date of this Agreement if Employee is still
employed by Employer on such date; provided, however, the
shares shall also vest in full upon a "change of control" of
Employer as that term is defined in Section 2 above. The Share
Option shall expire ten (10) years from the date of this
Agreement. The Share Option shall be on the terms and
conditions contained in a Nonqualified Stock Option Agreement
in the form attached hereto as Annex B.
LIMITATION ON PAYMENTS. Notwithstanding any other term of this
Agreement, the aggregated payments by Employer to Employee
under this Agreement or otherwise that are determined to be
"parachute payments" for purposes of Section 280G of the
Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder ("Section 280G"), shall not exceed 299%
of Employee's "base amount" as determined for purposes of
Section 280G. All determinations and computations for this
purpose, including the interpretation of Section 280G and its
application to the matters set forth herein, will be made by
the Compensation Committee of the Board in its sole discretion
and its determinations hereunder will be binding on Employee
and Employer. To the extent that this provision requires a
reduction in the amount of payment(s) that would otherwise be
due and owing by Employer to Employee under this Agreement or
otherwise, the Compensation Committee shall have sole
discretion, and will work in good faith, to determine the
method of reducing any such payment(s) in order to meet the
limitations imposed by this provision.
BENEFITS. Employee shall be entitled to participate in, and
receive benefits from, any insurance, medical, disability, or
other employee benefit plan of Employer, if any, which may be
in effect at any time during the term of this Agreement and
which shall be generally available to Employee on terms no
less favorable than to other executive management or
supervisory personnel of Employer. Nothing herein shall be
construed so as to prevent Employer from modifying or
terminating any employee benefit plans or programs, or
employee fringe benefits, that it has adopted or may adopt
from time to time.
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4. EXPENSES. During the first sixty (60) days of the term of this
Agreement (unless extended by the Board in its sole
discretion), Employee is authorized to incur reasonable
expenses for travel between his current home in Carmel,
Indiana and Employer's headquarters in Strongsville, Ohio.
Employer shall reimburse Employee for such expenses after
receipt of a written statement from Employee which itemizes
such expenses in reasonable detail, together with all receipts
related to such expenses.
If, at the direction of the Board, Employee relocates and
moves his home near Employer's headquarters, Employer would
reimburse Employee for the costs of such relocation in
accordance with Employer's existing relocation policy.
In addition, Employer agrees that it will reimburse Employee
for any and all necessary, customary and usual business
expenses incurred by Employee, subject to Employer's
then-current policies regarding such expenses.
5. COVENANTS.
NON-DISCLOSURE. During Employee's employment by Employer,
Employee will enjoy access to Employer's "confidential
information" and "trade secrets." For the purposes of this
Agreement, "confidential information" shall mean information
which is not publicly available including, without limitation,
information concerning customers, material sources, suppliers,
financial projections, marketing plans and operation methods,
Employee's access to which derives solely from Employee's
employment with Employer. For purposes of this Agreement,
"trade secrets" shall mean Employer's processes, methodologies
and techniques known only to those employees of Employer who
need to know such secrets in order to perform their duties on
behalf of Employer. Employer takes numerous steps, including
these provisions, to protect the confidentiality of its
confidential information and trade secrets, which it considers
unique, valuable and special assets.
Employee, recognizing Employer's significant investment of
time, effort and money in developing and preserving its
confidential information and trade secrets, shall not, during
his employment hereunder and for a period of three (3) years
after the end of Employee's employment hereunder, use for his
direct or indirect personal benefit any of Employer's
confidential information or trade secrets. During the term of
this Agreement and for a period of three (3) years after the
end of Employee's employment hereunder, Employee shall not
disclose to any person any of Employer's confidential
information or trade secrets.
No termination of this Agreement shall terminate the rights
and obligations of the parties under this Section 5, but such
rights and obligations shall survive such termination in
accordance with the terms of this Section.
6. NON-DISPARAGEMENT. Following the termination of this Agreement
for any reason, Employee agrees that he shall not indulge in
any conduct which may
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reflect adversely upon, nor make any statements disparaging
of, Employer, or the officers, directors, stockholders or
employees of Employer.
7. REMEDIES. Employee agrees that the remedy at law for any
violation or threatened violation by Employee of Sections 5
and 6 will be inadequate and that, accordingly, Employer shall
be entitled to injunctive relief in the event of a violation
or threatened violation without being required to post bond or
other surety. The foregoing remedies shall be in addition to,
and not in limitation of, any other rights or remedies to
which Employer is or may be entitled at law, or in equity, or
under this Agreement.
8. DEATH. Notwithstanding any other provisions of this Agreement,
this Agreement shall be deemed automatically terminated upon
death. In such event, Employer shall pay to Employee's
personal representative or executor any compensation accrued
but unpaid as of such date. Upon the payment of such accrued
compensation, Employer shall have no further obligations under
this Agreement, including, but not limited to, an obligation
to pay a salary, severance or termination pay or any other
form of compensation, or to provide any further fringe
benefits of any kind or nature.
9. DISABILITY. If Employee is unable substantially to perform his
duties under this Agreement by reason of physical or mental
illness, injury, or incapacity for one hundred twenty (120)
consecutive days, Employer may terminate this Agreement
forthwith upon notice to Employee and thereupon shall have no
further liability or obligation to Employee hereunder,
including, but not limited to, an obligation for severance or
termination pay or any other form of compensation, or to
provide any further fringe benefits of any kind of nature,
except as may be prescribed under the terms of any benefit
plans or arrangements referred to in Section 3 in which
Employee participated at the close of business on the first
day of such 120 day period. In the event of a dispute under
this Section 9, Employee agrees to submit to a physical or
mental examination by a licensed physician selected by
Employer, whose decision as to Employee's disability shall be
conclusive and binding upon Employer and Employee. Employer
shall bear the cost of such examination
10. ENTIRE AGREEMENT. This written Agreement contains the sole and
entire agreement between the parties and shall supersede any
and all other agreements, whether oral or written, between the
parties. The parties acknowledge and agree that neither of
them has made any representation with respect to the subject
matter of this Agreement or any representations inducing its
execution and delivery, except such representations as are
specifically set forth in this writing, and the parties
acknowledge that they have relied on their own judgment in
entering into the same. The parties further acknowledge that
any statements or representations that may have been made by
either of them to the other are void and of no effect and that
neither of them has relied on such statements or
representations in connection with its dealings with the
other.
11. WAIVER/MODIFICATION. It is agreed that no waiver or
modification of this Agreement or of any covenant, condition
or limitation contained in it shall be
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valid unless it is in writing and duly executed by the party
to be charged with it, and that no evidence of any waiver or
modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties
arising out of or affecting this Agreement, or the rights or
obligations of any party under it, unless such waiver or
modification is in writing, duly executed as above. The
parties agree that the provisions of this paragraph may not be
waived, except by a duly executed writing. No waiver of any of
the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver.
No waiver of any breach of condition of this Agreement shall
be deemed to be a waiver of any other subsequent breach of
condition, whether of like or different nature.
12. ARBITRATION. If a dispute of any kind arises from or relates
in any manner to this Agreement or the breach thereof, and if
such dispute cannot be settled through direct discussions, the
parties agree to endeavor to first settle the dispute in an
amicable manner by mediation administered in the state in
which Employer's headquarters is located by and through the
American Arbitration Association in accordance with its
Commercial Mediation Rules before resorting to arbitration.
Thereafter, any unresolved controversy or claim arising from
or relating to this Agreement or breach thereof shall be
settled by arbitration administered by and through the
American Arbitration Association in accordance with its
Commercial Arbitration Rules, provided however that only one
arbitrator shall be appointed, which arbitrator shall be an
attorney licensed in the state in which Employer's
headquarters is located or an active or retired judge, having
experience in employment contracts, and judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
13. GOVERNING LAW. The parties agree that it is their intention
and covenant that this Agreement be construed in accordance
with and under and pursuant to the laws of the State of Ohio,
without giving effect to principles of conflicts of law.
14. SUCCESSORS AND ASSIGNS. Employee may not assign any rights or
obligations under this Agreement without the prior written
consent of Employer. This Agreement shall be binding upon and
inure to the benefit of Employee and his lawful heirs,
guardians, executors, administrators, and permitted successors
and assigns.
Employer may not assign any rights or obligations under this
Agreement without the prior written consent of Employee except
to the surviving corporation in connection with a merger or
consolidation involving Employer or to the purchaser of assets
in connection with a sale of all or substantially all of its
assets, so long as the assignee expressly assumes Employer's
rights or obligations. This Agreement shall be binding upon
and inure to the benefit of Employer and its permitted
successors and assigns.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to
this Agreement, except as provided in this Section 14.
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15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an
original but all of which together will constitute one and the
same instrument.
16. RETURN OF PROPERTY. Upon termination of this Agreement for any
reason, Employee shall immediately return any property of
Employer, including, but not limited to, any equipment, credit
cards, advertising materials, booklets, training guides or any
other such similar information, materials or documents that
Employee has in Employee's possession or control.
17. SEVERABILITY. If any clause, paragraph, or section of this
Agreement be held invalid or unenforceable, the remaining
provisions of this Agreement shall not be affected thereby and
shall be valid and remain enforceable to the extent permitted
by law. Moreover, if any one or more of the provisions in this
Agreement shall for any reason by held to be excessively broad
as to duration, geographical scope, activity, or subject, it
shall be construed by limiting and reducing it, so as to be
enforceable to the extent compatible with then applicable law.
18. NOTICES. All notices required to be provided under the terms
of this Agreement shall be sent by United States mail,
certified, return receipt requested, and to the following
addresses:
TO EMPLOYER:
Ceres Group, Inc.
Attn: General Counsel
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
TO EMPLOYEE:
Xxxxxx X. Xxxxxx
00000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
ACKNOWLEDGMENT BY EMPLOYEE: BY SIGNING THIS AGREEMENT, I AFFIRM THAT I
HAVE CAREFULLY READ AND CONSIDERED ALL OF THE TERMS AND CONDITIONS OF
THIS AGREEMENT AND THAT SUCH TERMS AND CONDITIONS ARE UNDERSTOOD,
ACCEPTED AND AGREED.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER: EMPLOYEE:
CERES GROUP, INC. XXXXXX X. XXXXXX
By: /s/ Xxxxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxxx
-------------------------------------- -----------------------------
Its: Corporate Secretary
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ANNEX A
July 9, 2002
Board of Directors
Ceres Group, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
Ladies and Gentlemen:
I, Xxxxxx X. Xxxxxx, hereby resign as a member of the Board of Directors of
Ceres Group, Inc., effective as of the termination of my employment with Ceres
Group (for whatever reason) pursuant to my Employment Agreement, dated as of
July 9, 2002, between Ceres Group and me.
Very truly yours,
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
ANNEX B
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE CERES GROUP, INC.
1998 KEY EMPLOYEE SHARE INCENTIVE PLAN
This Non-Qualified Stock Option Agreement ("Agreement") is made on July
9, 2002, by and between Ceres Group, Inc., a Delaware corporation ("Ceres" or
the "Company"), and Xxxxxx X. Xxxxxx ("Optionee").
Ceres and Optionee agree that the option granted by this Agreement does
not qualify as an "incentive stock option" ("ISO") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). Ceres makes
this grant of an option pursuant to the Ceres Group, Inc., 1998 Key Employee
Share Incentive Plan ("Plan"). The option granted by this Agreement shall be
subject to all the provisions of the Plan, which are incorporated herein by
reference, and shall be subject to the following provisions of this Agreement:
1. NUMBER OF COMMON SHARES AND OPTION PRICE. Ceres hereby grants
Optionee an option ("Option") to purchase 100,000 shares of the Company's $0.001
par value common stock ("Common Shares") for a purchase price ("Option Price")
of $3.90 (Three dollars and Ninety cents) per Common Share.
2. GENERAL TERMS, PERIOD, VESTING AND EXERCISABILITY.
(a) The term of the Option and the term of this Agreement shall commence on the
date hereof ("Date of Grant") and shall terminate upon the expiration of ten
(10) years from the Date of Grant ("Maximum Term") if not terminated or
extinguished earlier by operation of this Agreement or the terms of the Plan.
Upon termination of the Optionee's employment (regardless of reason) with Ceres
or one of its subsidiary corporations, as the case may be, all Options evidenced
by this Agreement that remain outstanding but are not then vested and
exercisable shall terminate and expire. Upon termination of the Optionee's
employment with Ceres or a subsidiary company other than by death or permanent
and total disability and more than three (3) months prior to the end of the
Maximum Term, those Options evidenced by this Agreement that are vested and
exercisable shall terminate and expire three (3) months following the date such
employment terminates. Upon termination of the Optionee's employment with Ceres
or a subsidiary company, by death or permanent and total disability and more
than one (1) year prior to the end of the Maximum Term, those Options evidenced
by this Agreement that are vested and exercisable shall terminate and expire one
(1) year following the date of such death or permanent and total disability (as
determined by the Compensation Committee of the Board of Directors of Ceres).
Options that terminate, expire or lapse on a given date shall do so on such date
at 5:00 p.m., Cleveland, Ohio time.
(b) The Option shall vest and first become exercisable on July 9, 2005 and shall
terminate on July 9, 2012.
(c) Notwithstanding any contrary provisions of this Agreement and subject only
to the terms of the Plan, the Compensation Committee of the Board of Directors
of Ceres ("Committee") in
its sole discretion may cancel and extinguish this Agreement, incident to or as
a result of any reorganization, merger, consolidation, recapitalization,
dissolution or similar restructuring or corporate event involving Ceres, by
paying to the Optionee (or other party then in rightful possession of the
Option) the value of said Option (to the extent then vested and exercisable),
determined as of the date of such restructuring or corporate event and based on
the excess, if any, of the fair market value of Common Shares over the Option
Price.
3. METHOD OF EXERCISE: The Option shall be exercisable from time to
time by written notice (in substantially the form attached hereto as Exhibit A)
to the Company that shall:
(a) state that the Option is thereby being exercised, the number
of Common Shares with respect to which the Option is being
exercised, each person in whose name any certificates for the
Common Shares should be registered and his or her address and
social security number;
(b) be signed by the person or persons entitled to exercise the
Option and, if the Option is being exercised by anyone other
than the Optionee, be accompanied by proof satisfactory to
counsel for Ceres of the right of such person or persons to
exercise the Option under the Plan and all applicable laws and
regulations; and
(c) be accompanied by such representations, warranties or
agreements with respect to the investment intent of such
person or persons exercising the Option as Ceres may
reasonably request in form and substance satisfactory to
counsel for Ceres.
4. PAYMENT OF OPTION PRICE. Upon exercise of the Option, Ceres shall
deliver a certificate or certificates for such Common Shares to the specified
person or persons at the specified time upon receipt of the full purchase price
for such Common Shares by any method of payment authorized by the Plan.
5. TRANSFERABILITY. The Option shall not be transferable or assignable
by the Optionee except as expressly provided by the Plan. The Option shall be
exercisable (subject to any other applicable restrictions on exercise) only by
the Optionee for his or her own account, except that (a) in the event of the
death of the Optionee, the Option shall be exercisable (subject to any other
applicable restrictions on exercise) only by the Optionee's estate (acting
through its fiduciary) or by the Optionee's duly authorized legal
representative; (b) in the event of the permanent and total disability of the
Optionee, the Option shall be exercisable by the Optionee's authorized
representative (unless the Optionee has legal capacity); and (c) in the event of
a divorce or other marriage dissolution resulting in a change in ownership of
some or all of the Options covered by this Agreement, the Option shall be
exercisable only by the ex-spouse of the Optionee within the three (3) month
period ending on the date of such change in ownership.
6. RESTRICTIONS ON EXERCISE. The Option is subject to all restrictions
in this Agreement or in the Plan. As a condition of any exercise of the Option,
Ceres may require the Optionee or his successor to make any representation and
warranty to comply with any applicable law or regulation or to confirm any
factual matters reasonably requested by counsel for Ceres.
7. TAXES. The Optionee hereby agrees to pay to Ceres, in accordance
with the terms of the Plan, any federal, state or local taxes of any kind
required by law to be withheld with respect to the Option granted hereunder. If
the Optionee does not make such payment, Ceres shall have the right to deduct
from any payment of any kind otherwise due to the Optionee from Ceres, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Option or the Common Shares to be purchased by the Optionee under
this Agreement.
8. NO CONTRACT OF EMPLOYMENT. Neither the Plan nor this Agreement, nor
any other action taken by Ceres or any committee or representative thereof,
shall constitute or otherwise evidence a contract of employment, regardless
whether express or implied, between the Optionee and Ceres.
9. DEFINITIONS. Unless otherwise defined in this Agreement, capitalized
terms will have the same meanings given them in the Plan.
10. AMENDMENT AND CONTROLLING LAW. This Agreement may be amended or
modified at any time, but only by a written instrument signed by the parties
hereto (or their successors and assigns). This Agreement is to be governed and
construed according to the laws of the state of incorporation of Ceres, without
regard to its conflicts of law principles or statutes.
CERES GROUP, INC.
DATE OF GRANT: JULY 9, 2002 By: /s/ XXXXXXXX X. XXXXX
------------------------------
Xxxxxxxx X. Xxxxx
Secretary
---------------------------(Return signed page 3 only)-------------------------
ACCEPTANCE OF AGREEMENT
-----------------------
The Optionee hereby: (a) acknowledges receiving a copy of the Plan,
which is attached to this Non-Qualified Stock Option Agreement, and represents
that he/she is familiar with all provisions of the Plan; (b) accepts this
Non-Qualified Stock Option Agreement and the Option granted under this Agreement
subject to all provisions of the Plan and this Agreement; and (c) agrees to
accept as binding, conclusive and final all decisions or interpretations of
Ceres.
Date: _______________ _______________________________________
Signature
_______________________________________
Printed Name
Optionee
EXHIBIT A
EXERCISE OF NON-QUALIFIED STOCK OPTION
TO:
Secretary
Ceres Group, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
Dear Secretary:
The undersigned Optionee hereby exercises the Non-qualified
Stock Option granted to him/her pursuant to the Non-Qualified Stock Option
Agreement dated May 1, 2001, between Ceres Group, Inc. and the Optionee with
respect to ________________ Common Shares covered by said Option, and tenders
herewith $__________________________ in payment of the purchase price thereof by
delivery of
-------------------------------------------------------.
The name and registered address on such certificate should be:
-------------------------------
-------------------------------
-------------------------------
The Optionee's social security number is: ______-_____-______.
Dated: __________ ______________________________
Optionee