Employers Insurance Company of Nevada, a Nevada corporation, (the “Company”) and Douglas D. Dirks (the “Executive”) enter this Employment Agreement (this “Agreement”) as of this 1st day of February, 2006 (the “Commencement Date”).
A. Executive has knowledge and experience applicable to the position of Chief Executive Officer.
B. The Company is an insurance company, owning workers compensation insurance and service companies (the “Business”).
C. The Company desires to employ Executive to perform certain services for the Company, and Executive desires to be so employed by the Company.
D. This Agreement is the entire agreement between the parties concerning the subject matter hereof, and supersedes all prior agreements concerning the same subject.
In consideration of the premises and mutual covenants and promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the parties agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive accepts such employment upon the terms and conditions specified herein. Executive agrees to devote substantially all of his time and effort during working hours to the business and affairs of the Company and its affiliates in the performance of the duties called for herein and agrees that any other non-employment related duties (i.e., industry related groups, service on boards, etc.) will not be allowed to materially interfere with the performance of the duties called for herein.
2. Term. The term of this Agreement shall commence on the Commencement Date, and continue for an initial term of three (3) years, until January 31, 2009, subject to two (2) automatic one-year extensions, the first beginning on the first anniversary of the Commencement Date of this Agreement and the second beginning on the second anniversary date unless either party provides written notice of intent to reject the extension at least ninety (90) days prior to such anniversary date, and further subject to earlier termination in accordance with this Agreement. Provided there has been no such termination, the Agreement will expire (the “Expiration Date”) on the later of January 31, 2009 or three (3) years after the anniversary date following any extension, but in no event later than January 31, 2011.
3. Services and Duties. Executive shall serve as Chief Executive Officer and shall perform such duties as may be assigned by the Board of Directors (the “Board”) from time to time. The Executive shall report solely to the Board of Directors. At the request of the Board, Executive shall also serve as a director of the Company and/or one or more of the Company’s parent, subsidiaries or affiliates at no additional compensation. Executive agrees that upon the termination of his employment with the Company, he shall resign from any and all Boards effective on the date of the termination of employment.
4. Insurance. The Executive agrees to submit to a physical examination at a reasonable time as requested by the Company for the purpose of the Company’s obtaining life insurance on the life of the Executive for the benefit of the Company; provided, however, that
the Company shall bear the costs for such examinations and shall pay all premiums on any life insurance obtained as a result of such examinations. Executive further agrees to submit to drug testing in accordance with the Company policy.
(a) The Company, at any time, may terminate this Agreement immediately for Cause. Cause is defined as:
(i) A material breach of this Agreement by Executive;
(ii) Failure or inability of Executive to obtain or maintain any required licenses or certificates;
(iii) Willful violation by Executive of any law, rule or regulation, including without limitation, any material insurance law or regulation, which violation may, as determined by the Company, adversely affect the ability of Executive to perform his duties hereunder or may subject the Company to liability;
(iv) Election by the Company to discontinue the Company’s business; or,
(v) Conviction of any felony or crime including moral turpitude.
(b) The Executive may terminate this Agreement immediately in the event of:
(i) A material breach of this Agreement by the Company; or
(ii) Willful violation by Employer of any law, rule or regulation, including without limitation, any material insurance law or regulation, which violation may, as determined by the Executive, adversely affect the ability of Executive to perform his duties hereunder or may subject the Executive to liability.
(c) The Company may also terminate this Agreement upon the occurrence of one or more of the following events, subject to applicable law:
(i) Death of Executive;
(ii) Executive is deemed to be disabled in accordance with the policies of the Company and the law or if Executive is unable to perform the essential job functions of Executive’s position with the Company, with or without reasonable accommodation, for a period of more than 100 business days in any 120 consecutive business day period. Executive is entitled to any and all short term or long term disability programs, like any other employee, in accordance with the policies of the Company, whether or not this Agreement is terminated;
(iii) Any event, occurrence, or factual situation that, in the sole and absolute discretion of the Company, shall make the continued employment of Executive ineffective, inadvisable, or unnecessary.
6. Duties Upon Termination.
(a) If the Company terminates this Agreement for any reason before the Expiration Date as extended by any automatic extensions provided for under Section 2 of this Agreement other than specified above in subsection 5(a) for Cause, 5(c)(i), for the death of the Executive, or 5(C)(ii) for disability, or if the Executive terminates this Agreement for Cause which has not been cured by the Company within thirty (30) days of receipt of written notice of the alleged breach pursuant to Paragraph 5(b), the Executive shall receive the following severance pay (the “Severance Pay”):
(i) An amount equal to the greater of his current Base Salary for the remainder of the contract term or the sum of two (2) years of his current Base Salary payable within thirty (30) days of the effective date of the termination;
(ii) Amounts due under the Annual Incentive and any other amounts due under bonus plans of which the Executive has been a participant, pro-rated for the period of the calendar year in which the Executive last performed services for the Company, in accordance with such bonus plans in effect on the date of the termination and payable either in a lump sum within thirty (30) days of the effective date of the termination or in accordance with the payment schedule of such plans in effect on the date of the termination, such election to be made at the option of the Company;
(iii) The payment amounts set forth hereunder shall be subject to normal payroll deductions at Executive’s then-elected rate, Executive agrees to pay any federal or state taxes, which are required to be paid by Executive beyond the amount of any withholding by the Company; and
(iv) Continuation of the insurance coverage in effect on the date of the termination, for a period of 18 (eighteen) months with the Company paying the employer portion of the premium and the Executive paying the employee portion, including dependents if applicable, of the premium during the eighteen (18) month period, provided Executive elects to continue such insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Executive is solely responsible for taking the actions necessary to exercise his rights under COBRA for the insurance coverage Executive has in effect, including dependents if applicable, on the date of termination.
(b) The parties agree, in the event of a breach of this Agreement by the Company that is not cured in accordance with this Agreement, that actual damages are speculative and that the amount of the Severance Pay set forth herein is liquidated damages and is a reasonable estimate of what damages would be for a breach of this Agreement.
(c) Executive agrees and acknowledges that the following must be satisfied by the Executive before he is entitled to the Severance Pay called for herein:
(i) That Executive return any and all Company equipment, software, data or Company property or information, including documents and records or copies thereof relating in any way to any proprietary information of the Company, its parent, subsidiaries or affiliates whether prepared by the Executive or any other person or entity. That Executive further agrees that he shall not retain any proprietary information of the Company, its parent, subsidiaries or affiliates after the termination of his employment;
(ii) That Executive execute a Global Release of Liability, in a form substantially similar to the sample attached hereto, which releases liability for any and all claims, whether based in law or equity, arising from or associated with Executive’s employment or with this Agreement. That Executive further acknowledges and agrees that he has not made and will not make any assignment of any claim, cause or right of action, or any right of any kind whatsoever, arising from or associated with the employment of Executive by the Company; and,
(iii) That Executive reaffirm the covenants contained herein, in writing, including but not limited to the following: non-disclosure, non-competition and non-solicitation covenants.
(d) The Executive may terminate this Agreement for reasons other than those identified in Paragraph 5(b) upon not less than 60 days prior written notice. If the Executive terminates this Agreement pursuant to this paragraph, he shall only be entitled to the following:
(i) Any unpaid salary through the effective date of Executive’s resignation from the Company; and
(ii) Any accrued and unused vacation pay.
7. Compensation, and Benefits.
(a) During the term of this Agreement, the Company shall pay to Executive an annual salary of not less than $550,000 (“Base Salary”), which amount shall be paid according to the Company’s regular payroll practices. The Company agrees to review the Base Salary on an annual basis and adjust the salary to comply with the executive compensation policy in effect at the time of the review. Any increase made to the annual salary will establish the new Base Salary for the Executive. All payments made pursuant to this Agreement shall be reduced by and subject to withholding for all federal, state, and local taxes and any withholding required by applicable laws and regulations. The Company agrees that if its ultimate parent converts to a stock company, it will establish and Executive shall participate in such additional compensation plans, subject to regulatory approval, as are reasonable and customary to similarly situated executives in the property and casualty insurance industry.
(b) The Company will provide an annual incentive (the “Annual Incentive”) to the Executive during the term of employment based on the Executive’s and the Company’s performance, as determined by the Board (or a committee thereof) in its sole discretion. Such plan shall set a combined Annual and Long Term target incentive of not less than one hundred seventy-five percent (175%) of Base Salary. Such Annual Incentive shall be paid in accordance with the Company’s regular practice for its senior officers, as in effect from time to time. The Board of Directors (or a committee thereof) shall determine the apportionment of the Annual Incentive between Annual and Long Term and cash and non-cash components, if applicable, but in no event shall the cash portion of the Annual Incentive target be less than 25% of Base Salary. To the extent not duplicative of the specific benefits provided herein, the Executive shall be eligible to participate in all incentive compensation, retirement, supplemental retirement, and deferred compensation plans, policies and arrangements that are provided generally to other senior officers of the Company at a level (in terms of the amount and types of benefits and incentive compensation that the Executive has the opportunity to receive and the terms thereof) determined in the sole discretion of the Board;
(c) Executive agrees that the amounts payable under this Agreement including but not limited to the amount payable under Paragraph 6(a)(1) is good, valuable and separate cons