This NonCompetition Agreement involves
Title: EMPLOYMENT AND NON-COMPETITION AGREEMENT
Governing Law: Ohio Date: 12/21/2015
Industry: Insurance (Prop. and Casualty) Sector: Financial
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (“Agreement”) is effective this 21st day of December 2015 (“Effective Date”) by and between National Interstate Corporation (“NATL”) and Anthony J. Mercurio (“Mercurio”).
In consideration of the mutual covenants set forth in this Agreement, NATL and Mercurio agree as follows:
1. Employment; Term . NATL shall employ Mercurio on the terms and subject to the conditions set forth in this Agreement. The term of Mercurio’s employment pursuant to this Agreement shall commence on the Effective Date and, subject to prior termination as provided in Section 15, shall continue through December 31, 2017 (“Initial Term”). Following the Initial Term, this Agreement shall automatically renew for successive one (1) year periods (each a “Renewal Term”) unless and until it is terminated by either party by providing written notice of termination to the other party at least 120 days prior to the effective date of such termination. The Initial Term and any Renewal Term are collectively referred to herein as the “Term.”
2. Title, Duties and Responsibilities .
(a) Effective May 5, 2016 (the “Transition Date”), (i) NATL’s Board of Directors (the “Board”) shall promote Mercurio to Chief Executive Officer of NATL (in addition to his current title of President) and (ii) Mercurio shall vacate the position of Chief Operating Officer of NATL. During the Term, Mercurio shall perform all such duties and have all such responsibilities that are consistent with his position as President and, following the Transition Date, Chief Executive Officer of NATL. During the Term, Mercurio will also serve certain subsidiaries of NATL in such executive capacities as may be mutually agreed upon from time to time by Mercurio and the respective Boards of Directors of such NATL subsidiaries, consistent with NATL’s past practice with respect to the President serving in such capacities.
(b) During the Term, Mercurio will devote his entire business time, energy, and talent to the business of, and to the furtherance of, the purposes and objectives of NATL and its Affiliates.
3. Compensation . All compensation payable to Mercurio under this Agreement will be subject to such withholding as required by applicable law.
(a) Base Salary . During the period between the Effective Date and the Transition Date, NATL will pay a base annual salary to Mercurio, in accordance with NATL’s normal payroll practices, at the rate of no less than $380,000 per year. Following the Transition Date, NATL shall pay Mercurio, in accordance with NATL’s normal payroll practices, a base annual salary of not less than $410,000 for the remainder of the Initial Term. Mercurio’s annual base salary will be subject to review and potential increase, but not decrease, in (i) connection with annual salary reviews to be conducted in accordance with NATL’s customary practice or (ii) at such other time or times as the Board may deem appropriate.
(b) Annual Bonus . Mercurio will be eligible for a bonus each year, subject to and in accordance with the rules of NATL’s Management Bonus Plan, with a target bonus of
$285,000 (i.e., an amount equal to 75% of his annual base salary as in effect as of the Effective Date) for the 2015 Accident Year and target bonus of $410,000 (i.e., an amount equal to 100% of his annual base salary following the Transition Date) for the 2016 Accident Year. For each subsequent year during the Term, Mercurio’s target bonus will equal 100% of his annual base salary in accordance with the terms of NATL’s Management Bonus Plan unless otherwise modified by the Board.
(c) Restricted Stock Grants . Consistent with NATL’s Long Term Incentive Plan, and such plan’s Administrative Guidelines (collectively, the “LTIP”), Mercurio shall be granted Common Shares of NATL that are in accordance with his position and which are restricted subject to the LTIP’s vesting schedule. Mercurio will also be eligible to receive Performance Share Awards pursuant to the LTIP.
4. Health, Life, and Disability Coverage .
(a) NATL will provide to Mercurio, during the Term, coverage under NATL’s health insurance benefits plans, including the Flexible Spending Account program, subject to normal deductibles, premiums, and co-payments in effect from time to time and in accordance with the terms of such plans and program.
(b) NATL will provide to Mercurio, during the Term, the maximum levels of coverage available under NATL’s Basic Life Insurance/Accidental Death and Dismemberment Plan in accordance with the terms of such plan.
(c) NATL will provide to Mercurio, during the Term, short term and long term (group and supplemental) disability coverage on substantially the same basis as was provided to him by NATL prior to the Effective Date in accordance with the terms of such coverages.
5. Savings and Profit Sharing Plan . Mercurio will be eligible, during the Term, to participate in NATL’s Savings and Profit Sharing Plan with payroll deductions, company matches and ultimate distributions to be made in accordance with the provisions of such plan.
6. Office, Auto, and Perquisites . During the Term, Mercurio will be entitled to the continued use of an office and secretarial services appropriate to his position, to the continued use of an automobile (under NATL’s Company Auto Program for Senior Officers), and to all standard officer perquisites that are provided to other senior officers of NATL.
7. Paid Time Off . During the Term, Mercurio will be entitled to Paid Time Off during each calendar year in accordance with NATL’s Paid Time Off Policy, as applicable to senior executives of NATL and as in effect from time to time.
8. Reimbursement for Expenses . Subject to such limitations as may be reasonably imposed by NATL from time to time, NATL will reimburse Mercurio for reasonable, ordinary, and necessary business expenses incurred by him in furtherance of NATL’s business, provided Mercurio accounts to NATL in a manner sufficient to substantiate deductions with respect to those expenses by NATL for federal income tax purposes.
9. Confidential Information . Notwithstanding any other provision of this Agreement, during and after the Term, Mercurio shall maintain the confidentiality of NATL and its subsidiaries’ and affiliates’ (collectively, the “Affiliates”; however, “Affiliates” do not include American Financial Group, Inc., Great American Insurance Company or their subsidiaries or
affiliates) Confidential Information and shall refrain from using such Confidential Information (except in connection with Mercurio’s job responsibilities herein) and disclosing it to anyone other than NATL and its Affiliates, their respective employees, and other entities that have a business relationship with NATL and have a need for such Confidential Information. For purposes of this Agreement, “Confidential Information” is information that Mercurio would not have acquired but for his employment by NATL and that NATL and its Affiliates endeavor to keep confidential, including without limitation, and regardless of whether such information is in a tangible medium of expression, accounting information, agency information, broker-marketing information, claims information, customer service information, employee information, financial information, information systems information, underwriting information, and any information provided by a third party to NATL in confidence. At the termination of this Agreement or otherwise upon NATL’s demand, Mercurio will provide to NATL all records containing Confidential Information as well as any copies of it, including handwritten notes made or derived from Confidential Information or records, all of which are the property of NATL.
10. Activity Restraints . Mercurio agrees that he will not, while employed by NATL or at any time within 12 months after termination of his employment with NATL, whether as an individual for his own account, or as an employee, officer, director, significant shareholder, partner, member, agent, independent contractor, or consultant of any person, firm, corporation, or other entity engage in the following activities:
(a) Enter into or engage in any business that competes, directly or indirectly, with the NATL or its Affiliates;
(b) Have any contact, including discussions, negotiations, agreements, or understandings, with any insured, potential insured, agent, broker, or other entity of NATL with which NATL had discussions, negotiations, agreements or understandings with at any time during Mercurio’s employment relating in any manner to competing insurance products that are identical to, substantially the same as, or an adequate substitute for any insurance products of NATL and that are, or could reasonably be anticipated to be, marketed or distributed in such a manner and in such a geographic area as to actually compete with such insurance products of NATL. Nothing in this Section 10 is intended to preclude Mercurio from seeking employment in any capacity (including with any insurance company) that is not in conflict or competition (directly or indirectly) with the then-current or contemplated business activities of NATL at the time of his termination.
11. Soliciting NATL Employees . Mercurio will not, either while employed by NATL or at any time within 12 months after termination of his employment with NATL, directly or indirectly, hire or solicit for hire any of NATL’s employees to work for Mercurio or any person or entity with which Mercurio is associated other than NATL and its affiliates.
12. Remedies . Mercurio acknowledges that:
(a) The promises in Sections 9, 10 and 11 of this Agreement are reasonably necessary to protect the goodwill, trade secrets, and other business interests of NATL and will not cause Mercurio undue hardship.
(b) Any breach of these promises will cause NATL immediate irreparable harm for which injunctive relief, including an ex parte temporary restraining order, may be
necessary. Injunctive relief will not preclude NATL from receiving any other relief to which it might be entitled.
(c) The promises in Sections 9, 10 and 11 of this Agreement are of the essence of this Agreement. They must be construed as independent of any other provision of this Agreement and the existence of any claim or cause of action of Mercurio against NATL, whether predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by NATL of these promises.
13. Tolling . If any provisions of this Agreement are violated, then the time limitations set forth in this Agreement shall be extended for a period of time equal to the period of time during which such breach occurs, and, in the event that NATL is required to seek relief from such breach before any court, board, or other tribunal, then the time limitation shall be extended for a period of time equal to the pendency of such proceedings, including all appeals.
14. Construction of Agreement . Mercurio’s promises in Sections 9, 10 and 11 of this Agreement are separate and independent. If any of these promises is declared invalid or unenforceable by any court, Mercurio’s remaining promises and obligations shall remain in full force and effect. If any of the provisions contained in Sections 9, 10 or 11 of this Agreement are held to be unenforceable due to the duration or other aspect of the scope of those provisions, the parties agree that a court has the power to and should reduce the duration or scope of that provision and enforce the provision in its reduced form.
15. Termination .
(a) During the Term . If not earlier terminated, Mercurio’s employment under this Agreement shall terminate in accordance with Section 1.
(b) Death or Disability . Mercurio’s employment under this Agreement will terminate immediately upon Mercurio’s death. NATL may terminate Mercurio’s employment hereunder immediately upon giving notice of termination if Mercurio is disabled, by reason of physical or mental impairment, to such an extent that he has been unable to substantially perform his duties under this Agreement for an aggregate of 90 days (whether business or non-business days and whether or not consecutive) during any period of twelve consecutive calendar months.
(c) For Cause . NATL may terminate Mercurio’s employment under this Agreement for “Cause” if:
(i) Mercurio is convicted of a felony (other than felonious operation of a motor vehicle) or a crime invol