UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
February 22, 2018
Date of Report (Date of earliest event reported)
STEWART INFORMATION SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-02658 | 74-1677330 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
|
1980 Post Oak Blvd. Houston, Texas |
77056 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 713-625-8100
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Employment Agreements with Certain Executive Officers
On February 22, 2018, Stewart Information Services Corporation (the “Company”) entered into employment agreements, each effective January 1, 2018, with Patrick H. Beall and David A. Fauth in their capacities as the Company’s Group Presidents (collectively, the “Agreements” and, each, an “Agreement”). The material terms of the Agreements are summarized below:
Terms:
The terms of Messrs. Beall and Fauth’s Agreements are each one (1) year. Each Agreement extends automatically on a year-to-year basis thereafter, unless terminated by either of the parties upon 90 days’ notice prior to the end of a term.
Compensation and Benefits:
Pursuant to the terms of their respective Agreements, Messrs. Beall and Fauth are entitled to receive annual salaries of not less than $315,000 and $367,000 per year, respectively, plus customary health and welfare benefits and reimbursement of certain qualified business expenses by the Company.
Each of Messrs. Beall and Fauth are eligible to receive an annual short term incentive cash payment pursuant to an incentive plan. Under such incentive plan, Mr. Beall’s current target payout is 60% of base pay, or $189,000. Mr. Fauth’s current target payout is 75% of base pay, or $275,250. The maximum annual payment is 225% of the target payout under each Agreement. The payout amounts will be determined by the attainment towards metrics specific to the position and corporate performance.
Further, Messrs. Beall and Fauth are entitled to participate in the Company’s Long Term Incentive Plan (the “LTI Plan”). Currently, the target payouts under such plan for Mr. Beall and Mr. Fauth are 75% of their individual base pay. The awards under the plan will be paid out in the form of restricted stock awards and performance share awards. The payout amounts will be determined by the Board of Directors of the Company (the “Board”) in its discretion taking into account certain corporate performance metrics, including relative total shareholder return, compound annual growth rate of book value per share and cumulative dividends per share.
Payments Upon Qualifying Termination:
Pursuant to the terms of their respective Agreements, each executive is entitled to receive certain benefits upon the termination of their employment under certain circumstances. In the event of (i) the Company’s termination of their employment without “Cause” (as defined in the Agreements) during the term, (ii) their resignation for “Good Reason” (as defined in the Agreements) during the term, (iii) their voluntary retirement, (iv) a termination in their employment during a Change in Control Period (as defined in the Agreements) by the Company without Cause or by the executive for Good Reason, then such respective executive shall receive the following: (a) a cash payment equal to 12 months (24 months if the executive’s employment terminates without Cause or the executive resigns for Good Reason during a Change in Control Period) of the then-current salary in effect; (b) a cash payment (net after taxes paid by the executive) equal to the dollar value of the Company’s annual subsidy of continued coverage under the Company's group health plan in effect as of the date of termination for the 12-month period following the termination date; (c) a cash payment equal to the target amount (or if during a Change in Control Period, two times the target amount if the executive’s employment terminates without Cause or the executive resigns for Good Reason) under the Company’s short term incentive plan; (d) such accelerated vesting as may be provided for under the terms of the LTI Plan; (e) payments of accrued but unpaid salary, short term incentive and long-term incentive payments and accrued but unused vacation time; (f) any benefits that have vested as of the termination date as a result of participation in any of the Company’s benefit plans; (g) reimbursement of certain qualified business expenses by the Company; and (h) outplacement services (except in the case of the executive’s voluntary retirement from the Company) for a period of 12 months at a cost not to exceed $10,000.
To receive the severance and benefits provided in the event of a qualifying termination, each executive must execute a release of claims that is provided at the time of termination.
The Agreements also include non-competition and non-solicitation covenants by each executive for a twelve-month period following termination of their employment with the Company for any reason.
The foregoing description of the Agreements contained in this Current Report on Form 8-K is qualified in its entirety by reference to the complete text of the Agreements, copies of which are filed herewith as Exhibits 10.1 and 10.2 which are incorporated herein by this reference.
Awards of Restricted Stock Units under the LTI Plan
On February 22, 2018, the Company entered into Stock Unit Award Agreements (the “Stock Unit Award Agreements”) with certain executive officers, including the named executive officers, under the Company’s LTI Plan. Pursuant to each Stock Unit Award Agreement, the recipients will receive stock units (the “Stock Units”), each of which represent a contractual right to potentially receive a share of the Company’s Common Stock (“Common Stock”), provided all of the conditions for settlement of the units have been satisfied. The Stock Unit awards to the named executive officers were as follows:
| Name | Number of Units | |||
| Matthew W. Morris | 9,231 | |||
| John L. Killea | 3,461 | |||
| David C. Hisey | 6,923 | |||
| David A. Fauth | 2,117 | |||
| Patrick H. Beall | 1,817 | |||
In the event dividends are paid to shareholders during the period following the grant date up and to the delivery of any Shares, the recipient shall be entitled to a payment, at the same time the shares are delivered, equal to the amount that would have been paid as dividends to the recipient had the recipient held the shares during that period. The Stock Units are subject to restrictions and forfeitures. Any Stock Units that are not vested as of the date of the executive’s termination of employment are automatically forfeited. In the event of a termination of the executive’s employment by the Company without Cause (as defined in the Stock Unit Award Agreement), by the executive for Good Reason (as defined in the Stock Unit Agreement) or due to death or disability, any Units shall be subject to special pro-rata vesting, provided that the executive has been continuously employed by the Company for at least 25% of the period covered by the vesting schedule. In the event of an executive’s voluntary retirement, any units would vest in their entirety. The Stock Units will vest and the forfeiture restrictions will lapse in substantially equal one-third increments on each of February 8, 2019, February 8, 2020 and February 8, 2021.
The foregoing description of the Stock Unit Award Agreements contained in this Current Report on Form 8-K is qualified in its entirety by reference to the text of the form Stock Unit Award Agreement, filed herewith as Exhibit 10.3.
Awards of Restricted Performance Units (TSR) under the LTI Plan
On February 22, 2018, the Company entered into Restricted Performance Unit Agreements (TSR) (the “TSR Unit Agreements”) with each of its named executive officers, under the Company’s LTI Plan. Pursuant to each TSR Unit Agreement, the recipients will receive performance units (the “Performance Units”), each of which represents a contractual right to potentially receive shares of Common Stock, which the number of shares to be delivered at settlement, if any, being determined by reference to the number of Performance Units that are deemed vested. The performance reference for the Performance Units under the TSR Unit Agreements is the relative percentile ranking of total shareholder return as compared to a Board approved comparator group. Set forth below is a table of performance targets and number of Performance Units that may become vested and payable under the terms of the TSR Unit Agreements for each executive.
| Name | Number of Performance Units | |||||||||||
| Threshold | Target | Maximum | ||||||||||
| Matthew W. Morris | 2,307 | 9,231 | 20,769 | |||||||||
| John L. Killea | 865 | 3,461 | 7,787 | |||||||||
| David C. Hisey | 1,730 | 6,923 | 15,576 | |||||||||
| David A. Fauth | 529 | 2,117 | 4,763 | |||||||||
| Patrick H. Beall | 454 | 1,817 | 4,088 | |||||||||
Performance Units that are vested under the terms of the TSR Unit Agreements will be delivered following the determination of the extent to which the performance criteria have been attained. Except as to certain special circumstances set forth in the TSR Unit Agreements, executives forfeit all rights with respect to the Performance Units if the executive’s employment with the Company terminates prior to the date that the Performance Units are settled. In the event dividends are paid to shareholders during the Performance Period (January 1, 2018 through December 31, 2020), the executive will be entitled to a payment equal to such dividends, which payment shall be delivered upon the vesting of the Performance Units.
The foregoing description of the TSR Unit Agreements contained in this Current Report on Form 8-K is qualified in its entirety by reference to the text of the form TSR Unit Agreement, filed herewith as Exhibit 10.4.
Awards of Restricted Performance Units (Book Value) under the LTI Plan
On February 22, 2018, the Company entered into Restricted Performance Unit Agreements (BV) (the “BV Unit Agreements”) with each of its named executive officers, under the Company’s LTI Plan. Pursuant to each BV Unit Agreement, the recipients will receive performance units (the “Performance Units”), each of which represents a contractual right to potentially receive shares of Common Stock, which the number of shares to be delivered at settlement, if any, being determined by reference to the number of Performance Units that are deemed vested. The performance reference for the Performance Units under the BV Unit Agreements is the compound annual growth rate (CAGR) book value per share and cumulative dividends per share. Set forth below is a table of performance targets and number of Performance Units that may become vested and payable under the terms of the BV Unit Agreements for each executive.
| Name | Number of Performance Units | |||||||||||
| Threshold | Target | Maximum | ||||||||||
| Matthew W. Morris | 2,307 | 9,231 | 20,769 | |||||||||
| John L. Killea | 865 | 3,461 | 7,787 | |||||||||
| David C. Hisey | 1,730 | 6,923 | 15,576 | |||||||||
| David A. Fauth | 529 | 2,117 | 4,763 | |||||||||
| Patrick H. Beall | 454 | 1,817 | 4,088 | |||||||||
Performance Units that are vested under the terms of the BV Unit Agreements will be delivered following the determination of the extent to which the performance criteria have been attained. Except as to certain special circumstances set forth in the BV Unit Agreements, executives forfeit all rights with respect to the Performance Units if the executives employment with the Company terminates prior to the date that the Performance Units are settled. In the event dividends are paid to shareholders during the Performance Period (January 1, 2018 through December 31, 2020), the executive will be entitled to a payment equal to such dividends, which payment shall be delivered upon the vesting of the Performance Units.
The foregoing description of the BV Unit Agreements contained in this Current Report on Form 8-K is qualified in its entirety by reference to the text of the form BV Unit Agreement, filed herewith as Exhibit 10.5.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
The following exhibits are filed herewith:
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| STEWART INFORMATION SERVICES CORPORATION | ||
| By: | /s/ David C. Hisey | |
| David C. Hisey Chief Financial Officer, Secretary, Treasurer | ||
Date: February 28, 2018
Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of January 1, 2018, by and between Stewart Information Services Corporation (the “Company”), and Patrick H. Beall (“Executive”) (collectively, the “Parties”). This Agreement amends, restates and supersedes any prior written employment agreement between the Parties and any other written or unwritten agreement or understanding between the Parties regarding the subject matter hereof.
The Company and Executive agree as follows:
1. Definitions. The following terms used in this Agreement shall, unless otherwise clearly required by the context, have the meanings assigned to them in this Section 1,
“Annual Salary” means the annual salary payable to Executive in the amount of $315,000, as it may be adjusted by the Company from time to time.
“Benefits” has the meaning set forth in Section 4.6.
“Board” means the Board of Directors of the Company.
“Cause” means, in the good faith determination of the Board, any of the following:
(a) Executive’s willful failure to substantially perform Executive’s duties with the Company (other than by reason of Executive’s Disability), after a written demand for substantial performance is delivered to Executive that specifically identifies the manner in which the Company believes that Executive has not substantially performed such duties, and Executive has failed to remedy the situation within 30 days of such written notice from the Company;
(b) Executive’s gross negligence in the performance of Executive’s duties;
(c) Executive’s conviction of, or plea of guilty or nolo contendre to any felony or any crime involving moral turpitude or the personal enrichment of Executive at the expense of the Company;
(d) Executive’s willful engagement in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, without limitation, Executive’s breach of fiduciary duties owed to the Company;
(e) Executive’s willful violation of any material provision of the Company’s code of conduct;
(f) Executive’s willful violation of any of the material covenants contained in Section 5;
(g) Executive’s act of dishonesty resulting in or intending to result in personal gain at the expense of the Company; or
(h) Executive’s engaging in any material act that is intended or may be reasonably expected to harm the reputation, business prospects, or operations of the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Business” means the business of providing real estate support services, including, without limitation, title insurance, real estate information services, escrow services and related transaction services.
“Confidential Information” means confidential or proprietary information of the Company and its affiliates, including, without limitation, information of a technical and business nature regarding the past, current or anticipated business of the Company and its affiliates that may encompass financial information, financial figures, trade secrets, customer lists, details of client or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisition plans, employee information, organizational charts, new personnel acquisition plans, technical processes, inventions and research projects, ideas, discoveries, inventions, improvements, writings and other works of authorship.
“Conflict of Interest” has the meaning set forth in Section 5.7.
“Date of Termination” means the date that is Executive’s last day of work for the Company.
“Disability” means a physical or mental disability, whether total or partial, as defined by the Company’s Long-Term Disability Plan, as in effect from time to time.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Expenses” means all damages, losses, judgments, liabilities, fines, penalties, excise taxes, settlements, and costs, attorneys’ fees, accountants’ fees, and disbursements and costs of attachment or similar bonds, investigations, and any other expenses incurred in establishing a right to indemnification under this Agreement.
“Omnibus Plan” means the Company’s shareholder approved incentive plan or plans, which may include long-term equity-based compensation plans, short-term performance-based compensation plans and any other similar plans, as such may be in effect from time to time.
“Proceeding” means any action, suit or proceeding, whether civil, criminal, administrative or investigative.
“Restrictive Covenants” has the meaning set forth in Section 5.8.
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“Term” has the meaning set forth in Section 2.
2. Term. The term of this Agreement begins on January 1, 2018 and ends on December 31, 2018 (the “Term”). The Term will be automatically extended for successive one year periods unless either party provides written notice of non-renewal to the other party at least 90 days prior to the applicable renewal date. Notwithstanding the foregoing, Executive’s employment may be terminated prior to the end of the Term pursuant to the express provisions of this Agreement.
3. Title and Duties. Executive shall serve as Group President of the Company. Executive will have duties and responsibilities appropriate to Executive’s position. Executive will have such duties and responsibilities as may be assigned to Executive by the Company from time to time, at the Company’s discretion. Executive will devote all reasonable efforts and all of his or her business time to the Company.
4. Compensation and Benefits.
4.1 Annual Salary. The Annual Salary will be payable in accordance with the payroll policies of the Company in effect from time to time, but in no event less frequently than twice each month, less any deductions required to be withheld by applicable law and less any voluntary deductions made by Executive.
4.2 Incentive Compensation. Executive shall be eligible to receive long and short-term incentive compensation in the form of annual bonuses or long-term grants under the Omnibus Plan. The decision to award any incentive compensation to Executive under the Omnibus Plan and the amount and terms of any such awards or grants are subject to change from year to year and shall be in the sole and absolute discretion of the Compensation Committee of the Board or any other committee that may be designated as the administrative committee for the Omnibus Plan with respect to Executive.
4.3 Vacation Policy. Executive shall be entitled to four weeks of paid vacation during each calendar year of the Term, which such vacation shall accrue in accordance with Company policy.
4.4 Participation in Employee Benefit Plans. Executive may participate in any group life, hospitalization or disability insurance plan, health program, retirement plan, similar benefit plan or other so called “fringe benefits” of the Company (collectively, “Benefits”). Executive’s participation in any such plans shall be on the terms and conditions set forth in the governing plan documents as they may be in effect from time to time.
4.5 General Business Expenses. The Company shall pay or reimburse Executive for all business expenses reasonably and necessarily incurred by Executive in the performance of Executive’s duties under this Agreement, consistent with the Company’s business expense reimbursement policy, as in effect from time to time.
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4.6 Other Benefits. Executive shall be entitled to participate in or receive benefits under any compensatory employee benefit plan or other benefit or similar arrangements made available by the Company now or in the future to its senior executive officers and key management employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans or arrangement.
4.7 Clawback Policy. Executive agrees that the compensation and benefits provided by the Company under this Agreement or otherwise may be subject to recoupment under the Company’s Clawback Policy, as in effect from time to time. A copy of the current clawback Policy is available on request.
4.8 Stock Ownership. Executive understands and agrees that Executive may be subject to the Company’s stock ownership policy, as such policy may be in effect from time to time (the “Stock Ownership Policy”) and shall take all appropriate steps to comply with the Stock Ownership Policy. A copy of the Stock Ownership Policy is available on request. Executive understands and the Company agrees that notice of changes to the Stock Ownership Policy shall be made available by the Company as appropriate.
4.9 Perquisites. Executive shall be entitled, as of the date hereof, to the perquisites described in List of Perquisites provided to Executive with this Agreement; provided, however, that Executive’s perquisites shall be subject to modification from time to time by the Compensation Committee of the Board, at its sole discretion.
5. Confidentiality and Company Property, Non-Competition and Non-Solicitation.
5.1 Confidentiality, Non-Solicit, and Non-Compete Agreement. Executive agrees that, as a condition of Executive’s employment, Executive shall execute and shall be bound by the terms of the Confidentiality, Non-Solicit, and Non-Compete Agreement attached hereto as Exhibit A.
5.2 Non-Disparagement. Executive also agrees, as a condition of Executive’s employment, that Executive and Executive’s immediate family will not make any comments to the employees, vendors, customers, or suppliers of the Company or any of its affiliates, or to any media outlet or to others with the intent to impugn, castigate or otherwise damage the reputation of Company, any of its affiliates or any of the owners, directors, officers, or employees of Company.
5.3 Covenants Independent. The covenants of Executive contained in this Section 5 will be construed as independent of any other provision in this Agreement; and the existence of any claim or cause of action by Executive against the Company will not constitute a defense to the enforcement by the Company of said covenants. Executive has been advised to consult with counsel in order to be informed in all respects concerning the reasonableness and propriety of this Section 5 and its provisions with the specific regard to the nature of the business conducted by the Company. Executive acknowledges that this Section 5 and its provisions are reasonable in all respects.
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5.4 Company Property. All memoranda, notes, lists, records, and other documents or papers (and all copies thereof) relating to the Company and its affiliates, including such items stored in computer memories, microfiche or by any other means, made or compiled by or on behalf of Executive in connection with Executive’s employment, or made available to Executive shall be the property of the Company, and shall be delivered to the Company promptly upon the termination of Executive’s employment with the Company or at any other time upon the Company’s request; provided, however, that Executive’s address books, diaries and chronological correspondence files (including digital formats) shall be deemed to be property of Executive (except to the extent any of the foregoing contain Confidential Information).
5.5 Original Material. Executive agrees that any inventions, discoveries, improvements, ideas, concepts or original works of authorship relating directly to the Company Business, including without limitation information of a technical or business nature such as ideas, discoveries, inventions, trade secrets, know-how, writings and other works of authorship, computer programs, financial figures, marketing plans, customer lists and data, business plans or methods and the like, which relate in any manner to the actual or anticipated business or the actual or anticipated areas of business of the Company and its divisions and affiliates, whether or not protectable by patent or copyright, that have been originated, developed or reduced to practice by Executive alone or jointly with others during Executive’s employment with the Company shall be the property of and belong exclusively to the Company. Executive shall promptly and fully disclose to the Company the origination or development by Executive of any such material and shall provide the Company with any information that it may reasonably request about such material. Either during or subsequent to Executive’s employment, upon the request and at the expense of the Company or its nominee, and for no remuneration in addition to that due Executive pursuant to Executive’s employment by the Company, but at no expense to Executive, Executive agrees to execute, acknowledge, and deliver to the Company or its attorneys any and all instruments which, in the judgment of the Company or its attorneys, may be necessary or desirable to secure or maintain for the benefit of the Company adequate patent, copyright, and other property rights in the United States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or original works of authorship embraced within this Agreement.
5.6 Non-Competition During Employment. Executive agrees that during Executive’s employment with the Company Executive will not compete with the Company by engaging in the Company Business or in the conception, design, development, production, marketing, or servicing of any product or service that is substantially similar to the products or services which the Company provides, and that Executive will not work for (in any capacity), assist, or become affiliated with as an owner, partner, or otherwise, either directly or indirectly, any individual or business which engages in the Company Business or offers or performs services, or offers or provides products substantially similar to the services and products provided by the Company.
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5.7 Conflicts of Interest. Executive agrees that during his or her employment with the Company he or she will not engage, either directly or indirectly, in any activity which might adversely affect the Company or its affiliates (a “Conflict of Interest”), including ownership of a material interest in any supplier, contractor, distributor, subcontractor, customer or other entity with which the Company does business or acceptance of any material payment, service, loan, gift, trip, entertainment, or other favor from a supplier, contractor, distributor, subcontractor, customer or other entity with which the Company does business, and that Executive will promptly inform the Board as to each offer received by Executive to engage in any such activity. Executive further agrees to disclose to the Company any other facts of which Executive becomes aware which might in Executive’s good faith judgment reasonably be expected to involve or give rise to a Conflict of Interest or potential Conflict of Interest.
5.8 Rights and Remedies Upon Breach. If Executive breaches any of the provisions contained in Section 5, including any provisions of Exhibit A (the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity, including, without limitation, recovery of money damages and termination of this Agreement:
(a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.
(b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any action constituting a breach of the Restrictive Covenants.
(c) Remedies For Violation of Non-Competition or Confidentiality Provisions. Executive acknowledges and agrees that: (i) the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; (ii) because of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Section 5 are reasonable; and (iii) the injury suffered by the Company by a violation of this Section 5 will be difficult to calculate in damages in an action at law and damages cannot fully compensate the Company for any violation of any obligation or covenant in this Section 5. Executive’s compliance with this Section 5 is a condition precedent to the Company’s obligation to make payments of any nature to Executive (including, without limitation, payments otherwise payable pursuant to the LTI Plan).
5.9 Materiality and Conditionality of This Section 5. The covenants contained in this Section 5 are material to this Agreement. Executive’s agreement to strictly comply with this Section 5 is a precondition for Executive’s receipt of payments of any nature under this Agreement (including, without limitation, payments otherwise payable pursuant to the LTI Plan). Whether or not this Section 5 or any portion thereof has been held or found invalid or unenforceable for any reason whatsoever by a court or other constituted legal authority of competent jurisdiction, upon any violation of this Section 5 or any portion thereof, or upon a finding that a violation would have occurred if this Section 5 or any portion thereof were enforceable, Executive and the Company agree that (i) Executive’s interest in unvested awards granted pursuant to the LTI Plan shall automatically lapse and be forfeited; and (ii) Company shall have no obligation to make any further payments to Executive under this Agreement.
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5.10 Severability, Modification of Covenants. The Restrictive Covenants shall survive the termination or expiration of this Agreement, and in the event any of the Restrictive Covenants shall be held by any court to be effective in any particular area or jurisdiction only if said Restrictive Covenant is modified to be limited in its duration or scope, then, at the sole option of Company, the provisions of Section 5.12 may be deemed to have been triggered, and the rights, liabilities and obligations set forth therein shall apply. In the event Company does not elect to trigger application of Section 5.12, then the court shall have such authority to so reform the covenants and the parties hereto shall consider such covenants and/or other provisions of this Section 5 to be amended and modified with respect to that particular area or jurisdiction so as to comply with the order of such court and, as to all other jurisdictions, the covenants contained herein shall remain in full force and effect as originally written. Should any court hold that the covenants in this Section 5 are void and otherwise unenforceable in a particular area or jurisdiction, then notwithstanding the foregoing provisions of this Section 5.13, the provisions of Section 5.12 shall be applicable and the rights, liabilities and obligations of the parties set forth therein shall apply. Alternatively, at the sole option of Company, Company may consider such covenants to be amended and modified so as to eliminate therefrom the particular area or jurisdictions as to which such covenants are so held void or otherwise unenforceable and, as to all other areas and jurisdictions covered herein, the covenants contained herein shall remain in full force and effect as originally written.
6. Termination. In general, on termination of Executive’s employment for any reason, the following amounts will be paid to Executive, or Executive’s estate, as the case may be:
All accrued but unpaid Annual Salary through the Executive’s last active day of employment, payable in a lump sum within 30 days following Executive’s termination of employment;
Accrued but unused vacation time, to the extent payment is either required by law or provided for in the Company’s vacation or paid-time-off policy, as such may be in effect from time to time;
Any amounts payable to Executive under the terms of any employee benefit plans in which Executive was a participant;
Reimbursement of any of Executive’s business expenses not previously reimbursed, to the extent provided for under the Company’s business expense reimbursement policy; and
Any other amounts that determined to be due under the terms of the Omnibus Plan, or any grants or awards made thereunder.
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Unless expressly provided for under this Agreement, no amounts other than those set forth above shall be paid following any termination of Executive’s employment, including, by way of example, and not limitation, termination of Executive’s employment by reason of the Company for Cause and resignation and by reason of Executive’s resignation without Good Reason.
6.1 Termination for Cause. The Company has the right, at any time during the Term, subject to all of the provisions hereof, exercisable by serving notice, effective on or after the date of service of such notice as specified therein, to terminate Executive’s employment under this Agreement and discharge Executive for Cause.
6.2 Termination without Cause. The Company has the right, at any time during the Term to terminate Executive’s employment without Cause by providing Executive with notice at least 90 days prior to the effective date of such notice. In the event Executive’s employment is terminated without Cause, Executive shall be entitled to such benefits as may be provided pursuant to the Company’s Executive Separation Pay and Change in Control Plan (the “Executive Separation Pay Plan”). The Company shall also have the right to terminate Executive’s employment without Cause with less than 90 days’ advanced notice, but shall pay, in addition to anything payable under the Executive Separation Pay Plan, Executive’s Annual Salary as determined for the period that represents 90 days’ of continued employment, reduced by the period of actual advanced notice of termination provided by the Company.
6.3 Termination upon Disability. If during the Term Executive experiences a Disability, the Company shall, by written notice to Executive, terminate Executive’s employment with the Company. Executive shall be entitled to such payments as are provided in the case of any other termination of employment, and shall also be entitled to a payment corresponding to the value of certain benefits that were provided to Executive while actively employed. The amount payable in substitution for certain subsidized employee benefits under this Section 6.3 shall be determined as follows: The monthly value of the Company’s subsidy of Executive’s group health plan coverage shall be determined by reference to such subsidy as in effect immediately prior to Executive’s termination of employment, and that monthly amount shall be multiplied by twelve (12), which amount shall be paid as a lump sum, net of required withholding for federal, state and local wage and income taxes.
6.4 Resignation for Good Reason. Executive’s resignation for Good Reason, as set forth below, shall be treated in all respects like a Termination by the Company without Cause. For these purposes, the following provisions shall be applicable:
(a) The term “Good Reason” shall mean any of the following:
(i) The occurrence of any material breach by the Company or any of its affiliates of the terms of this Agreement or of the terms of any other material agreement between Executive and the Company or any of its affiliates;
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(ii) The Company’s assignment to Executive of any duties materially inconsistent with Executive’s position, including any other action which results in a material diminution in such status, title, authority, duties or responsibility; or
(iii) The relocation of Executive’s office to a location more than 35 miles outside Executive’s office location as agreed at time of execution of Agreement.
(b) In order for Executives resignation to be deemed to be for Good Reason, Executive must provide written notice to the Company specifying the event or condition claimed to constitute Good Reason for Executive’s resignation within sixty (60) days following the initial existence of such event or condition, the Company must, thereafter, have failed to have cured or corrected such event or condition within sixty (60) days following receipt of the initial notice from Executive and Executive must, then resign from employment and separate from service with the Company no later than thirty (30) days after the end of the Company’s sixty (60) day cure period.
6.5 Resignation without Good Reason. Executive may resign and any time without Good Reason. It is understood that Executive shall provide the Company with ninety (90) days’ notice of his or her intent to resign; provided, however, that in such a situation the Company reserves the right to terminate Executive’s employment at any time after receipt of such notice but shall continue to pay Executive’s base Annual Salary for the remainder of the ninety (90) day period following the Company’s termination of Executive’s employment. Such an early termination of employment by the Company shall not be deemed to be an involuntary termination of Executive’s employment by the Company for purposes of this Agreement.
7. Section 409A; Certain Excise Taxes.
7.1 In-kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Agreement or in any Company policy with respect to such payments, in-kind benefits and reimbursements provided under this Agreement during any tax year of Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Executive and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to Executive as soon as administratively practicable following such submission in accordance with the Company’s policies regarding reimbursements, but in no event later than the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This Section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Executive.
7.2 Specified Employee Rule. To the extent applicable, any payments to Executive called for under this Agreement or under the terms of any other plan, agreement or award, that are determined to be payments of deferred compensation to which Code Section 409A is applicable and that are paid by reason of the Executive’s separation from service, shall be delayed, to the extent necessary, to avoid a violation of Code Section 409A(a)(2)(B)(i). In general, this Section 7.2 may require that payments of nonqualified deferred compensation to the Executive that would otherwise be made within six (6) months following Executive’s separation from service shall be paid on the first day of the seventh (7th) month following Executive’s separation from service if Executive is determined to be a “specified employee” as that term is defined in Code Section 409A(a)(2)(B)(i) and related Treasury Regulations.
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7.3 Certain Excise Taxes. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by Section 4999 of the Code or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under Section 4999 of the Code and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times Executive’s base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made. Nothing in this Section 7.2 shall require the Company to be responsible for, or have any liability or obligation with respect to, Executive’s excise tax liabilities under Section 4999 of the Code.
8. Indemnification.
8.1 General. The Company agrees that if Executive is made a party or is threatened to be made a party to any Proceeding by reason of the fact that Executive is or was a trustee, director or officer of the Company, or any predecessor to the Company (including any sole proprietorship owned by Executive) or any of their affiliates or is or was serving at the request of the Company, any predecessor to the Company (including any sole proprietorship owned by Executive), or any of their affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by Texas or Delaware law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if Executive has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of his or her heirs, executors and administrators.
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8.2 Enforcement. If a claim or request under this Section 8 is not paid by the Company or on its behalf, within 30 days after a written claim or request has been received by the Company, Executive may at any time thereafter bring an arbitration claim against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, Executive shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Texas or Delaware law.
8.3 Partial Indemnification. If Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Executive for the portion of such Expenses to which Executive is entitled.
8.4 Advances of Expenses. Expenses incurred by Executive in connection with any Proceeding shall be paid by the Company in advance upon request of Executive that the Company pay such Expenses, but only in the event that Executive shall have delivered in writing to the Company (i) an undertaking to reimburse the Company for Expenses with respect to which Executive is not entitled to indemnification and (ii) a statement of his or her good faith belief that the standard of conduct necessary for indemnification by the Company has been met.
8.5 Notice of Claim. Executive shall give to the Company notice of any claim made against Executive for which indemnification will or could be sought under this Agreement. In addition, Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within Executive’s power and at such times and places as are convenient for Executive.
8.6 Defense of Claim. With respect to any Proceeding as to which Executive notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its own expense;
(b) Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Executive, which in the Company’s sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. Executive also shall have the right to employ his or her own counsel in such action, suit or proceeding if Executive reasonably concludes that failure to do so would involve a conflict of interest between the Company and Executive, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company; and
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(c) The Company shall not be liable to indemnify Executive under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty that would not be paid directly or indirectly by the Company or limitation on Executive without Executive’s written consent. Neither the Company nor Executive will unreasonably withhold or delay their consent to any proposed settlement.
8.7 Non-exclusivity. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 8 shall not be exclusive of any other right which Executive may have or hereafter may acquire under any statute or certificate of incorporation or by-laws of the Company or any subsidiary, agreement, vote of shareholders or disinterested directors or trustees or otherwise.
9. Miscellaneous.
9.1 Legal Fees and Expenses. If any contest or dispute shall arise between the Company and Executive regarding any provision of this Agreement, the Company shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive in connection with such contest or dispute, but only if Executive prevails to a substantial extent with respect to Executive’s claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives reasonable written evidence of such fees and expenses.
9.2 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, sent by courier service, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission or, if mailed or sent by courier service, on the date of actual receipt thereof, as follows:
if to the Company, to:
Chief Executive Officer, Matthew W. Morris
1980 Post Oak Blvd., Suite 800
Houston, Texas 77056
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if to Executive, to:
Patrick H. Beall
119 Saint Andrews Lane
Aledo, TX 76008
Any party may change its address for notice hereunder by notice to the other party hereto.
9.3 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements (including but not limited to prior employment agreements and incentive plans and agreements), written or oral, with respect thereto, however, the terms of any benefit plans shall remain in force and effect.
9.4 Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any waiver on the part of any party of any such right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
9.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas (without giving effect to the choice of law provisions thereof).
9.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by Executive and may be assigned by the Company only to a successor by merger or purchasers of substantially all of the assets of the Company or its affiliates.
9.7 Counterparts. This Agreement may be executed in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which together shall constitute one and the same instrument.
9.8 Headings. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
9.9 No Presumption Against Interest. This Agreement has been negotiated, drafted, edited and reviewed by the respective parties, and therefore, no provision of this Agreement shall be construed against any party as being drafted by said party.
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9.10 No Duty to Mitigate. Executive shall not be required to mitigate damages with respect to the termination of his or her employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided in this Agreement. Additionally, amounts owed to Executive under this Agreement shall not be offset by any claims the Company may have against Executive, and the Company’s obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against Executive or others.
9.11 Dispute Resolution. If any dispute arises out of or relates to this Agreement, or the breach thereof, Executive and the Company agree to promptly negotiate in good faith to resolve such dispute. If the dispute cannot be settled by the parties through negotiation, Executive and the Company agree to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration or any other dispute resolution procedure. If the parties are unable to settle the dispute by mediation as provided in the preceding sentence within 30 days of a written demand for mediation, any claim, controversy or dispute arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration before one (1) arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted in English and held in Houston, Harris County, Texas, or such other location to which the parties mutually agree. The arbitrator shall among other things determine the validity, scope, interpretation and enforceability of this arbitration clause. The award shall be a reasoned award and rendered within 30 days of the conclusion of the arbitration hearing. The decision of the arbitrator shall be final and binding and judgment upon the award rendered may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing provisions of this Section 9.11, the Company may seek injunctive relief from a court of competent jurisdiction located in Harris County, Texas, in the event of a breach or threatened breach of any covenant contained in Section 5.
9.12 Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and Executive and Executive’s legal representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
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| EXECUTIVE: | COMPANY: | |||
| STEWART INFORMATION SERVICES CORPORATION | ||||
| By: | ||||
| Patrick H. Beall | ||||
| Name: | Matthew W. Morris | |||
| Title: | Chief Executive Officer | |||
| Date: | Date: | |||
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Exhibit A
Stewart Title Guaranty Company, Stewart Title Company and Affiliates
Confidentiality, Non-Solicit, and Non-Compete Agreement
This Confidentiality, Non-Solicit, and Non-Compete Agreement (“Agreement”) is entered into between the undersigned individual (“I”, “me”, or “Employee”) and Stewart Title Guaranty Company, Stewart Title Company, or an affiliated company (“Employer”), for the benefit of Stewart Title Guaranty Company, and its parents, subsidiaries, affiliates, successors, and assigns to or for which Employee provides services, including Employer (collectively the “Company”). I understand the Company is in the business of providing global real estate services, including residential and commercial title insurance and closing and settlement services, offering products and services through its direct operations, network of Stewart Trusted Providers and family of companies, (the Company’s “Business” or “line of business”), and seeks to employ me in a position of trust and confidence related to this line of business, and I wish to be employed in such a position. In consideration of my employment and the compensation and other benefits received as a consequence thereof, and the other mutual promises and representations of the parties made herein, the parties agree as follows:
1. Position of Trust and Confidence. In reliance upon the promises made by me in this Agreement, the Company will provide me with access to Confidential Information (including trade secrets) related to my position, and may also provide me specialized training related to the Company’s Business and/or the opportunity to develop relationships with the Company’s employees, business contacts (customers and others) and agents for the purpose of developing goodwill for the Company. I agree that my receipt of the foregoing would give me an unfair competitive advantage if my activities during employment, and for a reasonable period thereafter, were not restricted as provided for in this Agreement.
2. Confidential Information and Company Property. Subject to Paragraph 6, I agree to use Company’s Confidential Information only in the performance of my duties, to hold such information in confidence and trust, and not to engage in any unauthorized use or disclosure of such information during my employment and for so long thereafter as such information qualifies as Confidential Information. “Confidential Information” means an item of information or compilation of information in any form (tangible or intangible) related to the Company’s Business that I acquire or gain access to during my employment that the Company has not authorized public disclosure of, and that is not readily available to the public or persons outside the Company. By way of example and not limitation, Confidential Information is understood to include: lists and records, contact information, private contract terms, business preferences, and historical transaction data regarding existing and prospective customers; non-public records and data regarding the Company’s financial performance; business plans and strategies, forecasts and analyses; internal business methods and systems, know how, and innovations; marketing plans, research and analysis; unpublished pricing information, and variables such as costs, discounting options, and profit margins; business sale and acquisition opportunities identified by the Company and related analysis; records of private dealings with vendors, suppliers, and distributors; and Company trade secrets. I acknowledge that items of Confidential Information are the Company’s valuable assets and have economic value because they are not generally known by the public or others who could use them to their own economic benefit and/or to the competitive disadvantage of the Company. I agree that all records, in any form (such as email, database, correspondence, notes, files, contact lists, drawings, specifications, spreadsheets, manuals, and calendars) that contain Confidential Information or otherwise relate to the Company’s Business, with the exception of wage and benefit related materials provided to me as an employee for my own use as an employee, are the property of the Company (collectively “Company Records”). I will follow all Company policies regarding use or storage of Company Records, and return all such records (including all copies) when my employment with Company ends or sooner if requested.
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Confidential Information does not include information lawfully acquired by a non-management employee about wages, hours or other terms and conditions of employment when used for purposes protected by §7 of the National Labor Relations Act such as joining or forming a union, engaging in collective bargaining, or engaging in other concerted activity for mutual aid or protection of laborers. For purpose of clarity, it shall still be a violation of this Agreement for a non-management employee to wrongfully compete by sharing Confidential Information with a competitor about other employees’ compensation and benefits which was obtained through the course of employment with the Company for purposes of assisting such competitor in soliciting Company employees.
3. Protective Covenants. In order to protect the Company’s Confidential Information (including trade secrets) and key business relationships, I agree that for a period of one (1) year after my employment ends (irrespective of which party ends the relationship or why it ends), I will not:
(a) solicit any employee of Company that I gained knowledge of through my employment with Employer (a “Covered Employee”) to leave the employment of the Company; or, (b) hire, attempt to hire, or assist in hiring any Covered Employee on behalf of a Competing Business; or,
(c) solicit, or attempt to solicit a Covered Customer or Key Relationship (terms separately defined below), as defined below, for the purpose of doing any business that would compete with the Company’s Business, or (d) knowingly engage in any conduct that is intended to cause, or could reasonably be expected to cause the Covered Customer or Key Relationship to stop or reduce doing business with the Company, or that would involve diverting business opportunities away from the Company; or,
(e) provide services for the benefit of a Competing Business within the Territory (terms separately defined below) that are the same or similar in function or purpose to those I provided to the Employer during the Look Back Period; or
(f) take on any other responsibilities for a Competing Business that would involve the probable use or disclosure of Confidential Information or the conversion of Covered Customers or Key Relationships to the benefit of a Competing Business or detriment of the Company.
Nothing herein is intended or to be construed as a prohibition against general advertising such as “help wanted” ads that are not targeted at the Company’s employees. This Agreement is not intended to prohibit: (i) employment with a non-competitive independently operated subsidiary, division, or unit of a family of companies that include a Competing Business, so long as the employing independently operated business unit is truly independent and my services to it do not otherwise violate this Agreement; or, (ii) a passive and non-controlling ownership of less than 2% of the stock in a publicly traded company. Further, nothing herein is intended to preclude conduct protected by Section 7 of the NLRA such as joining or forming a union, engaging in collective bargaining, or engaging in other concerted activity for mutual aid and protection.
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“Competing Business” means any person or entity that engages in (or is planning to engage in) a business that competes with a portion of the Company Business that I had involvement with or access to Confidential Information during the last two years of my employment (or such shorter period of time as I am employed)(the “Look Back Period”). “Covered Customer” means a customer that I had material business-related contact or dealings with or received Confidential Information about during the Look Back Period. “Key Relationships” refers to a person or entity with an ongoing business relationship with the Company (including vendors, agents, and contractors) that I had material business-related contact or dealings with during the Look Back Period. “Territory” means the geographic territory(ies) assigned to me by Company during the Look Back Period (by state, county, or other recognized geographic boundary used in the Company’s business); and, if I have no such specifically assigned geographic territory then: (i) those states and counties in which Company does business that I participated in and/or about which I was provided access to Confidential Information during the Look Back Period; and, (ii) the state and county where I reside and the states and counties contiguous thereto. I am responsible for seeking clarification from the Company’s Human Resources department if it is unclear to me at any time what the scope of the Territory is. State and county references include equivalents.
4. Severability and Special Remedies. Each of my obligations under this Agreement shall be considered a separate and severable obligation. If a court determines that a restriction in this Agreement cannot be enforced as written due to an overbroad limitation (such as time, geography, or scope of activity), the parties agree that the court shall reform or modify the restrictions or enforce the restrictions to such lesser extent as is allowed by law. If, despite the foregoing, any provision contained in this Agreement is determined to be void or unenforceable, in whole or in part, then the other provisions of this Agreement will remain in full force and effect. The parties agree that the Company will suffer irreparable harm, in addition to any damages that can be quantified, by a breach of this Agreement by me. Accordingly, in the event of such a breach or a threatened breach, the Company will be entitled to all remedies that may be awarded by a Court of competent jurisdiction, recovery of its attorneys’ fees and expenses (including not only costs of court, but also expert fees, travel expenses, and other expenses incurred), and any other legal or equitable relief allowed by law.
5. Choice of Law and Venue. The Parties agree that the law of the State in which the Employee primarily resides and was last employed by the Employer shall govern the interpretation, application, and enforcement of this Agreement, without regard to any choice of law rules of that or any other state. All disputes arising out of this Agreement or concerning the interpretation or enforcement of this Agreement shall be exclusively brought in the state and federal courts covering Harris County, Texas. Employee hereby expressly consents to the personal jurisdiction of the state and federal courts located in Harris County, Texas, for any lawsuit arising from or relating to this Agreement.
6. Agreement Limitations. Nothing in this Agreement prohibits me from reporting an event that I reasonably and in good faith believe is a violation of law to the relevant law-enforcement agency (such as the Securities and Exchange Commission or Department of Labor), requires notice to or approval from the Company before doing so, or prohibits me from cooperating in an investigation conducted by such a government agency. This may include a disclosure of trade secret information provided that it must comply with the restrictions in the Defend Trade Secrets Act of 2016 (DTSA). The DTSA provides that no individual will be held criminally or civilly liable under Federal or State trade secret law for the disclosure of a trade secret that: (i) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or, (ii) is made in a complaint or other document if such filing is under seal so that it is not made public. Also, an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order. To the extent that I am covered by Section 7 of the National Labor Relations Act (NLRA) because I am not in a supervisor or management role, nothing in this Agreement shall be construed to prohibit me from using information I acquire regarding the wages, benefits, or other terms and conditions of employment at the Company for any purpose protected under the NLRA. I understand that under the NLRA, covered employees have a right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and to refrain from any or all of such activities.
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7. Intellectual Property Protection and Assignment. Employee is expected to use his or her inventive and creative capacities for the benefit of the Employer and to contribute, where possible, to the Employer’s intellectual property in the ordinary course of employment.
(a) Definitions. “Inventions” mean any inventions, software source code, discoveries, improvements, designs, processes, machines, products, innovations, business methods or systems, know how, ideas or concepts of commercial value or utility, and related technologies or methodologies, whether or not shown or described in writing or reduced to practice and whether patentable or not. “Works” mean original works of authorship, including, but not limited to: literary works (including all written material), mask works, computer programs, formulas, tests, notes, data compilations, databases, artistic and graphic works (including designs, graphs, drawings, blueprints, and other works), recordings, models, photographs, slides, motion pictures, and audio visual works; whether copyrightable or not, and regardless of the form or manner in which documented or recorded. “Trademarks” mean any trademarks, trade dress or names, symbols, special wording or devices used to identify a business or its business activities whether subject to trademark protection or not. The foregoing is collectively referred to in this Agreement as “Intellectual Property.”
(b) Inventions Assignment. I agree to and do hereby grant and assign to Employer or its nominee my entire right, title and interest in and to all Inventions that are made, conceived, or reduced to practice by me, alone or jointly with others, during my employment with Employer (whether during working hours or not) that either (i) relate to Employer’s business, or actual or demonstrably anticipated research or development of the Employer, or (ii) involve the use or assistance of any tools, time, material, personnel, information, or facility of the Employer, or (iii) result from or relate to any work, services, or duties undertaken by me for the Employer.
(c) Works and Trademarks. I recognize that all Works and Trademarks conceived, created, or reduced to practice by me, alone or jointly with others, during my employment shall to the fullest extent permissible by law be considered the Employer’s sole and exclusive property and “works made for hire” as defined in the U.S. Copyright Laws for purposes of United States law and the law of any other country adhering to the “works made for hire” or similar notion or doctrine, and will be considered the Employer’s property from the moment of creation or conception forward for all purposes without the need for any further action or agreement by Employee or the Employer. If any such Works, Trademarks or portions thereof shall not be legally qualified as a works made for hire in the United States or elsewhere, or shall subsequently be held to not be a work made for hire or not the exclusive property of the Employer, I do hereby assign to Employer all of my rights, title and interest, past, present and future, to such Works or Trademarks. I will not engage in any unauthorized publication or use of such Company Works or Trademarks, nor will I use same to compete with or otherwise cause damage to the business interests of the Employer.
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(d) Waiver, License and Cooperation Obligation. It is the purpose and intent of this Agreement to convey to Employer all of the rights (inclusive of moral rights) and interests of every kind, that I may hold in Inventions, Works, Trademarks and other intellectual property that are covered by Paragraphs 7 (a) – (c) above (“Company Intellectual Property”), past, present and future; and, Employee waives any right that Employee may have to assert moral rights or other claims contrary to the foregoing understanding. It is understood that this means that in addition to the original work product (be it invention, plan, idea, know how, concept, development, discovery, process, method, or any other legally recognized item that can be legally owned), the Employer exclusively owns all rights in any and all derivative works, copies, improvements, patents, registrations, claims, or other embodiments of ownership or control arising or resulting from an item of assigned Intellectual Property everywhere such may arise throughout the world. The decision whether or not to commercialize or market any Company Intellectual Property is within the Employer's sole discretion and for the Employer’s sole benefit and no royalty will be due to Employee as a result of the Employer's efforts to commercialize or market any such invention. In the event that there is any Invention, Work, Trademark, or other form of intellectual property that is incorporated into any product or service of the Employer that Employee retains any ownership of or rights in despite the assignments created by this Agreement, then Employee does hereby grant to the Employer and its assigns a nonexclusive, perpetual, irrevocable, fully paid-up, royalty-free, worldwide license to the use and control of any such item that is so incorporated and any derivatives thereof, including all rights to make, use, sell, reproduce, display, modify, or distribute the item and its derivatives. All assignments of rights provided for in this Agreement are understood to be fully completed and immediately effective and enforceable assignments by Employee of all intellectual property rights in Company Intellectual Property. When requested to do so by Employer, either during or subsequent to employment with Employer, Employee will (i) execute all documents requested by Employer to affirm or effect the vesting in Employer of the entire right, title and interest in and to the Company Intellectual Property at issue, and all patent, trademark, and/or copyright applications filed or issuing on such property; (ii) execute all documents requested by Employer for filing and obtaining of patents, trademarks and/or copyrights; and (iii) provide assistance that Employer reasonably requires to protect its right, title and interest in the Company Intellectual Property, including, but not limited to, providing declarations and testifying in administrative and legal proceedings with regard to Company Intellectual Property. Power of Attorney: Employee does hereby irrevocably appoint the Employer as its agent and attorney in fact to execute any documents and take any action necessary for applications, registrations, or similar measures needed to secure the issuance of letters patent, copyright or trademark registration, or other legal establishment of the Employer’s ownership and control rights in Company Intellectual Property in the event that Employee’s signature or other action is necessary and cannot be secured due to Employee’s physical or mental incapacity or for any other reason.
(e) Records and Notice Obligations. Employee will make and maintain, and not destroy, notes and other records related to the conception, creation, discovery, and other development of Company Intellectual Property. These records shall be considered the exclusive property of the Employer and are covered by Paragraphs 1 and 3 above. During employment and for a period of one (1) year thereafter, Employee will promptly disclose to the Employer (without revealing the trade secrets of any third party) any Intellectual Property that Employee creates, conceives, or contributes to, alone or with others, that involve, result from, relate to, or may reasonably be anticipated to have some relationship to the line of business the Employer is engaged in or its actual or demonstrably anticipated research or development activity.
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(f) Prior Intellectual Property. Employee will not claim rights in, or control over, any Invention, Work, or Trademark as something excluded from this Agreement because it was conceived or created prior to being employed by Employer (a “Prior Work”) unless such item is identified on Appendix B and signed by Employee as of the date of this Agreement. Employee will not incorporate any such Prior Work into any work or product of the Employer without prior written authorization from the Employer to do so; and, if such incorporation does occur, Employee grants Employer and its assigns a nonexclusive, perpetual, irrevocable, fully paid-up, royalty-free, worldwide license to the use and control of any such item that is so incorporated and any derivatives thereof, including all rights to make, use, sell, reproduce, display, modify, or distribute the item and its derivatives.
(g) Notice. To the extent that Employee is a citizen of California and subject to its law, then Employee is notified that the foregoing assignment shall not include inventions excluded under Cal. Lab. Code § 2870 which provides: “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) relate at the time of concept or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) result from any work performed by the employee for the employer”, and to the extent Employee is a citizen of and subject to the law of another state which provides a similar limitation on invention assignments then Employee is notified that the foregoing assignment shall not include inventions excluded under such law (namely, Delaware Code Title 19 Section 805; Illinois 765ILCS1060/1-3, "Employees Patent Act"; Kansas Statutes Section 44-130; Minnesota Statutes 13A Section 181.78; North Carolina General Statutes Article 10A, Chapter 66, Commerce and Business, Section 66-57.1; Utah Code Sections 34-39-l through 34-39-3, "Employment Inventions Act"; Washington Rev. Code, Title 49 RCW: Labor Regulations, Chapter 49.44.140).
7. Survival, All Duties and At-Will Status Preserved. Nothing in this Agreement limits or reduces any common law or statutory duty I owe to the Company, nor does this Agreement limit or eliminate any remedies available to the Company for a violation of such duties. This Agreement will survive the expiration or termination of Employee’s employment with the Company and/or any assignee pursuant to Paragraph 9 and shall, likewise, continue to apply and be valid notwithstanding any change in the Employee’s duties, responsibilities, position, or title. Nothing in this Agreement modifies the parties’ at-will employment relationship or limits either party’s right to end the employment relationship between them.
8. Tolling. If Employee fails to comply with a timed restriction in this Agreement, the time period for that will be extended by one day for each day Employee is found to have violated the restriction, up to a maximum of twelve (12) months.
9. Assignment. This Agreement, including the restrictions on Employee’s activities set forth herein, also apply to any parent, subsidiary, affiliate, successor and assign of the Company to which Employee provides services or about which Employee receives Confidential Information. The Company shall have the right to assign this Agreement at its sole election without the need for further notice to or consent by Employee.
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AGREED:
| EMPLOYEE: | EMPLOYER: | |||
| STEWART INFORMATION SERVICES CORPORATION | ||||
| By: | ||||
| Patrick H. Beall | ||||
| Name: | Matthew W. Morris | |||
| Title: | Chief Executive Officer | |||
| Date: | Date: | |||
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APPENDIX A
Arizona:
If Employee resides in Arizona and is subject to Arizona law, then the following applies to Employee: (a) Employee’s nondisclosure obligation in Paragraph 2 shall extend for a period of three (3) years after Employee’s termination as to Confidential Information that does not qualify for protection as a trade secret. Trade Secret information shall be protected from disclosure as long as the information at issue continues to qualify as a trade secret; and (b) the restrictions in Paragraph 3 shall be limited to the Territory.
California:
If Employee resides in California, then the following applies to Employee: (a) the no-hire provision in Paragraph 3(b) shall not apply; (b) Paragraph 3(c)-(d) shall be limited to situations where Employee is aided in his or her conduct by the use or disclosure of the Company’s trade secrets (as defined by California law); (c) the noncompetition restrictions in Paragraph 3(e) and (f) shall not apply; (d) the provision in Paragraph 4 allowing the Company to recover its attorneys’ fees and expenses shall not apply; and (e) the venue provision in Paragraph 5 shall not apply.
Oklahoma:
For so long as Employee resides in Oklahoma and is subject to Oklahoma law, the noncompetition restrictions in Paragraph 3(e) and (f) shall not apply.
Oregon:
For so long as Employee resides in Oregon and is subject to Oregon law, the restrictions in Paragraph 3(e) and (f) shall only apply if Employee: (a) is engaged in administrative, executive or professional work and performs predominantly intellectual, managerial, or creative tasks, exercises discretion and independent judgment and earns a salary or is otherwise exempt from Oregon's minimum wage and overtime laws; (b) the Company has a "protectable interest" (meaning, access to trade secrets or competitively sensitive confidential business or professional information); and (c) the total amount of the Employee's annual gross salary and commission, calculated on an annual basis, at the time of the Employee's termination, exceeds the median family income for a family of four, as determined by the United States Census Bureau. However, if Employee does not meet requirements of either (a) or (c) (or both), the Company may, on a case-by-case basis, decide to make Paragraphs 3(e) and (f) enforceable as to Employee (as allowed by Oregon law), but paying the Employee during the period of time the Employee is restrained from competing the greater of: (i) compensation equal to at least 50 percent of the Employee’s annual gross base salary and commissions at the time of the Employee’s termination; or (ii) fifty percent of the median family income for a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the Employee’s termination.
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Wisconsin:
For so long as Employee resides in Wisconsin and is subject to Wisconsin law: (a) Employee’s nondisclosure obligation in Paragraph 2 shall extend for a period of three (3) years after Employee’s termination as to Confidential Information that does not qualify for protection as a trade secret. Trade Secret information shall be protected from disclosure as long as the information at issue continues to qualify as a trade secret; (b) Paragraph 8 shall not apply; and (c) Paragraph 3(a) and (b) is rewritten as follows: “While employed and for a period of one (1) year from the date of the termination of Employee’s employment, I will not participate in soliciting any Covered Employee of the Company that is in a Sensitive Position to leave the employment of the Company on behalf of (or for the benefit of) a Competing Business nor will I knowingly assist a Competing Business in efforts to hire a Covered Employee away from the Company. As used in this paragraph, an employee is a “Covered Employee” if the employee is someone with whom Employee worked, as to whom Employee had supervisory responsibilities, or regarding which Employee received Confidential Information during the Look Back Period. An employee in a “Sensitive Position” refers to an employee of the Company who is in a management, supervisory, sales, research and development, or similar role where the employee is provided Confidential Information or is involved in business dealings with the Company’s customers.”
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APPENDIX B
Statement Regarding Prior Inventions, Works & Trademarks
Employee seeks to exclude his or her Prior Works (Invention, Work, or Trademark) listed below from assignment to the Employer under Paragraph 7(f) of the attached Agreement (if there are none, write “none” or leave the section below blank):
Employee agrees not to disclose the trade secrets of any third party in describing the Prior Work. If additional pages are attached to provide a description, this fact and the number of pages attached are described above.
Employee:
| Date: |
(signature)
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Exhibit 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of January 1, 2018, by and between Stewart Information Services Corporation (the “Company”), and David A. Fauth (“Executive”) (collectively, the “Parties”). This Agreement amends, restates and supersedes any prior written employment agreement between the Parties and any other written or unwritten agreement or understanding between the Parties regarding the subject matter hereof.
The Company and Executive agree as follows:
1. Definitions. The following terms used in this Agreement shall, unless otherwise clearly required by the context, have the meanings assigned to them in this Section 1,
“Annual Salary” means the annual salary payable to Executive in the amount of $367,000, as it may be adjusted by the Company from time to time.
“Benefits” has the meaning set forth in Section 4.6.
“Board” means the Board of Directors of the Company.
“Cause” means, in the good faith determination of the Board, any of the following:
(a) Executive’s willful failure to substantially perform Executive’s duties with the Company (other than by reason of Executive’s Disability), after a written demand for substantial performance is delivered to Executive that specifically identifies the manner in which the Company believes that Executive has not substantially performed such duties, and Executive has failed to remedy the situation within 30 days of such written notice from the Company;
(b) Executive’s gross negligence in the performance of Executive’s duties;
(c) Executive’s conviction of, or plea of guilty or nolo contendre to any felony or any crime involving moral turpitude or the personal enrichment of Executive at the expense of the Company;
(d) Executive’s willful engagement in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, without limitation, Executive’s breach of fiduciary duties owed to the Company;
(e) Executive’s willful violation of any material provision of the Company’s code of conduct;
(f) Executive’s willful violation of any of the material covenants contained in Section 5;
(g) Executive’s act of dishonesty resulting in or intending to result in personal gain at the expense of the Company; or
(h) Executive’s engaging in any material act that is intended or may be reasonably expected to harm the reputation, business prospects, or operations of the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Business” means the business of providing real estate support services, including, without limitation, title insurance, real estate information services, escrow services and related transaction services.
“Confidential Information” means confidential or proprietary information of the Company and its affiliates, including, without limitation, information of a technical and business nature regarding the past, current or anticipated business of the Company and its affiliates that may encompass financial information, financial figures, trade secrets, customer lists, details of client or consultant contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques or plans, business acquisition plans, employee information, organizational charts, new personnel acquisition plans, technical processes, inventions and research projects, ideas, discoveries, inventions, improvements, writings and other works of authorship.
“Conflict of Interest” has the meaning set forth in Section 5.7.
“Date of Termination” means the date that is Executive’s last day of work for the Company.
“Disability” means a physical or mental disability, whether total or partial, as defined by the Company’s Long-Term Disability Plan, as in effect from time to time.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Expenses” means all damages, losses, judgments, liabilities, fines, penalties, excise taxes, settlements, and costs, attorneys’ fees, accountants’ fees, and disbursements and costs of attachment or similar bonds, investigations, and any other expenses incurred in establishing a right to indemnification under this Agreement.
“Omnibus Plan” means the Company’s shareholder approved incentive plan or plans, which may include long-term equity-based compensation plans, short-term performance-based compensation plans and any other similar plans, as such may be in effect from time to time.
“Proceeding” means any action, suit or proceeding, whether civil, criminal, administrative or investigative.
“Restrictive Covenants” has the meaning set forth in Section 5.8.
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“Term” has the meaning set forth in Section 2.
2. Term. The term of this Agreement begins on January 1, 2018 and ends on December 31, 2018 (the “Term”). The Term will be automatically extended for successive one year periods unless either party provides written notice of non-renewal to the other party at least 90 days prior to the applicable renewal date. Notwithstanding the foregoing, Executive’s employment may be terminated prior to the end of the Term pursuant to the express provisions of this Agreement.
3. Title and Duties. Executive shall serve as Group President of the Company. Executive will have duties and responsibilities appropriate to Executive’s position. Executive will have such duties and responsibilities as may be assigned to Executive by the Company from time to time, at the Company’s discretion. Executive will devote all reasonable efforts and all of his or her business time to the Company.
4. Compensation and Benefits.
4.1 Annual Salary. The Annual Salary will be payable in accordance with the payroll policies of the Company in effect from time to time, but in no event less frequently than twice each month, less any deductions required to be withheld by applicable law and less any voluntary deductions made by Executive.
4.2 Incentive Compensation. Executive shall be eligible to receive long and short-term incentive compensation in the form of annual bonuses or long-term grants under the Omnibus Plan. The decision to award any incentive compensation to Executive under the Omnibus Plan and the amount and terms of any such awards or grants are subject to change from year to year and shall be in the sole and absolute discretion of the Compensation Committee of the Board or any other committee that may be designated as the administrative committee for the Omnibus Plan with respect to Executive.
4.3 Vacation Policy. Executive shall be entitled to four weeks of paid vacation during each calendar year of the Term, which such vacation shall accrue in accordance with Company policy.
4.4 Participation in Employee Benefit Plans. Executive may participate in any group life, hospitalization or disability insurance plan, health program, retirement plan, similar benefit plan or other so called “fringe benefits” of the Company (collectively, “Benefits”). Executive’s participation in any such plans shall be on the terms and conditions set forth in the governing plan documents as they may be in effect from time to time.
4.5 General Business Expenses. The Company shall pay or reimburse Executive for all business expenses reasonably and necessarily incurred by Executive in the performance of Executive’s duties under this Agreement, consistent with the Company’s business expense reimbursement policy, as in effect from time to time.
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4.6 Other Benefits. Executive shall be entitled to participate in or receive benefits under any compensatory employee benefit plan or other benefit or similar arrangements made available by the Company now or in the future to its senior executive officers and key management employees, subject to and on a basis consistent with the terms, conditions, and overall administration of such plans or arrangement.
4.7 Clawback Policy. Executive agrees that the compensation and benefits provided by the Company under this Agreement or otherwise may be subject to recoupment under the Company’s Clawback Policy, as in effect from time to time. A copy of the current clawback Policy is available on request.
4.8 Stock Ownership. Executive understands and agrees that Executive may be subject to the Company’s stock ownership policy, as such policy may be in effect from time to time (the “Stock Ownership Policy”) and shall take all appropriate steps to comply with the Stock Ownership Policy. A copy of the Stock Ownership Policy is available on request. Executive understands and the Company agrees that notice of changes to the Stock Ownership Policy shall be made available by the Company as appropriate.
4.9 Perquisites. Executive shall be entitled, as of the date hereof, to the perquisites described in List of Perquisites provided to Executive with this Agreement; provided, however, that Executive’s perquisites shall be subject to modification from time to time by the Compensation Committee of the Board, at its sole discretion.
5. Confidentiality and Company Property, Non-Competition and Non-Solicitation.
5.1 Confidentiality, Non-Solicit, and Non-Compete Agreement. Executive agrees that, as a condition of Executive’s employment, Executive shall execute and shall be bound by the terms of the Confidentiality, Non-Solicit, and Non-Compete Agreement attached hereto as Exhibit A.
5.2 Non-Disparagement. Executive also agrees, as a condition of Executive’s employment, that Executive and Executive’s immediate family will not make any comments to the employees, vendors, customers, or suppliers of the Company or any of its affiliates, or to any media outlet or to others with the intent to impugn, castigate or otherwise damage the reputation of Company, any of its affiliates or any of the owners, directors, officers, or employees of Company.
5.3 Covenants Independent. The covenants of Executive contained in this Section 5 will be construed as independent of any other provision in this Agreement; and the existence of any claim or cause of action by Executive against the Company will not constitute a defense to the enforcement by the Company of said covenants. Executive has been advised to consult with counsel in order to be informed in all respects concerning the reasonableness and propriety of this Section 5 and its provisions with the specific regard to the nature of the business conducted by the Company. Executive acknowledges that this Section 5 and its provisions are reasonable in all respects.
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5.4 Company Property. All memoranda, notes, lists, records, and other documents or papers (and all copies thereof) relating to the Company and its affiliates, including such items stored in computer memories, microfiche or by any other means, made or compiled by or on behalf of Executive in connection with Executive’s employment, or made available to Executive shall be the property of the Company, and shall be delivered to the Company promptly upon the termination of Executive’s employment with the Company or at any other time upon the Company’s request; provided, however, that Executive’s address books, diaries and chronological correspondence files (including digital formats) shall be deemed to be property of Executive (except to the extent any of the foregoing contain Confidential Information).
5.5 Original Material. Executive agrees that any inventions, discoveries, improvements, ideas, concepts or original works of authorship relating directly to the Company Business, including without limitation information of a technical or business nature such as ideas, discoveries, inventions, trade secrets, know-how, writings and other works of authorship, computer programs, financial figures, marketing plans, customer lists and data, business plans or methods and the like, which relate in any manner to the actual or anticipated business or the actual or anticipated areas of business of the Company and its divisions and affiliates, whether or not protectable by patent or copyright, that have been originated, developed or reduced to practice by Executive alone or jointly with others during Executive’s employment with the Company shall be the property of and belong exclusively to the Company. Executive shall promptly and fully disclose to the Company the origination or development by Executive of any such material and shall provide the Company with any information that it may reasonably request about such material. Either during or subsequent to Executive’s employment, upon the request and at the expense of the Company or its nominee, and for no remuneration in addition to that due Executive pursuant to Executive’s employment by the Company, but at no expense to Executive, Executive agrees to execute, acknowledge, and deliver to the Company or its attorneys any and all instruments which, in the judgment of the Company or its attorneys, may be necessary or desirable to secure or maintain for the benefit of the Company adequate patent, copyright, and other property rights in the United States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or original works of authorship embraced within this Agreement.
5.6 Non-Competition During Employment. Executive agrees that during Executive’s employment with the Company Executive will not compete with the Company by engaging in the Company Business or in the conception, design, development, production, marketing, or servicing of any product or service that is substantially similar to the products or services which the Company provides, and that Executive will not work for (in any capacity), assist, or become affiliated with as an owner, partner, or otherwise, either directly or indirectly, any individual or business which engages in the Company Business or offers or performs services, or offers or provides products substantially similar to the services and products provided by the Company.
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5.7 Conflicts of Interest. Executive agrees that during his or her employment with the Company he or she will not engage, either directly or indirectly, in any activity which might adversely affect the Company or its affiliates (a “Conflict of Interest”), including ownership of a material interest in any supplier, contractor, distributor, subcontractor, customer or other entity with which the Company does business or acceptance of any material payment, service, loan, gift, trip, entertainment, or other favor from a supplier, contractor, distributor, subcontractor, customer or other entity with which the Company does business, and that Executive will promptly inform the Board as to each offer received by Executive to engage in any such activity. Executive further agrees to disclose to the Company any other facts of which Executive becomes aware which might in Executive’s good faith judgment reasonably be expected to involve or give rise to a Conflict of Interest or potential Conflict of Interest.
5.8 Rights and Remedies Upon Breach. If Executive breaches any of the provisions contained in Section 5, including any provisions of Exhibit A (the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which rights and remedies shall be independent of the others and severally enforceable, and each of which is in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity, including, without limitation, recovery of money damages and termination of this Agreement:
(a) Specific Performance. The right and remedy to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.
(b) Accounting. The right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any action constituting a breach of the Restrictive Covenants.
(c) Remedies For Violation of Non-Competition or Confidentiality Provisions. Executive acknowledges and agrees that: (i) the skills, experience and contacts of Executive are of a special, unique, unusual and extraordinary character which give them a peculiar value; (ii) because of the business of the Company, the restrictions agreed to by Executive as to time and area contained in this Section 5 are reasonable; and (iii) the injury suffered by the Company by a violation of this Section 5 will be difficult to calculate in damages in an action at law and damages cannot fully compensate the Company for any violation of any obligation or covenant in this Section 5. Executive’s compliance with this Section 5 is a condition precedent to the Company’s obligation to make payments of any nature to Executive (including, without limitation, payments otherwise payable pursuant to the LTI Plan).
5.9 Materiality and Conditionality of This Section 5. The covenants contained in this Section 5 are material to this Agreement. Executive’s agreement to strictly comply with this Section 5 is a precondition for Executive’s receipt of payments of any nature under this Agreement (including, without limitation, payments otherwise payable pursuant to the LTI Plan). Whether or not this Section 5 or any portion thereof has been held or found invalid or unenforceable for any reason whatsoever by a court or other constituted legal authority of competent jurisdiction, upon any violation of this Section 5 or any portion thereof, or upon a finding that a violation would have occurred if this Section 5 or any portion thereof were enforceable, Executive and the Company agree that (i) Executive’s interest in unvested awards granted pursuant to the LTI Plan shall automatically lapse and be forfeited; and (ii) Company shall have no obligation to make any further payments to Executive under this Agreement.
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5.10 Severability, Modification of Covenants. The Restrictive Covenants shall survive the termination or expiration of this Agreement, and in the event any of the Restrictive Covenants shall be held by any court to be effective in any particular area or jurisdiction only if said Restrictive Covenant is modified to be limited in its duration or scope, then, at the sole option of Company, the provisions of Section 5.12 may be deemed to have been triggered, and the rights, liabilities and obligations set forth therein shall apply. In the event Company does not elect to trigger application of Section 5.12, then the court shall have such authority to so reform the covenants and the parties hereto shall consider such covenants and/or other provisions of this Section 5 to be amended and modified with respect to that particular area or jurisdiction so as to comply with the order of such court and, as to all other jurisdictions, the covenants contained herein shall remain in full force and effect as originally written. Should any court hold that the covenants in this Section 5 are void and otherwise unenforceable in a particular area or jurisdiction, then notwithstanding the foregoing provisions of this Section 5.13, the provisions of Section 5.12 shall be applicable and the rights, liabilities and obligations of the parties set forth therein shall apply. Alternatively, at the sole option of Company, Company may consider such covenants to be amended and modified so as to eliminate therefrom the particular area or jurisdictions as to which such covenants are so held void or otherwise unenforceable and, as to all other areas and jurisdictions covered herein, the covenants contained herein shall remain in full force and effect as originally written.
6. Termination. In general, on termination of Executive’s employment for any reason, the following amounts will be paid to Executive, or Executive’s estate, as the case may be:
All accrued but unpaid Annual Salary through the Executive’s last active day of employment, payable in a lump sum within 30 days following Executive’s termination of employment;
Accrued but unused vacation time, to the extent payment is either required by law or provided for in the Company’s vacation or paid-time-off policy, as such may be in effect from time to time;
Any amounts payable to Executive under the terms of any employee benefit plans in which Executive was a participant;
Reimbursement of any of Executive’s business expenses not previously reimbursed, to the extent provided for under the Company’s business expense reimbursement policy; and
Any other amounts that determined to be due under the terms of the Omnibus Plan, or any grants or awards made thereunder.
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Unless expressly provided for under this Agreement, no amounts other than those set forth above shall be paid following any termination of Executive’s employment, including, by way of example, and not limitation, termination of Executive’s employment by reason of the Company for Cause and resignation and by reason of Executive’s resignation without Good Reason.
6.1 Termination for Cause. The Company has the right, at any time during the Term, subject to all of the provisions hereof, exercisable by serving notice, effective on or after the date of service of such notice as specified therein, to terminate Executive’s employment under this Agreement and discharge Executive for Cause.
6.2 Termination without Cause. The Company has the right, at any time during the Term to terminate Executive’s employment without Cause by providing Executive with notice at least 90 days prior to the effective date of such notice. In the event Executive’s employment is terminated without Cause, Executive shall be entitled to such benefits as may be provided pursuant to the Company’s Executive Separation Pay and Change in Control Plan (the “Executive Separation Pay Plan”). The Company shall also have the right to terminate Executive’s employment without Cause with less than 90 days’ advanced notice, but shall pay, in addition to anything payable under the Executive Separation Pay Plan, Executive’s Annual Salary as determined for the period that represents 90 days’ of continued employment, reduced by the period of actual advanced notice of termination provided by the Company.
6.3 Termination upon Disability. If during the Term Executive experiences a Disability, the Company shall, by written notice to Executive, terminate Executive’s employment with the Company. Executive shall be entitled to such payments as are provided in the case of any other termination of employment, and shall also be entitled to a payment corresponding to the value of certain benefits that were provided to Executive while actively employed. The amount payable in substitution for certain subsidized employee benefits under this Section 6.3 shall be determined as follows: The monthly value of the Company’s subsidy of Executive’s group health plan coverage shall be determined by reference to such subsidy as in effect immediately prior to Executive’s termination of employment, and that monthly amount shall be multiplied by twelve (12), which amount shall be paid as a lump sum, net of required withholding for federal, state and local wage and income taxes.
6.4 Resignation for Good Reason. Executive’s resignation for Good Reason, as set forth below, shall be treated in all respects like a Termination by the Company without Cause. For these purposes, the following provisions shall be applicable:
(a) The term “Good Reason” shall mean any of the following:
(i) The occurrence of any material breach by the Company or any of its affiliates of the terms of this Agreement or of the terms of any other material agreement between Executive and the Company or any of its affiliates;
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(ii) The Company’s assignment to Executive of any duties materially inconsistent with Executive’s position, including any other action which results in a material diminution in such status, title, authority, duties or responsibility; or
(iii) The relocation of Executive’s office to a location more than 35 miles outside Executive’s office location as agreed at time of execution of Agreement.
(b) In order for Executives resignation to be deemed to be for Good Reason, Executive must provide written notice to the Company specifying the event or condition claimed to constitute Good Reason for Executive’s resignation within sixty (60) days following the initial existence of such event or condition, the Company must, thereafter, have failed to have cured or corrected such event or condition within sixty (60) days following receipt of the initial notice from Executive and Executive must, then resign from employment and separate from service with the Company no later than thirty (30) days after the end of the Company’s sixty (60) day cure period.
6.5 Resignation without Good Reason. Executive may resign and any time without Good Reason. It is understood that Executive shall provide the Company with ninety (90) days’ notice of his or her intent to resign; provided, however, that in such a situation the Company reserves the right to terminate Executive’s employment at any time after receipt of such notice but shall continue to pay Executive’s base Annual Salary for the remainder of the ninety (90) day period following the Company’s termination of Executive’s employment. Such an early termination of employment by the Company shall not be deemed to be an involuntary termination of Executive’s employment by the Company for purposes of this Agreement.
7. Section 409A; Certain Excise Taxes.
7.1 In-kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Agreement or in any Company policy with respect to such payments, in-kind benefits and reimbursements provided under this Agreement during any tax year of Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Executive and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to Executive as soon as administratively practicable following such submission in accordance with the Company’s policies regarding reimbursements, but in no event later than the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This Section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Executive.
7.2 Specified Employee Rule. To the extent applicable, any payments to Executive called for under this Agreement or under the terms of any other plan, agreement or award, that are determined to be payments of deferred compensation to which Code Section 409A is applicable and that are paid by reason of the Executive’s separation from service, shall be delayed, to the extent necessary, to avoid a violation of Code Section 409A(a)(2)(B)(i). In general, this Section 7.2 may require that payments of nonqualified deferred compensation to the Executive that would otherwise be made within six (6) months following Executive’s separation from service shall be paid on the first day of the seventh (7th) month following Executive’s separation from service if Executive is determined to be a “specified employee” as that term is defined in Code Section 409A(a)(2)(B)(i) and related Treasury Regulations.
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7.3 Certain Excise Taxes. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by Section 4999 of the Code or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under Section 4999 of the Code and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times Executive’s base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made. Nothing in this Section 7.2 shall require the Company to be responsible for, or have any liability or obligation with respect to, Executive’s excise tax liabilities under Section 4999 of the Code.
8. Indemnification.
8.1 General. The Company agrees that if Executive is made a party or is threatened to be made a party to any Proceeding by reason of the fact that Executive is or was a trustee, director or officer of the Company, or any predecessor to the Company (including any sole proprietorship owned by Executive) or any of their affiliates or is or was serving at the request of the Company, any predecessor to the Company (including any sole proprietorship owned by Executive), or any of their affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by Texas or Delaware law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if Executive has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of his or her heirs, executors and administrators.
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8.2 Enforcement. If a claim or request under this Section 8 is not paid by the Company or on its behalf, within 30 days after a written claim or request has been received by the Company, Executive may at any time thereafter bring an arbitration claim against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, Executive shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Texas or Delaware law.
8.3 Partial Indemnification. If Executive is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Executive for the portion of such Expenses to which Executive is entitled.
8.4 Advances of Expenses. Expenses incurred by Executive in connection with any Proceeding shall be paid by the Company in advance upon request of Executive that the Company pay such Expenses, but only in the event that Executive shall have delivered in writing to the Company (i) an undertaking to reimburse the Company for Expenses with respect to which Executive is not entitled to indemnification and (ii) a statement of his or her good faith belief that the standard of conduct necessary for indemnification by the Company has been met.
8.5 Notice of Claim. Executive shall give to the Company notice of any claim made against Executive for which indemnification will or could be sought under this Agreement. In addition, Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within Executive’s power and at such times and places as are convenient for Executive.
8.6 Defense of Claim. With respect to any Proceeding as to which Executive notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its own expense;
(b) Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Executive, which in the Company’s sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. Executive also shall have the right to employ his or her own counsel in such action, suit or proceeding if Executive reasonably concludes that failure to do so would involve a conflict of interest between the Company and Executive, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company; and
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(c) The Company shall not be liable to indemnify Executive under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty that would not be paid directly or indirectly by the Company or limitation on Executive without Executive’s written consent. Neither the Company nor Executive will unreasonably withhold or delay their consent to any proposed settlement.
8.7 Non-exclusivity. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 8 shall not be exclusive of any other right which Executive may have or hereafter may acquire under any statute or certificate of incorporation or by-laws of the Company or any subsidiary, agreement, vote of shareholders or disinterested directors or trustees or otherwise.
9. Miscellaneous.
9.1 Legal Fees and Expenses. If any contest or dispute shall arise between the Company and Executive regarding any provision of this Agreement, the Company shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive in connection with such contest or dispute, but only if Executive prevails to a substantial extent with respect to Executive’s claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives reasonable written evidence of such fees and expenses.
9.2 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, sent by courier service, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission or, if mailed or sent by courier service, on the date of actual receipt thereof, as follows:
if to the Company, to:
Chief Executive Officer, Matthew W. Morris
1980 Post Oak Blvd., Suite 800
Houston, Texas 77056
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if to Executive, to:
David A. Fauth
6886 Pilger Ave NW
Annandale, MN 55302
Any party may change its address for notice hereunder by notice to the other party hereto.
9.3 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements (including but not limited to prior employment agreements and incentive plans and agreements), written or oral, with respect thereto, however, the terms of any benefit plans shall remain in force and effect.
9.4 Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any waiver on the part of any party of any such right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
9.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas (without giving effect to the choice of law provisions thereof).
9.6 Assignment. This Agreement, and any rights and obligations hereunder, may not be assigned by Executive and may be assigned by the Company only to a successor by merger or purchasers of substantially all of the assets of the Company or its affiliates.
9.7 Counterparts. This Agreement may be executed in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which together shall constitute one and the same instrument.
9.8 Headings. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
9.9 No Presumption Against Interest. This Agreement has been negotiated, drafted, edited and reviewed by the respective parties, and therefore, no provision of this Agreement shall be construed against any party as being drafted by said party.
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9.10 No Duty to Mitigate. Executive shall not be required to mitigate damages with respect to the termination of his or her employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided in this Agreement. Additionally, amounts owed to Executive under this Agreement shall not be offset by any claims the Company may have against Executive, and the Company’s obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against Executive or others.
9.11 Dispute Resolution. If any dispute arises out of or relates to this Agreement, or the breach thereof, Executive and the Company agree to promptly negotiate in good faith to resolve such dispute. If the dispute cannot be settled by the parties through negotiation, Executive and the Company agree to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration or any other dispute resolution procedure. If the parties are unable to settle the dispute by mediation as provided in the preceding sentence within 30 days of a written demand for mediation, any claim, controversy or dispute arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration before one (1) arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted in English and held in Houston, Harris County, Texas, or such other location to which the parties mutually agree. The arbitrator shall among other things determine the validity, scope, interpretation and enforceability of this arbitration clause. The award shall be a reasoned award and rendered within 30 days of the conclusion of the arbitration hearing. The decision of the arbitrator shall be final and binding and judgment upon the award rendered may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing provisions of this Section 9.11, the Company may seek injunctive relief from a court of competent jurisdiction located in Harris County, Texas, in the event of a breach or threatened breach of any covenant contained in Section 5.
9.12 Binding Agreement. This Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns and Executive and Executive’s legal representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
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| EXECUTIVE: | COMPANY: | |||
| STEWART INFORMATION SERVICES CORPORATION | ||||
| By: | ||||
| David A. Fauth | ||||
| Name: | Matthew W. Morris | |||
| Title: | Chief Executive Officer | |||
| Date: | Date: | |||
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Exhibit A
Stewart Title Guaranty Company, Stewart Title Company and Affiliates
Confidentiality, Non-Solicit, and Non-Compete Agreement
This Confidentiality, Non-Solicit, and Non-Compete Agreement (“Agreement”) is entered into between the undersigned individual (“I”, “me”, or “Employee”) and Stewart Title Guaranty Company, Stewart Title Company, or an affiliated company (“Employer”), for the benefit of Stewart Title Guaranty Company, and its parents, subsidiaries, affiliates, successors, and assigns to or for which Employee provides services, including Employer (collectively the “Company”). I understand the Company is in the business of providing global real estate services, including residential and commercial title insurance and closing and settlement services, offering products and services through its direct operations, network of Stewart Trusted Providers and family of companies, (the Company’s “Business” or “line of business”), and seeks to employ me in a position of trust and confidence related to this line of business, and I wish to be employed in such a position. In consideration of my employment and the compensation and other benefits received as a consequence thereof, and the other mutual promises and representations of the parties made herein, the parties agree as follows:
1. Position of Trust and Confidence. In reliance upon the promises made by me in this Agreement, the Company will provide me with access to Confidential Information (including trade secrets) related to my position, and may also provide me specialized training related to the Company’s Business and/or the opportunity to develop relationships with the Company’s employees, business contacts (customers and others) and agents for the purpose of developing goodwill for the Company. I agree that my receipt of the foregoing would give me an unfair competitive advantage if my activities during employment, and for a reasonable period thereafter, were not restricted as provided for in this Agreement.
2. Confidential Information and Company Property. Subject to Paragraph 6, I agree to use Company’s Confidential Information only in the performance of my duties, to hold such information in confidence and trust, and not to engage in any unauthorized use or disclosure of such information during my employment and for so long thereafter as such information qualifies as Confidential Information. “Confidential Information” means an item of information or compilation of information in any form (tangible or intangible) related to the Company’s Business that I acquire or gain access to during my employment that the Company has not authorized public disclosure of, and that is not readily available to the public or persons outside the Company. By way of example and not limitation, Confidential Information is understood to include: lists and records, contact information, private contract terms, business preferences, and historical transaction data regarding existing and prospective customers; non-public records and data regarding the Company’s financial performance; business plans and strategies, forecasts and analyses; internal business methods and systems, know how, and innovations; marketing plans, research and analysis; unpublished pricing information, and variables such as costs, discounting options, and profit margins; business sale and acquisition opportunities identified by the Company and related analysis; records of private dealings with vendors, suppliers, and distributors; and Company trade secrets. I acknowledge that items of Confidential Information are the Company’s valuable assets and have economic value because they are not generally known by the public or others who could use them to their own economic benefit and/or to the competitive disadvantage of the Company. I agree that all records, in any form (such as email, database, correspondence, notes, files, contact lists, drawings, specifications, spreadsheets, manuals, and calendars) that contain Confidential Information or otherwise relate to the Company’s Business, with the exception of wage and benefit related materials provided to me as an employee for my own use as an employee, are the property of the Company (collectively “Company Records”). I will follow all Company policies regarding use or storage of Company Records, and return all such records (including all copies) when my employment with Company ends or sooner if requested.
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Confidential Information does not include information lawfully acquired by a non-management employee about wages, hours or other terms and conditions of employment when used for purposes protected by §7 of the National Labor Relations Act such as joining or forming a union, engaging in collective bargaining, or engaging in other concerted activity for mutual aid or protection of laborers. For purpose of clarity, it shall still be a violation of this Agreement for a non-management employee to wrongfully compete by sharing Confidential Information with a competitor about other employees’ compensation and benefits which was obtained through the course of employment with the Company for purposes of assisting such competitor in soliciting Company employees.
3. Protective Covenants. In order to protect the Company’s Confidential Information (including trade secrets) and key business relationships, I agree that for a period of one (1) year after my employment ends (irrespective of which party ends the relationship or why it ends), I will not:
(a) solicit any employee of Company that I gained knowledge of through my employment with Employer (a “Covered Employee”) to leave the employment of the Company; or, (b) hire, attempt to hire, or assist in hiring any Covered Employee on behalf of a Competing Business; or,
(c) solicit, or attempt to solicit a Covered Customer or Key Relationship (terms separately defined below), as defined below, for the purpose of doing any business that would compete with the Company’s Business, or (d) knowingly engage in any conduct that is intended to cause, or could reasonably be expected to cause the Covered Customer or Key Relationship to stop or reduce doing business with the Company, or that would involve diverting business opportunities away from the Company; or,
(e) provide services for the benefit of a Competing Business within the Territory (terms separately defined below) that are the same or similar in function or purpose to those I provided to the Employer during the Look Back Period; or
(f) take on any other responsibilities for a Competing Business that would involve the probable use or disclosure of Confidential Information or the conversion of Covered Customers or Key Relationships to the benefit of a Competing Business or detriment of the Company.
Nothing herein is intended or to be construed as a prohibition against general advertising such as “help wanted” ads that are not targeted at the Company’s employees. This Agreement is not intended to prohibit: (i) employment with a non-competitive independently operated subsidiary, division, or unit of a family of companies that include a Competing Business, so long as the employing independently operated business unit is truly independent and my services to it do not otherwise violate this Agreement; or, (ii) a passive and non-controlling ownership of less than 2% of the stock in a publicly traded company. Further, nothing herein is intended to preclude conduct protected by Section 7 of the NLRA such as joining or forming a union, engaging in collective bargaining, or engaging in other concerted activity for mutual aid and protection.
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“Competing Business” means any person or entity that engages in (or is planning to engage in) a business that competes with a portion of the Company Business that I had involvement with or access to Confidential Information during the last two years of my employment (or such shorter period of time as I am employed)(the “Look Back Period”). “Covered Customer” means a customer that I had material business-related contact or dealings with or received Confidential Information about during the Look Back Period. “Key Relationships” refers to a person or entity with an ongoing business relationship with the Company (including vendors, agents, and contractors) that I had material business-related contact or dealings with during the Look Back Period. “Territory” means the geographic territory(ies) assigned to me by Company during the Look Back Period (by state, county, or other recognized geographic boundary used in the Company’s business); and, if I have no such specifically assigned geographic territory then: (i) those states and counties in which Company does business that I participated in and/or about which I was provided access to Confidential Information during the Look Back Period; and, (ii) the state and county where I reside and the states and counties contiguous thereto. I am responsible for seeking clarification from the Company’s Human Resources department if it is unclear to me at any time what the scope of the Territory is. State and county references include equivalents.
4. Severability and Special Remedies. Each of my obligations under this Agreement shall be considered a separate and severable obligation. If a court determines that a restriction in this Agreement cannot be enforced as written due to an overbroad limitation (such as time, geography, or scope of activity), the parties agree that the court shall reform or modify the restrictions or enforce the restrictions to such lesser extent as is allowed by law. If, despite the foregoing, any provision contained in this Agreement is determined to be void or unenforceable, in whole or in part, then the other provisions of this Agreement will remain in full force and effect. The parties agree that the Company will suffer irreparable harm, in addition to any damages that can be quantified, by a breach of this Agreement by me. Accordingly, in the event of such a breach or a threatened breach, the Company will be entitled to all remedies that may be awarded by a Court of competent jurisdiction, recovery of its attorneys’ fees and expenses (including not only costs of court, but also expert fees, travel expenses, and other expenses incurred), and any other legal or equitable relief allowed by law.
5. Choice of Law and Venue. The Parties agree that the law of the State in which the Employee primarily resides and was last employed by the Employer shall govern the interpretation, application, and enforcement of this Agreement, without regard to any choice of law rules of that or any other state. All disputes arising out of this Agreement or concerning the interpretation or enforcement of this Agreement shall be exclusively brought in the state and federal courts covering Harris County, Texas. Employee hereby expressly consents to the personal jurisdiction of the state and federal courts located in Harris County, Texas, for any lawsuit arising from or relating to this Agreement.
6. Agreement Limitations. Nothing in this Agreement prohibits me from reporting an event that I reasonably and in good faith believe is a violation of law to the relevant law-enforcement agency (such as the Securities and Exchange Commission or Department of Labor), requires notice to or approval from the Company before doing so, or prohibits me from cooperating in an investigation conducted by such a government agency. This may include a disclosure of trade secret information provided that it must comply with the restrictions in the Defend Trade Secrets Act of 2016 (DTSA). The DTSA provides that no individual will be held criminally or civilly liable under Federal or State trade secret law for the disclosure of a trade secret that: (i) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or, (ii) is made in a complaint or other document if such filing is under seal so that it is not made public. Also, an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order. To the extent that I am covered by Section 7 of the National Labor Relations Act (NLRA) because I am not in a supervisor or management role, nothing in this Agreement shall be construed to prohibit me from using information I acquire regarding the wages, benefits, or other terms and conditions of employment at the Company for any purpose protected under the NLRA. I understand that under the NLRA, covered employees have a right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and to refrain from any or all of such activities.
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7. Intellectual Property Protection and Assignment. Employee is expected to use his or her inventive and creative capacities for the benefit of the Employer and to contribute, where possible, to the Employer’s intellectual property in the ordinary course of employment.
(a) Definitions. “Inventions” mean any inventions, software source code, discoveries, improvements, designs, processes, machines, products, innovations, business methods or systems, know how, ideas or concepts of commercial value or utility, and related technologies or methodologies, whether or not shown or described in writing or reduced to practice and whether patentable or not. “Works” mean original works of authorship, including, but not limited to: literary works (including all written material), mask works, computer programs, formulas, tests, notes, data compilations, databases, artistic and graphic works (including designs, graphs, drawings, blueprints, and other works), recordings, models, photographs, slides, motion pictures, and audio visual works; whether copyrightable or not, and regardless of the form or manner in which documented or recorded. “Trademarks” mean any trademarks, trade dress or names, symbols, special wording or devices used to identify a business or its business activities whether subject to trademark protection or not. The foregoing is collectively referred to in this Agreement as “Intellectual Property.”
(b) Inventions Assignment. I agree to and do hereby grant and assign to Employer or its nominee my entire right, title and interest in and to all Inventions that are made, conceived, or reduced to practice by me, alone or jointly with others, during my employment with Employer (whether during working hours or not) that either (i) relate to Employer’s business, or actual or demonstrably anticipated research or development of the Employer, or (ii) involve the use or assistance of any tools, time, material, personnel, information, or facility of the Employer, or (iii) result from or relate to any work, services, or duties undertaken by me for the Employer.
(c) Works and Trademarks. I recognize that all Works and Trademarks conceived, created, or reduced to practice by me, alone or jointly with others, during my employment shall to the fullest extent permissible by law be considered the Employer’s sole and exclusive property and “works made for hire” as defined in the U.S. Copyright Laws for purposes of United States law and the law of any other country adhering to the “works made for hire” or similar notion or doctrine, and will be considered the Employer’s property from the moment of creation or conception forward for all purposes without the need for any further action or agreement by Employee or the Employer. If any such Works, Trademarks or portions thereof shall not be legally qualified as a works made for hire in the United States or elsewhere, or shall subsequently be held to not be a work made for hire or not the exclusive property of the Employer, I do hereby assign to Employer all of my rights, title and interest, past, present and future, to such Works or Trademarks. I will not engage in any unauthorized publication or use of such Company Works or Trademarks, nor will I use same to compete with or otherwise cause damage to the business interests of the Employer.
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(d) Waiver, License and Cooperation Obligation. It is the purpose and intent of this Agreement to convey to Employer all of the rights (inclusive of moral rights) and interests of every kind, that I may hold in Inventions, Works, Trademarks and other intellectual property that are covered by Paragraphs 7 (a) – (c) above (“Company Intellectual Property”), past, present and future; and, Employee waives any right that Employee may have to assert moral rights or other claims contrary to the foregoing understanding. It is understood that this means that in addition to the original work product (be it invention, plan, idea, know how, concept, development, discovery, process, method, or any other legally recognized item that can be legally owned), the Employer exclusively owns all rights in any and all derivative works, copies, improvements, patents, registrations, claims, or other embodiments of ownership or control arising or resulting from an item of assigned Intellectual Property everywhere such may arise throughout the world. The decision whether or not to commercialize or market any Company Intellectual Property is within the Employer's sole discretion and for the Employer’s sole benefit and no royalty will be due to Employee as a result of the Employer's efforts to commercialize or market any such invention. In the event that there is any Invention, Work, Trademark, or other form of intellectual property that is incorporated into any product or service of the Employer that Employee retains any ownership of or rights in despite the assignments created by this Agreement, then Employee does hereby grant to the Employer and its assigns a nonexclusive, perpetual, irrevocable, fully paid-up, royalty-free, worldwide license to the use and control of any such item that is so incorporated and any derivatives thereof, including all rights to make, use, sell, reproduce, display, modify, or distribute the item and its derivatives. All assignments of rights provided for in this Agreement are understood to be fully completed and immediately effective and enforceable assignments by Employee of all intellectual property rights in Company Intellectual Property. When requested to do so by Employer, either during or subsequent to employment with Employer, Employee will (i) execute all documents requested by Employer to affirm or effect the vesting in Employer of the entire right, title and interest in and to the Company Intellectual Property at issue, and all patent, trademark, and/or copyright applications filed or issuing on such property; (ii) execute all documents requested by Employer for filing and obtaining of patents, trademarks and/or copyrights; and (iii) provide assistance that Employer reasonably requires to protect its right, title and interest in the Company Intellectual Property, including, but not limited to, providing declarations and testifying in administrative and legal proceedings with regard to Company Intellectual Property. Power of Attorney: Employee does hereby irrevocably appoint the Employer as its agent and attorney in fact to execute any documents and take any action necessary for applications, registrations, or similar measures needed to secure the issuance of letters patent, copyright or trademark registration, or other legal establishment of the Employer’s ownership and control rights in Company Intellectual Property in the event that Employee’s signature or other action is necessary and cannot be secured due to Employee’s physical or mental incapacity or for any other reason.
(e) Records and Notice Obligations. Employee will make and maintain, and not destroy, notes and other records related to the conception, creation, discovery, and other development of Company Intellectual Property. These records shall be considered the exclusive property of the Employer and are covered by Paragraphs 1 and 3 above. During employment and for a period of one (1) year thereafter, Employee will promptly disclose to the Employer (without revealing the trade secrets of any third party) any Intellectual Property that Employee creates, conceives, or contributes to, alone or with others, that involve, result from, relate to, or may reasonably be anticipated to have some relationship to the line of business the Employer is engaged in or its actual or demonstrably anticipated research or development activity.
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(f) Prior Intellectual Property. Employee will not claim rights in, or control over, any Invention, Work, or Trademark as something excluded from this Agreement because it was conceived or created prior to being employed by Employer (a “Prior Work”) unless such item is identified on Appendix B and signed by Employee as of the date of this Agreement. Employee will not incorporate any such Prior Work into any work or product of the Employer without prior written authorization from the Employer to do so; and, if such incorporation does occur, Employee grants Employer and its assigns a nonexclusive, perpetual, irrevocable, fully paid-up, royalty-free, worldwide license to the use and control of any such item that is so incorporated and any derivatives thereof, including all rights to make, use, sell, reproduce, display, modify, or distribute the item and its derivatives.
(g) Notice. To the extent that Employee is a citizen of California and subject to its law, then Employee is notified that the foregoing assignment shall not include inventions excluded under Cal. Lab. Code § 2870 which provides: “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) relate at the time of concept or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) result from any work performed by the employee for the employer”, and to the extent Employee is a citizen of and subject to the law of another state which provides a similar limitation on invention assignments then Employee is notified that the foregoing assignment shall not include inventions excluded under such law (namely, Delaware Code Title 19 Section 805; Illinois 765ILCS1060/1-3, "Employees Patent Act"; Kansas Statutes Section 44-130; Minnesota Statutes 13A Section 181.78; North Carolina General Statutes Article 10A, Chapter 66, Commerce and Business, Section 66-57.1; Utah Code Sections 34-39-l through 34-39-3, "Employment Inventions Act"; Washington Rev. Code, Title 49 RCW: Labor Regulations, Chapter 49.44.140).
7. Survival, All Duties and At-Will Status Preserved. Nothing in this Agreement limits or reduces any common law or statutory duty I owe to the Company, nor does this Agreement limit or eliminate any remedies available to the Company for a violation of such duties. This Agreement will survive the expiration or termination of Employee’s employment with the Company and/or any assignee pursuant to Paragraph 9 and shall, likewise, continue to apply and be valid notwithstanding any change in the Employee’s duties, responsibilities, position, or title. Nothing in this Agreement modifies the parties’ at-will employment relationship or limits either party’s right to end the employment relationship between them.
8. Tolling. If Employee fails to comply with a timed restriction in this Agreement, the time period for that will be extended by one day for each day Employee is found to have violated the restriction, up to a maximum of twelve (12) months.
9. Assignment. This Agreement, including the restrictions on Employee’s activities set forth herein, also apply to any parent, subsidiary, affiliate, successor and assign of the Company to which Employee provides services or about which Employee receives Confidential Information. The Company shall have the right to assign this Agreement at its sole election without the need for further notice to or consent by Employee.
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AGREED:
| EMPLOYEE: | EMPLOYER: | |||
| STEWART INFORMATION SERVICES CORPORATION | ||||
| By: | ||||
| David A. Fauth | ||||
| Name: | Matthew W. Morris | |||
| Title: | Chief Executive Officer | |||
| Date: | Date: | |||
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APPENDIX A
Arizona:
If Employee resides in Arizona and is subject to Arizona law, then the following applies to Employee: (a) Employee’s nondisclosure obligation in Paragraph 2 shall extend for a period of three (3) years after Employee’s termination as to Confidential Information that does not qualify for protection as a trade secret. Trade Secret information shall be protected from disclosure as long as the information at issue continues to qualify as a trade secret; and (b) the restrictions in Paragraph 3 shall be limited to the Territory.
California:
If Employee resides in California, then the following applies to Employee: (a) the no-hire provision in Paragraph 3(b) shall not apply; (b) Paragraph 3(c)-(d) shall be limited to situations where Employee is aided in his or her conduct by the use or disclosure of the Company’s trade secrets (as defined by California law); (c) the noncompetition restrictions in Paragraph 3(e) and (f) shall not apply; (d) the provision in Paragraph 4 allowing the Company to recover its attorneys’ fees and expenses shall not apply; and (e) the venue provision in Paragraph 5 shall not apply.
Oklahoma:
For so long as Employee resides in Oklahoma and is subject to Oklahoma law, the noncompetition restrictions in Paragraph 3(e) and (f) shall not apply.
Oregon:
For so long as Employee resides in Oregon and is subject to Oregon law, the restrictions in Paragraph 3(e) and (f) shall only apply if Employee: (a) is engaged in administrative, executive or professional work and performs predominantly intellectual, managerial, or creative tasks, exercises discretion and independent judgment and earns a salary or is otherwise exempt from Oregon's minimum wage and overtime laws; (b) the Company has a "protectable interest" (meaning, access to trade secrets or competitively sensitive confidential business or professional information); and (c) the total amount of the Employee's annual gross salary and commission, calculated on an annual basis, at the time of the Employee's termination, exceeds the median family income for a family of four, as determined by the United States Census Bureau. However, if Employee does not meet requirements of either (a) or (c) (or both), the Company may, on a case-by-case basis, decide to make Paragraphs 3(e) and (f) enforceable as to Employee (as allowed by Oregon law), but paying the Employee during the period of time the Employee is restrained from competing the greater of: (i) compensation equal to at least 50 percent of the Employee’s annual gross base salary and commissions at the time of the Employee’s termination; or (ii) fifty percent of the median family income for a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the Employee’s termination.
| - 23 - |
Wisconsin:
For so long as Employee resides in Wisconsin and is subject to Wisconsin law: (a) Employee’s nondisclosure obligation in Paragraph 2 shall extend for a period of three (3) years after Employee’s termination as to Confidential Information that does not qualify for protection as a trade secret. Trade Secret information shall be protected from disclosure as long as the information at issue continues to qualify as a trade secret; (b) Paragraph 8 shall not apply; and (c) Paragraph 3(a) and (b) is rewritten as follows: “While employed and for a period of one (1) year from the date of the termination of Employee’s employment, I will not participate in soliciting any Covered Employee of the Company that is in a Sensitive Position to leave the employment of the Company on behalf of (or for the benefit of) a Competing Business nor will I knowingly assist a Competing Business in efforts to hire a Covered Employee away from the Company. As used in this paragraph, an employee is a “Covered Employee” if the employee is someone with whom Employee worked, as to whom Employee had supervisory responsibilities, or regarding which Employee received Confidential Information during the Look Back Period. An employee in a “Sensitive Position” refers to an employee of the Company who is in a management, supervisory, sales, research and development, or similar role where the employee is provided Confidential Information or is involved in business dealings with the Company’s customers.”
| - 24 - |
APPENDIX B
Statement Regarding Prior Inventions, Works & Trademarks
Employee seeks to exclude his or her Prior Works (Invention, Work, or Trademark) listed below from assignment to the Employer under Paragraph 7(f) of the attached Agreement (if there are none, write “none” or leave the section below blank):
Employee agrees not to disclose the trade secrets of any third party in describing the Prior Work. If additional pages are attached to provide a description, this fact and the number of pages attached are described above.
Employee:
| Date: |
(signature)
| - 25 - |
Exhibit 10.3
STEWART INFORMATION SERVICES CORPORATION
STOCK UNIT AWARD AGREEMENT
THIS STOCK UNIT AWARD AGREEMENT (the “Award Agreement”) is hereby granted as of February 8, 2018 (the “Grant Date”) by Stewart Information Services Corporation, a Delaware corporation (the “Company”), to [_________] (the “Participant”) pursuant to the Stewart Information Services Corporation 2014 Long Term Incentive Plan (the “Plan”), subject to the terms and conditions set forth therein and as set out in this Award Agreement. Capitalized terms used herein shall, unless otherwise required by the context, have the meaning ascribed to such terms in the Plan.
By action of the Committee, and subject to the terms of the Plan, the Participant is hereby granted Stock Units (the “Units”), each of which represent a contractual right that entitles the Participant potentially to receive a share of the Company’s Common Stock (each, a “Share”), provided all of the conditions for settlement of the Units have been satisfied, subject to the Plan and to the restrictions and risks of forfeiture as set forth in this Award Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained in this Award Agreement, the Company and the Participant agree as follows:
1. Grant. The Company grants to the Participant, upon the terms and conditions set forth in this Award Agreement and as set forth in the Plan [______] Units.
2. Vesting and Forfeiture.
(a) Any Units that are not vested as of the date of the Participant’s termination of employment for any reason shall be automatically forfeited without any further action required to be taken by the Participant or the Company.
(b) In general, the Units shall become vested on the dates set forth below (each, a “Vesting Date”), as to the specified percentage of the Units indicated:
| Vesting Date | Incremental Vesting Percentage | Cumulative Vesting Percentage | ||||||
| First anniversary of the Grant Date | 33⅓ | % | 33⅓ | % | ||||
| Second anniversary of the Grant Date | 33⅓ | % | 66⅔ | % | ||||
| Third Anniversary of the Grant Date | 33⅓ | % | 100 | % | ||||
The vesting of the Participant’s Units, as set forth above, shall only occur if the Participant has remained continuously employed through the relevant Vesting Date.
(c) Notwithstanding any other provision of this Award Agreement, in the event there is a Change of Control while the Participant remains employed with the Company or in the event the Participant is terminated in connection with a Change in Control, the Participant shall be vested in the number of Units set forth in Section 1 as of the date of the Participant’s termination of employment.
(d) Special Pro-Rata Vesting. The Units (if not already vested under any other provision of this Award Agreement) shall be vested pursuant to this Section 2(d) immediately prior to the Participant’s termination of employment under any of the following circumstances (“Special Vesting Termination Events”):
(i) Termination of the Participant’s employment due to Executive’s death;
(ii) Termination of the Participant’s employment due to Executive’s Disability;
(iii) Termination of the Participant’s employment by the Company without Cause;
(iv) Termination of the Participant’s employment by the Participant for Good Reason (if the Participant’s employment agreement has provisions for severance pay benefits in such circumstances).
In order for the Participant to be eligible for special pro-rata vesting under this Section 2(d), the Participant must have been continuously employed for at least twenty-five percent (25%) of the period covered by the vesting schedule set forth in Section 2(a), and the Participant must execute and not, thereafter, revoke, a full release of all claims that Executive may have against the Company, its Subsidiaries and affiliates, and all of their respective officers, employees, directors, and agents, and that shall include the Participant’s agreement not to disparage the Company and not to divulge any of the Company’s confidential information, in a form acceptable to the Company in a form satisfactory to the Committee (the “Release”).
(e) Calculation of Special Pro-Rata Vesting. If the Participant is eligible for special pro-rata vesting under Section 2(d), vesting shall be calculated as follows:
(i) Special Pro-rata Vesting shall be based on the number of full, completed calendar months worked by Executive during the applicable incentive period (as set forth in the applicable LTI Award). The calculation of Special Pro-Rata Vesting shall be determined as a percent of the total possible vested award that would have been vested to Executive had Executive remained employed during the entire incentive period, measured in whole calendar months, multiplied by a fraction whose numerator is the percentage of the number of calendar months of completed employment during the entire incentive period plus 100% and whose denominator is two.
| - 2 - |
(ii) By way of hypothetical example only: if Executive shall experience a Special Vesting Termination Event during the 24th month of a 36-month incentive program, Executive would receive 81.94% of the applicable LTI Award. The formula for calculating Special Pro-Rata Vesting based on the foregoing hypothetical is as follows:
(23 ÷ 36) = 63.88% + 100% = 163.88% = 81.94%
2
(iii) The time of payment of LTI Awards subject to Special Pro-Rata Vesting shall occur as provided in the applicable LTI Awards.
(f) Voluntary Retirement. Notwithstanding anything in this Section 2 to the contrary, the Participant’s Units shall be fully vested if the Participant is eligible to resign from employment with the Company and have that resignation treated as a Voluntary Retirement (as that term is defined in the Stewart Information Services Corporation Executive Voluntary Retirement Plan, or “EVRP”), provided the Participant satisfies all of the requirements of the EVRP to receive benefits under that plan.
3. Settlement of Vested Units. Vested Units shall generally be settled on or as soon as practicable following the Vesting Dates set forth in Section 2(b), and shall be settled by the delivery of Shares corresponding to the portion of the Units that are indicated as being vested on each of the Vesting Dates. Notwithstanding anything herein to the contrary, the accelerated vesting of Units that may occur based on the circumstances of the Participant’s termination of employment, or eligibility for Voluntary Retirement, shall not have any impact on the settlement date for the Units, so that no acceleration of settlement or payment occurs as a result of any such change in vesting. Settlement of Units shall be contingent on the Participant making appropriate arrangements for payment of amounts required to be withheld for federal, state and local income and wage taxes, and the Company shall also have the right to withhold or cancel Units or Shares that are otherwise to be delivered on settlement of Units so as to enable the Company to comply with its withholding obligations (and any such cancellation of withholding of Units or Shares shall be deemed to be a taxable distribution of Shares and a repurchase of such Shares for federal income tax purposes at the time that occurs). In addition, in the event any dividends are paid to shareholders during the period following the Grant Date and up to the delivery of any Shares, the Participant shall be entitled to a payment, at the same time the Shares are delivered to the Participant, equal to the amount that would have been paid as dividends to the Participant had the Participant held the Shares during that period (“Dividend Equivalents”). The Committee shall have the right to determine whether the Dividend Equivalents shall be paid in cash or in the form of a distribution of additional shares of Common Stock having the same value and to determine whether to deem such dividends to have been reinvested in shares at the time the dividends were paid.
| - 3 - |
4. Status of Units and Certain Tax Matters. The Units subject to this Award Agreement are only a contractual right of the Participant potentially to receive Shares corresponding to the number of Units granted to the Participant. As a consequence, the Units do not constitute property for purposes of Code Section 83. As a consequence, the Participant will be taxable for federal income tax purposes on the value of the Shares distributed to the Participant at the time the Shares are distributed, and not at the time the Units vest. Notwithstanding the foregoing, the value of the Units is treated as creating a form of nonqualified deferred compensation to which Code Sections 409A and 3121(v) are applicable. As a consequence, the value of the Units is subject to certain wages taxes (for Social Security and Medicare) at the time of vesting and the Company shall be entitled to cancel vested Units as a means to cover the Company’s wage withholding obligations that arise on vesting. Vesting is not, however, intended generally to be a taxable event for purposes of federal income taxation or Code Section 409A. Because the time of settlement or payment is, in all cases, fixed by reference to a specified schedule of payments that is not subject to acceleration, except for the cancellation of Units for withholding purposes, which is permissible under Code Section 409A, all requirements of Code Section 409A are intended to be met, and this Award Agreement shall be interpreted in a manner consistent with the Company’s intent to satisfy all applicable requirements of Code Section 409A.
5. Employment. Nothing in the Plan or in this Award Agreement shall confer upon the Participant any right to be continued as an employee of the Company or interfere in any way with the right of the Company to remove the Grantee as an employee at any time for any cause.
6. Binding Effect. This Award Agreement shall be binding upon and shall inure to the benefit of any successor of the Company, but except as provided above, the Shares subject to this Award Agreement shall not be assigned or otherwise disposed of by the Participant.
7. The Plan. This Award Agreement is subject to the terms and conditions of the Plan. In the event of a conflict between the Plan and this Agreement, the terms of the Plan shall control.
| - 4 - |
IN WITNESS WHEREOF, this Award Agreement has been executed on this 22nd day of February, 2018.
| STEWART INFORMATION SERVICES CORPORATION | ||
| By: | ||
| Its Chief Executive Officer | ||
| ACKNOWLEDGED | ||
| By: | ||
| PARTICIPANT | ||
| - 5 - |
Exhibit 10.4
STEWART INFORMATION SERVICES CORPORATION
RESTRICTED PERFORMANCE UNIT AGREEMENT (TSR)
THIS RESTRICTED PERFORMANCE UNIT AGREEMENT (the “Award Agreement”) is hereby granted as of February 8, 2018 (the “Grant Date”) by Stewart Information Services Corporation, a Delaware corporation (the “Company”), to [______] (the “Participant”) pursuant to the Stewart Information Services Corporation 2014 Long Term Incentive Plan (the “Plan”), and subject to the terms and conditions set forth therein and as set out in this Award Agreement. Capitalized terms used herein shall, unless otherwise required by the context, have the meaning ascribed to such terms in the Plan or as set forth herein.
By action of the Committee, and subject to the terms of the Plan, the Participant is hereby granted a Restricted Performance Units as described in Article IX of the Plan, subject to the terms of the Plan and to the provisions set forth in this Award Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained in this Award Agreement, the Company and the Participant agree as follows:
1. Grant. The Company grants to the Participant, upon the terms and conditions set forth in this Award Agreement and as set forth in the Plan [______] Restricted Performance Units (the “Units”), representing a contractual right of the Participant potentially to receive shares of Common Stock (“Shares”), with the number of Shares to be delivered at settlement, if any, being determined by reference to the number of Units that are deemed vested and to be settled provided all of the conditions for settlement of the Units have been satisfied and subject to the terms and conditions of the Plan and this Award Agreement.
2. Vesting and Forfeiture.
(a) Except as otherwise expressly provide herein, any Units that are not vested as of the date of the Participant’s termination of employment for any reason shall be automatically forfeited without any further action required to be taken by the Participant or the Company. Except as otherwise provided herein or at the discretion of the Committee, the Units are not deemed vested until after the results for the Performance Period have been determined and settlement of the Units by the delivery of Shares has occurred. As a consequence, in general the Participant shall forfeit all rights with respect to the Units if the Participant’s employment with the Company terminates prior to the date the Units are settled.
(b) The number of Units that are treated as vested shall be determined after the end of the Performance Period, as specified in Exhibit A, attached hereto, based on the achievement of the performance criteria, also set forth in Exhibit A, and subject in all regards to such other discretion by action of the Committee as permitted under the terms of the Plan.
(c) Notwithstanding any other provision of this Award Agreement, in the event there is a Change of Control while the Participant remains employed with the Company, or in the event the Participant is terminated in connection with a Change in Control, the Participant shall be vested in the number of Units set forth in Section 1 as of the date of the Participant’s termination of employment.
(d) Waiver of Continued Employment Requirement. The general requirement that the Participant be continuously employed through the date the Units are settled (the “Employment Requirement”) shall be waived to the extent provided in this Section 2(d), subject, however, in all regards, to the Committee’s discretionary authority as provided under the Plan. Specifically, the Employment Requirement shall not be applicable in the following circumstances (“Special Circumstances”):
(i) The Participant’s termination of employment under circumstances where the Participant is eligible for benefits under the Company’s Executive Voluntary Retirement Plan;
(ii) Termination of the Participant’s employment due to Executive’s death;
(iii) Termination of the Participant’s employment due to Executive’s Disability;
(iv) Termination of the Participant’s employment by the Company without Cause; or
(v) Termination of the Participant’s employment by the Participant for Good Reason (but only in circumstances where the Participant’s employment agreement provides for severance pay benefits on a resignation for Good Reason.
In order for the Participant receive any Shares with respect to Unit following the occurrence of any of the above Special Circumstances, the Participant must execute and not, thereafter, revoke, a full release of all claims that Executive may have against the Company, its Subsidiaries and affiliates, and all of their respective officers, employees, directors, and agents, and that shall include the Participant’s agreement not to disparage the Company and not to divulge any of the Company’s confidential information, in a form acceptable to the Company in a form satisfactory to the Committee (the “Release”)
(a) Calculation of Special Pro-Rata Vesting. If the Participant is eligible for special pro-rata vesting under Section 2(d), vesting shall be calculated as follows:
(i) Special Pro-rata Vesting shall be based on the number of full, completed calendar months worked by Executive during the applicable incentive period (as set forth in the applicable LTI Award). The calculation of Special Pro-Rata Vesting shall be determined as a percent of the total possible vested award that would have been vested to Executive had Executive remained employed during the entire incentive period, measured in whole calendar months, multiplied by a fraction whose numerator is the percentage of the number of calendar months of completed employment during the entire incentive period plus 100% and whose denominator is two.
| - 2 - |
(ii) By way of hypothetical example only: if Executive shall experience a Special Vesting Termination Event during the 24th month of a 36-month incentive program, Executive would receive 81.94% of the applicable LTI Award. The formula for calculating Special Pro-Rata Vesting based on the foregoing hypothetical is as follows:
(23 ÷ 36) = 63.88% + 100% = 163.88% = 81.94%
2
(iii) The time of payment of LTI Awards subject to Special Pro-Rata Vesting shall occur as provided in the applicable LTI Awards.
(b) Notwithstanding anything herein to the contrary, in the event the Participant is terminated for Cause, the Participant’s rights to any payments otherwise due under this Award Agreement are forfeited in their entirety.
3. Status of Units. The Units subject to this Award Agreement are not intended to constitute property for purposes of Section 83 of the Code. The Units represent a right to receive a payment, in the form Shares, at the time the Units are settled.
4. Time of Payment/Settlement. In all cases, Units that are vested and settled under the terms of this Award Agreement shall be settled as soon as practicable following the determination of the extent to which the performance criteria have been attained, and, in all events, during the calendar year following the end of the Performance Period. In addition, in the event any dividends are paid to shareholders during the Performance Period or thereafter prior to the settlement of the Units, the Participant shall be entitled to a payment equal to the amount that would have been paid as dividends to the Participant had the Participant held the Shares actually delivered to the Participant throughout that period (“Dividend Equivalents”). The Committee shall have the right to determine whether the Dividend Equivalents shall be paid in cash or in the form of a distribution of additional shares of Common Stock having the same value and to determine whether to deem such dividends to have been reinvested in shares at the time the dividends were paid.
5. Employment. Nothing in the Plan or in this Award Agreement shall confer upon the Participant any right to be continued as an employee of the Company or interfere in any way with the right of the Company to remove the Grantee as an employee at any time for any cause.
6. Binding Effect. This Award Agreement shall be binding upon and shall inure to the benefit of any successor of the Company, but except as provided above, the Units subject to this Award Agreement shall not be assigned or otherwise disposed of by the Participant.
| - 3 - |
7. The Plan. This Award Agreement is subject to the terms and conditions of the Plan. In the event of a conflict between the Plan and this Agreement, the terms of the Plan shall control.
IN WITNESS WHEREOF, this Award Agreement has been executed on this 22nd day of February 2018.
| STEWART INFORMATION SERVICES CORPORATION | ||
| By: | ||
| Its Chief Executive Officer | ||
| ACKNOWLEDGED | ||
| By: | ||
| PARTICIPANT | ||
| - 4 - |
Exhibit A
The performance metric for these Units is the relative percentile ranking of total shareholder return ("TSR") as compared to the Board-approved Custom Real Estate Index (“Comparative Group”).
Set forth below is the table of performance targets and percentage of Units that may become vested and payable under the terms of the Performance Award Agreement. The number of vested and payable Units will range from 0 to 225% of the stated number of Units set out in Section 1 of the Award Agreement.
Threshold and Maximum opportunity to incentivize performance will be associated with varying levels of relative performance. Targeted performance is achieved when Company TSR is at the 50th percentile of the Comparative Group. Threshold performance is set at the 40th percentile. In the event performance is below the 40th percentile, the associated payout is equal to zero. Maximum Payout is achieved when performance is at the 80th percentile of the Comparative Group.
| TSR Percentile Ranking Performance Achieved | Payout as % of Target Number of Units | |||||
| Maximum | 80th | 225 | % | |||
| Target | 50th | 100 | % | |||
| Threshold | 40th | 25 | % | |||
| Below Threshold | <40th | 0 | % | |||
Payout percentages will be interpolated for performance achievement between threshold, target, and maximum.
The Performance Period is the period from January 1, 2018 through December 31, 2020.
The following sets forth the definition of specific terms and calculations
| Term/Calculation | Definition | |
| Average Shares Outstanding | Average Shares Outstanding is the number of shares at the end of the Baseline Period, plus the shares at the end of the Performance Period, divided by two. | |
| Company | The Company is Stewart Information Services Corporation and its subsidiaries. | |
| Cumulative Dividends Per Share | Cumulative Dividends Per Share is the aggregate cash dividend paid during the Performance Period as reported in the 10K. | |
| Maximum Performance Level | The level of performance that results in Maximum Payout for a metric. |
| - 5 - |
| Term/Calculation | Definition | |
| Maximum Payout | The Maximum Payout is the maximum number of shares that can be earned under the LTI Plan for each performance metric. It is calculated by multiplying the Target number of shares by an agreed upon percentage as indicated. | |
| Performance Period | Performance Period is a three-year period beginning on January 1 of the initial award year and ending December 31 three years later. For example, the Performance Period for 2018-initiated awards is January 1, 2018 through December 31, 2020. | |
| Target Performance Level | The expected level of performance, which results in a payout of 100% of Target number of shares. | |
| Threshold Performance Level | The level of performance for a metric below which no shares will vest. | |
| Total Shareholder Return (TSR) | Total Shareholder Return is calculated by taking the difference between the Company’s end of year price per share and the beginning of year price per share and adding the Company dividend per share. Next, divide that sum by the Company’s beginning of year price per share. | |
| Total Shareholder Return (TSR) Ranking | Total Shareholder Return Ranking is determined by calculating the Company’s percentile ranking for Total Shareholder Return relative to the Comparative Group. |
| - 6 - |
Exhibit 10.5
STEWART INFORMATION SERVICES CORPORATION
RESTRICTED PERFORMANCE UNIT AGREEMENT (BV)
THIS RESTRICTED PERFORMANCE UNIT AGREEMENT (the “Award Agreement”) is hereby granted as of February 8, 2018 (the “Grant Date”) by Stewart Information Services Corporation, a Delaware corporation (the “Company”), to [______] (the “Participant”) pursuant to the Stewart Information Services Corporation 2014 Long Term Incentive Plan (the “Plan”), and subject to the terms and conditions set forth therein and as set out in this Award Agreement. Capitalized terms used herein shall, unless otherwise required by the context, have the meaning ascribed to such terms in the Plan or as set forth herein.
By action of the Committee, and subject to the terms of the Plan, the Participant is hereby granted a Restricted Performance Units as described in Article IX of the Plan, subject to the terms of the Plan and to the provisions set forth in this Award Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained in this Award Agreement, the Company and the Participant agree as follows:
1. Grant. The Company grants to the Participant, upon the terms and conditions set forth in this Award Agreement and as set forth in the Plan [_____] Restricted Performance Units (the “Units”), representing a contractual right of the Participant potentially to receive shares of Common Stock (“Shares”), with the number of Shares to be delivered at settlement, if any, being determined by reference to the number of Units that are deemed vested and to be settled provided all of the conditions for settlement of the Units have been satisfied and subject to the terms and conditions of the Plan and this Award Agreement.
2. Vesting and Forfeiture.
(a) Except as otherwise expressly provide herein, any Units that are not vested as of the date of the Participant’s termination of employment for any reason shall be automatically forfeited without any further action required to be taken by the Participant or the Company. Except as otherwise provided herein or at the discretion of the Committee, the Units are not deemed vested until after the results for the Performance Period have been determined and settlement of the Units by the delivery of Shares has occurred. As a consequence, in general the Participant shall forfeit all rights with respect to the Units if the Participant’s employment with the Company terminates prior to the date the Units are settled.
(b) The number of Units that are treated as vested shall be determined after the end of the Performance Period, as specified in Exhibit A, attached hereto, based on the achievement of the performance criteria, also set forth in Exhibit A, and subject in all regards to such other discretion by action of the Committee as permitted under the terms of the Plan.
(c) Notwithstanding any other provision of this Award Agreement, in the event there is a Change of Control while the Participant remains employed with the Company or in the event the Participant is terminated in connection with a Change in Control, the Participant shall be vested in the number of Units set forth in Section 1 as of the date of the Participant’s termination of employment.
(d) Waiver of Continued Employment Requirement. The general requirement that the Participant be continuously employed through the date the Units are settled (the “Employment Requirement”) shall be waived to the extent provided in this Section 2(d), subject, however, in all regards, to the Committee’s discretionary authority as provided under the Plan. Specifically, the Employment Requirement shall not be applicable in the following circumstances (“Special Circumstances”):
(i) The Participant’s termination of employment under circumstances where the Participant is eligible for benefits under the Company’s Executive Voluntary Retirement Plan;
(ii) Termination of the Participant’s employment due to Executive’s death;
(iii) Termination of the Participant’s employment due to Executive’s Disability;
(iv) Termination of the Participant’s employment by the Company without Cause; or
(v) Termination of the Participant’s employment by the Participant for Good Reason (but only in circumstances where the Participant’s employment agreement provides for severance pay benefits on a resignation for Good Reason.
In order for the Participant receive any Shares with respect to Unit following the occurrence of any of the above Special Circumstances, the Participant must execute and not, thereafter, revoke, a full release of all claims that Executive may have against the Company, its Subsidiaries and affiliates, and all of their respective officers, employees, directors, and agents, and that shall include the Participant’s agreement not to disparage the Company and not to divulge any of the Company’s confidential information, in a form acceptable to the Company in a form satisfactory to the Committee (the “Release”)
(a) Calculation of Special Pro-Rata Vesting. If the Participant is eligible for special pro-rata vesting under Section 2(d), vesting shall be calculated as follows:
(i) Special Pro-rata Vesting shall be based on the number of full, completed calendar months worked by Executive during the applicable incentive period (as set forth in the applicable LTI Award). The calculation of Special Pro-Rata Vesting shall be determined as a percent of the total possible vested award that would have been vested to Executive had Executive remained employed during the entire incentive period, measured in whole calendar months, multiplied by a fraction whose numerator is the percentage of the number of calendar months of completed employment during the entire incentive period plus 100% and whose denominator is two.
| - 2 - |
(ii) By way of hypothetical example only: if Executive shall experience a Special Vesting Termination Event during the 24th month of a 36-month incentive program, Executive would receive 81.94% of the applicable LTI Award. The formula for calculating Special Pro-Rata Vesting based on the foregoing hypothetical is as follows:
(23 ÷ 36) = 63.88% + 100% = 163.88% = 81.94%
2
(iii) The time of payment of LTI Awards subject to Special Pro-Rata Vesting shall occur as provided in the applicable LTI Awards.
(b) Notwithstanding anything herein to the contrary, in the event the Participant is terminated for Cause, the Participant’s rights to any payments otherwise due under this Award Agreement are forfeited in their entirety.
3. Status of Units. The Units subject to this Award Agreement are not intended to constitute property for purposes of Section 83 of the Code. The Units represent a right to receive a payment, in the form Shares, at the time the Units are settled.
4. Time of Payment/Settlement. In all cases, Units that are vested and settled under the terms of this Award Agreement shall be settled as soon as practicable following the determination of the extent to which the performance criteria have been attained, and, in all events, during the calendar year following the end of the Performance Period. In addition, in the event any dividends are paid to shareholders during the Performance Period or thereafter prior to the settlement of the Units, the Participant shall be entitled to a payment equal to the amount that would have been paid as dividends to the Participant had the Participant held the Shares actually delivered to the Participant throughout that period (“Dividend Equivalents”). The Committee shall have the right to determine whether the Dividend Equivalents shall be paid in cash or in the form of a distribution of additional shares of Common Stock having the same value and to determine whether to deem such dividends to have been reinvested in shares at the time the dividends were paid.
5. Employment. Nothing in the Plan or in this Award Agreement shall confer upon the Participant any right to be continued as an employee of the Company or interfere in any way with the right of the Company to remove the Grantee as an employee at any time for any cause.
6. Binding Effect. This Award Agreement shall be binding upon and shall inure to the benefit of any successor of the Company, but except as provided above, the Units subject to this Award Agreement shall not be assigned or otherwise disposed of by the Participant.
| - 3 - |
7. The Plan. This Award Agreement is subject to the terms and conditions of the Plan. In the event of a conflict between the Plan and this Agreement, the terms of the Plan shall control.
IN WITNESS WHEREOF, this Award Agreement has been executed on this 22nd day of February, 2018.
| STEWART INFORMATION SERVICES CORPORATION | ||
| By: | ||
| Its Chief Executive Officer | ||
| ACKNOWLEDGED | ||
| By: | ||
| PARTICIPANT | ||
| - 4 - |
Exhibit A
The performance metric for these Units is the Compound Annual Growth Rate (CAGR) Book Value Per Share + Cumulative Dividends Per Share performance scale ("BV").
Set forth below is the table of performance targets and percentage of Units that may become vested and payable under the terms of the Performance Award Agreement. The number of vested and payable Units will range from 0 to 225% of the stated number of Units set out in Section 1 of the Award Agreement.
Threshold and Maximum opportunity to incentivize performance will be associated with varying levels of relative performance. Targeted performance is achieved when Company BV is 10%. Threshold performance is set at 5%. In the event performance is below 5%, the associated payout is equal to zero. Maximum Payout is achieved when performance is 15%.
| CAGR Book Value Per Share + Cumulative Dividends Per Share Performance Achieved | Payout as % of Target Number of Shares | |||||||
| Maximum | 15 | % | 225 | % | ||||
| Target | 10 | % | 100 | % | ||||
| Threshold | 5 | % | 25 | % | ||||
| Below Threshold | <5 | % | 0 | % | ||||
Payout percentages will be interpolated for performance achievement between threshold, target, and maximum.
The Performance Period is the period from January 1, 2018 through December 31, 2020.
The following sets forth the definition of specific terms and calculations
| Term/Calculation | Definition | |
| Average Shares Outstanding | Average Shares Outstanding is the number of shares at the end of the Baseline Period, plus the shares at the end of the Performance Period, divided by two. | |
| Baseline Period | Baseline Period is the 12-month period ending immediately preceding the Performance Period. For example, a Performance Period of January 1, 2018 through December 31, 2020 would have a baseline period of 12 months ending December 31, 2017. | |
| Book Value per Share | Book Value is calculated as assets less total liabilities as reported in the Company 10K, divided by Average Shares Outstanding. |
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| Term/Calculation | Definition | |
| Compound Annual Growth Rate (CAGR) |
CAGR is the annual growth rate, taking into account the Performance Period and effects of compounded growth. The formula used to determine CAGR is as follows:
CAGR = (Value at end of Performance Period / Value at end of Baseline Period)^(1/years in Performance Period) – 1.
For example, for a Performance Period of January 1, 2018 through December 31, 2020, the basis for the CAGR calculation would be as follows:
CAGR = (Value at December 31, 2020 / Value at December 31, 2017)^(1/3)-1 | |
| Company | The Company is Stewart Information Services Corporation and its subsidiaries. | |
| Cumulative Dividends Per Share | Cumulative Dividends Per Share is the aggregate cash dividend paid during the Performance Period as reported in the 10K. | |
| Maximum Performance Level | The level of performance that results in Maximum Payout for a metric. | |
| Maximum Payout | The Maximum Payout is the maximum number of shares that can be earned under the LTI Plan for each performance metric. It is calculated by multiplying the Target number of shares by an agreed upon percentage as indicated. | |
| Performance Period | Performance Period is a three-year period beginning on January 1 of the initial award year and ending December 31 three years later. For example, the Performance Period for 2018-initiated awards is January 1, 2018 through December 31, 2020. | |
| System of Record | Hyperion Financial Management (HFM) is the system of record for all financial data unless otherwise stated. | |
| Target Performance Level | The expected level of performance, which results in a payout of 100% of Target number of shares. | |
| Threshold Performance Level | The level of performance for a metric below which no shares will vest. |
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