Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
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(1)
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At a special meeting on May 17, 2019, the Board of Directors (the “Board”) of Protective Insurance Corporation (the “Company”), upon
the recommendation of the Nominating and Governance Committee of the Board, appointed Jeremy D. Edgecliffe-Johnson to serve as the Company’s Chief Executive Officer (“CEO”) and to serve as a member of its Board, effective May 22, 2019.
Mr. Edgecliffe-Johnson will also become the Company’s principal executive officer effective as of May 22, 2019.
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Mr. Edgecliffe-Johnson, age 48, most recently served as President, U.S. Commercial of American International Group, Inc.
(“AIG”) from February 2016 to December 2017,
with responsibility for underwriting, operations, claims and distribution in the U.S., Canada,
Brazil, Mexico and Puerto Rico. He
served as Chief Executive Officer and President of Lexington Insurance Company, AIG’s excess and surplus lines unit, from February 2013 to December 2017. Mr. Edgecliffe-Johnson served in various
executive leadership roles at AIG between 2000 and 2013, including Specialty Product Line Executive, U.S. & Canada;
President of Cat Excess
Liability; U.S. Executive for Energy Excess Casualty; and Regional Vice President for the Mid-Atlantic territory.
Prior to joining AIG, Mr. Edgecliffe-Johnson served as a broker for Sedgwick, Inc. and Marsh, Inc.
There are no arrangements or understandings between Mr. Edgecliffe-Johnson and any other person pursuant to which Mr.
Edgecliffe-Johnson was selected as a director or an officer of the Company. There are no transactions in which the Company and/or its subsidiaries were a party and in which Mr. Edgecliffe-Johnson has a direct or indirect material interest that
would require disclosure under Item 404(a) of Regulation S-K. There is no family relationship between Mr. Edgecliffe-Johnson and any director or officer of the Company.
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(2)
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In connection with his appointment as CEO, the Company entered into an employment agreement (the “Agreement”) with
Mr.
Edgecliffe-
Johnson,
effective as of May 22, 2019. Under the Agreement, Mr.
Edgecliffe-
Johnson will serve as CEO until May 22, 2024 (the
“Initial Term”), unless earlier terminated by the Company or by Mr. Edgecliffe-Johnson. Upon the expiration of the Initial Term, the Agreement will be automatically extended for additional 12-month periods unless either party gives
written notice to the other at least 90 days prior to the commencement of the next scheduled extension.
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Under the Agreement,
Mr. Edgecliffe-Johnson will receive 70,000 restricted shares of the Company’s Class B common stock (the “Stock Grant”) on May 22, 2019 of which 35,000 shares will vest as of June 1, 2022; 21,000 shares will vest as of June 1, 2023, and 14,000
shares will vest as of June 1, 2024. Mr. Edgecliffe-Johnson’s annualized base salary is $600,000, which may be increased by the Compensation Committee of the Company’s Board but may not be decreased. He is eligible to receive awards under the
Company’s incentive bonus plans, including an annual award under the Short-Term Incentive Plan (“STIP”) with a target annual value of at least $600,000 and awards under the Long-Term Incentive Plan (“LTIP”) with a target annual value of at least
$900,000. His annual targets under the STIP and LTIP will be pro-rated for 2019, and his payout under the STIP for 2019 will be at the target amount. Mr. Edgecliffe-Johnson is also entitled to participate in all benefit plans offered to other
senior executives and to Company employees generally. In addition, the Company will provide Mr. Edgecliffe-Johnson with a cash relocation package of $150,000, which is subject to full repayment by Mr. Edgecliffe-Johnson if his employment is
terminated by the Company for cause (as defined in the Agreement) or by him without good reason (as defined in the Agreement) prior to December 31, 2019. During his term as CEO, Mr. Edgecliffe-Johnson will not be entitled to any fees or other
compensation for his services as a member of the Board.
The Company may terminate Mr. Edgecliffe-Johnson’s employment at any time with or without cause. If Mr. Edgecliffe-Johnson is
terminated without cause, including as a result of the Company’s delivery of a notice of non-extension of the Agreement, or he resigns for good reason, he will receive a cash payment equal to his annual base salary in effect at the time of
termination plus his target STIP and LTIP awards in effect upon his separation from the Company, a pro-rated share of both his STIP and LTIP awards for the year in which termination occurs, the vesting of any unvested equity awards, including any
unvested portion of the Stock Grant, the reimbursement of his costs associated with the continuation of certain health and welfare benefits for a period of up to 12 months and the cash payment of any annual, long-term or other incentive award with
a performance period ending prior to the termination date and payable but not yet paid as of such date. If Mr. Edgecliffe-Johnson’s employment is terminated due to his death or disability, he will receive a pro-rated share of both his STIP and LTIP
awards for the year in which termination occurs, the vesting of any unvested equity awards, including any unvested portion of the Stock Grant, and the cash payment of any annual, long-term or other incentive award with a performance period ending
prior to the termination date and payable but not yet paid as of such date. If Mr. Edgecliffe-Johnson’s employment is terminated as a result of his delivery of a notice of non-extension of the Agreement, any unvested equity awards will vest upon
such termination and he will be entitled to receive all STIP and LTIP awards for the last performance year of the term of the Agreement based on the Company’s actual performance for the relevant performance period.
The Agreement contains a change in control benefit that is payable if Mr. Edgecliffe-Johnson’s employment is terminated by
the Company without cause and in anticipation of a change in control (as defined in the Agreement) to be effectuated within 120 days of the termination date or by either the Company without cause or by Mr. Edgecliffe-Johnson for good reason on or
before the 24-month anniversary of a change in control. If the termination occurs on or before May 22, 2021, Mr. Edgecliffe-Johnson will receive a lump sum cash payment equal to the sum of his annual base salary in effect at the time of the
termination plus his target STIP and LTIP awards in effect upon his separation from the Company. In addition, 35,000 shares of the Stock Grant will fully vest, while the remainder of the Stock Grant will be forfeited. If the termination occurs
after May 22, 2021, Mr. Edgecliffe-Johnson will receive a lump sum cash payment equal to two times the sum of his annual base salary in effect at the time of the termination plus his target STIP and LTIP awards in effect upon his separation from
the Company. In addition, any unvested portion of the Stock Grant will fully vest.
The Agreement includes provisions requiring Mr. Edgecliffe-Johnson to maintain the confidentiality of the Company’s
confidential information and subjects Mr. Edgecliffe-Johnson to non-competition and non-solicitation provisions during the term of the Agreement and for 12 months thereafter.
The preceding description of the Agreement is a summary of its material terms, does not purport to be complete, and is
qualified in its entirety by reference to the Agreement, a copy of which is being filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
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(3)
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At the special meeting on May 17, 2019, the Board, upon the recommendation of the Nominating and Governance Committee of the Board,
appointed Stephen J. Gray to serve as a director, effective immediately. Mr. Gray will serve for a term expiring at the Company’s 2020 annual meeting of shareholders and until his successor is elected and has qualified.
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Mr. Gray, age 65, has served as a director and consultant for SRC Holdings Corporation, a remanufacturer to original
equipment manufacturers in North America, since 2008. From 1983 until 2007, Mr. Gray served in several executive roles with divisions of BMO Harris Bank, N.A., including Vice President of Commercial Banking and Senior Vice President of Commercial
Mid-Market & Institutional Markets. In addition, he served as President and CEO of Harris Bank, Glencoe from 1999 until 2003. Mr. Gray has been appointed to serve on the Company’s Investment and Strategic Evaluation Committees.
There are no arrangements or understandings between Mr. Gray and any other person pursuant to which Mr. Gray was selected as
a director. There are no transactions in which the Company and/or its subsidiaries were a party and in which Mr. Gray has a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K. There is no
family relationship between Mr. Gray and any director or officer of the Company. A
s a non-employee director, Mr. Gray received a pro-rated
annual director equity grant on May 17, 2019 and will participate in the non-employee director compensation arrangements described in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on April 5, 2019.
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(4)
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On May 21, 2019, the Company’s
Compensation Committee approved a discretionary bonus of $200,000 for Mr. John D. Nichols, Jr. in recognition of his exceptional performance as Interim CEO. The bonus is payable in equal portions of cash and unrestricted shares of the
Company’s Class B common stock. Effective May 22, 2019, Mr. Nichols will cease serving as the Company’s Interim CEO and principal executive officer. Mr. Nichols continues to serve as Chairman of the Board. Effective May 22, 2019, Mr.
Nichols is eligible to participate in the non-employee director compensation arrangements described in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on April 5, 2019. On May 22, 2019, Mr.
Nichols will receive a pro-rated annual director equity grant.
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