1
EXHIBIT 10.4
SEVERANCE AGREEMENT
BETWEEN
FPIC INSURANCE GROUP, INC.
AND
XXXX X. XXXXX
THIS AGREEMENT, effective as of the 1st day of January, 1999, between
FPIC Insurance Group, Inc., a Florida corporation (the "Company"), and Xxxx X.
Xxxxx, an individual (the "Executive").
W I T N E S E T H:
WHEREAS, the Executive is a valuable employee of the Company and an
integral part of its management and a key participant in the decision making
process relative to planning and policy for the Company; and
WHEREAS, the Company wishes to encourage the Executive to continue his
career and services with the Company for the period during and after an actual
or threatened Change in Control (as hereinafter defined);
NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. Definitions.
a. "Board" shall mean the Board of Directors of the Company.
b. "Cause" shall mean the Executive's fraud or dishonesty that
has resulted or is likely to result in material economic damage to the
Company, or the Executive's willful nonfeasance if such nonfeasance is
not cured within ten days of written notice from the Company, as
determined in good faith by a vote of at least two-thirds of the
non-employee directors of the Company at a meeting of the Board at which
the Executive is provided an opportunity to be heard.
c. "Change in Control" shall mean the earlier of the following
events:
(i) either (A) receipt by the Company of a report on Schedule
13D, or an amendment to such a report, filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), disclosing that any person
(as such term is used in Section 13(d) of the 0000 Xxx) ("Person"),
is the beneficial owner, directly or indirectly, of twenty (20)
percent or more of the outstanding stock of the Company, or (B)
actual knowledge by the Company of facts on the basis of which any
Person is required to file such a report on Schedule 13D, or to
file an amendment to such a report, with the SEC (or would be
required to file such a report or amendment upon the lapse of the
applicable period
1
2
of time specified in Section 13(d) of the 0000 Xxx) disclosing that
such Person is the beneficial owner, directly or indirectly, of
twenty (20) percent or more of the outstanding stock of the
Company;
(ii) purchase by any Person, other than the Company or a
wholly owned subsidiary of the Company, of shares pursuant to a
tender or exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities or any
other consideration provided that, after consummation of the offer,
such Person is the beneficial owner (as defined in Rule 13d-3 under
the 1934 Act regardless of whether the Company or such Person would
otherwise be subject to the 1934 Act), directly or indirectly, of
twenty (20) percent or more of the outstanding stock of the Company
(calculated as provided in paragraph (d) of Rule 13d-3 under the
1934 Act in the case of rights to acquire stock regardless of
whether the Company or such Person would otherwise be subject to
the 1934 Act);
(iii) either (A) the filing by any Person acquiring, directly
or indirectly, twenty percent (20%) or more of the outstanding
stock of the Company of a statement with the Florida Department of
Insurance pursuant to Section 628.461 of the Florida Statutes or a
successor statutory provision, or (B) actual knowledge by the
Company of facts on the basis of which any Person acquiring,
directly or indirectly, twenty percent (20%) or more of the
outstanding stock of the Company or a controlling company is
required to file such a statement pursuant to Section 628.461 or a
successor provision.
(iv) approval by the shareholders of the Company of (A) any
consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares
of stock of the Company would be converted into cash, securities or
other property, other than a consolidation or merger of the Company
in which holders of its stock immediately prior to the
consolidation or merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately
after the consolidation or merger as immediately before, or (B) any
consolidation or merger in which the Company is the continuing or
surviving corporation but in which the common shareholders of the
Company immediately prior to the consolidation or merger do not
hold at least a majority of the outstanding common stock of the
continuing or surviving corporation (except where such holders of
common stock hold at least a majority of the common stock of the
corporation that owns all of the common stock of the Company), or
(C) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all
the assets of the Company, or (D) any merger or consolidation of
the Company where, after the merger or consolidation, one Person
owns 100% of the shares of stock of the Company (except where the
holders of the Company's common stock immediately prior to such
merger or consolidation own at least 90% of the outstanding stock
of such Person immediately after such merger or consolidation); or
(v) a change in the majority of the members of the Board
within a 24-month period unless the election or nomination for
election by the Company's shareholders
2
3
of each new director was approved by the vote of at least
two-thirds of the directors then still in office who were in office
at the beginning of the 24-month period.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Constructive Discharge" shall mean any (i) material change by
the Company of the Executive's position, functions, or duties to an
inferior position, functions, or duties from that in effect on the date
of this Agreement, (ii) assignment or reassignment by the Company of the
Executive without the Executive's consent to another place of employment
more than 50 miles from the Executive's current place of employment,
(iii) liquidation, dissolution, consolidation or merger of the Company,
or transfer of all or substantially all of its assets, other than a
transaction or series of transactions in which the resulting or surviving
transferee entity has, in the aggregate, a net worth at least equal to
that of the Company immediately before such transaction and expressly
assumes this Agreement and all obligations and undertakings of the
Company hereunder, or (iv) reduction in the Executive's base salary or
target bonus opportunity (if greater than the target bonus opportunity,
the average of the annual bonuses paid to the Executive in the three
calendar years prior to the calendar year of the Constructive Discharge).
f. "Coverage Period" shall mean the period beginning on the
Starting Date and ending on the Ending Date. The "Starting Date" shall be
the date on which a Change in Control occurs. The "Ending Date" shall be
the earlier of (i) the date on which a public announcement is made by the
Company of its intention to abandon a Change in Control transaction, or
(ii) the date that is 36 full calendar months following the date on which
a Change in Control occurs, or (iii) if such Change in Control is subject
to shareholder approval of such transaction, the date that is 36 months
following the date on which the actual consolidation, merger or sale
transaction occurs.
g. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
h. "Independent Tax Counsel" shall mean an attorney, a certified
public accountant with a nationally recognized accounting firm, or a
compensation consultant with a nationally recognized actuarial and
benefits consulting firm, with expertise in the area of executive
compensation tax law, who shall be selected by the Company and shall be
reasonably acceptable to the Executive, and whose fees and disbursements
shall be paid by the Company.
2. Term.
This Agreement shall be effective as of the date of this Agreement and
shall continue thereafter until the earlier of (i) 36 full calendar months
following the date of an occurrence of a Change in Control, or (ii) the date of
the termination of the Executive's employment if such date is prior to the
Coverage Period. After a Change in Control, this Agreement shall remain in
effect until all of the obligations of the parties hereunder are satisfied.
3
4
3. Severance Benefit.
a. If at any time during the Coverage Period the Executive's
employment hereunder is terminated by the Company for any reason other than
Cause, death or disability, or by the Executive in the event of a Constructive
Discharge, then the Company shall pay to the Executive (or if the Executive has
died before receiving all payments to which he has become entitled hereunder,
the estate of the Executive) severance pay in a lump sum cash amount equal to
three times the sum of Executive's (i) annual salary and (ii) target bonus
opportunity for the current calendar year (if greater than the target bonus
opportunity, the average of the annual bonuses for the three prior calendar
years). The Company shall also pay Executive any unpaid salary or benefits
accrued to the date of termination. In such event, the Executive shall be 100%
vested in all stock options, stock appreciation rights, contingent stock,
restricted stock and other long-term incentive plans. The Executive's
termination of employment with the Company to become an employee of a
corporation that owns 100% of the Company shall not be considered a termination
of employment for purposes of this Agreement. The subsequent termination of
Executive's employment from such corporation shall be considered a termination
of employment for purposes of this Agreement.
b. The Company and the Executive, upon mutual written
agreement, may waive any of the provisions in paragraph 1(e) that would
otherwise constitute a Constructive Discharge. Pursuant to paragraph 3(a) of
this Agreement, Executive may terminate his employment in the event of a
Constructive Discharge by providing written notice to the Company within three
months after the occurrence of such event, specifying the event relied upon for
a Constructive Discharge. Within ten days of receiving such written notice from
Executive, the Company may cure the event that constitutes a Constructive
Discharge.
c. If at any time during the Coverage Period the Executive's
employment is terminated by the Company for any reason other than Cause, death
or disability or by the Executive in the event of a Constructive Discharge, and
the Executive is entitled to the benefits described under subparagraph 1(b) or
subparagraph 4(b) of his Employment Agreement dated as of January 1, 1999, and
as extended and amended thereafter, then the Executive shall be permitted to
select either the benefits (i) that he would otherwise have been entitled to
receive for the remaining term of his Employment Agreement or (ii) those
payments provided for under this Agreement. The Executive shall be permitted to
receive benefits under either the Employment Agreement or this Agreement, but
not benefits from both the Employment Agreement and this Agreement.
d. For a period commencing with the month in which termination
of employment as described in paragraph 3(a) above shall have occurred, and
ending 24 months thereafter, the Executive shall be entitled to all benefits
under the Company's welfare benefit plans (within the meaning of Section 3(1)
of ERISA), as if the Executive were still employed during such period, at the
same level of benefits and at the same dollar cost to the Executive as is
available to all of the Company's senior executives generally and if and to the
extent that equivalent benefits shall not be payable or provided under any such
plan, the Company shall pay or provide tax equivalent benefits on an individual
basis. The benefits provided in accordance with this paragraph 3(d) shall be
secondary to any comparable benefits provided by another employer.
4
5
e. If Independent Tax Counsel shall determine that the
aggregate payments made to the Executive pursuant to this Agreement and any
other payments to the Executive from the Company that constitute "parachute
payments" as defined in Section 280G of the Code (or any successor provision
thereto) ("Parachute Payments") would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then payments under this Agreement
shall be reduced to the maximum amount that would not trigger such excise tax.
The Executive shall be permitted to select the benefits to be reduced.
f. In the event of any termination of the Executive's
employment described in paragraph 3(a), the Executive shall be under no
obligation to seek other employment, and, except as provided in paragraph 3(a),
there shall be no offset against amounts due the Executive under this Agreement
on account of any remuneration attributable to any subsequent employment.
4. Source of Payments.
All payments provided for in paragraph 3 above shall be paid in cash from
the general funds of the Company; provided, however, that such payments shall
be reduced by the amount of any payments made to the Executive or his
dependents, beneficiaries or estate from any trust or special or separate fund
established by the Company to assure such payments. The Company shall not be
required to establish a special or separate fund or other segregation of assets
to assure such payments, and, if the Company shall make any investments to aid
it in meeting its obligations hereunder, the Executive shall have no right,
title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and the Executive or
any other person. To the extent that any person acquires a right to receive
payments from the Company pursuant to this Agreement, such right shall be no
greater than the right of an unsecured creditor of the Company.
5. Mediation and Arbitration.
Any dispute or controversy arising out of or in relation to this
Agreement shall first be submitted to mediation in the City of Jacksonville,
Florida in accordance with the Commercial Mediation Rules of the American
Arbitration Association. If mediation fails to resolve such dispute or
controversy, then such dispute or controversy shall be determined and settled
by arbitration in the City of Jacksonville, Florida, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator may be entered
in any court of competent jurisdiction. The parties hereto agree to use good
faith efforts to select a mediator and, if mediation fails to resolve such
dispute or controversy, an arbitrator. If the parties cannot agree upon a
mediator or arbitrator, such mediator or arbitrator shall be selected in
accordance with the relevant Commercial Rules of the American Arbitration
Association then in effect. The Company's mediation and arbitration expenses,
as well as any litigation costs, including legal counsel and reasonable
experts, shall be paid by the Company. The Executive's mediation and
arbitration costs, as well as any litigation costs, including legal counsel and
reasonable experts, shall be paid by the Company, unless the trier of fact
determines the Executive's claims thereunder are without merit. Whenever any
action is required to be taken under this Agreement within a specified
5
6
period of time and the taking of such action is materially affected by a matter
submitted to mediation or arbitration, such period shall automatically be
extended by the number of days plus ten that are taken for the determination of
that matter by the parties through mediation or otherwise by the arbitrator.
6. Income Tax Withholding.
The Company may withhold from any payments made under this Agreement all
federal, state or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understanding between the Company and
the Executive with respect to the subject matter hereof and supersedes any
prior severance agreement between the Company and the Executive, except that
this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to the Executive of any kind elsewhere provided and not
expressly provided for in this Agreement, including without limitation, any
benefit or compensation provided under an executive incentive compensation
program of the Company.
8. Severability.
If, for any reason, any one or more of the provisions or part of a
provision contained in this Agreement shall be held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement not held so invalid, illegal or
unenforceable, and each other provision or part of a provision shall to the
full extent consistent with law continue in full force and effect.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or with, or transfers
all or substantially all of its assets to, another corporation, the term
"Company" as used herein shall mean such other corporation and this Agreement
shall continue in full force and effect.
10. Notices.
All notices, requests, demands and other communications required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if hand delivered or mailed, postage prepaid, certified or
registered, first class as follows:
a. to the Company:
FPIC Insurance Group, Inc.
Attention: Chief Executive Officer
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
6
7
b. to the Executive:
Xxxx X. Xxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
or to such other address as either party shall have previously specified in
writing to the other.
11. No Attachment.
Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall inure to the benefit of,
the Executive and the Company and their respective permitted successors and
assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any estoppel against
the enforcement of any provision of this Agreement except by written instrument
signed by the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any act other than that specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agreement are included solely
for convenience of reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpretation, performance, and
enforcement shall be governed by the laws of the State of Florida without
giving effect to the choice of law provisions in effect in such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
7
8
FPIC INSURANCE GROUP, INC.
By:
----------------------------
Xxxxxxx X. Xxxxxxx
Xxxx X. Xxxxx
8
