Exhibit 10.77
[TIER I CHANGE IN CONTROL SEVERANCE AGREEMENT]
SCPIE HOLDINGS INC.
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
December ___, 2000
[Executive]
President and Chief Executive Officer
c/o SCPIE Management Company
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dear [Executive]:
SCPIE Holdings Inc. (the "Corporation") considers it essential to the
best interests of its shareholders to xxxxxx the continuous employment of key
management personnel. In connection with this, the Corporation's Board of
Directors (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Corporation may
exist and that the uncertainty and questions that it may raise among management
could result in the departure or distraction of management personnel to the
detriment of the Corporation and its shareholders.
The Board has decided to reinforce and encourage the continued
attention and dedication of members of the Corporation's management, including
yourself, to their assigned duties without the distraction arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation or
any of its affiliates (collectively, the "Company"), the Corporation hereby
agrees that after this letter agreement (this "Agreement") has been fully
executed, you shall receive the severance benefits set forth in Section 5 of
this Agreement in the event your employment with the Company is terminated under
the circumstances described in Section 4 of this Agreement subsequent to a
Change in Control (as defined in Section 2).
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1. Term of Agreement. This Agreement shall commence on the date
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hereof and shall continue in effect through December 31, 2003; provided,
however, that commencing on January 1, 2001 and on each January 1 thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the Corporation
shall have given notice that it does not wish to extend this Agreement;
provided, further, that if a Change in Control (as defined in Section 2), occurs
during the original or any extended term of this Agreement, the term of this
Agreement shall continue in effect for a period of not less than thirty-six (36)
months beyond the month in which such Change in Control occurred.
2. Change in Control.
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No benefits shall be payable under Section 4 of this Agreement unless
there has been a Change in Control. For purposes of this Agreement, a Change in
Control shall be deemed to occur if:
(a) any Person (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes
the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities
("Outstanding Corporation Voting Securities"); provided, however, that for
purposes of this subsection (a), the following shall not constitute a Change in
Control: (i) any acquisition by the Corporation or any corporation controlled by
the Corporation, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation controlled
by the Corporation, or (iii) any acquisition by a Person of 20% of the
Outstanding Corporation Voting Securities as a result of an acquisition of
common stock of the Corporation by the Corporation which, by reducing the number
of shares of common stock of the Corporation outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of the Outstanding Corporation Voting Securities; provided, however, that if a
Person shall become the beneficial owner of 20% or more of the Outstanding
Corporation Voting Securities by reason of a share acquisition by the
Corporation as described above and shall, after such share acquisition by the
Corporation, become the beneficial owner of any additional shares of common
stock of the Corporation, then such acquisition shall constitute a Change in
Control;
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with
Corporation to effect a transaction described in Sections 2(a), (c), (d) or (e))
whose election by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was
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previously so approved (hereinafter referred to as "Continuing Directors"),
cease for any reason to constitute at least a majority thereof;
(c) the consummation by the Corporation of a merger or consolidation
of Corporation with any other corporation (or other entity), other than a merger
or consolidation which would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) 50% or more of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person acquires more than 20% of the
Outstanding Corporation Voting Securities shall not constitute a Change in
Control;
(d) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation; or
(e) the consummation of an agreement (or agreements) providing for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets other than a sale or disposition which would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent 50% or more of the combined voting power of the
Corporation or such surviving entity outstanding immediately after such sale or
disposition.
3. Accelerated Vesting Upon a Change in Control.
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Notwithstanding any provisions of the Company's stock option plans,
incentive plans, or other similar plans, all outstanding options ("Options"), if
any, granted to you under any of the Company's stock option plans, incentive
plans, or other similar plans (or options substituted therefor covering the
stock of a successor corporation) shall become fully vested and exercisable
immediately prior to the Change in Control as to all shares of stock covered
thereby, and the restricted period with respect to any restricted stock or any
other equity award granted to you thereunder shall lapse and such shares shall
be distributed to you immediately prior to the Change in Control, unless it
would adversely affect the Corporation's ability to use pooling of interest
accounting in a Change in Control transaction in which such accounting is
intended to be used.
4. Termination of Employment Following a Change in Control.
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(a) General. During the term of this Agreement, if any of the events
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described in Section 2 constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 5(c) upon the subsequent
termination of your employment, provided that such termination occurs during the
term of this Agreement and within the two (2) year period immediately following
the date of such Change in Control, unless such termination is (i)
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because of your death or Disability (as defined in Section 4(b)), (ii) by the
Company for Cause (as defined in Section 4(c)), or (iii) by you other than (1)
for Good Reason (as defined in Section 4(d)), or (2) in a Covered Resignation
(as defined in Section 4(e)). In the event that you are entitled to such
benefits, such benefits shall be paid notwithstanding the subsequent expiration
of the term of this Agreement.
(b) Disability. If, as a result of your incapacity due to physical or
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mental illness, you shall have been absent from the full-time performance of
your duties with the Company for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
(c) Cause. Termination by the Company of your employment for
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"Cause" shall mean termination (i) upon your willful and continued failure to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after your issuance of a Notice of Termination (as
defined in Section 4(f) for Good Reason), after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, (ii) upon your willful and continued
failure to substantially follow and comply with the specific and lawful
directives of the Board, as reasonably determined by the Board (other than any
such failure resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after your issuance of a Notice of
Termination for Good Reason), after a written demand for substantial performance
is delivered to you by the Board, which demand specifically identifies the
manner in which the Board believes that you have not substantially performed
your duties, (iii) upon your willful commission of an act of fraud or dishonesty
resulting in material economic or financial injury to the Company, or (iv) upon
your willful engagement in illegal conduct or gross misconduct, in each case
which is materially and demonstrably injurious to the Company. For purposes of
this Section 4(c), no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith.
Notwithstanding the foregoing, you shall not be deemed terminated for Cause
pursuant to Sections 4(c)(i), (ii) or (iv) hereof unless and until there shall
have been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after reasonable notice to you, an
opportunity for you, together with your counsel, to be heard before the Board
and a reasonable opportunity to cure), finding that in the Board's good faith
opinion you were guilty of conduct set forth above in this Section 4(c) and
specifying the particulars thereof in reasonable detail.
(d) Good Reason. You shall be entitled to terminate your employment
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for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in Control
of any of the following
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circumstances unless, in the case of Sections 4(d)(i), (v), (vi), or (vii), such
circumstances are fully corrected (provided such circumstances are capable of
correction) prior to the Date of Termination (as defined in Section 4(g))
specified in the Notice of Termination given in respect thereof:
(i) the assignment to you of any duties inconsistent with the
position in the Company that you held immediately prior to the Change in
Control, a significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
immediately prior to such Change in Control, or any other action by the
Company that results in a material diminution in your position, authority,
duties or responsibilities;
(ii) the Company's reduction by more than 10% of your annual total
compensation as in effect on the date hereof or as the same may be
increased from time to time pursuant to the Amended and Restated Employment
Agreement dated January 3, 2000 (as amended, restated, extended,
supplemented or otherwise modified from time to time pursuant to its terms)
by and between SCPIE Management Company and you (the "Employment
Agreement");
(iii) the relocation of the Company's offices at which you are
principally employed immediately prior to the date of the Change in Control
(your "Principal Location") which results in the one-way commuting distance
for you increasing by more than thirty (30) miles from such location, or
the Company's requiring you, without your written consent, to be based
anywhere other than your Principal Location, except for required travel on
the Company's business to an extent substantially consistent with your
present business travel obligations;
(iv) the Company's failure to pay to you any portion of your current
compensation or to pay to you any portion of an installment of deferred
compensation under any deferred compensation program of the Company within
seven (7) days after the date such compensation is due;
(v) the Company's failure to continue in effect any material
compensation or benefit plan in which you participate immediately prior to
the Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such
plan, or the Company's failure to continue your participation therein (or
in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed at the
time of the Change in Control;
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(vi) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement,
as contemplated in Section 6 hereof; or
(vii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 4(f) hereof (and, if applicable, the requirements of Section 4(c)
hereof), which purported termination shall not be effective for purposes of
this Agreement.
Your right to terminate your employment pursuant to this Section 4(d) shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder. Any good faith
determination by you that Good Reason exists shall be presumed correct and shall
be binding upon the Corporation.
(e) Voluntary Termination and Covered Resignation. You shall be
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entitled to voluntarily terminate your employment for any reason or no reason at
any time after a Change in Control. Any such termination which occurs within the
thirty (30)-day period following the first anniversary of the occurrence of a
Change in Control (a "Covered Resignation") shall constitute a resignation which
entitles you to receive benefits under this Agreement.
(f) Notice of Termination. Any purported termination of your
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employment by the Company or by you (other than termination due to death which
shall terminate your employment automatically) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 7.
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(g) Date of Termination, Etc. "Date of Termination" shall mean (a) if
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your employment is terminated due to your death, the date of your death; (b) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty (30)-day period), and (c) if your
employment is terminated pursuant to Section 4(c), Section 4(d) or Section 4(e)
or for any other reason (other than death or Disability), the date specified in
the Notice of Termination (which, in the case of a termination for Cause shall
not be less than thirty (30) days from the date such Notice of Termination is
given, and in the case of a termination for Good Reason or in connection with a
Covered Resignation shall not be less than fifteen (15) nor more than sixty (60)
days from the date such Notice of Termination is given).
5. Compensation Upon Termination or During Disability Following A
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Change in Control.
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Following a Change in Control during the term of this Agreement, you
shall be entitled to the benefits described below during a period of disability,
or upon termination of your employment, as the case may be, provided that such
period or termination occurs during the term of this Agreement and within the
two (2) year period immediately following the date of such Change in Control.
The benefits to which you are entitled, subject to the terms and conditions of
this Agreement, are:
(a) During any period during which you fail to perform your full-time
duties with the Company as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in effect at
the commencement of any such period, together with all compensation payable to
you under the Company's disability plan or program or other similar plan during
such period, until this Agreement is terminated pursuant to Section 4(b) hereof.
Thereafter, or in the event your employment is terminated by reason of your
death, your benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(b) If your employment shall be terminated (i) by the Company for
Cause or (ii) by you other than for Good Reason or pursuant to a Covered
Resignation, the Corporation shall pay you (1) your full base salary, when due,
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, (2) the unpaid portion, if any, of any annual bonus for
any prior year, and (3) all other amounts to which you are entitled under any
compensation plan of the Company at the time such payments are due, and the
Corporation shall have no further obligations to you under this Agreement.
(c) If your employment by the Company shall be terminated by you for
Good Reason or by the Company other than for Cause or Disability, then you shall
be entitled to the benefits provided below:
(i) the Corporation shall pay to you (1) your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 5(e), (2) the unpaid portion, if any, of any
annual bonus, plus an amount equal to your targeted annual bonus, pro
rated from January 1 of the termination year through the Date of
Termination, and (3) all other amounts to which you are entitled under
any compensation plan of the Company at the time such payments are
due;
(ii) in lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Corporation shall
pay as severance pay to you, at the time specified in Section 5(e), a
lump sum severance payment equal to the sum of three (3) times your
annual base salary as in effect as of the Date of Termination or
immediately prior to the Change in Control, whichever is greater, and
three (3) times your targeted annual bonus as in effect as of the Date
of
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Termination or the average annual bonus received by you with respect
to the three (3) years immediately prior to the Change in Control,
whichever is greater;
(iii) for a period of three (3) years, the
Corporation shall continue to provide you and your eligible family
members, based on the cost sharing arrangement between you and the
Company on the date of the Change in Control, with medical and dental
health benefits at least equal to those which would have been provided
to you and them if your employment had not been terminated or, if more
favorable to you, as in effect generally at any time thereafter,
provided, however, that if you become re-employed with another
employer and are eligible to receive medical and dental health
benefits under another employer's plans, the Corporation's obligations
under this Section 5(c)(iii) shall be reduced to the extent comparable
benefits are actually received by you, and any such benefits actually
received by you shall be reported to the Corporation. In the event you
are ineligible under the terms of such benefit plans or programs to
continue to be so covered, in such event, the Corporation shall
provide you with substantially equivalent coverage through other
sources or will provide you with a lump sum payment in such amount
that, after all taxes on that amount, shall be equal to the cost to
you of providing yourself such benefit coverage. At the termination of
the benefits coverage under the second preceding sentence, you, your
spouse and your dependents shall be entitled to continuation coverage
pursuant to Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code"), Sections 601-608 of the Employee Retirement
Income Security Act of 1974, as amended, and under any other
applicable law, to the extent required by such laws, as if you had
terminated employment with the Company on the date such benefits
coverage terminates. The lump sum shall be determined on a present
value basis using the interest rate provided in Section 1274(b)(2)(B)
of the Code on the Date of Termination;
(iv) for a period of two (2) years following the
Date of Termination, the Corporation shall, at its sole expense as
incurred, provide you with outplacement services, the scope and
provider of which shall be selected by you in your sole discretion, at
an aggregate cost to the Corporation not to exceed twenty five percent
(25%) of your annual base salary as in effect as of the Date of
Termination or immediately prior to the Change in Control, whichever
is greater;
(v) you shall be fully vested in your accrued
benefits under any qualified or nonqualified pension, profit sharing,
deferred compensation or supplemental plans maintained by the Company
for your benefit, except to the extent that the acceleration of
vesting of such benefits would violate any applicable law or require
the Corporation to accelerate the vesting of the accrued benefits of
all participants in such plan or plans, in which case the Corporation
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may elect to pay you a lump sum payment at the time specified in
Section 5(e) in an amount equal to the value of such unvested accrued
benefits in lieu of accelerating the vesting of your benefits, plus
the Corporation shall pay to you an amount equal to the amount the
Company would have contributed to your account under the Company's
401(k) plan as a matching contribution had you remained employed by
the Company for three (3) years after your Date of Termination and had
you made the maximum elected deferral contributions;
(vi) the Corporation shall furnish you for six (6) years
following the Date of Termination (without reference to whether the
term of this Agreement continues in effect) with directors' and
officers' liability insurance insuring you against insurable events
which occur or have occurred while you were a director or officer of
the Company, such insurance to have policy limits aggregating not less
than the amount in effect immediately prior to the Change in Control,
and otherwise to be in substantially the same form and to contain
substantially the same terms, conditions and exceptions as the
liability insurance policies provided for officers and directors of
the Company in force from time to time, provided, however, that such
terms, conditions and exceptions shall not be, in the aggregate,
materially less favorable to you than those in effect on the date
hereof; provided, further, that if the aggregate annual premiums for
such insurance at any time during such period exceed one hundred and
fifty percent (150%) of the per annum rate of premium currently paid
by the Company for such insurance, then the Corporation shall provide
the maximum coverage that will then be available at an annual premium
equal to one hundred and fifty percent (150%) of such rate;
(vii) in any situation where under applicable law the
Corporation has the power to indemnify (or advance expenses to) you in
respect of any judgments, fines, settlements, loss, cost or expense
(including attorneys' fees) of any nature related to or arising out of
your activities as an agent, employee, officer or director of the
Company or in any other capacity on behalf of or at the request of the
Company, the Corporation shall promptly on written request, indemnify
(and advance expenses to) you to the fullest extent permitted by
applicable law, including but not limited to making such findings and
determinations and taking any and all such actions as the Corporation
may, under applicable law, be permitted to have the discretion to take
so as to effectuate such indemnification or advancement. Such
agreement by the Corporation shall not be deemed to impair any other
obligation of the Corporation respecting your indemnification
otherwise arising out of this or any other agreement or promise of the
Corporation or under any statute; and
(viii) (1) anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or
distribution to you
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or for your benefit (whether paid or payable or distributed or
distributable) pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of
any restriction on or the vesting or exercisability of any of the
foregoing (the "Payments") would be subject to the excise tax imposed
by Section 4999 of the Code by reason of being "contingent on a change
in the ownership or control" of the Corporation, within the meaning of
Section 280G of the Code or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such excise
tax (such tax or taxes, together with any such interest or penalties,
are collectively referred to as the "Excise Tax"), then you shall be
entitled to receive from the Corporation an additional payment (the
"Gross-Up Payment") in an amount such that the net amount of the
Payments and the Gross-Up Payment retained by you after the
calculation and deduction of all Excise Taxes (including any interest
or penalties imposed with respect to such taxes) on the payment and
all federal, state and local income tax, employment tax and Excise Tax
(including any interest or penalties imposed with respect to such
taxes) on the Gross-Up Payment provided for in this Section
5(c)(viii), and taking into account any lost or reduced tax deductions
on account of the Gross-Up Payment, shall be equal to the Payments;
(2) all determinations required to be made under this
Section 5(c)(viii), including whether and when the Gross-Up Payment is
required and the amount of such Gross-Up Payment, and the assumptions
to be utilized in arriving at such determinations shall be made by the
Accountants (as defined below) which shall provide you and the
Corporation with detailed supporting calculations with respect to such
Gross-Up Payment within fifteen (15) business days of the receipt of
notice from you or the Corporation that you have received or will
receive a Payment. For purposes of making the determinations and
calculations required herein, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code, provided that the
Accountant's determinations must be made on the basis of "substantial
authority" (within the meaning of Section 6662 of the Code). For the
purposes of this Section 5(c)(viii), the "Accountants" shall mean the
Corporation's independent certified public accountants serving
immediately prior to the Change in Control. In the event that the
Accountants are also serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, you shall
appoint another nationally recognized public accounting firm to make
the determinations required hereunder (which accounting firm shall
then be referred to as the Accountants hereunder). All fees and
expenses of the Accountants shall be borne solely by the Corporation;
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(3) for the purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, such Payments will be treated as "parachute payments"
within the meaning of Section 280G of the Code, and all "parachute
payments" in excess of the "base amount" (as defined under Section
280G(b)(3) of the Code) shall be treated as subject to the Excise Tax,
unless and except to the extent that in the opinion of the Accountants
such Payments (in whole or in part) either do not constitute
"parachute payments" or represent reasonable compensation for services
actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount," or such "parachute payments" are
otherwise not subject to such Excise Tax. For purposes of determining
the amount of the Gross-Up Payment you shall be deemed to pay federal
income taxes at the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be
made and to pay any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from the deduction of
such state or local taxes if paid in such year (determined without
regard to limitations on deductions based upon the amount of your
adjusted gross income), and to have otherwise allowable deductions for
federal, state and local income tax purposes at least equal to those
disallowed because of the inclusion of the Gross-Up Payment in your
adjusted gross income. To the extent practicable, any Gross-Up Payment
with respect to any Payment shall be paid by the Corporation at the
time you are entitled to receive the Payments and in no event will any
Gross-Up Payment be paid later than five (5) days after the receipt by
you of the Accountant's determination. Any determination by the
Accountants shall be binding upon the Corporation and you;
(4) as a result of uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by
the Accountants hereunder, it is possible that the Gross-Up Payment
made will have been an amount less than the Corporation should have
paid pursuant to this Section 5(c)(viii) (the "Underpayment"). In the
event that the Corporation exhausts its remedies pursuant to Section
5(c)(viii)(3) and you are required to make a payment of any Excise
Tax, the Underpayment shall be promptly paid by the Corporation to or
for your benefit;
(5) you and the Corporation shall each provide the
Accountants access to and copies of any books, records and documents
in the possession of the Corporation or you, as the case may be,
reasonably requested by the Accountants, and otherwise cooperate with
the Accountants in connection
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with the preparation and issuance of the determination contemplated by
this Section 5(c)(viii); and
(6) you shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Corporation of the Gross-Up Payment. Such
notification shall be given as soon as practicable after you are
informed in writing of such claim and shall apprise the Corporation of
the nature of such claim and the date on which such claim is requested
to be paid. You shall not pay such claim prior to the expiration of
the 30-day period following the date on which you give such notice to
the Corporation (or such shorter period ending on the date that any
payment of taxes, interest and/or penalties with respect to such claim
is due). If the Corporation notifies you in writing prior to the
expiration of such period that it desires to contest such claim, you
shall:
(A) give the Corporation any information
reasonably requested by the Corporation relating to such claim;
(B) take such action in connection with
contesting such claim as the Corporation shall reasonably request
in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an
attorney reasonably selected by the Corporation;
(C) cooperate with the Corporation in good faith
in order to effectively contest such claim; and
(D) permit the Corporation to participate in any
proceedings relating to such claims;
provided, however, that the Corporation shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify you for
and hold you harmless from, on an after-tax basis, any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of all related
costs and expenses. Without limiting the foregoing provisions of this
Section 5(c)(viii), the Corporation shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct you to pay the tax
claimed and xxx for a refund or contest the claim in any permissible
manner, and you agree to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more
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appellate courts, as the Corporation shall determine; provided,
however, that if the Corporation directs you to pay such claim and xxx
for a refund, the Corporation shall advance the amount of such payment
to you, on an interest-free basis, and shall indemnify you for and
hold you harmless from, on an after-tax basis, any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance (including as a result of any
forgiveness by the Corporation of such advance); provided, further,
that any extension of the statute of limitations relating to the
payment of taxes for your taxable year with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Corporation's control of the
contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If your employment by the Company shall be terminated by you
pursuant to a Covered Resignation, then you shall be entitled to the benefits
provided for in Section 5(c) except that (i) the severance benefits provided in
Section 5(c)(ii) shall be fifty percent (50%) of benefit provided therein, and
(ii) the medical and dental benefits provided in Section 5(c)(iii) shall be for
a maximum period of eighteen (18) months.
(e) The payments provided for in Sections 5(c)(i), (ii), (iii) and
5(d) shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Corporation shall pay to you on
such day an estimate, as determined in good faith by the Corporation, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Corporation to you, payable on
the fifth day after demand by the Corporation (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code).
(f) You shall not be required to mitigate the amount of any payment
provided for in this Section 5 by seeking other employment or otherwise nor,
except as provided in Section 5(c)(iii), shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation earned by
you as the result of employment by another employer or self-employment, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Corporation, or otherwise.
6. Successors; Binding Agreement.
-----------------------------
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(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to terminate your employment and
receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Unless expressly provided
otherwise, "Corporation" as used herein shall mean the Corporation as defined in
this Agreement and any successor to its business and/or assets as aforesaid.
(b) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Confidentiality and Non-Solicitation Covenants.
----------------------------------------------
(a) Confidentiality. You hereby agree that commencing on the Date of
---------------
Termination, you shall not, directly or indirectly, disclose or make available
to any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, any Confidential Information (as defined below). You agree
that, upon termination of your employment with the Company, all Confidential
Information in your possession that is in written or other tangible form
(together with all copies or duplicates thereof, including computer files) shall
be returned to the Corporation and shall not be retained by you or furnished to
any third party, in any form except as provided herein; provided, however, that
you shall not be obligated to treat as confidential, or return to the
Corporation copies of any Confidential Information that (i) was publicly known
at the time of disclosure to you, (ii) becomes publicly known or available
thereafter other than by any means in violation of this Agreement or any other
duty owed to the
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Company by any person or entity, or (iii) is lawfully disclosed to you by a
third party. As used in this Agreement, the term "Confidential Information"
means: information disclosed to you or known by you as a consequence of or
through your relationship with the Company, about the customers, employees,
business methods, public relations methods, organization, procedures or
finances, including, without limitation, information of or relating to customer
lists, of the Company.
(b) Non-Solicitation. You hereby agree that, for the period
----------------
commencing on the Date of Termination and terminating on the first anniversary
thereof, you shall not, either on your own account or jointly with or as a
manager, agent, officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or corporation,
directly or indirectly solicit or attempt to solicit away from the Company any
of its officers or employees or offer employment to any person who, on or during
the six (6) months immediately preceding the date of such solicitation or offer,
is or was an officer or employee of the Company; provided, however, that a
general advertisement to which an employee of the Company responds shall in no
event be deemed to result in a breach of this Section 8(b).
9. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed on a non-exclusive basis by the
laws of the State of California without giving effect to its conflicts of laws
rules.
10. Joint and Several Liability. Any successors or assigns shall be
---------------------------
jointly and severally liable with the Corporation under this Agreement.
11. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. Any obligations of the Corporation under Sections 5 and 6 shall survive the
expiration of the term of this Agreement. The section headings contained in this
Agreement are for convenience only, and shall not affect the interpretation of
this Agreement.
12. Severability. The invalidity or unenforceability of any provision
------------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
14. Arbitration; Dispute Resolution, Etc.
------------------------------------
(a) Arbitration Procedure. Any disagreement, dispute, controversy or
---------------------
claim arising out of or relating to this Agreement or the interpretation of this
Agreement or any arrangements relating to this Agreement or contemplated in this
Agreement or the breach, termination or invalidity thereof shall be settled by
final and binding arbitration administered by the JAMS/Endispute in Los Angeles,
California in accordance with its then existing JAMS/Endispute Arbitration Rules
and Procedures for Employment Disputes. In the event of such an arbitration
proceeding, you and the Corporation shall select a mutually acceptable neutral
arbitrator from among the JAMS/Endispute panel of arbitrators. In the event you
and the Corporation cannot agree on an arbitrator, the Administrator of
JAMS/Endispute will appoint an arbitrator. Neither you nor the Corporation nor
the arbitrator shall disclose the existence, content, or results of any
arbitration hereunder without the prior written consent of all parties. Except
as provided herein, the Federal Arbitration Act shall govern the interpretation,
enforcement and all proceedings under this Section 14. The arbitrator shall
apply the substantive law (and the law of remedies, if applicable) of the State
of California, or federal law, or both, as applicable and the arbitrator is
without jurisdiction to apply any different substantive law. The arbitrator
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. The arbitrator shall render
an award and a written, reasoned opinion in support thereof. Judgment upon the
award may be entered in any court having jurisdiction thereof. For purposes of
jurisdiction and venue, the Corporation hereby consents to jurisdiction and
venue in any suit, action or proceeding with respect to this Agreement in any
court of competent jurisdiction in the state in which you reside at the
commencement of such suit, action or proceeding and waives any objection,
challenge or dispute as to such jurisdiction or venue being proper. The
Corporation shall pay all fees and expenses of the Arbitrator regardless of the
result and shall provide all witnesses and evidence reasonably required by you
to present your case.
(b) Compensation During Dispute, Etc. Your compensation during any
--------------------------------
disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute") arising out of or relating to this Agreement or the
interpretation of this Agreement shall be as follows. If there is a termination
of your employment with the Company after a Change in Control followed by a
Dispute as to whether you are entitled to the payments and other benefits
provided under this Agreement, then, during the period of that Dispute the
Corporation shall pay you fifty percent (50%) of the amount specified in
Sections 5(c)(i) and 5(c)(ii) hereof, and the Corporation shall provide you with
the other benefits provided in Section 5(c) of this Agreement, if, but only if,
you agree in writing that if the Dispute is resolved against you, you shall
promptly
16
refund to the Corporation all payments you receive under Sections 5(c)(i) and
5(c)(ii) of this Agreement plus interest at the rate provided in Section 1274(d)
of the Code, compounded quarterly. If the Dispute is resolved in your favor,
promptly after resolution of the dispute the Corporation shall pay you the sum
that was withheld during the period of the Dispute plus interest at the rate
provided in Section 1274(d) of the Code, compounded quarterly.
(c) Legal Fees. In addition to all other amounts payable to you under
----------
this Agreement, the Corporation shall pay to you all legal fees and expenses
incurred by you in connection with any Dispute arising out of or relating to
this Agreement or the interpretation thereof (including, without limitation, all
such fees and expenses, if any, incurred in contesting or disputing any
termination of your employment or in seeking to obtain or enforce any right or
benefit provided by this Agreement, or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder), regardless of the outcome of
such proceeding; provided, however, that in the event you commence such action,
you shall not be entitled to recover such fees and costs if the court determines
that you brought the claim in bad faith or the claim was frivolous. Any
attorney's fees incurred by you shall be paid by the Corporation in advance of
the final disposition of such action or challenge, as such fees and expenses are
incurred; provided, however, that you agree to repay such amounts, net of any
income taxes paid or payable by you with respect to such amounts, if such
amounts are incurred in connection with an action commenced by you if it is
ultimately determined by the court that you brought such action in bad faith or
the claim was frivolous.
15. At-Will Employment. Nothing in the foregoing diminishes or alters
------------------
the Company's policy of at-will employment for all employees, where both the
Company and you may terminate the employment relationship at any time and for
any reason, with or without cause or notice.
16. Entire Agreement. This Agreement sets forth the entire agreement
----------------
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein,
including, without limitation, any prior severance agreements, is hereby
terminated and cancelled. Notwithstanding the foregoing, this Agreement shall
not supersede the Employment Agreement. Any of your rights hereunder shall be in
addition to any rights you may otherwise have under benefit plans or agreements
of the Company to which you are a party or in which you are a participant,
including, but not limited to, any Company sponsored employee benefit plans and
stock options plans. Provisions of this Agreement shall not in any way abrogate
your rights under such other plans and agreements.
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If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which shall then constitute our agreement on this subject.
Sincerely,
SCPIE HOLDINGS INC.
By: ______________________________
Its:______________________________
Agreed to this 14th day
of December, 2000.
_____________________________
[Executive]
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