EMPLOYMENT AGREEMENT
Exhibit 10-18i
This Employment Agreement, (the “Agreement”) is made as of the 1st day of March, 2007,
between Selective Insurance Company of America, a New Jersey corporation with a principal place of
business at 00 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (the “Company”) and Xxxx X. Xxxxxxxxx,
an individual residing at 0 Xxxxx Xxxxx, Xxxxxxx, XX 00000 (the “Executive”).
SECTION 1. DEFINITIONS.
1.1. Definitions. For purposes of this Agreement, the following terms shall have the
meanings set forth below:
“Accounting Firm” has the meaning given to such term in Section 3.6(b) hereof.
“Agreement” has the meaning given to such term in the Preamble hereto.
“Board” means the Board of Directors of the Company’s Parent.
“Cause” means any one or more of the following:
(i) the Executive shall have been convicted by a court of competent jurisdiction of, or
pleaded guilty or nolo contendere to, any felony under, or within the meaning of, applicable
United States federal or state law;
(ii) the Executive shall have breached in any respect any one or more of the material
provisions of this Agreement, including, without limitation, any failure to comply with the
Code of Conduct, and, to the extent such breach may be cured, such breach shall have
continued for a period of thirty (30) days after written notice by the Chief Executive
Officer to the Executive specifying such breach; or
(iii) the Executive shall have engaged in acts of insubordination, gross negligence or
willful misconduct in the performance of the Executive’s duties and obligations to the
Company.
For purposes of clauses (ii) and (iii) of this definition of “Cause”, no act, or failure to act, on
the part of the Executive shall be considered grounds for “Cause” under such clauses if such act,
or such failure to act, was done or omitted to be done based upon authority or express direction
given by the Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or
such other executive as the Chief Executive Officer may designate, or based upon the advice of
counsel for the Company.
“Change in Control” means the occurrence of an event of a nature that would be required to be
reported by the Company’s Parent in response to Item 5.01 of a Current Report on Form 8-K, as in
effect on the date thereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act;
provided, however, that a Change in Control shall,
in any event, conclusively be deemed to have occurred upon the first to occur of any one of
the following events:
(i) The acquisition by any “person” or “group” (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company’s Parent, of securities of the Company’s Parent resulting in such person or
group being a “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange
Act) of twenty-five percent (25%) or more of any class of Voting Securities of the Company’s
Parent;
(ii) The acquisition by any “person” or “group” (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company’s Parent, of securities of the Company’s Parent resulting in such person or
group being a “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange
Act) of twenty percent (20%) or more, but less than twenty-five percent (25%), of any class
of Voting Securities of the Company’s Parent, if the Board adopts a resolution that such
acquisition constitutes a Change in Control;
(iii) The sale or disposition of more than fifty percent (50%) of the Company’s
Parent’s assets on a consolidated basis, as shown in the Company’s Parent’s then most recent
audited consolidated balance sheet;
(iv) The reorganization, recapitalization, merger, consolidation or other business
combination involving the Company’s Parent the result of which is the ownership by the
shareholders of the Company’s Parent of less than eighty percent (80%) of those Voting
Securities of the resulting or acquiring Person having the power to vote in the elections of
the board of directors of such Person; or
(v) A change in the membership in the Board which, taken in conjunction with any other
prior or concurrent changes, results in twenty percent (20%) or more of the Board’s
membership being persons not nominated by the Company’s Parent’s management or the Board as
set forth in the Company’s Parent’s then most recent proxy statement, excluding changes
resulting from substitutions by the Board because of retirement or death of a director or
directors, removal of a director or directors by the Board or resignation of a director or
directors due to demonstrated disability or incapacity.
(vi) Anything in this definition of Change in Control to the contrary notwithstanding,
no Change in Control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction which results in the Executive, or a group of Persons which
includes the Executive, acquiring, directly or indirectly, Voting Securities of the Company.
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“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Code of Conduct” has the meaning given to such term in Section 2.3(a) hereof.
“Commencement Date” has the meaning given to such term in Section 2.2 hereof.
“Company” has the meaning given to such term in the Preamble hereto and includes any Person
which shall succeed to or assume the obligations of the Company hereunder pursuant to Section 5.6
hereof.
“Company’s Parent” means Selective Insurance Group, Inc., a publicly traded New Jersey
corporation with a principal office at 00 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx 00000.
“Determination” has the meaning given to such term in Section 3.6(b) hereof.
“Disability” means the Executive’s physical injury or physical or mental illness which causes
him to be absent from his duties with the Company on a full-time basis for a continuous period in
excess of the greater of: (i) the period of disability constituting permanent disability as
specified under the Company’s long-term disability insurance coverage applicable to the Executive
at the time of the determination of the existence of a disability (or, if such determination is
made after the occurrence of a Change in Control, as specified under the long-term disability
insurance coverage applicable to the Executive prior to a Change in Control) or (ii) 180 days,
unless within thirty (30) days after a Notice of Termination is thereafter given the Executive
shall have returned to the full-time performance of his duties.
“Early Termination” has the meaning given to such term in Section 3.2 hereof.
“Excise Tax” has the meaning given to such term in Section 3.6(a) hereof.
“Executive” has the meaning given to such term in the Preamble hereto.
“Extended Benefit Period” has the meaning given to such term in Section 3.3(c) hereof.
“Good Reason” means the occurrence of any one or more of the following:
(i) any reduction in the Executive’s Salary below the annualized rate in effect on the
date preceding the date on which a Change in Control shall have occurred unless such
reduction is implemented for the senior executive staff generally, provided, however, that
such reduction shall constitute Good Reason even if implemented for senior executive staff
generally if such reduction occurs within two years after a Change in Control;
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(ii) (A) a failure by the Company to continue in effect benefits that are comparable in
the aggregate to the benefits the Executive receives under the Plans in which the Executive
participates, other than as a result of the normal expiration of any such Plan as to other
eligible employees in accordance with its terms as in effect on the date preceding the date
on which a Change in Control shall have occurred, or (B) the taking of any action, or the
failure to act, by the Company which would adversely affect the Executive’s continued
participation in any of such Plans on at least as favorable a basis to him as was the case
on the date preceding the date on which a Change in Control shall have occurred or which
would materially reduce the Executive’s benefits in the future under any such Plans, unless,
in any of the cases described in sub-clauses (A) and (B) of this clause (ii), such failure
to continue in effect, taking of any action or failure to act affects all participants of
such Plan generally;
(iii) without the Executive’s express prior written consent, the assignment to the
Executive of any duties inconsistent with his positions, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material diminution in the
Executive’s responsibilities as an executive of the Company as compared with those he had as
an executive of the Company immediately prior to a Change in Control, or any change in the
Executive’s titles or office as in effect immediately prior to a Change in Control, or any
removal of the Executive from, any of such positions, except in connection with the
termination of the Executive’s employment for Cause, Disability or Retirement or as a result
of the Executive’s death, or by his termination of his employment other than for Good
Reason;
(iv) without the Executive’s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in excess of fifty
(50) miles from the location of the Executive’s office on the date preceding the date on
which a Change in Control shall have occurred;
(v) without the Executive’s express prior written consent, any reduction in the number
of paid vacation days to which the Executive was entitled as of the date preceding the date
on which a Change in Control shall have occurred;
(vi) the failure by the Company to obtain from any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets, the agreement of
such Person as set forth in the proviso in Section 5.6 hereof; provided that such
merger, consolidation or sale constitutes a Change in Control;
(vii) subsequent to a Change in Control, any purported termination of the Executive’s
employment which is not effected pursuant to a Notice of Termination given in accordance
with Section 3.2 hereof; or
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(viii) within two years after a Change in Control shall have occurred, any material
breach by the Company of any of the terms and conditions of this
Agreement or any Plans referred to in clause (ii) of this definition of “Good Reason”
to which the Executive is entitled to receive benefits thereunder, provided, to the extent
such breach may be cured, such breach shall have continued for a period of thirty (30) days
after written notice of the Company specifying such breach.
“Gross-Up Payment” has the meaning given to such term in Section 3.6(a) hereof.
“Notice of Termination” means a written notice which shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated and, (iii) specify the date of termination in accordance with this
Agreement (other than for a termination for Cause).
“Overpayments” has the meaning given to such term in Section 3.6(c) hereof.
“Person” means an individual, partnership, corporation, association, limited liability
company, trust, joint venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
“Plans” has the meaning given to such term in Section 2.4(b) hereof.
“Rabbi Trust” has the meaning given to such term in Section 3.4(d) hereof.
“Release” has the meaning given to such term in Section 3.5 hereof.
“Restrictive Covenants” has the meaning given to such term in Section 3.5 hereof.
“Retirement” means a termination of the Executive’s employment by the Company or the Executive
(i) at such age as shall be established by the Board for mandatory or normal retirement of Company
executives in general (which age shall be, if the determination of Retirement is made after the
occurrence of a Change in Control, the age established by the Board prior to a Change in Control),
which shall not be less than age 65, or (ii) at any other retirement age set by mutual agreement of
the Company and the Executive and approved by the Board.
“Salary” has the meaning given to such term in Section 2.4(a) hereof.
“Section 409A Tax” has the meaning given to such term in Section 3.7 hereof.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
“Term” has the meaning given to such term in Section 2.2 hereof.
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“Termination Date” means (i) if the Executive’s employment is to be terminated by the Company
for Disability, thirty (30) days after a Notice of Termination is given; provided that the
Executive shall not have returned to the performance of the Executive’s duties on a full-time basis
during such thirty (30) day period; and (ii) if the Executive’s employment is to be terminated by
either the Company or the Executive for any other reason, the date on which a Notice of Termination
is given.
“Total Payments” has the meaning given to such term in Section 3.6(a) hereof.
“Triggering Event” has the meaning given to such term in Section 3.4(d) hereof.
“Trustee” has the meaning given to such term in Section 3.4(d) hereof.
“Underpayments” has the meaning given to such term in Section 3.6(c) hereof.
“Voting Securities” means, with respect to a specified Person, any security of such Person
that has, or may have upon an event of default or in respect to any transaction, a right to vote on
any matter upon which the holder of any class of common stock of such Person would have a right to
vote.
1.2. Terms Generally. Unless the context of this Agreement requires otherwise, words
importing the singular number shall include the plural and vice versa, and any pronoun shall
include the corresponding masculine, feminine and neuter forms.
1.3. Cross-References. Unless otherwise specified, references in this Agreement to
any Paragraph or Section are references to such Paragraph or Section of this Agreement.
SECTION 2. EMPLOYMENT AND COMPENSATION. The following terms and conditions will
govern the Executive’s employment with the Company throughout the Term.
2.1. Employment. The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, on the terms and conditions set forth herein.
2.2. Term. The term of employment of the Executive under this Agreement shall
commence as of the date hereof (the “Commencement Date”) and, subject to Section 3.1 hereof, shall
terminate three (3) year(s) after the Commencement Date, and shall automatically be extended for
additional one (1) year periods thereafter (any such renewal periods, together with the initial
three (3) year period, being referred to as the “Term”) unless terminated by either party by
written notice to the other party.
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2.3. Duties.
(a) The Executive agrees to serve as Senior Vice President during the
Term. In such capacity, the Executive shall have the responsibilities and duties customary for
such office(s) and such other executive responsibilities and duties as are assigned by the Chief
Executive Officer, Senior Executive Vice President of Insurance Operations, or such other executive
as the Chief Executive Officer may
designate, which are consistent with the Executive’s position(s). The Executive agrees to
devote substantially all his business time, attention and services to the business and affairs of
the Company and its subsidiaries and to perform his duties to the best of his ability. At all
times during the performance of this Agreement, the Executive will adhere to the Code of Conduct of
the Company (the “Code of Conduct”) that has been or may hereafter be established and communicated
by the Company to the Executive for the conduct of the position or positions held by the Executive.
The Executive may not accept directorships on the board of directors of for-profit corporations
without the prior written consent of the Executive Vice President, Human Resources of the Company.
The Executive may accept directorships on the board of directors of not-for-profit corporations
without the prior, written consent of the Executive Vice President, Human Resources so long as
(a) such directorships do not interfere with Executive’s ability to carry out his responsibilities
under this Agreement, and (b) Executive promptly notifies the Executive Vice President, Human
Resources in writing of the fact that he has accepted such a non-profit directorship.
(b) If the Company or the Executive elects not to renew the Term pursuant to Section 2.2,
the Executive shall continue to be employed under this Agreement until the expiration of the
then current Term (unless earlier terminated pursuant to Section 3.1 hereof), shall cooperate
fully with the Chief Executive Officer, Senior Executive Vice President of Insurance
Operations, or such other executive as the Chief Executive Officer may designate and shall
perform such duties not inconsistent with the provisions hereof as he shall be assigned by the
Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or such other
executive as the Chief Executive Officer may designate.
2.4. Compensation.
(a) Salary. For all services rendered by the Executive under this Agreement, the
Company shall pay the Executive a salary during the Term at a rate of not less than TWO HUNDRED
THIRTY THOUSAND AND NO/100 DOLLARS ($230,000.00) per year, which may be increased but not
decreased unless decreased for the senior executive staff generally (the “Salary”), payable in
installments in accordance with the Company’s policy from time to time in effect for payment of
salary to executives. The Salary shall be reviewed no less than annually and nothing contained
herein shall prevent the Company from at any time increasing the Salary or other benefits
herein provided to be paid or provided to the Executive or from providing additional or
contingent benefits to the Executive as it deems appropriate.
(b) Benefits. During the Term, the Company shall permit the Executive to
participate in or receive benefits based on eligibility under the Selective Insurance Group,
Inc. 2005 Omnibus Stock Plan, the Selective Insurance Group, Inc. Cash Incentive Plan, the
Selective Insurance Retirement Savings Plan, the Retirement Income Plan For Selective Insurance
Company of America, as amended, the Selective Insurance Company of America Deferred
Compensation Plan, the Selective Insurance Supplemental Pension Plan and any other incentive
compensation, stock option, stock appreciation right, stock bonus, pension, group
insurance, retirement, profit sharing, medical, disability, accident, life insurance plan,
relocation plan or policy, or any other plan, program, policy or arrangement of the Company
intended to benefit the employees of the Company generally, if any, in accordance with the
respective provisions thereof, from time to time in effect (collectively, the “Plans”).
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(c) Vacations and Reimbursements. During the Term, the Executive shall be
entitled to vacation time off and reimbursements for ordinary and necessary business travel and
entertainment expenses in accordance with the Company’s policies on such matters from time to
time in effect.
(d) Perquisites. During the Term, the Company shall provide the Executive with
suitable offices, secretarial and other services, and other perquisites to which other
executives of the Company generally are (or become) entitled, to the extent as are suitable to
the character of the Executive’s position with the Company, subject to such specific limits on
such perquisites as may from time to time be imposed by the Company.
SECTION 3. TERMINATION AND SEVERANCE.
3.1. Termination. The Executive’s employment hereunder shall commence on the
Commencement Date and continue until the expiration of the Term, except that the employment of the
Executive hereunder shall earlier terminate:
(a) Death. Upon the Executive’s death.
(b) Disability. At the option of the Company, upon the Disability of the
Executive.
(c) For Cause. At the option of the Company, for Cause.
(d) Resignation. At any time at the option of the Executive, by resignation
(other than a resignation for Good Reason).
(e) Without Cause. At any time at the option of the Company, without Cause;
provided, that a termination of the Executive’s employment hereunder by the Company
based on Retirement, death, or Disability shall not be deemed to be a termination without
Cause.
(f) Relocation. At the option of the Executive at any time prior to a Change in
Control, if the Company imposes a requirement without the consent of the Executive that the
Executive be based at a location in excess of fifty (50) miles from the location of the
Executive’s office on the Commencement Date.
(g) For Good Reason. At any time at the option of the Executive within two (2)
years following the occurrence of a Change in Control, for Good Reason.
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3.2. Procedure For Termination. Any termination of the Executive’s employment by the
Company or by the Executive prior to the expiration of the Term (an “Early Termination”) shall be
communicated by delivery of a Notice of Termination to the other party hereto given in accordance
with Section 5.13 hereof. Any Early Termination shall become effective as of the applicable
Termination Date.
3.3. Rights and Remedies on Termination. The Executive will be entitled to receive
the payments and benefits specified below if there is an Early Termination.
(a) Accrued Salary. If the Executive’s employment is terminated pursuant to any
of the Paragraphs set forth in Section 3.1 hereof, then the Executive (or his legal
representative, as applicable) shall only be entitled to receive his accrued and unpaid Salary
through the Termination Date.
(b) Severance Payments.
(i) If the Executive’s employment is terminated pursuant to Paragraphs (a) or (b) in
Section 3.1 hereof, then the Executive (or his legal representative, as applicable) shall be
entitled to receive a severance payment from the Company in an aggregate amount equal to the
product of (A) 1 times (B) the Executive’s Salary plus an amount equal to
the average of the three most recent annual cash incentive payments (each an “ACIP”) made
to the Executive; provided that any such severance payment shall be reduced by the
amount of payments the Executive receives under any life or disability insurance policies
with respect to which the premiums were paid by the Company.
(ii) If the Executive’s employment is terminated pursuant to Paragraph (e) or (f) in
Section 3.1 hereof, then the Executive shall be entitled to receive a severance payment from
the Company in an aggregate amount equal to the product of (A) 1.5 times (B) the
Executive’s Salary plus an amount equal to the average of the three most recent ACIP
payments made to the Executive.
(iii) The severance payment required to be paid by the Company to the Executive
pursuant to Paragraph (b)(i) or (b)(ii) above, shall, subject to Section 3.7, be paid in
equal monthly installments over the twelve (12) month period following the Termination Date.
(c) Severance Benefits.
(i) If the Executive’s employment is terminated pursuant to any of the Paragraphs set
forth in Section 3.1 hereof, then the Executive (or his legal representative, as applicable)
shall be entitled to receive the benefits which the Executive has accrued or earned or which
have become payable under the Plans as of the Termination Date, but which have not yet been
paid to the Executive. Payment of any such benefits shall be made in accordance with the
terms of such Plans.
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(ii) If the Executive’s employment is terminated pursuant to Paragraph (e) or (f) in
Section 3.1 hereof, then the Company shall, subject to Section 3.7, maintain in full force
and effect for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of (A) twelve (12) months following the applicable Termination
Date, or (B) the commencement date of equivalent benefits from a new employer, (any such
period being referred to as the applicable “Extended Benefit Period”) all insured and
self-insured medical, dental, vision, disability and life insurance employee benefit Plans
in which the Executive was entitled to participate immediately prior to the Termination
Date; provided that the Executive’s continued participation is not barred under the
general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive
shall continue to participate in such Plans during the Extended Benefit Period only to the
extent that such Plans remain in effect for other executives of the Company from time to
time during the Extended Benefit Period and subject to the terms of such Plans, including
any modifications and amendments thereto following the Termination Date. In the event that
the Executive’s participation in any such Plan is barred by its terms, the Company shall
arrange, at its sole cost and expense, to have issued for the benefit of the Executive and
his dependents during the Extended Benefit Period individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph
(c)(ii). Executive shall be responsible for making any required contributions to the cost
of such coverage, on an after-tax basis, at the rate which Executive was obligated to pay
immediately prior to the Termination Date. If, at the end of the applicable Extended
Benefit Period, the Executive has not previously received or is not receiving equivalent
benefits from a new employer, or is not otherwise receiving such benefits, the Company shall
arrange to enable the Executive to convert his and his dependents’ coverage under such Plans
to individual policies or programs upon the same terms as employees of the Company may apply
for such conversions upon termination of employment. In no event shall the Company’s
obligation to provide disability benefits hereunder be reduced as a result of any individual
disability policy purchased by the Executive.
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(d) Rights Under Plans. If the Executive’s employment is terminated pursuant to
Paragraphs (a), (b), (e), or (f) in Section 3.1 hereof, the Executive shall be entitled to the
benefits of any stock options, stock appreciation rights, restricted stock grants, stock
bonuses or other benefits theretofore granted by the Company to the Executive under any Plan,
whether or not provided for in any agreement with the Company; provided,
however, that (i) all unvested stock options, stock appreciation rights, restricted
stock grants, stock bonuses, long-term incentives and similar benefits shall be deemed to be
vested in full on the Termination Date, notwithstanding any provision to the contrary or any
provision requiring any act or acts by the Executive in any agreement with the Company or any
Plan; (ii) to the extent that any such stock options, stock appreciation rights, restricted
stock grants, stock bonuses, long-term incentives or similar benefits shall require by its
terms the exercise thereof by the Executive, the last date to exercise the same shall,
notwithstanding any provision to the contrary in any agreement or any Plan, be the earlier of
(A) the later to occur of the fifteenth day of the third month following the date at which, or
the December 31 of the calendar year in which, any such stock options, stock appreciation
rights, restricted stock grants, stock bonuses, long-term incentives or similar benefits would
otherwise have expired if not extended, or (B) the original expiration date had the Executive’s
employment not so terminated; and (iii) if the vesting or exercise pursuant hereto of any such
stock options, stock appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits shall have the effect of subjecting the Executive to liability
under Section 16(b) of the Securities Exchange Act or any similar provision of law, the vesting
date thereof shall be deemed to be the first day after the Termination Date on which such
vesting may occur without subjecting the Executive to such liability.
(e) No Double Dipping.
(i) The severance payments and severance benefits the Executive may be entitled to
receive pursuant to this Section 3.3 shall be in lieu of any of the payments and benefits
the Executive may be entitled to receive pursuant to any other agreement, plan or
arrangement providing for the payment of severance payments or benefits.
(ii) The Executive expressly disclaims any interest he may have in the Selective
Insurance Company of America Severance Plan.
3.4. Rights and Remedies on Termination After Change in Control. The Executive will
be entitled to receive the severance payments and severance benefits specified below in the event
there shall occur a termination of the Executive’s employment pursuant to Paragraph (e) or (g) of
Section 3.1 hereof within two (2) years following the occurrence of a Change in Control. The
severance payments and benefits the Executive may be entitled to receive pursuant to this Section
3.4 shall be in addition to, and not in lieu of, any of the payments and benefits the Executive may
be entitled to receive pursuant to Section 3.3 hereof, unless expressly so stated to be in lieu of
such benefits and/or payments.
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(a) Severance Payments. The Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (i) 1.5; and (ii) the
greater of:
(1) the sum of the Executive’s Salary plus the Executive’s
target ACIP in effect as of the Termination Date, or
(2) the sum of the Executive’s Salary in effect as of the Termination
Date plus the Executive’s average ACIP for the three calendar years prior to
the calendar year in which the Termination Date occurs.
Such payment shall be made, subject to Section 3.7, thirty (30) business days following the
Termination Date, provided that the Executive has executed and delivered a Release pursuant to
Section 3.5 hereof and such Release has become effective and irrevocable. The severance
payment required to be paid by the Company to the Executive pursuant to this Section 3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to be paid by the
Company to the Executive.
(b) Severance Benefits. Subject to Section 3.7, the Company shall maintain in full
force and effect, for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of: (i) eighteen (18) months after the Termination Date or (ii) the
commencement date of equivalent benefits from a new employer (the “CIC Extended Benefit Period”),
all insured and self insured medical, dental, vision, disability and life insurance employee
welfare benefit plans in which the Executive was entitled to participate immediately prior to the
Termination Date; provided that the Executive’s continued participation is not barred under
the general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive shall
continue to participate in such Plans during the CIC Extended Benefit Period only to the extent
that such Plans remain in effect for other executives of the Company from time to time during the
CIC Extended Benefit Period and subject to the terms of such Plans, including any modifications and
amendments thereto following the Termination Date. In the event that the Executive’s participation
in any such Plan is barred by its terms, the Company, at its sole cost and expense, shall arrange
to have issued for the benefit of the Executive and his dependents individual policies of insurance
providing benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph (b).
Executive shall be responsible for making any required contributions to the cost of such coverage,
on an after-tax basis, at the rate which Executive was obligated to pay immediately prior to the
Termination Date. If, at the end of the applicable CIC Extended Benefit Period, the Executive has
not previously received or is not receiving equivalent benefits from a new employer, or is not
otherwise receiving such benefits, the Company shall arrange to enable the Executive to convert his
and his dependents’ coverage under such Plans to individual policies or programs upon the same
terms as employees of the Company may apply for such conversions upon termination of employment.
The severance benefits required to be provided by the Company to the Executive pursuant to this
Paragraph (b) shall be in lieu of, and not in addition to, any severance benefits
required to be provided to the Executive pursuant to Section 3.3(c)(ii) hereof. In no event
shall the Company’s obligation to provide disability benefits hereunder be reduced as a result of
any individual disability policy purchased by the Executive.
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(c) Rights Under Plans. The Executive shall be entitled to the benefits of any stock
options, stock appreciation rights, restricted stock grants, stock bonuses or other benefits
theretofore granted by the Company to the Executive under any Plan, whether or not provided for in
any agreement with the Company; provided, however, that (i) all unvested stock
options, stock appreciation rights, restricted stock grants, stock bonuses, long-term incentives
and similar benefits shall be deemed to be vested in full on the Termination Date, notwithstanding
any provision to the contrary or any provision requiring any act or acts by the Executive in any
agreement with the Company or any Plan; (ii) to the extent that any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits shall require by its terms the exercise thereof by the Executive, the last date to
exercise the same shall, notwithstanding any provision to the contrary in any agreement or any
Plan, be the earlier of (A) the later to occur of the fifteenth day of the third month following
the date at which, or the December 31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits would otherwise have expired if not extended or (B) the original expiration date had the
Executive’s employment not so terminated; and (iii) if the vesting or exercise pursuant hereto of
any such stock options, stock appreciation rights, restricted stock grants, stock bonuses,
long-term incentives or similar benefits shall have the effect of subjecting the Executive to
liability under Section 16(b) of the Securities Exchange Act or any similar provision of law, the
vesting date thereof shall be deemed to be the first day after the Termination Date on which such
vesting may occur without subjecting the Executive to such liability.
(d) Rabbi Trust. The Company shall maintain a trust intended to be a grantor trust
within the meaning of subpart E, Part I, subchapter J, chapter 1, subtitle A of the Code (the
“Rabbi Trust”). Coincident with the occurrence of a Change in Control, the Company shall promptly
deliver to a bank as trustee of the Rabbi Trust (the “Trustee”), an amount of cash or certificates
of deposit, treasury bills or irrevocable letters of credit adequate to fully fund the payment
obligations of the Company under this Section 3.4. The Company and Trustee shall enter into a
trust agreement that shall provide that barring the insolvency of the Company, amounts payable to
the Executive under this Section 3.4 (subject to Section 3.7) shall be paid by the Trustee to the
Executive five (5) days after written demand by the Executive to the Trustee, with a copy to the
Company, certifying that such amounts are due and payable under this Section 3.4 because the
Executive’s employment has been terminated pursuant to Paragraph (e) or (g) in Section 3.1 hereof
at a time which is within two (2) years following the occurrence of a Change in Control (a
“Triggering Event”). Such trust agreement shall also provide that if the Company shall, prior to
payment by the Trustee, object in writing to the Trustee, with a copy to the Executive, as to the
payment of any amounts demanded by the Executive under this Section 3.4, certifying that such
amounts are not due and payable to the Executive because a Triggering Event has not
occurred, such dispute shall be resolved by binding arbitration as set forth in Section 5.8
hereof.
- 13 -
3.5. Conditions to Severance Payments and Benefits. The Executive’s right to receive
the severance payments and benefits pursuant to Sections 3.3 and 3.4 hereof, is expressly
conditioned upon (a) receipt by the Company of a written release (a “Release”) executed by the
Executive in the form of Exhibit A hereto, and the expiration of the revocation period described
therein without such Release having been revoked, and (b) the compliance by the Executive with the
covenants, terms or provisions of Sections 4.1 and 4.2 hereof (the “Restrictive Covenants”). If
the Executive shall fail to deliver a Release in accordance with the terms of this Section 3.5 or
shall breach any of the Restrictive Covenants, the Company’s obligation to make the severance
payments and to provide the severance benefits pursuant to Sections 3.3 and 3.4 hereof shall
immediately and irrevocably terminate.
3.6. Tax Effect of Payments.
(a) Gross-Up Payment. In the event that it is determined that any payment,
distribution or other benefit of any type to or for the Executive’s benefit made by the Company, by
any of its affiliates, by any Person who acquires ownership or effective control of the Company or
ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of
the Code and the regulations thereunder) or by any affiliate of such Person, whether paid or
payable or distributed or distributable or otherwise made available pursuant to the terms of this
Agreement or otherwise (the “Total Payments”), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties, are collectively referred to as the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”)
in an amount such that after payment by the Executive of all taxes imposed upon the Gross-Up
Payment, including any Excise Tax, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Total Payments.
(b) Determination by Accountant. All mathematical determinations and all
determinations of whether any of the Total Payments are “parachute payments” (within the meaning of
Section 280G of the Code) that are required to be made under this Section, including all
determinations of whether a Gross-Up Payment is required, of the amount of such Gross-Up Payment
and of amounts relevant to the last sentence of this Section (collectively, the “Determination”),
shall be made by an independent accounting firm acceptable to each of the parties hereto, or, if no
firm is acceptable to both parties hereto, each of the Executive and the Company shall select an
accounting firm acceptable to it, and such accounting firms shall together designate an independent
accounting firm, provided, however, that any accounting firm so designated shall
not have been previously retained by either party for a period of a least two (2) years subsequent
to the applicable Termination Date. Any independent accounting firm selected by the Executive and
the Company or designated pursuant to this Paragraph (b) shall be referred to herein as the
“Accounting Firm”. Subject to Section 3.6(c) and Section 3.7, if a
Gross-Up Payment is determined to be payable, it shall be paid by the Company to the Executive
within five (5) days after such Determination is delivered to the Company. Subject to Section
3.6(c), any Determination by the Accounting Firm shall be binding upon the Company and Executive,
absent manifest error. All of the costs and expenses of the Accounting Firm shall be borne by the
Company.
- 14 -
(c) Underpayments and Overpayments. As a result of uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments not made by the Company should have been made
(“Underpayments”) or that Gross-Up Payments will have been made by the Company which should not
have been made (“Overpayments”). In either event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount
of such Underpayment shall promptly be paid by the Company to or for the Executive’s benefit. In
the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company and otherwise
reasonably cooperate with the Company to correct such Overpayment; provided,
however, that (i) the Executive shall in no event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that the Executive has retained or
has received as a refund or has received the benefit of from the applicable taxing authorities and
(ii) this provision shall be interpreted in a manner consistent with the intent of this Section,
which is to make the Executive whole, on an after-tax basis, for the application of the Excise Tax,
it being understood that the correction of an Overpayment may result in the Executive’s repaying to
the Company an amount which is less than the Overpayment. Anything herein to the contrary
notwithstanding, in the event of a final determination as to the liability for the Excise Tax
applicable to the Total Payments such determination shall be the basis for determining whether
there have been Underpayments or Overpayments pursuant to this Section 3.6. For this purpose, a
final determination shall mean a final agreement reached with the Internal Revenue Service or a
final determination by a court with jurisdiction from which there is no appeal, in either case,
concluded in accordance with the provisions of this Paragraph (c).
(d) Application of Section 409A. Notwithstanding anything contained in this Section
3.6, no portion of the Gross-Up Payment shall be paid to the Executive so as to cause the
Executive to be subject to tax under Section 409A of the Code. In particular, if necessary to
avoid taxation under Code Section 409A, the Gross-Up Payment shall be paid to Executive in a lump
sum at the same date that severance payments are paid to the Executive pursuant to Section 3.4(a).
If the amount of the Gross-Up Payment cannot be fully determined pursuant to Section 3.6(b) by such
date, the Company shall pay to the Executive on such date an estimate of the Gross-Up Payment, as
determined by the Accounting Firm, and shall pay the remainder (or the Executive shall reimburse
the Company the difference) 30 days thereafter.
- 15 -
3.7. Section 409A Tax. Notwithstanding anything herein to the contrary, to the extent
any payment or provision of benefits under this Agreement upon the Executive’s “separation from
service” is subject to Section 409A of the Code, no such payment shall be made, and Executive
shall be responsible for the full cost of such benefits, for six (6) months following the
Executive’s “separation from service” if the Executive is a “specified employee.” On the
expiration of such six (6) month period, any payments delayed, and an amount sufficient to
reimburse the Executive for the cost of benefits met by the Executive, during such period shall be
aggregated (the “Make-Up Amount”) and paid in full to the Executive, and any succeeding payments
and benefits shall continue as scheduled hereunder. The Company shall credit the Make-Up
Amount with interest at no less than the interest rate it pays for short-term borrowed funds, such
interest to accrue from the date on which payments would have been made, or benefits would have
been provided, by the Company to the Executive absent the six month
delay. The terms
“separation from service” and “specified employee” shall have the meanings set forth under Section
409A and the regulations and rulings issued thereunder. Furthermore, the Company shall not be
required to make, and the Executive shall not be required to receive, any severance or other
payment or benefit under Sections 3.3, 3.4 or 3.6 hereof if the making of such payment or the
provision of such benefit or the receipt thereof shall result in a tax to the Executive arising
under Section 409A of the Code (a “Section 409A Tax”). In the event the Company cannot make a
payment or provide a benefit under Sections 3.3, 3.4 or 3.6 hereof, or if the Executive cannot
receive any such payment or benefit, in accordance with the terms of such Sections, without the
Executive incurring a Section 409A Tax, then the Company and the Executive shall work together in
good faith to agree on an alternative payment schedule or an alternative benefit of comparable
economic value acceptable to both parties (and to amend this Agreement, where necessary or
desirable) such that the Executive does not incur a Section 409A Tax or the Executive incurs the
least amount of Section 409A Tax as is possible under the
circumstances. If a satisfactory
alternative payment schedule or benefit cannot be agreed to by the later to occur of (i) the
originally scheduled payment, distribution or benefit date and (ii) six months following the date
of the Executive’s “separation from service,” the Company shall provide such payment, distribution
or benefit to the Executive (“409A Amount”) on the originally scheduled date for such payment,
distribution or benefit together with an additional payment (a “409A Payment”) in an amount such
that after payment by the Executive of all taxes imposed on the 409A Payment (excluding any Excise
Tax to which payment to the Executive is made pursuant to Section 3.6(a)), the Executive retains an
amount of the 409A Payment equal to any taxes (including taxes, penalties and interest under
Section 409A) on the 409A Amount.
- 16 -
SECTION 4. RESTRICTIVE COVENANTS.
4.1. Confidentiality. The Executive agrees that he will not, either during the Term
or at any time after the expiration or termination of the Term, disclose to any other Person any
confidential or proprietary information of the Company, the Company’s Parent, or any of their
subsidiaries, except for (a) disclosures to directors, officers, key employees, independent
accountants and counsel of the Company and its subsidiaries as may be necessary or appropriate in
the performance of the Executive’s duties
hereunder, (b) disclosures which do not have a material adverse effect on the business or
operations of the Company and its subsidiaries, taken as a whole, (c) disclosures which the
Executive is required to make by law or by any court, arbitrator or administrative or legislative
body (including any committee thereof) with apparent jurisdiction to order the Executive to
disclose or make accessible any information, (d) disclosures with respect to any other litigation,
arbitration or mediation involving this Agreement, and (e) disclosures of any such confidential or
proprietary information that is, at the time of such disclosure, generally known to and available
for use by the public otherwise than by the Executive’s wrongful act or omission. The Executive
agrees not to take with him upon leaving the employ of the Company any document or paper relating
to any confidential information or trade secret of the Company and its subsidiaries, except that
Executive shall be entitled to retain (i) papers and other materials of a personal nature,
including but limited to, photographs, correspondence, personal diaries, calendars and Rolodexes
(so long as such Rolodexes do not contain the Company’s only copy of business contact information),
personal files and phone books, (ii) information showing his compensation or relating to his
reimbursement of expenses, (iii) information that he reasonably believes may be needed for tax
purposes, and (iv) copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company.
4.2. Non-Solicitation of Employees. The Executive agrees that, except in the course
of performing his duties hereunder, he will not, either during the Term and for a period of two (2)
years after the expiration or termination of the Term, directly or indirectly, solicit or induce or
attempt to solicit or induce or cause any of the employees of the Company, the Company’s Parent, or
any of their subsidiaries to leave the employ of the Company, the Company’s Parent, or of any of
their subsidiaries.
SECTION 5. MISCELLANEOUS PROVISIONS.
5.1. No Mitigation; Offsets. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other employment or
otherwise and no future income earned by the Executive from employment or otherwise shall in any
way reduce or offset any payments due to the Executive hereunder. Assuming a payment or otherwise
is due Executive under this Agreement, the Company may offset against any amount due Executive
under this Agreement only those amounts due Company in respect of any undisputed, liquidated
obligation of Executive to the Company.
5.2. Governing Law. The provisions of this Agreement will be construed and
interpreted under the laws of the State of New Jersey, without regard to principles of conflicts of
law.
- 17 -
5.3. Injunctive Relief and Additional Remedy. The Executive acknowledges that the
injury that would be suffered by the Company as a result of a breach of the provisions of Sections
4.1 and 4.2 hereof would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may
have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Company will not be obligated to post
bond or other security in seeking such relief. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of the federal and state courts of the State of New Jersey for the
purpose of injunctive relief.
5.4. Representations and Warranties by Executive. The Executive represents and
warrants to the best of his knowledge that the execution and delivery by the Executive of this
Agreement do not, and the performance by the Executive of the Executive’s obligations hereunder
will not, with or without the giving of notice or the passage of time, or both: (a) violate any
judgment, writ, injunction, or order of any court, arbitrator or governmental agency applicable to
the Executive or (b) conflict with, result in the breach of any provisions of or the termination
of, or constitute a default under, any agreement to which the Executive is a party or by which the
Executive is or may be bound.
5.5. Waiver. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law, (a) no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (b) no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.
5.6. Assignment. No right or benefit under this Agreement shall be assigned,
transferred, pledged or encumbered (a) by the Executive except by a beneficiary designation made by
will or the laws of descent and distribution or (b) by the Company except that the Company may
assign this Agreement and all of its rights hereunder to any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets; provided that
such Person shall, by agreement in form and substance satisfactory to the Executive, expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such merger, consolidation or sale had taken place.
Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and each of its successors and assigns, and the Executive, his heirs, legal representatives
and any beneficiary or beneficiaries designated hereunder.
5.7. Entire Agreement; Amendments. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by
the parties hereto.
- 18 -
5.8. Arbitration. Any dispute which may arise between the Executive and the Company
with respect to the construction, interpretation or application of any of the terms, provisions,
covenants or conditions of this Agreement or any claim arising from or relating to this Agreement
will be submitted to final and binding arbitration by three (3) arbitrators in Newark, New Jersey,
under the expedited rules of the American Arbitration Association then obtaining. One such
arbitrator shall be selected by each of the Company and the Executive, and the two arbitrators so
selected shall select the third arbitrator. Selection of all three arbitrators shall be made
within thirty (30) days after the date the dispute arose. The written decision of the arbitrators
shall be rendered within ninety (90) days after selection of the third arbitrator. The decision of
the arbitrators shall be final and binding on the Company and the Executive and may be entered by
either party in any New Jersey federal or state court having jurisdiction.
5.9. Legal Costs. The Company shall pay any reasonable attorney’s fees and costs
incurred by the Executive in connection with any dispute regarding this Agreement so long as
Executive’s claim(s) or defense(s) in such action are asserted in the good faith belief that they
are not frivolous. The Company shall pay any such fees and costs promptly following its receipt of
written requests therefor, which requests shall be made no more frequently than once per calendar
month. The Company shall bear all legal costs and expenses incurred in the event the Company should
contest or dispute the characterization of any amounts paid pursuant to this Agreement as being
nondeductible under Section 280G of the Code or subject to imposition of an excise tax under
Section 4999 of the Code, including, without limitation, the reasonable costs and expenses of any
counsel selected by the Executive to represent him in connection with such a matter.
5.10. Severability. In the case that any one or more of the provisions contained in
this Agreement shall, for any reason, be held invalid or unenforceable, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree shall remain in full force and effect to the extent not
held invalid or unenforceable.
5.11. Counterparts; Facsimile. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same agreement. This
Agreement may be executed via facsimile.
5.12. Headings; Interpretation. The various headings contained herein are for
reference purposes only and do not limit or otherwise affect any of the provisions of this
Agreement. It is the intent of the parties that this Agreement not be construed more strictly with
regard to one party than with regard to any other party.
- 19 -
5.13. Notices.
(a) All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and sent as follows:
If to the Company, to:
Selective Insurance Company of America
00 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
00 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
If to the Executive, to:
Xxxx X. Xxxxxxxxx
0 Xxxxx Xxxxx
Xxxxxxx, XX 00000
0 Xxxxx Xxxxx
Xxxxxxx, XX 00000
(b) All notices and other communications required or permitted under this Agreement which
are addressed as provided in Paragraph (a) of this Section 5.13, (i) if delivered personally
against proper receipt shall be effective upon delivery, (ii) if sent by facsimile transmission
(with evidence supplied by the sender of the facsimile’s receipt at a facsimile number
designated for receipt by the other party hereunder, which other party shall be obligated to
provide such a facsimile number) shall be effective upon dispatch, and (iii) if sent (A) by
certified or registered mail with postage prepaid or (B) by Federal Express or similar courier
service with courier fees paid by the sender, shall be effective upon receipt. The parties
hereto may from time to time change their respective addresses and/or facsimile numbers for the
purpose of notices to that party by a similar notice specifying a new address and/or facsimile
number, but no such change shall be deemed to have been given unless it is sent and received in
accordance with this Section 5.13.
5.14. Withholding. All amounts payable by the Company to the Executive hereunder
(including, but not limited to, the Salary or any amounts payable pursuant to Sections 3.3 and/or
3.4 hereof) shall be reduced prior to the delivery of such payment to the Executive by an amount
sufficient to satisfy any applicable federal, state, local or other withholding tax requirements.
- 20 -
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the
Commencement Date.
| SELECTIVE INSURANCE COMPANY OF AMERICA |
||||
| By: | /s/ Xxxxxx X. Xxxxx | |||
| Xxxxxx X. Xxxxx | ||||
| Its Executive Vice President, Human Resources | ||||
| EXECUTIVE |
||||
| /s/ Xxxx X. Xxxxxxxxx | ||||
| Xxxx X. Xxxxxxxxx | ||||
- 21 -
EXHIBIT A
FORM OF RELEASE
Reference is hereby made to the Employment Agreement, dated as of
______, 200___
(the
“Employment Agreement”), by and between
_____
(the “Executive”) and
Selective Insurance Company of America, a New Jersey corporation (the “Company”).
Capitalized terms used but not defined herein shall have the meanings specified in the Employment
Agreement.
Pursuant to the terms of the Employment Agreement and in consideration of the payments to be
made to the Executive by the Company, which Executive acknowledges are in excess of what Executive
would otherwise be entitled to receive, the Executive hereby releases and forever discharges and
holds the Company and its parent, affiliates, and subsidiaries (collectively, the “Company
Parties” and each a “Company Party”), and the respective officers,
directors, employees, partners, stockholders, members, agents, affiliates, successors and assigns
and insurers of each Company Party, and any legal and personal representatives of each of the
foregoing, harmless from all claims or suits, of any nature whatsoever (whether known or unknown),
past, present or future, including those arising from the law, being directly or indirectly related
to the Executive’s employment by or the termination of such employment by any Company Party,
including, without limiting the foregoing, any claims for notice, pay in lieu of notice, wrongful
dismissal, severance pay, bonus, overtime pay, incentive compensation, interest or vacation pay for
the Executive’s service as an officer or director to any Company Party through the date hereof.
The Executive also hereby agrees not to file a lawsuit asserting any such claims. This release
(this “Release”) includes, but is not limited to, claims growing out of any legal
restriction on any Company Party’s right to terminate its employees and claims or rights under
federal, state, and local laws prohibiting employment discrimination (including, but not limited
to, claims or rights under Title VII of the Civil Rights Act of 1964, as amended by the Civil
Rights Act of 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the Uniformed Services Employment and Reemployment Rights Act, the Employee
Retirement Income Security Act, the Equal Pay Act, the Age Discrimination in Employment Act of
1967, as amended by the Older Workers Benefit Protection Act of 1990, and the laws of the State of
New Jersey against discrimination, or any other federal or state statutes prohibiting
discrimination on the basis of age, sex, race, color, handicap, religion, national origin, and
sexual orientation, or any other federal, state or local employment law, regulation or other
requirement) which arose before the date this Release is signed, excepting only claims in the
nature of workers’ compensation, claims for vested benefits, and claims to enforce this agreement.
The Executive acknowledges that because this Release contains a release of claims and is an
important legal document, he has been advised to consult with counsel before executing it, that he
may take up to [twenty-one (21)]1 [forty-five (45)]2
days to decide whether to execute it, and that he may revoke this Release by delivering or
mailing a signed notice of revocation to the Company at its offices within seven (7) days after
executing it. If Executive executes this Release and does not subsequently revoke the release
within seven (7) days after executing it, then this Release shall take effect as a legally binding
agreement between Executive and the Company.
| 1 | Delete brackets and use text enclosed therewith if 45 days is not otherwise required by Section 7(f)(1)(F) of the Age Discrimination in Employment Act and/or 29 C.F.R. Part 1625. If 45 days is so required, delete bracketed text in its entirety. |
| 2 | Delete brackets and use text enclosed therewith if 45 days is required by Section 7(f)(1)(F) of the Age Discrimination in Employment Act and/or 29 C.F.R. Part 1625. If 45 days is not so required, delete bracketed text in its entirety. |
- 2 -
If Executive does not deliver to the Company an original signed copy of this Release by
_____, or if Executive signs and revokes this Release within seven (7) days as set forth
above, the Company will assume that Executive rejects the Release and Executive will not receive
the payments referred to herein.
The Executive acknowledges that there is a risk that after signing this Release he may
discover losses or claims that are released under this Release, but that are presently unknown to
him. The Executive assumes this risk and understands that this Release shall apply to any such
losses and claims.
The Executive understands that this Release includes a full and final release covering all
known and unknown, injuries, debts, claims or damages which have arisen or may have arisen from
Executive’s employment by or the termination of such employment by any Company party. The
Executive acknowledges that by accepting the benefits and payments set forth in the Employment
Agreement, he assumes and waives the risks that the facts and the law may be other than as he
believes.
Notwithstanding the foregoing, this Release does not release, and the Executive continues to
be entitled to, (i) any rights to exculpation or indemnification that the Executive has under
contract or law with respect to his service as an officer or director of any Company Party and (ii)
receive the payments to be made to him by the Company pursuant to Section 3.3 and/or 3.4 of the
Employment Agreement (including any plan, agreement or other arrangement that is referenced in or
the subject of the applicable Section), subject to the conditions set forth in Section 3.5 of the
Employment Agreement, (iii) any right the Executive may have to obtain contribution as permitted by
law in the event of entry of judgment against him as a result of any act or failure to act for
which he and any Company party are jointly liable, and (iv) any claim in respect of any insurance
policy with any Company party entered into outside of the employment relationship.
This Release constitutes the release referenced in Section 3.5 of the Employment Agreement.
- 3 -
The undersigned Executive, having had the time to reflect, freely accepts and agrees to the
above Release. The Executive acknowledges and agrees that no Company representative has made any
representation to or agreement with the Executive relating to this Release which is not contained
in the express terms of this
Release. The Executive acknowledges and agrees that the execution and delivery of this
Release is based upon the Executive’s independent review of this Release, and the Executive hereby
expressly waives any and all claims or defenses by the Executive against the enforcement of this
Release which are based upon allegations or representations, projections, estimates, understandings
or agreements by the Company or any of its representatives or any assumptions by the Executive that
are not contained in the express terms of this Release.
| EXECUTIVE | ||||||
| Date: | ||||||
[Attach disclosures required by the Older Workers Benefit Protection Act, if required]
- 4 -
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the “Amendment”) is made effective as of this
15th day of April, 2008 between Selective Insurance Company of America, a New Jersey corporation
with a principal place of business at 00 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (the
“Company”), and Xxxx X. Xxxxxxxxx , an individual residing at 0 Xxxxx Xxxxx, Xxxxxxx, XX 07821(the
“Executive”).
WHEREAS, on March 1, 2007, the parties entered into an Employment Agreement (the “Employment
Agreement”); and
WHEREAS, the parties wish to amend the Employment Agreement to reflect recent guidance under
Sections 409A and 162(m) of the Internal Revenue Code of 1986, as amended, and to reflect certain
changes in the terms of the Executive’s employment as a result of the Executive’s promotion to
Executive Vice President of the Company;
NOW, THEREFORE, for and in consideration of the mutual promises, terms, provisions and
conditions set forth herein, the parties hereby amend the Employment Agreement, effective as of the
date first above written unless otherwise noted, as follows:
1. Effective January 1, 2009, a new definition shall be added to Section 1.1 of the Employment
Agreement (Definitions) as follows:
“Section 409A” means Section 409A of the Code and the regulations of the
Treasury and other applicable guidance promulgated thereunder.
2. Effective January 1, 2009, the definition of “Good Reason” in Section 1.1 of the Employment
Agreement shall be deleted in its entirety and replaced with the following:
“Good Reason” means the occurrence of any one or more of the following
conditions; provided, however, that no such condition shall be deemed
to constitute “Good Reason” unless the Executive provides notice of such
condition to the Company within ninety (90) days of its initial existence, and
the Company shall have failed to remedy the condition within thirty (30) days
of its receipt of such notice:
(i) any material diminution in the Executive’s Salary below the annualized rate
in effect on the date on which a Change in Control shall have occurred, unless
such reduction is implemented for the senior executive staff generally,
provided, however that such reduction shall constitute Good Reason even
if implemented for senior executive
staff generally if such reduction occurs within two years after a Change in
Control;
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(ii) any material negative change in the aggregate benefits the Executive
receives, other than as a result of the normal expiration of any Plan as to
other eligible employees in accordance with its terms as in effect on the date
preceding the date on which a Change in Control shall have occurred, or unless
such change affects all participants of such Plan generally;
(iii) without the Executive’s express prior written consent, a material
diminution of the Executive’s position, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material
diminution in the Executive’s responsibilities as an executive of the Company
as compared with those he had as an executive of the Company immediately prior
to a Change in Control, or any material negative change in the Executive’s
titles or office as in effect immediately prior to a Change in Control, except
in connection with the termination of the Executive’s employment for Cause,
Disability or Retirement or as a result of the Executive’s death, or by his
termination of his employment other than for Good Reason;
(iv) without the Executive’s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in
excess of fifty (50) miles from the location of the Executive’s office on the
date preceding the date on which a Change in Control shall have occurred;
(vi) the failure by the Company to obtain from any Person with which it may
merge or consolidate or to which it may sell all or substantially all of its
assets, the agreement of such Person as set forth in the proviso in Section 5.6
hereof; provided that such merger, consolidation or sale constitutes a
Change in Control; or
(vii) within two years after a Change in Control shall have occurred, any
action or inaction that constitutes a material breach by the Company of any of
the terms and conditions of this Agreement.
3. The first sentence of Section 2.3(a) of the Employment Agreement shall be deleted and
replaced with the following:
The Executive agrees to serve as Executive Vice President during the Term.
4 The first sentence of Section 2.4(a) of the Employment Agreement shall be deleted and
replaced with the following:
For all services rendered by the Executive under this Agreement, the Company
shall pay the Executive a salary during the Term at a rate of not less than
THREE HUNDRED TWENTY-FIVE THOUSAND AND
00/100 DOLLARS ($325,000.00) per year, which may be increased but not decreased
unless decreased for the senior executive staff generally (the “Salary”),
payable in installments in accordance with the Company’s policy from time to
time in effect for payment of salary to its executives.
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5. Section 3.3(b)(i) of the Employment Agreement shall be deleted and replaced with the
following:
If the Executive’s employment is terminated pursuant to Paragraphs (a) or (b)
in Section 3.1 hereof, then the Executive (or his legal representative, as
applicable) shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (A) 1.5 times (B) the
Executive’s Salary plus an amount equal to the average of the three
most recent annual cash incentive payments (each an “ACIP”) made to the
Executive; provided that any such severance payment shall be reduced by
the amount of payments the Executive receives under any life or disability
insurance policies with respect to which the premiums were paid by the Company.
6. Section 3.3(b)(ii) of the Employment Agreement shall be deleted and replaced with the
following:
If the Executive’s employment is terminated pursuant to Paragraph (e) or (f) in
Section 3.1 hereof, then the Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (A) 1.5
times (B) the Executive’s Salary plus an amount equal to the
average of the three most recent ACIP payments made to the Executive.
7. The first sentence of Section 3.3(c)(ii) of the Employment Agreement shall be amended
by substituting “eighteen (18) months” for “twelve (12) months.”
8. Section 3.4(a) of the Employment Agreement shall be deleted and replaced with the
following:
The Executive shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (i) 2; and (ii) the greater of:
(1) the sum of the Executive’s Salary plus the Executive’s target
ACIP in effect as of the Termination Date; or
(2) the sum of the Executive’s Salary as of the Termination Date
plus the Executive’s average ACIP for the three (3) calendar years
prior to the calendar year in which the Termination Date occurs.”
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Such payment shall be made, subject to Section 3.7, sixty (60) days following
the Executive’s termination of employment; provided, however, that, if
and to the extent any payments under this Section 3.4 constitute deferred
compensation subject to Section 409A, then, unless the Change in Control
qualifies as a change in the ownership of the Company, a change in effective
control of the Company, or a change in the ownership of a substantial portion
of the assets of the Company, as described in Treasury Regulations Section
1.409A-3(i)(5), such payment shall be made at the times specified in Section
3.3(b)(iii) of the Employment Agreement. The severance payment(s) required to
be made by the Company to the Executive pursuant to this Section 3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to
be paid by the Company to the Executive.
9. The first sentence of Section 3.4(b) of the Employment Agreement shall be amended by
substituting “twenty-four (24) months” for “eighteen (18) months.”
10. Effective January 1, 2009, Section 3.4(c)(ii) of the Employment Agreement shall be deleted
and replaced with the following:
(ii) to the extent that any such stock options, stock appreciation rights,
restricted stock grants, stock bonuses, long-term incentives or similar
benefits shall require by their terms the exercise thereof by the Executive,
the last date to exercise the same shall, notwithstanding any provision to the
contrary in any agreement or Plan, be the earliest of (A) the later to occur of
the fifteenth day of the third month following the date on which, or the
December 31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits would otherwise have expired if not extended,
(B) the original expiration date had the Executive’s employment not so
terminated, and (C) with respect only to a stock option or stock appreciation
right, the tenth anniversary of the date of grant of such stock right;
11. Effective January 1, 2009, Section 3.5 of the Employment Agreement shall be renumbered as
Section 3.5(a) and retitled “Release and Restrictive Covenants,” and the first sentence of Section
3.5(a) of the Employment Agreement shall be deleted and replaced with the following:
Within ten (10) days of the Executive’s termination of employment, the Company
shall provide the Executive with a release substantially in the form of
Exhibit A attached hereto (the “Release”). The Executive’s right to
receive the severance payments and benefits pursuant to Sections 3.3 and 3.4
hereof is expressly conditioned upon (i) receipt by the Company of the Release
executed by the Executive within forty-five (45) days of receipt by the
Executive of such Release, and the expiration of the revocation period
described therein without such
Release having been revoked, and (ii) the compliance by the Executive with the
covenants, terms and provisions of Sections 4.1 and 4.2 hereof (the
“Restrictive Covenants”).
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12. A new Section 3.5(b) of the Employment Agreement shall be added as follows:
(b) Performance-Based Compensation. Upon the expiration of the initial
three (3) year period of the Term, during any calendar year in which the
Executive is a “covered employee,” as defined in Section 162(m)(3) of the Code,
if any ACIP entitlements or stock-based awards of the Executive are intended to
qualify as “performance based compensation” within the meaning of Section
162(m) of the Code, then the Executive shall not be entitled to any severance
payments based on his ACIP payments or accelerated vesting of his stock-based
awards pursuant to Section 3.3 or 3.4 of this Agreement if and to the extent
that such payments or accelerated vesting would cause any portion of such ACIP
entitlements or stock-based awards to fail to be deductible pursuant to Section
162(m) of the Code.
13. Effective January 1, 2009, Section 3.6(d) of the Employment Agreement shall be deleted in
its entirety and replaced with the following:
Application of Section 409A. Notwithstanding anything in this Section
3.6 to the contrary, all Gross-Up Payments shall be made by the end of the
Executive’s taxable year next following the taxable year in which he remits the
related taxes to the applicable taxing authorities.
14. Effective January 1, 2009, Section 3.7 of the Employment Agreement shall be deleted in its
entirety and replaced with the following:
(a) Specified Employee Provisions. “Notwithstanding anything herein to
the contrary, if the Executive is a “specified employee,” as defined under
Section 409A, of the Company, as determined by the Board or the Compensation
Committee of the Company or the Company’s parent company from time to time,
upon the date of his “separation from service,” as defined in Section 409A,
from the Company (his “Separation from Service”), then, to the extent any
payment or provision of benefits under this Agreement upon the Executive’s
Separation from Service is subject to Section 409A of the Code, no such payment
shall be made and the Executive shall be responsible for the full cost of such
benefits for six (6) months following the Executive’s Separation from Service;
provided, however, that such six month delay of payments shall not
apply to any payments or benefits that are not subject to Section 409A,
including the following: (a) any severance or other payments that become due
and payable during the period commencing with the date of the Executive’s date
of termination of employment and ending on March 15 of the succeeding calendar
year and which qualify as “short term deferral payments” under Section 409A,
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and (b) any remaining severance or other payments paid after the Executive’s
Separation from Service to the extent (i) that the dollar amount of such
payments does not exceed two (2) times the lesser of (x) the Executive’s
annualized compensation (based on the Executive’s annual rate of pay for the
calendar year preceding the calendar year in which the separation from service
occurred, adjusted to reflect any increase during such calendar year which was
expected to continue indefinitely had the Executive’s separation from service
not occurred) or (y) the maximum amount of compensation that may be taken into
account under a qualified plan pursuant to Section 401(a)(17) of the Code for
the calendar year in which the separation from service occurred, and (ii) such
severance or other payments are to be made to the Executive no later than the
last day of the second calendar year following the calendar year in which the
Separation from Service occurs. For purposes of Section 409A, the severance
payments and each monthly provision of severance benefits under Sections 3.3
and 3.4 of this Agreement shall be treated as a right to a series of
separate payments.
(b) Amendments and Acknowledgements. All payments to the Executive
pursuant to this Agreement are intended to comply with, or to be exempt from,
the requirements of Section 409A of the Code. The Company and Executive agree
that they will consider in good faith any and all amendments to this Agreement
either may deem necessary to ensure compliance with the provisions of Section
409A of the Code. However, the Executive acknowledges that, notwithstanding
the 409A Payment set forth in Section 3.7 of this Agreement, the Executive
bears the entire risk of any adverse Federal and State tax consequences and
penalty taxes in the event any payment pursuant to this Agreement is deemed to
be subject to Section 409A of the Code and that no representations have been
made to the Executive relating to the tax treatment of any payment pursuant to
this Agreement under Section 409A of the Code and the corresponding provisions
of any applicable State income taxation laws [(including California income
taxation laws)].”
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15. Effective January 1, 2009, the second sentence in Section 5.1 of the Employment Agreement
shall be deleted and replaced with the following:
Assuming a payment or otherwise is due to the Executive under this Agreement,
the Company may offset against any amount due to the Executive under this
Agreement only those amounts due to the Company in respect of any undisputed,
liquidated obligation of the Executive to the Company; provided,
however, that any amount due to
the Company by the Executive shall first be applied to offset amounts due to
the Executive under this Agreement that are not deferred compensation subject
to Section 409A, and then, to the extent applicable, to offset amounts due to
the Executive under this Agreement that are deemed to be deferred compensation
subject to Section 409A; and further provided that, if and to
the extent required to satisfy the provisions of Treasury Regulation Section
1.409A-3(j)(xiii), any debt of the Executive to the Company may be offset
against any amount due to the Executive under this Agreement that constitutes
deferred compensation subject to Section 409A only if (a) such debt is incurred
in the ordinary course of the service relationship between the Executive and
the Company, (b) the entire amount of the offset is limited to $5,000 in any of
the Company’s taxable years, and (c) the offset is made at the same time and in
the same amount as the debt otherwise would have been due and collected from
the Executive.
16. All other provisions of the Employment Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment effective as of
the date above written.
| SELECTIVE INSURANCE COMPANY OF AMERICA |
||||
| By: | /s/ Xxxxxx X. Xxxxx | |||
| Xxxxxx X. Xxxxx | ||||
| Its Executive Vice President, Human Resources | ||||
| EXECUTIVE |
||||
| /s/ Xxxx X. Xxxxxxxxx | ||||
| Xxxx X. Xxxxxxxxx | ||||
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