Exhibit 29
SEVERANCE AGREEMENT
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THIS AGREEMENT between ALLIED Group, Inc., an Iowa corporation (the
"Company"), and _____________________ (the "Employee"), dated as of this ____
day of May, 1998.
W I T N E S S E T H :
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WHEREAS, the Employee holds a position of significant importance with the
Company;
WHEREAS, the Company believes that, in the event it is confronted with a
situation that could result in a change in ownership or control of the Company,
continuity of management will be essential to its ability to evaluate and
respond to such situation in the best interests of shareholders;
WHEREAS, the Company understands that any such situation will present
significant concerns for the Employee with respect to his financial and job
security;
WHEREAS, the Company desires to assure itself of the Employee's services
during the period in which it is confronting such a situation, and to provide
the Employee certain financial assurances to enable the Employee to perform the
responsibilities of his position without undue distraction and to exercise his
judgment without bias due to his personal circumstances;
WHEREAS, to achieve these objectives, the Company and the Employee desire
to enter into an agreement providing the Company and the Employee with certain
rights and obligations upon the occurrence of a Change of Control (as defined in
Section 2);
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Employee as follows:
1. Operation of Agreement. (a) Effective Date. The effective date
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of this Agreement shall be the date on which a Change of Control occurs (the
"Change of
Control Date"), provided that, except as provided in Section 1(b), if the
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Employee is not employed by the Company on the Change of Control Date, this
Agreement shall be void and without effect.
(b) Termination of Employment Following a Potential Change of Control.
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Notwithstanding Section 1(a), if (i) the Employee's employment is terminated by
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the Company without Cause (as defined in Section 2) after the occurrence of a
Potential Change of Control and prior to the occurrence of a Change of Control
and (ii) a Change of Control occurs within one year of such termination, the
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Employee shall be deemed, solely for purposes of determining his rights under
this Agreement, to have remained employed until the date such Change of Control
occurs and to have been terminated by the Company without Cause immediately
after this Agreement becomes effective.
(c) Termination of Employment Following Death or Disability. This
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Agreement shall terminate automatically upon the Employee's death or termination
due to Disability (as defined in Section 2).
2. Definitions. (a) Change of Control. For the purposes of this
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Agreement, a "Change of Control" shall mean the happening of any of the
following:
(i) Any person or entity, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"),
other than the Company, a subsidiary of the Company, or any employee benefit
plan of the Company or its subsidiaries, becomes the beneficial owner of the
Company's securities having 20 percent or more of the combined voting power
of the then outstanding securities of the Company (other than as a result of
an issuance of securities initiated by the Company in the ordinary course of
business); or
(ii) As the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, less
than 80% of the combined voting power of the then outstanding securities of
the Company or any successor corporation or entity entitled to vote generally
in the election of directors of the Company or such other corporation or
entity after such transaction, are held in the aggregate by holders of the
Company's securities entitled to vote generally in the election of directors
of the Company immediately prior to such transactions; or
(iii) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for
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election by the Company's stockholders, of each director of the Company first
elected during such period was (a) approved by a vote of at least two-thirds
of the directors of the Company then still in office who were directors of
the Company at the beginning of any such period or was made pursuant to the
Stock Rights Agreement between the Company and ALLIED Mutual.
(b) Potential Change of Control. For the purposes of this Agreement, a
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"Potential Change of Control" shall mean the happening of any of the following:
(i) any person commences a tender offer, which if consummated would
result in such person being the beneficial owner of at least 20% of the
Company's voting securities;
(ii) proxies for the election of directors of the Company are solicited
by anyone other than the Company; or
(iii) the execution by the Company of an agreement, the consummation of
which would result in a Change of Control of the Company; or
(iv) the acquisition of beneficial ownership, directly or indirectly, by
any entity, person or group (other than the Company, a wholly-owned
subsidiary thereof or any employee benefit plan of the Company or its
subsidiaries (including any trustee of such plan acting as such trustee)) of
securities of the Company representing 10 percent or more of the combined
voting power of the Company's outstanding securities and the adoption by the
Board of Directors of a resolution to the effect that a Potential Change of
Control of the Company has occurred for purposes of this Agreement.
(c) Cause. For the purposes of this Agreement, "Cause" means (i) the
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Employee's conviction or plea of nolo contendere to a felony; (ii) an act or
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acts of dishonesty or gross misconduct on the Employee's part which result or
are intended to result in material damage to the Company's business or
reputation; or (iii) repeated material violations by the Employee of his
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position, authority, duties, obligations or responsibilities as in effect at
the Change of Control Date, which violations are demonstrably willful and
deliberate on the Employee's part and which result in material damage to the
Company's business or reputation.
(d) Good Reason. "Good Reason" means the occurrence of any of the
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following, without the express written consent of the Employee, after the
occurrence of a Potential Change of Control or a Change of Control:
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(i) (A)the assignment to the Employee of any duties inconsistent in any
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material adverse respect with the Employee's position, authority or
responsibilities as in effect at the Change of Control Date, or (B) any other
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material adverse change in Employee's authority or responsibilities;
(ii) any failure by the Company, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of notice
thereof given by the Employee, to provide the Employee with (A) an annual
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base salary, as it may be increased from time to time (the "Base Salary"),
which is at least equal to the Base Salary paid to the Employee immediately
prior to the Change of Control Date, or (B) incentive compensation
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opportunities at a level which is at least equal to the level of incentive
compensation opportunities made available to the Employee immediately prior
to the Change of Control Date;
(iii) the failure by the Company to permit the Employee (and, to the
extent applicable, his dependents) to participate in or be covered under all
pension, retirement, deferred compensation, savings, medical, dental, health,
disability, group life, accidental death and travel accident insurance plans
and programs of the Company and its affiliated companies at a level that is
commensurate with the Employee's participation in such plans immediately
prior to the Change of Control Date (or, if more favorable to the Employee,
at the level made available to the Employee or other similarly situated
officers at any time thereafter);
(iv) the Company's requiring the Employee to be based at any office or
location more than 25 miles from that location at which he performed his
services for the Company immediately prior to the Change of Control, except
for travel reasonably required in the performance of the Employee's
responsibilities; or
(v) any failure by the Company to obtain the assumption and agreement
to perform this Agreement by a successor as contemplated by Section 5.
In no event shall the mere occurrence of a Change of Control, absent any further
impact on the Employee, be deemed to constitute Good Reason.
(e) Disability. For purposes of this Agreement, "Disability" shall
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mean the Employee's inability to perform the duties of his position, as
determined in accordance with the policies and procedures applicable with
respect to the Company's long-term disability plan, as in effect immediately
prior to the Change of Control Date.
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(f) Notice of Termination. Any termination by the Company for Cause
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or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 6(d). For
purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10 business days of the
Company's having actual knowledge of the events giving rise to such termination,
and in the case of a termination for Good Reason, within 90 days of the later to
occur of (x) the Change of Control Date or (y) the Employee's having actual
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knowledge of the events giving rise to such termination, and which (i) indicates
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the specific termination provision in this Agreement relied upon, (ii) sets
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forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
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of such notice, specifies the termination date of this Agreement (which date
shall be not more than 30 days after the giving of such notice). The failure by
the Employee to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of the
Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
(g) Date of Termination. For the purpose of this Agreement, the term
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"Date of Termination" means (i) in the case of a termination for which a Notice
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of Termination is required, the date of receipt of such Notice of Termination
or, if later, the date specified therein, as the case may be, and (ii) in all
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other cases, the actual date on which the Employee's employment terminates.
3. Employment Protection Benefits. (a) Basic Benefits. If on or
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before the second anniversary of the Change of Control Date (x) the Company
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terminates the Employee's employment for any reason other than for Cause or
Disability or (y) the Employee voluntarily terminates his employment for Good
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Reason, then the Company shall pay the Employee the following amounts:
(i) the Employee's Base Salary earned through the Date of Termination
(the "Earned Salary");
(ii) a cash amount (the "Severance Amount") equal to [the product of
two] and the sum of
(A) the Employee's annual Base Salary; and
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(B) the higher of the annual bonuses payable to the Employee in
respect of either of the two fiscal years ended immediately
preceding the fiscal year in which the Change of Control
occurs; and
(iii) any vested amounts or benefits owing to the Employee under the
Company's otherwise applicable employee benefit plans and programs, including
any compensation previously deferred by the Employee (together with any
accrued earnings thereon) and not yet paid by the Company and any accrued
vacation pay not yet paid by the Company (the "Accrued Obligations").
The Earned Salary and Severance Amount shall be paid in a single lump sum as
soon as practicable, but in no event more than ten business days (or at such
earlier date required by law) following the Employee's Date of Termination.
Accrued Obligations shall be paid in accordance with the terms of the applicable
plan, program or arrangement.
(b) Continuation of Benefits. If the Employee receives the Severance
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Amount described in this Section 3, the Employee (and, to the extent applicable,
his dependents) shall be entitled, after the Date of Termination until the
earlier of (x) the eighteen month anniversary of his Date of Termination (the
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"End Date") or (y) the date the Employee becomes eligible for comparable
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benefits under a similar plan, policy or program of a subsequent employer, to
continue participation in all of the Company's employee and Employee welfare and
fringe benefit plans (the "Benefit Plans") as were generally provided to the
Employee in accordance with the Company's policies and practices immediately
prior to the Change of Control Date. To the extent any such benefits cannot be
provided under the terms of the applicable plan, policy or program, the Company
shall provide a comparable benefit under another plan or from the Company's
general assets. The Employee's participation in the Benefit Plans will be on the
same terms and conditions that would have applied had the Employee continued to
be employed by the Company through the End Date. Notwithstanding the foregoing,
any continuation of health benefits provided hereunder would be treated as
fulfilling the Company's COBRA requirements and in no case would such
continuation exceed the maximum time period under COBRA.
(c) Indemnification. The Company shall indemnify the Employee and hold
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the Employee harmless from and against any claim, loss or cause of action
arising from or out of the Employee's performance as an officer, director or
employee of the Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which the Employee serves at the request of
the Company to the maximum extent permitted by applicable law and the Company's
Certificate of Incorporation and By-Laws (the "Governing Documents"), provided
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that in no event shall the protection afforded to the
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Employee hereunder be less than that afforded under the Governing Documents as
in effect immediately prior to the Change of Control Date.
(d) Discharge of the Company's Obligations. Except as expressly
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provided in Section 4, the Severance Amount and the other amounts payable and
benefits provided in respect of the Employee pursuant to this Section 3
following termination of his employment shall be in full and complete
satisfaction of the Employee's rights under this Agreement and any other claims
he may have in respect of his employment by the Company or any of its
subsidiaries. Such amounts shall constitute liquidated damages with respect to
any and all such rights and claims and, upon the Employee's receipt of such
amounts, the Company shall be released and discharged from any and all liability
to the Employee in connection with this Agreement or otherwise in connection
with the Employee's employment with the Company and its subsidiaries. Without
limiting the generality of the foregoing, the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others whether by reason of the
subsequent employment of the Employee or otherwise. Nothing in this Section
3(d), however, shall in any way limit the Company's obligations to the Employee
pursuant to Section 3(c) hereof.
(e) Limit on Payments by the Company.
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(i) Application of Section 3(e). In the event that any amount or
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benefit paid or distributed to the Employee pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to the
Employee by the Company or any affiliated company (collectively, the "Covered
Payments"), would be an "excess parachute payment" as defined in Section 280G
of the Code and would thereby subject the Employee to the tax (the "Excise
Tax") imposed under Section 4999 of the Code (or any similar tax that may
hereafter be imposed), the provisions of this Section 3(e) shall apply to
determine the amounts payable to Employee pursuant to this Agreement.
(ii) Calculation of Benefits. Immediately following delivery of any
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Notice of Termination, the Company shall notify the Employee of the aggregate
present value of all termination benefits to which he would be entitled under
this Agreement and any other plan, program or arrangement as of the projected
Date of Termination, together with the projected maximum payments, determined
as of such projected Date of Termination that could be paid without the
Employee being subject to the Excise Tax.
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(iii) Imposition of Payment Cap. If (x) the aggregate value of all
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compensation payments or benefits to be paid or provided to the Employee
under this Agreement and any other plan, agreement or arrangement with the
Company exceeds the amount which can be paid to the Employee without the
Employee incurring an Excise Tax and (y) the Employee would receive a greater
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net after-tax amount (taking into account all applicable taxes payable by the
Employee, including any Excise Tax) by applying the limitation contained in
this Section 3(e)(iii), then the amounts payable to the Employee under this
Section 3 shall be reduced (but not below zero) to the maximum amount which
may be paid hereunder without the Employee becoming subject to such an Excise
Tax (such reduced payments to be referred to as the "Payment Cap"). In the
event that Employee receives reduced payments and benefits hereunder,
Employee shall have the right to designate which of the payments and benefits
otherwise provided for in this Agreement that he will receive in connection
with the application of the Payment Cap. In addition, the Employee may elect,
by written notice to the Company delivered not later than the Change of
Control Date, that, in lieu of limiting the benefits payable hereunder (or,
if required to avoid an Excise Tax without regard to the payments made
hereunder), the "Requisite Portion" (as defined below) of the stock options
held by the Employee which are not then exercisable shall not become
exercisable by reason of the Change of Control, but rather shall become
exercisable in accordance with their original terms. The Requisite Portion
shall mean the portion of all such stock options pertaining to the least
number of shares necessary to avoid the imposition of an Excise Tax (taking
into account the potential payment of severance benefits hereunder); it being
understood that the portion of the options which would become exercisable at
the last date after the Change of Control shall be first taken into account
to satisfy this requirement, with such other portions of other options, in
reverse order of exercise date, applied thereunder until a sufficient number
of options have not been accelerated to avoid the imposition of an Excise
Tax.
(iv) Application of Section 280G. For purposes of determining whether
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any of the Covered Payments will be subject to the Excise Tax and the amount
of such Excise Tax,
(A) such Covered 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 good faith
judgment of the Company's independent certified public accountants
appointed prior to the Effective Date or tax counsel selected by
such accountants (the "Accountants"), the Company has a
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reasonable basis to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute payments" or
represent reasonable compensation for personal services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code)
in excess of the "base amount," or such "parachute payments" are
otherwise not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with
the principles of Section 280G of the Code.
(v) Applicable Tax Rates. For purposes of determining whether the
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Employee would receive a greater net after-tax benefit were the amounts
payable under this Agreement reduced in accordance with Section 3(e)(iii),
the Employee shall be deemed to pay:
(A) Federal income taxes at the highest applicable marginal rate of
Federal income taxation for the calendar year in which the first
amounts are to be paid hereunder, and
(B) any applicable state and local income taxes at the highest
applicable marginal rate of taxation for such calendar year, net of
the maximum reduction in Federal incomes taxes which could be
obtained from the deduction of such state or local taxes if paid in
such year;
provided, however, that the Employee may request that such determination be
made based on his individual tax circumstances, which shall govern such
determination so long as the Employee provides to the Accountants such
information and documents as the Accountants shall reasonably request to
determine such individual circumstances.
(vi) Adjustments in Respect of the Payment Cap. If the Employee
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receives reduced payments and benefits under this Section 3(e) (or this
Section 3(e) is determined not to be applicable to the Employee because the
Accountants conclude that Employee is not subject to any Excise Tax) and it
is established pursuant to a final determination of a court or an Internal
Revenue Service proceeding (a "Final Determination") that, notwithstanding
the good faith of the Employee and the Company in applying the terms of this
Agreement, the aggregate "parachute payments" within the meaning of Section
280G of the Code paid to the Employee or for his benefit are in an amount
that would result in the Employee being subject an
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Excise Tax and the Employee would still be subject to the Payment Cap under
the provisions of Section 3(e)(iii), then the amount equal to such excess
parachute payments shall be deemed for all purposes to be a loan to the
Employee made on the date of receipt of such excess payments, which the
Employee shall have an obligation to repay to the Company on demand, together
with interest on such amount at the applicable Federal rate (as defined in
Section 1274(d) of the Code) from the date of the payment hereunder to the
date of repayment by the Employee. If this Section 3(e) is not applied to
reduce the Employee's entitlements under this Section 3 because the
Accountants determine that the Employee would not receive a greater net
after-tax benefit by applying this Section 3(e) and it is established
pursuant to a Final Determination that, notwithstanding the good faith of the
Employee and the Company in applying the terms of this Agreement, the
Employee would have received a greater net after-tax benefit by subjecting
his payments and benefits hereunder to the Payment Cap, then the aggregate
"parachute payments" paid to the Employee or for his benefit in excess of the
Payment Cap shall be deemed for all purposes a loan to the Employee made on
the date of receipt of such excess payments, which the Employee shall have an
obligation to repay to the Company on demand, together with interest on such
amount at the applicable Federal rate (as defined in Section 1274(d) of the
Code) from the date of the payment hereunder to the date of repayment by the
Employee. If the Employee receives reduced payments and benefits by reason of
this Section 3(e) and it is established pursuant to a Final Determination
that the Employee could have received a greater amount without exceeding the
Payment Cap, then the Company shall promptly thereafter pay the Employee the
aggregate additional amount which could have been paid without exceeding the
Payment Cap, together with interest on such amount at the applicable Federal
rate (as defined in Section 1274(d) of the Code) from the original payment
due date to the date of actual payment by the Company.
4. Legal Fees and Expenses. If the Employee asserts any claim in any
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contest (whether initiated by the Employee or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Employee's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorney's fees, on a
quarterly basis, upon presentation of proof of such expenses, provided that the
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Employee shall reimburse the Company for such amounts, plus simple interest
thereon at the 90-day United States Treasury Xxxx rate as in effect from time to
time, compounded annually, if the arbitrator shall find that the Employee did
not have a good faith basis to assert or defend the claim in question.
5. Successors. This Agreement shall inure to the benefit of and be
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binding upon the Company and its successors. The Company shall require any
successor to all or
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substantially all of the business and/or assets of the Company, whether direct
or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Employee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place. This Agreement is personal to the Employee and is
not assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee's legal representatives.
6. Miscellaneous. (a) Applicable Law. This Agreement shall be
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governed by and construed in accordance with the laws of the State of Iowa,
applied without reference to principles of conflict of laws.
(b) Arbitration. Any dispute or controversy arising under or in
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connection with this Agreement shall be resolved by binding arbitration. The
arbitration shall be held in Des Moines, Iowa, and except to the extent
inconsistent with this Agreement, shall be conducted in accordance with the
Expedited Employment Arbitration Rules of the American Arbitration Association
then in effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and the Employee. If the parties cannot
agree on an acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators, one appointed by each of the parties and the third appointed
by the other two arbitrators.
(c) Entire Agreement. Upon the Change of Control Date, this Agreement
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shall constitute the entire agreement between the parties hereto with respect to
the matters referred to herein. Notwithstanding anything else to the contrary,
this Agreement is not intended to replace or supersede any other written
agreement with the Employee, but rather is intended solely to provide the
Employee with additional rights and obligations upon a Change of Control which
may supplement rather than replace any rights or obligations the Employee may
have pursuant to any written agreement with the Company which is in effect on
such Change of Control Date. There are no promises, representations,
inducements or statements between the parties other than those that are
expressly contained herein. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. In the event any provision of
this Agreement is invalid or unenforceable, the validity and enforceability of
the remaining provisions hereof shall not be affected. The Employee acknowledges
that he is entering into this Agreement of his own free will and accord, and
with no duress, that he has read this Agreement and that he understands it and
its legal consequences.
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(d) Notices. All notices and other communications hereunder shall be
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in writing and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee: at the home address of the Employee noted on
the records of the Company
If to the Company: ALLIED Group, Inc.
000 0xx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
Attn.: [_____________]
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and Employee has hereunto set his hand
as of the day and year first above written.
ALLIED GROUP, INC.
By
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Name:
Title:
WITNESSED:
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[NAME]
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WITNESSED:
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