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EXHIBIT 10(4)
EXECUTIVE CHANGE IN CONTROL AND TERMINATION BENEFITS AGREEMENT
THIS AGREEMENT, between CAPSURE HOLDINGS CORP., a Delaware corporation
(hereinafter called "Capsure"), UNITED CAPITOL INSURANCE COMPANY, a Wisconsin
Corporation (hereinafter called "UCIC"), and XXXXXX X. XXXXXXX (hereinafter
called the "Employee"), dated as of this 6th day of November, 1995.
W I T N E S S E T H:
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WHEREAS, Capsure considers it essential to the best interests of Capsure
and its stockholders that the Employee, as a member of the key management
personnel of UCIC, a wholly-owned indirect subsidiary of Capsure, be encouraged
to remain with UCIC, and to continue to devote full attention to UCIC's
business in the event an effort is made by Capsure to relinquish control of
UCIC through a sale of UCIC by Capsure or otherwise. In this connection,
Capsure recognizes that the possibility of a change in control and the
uncertainty and questions which it may raise among management may result in the
departure or distraction of key management personnel of UCIC to the detriment
of Capsure and its stockholders. As such, the Board of Directors of Capsure
(the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of key members
of UCIC's management to their assigned duties without distraction in the face
of the potentially disturbing circumstances arising from the possibility of a
change in control of UCIC;
WHEREAS, the Employee is a key member of UCIC's management personnel;
WHEREAS, Capsure believes the Employee has made and will continue to make
valuable contributions to UCIC;
WHEREAS, should Capsure receive any proposal from a third person
concerning the acquisition of 51% or more of the voting securities of UCIC, the
Board believes it imperative that UCIC, Capsure and the Board be able to rely
upon the Employee to continue as a member of management of UCIC, and that UCIC
and Capsure be able to receive and rely upon the advice and services of the
Employee, without concern that he or she might be distracted by the personal
uncertainties and risks created by such a proposal; and
WHEREAS, should Capsure receive any such proposals, in addition to the
Employee's regular duties, the Employee may be called upon to assist in the
assessment and furtherance of such proposals, and to take such other actions as
UCIC, Capsure or the Board might determine to be appropriate;
NOW, THEREFORE, to ensure Capsure and UCIC that they will have the
continued, undivided attention and services of the Employee and the
availability of the Employee's cooperation, advice and counsel notwithstanding
the possibility, threat or occurrence of a bid to take over control of UCIC,
and to induce the Employee to remain in the employ of UCIC, and for other good
and valuable consideration, Capsure, UCIC, and the Employee agree as follows:
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1. Change in Control.
For purposes of this Agreement, a "Change in Control of UCIC" shall be
deemed to have occurred if, on or before December 31, 1996 Capsure or
Capsure's subsidiary, Capsure Financial Group, Inc., actually transfers,
assigns, sells or disposes of (i) all or substantially all of UCIC's
assets, or (ii) 51% or more of the voting securities of UCIC or United
Capitol Holding Company.
2. Payment of a Transaction Bonus.
Upon the occurrence of a Change in Control of UCIC, the Employee shall be
entitled to a transaction bonus payable by either Capsure or UCIC (as
Capsure may elect) to the Employee, such bonus to be in an amount to be
determined by the Board (or the Compensation Committee of the Board or any
other person or entity designated by the Board) prior to the closing of the
Change in Control of UCIC. The transaction bonus shall be in an amount
which is not less than 50% and not more than 75% of the sum of the
Employee's effective annual base salary, plus the last cash bonus paid to
the Employee, prior to the Change in Control of UCIC. The transaction
bonus shall be payable in cash at the closing of the Change in Control of
UCIC, subject to any applicable payroll or other taxes required to be
withheld. The determination of whether the Employee receives 50% or 75% of
his annual base salary plus bonus (or something in between) as a
transaction bonus shall be made solely at the discretion of the Board (or
the Compensation Committee of the Board or any other person or entity
designated by the Board), following the consideration of such factors as
the Employee's assistance, furtherance efforts, general attitude and spirit
of cooperation with Capsure and UCIC during the circumstances arising from
the possibility of a Change in Control of UCIC.
3. Employee Stock Options.
(a) Upon a Change in Control of UCIC, Capsure will, at
the election of the Employee by notice (the "Election")
given to Capsure within eighty-five (85) days following
the Change in Control of UCIC, pay to the Employee in
cash equivalents an amount (an "option payment") equal to
the excess, if any, of the fair market value for each
share of Capsure's common stock subject to an unexercised
option held by the Employee over the exercise price per
share of such option(s). For purposes of determining the
amount of the option payment, the fair market value for
each share of Capsure's stock subject to an unexercised
option held by the Employee shall be the last trade price
for Capsure's common stock on the New York Stock Exchange
at the close of trading on the day prior to the delivery
to Capsure of the Election by the Employee. Capsure
shall pay the option payment to the Employee within five
(5) business days following the receipt of the Election.
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(b) All unexercised options granted to the Employee shall fully vest
immediately upon the closing of a Change in Control of UCIC.
4. Termination of the Employee Following a Change in Control of UCIC.
(a) Following the closing of a Change in Control of UCIC, the
Employee shall be entitled to the benefits set forth in Sections 6 and
7 hereof upon any termination by UCIC or its successor of the
Employee's employment by UCIC or its successor within 24 months
following a Change in Control of UCIC for any reason, except the
following:
(i) Termination by reason of the Employee's death,
provided the Employee has not previously given a "Notice of
Termination" pursuant to Section 5 hereof; or
(ii) Termination by reason of the Employee's "disability". For the
purposes of this Agreement, disability shall be defined
as the Employee's inability by reason of physical or mental
illness or other physical or mental disability to substantially
perform the duties required by the position held by the
Employee at the inception of such illness or disability for any
consecutive ninety (90) day period unless within 30 days after
written notice of termination is thereafter given by UCIC to
the Employee, the Employee shall have returned to the full time
performance of his duties; or
(iii) Termination by reason of retirement on or after normal
retirement age in accordance with and under UCIC's Employee's
Money Purchase Pension Plan (the "Pension Plan") or any plan
in substitution thereof; or
(iv) Termination upon a good faith determination by a majority vote
of the Board of Directors of UCIC, or of any affiliate
or subsidiary of UCIC, that termination is necessary by reason
of a determination by the Insurance Department of any state
having jurisdiction over UCIC, or any affiliate or subsidiary,
that the Employee must be removed or disqualified from acting
as an officer of UCIC or any of its subsidiaries; or
(v) Termination for "cause". For purposes of this Agreement,
"cause" shall mean when in the judgment of the Board of
Directors of UCIC, the Employee has (A) willfully and
continually failed to substantially perform his duties or (B)
engaged in misconduct materially detrimental to the best
interests of UCIC or conduct which is illegal; provided that,
termination for cause based on the Employee's willful and
continued failure to substantially perform his duties shall not
be effective unless the Employee shall have received written
notice from either the Chairman of the Board of Directors of
UCIC or the President of UCIC of such failure and demand for
substantial performance 30 days prior to such termination and
the Employee has failed after receipt of such
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notice to resume the diligent performance of his duties.
Examples of the types of misconduct which would be considered
materially detrimental or illegal and justifying termination
for cause include embezzlement, fraud, payoffs, kickbacks,
illegal political contributions, and the like.
(b) Capsure shall also provide the Employee with the benefits set
forth in Sections 6 and 7 upon any termination of employment with
UCIC by the Employee for "Good Reason" within 24 months following a
Change in Control of UCIC. For purposes of this Agreement, "Good
Reason" shall mean the occurrence of any one of the following events
without the Employee's consent:
(i) The assignment of the Employee to any duties
substantially inconsistent with his position, duties,
responsibilities or status with UCIC immediately prior to the
Change in Control of UCIC, or a substantial reduction of
Employee's duties or responsibilities, as compared with the
duties or responsibilities immediately prior to the Change in
Control of UCIC, and the continuation of such inconsistent
assignment or reduction for thirty (30) days following
written notice thereof from the Employee to UCIC; or
(ii) A reduction by UCIC in the amount of the Employee's base
salary as compared to that which was paid immediately prior
to the Change in Control of UCIC; or
(iii) The failure by UCIC or its successor to continue to
provide to the Employee benefits substantially similar in the
aggregate to the benefits provided under UCIC's benefit
programs prior to the Change in Control of UCIC, such as any
of UCIC's pension, life insurance, medical, health or
disability plans in which the Employee was participating at
the time of the Change in Control of UCIC; or
(iv) Requiring the Employee to be transferred outside the
metropolitan Atlanta area at the time within 24 months after
the Change in Control of UCIC, except with the Employee's
consent; or
(v) Any breach by UCIC of any of the provisions of this
Agreement or any failure by UCIC to carry out its obligations
hereunder and the continuation of such breach or failure for
thirty (30) days following written notice thereof from the
Employee to UCIC.
(c) Notwithstanding the other provisions of this Section 4, in the
event that the Employee shall resign the employment with UCIC without
"Good Reason", then the Employee shall not be entitled to the benefits
set forth in Sections 6 and 7 upon such resignation.
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5. Notice of Termination.
Any termination of the Employee's employment by UCIC as contemplated by
Section 4(a) of this Agreement or by the Employee as contemplated by
Section 4(b) of this Agreement shall be communicated by written "Notice of
Termination" to the other party hereto. Any "Notice of Termination" shall
indicate the effective date of termination which shall not be less than 30
days after the date the Notice of Termination is delivered (the
"Termination Date"), the specific provision in this Agreement relied upon,
and will set forth in reasonable detail the facts and circumstances claimed
to provide a basis for such termination.
6. Termination Benefits.
Upon termination of the Employee's employment by UCIC as described in
Section 4(a) or 4(b) of this Agreement, the following payments (subject to
any applicable payroll or other taxes required to be withheld) and benefits
shall be paid and provided to the Employee:
(a) Compensation
UCIC shall pay to the Employee an amount equal to two (2) times the
greater of (i) the Employee's effective annual base salary at the
Termination Date, or (ii) the Employee's effective annual base salary
immediately prior to the Change in Control of UCIC. UCIC shall
make monthly payments of a portion of such amount in 24 equal monthly
installments on the first day of each month after the Termination
Date. The amount payable to the Employee under either (i) or (ii)
shall be reduced by one monthly installment for each full month the
Employee remains employed by UCIC after the Change in Control of UCIC,
provided, however, that such payments shall cease after the month in
which Employee reaches normal retirement age in accordance with
UCIC's Money Purchase Pension Plan.
(b) Insurance Benefits, Etc.
UCIC shall provide or cause to be provided to the Employee, for a
period of 24 months after the Date of Termination, all life insurance,
medical, health, and disability plans, programs or arrangements in
which the Employee would have been entitled to participate if he had
continued in the employment of UCIC, to the extent such plans,
programs, or arrangements are offered by UCIC during such 24-month
period. This 24-month time obligation of UCIC to furnish these
aforementioned benefits shall be reduced by one month for each full
month the Employee remains employed by UCIC after the closing of the
Change in Control of UCIC. In the event that the Employee's
participation in any such continuing plan, program or arrangement is
not directly permitted by the provisions of these plans, programs or
arrangements, UCIC shall arrange, at its expense, to provide the
Employee with substantially similar benefits.
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7. Other Benefits.
Upon termination of the Employee's employment by UCIC as described in
Sections 4(a) or 4(b) of this Agreement, the following benefits (subject to
any applicable payroll or other taxes required to be withheld) shall be
paid or provided to the Employee:
(a) Retirement Benefits
For purposes of this Agreement, the Employee shall be deemed to be
completely vested under the UCIC Money Purchase Pension Plan and all
supplemental, non-qualified plans (or any successor plan), in effect
immediately prior to the Change in Control of UCIC (collectively
the "Retirement Plans"), regardless of the Employee's actual vesting
service credit thereunder. Any part of the foregoing retirement
benefits which are not paid through the Retirement Plans shall be paid
by UCIC. With the consent of the Employee, UCIC's obligation under
this Section 7(a) may be satisfied by the purchase of an individual
retirement annuity providing the foregoing retirement benefits are
calculated and payable in accordance with the provisions of the
Retirement Plans in effect as of the date of Change in Control of
UCIC.
(b) Executive Outplacement Counseling
Upon written request of the Employee, UCIC shall engage an
outplacement counseling service of national reputation to assist the
Employee in obtaining employment. The Employee shall be entitled to
only one such engagement of an outplacement counseling service. The
Employee's right to elect this counseling shall terminate 90 days from
the Termination Date of the Employee.
8. Mitigation.
(a) The Employee is required to seek other employment or otherwise
mitigate the amount of any payments (other than any payments pursuant
to Section 2 hereof) or benefits to be made by UCIC or Capsure
pursuant to this Agreement.
(b) If the Employee is employed (including self-employment) by any
business, whether or not the other employment is in direct competition
with the business of UCIC or its subsidiaries, after the Termination
Date, then the amount of any prospective payments provided for in
Section 6(a) shall be reduced by any base salary or other similar form
of compensation (except for incentive compensation) earned by the
Employee as the result of such other employment including any
voluntary deferral of such base salary or similar form of
compensation.
(c) To the extent the Employee is eligible to participate in a plan
providing benefits comparable to those to be provided by
Section 6(b) hereof upon obtaining other employment (including
self-employment), whether or not the
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other employment is in direct competition with the business of UCIC or
its subsidiaries, the comparable benefits UCIC would otherwise provide
pursuant to Section 6(b) hereof shall not be required of UCIC. The
benefit payments provided for in Section 7 shall not be reduced.
(d) The Employee hereby agrees to notify UCIC promptly upon obtaining
any other employment, and to furnish UCIC with details of the
employee's base salary or similar form of compensation, employee
benefits and the like.
9. Services During Certain Events.
For purposes of this Agreement, a "potential Change in Control of UCIC"
shall be deemed to have occurred if (i) Capsure enters into an agreement or
arrangement, the consummation of which would result in the occurrence of a
Change in Control of UCIC as defined in Section 1 of this Agreement, or
(ii), the Board adopts a resolution to the effect that, for purposes of
this Agreement, a potential Change in Control of UCIC has occurred. The
Employee agrees that, subject to the terms and conditions of this
Agreement, in the event of the occurrence of a potential Change in Control
in UCIC on or before December 31, 1996, the Employee will remain in the
employ of UCIC until the earliest of (A) a date which is six months from
the occurrence of such potential Change in Control of UCIC, or (B) the
termination by the Employee of employment by reason of disability or
retirement (at the Employee's normal retirement age), or (C) the occurrence
of a Change in Control of UCIC.
10. Successors.
(a) Capsure shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the equity securities, business and/or assets of
UCIC to expressly assume and agree to perform this Agreement. Upon
the assumption of this Agreement by such successor, Capsure shall be
released from any and all of its obligations and liabilities under
this Agreement. Failure of Capsure to obtain such assumption prior to
the effectiveness of any such Change in Control of UCIC shall be a
breach of this Agreement, and shall entitle the Employee to
compensation from Capsure in the same amount and on the same terms as
the Employee would be entitled hereunder if the Employee were to
terminate employment for Good Reason following a Change in Control of
UCIC, except that for purposes of implementing the foregoing, the date
on which any such Change in Control of UCIC closes shall be deemed the
Termination Date.
For purposes of this Agreement, "UCIC" shall mean United Capitol
Insurance Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors,
administrators,
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successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts are payable to him hereunder,
all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Employee's
devisee, legatee or other designee or, if there be no such
designee, to the Employee's estate.
11. Notices.
For the purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
Xxxxxx X. Xxxxxxx
2870 Xxxxx Ct. So. Apt. 1205
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Xxxxxxx, XX 00000
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If to Capsure Holdings Corp. ("Capsure"):
0 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: General Counsel
If to United Capitol Insurance Company ("UCIC"):
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Governing Law.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Georgia.
13. Miscellaneous.
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing
signed by the Employee, Capsure and UCIC, excepting that after the date a
Change in Control of UCIC has occurred, Capsure shall not be required to be
a party to any such modification, waiver or discharge. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar
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provisions or conditions at the same or any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.
14. Separability.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of
this Agreement, which shall remain in full force and effect.
15. Non-Assignability.
This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement
or any rights or obligations hereunder, except as provided in Section 10.
Without limiting the foregoing, the Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than a transfer by his
will or trust or by the laws of descent or distribution, and in the event
of any attempted assignment or transfer contrary to this Section 15 Capsure
and UCIC shall have no liability to pay any amount so attempted to be
assigned or transferred.
16. Term of Agreement.
This Agreement shall commence on the date hereof and shall continue in
effect through December 31, 1996, provided that the expiration of this
Agreement shall not affect the rights or obligations of Capsure, UCIC, or
Employee arising from a Change in Control of UCIC occurring prior to the
expiration of the Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first set forth on page 1 of this
agreement.
Capsure Holdings Corp. ("Capsure") Xxxxxx X. Xxxxxxx ("the Employee")
by: /s/ Xxxxx X. Xxxxxxxxx /s/ Xxxxxx X. Xxxxxxx
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its: President signed this 6th day of November , 1995
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signed this 6th day of November , 1995 at Atlanta, GA
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at Atlanta, GA
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United Capitol Insurance Company ("UCIC")
by: /s/ Xxxx Xxxx Xxxxxxxxx
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its: Executive VP and CFO
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signed this 6th day of November , 1995
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at Atlanta, GA
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