Exhibit 10.4
OHIO CASUALTY CORPORATION
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CHANGE IN CONTROL AGREEMENT
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This Agreement between Dan R. Carmichael ("Employee"), the Ohio Casualty
Corporation, an Ohio corporation ("Corporation") and The Ohio Casualty
Insurance Company ("Company"), is effective December 1, 2005 ("Effective
Date") and, except as specifically provided in this document, supersedes
all agreements of similar import between the Employee, the Corporation and
the Company (collectively, the "Parties"). This agreement is entered into
simultaneously with an employment agreement ("Employment Agreement")
between the Parties, although it is a separate agreement.
1.00 PURPOSE
The Corporation and the Company believe that [1] a sound and stable
management team is essential to promoting the best interests of the Group
and the Corporation's shareholders, [2] as is the case with many publicly
held corporations, a Change in Control may materially alter the Group's
structure and adversely affect managers' employment security,
[3] appropriate steps should be taken to enable certain managers, including
the Employee, to devote their full and continued attention to the Group's
business affairs during the crucial (and often tumultuous) period preceding
and immediately following a Change in Control and [4] subject to the terms
of this Agreement, these objectives can best be met by providing the
Employee with the severance payments described in this Agreement.
2.00 DEFINITIONS
When used in this Agreement, the following terms will have the meanings
given to them in this section unless another meaning is expressly provided
elsewhere in this Agreement. When applying these definitions, the form of
any term or word will include any of its other forms and the word
"including" will mean "including, without limitation."
2.01 Board. The board of directors of the Corporation.
2.02 Cause. [1] Any act of fraud, intentional misrepresentation,
embezzlement, misappropriation or conversion by the Employee of the assets
or business opportunities of the Group, the Company, the Corporation, the
Employer or of any other Group Member, [2] conviction of the Employee of a
felony or intentional and repeated violations by the Employee of the
Employer's written policies or procedures, [3] the Employee's [a] willful
and continued refusal to substantially perform assigned duties (other than
any refusal resulting from incapacity due to physical or mental illness,
including Disability), [b] willful engagement in gross misconduct
materially and demonstrably injurious to any Group Member or [c] breach of
any term of this Agreement or [4] any intentional cooperation with any
party attempting to effect a Change in Control unless [a] the Board has
approved or ratified that action before the Change in Control or [b] that
cooperation is required by law. However, [5] Cause will not arise
[a] solely because the Employee is absent from active employment during
periods of vacation, consistent with the Employer's applicable vacation
policy, or other period of absence initiated by the Employee and approved
by the Employer or [b] due to any event that constitutes Good Reason.
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2.03 Change in Control.
[1] Subject to the rules of application described in Section 2.03[2],
the date on which the earliest of the following events occurs:
[a] After the Effective Date, an event that would be required to
be reported as a change in control for purposes of the Exchange
Act.
[b] During any 24-consecutive-calendar-month period ending after
the Effective Date, there is a change in a majority of the Board;
provided, however, that any new director whose nomination for
election by the Corporation's shareholders was approved, or who
was appointed or elected to the Board, by the vote of two-thirds
of the directors then still in office who were in office at the
beginning of the 24-consecutive-calendar-month period will be
disregarded in determining if there has been a change in the
majority of the Board.
[c] During any 12-consecutive-calendar month period beginning
after the Effective Date, any entity or "person," [including a
"group" as contemplated by Exchange Act Sections 13(d)(3) and
14(d)(2)] is or becomes the "beneficial owner" [as defined in
Rule 13d-3 under the Exchange Act], through a tender offer or
otherwise, of Common Shares representing more than 20 percent or
more of the combined voting power of the Corporation's then
outstanding Common Shares. However, this element of this
definition will be applied without regard to the effect of any
redemption of Common Shares by the Corporation or the acquisition
of Common Shares by any Group Member and, solely for purposes of
applying this subsection 2.03[1][c], after ignoring any Common
Shares acquired:
[i] By any employee benefit plan maintained by any Group
Member;
[ii] Directly, through an equity compensation plan
maintained by any Group Member;
[iii] Directly, through inheritance, gift, bequest or by
operation of law on the death of an individual; or
[iv] By any entity or "person" [including a "group" as
contemplated by Exchange Act Sections 13(d)(3) and 14(d)(2)]
with respect to which that acquirer has filed SEC Schedule
13G indicating that the Common Shares were not acquired and
are not held for the purpose of or with the effect of
changing or influencing, directly or indirectly, the
Corporation's management or policies, unless and until that
entity or person indicates that its intent has changed by
filing SEC Schedule 13D.
[d] After the Effective Date, any entity or "person," [including
a "group" as contemplated by Exchange Acts Sections 13(d)(3) and
14(d)(2) and, in the aggregate, all employee pension benefit
plans, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, maintained by any Group
Member] is or becomes the "beneficial owner" [as defined in Rule
13d-3 under
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the Exchange Act], through a tender offer or otherwise, of Common
Shares representing more than 50 percent or more of the combined
voting power of the Corporation's then outstanding Common Shares.
[e] After the Effective Date, the Corporation's shareholders
approve a definitive agreement to merge or combine the
Corporation with or into another entity, a majority of the
directors of which were not members of the Board immediately
before the merger and in which the Corporation's shareholders
will hold less than 50 percent of the voting power of the
surviving entity. When applying this element of this definition,
shareholders will be determined immediately before and
immediately after the merger or combination
[f] Within any 12-consecutive-calendar-month period ending after
the Effective Date, any entity or "person" [including a "group"
as contemplated by Exchange Act Sections 13(d)(3) and 14(d)(2)
and Code Section 280G] acquires, either directly or as a
"beneficial owner" [as defined in Rule 13d-3 under the Exchange
Act] of another entity or person, Group assets having a total
gross fair market value equal to or greater than 50 percent of
the book value of the Group's assets. For purposes of this
definition, "book value" will be established on the basis of the
latest consolidated financial statement the Corporation filed
with the Securities and Exchange Commission before the date any
12-consecutive-calendar-month measurement period began. However,
except as otherwise provided in this section, this element of
this definition will be applied after ignoring:
[i] Any transfer of assets to an entity, more than 50
percent of the total value or voting power of which is owned
by one or more Group Members; or
[ii] Any transfer of assets to any entity or "person"
[including a "group" as contemplated by Exchange Act
Sections 13(d)(3) and 14(d)(2)] that, immediately before the
transfer, owns, directly or as a "beneficial owner" [as
defined in Rule 13d-3 under the Exchange Act], more than 50
percent of the total value or voting power of the
Corporation's outstanding securities.
[2] For purposes of applying all parts of this definition, [a] Common
Shares owned or acquired by the Employee or by any other entity or
"person" [including a "group" as contemplated by Exchange Act Sections
13(d)(3) and 14(d)(2)] acting in concert with the Employee will be
disregarded, [b] any transfer of assets to the Employee or to (or
merger of the Corporation with) any other entity or "person"
[including a "group" as contemplated by Exchange Act Sections 13(d)(3)
and 14(d)(2)] acting in concert with the Employee will be disregarded
and [c] the constructive ownership rules of Code Section 318(a) will
be applied to determine share ownership.
2.04 Code. The Internal Revenue Code of 1986, as amended, or any successor
statute.
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2.05 Common Shares. The Corporation's common shares or any security issued
in substitution, exchange or in place of the Corporation's common shares.
2.06 Confidential Information. Any and all information (other than
information in the public domain) related to the Group's business or that
of any Group Member, including all processes, inventions, trade secrets,
computer programs, technical data, drawings or designs, information
concerning pricing and pricing policies, marketing techniques, plans and
forecasts, new product information, information concerning methods and
manner of operations and information relating to the identity and location
of all past, present and prospective agents and policy holders.
2.07 Date of Termination. Except as otherwise provided in this Agreement:
[1] If the Employee is Terminated at or after reaching Retirement Age
or because of Disability or for Cause, the date specified in the
Notice of Termination;
[2] If the Employee dies, the date of death;
[3] If the Employee is Terminated for Good Reason, the date specified
in the Notice of Termination;
[4] If the Employee Terminates after Retirement Age or is Terminated
for any reason other than Retirement, Cause, Disability, death or Good
Reason, the date on which a Notice of Termination is given; or
[5] If the Employer Terminates the Employee without giving a Notice
of Termination, the date on which that Termination is effective.
However, if either Party utilizes the procedures described in Section 7.03
to dispute the basis on which the Employee's employment is being
terminated, the Date of Termination will be established by the adjudicator
acting under Section 7.03 but will never be later than the last day of the
Employee's active employment as an employee of all Group Members.
2.08 Disability. A disability as defined in Code Section 22(e)(3).
2.09 Effective Period. Except as otherwise provided in this Agreement, the
shorter of [1] 24 consecutive calendar months beginning after a Change in
Control occurring during the Term, even if that period extends beyond the
Term or [2] the remaining term of the Employment Agreement (or any
successor employment agreement) at the date of a Change in Control.
2.10 Employee Obligation Payment. A lump sum equal in value to the
obligations the Employee assumes under Section 3.05. This amount will
consist of [1] the larger of [a] the annualized base salary the Employee
was receiving on the Date of Termination or [b] the annualized salary the
Employee was receiving on the date of the Change in Control, multiplied by
[2] 100 percent.
2.11 Employer. The Group Member by which the Employee is directly employed
on the date of any event, act or occurrence described in this Agreement,
including execution of this
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Agreement. If, without incurring a Termination, the Employee becomes an
employee of a Group Member other than the Employer, that Group Member will
automatically become the Employee's "Employer" under this Agreement and will
be fully liable, as the Employee's Employer, for all obligations arising
under this Agreement, including the payment of any amount described in
Section 5.00 that becomes due during the course of that employment
relationship.
2.12 Exchange Act. The Securities Exchange Act of 1934, as amended, or any
successor statute.
2.13 Good Reason. Any of the following to which the Employee has not
consented in writing:
[1] At any time after a Change in Control and as of any time during
the Effective Period, any breach of this Agreement of any nature
whatsoever by or on behalf of the Group or any Group Member;
[2] At any time after a Change in Control and as of any time during
the Effective Period, a reduction in the Employee's title, duties,
responsibilities or status, as compared to either [a] the Employee's
title, duties, responsibilities or status immediately before a Change
in Control or [b] any enhanced or increased title, duties,
responsibilities or status assigned to the Employee after the Change
in Control;
[3] At any time after a Change in Control and as of any time during
the Effective Period, the permanent assignment to the Employee of
duties that are inconsistent with [a] the Employee's office
immediately before the date of a Change in Control or [b] any more
senior office to which the Employee is promoted after a Change in
Control;
[4] During any calendar year ending after a Change in Control and as
of any time during the Effective Period, a 15 percent (or larger)
reduction (other than a reduction that is attributable to any
[a] Termination for [i] death, [ii] Termination after reaching
Retirement Age, [iii] Disability or [iv] Cause, [b] voluntary
Termination by the Employee other than for Good Reason attributable to
an event or condition arising under other subsections of this
definition or [c] for any period of temporary absence initiated by the
Employee and approved by the Employer) in the highest of [d] the
Employee's total cash compensation for the preceding calendar year
(including base salary, bonus potential, employee benefits and fringe
benefits) or, if higher, [e] the Employee's total cash compensation
for the last calendar year ending before the Change in Control
(including base salary, bonus potential, employee benefits and fringe
benefits) but [f] in both cases, determined without regard to any
amounts, paid or payable, under Section 5.01[2] through 5.01[8];
[5] At any time after a Change in Control and as of any time during
the Effective Period, a requirement that the Employee relocate to a
principal office or worksite (or accept indefinite assignment) to a
location more than 50 miles distant from [a] the principal office or
worksite to which the Employee was assigned immediately before a
Change in Control or [b] any location to which the Employee agreed, in
writing, to be assigned after a Change in Control;
[6] At any time after a Change in Control and as of any time during
the Effective Period, the imposition on the Employee of business
travel obligations substantially
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greater than the Employee's business travel obligations during the
12-consecutive-calendar-month period ending before the Change in
Control but determined without regard to any special business travel
obligations associated with activities relating to the Change in
Control;
[7] At any time after a Change in Control and as of any time during
the Effective Period, the Employer's [a] failure to continue in effect
any material fringe benefit or compensation plan, retirement or
deferred compensation plan, life insurance plan, health and accident
plan, sick pay plan or disability plan in which the Employee is
participating at the time of a Change in Control, [b] modification of
any of the plans or programs just described that adversely affects the
value of the Employee's benefits under those plans or [c] failure to
provide the Employee, after a Change in Control, with the same number
of paid vacation days to which the Employee is or becomes entitled at
or anytime on or after a Change in Control under the terms of the
Employer's vacation policy or program. However, Good Reason will not
arise under this subsection solely because [d] the Corporation or the
Employer terminates or modifies any program after a Change in Control
solely to comply with applicable law but only to the extent of the
legally required change, [e] a plan or benefit program expires under
self-executing terms contained in that plan or benefit program before
the Change in Control or [f] the Corporation or the Employer replaces
a plan or program with a successor plan or program of equal or
equivalent value to the Employee;
[8] For the duration of any period of any absence from active
employment that begins or continues at any time after a Change in
Control and before the earlier of Termination or the end of the
Effective Period, failure to provide or continue any benefits
(including disability benefits) available to employees who are absent
from active employment (including because of disability) under
programs maintained by the Employer on the date the absence (including
disability) begins;
[9] During any period after a Change in Control and as of any time
during the Effective Period, the Employee is unable to perform
normally assigned duties because of a physical or mental condition and
before the Employee Terminates, the Employer delivers to the Employee
a Notice of Termination that is inconsistent with any disability
program maintained by the Employer on the date of the Change in
Control;
[10] After a Change in Control and as of any time during the Effective
Period, the Employer unsuccessfully attempts to Terminate the Employee
for Cause, in which case the Effective Period will not end earlier
than 60 days after the conclusion of the Employer's unsuccessful
attempt to Terminate the Employee for Cause;
[11] After a Change in Control and as of any time during the Effective
Period, the Employer attempts to amend or terminate this Agreement
without regard to the procedures described in Sections 6.01 or 6.02;
or
[12] For any act or event described in Section 2.13[1] through [11]
that occurs within six months before a Change in Control.
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2.14 Group. The Employer, the Corporation, the Company and any other
entity to which either is related through common ownership as defined in
Code Section 1504 either on the Effective Date or at any time during the
Term.
2.15 Group Member. Each entity that is a member of the Group either on the
Effective Date or at any time during the Term.
2.16 Notice of Payment. The written notice by which the Employer apprises
the Employee of [1] the amount of any payment due under this Agreement,
[2] the reason that amount is payable and [3] the basis on which that
payment was calculated.
2.17 Notice of Termination. A written notice that describes in reasonable
detail the facts and circumstances claimed to provide a basis for
Termination.
2.18 Parties. The Employer, the Corporation, the Company and the Employee.
2.19 Retirement Age. The latest date on which the Employee is first
entitled to retire and receive unreduced normal retirement benefits under
any tax-qualified retirement plan sponsored by the Employer.
2.20 Term. Initially, the period beginning on the Effective Date and
ending midnight, December 31, 2006 ("Termination Date"). Subject to
Section 6.02, the Term will automatically be extended for successive one-
year periods beginning on the Termination Date and anniversaries of each
Termination Date but, except as otherwise provided in the document, will
expire on expiration of the Employment Agreement or any successor
employment agreement.
2.21 Termination. Termination of the employee-employer relationship
between the Employee and all Group Members for any reason, whether or not
the Employee subsequently becomes a consultant or adviser to any Group
Member or serves as a member of the board of directors of any Group Member
and regardless of services performed pursuant to Sections 3.02 through
3.09. However, a Termination will not be deemed to have occurred
[1] solely because the Employee's Employer ceases to be a Group Member and
the Employee continues to be employed by that former Group Member or,
[2] subject to Section 4.06, if the Employee's employment relationship is
transferred between Group Members without interruption.
3.00 EMPLOYEE'S OBLIGATIONS
By signing this Agreement, the Employee agrees to be bound by and to comply
with the following restrictions, whether or not the Employee also receives
the Employee Obligation Payments or any of the amounts and benefits
described in Section 5.00.
3.01 Services During Certain Events. If any "person" (as used in Section
2.03[1][c]) initiates a tender or exchange offer, distributes proxy
materials to the Corporation's shareholders or takes other steps to effect,
or that may result in, a Change in Control, the Employee agrees not to
Terminate voluntarily during the pendency of that activity other than by
reason of Termination after reaching Retirement Age or Disability and to
continue to serve as a full-time employee of the Employer until those
efforts are abandoned, that activity is terminated or until a Change in
Control has occurred.
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3.02 Confidential Information. In exchange for the compensation described
in Sections 2.10[1] and [2][a] and subject to Section 4.00, and except as
otherwise required by applicable law, Employee expressly agrees to keep and
maintain Confidential Information confidential and not, at any time during
or subsequent to the Employee's employment with any Group Member, to use
any Confidential Information for Employee's own benefit or to divulge,
disclose or communicate any Confidential Information to any person or
entity in any manner except [1] to employees or agents of the Employer or
of the Corporation or any Group Member that need the Confidential
Information to perform their duties on behalf of any Group Member, [2] in
the performance of Employee's duties to the Employer or [3] as a necessary
(and only to the extent necessary) part of any undertaking by the Employee
to enforce the Employee's rights under this Agreement. Employee also
agrees to notify the Corporation promptly of any circumstance Employee
believes may legally compel the disclosure of Confidential Information and
to give this notice before disclosing any Confidential Information.
3.03 Solicitation of Employees. In exchange for the compensation described
in Sections 2.10[1] and subject to Section 4.00, the Employee agrees that
for two years after Termination [1] not, directly or indirectly, to solicit
any employee of any Group Member to leave employment with the Group,
[2] not, directly or indirectly, to employ or seek to employ any employee
of any Group Member and [3] not to cause or induce any of the Group's (or
Group Member's) competitors to solicit or employ any employee of any Group
Member.
3.04 Solicitation of Third Parties. In exchange for the compensation
described in Sections 2.10[1] and subject to Section 4.00, the Employee
agrees that during employment and for two years after terminating
employment with all Group Members not, directly or indirectly, to recruit,
solicit or otherwise induce or influence any agent or policy holder, sales
representative, lender, lessor, lessee or any other person having a
business relationship with the Group (or any Group Member) to discontinue
or reduce the extent of that relationship except in the course of
discharging the duties described in this Agreement and with the good faith
objective of advancing the Group's (or any Group Member's) business
interests.
3.05 Non-Competition. In exchange for the compensation described in
Sections 2.10[1] and subject to Section 4.00, the Employee agrees that for
two years after terminating employment with all Group Members not, directly
or indirectly, to accept employment with, act as a consultant to, or
otherwise perform services that are substantially the same or similar to
those for which the Employee was compensated by any Group Member (this
comparison will be based on job-related functions and responsibilities and
not on job title) for any business that directly competes with any portion
of the Group's (or any Group Member's) business with which the Employee was
directly involved at any time during the five calendar years preceding
Termination. This restriction applies to any parent, division, affiliate,
newly formed or purchased business(es) and/or successor of a business that
competes with the Group's (or any Group Member's) business.
3.06 Post-Termination Cooperation. The Employee agrees that during and
after employment with any Group Members and without additional compensation
(other than reimbursement for reasonable associated expenses) to cooperate
with the Group (and with each
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Group Member) in the following areas:
[1] Cooperation With the Group. The Employee agrees [a] to be
reasonably available to answer questions for the Group's (and any
Group Member's) officers regarding any matter, project, initiative or
effort for which the Employee was responsible while employed by any
Group Member and [b] to cooperate with the Group (and with each Group
Member) during the course of all third-party proceedings arising out
of the Group's (and any Group Member's) business about which the
Employee has knowledge or information. For purposes of this
Agreement, [c] "proceedings" includes internal investigations,
administrative investigations or proceedings and lawsuits (including
pre-trial discovery and trial testimony) and [d] "cooperation"
includes [i] the Employee's being reasonably available for interviews,
meetings, depositions, hearings and/or trials without the need for
subpoena or assurances by the Group (or any Group Member),
[ii] providing any and all documents in the Employee's possession that
relate to the proceeding and [iii] providing assistance in locating
any and all relevant notes and/or documents.
[2] Cooperation With Third Parties. Unless compelled to do so by
lawfully-served subpoena or court order, the Employee agrees not to
communicate with, or give statements or testimony to, any attorney
representing an interest opposed to the Group's (or any Group
Member's) interest ("Opposing Attorney"), Opposing Attorney's
representative (including private investigator) or current or former
employee relating to any matter (including pending or threatened
lawsuits or administrative investigations) about which the Employee
has knowledge or information (other than knowledge or information that
is not Confidential Information as defined in Section 2.06) as a
result of employment with the Group (or any Group Member). The
Employee also agrees to notify the Corporation immediately after being
contacted by a third party or receiving a subpoena or court order to
appear and testify with respect to any matter that may include a claim
opposed to the Group's (or any Group Member's) interest. However,
this subsection will not apply to any effort undertaken by the
Employee to enforce the Employee's rights under this Agreement but
only to the extent necessary for that purpose.
[3] Cooperation With Media. The Employee agrees not to communicate
with, or give statements to, any member of the media (including print,
television or radio media) relating to any matter (including pending
or threatened lawsuits or administrative investigations) about which
the Employee has knowledge or information (other than knowledge or
information that is not Confidential Information as defined in
Section 2.06) as a result of employment with the Group (or any Group
Member). The Employee also agrees to notify the Corporation
immediately after being contacted by any member of the media with
respect to any matter affected by this section.
3.07 Non-Disparagement. The Employee, the Corporation and the Company (on
their behalf and on behalf of the Group and each Group Member) agree that
neither will make any disparaging remarks about the other and the Employee
will not make any disparaging remarks about the Corporation's or the
Company's Chairman, Chief Executive Officer or any of the Group's officers,
directors or employees. However, this section will not preclude
[1] remarks by any employee of a Group Member made in the normal course of
business, [2] remarks by the
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Employee that are required to discharge the Employee's regular duties or
other duties described in this Agreement, [3] the Corporation or the Company
from making (or eliciting from any person) disparaging remarks about the
Employee concerning any conduct that may lead to a termination for Cause, as
defined in Section 2.02 (including initiating an inquiry or investigation
that may result in a termination for Cause), but only to the extent
reasonably necessary to investigate the Employee's conduct and to protect the
Group's (or any Group Member's) interests or [4] any remarks made by either
Party that are necessary (but only to the extent necessary) to resolve any
dispute arising under this Agreement and that are made solely in the context
of proceeding undertaken to pursuant to Sections 7.02 and 7.03.
3.08 Effect of Breach of Obligations. If the Employee breaches any
obligation described in this Agreement:
[1] If that breach occurs before a Change in Control, this Agreement
will terminate as of the date of the breach, even if the fact of the
breach becomes apparent at a later date and no amount will be due
under this Agreement;
[2] If that breach occurs after a Change in Control but before the
Employee has Terminated, this Agreement will terminate as of the date
of the breach, even if the fact of the breach becomes apparent at a
later date and no amounts will be due under this Agreement; or
[3] If that breach occurs after a Change in Control and after the
Employee Terminates, [a] the Corporation will be entitled to the
remedies described in Section 7.00 and [b] Employee will repay the
portion of the Employee Benefit Payment received in exchange for the
post-termination commitment breached plus interest calculated with
reference to the mid-term applicable federal rate [as defined in Code
Section 1274(d)] for January 1 of each calendar year, compounded
annually until paid.
3.09 Release. In exchange for the payments and benefits to Employee
described in this Agreement, as well as any and all other mutual promises
made in this Agreement, Employee, and his/her personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, legatees, and assigns agree to release and forever
discharge the Corporation, the Company, the Group and each Group Member
their employees, officers, directors, agents, attorneys, successors and
assigns, from any and all claims, suits and/or causes of action that grow
out of or are in any way related to, his/her recruitment to or his/her
employment with any group Member, except Employee does not release and
discharge the Corporation or any other Group Member for any claim that the
Corporation or any Group Member has breached this Agreement. This release
includes, but is not limited to, any claims that the Corporation, the
Company or any Group Member violated the Employee Retirement and Income
Security Act, the Age Discrimination in Employment Act, the Older Worker's
Benefit Protection Act, the Americans with Disabilities Act, Title VII of
the Civil Rights Act of 1964, the Family and Medical Leave Act, any law
prohibiting discrimination, harassment, or retaliation in employment, any
claim of promissory estoppel or detrimental reliance, defamation,
intentional infliction of emotional distress, the public policy of any
state, or any federal, state, or local law. Employee agrees, upon receipt
of the payment provided under this Agreement, to reaffirm and execute this
release in writing. If Employee fails to reaffirm and execute this release
within 30 days of the Date of
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Termination, Employee agrees that the payments otherwise due under this
Agreement will not be due or payable. Specifically, Employee agrees that a
necessary condition for the payment of any of the amounts described in this
Agreement (except termination because of death) is Employee's reaffirmation
of this release within 30 days of the Date of Termination. Employee agrees
that the Employee is knowledgeable about the claims that might arise in the
course of employment with the Employer and all Group Members, and that the
Employee knowingly agrees that the payments provided for in this Agreement
are satisfactory consideration for the release of such possible claims.
Employee is advised to consult with an attorney before signing this
Agreement. Employee agrees that given 21 days has been given in which to
consider this release. Employee may revoke his/her consent to this Agreement
by delivering a written notice (which may be given only by certified or
registered letter deposited with the U. S. Postal Service, postage paid) of
such revocation within seven days of signing this Agreement. Should Employee
revoke this Agreement, it shall become null and void and Employee must return
any amount received under it.
No provision of this Agreement may be modified or waived except in a
document signed by the Parties. This Agreement constitutes the entire
agreement between the parties regarding to the subject matter of this
agreement, and any other agreements relating to the subject of this
agreement are terminated and of no further force or legal effect. No
agreements or representations, oral or otherwise, with respect to the
subject matter of this agreement have been made or relied upon by either
party which are not set forth expressly in this Agreement.
4.00 COMPENSATION PAID IF EMPLOYEE TERMINATES
AFTER A CHANGE IN CONTROL
4.01 Termination For Cause.
[1] The Employer may Terminate the Employee for Cause at any time
before or after a Change in Control and for any action or series of
acts that constitute Cause that occurred or began at any time before
or after a Change in Control (other than an action or series of acts
the effect of which was known to the Employer before the Change in
Control but, before a Change in Control, the Employer concluded did
not constitute Cause) by delivering to the Employee a Notice of
Termination specifying the effective date of the Termination (which
may not be earlier than the date the Notice of Termination is given)
and the basis upon which the Employer believes that it has Cause to
Terminate the Employee.
[2] As of the Date of Termination specified in the Notice of
Termination, [a] the Employee's employment will end, [b] this
Agreement will terminate and [c] no amounts will be paid or due under
this Agreement at any time, although amounts due under other programs
(including the Employment Agreement) will be due.
4.02 Termination Because of Death. Except as provided in Section 4.06, if
the Employee Terminates because of death, this Agreement will terminate as
of the date the Employee dies and no amounts will be paid or due under this
Agreement at any time, although amounts due under other programs (including
the Employment Agreement) will be due.
11
4.03 Termination At or After Retirement Age. Except as provided in Section
4.06, no benefits will be paid under this Agreement of the Employee
Terminates employment at or after Retirement Age, although amounts due
under other programs (including the Employment Agreement) will be due.
4.04 Termination Because of Disability. Except as provided in Section 4.06
and in the last sentence of this section, if the Employee Terminates
because of Disability, this Agreement will terminate as of the date
specified in the Notice of Termination and no amounts will be paid or due
under this Agreement at any time, although amounts due under other programs
(including the Employment Agreement) will be due. However, if ant any time
during the Effective Period, the Employer terminates disability benefits
payable to the Employee during Disability, regardless of whether that
Disability began before or after the Change in Control, the Employee will
be deemed to have Terminated for Good Reason and will be entitled to the
amounts described in Section 5.00, calculated as of the last day of the
Employee's active employment with any Group Member.
4.05 Termination Without Cause.
[1] The Employer may Terminate the Employee without Cause before or
after a Change in Control for any reason by delivering to the Employee
a Notice of Termination that specifies the Date of Termination, which
may not be earlier than the date the Notice of Termination is given.
[2] If the Notice of Termination without Cause is delivered within
the period beginning six months before and Change in Control and
ending on the last day of the Effective Period and is for reasons
other than death, Disability or Cause or is given after the Employee
reaches Retirement Age, the Corporation or the Company will pay (or
cause the Employer to pay) to the Employee the amount described in
Section 5.00. After those amounts have been paid, this Agreement will
terminate and no further amounts will be paid or due under this
Agreement.
[3] The Employer may not Terminate the Employee for Cause if
[a] before the Notice of Termination for Cause is delivered to the
Employee, the Employee has delivered to the Employer a Notice of
Termination for Good Reason and [b] it is subsequently determined that
the Employee had Good Reason to Terminate. If the Employer delivers
to the Employee a Notice of Termination for Cause after the Employee
has delivered to the Employer a Notice of Termination for Good Reason,
the Employer's Notice of Termination for Cause [c] will not become
effective until it is established that the Employee did not have Good
Reason to Terminate and [d] will not be effective at all if it is
established that the Employee did have Good Reason to Terminate.
4.06 Termination for Good Reason.
[1] The Employee may Terminate for Good Reason after a Change in
Control by delivering to the Company a Notice of Termination for Good
Reason specifying the Date of Termination (which may not be earlier
than the date the Notice of Termination is given) and the basis upon
which the Employee believes that Good Reason has arisen.
12
[2] A Notice of Termination for Good Reason will be effective only if
[a] it is given before the Employee Terminates because of death, or
Disability or before reaching Retirement Age and [b] it is given no
later than 60 days after occurrence of the event or development of the
condition upon which it is based (or, if later, 60 days after the
event or development of the condition upon which it is based became
apparent), even if that period ends after the Effective Period.
[3] If [a] the Date of Termination specified in the Notice of
Termination is within the period beginning six months before the
beginning of an Effective Period and ending on the last day of the
same Effective Period and [b] within 30 days after the Date of
Termination, the Employer does not cure the Good Reason event or
condition (if the event or condition may be cured) described in the
Notice of Termination, [c] the Corporation or the Company will pay (or
cause the Employer to pay) to the Employee the amount described in
Section 5.00, even if the 30-day correction period ends after the
Effective Period. After those amounts have been paid, this Agreement
will terminate and no further amounts will be paid or due under this
Agreement.
[4] A Notice for Termination for Good Reason that is given within the
period otherwise described in this section will be effective (and the
amounts described in Section 5.00 will be due) even though the
Employee Retires, dies or becomes Disabled before those benefits are
paid.
5.00 CHANGE IN CONTROL PAYMENTS
5.01 Calculation of Change in Control Payments. Subject to the terms of
this Agreement and the restrictions imposed under Code Section 409A, if the
Employee is Terminated (or deemed Terminated) under Section 4.05 or 4.06,
the Corporation or the Company (or the Employer) will:
[1] Continue to pay the Employee's compensation and other benefits
through the Date of Termination and also will pay the Employee the
value of any unused vacation days determined under the Employer's
personnel policy. The amounts attributable to unused vacation
[a] will equal the Employee's annualized base salary at Termination
divided by 260 and multiplied by the number of unused vacation days,
[b] will be paid no later than 30 days after the Employee's Date of
Termination and [c] will be based on the rate of compensation and
value of benefits in effect before the Notice of Termination was
delivered.
[2] Reimburse the Employee for the cost of continued participation in
all programs subject to the benefit provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1993 ("COBRA") for the period
beginning on the Employee's Date of Termination and ending on the
earlier of [a] the date the Employee acquires replacement coverage or
[b] the maximum coverage period prescribed by COBRA. These amounts
will be reimbursed on the date the required premium is due. However,
if the Employee has not acquired replacement coverage at the end of
the maximum coverage period prescribed by COBRA, he will be entitled
to continued medical coverage for 36 months after Termination minus
the maximum coverage period prescribed by COBRA at the same cost
13
to him (and subject to the same terms and conditions) that applied
immediately before the end of the maximum coverage period prescribed
by COBRA; plus
[3] [a] A lump sum amount equal to the difference between [i] the
lump sum present value of all amounts that the Employee would have
accrued or been credited with under each tax-qualified and
nonqualified deferred compensation arrangements in which the Employee
actively accrues a benefit at any time between the date of the Change
in Control ("Deferred Compensation Plans") and the Date of Termination
(other than an accretion based solely on the passage of time),
calculated as provided in Section 5.01[3][b] as if the Employee's Date
of Termination had been 36 months after the Employee's actual Date of
Termination ("Calculation Period") minus [ii] the lump sum present
value of all amounts actually accrued and credited under the Deferred
Compensation Plans as of the Date of Termination.
[b] For purposes of this computation and comparison:
[i] The amount determined under Section 5.01[3][a] will be
calculated separately for each Deferred Compensation Plan;
[ii] If a Deferred Compensation Plan is terminated, frozen
or amended to diminish benefit accruals or the rate of
benefit accruals (collectively and separately, these actions
are referred to as "Diminished") before the end of the
Calculation Period, [A] the calculation of the amount
described in Section 5.01[3][a][i] will be made on the
assumption that the Diminished Deferred Compensation Plan
had not been Diminished and [B] calculation of the amount
described in Section 5.01[3][a][ii] will be based on the
amount actually earned or accrued under the Diminished
Deferred Compensation Plan as of the date of the Deferred
Compensation Plan is Diminished and (I) will not be adjusted
for the portion of any benefit accretion attributable solely
to the passage of time and (II) will not be adjusted by the
amount of any hypothetical benefit that might have been
earned or accrued if the Diminished Deferred Compensation
Plan had not been Diminished;
[iii] The amount calculated under Section 5.01[3][a][i]
will be determined as if the Employee is fully vested in
each Deferred Compensation Plan and the amount calculated
under Section 5.01[3][a][ii] will be determined on the basis
of the Employee's actual vesting service under each Deferred
Compensation Plan;
[iv] Only accruals or allocations attributable to Employer
contributions will be considered;
[v] If any Deferred Compensation Plan requires that the
Employee make either pretax or after-tax contributions as a
condition of accruing a benefit or receiving an allocation,
the calculation and comparison described in
Section 5.01[3][a] will be based on the assumption that,
14
throughout the Calculation Period, the Employee made pretax
or after-tax contributions (whichever may be applicable) for
each period at the rate required to generate the highest
possible accrual or allocation attributable to Employer
contributions and at the time that would have produced the
highest possible accrual or allocation attributable to
Employer contributions (although the Employee will not be
required to make any contributions to receive the amount
described in Section 5.01[3][a]);
[vi] The Employee will be deemed to have received
compensation throughout the Calculation Period equal to the
rate of compensation in effect on the Date of Termination;
[vii] The Employee's benefit accrual service will be
increased by the Calculation Period;
[viii] In the case of a Deferred Compensation Plan that
is a defined contribution plan, the lump sum present value
of benefits will be based on [A] the Employee's account
balance as of the Date of Termination and [B] the balance
that would have been credited to the Employee's account if
[I] Employer contributions had continued during the
Calculation Period at a rate equal to the highest of the
annualized rate [X] in effect on the Date of Termination,
[Y[ in effect for the most recently completed plan year
before the Date of Termination or [Z] in effect for the most
recently completed plan year before the Change in Control,
(II) Employer contributions had been made throughout the
Calculation Period at the time prescribed in the Deferred
Compensation Plan document or if no schedule is specified in
the document, at a time that is consistent with the
Employer's customary practice for the last complete plan
year and [III] the Employee's Deferred Compensation Plan
account had realized investment earnings throughout the
Calculation Period at a rate equal to the larger of [X] the
Discount Rate defined below, [Y] the annualized rate
realized for the last valuation period before the Date of
Termination or [Z] the rate realized for the most recently
completed plan year before the Date of Termination or the
rate realized for the most recently completed plan year
before the date of the Change in Control; and
[ix] In the case of a Deferred Compensation Plan that is a
defined benefit plan, [A][I] the lump sum present value of
the benefit calculated under Section 5.01[3][a][i] will be
based on [Y] the applicable mortality table and the
applicable interest rate determined under Code Section
417(e)(3)(A), without regard to Code Section 417(e)(3)(B) or
[Z] the actuarial assumptions applied by the Deferred
Compensation Plan for purposes of calculating benefits under
Code Section 417(e), if those actuarial assumptions produce
a greater benefit that produced under the assumptions
described in Section 5.01[2][b][ix][I][x] and [II] the lump
sum value of the benefit calculated under Section
5.01[3][a][ii] will be based on the mortality table
and interest rates applied by the Deferred
15
Compensation Plan to calculate the value of a lump sum
distribution or, if a lump sum form of distribution is not
available under the Deferred Compensation Plan, the
assumptions prescribed in Section 5.01[3][b][ix][A]
and [B] the amount calculated under Sections 5.01[3][a][i]
and 5.01[3][a][ii] will be based on the highest accrual rate
in effect [I] on the Date of Termination, [II] for the most
recently completed plan year before the Date of Termination
or [III] for the most recently completed plan year before the
Change in Control.
[x] The present value of the lump sum amounts described in
this subsection will be calculated [A] in the case of a
Deferred Compensation Plan that is a defined benefit plan,
by applying the applicable factors described in Section
5.01[3][a][ix] and [B] in the case of a Deferred
Compensation Plan that is a defined contribution plan, by
applying a discount rate over the Calculation Period equal
to 120 percent of the applicable federal rate (determined
under Code Section 1274(d) and regulations issued under that
Code section) compounded semiannually. The applicable
federal rate to be used for this purpose is the federal rate
that is in effect on the date as of which the present value
is determined, using the period until the payment otherwise
would have been made.
[c] This amount will be paid not more than 60 days after the
occurrence of the event giving rise to the payment obligation.
[4] Reimbursement (or direct payment) for executive outplacement
services from an independent executive outplacement organization until
the earlier of [a] the date the Employee is able to secure acceptable
employment acceptable or [b] the fees paid to the independent
executive outplacement service equal $25,000. This amount will be
paid as incurred; and
[5] Pay the Employee a lump sum equal to the amount described in this
Section 5.01[5]. This payment will be made no more than 60 days
after the occurrence giving rise to the payment obligation. The
amount payable under this subsection will be the sum of:
[a] The Employee Obligation Payment; plus
[b] The smaller of [i]the base salary then in effect multiplied
by the number of whole payroll periods the remaining in the
Employment Agreement or [ii] 200 percent of the larger of [A] the
annualized base salary rate the Employee was receiving from the
Employer as in effect on the date of the Change in Control or
[B] the highest annualized base salary rate the Employee was
receiving from the Employer any time during the 24 months
beginning on the date of the Change in Control; plus
[c] The Employee's highest bonus earned under the Company's
Annual Incentive Plan (in whatever form paid or payable) [i] for
the full fiscal year that
16
ended coincident with or before the Change in Control or [i] at
any time after the Change in Control occurs multiplied by the
smaller of three or the years and fractions of a year (stated as
days) between Termination and the expiration of the Employment
Agreement; plus
[6] Any other benefits (including change in control benefits) to
which the Employee is entitled under any other plan, program or
agreement with the Corporation, the Company, the Employer or any other
Group Member; plus
[7] All the Employee's outstanding stock options and other cash and
equity incentive grants will be exercisable to the extent provided
under the terms relating to terminations of employment for similar
reasons contained in the plan and the award agreements through which
they were granted; plus.
[8] If appropriate, the additional amount described in Section 5.02;
plus
[9] An allowance for three years after Termination (not to exceed
$15,000 for any calendar year) to be applied against the cost of the
Employee's financial, tax and estate planning.
The amounts provided under this Agreement will be reduced (but not below
zero) by the amount paid under the Employment Agreement for the same
purpose
5.02 Effect of Code Section 280G. If the sum of the payments described in
Section 5.01 constitute "excess parachute payments" as defined in Code
Section 280G(b)(1), the Employer will either:
[1] Reimburse the Employee for the amount of any excise tax due under
Code Section 4999, if this procedure provides the Employee with an
after-tax amount that is larger than the after-tax amount produced
under Section 5.02[2]; or
[2] Reduce the Employee's benefits under this Agreement so that the
Employee's total "parachute payment" as defined in Code Section
280G(b)(2)(A) under this and all other agreements will be $1.00 less
than the amount that would be an "excess parachute payment" if this
procedure provides the Employee with an after-tax amount that is
larger than the after-tax amount produced under Section 5.02[1].
If Section 5.02[2] applies, within 10 days of the Date of Termination the
Corporation will apprise the Employee of the amount of the reduction
("Notice of Reduction"). Within 10 days of receiving that information, the
Employee may specify how (and against which benefit or payment source) the
reduction is to be applied ("Notice of Allocation"). The Employer will be
required to implement these directions within 10 days of receiving the
Notice of Allocation. If, the Corporation has not received a Notice of
Allocation from the Employee within 10 days of the date of the Notice of
Reduction or if the allocation provided in the Notice of Allocation is not
sufficient to fully implement Section 5.02[2], the Corporation will apply
Section 5.02[2] proportionately based on the amounts otherwise payable
under Section 5.01 or, if a Notice of Allocation has been returned that
does not sufficiently implement Section 5.02[2], on the basis of the
reductions specified in the Notice of Allocation.
17
5.03 Conditions Affecting Payments.
[1] Except as expressly provided in this Agreement, the Employee's
right to receive the payments described in this Agreement will not
decrease the amount of, or otherwise adversely affect, any other
benefits payable to the Employee under any other plan, agreement or
arrangement between the Employee and any Group Member.
[2] The Employee is not required to mitigate the amount of any
payment described in this Agreement by seeking other employment or
otherwise, nor, except as provided in Section 5.01[2], will the
amount of any payment or benefit provided for in this Agreement be
reduced by any compensation or benefits the Employee earns, or is
entitled to receive, in any capacity after Termination or by reason of
the Employee's receipt of or right to receive any retirement or other
benefits attributable to employment with the Group on or after
Termination.
[3] However, the amount of any payment made under this Agreement will
be reduced by amounts the Employer is required to withhold in payment
(or in anticipation of payment) of any income, wage or employment
taxes imposed on the payment.
[4] If the Employee is a "key employee" as defined in Code Section
409A(a)(2)(B)(i) at the time of Termination, amounts due under this
Agreement will be distributed as the earliest time permitted by
Code Section 409A(a)(2)(B)(i).
6.00 AMENDMENT AND TERMINATION
6.01 Amendment. This Agreement may be amended at any time by written
agreement between the Parties. Also, the Parties agree that this Agreement
may be amended, without any further consideration due to or from either
party, to conform with requirements imposed under Code Section 409A.
6.02 Termination. This Agreement will terminate on the earliest of the
following to occur:
[1] Except as provided in Section 4.00, the Employee's employment
with all Group Members is Terminated before a Change in Control;
[2] Before a Change in Control and except as provided in Section
4.00, the Employee is reassigned to a more junior position than that
held on the date of this Agreement; however, if the more junior
position is in a classification, the majority of whose members have
change in control agreements, this Agreement will remain in effect,
although benefit levels will automatically be reduced to the level
established under those agreements;
[3] The Parties mutually agree, in writing, to terminate this
Agreement, whether or not it is replaced with a similar agreement;
[4] The Employer notifies the Employee, in writing, that the
Agreement is to terminate at the end of its then current Term. To be
effective, however, this written notice [a] must be given no later
than 60 consecutive calendar days before the end of the then current
Term but [b] may never be effective [i] during an Effective Period or
[ii] at
18
any time after the Corporation learns that activities have begun that,
if completed, would cause a Change in Control, although a notice of
termination of this Agreement may be given if those activities end
without generating a Change in Control;
[5] All payments due under this Agreement have been fully paid; or
[6] As provided in (and subject to the terms of) Section 4.00.
7.00 EQUITABLE RELIEF/DISPUTE RESOLUTION
7.01 Uniqueness of Obligations. The Employee's obligations described in
this Agreement are of a special and unique character which gives them a
peculiar value to the Group and the Group cannot be reasonably or
adequately compensated solely in damages in an action at law if Employee
breaches those obligations. Employee therefore expressly agrees that, in
addition to any other rights or remedies that the Corporation, the Company,
the Employer or the Group may have, and whether or not the Employee
receives the Employee Obligation Payments or any other payments described
in Section 5.00, the Corporation, the Company, the Employer and the Group
will be entitled to injunctive and other equitable relief in the form of
preliminary and permanent injunctions without bond or other security if the
Employee actually breaches (or threatens to breach) any obligation under
this Agreement.
7.02 Initial Resolution of Disputes Affecting Payment Amount.
[1] The Employee may request the Corporation to recalculate the
amount of payments due under this Agreement. That request must [a] be
filed in writing no later than 30 days after the Employee receives the
Notice of Payment and [b] specify the basis upon which the Employee
believes that an additional amount is due. Any request for
recalculation that does not comply with both requirements will be
ineffective.
[2] Within 30 days of receiving a request that complies with
Section 7.02[1], the Corporation will notify the Employee of any
changes to its calculations and the effect of any changes on the
amount payable to the Employee. If the Corporation does not deliver
this information to the Employee within this 30-day period, the
Employee may regard the request as having been denied.
[3] The Employee expressly waives any right to proceed under Section
7.03 to dispute the calculation of the amount payable under this
Agreement unless and until the administrative remedies described in
this Section 7.02 are fully exhausted.
7.03 Arbitration Any [1] disagreement concerning the calculation of any
payment due under this Agreement that is not resolved after utilizing the
procedures described in Section 7.02, [2] breach of any term of this
Agreement or [3] other dispute or controversy arising out of or relating to
this Agreement, including the basis on which the Employee is Terminated,
will be resolved by arbitration in accordance with the rules of the
American Arbitration Association. The award of the arbitrator will be
final, conclusive and nonappealable and judgment upon the award rendered by
the arbitrator may be entered in any court having competent jurisdiction.
The arbitrator must be an arbitrator qualified to serve in accordance with
the rules of the American Arbitration Association and one who is approved
by the Corporation and the Employee. If the
19
Employee and the Corporation fail to agree on an arbitrator, each must
designate a person qualified to serve as an arbitrator in accordance with
the rules of the American Arbitration Association and these persons will
select the arbitrator from among those persons qualified to serve in
accordance with the rules of the American Arbitration Association. Any
arbitration relating to this Agreement will be held in the city in which
the Employee's last principal place of employment with a Group Member before
the Employee's Date of Termination is or was located or another place the
Parties mutually select immediately before the arbitration.
7.04 Costs. The Corporation or the Employer will bear all reasonable costs
associated with any dispute arising under this Agreement, including
reasonable accounting and legal fees incurred by the Employee through any
proceeding described in Section 7.02 or 7.03.
7.05 Payment During Dispute Resolution Period. If otherwise due, the
Employer may not defer (or cause the Employer to defer) payment of any
amount that is not being contested under Section 7.02 or 7.03.
7.06 Payment of Additional Amounts. If the arbitrator decides, at the
conclusion of the arbitration proceedings described in Section 7.03, that
the Corporation has understated the amount due under this Agreement, the
Corporation will, subject to application of Section 5.02 to the aggregate
of the amount initially paid under Section 5.00 and the additional award,
pay the additional amount, if any, to the Employee within 30 days after the
date of the award along with interest calculated at the interest rate
prescribed in Section 3.08[3]. However, if, after application of Section
5.02 to the arbitrator's award, the net amount due to the Employee would
not increase, no amounts will be paid under this subsection, regardless of
the arbitrator's award.
7.07 Effect of Subsequent Tax Claim.
[1] Employee's Obligations.
[a] The Employee will notify the Corporation in writing of any
claim by the Internal Revenue Service or any other taxing
authority relating to any "excise taxes" arising under Code
Section 4999 ("Excise Taxes") due with respect to payments under
Section 5.00 ("Tax Claim"). The Employee must give this
notification in writing as soon as practicable but no later than
10 business days after receipt of the notice of any Tax Claim.
Simultaneously, the Employee will apprise the Corporation of the
nature of the Tax Claim. The Employee agrees not to pay any Tax
Claim before the expiration of the 30-day period following the
date on which the Employee gives this notice to the Corporation
(or any shorter period ending on the date that any payment of
taxes with respect to the Tax Claim is due).
[b] Employee's Duty to Cooperate. If, before the expiration of
the period described in the last sentence of the preceding
subsection, the Corporation notifies the Employee in writing that
it intends to contest the Tax Claim, the Employee will:
[i] Give the Corporation any information it reasonably
requests in writing that is related to the Tax Claim;
20
[ii] Take any action in connection with contesting the Tax
Claim that the Corporation reasonably requests in writing,
including accepting legal representation with respect to the
Tax Claim by an attorney selected by the Corporation;
[iii] Cooperate with the Corporation in good faith to
contest the Tax Claim effectively; and
[iv] Permit the Corporation to participate in and to control
any proceedings relating to any Tax Claim.
If the Employee does not comply in every respect with the
procedures described in Section 7.07[1] and Section 7.09, the
Corporation will be discharged from all obligations described in
Section 7.07[2].
[2] Corporation's Obligations. Upon receipt of the notice described
in Section 7.07[1][a], the Corporation will notify the Employee that
it will either accede to or contest the Tax Claim. If this notice is
not given within 30 days of the receipt of the notice described in
Section 7.07[1], the Corporation will be deemed to have acceded to the
Tax Claim.
[a] If the Corporation accedes to the Tax Claim, the Corporation
and the Employee agree that [i] the Corporation will treat the
Tax Claim as a final notice of deficiency and implement Section
7.10 and [ii] this decision will be binding on the Employee and
the Group even if this procedure results in a smaller after-tax
benefit to the Employee.
[b] If the Corporation decides to contest the Tax Claim, the
Corporation and the Employee agree that the Corporation will:
[i] Assume control of all proceedings taken in connection
with any contest relating to the Tax Claim and, at the
Corporation's sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of any Tax
Claim; and
[ii] Directly bear and pay all costs and expenses (including
additional interest and penalties) incurred in connection
with any contest relating to a Tax Claim and, after
application of Section 5.02 with respect to the Tax Claim,
will, if appropriate, indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax, including associated interest and penalties
imposed as a result of the Corporation's payment of the
costs of resisting any Tax Claim.
7.08 Repayment of Refunds. If, after the receipt by the Employee of an
amount under Section 7.07 (including any amount under Section 5.02[2], if
applicable), the Employee becomes entitled to receive any tax refund
relating to any overpayment of any Excise Tax or other tax,
21
including interest and penalties, the Employee will promptly pay to the
Corporation the amount of any refund (together with any interest received
with respect to that refund).
7.09 Notice of Extension of Statute of Limitations. The Employee agrees to
notify the Corporation if and when the Employee consents to the extension
of the statute of limitations for any year for which a payment is made
under Section 5.00.
7.10 Effect of Miscalculating Payment.
[1] If an arbitrator subsequently and conclusively decides the
Corporation has miscalculated the amount of any payment under Section
5.00 and if that decision, had it been made initially:
[a] Would have resulted in a larger payment than initially
calculated, the Corporation will reapply Sections 5.02[1] and [2]
based on the revised calculation to identify the Employee's
revised payment and immediately pay that additional amount to the
Employee.
[b] If, after the recalculation described in Section 7.10[1][a],
the Employee is entitled to a smaller amount under this Agreement
than initially calculated, the Corporation and the Employee agree
that, within 30 days of the arbitrator's decision, the Employee
will repay to the Corporation the difference between the amount
initially paid and the amount due under Section 7.10[1][a] along
with interest, calculated from the date of the initial payment,
at the lowest prime rate of interest calculated as provided in
Section 3.08[3] during the period between the date the
arbitrator's decision is issued and the date the excess amount is
repaid.
[2] If the Internal Revenue Service issues a final notice of
liability with respect to any Tax Claim, the Corporation will reapply
Section 5.02. If, after that reapplication, the Corporation concludes
that a smaller amount should have been paid to the Employee, the
Corporation and the Employee agree that, within 30 days of the
arbitrator's decision, the Employee will repay to the Corporation the
difference between the amount initially paid and the amount due under
Section 7.10 along with interest, calculated as provided in Section
3.08[3].
8.00 MISCELLANEOUS
8.01 Security. At any time during the Term, the Corporation may provide
(or cause the Employer to provide) security for payment of the amounts and
benefits described in Section 5.00. This security may include one or more
of [1] a stand-by letter of credit issued by a reputable financial
institution, [2] an irrevocable grantor trust (the "Trust") established on
terms the Corporation believes to be appropriate, including a ruling from
the Internal Revenue Service (or opinion of counsel satisfactory to the
Corporation), to the effect that any funds held by the Trust will be
includable in the Employee's gross income only for the taxable year or
years paid to the Employee under the terms of the Trust's related trust
agreement or [3] any other form of security the Corporation believes is
appropriate.
22
8.02 Nonassignment. The right of an Employee or any other person to
receive any amount under this Agreement may not be assigned, transferred,
pledged or encumbered except by will or by applicable laws of descent and
distribution. Any attempt to assign, transfer, pledge or encumber any
amount that is or may be receivable under this Agreement will be null and
void and of no legal effect.
8.03 Successors to the Employee. Subject to Section 8.02, this Agreement
inures to the benefit of and may be enforced by the Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8.04 Transfers.
[1] If, either before or after a Change in Control, the Employee's
employment relationship shifts within the Group and there has been no
intervening Termination, this Agreement will remain in full force and
effect and for all purposes of this Agreement, the Employee's new
Employer will be substituted for the Employee's prior Employer.
[2] If the Employee's Employer is no longer a Group Member, whether or
not as part of a transaction that constitutes a Change in Control,
this Agreement will remain in full force and effect as described in
Section 8.03. However, the Employee will not be entitled to any
amount under this Agreement on account of a Change in Control that
[a] solely affects the Group after that transfer and [b] is not part
of the same transaction through which the Employer left the Group.
8.05 Notices. All notices and other communications provided for in this
Agreement must be written and will be deemed to have been given when
deposited with a reputable delivery service or in United States registered
mail, return receipt requested, postage prepaid. Also,:
[1] All notices must be directed to the address shown on the last page
of this Agreement (or, if appropriate, to the Employee's Beneficiary
at the address shown in the latest Beneficiary designation form filed
with the Employer);
[2] Notices and other communications to the Corporation and the
Employer will not be deemed to have been given unless they are
directed to the attention of the Corporation's Chief Executive Officer
and copies are sent to the Corporation's Secretary.
[3] Neither Party will be required to use any address other than that
shown on the last page of this Agreement (or, if appropriate, the
latest Beneficiary designation the Employee filed with the
Corporation) unless notified of a change in the other Party's (or
Beneficiary's) address. Any change in either Party's (or
Beneficiary's) address must be given in writing to the other Party and
will be effective only upon receipt.
8.06 Complete Agreement. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement have been made by either Party that are not set forth expressly
in this Agreement. This Agreement may be amended only by mutual written
agreement of the Parties. However, by signing this Agreement, the Employee
agrees, without any further consideration, to consent to any amendment
necessary to avoid penalties under Code Section 409A.
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8.07 Applicable Law. The validity, interpretation, construction and
performance of this Agreement will be governed by the laws (but not the law
of conflicts of laws) of the State of Ohio.
8.08 Validity. The invalidity or unenforceability of any provisions of
this Agreement will not affect the validity or enforceability of any other
provisions of this Agreement, which will remain in full force and effect.
5.09 Effect of Code Section 409A. Regardless of any other section of this
Agreement, if the Corporation (or any successor, including another entity
involved in a Change in Control with the Corporation) unilaterally and
without the Employee's specific written consent takes (or fails to take)
any action that generates an excise tax under Code Section 409A, the
Corporation will distribute an additional amount sufficient to ensure that
the Employee (or the Employee's beneficiary, if appropriate) retains an
amount as large as the amount he would have retained but for that action.
This undertaking applies to the effect of the excise taxes arising under
Code Section 409A as well as any other excise taxes that might apply as a
result of those taxes or this reimbursement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be
effective as of the date and year first above written.
OHIO CASUALTY CORPORATION
By:
---------------------------------------------
Stanley N. Pontius, Lead Director
THE OHIO CASUALTY INSURANCE COMPANY
By:
---------------------------------------------
Stanley N. Pontius, Lead Director
Address:
9450 Seward Road
Fairfield, OH 45014
DAN R. CARMICHAEL
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Address:
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