Exhibit 99.2
LIBERTY FINANCIAL COMPANIES, INC. AND SUBSIDIARIES
NON-COMMISSIONED EMPLOYEE SEVERANCE AND RETENTION PLAN
The Company hereby adopts the Liberty Financial Companies, Inc. and
Subsidiaries Non-Commissioned Employee Severance and Retention Plan for the
benefit of certain employees of the Company and its Affiliates, on the terms and
conditions hereinafter stated. All capitalized terms used herein are defined in
Section 1 hereof.
SECTION 1. DEFINITIONS. As hereinafter used:
1.1 "AFFILIATE" shall have the meaning set forth in Rule 12b-2
under Section 12 of the Exchange Act.
1.2 "BENEFICIAL OWNER" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
1.3 "BOARD" means the Board of Directors of the Company.
1.4 "CAUSE" means (i) the willful and continued failure by a
Covered Employee to substantially perform the Covered Employee's duties with the
Employer (other than any such failure resulting from the Covered Employee's
incapacity due to physical or mental illness), or (ii) the willful engaging by a
Covered Employee in conduct which is demonstrably injurious in a material extent
to the Company or any of its Affiliates, monetarily or otherwise. For purposes
of this definition, no act, or failure to act, on a Covered Employee's part
shall be deemed "willful" unless done, or omitted to be done, by the Covered
Employee not in good faith or without reasonable belief that the Covered
Employee's act, or failure to act, was in the best interest of the Company.
1.5 A "CHANGE IN CONTROL" shall be deemed to have occurred if any
of the events set forth in the following paragraphs shall have occurred:
(1) any Person (other than Liberty Mutual Insurance Company
or any of its affiliates) becomes the Beneficial Owner (except in connection
with a transaction described in paragraphs (2) or (3) below), directly or
indirectly, of (i) securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding Voting Securities or
(ii) assets of the Company comprising 50% or more of such assets;
(2) the consummation of any merger or consolidation or
similar business transaction of the Company (or any direct or indirect
subsidiary of the Company)
with any other corporation or other entity in which the holders of the Company's
outstanding Voting Securities immediately prior to such transaction no longer
hold (in combination with the ownership of any trustee or other fiduciary
holding securities under any employee benefit plan of the Company) at least 50%
of the outstanding Voting Securities of the Company, the surviving entity or any
parent thereof immediately after such transaction; or
(3) any Person becomes the Beneficial Owner (except in
connection with a transaction described in paragraphs (1) and (2) above),
directly or indirectly, of assets of the Company comprising of all or
substantially all of the Company's annuity or asset management business (as
determined by the Board in its discretion); PROVIDED, HOWEVER, that such
event will result in a "Change in Control" only with respect to a Covered
Employee the assets of whose Employer are transferred in connection with the
transaction described in this paragraph (3); provided, further, that a
"Change of Control" shall be deemed to have occurred with respect to Covered
Employees who are employed in the Company's corporate group in the event that
one or more transactions described in this paragraph (3) shall occur with
respect to all or substantially all of both of the Company's annuity and
asset management businesses.
1.6 "CHANGE IN CONTROL PRICE" means, with respect to a Covered
Employee, the average of the closing share price of the Company's common stock
on the New York Stock Exchange Consolidated Trading System during the 10 trading
days prior to the applicable Change in Control.
1.7 "CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
1.8 "COMPANY" means Liberty Financial Companies, Inc. or any
successors thereto.
1.9 "COVERED EMPLOYEE" means any employee who is a Tier 1, Tier 2,
Tier 3, Tier 4, Tier 5, Tier 6, Tier 7 or Tier 8 Employee and who is in good
standing (not on probation). A Covered Employee becomes a "SEVERED EMPLOYEE"
once he or she incurs a Severance.
1.10 "DATE OF HIRE" means the earlier of the date a Covered
Employee commences employment with the Employer or a Covered Employee's adjusted
service date designated in the Company's records.
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1.11 "DISABILITY" shall mean total and permanent disability as
determined under the provisions of the applicable Employer long-term disability
program.
1.12 "EMPLOYER" means the Company or any of its Affiliates (or any
successor Person following a Change in Control) which is an employer of a
Covered Employee.
1.13 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
1.14 "EXCISE TAX" shall have the meaning ascribed to such term in
Section 6 hereof.
1.15 "FIRST PAYMENT DATE" means the date on which the initial fifty
percent (50%) of a Covered Employee's Prorated Retention Bonus or Maximum
Retention Bonus, as the case may be, is paid to such Covered Employee by the
Company in accordance with Section 3.1 hereof.
1.16 "GOOD REASON" in respect to a Tier 7 or Tier 8 Employee means,
the occurrence, on or after the date of a Change in Control and without the
affected Covered Employee's written consent (which the Covered Employee may
withhold in his or her sole discretion), of (i) the assignment to the Covered
Employee of duties in the aggregate that are materially different with the
Covered Employee's level of responsibility either as of November 1, 2000 or
immediately prior to the date of the Change in Control or any material reduction
in the nature or status of the Covered Employee's responsibilities from those in
effect either as of November 1, 2000 or immediately prior to the date of the
Change in Control; PROVIDED, HOWEVER, that the mere fact of a Covered Employee
ceasing to be an officer of a public company shall not constitute a material
reduction in the nature or status of such Covered Employee's responsibilities;
(ii) a material reduction by the Employer in the Covered Employee's annual base
salary or annual incentive compensation opportunity (based upon factors
reasonably within the management control and influence of such Covered Employee)
from that in effect immediately prior to the Change in Control; or (iii) the
relocation of the Covered Employee's principal place of employment to a location
more than fifty (50) miles from the Covered Employee's principal place of
employment immediately prior to the date of the Change in Control. "Good Reason"
in respect of a Tier 1, Tier 2, Tier 3, Tier 4, Tier 5 or Tier 6 Employee means,
the occurrence, on or after the date of a Change in Control and without the
Covered Employee's written consent, of (i) a material reduction by the Employer
in the Covered Employee's total annual pay (including the variable pay target)
from that in
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effect immediately prior to the Change in Control or (ii) the relocation of the
Covered Employee's principal place of employment to a location more than fifty
(50) miles from the Covered Employee's principal place of employment immediately
prior to the date of the Change in Control. Notwithstanding the foregoing, with
respect to Covered Employees who are employed in the Company's corporate group
and who have been designated as required to stay through the LFC Merger Date,
Good Reason cannot occur until the LFC Merger Date.
1.17 "GROSS-UP PAYMENT" shall have the meaning ascribed to such
term in Section 6 hereof.
1.18 "LFC MERGER" means the merger or similar business transaction
occurring after the last Change in Control by which the Company shall be merged
with or into Liberty Mutual Insurance Company or a wholly owned subsidiary
thereof.
1.19 "LFC MERGER DATE" shall mean the effective date of the LFC
Merger.
1.20 "LFC MERGER SHAREHOLDER PRICE" shall mean the cash value
payable to minority public shareholders of a share of the Company's common stock
on the LFC Merger Date as finally determined after applicable adjustments
thereto in accordance with the Agreement and Plan of Merger relating to the LFC
Merger.
1.21 "MAXIMUM RETENTION BONUS" shall mean a cash amount equal to
the following with respect to a Tier 1, Tier 2, Tier 3, Tier 4, Tier 5, Tier 6,
Tier 7 or Tier 8 Employee:
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Tier 8 Employee Two times his or her Target Bonus.
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Tier 7 Employee His or her annual base salary rate.
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Tier 5 or Tier 6 Employee The greater of (i) two times his or her Target
Bonus or (ii) nine months of his or her annual
base salary rate; PROVIDED, HOWEVER, that with
respect to a New Covered Employee, such amount
shall be equal to the maximum of the product of
(i) 75% and (ii) one month of his or her annual
base salary rate for each Month of Service
(subject to a maximum of nine months of his or
her annual base salary rate) or 200% of monthly
target bonus per each month of employment
through the date of closing.
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Tier 3 or Tier 4 Employee Nine months of his or her annual base salary
rate; PROVIDED, HOWEVER, that with respect to a
New Covered Employee, such amount shall be
equal to the product of (i) 75% and (ii) one
month of his or her annual base salary rate for
each Month of Service (subject to a maximum of
nine months of his or her annual base salary
rate).
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Tier 2 Employee Six months of his or her annual base salary
rate; PROVIDED, HOWEVER, that with respect to a
New Covered Employee, such amount shall be
equal to the greater of (i) one month of his or
her annual base salary rate for each Month of
Service (subject to a maximum of six months of
his or her annual base salary rate) or (ii) one
month of his or her annual base salary rate.
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Tier 1 Employee Four months of his or her annual base salary
rate; PROVIDED, HOWEVER, that with respect to a
New Covered Employee, such amount shall be
equal to the greater of (i) one month of his or
her annual base salary rate for each Month of
Service (subject to a maximum of four months of
his or her annual base salary rate) or (ii) one
month of his or her annual base salary rate.
- ------------------------------------------------------------------------------------------------------
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For purposes of this Section 1.21, "annual base salary rate" shall
be determined immediately prior to a Change in Control.
1.22 "MINIMUM RETENTION BONUS" shall mean a cash amount equal to
the following with respect to a Tier 3, Tier 4, Tier 5, Tier 6, Tier 7 or Tier 8
Employee:
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Tier 8 Employee His or her Target Bonus.
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Tier 7 Employee Six months of his or her annual base salary
rate.
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Tier 5 or Tier 6 Employee The greater of (i) his or her Target Bonus or
(ii) six months of his or her annual base
salary rate; PROVIDED, HOWEVER, that with
respect to a New Covered Employee, such amount
shall be equal to the greater of four months of
his or her annual base salary rate or the
equivalency of 200% of monthly target bonus for
three months.
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Tier 3 or Tier 4 Employee Six months of his or her annual base salary
rate; PROVIDED, HOWEVER, that with respect to a
New Covered Employee, such amount shall be
equal to two months of his or her annual base
salary rate.
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For purposes of this Section 1.22, "annual base salary rate" shall
be determined immediately prior to a Change in Control.
1.23 "MONTH OF SERVICE" means each full month during which a New
Covered Employee has been employed by the Employer; PROVIDED, HOWEVER, that a
New Covered Employee whose Date of Hire occurs on or before the 14th day of the
month in which the Date of Hire occurs shall be credited with a Month of Service
for such month; PROVIDED, FURTHER, that in the event the date of a Change in
Control occurs on or after the 15th day of the month during which a Change in
Control occurs, a New Covered Employee who is then employed by the Employer
shall be credited with a Month of Service for such month.
1.24 "NEW COVERED EMPLOYEE" means any Tier 1, Tier 2, Tier 3, Tier
4 or Tier 5 Employee who commences employment with the Employer following
November 6, 2000 and who is designated as a New Covered Employee in his or her
offer of employment; PROVIDED, HOWEVER, that any Tier 1, Tier 2, Tier 3, Tier 4
or Tier 5 Employee who is designated as a Covered Employee in his or her offer
of employment shall be a Covered Employee and shall not be a New Covered
Employee; PROVIDED, FURTHER, that a New Covered Employee shall be treated the
same as a Covered Employee for purposes of the Plan except where different
treatment is specifically stated in the Plan.
1.25 "NOTICE PERIOD" shall have the meaning ascribed to such term
in Section 2.4 hereof.
1.26 "PERSON" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
1.27 "PLAN" means this Liberty Financial Companies, Inc. and
Subsidiaries Non-Commissioned Employee Severance and Retention Plan, as set
forth herein, as it may be amended from time to time in accordance with Section
8 hereof.
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1.28 "PLAN ADMINISTRATOR" means the Compensation Committee of the
Board or one or more successors appointed by the Board.
1.29 "PRORATED RETENTION BONUS" shall have the meaning ascribed to
such term in Section 3.1(1) hereof.
1.30 "RESTRICTED STOCK AGREEMENT" means a restricted stock
agreement between a Covered Employee and the Company pursuant to which the
Covered Employee was granted shares of the Company's common stock that are
subject to restrictions on transfer.
1.31 "RESTRICTED PERIOD" shall have the meaning set forth in a
Covered Employee's Restricted Stock Agreement.
1.32 "RESTRICTED STOCK TARGET PRICE" means that price per share of
the Company's common stock stipulated in a Covered Employee's Restricted Stock
Agreement at which such shares must trade for a period of ten consecutive
trading days after the expiration of the applicable two year waiting period set
forth in such Covered Employee's Restricted Stock Agreement as a condition
precedent to the expiration of the Restricted Period.
1.33 "RETIREMENT" means a termination of a Covered Employee's
employment with the Employer within or after the calendar year the Covered
Employee attains age sixty (60).
1.34 "SECOND PAYMENT DATE" means a date six months immediately
following a Change in Control.
1.35 "SEVERANCE" means the termination of a Covered Employee's
employment with the Employer (or, if applicable, a successor to the Employer) on
or within eighteen (18) months following the date of the Change in Control, (i)
by the Employer (or, if applicable, a successor to the Employer) other than for
Cause, or (ii) by the Covered Employee for Good Reason. A Covered Employee will
not be considered to have incurred a Severance (i) if his or her employment is
discontinued by reason of the Covered Employee's death or a physical or mental
condition causing such Covered Employee's inability to substantially perform his
or her duties with the Employer, including, without limitation, such condition
entitling him or her to benefits under any sick pay or disability income policy
or program of the Employer; PROVIDED, HOWEVER, that a Covered Employee who is
entitled to short-term disability benefits may incur a Severance of such Covered
Employee's employment in accordance with this Section 1.36 or (ii) by reason of
the divestiture of a facility, sale of a
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business or business unit, or the outsourcing of a business activity with which
the Covered Employee is affiliated (including, but not limited to, a sale of the
Company's annuity or asset management business that results in a Change in
Control pursuant to Section 1.5(3) hereof) if the Covered Employee is offered
employment by the entity which acquires such facility, business or business unit
or which succeeds to such outsourced business activity (subject to such Covered
Employee's right to terminate his or her employment for Good Reason), in which
case such acquiring entity shall be treated as the Employer of such Covered
Employee for all purposes under the Plan.
1.36 "SEVERANCE DATE" means the date on or after the date of the
Change in Control on which a Covered Employee incurs a Severance.
1.37 "SEVERANCE PAY" shall mean a cash payment from the Company
equal to the greater of (i) any severance pay due under the Employer's existing
severance guidelines based upon a Covered Employee's Date of Hire or (ii) the
following with respect to a Tier 1, Tier 2, Tier 3, Tier 4, Tier 5, Tier 6, Tier
7 or Tier 8 Employee:
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Tier 8 Employee The sum of (i) two times his or her
annual base salary rate, plus (ii) his or her
Target Bonus.
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Tier 6 or Tier 7 Employee The sum of (i) his or her annual base salary
rate, plus (ii) his or her Target Bonus.
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Tier 2, Tier 3, Tier 4 or Tier 5 Employee His or her annual base salary rate; PROVIDED,
HOWEVER, that with respect to a New Covered
Employee, such amount shall be equal to the
greater of (i) one month of his or her annual
base salary rate for each Month of Service
(subject to a maximum of his or her annual base
salary rate) or (ii) two months of his or her
annual base salary rate.
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Tier 1 Employee Six months of his or her annual base salary
rate; PROVIDED, HOWEVER, that with respect to a
New Covered Employee, such amount shall be
equal to the greater of (i) one month of his or
her annual base salary rate for each Month of
Service (subject to a maximum of six months of
his or her annual base salary rate) or (ii) one
month of his or her annual base salary rate.
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For purposes of this Section 1.38, "annual base salary rate" shall
be determined immediately prior to the Severance (without regard to any
reductions therein which constitute Good Reason).
1.38 "TARGET BONUS" means the Covered Employee's target annual
incentive bonus in effect on the date immediately prior to the Change in Control
or, in the event a Change in Control does not occur prior to November 1, 2001,
the Covered Employee's target annual incentive bonus in effect on October 31,
2001.
1.39 "TIER 1 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 1 Participant.
1.40 "TIER 2 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 2 Participant.
1.41 "TIER 3 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 3 Participant.
1.42 "TIER 4 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 4 Participant.
1.43 "TIER 5 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 5 Participant.
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1.44 "TIER 6 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 6 Participant.
1.45 "TIER 7 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 7 Participant.
1.46 "TIER 8 EMPLOYEE" means any employee of the Employer selected
by the Plan Administrator to participate in the Plan and who is designated in
the Company's records as a Tier 8 Participant.
1.47 "TOTAL PAYMENTS" shall have the meaning ascribed to such term
in Section 6 hereof.
1.48 "VOTING SECURITIES" means voting securities entitled to be
voted generally in the election of directors.
SECTION 2. SEVERANCE BENEFITS.
2.1 Each Covered Employee who incurs a Severance shall be entitled,
subject to Section 2.5 hereof, to receive Severance Pay. Severance Pay shall be
paid to a Severed Employee in a cash lump sum, as soon as practicable following
the Severance Date, but in no event later than thirty (30) days immediately
following the expiration of the revocation period, if any, applicable to such
Severed Employee's Nonsolicitation/Waiver and Release of Claims Agreement,
described in Section 2.5.
2.2 The Company shall provide each Severed Employee with
outplacement services for a period of up to twelve (12) months.
2.3 Except for Level 8 Severed Employees, the coverage period for
purposes of the group health continuation requirements of section 4980B of the
Code shall commence on a Severed Employee's Severance Date. The Company shall
waive any premium payments otherwise required of a Severed Employee in
connection with such continuation coverage with respect to the period beginning
on each such Severed Employee's Severance Date and continuing thereafter for the
period with respect to which such Severed Employee is entitled to Severance Pay
in accordance with Section 1.38 hereof; PROVIDED, HOWEVER, that during such
period, each such Severed Employee shall continue to pay to the Company the
employee portion of any premium payments at active employee rates (which may be
changed by the Company). Level 8 Severed Employees' group health continuation
requirements of Section 4980B of the Code shall commence six (6) months after a
Severed Employee's Severance Date.
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2.4 If an Employer is obligated by law or by contract to pay
severance pay, a termination indemnity, notice pay, or the like to a Covered
Employee, or if an Employer is obligated by law to provide advance notice of
separation (not including any notice period that relates to obligations of an
Employer which arise under the Worker Adjustment Retraining Notification Act, 29
U.S.C. Section 2101, et seq.) ("NOTICE PERIOD") to a Covered Employee, then any
Severance Pay hereunder to such Covered Employee shall be reduced by the amount
of any such severance pay, termination indemnity, notice pay or the like, as
applicable, and by the amount of any compensation received during any Notice
Period. Any Severance Pay hereunder shall be reduced, on a dollar for dollar
basis, by any severance payment made by the Company, any subsidiary of the
Company, the Employer or successor Employer to the Covered Employee pursuant to
any other severance plan, program, policy or arrangement.
2.5 No Severed Employee shall be eligible to receive Severance Pay
or other benefits under the Plan unless he or she first executes a
Nonsolicitation/ Waiver and Release of Claims Agreement substantially in the
form attached hereto as Schedule A or in the form generally used by the
Beneficial Owner or other acquiring Person (or, if the Severed Employee is not a
United States employee, a similar agreement which is in accordance with the
applicable laws of the relevant jurisdiction).
2.6 Notwithstanding the foregoing, any individual who is designated
on Exhibit A hereto will not be entitled to any benefits under this Section 2.
SECTION 3. RETENTION BONUS.
3.1 PAYMENT OF RETENTION BONUS. A Covered Employee's Retention
Bonus shall be paid by the Company to the Covered Employee as follows:
(1) In the event a Change in Control occurs during the
period beginning on November 1, 2000 and ending on October 31, 2001, a Tier
3, Tier 4, Tier 5, Tier 6, Tier 7 or Tier 8 Employee who is employed by the
Employer on the date of a Change in Control shall be entitled to receive from
the Company an amount equal to the greater of (A) such Covered Employee's
Minimum Retention Bonus or (B) the product of (i) such Covered Employee's
Maximum Retention Bonus multiplied by (ii)
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a fraction, the numerator of which shall the number of full months from November
1, 2000 to the date of a Change in Control and the denominator of which shall be
twelve (12) (such greater amount, the "PRORATED RETENTION BONUS"); PROVIDED,
HOWEVER, that in the event the date of a Change in Control occurs on or after
the 15th day of the month during which a Change in Control occurs, the month
during which a Change in Control occurs shall be deemed to be a full month for
purposes of determining the number of full months to be included in the
numerator of such fraction. Fifty percent (50%) of such Covered Employee's
Prorated Retention Bonus shall be paid by the Company to the Covered Employee as
soon as practicable, but no later than thirty (30) days, following the date of a
Change in Control. The remaining fifty percent (50%) of such Covered Employee's
Prorated Retention Bonus shall be paid by the Company to the Covered Employee as
soon as practicable, but no later than thirty (30) days following, the Second
Payment Date if the Covered Employee is then employed by the Employer. If such
Covered Employee's employment is terminated prior to the Second Payment Date by
the Employer without Cause, by the Covered Employee for Good Reason or due to
the Covered Employee's death, Disability or Retirement, the remaining fifty
percent (50%) of the Covered Employee's Prorated Retention Bonus shall be paid
by the Company as soon as practicable, but no later than thirty (30) days,
following the date of such termination. If such Covered Employee's employment is
terminated prior to the Second Payment Date for any other reason, the remaining
fifty percent (50%) of the Covered Employee's Prorated Retention Bonus shall be
forfeited.
(2) In the event a Change in Control occurs during the
period beginning on November 1, 2000 and ending on October 31, 2001, a Tier 1
or Tier 2 Employee who is employed by the Employer on the date of a Change in
Control shall be entitled to receive from the Company an amount equal to such
Covered Employee's Maximum Retention Bonus. Fifty percent (50%) of such
Covered Employee's Maximum Retention Bonus shall be paid by the Company to
the Covered Employee as soon as practicable, but no later than thirty (30)
days, following the date of a Change in Control. The remaining fifty percent
(50%) of such Covered Employee's Maximum Retention Bonus shall be paid by the
Company to the Covered Employee as soon as practicable, but no later than
thirty (30) days following, the Second Payment Date if the Covered Employee
is then employed by the Employer. If such Covered Employee's employment is
terminated prior to the Second Payment Date by the Employer without Cause, by
the Covered Employee for Good Reason or due to the Covered Employee's death,
Disability or Retirement, the remaining fifty percent (50%) of the Covered
Employee's Maximum Retention Bonus shall be paid by the Company as soon as
practicable, but no later than thirty (30) days, following the date of such
termination. If such Covered Employee's employment is terminated prior to the
Second Payment Date for any other reason, the remaining fifty percent (50%)
of the Covered Employee's Maximum Retention Bonus shall be forfeited.
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(3) In the event a Change in Control does not occur prior to
November 1, 2001, a Tier 3, Tier 4, Tier 5, Tier 6, Tier 7 or Tier 8 Employee
who is employed by the Employer on November 1, 2001 shall be entitled to
receive from the Company an amount equal to such Covered Employee's Maximum
Retention Bonus. Fifty percent (50%) of such Covered Employee's Maximum
Retention Bonus shall be paid by the Company to the Covered Employee as soon
as practicable, but no later than thirty (30) days, following November 1,
2001. The remaining fifty percent (50%) of such Covered Employee's Maximum
Retention Bonus shall be paid by the Company to the Covered Employee as soon
as practicable, but no later than thirty (30) days following, May 1, 2002 if
the Covered Employee is then employed by the Employer. If such Covered
Employee's employment is terminated prior to May 1, 2002 by the Employer
without Cause, by the Covered Employee for Good Reason or due to the Covered
Employee's death, Disability or Retirement, the then unpaid amount of a
Covered Employee's Maximum Retention Bonus shall be paid by the Company as
soon as practicable, but no later than thirty (30) days, following the date
of such termination. If such Covered Employee's employment is terminated
prior to May 1, 2002 for any other reason, the remaining fifty percent (50%)
of the Covered Employee's Maximum Retention Bonus shall be forfeited.
(4) In the event a Change in Control does not occur prior to
November 1, 2001, a Tier 1 or Tier 2 Employee who is employed by the Employer
on November 1, 2001 shall be entitled to receive from the Company an amount
equal to such Covered Employee's Maximum Retention Bonus. Fifty percent (50%)
of such Covered Employee's Maximum Retention Bonus shall be paid by the
Company to the Covered Employee as soon as practicable, but no later than
thirty (30) days, following November 1, 2001. The remaining fifty percent
(50%) of such Covered Employee's Maximum Retention Bonus shall be paid by the
Company to the Covered Employee as soon as practicable, but no later than
thirty (30) days following, May 1, 2002 if the Covered Employee is then
employed by the Employer. If such Covered Employee's employment is terminated
prior to May 1, 2002 by the Employer without Cause, by the Covered Employee
for Good Reason or due to the Covered Employee's death, Disability or
Retirement, the then unpaid amount of a Covered Employee's Maximum Retention
Bonus shall be paid by the Company as soon as practicable, but no later than
thirty (30) days, following the date of such termination. If such Covered
Employee's employment is terminated prior to May 1, 2002 for any other
reason, the remaining fifty percent (50%) of the Covered Employee's Maximum
Retention Bonus shall be forfeited.
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3.2 Notwithstanding the foregoing, any individual who is designated
on Exhibit B hereto will not be entitled to any benefits under this Section 3.
SECTION 4. STOCK OPTIONS.
4.1 VESTED STOCK OPTIONS. Upon a Change in Control, each then
outstanding vested stock option held by a Covered Employee can be exercised at
any time prior to the earlier of (i) the LFC Merger Date, or (ii) the date such
option expires in accordance with its terms. If the LFC Merger Date is not on or
prior to such expiration date, the Covered Employee's vested options not
exercised on or prior to such expiration date will expire. If the LFC Merger
Date is on or prior to such expiration date, vested options not exercised prior
to the LFC Merger Date will be cancelled as of the LFC Merger Date in exchange
for a cash payment from the Company equal to the excess, if any, of the LFC
Merger Shareholder Price over the exercise price per share of each such option,
multiplied by the number of shares subject to such option. The Company shall
make such payment within thirty (30) days of the LFC Merger Date.
4.2 UNVESTED STOCK OPTIONS. Upon a Change in Control, any then
outstanding unvested stock options held by a Covered Employee shall be subject
to the following provisions, whichever is applicable to the Covered Employee:
(1) COVERED EMPLOYEE CONTINUES EMPLOYMENT UNTIL THE LFC
MERGER DATE. With respect to each Covered Employee who continues employment
with the Employer following the Change in Control until the LFC Merger Date,
each outstanding unvested option shall be cancelled upon the Change in
Control in exchange for cash payments from the Company determined as follows:
(i) Within thirty (30) days after the Change in
Control, the Company shall make a cash payment to the Covered Employee equal
to fifty percent (50%) of the excess, if any, of the Change in Control Price
over the exercise price of each such option, multiplied by the number of
shares subject to such option (the "First Option Payment").
(ii) Within thirty (30) days after the Second Payment
Date, the Company shall make a cash payment to the Covered Employee equal to
the combination of (a) fifty percent (50%) of the excess, if any, of the LFC
Merger Shareholder Price over the exercise price of each such option,
multiplied by the number of shares subject to each such option, and (b) plus
the excess, or minus the deficit, of the LFC Merger Shareholder Price over
the Change in Control Price
15
multiplied by fifty percent (50%) of the number of shares subject to each such
option (the "Second Option Payment"). (The purpose of clause (b) of the
preceding sentence is to "true up" the cash out price of the First Option
Payment so that it is based on the LFC Merger Shareholder Price.)
(iii) If the Covered Employee's employment is
terminated prior to the Second Payment Date by the Employer without Cause, by
the Covered Employee for Good Reason or due to the Covered Employee's death,
Disability or Retirement (each of such reasons being hereinafter referred to
as a "Valid Reason"), the Company shall make the Second Option Payment to the
Covered Employee within thirty (30) days after the later of such Covered
Employee's termination of employment or the LFC Merger Date. If the Covered
Employee's employment is terminated prior to the Second Payment Date for any
other reason other than a Valid Reason, the Second Option Payment shall not
be made.
(2) COVERED EMPLOYEE TERMINATES EMPLOYMENT PRIOR TO LFC
MERGER DATE. With respect to each Covered Employee who continues in
employment with the Employer following a Change in Control but then
terminates such employment prior to the LFC Merger Date, each outstanding
unvested option shall be cancelled upon the Change in Control in exchange for
cash payments from the Company determined as follows:
(i) Within thirty (30) days after the Change in
Control, the Company shall make a First Option Payment to the Covered
Employee.
(ii) If the Covered Employee's employment is
terminated for a Valid Reason, then within thirty (30) days after the LFC
Merger Date, the Company shall make a Second Option Payment to the Covered
Employee. If the Covered Employee's employment is terminated for any reason
other than a Valid Reason, then the Second Option Payment shall not be made.
SECTION 5. RESTRICTED STOCK.
If the LFC Merger Shareholder Price equals or exceeds the
Restricted Stock Target Price applicable to an outstanding share of restricted
stock held by a Covered Employee, then, immediately prior to the LFC Merger,
such outstanding share of restricted stock shall become fully vested and all
restrictions relating to such stock shall lapse. Any then outstanding share of
restricted stock of the Company held by a Covered Employee for which the
Restricted Stock Target Price applicable to such share of restricted stock is
more than the LFC Merger Shareholder Price shall be
16
forfeited by the Covered Employee upon the LFC Merger. The phrase "immediately
prior to the LFC Merger Date" in the first sentence of this Section 5 shall be
understood to mean sufficiently in advance of the LFC Merger to permit the
Covered Employee to take all steps reasonably necessary to deal with the shares
of such stock so that such shares may be treated in the same manner, subject to
the consummation of the LFC Merger, as the shares of stock of other shareholders
(other than Liberty Mutual Insurance Company or any shareholders seeking
appraisal rights) in connection with the LFC Merger.
SECTION 6. EXCISE TAX.
If any of the payments or benefits received or to be received by a
Covered Employee in connection with the Change in Control or his or her
termination of employment (whether pursuant to the terms of this Plan or any
other plan, arrangement or agreement) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "TOTAL PAYMENTS") will be
subject to any excise tax imposed under section 4999 of the Code (the "EXCISE
TAX"), the Company shall pay to the Covered Employee an additional amount (the
"GROSS-UP PAYMENT") such that the net amount retained by the Covered Employee,
after deduction of any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. The amount of the Gross-Up Payment, if
any, shall be determined in a reasonable manner by the Plan Administrator or any
person or entity designated by the Plan Administrator. The Gross-Up Payment, if
any, (a) with respect to a Severed Employee, shall be paid in a cash lump sum,
as soon as practicable following the Severance Date, but, in any event, not
later than thirty (30) days immediately following the expiration of the
revocation period, if any, applicable to such Severed Employee's release,
described in Section 2.5, and, (b) with respect to any other Covered Employee,
shall be paid in a cash lump sum not later than thirty (30) days immediately
following the receipt of payments subject to the Excise Tax.
SECTION 7. PLAN ADMINISTRATION.
7.1 The Plan Administrator shall administer the Plan and may
interpret the Plan, prescribe, amend and rescind rules and regulations under the
Plan and make all other determinations necessary or advisable for the
administration of the Plan, subject to all of the provisions of the Plan,
including, without limitation, Sections 8 and 9.2 hereof.
17
7.2 The Plan Administrator is empowered, on behalf of the Plan, to
engage accountants, legal counsel and such other personnel as it deems necessary
or advisable to assist it in the performance of its duties under the Plan. The
functions of any such persons engaged by the Plan Administrator shall be limited
to the specified services and duties for which they are engaged, and such
persons shall have no other duties, obligations or responsibilities under the
Plan. Such persons shall exercise no discretionary authority or discretionary
control respecting the management of the Plan. All reasonable expenses thereof
shall be borne by the Company.
SECTION 8. PLAN MODIFICATION OR TERMINATION.
The Plan may be amended or terminated by the Board at any time;
PROVIDED, HOWEVER, that the Plan may not be amended or terminated during the
eighteen (18) month period following a Change in Control.
SECTION 9. GENERAL PROVISIONS.
9.1 The Company shall pay to each Covered Employee all reasonable
legal fees and expenses incurred by such Covered Employee in pursuing any claim
under the Plan in which such Covered Employee prevails in any material respect.
9.2 In the event of a claim by a Covered Employee as to the amount
or timing of any distribution, such Covered Employee shall present the reason
for his or her claim in writing to the Plan Administrator or its designee. The
Plan Administrator shall, within sixty (60) days after receipt of such written
claim, send a written notification to the Covered Employee as to its
disposition. In the event the claim is wholly or partially denied, such written
notification shall (a) state the specific reason or reasons for the denial, (b)
make specific reference to pertinent Plan provisions on which the denial is
based, (c) provide a description of any additional material or information
necessary for the Covered Employee to perfect the claim and an explanation of
why such material or information is necessary, and (d) set forth the procedure
by which the Covered Employee may appeal the denial of his or her claim. In the
event a Covered Employee wishes to appeal the denial of his or her claim, he or
she may request a review of such denial by making application in writing to the
Plan Administrator within sixty (60) days after receipt of such denial. Such
Covered Employee (or his or her duly authorized legal representative) may, upon
written request to the Plan Administrator, review any documents pertinent to his
or her claim, and submit in writing, issues and comments in support of his or
her position. Within
18
sixty (60) days after receipt of a written appeal (unless special circumstances,
such as the need to hold a hearing, require an extension of time, but in no
event more than one hundred twenty (120) days after such receipt), the Plan
Administrator shall notify the Covered Employee of the final decision. The final
decision shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision is
based.
9.3 An Employer shall be entitled to withhold from amounts to be
paid to a Covered Employee hereunder any federal, state or local withholding or
other taxes or charges (or foreign equivalents of such taxes or charges) which
it is from time to time required to withhold.
9.4 Except as otherwise provided herein or by law, no right or
interest of any Covered Employee under the Plan shall be assignable or
transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Covered Employee under the
Plan shall be liable for, or subject to, any obligation or liability of such
Covered Employee. When a payment is due under this Plan to a Severed Employee
who is unable to care for his or her affairs, payment may be made directly to
his or her legal guardian or personal representative.
9.5 Neither the establishment of the Plan, nor any modification
thereof, nor the creation of any fund, trust or account, nor the payment of any
benefits shall be construed as giving any Covered Employee, or any person
whomsoever, the right to be retained in the service of the Employer, and all
Covered Employees shall remain subject to discharge to the same extent as if the
Plan had never been adopted.
9.6 If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.
9.7 This Plan shall inure to the benefit of and be binding upon the
heirs, executors, administrators, successors and assigns of the parties,
including each Covered Employee, present and future, and any successor to the
Company or the Employer. If a Severed Employee shall die while any amount would
still be payable to such Severed Employee hereunder if the Severed Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Plan to the executor, personal
representative or administrators of the Severed Employee's estate.
19
9.8 The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
9.9 The Plan shall not be funded. No Covered Employee shall have
any right to, or interest in, any assets of any Employer which may be applied by
the Employer to the payment of benefits or other rights under this Plan.
9.10 Any notice or other communication required or permitted
pursuant to the terms hereof shall have been duly given when delivered or mailed
by United States Mail, first class, postage prepaid, addressed to the intended
recipient at his, her or its last known address. The address of the Plan
Administrator is c/o Liberty Financial Companies, Inc., 600 Atlantic Avenue,
24th Floor, Boston, Massachusetts 02110, Attention: William O'Donnell. The Plan
Administrator may change such address by notice to the Covered Employees.
9.11 This Plan shall be construed and enforced according to the
laws of the Commonwealth of Massachusetts to the extent not preempted by federal
law, which shall otherwise control.
20
DRAFT
SUBJECT TO CHANGE
SCHEDULE A
NONSOLICITATION/WAIVER AND RELEASE OF CLAIMS AGREEMENT
YOU HAVE BEEN ADVISED TO CONSULT AN ATTORNEY PRIOR TO SIGNING THIS
NONSOLICITATION/WAIVER AND RELEASE OF CLAIMS AGREEMENT (the "AGREEMENT").
[YOU HAVE [FORTY-FIVE] [TWENTY-ONE] DAYS AFTER RECEIVING THIS
AGREEMENT TO CONSIDER WHETHER TO SIGN IT. YOU AGREE THAT ANY MODIFICATIONS,
MATERIAL OR OTHERWISE, DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL
CONSIDERATION PERIOD. YOU ACKNOWLEDGE THAT YOU HAVE RECEIVED THE EXHIBITS A AND
B ATTACHED WHICH PROVIDE INFORMATION REGARDING THE EMPLOYEES SELECTED FOR
SEPARATION AS PART OF THIS ORGANIZATION RESTRUCTURING.
AFTER SIGNING THIS AGREEMENT, YOU HAVE ANOTHER SEVEN DAYS IN
WHICH TO REVOKE IT, AND IT DOES NOT TAKE EFFECT UNTIL THOSE SEVEN DAYS HAVE
ENDED.(1) ANY REVOCATION MUST BE SUBMITTED, IN WRITING, TO FRANK FAGGIANO OR
HIS SUCCESSOR, SENIOR VICE PRESIDENT, HUMAN RESOURCES, AND STATE "I HEREBY
REVOKE MY ACCEPTANCE OF THE NONSOLICITATION/WAIVER AND RELEASE OF CLAIMS
AGREEMENT." THE REVOCATION MUST BE PERSONALLY DELIVERED TO MR. FAGGIANO OR
HIS SUCCESSOR AT LIBERTY FINANCIAL COMPANIES, INC., 600 ATLANTIC AVENUE, 24TH
FLOOR, BOSTON, MASSACHUSETTS 02210, AND POSTMARKED WITHIN SEVEN (7) DAYS OF
EXECUTION OF THIS AGREEMENT.
In consideration of, and subject to, the payments to be made to me
by Liberty Financial Companies, Inc. (together with its subsidiaries, related
corporations, parent and any of their respective successors, the "COMPANY"),
pursuant to the Liberty Financial Companies, Inc. and Subsidiaries
Non-Commissioned Employee Severance and Retention Plan (the "PLAN"), which I
acknowledge that I would not otherwise be
- -------------------------
(1) Square bracketed sections for employees over age 40 only.
A-1
entitled to receive, I hereby waive any claims I may have for employment or
re-employment by the Company after the date hereof, and I further agree to and
do release and forever discharge the Company and its present officers,
directors, shareholders, employees and agents from any and all claims and causes
of action, known or unknown, arising out of or relating to my employment with
the Company or the termination thereof, including, but not limited to, wrongful
discharge, breach of contract, tort, fraud, Title VII of the Civil Rights Act of
1964, [Age Discrimination in Employment Act], Employee Retirement Income
Security Act, Americans with Disabilities Act, the Massachusetts Law Against
Discrimination, G.L. 151B, or any other federal, state or local legislation or
common law relating to employment or discrimination in employment, labor or
human rights law or otherwise.
Notwithstanding the foregoing or any other provision hereof,
nothing in this Agreement shall adversely affect (i) my rights under the Plan;
(ii) my rights to benefits other than severance benefits under written plans of
the Company; or (iii) my rights to indemnification under any indemnification
agreement, applicable law and the certificates of incorporation and bylaws of
the Company, and my rights under any director's and officer's liability
insurance policy covering me.
I hereby acknowledge and agree that, for a period of twelve months
from my Severance Date (as such term is defined in the Plan), I will not, either
directly or indirectly, solicit, recruit, hire or promise future employment to
any employee of the Company, or solicit or encourage any employee of the Company
to leave the employment of the Company.
I acknowledge that I have signed this Agreement voluntarily,
knowingly, of my own free will and without reservation or duress, and that no
promises or representations, written or oral, have been made to me by any person
to induce me to do so other than the promise of payment set forth in the first
paragraph above and the Company's acknowledgment of my rights reserved under the
second paragraph above.
I understand that this Agreement will be deemed to be an
application for benefits under the Plan, and that my entitlement thereto shall
be governed by the terms and conditions of the Plan, and I expressly hereby
consent to such terms and conditions.
I acknowledge that [I have been given not less than [forty-five
(45)] [twenty-one (21)] days to review and consider this Agreement, and that] I
have had the opportunity to consult with an attorney or other advisor of my
choice and have been advised by the Company to do so if I choose. [I may revoke
this Agreement seven days or less after its execution by providing written
notice to the Company.]
A-2
Finally, I acknowledge that I have carefully read this Agreement
and understand all of its terms. This is the entire Agreement between the
parties and is legally binding and enforceable.
This Agreement shall be governed and interpreted under federal law
and the laws of the Commonwealth of Massachusetts.
I knowingly and voluntarily sign this Agreement.
Date Delivered to Employee: [Company]
- ------------------------------------
Date Signed by Employee: By:
-----------------------------
Title:
- ------------------------------------ --------------------------
[Seven-Day Revocation Period Ends:
- ------------------------------------]
Signed: Date:
----------------------------- ---------------------------
- ------------------------------------
(Print Employee's Name)
A-3
EXHIBIT A
NAME BUSINESS UNIT
- ---- -------------
James S. Tambone LFDI
Louis Tasiopoulos LFDI
Thomas R. Tuttle Newport
Ralph L. Wanger Wanger
Leah Zell Wanger Wanger
Charles P. McQuaid Wanger
Marcel P. Houtzager Wanger
Robert A. Mohn Wanger
John H. Park Wanger
Bruce H. Lauer Wanger
Peter A. Zaldivar Wanger
Jason Selch Wanger
Todd Narter Wanger
Erik P. Gustafson Stein Roe
Brian W. Good Stein Roe
James R. Fellows Stein Roe
Kathleen Ann Zarn Stein Roe
Brian Murphy Stein Roe
David P. Brady Stein Roe
Daniel Cantor Stein Roe
Ben Andrews Wanger
Michael King Wanger
Zach Egan Wanger
E-1
EXHIBIT B
NAME BUSINESS UNIT NAME BUSINESS UNIT
- ---- ------------- ---- -------------
Erik P. Gustafson Stein Roe Bruce H. Lauer Wanger
Brian W. Good Stein Roe Peter A. Zaldivar Wanger
James R. Fellows Stein Roe Eric Arvold Wanger
Kathleen Ann Zarn Stein Roe Ken Kalina Wanger
Brian Murphy Stein Roe Marilyn Morrison Wanger
David P. Brady Stein Roe Susan Pinsky Wanger
Daniel Cantor Stein Roe Harold Lichtenstein Wanger
Marx Cazenave Progress Rob Chapulnik Wanger
A. Ronald Berryman Progress Jason Selch Wanger
Clayton Jue Progress Todd Narter Wanger
Thurman White Progress Michael King Wanger
Garth Nisbet Crabbe Huson
Paul Rocheleau Crabbe Huson
John Johnson Crabbe Huson
Peter Belton Crabbe Huson
Robert Anton Crabbe Huson
Denise O'Brien Wanger
Ben Andrews Wanger
Zach Egan Wanger
James S. Tambone LFDI
Louis Tasiopoulos LFDI
Thomas R. Tuttle Newport
Ralph L. Wanger Wanger
Leah Zell Wanger Wanger
Charles P. McQuaid Wanger
Marcel P. Houtzager Wanger
Robert A. Mohn Wanger
John H. Park Wanger
E-2