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EXHIBIT (c)(7)
TRANSACTION AGREEMENT
This Agreement is made this 17th day of March, 1997, by and
between Acordia, Inc., a Delaware company (the "Company") and Xxxxx X. Xxxxxxx
(the "Executive").
WHEREAS, the Company, in anticipation of a possible Change in
Control (as hereinafter defined) desires to provide the Executive additional
compensation and benefits to assure the Company of the services of Executive
prior to the Change in Control and to effect a smooth transition by providing
for consulting services by the Executive; and
WHEREAS, the Company and the Executive have entered into an
Employment Agreement dated January 1, 1997, (the "Employment Agreement"), which
may be modified by mutual consent; and
WHEREAS, the Company and Executive have mutually agreed to modify
the Employment Agreement as set forth herein;
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions and Construction.
1.1. Definitions.
"Beneficiary" shall mean the person designated in
writing by the Executive on Attachment 1 hereof as the recipient of benefits in
the event of the death of the Executive.
"Board" shall mean the Board of Directors of the
Company.
"Cause" shall mean a reasonable determination by
the Board that Executive (i) failed to obey the reasonable and lawful orders of
the Company; (ii) acted with gross negligence in the performance of his
obligations or in a manner materially detrimental to the Company and/or its
subsidiaries; (iii) willfully breached or habitually neglected his duty; (iv)
has been convicted of a felony; (v) committed any act involving dishonesty or
fraud; or (vi) violated any of the provisions of Section 6 hereof.
"Change in Control" shall mean (i) a merger or
consolidation in which the Company is not the surviving entity; (ii) a change in
majority of the Board over a twenty-four (24) month period, not taking into
account directors nominated by a majority of the current directors; (iii) a
complete liquidation of the Company; or (iv) sale or disposition of all or a
substantial part of the Company's
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assets, such as disposition of the assets relating to the brokerage business of
the Company.
"Compensation Committee" shall mean the
Compensation Committee of the Board.
"Disability" shall have the meaning set forth in
the Company's long term executive disability plan as in effect at the time of
execution of this Agreement.
"Salary" shall mean an annual base salary existing
at the time of execution of this Agreement ($330,018), expressed in monthly
increments, plus increments thereon as of the time of a Termination as a result
of a Change in Control.
"Successor" shall mean any acquiror of a
substantial portion of the assets of the Company, and shall include an acquiror
of the assets relating to the brokerage business of the Company.
"Termination as a result of a Change in Control"
shall occur if upon or following a Change in Control or, with respect to (ii),
if in anticipation of a Change in Control,
(i) Anthem Insurance Companies, Inc., or
one of its affiliates ("Anthem"), or a Successor does not (x)
assume both the Employment Agreement and this Agreement in the
whole, (y) extend the term of the Employment Agreement to result
in a total contract duration of 36 months from the Change in
Control, and (z) offer Executive a position comparable to his
position at the time of execution of this Agreement; or
(ii) Executive's position with the Company
is not comparable to his position at the time of execution of
this Agreement.
For purposes of this Agreement, a position shall not be comparable if (i)
Executive is assigned to any duties substantially inconsistent with his
position, duties or responsibilities with the Company immediately prior to the
Change in Control or his duties or responsibilities are substantially reduced as
compared with such duties and responsibilities immediately prior to the Change
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in Control; (ii) Executive's Salary or target annual incentive or long term
incentive opportunities are materially reduced as compared to his Salary and
target annual incentives and long term incentive opportunities immediately prior
to the Change in Control; or (iii) Executive is assigned to duties or
responsibilities involving a residence relocation or business travel obligations
substantially greater than existing prior to the Change in Control. If Executive
accepts a position at Anthem, or a Successor, it shall be deemed to be
comparable for the purposes of this Agreement.
An event shall be deemed to be in anticipation of a Change in Control if it
occurs after the execution of this Agreement and if a Change in Control in fact
occurs within 12 months following the event.
A voluntary termination by Executive or a termination for Cause shall not
constitute a Termination as a result of a Change in Control.
1.2. Terms not otherwise defined shall have the meaning set forth
in the Employment Agreement.
1.3. In the event of any inconsistency between this Agreement and
the Employment Agreement, this Agreement shall control.
1.4. Other than sections 3 and 10 hereof, no provision of this
Agreement shall operate to reduce any amounts or benefits payable under the
Employment Agreement, standing alone or in aggregate, however, any benefit
provided under both agreements shall be paid only once.
2. Term. This Agreement shall expire on the earlier of (a) December 31, 1997 or
(b) the date on which Acordia and Anthem Insurance Companies Inc. publicly
announce that the companies are no longer pursuing the possible disposition of
the brokerage business of Acordia, provided, however, that if on or before
December 31, 1997, the Board has approved the general terms of a transaction
that would be a Change in Control, this Agreement shall be extended to the
earlier of the closing of the Change in Control or December 31, 1998.
3. Services and Compensation of Executive.
3.1. Consulting Services. In the event of a Termination as a
result of a Change in Control, in lieu of payments as provided in Section 11 of
the Employment Agreement, and any other severance, Executive shall be paid,
compensation under this Agreement for services as an employee/consultant.
Executive shall receive consulting compensation of $314,324 his Salary until
November 1, 1998. Executive shall be available until November 1, 1998 to provide
consulting services reasonably requested by such Company,
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Anthem, or a Successor. Subject to the obligations under Section 6 hereof, this
provision shall not be construed to preclude Executive from accepting full time
employment elsewhere.
3.2. Severance Compensation. In the event of a Termination as a
result of a Change in Control, Executive shall receive a severance payment equal
to 36 months' Salary, less any compensation paid pursuant to Section 3.1 hereof.
4. Incentive Plans.
4.1. Annual Incentive Plan ("AIP") for 1997. Awards shall be
determined and paid under the AIP for the 1997 Plan Year based on the
performance goals established by the Compensation Committee. However, in the
event of a Change in Control prior to the payment of the 1997 Plan Year Award,
such AIP Award payable to Executive for the 1997 Plan Year shall be in an amount
at least equal to the full "target" level amount for the year.
4.2. Long Term Incentive Plan ("LTI") for 1997. The performance
goals for award of LTI payments based on 1997 performance shall include a Change
in Control. In the event of a Change in Control prior to the award of the 1997
Plan Year LTI Award, such 1997 LTI Plan Year Award shall be of an amount at
least equal to the "target" level LTI for the 1997 Plan Year, and shall be fully
vested and paid to the Executive.
4.3. 1998 and 1999 and 2000 AIP. In the event of a Termination as
a result of a Change in Control, Executive shall be paid an amount equal to 50%
of the target AIP award for each of the 1998, 1999, and 2000 Plan Years, which
target amounts shall each be at least equal to the 1997 AIP target award
applicable to the Executive.
4.4 1998 and 1999 and 2000 LTI. In the event of a Termination as
a result of a Change in Control, Executive shall be paid an amount equal to 50%
of the target LTI awards for each of the 1998, 1999, and 2000 Plan Years, which
target shall each be at least equal to the 1997 LTI target award applicable to
the Executive.
4.5 Prior Stock Awards. All Company 1992 Stock Compensation
Plan awards will fully vest in the event of a Change in Control.
5. Benefits.
5.1. Retirement Programs. In the event of a Termination as a
result of a Change in Control, Executive shall continue to accumulate benefit
service as an employee for purposes of the Company's Cash Balance Pension Plan,
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401(k) Plan, and the Supplemental Executive Retirement Plan through October 31,
1998.
5.2. Health, Dental and Other. In the event of a Termination as a
result of a Change in Control, the Company shall provide continued coverage to
Executive and his or her dependents under the Company's welfare plans for the
period ending October 31, 1998 for which compensation or benefits are paid under
this Agreement at an after tax cost to the Executive no greater than that
incurred by similarly situated employees of Anthem Insurance Companies Inc.
during that same period. Such coverage shall be provided either through the
plans or by reimbursing the Executive for the cost of COBRA coverage. Executive
shall have rights to elect COBRA coverage without any offset for periods of
extended coverage under this Agreement upon expiration of the period of coverage
under this section.
5.3. Retiree Medical/Life. In the event of a Termination as a
result of a Change in Control, the Company shall provide post-retirement medical
and life benefits under whatever Plan provisions and cost-sharing arrangements
exist for similarly situated employees of Anthem retiring as of November 1,
1998. For purposes of determining the cost of retiree medical/life benefits to
Executive, Executive shall be credited with service to October 31, 1998.
6. Restrictions on Executive. The provisions of the Employment Agreement
relating to Non-Disclosure, Return of Property and Competition (Sections 12, 13,
and 14) shall continue in full force and effect for all the periods of
employment, and, in the event of a Termination as a result of a Change in
Control, for a two year period following the later of (i) termination of
Executive's consulting services, or (ii) November 1, 1998. In return for
the extension of the additional two year covenant not to compete, in connection
with a Termination as a result of a Change in Control, Executive shall be paid
$1,572,000 following his termination of consulting services, as set forth in
Section 7.2 hereof. If Executive is employed by Xxxxxx, xxx terms "Company" and
"Assigned Subsidiary" in those provisions shall refer to Anthem, as applicable.
7. Timing of Payments.
7.1. Consulting Services. Subject to Section 8 hereof, consulting
payments pursuant to Section 3.1 hereof, shall begin upon the date of
Termination as a result of a Change
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in Control and shall continue to be paid bi-weekly is paid, over the term of the
consulting services (without regard to any Disability of Executive), or, in the
event of the Executive's death, any balance remaining due (i.e., amounts which
would have been paid had the death not occurred) shall be paid in a lump sum,
within 30 days of the death, to the Executive's Beneficiary.
7.2. Non-Compete Severance. Subject to Sections 8 hereof, the
payments provided for in Section 6 hereof shall be paid ratably in bi-weekly
installments over the period beginning November 1, 1998, and ending on November
1, 2000 (without regard to any disability of Executive), or in the event of the
Executive's death, any balance remaining due (i.e., amounts which would have
been paid had the death not occurred) shall be paid in a lump sum, within 30
days of the death, to the Executive's beneficiary.
7.3. Other. Subject to Section 8 hereof, all other payments shall
be made in accordance with Executive's deferral election, or, if no election
exists, in cash within 30 days of the date of Termination as a result of a
Change in Control.
8. Conditions. Payments made pursuant to this Agreement in connection with
termination of employment shall be made only upon execution of a written
release, in a form acceptable to the Company.
9. Anthem Guarantee. In the event the Successor to the Company does not assume
the obligations under this Agreement and the Employment Agreement, Anthem
Insurance Companies Inc. shall guarantee the obligations of the Company under
both agreements. In the event the Successor does assume such agreements, but
does not fulfill its obligations under Section 5, Anthem Insurance Companies,
Inc. shall provide comparable benefits under its plans or programs.
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10. Tax Provisions.
Notwithstanding any other provision of this Agreement, if there
occurs a Change in Control and any payments made by the Company, Anthem, or a
Successor to Executive hereunder or otherwise would be subject to the excise tax
or taxes imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended ("Code") (hereinafter "Change in Control Payments"), then the amount of
such Change in Control Payments hereunder shall be determined by comparing:
(a) amounts payable pursuant to this Agreement
reduced by excise taxes, and
(b) the present value (as determined for purposes
of Section 280G of the Code) of not more in the aggregate than
2.99 times Executive's applicable base amount under Section 280G
of the Code.
The greater of (a) or (b) above shall be paid to Executive as Change in Control
Payments. Any applicable reductions shall be conclusively determined by an
independent auditor. If (a) is applicable, excise taxes deducted pursuant to
paragraph (a) will be paid directly to the Internal Revenue Service.
11. Miscellaneous.
11.1. Assignment. The Company, in its sole discretion, may assign
its rights and duties under this Agreement, but Executive may not. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
(a) the Company and its Successors and assigns and any purchaser of the Company
or all or a substantial part of the Company's assets, such as the assets
relating to the brokerage business of the Company, and (b) Executive, and his
designees and his estate.
11.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
11.3. Severability. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable in whole or in part, neither
the validity of the remaining part of such provision nor the validity of any
other provision of this Agreement shall in any way be affected. Should any
particular non-disclosure or non-competition covenant, provision or clause of
this Agreement be held unreasonable or unenforceable for any reason, including
without limitation, the time period, geographic area and/or scope of activity
covered by such covenant, provision or clause, the Company and Executive
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acknowledge and agree that such covenant, provision or clause shall be given
effect and enforced to whatever extent would be reasonable and enforceable under
applicable law.
11.4. Waiver. Failure to insist upon strict compliance with any
of the terms, covenants or conditions of this Agreement shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power under this Agreement at any one or more
times be deemed a waiver or relinquishment of such right or power at any other
time or times.
11.5. Modifications. This Agreement may be modified or amended
only by an instrument in writing signed by all parties affected by the
modification or amendment.
11.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
11.7. Headings. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any of its provisions.
11.8 Remedies.
a. Suspension of Non-Compete Payments. Executive acknowledges
that the payments made pursuant to section 6 hereof are made on condition that
the Executive observes the restrictions incorporated therein. If the Company,
Anthem, or a Successor, as applicable, determines that Executive has breached
any of those restrictions, that entity shall give notice to the Executive which
notice shall (i) state in detail the basis of the determination and (ii) state
that payments under section 6 shall be suspended within 30 days of the date of
the notice unless Executive shall demonstrate that the breach has been cured. If
Executive fails to so demonstrate, the payments shall be suspended. In the event
payments are suspended and it is later determined by a court of competent
jurisdiction that there was no breach, Executive shall receive all of the
payments plus interest determined at the applicable federal rate. Notice shall
be given to Executive in writing at the following address, or such other address
as Executive shall provide in writing to the Company:
Xxxxx X. Xxxxxxx
0000 Xxxxx Xxxx Xxxxxx
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Xxxxxxxxxxxx, XX 00000
b. General. Executive acknowledges that a remedy at law for any
breach or threatened breach of the provisions of this Agreement would be
inadequate and therefore agrees that the Company shall be entitled to injunctive
relief, both preliminary and permanent, in addition to any other available
rights and remedies in case of any such breach or threatened breach; provided,
however, that nothing contained herein shall be construed as prohibiting the
Company from pursuing any other remedies available for any such breach or
threatened breach. Executive further acknowledges and agrees that in the event
of a breach by Executive of any provision of this Agreement, the Company shall
be entitled, in addition to all other remedies to which the Company may be
entitled under this Agreement, to recover from Executive all reasonable attorney
fees incurred by the Company in enforcing this Agreement. The Company
acknowledges and agrees that in the event the Executive is the prevailing party
in an action by the Company to enforce this Agreement, the Executive shall be
entitled to recover from the Company all reasonable attorneys' fees incurred by
the Executive in defending the action.
11.9 Mitigation. Executive shall have no duty to mitigate nor
shall the obligations of the Company under this Agreement be reduced by any
other compensation earned by Executive.
11.10 Prior Agreement. This Agreement supersedes any prior
Transaction Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement.
EXECUTIVE ACORDIA, INC.
Name: Xxxxx X. Xxxxxxx
______________________________
By:_________________________________
Signed:_____________________________
Printed: L. Xxx Xxxxx
____________________________
Title: Chairman of the Board
______________________________
ANTHEM INSURANCE COMPANIES, INC.
By:_________________________________
Printed: Xxxxxxx X. Xxxxxxxx
____________________________
Title: Executive Vice President and
Chief Financial Officer
______________________________
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ATTACHMENT I
Beneficiary Designation: I hereby designate the beneficiary on file with the
Company's retirement plan as my Beneficiary for purposes of this Agreement. If I
have not designated a beneficiary under the Acordia Deferred Compensation
Program, I hereby designate _______________________ as my Beneficiary.
Signed:__________________________________
Executive
Date:____________________________________
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