RETENTION AGREEMENTS SUBSTANTIALLY IN THE FORM OF THIS
EXHIBIT FOR EXECUTIVES EXHIBIT 10(o)
RETENTION AGREEMENT
This Agreement between ____________________ ("you") and 21st Century Insurance
Group and its subsidiary, 21st Century Insurance Company (hereinafter
collectively referred to as the "Company") has been entered into as of April 1,
2003. This Agreement promises you severance benefits if you are terminated
without Cause or resign for Good Reason during the Term of this Agreement.
Capitalized terms are defined in the last section of this Agreement.
1. PURPOSE
The Company considers a sound and vital management team to be essential.
Management personnel who become concerned about the possibility that the Company
may undergo substantial or adverse changes may terminate employment or become
distracted. Accordingly, the Board has determined that appropriate steps should
be taken to minimize the distraction or concerns executives may suffer from the
possibility of such events or business conditions. One step is to enter into
this Agreement with you.
2. EVENTS THAT TRIGGER SEVERANCE BENEFITS
(a) Termination
You will receive Severance Benefits under this Agreement if, during the Term of
this Agreement, your employment is terminated by the Company without Cause or
you resign for Good Reason.
Your Severance Benefits under this Agreement will continue to apply if you are
transferred to an affiliate of the Company and you are terminated by such
affiliate without Cause or you resign from such affiliate for Good Reason.
(b) Successor Fails to Assume This Agreement
You also will receive Severance Benefits under this Agreement if, during the
Term of this Agreement, a successor to the Company or affiliate to which you are
transferred fails to assume this Agreement.
3. EVENTS THAT DO NOT TRIGGER SEVERANCE BENEFITS
You will not be entitled to Severance Benefits if your employment ends because
you are terminated for Cause or on account of Disability or because you resign
without Good Reason, retire, or die. Except as provided in Section 2(b), you
will not be entitled to Severance Benefits while you remain protected by this
Agreement and remain employed by the Company, its affiliates, or their
successors.
4. TERMINATION PROCEDURES
If you are terminated by the Company during the Term of this Agreement, you will
receive advance written notice of your termination ("Termination Notice"). This
Termination Notice will be given to you at least 30 days in advance, unless you
are being terminated for Cause. The Termination Notice will indicate why you
are being terminated and will set forth in reasonable detail the facts and
circumstances claimed to provide a basis for your termination. If you are being
terminated for Cause, your Termination Notice will include a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board (at a meeting of the Board called and held
for the purpose of considering your termination and after reasonable notice to
you and an opportunity for you and your counsel to be heard
before the Board) finding that Cause for your termination exists and specifying
the basis for that opinion in detail. If you are purportedly terminated without
the Termination Notice required by this Section, your termination shall not be
effective.
5. SEVERANCE BENEFITS
(a) In General
If you become entitled to Severance Benefits under this Agreement, you will
receive all of the Severance Benefits described in this Section. Severance
Benefits payable to you following your termination of employment will be paid
only if you deliver to the Company (substantially in the form attached as
Exhibit A and by the deadline it prescribes) your executed general and special
release (The "Release") of all claims you may have against the Company, its
affiliates and directors, officers, employees and others specified in the
Release, relating to your termination of employment, other than claims for
failure to fulfill obligations created by the Agreement, indemnification and
defense cost adjustment rights, pension plan and supplemental executive
retirement plans, 401(k) plans and supplemental 401(k) plans, stock option and
restricted stock plans, or under any other employee benefit or vacation programs
of the Company to which you are entitled.
(b) Lump-Sum Payment in Lieu of Future Compensation
In lieu of any further cash compensation for periods after your employment ends,
you will be paid a cash lump sum equal to 2.5 times your annual base salary in
effect immediately before any Notice of Termination or Good Reason event for
which you terminate employment.
(c) Vesting of Stock Options and Waiver of 90 Day Post-Termination
Expiration Provision
If you become entitled to Severance Benefits under this Agreement, the Company
agrees that any unvested stock option grants outstanding shall become
immediately vested on the date your employment ends and that the Company shall
waive any requirement that vested options be exercised within 90 days of
termination of employment and allow such options to be exercisable for their
full remaining term, subject to a maximum of five years from the date of
termination of your employment.
(d) Group Insurance Benefit Continuation
During the period that begins when you become entitled to Severance Benefits
under this Agreement and ends on the last day of the 30th calendar month
beginning thereafter, the Company shall provide, at no cost to you or your
spouse or dependents, the life, disability, accident, and health insurance
benefits (or substantially similar benefits) it was providing to you and your
spouse and dependents immediately before you became entitled to Severance
Benefits under this Agreement (or immediately before a benefit reduction that
constitutes Good Reason, if you terminate employment for that Good Reason).
These benefits shall be treated as satisfying the Company's COBRA obligations.
After the benefit continuation under this subsection ends, you and your spouse
and dependents will be entitled to any remaining COBRA rights. This benefit will
terminate at such time as you become eligible for substantially similar benefits
as a result of subsequent employment.
6. GOLDEN PARACHUTE LIMITATION
Your aggregate payments and benefits under this Agreement and all other
contracts, arrangements, or programs shall not exceed the maximum amount that
may be paid without triggering golden parachute penalties under Section 280G and
related provisions of the Internal Revenue Code, as determined in good faith by
the Company's independent auditors. If your benefits must be cut back to avoid
triggering such penalties, your benefits will be cut back in the priority order
you designate or, if you fail to designate an order within a reasonable time
specified by the Company, in the priority order designated by the Company. You
and the Company agree to cooperate with each other reasonably in connection with
any administrative or judicial proceedings concerning the existence or amount of
golden parachute penalties on payments or benefits you receive.
7. TIME FOR PAYMENT
You will be paid your cash Severance Benefits within 5 days after you become
entitled to Severance Benefits under this Agreement (e.g., within 5 days
following your termination of employment) or, if later, the date specified in
the Separation Agreement and General and Special Release of Claims Agreement
executed in connection with this Agreement.
8. PAYMENT EXPLANATION
When payments are made to you, the Company will provide you with a written
statement explaining how your payments were calculated and the basis for the
calculations. This statement will include any opinions or other advice the
Company has received from auditors or consultants as to the calculation of your
benefits.
9. RELATION TO OTHER SEVERANCE PROGRAMS
Your Severance Benefits under this Agreement are in lieu of and supercede any
severance or similar benefits that may be payable to you under any other
employment agreement or other arrangement, other than any benefits payable under
the Executive Severance Plan as it exists on the date hereof (the "Executive
Severance Plan") and the Supplemental Executive Retirement Plan which may be
payable following a change in control of the Company. In the event you are
terminated or resign after a change in control under circumstances which entitle
you to benefits under the Executive Severance Plan, you shall be entitled to
receive the benefits payable under the Executive Severance Plan (subject to all
the terms and limitations thereof) and you shall not be entitled to any
Severance Benefits under this Agreement if you in fact receive the severance
benefits to which you are entitled under the Executive Severance Plan. Nothing
in this Agreement shall be deemed to affect your entitlement to benefits payable
under the Supplemental Executive Retirement Plan. Subject to the foregoing, this
Agreement constitutes the entire agreement between you and the Company and its
affiliates with respect to severance benefits.
10. AMENDMENTS
This Agreement may be modified only by a written agreement executed by you and
the chief executive officer or general counsel of the Company that is approved
by the Board of Directors of the Company.
11. GOVERNING LAW
This Agreement creates a "top hat" employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, and it shall be interpreted,
administered, and enforced in
accordance with that law; the Company is the "plan administrator." To the extent
that state law is applicable, the statutes and common law of the State of
California, excluding any that mandate the use of another jurisdiction's laws,
shall apply.
12. CLAIMS
(a) When Required; Attorneys' Fees
You do not need to present a formal claim to receive benefits payable under this
Agreement. However, if you believe that your rights under this Agreement are
being violated, you must file a formal claim with the Company (for the purposes
of this Section 12, 21st Century Insurance Group) in accordance with the
procedures set forth in this Section. If the claim cannot be resolved under
these administrative procedures, the Company will pay your reasonable attorneys'
fees and related costs in enforcing your rights under this Agreement if you
ultimately prevail.
(b) Initial Claim
Your claim must be presented to the Company in writing. Within 90 days after
receiving the claim, a claims official appointed by the Company will consider
your claim and issue his or her determination thereon in writing. The claims
official may extend the determination period for up to an additional 90 days by
giving you written notice. With your consent, the initial claim determination
period can be extended further. If you can establish that the claims official
failed to respond to your claim in a timely manner, you may treat the claim as
having been denied by the claims official.
(c) Claim Decision
If your claim is granted, the benefits or relief you are seeking will be
provided. If your claim is wholly or partially denied, the claims official
shall, within 90 days (or a longer period, as described above), provide you with
written notice of the denial, setting forth, in a manner calculated to be
understood by you: (i) the specific reason or reasons for the denial; (ii)
specific references to the provisions on which the denial is based; (iii) a
description of any additional material or information necessary for you to
perfect your claim, together with an explanation of why the material or
information is necessary; and (iv) an explanation of the procedures for
appealing denied claims. If you establish that the claims official has failed
to respond to your claim in a timely manner, you may treat the claim as having
been denied by the claims official.
(d) Appeal of Denied Claims
You may appeal the claims official's denial of your claim in writing to an
appeals official designated by the Company (which may be a person, committee, or
other entity) for a full and fair appeal. In connection with the appeals
proceeding, you (or your duly authorized representative) may review pertinent
documents and may submit issues and comments in writing.
(e) Appeal Decision
The decision by the appeals official will be made within 60 days after your
appeal request, unless special circumstances require an extension of time, in
which case the decision will be rendered as soon as possible, but not later than
120 days after your appeal request, unless you agree to a greater extension of
that deadline. The appeal decision will be in writing, set forth in a manner
calculated to be understood by you; it will include specific reasons for the
decision, as well as specific references to the pertinent provisions of this
Agreement on which the decision is based.
If you do not receive the appeal decision by the date it is due, you may deem
your appeal to have been denied.
(f) Procedures
The Company will adopt procedures by which initial claims and appeals will be
considered and resolved; different procedures may be established for different
claims. All procedures will be designed to afford you full and fair
consideration of your claim. Notwithstanding anything in this Section 12 to the
contrary, claims and appeals shall be resolved through procedures that comply
with applicable Department of Labor regulations as then in effect.
13. LIMITATION ON EMPLOYEE RIGHTS
This Agreement does not give you the right to be retained in the service of the
Company.
14. VALIDITY
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
15. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which will be
deemed an original, but all of which will constitute one and the same
instrument.
16. GIVING NOTICE
(a) To the Company
All communications from you to the Company relating to this Agreement must be
sent to the Company in writing, addressed as follows (or in any other manner the
Company notifies you to use):
If Mailed 21st Century Insurance Group
Attention: Xxxxx X. Xxxxxx, President and CEO
0000 Xxxxxxxxxx Xxx.
Xxxxxxxx Xxxxx XX 00000
If Faxed 21st Century Insurance Group
Attention: Xxxxx X. Xxxxxx, President and CEO
Fax: 000 000-0000
Tel.: 000 000-0000
(b) To You
All communications from the Company to you relating to this Agreement must be
sent to you in writing, addressed as indicated at the end of this Agreement.
17. DEFINITIONS
(a) Agreement
"Agreement" means this contract, as amended.
(b) Board
"Board" means the Board of Directors of the 21st Century Insurance Group.
(c) Cause
"Cause" means any of the following:
(1) Willful Failure to Perform Duties. You continue willfully to fail to
perform your duties for the Company after a written demand for
performance has been delivered to you by the Board that specifically
identifies how you have failed to perform. Your conduct will not be
considered "willful" if a reasonable person would believe that you
were acting in the best interests of the Company or if your failure to
perform was caused by your physical or mental illness. You may not be
terminated for Cause under this paragraph after you have properly
notified the Company that you are resigning for Good Reason.
(2) Willful Adverse Conduct. You willfully engage in conduct that is
demonstrably and materially injurious to the Company or its
affiliates, monetarily or otherwise. Your conduct will not be
considered "willful" if you believed in good faith that you were
acting in the best interests of the Company and such belief was
reasonable.
(3) Disability.
(d) Company
"Company" means 21st Century Insurance Group and 21st Century Insurance Company
and any successor to the business or assets of either that (by operation of law,
or otherwise) assumes and agrees to perform this Agreement. The liability of
the each such Company hereunder shall be joint and several.
(e) Disability
"Disability" means that, due to physical or mental disability: (i) you have been
absent from the full-time performance of your duties with the Company for
substantially all of a period of 6 consecutive months; (ii) the Company has
notified you that it intends to terminate your employment because of your
inability to perform your job duties on account of Disability; and (iii) you do
not resume the full-time performance of your duties within 30 days after
receiving notice of your intended termination on account of your inability to
perform your job duties on account of Disability.
(f) Good Reason
"Good Reason" means the occurrence of any of the following without your express
written consent:
(1) Breach of Promise. The Company has committed a material breach of its
obligations under this Agreement.
(2) Improper Termination. You are purportedly terminated, other than
pursuant to a Termination Notice satisfying the requirements of
Section 4.
(3) Constructive Termination. You are constructively terminated by the
Company, as reasonably determined by you in good faith, by reason of
Company, Board or controlling shareholder actions that (i) reduce your
base compensation or benefits by more than 5% in any 12 month period,
or (ii) materially reduce your benefits under incentive plans without
regard to either your performance or the
Company's performance, or (iii) demote you or materially change the
nature or location of your position, or (iv) materially interfere, in
a manner inconsistent with the Company standards and rules of
corporate governance, with your fulfillment of the responsibilities of
your office and employment.
However, an event that is or would constitute Good Reason shall cease to be Good
Reason if: (a) you do not terminate employment within 45 days after the event
occurs; or (b) you were a primary instigator of the Good Reason event and the
circumstances make it inappropriate for you to receive benefits under this
Agreement (e.g., you agree temporarily to relinquish your position on the
occurrence of a merger transaction you negotiate). If you have Good Reason to
terminate employment, you may do so even if you are on a leave of absence due to
physical or mental illness or any other reason.
(g) Severance Benefits
"Severance Benefits" means your benefits under Section 5 of this Agreement.
(h) Term of this Agreement
"Term of this Agreement" means the period that commences on the date of this
Agreement and ends on a date specified by the Board for expiration of this
Agreement (at least 24 months' advance written notice of this date must be given
to you before it is effective); provided, however, that in no event shall the
Term of this Agreement be less than three years.
21st Century Insurance Group
Date _________________________ _________________________________________
Xxxxx X. Xxxxxx
President and CEO
21st Century Insurance Group
Date _________________________ _________________________________________
_________________________
_________________________
Company notices to you shall be addressed as follows (or in any other manner you
notify the Company to use):
If Mailed
EXHIBIT A
---------
SEPARATION AGREEMENT
AND
GENERAL AND SPECIAL RELEASE OF CLAIMS
This Separation Agreement and General and Special Release of Claims is
entered into by ____________________ ("Employee") and 21st Century Insurance
Group and Subsidiaries (hereinafter collectively referred to as the "Company").
It is entered into to resolve amicably all matters between Employee and the
Company concerning Employee's employment and the cessation of that employment.
1. Separation Benefits. Notwithstanding this Agreement, Employee shall
-------------------
receive payment of all accrued and unpaid salary and vacation through Employee's
last day of employment, subject to required and authorized deductions. In
exchange for Employee's decision to enter into this Agreement as well as the
Severance Agreement, the Company agrees to pay Employee the severance payments
set forth in the Severance Agreement. The payments shall be made payable to
Employee after expiration of the revocation period set forth in paragraph 7,
provided that Employee has not exercised Employee's right of revocation.
2. Release. Employee (on behalf of Employee and Employee's agents,
-------
heirs, successors, assigns, spouses, executors and/or administrators) does
hereby and forever release and discharge the Company as well as the successors,
predecessors, partnerships, partners, joint venturers, affiliated entities,
parents, subsidiaries, officers, directors, shareholders, accountants, insurers,
advisors, employees, attorneys, heirs, assigns, agents, spouses, executors
and/or administrators and representatives of the Company, past or present, from
any and all causes of action, actions, judgments, liens, debts, contracts,
indebtedness, damages, losses, claims, liabilities, rights, interests and
demands of whatsoever kind or character, known or unknown, suspected to exist or
not suspected to exist, anticipated or not anticipated, whether or not
heretofore brought before any state or federal court, which Employee has or may
have against any released person or entity, by reason of any and all acts,
omissions, events or facts occurring or existing prior to the date the Agreement
is signed by Employee, including, without limitation, all claims attributable to
the employment of Employee, all claims attributable to the cessation of that
employment, and all claims arising under any federal, state or other
governmental statute, regulation or ordinance or common law, such as, for
example and without limitation, breach of contract, breach of implied covenant,
breach of oral or written promise, allegedly unpaid compensation, wrongful
termination, infliction of emotional distress, defamation, interference with
contract relations or prospective economic advantage, negligence,
misrepresentation or employment discrimination, violation of Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1866, the Age Discrimination
in Employment Act of 1967, the Americans with Disabilities Act, the Family and
Medical Leave Act, the WARN Act, the Equal Pay Act, the Fair Labor Standards
Act, ERISA, the California Xxxxx Act, the California Fair Employment and Housing
Act, the California Labor Code (excepting any workers' compensation claim) and
wrongful termination claims, excepting only those obligations expressly recited
to be performed hereunder. Employee acknowledges that Employee is not presently
suffering from any work-related injury and that Employee has fully recovered
from any and all prior work-related injuries.
In light of the intention of Employee (for Employee, Employee's agents,
heirs, successors, assigns, executors, spouses, and/or administrators) that this
release extend to any and
all claims of whatsoever kind or character, known or unknown, Employee expressly
waives any and all rights granted by California Civil Code Section 1542 (or any
other analogous federal or state law or regulation). Section 1542 reads as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
3. No Admissions or Assignment. Nothing contained herein shall be
------------------------------
construed as an admission of wrongdoing or liability by either the Employee or
the Company. Employee shall make no assignment of any matter released by this
Agreement and Employee represents that no such assignment has been made.
4. Company Property and Confidential Information. All memoranda,
-------------------------------------------------
notes, records and other documents made or compiled by Employee or made
available to Employee during Employee's employment concerning or related to the
Company or any if its clients, whether in hard copy or electronic form, are
Company property. Employee agrees to deliver all Company property to the
Company upon request by the Company, and if not requested, upon or before the
cessation of Employee's employment with the Company. Employee agrees that any
and all non-public information about the Company or any of its clients
constitutes Confidential Information. Employee agrees not to disclose to any
person, directly or indirectly, (including without limitation present or former
employees of the Company), any Confidential Information excepting only (i)
Employee's spouse, if any, (ii) Employee's attorneys and accountants, only as
necessary, and (iii) under compulsion of law or court process.
5. Covenant Not To Xxx. Employee covenants and represents that he
-----------------------
shall have no right whatsoever to file any lawsuit or institute any other legal
proceeding of any type whatsoever against the Company based upon or arising out
of or during Employee's employment with the Company based upon facts, acts or
omissions occurring prior to the date of the signing of this Separation
Agreement and General and Special Release of Claims.
6. Entire Agreement/Modifications/Severability. This Agreement
--------------------------------------------
constitutes a single integrated contract expressing the entire agreement of the
parties with respect to the subject matter hereof, including without limitation
all matters pertaining to or arising out of the Employee's employment or
employment termination, and supersedes all prior and contemporaneous oral,
written and implied agreements and discussions with respect to the subject
matter hereof. There are no other agreements, written or oral, express or
implied, between the parties hereto, concerning the subject matter hereof,
except as set forth herein. This Agreement may be amended or modified only by
an agreement in writing. Should any provision of this Agreement become or be
held to be legally unenforceable, no other provision of this Agreement shall be
affected, and this Agreement shall be construed to be enforceable or shall be
construed as if the Agreement had never included the unenforceable provision.
Any invalid or unenforceable provision of this Agreement shall be modified or
reformed as permitted by law so that such provision is no longer invalid or
unenforceable.
7. Waiting Period and Right of Revocation. EMPLOYEE ACKNOWLEDGES THAT
---------------------------------------
EMPLOYEE IS AWARE THAT AND IS HEREBY ADVISED THAT EMPLOYEE
HAS THE RIGHT TO CONSIDER THIS AGREEMENT FOR TWENTY-ONE DAYS FROM THE DATE OF
DELIVERY OF THIS RELEASE FORM BEFORE SIGNING IT AND THAT IF EMPLOYEE SIGNS THIS
AGREEMENT PRIOR TO THE EXPIRATION OF TWENTY-ONE DAYS, EMPLOYEE IS WAIVING THIS
RIGHT FREELY AND VOLUNTARILY. EMPLOYEE ALSO ACKNOWLEDGES THAT EMPLOYEE IS AWARE
OF AND IS HEREBY ADVISED OF EMPLOYEE'S RIGHT TO REVOKE THIS AGREEMENT FOR A
PERIOD OF SEVEN DAYS FOLLOWING THE SIGNING OF THIS AGREEMENT AND THAT IT SHALL
NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED. TO
REVOKE THIS AGREEMENT, EMPLOYEE MUST NOTIFY THE COMPANY, IN WRITING, WITHIN
SEVEN DAYS OF SIGNING IT.
8. Attorney Advice. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE IS AWARE OF
----------------
EMPLOYEE'S RIGHT TO CONSULT AN ATTORNEY, THAT EMPLOYEE HAS BEEN ADVISED TO
CONSULT WITH AN ATTORNEY, AND THAT EMPLOYEE HAS HAD THE OPPORTUNITY TO CONSULT
WITH AN ATTORNEY, IF DESIRED, PRIOR TO SIGNING THIS AGREEMENT.
9. Understanding of Agreement. Employee states that Employee is
----------------------------
physically and mentally competent to enter into this Agreement, that Employee
has carefully read this Agreement, that Employee has had sufficient time and
opportunity to consider its terms and to obtain legal advice, if desired, that
Employee fully understands its effect, that the only promises made to Employee
to sign this Agreement are those stated above, and that Employee is signing this
Agreement voluntarily and without any threat, duress, coercion or undue
influence.
Dated: _______________, 2003 By ___________________________
Employee
Dated: _______________, 2003 21st Century Insurance Group and
Subsidiaries
By ____________________________
[name of Company official]
[title]
