Exhibit 10.22
CHANGE OF CONTROL AGREEMENT
---------------------------
This Agreement between and among EVEREST REINSURANCE COMPANY
("Company") and EVEREST REINSURANCE HOLDINGS, INC. ("Holdings") and Xxxxxx X.
Xxxxxxx ("Xxxxxxx") ("Agreement") is effective as of July 15, 1998.
WHEREAS, the Board of Directors of the Company (the "Board") and
Holdings ("Holdings Board") have determined it to be in the best interests of
the Company, Holdings and their respective shareholders to enter into an
agreement with Xxxxxxx that will provide Xxxxxxx with certain benefits in the
event that there is a change in control of the Company or Holdings; and
WHEREAS, Xxxxxxx is willing to enter into an agreement that will
provide him with certain benefits in the event there is a change in control of
the Company or Holdings;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Change of Control
-----------------
A. If within one year of a Material Change (as defined herein) Xxxxxxx
terminates his employment with the Company for any reason or the Company
terminates Xxxxxxx'x employment for any reason other than for Due Cause (as
defined herein): (a) all of Xxxxxxx'x outstanding stock options granted under
Holdings' stock option plans shall vest immediately, be automatically
exercisable and remain exercisable for three months following the termination of
his employment, notwithstanding any provision to the contrary in the applicable
award agreement(s) between Xxxxxxx and Holdings; (b)Xxxxxxx shall receive within
sixty (60) days of the termination of his employment with the Company a lump sum
payment (the "Cash Payment") equal to the lesser of (i) 2.99 multiplied by
Xxxxxxx'x annual compensation for the most recent taxable year ending prior to
the date of the Material Change less the value of Xxxxxxx'x xxxxx income in the
most recent taxable year ending prior to the date of a Material Change
attributable to Xxxxxxx'x exercise of stock options, stock appreciation rights
and other stock-based awards granted to Xxxxxxx by Holdings (or its
predecessor), and (ii) 2.99 multiplied by Xxxxxxx'x "annualized includible
compensation for the base period" as that phrase is defined in Section 28OG(d)
of the Internal Revenue Code of 1986, as amended ("Code"); (c) Xxxxxxx shall
continue to be covered under the Company's medical and dental insurance plans
for a period of three years from the date of termination to the same extent and
under the same terms and conditions as active employees of the Company; and (d)
Xxxxxxx shall receive "Special Retirement Benefits" as provided herein.
2
B. In the event that the value of benefits Xxxxxxx receives pursuant to
this Agreement causes Xxxxxxx to receive a "Parachute Payment" within the
meaning of Section 280G of the Code, the Company shall provide Xxxxxxx with
written notice that his receipt of benefits hereunder would result in Xxxxxxx
receiving a Parachute Payment. Upon receipt of such notice, Xxxxxxx shall,
within ten (10) days, advise the Company in writing of the specific benefits he
elects to have reduced by an amount necessary to reduce the value of such
benefits to an amount that is one dollar less than the amount that would cause
the value of the benefits to constitute a "Parachute Payment", and the benefits
shall be reduced accordingly. If the Company does not receive notice from
Xxxxxxx within this ten (10) day period, the Company shall automatically reduce
the Cash Payment portion of the benefits provided hereunder.
3
C. For purposes of this Agreement, a Material Change means the
occurrence of any of the following events:
(i) A tender offer or exchange offer is made whereby the
effect of such offer is to take over and control the affairs of the Company or
Holdings, and such offer is consummated for the ownership of securities of the
Company or Holdings representing twenty-five percent (25%) or more of the
combined voting power of the Company's or Holdings' then outstanding voting
securities.
(ii) The Company or Holdings is merged or consolidated with
another corporation and, as a result of such merger or consolidation, less than
seventy-five percent (75%) of the outstanding voting securities of the surviving
or resulting corporation shall then be owned in the aggregate by the former
stockholders of the Company or Holdings other than affiliates within the meaning
of the Securities Exchange Act of 1934 ("Exchange Act").
(iii) The Company or Holdings transfers substantially all of
its assets to another corporation or entity that is not a wholly owned
subsidiary of the Company or Holdings.
(iv) Any person (as such term is used in Sections 3 (a) (9)
and 13 (d) (3) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Company or Holdings representing twenty-five
4
percent (25%) or more of the combined voting power of the Company's or Holdings'
then outstanding securities, and the effect of such ownership is to take over
and control the affairs of the Company or Holdings.
(v) As the result of a tender offer, merger, consolidation,
sale of assets, or contested election, or any combination of such transactions,
the persons who were members of the Board or the Holdings Board immediately
before this transaction, cease to constitute at least a majority thereof.
D. For purposes of this Agreement, Special Retirement Benefits means
the additional retirement benefits necessary (if any) so that the total
retirement benefits Xxxxxxx receives will equal the retirement benefits he would
have received had he continued in the employ of the Company for three years
following his termination (or until his normal retirement date, whichever is
earlier). Special Retirement Benefits will include all ancillary benefits, such
as early retirement and survivor rights and benefits available at retirement, as
well as benefits (if any) under the Everest Reinsurance Retirement Plan and any
supplemental retirement plans adopted by the Company, or any successor or
substitute plan or plans ("the Plans"). If Xxxxxxx'x credited service with the
Company plus three (3) years would result in vested benefits and/or eligibility
for ancillary benefits or additional benefits under the Plans, the amount
payable to Xxxxxxx or his beneficiaries shall equal the excess of the amount
specified in paragraph (i) over that in paragraph (ii) below:
5
(i) the total retirement benefits that would be paid to
Xxxxxxx or his beneficiaries, if the three (3) years (or the period to his
normal retirement date, if less) following his termination are added to his
credited service under the Plans and his final average compensation is the same
as his actual average compensation, including the Cash Payment as compensation
for services rendered to the Company in the year of his termination;
(ii) the total retirement benefits payable to Xxxxxxx or his
beneficiaries under the Plans.
All Special Retirement Benefits are provided on an unfunded basis and
are not intended to meet the qualification requirements of Section 401 of the
Code. All Special Retirement Benefits shall be payable solely from the general
assets of the Company and shall be paid at the same times as retirement benefits
under the Plans are payable, in accordance with the payment terms of such Plans.
E. For purposes of this Agreement, Due Cause means (a) repeated and
gross negligence in fulfillment of, or repeated failure of Xxxxxxx to fulfill
his material obligations as an employee of the Company, in either event
after written notice thereof; (b) material willful misconduct by Xxxxxxx
in respect of his obligations as an employee of the Company; (c)
conviction of any felony or any crime of moral turpitude by Xxxxxxx;
or (d) a material breach in trust committed in willful or
6
reckless disregard of the interests of the Company or Holdings or undertaken
for personal gain by Xxxxxxx.
2. Special Reimbursement
---------------------
In the event that Xxxxxxx'x employment terminates after a Material
Change and he is assessed a tax pursuant to Section 4999 of the Code (the
"Parachute Tax"), the Company shall immediately pay Xxxxxxx that additional
amount of money (the "Gross-Up Payment") which will put Xxxxxxx in the same net
after tax position had no Parachute Tax been incurred. The Gross-Up Payment
shall be sufficient in amount to cover any income or excise tax on the Gross-Up
Payment itself. In the event that the Parachute Tax is ultimately determined to
exceed the amount taken into account in computing the Gross-Up Payment at the
time of the termination of Xxxxxxx'x employment (including by reason of any
payment the existence or amount of which could not be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess at the time that the amount of such excess is finally
determined. Xxxxxxx and the Company shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning
the existence or amount of any such subsequent liability for the Parachute Tax.
3. General
-------
7
A. The Company's and Holdings' obligations to pay Xxxxxxx the
compensation and other benefits specified herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company or Holdings may have against him or anyone else. In no event shall
Xxxxxxx be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to him under this Agreement. All amounts
payable and benefits provided by the Company and Holdings hereunder shall be
paid or provided without notice or demand. Each and every payment made hereunder
by the Company and Holdings shall be final and the Company and Holdings will not
seek to recover all or any part of any such payment from Xxxxxxx or from whoever
may be entitled thereto, for any reason whatsoever.
B. This Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company and Holdings, respectively. This
Agreement shall inure to the benefit of and shall be binding upon Xxxxxxx and
his estate, but neither this Agreement nor any rights arising hereunder may be
assigned by Xxxxxxx.
C. In the event that any provision or portion of
this Agreement shall shall be determined to be invalid
or unenforceable for any reason, the remaining provisions
8
or portions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.
D. Anything to the contrary notwithstanding, all payments required to
be made by the Company and Holdings hereunder to Xxxxxxx or his beneficiaries,
including his estate, shall be subject to withholding and deductions as the
Company and Holdings may reasonable determine should be withheld or deducted
pursuant to any applicable law or regulations.
E. This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of New Jersey.
F. This Agreement shall terminate on the earliest of: (i) one year
following a Material Change; (ii) termination by Xxxxxxx of his employment with
the Company under circumstances not following a Material Change; (iii)
the Company's termination of Xxxxxxx'x employment for Due Cause; or (iv)
December 31, 2001, or any date thereafter, provided that sixty days prior
written notice of termination of this Agreement is given to Xxxxxxx by
the Company and Holdings, and further provided that such written notice
of termination shall not be effective during any period of time when
the Board or Holdings' Board is aware of any circumstance which could
reasonably be expected to result in a Material Change. Termination
of this Agreement shall not relieve the Company and Holdings from
9
their respective obligations to Xxxxxxx under this Agreement relating to a
Material Change which occurs prior to such termination.
G. In the event Xxxxxxx institutes litigation to obtain or enforce any
right or benefit to which he is entitled under this Agreement, the Company and
Holdings agree to pay as incurred all legal fees and expenses reasonably
incurred by Xxxxxxx; provided, however, that Xxxxxxx agrees to repay all legal
fees and expenses paid to him by the Company and Holdings in the event that it
is determined by a judgment of a court of competent jurisdiction that the
Company has established that, under all the facts and circumstances, there was
no reasonable basis for Xxxxxxx'x litigation. The Company and Holdings agree to
pay as incurred, to the fullest extent permitted by law, all legal fees and
expenses which Xxxxxxx may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, Holdings or third parties of
the validity or enforceability of, or liability under, any provision of this
Agreement. In addition, the Company and Holdings agree to pay pre-judgment
interest on any money judgment obtained by Xxxxxxx and to pay interest on any
delayed payment calculated at the prime rate of interest as published in the
Wall Street Journal in effect from time to time, from the date that payment to
him should have been made in accordance with the provisions of this Agreement.
10
H. Any notice to be given under this Agreement shall be in writing and
delivered personally or sent by over-night mail (such as Federal Express),
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently provide in writing:
If to the Company or Holdings: Everest Reinsurance Company
000 Xxxxxxxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxx Xxxxxx, XX 00000-0000
(000) 000-0000
Attn: General Counsel
If to Xxxxxxx: 000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
I. Nothing contained herein shall give Xxxxxxx any right to any
employee benefit upon termination of employment with the Company, except as
specifically provided herein, required by law or provided by the terms of
another employee benefit plan document relating to the treatment of former
employees generally. Pursuant to the terms of the Everest Reinsurance Company
Severance Plan for United States Employees Xxxxxxx shall not be eligible for
benefits under such Severance Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dates set forth below.
EVEREST REINSURANCE HOLDINGS, INC.
______________________ By:___________________________
Xxxxxx X. Xxxxxxx
Dated: Dated:
11
EVEREST REINSURANCE COMPANY
By:___________________________
Dated:
12
