<PAGE>
Exhibit 10.4(J)
RETENTION PLAN
RELEASE AND SEVERANCE COMPENSATION AGREEMENT
THIS
RELEASE AND SEVERANCE COMPENSATION AGREEMENT (the "Agreement")
is
between ProAssurance Corporation, a Delaware corporation
("ProAssurance"),
ProNational Insurance Company, a Michigan insurance company
("ProNational"),
Professionals Group, Inc., a Michigan corporation ("Professionals
Group") and
Darryl K. Thomas, an individual (the "Executive"). ProAssurance,
ProNational,
and Professionals Group and their respective majority-owned
subsidiaries are
hereinafter collectively referred to as the "Companies."
RECITALS:
The
Executive is currently rendering valuable services to
Professionals
Group and/or its wholly-owned subsidiary of ProNational.
ProAssurance has
acquired, or will acquire, control of Professionals Group and
ProNational in a
transaction (the "Consolidation") that will result in a "change of
control" (the
"Change of Control") under the terms and conditions of the 1996 Key
Employee
Retention Plan of ProNational as assumed by Professionals Group
(the "Change of
Control Agreement"). The Companies have offered to employ the
Executive in an at
will employment relationship after the Consolidation and to expand
protection to
the Executive in the form of severance benefits payable on
termination of
employment under certain circumstances after the Consolidation on
the condition
that the Executive releases the Companies from any past or future
liability
under the Change of Control Agreement. The Executive desires to
continue
employment with the Companies under such terms and conditions, and
with the
protection afforded to the Executive by this Agreement.
<PAGE>
AGREEMENT
NOW,
THEREFORE, These Premises Considered, and in consideration of
the
mutual covenants and promises in this Agreement, the sufficiency of
which is
hereby acknowledged, the parties agree as follows:
1.
Term of Agreement. This Agreement is subject to, and conditioned
upon,
the closing (the "Closing") of the transactions (the
"Consolidation")
contemplated by the Agreement to Consolidate by and between Medical
Assurance,
Inc. and Professionals Group, Inc. dated June 22, 2000, as amended
November 1,
2000. This Agreement is effective on the date of Closing which is
scheduled to
occur on June 27, 2001, and shall continue in effect for a period
of two years
from the date of Closing (the "Initial Term"). Thereafter, this
Agreement shall
automatically be extended for successive terms of one year (a
"Renewal Term"),
except this Agreement may be terminated after the first Renewal
Term upon
delivery of written notice of the termination of this Agreement by
any of the
Companies at least six months prior to the expiration of any
Renewal Term. If
the Executive's employment is terminated during the term of the
Agreement, the
date on which the Executive's employment terminates shall be
referred to as the
"Date of Termination."
2.
Severance Benefits. If during the term of this Agreement the
Executive
leaves the employment of the Companies for Good Reason, as
explained in Section
4 of this Agreement, and the Executive signs the release (the
"Release") that is
attached to and incorporated in this Agreement, the Executive shall
receive the
following benefits (the "Severance Benefits"):
(a) An amount equal to either of whichever the following is
applicable: (i) if the Date of Termination occurs during the
Initial Term,
two
(2) times the Executive's annual base salary; or (ii) if the Date
of
Termination occurs during a
2
<PAGE>
Renewal Term, one (1) times the Executive's annual base salary. The
"annual
base
salary" of the Executive shall be defined as the Executive's base
rate
of
compensation in effect as of the Date of Termination, but in no
event
less
than the Executive's base rate of compensation in effect as of the
end
of
the last calendar quarter preceding the Date of Termination;
(b) An amount equal to either of whichever of the following is
applicable: (i) if the Date of Termination occurs during the
Initial Term,
two
(2) times the average total annual incentive award(s) or bonus(es);
or
(ii)
if the Date of Termination occurs during a Renewal Term, one (1)
times
the
average total annual incentive award(s) or bonus(es). The
"average
total annual incentive award(s) or bonus(es)" shall mean the
average of the
sum
of (i) cash awards or bonuses earned with the Companies by the
Executive, plus (ii) the value of stock awarded to the Executive by
the
Companies for each complete fiscal year during the last three
years
(whether or not deferred) or, if shorter, over the Executive's
entire
period of employment with the Companies. The value of stock awarded
to the
Executive shall be calculated based on the value of the stock as of
the
date
the stock was awarded to the Executive as annual incentive
compensation. Notwithstanding the foregoing, the Executive's actual
total
annual incentive awards or bonuses shall be calculated excluding
the value
of
options to purchase stock which may have been awarded to the
Executive;
(c) Payment of the Executive's monthly COBRA premiums for
continued
health and dental insurance coverage for the shorter of the
following: (i)
18 months if the Date of
Termination occurs in the Initial Term; (ii) 12
months if the Date of Termination occurs in the Renewal Term; (iii)
until
the
Executive no longer has coverage
3
<PAGE>
under COBRA; or (iv) until the Executive becomes eligible for
substantially
similar coverage under a subsequent employer's group health plan;
and
(d) Outplacement services that are customary to Executive's
position.
The
cash severance benefits described in subparagraphs (a) and (b)
above
shall be paid in equal monthly installments during the period that
the covenants
set forth in Section 7 shall be in effect commencing upon the Date
of
Termination; provided that the obligation of the Companies to pay
such cash
severance benefits to the Executive shall be subject to termination
under the
provisions of Section 7 hereof in the event the Executive should
violate the
covenants set forth therein; and provided further that the payment
of such cash
severance benefits shall be accelerated and payable in lump sum by
the Companies
upon a breach of this Agreement as a result of the failure of a
successor
(herein defined) to assume this Agreement as required in Section 10
of this
Agreement. The Companies shall withhold from any amounts payable
under this
Agreement all federal, state, city or other income and employment
taxes that
shall be required.
The
Companies shall fund the obligation to pay cash Severance Benefits
by
depositing in escrow an amount equal to the sum of the amounts
payable to the
Executive under subparagraphs (a) and (b) hereof (the "Escrow
Funds") with
SouthTrust Bank (or another financial institution with total assets
of more than
$1,000,000,000) as escrow agent (the "Escrow Agent"). The Escrow
Funds shall be
the property of the Companies and shall be held, invested and
distributed by
Escrow Agent in accordance with the following provisions. At the
time of
delivery of the Escrow Funds, the Escrow Agent shall acknowledge
receipt of the
Escrow Funds and agree to be bound by the provisions of this
Agreement in a
separate written document. The Escrow Agent shall invest the Escrow
Funds in a
money market account for the benefit of the Companies and
4
<PAGE>
shall distribute the earnings not more frequently than monthly.
Unless and until
the Escrow Agent receives notice from ProAssurance that the
Executive has
breached this Agreement, the Escrow Agent shall distribute the
Escrow Funds to
the Executive in the same number of equal monthly installments as
the number of
whole calendar months in the Restricted Period (as defined in
Section 7 hereof).
The monthly installments shall be distributed to the Executive on
the first day
of each calendar month in the Restricted Period together with
accrued and
undistributed earnings on the Escrow Funds. If the Company delivers
written
notice to the Escrow Agent and Executive that the cash Severance
Benefits
payable to Executive are subject to termination under Section 7 of
this
Agreement, the Escrow Agent shall distribute the balance of the
Escrow Funds and
accrued and undistributed earnings thereon to ProAssurance unless
the Escrow
Agent receives a written notice of objection from the Executive
within 15 days
after delivery of ProAssurance's notice. If Executive provides a
timely notice
of objection, the Escrow Agent shall hold the Escrow Funds until it
receives a
written notice of distribution from the arbitrator appointed
pursuant to Section
13 hereof or a joint written notice of distribution from the
Executive and
ProAssurance. The failure of the Executive or the Company to
deliver notice to
the Escrow Agent as herein provided shall not be a waiver of any of
their
respective rights under this Agreement.
The Executive shall be
entitled to the following in addition to and not in
limitation of the Severance Benefits: (i) accrued and unpaid base
salary as of
the Date of Termination; (ii) accrued vacation and sick leave, if
any, on Date
of Termination in accordance with the then current policy of the
Companies with
respect to terminated employees generally; and (iii) vested
benefits under the
Companies' employee benefit plans in which the Executive was a
participant on
Date of Termination, which vested benefits shall be paid or
provided for in
accordance with
5
<PAGE>
the terms of said employee benefit plans. If the Executive has
regular use of a
vehicle provided by the Companies for business and personal use on
Date of
Termination, the Companies shall offer for sale to the Executive
the vehicle at
a purchase price equal to either of the following: (x) if owned by
any of the
Companies, the then current book value of the vehicle (cost less
accumulated
depreciation), or (y) if leased by any of the Companies, the
purchase price upon
the exercise of the purchase option, if any, under the lease.
The
Executive shall not be entitled to receive Severance Benefits
if
employment with the Companies is terminated by reason of death of
Executive,
retirement of Executive pursuant to the Company's retirement plan
as then in
effect, the Executive having reached the age of mandatory
retirement (if such
requirement then exists for bona fide executives); or Disability of
Executive
(herein defined); or by reason of termination of employment by the
Executive
without Good Reason (herein defined); or by reason of termination
of employment
by the Companies with Cause (herein defined).
The
Executive shall be under no duty or obligation to seek or accept
other
employment and shall not be required to mitigate the amount of the
Severance
Benefits provided under the Agreement by seeking employment or
otherwise;
provided, however, that the Executive shall be required to notify
the Companies
if the Executive becomes covered by a health or dental care program
providing
substantially similar coverage, at which time health or dental care
continuation
coverage provided under this Agreement shall cease.
3.
Parachute Payments. Subject to Section 280G of the Internal Revenue
Code
of 1986, as amended ("Code"), if the board of directors of
ProAssurance
determines that an excise tax under Section 4999 ("Excise Tax")
would be due,
the Executive's Severance Benefits under this Agreement shall be
limited to the
amount necessary to avoid the Excise Tax only if applying
6
<PAGE>
such a limit results in a greater net benefit to the Executive than
would have
resulted had the benefits not been limited and an Excise Tax paid.
For purposes
of making such computation:
(a) Any other payments or benefits received or to be received by
the
Executive in connection with the Change of Control or the
Executive's
termination of employment (whether pursuant to the terms of this
Agreement or
any other plan, arrangement, or agreement with the Companies, or
with any person
whose actions result in the Change of Control) shall be treated as
"parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the
Code shall
be treated as subject to the Excise Tax, unless, in the opinion of
tax counsel
selected by ProAssurance's independent auditors, such other
payments or benefits
(in whole or in part) do not constitute parachute payments, or such
other
payments or benefits (in whole or in part) represent reasonable
compensation for
services actually rendered within the meaning of Section 280G(b)(4)
of the Code
in excess of the base amount within the meaning of Section
280G(b)(3) of the
Code, or such other payments or benefits (in whole or in part) are
otherwise not
subject to the Excise Tax. In the event an Excise Tax is due,
because of
payments made under this Agreement, the Executive shall be
responsible for
paying said Excise Tax.
(b) The amount of the Severance Benefits that will be treated
as
subject to the Excise Tax shall be equal to the lesser of: (i) the
total amount
of the Severance Benefits; or (ii) the amount of excess parachute
payments
within the meaning of Section 280G(b)(l) (after applying
subparagraph (a)
above).
(c) The value of any noncash benefits or any deferred payment
or
benefit shall be determined by ProAssurance's independent auditors
in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
7
<PAGE>
(d) The Executive shall be deemed to pay federal income taxes at
the
highest marginal rate of federal income taxation in a calendar year
in which the
Severance Benefits are to be paid, and state and local income taxes
at the
highest marginal rate of taxation in the state and locality of the
Executive's
residence on the Date of Termination, net of the maximum reduction
in federal
income taxes that could be obtained from deduction of such state
and local
taxes.
In
the event the Internal Revenue Service adjusts the computation
in
subparagraphs (a) through (d) above, so that the Executive did not
receive the
greatest net benefit, the Companies shall reimburse the Executive
for the amount
necessary to make the payment of Severance Benefits to the
Executive to the
extent permitted hereunder, plus a market rate of interest as
determined by the
Board of Directors of ProAssurance.
4. Good Reason for
Termination. In the event that the Executive's
employment relationship with the Companies is terminated for any of
the reasons
described in this Section 4, the Executive shall be entitled to
Severance
Benefits, subject to and described in Section 2 of this Agreement.
"Good Reason"
shall constitute any of the following circumstances if they occur
without the
Executive's express written consent during the term of this
Agreement:
(a) The Executive no longer holds an executive level position
with
executive level responsibilities with the Companies consistent with
the
Executive's training and experience (Executive and Company
acknowledge that the
initial position and responsibilities of Executive will be as set
forth in the
terms of employment ("Terms of Employment") attached to, and
incorporated in,
this Agreement);
(b) The Companies require that the Executive's primary location
of
employment be more than 50 miles from the location of the
Executive's primary
location of
8
<PAGE>
employment on June 27, 2001; provided, however, that it is agreed
that the
relocation of Executive's principal office to Birmingham, Alabama
will not
violate this subparagraph and that after the relocation to
Birmingham, the fifty
(50) mile radius will apply with respect to the Birmingham
location;
(c) The failure of the Companies to provide the Executive, at a
level
in 2001 as set forth in the Terms of Employment and thereafter at a
level
commensurate with the Executive's position, the incentive
compensation
opportunities and employee benefits that are provided to other
executives of
comparable rank with the Companies;
(d) A breach by the Companies of any provision of this
Agreement,
including without limitation, the failure of a successor to assume
this
Agreement as required in Section 10 hereof;
(e) The termination of the Executive's employment by the Companies
for
a reason other than: (i) death; (ii) retirement pursuant to the
Companies'
retirement plan as then in effect; (iii) Disability as explained in
Section 5 of
this Agreement; (iv) the Executive has reached the age of mandatory
retirement
(if such requirement then exists for bona fide executives); (v) for
Cause, as
explained in Section 7 of this Agreement;
(f) A reduction by the Companies in the Executive's base salary as
set
forth in the Terms of Employment; or
(g) The termination or non-renewal of this Agreement by the
Companies.
The
Executive must provide the Companies with written notice no later
than
45 calendar days after the Executive knows or should have known
that Good Reason
has occurred. Following the Executive's Notice, the Companies shall
have 45
calendar days to rectify the
9
<PAGE>
circumstances causing the Good Reason. If the Company fails to
rectify the
event(s) causing the Good Reason within the 45 day period after the
Executive's
Notice, or if any of the Companies delivers to the Executive
written notice
stating that the circumstances cannot or shall not be rectified,
the Executive
shall be entitled to assert Good Reason and terminate employment on
or before 90
days after the delivery of the Executive's Notice. Should Executive
fail to
provide the required Notice in a timely manner, Good Reason shall
not be deemed
to have occurred as a result of that event. The Initial Term or a
Renewal Term
shall not be deemed to have expired during the Notice period,
however, as long
as the Executive has provided Notice within the Term.
5.
Disability. For purposes of this Agreement, Disability means a
serious
injury or illness that requires the Executive to be under the
regular care of a
licensed medical physician and renders the Executive incapable of
performing the
essential functions of the Executive's position for 12 months as
determined by
the Board of Directors of the Companies in good faith and upon
receipt of and in
reliance on competent medical advice from one or more individuals
selected by
the Board of Directors, who are qualified to give professional
medical advice.
6.
Cause. If the Executive's employment relationship with the
Companies is
terminated for Cause by the Companies, as described below in this
Section, the
Executive shall not be eligible for Severance Benefits and all
rights of the
Executive and obligations of the Companies under this Agreement
shall expire.
Cause means:
(a) The Executive has been convicted in a federal or state court of
a
crime classified as a felony;
(b) Action or inaction by the Executive (i) that constitutes
embezzlement, theft, misappropriation or conversion of assets of
the Companies
which alone or together with related
10
<PAGE>
actions or inactions involve assets of more than a de minimis
amount, or that
constitutes fraud, gross malfeasance of duty, or conduct grossly
inappropriate
to Executive's office; and (ii) such action or inaction has
adversely affected
or is likely to adversely affect the business of the Companies or
has resulted
or is intended to result in direct or indirect gain or personal
enrichment of
the Executive to the detriment of the Companies;
(c) The Executive has been grossly inattentive to, or in a
grossly
negligent manner failed to competently perform, Executive's job
duties and the
failure was not cured within 45 days after written notice from the
Companies.
Any
termination of the Executive's employment by the Companies for
Cause
shall be communicated by a notice of termination (the "Notice of
Termination")
to the Executive. The Notice of Termination shall be a written
notice indicating
the specific termination provision of this Agreement relied upon
and shall set
forth in reasonable detail the facts and circ
