Exhibit 10.26
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the "Agreement"),
dated as of February 18, 2009 by and between PMA Capital
Corporation, a Pennsylvania corporation, and its subsidiaries (the
"Company"), and Stephen L. Kibblehouse (the
"Executive").
WITNESSETH THAT
WHEREAS, the Executive is Executive Vice
President and General Counsel of the Company or a subsidiary of the
Company;
WHEREAS, the Company wishes to encourage the
Executive to continue his career and services with the Company or a
subsidiary, as the case may be;
WHEREAS, the Company has determined that it is
in its best interests and the shareholders' to assure continuity in
the management of the Company's and it subsidiaries in the event of
a Change in Control by entering into this Agreement with the
Executive;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants contained herein, the Company and the
Executive hereby agree as follows:
1. Term
. This Agreement shall become effective on the Effective
Date and shall continue in effect throughout the Term of
Employment; provided, however, the restrictive covenants contained
in section 9 of this Agreement and, as applicable, the Company's
and the Executive's obligations under the other provisions of this
Agreement shall survive the Term of Employment and shall continue
in effect through the periods provided therein and/or until the
Company's and/or the Executive's obligations, as applicable,
thereunder are satisfied.
2.
Compensation . Except as otherwise expressly set
forth below, the Executive's compensation shall be determined by,
and in the sole discretion of, the Board of Directors of the
Company (the "Board") or a committee of the Board.
(a) Annual Base
Salary means the Executive's annual salary in effect on (i) the
date of this Agreement, as adjusted from time to time by the Board,
(ii) the date in which a Change in Control occurs, or (iii) the
date preceding an occurrence which results in the Executive's Good
Reason termination of employment, whichever is highest.
(b) Annual
Bonus means the amount awarded to the Executive under the
Company's Officer Annual Incentive Compensation Plan (the "Annual
Plan") in effect on (i) the date of this Agreement, as adjusted
from time to time by the Board, (ii) the date in which a Change in
Control occurs, or (iii) the date preceding an occurrence which
results in the Executive's Good Reason termination of employment,
whichever is highest.
(c) Long Term
Incentive means the amount awarded to the Executive under the
Company's Officer Long Term Incentive Compensation Plan in effect
on (i) the date of this
Agreement, as
adjusted from time to time by the Board, (ii) the date on which a
Change in Control occurs, or (iii) the date preceding an occurrence
which results in the Executive's Good Reason termination of
employment, whichever is highest.
(d) Employee
Benefits . In addition to the foregoing, during the
Term of Employment,
(i) to the extent not
duplicative of the specific benefits provided herein, the Executive
shall be eligible to participate in all incentive compensation,
retirement, supplemental retirement, and deferred compensation
plans, policies and arrangements that are provided generally to
other executive officers of the Company;
(ii) the Executive and,
as applicable, the Executive's covered dependent(s) shall be
eligible to participate in all of the Company's health and welfare
benefit plans (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended); and
(iii) the Executive
shall be entitled to receive fringe benefits provided for executive
officers of the Company as determined from time to time by the
Company.
(e)
Reimbursements . To the extent required by
Section 409A of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder (“409A”),
with regard to any provision of this Agreement that provides for
the reimbursement of costs and expenses, or for the provision of
in-kind benefits:
(i) the right to such
reimbursement or in-kind benefit shall not be subject to
liquidation or exchange for another benefit;
(ii) the amount of
expenses or in kind benefits available or paid in one year shall
not affect the amount available or paid in any subsequent year;
and
(iii) such payments
shall be made on or before the last day of the Executive’s
taxable year which follows the year in which the expense
occurred.
(f) Separate
Payments . To the extent permissible by law, each
payment and each installment described in this Agreement shall be
considered a separate payment from each other payment or
installment.
3. Termination of
Employment .
(a) Termination of
Employment and Term of Employment . The Company or
the Executive may terminate the Executive's employment at any time
and for any reason in accordance with subsection 3(b)
below. The Term of Employment shall be deemed to have
ended on the last day of the Executive's employment. The
Term of Employment shall terminate upon the Executive's
death.
(b) Notice of
Termination . Any purported termination of the
Executive's employment (other than by reason of death) shall be
communicated by written Notice of
Termination
from one party hereto to the other party hereto in accordance with
the notice provisions contained in subsection 14(b)
below. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that indicates the Date of
Termination and, with respect to a termination due to Disability,
Cause or Good Reason, sets forth in reasonable detail the facts and
circumstances that are alleged to provide a basis for such
termination. A Notice of Termination from the Company
shall specify whether the termination is with or without Cause or
due to the Executive's Disability. A Notice of
Termination from the Executive shall specify whether the
termination is with or without Good Reason and, if the termination
is without Good Reason, whether the termination is due to
Executive's Disability.
(c) Date of
Termination . For purposes of this Agreement, "Date
of Termination" shall mean the date specified in the Notice of
Termination (but in no event shall such date be earlier than the
30th day following the date the Notice of Termination is given,
unless expressly agreed to by the parties hereto or the date of the
Executive's death).
(d) No Waiver
. The failure to set forth any fact or circumstance in a
Notice of Termination, which fact or circumstance was not known to
the party giving the Notice of Termination when the notice was
given, shall not constitute a waiver of the right to assert such
fact or circumstance in an attempt to enforce any right under or
provision of this Agreement.
(e) Cause
. For purposes of this Agreement, the term "Cause" shall
mean Executive: (i) commits any act of fraud,
embezzlement, theft or commission of a felony in the course of his
employment; (ii) engages in knowing and willful misconduct or gross
negligence in the performance of his duties; (iii) unlawfully
appropriates a corporate opportunity of the Company or its
affiliates and subsidiaries; or (iv) knowingly and willfully
breaches any of Executive's covenants contained in this Agreement
in any material respect. No act or failure to act
directly related to Company action or inaction that constitutes
Good Reason shall constitute Cause under this Agreement if the
Executive has provided a Notice of Termination based on such Good
Reason event prior to the Company's giving of the Notice of
Termination for Cause. The Executive's termination for
Cause shall be effective when and if a resolution is duly adopted
by an affirmative vote of the Board (less the Executive), stating
that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in the Notice of Termination, and
such conduct constitutes Cause under this Agreement; provided,
however, that the Executive shall have been given the opportunity
(i) to cure any act or omission that constitutes Cause if capable
of cure and (ii), together with counsel, during the 30-day period
following the receipt by the Executive of the Notice of Termination
and prior to the adoption of the Board's resolution, to be heard by
the Board.
(f) Disability
. For purposes of this Agreement, the Executive shall be
deemed to have a Disability if the Executive is entitled to
long-term disability benefits under the Company's long-term
disability plan or policy, as the case may be, as in effect on the
Date of Termination.
(g) Good Reason
. For purposes of this Agreement, the term "Good Reason"
means the occurrence (without the Executive's express written
consent) of any of the following acts or failures to act by the
Company:
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a material
reduction in his duties, authority or responsibilities;
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requiring the
Executive to be based more than 50 miles away from the Company's
headquarters in Blue Bell, Pennsylvania;
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the material
breach, and failure to cure, by the Company of any of its other
obligations under this Agreement;
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the failure of
the Company to obtain the assumption of this Agreement as
contemplated in subsection 12(b) hereof; or
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any reduction
in the Executive's Annual Base Salary or Annual Bonus target that
does not affect all similarly situated Executives; provided that
any reduction in the Executive's Annual Base Salary or Annual Bonus
target shall constitute Good Reason in connection with a Change of
Control.
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The Executive's
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting
Good Reason hereunder; provided, however, that no such event
described above shall constitute Good Reason unless the Executive
has given a Notice of Termination to the Company specifying the
condition or event relied upon for such termination within 90 days
of the occurrence of such event, the Company has failed to cure the
condition or event constituting Good Reason within the 30 day
period following receipt of the Executive's Notice of Termination,
and the Executive’s Termination Date is within six months of
the event that constitutes Good Reason.
4. Obligations of
the Company upon Termination .
(a) Termination by
the Company for other than Cause or by the Executive for Good
Reason . If the Executive's employment is terminated
by the Company for any reasons other than Cause or Disability or by
the Executive for Good Reason:
(i) The Company shall
pay to the Executive, within thirty business days of the Date of
Termination, any earned but unpaid Annual Base Salary;
(ii) The Company shall
pay to the Executive, within thirty business days of the Date of
Termination, a prorated Annual Bonus which is the product of (A)
the target Annual Bonus opportunity in the year in which the Date
of Termination occurs or the prior year if no target Annual Bonus
opportunity has yet been determined, (B) the average payout factor
of the Annual Plan for the prior three years, and (C) the fraction
of the year the Executive was employed.
(iii) Upon the execution
and non-rescission of the release noted in Section 6, the Company
shall commence to pay as of the next regular Company payroll to the
Executive, in accordance with the Company's regular payroll
practice for its executive officers, payments equal to the sum of
100% of (A) the Executive's Annual Base Salary, less any applicable
deductions for taxes and/or benefits, and (B) the product of
(I) the Executive's target Annual Bonus opportunity for the year in
which the Date of Termination occurs or the prior year
if no target
Annual Bonus opportunity has yet been determined and (II) the
average payout factor of the Annual Plan for the prior three
years;
(iv) For a one (1) year
period after the Date of Termination, the Company will arrange to
provide the Executive (and any covered dependents), with life,
accident and health insurance benefits substantially similar to
those the Executive and any covered dependents were receiving
immediately prior to the Notice of Termination, except for any such
benefits that were waived by the Executive in
writing. Nothing in this subsection 4(a)(iv) will affect
the Executive's right to elect COBRA continuation coverage in
accordance with applicable law or extend the COBRA continuation
coverage period; and
(v) The Executive
shall have at least three (3) months (or until the last day of the
stock option term or the tenth anniversary of the date of the
grant; whichever occurs first) to exercise any then vested
outstanding stock options. Executive's outstanding Long
Term Incentive awards shall be deemed earned as set forth in the
original award, except that the amount earned shall be prorated
based on a fraction, the numerator of which is the number of full
months Executive was employed during the performance period of such
award and the denominator of which is the number of months in such
performance period. Such awards will be payable under
the terms set forth in the award. All of the Executive's
other unvested equity-based awards shall be forfeited.
(vi) The Company agrees
to engage the services, on Executive's behalf and at the Company's
expense, the services of an outplacement company, who will assist
Executive with job search support. Services will be
available for one year following the Date of
Termination.
