Exhibit 10.8
PROVANTAGE HEALTH SERVICES, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT by and between PROVANTAGE HEALTH SERVICES,
INC., a Minnesota corporation (the "Company"), and ___________________ (the
"Executive"), is entered into on this ____ day of ________ __, 199_.
WHEREAS, in order to retain capable executives, the Company desires to
enter into agreements to protect its executives upon a change of control of the
Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Definitions.
(a) The "Change of Control Date" shall be the first date on which a Change
of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is
terminated by the Company within one hundred eighty (180) days before
the date on which a Change of Control occurs, and the Executive can
demonstrate that such termination arose in connection with or in
anticipation of a Change of Control then the "Change of Control Date"
shall mean the date immediately prior to the date of such termination.
(b) The "Board" means the Board of Directors of the Company.
(c) A "Control Acquisition" means the acquisition by an individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either (i) the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Control Acquisition: (i) any
acquisition directly from the Company (including, without limitation,
any acquisition through an underwritten public offering of the
Company's securities by the Company), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (iv) any acquisition by ShopKo
Stores, Inc., a Wisconsin corporation ("ShopKo"), or any corporation
controlled by ShopKo, or any employee benefit plan (or related trust)
sponsored or maintained by ShopKo or any corporation
controlled by ShopKo, (v) any acquisition pursuant to a public
distribution of the Company's securities as a dividend to ShopKo's
shareholders, or (vi) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of Section
2(b) below.
2. Change of Control. For the purpose of this Agreement, a "Change of Control"
shall mean:
(a) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then constituting the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of:
(i) an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other
than the Board, or (ii) a Control Acquisition; or
(b) consummation of a reorganization, merger, statutory share exchange, or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company for which approval of the shareholders of
the Company is required (a "Business Combination"), in each case,
unless, immediately following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock")
and the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities") immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (excluding
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding Common Stock of the Corporation resulting from such
Business
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Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the Board of Directors of the
corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(c) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. Protected Period. Subject to Section 7 hereof, the Company hereby agrees
to provide to the Executive the benefits and protections described herein
for the period commencing on the Change of Control Date and ending on the
second anniversary of the Change of Control Date (the "Protected Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Protected Period, (A) the Executive's position,
authority, duties and responsibilities shall be at least
commensurate in all material respects with those held, exercised
and assigned immediately preceding the Change of Control Date and
(B) except when traveling in the normal course of business, the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Change of
Control Date or any office or location not more than fifty (50)
miles from such location.
(ii) During the Protected Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full-time attention during normal
business hours to the business and affairs of the Company and, to
use the Executive's best efforts to perform the responsibilities
assigned to the Executive hereunder faithfully and efficiently.
(b) Compensation.
(i) Base Salary. During the Protected Period, the Executive shall
receive an annual base salary ("Base Salary") at least equal to
the annualized rate of pay received by the Executive from the
Company immediately prior to the Change of Control Date. During
the Protected Period, the Base Salary shall be reviewed at least
annually and shall be increased from time to time consistent with
increases in base salary awarded in the ordinary
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course of business to other key executives of the Company.
During the Protected Period, Base Salary shall not be reduced
after any increase.
(ii) Annual Bonus. During the Protected Period, the Executive shall
be awarded an annual bonus (an "Annual Bonus") in cash
determined pursuant to a bonus program at least as advantageous
to the Executive as the bonus program in place immediately prior
to the Change of Control Date.
(iii) Benefits. During the Protected Period, the Executive shall be
entitled to participate in all welfare benefit plans, incentive,
savings, fringe benefit and retirement plans and programs
applicable to other key executives of the Company (including,
without limitation, vacation, automobile allowance, medical,
dental, disability, salary continuance, executive life, group
life, accidental death and travel accident insurance plans and
programs). Such plans and programs, in the aggregate, shall
provide the Executive with benefits at least as favorable as the
benefits provided by the Company to the Executive immediately
prior to the Change of Control Date.
(iv) Expenses. During the Protected Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the
policies and procedures of the Company in effect immediately
prior to the Change of Control Date.
5. Termination of Employment. Prior to the Change of Control Date, the
Executive is an "at will" employee whose employment may be terminated at
any time by either the Company or the Employee. During the Protected
Period, the following provisions shall apply:
(a) Death or Disability. This Agreement shall terminate automatically upon
the Executive's death. The Company may terminate this Agreement, after
having established the Executive's Disability (pursuant to the
definition of "Disability" set forth below), by giving to the
Executive written notice of its intention to terminate the Executive's
employment. In such a case, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of
such notice (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" means disability which, at least 26 weeks
after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or the Executive's legal representative.
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(b) Cause. The Company may terminate the Executive's employment for
"Cause." For purposes of this Agreement, "Cause" means (i) an act or
acts of personal dishonesty taken by the Executive and intended to
result in substantial personal enrichment of the Executive at the
expense of the Company, (ii) repeated violations by the Executive of
the Executive's obligations under Section 4(a) of this Agreement which
are demonstrably willful and deliberate on the Executive's part and
which are not remedied after receipt of notice from the Company, or
(iii) the conviction of the Executive of a felony.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good
Reason" means:
(i) the Executive's authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement are materially
and adversely reduced, excluding for this purpose an isolated,
insubstantial or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated,
insubstantial or inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive; or
(iii) the Company's requiring the Executive to be based at any office
other than that described in Section 4(a)(i)(B) hereof, except
for travel reasonably required in the performance of the
Executive's responsibilities.
(d) Notice of Termination. Any termination by the Company for Cause or by
the Executive for Good Reason shall be communicated by Notice of
Termination to the other party in accordance with Section 14(b) of
this Agreement. A "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if
the termination date is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
fifteen (15) days after the giving of such notice).
(e) Date of Termination. "Date of Termination" means the date of receipt
of the Notice of Termination or any later date specified therein, as
the case may be. If the Executive's employment is terminated by the
Company other than for Cause or Disability, the Date of Termination
shall be the date on which the Company notifies the Executive of such
termination. If the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the
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date of death of the Executive or the Disability Effective Date, as
the case may be.
6. Obligations of the Company upon Termination.
(a) Death. If, during the Protected Period, the Executive's employment is
terminated by reason of the Executive's death, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than those obligations
accrued or earned by the Executive hereunder as of the Date of
Termination. During the Protected Period, the Executive's family
shall be entitled to receive benefits at least equal to the benefits
provided by the Company to surviving families of executives of the
Company under such plans, programs and policies relating to family
death benefits, if any, as in effect immediately prior to the Change
of Control Date.
(b) Disability. If, during the Protected Period, the Executive's
employment is terminated by reason of the Executive's Disability, this
Agreement shall terminate without further obligations to the
Executive, other than those obligations accrued or earned by the
Executive hereunder as of the Date of Termination. During the
Protected Period, the Executive shall be entitled to receive
disability and other benefits at least equal to those provided by the
Company to disabled employees and/or their families in accordance with
such plans, programs and policies relating to disability, if any, as
in effect immediately prior to the Change of Control Date.
(c) Cause and Other Than for Good Reason. If, during the Protected Period,
the Executive's employment shall be terminated for Cause, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay to the Executive amounts accrued to
the Executive through the Date of Termination. If the Executive
terminates employment other than for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than
those obligations accrued or earned by the Executive through the Date
of Termination.
(d) Good Reason and Other Than for Cause or Disability. If, during the
Protected Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the employment of
the Executive shall be terminated by the Executive for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. to the extent not therefore paid, the Executive's Base
Salary through the Date of Termination; and
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B. ___ ( ) times the smaller of the following amounts:
(1) the average of the Annual Bonuses payable to the
Executive in respect of the three fiscal years
preceding the fiscal year in which the Date of
Termination occurs; and
(2) the average of Executive's annual bonus "norm" for each
of the three fiscal years preceding the fiscal year in
which the Date of Termination occurs, regardless of the
actual Annual Bonus payable for such years; and
C. ___ ( ) times the current Base Salary; and
D. all other amounts accrued or earned by the Executive through
the Date of Termination and amounts otherwise owing under
the then existing plans and policies of the Company; and
(ii) for ___ ( ) months after the Date of Termination the Company
shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to
them in accordance with the health and dental plans, programs and
policies provided by the Company to employees and/or their
families if the Executive's employment had not been terminated,
including health insurance and dental insurance, as in effect
immediately prior to the Change of Control Date; provided,
however, that such benefit continuation shall cease when and to
the extent the Executive obtains coverage through a new employer.
7. Termination of Agreement at Election of the Company. The Executive agrees
that prior to a Change of Control Date occurring the Company may terminate
this Agreement on not less than one hundred eighty (180) days prior written
notice to Executive which notice shall designate the date this Agreement is
to terminate; provided, however, that such termination shall be of no force
or effect whatsoever, and this Agreement shall remain in full force and
effect, if a Change of Control Date occurs on or before the date set forth
in such notice as the date of termination of this Agreement.
8. Mitigation; Attorney's Fees. The Executive shall not be obligated to seek
other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement. The Company agrees to pay all reasonable legal fees and
expenses which the Executive may reasonably incur as a result of any action
brought by the Executive to enforce the provisions of this Agreement
provided that Executive is successful on the merits of any such action.
9. Certain Reduction of Payments by the Company.
(a) For purposes of this section, (i) "Payment" shall mean any payment or
distribution in the nature of compensation to or for the benefit of
Executive,
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whether paid or payable pursuant to this Agreement or otherwise; (ii)
"Agreement Payment" shall mean a Payment paid or payable pursuant to
this Agreement (disregarding this Section 9); (iii) "Net After Tax
Receipt" shall mean the Present Value of a Payment net of all taxes
imposed on Executive with respect thereto under Sections 1 and 4999 of
the Code, determined by applying the highest marginal rate under
Section 1 of the Code which applied to the Executive's taxable income
for the immediately preceding taxable year; (iv) "Present Value" shall
mean such value determined in accordance with Section 280G(d)(4) of
the Code; and (v) "Reduced Amount" shall mean the smallest aggregate
amount of Payments which (a) is less than the sum of all Payments and
(b) results in aggregate Net After Tax Receipts which are equal to or
greater than the Net After Tax Receipts which would result if the
aggregate Payments were any other amount less than the sum of all
Payments.
(b) Anything in this Agreement to the contrary notwithstanding, in the
event Deloitte & Touche (the "Accounting Firm") shall determine that
receipt of all Payments would subject Executive to tax under Section
4999 of the Code, it shall determine whether some amount of Payments
would meet the definition of a "Reduced Amount." If the Accounting
Firm determines that there is a Reduced Amount, the aggregate
Agreement Payments shall be reduced to such Reduced Amount; provided,
however, that if the Reduced Amount exceeds the aggregate Agreement
Payments, the aggregate Payments shall, after the reduction of all
Agreement Payments, be reduced (but not below zero) in the amount of
such excess.
(c) If the Accounting Firm determines that aggregate Agreement Payments or
Payments, as the case may be, should be reduced to the Reduced Amount,
the Company shall promptly give Executive notice to that effect and a
copy of the detailed calculation thereof, and the Executive may then
elect, in his sole discretion, which and how much of the Payments
shall be eliminated or reduced (as long as after such election the
present value of the aggregate Payments equals the Reduced Amount) and
shall advise the Company in writing of his election within ten days of
his receipt of notice. If no such election is made by the Executive
within such ten-day period, the Company may elect which of the
Agreement Payments or Payments, as the case may be, shall be
eliminated or reduced (as long as after such election the present
value of the aggregate Agreement Payments or Payments, as the case may
be, equals the Reduced Amount) and shall notify the Executive promptly
of such election. All determinations made by the Accounting Firm under
this Section shall be binding upon the Company and Executive and shall
be made within 60 days of a termination of employment of the
Executive. As promptly as practicable following such determination,
the Company shall pay to or distribute for the benefit of Executive
such Payments as are then due to Executive under this Agreement and
shall promptly pay to or distribute for the benefit of Executive in
the future such Payments as become due to Executive under this
Agreement.
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(d) While it is the intention of the Company and the Executive to reduce
the amounts payable or distributable to Executive hereunder only if
the aggregate Net After Tax Receipts to Executive would thereby be
increased, as a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by
the Accounting Firm hereunder, it is possible that amounts will have
been paid or distributed by the Company to or for the benefit of
Executive pursuant to this Agreement which should not have been so
paid or distributed ("Overpayment") or that additional amounts which
will have not been paid or distributed by the Company to or for the
benefit of Executive pursuant to this Agreement could have been so
paid or distributed ("Underpayment"), in each case, consistent with
the calculation of the Reduced Amount hereunder. In the event that the
Accounting Firm, based either upon the assertion of a deficiency by
the Internal Revenue Service against the Company or Executive which
the Accounting Firm believes has a high probability of success or
controlling precedent or other substantial authority, determines that
an Overpayment has been made, any such Overpayment paid or distributed
by the Company to or for the benefit of Executive shall be treated for
all purposes as a loan ab initio to Executive which Executive shall
repay to the Company together with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code; provided,
however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the
extent such deemed loan and payment would not either reduce the amount
on which the Executive is subject to tax under Section 1 and Section
4999 of the Code or generate a refund of such taxes. In the event that
the Accounting Firm, based upon controlling precedent or other
substantial authority, determines that an Underpayment has occurred,
any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.
10. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained
by the Executive during the Executive's employment by the Company or any of
its affiliated companies and which shall not be public knowledge (other
than by acts by the Executive or his representatives in violation of this
Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
11. Exclusive Remedy, Waiver of Claims. During the Protected Period, severance
benefits provided to the Executive pursuant to this Agreement are to be
paid and provided in lieu of any severance payments, severance benefits and
severance protections provided in any other plan or policy of the Company,
except as expressly provided in writing under the terms of any plan or
policy of the Company, or in a written agreement between the
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Company and the Executive entered into after the date of this Agreement.
Additionally, any payments due to Executive hereunder may be conditioned
upon Executive's execution and delivery of a waiver of any and all claims
the Executive may have against the Company.
12. Statement of Intention. It is the intention of the parties hereto that
prior to the Change of Control Date, this Agreement shall not create any
rights or obligations in the Executive or the Company, or require any
payments by the Company to the Executive, except as expressly provided
herein.
13. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Wisconsin, without reference to principles of
conflict of laws. This Agreement contains the entire understanding of
the Company and the Executive with respect to the subject matter
hereof and may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive: c/o ProVantage Health Services, Inc.
13555 Bishops, Suite 201
X.X. Xxx 000
00
Xxxxxxxxxx, XX 00000-0000
If to the Company: ProVantage Health Services, Inc.
00000 Xxxxxxx, Xxxxx 000
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Secretary
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) It is expressly agreed that this Agreement supersedes and replaces any
other form of Change of Control Agreement which may have previously
been entered into between Company and Executive. In addition, at such
time as an initial public offering of the Company's common stock is
completed, any Change of Control Severance Agreement between Executive
and ShopKo shall be terminated and shall be of no further force or
effect whatsoever. ShopKo is an intended third-party beneficiary of
the foregoing provision.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the day and year first above written.
PROVANTAGE HEALTH SERVICES, INC.
By: ____________________________________
Xxxxxxx X. Xxxxxx
Secretary
EXECUTIVE
____________________________________
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