EXHIBIT 10.5
AMENDED CHANGE OF CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS AMENDED CHANGE OF CONTROL SEVERANCE BENEFITS AGREEMENT (this
"Agreement") is made and entered into as of the 18th day of December, 1997, by
and between PERSONNEL MANAGEMENT, INC., an Indiana corporation (the
"Corporation"), and XXXXXX X. XXXXXXX (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Corporation have previously executed a
Change of Control Severance Benefits Agreement dated February 5, 1996 (the
"Original Agreement"); and
WHEREAS, the Executive and the Corporation mutually desire to replace the
Original Agreement with this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
promises contained herein and other valuable consideration, including services
to be performed by the Executive, it is hereby agreed by and between the parties
as follows:
Section 1. Effect; Effective Date. This Agreement supersedes and
replaces the Original Agreement effective as of the date hereof. Anything in
this Agreement to the contrary notwithstanding, neither this Agreement nor any
provision hereof shall be operative unless and until there has been a Change of
Control of the Corporation (as "Change of Control of the Corporation" is defined
in Section 7 of this Agreement). Upon a Change of Control of the Corporation
this Agreement shall become operative immediately.
Section 2. Employment. This Agreement shall not be construed as
creating a contract of employment between the Executive and the Corporation. The
Executive is, however, employed by the Corporation at the time this Agreement is
executed.
Section 3. Obligation to Provide Severance Entitlement. If the
Executive's employment with the Corporation is terminated under any
circumstances other than a Disqualifying Termination (as defined in Section 9 of
this Agreement) and if such termination of employment occurs concurrently with
or within three months immediately preceding or twenty-four months immediately
following a Change of Control of the Corporation (the "Termination Period"),
then the Corporation shall provide to the Executive a severance benefit in the
manner and amount as provided in Section 4 of this Agreement (the "Severance
Entitlement").
Section 4. Manner and Amount of Severance Entitlement. If the
Corporation is obligated to provide a Severance Entitlement to the Executive
pursuant to Section 3 of this Agreement, the manner in which the Corporation
shall provide such Severance Entitlement and the amount thereof shall be as
follows:
(a) The Corporation shall cancel all indebtedness of the
Executive to the Corporation (if any) up to, but not in excess of, the
amount of the Severance Entitlement (as provided in Section 4(c)
below).
(b) If the amount of indebtedness of the Executive to the
Corporation cancelled pursuant to Section 4(a) above is less than the
amount of the Severance Entitlement to be provided to the Executive by
the Corporation, the Corporation shall pay to the Executive, by check,
an amount of money equal to the difference between the amount of the
Executive's indebtedness that is cancelled and the amount of the
Severance Entitlement to be provided to the Executive.
(c) The Severance Entitlement to be provided by the
Corporation to the Executive shall consist of the cancellation of
indebtedness and/or the payment of money as provided in Sections 4(a)
and 4(b) above. The aggregate dollar amount of the Severance
Entitlement, whether in debt cancellation or money or both, shall be
equal to three times the greater of (i) the current (as of the time
Executive becomes entitled to the Severance Entitlement) amount of base
salary being paid by the Corporation to the Executive on an annualized
basis, or (ii) the highest amount of base salary paid by the
Corporation to the Executive for any full calendar year during which
the Executive was employed by the Corporation; provided, however, that
if such Severance Entitlement, either alone or together with other
payments which the Executive has the right to receive from any PMI
Company, would constitute an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), then the Corporation shall pay an additional
amount of money to the Executive that will equal (based upon the
Executive's good faith representations of the Executive's income tax
position for the year(s) of payment(s)) the sum of (i) all excise tax
imposed upon the Executive by Section 4999 of the Code and (ii) all
additional state and federal income taxes attributable to the
additional payments to the Executive pursuant to this proviso clause
(including all state and federal taxes on the additional income tax
payments). The determination of the amounts of such payments pursuant
to the immediately preceding proviso shall be made by the Corporation
in good faith, and such determination shall be conclusive and binding.
Section 5. Provision of Severance Entitlement. With respect to a
Severance Entitlement to be provided to the Executive hereunder,the Corporation
shall provide to the Executive satisfactory written evidence of the amount of
any debt cancellation, and/or shall pay to the Executive any money, to which the
Executive is entitled as a Severance Entitlement not later than 30 days after
the later of (i) the occurrence of the Change of Control of the Corporation or
(ii) the termination of the Executive's employment.
Section 6. Withholding. The Corporation may withhold or otherwise
deduct from any Severance Entitlement to be provided hereunder all federal,
state, city, county or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
Section 7. Change of Control of the Corporation. For purposes of this
Agreement, a "Change of Control of the Corporation" shall be deemed to have
occurred if, after the date hereof either:
(a) there shall have been consummated (i) any
reorganization, consolidation or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation or pursuant
to which shares of the Corporation's common stock shall have been
converted into cash, securities or other property, or (ii) any sale,
lease, exchange or other transfer, directly or indirectly, (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation and its
consolidated subsidiaries unless, following such reorganization,
merger, consolidation, or transfer of assets,
(A) more than 60 percent of the then outstanding shares of
common stock of the corporation resulting from such
reorganization, merger or consolidation (or of the corporation
receiving the transferred assets) (the "Continuing Corporation")
and of the then outstanding voting securities of the Continuing
Corporation entitled to vote generally in the election of
Directors are then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the outstanding shares of
common stock of the Corporation and of the outstanding voting
securities of the Corporation entitled to vote generally in the
election of Directors immediately prior to such reorganization,
merger, consolidation or transfer of assets in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or transfer of assets, of
the outstanding shares of common stock of the Corporation and of
the outstanding voting securities of the Corporation,
(B) no "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
(excluding (aa) the Corporation, (bb) any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or
any entity controlled, directly or indirectly, by the Corporation
or the Continuing Corporation and (cc) any "person" beneficially
owning, immediately prior to such reorganization, merger,
consolidation or transfer of assets, directly or indirectly, 20
percent or more of the outstanding shares of common stock of the
Corporation or the outstanding voting securities of the
Corporation) beneficially owns, directly or indirectly, 20
percent or more of, respectively, the then outstanding shares of
common stock of the Continuing Corporation or of the combined
voting power of the then outstanding voting securities of the
Continuing Corporation entitled to vote generally in the election
of Directors, and
(C) at least a majority of the members of the Board of
Directors of the Continuing Corporation were members of the Board
of Directors of the Corporation at the time of the execution of
the initial agreement providing for such reorganization, merger,
consolidation or transfer of assets;
(b) any "person" or "group" of persons (as those terms are used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Regulations 13D-G and 14D
thereunder) shall have become the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing 20 percent or more of
the combined voting power of the Corporation's then outstanding voting
securities entitled to vote generally in the election of Directors
(excluding (i) the Corporation, (ii) any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
entity controlled, directly or indirectly, by the Corporation, (iii)
any "person" who, on the date of this Agreement, is the "beneficial
owner", directly or indirectly, of 20 percent or more of the
Corporation's outstanding common stock, and (iv) any "group" of
persons that includes Xxx X. Xxxxxx); or
(c) during any period of two consecutive years, individuals who
constitute the Board of Directors of the Corporation at the beginning
of such period cease for any reason to constitute at least a majority
thereof, excluding individuals whose election, or nomination for
election by the Corporation's shareholders was approved by a vote of
at least two-thirds of the Directors then still in office who were
Directors at the beginning of such period, unless, for this purpose,
any such new Director's initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 or Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors
of the Corporation.
Section 8. Successive Changes of Control. In the event a Change of
Control of the Corporation occurs but the Executive remains employed by the
Corporation until the expiration of the twenty-four month period following the
occurrence thereof, this Agreement shall nevertheless remain in effect and be
applicable with respect to any subsequent or further Change of Control of the
Corporation that may thereafter occur. In the event a Change of Control of the
Corporation occurs subsequent to the occurrence of a prior Change of Control of
the Corporation as to which the twenty-four month period following same has not
yet expired, this Agreement shall survive and continue in effect and the
twenty-four month period following the subsequent Change of Control of the
Corporation shall become the relevant period for determining the Executive's
entitlement to a Severance Entitlement hereunder. For purposes of determining
whether a subsequent Change of Control of the Corporation has occurred after the
occurrence of a prior Change of Control of the Corporation under clauses (b) or
(c) of Section 7 hereof (i) the increase in ownership percentage of the
Corporation's voting securities held by a "person" or "group" whose ownership of
such voting securities has resulted in a prior Change of Control of the
Corporation shall not constitute an additional or subsequent Change of Control
of the Corporation, (ii) each "group" of "persons" shall be separate and
distinct from any other "group" even though one or more "persons" may be
included in common in more than one "group", and (iii) a determination as to
whether a Change of Control of the Corporation has occurred under clause (c) of
Section 7 shall be made each time the composition of the Board of Directors of
the Corporation changes based on the then applicable two year "look back"
period.
Section 9. Disqualifying Termination. For purposes of this Agreement, a
"Disqualifying Termination" of the Executive's employment with the Corporation
shall mean a termination of the Executive's employment under any of the
following circumstances:
(a) termination of the Executive's employment by the Corporation
for Cause (as defined in Section 10); or
(b) termination of the Executive's employment by the Corporation
for Disability (as defined in Section 11); or
(c) termination of the Executive's employment by the Executive
without Good Reason (as defined in Section 12) to do so; or
(d) termination of the Executive's employment as a result of the
death of the Executive.
(As provided in Section 3, the Executive shall not be entitled to a Severance
Entitlement under this Agreement if the Executive's employment with the
Corporation was terminated under circumstances constituting a Disqualifying
Termination.)
Section 10. Termination by the Corporation for Cause. For purposes of
this Agreement, the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for "Cause" only if the Corporation
terminated the Executive's employment with the Corporation for any of the
following reasons:
(a) the continued failure of the Executive to substantially
perform any of the Executive's significant duties or responsibilities
in connection with the Executive's employment (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness) if such failure is not corrected or cured within 30
days after demand for substantial performance is made in writing upon
the Executive by the Corporation specifically identifying the manner in
which the Corporation believes the Executive has failed to
substantially perform one or more of the Executive's significant duties
or responsibilities (repetition of the same failure as previously
described in any such written demand after the 30-day cure period
following such written demand shall be deemed to be "continued failure"
to substantially perform by the Executive); or
(b) any act that constitutes on the part of the Executive
common law fraud or dishonesty regardless of whether such fraud or
dishonesty resulted in, or was intended to result in, a benefit to the
Executive at the expense of the Corporation; or
(c) the conviction of the Executive of, or the plea by the
Executive of nolo contendere to, a felony or a crime involving moral
turpitude; or
(d) any continuing violation by the Executive in any material
respect of any of the Corporation's policies or of any term or
provision of any employment or other agreement between the Executive
and the Corporation which, in any such case, is not corrected or abated
by the Executive within 30 days after written notice of such violation
is given by the Corporation to the Executive (repetition of the same
violation as previously described in any such written notice after the
30 day correction period following such written notice shall be deemed
to be a "continuing violation" by the Executive); or
(e) the Executive's unexcused total abandonment or neglect of
the Executive's duties and responsibilities in connection with the
Executive's employment with the Corporation (other than absences due to
illness, physical or mental incapacity, vacations, or other excused
absences) for a continuous period of ten working days.
Section 11. Termination by the Corporation for Disability. For purposes
of this Agreement, the Executive shall be considered to have suffered a
"Disability" and the Corporation shall be deemed to have terminated the
Executive's employment with the Corporation for Disability if such termination
is made after (and is identified by the Corporation as being on account of the
occurrence of) either of the following:
(a) the actual receipt by the Executive of income continuation
benefits or similar benefits pursuant to a disability insurance policy
as a result of a determination under such policy that the Executive is
disabled, or
(b) the Executive's inability by reason of physical and/or
mental incapacity to substantially perform the essential functions of
the Executive's duties and responsibilities to the Corporation on a
full-time basis for a period of 26 consecutive weeks.
Section 12. Termination by the Executive for Good Reason.
(a) For purposes of this Agreement, and subject to the time
limitations and in compliance with the requirements of subsection (b)
of this Section, the Executive shall have "Good Reason" to terminate
the Executive's employment with the Corporation upon the occurrence
during the Termination Period, without the Executive's express written
consent or agreement thereto, of any of the following:
(i) the Executive is demoted to a materially lesser
position within the Corporation (considering, in making a
determination as to whether a demotion has occurred, the
Executive's status, offices, titles, reporting requirements,
authority, duties, responsibilities and other relevant
factors) or the taking by the Corporation of any other action
that a reasonable person in the Executive's position would
conclude is inconsistent in any material and adverse respect
with the Executive's position within the Corporation;
(ii) the Executive's base salary is reduced or the
Executive is denied a fringe benefit provided to the
Corporation's management employees generally;
(iii) the Executive is required by the Corporation to
be based at any office or location outside of either Xxxxxxx
County or Xxxxxx County, Indiana, or any county contiguous to
Xxxxxx County, Indiana; or
(iv) the Corporation fails to comply with and satisfy
Section 17.
(b) Upon the occurrence during the Termination Period of any
facts or circumstances that constitute Good Reason for the Executive to
terminate his employment with the Corporation as described in
subsection (a) of this Section, the Executive shall, within sixty (60)
days after the occurrence thereof, give written notice to the
Corporation of the facts or circumstances that constitute Good Reason,
describing in such written notice the facts or circumstances in
question with reasonable particularity. The Corporation shall have a
period of thirty (30) days after receipt of such written notice from
the Executive in which to take such actions, if any, as the Corporation
shall deem necessary, appropriate or desirable, in its judgment, to
remedy, eliminate or otherwise "cure" the facts or circumstances in
question in such a manner that Good Reason no longer exists by virtue
thereof. In the event the Corporation shall fail to remedy, eliminate
or cure such facts or circumstances in such a manner that Good Reason
no longer exists by virtue thereof within such thirty (30) day period,
then after the expiration of such thirty (30) day period the Executive
may terminate his employment with the Corporation for Good Reason (if
Good Reason does, in fact, exist) by written notice of such termination
to the Corporation; provided, however, that any such termination must
be effected by the Executive on or before the earlier of (i) the date
that is sixty (60) days after the date the Corporation receives the
written notice required hereunder from the Executive, or (b) the
expiration of the Termination Period.
Section 13. No Mitigation. The Executive is not required to mitigate
the amount of the Severance Entitlement to be provided by the Corporation
pursuant to this Agreement by seeking other employment or otherwise, nor shall
the amount of the Severance Entitlement payable pursuant to this Agreement be
reduced by any compensation earned by the Executive as the result of employment
by another employer, or which might have been earned by the Executive had the
Executive sought other employment, after the date of termination of the
Executive's employment with the Corporation.
Section 14. Notices. Any notice, request, demand and other
communication to be given hereunder shall be in writing and personally delivered
or mailed in the continental United States by registered or certified mail,
postage prepaid, at the address stated below or to such changed address as the
addressee may have given by a similar notice:
To the Company: Personnel Management, Inc.
0000 Xxxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxx 00000
To the Executive: Xxxxxx X. Xxxxxxx
0000 Xxxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Section 15. Legal Expenses. In the event that either of the parties
institutes any legal action to enforce its rights under, or to recover damages
for breach of, this Agreement, the prevailing party shall be entitled to recover
from the other party any actual expenses for attorney's fees, costs, expenses
and disbursements incurred by the prevailing party.
Section 16. Successors to the Executive. This Agreement shall be
binding upon and shall inure to the benefit of the Executive, the Executive's
heirs, beneficiaries, devisees, successors and legal representatives. No right
or interest to or in any payments hereunder shall be assignable by the Executive
except assignments to the Corporation in accordance with applicable law;
provided, however, that this provision shall not preclude the Executive from
designating one or more beneficiaries to receive any amount that may be payable
after the Executive's death and shall not preclude the legal representative of
the Executive's estate from assigning any right hereunder to the person or
persons entitled thereto under the Executive's will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of intestacy
applicable to the Executive's estate. The term "beneficiaries" as used in this
Agreement shall mean a beneficiary or beneficiaries so designated to receive any
such amount, or, if no beneficiary has been so designated, the legal
representative of the Executive's estate. In the event of the Executive's death,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to the Executive's legal representative or, where appropriate, to the
Executive's beneficiary or beneficiaries.
Section 17. Successors to the Corporation. This Agreement shall be
binding upon and inure to the benefit of the Corporation and any successor of
the Corporation, including, without limitation, any successor acquiring directly
or indirectly all or substantially all of the business and/or assets of the
Corporation whether by merger, consolidation, sale or otherwise (and such
successor shall thereafter be deemed the "Corporation" for the purposes of this
Agreement). The Corporation shall require and shall cause any such successor of
the Corporation to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place.
Section 18. Headings; Pronouns. The titles to sections in this Agreement
are intended solely for convenience and no provision of this Agreement is to be
construed by reference to the title of any section. All pronouns in this
Agreement and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
may require.
Section 19. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Indiana.
Section 20. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment, modification
or waiver shall be authorized by the Board of Directors of the Corporation or
any authorized committee of the Board of Directors of the Corporation and shall
be agreed to in writing, signed by the Executive and by an officer of the
Corporation thereunto duly authorized. Except as otherwise specifically provided
in this Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a subsequent breach of such
condition or provision or a waiver of a similar or dissimilar provision or
condition at the same or at any prior or subsequent time.
Section 21. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect to the fullest extent permitted by law.
Section 22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute the same instrument.
Section 23. PMI Companies. Although the Corporation is the only one of the
PMI Companies formally executing this Agreement, the Executive understands,
acknowledges and agrees that this Agreement is made for the benefit of all of
the PMI Companies, as applicable, each of whom shall be entitled to enforce this
Agreement as their respective interests may appear.
IN WITNESS WHEREOF, the Corporation and the Executive have executed
this Agreement as of the date and year first above written.
PERSONNEL MANAGEMENT, INC.
By /s/ Xxx X. Xxxxxx
Xxx X. Xxxxxx
Chief Executive Officer
ATTEST:
/s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx
President
"EXECUTIVE"
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
