1
EXHIBIT 10.20
SEVERANCE AGREEMENT
AGREEMENT, dated as of February , 2000, between HEALTHCARE RECOVERIES,
INC. (including all of its subsidiaries, the "Company") and (the
"Employee").
WITNESSETH:
WHEREAS, the Employee is a key employee of the Company; and
WHEREAS, the Company desires to provide the Employee with severance
benefits under the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Employee agree as follows:
1. Term of Agreement
The rights of the Employee under this Agreement shall commence as of the
date hereof, and shall terminate upon the earlier of (i) the voluntary
termination of the Employee's employment with the Company or (ii) the date one
year after written notice is given by the Company to the Employee of termination
of the Employee's rights under this Agreement (the period during which this
Agreement is in effect being hereinafter referred to as the "Term").
2. Payments
2.1 If there is a Termination, as defined in Section 2.2, with regard
to the Employee, (i) the Company will pay to the Employee within 20
business days after the day on which the Termination occurs, a lump sum
equal to the Employee's current annual base salary (the "Severance Amount")
and (ii) for a period of 12 months after the date of termination, the
Company shall continue to pay, or reimburse the Employee for, the
Company-paid portion of medical premiums under the Company's group health
plan that would apply to the Employee had he not terminated, provided that
the Employee makes a timely election of such continuation coverage under
COBRA; provided, however, that the Employee shall not be entitled to
payment of the Severance Amount upon a Termination if upon that Termination
the Employee is entitled to a severance or similar payment under any other
agreement with the Company including without limitation the
Change-in-Control Agreement, dated the same date as this Agreement, between
the Employee and the Company (the "CIC Agreement"); further provided,
however, that in such event the Employee nonetheless shall continue to be
bound by the provisions of Sections 3, 4, 5, 6, 7, 8 and 9. The Company's
obligation to pay the Severance Amount, to the extent accrued prior to the
expiration of the Term, shall survive the expiration of the Term.
2.2 There will be a "Termination" with regard to the Employee if the
Company terminates the Employee's employment during the Term other than for
"Cause."
"Cause" means the occurrence of any of the following:
(i) the Employee materially breaches the provisions of this
Agreement or any other employment-related agreement between the Employee
and the Company, and the Employee fails to cure such breach within ten
days after the Employee's receipt from the Company of written notice of
such breach, which notice shall describe in reasonable detail the
Company's belief that the Employee is in breach (notwithstanding the
foregoing, no cure period shall be applicable to breaches by the
Employee of the provisions of Section 3, 4, 5, 6, 7 or 8 of this
Agreement);
(ii) the Employee commits any other act in bad faith materially
detrimental to the business or reputation of the Company;
(iii) the Employee intentionally engages in dishonest or illegal
activities or commits or is convicted of (or pleads nolo contendere to)
any crime involving fraud, deceit or moral turpitude; or
2
(iv) the Employee dies or becomes mentally or physically
incapacitated or disabled so as to be unable to perform the Employee's
duties, whether under the terms of any employment agreement between the
Company and the Employee or otherwise. Without limiting the generality
of the foregoing, the Employee's inability adequately to perform
services as described in the preceding sentence for a period of 60
consecutive days will be conclusive evidence of such mental or physical
incapacity or disability, unless such inability adequately to perform
services is pursuant to a mental or physical incapacity or disability
covered by the Family Medical Leave Act, in which case such 60-day
period shall be extended to a 120-day period.
3. Non-Disclosure of Proprietary Information
3.1 The Employee recognizes and acknowledges that the Trade Secrets
and Confidential Information of the Company and its affiliates and all
physical embodiments of the same (as they may exist from time-to-time,
collectively, the "Proprietary Information") are valuable, special and
unique assets of the Company's and its affiliates' businesses. The Employee
further acknowledges that access to such Proprietary Information is
essential to the performance of the Employee's duties under this Agreement.
Therefore, in order to obtain access to such Proprietary Information, the
Employee agrees that the Employee shall hold in confidence all Proprietary
Information and will not reproduce, use, distribute, disclose, publish or
otherwise disseminate any Proprietary Information, in whole or in part, and
will take no action causing, or fail to take any action necessary to
prevent causing, any Proprietary Information to lose its character as
Proprietary Information, nor will the Employee make use of any such
information for the Employee's own purposes or for the benefit of any
person, firm, corporation, association or other entity (except the Company)
under any circumstances.
3.2 For purposes of this Agreement, the term "Trade Secrets" means the
whole or any portion of any scientific or technical or other information,
design, process, procedure, formula, computer software product,
documentation or improvement relating to the Company's or its affiliates'
businesses which (i) derives economic value, actual or potential, from not
being generally known to other persons who can obtain economic value from
its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. The term "Confidential Information" means any and all data
and information relating to the Company's or its affiliates' "Business,"
other than Trade Secrets, (x) which has value to the Company or its
affiliates; (y) is not generally known by its competitors or the public;
and (z) is treated as confidential by the Company or its affiliates. The
term "Business" means the provision of subrogation and related recovery
services, hospital xxxx auditing, contract compliance review,
identification of certain other healthcare-related payments and cost
management consulting for healthcare payors, including health maintenance
organizations, indemnity insurers, Blue Cross and Blue Shield
organizations, third-party administrators, self-funded employee health and
welfare benefit plans, and provider hospital organizations. The provisions
of this Section 3 will apply during the Employee's employment by the
Company and for a two-year period thereafter with respect to Confidential
Information, and during the Employee's employment by the Company and at any
and all times thereafter with respect to Trade Secrets. These restrictions
will not apply to any Proprietary Information which is in the public domain
provided that the Employee was not responsible, directly or indirectly, for
such Proprietary Information entering the public domain without the
Company's consent. This Section 3, together with Sections 4, 5, 6, 7, 8 and
9 of this Agreement, shall survive termination of this Agreement.
4. Non-Competition Covenant
4.1 During the Employee's employment by the Company and for a period
of two years following any termination of the Employee's employment for
whatever reason, the Employee will not, directly or indirectly, on the
Employee's own behalf or in the service of or on behalf of any other
individual or entity, compete with the Company within the Geographical Area
(as defined). The term "compete" means to engage in, have any equity or
profit interest in, make any loan to or for the benefit of, or render any
services of any kind to, directly or indirectly, on the Employee's own
behalf or in the service of or on behalf of any other individual or entity,
either as a proprietor, employee, agent, independent contractor,
3
consultant, director, officer, partner or stockholder (other than a
stockholder of a corporation listed on a national securities exchange or
whose stock is regularly traded in the over-the-counter market, provided
that the Employee at no time owns, directly or indirectly, in excess of one
percent of the outstanding stock of any class of any such corporation) any
business which provides Business services. For purposes of this Agreement,
the term "Geographic Area" means the territory located within a
seventy-five mile radius of each facility for which the Employee has
management responsibility during the Employee's employment with the
Company.
4.2 Non-Interference. During the Employee's employment by the Company
and for a period of two years following the termination of the Employee's
employment for whatever reason, the Employee will not, directly or
indirectly, on the Employee's own behalf or in the service of or on behalf
of any other individual or entity, interfere with, disrupt, or attempt to
disrupt the past, present or prospective relationships, contractual or
otherwise, between the Company and any supplier, consultant, or client of
the Company with whom the Employee had material contact during the
Employee's employment by the Company. The term "prospective relationship"
is defined as any relationship where the Company has actively sought an
individual or entity as a prospective supplier, consultant, or client.
4.3 Non-Solicitation of Clients Covenant. The Employee agrees that
during the Employee's employment by the Company and for a period of two
years following the termination of the Employee's employment for whatever
reason, the Employee will not, directly or indirectly, on the Employee's
own behalf or in the service of or on behalf of any other individual or
entity, divert, solicit or attempt to solicit or accept business from any
individual or entity (i) who is a client of the Company at any time during
the six-month period prior to the Employee's termination of employment with
the Company ("Client"), or was actively sought by the Company as a
prospective client, and (ii) with whom the Employee had material contact
while employed by the Company to provide Business services to such Clients
or prospects. The Employee further agrees that during the Employee's
employment by the Company and for a period of two years following the
termination of the Employee's employment for whatever reason in accordance
with this Agreement, the Employee will not, directly or indirectly, as an
employee, independent contractor, agent or in any other capacity, be
employed by any Client:
a. which received Business services from the Employee, or with
which the Employee otherwise had material contact while employed by the
Company; or
b. which received Business services from any employee or officer of
the Company over which the Employee had management responsibility;
in either case to provide, directly or indirectly, Business
services.
4.4 Construction. The parties agree that any judicial authority
construing all or any portion of this Section 4 or Section 5 will be
empowered to sever any portion of the Geographical Area, client base,
prospective relationship or prospect list or any prohibited business
activity from the coverage of such Section and to apply the provisions of
such Section to the remaining portion of the Geographical Area, the client
base or the prospective relationship or prospect list, or the remaining
business activities not so severed by such judicial authority. In addition,
it is the intent of the parties that the judicial authority replace each
such severed provision with a provision as similar in terms to such severed
provision as may be possible and be legal, valid and enforceable. It is the
intent of the parties that Sections 4 and 5 be enforced to the maximum
extent permitted by law. If any provision of either such Section is
determined not to be specifically enforceable, the Company shall
nevertheless be entitled to bring an action to seek to recover monetary
damages as a result of the breach of such provision by the Employee.
5. Non-Solicitation of Employees Covenant
5.1 The Employee agrees and represents that during the Employee's
employment by the Company and for a period of two years following any
termination of the Employee's employment for whatever reason, the Employee
will not, directly or indirectly, on the Employee's own behalf or in the
service of, or on behalf of any other individual or entity, divert, solicit
or hire away, or attempt to divert, solicit or hire away, to or for any
individual or entity which is engaged in providing Business services, (i)
any person
4
employed by the Company or (ii) any person who has left the employment of
the Company within the one-year period which follows the termination of
such employee's employment with the Company, in either case, whether or not
such employee is or was a full-time employee or temporary employee of the
Company, whether or not such employee is or was employed pursuant to a
written agreement and whether or not such employee is or was employed for a
determined period or at will.
6. Existing Restrictive Covenants
6.1 The Employee represents and warrants that the Employee's
employment with the Company does not and will not breach any agreement
which the Employee has with any former employer to keep in confidence
confidential information or not to compete with any such former employer.
The Employee will not disclose to the Company or use on its behalf any
confidential information of any other party required to be kept
confidential by the Employee.
7. Return of Confidential Information
7.1 The Employee acknowledges that as a result of the Employee's
employment with the Company, the Employee may come into the possession and
control of Proprietary Information, such as proprietary documents,
drawings, specifications, manuals, notes, computer programs, or other
proprietary material. The Employee acknowledges, warrants and agrees that
the Employee will return to the Company all such items and any copies or
excerpts thereof, and any other properties, files or documents obtained as
a result of the Employee's employment with the Company, immediately upon
the termination of the Employee's employment with the Company.
8. Proprietary Rights
8.1 During the course of the Employee's employment with the Company,
the Employee may make, develop or conceive of useful processes, machines,
compositions of matter, computer software, algorithms, works of authorship
expressing any such algorithm, or any other discovery, idea, concept,
document or improvement which relates to or is useful to the Company's
Business (the "Inventions"), whether or not subject to copyright or patent
protection, and which may or may not be considered Proprietary Information.
The Employee acknowledges that all such Inventions will be "works made for
hire" under United States copyright law and will remain the sole and
exclusive property of the Company. The Employee assigns and agrees to
assign to the Company, in perpetuity, all right, title and interest the
Employee may have in and to such Inventions, including without limitations
all copyrights, and the right to apply for any form of patent, utility
model, industrial design or similar proprietary right recognized by any
state, country or jurisdiction. The Employee further agrees, at the
Company's request and expense, to do all things and sign all documents or
instruments necessary, in the opinion of the Company, to eliminate any
ambiguity as to the ownership of, and rights of the Company to, such
Inventions, including filing copyright and patent registrations and
defending and enforcing in litigation or otherwise all such rights.
8.2 The Employee will not be obligated to assign to the Company any
Invention made by the Employee while in the Company's employ which does not
relate to any business or activity in which the Company is or may
reasonably be expected to become engaged, except that the Employee is so
obligated if the same relates to or is based on Proprietary Information to
which the Employee will have had access during and by virtue of the
Employee's employment or which arises out of work assigned to the Employee
by the Company. The Employee will not be obligated to assign any Invention
which may be wholly conceived by the Employee after the Employee leaves the
employ of the Company, except that the Employee is so obligated if such
Invention involves the utilization of Proprietary Information obtained
while in the employ of the Company. The Employee is not obligated to assign
any Invention which relates to or would be useful in any business or
activities in which the Company is engaged if such Invention was conceived
and reduced to practice by the Employee prior to the Employee's employment
with the Company, and if such Invention is listed on the attached Exhibit
A.
5
9. Remedies
9.1 The Employee agrees and acknowledges that the violation of any of
the covenants or agreements contained in Section 3, 4, 5, 6, 7 and 8 of
this Agreement would cause irreparable injury to the Company, that the
remedy at law for any such violation or threatened violation thereof would
be inadequate, and that the Company will be entitled, in addition to any
other remedy, to temporary and permanent injunctive or other equitable
relief without the necessity of proving actual damages.
10. Excise Tax Limitation
10.1 Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (the "Total Payments") would be subject to the excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the payments due hereunder shall be reduced, prior to
reduction of Total Payments under any other agreement or program, such that
the Employee shall be entitled to receive Total Payments not to exceed 2.99
times the Employee's applicable "base amount" under Section 280G of the
Code.
11. General Provisions
11.1 Nothing contained herein shall limit the right of the Company or
the Employee to terminate or alter the terms of the Employee's employment
prior to a Termination.
11.2 If any provisions of this Agreement are determined to be invalid,
the remaining provisions will remain in full force and effect to the
fullest extent permitted by law.
11.3 This Agreement will be binding upon and inure to the benefit of
the Company and any successor of the Company, including any corporation
which acquires (by merger, consolidation or otherwise) all or substantially
all the assets of the Company (which successor, after it acquires all or
substantially all the assets of the Company, will be the "Company" for the
purposes of this Agreement). This Agreement will be binding upon and inure
to the benefit of (and be enforceable by) the Employee and, after the
Employee dies or is determined not to be competent, the Employee's
executors or other legal representatives.
11.4 The Employee will be entitled to the payments specified in
Section 2 without regard to whether the Employee seeks or obtains other
employment after a Termination and without reduction for any compensation
received from other employment after the Termination.
11.5 Any notices or other communications under or relating to this
Agreement must be in writing and will be deemed given on the day on which
it is delivered in person or by overnight courier service or sent by
facsimile transmission (with a confirmation from the sending facsimile
machine indicating receipt at the number to which sent), or on the third
business day after the day on which it is sent from within the United
States of America by first class mail, addressed (i) if to the Company or
its Board of Directors, at the principal offices of the Company, attention
General Counsel and (ii) if to the Employee, to the Employee's office or to
the Employee's home address as shown on the personnel records of the
Company, or at such other address as is specified by the Employee to the
Company after the date of this Agreement in the manner provided in this
Section.
11.6 This Agreement and the CIC Agreement together contain the entire
agreement of the parties with respect to the subject matter of this
Agreement and supersede all prior employment agreements and other
agreements and understandings with respect to that subject matter, whether
oral or written. This Agreement may be amended only by a writing signed by
the Company, with the approval of its Board of Directors, and the Employee.
11.7 The Company may withhold from payments it is required to make
under this Agreement and from other payments of compensation to the
Employee all sums, including taxes, which the Company determines it is
required by law to withhold because of payments made under this Agreement.
6
11.8 This Agreement will be governed by, and construed under, the laws
of the State of Delaware applicable to contracts made and to be performed
in that state.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year shown on the first page.
HEALTHCARE RECOVERIES, INC.
By:
--------------------------------------
Xxxxxxx X. XxXxxxxx
President and Chief Executive Officer
--------------------------------------
[Employee]
