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Exhibit 10(i)
EXECUTIVE SEVERANCE BENEFITS AGREEMENT,
AMONG HEALTH POWER, INC., COMPMANAGEMENT, INC.,
COMPMANAGEMENT HEALTH SYSTEMS, INC. AND
XXXXXXX X. XXXXX, DATED AS OF AUGUST 26, 1999
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EXECUTIVE SEVERANCE BENEFITS AGREEMENT
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This Executive Severance Benefits Agreement (the "Agreement") is made
as of August 26, 1999, by and among Health Power, Inc., a Delaware corporation
("Health Power"), CompManagement, Inc., an Ohio corporation ("CMI"),
CompManagement Health Systems, Inc., an Ohio Corporation ("CHS") (CMI and CHS
are collectively referred to as "CompManagement") (Health Power, CMI and CHS are
collectively referred to as the "Company"), and Xxxxxxx X. Xxxxx (the
"Executive").
BACKGROUND INFORMATION
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A. The Executive has served the Company in the past and is expected to
continue to serve the Company as a key executive officer of CompManagement, and
to make a significant contribution to the profitability, growth and financial
strength of the Company.
B. The Company desires to provide income security to the Executive upon
the terms and subject to the conditions set forth in this Agreement, in the
event the Executive's employment with the Company is terminated prior to or
following a Change in Control, either voluntarily by the Executive for Good
Reason or involuntarily by the Company without Cause.
AGREEMENT
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The parties acknowledge the accuracy of the foregoing Background
Information and in consideration of the mutual promises and convenants contained
herein, hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(a) Benefit Period - a period of twenty-four (24) months from the
Executive's Date of Termination.
(b) Cause - means (i) gross and willful misconduct by, or gross
dishonesty of, the Executive which is found to be injurious to any Company; (ii)
other willful malfeasance, gross negligence or failure to act that has or will
have a material adverse effect on the Company; (iii) a material breach by the
Executive of his noncompetition and confidentiality obligations set forth in
Section 10 of the Employment Agreement between the Executive and CMI dated as of
July 21, 1995 (the "Noncompete Agreement"), as such Noncompete Agreement may be
hereafter modified, amended, or replaced; or (iv) the conviction of the
Executive of a felony involving moral turpitude, provided that such conviction
would at the time have a material adverse effect on either Company.
(c) Change in Control - means the occurrence of any of the following
events after the date of this agreement: (i) the purchase or other acquisition
by any person, entity or group of
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persons (within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended ("the Exchange Act") or any comparable successor
provisions), directly or indirectly, which results in the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of such
person, entity or group of persons equaling twenty-five percent (25%) or more of
the combined voting power of the then outstanding voting securities of either
Health Power or CMI entitled to vote generally in the election of directors
("Voting Securities"), but excluding an acquisition (A) by the Company, (B) by
any employee benefit plan or related trust sponsored or maintained by the
Company, (C) by the Executive or (D) by a group including the Executive, but
only if the Executive and other executives of the Company who have entered into
similar Executive Severance Benefits Agreements control such group; or (ii) the
approval by the shareholders of Health Power of a reorganization, merger or
consolidation, with respect to which, in each case, persons who were
shareholders of Health Power immediately prior to such reorganization, merger or
consolidation do not (solely because of their Voting Securities owned
immediately prior to such reorganization, merger or consolidation) own
immediately thereafter more than 50% of the combined voting power entitled to
vote in the election of directors of the then outstanding securities or the
reorganized, merged or consolidated company; or (iii) a change in the
composition of the majority of the board of directors of Health Power within a
two-year period, which change shall not have been approved by a majority of the
persons then serving as directors immediately prior to such two-year period; or
(iv) a liquidation or dissolution of CompManagement; or (v) the sale of all or
substantially all of the assets of CompManagement.
(d) Compensation - means the monthly average of the base salary and any
cash bonus or commissions received by the Executive during the 36-month period
prior to the Executive's Date of Termination or such shorter period if the
Executive was not employed for at least 36 months.
(e) Date of Termination - means the date which is 30 days following
notice of (i) the Executive's Termination of employment for Good Reason or (ii)
Termination of the Executive's employment by the Company other than for Cause,
death or disability.
(f) Disability - means that, because of physical or mental illness,
injury or accident, it is probable, in the opinion of an independent physician
selected by the Company and reasonably acceptable to the Executive or his legal
representative, the Executive will not be able to perform his usual duties for a
period of 180 days or longer.
(g) Good Reason - means that, without the Executive's written consent,
(i) the Executive is assigned to duties materially inconsistent in any respect
with his position, authority, duties or responsibilities, or the Company takes
any other action that results in a material diminution in such position,
authority, duties or responsibilities; (ii) the Executive's base salary is
reduced for any reason other than in connection with the Termination of his
employment; (iii) the formula or other method of determining bonuses or
commissions payable to the Executive is materially changed in a manner which
causes a material reduction in the overall bonuses and commissions payable to
the Executive; (iv) the fringe benefits provided to the Executive are materially
reduced from what was provided prior to the Change in Control, unless the
Company and the Executive agree to separate compensation for any such material
reduction; (v) the relocation of the Company's principal executive offices to a
location outside the Columbus metropolitan area or the relocation of the
Executive by the Company, without his prior written
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consent, to any location other than the location at which the Executive
performed his duties prior to a Change in Control, except for required travel on
the Company's business to an extent substantially consistent with business
travel obligations at the time of a Change in Control; (vi) there is a material
change in the kind of business engaged in by CompManagement; (vii) there is a
breach of this Agreement; or (viii) the Company fails to obtain an agreement
from any successor or assign of the Company to assume and agree to perform the
obligations of the Company under this Agreement.
(h) Termination - means the Company, or any successor or assign of the
Company, terminates the employment of the Executive for any reason other than
Cause, death or disability, or the Executive voluntarily terminates employment
with the Company or any successor or assign of the Company for Good Reason,
provided the Executive shall have no more than 90 days following the occurrence
of the event or events constituting Good Reason (as defined in subsection (g)
above) to elect to treat such event as a Termination of employment (the "Good
Reason Election"). Upon giving notice of the Good Reason Election in accordance
with Section 10 of this Agreement, the Executive shall have 30 days to actually
terminate Executive's employment with the Company. Notwithstanding the
foregoing, the Executive may voluntarily terminate employment with the Company
for any reason during the first six months following a Change in Control.
Section 2. Eligibility for Benefits
The Company agrees to pay to the Executive the benefits specified in
Section 3 if a Termination of the Executive's employment occurs within two years
after the occurrence of a Change in Control. In addition, the Company agrees to
pay to the Executive the benefits specified in Section 3 if a Termination of the
Executive's employment occurs within six months prior to the occurrence of a
Change in Control. In such case, the 90-day Good Reason Election must be made no
more than 90 days following the Change in Control.
Section 3. Benefits Upon Termination of Employment
If the Executive is entitled to benefits under Section 2 of this
Agreement, the Company shall provide the Executive with the following severance
and other benefits:
(a) Severance Benefit - The Company shall pay Executive a severance
benefit equal to continuation of the Executive's Compensation for the Benefit
Period, commencing on the Date of Termination. This severance benefit shall be
paid to Executive in accordance with the Company's standard payroll practices
for active employees beginning on the first pay date on or after the Date of
Termination and continuing to the end of the Benefit Period. During any period
of time in which Executive is receiving the severance benefit payment, Executive
shall not be required to perform any services or be physically present at any
facility of the Company or its affiliates.
(b) Other Benefits - During the Benefit Period, the Company will
continue to provide Executive with, and Executive shall continue to be entitled
to, all fringe benefits (other than continued accrual of retirement benefits),
including but not limited to group health, disability, life and other insurance
plans made available to employees of the Company, which were
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provided to Executive as of the Date of Termination; provided, however, that the
Company's obligation to provide any specific fringe benefit, other than life
insurance, to the Executive shall terminate as of the date such benefit is
provided to the Executive by another employer. If the Company changes the terms
of or providers for any such fringe benefits during the Benefit Period, the
benefits provided to the Executive will likewise be changed to those provided to
other employees and executives of the Company. The treatment of the severance
benefit payments to the Executive under any tax-qualified retirement plans of
the Company shall be strictly in accordance with the terms of such plans.
Notwithstanding the foregoing, should the Termination of the Executive's
employment result in a forfeiture of any nonvested interest under such
tax-qualified retirement plan maintained by the Company, the Executive shall be
entitled to an additional single lump sum severance payment, payable within 30
days of the Date of Termination, equal to the present value of the nonvested
interest forfeited under such plan.
The Company shall pay the Executive all base salary and vacation time
accruing through the Date of Termination, which amounts shall be payable within
the time periods specified by the Company's policies and procedures or as
required by law. The Company shall also pay the Executive any bonus (or a pro
rata share of any bonus dependent on annual performance criteria) which is
earned but unpaid as of the Date of Termination, which amount shall be payable
within 30 days of such date of Termination.
All outstanding stock options issued to the Executive shall become
fully vested upon a Change in Control and thereafter exercisable in accordance
with the stock option plans and agreements governing such options.
(c) Outplacement - The Company shall reimburse expenses incurred by the
Executive during the Benefit Period for outplacement services or job search
expenses, up to a maximum amount of $5,000. Reimbursable expenses under this
provision shall include the use of an executive outplacement service, including
but not limited to secretarial service and use of an office, phone, office
supplies and office services comparable to the level of such services available
to the Executive prior to the Date of Termination, and documented job search
expenses such as travel and relocation expenses, which are not reimbursed from
any other source.
(d) General Requirements and Limitations - The severance benefits under
this Agreement shall be in lieu of any other payment due to Executive under any
other contractual rights between Executive and the Company arising from or
incident to any employment agreement or other severance benefit programs of the
Company. Notwithstanding anything to the contrary, no severance benefit shall be
payable to Executive from and after the date of the Executive's material breach
of his obligations contained in the Noncompete Agreement, any such material
breach resulting in an immediate forfeiture of all future benefits otherwise
payable hereunder. Furthermore, notwithstanding any other provision hereunder,
if the Executive will incur any excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), due to any payment under this or
other agreements with the Company, then the amount payable as severance benefits
hereunder shall be reduced to equal one dollar less than three times the
Executive's "base amount" under Section 280G of the Code, reduced by the present
value of any other payments that constitute "payments" thereunder.
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Section 4. Term
This Agreement shall continue for a period of 24 months from the
effective date of a Change in Control of the Company. Executive shall have no
vested rights in the severance benefits provide under this Agreement until the
Company enters into a definitive agreement, binding on the respective parties,
intended to effect a Change in Control.
Section 5. No Guarantee of Employment
Nothing contained in this Agreement shall be construed as a contract of
employment or be deemed to give Executive the right to be retained in the employ
of the Company or any equity or other interest in the assets, business or
affairs of the Company. Executive shall have no security interest in assets of
the Company used to pay benefits hereunder.
Section 6. No Duty to Mitigate
The amounts payable to the Executive under this Agreement shall not be
treated as damages but as severance compensation to which the executive is
entitled by reason of Termination of employment in the circumstances
contemplated by this Agreement. The Company shall not be entitled to set off
against the amounts payable to the Executive any amounts earned by the Executive
from other employment after Termination of employment with the Company or any
amounts which might have been earned by the Executive from other employment had
such other employment been sought or accepted.
Section 7. Arbitration
Any controversy or claim relating to benefits under this Agreement or
the breach thereof shall be settled by arbitration in Columbus, Ohio, or such
other mutually agreed upon site, in accordance with the commercial rules of the
American Arbitration Association. The judgment upon the award rendered by the
board of arbitrators may be entered in any court having jurisdiction thereof and
the parties hereby consent to the jurisdiction of the Court of Common Pleas of
Franklin County, Ohio. Except as set forth in Section 8 of this Agreement, the
fees and expenses of the arbitrators incurred in connection with any arbitration
shall be paid by the Company.
A party seeking arbitration of a controversy or claim shall provide
notice of such event to all other parties (the "Arbitration Notice"). No later
than 15 days after the Arbitration Notice is given, the Company and the
Executive shall each select one person from an approved-panel of arbitrators to
serve as their designee on a three-member board of arbitrators. Such designees
shall have substantial experience in business matters. No later than 15 days
after their designation, the two members shall mutually select a third member
from the same panel of arbitrators, which person shall also have substantial
experience in business matters, and such person shall act as the chairperson of
the board of arbitrators. The board of arbitrators shall act by majority rule in
accordance with the rules and procedures set forth in Ohio Revised Code Chapter
2711, and to the extent not inconsistent with such chapter the rules and
procedures of the American Arbitration Association then in effect. The
arbitration hearing shall be commenced no later 15 days after the selection of
the third member of the board of arbitrators. To the extent
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possible, the arbitration hearing shall be completed within 30 days after its
commencement. Within 30 days after the completion of the arbitration hearing,
the board of arbitrators shall render a ruling on all matters submitted before
them.
Section 8. Enforcement of Agreement
The Company is aware that upon the occurrence of a Change in Control,
the Board of Directors or a shareholder of the Company may then cause or attempt
to cause the Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to institute, or may
institute litigation seeking to have this Agreement declared unenforceable, or
may take or attempt to take other action to deny the Executive the benefits
intended under this Agreement. In these circumstances, the purpose of this
Agreement could be frustrated. It is the intent of the Company that the
Executive not be required to incur the expenses associated with the enforcement
of any rights under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of any rights hereunder, because the cost and
expense of such legal action or settlement would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if
following a Change in Control it should appear to the Executive that the Company
has failed to comply with any of its obligations under this Agreement or in the
event that the Company or any other person takes any action to declare this
Agreement void or enforceable, or institutes any litigation or other legal
action designed to deny, diminish or to recover from the Executive the benefits
entitled to be provided to the Executive hereunder, and that the Executive has
complied with all obligations under this Agreement, the Company irrevocably
authorizes the Executive from time to time to retain counsel of the Executive's
choice, at the expense of the Company as provided in this Section, to represent
the Executive in connection with the initiation or defense of any litigation or
other legal action, whether such action is by or against the Company or any
Director, officer, shareholder, or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel.
The reasonable fees and expenses of counsel selected from time to time by the
Executive as hereinabove provided shall be paid or reimbursed to the Executive
by the Company on a regular, periodic basis upon presentation by the Executive
of a statement or statements prepared by such counsel in accordance with its
customary practices, up to a maximum aggregate amount equal to 25% of the total
severance benefits payable to the Executive under Section 3(a) of this
Agreement. Any legal expenses incurred by the Company by reason of any dispute
between the parties as to enforceability of or the terms contained in this
Agreement, notwithstanding the outcome of any such dispute, shall be the sole
responsibility of the Company, and the Company shall not take any action to seek
reimbursement from the Executive for such expenses.
Notwithstanding the foregoing, if upon submission of a dispute to
arbitration in accordance with Section 7 of this Agreement, the board of
arbitrators finds that the Executive was terminated for Cause, as defined in
Section 1(b), or if the board of arbitrators find that the Executive did not
have Good Reason, as defined in Section 1(g), then (a) the Company shall have no
obligation to pay or reimburse the fees and expenses of the Executive's legal
counsel,
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and (b) the Executive shall be responsible to pay one-half of the fees and
expenses of the arbitrators incurred in connection with such arbitration.
Section 9. Non-secured Promise
The rights of the Executive under this Agreement will be solely those
of an unsecured creditor of the Company. The benefits under this Agreement will
be paid by the Company from its general assets. Any insurance policy or any
other asset acquired or held by the Company in connection with the liabilities
assumed by it hereunder will not be deemed to be held under any trust for the
benefit of the Executive, or to be security for the performance of the
obligations of the Company, but will be, and remain, a general, unpledged,
unrestricted asset of the Company.
This Agreement is intended to constitute an unfunded or insured welfare
plan for a select group of management or highly compensated employees, within
the meaning of Department of Labor Reg. ss.2520.104-24, exempting such plans and
arrangement from the reporting and disclosure provisions of Part 1 of Title 1 of
the Employee Retirement Income Security Act of 1974, as amended.
Section 10. Notice of Termination
Any purported Termination of employment by the Company or by the
Executive shall be communicated by written notice of Termination to the other
party in accordance with the notice provisions set forth in Section 10 below.
For purposes of this Agreement, a notice of Termination shall be a notice which
indicates the specific Termination provision in this Agreement relied upon and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for Termination of employment under the provisions so indicated.
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Section 11. Notices
Any notices to be given pursuant to this Agreement shall be in writing
and shall be deemed duly given three days after deposit in the mail, certified
mail, return receipt requested, to the party to receive such notice at the
address set forth below.
If to the Company:
CompManagement, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxx, Xxxx 00000
Attn: Chief Executive Officer
If to the Executive:
Xxxxxxx X. Xxxxx
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Either party may change its name or address for purposes of this section by
providing the other party written notice of the new name or address in the
manner set forth above.
Section 12. Other Severance Benefit Arrangements
If the Executive receives benefits under Section 3 of this Agreement,
then such benefits shall be the exclusive severance benefits receivable by the
Executive from the Company, and the benefits received under Section 3 of this
Agreement shall supersede and replace any and all other severance benefits of
any kind that the Executive may be entitled to receive from the Company under
any other severance benefit arrangement, including any employment agreement.
This Agreement shall not supersede or replace the Executive's severance benefits
of any kind that the Executive may be entitled to receive from the Company under
any other severance benefit arrangement, including any employment agreements now
in existence or subsequently entered into, if the Executive is not entitled to
receive the severance benefits accorded to the Executive in Sections 2 and 3 set
forth herein.
Section 13. Miscellaneous
This Agreement constitutes the entire understanding between the parties
with respect to the subject matter of this Agreement. This Agreement supersedes
all other prior and contemporaneous understandings or agreements between the
parties with respect to the subject matter of this Agreement. This Agreement may
be amended only by a written instrument executed by each party. This Agreement
shall be binding upon, and inure to the benefit of, the parties and their
respective successors and assigns, but the Executive may not assign or transfer
any right hereunder. The Company shall assign this Agreement to any corporation
or other business entity succeeding to substantially all of the business and
assets of either Health Power or CompManagement by merger, consolidation, sale
of assets, or otherwise, and shall obtain the assumption of this Agreement by
such successor. Should any provision of this Agreement be
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held unenforceable or invalid for any reason, the remaining provisions of this
Agreement shall continue in full force and effect. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Ohio.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but together shall constitute one in the same document.
XXXXXXX X. XXXXX HEALTH POWER, INC.
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Master, D.O.
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Date: 10/1/99 Its: Chairman
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Date: 11/5/99
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COMPMANAGEMENT HEALTH COMPMANAGEMENT, INC.
SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
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Its: CEO Its: CEO
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Date: 9/29/99 Date: 9/29/99
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