Exhibit 10.2
FORM TIER I
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this
“Agreement”) is made and entered into as
of [INSERT DATE] (the “Effective Date”), by
and between Health Net, Inc., a Delaware corporation (the
“Company”), with its principal place of business
located at 21650 Oxnard Street, Woodland Hills, California 91367,
and [NAME OF EXECUTIVE] (“Executive”).
RECITALS
WHEREAS, the Company desires to
employ Executive and Executive desires to render services to the
Company as an employee; and
WHEREAS, the Company and Executive
are entering into this Agreement to establish the terms and
conditions of the employment relationship.
NOW, THEREFORE, in consideration of
the following covenants, conditions and promises contained herein,
and other good and valuable consideration, the Company and
Executive hereby agree as follows:
1. Duties and
Salary.
A. Duties .
Executive’s employment with the Company shall commence on
[STARTING DATE] and Executive’s title will be
[TITLE] , but may be changed at the discretion of the
Company to a title that reflects a similarly situated senior
executive position. Executive shall report directly to Jay Gellert,
President and Chief Executive Officer of the Company, but
Executive’s reporting relationship may be changed from time
to time at the discretion of the Company. Executive’s duties
and responsibilities are to provide [BRIEF JOB DESCRIPTION]
, but the Company reserves the right to assign Executive other
duties as needed and to change Executive’s duties from time
to time on reasonable notice, based on Executive’s skills and
the needs of the Company.
B. Salary . Executive
will be paid a base salary at the annual rate of [$
] , which salary will be
paid on a pro-rated bi-weekly basis, less applicable withholdings
(“Base Salary”), covering all hours worked. Generally,
Executive’s Base Salary will be reviewed annually, but the
Company reserves the right to change Executive’s compensation
from time-to-time. Pursuant to the charter of the Compensation
Committee of the Company’s Board of Directors (the
“Committee”), any adjustment to Executive’s
compensation must be made with the approval of the Committee and,
in the event that Executive constitutes one of the top two
(2) highest paid executive officers of the Company, with the
ratification of the Company’s Board of Directors.
C. Disclosure of Personal
Compensation Information . As an “executive
officer” of the Company (as such term is defined in the rules
and regulations of the Securities and Exchange Commission
(“SEC”)), information regarding Executive’s
employment arrangements with the Company, including, among other
things, the terms of this Agreement and any stock option agreement,
restricted stock agreement, restricted stock unit agreement,
performance share agreement and/or severance agreement Executive
enters into with the Company from time to time (collectively,
“Personal Compensation Information”), may be disclosed
in filings with the SEC, the New York Stock Exchange
(“NYSE”) and/or other regulatory organizations upon the
occurrence of certain triggering events. Such triggering events
include, but are not limited to, the execution of this Agreement
and any amendments thereto, changes in Executive’s Base
Salary, any annual incentive payment (whether in the form of cash
or equity) awarded to Executive (in the past or after the date
hereof), and the establishment of performance goals under the
Company’s incentive plans. Executive’s execution of
this Agreement will serve as Executive’s acknowledgement that
Executive’s Personal Compensation Information may be publicly
disclosed from time to time in filings with the SEC, NYSE or
otherwise as required by applicable law.
2. Adjustments and Changes
in Employment Status . Executive understands that the Company
reserves the right to make personnel decisions regarding
Executive’s employment, including, but not limited to,
decisions regarding any promotion, salary adjustment, transfer or
disciplinary action, up to and including Termination (as defined
below), consistent with the needs of the business of the
Company.
For purposes of this Agreement, the
capitalized terms “Termination” and
“Terminate,” shall mean Executive’s Separation
from Service (as defined below) from the Company. A “
Separation from Service ” with respect to Executive
shall mean a “separation from service,” as defined in
Treasury Regulation Section 1.409A-1(h).
3. Protection of Proprietary
and Confidential Information . Executive agrees that
Executive’s employment creates a relationship of confidence
and trust with the Company with respect to Proprietary and
Confidential Information (as defined below) of the Company learned
by Executive during Executive’s employment.
A. Executive agrees not to
directly or indirectly use or disclose any of the Proprietary and
Confidential Information of the Company or any of its affiliates at
any time except in connection with the services Executive provides
to such entities. “ Proprietary and Confidential
Information ” shall mean trade secrets, confidential
knowledge, data or any other proprietary or confidential
information of the Company or any of its affiliates, or of any
customers, members, employees or directors of any of such entities,
but shall not include any information that (i) was publicly
known and made generally available in the public domain prior to
the time of disclosure to Executive by the Company or
(ii) becomes publicly known and made generally available after
disclosure to Executive by the Company other than as a result of a
disclosure by Executive in violation of this Agreement. By way of
illustration but not limitation, “Proprietary and
Confidential Information” includes: (i) trade secrets,
documents, memoranda, reports, files, correspondence, lists and
other written and graphic records affecting or relating to any such
entity’s business; (ii) confidential marketing
information including without limitation marketing strategies,
customer and client names and requirements, services, prices,
margins and costs; (iii) confidential financial information;
(iv) personnel information (including without limitation
employee compensation); and (v) other confidential business
information.
B. Executive further agrees
that at all times during Executive’s employment and
thereafter, Executive will keep in confidence and trust all
Proprietary and Confidential Information, and that Executive will
not use or disclose any Proprietary and Confidential Information or
anything related to such information without the written consent of
the Company, except as may be necessary in the ordinary course of
performing Executive’s duties to the Company.
C. All Company property,
including, but not limited to, Proprietary and Confidential
Information, documents, data, records, apparatus, equipment and
other physical property, whether or not pertaining to Proprietary
and Confidential Information, provided to Executive by the Company
or any of its affiliates or produced by Executive or others in
connection with Executive’s providing services to the Company
or any of its affiliates shall be and remain the sole property of
the Company or its affiliates (as the case may be) and shall be
returned promptly to such appropriate entity as and when requested
by such entity. Executive shall return and deliver all such
property upon termination of Executive’s employment, and
Executive may not take any such property or any reproduction of
such property upon such termination.
D. Executive recognizes that
the Company and its affiliates have received and in the future will
receive information from third parties which is private,
proprietary or confidential information subject to a duty on such
entity’s part to maintain the confidentiality of such
information and to use it only for certain limited purposes.
Executive agrees that during Executive’s employment, and
thereafter, Executive owes such entities and such third parties a
duty to hold all such private, proprietary or confidential
information received from third parties in the strictest confidence
and not to disclose it, except as necessary in carrying out
Executive’s work for such entities consistent with such
entities’ agreements with such third parties, and not to use
it for the benefit of anyone other than for such entities or such
third parties consistent with such entities’ agreements with
such third parties.
E. Executive’s
obligations under this Section 3 shall continue after the
Termination of Executive’s employment and any breach of this
Section 3 shall be a material breach of this Agreement.
4. Drug Screening;
Background Check; Physical Exam.
A. Drug Screening . The
Company reserves the right to terminate Executive’s
employment in the event Executive does not pass the Company’s
drug screening test.
B. Background Check .
The Company reserves the right to terminate Executive’s
employment in the event the background check conducted by the
Company on Executive is not satisfactory to the Company in the
Company’s sole discretion.
C. Physical Exam .
Executive shall be required, on an annual basis, to undergo a
physical examination and to send evidence that Executive has
undergone such exam (but in no case the results of such exam) to
the Senior Vice President of Organizational Effectiveness. The
Company shall reimburse Executive for any out-of-pocket expenses
relating to the physical examination that are not otherwise covered
by Executive’s health insurance plan.
5. Immigration
Documentation . Executive’s employment is contingent on
Executive’s ability to prove Executive’s identity and
authorization to work in the United States for the Company.
Executive must comply with the Immigration and Naturalization
Service’s employment verification requirements.
6. Representations and
Warranties of Executive .
A. No Violation; No
Conflicts . Executive represents and warrants to the Company
that the entering into of this Agreement and Executive’s
performance of Executive’s duties hereunder, will not violate
any agreements with, or trade secrets of, any other person or
entity. Executive further represents and warrants that Executive
does not have any relationship or commitment to any other person or
entity that might be in conflict with Executive’s obligations
to the Company under this Agreement, including but not limited to
outside employment, sales broker relationships, investments or
business activities. Executive understands and agrees that while
employed by the Company Executive is expected to refrain from
engaging in any outside activities that might be in conflict with
the business interests of the Company. In addition, Executive
represents and warrants to the Company that Executive has not
shared with or disclosed to, and will not share with or disclose
to, the Company any proprietary or confidential information of
Executive’s previous employers or any other third party.
B. Legal Proceedings .
Executive represents and warrants to the Company that Executive has
not been arrested, indicted, convicted or otherwise involved in any
criminal or civil action or legal matter that could affect
Executive’s ability to perform Executive’s duties
hereunder or that may have a negative impact on the Company, its
reputation or its operations. Executive agrees, to the extent
permitted by applicable law, to notify the Company’s Senior
Vice President of Organizational Effectiveness immediately in the
event that Executive becomes party to any criminal or civil action
or other legal matter in the future that could have an affect on
the foregoing representation.
7. Executive Benefits
.
A. Employee Benefit
Programs . Executive shall be eligible to participate in the
Company’s various employee benefit programs and plans in
place from time to time as long as Executive remains employed by
the Company and Executive meets the applicable participation
requirements. These benefit programs and plans include paid time
off (“PTO”), holidays, group medical, dental, vision,
term life, and short and long term disability insurance and
participation in the Company’s 401(k) plan, tuition
reimbursement plan and deferred compensation plan. The Company or
its subsidiaries or affiliates may modify, terminate or amend any
benefit or plan in its discretion, retroactively or prospectively,
subject only to applicable law.
B. Required Insurance .
Executive will be covered by workers’ compensation insurance
and state disability insurance, as required by state law.
C. Financial Counseling
Allowance . Executive will be entitled to be reimbursed up to
the amount of $5,000 per year for documented costs incurred for
personal financial counseling services provided to Executive,
including tax preparation, as long as Executive remains employed by
the Company.
D. Incentive Bonus .
Executive will be eligible to participate in the Health Net, Inc.
Executive Incentive Plan (“EIP”) in accordance with the
terms of the EIP, which provides Executive with a target
opportunity to earn each plan year up to [
%] of Executive’s
Base Salary as additional compensation according to the terms of
the EIP. The bonus payment will range from 0% to 200% of target
depending upon the actual results achieved, and specific,
individually tailored measures will be established by the Company
that must be achieved by Executive in order for Executive to be
eligible to receive bonus payments for a given plan year. It is
understood that the Committee and the Company will award bonus
amounts, if any, as it deems appropriate consistent with the
EIP.
E. [Relocation
Benefits . Executive’s relocation will be covered under
the Company’s Relocation Policy currently in effect. All
relocation expenses not deductible under IRS regulations, except
the miscellaneous spending allowance, will be “grossed
up” for income tax purposes at the supplemental federal tax
rate and applicable state tax liability.] [DELETE OR MODIFY AS
APPLICABLE]
F. Expenses . Subject
to and in accordance with the Company’s written policies for
business and travel expenses, Executive will receive reimbursement
for all business travel and other out-of-pocket expenses reasonably
incurred by Executive in the performance of Executive’s
duties pursuant to this Agreement.
8. Equity Grants .
A. Initial Equity Grant
. As soon as practicable on or following Executive’s first
date of employment and upon approval by the Board of Directors (or
appropriate committee thereof), Executive will be granted a
non-qualified stock option (the “Stock Option”) to
purchase [INSERT NUMBER] shares of Common Stock of the
Company (the “Common Stock”) which will vest and become
exercisable at the rate of [
] . All Stock Options
granted to Executive will be granted under one of the
Company’s Long-Term Incentive Plans and will be subject to
the terms and conditions set forth in such plan and the agreement
executed in connection with such grant.
[In addition, as of
Executive’s first date of employment, Executive will be
granted [INSERT NUMBER] restricted shares of Common Stock of the
Company (the “Restricted Shares”) which will vest and
become non-forfeitable at the rate of [
]. The Restricted Shares
granted to Executive will be granted under one of the
Company’s Long-Term Incentive Plans and will be subject to
the terms and conditions set forth in such plan and the agreement
executed in connection with such grant.] [DELETE OR MODIFY AS
APPLICABLE]
[In addition, as of
Executive’s first date of employment, Executive will be
granted [INSERT NUMBER] restricted stock units of the
Company’s Common Stock (the “RSUs”) which will
vest and become non-forfeitable at the rate of [
]. The RSUs granted to
Executive will be granted under one of the Company’s
Long-Term Incentive Plans in accordance with and subject to the
terms and conditions set forth in such plan and the agreement
executed in connection with such grant.] [DELETE OR MODIFY AS
APPLICABLE]
[In addition, as of
Executive’s first date of employment, Executive will be
granted [INSERT NUMBER] performance shares (the “Performance
Shares”) which will vest and become non-forfeitable in
accordance with the terms of the performance share agreement
executed in connection with such grant. The Performance Shares
granted to Executive will be granted under one of the
Company’s Long-Term Incentive Plans in accordance with and
subject to the terms and conditions set forth in such plan and the
agreement executed in connection with such grant.] [DELETE OR
MODIFY AS APPLICABLE]
B. Future Equity Grants
. Any future equity grants made to Executive will be granted under
one of the Company’s Long-Term Incentive Plans, and will be
subject to the terms of such plan and of the agreement executed in
connection with such grant. Any future equity grants to Executive
will be made at the discretion of the Committee.
C. Company Stock Ownership
Requirement . In accordance with the Executive Officer Stock
Ownership Policy adopted by the Board of Directors of the Company
(the “Executive Stock Ownership Policy”), Executive is
required to own shares of Common Stock of the Company having a
value of [ ] times
[( x)]
Executive’s Base Salary in effect from time to time pursuant
to this Agreement (the “Stock Ownership Requirement”).
The number of shares of Common Stock Executive is required to own
will be calculated based on the average NYSE closing price per
share of the Company’s Common Stock (as adjusted for stock
splits and similar changes to the Common Stock) for the most
recently completed fiscal year of the Company.
Using Executive’s current
salary of [$ ] and a
stock price of [$ ] ,
which is the average closing price per share of the Company’s
Common Stock as of December 31, 200 [_] ,
Executive’s current stock ownership requirement is [
] (“Target
Amount”). The Target Amount is subject to change from time to
time based on (1) changes in the average closing sales price
of the Company’s Common Stock on an annual basis and
(2) any changes in Executive’s Base Salary made pursuant
to and in accordance with Section 1B of this Agreement. Any
shares of Company Common Stock that Executive owns, and any
restricted stock units, shares of restricted stock or performance
shares of the Company that Executive owns and have vested count
toward the Target Amount. Stock options, unvested restricted stock
units, unvested shares of restricted stock, unvested performance
shares and shares of Common Stock gifted to others do not count
toward the Target Amount. Under the Executive Stock Ownership
Policy, Executive will have until four years from the Effective
Date to comply with the Stock Ownership Requirement.
The Committee expects that Executive
will make reasonable progress toward Executive’s Stock
Ownership Requirement. Executive will be notified on an annual
basis of any changes in Executive’s Target Amount.
9. Term of Employment .
Executive’s employment with the Company is at the mutual
consent of Executive and the Company. Nothing in this Agreement is
intended to guarantee Executive’s continuing employment with
the Company or employment for any specific length of time.
Accordingly, either Executive or the Company may terminate the
employment relationship at any time, with or without advance notice
and with or without “Cause” (as defined below). Upon
Termination of Executive’s employment for any reason, in
addition to any other payments that may be payable to Executive
hereunder, Executive (or Executive’s beneficiaries or estate)
shall be paid (in each case to the extent not theretofore paid)
within thirty (30) days following Executive’s date of
Termination (or such shorter period that may be required by
applicable law): (a) Executive’s annual Base Salary
through such Termination date, (b) accrued but unused PTO,
(c) reimbursable expenses incurred by Executive prior to the
Termination date and (d) amounts under any other compensatory
plan, arrangement or program payment to which Executive may then be
entitled. This Agreement constitutes a final and fully binding
integrated agreement with respect to the at-will nature of the
employment relationship.
10. Termination of
Employment/Severance Pay .
A. Termination Without
Cause Not Following Change in Control . If Executive’s
employment is Terminated by the Company without “Cause”
(as defined in Section 10(D) below) at any time that is not
within two (2) years after a “Change in Control”
(as defined below) of Health Net, Inc., Executive will be entitled
to receive, within thirty (30) days following the Termination
of Executive’s employment, provided that Executive
signs and delivers prior to the expiration of such (30) day
period, and does not revoke or attempt to revoke, a Separation
Agreement, Waiver and Release of Claims substantially in the form
attached hereto as Exhibit A , which is incorporated
into this Agreement by reference, (i) a lump sum cash payment
equal to [INSERT NUMBER] months of Executive’s Base
Salary in effect immediately prior to the date of Executive’s
Termination, and (ii) the continuation of Executive’s
medical, dental and vision benefits (as maintained for
Executive’s benefit immediately prior to the date of
Executive’s Termination) (the “Benefits”) for
Executive and Executive’s dependents for a period of
[INSERT NUMBER] months following the effective date of
Executive’s Termination, and (iii) the continuation,
under COBRA, of Executive’s Benefits for Executive and
Executive’s dependents for a period of [INSERT NUMBER]
months, with premium payments paid by the Company on
Executive’s behalf, provided , that Executive properly
elects to continue those benefits under COBRA.
For purposes of this Agreement,
“ Change in Control ” is defined as any of the
following which occurs subsequent to the effective date of
Executive’s employment:
(i) Any
person (as such term is defined under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), corporation or other entity (other than Health Net,
Inc. or any of its subsidiaries, or any employee benefit plan
sponsored by Health Net, Inc. or any of its subsidiaries) is or
becomes the beneficial owner (as such term is defined in
Rule 13d-3 under the Exchange Act) of securities of Health
Net, Inc. representing twenty percent (20%) or more of the combined
voting power of the outstanding securities of Health Net, Inc.
which ordinarily (and apart from rights accruing under special
circumstances) have the right to vote in the election of directors
(calculated as provided in paragraph (d) of such
Rule 13d-3 in the case of rights to acquire Health Net,
Inc.’s securities) (the “Securities”);
(ii) As a
result of a tender offer, merger, sale of assets or other major
transaction, the persons who are directors of Health Net, Inc.
immediately prior to such transaction cease to constitute a
majority of the Board of Directors of Health Net, Inc. (or any
successor corporations) immediately after such transaction;
(iii) Health
Net, Inc. is merged or consolidated with any other person, firm,
corporation or other entity and, as a result, the shareholders of
Health Net, Inc., as determined immediately before such
transaction, own less than eighty percent (80%) of the outstanding
Securities of the surviving or resulting entity immediately after
such transaction:
(iv) A
tender offer or exchange offer is made and consummated for the
ownership of twenty percent (20%) or more of the outstanding
Securities of Health Net, Inc.;
(v) Health
Net, Inc. transfers substantially all of its assets to another
person, firm, corporation or other entity that is not a
wholly-owned subsidiary of Health Net, Inc.; or
(vi) Health
Net, Inc. enters into a management agreement with another person,
firm, corporation or other entity that is not a wholly-owned
subsidiary of Health Net, Inc. and such management agreement
extends hiring and firing authority over Executive to an individual
or organization other than Health Net, Inc.
B. Termination Without
Cause or For Good Reason Following Change in Control . If at
any time within two (2) years after a Change in Control of
Health Net, Inc. Executive’s employment is Terminated by the
Company without Cause or Executive Terminates Executive’s
employment for “Good Reason” (as defined below) (by
giving the Company at least fourteen (14) days prior written
notice of the effective date of Termination), then Executive will
be entitled to receive, within thirty (30) days following the
Termination of Executive’s employment, provided that
Executive signs and delivers prior to the expiration of such thirty
(30) day period, and does not revokes or attempt to revoke, a
Separation Agreement, Waiver and Release of Claims substantially in
the form attached hereto as Exhibit A , which is
incorporated into this Agreement by reference, (i) a lump sum
payment equal to [INSERT NUMBER] months of Executive’s
Base Salary in effect immediately prior to the date of
Executive’s Termination, and (ii) the continuation of
Executive’s Benefits for [INSERT NUMBER] months
following Executive’s date of Termination, and (iii) and
after expiration of such [INSERT NUMBER] months Benefits
continuation period, the continuation, under COBRA, of Benefits for
Executive and Executive’s dependents for a period of
[INSERT NUMBER] months following the effective date of
Executive’s Termination with premium payments made by the
Company on Executive’s behalf, provided , that
Executive properly elects to continue those benefits under COBRA,
and provided , further , that in the event the
Company requests, in writing, prior to such voluntary Termination
by Executive for Good Reason that Executive continue in the employ
of the Company for a period of time up to 90 days following
such Change in Control, then Executive shall forfeit such severance
allowance if Executive voluntarily leaves the employ of the Company
prior to the expiration of such period of time.
For purposes of this Agreement, the
term “ Good Reason ” means any of the following
which occurs, without Executive’s consent, subsequent to the
effective date of a Change in Control as defined above:
(i) A
substantial reduction in the scope of Executive’s authority,
duties or responsibilities with the Company, except in connection
with the Termination of Executive’s employment for Disability
(as defined below), normal retirement or Cause or by Executive
voluntarily other than for Good Reason;
(ii) A
material reduction by the Company in Executive’s base
compensation ( i.e. , the Executive’s Base Salary
and/or target annual bonus) as in effect immediately prior to any
such reduction;
(iii) A
relocation of Executive to a work location more than fifty
(50) miles from Executive’s work location immediately
prior to such proposed relocation; provided that such proposed
relocation results in a materially greater commute for Executive
based on Executive’s residence immediately prior to such
relocation; or
(iv) The
failure of the Company to obtain an assumption agre
