Exhibit 10.1
May 18, 2005
Mr. David W. Olson
Senior Vice President, Corporate
Communications
[ADDRESS]
[ADDRESS]
Dear David:
The purpose of this letter agreement
(this “Agreement”) is to memorialize your current
employment arrangements with Health Net, Inc. (the
“Company”). As you are aware, you and the Company are
currently party to an Offer Letter Agreement, dated December 30,
1993, a Severance Payment Agreement dated December 4, 1998 and an
Agreement dated January 1, 2001 providing for your consent to
certain changes under the Company’s Second Amended and
Restated 1991 Stock Option Plan and 1997 Stock Option Plan, as
amended (collectively, the “Employment Agreement”). By
executing this Agreement, you agree to the amendment and
restatement of your Employment Agreement as set forth
herein.
1. Duties and
Salary.
A. Duties . Your title is
Senior Vice President, Corporate Communications, but may be changed
at the discretion of the Company to a title that reflects a
similarly senior executive position. You report directly to Jay
Gellert, President and Chief Executive Officer of the Company, but
your reporting relationship may be changed from time to time at the
discretion of the Company. Your duties and responsibilities are to
provide executive leadership and management of the corporate
communications and investor relations functions, but the Company
reserves the right to assign you other duties as needed and to
change your duties from time to time on reasonable notice, based on
your skills and the needs of the Company.
B. Salary . You are paid an
annual base salary of $269,104.14, less applicable withholdings
(payable on a bi-weekly basis) (“Base Salary”), which
covers all hours worked. Generally, your Base Salary will be
reviewed annually, but the Company reserves the right to change
your compensation from time-to-time. Pursuant to the charter of the
Compensation Committee (the “Committee”) of the
Company’s Board of Directors, any adjustment to your
compensation must be made with the approval of the Committee (or,
in the event that you constitute 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 your employment
arrangements with the Company, including, among other things, the
terms of this Agreement and any stock option agreement, restricted
stock agreement and/or severance agreement you enter 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 your Base Salary, any annual incentive payment
(whether in the form of cash or equity) awarded to you (in the past
or after the date hereof), and the establishment of performance
goals under the Company’s incentive plans. Your execution of
this Agreement will serve as your acknowledgement that your
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 . You understand that the Company reserves
the right to make personnel decisions regarding your employment,
including but not limited to decisions regarding any promotion,
salary adjustment, transfer or disciplinary action, up to and
including termination, consistent with the needs of the business or
the Company. Generally, your performance and compensation will be
reviewed on an annual basis.
3. Protection of Proprietary and
Confidential Information . You agree that your 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 you during your
employment.
A. You agree 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 you provide 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
you by the Company or (ii) becomes publicly known and made
generally available after disclosure to you by the Company. 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. You further agree that at all
times during your employment and thereafter, you will keep in
confidence and trust all Proprietary and Confidential Information,
and that you 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 your 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 you by the Company or any of its
affiliates or produced by you or others in connection with your
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. You shall return and
deliver all such property upon termination of your employment, and
you may not take any such property or any reproduction of such
property upon such termination.
D. You recognize 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. You agree that during your
employment, and thereafter, you owe 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 your 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. Your obligations under this
Section 3 shall continue after the termination of your employment
and any breach of this Section 3 shall be a material breach of this
Agreement.
4. Representation and Warranty of
Employee . You represent and warrant to the Company that the
performance of your duties, and the entering into of this
Agreement, has not violated and will not violate any agreements
with or trade secrets of any other person or entity. You further
represent and warrant that you do not have any relationship or
commitment to any other person or entity that might be in conflict
with your obligations to the Company under this offer, including
but not limited to outside employment, sales broker relationships,
investments or business activities. You further understand and
agree that while employed by the Company you are expected to
refrain from engaging in any outside activities that might be in
conflict with the business interests of the Company. In addition,
you represent and warrant to the Company that you have not shared
with or disclosed to, and will not share with or disclose to, the
Company any proprietary or confidential information of your
previous employers or any other third party.
5. Employee Benefits
.
A. Employee Benefit Programs
. You may be eligible for various employee benefit programs if you
meet the applicable participation requirements. These benefit
programs 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, deferred compensation plan and tuition reimbursement
plan. You will also be eligible to participate in any employee
benefit programs added at any future time that are generally
applicable to senior executives of the Company and that have been
approved by the Committee, provided that you meet the applicable
participation requirements; provided , however , that
this provision does not extend to any individually negotiated or
tailored benefits, plans or programs covering a particular employee
or employees. Although the Company may sponsor a benefit or plan or
program for some employees, it is not required to do so for all
employees and may exclude certain employees now or in the future
from one or more benefits, plans or programs. 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 . You
are covered by workers’ compensation insurance and state
disability insurance, as required by state law.
C. Financial Counseling
Allowance . You are reimbursed up to the amount of $5,000 per
year for documented costs incurred for your personal financial
counseling services, including tax preparation.
D. Car Allowance . You are
entitled to a car allowance of $1,000 per month.
E. Incentive Bonus . You are
eligible to participate in the Health Net, Inc. Executive Incentive
Plan (also known as the Management Incentive Plan
(“MIP”)) in accordance with the terms of the MIP, which
provides you with a target opportunity to earn each plan year up to
70% of your Base Salary as additional compensation according to the
terms of the actual MIP documents. 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 you in order
for you 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 guidelines of the MIP. You acknowledge that in the event
you are one of the top five (5) highest paid executive officers of
the Company for a given calendar year under applicable federal
securities laws, your bonus for that year, if any, will be subject
to the Company’s Performance Based 162(m) Plan in lieu of the
MIP.
F. Expenses . Subject to and
in accordance with the Company’s written guidelines and
procedures for business and travel expenses, you will receive
reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by you in the performance of your
duties pursuant to this Agreement.
6. Stock Options . Any stock
options or restricted stock granted to you have been or will be
granted under the applicable Company Stock Option Plan (the
“Stock Option Plan”), and have been or will be subject
to the terms of the Company’s form of stock option agreement
or restricted stock agreement, as applicable, as adopted by the
Committee. Any future grants of stock options and/or restricted
stock to you are at the discretion of the Committee.
A. Company Stock Ownership
Requirement. In accordance with the Executive Officer Stock
Ownership Guidelines adopted by the Board of Directors of the
Company (the “Executive Stock Ownership Guidelines”),
you are required to own shares of Common Stock of the Company
having a value of one times your Base Salary in effect from time to
time pursuant to this Agreement (the “Stock Ownership
Requirement”). The number of shares of Common Stock you are
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 your current salary of $269,104.14 and a
stock price of $26.2684, which is the average closing price per
share of the Company’s Common Stock as of December 31, 2004,
your current stock ownership requirement is 10,245 (“Target
Amount”). Any shares of Company Common Stock that you
currently own and any shares of restricted stock of the Company
that you own and have vested count toward the Target Amount. Stock
options, unvested shares of restricted stock and shares of Common
Stock gifted to others do not count toward the Target Amount. Under
the Executive Stock Ownership Guidelines, you will have until
August 2006 to comply with the Stock Ownership Requirement. Please
keep in mind that 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 your Base Salary made pursuant to and in accordance with
Section 1A of this Agreement.
The Committee expects that you will make
reasonable progress toward your Stock Ownership Requirement. You
will be notified on an annual basis of any changes in your Target
Amount.
(B) Stock Plan Amendments .
In accordance with the Agreement dated January 1, 2001 between you
and the Company, you have previously consented, pursuant to Section
14 of the Company’s Second Amended and Restated 1991 Stock
Option Plan (the “1991 Plan”) and Section 6.2 of the
Company’s 1997 Stock Option Plan, as amended (the “1997
Plan”, and together with the 1991 Plan, the
“Plans”), that the Plans, as amended by the amendments
to the Accelerated Provisions of the Plans set forth on Exhibit
A attached hereto, shall govern and apply to all of your
outstanding options under the Plans, regardless of the date such
options were granted. To the extent the option agreements for your
outstanding options under the Plans state anything to the contrary,
you and the Company have agreed that such option agreement(s) are
amended to be consistent with the foregoing sentence.
7. Term of Employment . Your
employment with the Company is “at-will,” which means
that either you 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 your
employment for any reason, in addition to any other payments that
may be payable to you hereunder, you (or your beneficiaries or
estate) will be paid (in each case to the extent not theretofore
paid) within thirty (30) days following your date of termination
(or such shorter period that may be required by applicable law):
your annual Base Salary through the date of termination, any
compensation previously deferred by you (together with any interest
and earnings therein), accrued but unused PTO, reimbursable
expenses incurred by you prior to the termination date and any
other compensatory plan, arrangement or program payment to which
you may be entitled.
8. Severance Pay .
A. If your employment is terminated
by the Company without Cause (as defined in subsection (C) below)
at any time that is not within two (2) years after a Change in
Control (as defined in subsection (D) below) of Health Net, Inc.,
you will be entitled to receive, provided you sign a Waiver and
Release of Claims substantially in the form attached hereto as
Exhibit B , which is incorporated into this Agreement by
reference,
(a) a lump sum cash payment equal to
one (1) year of your Base Salary in effect immediately prior to the
date of your termination; and
(b) the continuation of all your
medical, health, disability, life and accident insurance as
maintained for your benefit immediately prior to the date of your
termination (collectively, “Benefits”) for a period of
one (1) year following the effective date of your
termination.
The lump sum payments referred to
above will be paid within thirty (30) days following your
termination of employment.
B. If at any time within two (2)
years after a Change in Control (as defined in subsection (D)
below) of Health Net, Inc. your employment is terminated by the
Company without Cause
