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Exhibit
10.15
LINDA V.
TIANO
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT
(this “Agreement”) is made and entered into as of
December 27, 2006 (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 Linda V. Tiano (“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
February 1, 2007 and Executive’s title will be Senior
Vice President, General Counsel & Secretary, but may be
changed at the discretion of the Company to a title that reflects a
similarly 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
executive leadership, infrastructure, processes and management of
the Company’s legal organization, 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 an annual base salary of $500,000, 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. Engagement Bonus .
In addition, you will receive an engagement bonus in the amount of
$200,000 payable within thirty (30) days of your effective
date of employment. You must be actively employed and on the
Company payroll at the time the bonus is paid. If you voluntarily
terminate your employment with the Company or the Company
terminates your
employment for cause within
the first twenty-four (24) months of employment, you will be
required to repay a prorated portion of the engagement bonus to the
Company based on the number of months employed by the
Company.
D. 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 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, consistent
with the needs of the business of the Company.
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. 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 in the event
Executive does not pass the Company’s drug screening
test.
B. Background Check .
The Company reserves the right to terminate Executive 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 will 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 70% of
Executive’s Base Salary as additional compensation according
to the terms of the actual EIP 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 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 guidelines of 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.
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 of Executive’s first date of employment,
Executive will be granted a non-qualified stock option (the
“Stock Option”) to purchase 50,000 shares of Common
Stock of the Company (the “Common Stock”) which will
vest and become exercisable at the rate of one-fourth of the shares
on each, first through fourth, anniversary of the grant. 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 25,000 restricted stock units of the Company’s Common
Stock (the “RSUs”) which will vest and become
non-forfeitable at the rate of one-half of the shares covered on
the third and fourth anniversary of the grant. 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.
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 one times (1x) 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 $500,000 and a stock price of $39.3033, which is
the average closing price per share of the Company’s Common
Stock as of December 31, 2005, Executive’s current stock
ownership requirement is 12,722 (“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 1A of this Agreement. Any shares of
Company Common Stock that Executive owns, and any restricted stock
units or shares of restricted stock 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 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)
will 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 the date of termination, (b) any compensation
previously deferred by Executive (together with any interest and
earnings therein), (c) accrued but unused PTO,
(d) reimbursable expenses incurred by Executive prior to the
termination date and (e) amounts under any other compensatory
plan, arrangement or program payment to which Executive may 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 Executive signs 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 twenty-four (24) 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 six
(6) 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 eighteen (18) 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 Executive signs 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 thirty-six (36) 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 eighteen (18) months following
Executive’s date of termination, and (iii) and after
expiration of such eighteen (18) months Benefits continuation
period, the continuation, under COBRA, of Benefits for Executive
and Executive’s dependents for a period of eighteen
(18) 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 demotion or a
substantial reduction in the scope of Executive’s position,
duties, responsibilities or status with the Company, or any removal
of Executive from or any failure to reelect Executive to any of the
positions (or functional equivalent of such positions) referred to
in the introductory paragraphs hereof, 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 reduction by the
Company in Executive’s Base Salary or a mater
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