EXHIBIT 10.01
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of March 30, 2004 (the "Effective Date"), by and between PACIFICARE HEALTH
SYSTEMS, INC., a Delaware corporation (the "Company"), with its principal place
of business located at 0000 Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000, and Xxxxxx
X. Xxxxxxxxx ("Executive").
RECITALS
WHEREAS, the Company desires to continue Executive's employment in the
capacity of Chairman of the Board of Directors and Chief Executive Officer.
WHEREAS, the Company and Executive are entering into this Agreement to
establish the terms and conditions of the employment relationship.
WHEREAS, this Agreement is intended to replace the Senior Executive
Employment Agreement between the Company and Executive dated March 30, 2001, as
amended by the First Amendment thereto dated March 30, 2001 (as so amended, the
"Prior Agreement").
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. EMPLOYMENT
1.1 Executive's General Duties. The Company employs Executive and
Executive serves the Company in the capacity of Chairman of the Board of
Directors and Chief Executive Officer, having such usual and customary duties
and authority as an officer of similar capacity in a corporation of comparable
size, holdings, and business as that of the Company.
Executive shall do and perform all services, acts, or things necessary
or advisable to manage and conduct the business of the Company and shall preside
over such other areas of corporate activity as specified from time to time by
the Board of Directors of the Company. During the term of this Agreement,
Executive shall perform such additional or different duties, and accept the
election or appointment to such other offices or positions as are mutually
agreed upon by Executive and the Company.
1.2 Devotion of Executive. During the term of this Agreement, Executive
shall devote his entire productive time, ability, and attention to the business
of the Company. Executive shall use Executive's best efforts, skills, and
abilities to promote the general
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welfare and interests of the Company and to preserve, maintain, and xxxxxx the
Company's business and business relationships with all persons and entities
associated therewith, including, without limitation, employer groups, medical
service providers, stockholders, affiliates, officers, employees, and banks and
other financial institutions. The Company shall give Executive a reasonable
opportunity to perform Executive's duties and shall neither expect Executive to
devote more time, nor assign more duties or functions to Executive, than are
customary and reasonable for a person in Executive's position.
2. TERM AND TERMINATION
2.1 Term. The initial term of Executive's employment under this
Agreement shall be 36 months, commencing on the effective date of this
Agreement. The Company may extend the term of this Agreement for a successive
term of 12 months or more by giving Executive written notice at least 60 days
prior to the expiration of the term. Notwithstanding the foregoing, if a
Change-of-Control occurs, as defined in Section 5.1(c) of this Agreement, then
the term of the Agreement shall end 24 months from the effective date of the
Change-of-Control. Except as provided by Section 2.2(f), if the Company offers
Executive a new employment agreement but Executive does not accept the new
employment agreement, then Executive's continued employment with the Company
will be without the benefit of a written employment agreement, in which case
Executive's entitlement to severance benefits on termination shall be governed
by then-existing Company policies and practices. In the event that at the end of
the term of this Agreement, the Company neither extends the term of the
Agreement nor offers Executive a new employment agreement, then the Company
shall have been deemed to have given 45 days written notice pursuant to Section
2.2(d) of this Agreement and Executive's employment with the Company shall
terminate pursuant to Section 2.2(d) of this Agreement.
2.2 Termination. This Agreement, and Executive's employment with the
Company, shall be terminated upon the occurrence of any one of the following
events:
a. The death of the Executive.
b. Executive becomes incapacitated or disabled, which incapacity or
disability prevents Executive from fully performing his duties to the
Company for a period in excess of 90 days and, after such 90-day period,
the Company and a physician, duly licensed and qualified in the
specialty of Executive's incapacity, decide in their reasonable
judgments, that such incapacity will be of such continued duration as to
prevent Executive from resuming the rendition of services to the Company
for at least an additional six-month period. For purposes of this
Agreement, Executive shall be deemed permanently disabled, and this
Agreement terminated upon the date Executive receives written notice
from the Company that such determination has been made.
c. Executive habitually neglects his duties to the Company or
engages in gross misconduct during the term of this Agreement. For the
purposes of this Agreement,
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"gross misconduct" shall mean Executive's misappropriation of funds;
fraud; xxxxxxx xxxxxxx; unauthorized possession of corporate property;
the sale, distribution, possession or use of a controlled substance;
conviction of any criminal offense (whether or not such criminal offense
is committed in connection with Executive's duties hereunder or in the
course of his employment with the Company); or Executive's action, or
failure to commit an act, involving the Company which amounts to willful
misconduct, wanton misconduct or gross negligence and which is
materially and demonstrably harmful to the Company. In such event,
Executive's termination shall be effective immediately upon receipt of
written notice from the Company.
d. Either party hereto may terminate this Agreement, with or without
cause, upon 45 days prior written notice to the other party. Except for
the circumstances described in Subsections (a), (b), (c), (e) and (f) of
this Section 2.2, Executive's termination shall be effective 45 days
after receipt of such written notice.
e. Upon the expiration of the term of this Agreement, the Company
neither extends the Agreement pursuant to Section 2.1 nor offers
Executive a new employment agreement.
f. Executive voluntarily terminates his employment, upon written
notice to the Company, to be effective at the end of the term of this
Agreement, after the Company offers Executive a new employment agreement
that establishes duties materially inconsistent with those described in
Section 1.1, reduces Executive's salary by more than 10 percent below
the salary in effect at the end of the term of this Agreement or does
not contain severance provisions comparable to those in this Agreement.
3. COMPENSATION DURING THE TERM OF THIS AGREEMENT
3.1 Base Salary. As long as Executive satisfactorily performs all of his
obligations under this Agreement, the Company shall pay Executive an annual base
salary during the term of this Agreement, payable in equal installments on the
Company's regular payroll dates. As of this date, Executive's annual base salary
has been set at $990,000. On an annual basis, the Company shall review
Executive's salary, but shall be under no obligation to increase Executive's
salary. Executive authorizes the Company to take such deductions and
withholdings from his base salary and other compensation, including any bonus as
are required by law, directed by Executive, or as reasonably directed by the
Company for its employees, which deductions shall include, without limitation,
withholding for federal and state income taxes and social security.
3.2 Benefits. Executive shall be eligible to fully participate in all of
the employee benefit plans and programs available to other high-level executives
of the Company, including, without limitation, health, dental, and life
insurance coverage for Executive and Executive's dependents, pension and profit
sharing programs (including the Company's Supplemental
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Executive Retirement Plan), and vacation and sick leave benefits, the Amended
and Restated PacifiCare Health Systems, Inc. Savings and Profit-Sharing Plan,
and the trust agreement implemented pursuant thereto, adopted as of July 1999,
the Company's Statutory Restoration Plan and the Company's Deferred Compensation
Plan. The Company shall have the right to change, amend, modify, or terminate
any existing benefit plan or program, or to change any insurance company or
modify any insurance policy adopted incident to such existing benefit plan and
program.
3.3 Automobile Allowance. The Company shall provide Executive with an
$850.00 (eight hundred fifty dollar) per month automobile allowance. The Company
shall furnish Executive with a cellular telephone. Executive shall provide and
maintain automobile insurance for Executive's car including collision,
comprehensive liability, personal and property damage, and uninsured and
underinsured motorist coverage in amounts customarily obtained to cover such
contingencies in the State of California. Executive shall provide proof of such
coverage to the Company upon the Company's request.
3.4 Reimbursement of Expenses. The Company shall pay for or reimburse
Executive for all reasonable travel, entertainment, and other business expenses
incurred or paid for by Executive in connection with the performance of his
services under this Agreement. The Company shall not be obligated to make any
such reimbursement unless Executive presents corresponding expense statements or
vouchers and such other supporting information as the Company may from time to
time reasonably request. The Company reserves the right to place subsequent
limitations or restrictions on business expenses to be incurred or reimbursed.
3.5 Annual Incentive Plan. Executive shall be eligible to participate in
the Company's 2003 Management Incentive Compensation Plan, or any replacement
plan, and as such plan may be further amended, modified, or terminated, from
time to time (the "MICP"), in accordance with the terms and conditions set forth
herein and therein. To the extent consistent with the MICP, the Compensation
Committee will establish performance goals for Executive during each given Plan
Year (as defined in the MICP) that would result in an Award under the MICP for
achievement of target performance goals for that Plan Year (as defined in the
MICP) equal to at least 125% of Executive's annual base salary, with such Award
not to exceed the Maximum Award (as defined in the MICP).
3.6 Equity-Based Plans. Executive shall be eligible to participate in
the applicable equity-based compensation plans for officers and key employees of
PacifiCare Health Systems, Inc., as may be amended, modified or replaced, from
time to time, in accordance with the terms and conditions set forth herein and
therein including eligibility for both stock options and restricted share
awards.
3.7 Insurance. During the term of this Agreement, the Company shall
insure Executive under its general liability insurance for all conduct committed
in good faith while acting
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in the capacity of Chairman of the Board of Directors and Chief Executive
Officer of the Company or in any other capacity to which Executive may be
appointed or elected.
4. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT PURSUANT TO SECTION 2.2
4.1 Death. In the event that this Agreement is terminated by reason of
Executive's death, Executive's estate or legal representative shall be entitled
to receive the following:
a. Payment of benefits under the life insurance policy purchased by
the Company on Executive's behalf, if any;
b. Payments of benefits under the MICP set forth in Section 3.5 in
accordance with the terms of the MICP plan document;
c. Executive's legal representative shall be permitted to exercise
any vested and unexercised options granted under the 1996 Stock Option
Plan for Officers and Key Employees, the 2000 Employee Plan and any
other stock option plans of the Company (collectively, the "Stock Option
Plans") in accordance with their terms for a period of one year
following Executive's death.
4.2 Disability. In the event that Executive is terminated because of
incapacity or disability, the Company shall provide Executive with the
following:
a. Payment of benefits under the disability insurance policy
maintained by the Company on Executive's behalf, if any;
b. Payment of benefits under the MICP set forth in Section 3.5 in
accordance with the terms of the MICP plan document;
c. The right to exercise any vested and unexercised options under
the Stock Option Plans in accordance with the terms stated therein;
d. Payment of the automobile allowance as provided under Section 3.3
for a period of 18 months following the effective date of such
termination.
4.3 Neglect, Misconduct or Voluntary Termination. In the event this
Agreement is terminated because of Executive's habitual neglect or gross
misconduct pursuant to Section 2.2(c) or because of Executive's voluntary
termination (except for resignation pursuant to Section 2.2(f)), the Company
shall be relieved from any and all further or future obligations to compensate
Executive; provided, however, that Executive shall be able to exercise any
vested and unexercised awards under the Stock Option Plans in accordance with
the terms set forth therein.
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4.4 Discharge by the Company Pursuant to Section 2.2(d) or 2.2(e). In
the event that the Company terminates Executive pursuant to Section 2.2(d) or
2.2(e) under circumstances other than a Change-of-Control (as defined herein)
and for any reason other than Executive's incapacity or disability or
neglect/misconduct as described in Sections 2.2(b) and 2.2(c), respectively,
then Executive shall be entitled to the following compensation:
a. An amount equal to three times Executive's then current annual
base salary under Section 3.1;
b. An amount equal to three times the average of the last two MICP
bonuses paid to Executive. For purposes of this Section 4.4(b), the word
"paid" shall include $0.00 for any year in which Executive was eligible
for, but was not paid, an MICP bonus, and for 2002 (if that year is
included in any average), the amount shall be $2,546,500 (which includes
$856,500 as the fair market value of the 30,000 restricted shares
granted to Executive in 2002 in lieu of additional MICP bonus amounts);
c. The right to exercise any vested and unexercised options under
the Stock Option Plans in accordance with their terms within one year of
the effective date of such termination;
d. Continuation of Executive's and his dependents' medical, dental
and vision benefits for a period of 36 months following the effective
date of such termination;
e. An amount equal to 36 months of Executive's automobile allowance;
f. The Company shall provide to Executive appropriate office space
and administrative support services for a period of up to 36 months
following the effective date of such termination. The Company shall be
obligated to provide such space and administrative support services in a
manner as is customarily provided by companies of similar size and
holdings as those of the Company to prior executive with comparable
responsibility as Executive, and the location of such office space shall
be reasonably convenient to Executive. The Company's provision of such
office space and administrative support services shall not limit,
restrict, or reduce, in any manner, any and all other compensation to
which Executive is entitled hereunder;
g. Executive shall receive, or have paid, the amounts of severance
compensation provided in clauses (a), (b) and (e) above in equal
installments over a period of 36 months. Payments will be made either in
biweekly installments on the Company's regular paydays or as currently
being paid to Executive;
h. Notwithstanding the foregoing, in the event Executive engages in
employment, whether as an employee, consultant or contractor with a
competitor of the Company during the 36 month period in which
Executive's salary continues pursuant to
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this Section 4.4, the severance compensation available to Executive
under this Section 4.4 shall be reduced by the amount of any and all
gross earnings Executive earns while engaged in employment with any such
competitor or competitors. For the purposes of this Section 4.4, a
"competitor of the Company" means any company offering managed care and
other health insurance products, including specialty managed care
products and services, including without limitation, managed care
organizations, health maintenance organizations, competitive medical
plans, preferred provider organizations, provider sponsored
organizations ("PSO"), health insurance companies, pharmacy benefit
management companies, behavioral health companies, and dental and vision
benefit plans. Executive agrees to provide immediate notice to the
Company upon receipt of any gross earnings received by Executive from a
competitor of the Company. Quarterly, Executive shall provide the
Company a certificate certifying as to his employment status and if
employed, the name and business of his current employer;
i. If Executive is rehired by the Company, payments of severance
compensation provided for in this Section 4.4 shall cease; and
j. If Executive dies while receiving the salary continuation benefit
as provided in this Section 4.4, Executive's estate will receive a lump
sum payment of the remaining salary continuation benefit.
4.5 Resignation by Executive Pursuant to Section 2.2(f). In the event
that Executive resigns pursuant to Section 2.2(f), then Executive shall be
entitled to the compensation provided by Section 4.4 of this Agreement.
5. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT AS A RESULT OF A
CHANGE-OF-CONTROL
5.1 Termination of Employment or Resignation for Good Cause
a. Executive's Rights. In the event that, during the term of this
Agreement, the Company undergoes a Change-of-Control (as that term is
defined below) and if within 24 months after the consummation of such
Change-of-Control either (1) Executive is involuntarily terminated,
except as provided in Section 5.1(b), or (2) Executive voluntarily
terminates his employment for "good cause" as defined in Section 5.1(d),
then Executive shall be entitled to the following compensation:
1. A lump sum payment consisting of: (i) an amount equal to three
times Executive's then annual base salary; (ii) an amount equal to
three times the average of the last two MICP bonuses paid to
Executive; (iii) a prorated bonus based on target opportunity for
the year in which the Change-of-Control occurs; (iv) an amount equal
to the equivalent of the premium cost of 36 MONTHS of COBRA benefits
for continued medical, vision and dental coverage at the same
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levels provided to Executive prior to such termination; and (v) an
amount equal to 36 months of Executive's automobile allowance. For
purposes of this Section 5.1(a)(1), the word "paid" shall include
$0.00 for any year in which Executive was eligible for, but was not
paid, an MICP bonus, and for 2002 (if that year is included in any
average), the amount shall be $2,546,500 (which includes $856,500 as
the fair market value of the 30,000 restricted shares granted to
Executive in 2002 in lieu of additional MICP bonus amounts) .
2. The right to exercise any and all unexercised stock options
granted under the Stock Option Plans in accordance with their terms,
as if all such unexercised stock options were fully vested, within
one year of the effective date of such termination. In addition, all
restricted shares granted to Executive under the Stock Option Plans
shall fully vest as of the date of termination.
3. If any payments, distributions or benefits that Executive
receives under this Section 5 ("Payment") would constitute a
"parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986 (the "Code") and would be subject to
the excise tax imposed by Section 4999 of the Code or any interest
or penalties payable with respect to such excise tax (such excise
tax, together with any such interest and penalties, hereinafter
referred to as the "Excise Tax"), then Executive shall be paid an
additional payment (the "Gross-Up Payment") in an amount that shall
fund the payment by Executive of any Excise Tax on the Payment as
well as all income and employment taxes imposed on the Gross-Up
Payment, any Excise Tax imposed on the Gross-Up Payment and any
interest or penalties imposed with respect to income and employment
taxes imposed on the Gross-Up Payment.
4. The Company shall provide to Executive the office space and
administrative support services described in Section 4.4(f) for a
period of up to 36 months after such termination.
b. Limitation of Benefits. In the event that Executive is terminated
within 24 months after a Change-of-Control of the Company, and such
termination results from either Executive's death, incapacity or
disability or habitual neglect or gross misconduct, then,
notwithstanding anything in this Article 5 to the contrary, Executive
shall receive only that compensation, if any, to which he is entitled to
under Sections 4.1, 4.2 and 4.3, respectively.
c. Change-of-Control. As used in this Section 5, the term
"Change-of-Control" means and refers to:
1. The acquisition by any Person (as hereinafter defined) of
Beneficial Ownership (as hereinafter defined) of 20% or more of the
outstanding voting
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securities entitled to vote generally in the election of directors
of the Company (the "Outstanding Company Stock"), provided that, for
purposes of this subsection (1), the following acquisitions shall
not constitute a Change of Control: (I) any acquisition by the
Company, (II) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Person
that controls, is controlled by or is under common control with, the
Company or (III) a Non-Qualifying Business Combination (as
hereinafter defined); or
2. Individuals who, as of December 17, 2003 or such subsequent
date as the Board may determine from time to time to be applicable
for this Change-of-Control definition (the "Base Date"), constitute
the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that, for purposes of
this subsection (2), any individual who becomes a director
subsequent to the Base Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, excluding, however any such individual who
initially assumes office as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
3. Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets
of the Company or the acquisition of assets or stock of another
corporation (a "Business Combination"), in each case, unless,
following such Business Combination, the Persons who had Beneficial
Ownership of the Outstanding Company Stock immediately prior to such
Business Combination have Beneficial Ownership immediately following
the consummation of such Business Combination, directly or
indirectly, of more than 50% of the combined voting power of the
then outstanding securities entitled to vote generally in the
election of directors of the corporation resulting or surviving from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Stock (a Business Combination
that satisfies this exception shall be deemed to be a
"Non-Qualifying Business Combination"); or
4. Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company; or
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5. The consummation of any other transaction involving a
significant issuance of the Company's securities, a change in the
composition of the Board of other material event that the Board
determines to be a Change-of-Control for purposes of this section.
Notwithstanding the foregoing provisions of this definition, unless
otherwise determined by the Board, no Change-of-Control shall be deemed to have
occurred if (I) Executive is a member of a group that first announces a proposal
which, if successful, would result in a Change-of-Control and which proposal
(including any modifications thereof) is ultimately successful, or (II)
Executive acquires a two percent (2%) or more equity interest in the entity
which ultimately acquires the Company pursuant to the transaction described in
clause (I) above.
For purposes of this definition, "Person" means an individual,
partnership, joint venture corporation, trust, unincorporated organization,
government (or agency or political subdivision thereof), group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) or any other
entity, and "Beneficial Ownership" means beneficial ownership within the meaning
of Rule 13d-3 promulgated under the Exchange Act.
d. Good Cause. As used in this Agreement "good cause" for Executive
to terminate his employment shall be deemed to exist if Executive
voluntarily terminates employment within 24 months of a
Change-of-Control for any of the following reasons:
1. Without Executive's express prior written consent, Executive
is assigned duties materially inconsistent with and of a diminished
nature from Executive's position, duties, responsibilities, or
status with the Company, which substantially varies from that which
existed immediately prior to such Change-of-Control.
2. Without Executive's express prior written consent, Executive
experiences a change in his reporting level, titles, or business
location (of more than 50 miles from Executive's current business
location or residence whichever is closer to the new business
location) which substantially varies from that which existed
immediately prior to the Change-of-Control; except that if Executive
is not located at the Company's corporate headquarters in
California, a relocation to the Company's corporate headquarters in
California shall not be deemed a substantial variation, unless
Executive's reporting level or title is also substantially varied.
3. Without Executive's express prior written consent, Executive
is removed from any position held immediately prior to the
Change-of-Control, or if Executive fails to obtain reelection to any
position held immediately prior to the Change-of-Control, which
removal or failure to reelect is not directly related to Executive's
incapacity or disability, habitual neglect, gross misconduct or
death.
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4. Without Executive's express prior written consent, Executive
experiences a reduction in salary of more than 10 percent below that
which existed immediately prior to the Change-of-Control.
5. Without Executive's express prior written consent, Executive
experiences an elimination or reduction of any employee benefit,
business expense reimbursement or allotment, incentive bonus
program, or any other manner or form of compensation available to
Executive immediately prior to the Change-of-Control and such change
is not otherwise applied to others in the Company with Executive's
position or title.
6. The Company fails to obtain from any successor, before the
succession takes place, a written commitment obligating the
successor to perform this Agreement in accordance with all of its
terms and conditions.
7. The Company or any successor thereto purports to terminate
Executive pursuant to Section 4.4 without first giving Executive
prior written notice thereof that specifies the facts and
circumstances, in reasonable detail, serving as the basis for
Executive's termination.
5.2 Resignation for Other Than Good Cause after a Change-of-Control. In
the event that the Company undergoes a Change-of-Control and Executive remains
with the Company for 12 months following the effective date of the
Change-of-Control, Executive will be given a 30-day "window period" in which to
elect to voluntarily terminate Executive's employment for reasons other than
good cause. Should Executive choose to terminate Executive's employment within
the 30-day "window period," then Executive shall be entitled to the following
compensation:
a. One-half the lump sum payment referred to in Section 5.1(a)(1).
b. The right to exercise all vested and unexercised stock options
granted under the Stock Option Plans in accordance with their terms
within one year of the effective date of such termination.
c. Office space and administrative support services as set forth in
Section 4.4(f) for a period of up to 36 months from the date of
termination.
6. CONFIDENTIALITY AND OWNERSHIP OF PROPRIETARY INFORMATION
6.1 Confidential Information. Executive acknowledges that, during the
course of Executive's employment with the Company or with any subsidiary or
affiliate of the Company, Executive will have access to certain confidential
information in the form of know-
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how, trade secrets, or proprietary information of the Company or its
subsidiaries or affiliates ("Confidential Information") and that such
Confidential Information will be acquired in confidence and as a fiduciary of
the Company or its subsidiaries or affiliates. For the purposes of this
Agreement, Confidential Information shall include, without limitation, member
health data and medical records and any other protected healthcare information,
any and all cost and expense data, marketing and customer data, sales manuals,
underwriting guidelines, case management policies and procedures, utilization
review and quality assurance policies and procedures, provider manuals,
individual and group subscriber information (including, the name, address,
telephone number, or contact person for an individual or group subscriber),
subscriber group manuals, processes, designs, devices, compilations of
information, operational techniques operating manuals, symbols, service marks,
logos, customer and vendor lists (including, without limitation, lists of
subscribers, subscriber groups, clients, brokers, and providers contracting with
the Company or any subsidiary or affiliate of the Company), business
information, marketing programs, plans, and strategies, research and development
plans, contracts and licenses, licensing techniques and practices, advertising
and promotional materials, financial information and strategies, computer
software and other computer-related materials, copyrightable material, security
controls, including computer system passwords, and other legally protected
information owned by or used in the respective businesses of the Company or its
subsidiaries or affiliates which are confidential or proprietary in nature and
may include confidential or proprietary information received from third parties.
In addition to the foregoing, Confidential Information also includes any
information which is not generally known to the public, or within the market or
trade in which the Company competes that derives independent value from not
being generally known, and the physical embodiments of such information in any
tangible form, whether written or machine-readable in nature, or any information
which is marked or designated as "Confidential" or "Proprietary."
6.2 Ownership of Inventions. Executive agrees to assign and does hereby
assign to the Company any and all ideas, designs, know-how, programs,
improvements, inventions, discoveries and literary creations which Executive
alone or with others may conceive or make, and which (a) are made wholly or
partially with the Company's assets or confidential or trade secret information;
or (b) are developed wholly or partially on the Company's time; or (c) relate at
the time of conception or reduction to practice to the Company's business,
including actual or demonstrably anticipated research or development of the
Company; or (d) result from Executive's work for the Company (collectively
referred to as "Inventions"). Such Inventions are and shall be the property of
the Company and shall be deemed to be part of the Company's business, whether or
not any applications for patents, trademarks or copyrights are filed thereon.
Further, all such Inventions shall constitute Confidential Information.
Executive shall not claim to own any Inventions relating to the business of the
Company. Executive agrees that, upon request of the Company, Executive shall
execute any and all papers and do all other lawful acts that may be required by
the Company in order to make applications for Letters Patent, of the United
States and of any and all other countries, on such Inventions, or that may be
required to vest ownership of such applications, patents and copyrights in the
Company, or that may be required to prosecute or obtain such patents, or to
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maintain, preserve or enforce the rights of the Company in such Inventions,
patents and copyrights. Except as otherwise prohibited by law (including but not
limited to California Labor Code section 2870), and except for Inventions made
prior to commencement of Executive's employment with the Company, in addition to
the above assignment of Inventions to the Company, without further
consideration, Executive hereby fully, forever, and irrevocably assigns,
transfers, and conveys to the Company: (i) all patents, patent applications,
copyrights, mask works, trade secrets, and other intellectual property rights in
any Invention; and (ii) any and all "Moral Rights" (as defined below) which
Executive may have in, to, or with respect to any Invention. For purposes of
this Agreement, "Moral Rights" shall mean any rights to claim authorship of an
Invention, to object to or prevent the modification of any Invention, or to
withdraw from circulation or control the publication or distribution of any
Invention, and any similar right, existing under judicial or statutory law of
any country in the world, or under any treaty, regardless of whether or not such
right is denominated or generally referred to as a "moral right." Executive will
promptly disclose any Inventions to the Company whether developed or created
alone or jointly with others.
6.3 Confidentiality Covenant. Executive acknowledges and agrees that
maintaining the confidentiality of all of the Confidential Information is
integral to the value of the Company and is vital to the successful operations
of the Company and its subsidiaries and affiliates. In view of the foregoing,
Executive agrees to maintain the confidentiality of all Confidential Information
and to not disclose, divulge, exploit, or use, in any manner whatsoever, the
Confidential Information for Executive's own benefit or the benefit of another
person. Executive will additionally take all reasonable precautions to prevent
the inadvertent or accidental exposure of the Confidential Information.
Executive shall not remove any Confidential Information from the Company's
premises or make copies of any of such information except for the benefit of the
Company and in furtherance of Executive's duties as an employee of the Company.
Upon Executive's termination of employment with the Company, Executive shall not
remove from the Company's premises any materials containing any Confidential
Information, and will promptly return to the Company any material which contain
Confidential Information which are in Executive's possession or control.
6.4 No Solicitation. During the term of this Agreement and for 36 months
following termination of Executive's employment for any reason, Executive
acknowledges and agrees that Executive will not solicit or participate in or
assist in any way in the solicitation of any employees of the Company. For
purposes of this provision, "solicitation" means directly or indirectly
influencing or attempting to influence employees of the Company to become
employed with any person, partnership, firm, corporation or other entity.
6.5 Equitable Relief. Executive acknowledges and agrees that it would be
difficult to measure the damage to the Company (or any subsidiary or affiliate,
as the case may be) from any breach of Executive's obligations under this
Article 6, that injury to the Company (or to any subsidiary or affiliate, as the
case may be) from any such breach would be impossible to calculate, and that
money damages would therefore be an inadequate remedy for any such
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breach. Therefore, Executive acknowledges and agrees that the Company, in
addition to any of its other rights or remedies, shall be entitled to seek
injunctive or other equitable relief without bond or other security in the event
of an actual or threatened breach of this Agreement. The obligations of
Executive and the rights and remedies of the Company under this Agreement are
cumulative and in addition to, and not in lieu of, any obligations, rights, or
remedies created by applicable patent, copyright, or other laws, including the
statutory and common laws governing unfair competition, misappropriation or
theft of trade secrets, proprietary rights, or confidential information
generally.
6.6 Survival of Obligations. Executive's obligations under this Article
6 shall survive the termination of Executive's employment regardless of the
manner of such termination and shall be binding upon Executive's heirs,
executors, administrators and legal representatives.
7. NOTICES
All notices or other communications required or permitted to be made
hereunder shall be given in writing and sent by either personal delivery,
overnight delivery, or United States registered or certified mail, return
receipt requested, all of which shall be properly addressed with postal or
delivery charges prepaid, to the parties at their respective addresses set forth
below, or to such other address as either party may designate to the other in
accordance with this Article 7:
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If to the Company: PacifiCare Health Systems, Inc.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
If to Executive: Xxxxxx X. Xxxxxxxxx
00000 Xxxxxxxx Xxxxxxxxx, Xxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
All notices sent by personal delivery shall be deemed given when actually
received. All notices sent by overnight delivery shall be deemed received on the
next business day. All other notices sent via United States mail shall be deemed
received no later than two business days after mailing. Any notice given by any
method not expressly authorized herein, shall nevertheless be effective if
actually received, and shall be deemed given upon actual receipt.
8. GENERAL PROVISIONS
8.1 Severance Agreement. Any payments of compensation made pursuant to
Articles 4 and 5 are contingent on Executive executing the Company's standard
severance agreement, including a general release of the Company, its owners,
partners, stockholders, directors, officers, employees, independent contractors,
agents, attorneys, representatives, predecessors, successors and assigns,
parents, subsidiaries, affiliated entities and related entities, and on
Executive's continued compliance with Section 6.
8.2 Assignability. This Agreement shall inure to the benefit of, and
shall be binding upon the heirs, executors, administrators, successors, and
legal representatives of Executive and shall inure to the benefit of, and be
binding upon the Company and its successors and assigns. Executive shall not
assign, delegate, subdelegate, transfer, pledge, encumber, hypothecate, or
otherwise dispose of this Agreement, or any rights, obligations, or duties
hereunder, and any such attempted delegation or disposition shall be null and
void and without any force or effect; provided, however, that nothing contained
herein shall prevent Executive from designating beneficiaries for insurance,
death or retirement benefits.
8.3 Entire Agreement. This Agreement is a fully integrated document and
contains any and all promises, covenants, and agreements between the parties
hereto with respect to Executive's employment. This Agreement supersedes any and
all other, prior or contemporaneous, discussions, negotiations, representations,
warranties, covenants, conditions, and agreements (including but not limited to
the Prior Agreement), whether written or oral, between the parties hereto.
Except as expressed herein, the parties have not exchanged any other
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representations, warranties, inducements, promises, or agreements respecting
Executive's employment with the Company.
8.4 Severability. In the event any one or more of the provisions of this
Agreement shall be rendered by a court of competent jurisdiction to be invalid,
illegal, or unenforceable, in any respect, such invalidity, illegality, or
unenforceability shall not affect or impair the remainder of this Agreement
which shall remain in full force and effect and enforced accordingly, unless a
party demonstrates by a preponderance of the evidence that the invalidated
provision was an essential economic term of this Agreement.
8.5 Amendment. This Agreement shall not be changed, amended, or
modified, nor shall any performance or condition hereunder be waived, in whole
or in part, except by written instrument signed by the party against whom
enforcement or waiver is sought. The waiver of any breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of any
other or subsequent breach of the same or any other term or condition of this
Agreement.
8.6 Governing Law. This Agreement shall be governed by, enforced under,
and construed in accordance with the laws of the State of California.
8.7 Membership on Other Boards. Executive may serve on the board of
directors of up to two companies other than the Company and its affiliates
during the course of his employment with the Company, as long as such service
does not interrupt Executive in the performance of his duties as the full-time
Chairman of the Board of Directors and Chief Executive Officer of the Company
and Executive advises the Board of Directors of the Company (the "Board") of
such services. From time to time, Executive may serve on additional boards with
the approval of the Board.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
The Company: PACIFICARE HEALTH SYSTEMS, INC.,
a Delaware corporation
By: /s/ XXXXX X. XXXX
---------------------------------
Xxxxx X. Xxxx
Lead Independent Director
Executive: /s/ XXXXXX X. XXXXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxxxx
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