Ex. 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of November 8, 1993, by and
between XX XXXXX (the "Employee") and FOUNDATION HEALTH CORPORATION, a
Delaware corporation (the "Company").
1. TERM OF EMPLOYMENT.
(a) BASIC RULE. The Company agrees to continue the Employee's
employment, and the Employee agrees to remain in employment with the Company,
for a three-year period commencing as of the date hereof and ending November
8, 1996, and thereafter automatically renewable from year to year unless
sooner terminated pursuant to Subsection (b), (c), (d) or (e) below.
(b) EARLY TERMINATION. Subject to Sections 6 and 7, the Company
may terminate the Employee's employment by giving the Employee 30 days'
advance notice in writing. The Employee may terminate his employment by
giving the Company 30 days' advance notice in writing. The Employee's
employment shall terminate automatically in the event of his death. Any
waiver of notice shall be valid only if it is made in writing and expressly
refers to the applicable notice requirement of this Section 1.
(c) CAUSE. The Company may terminate the Employee's employment for
Cause at any time by giving the Employee notice in writing. For all purposes
under this Agreement, "Cause" shall mean (i) a failure by the Employee to
perform his duties, other than a failure resulting from the Employee's
complete or partial incapacity due to physical or mental illness or
impairment, (ii) misconduct or fraud or (iii) conviction of, or a plea of
"guilty" or "no contest" to, a felony.
(d) DISABILITY. The Company may terminate the Employee's active
employment due to Disability by giving the Employee 30 days' advance notice
in writing. For all purposes under this Agreement, "Disability" shall mean
that the Employee, as the time notice is given, has not performed his duties
under this Agreement for at least 90 working days in a period of not more
than 365 consecutive days as the result of his incapacity due to physical or
mental illness.
(e) RETIREMENT. The Company may terminate the Employee's
employment due to the Employee having attained the later of (i) the Company's
normal retirement age or (ii) 65 years old (hereinafter referred to as
"Retirement") by giving the Employee 30 days advance notice in writing.
(f) RIGHTS UPON TERMINATION. Except as expressly provided in
Sections 6 and 7, upon the termination of the Employee's employment pursuant
to this Section 1, the Employee shall only be entitled to the compensation,
benefits and reimbursements described in Sections 3, 4 and 5 for the period
preceding the effective date of the termination. The payments under this
Agreement shall fully discharge all responsibilities of the Company to the
Employee upon the termination of his employment.
(g) TERMINATION OF AGREEMENT. This Agreement shall terminate when
all obligations of the parties hereunder have been satisfied.
2. EMPLOYEE'S DUTIES.
During the term of his employment under this Agreement, the Employee
shall devote his full business efforts and time to the Company and its
subsidiaries and shall not render services to any other person or entity
without the prior written consent of the Company's President and Chief
Executive Officer. The foregoing, however, shall not preclude the Employee
from engaging in appropriate civic, charitable or religious activities or
from devoting a reasonable amount of time to private investments that do not
interfere or conflict with his responsibilities to the Company.
3. BASE COMPENSATION.
During the term of his employment under this Agreement, the Company
agrees to pay the Employee as compensation for his services a base salary at
the annual rate of $129,996 or at such higher rate as the Company may
determine from time to time. Such salary shall be payable in accordance with
the Company's standard payroll procedures. Once the Company has increased
such salary, it thereafter shall not be reduced. (The annual compensation
specified in this Section 3, together with any increases in such
compensation that the Company may grant from time to time, is referred to in
this Agreement as "Base Compensation.")
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4. EMPLOYEE BENEFITS.
During the term of his employment under this Agreement, the Employee
shall be eligible to participate in employee benefit plans and executive
compensation programs maintained by the Company, subject in each case to the
generally applicable terms and conditions of the plan or program in question
and to the determination of any person or committee administering such plan
or program.
5. BUSINESS EXPENSES.
During the term of his employment under this Agreement, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment
and other business expenses in connection with his duties hereunder. The
Company shall reimburse the Employee for such expenses upon presentation of
an itemized account and appropriate supporting documentation, all in
accordance with the Company's generally applicable policies.
6. CHANCE IN CONTROL.
(a) DEFINITION. For all purposes under this Agreement, "Change in
Control" shall mean the occurrence of any of the following events after the
date of this Agreement:
(i) A change in the composition of the Company's Board of Directors
(the "Board"), as a result of which fewer than two-thirds of the
incumbent directors are directors who either (A) had been directors of the
Company 24 months prior to such change or (B) were elected, or nominated
for election, to the Board with the affirmative votes of at least a
majority of the directors who had been directors of the Company 24 months
prior to such change and who were still in office at the time of the
election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act) through the acquisition or aggregation of securities
is or becomes the beneficial owner, directly or indirectly, of securities
of the Company representing 20 percent or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to vote
at elections of directors (the "Base Capital Stock"), except that any
change in the relative beneficial
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ownership of the Company's securities by any person resulting solely from
a reduction in the aggregate number of outstanding shares of Base Capital
Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of any
securities of the Company.
(b) GOOD REASON. For purposes of Section 6 under this
Agreement, unless otherwise consented to by Employee, "Good Reason" shall mean
that the Employee:
(i) Has been demoted;
(ii) Has incurred a substantial reduction in his authority or
responsibility; or
(iii) Has incurred a reduction in his Base Compensation;
except that a mere change in reporting relationship as a result of
organizational restructuring shall not be considered "Good Reason".
(c) SEVERANCE PAYMENT. If, during the term of this Agreement and
within two years after the occurrence of a Change in Control, the Employee
voluntarily resigns his employment for Good Reason or the Company terminates
the Employee's employment for any reason other than Cause or Retirement, then
the Employee shall be entitled to receive a severance payment from the
Company (the "Severance Payment"). The Severance Payment shall be made in a
lump sum not more than five business days following the date of the
employment termination and shall be in an amount determined under Subsection
(d) below. The Severance Payment shall be in lieu of any further payments to
the Employee under Section 3 and any further accrual of benefits under
Section 4 with respect to periods subsequent to the date of the employment
termination.
(d) AMOUNT. The amount of the Severance Payment shall be equal to
1.5 times the Employee's annual rate of Base Compensation, as in effect on
the date of the employment termination.
(e) INCENTIVE PROGRAMS. If, during the term of this Agreement, a
Change in Control occurs with respect to the Company, the Employee shall
become fully vested in all awards heretofore or hereafter granted to him
under all incentive compensation, deferred compensation, bonus, stock
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option, stock appreciation rights, restricted stock, phantom stock or similar
plans maintained by the Company, any contrary provisions of such plans
notwithstanding.
(f) INSURANCE COVERAGE. During the 18-month period commencing
upon a termination of employment described in Subsection (c) above, the
Employee (and, where applicable, his dependents) shall be entitled to
continue participation in the basic group insurance plans maintained by the
Company, including life, disability and health insurance programs, as if he
were still an employee of the Company. Where applicable, the Employee's
salary for purposes of such plans shall be deemed to be equal to his Base
Compensation. To the extent that the Company finds it impossible to cover
the Employee under its group insurance policies during such 18-month period,
the Company shall provide the Employee with the same level of coverage at the
same cost under individual policies.
(g) NO MITIGATION. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Section 6 (whether by seeking
new employment or in any other manner), nor shall any such payment be reduced
by any earnings that the Employee may receive from any other source.
(h) POOLING-OF-INTEREST ACCOUNTING RULES. Any other provisions of
this Agreement shall be invalid to the extent that the implementation of such
provision would preclude the application of pooling-of-interests accounting
treatment to a transaction (including a Change in Control) for which such
treatment is to be adopted by the Company and which has been approved by the
Board of Directors of the Company. If the pooling-of-interests accounting
rules require the invalidation of one or more provisions of this Agreement,
the adverse impact on the Employee shall be proportionate to the adverse
impact on all similarly situated employees of the Company, as determined by
the Board of Directors of the Company. All determinations regarding the
pooling-of-interests accounting rules for purposes of this Subsection (h)
shall be made by the independent auditors retained by the Company most
recently prior to the Change of Control ("the Auditors").
7. TERMINATION BY COMPANY WITHOUT CAUSE.
(a) CONTINUATION PERIOD. If, during the term of this Agreement,
the Company terminates the Employee's employment for any reason other than
Cause, Retirement or Disability and if Section 6 does not apply, then the
Employee shall be entitled to receive all of the payments
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and benefit coverage described in this Section 7. Such payments and benefit
coverage shall continue for the period commencing on the date when the
employment termination is effective and ending on the earlier of (i) the day
12 months after such date of (ii) the date of the Employee's death (the
"Continuation Period").
(b) BASE COMPENSATION. During the Continuation Period, the
Company shall pay the Employee, in accordance with Section 3, his Base
Compensation at the annual rate in effect on the date of the employment
termination.
(c) INSURANCE COVERAGE. During the Continuation Period, the
Employee (and, where applicable, his dependents) shall be entitled to
continue participation in all insurance or similar plans maintained by the
Company, including (without limitation) life, disability, health and accident
insurance programs, as if he were still an employee of the Company. Where
applicable, the Employee's salary for purposes of such plans shall be deemed
to be equal to his Base Compensation. To the extent that the Company finds
it impossible to cover the Employee under its group insurance policies during
the Continuation Period, the Company shall provide the Employee with the same
level of coverage at the same cost under individual policies.
(d) INCENTIVE PROGRAMS. The Continuation Period shall be counted
as employment with the Company for purposes of vesting under all executive
compensation programs maintained by the Company, including (without
limitation) incentive compensation, deferred compensation, bonus, stock
option, stock appreciation rights, restricted stock, phantom stock or similar
plans maintained by the Company (any contrary provisions of such plans
notwithstanding), but not including any pension, thrift or profit-sharing
plan intended to qualify under section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The preceding sentence shall not be
construed to require the Company to grant any new awards to the Employee
under such executive compensation programs during the Continuation Period.
The Continuation Period shall also be counted as employment with the Company
for purposes of determining the expiration date of any stock option granted
by the Company and held by the Employee when his employment terminates.
(e) MITIGATION AND NEW EMPLOYMENT. The Employee shall not be
required to mitigate the amount of any cash payment contemplated by this
Section 7, nor shall any such payment be reduced by any earnings that the
Employee may receive from any other source. All of the Employee's insurance
coverage under Subsection (c) above shall be
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discontinued (subject to applicable law) when the Employee becomes eligible
for any group insurance coverage in connection with new employment or
self-employment, regardless of whether the new group insurance coverage is
equivalent to the coverage described in Subsection (c) above.
8. LIMITATION ON PAYMENTS.
(a) BASIC RULE. Any other provision of this Agreement
notwithstanding, the Company shall not be required to make any payment or
transfer any property to, or for the benefit of, the Employee (under this
Agreement or otherwise) that would be nondeductible by the Company by reason
of section 280G of the Code or that would subject the Employee to the excise
tax described in section 4999 of the Code. All calculations required by this
Section 8 shall be performed by Auditors, based on information supplied by
the Company and the Employee, and shall be binding on the Company and the
Employee. All fees and expenses of the Auditors shall be paid by the Company.
(b) REDUCTIONS. If the amount of the aggregate payments or
property transfers to the Employee must be reduced under this Section 8, then
the Employee shall direct in which order the payments or transfers are to be
reduced, but no change in the timing of any payment or transfer shall be made
without the Company's consent. As a result of uncertainty in the application
of sections 280G and 4999 of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that a payment will have been made
by the Company that should not have been made (an "Overpayment") or that an
additional payment that will not have been made by the Company could have been
made (an "Underpayment"). In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company
or the Employee that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Employee that he shall repay to the
Company, together with interest at the applicable federal rate specified in
section 7872(f) (2) of the Code; provided, however, that no amount shall be
payable by the Employee of the Company if and to the extent that such payment
would not reduce the amount that is nondeductible under section 280G of the
Code or is subject to an excise tax under sections 4999 of the Code. In the
event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to, or for
the benefit of, the Employee, together with interest at the applicable
federal rate specified in section 7872(f) (2) of the Code.
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9. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. The Company shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all substantially all of the
Company's business and/or assets, by an agreement in substance and form
satisfactory to the Employee, to assume this Agreement and to agree expressly
to perform this Agreement in the same manner and to the same extent as the
Company would be required to perform it in the absence of a succession. The
Company's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee
to all of the compensation and benefits to which he would have been entitled
hereunder if the Company had involuntarily terminated his employment without
Cause immediately after such succession becomes effective. For all purposes
under this Agreement, the term "Company" shall include any successor to the
Company's business and/or assets which executes and delivers the assumption
agreement described in this Subsection (a) or which becomes bound by this
Agreement by operation of law.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employees' personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. NO DISCLOSURE OR SOLICITATION.
(a) CONFIDENTIAL INFORMATION. During the term of this Agreement
and at all times thereafter, the Employee shall not, without the prior
written consent of the Board, disclose or use for any purpose (except in the
course of his employment under this Agreement and in furtherance of the
business of the Company) confidential information, proprietary data and
customer lists of the Company, except as required by applicable law or legal
process; provided, however, that "confidential information, proprietary data
and customer lists" shall not include any information known generally to the
public or ascertainable from public or published information (other than as a
result of unauthorized disclosure by the Employee) or any information of a
type not otherwise considered confidential by persons engaged in the same
business or a business similar to that conducted by the Company. The
Employee agrees to deliver to the Company at the termination of his
employment, or at any other time the Company may request, all memoranda,
notes, plans, records, lists, reports and any other documents (and
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copies thereof) relating to the business of the Company which he may then
possess or have under his control.
(b) SOLICITATION OF EMPLOYEES. During the term of this Agreement
and, in the event of a termination under Section 7, during the Continuation
Period, the Employee shall not, directly or indirectly:
(i) Contact any employee or consultant of the Company or any of its
subsidiaries to solicit such employee or consultant (or any entity in
which such employee or consultant has a significant equity interest) to
become an employee, partner or independent contractor of the Employee or
any other person; or
(ii) Employ or retain any present or former employee or consultant
of the Company or any of its subsidiaries (or any entity in which such
employee or consultant has a significant equity interest) as an employee,
partner or independent contractor of the Employee or any other person.
11. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all
notices shall be directed to the attention of its Secretary.
(b) WAIVER. No provisions of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed
to in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by
the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into
by either party with respect to the subject matter hereof. This Agreement
supersedes, without limitation, any prior
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agreement entered into by the parties (or by any wholly owned subsidiary of
the Company and the Employee) hereto.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes required to be withheld by law.
(e) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(f) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.
(g) ARBITRATION. Except as otherwise provided in Section 8, any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by binding arbitration in accordance with
the California Code of Civil Procedure, Section 1280 et seq., except where
federal law requires otherwise, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. All fees
and expenses of the arbitrator and such Association shall be paid as
determined by the arbitrator.
(h) NO ASSIGNMENT. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or
other creditor's process, and any action in violation of this Subsection (h)
shall be void.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its
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duly authorized officer, as of the day and year first above written.
/s/ XX XXXXX
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Employee
FOUNDATION HEALTH CORPORATION
By /s/ XXXXXX X. XXXXXXX
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Title PRESIDENT
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