EXHIBIT 10.74
[LETTERHEAD]
July 30, 1998
Mr. Michael White
8446 Marina Vista Lane
Fair Oaks, CA 95628
Re: Terms of Employment
Dear Michael:
On behalf of Foundation Health Systems, Inc. (hereinafter "Company"), I would
like to confirm our offer to you for the exempt position of Senior Vice
President and Treasurer. In this position you will report directly to the
Executive Vice President and Chief Financial Officer of the Company. Effective
May 16, 1998, you will earn a monthly salary of $16,666.67. As is our current
practice, you will continue to be paid on a biweekly basis with 26 pay periods
per year. Performance of each of the Company's Associates is generally reviewed
on an annual basis, and any adjustment to salary is ordinarily made upon the
completion of such performance review. You will receive a $1,000 per month
automobile allowance, subject to any changes that might be made from time to
time to the overall automobile allowance program.
In addition, during 1998 you will continue to be eligible to participate in the
Executive Incentive Plan which allows you an opportunity to earn up to 50
percent of your base salary. The receipt of any incentive compensation is
contingent upon achieving corporate and individual objectives. You must be
actively employed and on the Company payroll at the time incentive compensation
is paid. Incentive compensation calculations are based on the base salary in
effect on December 31st of the Executive Incentive Plan year. Incentive
compensation payments are subject to normal payroll deductions.
I am pleased to advise you that the Company's Compensation and Stock Option
Committee (hereinafter "Committee") has granted to you an out-of-cycle stock
option to purchase 10,000 shares of the Company's Class A Common Stock. The
exercise price for the option is equal to the last sales price on May 7, 1998,
which was $31.9375. A stock option agreement formalizing this grant will follow
under separate cover. Any future recommendation for additional options made by
the Company's management will be made consistent with your performance and
generally comparable to peer managers of the Company at the time option
recommendations are presented to the Committee. At all times, all stock option
grants remain within the sole discretion of the Committee.
In addition to the foregoing, and subject to your continued employment with the
Company, you will be eligible to continue participation in Company-offered
benefits if you meet certain criteria. These benefits include group medical,
dental, vision, life insurance, short-term and long-term disability insurance,
401(k) plan, Company-recognized holidays, the employee stock purchase
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Offer ltr/Michael White
July 30, 1998
plan, tuition reimbursement and participation in our deferred compensation
program. In our 401(k) plan, the Company currently matches your contribution at
$.50 for every dollar contributed up to six percent (6%). The Company's Paid
Time Off ("PTO") benefit is provided to you for illness, vacation and personal
time off. Under the PTO program you accrue PTO at a rate of 23 days per year
between your date of hire and 120 months of service, and 25 days per year
thereafter. In case of a conflict between this summary and the official
documents, the official documents will always govern. In addition, the Company
reserves the right to change, amend, or terminate the benefits plans at any
time, with or without notice.
The Company will provide you with protection in the event of the termination of
your employment without "cause" (absent a change of control). Under the terms of
this agreement "cause" is defined as clear and willful failure to perform your
duties not resulting from complete or partial incapacity due to physical or
mental illness or impairment that continues after reasonable written notice and
an opportunity to correct such failure; gross misconduct or fraud; or conviction
of, or a plea of "guilty" or "no contest" to a felony. In the event that your
employment is terminated involuntarily without cause, and you agree and sign the
Company's standard Severance Agreement and Release of Claims document, you will
be provided a severance package which will include a severance payment totaling
twelve (12) months of base salary in effect at the date of your termination,
together with all other severance benefits payable under the Company's
"Separation Agreement and Release of Claims". Payment of base salary under
provisions of the severance package will be made on a salary continuation basis
until the sum of twelve (12) months of base salary is paid in full. During this
period of severance payment, should you elect to continue your medical benefits,
the Company will pay the premium to provide you and your dependents medical and
dental coverage under COBRA, or if not available under COBRA, some other plan
substantially similar to that which the Company provided you as an active
employee.
If within the first two years following a change of control, your employment is
involuntarily terminated by the Company without cause, as defined above, or
should you voluntarily terminate your employment for "Good Reason", then within
thirty (30) days of your termination from the Company, you will be provided a
change of control severance payment totaling eighteen (18) months of base salary
in effect at the date of your termination.
For the purposes of this agreement, Change of Control shall mean any of the
following which occurs subsequent to the date of this offer:
(a) 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 the company or any employee
benefit plan sponsored by the Company 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 the Company representing twenty
percent (20%) or more of the combined voting power of the outstanding
securities of the Company 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
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Offer ltr/Michael White
July 30, 1998
case of rights to acquire the Company's securities) (the "Securities");
b) As a result of a tender offer, merger, sale of assets or other major
transaction, the persons who are directors of the Company immediately prior
to such transaction cease to constitute a majority of the Board of
Directors of the Company (or any successor corporations) immediately after
such transaction;
c) The Company is merged or consolidated with any other person, firm,
corporation or other entity and, as a result, the shareholders of the
Company, 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;
d) A tender offer or exchange offer is made and consummated for the
ownership of twenty percent (20%) or more of the outstanding Securities of
the Company;
e) The Company transfers substantially all its assets to another
person, firm, corporation or other entity that is not a wholly-owned
subsidiary of the Company; or
f) The Company enters into a management agreement with another person,
firm, corporation or other entity that is not a wholly-owned subsidiary of
the Company and such management agreement extends hiring and firing
authority over Employee to an individual or organization other than the
Company.
For the purposes of this agreement, "Good Reason" is defined as any one of the
following:
a) A demotion or substantial reduction in the scope of Employee's
position, duties, responsibilities or status with the Company or any new
parent company of the Company, or any removal of Employee from or any
failure to reelect Employee to any of the positions (or functional
equivalent of such positions) held by Employee immediately prior to a
change-of-control, except in connection with the termination of his/her
employment for disability, normal retirement or Cause or by Employee
voluntarily other than for Good Reason;
b) A reduction by the Company in Employee's Base Salary or a material
reduction in the benefits or perquisites available to Employee as in effect
immediately prior to any such reduction;
c) A relocation of Employee to a work location more than fifty (50) miles
from Employee's work location immediately prior to such proposed
relocation; provided that such proposed relocation results in a materially
greater commute for Employee based on Employee's residence immediately
prior to such relocation; or
d) The failure of the Company to obtain an assumption agreement,
encompassing this agreement, from any successor resulting from a change of
control.
During the eighteen (18) month period from and after the date of your
termination of
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Offer ltr/Michael White
July 30, 1998
employment, the Company will also provide you and your covered dependents,
medical and dental coverage by paying the COBRA premium, if eligible under
COBRA, or the premium to provide coverage substantially similar to that which
the Company provided you as an active employee. Additionally, if within the
first two years following a change of control, your employment is involuntarily
terminated by the Company without cause or you voluntarily terminate your
employment for "Good Reason", any and all shares of FHS stock granted under the
FHS and FHC Stock Option Programs will become fully vested.
Additionally, should you be required to relocate from your current primary work
location the Company will provide you relocation assistance as outlined in the
attached amended Relocation Benefits program. This reimbursement will be grossed
up to cover the associated tax liability that you would likely to incur. To
provide further assistance at the time of relocation, you will be provided a
relocation bonus totaling three months of base salary in effect at that time.
You agree, through the signing of this letter, that your employment with the
Company is at the mutual consent of each employee and the Company and is an
"at-will" employment relationship. Nothing in this letter is intended to
guarantee your continued employment with the Company or employment for any
specific length of time. While the Company hopes that your employment
relationship will be mutually beneficial and rewarding, both you and the Company
retain the right to terminate the employment relationship at will, at any time,
with or without cause. The at-will nature of your employment with the Company
cannot be modified or superseded except by a written agreement, signed by you
and the President and Chief Operating Officer of FHS, that clearly and expressly
specifies the intent to modify the at-will relationship. In accepting employment
with the Company, you acknowledge that no Company representative has made any
oral or written promise or representation contrary to this paragraph.
Furthermore, you acknowledge that this paragraph represents the only agreement
between you and the Company concerning the duration of your employment and the
at-will nature of the employment relationship.
During your employment with the Company, you will have access to and become
acquainted with certain proprietary and confidential information and practices
("Confidential Information"). Confidential Information includes all information
that is not generally known to the Company's competitors and the public, and
that has or could have commercial value to the Company's business. It includes,
but is not limited to, customer information, customer lists, and pricing
methodology.
In accepting this new position with the Company, you acknowledge and agree
that all documents, memoranda, reports, files, correspondence, lists and
other written, electronic and graphic records affecting or relating to the
Company's business that you may prepare, use, observe, possess or control
(including, but not limited to, any materials containing Confidential
Information) shall be and remain the Company's sole property, and you agree
not to make use of or disclose to any third party any such material,
confidential or otherwise, except for the benefit of the Company and in the
course of your employment with the Company. If your employment is terminated
(voluntary or otherwise), you agree to deliver to the Company within five
business
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Offer ltr/Michael White
July 30, 1998
days of termination all written and/or graphic records affecting or relating to
the Company's business, including but not limited to material containing
Confidential Information.
You have agreed and certify that you have no other agreement, relationship, or
commitment to any other person or entity that conflicts with your obligations to
the Company under this offer letter. If you are unable to so certify, all such
agreement(s) must be identified here:
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You agree not to use or disclose any confidential information or trade secrets
of others, including all prior employers, in your work at the Company. Should a
situation arise in which you believe that your job duties may lead to the use or
disclosure of confidential information or trade secrets of another, you agree to
notify the Executive Vice President and Chief Financial Officer or myself in the
Human Resources Department of the situation immediately.
Finally, this letter sets forth all the terms of this offer of employment. It
supersedes all previous and contemporaneous oral and written communications and
representations. To confirm your acceptance of these terms, please sign, date
and return a copy of this letter to the Senior Vice President of Human
Resources. An additional copy of the offer letter is enclosed for your files.
Michael, we are pleased to offer you this promotion and are excited about the
contributions that you can make to the Company as part of our management
team. Should you have any questions please feel free to contact me at (916)
631-5061.
Sincerely,
/s/ Danny O. Smithson
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Danny O. Smithson
Senior Vice President
Corporate Human Resources
Attachment: Relocation Benefit guideline
cc: Steven P. Erwin
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Offer ltr/Michael White
July 30, 1998
I HEREBY ACCEPT AND AGREE TO THE TERMS OF THIS OFFER OF EMPLOYMENT AS OUTLINED
ABOVE.
/s/ Michael P. White 7/31/98
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SIGNATURE DATE