Exhibit 10.21

 

FORM

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (this “Restricted Stock Agreement”) is made and
entered into as of [DATE OF GRANT] (the “Date of Grant”), by and between Health
Net, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Recipient”).

 

WHEREAS, the Compensation and Stock Option Committee (the “Committee”) of the
Board of Directors (the “Board”) of the Company has approved the grant of
Restricted Stock, as hereinafter defined, to the Recipient as set forth below
under the Company’s [NAME OF PLAN] (the “Plan”). Capitalized terms used but not
defined herein shall have the meanings set forth in the Plan.

 

NOW, THEREFORE, in consideration of the covenants and agreements herein
contained and intending to be legally bound hereby, the parties agree as
follows:

 

1. Grant of Restricted Stock. The Company hereby grants to the Recipient [NUMBER
OF SHARES] restricted shares (the “Restricted Stock”) of the Common Stock, par
value $.001 per share (the “Common Stock”) of the Company, subject to all of the
terms and conditions of this Restricted Stock Agreement. As a condition of the
effectiveness of this grant, the Recipient shall pay to the Company as soon as
practicable the par value in cash for each share of Restricted Stock subject to
this grant. The Recipient’s grant and record of share ownership shall be kept on
the books of the Company, until the restrictions on transfer have lapsed
pursuant to Sections 2 or 3 below. Shares that have become vested pursuant to
Sections 2 or 3 below may be evidenced by stock certificates, at the request of
the Recipient, which certificates shall be registered in the name of the
Recipient and delivered to Recipient within ten (10) days of such request.

 

2. Lapse of Restrictions. Except as otherwise provided in Section 3 hereof, the
restrictions on transfer set forth in Section 4 hereof shall lapse (the “Vesting
Date”) with respect to all shares of the Restricted Stock on the [NUMBER]
anniversary of the Grant Date.

 

3. Termination of Service.

 

(a) If prior to the Vesting Date, the Recipient’s employment or service with the
Company is terminated by either the Recipient or the Company for any reason (a
“Termination Event”), then all shares of Restricted Stock not yet vested shall
be immediately forfeited at such time, and the Company shall return to the
Recipient an amount equal to the par value of the Restricted Stock which was
paid by the Recipient to the Company as described in Section 1 above.

 

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(b) If the Recipient violates the terms of Section 5 of this Agreement (a
“Breach Event”), in addition to being subject to all remedies in law or equity
that the Company may assert, then at any time thereafter the Company, in its
sole and absolute discretion, may, with respect to any Restricted Stock that has
vested within six (6) months of the Recipient’s termination of employment: (i)
to the extent that the Restricted Stock is beneficially owned by the Recipient,
reacquire from the Recipient, in return for an amount equal to the par value of
the Restricted Stock which was paid by the Recipient to the Company as described
in Section 1 above, any or all of the shares of Restricted Stock; and (ii) to
the extent that the Restricted Stock has been sold, assigned or otherwise
transferred by the Recipient, recover from the Recipient an amount equal to the
Gain Realized (as defined in Section 5 below) from such sale, assignment or
transfer.

 

(c) Upon the occurrence of a Breach Event, the Company may elect to purchase all
or any portion of the Restricted Stock pursuant to this Section 3 by delivery of
written notice (the “Repurchase Notice”) to the Recipient within ninety (90)
days after the occurrence of such Breach Event.

 

4. Restrictions on Transfer. Unless earlier vested pursuant to Section 2 above,
shares of Restricted Stock may not be transferred or otherwise disposed of by
the Recipient prior to [DATE], including by way of sale, assignment, transfer,
pledge or otherwise except by will or the laws of descent and distribution.

 

5. Employment/Association with Company Competitor. The Recipient hereby agrees
that, during (i) the six-month period following a termination of the Recipient’s
employment with an Employer that entitles the Recipient to receive severance
benefits under an agreement with or the policy of the Company or (ii) the
twelve-month period following a termination of the Recipient’s employment with
an Employer that does not entitle the Recipient to receive such severance
benefits (the period referred to in either clause (i) or (ii), the
“Noncompetition Period”), the Recipient shall not undertake any employment or
activity (including, but not limited to, consulting services) with a Competitor
(as defined below), where the loyal and complete fulfillment of the duties of
the competitive employment or activity would call upon the Recipient to reveal,
to make judgments on or otherwise use any confidential business information or
trade secrets of the business of the Company or any Subsidiary to which the
Recipient had access during the Recipient’s employment with the Employer. In
addition, the Recipient agrees that, during the Noncompetition Period applicable
to the Recipient following termination of employment with the Employer, the
Recipient shall not, directly or indirectly, solicit, interfere with, hire,
offer to hire or induce any person, who is or was an employee of the Company or
any of its Subsidiaries during the 12 month period prior to the date of such
termination of employment, to discontinue his or her relationship with the
Company or any of its Subsidiaries or to accept employment by, or enter into a
business relationship with, the Recipient or any other entity or person. In the
event that the Recipient breaches the covenants set forth in this first
paragraph of Section 5, it shall be considered a Breach Event under Section 3
above.

 

For purposes of this Section 5: “Gain Realized” shall equal the difference
between (x) the par value paid by the Recipient for the Restricted Stock and (y)
the greater of the Fair Market

 

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Value (as defined in the Plan) of the Common Stock representing the Restricted
Stock (I) on the date of transfer of such Restricted Stock or (II) on the date
such competitive activity with a Competitor was commenced by the Recipient; and
“Competitor” shall refer to any health maintenance organization or insurance
company that provides managed health care or related services similar to those
provided by the Company or any Subsidiary.

 

It is hereby further agreed that if any court of competent jurisdiction shall
determine that the restrictions imposed in this Section 5 are unreasonable
(including, but not limited to, the definition of Market Area or Competitor or
the time period during which this provision is applicable), the parties hereto
hereby agree to any restrictions that such court would find to be reasonable
under the circumstances.

 

The Recipient acknowledges that the services to be rendered by the Recipient to
the Company are of a special and unique character, which gives this Agreement a
peculiar value to the Company, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law, and that a material
breach or threatened breach by the Recipient of any of the provisions contained
in this Section 5 will cause the Company irreparable injury. Recipient therefore
agrees that the Company may be entitled, in addition to the remedies set forth
above in this Section 5 and any other right or remedy, to a temporary,
preliminary and permanent injunction, without the necessity of proving the
inadequacy of monetary damages or the posting of any bond or security, enjoining
or restraining Recipient from any such violations or threatened violations.

 

6. Rights as a Stockholder. The Company shall hold in escrow all dividends, if
any, that are paid with respect to the shares of Restricted Stock until all
restrictions on such shares have lapsed. Recipient agrees that the right to vote
any shares for which the restrictions on transfer set forth in Section 4 hereof
have not yet lapsed (the “Unvested Shares”) will be held by the Company and,
accordingly, the Employee shall execute an Irrevocable Proxy in favor of the
Company for all shares of Restricted Stock in the form supplied by the Company.

 

7. Notices. Any notice or communication given hereunder shall be in writing and
shall be given by fax or first class mail, certified or registered with return
receipt requested, and shall be deemed to have been duly given three (3) days
after mailing or twenty-four (24) hours after transmission of a fax to the
following addresses:

 

To the Recipient at:

   [NAME]      [ADDRESS]

To the Company at:

   Health Net, Inc.      21650 Oxnard Street      Woodland Hills, California
91367      Attention: General Counsel

 

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or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

 

8. Securities Laws Requirements. The Company shall not be obligated to transfer
any shares of Common Stock from the Recipient to another party, if such
transfer, in the opinion of counsel for the Company, would violate the
Securities Act of 1933, as amended from time to time (the “Securities Act”) (or
any other federal or state statutes having similar requirements as may be in
effect at that time). Further, the Company may require as a condition of
transfer of any shares to the Recipient that the Recipient furnish a written
representation that he or she is holding the shares for investment and not with
a view to resale or distribution to the public. The Company either has or will
file an appropriate Registration Statement on Form S-8 (or other applicable
form), and has taken or will take such actions as necessary to keep the
information therein current from time to time, in order to register the
Restricted Stock under the Securities Act and shall use its commercially
reasonable efforts to cause such Registration Statement to become effective and
to maintain the effectiveness of such registration.

 

9. Protections Against Violations of Restricted Stock Agreement. No purported
sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift,
transfer in trust (voting or other) or other disposition of, or creation of a
security interest in or lien on, any of the shares of Restricted Stock by any
holder thereof in violation of the provisions of this Restricted Stock Agreement
or the Certificate of Incorporation or the By-Laws of the Company, shall be
valid, and the Company will not transfer any of said shares of Restricted Stock
on its books nor will any of said shares of Restricted Stock be entitled to
vote, nor will any dividends be paid thereon, unless and until there has been
full compliance with said provisions to the satisfaction of the Company. The
foregoing restrictions are in addition to and not in lieu of any other remedies,
legal or equitable, available to enforce said provisions.

 

10. Taxes. The Recipient understands that he or she (and not the Company) shall
be responsible for any tax obligation that may arise as a result of the
transactions contemplated by this Restricted Stock Agreement and shall pay to
the Company the amount determined by the Company to be such tax obligation at
the time such tax obligation arises. If the Recipient fails to make such
payment, the number of shares necessary to satisfy the tax obligations shall be
forfeited. The Recipient shall promptly notify the Company of any election made
pursuant to Section 83(b) of the Code.

 

THE RECIPIENT ACKNOWLEDGES THAT IT IS THE RECIPIENT’S SOLE RESPONSIBILITY AND
NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE,
IN THE EVENT THAT THE RECIPIENT DESIRES TO MAKE THE ELECTION.

 

11. Change of Control. Section [INSERT SECTION NUMBER] of the Plan provides for
the acceleration of exercisability of the Vesting Date applicable to the
Restricted Stock in the event of a Change in Control, as such term is defined in
the Plan. The Recipient hereby acknowledges that the Committee retains the right
to determine whether the acceleration of vesting provided for in said Section
[INSERT SECTION NUMBER] shall have occurred

 

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with respect to the Restricted Stock (notwithstanding the provisions of such
Section [INSERT SECTION NUMBER]) in those instances (unless otherwise determined
by the Board) in which (A) the holders of the Common Stock immediately prior to
a Consummated Transaction or Control Purchase (each as defined in the Plan) own
more than 50% of the voting common stock of the surviving corporation
immediately after such Consummated Transaction or Control Purchase, (B) the
holders of all classes of common stock of the Company immediately prior to a
Consummated Transaction or Control Purchase own more than 50% of the total
equity of the surviving corporation immediately after such Consummated
Transaction or Control Purchase, (C) the Consummated Transaction or Control
Purchase does not result in a Board Change (as defined in the Plan) and (D) the
Consummated Transaction or Control Purchase does not result in a substantial
change in the executive officers of the Company.

 

12. Failure to Enforce Not a Waiver. The failure of the Company to enforce at
any time any provision of this Restricted Stock Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.

 

13. Governing Law. This Restricted Stock Agreement shall be governed by and
construed according to the laws of the State of Delaware without regard to its
principles of conflict of laws.

 

14. Amendments. This Restricted Stock Agreement may be amended or modified at
any time only by an instrument in writing signed by each of the parties hereto,
and approved by the Committee. The Board may terminate or amend the Plan at any
time; provided, however, that the termination or any modification or amendment
of the Plan shall not, without the consent of the Recipient, affect the rights
of the Recipient under this Restricted Stock Agreement.

 

15. Survival of Terms. This Restricted Stock Agreement shall apply to and bind
the Recipient and the Company and their respective permitted assignees and
transferees, heirs, legatees, executors, administrators and legal successors.

 

16. Agreement Not a Contract for Services; Rights to Terminate Employment.
Neither the grant of the Restricted Stock, this Restricted Stock Agreement nor
any other action taken pursuant to this Restricted Stock Agreement shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Recipient has a right to continue to provide services as an officer,
director, employee or consultant of the Company and/or the Employer for any
period of time or at any specific rate of compensation. Nothing in the Plan or
in this Restricted Stock Agreement shall confer upon the Recipient the right to
continue in the employment of an Employer or affect any right which an Employer
may have to terminate the employment of the Recipient. The Recipient
specifically acknowledges that the Employer intends to review the Recipient’s
performance from time to time, and that the Company and/or the Employer has the
right to terminate the Recipient’s employment at any time, including a time in
close proximity to the Vesting Date, for any reason, with or without cause. The
Recipient acknowledges that upon his or her termination of employment with an
Employer for any reason, then all shares of Restricted Stock not yet vested
shall be immediately forfeited at such time, and

 

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the Company shall return to the Recipient an amount equal to the par value of
the Restricted Stock which was paid by the Recipient to the Company as is set
forth in Section 3 of this Restricted Stock Agreement.

 

17. Decisions of Board or Committee. The Board or the Committee shall have the
right to resolve all questions which may arise in connection with the Restricted
Stock. Any interpretation, determination or other action made or taken by the
Board or the Committee regarding the Restricted Stock, the Plan or this
Restricted Stock Agreement shall be final, binding and conclusive.

 

18. Failure to Execute Agreement. This Restricted Stock Agreement and the
Restricted Stock granted hereunder is subject to the Recipient returning a
counter-signed copy of this Restricted Stock Agreement to the designated
representative of the Company on or before 60 days after the date of its
distribution to the Recipient. In the event that the Recipient fails to so
return a counter-signed copy of this Agreement within such 60-day period, then
this Restricted Stock Agreement and the Restricted Stock granted hereunder shall
automatically become null and void and shall have no further force or effect.

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Restricted Stock Agreement on the day and year first above written.

 

Health Net, Inc.  

Name:

  Jay M. Gellert

Title:

  President and Chief Executive Officer THE UNDERSIGNED RECIPIENT HEREBY
EXPRESSLY ACKNOWLEDGES AND AGREES THAT HE/SHE IS AN EMPLOYEE AT WILL AND MAY BE
TERMINATED BY THE EMPLOYER AT ANY TIME, WITH OR WITHOUT CAUSE. The undersigned
hereby accepts and agrees to all the terms and provisions of the foregoing
Restricted Stock Agreement and to all the terms and provisions of the Health
Net, Inc. [PLAN NAME], as amended to date, incorporated by reference herein.
Recipient:   [NAME]

 

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IRREVOCABLE PROXY

 

I, the undersigned, hereby irrevocably authorize and empower Jay M. Gellert, the
President and Chief Executive Officer of Health Net, Inc. (the “Company”), and
B. Curtis Westen, the Senior Vice President, General Counsel and Secretary of
the Company, or each of their successors in the event either of them is no
longer serving the Company in such capacity, (collectively, the “Proxies”) to
represent me with respect to any and all shares of Restricted Stock (as such
term is defined in the Restricted Stock Agreement (the “Restricted Stock
Agreement”) by and between the Company and the undersigned) that are not yet
vested, at any and all general meetings of the shareholders of the Company.

 

The Proxies are irrevocably authorized and empowered to receive, in my stead,
any and all notices of and invitations to the Company’s general meetings, and to
participate in all such general meetings; and the Proxies are authorized and
empowered to vote all such unvested shares in such manner as the Proxies shall,
in their sole discretion, deem to be in the best interests of the Company.

 

This proxy shall remain in full force and effect until the shares of Restricted
Stock granted to me pursuant to the Restricted Stock Agreement have vested in
accordance with the terms of the Restricted Stock Agreement, unless otherwise
determined by the Company in writing.

 

NAME:     DATE:    

SIGNATURE:

   

 

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