Exhibit 10.1

JOSEPH C. CAPEZZA

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
October 9, 2007, by and between Health Net, Inc., a Delaware corporation (the
"Company"), with its principal place of business located at 21650 Oxnard Street,
Woodland Hills, California 91367, and Joseph C. Capezza ("Executive").

RECITALS

WHEREAS, the Company desires to employ Executive and Executive desires to render
services to the Company as an employee; and

WHEREAS, the Company and Executive are entering into this Agreement to establish
the terms and conditions of the employment relationship.

NOW, THEREFORE, in consideration of the following covenants, conditions and
promises contained herein, and other good and valuable consideration, the
Company and Executive hereby agree as follows:

1.    Duties and Salary.

A.    Duties.  Executive’s employment with the Company shall commence on
November 1, 2007 (the “Effective Date”) and Executive’s title will be Executive
Vice President & Chief Financial Officer. Executive shall report directly to the
President and Chief Executive Officer of the Company. Executive’s duties and
responsibilities are to provide executive leadership, infrastructure, processes
and management of the Company’s Finance organization, but the Company reserves
the right to assign Executive other duties as needed and to change Executive’s
duties from time to time on reasonable notice, based on Executive’s skills and
the needs of the Company.

B.    Salary.  Executive will be paid a base salary at the annual rate of
$550,000, which salary will be paid on a pro-rated bi-weekly basis, less
applicable withholdings ("Base Salary"), covering all hours worked. Generally,
Executive’s Base Salary will be reviewed annually, but the Company reserves the
right to change Executive’s compensation from time-to-time. Pursuant to the
charter of the Compensation Committee of the Company’s Board of Directors (the
“Committee”), any such adjustment to Executive’s compensation must be made with
the approval of the Committee and, in the event that Executive constitutes one
of the top two (2) highest paid executive officers of the Company, with the
ratification of the Company’s Board of Directors.

C.    Engagement Bonus.  Executive will receive an engagement bonus in the
amount of $350,000 payable within thirty (30) days of the Effective Date.
Executive must be actively employed and on the Company payroll at the time the
bonus is paid. If Executive voluntarily Terminates (as defined below) employment
with the Company or if the Company Terminates (as defined below) Executive’s
employment for Cause within the first twenty-four

 

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(24) months of employment, Executive will be required to repay a prorated
portion of the engagement bonus to the Company based on the number of months
Executive has been employed by the Company as of the date of such Termination.

D.    Disclosure of Personal Compensation Information.  As an “executive
officer” of the Company (as such term is defined in the rules and regulations of
the Securities and Exchange Commission (“SEC”)), information regarding
Executive’s employment arrangements with the Company, including, among other
things, the terms of this Agreement and any stock option agreement, restricted
stock agreement, restricted stock unit agreement, performance share agreement
and/or severance agreement Executive enters into with the Company from time to
time (collectively, “Personal Compensation Information”), may be disclosed in
filings with the SEC, the New York Stock Exchange (“NYSE”) and/or other
regulatory organizations upon the occurrence of certain triggering events. Such
triggering events include, but are not limited to, the execution of this
Agreement and any amendments thereto, changes in Executive’s Base Salary, any
annual incentive payment (whether in the form of cash or equity) awarded to
Executive and the establishment of performance goals under the Company’s
incentive plans. Executive’s execution of this Agreement will serve as
Executive’s acknowledgement that Executive’s Personal Compensation Information
may be publicly disclosed from time to time in filings with the SEC, NYSE or
otherwise as required by applicable law.

2.    Adjustments and Changes in Employment Status.  Executive understands that
the Company reserves the right to make personnel decisions regarding Executive’s
employment, including, but not limited to, decisions regarding any promotion,
salary adjustment, transfer or disciplinary action, up to and including
Termination (as defined below), consistent with the needs of the business of the
Company; provided, however, that those decisions do not violate or alter any of
the terms of this Agreement.

For purposes of this Agreement, the capitalized terms “Termination” and
“Terminate,” shall mean Executive’s Separation from Service (as defined below)
from the Company. A “Separation from Service” shall have the meaning ascribed to
such term in Treasury Regulations promulgated under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), from time to time and other
publications of the Internal Revenue Service published in the Internal Revenue
Bulletin from time to time.

3.    Protection of Proprietary and Confidential Information.  Executive agrees
that Executive’s employment creates a relationship of confidence and trust with
the Company with respect to Proprietary and Confidential Information (as defined
below) of the Company learned by Executive during Executive’s employment.

A.    Except as may be required of the Executive by law, Executive agrees not to
directly or indirectly use or disclose any of the Proprietary and Confidential
Information of the Company or any of its affiliates at any time except in
connection with the services Executive provides to such entities. “Proprietary
and Confidential Information” shall mean trade secrets, confidential knowledge,
data or any other proprietary or confidential information of the Company or any
of its affiliates, or of any customers, members, employees or directors of any
of such entities, but shall not include any information that (i) was publicly
known and made generally available in the public domain prior to the time of
disclosure to Executive by the

 

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Company or (ii) becomes publicly known and made generally available after
disclosure to Executive by the Company other than as a result of a disclosure by
Executive in violation of this Agreement. By way of illustration but not
limitation, “Proprietary and Confidential Information” includes: (i) trade
secrets, documents, memoranda, reports, files, correspondence, lists and other
written and graphic records affecting or relating to any such entity’s business;
(ii) confidential marketing information including without limitation marketing
strategies, customer and client names and requirements, services, prices,
margins and costs; (iii) confidential financial information; (iv) personnel
information (including without limitation employee compensation); and (v) other
confidential business information.

B.    Executive further agrees that at all times during Executive’s employment
and thereafter, Executive will keep in confidence and trust all Proprietary and
Confidential Information, and that Executive will not use or disclose any
Proprietary and Confidential Information or anything related to such information
without the written consent of the Company, except as may be necessary in the
ordinary course of performing Executive’s duties to the Company.

C.    All Company property, including, but not limited to, Proprietary and
Confidential Information, documents, data, records, apparatus, equipment and
other physical property, whether or not pertaining to Proprietary and
Confidential Information, provided to Executive by the Company or any of its
affiliates or produced by Executive or others in connection with Executive’s
providing services to the Company or any of its affiliates shall be and remain
the sole property of the Company or its affiliates (as the case may be) and
shall be returned promptly to such appropriate entity as and when requested by
such entity. Executive shall return and deliver all such property upon
termination of Executive’s employment, and Executive may not take any such
property or any reproduction of such property upon such termination.

D.    Executive recognizes that the Company and its affiliates have received and
in the future will receive information from third parties which is private,
proprietary or confidential information subject to a duty on such entity’s part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. Executive agrees that during Executive’s employment,
and thereafter, Executive owes such entities and such third parties a duty to
hold all such private, proprietary or confidential information received from
third parties in the strictest confidence and not to disclose it, except as
necessary in carrying out Executive’s work for such entities consistent with
such entities’ agreements with such third parties, and not to use it for the
benefit of anyone other than for such entities or such third parties consistent
with such entities’ agreements with such third parties.

E.    Executive’s obligations under this Section 3 shall continue after the
Termination of Executive’s employment.

4.    Drug Screening; Background Check; Physical Exam.

A.    Drug Screening.  The Company reserves the right to terminate Executive’s
employment in the event Executive does not pass the Company’s drug screening
test for illegal drugs.

 

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B.    Background Check.  The Company reserves the right to terminate Executive’s
employment in the event the background check conducted by the Company on
Executive is not satisfactory to the Company in the Company’s sole discretion.
The Company shall notify Executive of the results of the background check within
five (5) business days of the receipt of the same.

C.    Physical Exam.  Executive shall be required, on an annual basis, to
undergo a physical examination and to send evidence that Executive has undergone
such exam (but in no case the results of such exam) to the Senior Vice President
of Organizational Effectiveness. The Company shall reimburse Executive for any
out-of-pocket expenses relating to the physical examination that are not
otherwise covered by Executive’s health insurance plan.

5.    Immigration Documentation.  Executive’s employment is contingent on
Executive’s ability to prove Executive’s identity and authorization to work in
the United States for the Company. Executive must comply with the Immigration
and Naturalization Service's employment verification requirements.

6.    Representations and Warranties of Executive.

A.    No Violation; No Conflicts.  Executive represents and warrants to the
Company that the entering into of this Agreement and Executive’s performance of
Executive’s duties hereunder, will not violate any agreements with, or trade
secrets of, any other person or entity. Executive further represents and
warrants that Executive does not have any relationship or commitment to any
other person or entity that might be in conflict with Executive’s obligations to
the Company under this Agreement, including but not limited to outside
employment, sales broker relationships, investments or business activities.
Executive understands and agrees that while employed by the Company Executive is
expected to refrain from engaging in any outside activities that might be in
conflict with the business interests of the Company. In addition, Executive
represents and warrants to the Company that Executive has not shared with or
disclosed to, and will not share with or disclose to, the Company any
proprietary or confidential information of Executive’s previous employers or any
other third party.

B.    Legal Proceedings.  Executive represents and warrants to the Company that
Executive has not been arrested, indicted, convicted or otherwise involved in
any criminal or civil action or legal matter that could affect Executive’s
ability to perform Executive’s duties hereunder or that may have a negative
impact on the Company, its reputation or its operations. Executive agrees, to
the extent permitted by applicable law, to notify the Company’s Senior Vice
President of Organizational Effectiveness immediately in the event that
Executive becomes party to any criminal or civil action or other legal matter in
the future that could have an affect on the foregoing representation.

7.    Executive Benefits.

A.    Employee Benefit Programs.  Executive shall be eligible to participate in
the Company’s various employee benefit programs and plans in place from time to
time as long as Executive remains employed by the Company and Executive meets
the applicable participation requirements. These benefit programs and plans
include paid time off (“PTO”), holidays, group medical, dental, vision, term
life, and short and long term disability insurance

 

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and participation in the Company's 401(k) plan, tuition reimbursement plan and
deferred compensation plan. The Company or its subsidiaries or affiliates may
modify, terminate or amend any benefit or plan in its discretion, retroactively
or prospectively, subject only to applicable law; provided, that any such
modifications, terminations and amendments are directed at rights granted to a
class of employees generally and not directed to the Executive or any specific
rights granted to Executive in this Agreement.

B.    Required Insurance.  Executive will be covered by workers’ compensation
insurance and state disability insurance, as required by state law.

C.    Financial Counseling Allowance.  Executive will be entitled to be
reimbursed up to the amount of $5,000 per year for documented costs incurred for
personal financial counseling services provided to Executive, including tax
preparation, as long as Executive remains employed by the Company.

D.    Incentive Bonus.  Executive will be eligible to participate in the Health
Net, Inc. Executive Incentive Plan ("EIP") in accordance with the terms of the
EIP, which provides Executive with a target opportunity to earn each plan year
up to 80% of Executive’s Base Salary as additional compensation according to the
terms of the EIP. The bonus payment will range from 0% to 200% of target
depending upon the actual results achieved, and specific, individually tailored
measures will be established by the Company that must be achieved by Executive
in order for Executive to be eligible to receive bonus payments for a given plan
year. It is understood that the Committee and the Company will award bonus
amounts, if any, as it deems appropriate consistent with the EIP. For 2007,
Executive’s incentive bonus will be guaranteed at $440,000 and shall be paid on
or before March 15, 2008.

E.    Relocation Benefits.  Executive’s relocation will be covered under the
Company’s Relocation Policy currently in effect. All relocation expenses not
deductible under IRS regulations, except the miscellaneous spending allowance,
will be “grossed up” for income tax purposes at the supplemental federal tax
rate and applicable state tax rate. In the event Executive is Terminated without
Cause by the Company within the first twenty-four (24) months of employment and
Executive is unable to secure new employment with a relocation benefit within
thirty (30) days of the date of such Termination, the Company shall provide
Executive relocation services in an amount not to exceed $80,000 (the “Move-Back
Benefit”). Executive acknowledges and agrees that any amounts paid to Executive
as part of the Move Back Benefit shall be imputed income to the Executive and
Executive shall be solely responsible for any income taxes resulting there from.

F.    Expenses.  Subject to and in accordance with the Company's written
policies for business and travel expenses, Executive will receive reimbursement
for all business travel and other out-of-pocket expenses reasonably incurred by
Executive in the performance of Executive’s duties pursuant to this Agreement.

8.    Equity Grants.

A.    Initial Equity Grant.  As of Effective Date, Executive will be granted
40,000 restricted stock units of the Company’s Common Stock (the “RSUs”), which
will vest and become non-forfeitable in accordance with the terms of the
restricted stock unit

 

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agreement to be entered into between the Company and Executive on the Effective
Date. The RSUs granted to Executive will be granted under one of the Company’s
Long-Term Incentive Plans in accordance with and subject to the terms and
conditions set forth in such plan and the restricted stock unit agreement
executed in connection with such grant.

In addition, as of the Effective Date, Executive will be granted 40,000
performance shares (the “Performance Shares”) which will vest and become
non-forfeitable in accordance with the terms of the performance share agreement
to be entered into between the Company and Executive on the Effective Date. The
Performance Shares granted to Executive will be granted under one of the
Company’s Long-Term Incentive Plans in accordance with and subject to the terms
and conditions set forth in such plan and the performance share agreement
executed in connection with such grant.

B.    Future Equity Grants.  Any future equity grants made to Executive will be
granted under one of the Company’s Long-Term Incentive Plans, and will be
subject to the terms of such plan and of the agreement executed in connection
with such grant. Any future equity grants to Executive will be made at the
discretion of the Committee. Executive acknowledges and agrees that Executive
will not be eligible for an annual equity grant in 2008.

C.    Company Stock Ownership Requirement.  In accordance with the Executive
Officer Stock Ownership Policy adopted by the Board of Directors of the Company
(the “Executive Stock Ownership Policy”), Executive is required to own shares of
Common Stock of the Company having a value of three times (3x) Executive’s Base
Salary in effect from time to time pursuant to this Agreement (the “Stock
Ownership Requirement”). The number of shares of Common Stock Executive is
required to own will be calculated based on the average NYSE closing price per
share of the Company's Common Stock (as adjusted for stock splits and similar
changes to the Common Stock) for the most recently completed fiscal year of the
Company.

Using Executive’s current salary of $550,000 and a stock price of $45.34, which
is the average closing price per share of the Company’s Common Stock as of
December 31, 2006, Executive’s current stock ownership requirement is 36,392
shares (“Target Amount”). The Target Amount is subject to change from time to
time based on (1) changes in the average closing sales price of the Company’s
Common Stock on an annual basis and (2) any changes in Executive’s Base Salary
made pursuant to and in accordance with Section 1B of this Agreement. Any shares
of Company Common Stock that Executive owns, and any restricted stock units,
shares of restricted stock or performance shares of the Company that Executive
owns and have vested count toward the Target Amount. Stock options, unvested
restricted stock units, unvested shares of restricted stock, unvested
performance shares and shares of Common Stock gifted to others do not count
toward the Target Amount. Under the Executive Stock Ownership Policy, Executive
will have until four years from the Effective Date to comply with the Stock
Ownership Requirement.

The Committee expects that Executive will make reasonable progress toward
Executive’s Stock Ownership Requirement. Executive will be notified on an annual
basis of any changes in Executive’s Target Amount.

 

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9.    Term of Employment.  Executive’s employment with the Company is at the
mutual consent of Executive and the Company. Nothing in this Agreement is
intended to guarantee Executive’s continuing employment with the Company or
employment for any specific length of time. Accordingly, either Executive or the
Company may terminate the employment relationship at any time, with or without
advance notice and with or without “Cause” (as defined below). Upon Termination
of Executive’s employment for any reason, in addition to any other payments that
may be payable to Executive hereunder, Executive (or Executive’s beneficiaries
or estate) shall be paid (in each case to the extent not theretofore paid)
within thirty (30) days following Executive’s date of Termination (or such
shorter period that may be required by applicable law): (a) Executive’s annual
Base Salary through such date, (b) accrued but unused PTO, (c) reimbursable
expenses incurred by Executive prior to the Termination date and (d) amounts
under any other compensatory plan, arrangement or program payment to which
Executive may then be entitled. The Company acknowledges and agrees that,
following the Termination of Executive’s employment for any reason, Executive
shall continue to be entitled to receive any vested benefit Executive has
accrued pursuant to the Company’s 401(k) Plan and shall be entitled to all
post-termination rights and benefits available to Executive under applicable law
relating to the 401(k) Plan and any other benefit plan in which Executive
participated pre-Termination. This Agreement constitutes a final and fully
binding integrated agreement with respect to the at-will nature of the
employment relationship.

10.    Termination of Employment/Severance Pay.

A.    Termination Without Cause Not Following Change in Control.  If Executive’s
employment is Terminated by the Company without “Cause” (as defined in
Section 10(D) below) at any time that is not within two (2) years after a
“Change in Control” (as defined below) of Health Net, Inc., Executive will be
entitled to receive, within thirty (30) days following the Termination of
Executive’s employment, provided that Executive signs, prior to the expiration
of such (30) day period, a Separation Agreement, Waiver and Release of Claims
substantially in the form attached hereto as Exhibit A, which is incorporated
into this Agreement by reference, (i) a lump sum cash payment equal to
twenty-four (24) months of Executive’s Base Salary in effect immediately prior
to the date of Executive’s Termination, and (ii) the continuation of Executive’s
medical, dental and vision benefits (as maintained for Executive’s benefit
immediately prior to the date of Executive’s Termination) (the “Benefits”) for
Executive and Executive’s dependents for a period of six (6) months following
the effective date of Executive’s Termination, and (iii) the continuation, under
COBRA, of Executive’s Benefits for Executive and Executive’s dependents for an
additional period of eighteen (18) months, with premium payments paid by the
Company on Executive’s behalf, provided, that Executive properly elects to
continue those benefits under COBRA.

For purposes of this Agreement, “Change in Control” is defined as any of the
following which occurs subsequent to the effective date of Executive’s
employment:

(i)    Any person (as such term is defined under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation
or other entity (other than Health Net, Inc. or any of its subsidiaries, or any
employee benefit plan sponsored by Health Net, Inc. or any of its subsidiaries)
is or becomes the beneficial owner (as such term is defined in Rule 13d-3 under
the Exchange Act) of securities of Health Net, Inc. representing twenty percent
(20%) or more of the combined

 

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voting power of the outstanding securities of Health Net, Inc. which ordinarily
(and apart from rights accruing under special circumstances) have the right to
vote in the election of directors (calculated as provided in paragraph (d) of
such Rule 13d-3 in the case of rights to acquire Health Net, Inc.'s securities)
(the "Securities");

(ii)    As a result of a tender offer, merger, sale of assets or other major
transaction, the persons who are directors of Health Net, Inc. immediately prior
to such transaction cease to constitute a majority of the Board of Directors of
Health Net, Inc. (or any successor corporations) immediately after such
transaction;

(iii)    Health Net, Inc. is merged or consolidated with any other person, firm,
corporation or other entity and, as a result, the shareholders of Health Net,
Inc., as determined immediately before such transaction, own less than eighty
percent (80%) of the outstanding Securities of the surviving or resulting entity
immediately after such transaction:

(iv)    A tender offer or exchange offer is made and consummated for the
ownership of twenty percent (20%) or more of the outstanding Securities of
Health Net, Inc.;

(v)    Health Net, Inc. transfers substantially all of its assets to another
person, firm, corporation or other entity that is not a wholly-owned subsidiary
of Health Net, Inc.; or

(vi)    Health Net, Inc. enters into a management agreement with another person,
firm, corporation or other entity that is not a wholly-owned subsidiary of
Health Net, Inc. and such management agreement extends hiring and firing
authority over Executive to an individual or organization other than Health Net,
Inc.

B.    Termination Without Cause or For Good Reason Following Change in
Control.  If at any time within two (2) years after a Change in Control of
Health Net, Inc. Executive’s employment is Terminated by the Company without
Cause or Executive Terminates Executive’s employment for “Good Reason” (as
defined below) (by giving the Company at least fourteen (14) days prior written
notice of the effective date of Termination), then Executive will be entitled to
receive, within thirty (30) days following the Termination of Executive’s
employment, provided that Executive signs, prior to the expiration of such
thirty (30) day period, a Separation Agreement, Waiver and Release of Claims
substantially in the form attached hereto as Exhibit A, which is incorporated
into this Agreement by reference, (i) a lump sum payment equal to thirty-six
(36) months of Executive’s Base Salary in effect immediately prior to the date
of Executive’s Termination, and (ii) the continuation of Executive’s Benefits
for eighteen (18) months following Executive’s date of Termination, and
(iii) and after expiration of such eighteen (18) months Benefits continuation
period, the continuation, under COBRA, of Benefits for Executive and Executive’s
dependents for an additional period of eighteen (18) months following the
effective date of Executive’s Termination with premium payments made by the
Company on Executive’s behalf, provided, that Executive properly elects to
continue those benefits under COBRA, and provided, further, that in the event
the Company requests, in writing, prior to such voluntary Termination by
Executive for Good Reason that Executive continue in the employ of the Company
for a period of time up to 90 days following such

 

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Change in Control, then Executive shall forfeit such severance allowance if
Executive voluntarily leaves the employ of the Company prior to the expiration
of such period of time.

For purposes of this Agreement, the term “Good Reason” means any of the
following which occurs, without Executive’s consent, subsequent to the effective
date of a Change in Control as defined above:

(i)    A demotion or a substantial reduction in the scope of Executive’s
position, duties, responsibilities or status with the Company, or any removal of
Executive from or any failure to reelect Executive to any of the positions (or
functional equivalent of such positions) referred to in the introductory
paragraphs hereof, except in connection with the Termination of Executive’s
employment for Disability (as defined below), normal retirement or Cause or by
Executive voluntarily other than for Good Reason;

(ii)    A reduction by the Company in Executive’s Base Salary or a material
reduction in the benefits or perquisites available to Executive as in effect
immediately prior to any such reduction;

(iii)    A relocation of Executive to a work location more than fifty (50) miles
from Executive’s work location immediately prior to such proposed relocation;
provided that such proposed relocation results in a materially greater commute
for Executive based on Executive’s residence immediately prior to such
relocation; or

(iv)    The failure of the Company to obtain an assumption agreement from any
successor contemplated under Section 14 of this Agreement.

C.    Voluntary Termination.  Notwithstanding anything to the contrary in this
Agreement, whether express or implied, Executive may at any time Terminate
Executive’s employment for any reason by giving the Company fourteen (14) days
prior written notice of the effective date of Termination. In the event that
Executive voluntarily Terminates employment with the Company (except for Good
Reason within two (2) years after a Change in Control of Health Net, Inc.), then
Executive shall not be eligible to receive any payments or continuation of
Benefits set forth in this Section 10 other than compensation and benefits
earned through the date of Termination).

D.    Termination by the Company for Cause.  The Company may Terminate
Executive’s employment for Cause at any time with or without advance notice. In
the event of such Termination, Executive will not be eligible to receive any of
the payments set forth in Section 10(A) or 10(B) above. For purposes of this
Agreement, a Termination for “Cause” is defined as: (i) an act of dishonesty
causing harm to the Company or any of its affiliates, (ii) the material breach
of either the Company’s Code of Business Conduct and Ethics (the “Code of
Conduct”) or any policy or procedure developed and published by the Company
regarding compliance or ethics related to the Code of Conduct, (iii) habitual
drunkenness or narcotic drug addiction, (iv) conviction of a felony or a
misdemeanor involving moral turpitude, (v) willful refusal to perform or gross
neglect of the duties assigned to Executive, (vi) the willful breach of any law
that, directly or indirectly, affects the Company or any of its affiliates,
(vii) a material breach by Executive following a Change in Control of those
duties and responsibilities of Executive that do not differ in any material
respect from Executive’s duties and responsibilities

 

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during the 90-day period immediately prior to such Change in Control (other than
as a result of incapacity due to physical or mental illness) which is
demonstrably willful and deliberate on Executive’s part, which is committed in
bad faith or without reasonable belief that such breach is in the best interests
of the Company or any of its affiliates and which is not remedied in a
reasonable period of time after receipt of written notice from the Company
specifying such breach, or (viii) breach of Executive’s obligations hereunder
(or under any Company policy) to protect the proprietary and confidential
information of the Company or any of its affiliates.

E.    Termination Due to Death or Disability.  In the event that Executive’s
employment is Terminated at any time due to Executive’s death or “Disability”
(as defined below), Executive (or Executive’s beneficiaries or estate) shall be
entitled to receive, provided Executive (or Executive’s beneficiaries or estate,
as applicable) signs a Separation Agreement, Waiver and Release of Claims
substantially in the form attached hereto as Exhibit A, which is incorporated
into this Agreement by reference, (i) continuation of Executive’s Benefits for a
period of twelve (12) months from the date of Termination and (ii) a lump sum
payment equal to one times (1x) Executive’s Annual Base Salary in effect
immediately prior to the date of Executive’s Termination, to be paid within
thirty (30) days following Executive’s Termination of employment. For purposes
of this Agreement, a Termination for "Disability" shall mean a Termination of
Executive’s employment due to Executive’s absence from Executive’s duties with
the Company on a full-time basis for at least 180 consecutive days as a result
of Executive’s incapacity due to physical or mental illness.

11.    Withholding.  All payments required to be made by the Company hereunder
to Executive or Executive’s estate or beneficiaries shall be subject to the
withholding of such amounts relating to taxes as the Company may reasonably
determine should be withheld pursuant to any applicable law or regulation.

12.    Potential Tax Consequences for “Parachute” Payments

A.    Tax Gross-Up.  Notwithstanding any other provisions of this Agreement,
during the period from November 1, 2007 through December 31, 2009 only, a period
of twenty-six (26 months), in the event that (i) any payment or distribution by
the Company to or for Executive’s benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (all such payments and distributions, including the severance payments
and benefits provided for in Section 10 hereof (the "Severance Payments"), being
hereinafter called ("Total Payments") would be subject (in whole or part) to the
excise tax imposed under Section 4999 of the Code, or any successor provision
enacted under the Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise
Tax”) and (ii) the amount of such Total Payments subject to such Excise Tax
exceeds $50,000, then the Company shall pay to Executive an additional cash
payment (the “Tax Gross-Up”) so that after receipt of such Tax Gross-Up, the
payment of any additional federal, state and local income taxes on such Tax
Gross-Up amount and the payment of any Excise Taxes, Executive shall receive
such net amount of Total Payments equal to the amount that Executive would have
received if no Excise Tax was due. If the amount of Total Payments subject to
the Excise Tax does not exceed $50,000, then the Tax-Gross-Up shall not be paid
and the Severance Payments shall be reduced

 

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(if necessary, to zero) to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax.

B.    Accounting Firm Determination.  All determinations required to be made
under this Section 12, including whether and when a Tax Gross-Up is required and
the amount of such Tax Gross-Up and the assumptions to be utilized in arriving
at such determination, shall be made by the public accounting firm that,
immediately prior to the Change in Control, was the Company’s independent
auditor (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days
of the receipt of notice from Executive that Executive has received Total
Payments, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any Tax
Gross-Up, as determined pursuant to this Section 12, shall be paid by the
Company to Executive within five (5) days of the receipt of the Accounting
Firm’s determination, but in no event later than the end of Executive’s taxable
year next following Executive’s taxable year in which Executive pays the Excise
Tax. If the Accounting Firm determines that no Excise Tax is payable by
Executive, then the Accounting Firm shall furnish to Executive a written opinion
that failure to report the Excise Tax on Executive’s applicable federal income
tax return would not result in the imposition of any tax assessment or a
negligence or similar penalty. As a result of any uncertainty in the application
of Section 4999 of the Code at the time of the determination by the Accounting
Firm hereunder, it is possible that Tax Gross-Up which will not have been made
by the Company should have been made (“Underpayment”), or that amount of the Tax
Gross-Up will exceed the amount required under Section 12(A) (“Overpayment”). In
the event that the Accounting Firm shall determine that an Underpayment or
Overpayment has occurred, either Executive or the Company, as applicable, shall
promptly reimburse the other for the amount of such Underpayment or Overpayment
that has occurred

C.    Notifications.  Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Tax Gross-Up. Such notification shall be given as soon as
practicable but no later than ten (10) business days after Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Executive and
the Company shall each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to Total Payments.

D.    Payment Calculator.  At the time that payments are made under this
Section 12, the Company shall provide Executive with a written statement setting
forth the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from tax counsel, the Accounting Firm or other advisors or
consultants (and any such opinions or advice which are in writing shall be
attached to the statement).

 

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13.    Restrictive Covenants.

A.    Non-Competition.  Executive hereby agrees that, during (i) the six
(6)-month period following a Termination of Executive’s employment with the
Company that entitles Executive to receive severance benefits under this
Agreement or a written agreement with or policy of the Company or (ii) the
twelve (12)-month period following a Termination of Executive’s employment with
the Company that does not entitle Executive to receive such severance benefits
(the period referred to in either clause (i) or (ii), the “Restricted Period”),
Executive shall not undertake any employment or activity (including, but not
limited to, consulting services) with a Competitor (as defined below) in any
geographic area in which the Company or any of its affiliates operate (the
“Market Area”), where the loyal and complete fulfillment of the duties of the
competitive employment or activity would call upon Executive to reveal, to make
judgments on or otherwise use or disclose any confidential business information
or trade secrets of the business of the Company or any of its affiliates to
which Executive had access during Executive’s employment with the Company. For
purposes of this Section, “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 of its affiliates.

B.    Non-Solicitation.  In addition, Executive agrees that, during the
applicable Restricted Period following Termination of Executive’s employment
with the Company, Executive shall not, directly or indirectly, (i) solicit,
interfere with, hire, offer to hire or induce any person, who is or was an
employee of the Company or any of its affiliates at the time of such
solicitation, interference, hiring, offering to hire or inducement, to
discontinue his/her relationship with the Company or any of its affiliates or to
accept employment by, or enter into a business relationship with, Executive or
any other entity or person or (ii) solicit, interfere with or otherwise contact
any customer or client of the Company or any of its affiliates. Notwithstanding
the foregoing, the restrictions contained in Section 12B(i) above shall not
apply to any person solicited by Executive to work for the Company and who
previously worked for or with Executive at any prior place of employment.

C.    Modification of Restrictions.  It is hereby further agreed that if any
court of competent jurisdiction shall determine that the restrictions imposed in
this Section 13 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.

D.    Injunction Rights.  Executive also acknowledges that the services to be
rendered by Executive to the Company are of a special and unique character,
which gives this Agreement a peculiar value to the Company or any of its
affiliates, 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 Executive of any of the provisions contained in this Section 13 will
cause the Company or any of its affiliates irreparable injury. Executive
therefore agrees that the Company may be entitled, in addition to the remedies
set forth above in this Section 13 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 Executive from any such violation or
threatened violations.

 

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14.    Successors; Binding Agreement.

A.    Survival Following Merger, Consolidation or Asset Transfer.  This
Agreement shall not be terminated by any merger or consolidation of the Company
whereby the Company is or is not the surviving or resulting corporation or as a
result of any transfer of all or substantially all of the assets of the Company.
In the event of any such merger, consolidation or transfer of assets, the
provisions of this Agreement shall be binding upon the surviving or resulting
corporation or the person or entity to which such assets are transferred.

B.    Survivor’s Assumption of Agreement.  The Company agrees that concurrently
with any merger, consolidation or transfer of assets referred to in this
Section 14, it will cause any successor or transferee to unconditionally assume,
by written instrument delivered to Executive (or Executive’s beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption prior to the effectiveness of any such merger,
consolidation or transfer of assets shall entitle Executive to compensation and
other benefits from the Company in the same amount and on the same terms as
Executive would be entitled hereunder if Executive’s employment were Terminated
without Cause. For purposes of implementing the foregoing, the date on which any
such merger, consolidation or transfer becomes effective shall be deemed the
date of Termination.

C.    Enforceability.  This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive’s estate.

15.    Section 409(A) of the Internal Revenue Code.  It is the intention of the
Company and Executive that this Agreement not result in unfavorable tax
consequences to Executive under Section 409A of the Code, and the regulations
and guidance promulgated thereunder (“Section 409A”) and the Agreement shall be
interpreted as to so comply. Notwithstanding anything to the contrary herein,
the Company and Executive agree to the provisions set forth in this Section 15
in order to comply with the requirements of Section 409A.

A.    If Executive is a "specified employee" (within the meaning of
Section 409A) with respect to the Company, any non-qualified deferred
compensation otherwise payable to or in respect of Executive in connection with
Executive’s Termination pursuant to this Agreement shall be delayed until the
earliest date upon which such amounts may be paid without being subject to
taxation under Section 409A. Any amount, the payment or benefit of which is
delayed by application of the preceding sentence, shall be paid as soon as
possible following the expiration of such period.

B.    All incentive bonus payments described in Section 7(D) shall be paid to
Executive, to the extent earned, in no event later than the last day of the
“applicable 2  1/2 month period”, as such term is defined in Treasury Regulation
Section 1.409A-1(b)(4)(i)(A) with respect to such payment’s treatment as a
“short-term deferral” for purposes of Section 409A.

 

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C.    With respect to the Company’s reimbursement and tax gross-up obligations
under Sections 7(C) and 7(E) hereof, in no event shall any such reimbursements
or gross-up payments be made later than the last day of Executive’s taxable year
following the taxable year in which the fee or expense was incurred or the tax
payment was made, as applicable.

D.    The provision of Benefits to Executive following Termination hereunder
shall be subject to the provisions of Treasury Regulation 1.409A-3(i)1(iv)(A)
and (B).

E.    The Company and Executive agree to cooperate in good faith in an effort to
comply with Section 409A. Under no circumstances shall the Company be
responsible for any taxes, penalties, interest or other losses or expenses
incurred by the Executive due to any failure to comply with Section 409A.

16.    Company Policies.  Executive’s employment with the Company is subject to
the terms and conditions contained in the Company’s Associate Policy Manual (the
“Policy Manual”), the content of which is incorporated by reference herein.
Executive shall be required to read, understand and comply with the policies
contained in the Policy Manual and, within 30 days of Executive’s first date of
employment, acknowledge receipt of the Policy Manual through HR Link, which can
be accessed through the Company’s intranet site. The Company acknowledges and
agrees that, to the extent any Company Policy provides a benefit to Company
associates in general (including, but not limited to, PTO, severance or
relocation benefits) and such benefit is less favorable to Executive than the
benefits provided herein, the terms of this Agreement shall control.

17.    Severability.  If any term of this Agreement is held to be invalid, void
or unenforceable, the remainder of this Agreement shall remain in full force and
effect and shall in no way be affected and the parties shall use their best
efforts to find an alternative way to achieve the same result.

18.    Integrated Agreement.  This Agreement supersedes any prior agreements,
representations or promises of any kind, whether written, oral, express or
implied between the parties hereto with respect to the subject matters herein.
It constitutes the full, complete and exclusive agreement between Executive and
the Company with respect to the subject matters herein. This Agreement cannot be
changed unless in writing, signed by Executive and the Chief Executive Officer
of the Company and approved by the Board of Directors of the Company (or the
Committee, if permitted by the Committee’s charter).

19.    Waiver.  No waiver of any default hereunder shall operate as a waiver of
any subsequent default. Failure by either party to enforce any of the terms or
conditions of this Agreement, for any length of time or from time to time, shall
not be deemed to waive or decrease the rights of such party to insist thereafter
upon strict performance by the other party.

20.    Notices.  All notices and communications required or permitted hereunder
shall be in writing and shall be deemed given (a) if delivered personally,
(b) one (1) business day after being sent by Federal Express or a similar
commercial overnight service, or (c) three (3) business days after being mailed
by registered or certified mail, return receipt requested, prepaid and

 

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addressed to the following addresses, or at such other addresses as the parties
may designate by written notice in the manner aforesaid:

 

If to the Company:   

Health Net, Inc.

21650 Oxnard Street, 22nd Floor

Woodland Hills, CA 91367

Attention: General Counsel

If to the Executive:   

Joseph C. Capezza

[ADDRESS]

21.    Governing Law.  The interpretation, construction and performance of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Delaware without regard to the principle of
conflicts of laws. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which other provisions shall remain in full force
and effect.

22.    Survival and Enforcement.  Sections 3, 9, 10, 12, 13 and 14 of this
Agreement and any rights and remedies arising out of this Agreement shall
survive and continue in full force and effect in accordance with the respective
terms thereof, notwithstanding any termination of this Agreement or a
Termination of Executive’s employment. The parties agree that the Company would
be damaged irreparably in the event any provision of Sections 3, 12, 13 and 14
of this Agreement were not performed in accordance with its terms or were
otherwise breached and that money damages would be an inadequate remedy for any
such nonperformance or breach. Therefore, the Company or its successors or
assigns shall be entitled in addition to other rights and remedies existing in
their favor, to an injunction or injunctions to prevent any breach or threatened
breach of any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).

23.    Acknowledgement.  Executive acknowledges that Executive has had the
opportunity to discuss the content of this Agreement with and obtain advice from
Executive’s attorney, have had sufficient time to and have carefully read and
fully understood all of the provisions of this Agreement, and Executive is
knowingly and voluntarily entering into this Agreement. Executive further
acknowledges that Executive is obligated to become familiar with and comply at
all times with all written policies of the Company.

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth in the preamble to this Agreement.

 

Executive     Health Net, Inc. By:   /s/ Joseph C. Capezza     By:   /s/ Jay M.
Gellert   Name: Joseph C. Capezza       Name: Jay M. Gellert   Title: Executive
Vice President & Chief Financial Officer       Title: President & Chief
Executive Officer

 

cc: Linda V. Tiano

     Karin Mayhew

     Debbie J. Colia/Capezza Personnel File

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EXHIBIT A

[FORM OF SEPARATION AGREEMENT, WAIVER AND RELEASE OF CLAIMS]

This SEPARATION AGREEMENT, WAIVER AND RELEASE OF CLAIMS (this “Separation
Agreement and Release”) is made and entered into as of the dates set forth on
the signature pages hereto by and between Health Net, Inc. and its affiliates
and subsidiaries (hereinafter referred to as the “Company”) and [EXECUTIVE NAME]
(hereinafter referred to as the “Executive”).

WHEREAS, the Company and Executive are parties to an Employment Agreement dated
as of [DATE] (the “Employment Agreement”) and are entering into this Separation
Agreement and Release as a condition to Executive’s receipt of a severance
payment thereunder (capitalized terms used but not defined herein shall have the
meanings set forth in the Employment Agreement).

NOW, THEREFORE, the Company and Executive agree as follows:

 

1. Executive’s employment with the Company will terminate on [TERM DATE ] (the
“Termination Date”). Upon termination of employment, Executive will not
represent to anyone that he is an employee of the Company and will not say or do
anything purporting to bind the Company. Upon Executive’s termination of
employment, Executive shall be deemed to have resigned from all other positions
with the Company, if any, held by Executive.

 

2. Executive’s termination of employment with the Company shall be considered a
[DESCRIBE TYPE OF TERMINATION] under the Employment Agreement, and Executive is
therefore eligible to receive [DESCRIBE PAYMENTS AND OTHER BENEFITS TO BE
RECEIVED (SEVERANCE, BENEFIT CONTINUATION/COBRA, ETC.].

 

3. Executive acknowledges that all unused accrued vacation and unused personal
absence time will be paid in Executive’s final regular paycheck in keeping with
the Company’s policy and practice or such shorter time as may be required by
applicable law. Executive further acknowledges that no further
vacation/paid-time-off or other benefits will accrue after the Termination Date.

 

4. Executive’s participation in all Company employee benefit plans as an active
employee shall cease on the Termination Date, and Executive shall not be
eligible to make contributions to or to receive Company matching contributions
under the Health Net, Inc. 401(k) Associate Savings Plan, or to make any
deferrals pursuant to any deferred compensation plan of the Company after the
Termination Date (it being understood that Executive shall be entitled to all
vested benefits accrued as of the date hereof under the Company’s 401(k) Savings
Plan and any deferred compensation plan). If, immediately prior to the
Termination Date, Executive participates in any Company employee welfare benefit
plan, Executive’s participation in such plan shall continue on the same terms
and conditions, including the same co-payment terms, until 11:59 p.m. (Pacific
Time) on the last day of the month in which the Termination Date occurs.

 

A - 1

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5. In partial consideration of the Company providing Executive the payments and
benefits set forth above and as a condition to receive such payments and
benefits, which Executive acknowledges he is not otherwise entitled to receive,
Executive freely and voluntarily enters into this Separation Agreement and
Release and, by signing this Separation Agreement and Release, Executive, on his
own behalf and on behalf of his heirs, beneficiaries, successors,
representatives, trustees, administrators and assigns, hereby waives and
releases the Company, and each of its past, present and future officers,
directors, shareholders, employees, consultants, accountants, attorneys, agents,
managers, insurers, sureties, parent and sister corporations, divisions,
subsidiary corporations and entities, partners, joint venturers, affiliates,
beneficiaries, successors, representatives and assigns, from any and all claims,
demands, damages, debts, liabilities, controversies, obligations, actions or
causes of action of any nature whatsoever, whether based on tort, statute,
contract, indemnity, rescission or any other theory of recovery, including but
not limited to claims arising under federal, state or local laws prohibiting
discrimination in employment, including Title VII of the Civil Rights Act of
1964, as amended, the Civil Rights Act of 1870, as amended, claims of disability
discrimination under the Americans with Disabilities Act, the Age Discrimination
in Employment Act, as amended (“ADEA”), the Worker Adjustment and Retraining
Notification Act (“WARN”), or claims growing out of any legal restrictions on
the Company’s right to terminate its employees and whether for compensatory,
punitive, equitable or other relief, whether known, unknown, suspected or
unsuspected, against the Company, including without limitation claims which may
have arisen or may in the future arise in connection with any event which
occurred on or before the date of Executive’s execution of this Separation
Agreement and Release. The provisions in this paragraph do not extend to any
rights Executive may have to enforce the terms of this Agreement and are not
intended to prohibit Executive from filing a claim for unemployment insurance.

 

6. Executive expressly waives any right or claim of right to assert hereafter
that any claim, demand, obligation and/or cause of action has, through
ignorance, oversight or error, been omitted from the terms of this Separation
Agreement and Release. Executive makes this waiver with full knowledge of his
rights and with specific intent to release both his known and unknown claims,
and therefore specifically waives the provisions of Section 1542 of the Civil
Code of California or other similar provisions of any other applicable law,
which reads as follows:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

Executive understands and acknowledges the significance and consequence of this
Separation Agreement and Release and of such specific waiver of Section 1542,
and expressly agrees that this Agreement shall be given full force and effect
according to each and all of its express terms and provisions, including those
relating to unknown and unsuspected claims, demands, obligations and causes of
action herein above specified.

 

7.

Executive shall not initiate or cause to be initiated against the Company any
compliance review, suit, action, investigation or proceeding of any kind, or
voluntarily participate in same, individually or as a representative, witness or
member of a class, under contract,

 

A - 2

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law or regulation, federal, state or local, pertaining to any matter related to
his employment with the Company, unless Executive first cooperates in making his
allegations known to the Company for the Company to take corrective action at a
time and place designated by the Company. Executive represents and warrants that
he has not, to date, initiated (or caused to be initiated) any such review,
suit, action, investigation or proceeding; provided, however, that nothing in
this Section 7 shall restrict Executive’s ability to challenge the validity of
any release herein of ADEA claims nor to any suit or action brought by Executive
to assert such a challenge. In addition, Executive shall, without further
compensation, cooperate with and assist the Company in the investigation of,
preparation for or defense of any actual or threatened third party claim,
investigation or proceeding involving the Company or its predecessors or
affiliates and arising from or relating to, in whole or in part, Executive’s
employment with the Company or its predecessors or affiliates for which the
Company requests Executive’s assistance, which cooperation and assistance shall
include, but not be limited to, providing testimony and assisting in information
and document gathering efforts. In this connection, it is agreed that the
Company will use its reasonable best efforts to assure that any request for such
cooperation will not unduly interfere with Executive’s other material business
and personal obligations and commitments.

 

8. Executive agrees he will return to the Company immediately upon termination
any building keys, security passes or other access or identification cards and
any Company property that was in his possession, including but not limited to
any documents, credit cards, computer equipment, mobile phones or data files.
Executive agrees to clear all expense accounts and pay all amounts owed on any
corporate credit cards which the Company previously issued to Executive, subject
to the Company's obligation to reimburse Executive for any properly reimbursable
business expenses in accordance with the Company's expense policies and
procedures then in effect.

 

9. Executive shall not, without the Company’s written consent by an authorized
representative, at any time prior or subsequent to the execution of this
Separation Agreement and Release, disclose, use, remove or copy any
confidential, trade secret or proprietary information he acquired during the
course of his employment by the Company, including without limitation, any
technical, actuarial, economic, financial, procurement, provider, customer,
underwriting, contractual, managerial, marketing or other information of any
type that has economic value in the business in which the Company is engaged,
but not including any previously published information or other information
generally in the public domain.

 

10.

In addition to any other part or term of this Separation Agreement and Release
or the Employment Agreement, Executive agrees that he will not, (a) for a period
of one (1) year from the date of this Agreement, irrespective of the reason for
the termination, either directly or indirectly, on his own behalf or on behalf
of any other person: (1) make known to any person, firm, corporation or other
entity of any type, the names and addresses of any of the Company’s customers,
enrollees or providers or any other information pertaining to them; or
(2) disrupt, solicit or influence or attempt to solicit, disrupt or influence
any of the Company’s customers, providers, vendors, agents or independent
contractors with whom the Executive became acquainted during the course of
employment or service for the purpose of terminating such a person’s or entity’s

 

A - 3

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relationship with the Company or causing such a person or entity to associate
with a competitor of the Company, and (b) for [a period of one (1) year] [the
six (6) month period] following the Termination Date undertake any employment or
activity prohibited by the Employment Agreement. The prohibitions of this
paragraph are not intended to deny employment opportunities within the
Executive’s field of employment but are limited only to those prohibitions
necessary to protect the Company from unfair competition. In addition, Executive
agrees that, for [a period of one (1) year] [the six (6) month period] following
the Termination Date, he 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 affiliates at the time of such solicitation, interference,
hiring, offering to hire or inducement, to discontinue his/her relationship with
the Company or any of its affiliates or to accept employment by, or enter into a
business relationship with, Executive or any other entity or person.

 

11. Executive further agrees that, in exchange for the consideration set forth
in Section 2 hereof, Executive shall not make any disparaging comments and/or
statements to anyone either orally or in writing about the Company and/or its
employees.

 

12. Nothing contained herein shall be construed as an admission of any wrongful
act, including but not limited to violation of any contract, express or implied,
or any federal, state or local employment laws or regulations, and nothing
contained herein shall be used for any purpose except in proceedings related to
the enforcement of this Separation Agreement and Release.

 

13. If any part or term of this Separation Agreement and Release is held invalid
or unenforceable by any court or arbitrator, such invalidity or unenforceability
shall not affect in any way the validity or enforceability of any other part or
term of this Separation Agreement and Release. In addition, if any court of
competent jurisdiction construes the covenants contained in Section 10 hereof,
or any part thereof, to be unenforceable in any respect, the court may reduce
the duration or scope to the extent necessary so that the provision is
enforceable, and the provision, as reduced, shall then be enforceable.

 

14. Executive agrees and acknowledges that this Separation Agreement and Release
recites all payments and benefits Executive is entitled to receive hereunder and
under the Employment Agreement, and that no other payments or benefits will be
asserted or requested by Executive.

 

15. The Executive acknowledges that he has had an opportunity to consult and be
represented by counsel of his own choosing in the review of this Separation
Agreement and Release, and that he has been advised by the Company to do so,
that the Executive is fully aware of this Separation Agreement and Release and
of its legal effect, that the preceding paragraphs recite the sole consideration
for this Separation Agreement and Release, and that Executive enters into this
Separation Agreement and Release freely, without coercion, and based on the
Executive’s own judgment and not in reliance upon any representation or promise
made by the other party, other than those contained herein. There may be no
modification of the terms of this Separation Agreement and Release except in
writing signed by the parties hereto including an appropriately authorized
officer of the Company.

 

A - 4

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16. This Separation Agreement and Release constitutes the full, complete and
exclusive agreement between Executive and the Company with respect to the
subject matters herein and supersedes any prior agreements, representations or
promises of any kind, whether written, oral, express or implied, with respect to
the subject matters herein. This Separation Agreement and Release cannot be
changed unless in writing, signed by Executive and an authorized officer of the
Company.

 

17. If there is any dispute between the Company and Executive over the terms or
obligations under this Separation Agreement and Release, that dispute shall be
resolved by binding arbitration before a single neutral arbitrator who shall be
a retired judge. The arbitration shall proceed in accordance with the
then-current rules of the Commercial American Arbitration Association to the
extent not inconsistent with this Separation Agreement and Release. The judgment
of the arbitrator shall be final, binding and nonappealable, and may be entered
in any state or federal court having jurisdiction thereafter. The arbitrator
shall be bound to apply and follow the applicable state or federal laws in
reaching a decision in this matter. Any disagreement regarding whether a dispute
is required to be arbitrated pursuant to this Separation Agreement and Release
shall be decided by the arbitrator. The Federal Arbitration Act, 9 U.S.C.
Sections 1-16, shall govern the interpretation and enforcement of this
Section 17. The prevailing party will be entitled to recover reasonable
attorney’s fees and costs incurred in any action to enforce or defend this
Separation Agreement and Release.

 

18. This Separation Agreement and Release shall be construed and governed by the
laws of the State of Delaware.

EXECUTIVE ACKNOWLEDGES BY SIGNING BELOW that (i) Executive has not relied upon
any representations, written or oral, not set forth in this Separation Agreement
and Release; (ii) at the time Executive was given this Separation Agreement and
Release Executive was informed in writing by the Company that (a) Executive had
at least 21 days in which to consider whether Executive would sign the
Separation Agreement and Release and (b) Executive should consult with an
attorney before signing the Separation Agreement and Release; and
(iii) Executive had an opportunity to consult with an attorney and either had
such consultations or has freely decided to sign this Separation Agreement and
Release without consulting an attorney.

Executive further acknowledges that he may revoke acceptance of this Separation
Agreement and Release by delivering a letter of revocation within seven (7) days
after the later of the dates set forth below addressed to: Health Net, Inc.,
Organization Effectiveness Department, 21650 Oxnard Street, Woodland Hills,
California 91367, Attention: Karin Mayhew.

Finally, Executive acknowledges that he understands that this Separation
Agreement and Release will not become effective until the eighth (8th) day
following his signing this Separation Agreement and Release and that if
Executive does not revoke his acceptance of the terms of this Separation
Agreement and Release within the seven (7) day period following the date on
which Executive signs this Separation Agreement and Release as set forth above,
this Separation Agreement and Release will be binding and enforceable.

[Signature Page Follows]

 

A - 5

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IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement
and Release as of the dates set forth below.

 

Executive     Health Net, Inc. By:   [EXHIBIT COPY]     By:   [EXHIBIT COPY]  
Name:       Name:   Title:       Title: Dated:   [TO BE INSERTED]     Dated:  
[TO BE INSERTED]

 

A - 6