EXHIBIT 10.1

KARIN D. MAYHEW

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and
entered into as of October 4, 2006 (the “Effective Date”) and amended and
restated as of December 3, 2008, 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 Karin D. Mayhew
(“Executive”).

RECITALS

WHEREAS, the Company and Executive are party to an Amended and Restated
Employment Agreement, dated October 4, 2006 (the “Prior Agreement”); and

WHEREAS, the Company and Executive desire to amend and restate the Prior
Agreement to conform it to the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations and Internal
Revenue Service guidance thereunder.

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 title is Senior Vice President, Organization
Effectiveness, but may be changed at the discretion of the Company to a title
that reflects a similarly situated senior executive position. Executive shall
report directly to Jay Gellert, President and Chief Executive Officer of the
Company, but Executive’s reporting relationship may be changed from time to time
at the discretion of the Company. Executive’s duties and responsibilities are to
provide executive leadership and management of the corporate organization
effectiveness functions, 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 an annual base salary of $412,500, 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 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. 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

 

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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 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 (in the past or after the date hereof), 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, consistent with the needs of the business of the Company.

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. 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 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.

 

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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 and any breach of this Section 3 shall be
a material breach of this Agreement.

4. Physical Exam. Executive will 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 Debbie Colia, Vice President, OE
Consulting Services. 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. 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.

 

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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 General Counsel
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.

6. 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 and participation in the Company’s
401(k) plan, tuition reimbursement plan, deferred compensation plan, and
Supplemental Executive Retirement Plan (“SERP”). Under the SERP Executive is
entitled to vest and accrue a retirement benefit of up to 50% of Executive’s
Base Salary plus incentive compensation. This SERP benefit is offset with other
retirement benefits provided by the Company to Executive and with 50% of
Executive’s Social Security benefits. Executive has received credit for one
additional year of service under the SERP upon Executive’s completion of five
years of service with the Company. 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.

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

C. Financial Counseling Allowance. Executive is 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 is 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 70% of
Executive’s Base Salary as additional compensation according to the terms of the
actual EIP documents. 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 guidelines of the
EIP.

E. Car Allowance. Executive is entitled to a car allowance of $1,000 per month.

 

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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.

7. Equity Grants.

A. 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.

B. 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 one times (1x) 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 $412,500 and a stock price of $39.3033,
which is the average closing price per share of the Company’s Common Stock as of
December 31, 2005, Executive’s current stock ownership requirement is 10,495
(“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 or
shares of restricted stock 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 and shares of Common Stock gifted to others
do not count toward the Target Amount. Executive will be notified on an annual
basis of any changes in Executive’s Target Amount.

C. Stock Plan Amendments. In accordance with the Agreement dated January 1, 2001
between Executive and the Company, Executive previously consented, pursuant to
Section 14 of the Company’s Second Amended and Restated 1991 Stock Option Plan
(the “1991 Plan”), Section 6.2 of the Company’s 1997 Stock Option Plan, as
amended (the “1997 Plan”) and Section 6.2 of the Company’s 1998 Stock Option
Plan, as amended (the “1998 Plan,” and together with the 1991 Plan and the 1997
Plan, the “Plans”), that the Plans, as amended by the amendments to the
Accelerated Provisions of the Plans set forth on Exhibit A attached hereto,
shall govern and apply to all of Executive’s outstanding options under the
Plans, regardless of the date such options were granted. To the extent the
option agreements for Executive’s outstanding options under the Plans state
anything to the contrary, Executive and the Company have agreed that such option
agreement(s) are amended to be consistent with the foregoing sentence.

 

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8. 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) will 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 the date of termination, (b) any compensation previously deferred
by Executive (together with any interest and earnings therein), (c) accrued but
unused PTO, (d) reimbursable expenses incurred by Executive prior to the
termination date and (e) amounts under any other compensatory plan, arrangement
or program payment to which Executive may be entitled. This Agreement
constitutes a final and fully binding integrated agreement with respect to the
at-will nature of the employment relationship.

9. 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 9(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 Executive 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) 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, vision, disability, life and accident 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 twenty-four (24) months following the effective date of Executive’s
termination.

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 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;

 

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(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 Executive 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) 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 thirty-six (36) months following Executive’s date of termination, 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
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, within two (2) years
following the effective date of a Change in Control as defined above:

(i) A substantial reduction in the scope of Executive’s authority, duties or
responsibilities with the Company, 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;

 

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(ii) A material reduction by the Company in Executive’s base compensation (i.e.,
Executive’s Base Salary and/or annual target bonus) 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 13 of this Agreement;

provided, however, that Executive must provide notice to the Company of the
existence of the condition described above within ninety (90) days of the
initial existence of the condition, upon the notice of which the Company has
thirty (30) days during which it may remedy the condition, in accordance with
Treasury Regulation Section 1.409A-1(n)(2)(ii).

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 9).

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 9(A) or 9(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 knowing unauthorized disclosure
of confidential information relating to the business of the Company or any of
its affiliates, (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 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 death or “Disability” (as defined
below), Executive (or Executive’s beneficiaries or estate) shall be entitled to
receive, provided Executive (or

 

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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 12 months from the date
of termination and (ii) a lump sum payment equal to one times (1x) Executive’s
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.

10. 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.

11. Potential Tax Consequences for “Parachute” Payments.

A. Tax Gross-Up. Notwithstanding any other provisions of this Agreement, 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 9 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 Internal Revenue Code of 1986, as amended (the “Code”), or
any successor provision enacted under the Code or any interest or penalties (to
the extent permitted under Treasury Regulation Section 1.409A-3(i)(1)(v)) 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 (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 11, 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

 

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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 11, shall be paid by the Company to Executive within
five (5) days of the receipt of the Accounting Firm’s determination. 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 11(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 11,
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).

12. 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, health
care management company, physician group, insurance company or similar entity
that provides managed health care or related services similar to those provided
by the Company or any of its affiliates.

 

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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.

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 12 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 12 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 12 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.

13. 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 13,
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.

 

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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.

14. Section 409A of the Internal Revenue Code.

A. 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 Treasury Regulations and Internal Revenue Service guidance
promulgated thereunder (“Section 409A”), and the Agreement shall be interpreted
as to so comply with, or be exempt from, Section 409A. Notwithstanding anything
to the contrary herein, the Company and Executive agree to the provisions set
forth in this Section 14 in order to comply with, or be exempt from, the
requirements of Section 409A. Notwithstanding anything to the contrary herein,
if Executive is a “specified employee” (as determined under the Company’s
Specified Employee Policy, or, in the absence of such policy, within the meaning
of Section 409A(a)(2)(B)(i) of the Code), any amounts (or benefits) otherwise
payable to or in respect of Executive pursuant to this Agreement shall be
delayed until the earliest date permitted by Section 409A(a)(2) of the Code. The
Company and Executive agree to cooperate in good faith in an effort to comply
with Section 409A of the Code including, if necessary, amending this Agreement
based on further guidance issued by the Internal Revenue Service from time to
time, provided that the Company shall not be required to assume any increased
economic burden in connection with such amendment. If any provision of the
Agreement would cause such payments and benefits to fail to so comply, such
provision shall not be effective and shall be null and void with respect to such
payments or benefits, and such provision shall otherwise remain in full force
and effect.

B. Notwithstanding anything herein to the contrary, Executive shall not be
considered to have terminated employment unless such termination constitutes a
“separation from service” with respect to Executive, as defined in Treasury
Regulation Section 1.409A-1(h).

C. All incentive bonus payments described in Section 6(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.

D. With respect to the Company’s reimbursement obligations and provision of
in-kind benefits under Sections 6(C) and 6(E) hereof, and the provision of
Benefits to Executive, (i) in no event shall any such reimbursements or in-kind
benefits be made or provided 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, (ii) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during Executive’s taxable year may
not affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year of Executive, and (iii) the right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for
another benefit, in accordance with Treasury Regulation
Section 1.409A-3(i)(1)(iv).

 

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E. The Tax Gross-Up payment, if any, provided under Section 11 shall be provided
in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(v),
including that such Tax Gross-Up payment shall be paid by the end of Executive’s
taxable year next following Executive’s taxable year in which Executive remits
the related taxes to the relevant taxing authority. To the extent required by
Section 409A, any Tax Gross-Up payment made with respect to any payment that is
non-exempt non-qualified deferred compensation (within the meaning of
Section 409A) which is subject to Section 409A shall be payable only upon
Executive’s “separation from service” (as defined above) and subject to
Section 14(A).

15. Company Policies. Executive’s employment with the Company is subject to the
terms and conditions contained in the Company’s Associate Policies located on HR
Link, which can be accessed through the Company’s intranet site, as in effect
from time to time (the “Associate Policies”), the content of which is
incorporated by reference herein. Executive shall be required to read,
understand and comply with the Associate Policies.

16. 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.

17. 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,
including, but not limited to, the Prior Agreement. 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). The Company acknowledges and agrees that
nothing contained herein shall be deemed to supercede, amend or otherwise modify
the terms of the Indemnification Agreement dated December 17, 2004 between
Executive and the Company.

18. 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.

19. 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 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
     

 

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If to the Executive:    Karin D. Mayhew      

    

 

                

 

           

20. 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.

21. Survival and Enforcement. Sections 3, 8, 9, 11, 12 and 13 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 Executive’s
employment. The parties agree that the Company would be damaged irreparably in
the event any provision of Sections 3, 12 and 13 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).

22. 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
Effective Date set forth above.

 

Executive   Health Net, Inc. By:  

/s/ Karin D. Mayhew

  By:  

/s/ Jay M. Gellert

Name:   Karin D. Mayhew   Name:   Jay M. Gellert Title:  

Senior Vice President,

Organization Effectiveness

  Title:   President and Chief Executive Officer

 

cc:    Linda V. Tiano    Debbie J. Colia/Karin Mayhew Personnel File

 

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EXHIBIT A

Amendment to Second Amended and Restated 1991 Stock Option Plan

The Health Net, Inc. Second Amended and Restated 1991 Stock Option Plan (the
“1991 Plan”) is hereby amended to delete paragraph 8 of the 1991 Plan in its
entirety and to replace it with the following new paragraph 8:

“8. ACCELERATION OF OPTIONS AND RESTRICTED SHARES.

Notwithstanding any contrary waiting period or installment period in any Stock
Option Agreement or any Restriction Period in any Restricted Shares Agreement or
in the Restated 1991 Plan, each outstanding Option granted under the Restated
1991 Plan shall, except as otherwise provided in the applicable Stock Option
Agreement, become exercisable in full for the aggregate number of shares covered
thereby, and each Restricted Share, except as otherwise provided in the
Restricted Shares Agreement, shall vest unconditionally, in the event (i) the
Company shall consummate (a) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
shares of Common Stock are converted into cash, securities or other property,
other than a Merger, or (b) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (c) the liquidation or dissolution of the
Company, or (ii) any person (as such term is defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), corporation or other entity (other than the
Company or any employee benefit plan sponsored by the Company or any Subsidiary)
(A) shall purchase any Common Stock of the Company (or securities convertible
into the Company’s Common Stock) for cash, securities or any other consideration
pursuant to a tender offer or exchange offer, without the prior consent of the
Board, and (B) shall become the “beneficial owner” (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20 percent or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights accruing
under special circumstances) having 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 the Company’s securities), or (iii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company’s
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period, or (iv) there occurs such other transactions involving a significant
issuance of voting stock or change in the composition of the Board that the
Board determines to be an accelerating event under this paragraph 8. Any
transaction referred to in the foregoing clause (i) is herein called a
Consummated Transaction, any purchase pursuant to a tender offer or exchange
offer or otherwise as described in the foregoing clause (ii) is herein called a
Control Purchase, the cessation of individuals constituting a majority of the
Board as described in the foregoing clause (iii) is herein called a Board Change
and such other transactions as described in the foregoing clause (iv) is herein
called an “Other Accelerating Event”. The Stock Option Agreement and Restricted
Shares Agreement evidencing Options or Restricted Shares granted under the
Restated 1991 Plan may contain such provisions limiting the acceleration of the
exercisability of Options and the acceleration of the vesting of Restricted
Shares as provided in this paragraph 8 as the Committee deems appropriate to
ensure that the penalty provisions of Section 4999 of the Code, or any successor
thereto in effect at the time of such acceleration, will not apply to any stock,
cash or other property received by the Holder from the Company.”

 

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The 1991 Plan is hereby further amended to delete all references to “Approved
Transaction” in the 1991 Plan and to replace all such references with
“Consummated Transaction.”

Amendment to 1997 Stock Option Plan

The Health Net, Inc. 1997 Stock Option Plan (the “1997 Plan”) is hereby amended
to delete subsection 6.8(b) of the 1997 Plan in its entirety and to replace it
with the following new subsection 6.8(b):

“(b) Definition of Change in Control. A “Change in Control” shall mean:

(i) Consummated Transaction. Consummation of (a) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock are converted into cash, securities
or other property, other than a Merger, or (b) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (c) the liquidation or
dissolution of the Company;

(ii) Control Purchase. The purchase by any person (as such term is defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity
(other than the Company or any employee benefit plan sponsored by an Employer)
of any Common Stock of the Company (or securities convertible into the Company’s
Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer, without the prior consent of the Board and,
after such purchase, such person shall be the “beneficial owner” (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20 percent or more of the combined voting
power of the then outstanding securities of the Company ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors (calculated as provided in Section (d) of such Rule
13d-3 in the case of rights to acquire the Company’s securities);

(iii) Board Change. A change in the composition of the Board during any period
of two consecutive years, such that individuals who at the beginning of such
period constitute the entire Board shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company’s stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or

(iv) Other Transactions. The occurrence of such other transactions involving a
significant issuance of voting stock or change in the composition of the Board
that the Board determines to be a Change in Control for purposes of the Plan.

The Agreement evidencing options or Restricted Stock granted under the Plan may
contain provisions limiting the acceleration of the exercisability of options
and the acceleration of the vesting of Restricted Stock as provided in this
Section as the Committee deems appropriate to

 

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ensure that the penalty provisions of Section 4999 of the Code, or any successor
thereto in effect at the time of such acceleration, will not apply to any stock,
cash or other property received by the holder from the Company.”

Amendment to the 1998 Stock Option Plan

The Health Net, Inc. 1998 Stock Option Plan, as amended (the “1998 Plan”), is
hereby further amended to delete subsection 6.8(b) of the 1998 Plan in its
entirety and to replace it with the following new subsection 6.8(b):

“(b) Definition of Change in Control. A “Change in Control” shall mean:

(i) Consummated Transaction. Consummation of (a) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock are converted into cash, securities
or other property, other than a Merger, or (b) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or (c) the liquidation or
dissolution of the Company;

(ii) Control Purchase. The purchase by any person (as such term is defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity
(other than the Company or any employee benefit plan sponsored by an Employer)
of any Common Stock of the Company (or securities convertible into the Company’s
Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer, without the prior consent of the Board and,
after such purchase, such person shall be the “beneficial owner” (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20 percent or more of the combined voting
power of the then outstanding securities of the Company ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors (calculated as provided in Section (d) of such Rule
13d-3 in the case of rights to acquire the Company’s securities);

(iii) Board Change. A change in the composition of the Board during any period
of two consecutive years, such that individuals who at the beginning of such
period constitute the entire Board shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company’s stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or

(iv) Other Transactions. The occurrence of such other transactions involving a
significant issuance of voting stock or change in the composition of the Board
that the Board determines to be a Change in Control for purposes of the Plan.

The Agreement evidencing Options or Restricted Stock granted under the Plan may
contain such provisions limiting the acceleration of the exercisability of
options and the acceleration of the vesting of Restricted Stock as provided in
this Section as the Committee deems appropriate to ensure that the penalty
provisions of Section 4999 of the Code, or any successor thereto in effect at
the time of such acceleration, will not apply to any stock, cash or other
property received by the holder from the Company.”

 

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EXHIBIT B

[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

 

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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. 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.

 

5. 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.

 

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6. 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, 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.

 

7. 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.

 

8. 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.

 

9.

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,

 

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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 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.

 

10. 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.

 

11. 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.

 

12. 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.

 

13. 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.

 

14.

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.

 

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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.

 

15. 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.

 

16. 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.

 

17. 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: General Counsel.

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]

 

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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]

 

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