Health Net 2009 Annual Report Download - page 165

4. Amendment of Section 1.4(e)(ii) and (iii). Sections 1.4(e)(ii) and (iii) shall be amended and replaced in their entirety with the
following:
(ii) Notwithstanding Sections 1.4(d)(v) and 1.4(e)(i), in the event that all of the Administrative Services Agreements are
terminated pursuant to their terms prior to the Transition Date (the date of such termination, the “ASA Termination Date”),
(A) the Estimated Final Net Payment shall be equal to zero (0) for purposes of Section 1.4(d)(v)(E) and (F) and (B) neither
Seller nor Buyer shall be obligated to make any remaining payments under Section 1.4(e)(i). In lieu thereof, however, no later
than thirty (30) days after the ASA Termination Date, Seller, with the cooperation and assistance of Buyer, shall prepare or
cause to be prepared an unaudited combined estimated income statement and estimated balance sheet for all of the Acquired
Companies (the “Termination Date Combined Financial Statement”). The Termination Date Combined Financial Statement
shall be for the period commencing on the first day following the last day of the period covered by any preceding Quarterly
Combined Financial Statement for which a Quarterly Net Payment has been made (or, if no such payment has been made, the
Closing Date) and ending on the ASA Termination Date. The Termination Date Combined Financial Statement shall be
prepared based on the historical administrative costs of the Acquired Companies, as adjusted to take into consideration the wind-
down of the Acquired Business as contemplated by the Transaction Documents. The Termination Date Combined Financial
Statement shall include an actuarially determined provision for medical costs and loss adjustment expenses as of the ASA
Termination Date for all claims through the winding up and running out period of the Acquired Business; provided, however,
that the Termination Date Combined Financial Statement shall not include any reserves for Unreserved Claims or loss
adjustment expenses related to such Unreserved Claims nor shall the Termination Date Combined Financial Statement include
any reserves for loss adjustment expenses if the ASA Termination Date is the result of all of the Administrative Services
Agreements terminating pursuant to Section 16.1, 16.2(b), 16.2(c) or 16.2(d) of each such Administrative Services Agreement
(“Termination Date Loss Reserves”). The amount of such Termination Date Loss Reserves shall be calculated in accordance
with GAAP, consistently applied in accordance with the accounting policies and practices used to prepare the unaudited
combined financial statements of the Acquired Companies as of and for the year ended December 31, 2008, insofar as such
accounting policies and practices are consistent with GAAP. Net income and net loss as reflected on the Termination Date
Combined Financial Statement shall be determined in accordance with the last sentence of Section 1.4(e)(i). Seller shall
promptly cause a copy of the Termination Date Combined Financial Statement to be delivered to Buyer within such thirty-day
period, together with a calculation of the Quarterly Net Payment with respect to such period due from Buyer to Seller or from
Seller to Buyer (the “Termination Date Net Payment”).
(iii) Intentionally Deleted.
5. Amendment of Section 1.4(e)(iv)(B). Section 1.4(e)(iv)(B) shall be amended and replaced in its entirety with the following:
(B) All of the other cash, cash equivalents and securities of the Acquired Companies (i.e., other than the cash and cash
equivalents deemed to be included in the Buyer TNE Account) shall be segregated into the “Seller Commercial Account” which
shall be adjusted for each Adjusted Tangible Net Equity Payment, payment of a Capital
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