Health Net 2011 Annual Report Download - page 241

agreement) (all such payments and benefits, including the payments and benefits under Section 9 hereof, being hereinafter referred to
as the “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”) (the “Excise Tax”), then, after taking into account any reduction in the Total Payments
provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments shall
first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the
Total Payments is subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after
subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the
phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to
(ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local
income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such
unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to
such unreduced Total Payments). The Total Payments shall be reduced by the Company in its reasonable discretion in the following
order: (A) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A (as defined
below), (B) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A, but
excluding any payments attributable to the acceleration of vesting or payments with respect to any stock option or other equity award
with respect to the Company’s Common Stock that are exempt from Section 409A, (C) reduction of any other payments or benefits
otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A, but excluding any
payments attributable to the acceleration of vesting and payments with respect to any stock option or other equity award with respect
to the Company’s Common Stock that are exempt from Section 409A, and (D) reduction of any payments attributable to the
acceleration of vesting or payments with respect to any stock option or other equity award with respect to the Company’s Common
Stock that are exempt from Section 409A.
B. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax,
(i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner
as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the
Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing
(“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G
(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such
Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for
services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in
Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
14. Section 409A 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
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