Health Net 2009 Annual Report Download - page 187

14. Limitation on Payments.
A. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be
received by Executive (including any payment or benefit received in connection with a Change in Control or the termination of
Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such
payments and benefits, including the payments and benefits under Section 10 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 of the Code, (B) reduction of any
other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, 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 of the Code, (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 of the Code, 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 of the Code, 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 of the Code.
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
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