Health Net 2015 Annual Report Download - page 149

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Change in Control Severance Plan
In connection with entering into the Merger Agreement, the Compensation Committee adopted the Health Net, Inc.
Change in Control Severance Plan (the “Change in Control Severance Plan”). The Change in Control Severance Plan
becomes effective upon the consummation of a change in control. The Merger will constitute a “change in control” under
the Change in Control Severance Plan.
If an individual who is otherwise eligible to participate in the Change in Control Severance Plan, including an
executive officer, has an employment agreement that provides for severance, the individual will only receive payments
and benefits under the Change in Control Severance Plan if they are better than those provided under the applicable
employment agreement. All executive officers currently employed by the Company will only receive severance
payments and benefits under the Change in Control Severance Plan during the two year period following a change in
control if the executive officer’s employment terminates and such termination does not constitute an involuntary
termination without Cause or resignation for Good Reason pursuant to the terms of the executive officer’s employment
agreement but does constitute an involuntary termination without Cause or due to a Reduction in Force or a resignation
for Good Reason pursuant to the terms of the Change in Control Severance Plan.
The Change in Control Severance Plan provides that if, after a change in control, the Company or, in the case of a
merger or similar transaction, the surviving corporation in such transaction (the “surviving corporation”), terminates an
executive officer’s employment without Cause or due to a Reduction in Force (as defined below), or he or she
voluntarily terminates employment for Good Reason (as defined below) and the benefits to be provided to the executive
officer are better than those provided under the executive officer’s applicable employment agreement, if any, then such
executive officer will be entitled to receive:
• a one-time lump sum payment equivalent to 12 months of his or her then-current annual base salary;
• payment of COBRA premiums for a 12-month period provided he or she properly elects to continue those
benefits under COBRA; and
• outplacement services and/or career transition services.
In the event that an executive officer voluntarily terminates his or her employment at any time (other than for Good
Reason), or the surviving corporation terminates the executive officer for Cause, the executive officer would not be
eligible to receive any of the severance benefits provided under the Change in Control Severance Plan.
To the extent that any severance and change in control payments and benefits provided to a participant in the
Change in Control Severance Plan, whether under the Change in Control Severance Plan or otherwise, constitute
“parachute payments” then such payments and benefits shall be “cut-back” or reduced to the extent necessary such that
no portion of the payments and benefits is subject to the imposition of excise taxes, but only if the net amount of such
payment and benefits, as so reduced (and after subtracting any additional taxes due on such reduced payments and
benefits) is greater than or equal to the net amount of such payments and benefits without such reduction (but after
subtracting the net amount of excise taxes and all additional taxes due on such unreduced payments and benefits).
To receive severance payments and benefits under the Change in Control Severance Plan, a terminated executive
must execute a waiver and release of claims substantially in the form used by the Company immediately prior to the
change in control. For the two year period following the change in control, no amendment or termination of the Change
in Control Severance Plan shall impair any rights or obligations to a participant unless the participant consents to such
amendment or termination.
For purposes of the Change in Control Severance Plan, “Good Reason” generally means any of the following
which occurs without a participant’s prior written consent: (i) a relocation of a participant’s principal place of
employment by more than 50 miles from the participant’s place of work immediately prior to the change in control, (ii) a
material diminution of a participant’s base compensation as in effect immediately prior to the change in control or (iii)
with respect to employees at the level of director or above, a material diminution of responsibilities as in effect
immediately prior to the change in control; provided that, the participant must provide notice of the existence of the
condition constituting Good Reason within 90 days of the initial existence of the condition, upon the notice of which the
surviving corporation will have 30 days during which it may remedy the condition, and the participant must terminate
employment no later than one year after the initial occurrence of the event constituting Good Reason.
For purposes of the Change in Control Severance Plan, “Reduction in Force” means changes in the surviving
corporation’s operations that result in elimination of a participant’s position, and “Cause” means, without limitation, and
as determined by the surviving corporation in its sole discretion, (i) an act of dishonesty by a participant that causes harm
to the surviving corporation; (ii) a knowing disclosure by a participant of confidential information relating to the
surviving corporation’s business; (iii) habitual drunkenness or narcotic drug addiction; (iv) conviction of a felony; (v)