EXHIBIT 10.19
HEALTH NET, INC.
DEFERRED COMPENSATION
PLAN
(as amended and restated effective
November 12, 2007)
I. INTRODUCTION
The purpose of the Health Net, Inc.
Deferred Compensation Plan (the “Plan”) is to permit
certain key employees of Health Net, Inc., a Delaware corporation
(the “Company”), and certain of its subsidiaries to
defer receipt of compensation payable to such employees until such
times as set forth herein.
II. DEFINITIONS
For purposes of the Plan, the
following capitalized terms shall have the meanings set forth in
this Article.
2.1 “Account” shall mean
the account kept on the books and records of the Company
established on behalf of a Participant in the Plan to which amounts
deferred by such Participant (and deemed earnings and losses
thereon), other than amounts credited to the Participant’s
In-Service Withdrawal Account, are credited.
2.2 “Beneficiary” shall
mean the beneficiary or beneficiaries (including any contingent
beneficiary) designated pursuant to Section 4.5, except that
the beneficiary or beneficiaries entitled to amounts credited to
the subaccounts of an Eligible Employee’s Former Account
shall be the beneficiary or beneficiaries as designated pursuant to
The Health Net Executive Deferral Plan and The Health Net
Supplemental Credit Plan (such plans terminated effective as of
December 31, 2000), unless a change to such a beneficiary is
made pursuant to Section 4.5 hereof.
2.3 “Board” shall mean
the Board of Directors of the Company.
2.4 “Code” shall mean
the Internal Revenue Code of 1986, as amended.
2.5 “Committee” shall
mean the Compensation and Stock Option Committee of the
Board.
2.6 “Common Stock” shall
mean the Class A Common Stock, $.001 par value, of the
Company.
2.7 “Company” shall mean
Health Net, Inc. (formerly known as Foundation Health Systems,
Inc.), a Delaware corporation, or any successor thereto.
2.8 “Compensation” shall
mean the total earnings paid by an Employer to an Eligible Employee
and properly reportable on IRS Form W-2 for a Deferral Year
(including bonuses and overtime), and all amounts not includible in
such Eligible Employee’s gross income for federal
income tax purposes solely on account of his or
her election to have compensation reduced pursuant to the Plan, a
qualified cash or deferred arrangement described in
Section 401(k) of the Code or a cafeteria plan as defined in
Section 125 of the Code, but excluding any reimbursements or
other allowances for automobile, relocation, travel or education
expenses (even if includible in the Eligible Employee’s gross
income for federal income tax purposes).
2.9 “Deferral Year”
shall mean the twelve-month period beginning each January 1,
except that the first Deferral Year shall be the eight-month period
beginning on May 1, 1998.
2.10 “Disability” shall
mean a disability within the meaning of the long-term disability
plan maintained by the Employer of an Eligible Employee, pursuant
to which such Eligible Employee is receiving long-term disability
benefits.
2.11 “Eligible Employee”
shall mean an individual (i) who is treated by an Employer as
its employee, (ii) whose employment position is categorized as
“director-level” or above, and (iii) whose annual
base rate of salary for a Deferral Year is at least $100,000 (or
such other amount determined by the Company from time to time) as
of the first day of such Deferral Year.
2.12 “ERISA” shall mean
the Employee Retirement Income Security Act of 1974, as
amended.
2.13 “Effective Date”
shall mean May 1, 1998.
2.14 “Employer” shall
mean the Company or a Subsidiary, other than a Subsidiary that the
Committee excludes from participation in the Plan.
2.15 “Exchange Act”
shall mean the Securities Exchange Act of 1934, as
amended.
2.16 “Former Account”
shall mean an account kept on the books and records of the Company
established on behalf of an Eligible Employee to which shall be
credited the following: (i) amounts equal to the benefits
earned by such Eligible Employee as of December 31, 2000 (the
“Plan Termination Date”) under The Health Net Executive
Deferral Plan (the “Deferral Plan”) and The Health Net
Supplemental Credit Plan (the “Supplemental Credit
Plan”) and (ii) deemed earnings and losses on such
amounts after the Plan Termination Date. An Eligible
Employee’s Former Account shall consist of two subaccounts,
i.e. , (x) a Deferral Plan Subaccount, to which shall
be credited such Eligible Employee’s benefit under the
Deferral Plan as of the Plan Termination Date, and deemed earnings
and losses thereon after the Plan Termination Date, and (y) a
Supplemental Credit Plan Subaccount, to which shall be credited
such Eligible Employee’s benefit under the Supplemental
Credit Plan as of the Plan Termination Date, and deemed earnings
and losses thereon after the Plan Termination Date.
2.17 “In-Service Withdrawal
Account” shall mean the account kept on the books and records
of the Company established on behalf of a Participant to which
amounts deferred by such Participant pursuant to
Section 3.2(f) shall be paid in a lump sum at the time or
times described in Section 4.1(b).
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2.18 “In-Service Withdrawal
Year” shall mean the calendar year designated by a
Participant on his or her deferral election form filed pursuant to
Section 3.2(f), which year begins at least three years after
the year in respect of which the Participant has filed such
election form.
2.19 “Investment Fund”
shall mean an “open-end,” “closed-end” or
other collective investment fund selected by the Company from time
to time as a measure for allocating deemed investment gains and
losses to Participants’ accounts.
2.20 “Merger” shall mean
any merger of the Company in which the holders of the Class A
common stock, $.001 par value, of the Company immediately prior to
the merger have the same proportionate ownership of common stock of
the surviving or resulting parent corporation immediately after the
merger.
2.21 “Participant” shall
mean an Eligible Employee who has elected to defer, pursuant to the
terms of the Plan, an amount that would otherwise be payable as
Compensation in a Deferral Year.
2.22 “Payment Date”
shall mean the date chosen by the Company, in its sole discretion,
that occurs within the 90-day period beginning immediately after
the last day of a calendar year.
2.23 “Regular
Compensation” shall mean an Eligible Employee’s
Compensation for a Deferral Year, excluding any bonuses payable to
such Eligible Employee during, or with respect to, such Deferral
Year.
2.24 “Subsidiary” shall
mean any corporation other than the Company in an unbroken chain of
corporations beginning with the Company if, at the time of
reference, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of
the other corporations in such chain.
III. PARTICIPATION AND
DEFERRALS
3.1 Participation
.
(a) In General . Each
Eligible Employee may participate in the Plan in a Deferral Year by
irrevocably specifying on an election form filed with the Company
prior to the beginning of such Deferral Year the percentage of
Compensation for the Deferral Year to be deducted from such
Compensation and deferred for payment at a later date pursuant to
the Plan. The Company shall establish rules and procedures
prescribing the time and manner in which election forms shall be
filed with the Company.
(b) Initial Participation .
An individual may participate in the Plan during the first Deferral
Year in which the individual begins employment with an Employer,
provided that on the individual’s date of hire he or
she satisfies the conditions set forth in clauses (i) and
(ii) of the definition of “Eligible Employee” and
his or her annual base rate of salary for such Deferral Year is at
least $100,000. To participate in the Plan, such individual must
file a deferral election form with the Company within 30 days of
his or her date of hire (hereinafter, such individual is
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referred to as an “Eligible
Employee”) and may only elect to defer Compensation with
respect to services performed for periods following the date of the
election.
3.2 Deferral Elections
.
(a) In General . Except as
provided in Section 3.1(b), a deferral election form must be
filed in accordance with rules and procedures prescribed by the
Company prior to the Deferral Year for which the election is to be
effective. A Participant may not revoke or change a deferral
election for a Deferral Year after the beginning of such year. A
Participant must file a new election form with the Company prior to
each Deferral Year for which the election is to be effective. In no
event shall an election under the Plan apply to Compensation earned
prior to the date on which the election to participate in the Plan
for a Deferral Year is received by the Company.
(b) Deferral Amount . An
Eligible Employee may elect on the election form (in the time and
manner designated by the Company) to defer the receipt of
(i) between 5% and 90% of the amount that would otherwise be
the Eligible Employee’s Regular Compensation for a Deferral
Year, (ii) between 5% and 100% of any bonus payable to such
Eligible Employee during, or with respect to, the Deferral Year or
(iii) any combination of such percentages described in clauses
(i) and (ii).
(c) Deemed Investment
Election . Upon the commencement of participation in the Plan,
each Participant shall specify on his or her election form any one
or more of the Investment Funds in which all of the
Participant’s accounts under the Plan are to be deemed
invested.
(d) Change of Deemed
Investment Election . A Participant may elect to change
his or her deemed investment election as frequently as may be
designated by the Company, and in any event at least quarterly. Any
such change shall specify the whole percentages (or amounts if so
permitted by the Company) to be deemed invested in one or more of
the then available Investment Funds. A Participant may change his
or her election (i) with respect to the balance of his or her
account(s) as of the effective date of the Participant’s new
investment election, (ii) with respect to future amounts
credited to the Participant’s account(s) under
Section 3.3(a) and (b) or (iii) both. A
Participant’s change of a deemed investment election must be
made in accordance with the written rules and conditions provided
by the Company to the Participants.
(e) Payment Election . Except
as provided in subsection (f) of this Section 3.2, an
Eligible Employee must designate on each deferral election form
filed with the Company (i) a manner of payment in which his or
her Account shall be paid, provided that such manner of
payment is permitted under Section 4.2, and (ii) whether
the Account is to be paid on the Payment Date occurring immediately
after (x) the calendar year in which the Eligible Employee
terminates employment with the Employer, or (y) the calendar
year immediately following the calendar year in which such
employment terminates. The Participant’s election on a
deferral election form shall in no event supersede the
Participant’s election with respect to previously deferred
amounts (and credits attributable thereto).
(f) In-Service Withdrawals .
A Participant may elect for any Deferral Year on a deferral
election form filed with the Company (i) to designate any
percentage of the amount to be
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deferred to be credited to an In-Service
Withdrawal Account established on behalf of the Participant and
(ii) to receive payment of the balance of such In-Service
Withdrawal Account in a lump-sum within 90 days after the last day
of the In-Service Withdrawal Year so designated by the
Participant.
3.3 Deferred Compensation
Account .
(a) Crediting Deferred
Compensation . Any amount otherwise payable as Compensation
that is deferred by a Participant hereunder shall be credited to
the applicable account of the Participant as of the date on which,
absent such election, such amount would have been payable to the
Participant as Compensation.
(b) Earnings . Each
Participant’s account(s) under the Plan shall be credited
with deemed earnings, or reduced by deemed losses, equal to the
earnings or losses that would have been realized or paid if assets
in an amount equal to the balance of such account(s) were actually
invested among the Investment Funds selected by the Participant in
accordance with Section 3.2(c) and (d). Although the Company
or an Employer might actually invest assets of the Company or such
Employer according to the Participant’s election, it is not
required to do so nor to set aside any assets to provide for
payments hereunder. The Company may promulgate separate accounting
and administrative rules to facilitate the deemed investment in an
Investment Fund.
(c) Notices . Each
Participant shall receive written notice of the balance of his or
her account(s) as soon as practicable following the last day of
each calendar q
