EXHIBIT 10.1
HEALTH NET, INC.
2006 EXECUTIVE OFFICER INCENTIVE
PLAN
I.
PURPOSE
The purposes of the Health Net, Inc. Executive
Officer Incentive Plan (the “Plan”) are to retain and
motivate the Executive Officers of Health Net, Inc. (the
“Company”) who have been designated by the Committee to
be Participants for a Performance Period by providing them with the
opportunity to earn incentive payments based upon the extent to
which specified performance goals have been achieved or exceeded
for the Performance Period. It is intended that all amounts payable
to Participants who are “covered employees” within the
meaning of Section 162(m) of the Code will constitute
“qualified performance-based compensation” within the
meaning of U.S. Treasury regulations promulgated thereunder, and
the Plan and the terms of any awards hereunder shall be so
interpreted and construed to the maximum extent
possible.
II.
DEFINITIONS
For purposes of the Plan, the following terms
shall have the following meanings:
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1.
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“Annual
Base Salary” shall mean for any Executive Officer an amount
equal to the rate of annual base salary in effect or approved by
the Committee or other authorized person at the time or immediately
before performance goals are established for a Performance Period,
including any base salary that otherwise would be payable to the
Executive Officer during the Performance Period but for his or her
election to defer receipt thereof. Notwithstanding the previous
sentence, the Committee, in its sole discretion, may provide at the
time it selects an Executive Officer to be a Participant that such
Participant’s Annual Base Salary shall have a different
meaning, provided that the dollar amount of such Annual Base Salary
is fixed at the time the applicable performance goals are
established.
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2.
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“Applicable Period” shall mean, with
respect to any Performance Period, a period commencing on or before
the first day of the Performance Period and ending not later than
the earlier of (i) 90 days after the commencement of the
Performance Period and (ii) the date on which twenty-five percent
(25%) of the Performance Period has been completed. Any action
required to be taken within an Applicable Period may be taken at a
later date if permissable under Section 162(m) of the Code or
regulations promulgated thereunder, as they may be amended from
time to time.
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3.
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“Board” shall mean the Board of
Directors of the Company.
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4.
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“Cause” shall mean
“cause” as defined in any employment agreement between
an Executive Officer and the Company, or if not defined in such
agreement, or if there is no agreement, “Cause” shall
include, without limitation, (a) an act of dishonesty causing harm
to the Company, (b) the knowing disclosure of confidential
information relating to the Company’s business, (c) habitual
drunkenness or narcotic drug addiction, (d) conviction of a felony,
(e) willful refusal to perform or gross neglect of the duties
assigned to the Participant, (f) the Participant’s willful
breach of any law that, directly or indirectly, affects the
Company, (g) the Participant’s material breach of his or her
duties or responsibilities following a Change in Control that do
not differ in any material respect from the Participant’s
duties and responsibilities during the 90-day period immediately
prior to such Change in Control (other than as a result of
incapacity due to physical or mental illness) which is demonstrably
willful and deliberate on the Participant’s part, which is
committed in bad faith or without reasonable belief that such
breach is in the best interests of the Company and which is not
remedied in a reasonable period of time after receipt of written
notice from the Company specifying such breach.
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5.
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A “Change
in Control” shall mean:
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(i)
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Consummated
Transaction. Consummation of (A) any
consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares
of Common Stock are converted into cash, securities or other
property, other than a Merger, or (B) any sale, lease, exchange, or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Company, or (C) the liquidation or dissolution of the
Company.
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(ii)
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Control
Purchase. The purchase by any
person (as such term is defined in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), corporation or other entity (other than the
Company or any employee benefit plan sponsored by an Employer) of
any Common Stock of the Company (or securities convertible into the
Company’s Common Stock) for cash, securities or any other
consideration pursuant to a tender offer or exchange offer, without
the prior consent of the Board and, after such purchase, such
person shall be the “beneficial owner” (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20 percent
(20%) or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in
the election of directors (calculated as provided in Section (d) of
such Rule 13d-3 in the case of rights to acquire the
Company’s securities);
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(iii)
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Board
Change. A change in the
composition of the Board during any period of two consecutive
years, such that individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to
constitute a majority thereof unless the election, or the
nomination for election by the Company’s stockholders, of
each new director was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the
beginning of the period; or Other Transactions. The occurrence of
such other transactions involving a significant issuance of voting
stock or change in the composition of the Board that the Board
determines to be a Change in Control for purposes of the
Plan;
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(iv)
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Other
Transactions. The occurrence of such
other transactions involving a significant issuance of voting stock
or change in the composition of the Board that the Board determines
to be a Change in Control for purposes of the Plan.
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6.
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“Code” shall mean the Internal
Revenue Code of 1986, as amended from time to time.
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7.
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“Committee” shall mean the
Compensation Committee of the Board or a subcommittee thereof that
consists solely of two or more members of the Board of Directors
who shall qualify as “outside directors” within the
meaning of Section 162(m) of the Code.
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8.
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“Company” shall mean Health Net,
Inc., a corporation organized under the laws of the State of
Delaware, and any successor thereto.
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9.
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“Common
Stock” shall mean the Common Stock, $.001 par value, of the
Company and any other equity security which (i) is designated by
the Board to be available for awards under the Plan or (ii) becomes
available for awards under the Plan by reason of a conversion,
stock split, stock dividend, recapitalization, reclassification,
reorganization, merger, consolidation, combination, exchange of
shares, liquidation, spin-off or other similar change in
capitalization or event or any distribution to holders of shares of
Common Stock.
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10.
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“Disability” shall mean
“disability” as defined in any employment agreement
between the Participant and the Company or any of its subsidiaries)
or, if not defined therein or if there is no such agreement, as
defined in the Company’s long-term disability
plan.
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11.
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“Executive Officer” shall have the
meaning set forth in Rule 3b-7 promulgated under th
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