Exhibit 10.3
[NAME OF
INDEMNITEE]
INDEMNIFICATION
AGREEMENT
AGREEMENT, effective as of
[DATE] , between Health Net, Inc., a Delaware corporation
(the “Company”), and [NAME]
(“Indemnitee”).
WHEREAS, it is essential to the
Company to retain and attract as directors and officers the most
capable persons available; and
WHEREAS, both the Company and
Indemnitee recognize the increased risk of litigation and other
claims being asserted against directors and officers of public
companies in today’s environment; and
WHEREAS, the Sixth Amended and
Restated Certificate of Incorporation of the Company (the
“Certificate”) and the Ninth Amended and Restated
Bylaws of the Company, as amended (the “Bylaws”) permit
the Company to indemnify and advance expenses to its directors,
officers and employees to the fullest extent permitted by law, and
the Indemnitee [will be serving][has been serving and continues
to serve] as a director and/or officer of the Company and/or
its affiliated entities, in part in reliance on the Certificate and
Bylaws, as well as on the director and officer liability insurance
coverage made available by the Company; and
WHEREAS, the current difficulty in
obtaining adequate director and officer liability insurance
coverage at a reasonable cost and uncertainties as to the
availability of indemnification created by recent court decisions
have increased the risk that the Company will be unable to retain
and attract as directors and officers the most capable persons
available; and
WHEREAS, the Board of Directors of
the Company has determined that the inability of the Company to
retain and attract as directors and officers the most capable
persons would be detrimental to the interests of the Company and
that the Company therefore should seek to assure such persons that
indemnification and insurance coverage will be available in the
future; and
WHEREAS, Indemnitee is [a member
of the Company’s Board of Directors][an executive officer of
the Company] ; and
WHEREAS, Indemnitee and the Company
are not currently parties to an Indemnification Agreement; and
WHEREAS, in recognition of
Indemnitee’s [continued] need for substantial
protection against personal liability in order to enhance
Indemnitee’s [continued] service to the Company in an
effective manner, the increasing difficulty in obtaining
satisfactory director and officer liability insurance coverage and
Indemnitee’s reliance on the Certificate and Bylaws, and in
part to provide Indemnitee with specific contractual assurance that
the protection permitted by the Certificate and Bylaws will be
available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate or Bylaws, any change
in the composition of the Company’s Board of Directors or any
acquisition transaction relating to the Company), the Company
wishes to provide in this Agreement for the [continued]
indemnification of and the advancing of expenses to Indemnitee to
the fullest extent (whether partial or complete) permitted by law
and as set forth in this Agreement and, to the extent insurance is
maintained, for the [continued] coverage of Indemnitee under
the Company’s directors’ and officers’ liability
insurance policies.
NOW, THEREFORE, in consideration of
the above premises and of Indemnitee [agreeing][continuing]
to serve the Company or any of its subsidiaries or affiliated
entities, directly or, at its request, another enterprise, and
intending to be legally bound hereby, the parties hereto agree as
follows:
1. Certain Definitions
:
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(a)
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A “Change in Control” :
shall be deemed to have occurred if (i) any
“person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, a Passive Institutional Investor or a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company, becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 20% or more of the total
voting power represented by the Company’s then outstanding
Voting Securities; (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose
election by the Board of Directors or nomination for election by
the Company’s stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (iii) the
stockholders of the Company approve (A) a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at
least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, (B) a plan of
complete liquidation of the Company or (C) an agreement for
the sale or disposition by the Company of (in one transaction or a
series of transactions) all or substantially all the
Company’s assets.
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(b)
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“Claim” : means any
threatened, asserted, pending or completed action, suit or
proceeding, or any inquiry or investigation, and any appeal thereof
whether instituted by the Company, any governmental agency or any
other party, that Indemnitee in good faith believes might lead to
the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other, including
any arbitration or other alternative dispute resolution
mechanism.
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(c)
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“Expenses” : include
attorneys’ fees and all other costs, expenses and obligations
(including, without limitation, experts’ fees, court costs,
retainers, transcript fees, duplicating, printing and binding
costs, as well as telecommunications, postage and courier charges)
paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or
preparing to investigate, defend, be a witness in or participate in
any Claim relating to any Indemnifiable Event or in connection with
enforcing this Agreement.
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(d)
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“Indemnifiable Amounts” :
means any and all Expenses, damages, judgments, fines, penalties,
ERISA excise taxes and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines,
penalties, excise taxes or amounts paid in settlement) arising out
of or resulting from any Claim relating to an Indemnifiable
Event.
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(e)
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“Indemnifiable Event” :
means any event or occurrence, whether occurring prior to, on or
after the date of this Agreement, related to the fact that
Indemnitee is or was a director, officer, employee, manager, agent
or fiduciary of the Company or is or was serving at the request of
the Company as a director, officer, employee, manager, agent,
trustee or otherwise as a fiduciary of another corporation,
partnership, limited liability company, joint venture, employee
benefit plan, trust or other entity or enterprise, or by reason of
anything done or not done by Indemnitee in any such capacity.
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(f)
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“Independent Legal Counsel”
: means an attorney or firm of attorneys, selected in accordance
with the provisions of Section 3, who is experienced in
matters of corporate law and shall not have otherwise performed
services for the Company or Indemnitee within the last five years
(other than with respect to matters concerning the rights of
Indemnitee under this Agreement or of other indemnitees under
similar indemnity agreements).
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(g)
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“Passive Institutional Investor"
: means a person who or which, as of March 14, 2001, was the
beneficial owner, directly or indirectly, of shares of the
Company’s Common Stock (“Common Stock”)
representing 15% or more of the shares of Common Stock then
outstanding and had a Schedule 13G on file with the Securities
and Exchange Commission pursuant to the requirements of
Rule 13d-1 under the Exchange Act with respect to such
beneficial ownership, so long as such person either
(i) (A) is principally engaged in the business of
managing investment funds for unaffiliated securities investors
and, as part of such person’s duties as agent for fully
managed accounts, holds or exercises voting or dispositive power
over shares of Common Stock, (B) became the beneficial owner
of shares of Common Stock pursuant to trading activities undertaken
in the ordinary course of such person’s business and not
(x) with the purpose or the effect, either alone or in concert
with any person, of controlling or influencing the management or
policies of the Company or engaging in any of the actions specified
in Item 4 of Schedule 13D under the Exchange Act as in
effect on March 14, 2001 (other than the disposition of the
Common Stock) or (y) in connection with or as a participant in
any transaction having a purpose or effect described in the
foregoing clause (x), including any transaction subject to
Rule 13d-3(b) under the Exchange Act as in effect on
March 14, 2001, and (C) if such person is a person
included in Rule 13d-1(b)(1)(ii) under the Exchange Act as in
effect on March 14, 2001, such person is not obligated to, and
does not, file a Schedule 13D (or any comparable or successor
report) with respect to securities of the Company; or
(ii) satisfies the criteria set forth in both
Rule 13d-1(b)(1)(i) and Rule 13d-1(b)(1)(ii) under the
Exchange Act as in effect on March 14, 2001 and is not
obligated to, and does not, file a Schedule 13D (or any
comparable or successor report) with respect to securities of the
Company.
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(h)
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A “Potential Change in
Control” : shall be deemed to have occurred if
(i) the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in
Control; (ii) any person (including the Company) publicly
announces an intention to take or to consider taking actions which
if consummated would constitute a Change in Control; (iii) any
person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company acting in such
capacity, a Passive Institutional Investor or a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company, who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more
of the combined voting power of the Company’s then
outstanding Voting Securities, increases his or her beneficial
ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (iv) the Board
adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.
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(i)
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“Voting Securities” : means
any securities of the Company which vote generally in the election
of the directors.
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2. Basic Indemnification
Arrangement :
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(a)
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In the event Indemnitee was, is or becomes a
party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, a Claim by
reason of (or arising in part out of) an Indemnifiable Event, the
Company shall indemnify Indemnitee to the fullest extent permitted
by law as soon as practicable but in any event no later than thirty
days after written demand is presented the Company against any and
all Indemnifiable Amounts. If so requested by Indemnitee, the
Company shall advance (within two business days of such request)
any and all Expenses to Indemnitee (an “Expense
Advance”). The Company shall, in accordance with such request
(but without duplication), either (i) pay such Expenses on
behalf of Indemnitee or (ii) reimburse Indemnitee for such
Expenses. Indemnitee’s right to an Expense Advance is
absolute and shall not be subject to any prior determination by the
Reviewing Party (as defined below) that the Indemnitee has
satisfied any applicable standard of conduct for
indemnification.
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(b)
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Notwithstanding Section 2(a),
(i) the indemnification obligations of the Company under
Section 2(a) shall be subject to the condition that the Reviewing
Party shall not have determined (in a written opinion in any case
in which Independent Legal Counsel is involved) that Indemnitee
would not be permitted to be indemnified under applicable law and
(ii) the obligation of the Company to make an Expense Advance
pursuant to Section 2(a) shall be subject to the condition
that the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts
theretofore paid (it being understood and agreed that the foregoing
agreement by Indemnitee shall be deemed to satisfy any requirement
that Indemnitee provide the Company with an undertaking, as is set
forth in Section 145(e) of the Delaware General Corporation Law,
which undertaking shall be unsecured and interest-free, to repay
any Expense Advance if it is ultimately determined that the
Indemnitee is not entitled to indemnification under applicable law)
if, when and to the extent that the Reviewing Party determines that
Indemnitee would not be permitted to be so indemnified under
applicable law; provided , however , that if
Indemnitee has commenced or thereafter commences legal proceedings
in a court of competent jurisdiction to secure a determination that
Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not
be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights
of appeal therefrom have been exhausted or lapsed). The
“Reviewing Party” shall be one of the following, as
selected by Indemnitee: (1) the member or members of the
Company’s Board of Directors who are not a party to the
particular Claim for which Indemnitee is seeking indemnification
(each an “Independent Director”) or
(2) Independent Legal Counsel, which Independent Legal Counsel
shall be selected by Indemnitee (unless Indemnitee requests that
such Independent Legal Counsel be selected by the Company’s
Board of Directors); provided that if there is not at least
one Independent Director, the Reviewing Party shall be Independent
Legal Counsel, which Independent Legal Counsel shall be selected by
Indemnitee (unless Indemnitee requests that such Independent Legal
Counsel be selected by the Company’s Board of Directors); and
provided further that, if the Reviewing Party
consists of one or more Independent Directors pursuant to the
preceding clause (1), any determination of such Reviewing
Party hereunder shall be made by majority vote of such Independent
Directors. The Company shall pay the reasonable fees of the
Independent Legal Counsel referred to in the preceding sentence and
fully indemnify such counsel against any and all expenses
(including attorneys’ fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement
pursuant hereto.
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(c)
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If the Reviewing Party is the Independent
Legal Counsel pursuant to subsection (b) above, the
Independent Legal Counsel shall be selected as provided in this
subsection (c). The Independent Legal Counsel shall be selected by
the Indemnitee (unles
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