8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): June 17, 2010

Health Net, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	1-12718	95-4288333
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
21650 Oxnard Street, Woodland Hills, California		91367
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (818) 676-6000

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) On May 12, 2010, the Board of Directors (the "Board") of Health Net, Inc. (the "Company") approved the terms of the Health Net, Inc. Compensation Recovery Policy (the "Policy") and authorized the officers of the Company to adopt and establish the Policy in accordance with the terms approved by the Board. On June 17, 2010, the Company adopted the Policy, effective as of May 12, 2010.

The Policy generally provides for the recovery of cash- or equity-based incentive compensation and profits realized from the sale of securities (collectively, "Incentive Compensation") from the Company’s current executive officers (and certain other employees identified by the Board from time to time) following a "recoverable event," which generally means (i) fraudulent, intentional, willful or grossly negligent misconduct that ultimately results in the Company being required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under U.S. federal secu rities law, or (ii) a covered employee’s engagement in conduct that constitutes "cause" under the covered employee’s employment agreement.

In the event the Board determines that a recoverable event has occurred, the Compensation Committee of the Board (the "Committee"), in its sole discretion, may recover from the covered employee any or all Incentive Compensation granted to, paid or payable to, or received or realized by, the covered employee during (i) the twelve (12) month period following the date of the first public disclosure of restated financials, if the recoverable event is triggered by an accounting restatement (as described above), or (ii) the twelve (12) month period following the initial occurrence of conduct constituting "cause."

In connection with the Policy, the Company has revised its forms of nonqualified stock option agreement, performance share award agreement, restricted stock agreement, restricted stock unit agreement and executive officer employment agree ment to provide that certain compensation granted or payable under such agreements will be subject to the terms and conditions of the Policy.

The Company intends to update the Policy from time to time as may be required by applicable law such as the pending financial reform legislation should it be signed into law.

The above summary of the Policy is qualified in its entirety by reference to the Policy, which is attached hereto as exhibit 10.1 and incorporated herein by reference.

CAUTIONARY STATEMENT: Certain statements made in this report contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that involve a number of risks and uncertainties. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements. These statements are based on management’s analysis, judgment, belief and expectation only as of the date hereof, and are subject to uncertainty and changes in circumstances. Without limiting the foregoing, statements including the words "believes," "anticipates," "plans," "expects," "may," "should," "could," "estimate," "intend" and other similar expressions are intended to identify forward-looking statements. Actual results could differ materially due to, among other things, costs, fees and expenses related to the post-closing administrative services to be provided under the administrative services agreements entered into in connection with the sale of our Northeast business; potential termination of the administrative services agreements by the service recipients should we breach such agreements or fail to perform all or a material part of the services required thereunder; any liabilities of the Northeast business that were incurred prior to the closing of its sale as well as those liabilities incurred through the winding-up and running-out period of the Northeast business; health care reform; rising health care costs; continued recessionary economic conditions or a further decline in the economy; negative prior period claims reserve developments; trends in medical care ratios; unexpected utilization patterns or unexpectedly severe or widespread illnesses; membership declines; rate cuts affecting our Medicare or Medicaid businesses; litigation costs; regulatory issues; operational issues; investment portfolio impairment charges; volatility in the financial markets; and general business and market conditions. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the "Risk Factors" section included within the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission ("SEC"), and the risks discussed in the Company’s other filings with the SEC. Readers are cautioned not to place undue r eliance on these forward-looking statements. The Company undertakes no obligation to publicly revise any of its forward-looking statements to reflect events or circumstances that arise after the date of this report.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No. Description

10.1* Health Net, Inc. Compensation Recovery Policy
10.2* Form of Nonqualified Stock Option Agreement under the Health Net, Inc. 2006 Long-Term Incentive Plan, as amended
10.3* Form of Performance Share Award Agreement
10.4* Form of Restricted Stock Unit Agreement
10.5* Form of Restricted Stock Agreement

____
* Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Health Net, Inc.
June 17, 2010	By:	/s/ Angelee F. Bouchard
		Name: Angelee F. Bouchard
		Title: Senior Vice President, General Counsel and Secretary

Exhibit Index

Exhibit No.	Description
10.1	Health Net, Inc. Compensation Recovery Policy
10.2	Form of Nonqualified Stock Option Agreement under the Health Net, Inc. 2006 Long-Term Incentive Plan, as amended
10.3	Form of Performance Share Award Agreement
10.4	Form of Restricted Stock Unit Agreement
10.5	Form of Restricted Stock Agreement

EX-10.1

HEALTH NET, INC.
COMPENSATION RECOVERY POLICY

1. Purpose.

This Compensation Recovery Policy (the “Policy”) is intended to maintain a culture of focused, diligent and responsible management that discourages conduct detrimental to the growth of Health Net, Inc., a Delaware corporation, and its subsidiaries and affiliates (collectively, the “Company”). Accordingly, as set forth in this Policy, it may be appropriate for the Company to recover incentive-based cash and equity compensation of its executive officers and key employees in the event that they engage in conduct that is detrimental to the Company. This Policy is hereby adopted by the Company effective as of May 12, 2010 (the “Effective Date”).

2. Applicability.

This Policy applies to all current reporting officers of the Company under Section 16 of the Securities and Exchange Act of 1934, as amended, and other current senior executives identified by the Company from time to time (collectively, the “Covered Employees”).

3. Definitions.

For purposes of this Policy, the following terms will have the meanings set forth below.

(a) “Administrator” shall mean the Board of Directors of the Company or its designee pursuant to Section 5 hereof.

(b) “Cause” shall mean “Cause,” as such term is defined under a Covered Employee’s employment agreement (or, in the event that such Covered Employee does not have an employment agreement with the Company, engaging in conduct that constitutes “Cause,” as such term is defined under the Company’s form of Tier I employment agreement, as such agreement may be amended from time to time).

(c) “Covered Period” shall mean:

(i) If the Recoverable Event is conduct constituting Cause, the twelve (12) month period following the date of the initial occurrence of such Recoverable Event, and

(ii) If the Recoverable Event is conduct described in Section 3(e)(ii) hereof, the twelve (12) month period following the date of the first public issuance or filing with the Securities and Exchange Commission (whichever occurs first) of the financial document embodying the financial reporting requirement with respect to which the Company was required to restate due to material noncompliance.

Notwithstanding the foregoing, in no event shall the Covered Period begin earlier than the Effective Date of the Policy.

(d) “Incentive Compensation” shall mean any cash- or equity-based bonus, incentive payment, award or other compensation (whether paid or unpaid, vested or unvested) granted to, paid or payable to, or received by, such Covered Employee by or from the Company during the Covered Period, and any profits realized by such Covered Employee from the sale of Company equity securities during the Covered Period; provided, however, that “Incentive Compensation” shall not include a Covered Employee’s wages or base salary.

(e) “Recoverable Event” shall mean the occurrence of any of the following events:

(i) The Covered Employee’s engagement in conduct that constitutes Cause.

(ii) The Covered Employee’s engagement in fraudulent, intentional, willful, or grossly negligent misconduct that ultimately results in the Company being required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under United States federal securities laws.

4. Compensation Recovery.

(a) In the event that the Administrator determines that a Recoverable Event has occurred with respect to a Covered Employee (the date of any such determination, the “Determination Date”), the Administrator, in its sole and absolute discretion, may recover from the Covered Employee an amount equal to any or all Incentive Compensation granted to, paid or payable to, or received or realized by, the Covered Employee during the Covered Period (the “Recoverable Amount”). Notwithstanding any provision in this Policy to the contrary, the Recoverable Amount shall not exceed an amount equal to all Incentive Compensation granted to, paid or payable to, or received or realized by, the Covered Employee during the Covered Period.

(b) In the event that federal or state law prohibits the recovery or reimbursement of already paid or vested amounts, the Administrator shall determine, in its sole and absolute discretion, whether to recover any Recoverable Amount through the reduction or forfeiture of future awards or payments, unpaid amounts or awards, or any other compensation or payments due to the Covered Employee from the Company (under any compensation agreement or arrangement between the Covered Employee and the Company) or take any other legal action.

(c) The Administrator may determine that any equity award agreement, employment agreement, bonus plan or similar agreement or plan entered into or amended on or after the Effective Date shall, as a condition to the grant of any benefit covered by such agreement or plan, require a Covered Employee to contractually agree to abide by the terms of this Policy. To the extent necessary to effectuate this Policy, the Administrator may also amend any such agreement entered into prior to the Effective Date, in accordance with the terms and conditions of such agreement. Further, the adoption of this Policy does not mitigate, and is intended to enhance, the effect of any recoupment, forfeiture or similar policies in any equity award agreement, employment agreement or similar agreement in effect prior to the Effective Date.

5.

Administration.

(a) Administration and Delegation of Authority.

(i) The Policy generally will be administered by the Board of Directors of the Company (the “Board”). The Board shall determine, in its sole and absolute discretion, whether a Recoverable Event has occurred with respect to a Covered Employee, and, if so, whether to take any action upon such determination of a Recoverable Event.

(ii) The Board may delegate to the Compensation Committee of the Board (the “Compensation Committee”) the authority to determine: (A) as set forth in Section 4(a) hereto, any Recoverable Amount with respect to a Covered Employee; (B) the specific Incentive Compensation subject to reimbursement, recovery or forfeiture; and (C) the manner of reimbursement, recovery or forfeiture of any Recoverable Amount. All references to the “Administrator” shall include references to the Board and the Compensation Committee, as applicable.

(b) Determination in Discretion of the Administrator. Any action or inaction taken by the Administrator with respect to a Covered Employee under this Policy shall in no way limit the Administrator’s actions or decisions not to act with respect to any other Covered Employee, including those subject to a similar policy, agreement, or arrangement. The Administrator may apply the provisions of this Policy differently to each such Covered Employee, in its discretion, taking into account, among other things: (i) whether the assertion of a claim may violate applicable law or prejudice the interests of the Company (including but not limited to any prejudice to the interests of the Company in any proceeding or investigation); (ii) whether other penalties or punishments are being imposed on the Covered Employee, including by third parties, or any governmental or regulatory authority (including, without limitation action taken under Section 304 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”)); (iii) the nature of the events that led to the Recoverable Event; (iv) the Covered Employee’s conduct, role and responsibilities with respect to the events that led to a Recoverable Event; and (v) such other factors as determined by the Administrator in its sole and absolute discretion; provided, however, that in the event the Securities and Exchange Commission takes action under Section 304 of Sarbanes-Oxley against a Covered Employee with respect to a Recoverable Event, the Administrator shall not take any action under this Policy which shall result in a duplicative effect in conjunction with any action taken under Section 304 of Sarbanes-Oxley.

6. Miscellaneous Provisions.

(a) Severability. The provisions in this Policy are intended to be applied to the fullest extent of the law, provided, however, to the extent that any provision of this Policy is found to be unenforceable, inconsistent or invalid under any applicable law, such provision will be applied to the maximum extent permitted, and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to applicable law.

(b) Governing Law. The Policy shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.

(c) Amendment; Termination. The Administrator may amend or terminate the Policy at any time.

(d) Section 409A of the Internal Revenue Code. To the extent that any Recoverable Amount is recovered by offsetting amounts against future payments of a Covered Employee’s “nonqualified deferred compensation” (as such term is defined for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) and the Treasury Regulations and guidance issued thereunder, then the Administrator shall take such action(s) as it deems necessary or appropriate to offset such amounts in a manner intended to comply with, or be exempt from, Section 409A of the Code. After reviewing the relevant facts and circumstances, if the Administrator determines that it is not feasible or in the best interests of the Company to take such action(s) in a manner that complies with, or is exempt from, Section 409A of the Code, such determination shall be final and binding on the Covered Employee, and the Company shall not be liable for any taxes, penalties, or interest arising under Section 409A of the Code, which shall be borne by the Covered Employee at his or her sole expense.

* * * * *

On May 12, 2010, the Board authorized the officers of the Company to adopt this Compensation Recovery Policy in accordance with the terms approved by the Board on May 12, 2010.

Being an officer of the Company duly authorized by the Board to adopt this Compensation Recovery Policy on behalf of the Company, I hereby certify that the foregoing Compensation Recovery Policy was adopted by the Company on June 17, 2010, to be effective as of May 12, 2010.

Executed on this 17th day of June, 2010.

Health Net, Inc.

By:	/s/ Karin Mayhew
	Name: Title:	Karin Mayhew Senior Vice President,

Organization Effectiveness

FORM OF
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE HEALTH NET, INC.
2006 LONG-TERM INCENTIVE PLAN,
AS AMENDED

This agreement (together with the Notice of Grant of Stock Options (the “Grant Notice”) attached hereto and incorporated by reference herein, the “Option Agreement”) is made as of the grant date set forth on the Grant Notice (the “Grant Date”), by and between Health Net, Inc., a Delaware corporation (the “Company”), and the participant identified on the Grant Notice, an employee of the Company or a Subsidiary of the Company (the “Optionee”).

Pursuant to the Health Net, Inc. 2006 Long-Term Incentive Plan, as amended (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) or an appropriate executive officer of the Company empowered by the Committee, has determined that the Optionee is to be granted, on the terms and conditions set forth in this Option Agreement, a nonqualified stock option (the “Option”) to purchase shares of Common Stock of the Company, par value $.001 per share (the “Common Stock”), and hereby grants such Option. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

1. Number of Shares and Exercise Price. The Option is to purchase the number of shares of Common Stock set forth on the Grant Notice (the “Option Shares”) at a price per share set forth on the Grant Notice (the “Exercise Price”), which is equal to the Fair Market Value (as defined in the Plan) of the Option Shares as of the Grant Date.

2. Exercise of Option. Except as set forth in Sections 3 and 9, the Option shall become exercisable in cumulative installments beginning on the [first] anniversary of the Grant Date to the extent of [     %] of the Option Shares covered by the Option, and [on each subsequent anniversary of the Grant Date to the extent of an additional      %] of the Option Shares covered by the Option, until the Option has become exercisable as to all of the Option Shares (the “Vesting Dates”). The Option may be exercised only to purchase whole shares, and in no case may a fraction of a share be purchased.

3. Term of Option and Termination of Employment.

(a) General Term. The term of the Option and this Option Agreement shall commence on the Grant Date. The right of the Optionee to exercise the Option with respect to any Option Shares, to purchase any such Option Shares and all other rights of the Optionee with respect to any such Option Shares shall terminate on the seventh anniversary of the Grant Date, unless the Option has been earlier terminated as provided either in paragraphs (b) through (g) below or under the Plan.

(b) Death of Optionee. If the Optionee shall die prior to the exercise of the Option, then:

(i) if the Optionee dies while employed by an Employer (as defined in the Plan), then the Option (subject to subsection (g) below) may be exercised by the legatee(s) or personal representative of the Optionee at any time within one year after the Optionee’s death;

(ii) if the Optionee’s employment with the Employer was terminated due to a Disability (as defined in the Plan) and the Optionee dies within one year after termination of employment, then the Option (subject to subsection (g) below) may be exercised by the legatee(s) or personal representative of the Optionee any time during the remainder of the period during which the Optionee would have been able to exercise the Option pursuant to subsection (c) below had the Optionee not died;

(iii) if the Optionee dies within three months after termination of employment by the Employer without Cause, as determined pursuant to Subsection 3(g), and clause (ii) is not applicable, then the Option (subject to subsection (g) below) may be exercised by the legatee(s) or personal representative of the Optionee at any time within one year after the Optionee’s death.

(c) Disability. If the Optionee’s employment with the Employer shall terminate prior to the exercise of the Option as a result of a Disability, then the Option (subject to subsection (g) below) may be exercised by the Optionee (or his or her personal representative) at any time within one year after the Optionee’s termination of employment.

(d) Termination by the Employer for Cause. If the Optionee’s employment with the Employer shall be terminated by the Employer prior to the exercise of the Option for Cause then the Option shall immediately terminate and shall immediately cease to be exercisable and shall be forfeited to the Company. For purposes of this Option Agreement, “Cause” shall have the meaning set forth in Section [INSERT SECTION NUMBER] of the Plan.

(e) Termination by the Employer Without Cause. If prior to the exercise of the Option, the Optionee’s employment with the Employer shall be terminated by the Employer without Cause, then the Option (subject to subsection (g) below) held by the Optionee may be exercised at any time within three months after the Optionee’s termination of employment. For purposes of this Option Agreement, if a Subsidiary by which the Optionee is employed ceases to be a Subsidiary, whether through a sale by the Company of all or a portion of the stock or assets of such Subsidiary, a merger or otherwise (a “Subsidiary Transaction”), the Optionee’s employment with the Employer shall be deemed to have been terminated by the Employer without Cause as of the effective date of such Subsidiary Transaction.

(f) Termination for Other Reason. If prior to the exercise of the Option, the Optionee’s employment with the Employer shall be terminated for any reason other than as set forth in paragraphs (b) through (e) above, then the Option (subject to subsection (g) below) held by the Optionee may be exercised at any time within one month after the Optionee’s termination of employment.

(g) Post-Termination exercisability. Notwithstanding any other provision of this Section 3 to the contrary, following termination of employment of the Optionee for any reason: (i) the Option shall be exercisable during any of the post-employment periods described in subparagraphs (b) through (f) of this Section 3 if and only to the extent the Option was exercisable (i.e., vested) at the time of such termination of employment and (ii) no portion of the Option shall be exercisable following the seventh anniversary of the Grant Date.

4. Employment/Association with Company Competitor. The Optionee hereby agrees that, during (i) the six-month period following a termination of the Optionee’s employment with an Employer that entitles the Optionee to receive severance benefits under an agreement with or the policy of the Company or (ii) the twelve-month period following a termination of the Optionee’s employment with an Employer that does not entitle the Optionee to receive such severance benefits (the period referred to in either clause (i) or (ii), the “Noncompetition Period”), the Optionee shall not undertake any employment or activity (including, but not limited to, consulting services) with a Competitor (as defined below), where the loyal and complete fulfillment of the duties of the competitive employment or activity would call upon the Optionee to reveal, to make judgments on or otherwise use any confidential business information or trade secrets of the business of the Company or any Subsidiary to which the Optionee had access during his employment with the Employer. In addition, the Optionee agrees that, during the Non-competition Period applicable to the Optionee following termination of employment with the Employer, the Optionee shall not, directly or indirectly, solicit, interfere with, hire, offer to hire or induce any person, who is or was an employee of the Company or any of its Subsidiaries during the 12 month period prior to the date of such termination of employment, to discontinue his or her relationship with the Company or any of its Subsidiaries or to accept employment by, or enter into a business relationship with, the Optionee or any other entity or person. In the event that the Optionee breaches the covenants set forth in this first paragraph of Section 4:

(a) the Option shall immediately terminate; and

(b) the Optionee shall promptly pay to the Company an amount of cash equal to the Gain Realized (as defined below) on any Option Shares acquired during the Restricted Period (as defined below).

For the purposes of this Section 4: “Restricted Period” shall refer to the period of time commencing ninety days prior to such termination of the Optionee’s employment and ending (x) in the case of an Optionee terminated under clause (i) of the first paragraph of this Section 4, six months after such termination or (y) in the case of an Optionee terminated under clause (ii) of the first paragraph of this Section 4, twelve months after such termination; “Gain Realized” shall equal the difference between (x) the Exercise Price applicable to the Option Shares and (y) the greater of the Fair Market Value (as defined in the Plan) of the Option Shares (I) on the date of acquisition of such Option Shares or (II) on the date such competitive activity with a Competitor was commenced by the Optionee; and “Competitor” shall refer to any health maintenance organization or insurance company that provides managed health care or related services similar to those provided by the Company or any Subsidiary.

It is hereby further agreed that if any court of competent jurisdiction shall determine that the restrictions imposed in this Section 4 are unreasonable (including, but not limited to, the definition of Market Area or Competitor or the time period during which this provision is applicable), the parties hereto hereby agree to any restrictions that such court would find to be reasonable under the circumstances.

The Optionee acknowledges that the services to be rendered by him/her to the Company are of a special and unique character, which gives this Option Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by him/her of any of the provisions contained in this Section 4 will cause the Company irreparable injury. Optionee therefore agrees that the Company may be entitled, in addition to the remedies set forth above in this Section 4 and any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Optionee from any such violations or threatened violations.

4A. Compensation Recovery (Clawback). In the event that Optionee is subject to the Company’s Compensation Recovery Policy, as such policy may be amended from time to time (the “Compensation Recovery Policy”), notwithstanding anything in this Option Agreement to the contrary, any Options granted (or Option Shares vesting) hereunder shall be subject to the terms and conditions of the Compensation Recovery Policy.

5. Notices. Any notice or communication given hereunder shall be in writing and shall be given electronically (e.g., email), or by fax or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of an email or a fax to the following addresses:

To the Recipient at: Address on record at Health Net, Inc. as of the date any notice is to be delivered.

To the Company at:

Health Net, Inc.
21650 Oxnard Street
Woodland Hills, California 91367
Attention: General Counsel

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

6. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Option Agreement or the Plan shall in no way be construed to be a waiver of such provision or of any other provision hereof.

7. Incorporation of Plan; Entire Agreement. The Plan is hereby incorporated by reference and made a part hereof, and the Option and this Option Agreement are subject to all terms and conditions of the Plan. This Option Agreement and the Plan, taken together, constitutes the entire agreement between the parties relating to or effecting the Option, and no promises, terms, conditions or obligations other than those contained in this Option Agreement or the Plan shall be valid or binding. Any prior agreements, statements or promises, either oral or written, made by any party or agent of any party relating to or effecting the Option that are not contained in the Option Agreement or the Plan are of no force or effect.

8. Rights of a Stockholder. The Optionee shall have no rights as a stockholder with respect to any Option Shares unless and until certificates for shares of Common Stock are issued to the Optionee.

9. Change of Control. Notwithstanding the provisions of Section 2 and 3 hereof, in the event that (i) there shall occur a Change in Control (as defined in the Plan) and (ii) the employment of the Optionee shall be terminated within the two year period following the Change in Control but prior to any Vesting Date either (A) by the Company without Cause or (B) under circumstances which entitle the Optionee to Change in Control severance benefits under an effective employment agreement between the Optionee and the Company or the Company’s Safety Net Security Program, each Option shall become fully vested and the date of such vesting shall be deemed to be the Vesting Date hereunder; such termination shall be treated as having occurred pursuant to Section 3(e) hereof for purposes of determining the post-termination exercise period. For purposes of this Section 9, “Cause” shall have the meaning set forth in the Plan.

10. Rights to Terminate Employment. Nothing in the Plan or in this Option Agreement shall confer upon the Optionee the right to continue in the employment of an Employer or affect any right which an Employer may have to terminate the employment of the Optionee. The Optionee specifically acknowledges that the Employer intends to review Optionee’s performance from time to time, and that the Company and/or the Employer has the right to terminate Optionee’s employment at any time, including a time in close proximity to a Vesting Date, for any reason, with or without Cause. The Optionee acknowledges that upon his or her termination of employment with an Employer for any reason, the Option shall be exercisable only to the extent it is exercisable on the effective date of the Optionee’s termination of employment and only within the period following such termination as is set forth in this Option Agreement.

11. Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Optionee otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

12. Amendment. The Board may terminate or amend the Plan at any time; provided, however, that the termination or any modification or amendment of the Plan shall not, without the consent of the Optionee, impair the rights of the Optionee under this Option Agreement.

13. Compliance with Applicable Law. The Option is subject to the condition that if the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action, is necessary or desirable as a condition of, or in connection with, the purchase or delivery of shares hereunder, the Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval.

14. Decisions of Board or Committee. The Board of Directors or the Committee shall have the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Board of Directors or the Committee regarding the Plan or this Option Agreement shall be final, binding and conclusive.

15. Failure to Execute Agreement. This Option Agreement and the Option granted hereunder is subject to the Optionee returning a counter-signed copy of this Option Agreement to the designated representative of the Company on or before 60 days after the date of its distribution to the Optionee. In the event that the Optionee fails to so return a counter-signed copy of this Option Agreement within such 60 day period, then this Option Agreement and the Option granted hereunder shall automatically become null and void and shall have no further force or effect. Electronic acceptance of this Option Agreement shall constitute an execution of the Option Agreement by the Optionee and a return of the counter-signed copy to the Company for purposes of this Section 15.

IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of the date and year set forth above.

Health Net, Inc.

Name:

Title:

OPTIONEE HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT (I) HE/SHE IS AN EMPLOYEE AT WILL AND MAY BE TERMINATED BY THE EMPLOYER AT ANY TIME, WITH OR WITHOUT CAUSE, (II) THE OPTION MAY NOT BE EXERCISED WITH RESPECT TO ANY OPTION SHARES THAT ARE NOT VESTED ON THE DATE OF ANY SUCH TERMINATION AND (III) THE OPTION MAY BE EXERCISED WITH RESPECT TO OPTION SHARES THAT ARE VESTED ON THE DATE OF ANY SUCH TERMINATION ONLY TO THE EXTENT EXPRESSLY PROVIDED IN THIS OPTION AGREEMENT.

Your acceptance of this Option Agreement indicates that you hereby accept and agree to all the terms and provisions of the foregoing Option Agreement and the attached Grant Notice, and to all the terms and provisions of the Plan incorporated by reference herein.

Notice of Grant of Stock Options
Health Net, Inc.

Plan Name:

Participant Name:

Participant ID:

Grant Date:

Grant Number:

Type of Options:Non-Qualified Stock Options

Option Shares Granted:

Exercise Price:

Expiration Date:

Vesting Template:

Vesting Schedule:

FORM OF
PERFORMANCE SHARE AWARD AGREEMENT

This Performance Share Award Agreement (together with the Notice of Grant of Performance Share Award (the “Grant Notice”) attached hereto and incorporated by reference herein, the "Performance Share Award Agreement”) is made and entered into as of the grant date set forth on the Grant Notice (the “Date of Grant”), by and between Health Net, Inc., a Delaware corporation (the “Company”), and the recipient identified on the Grant Notice, an employee of the Company or a subsidiary of the Company (the “Recipient”).

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors (the "Board”) of the Company has approved the grant (the “Grant”) of a Performance Share Award, as hereinafter defined, to the Recipient as set forth below under the Company’s 2006 Long-Term Incentive Plan, as amended from time to time (the “Plan”). Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the covenants and agreements herein contained and intending to be legally bound hereby, the parties agree as follows:

1. Grant of Performance Shares. The Company hereby grants to the Recipient a Performance Share Award consisting of the target number set forth on the Grant Notice (the "Target Award”) of rights to receive (“Performance Shares”), upon vesting, a share of the Common Stock, par value $.001 per share (the “Common Stock”) of the Company, subject to all of the terms and conditions of this Performance Share Award Agreement. The actual number of shares earned by the Recipient may be less than or greater than the Target Award, as set forth in Section 2.

2. Lapse of Restrictions. Except as otherwise provided in Section 3 or 10 hereof, the Performance Shares shall vest with respect a percentage of the Performance Shares (with such percentage ranging between 0% to 200% of the Target Award) on a date, which shall be as soon as practicable following the completion of the performance period (which shall be set forth on Appendix I), upon which the Committee makes a determination (the “Vesting Date”) whether, as of the completion of the performance period, the performance goals set forth on Appendix I hereto have been achieved, with the extent of such vesting to be determined in the manner set forth in such Appendix; provided, however, that in no event shall the Company deliver the vested Performance Shares to Recipient later than March 15 following the calendar year in which such Performance Shares vest, subject to Recipient’s payment of the par value (if any) for such Performance Shares. Upon the Vesting Date, the Recipient shall pay to the Company the par value for each share of Common Stock delivered pursuant to this Grant in such consideration as determined by the Committee in its sole discretion. Shares that have become vested may be evidenced by stock certificates, at the request of the Recipient, which certificates shall be registered in the name of the Recipient and delivered to Recipient within ten (10) days of such request. If the Minimum Performance Levels (as defined on Appendix I) have not been achieved as of the Vesting Date, the unvested Performance Shares shall be forfeited without consideration upon the Vesting Date.

3. Termination of Employment.

(a) Except as otherwise set forth in Section 10, if prior to the Vesting Date, the Recipient’s employment with the Company is terminated by either the Recipient or the Company for any reason (a "Termination Event”), then all of the Performance Shares shall be immediately forfeited at such time.

(b) If the Recipient violates the terms of Section 4 of this Performance Share Award Agreement (a “Breach Event”), in addition to being subject to all remedies in law or equity that the Company may assert, then at any time thereafter the Company, in its sole and absolute discretion, may, with respect to any Common Stock attributable to a Performance Share: (i) to the extent that the Common Stock is beneficially owned by the Recipient, reacquire from the Recipient, in return for an amount equal to the par value of the Common Stock which was paid by the Recipient to the Company as described in Section 2 above, any or all of the shares of such Common Stock; and (ii) to the extent that the Common Stock has been sold, assigned or otherwise transferred by the Recipient, recover from the Recipient an amount equal to the Gain Realized (as defined in Section 4 below) from such sale, assignment or transfer.

(c) Upon the occurrence of a Breach Event, the Company may elect to purchase all or any portion of the Common Stock pursuant to this Section 3 by delivery of written notice (the "Repurchase Notice”) to the Recipient within ninety (90) days after the occurrence of such Breach Event.

4. Employment/Association with Company Competitor. The Recipient hereby agrees that, during (i) the six-month period following a termination of the Recipient’s employment with an Employer that entitles the Recipient to receive severance benefits under an agreement with or the policy of the Company or (ii) the twelve-month period following a termination of the Recipient’s employment with an Employer that does not entitle the Recipient to receive such severance benefits (the period referred to in either clause (i) or (ii), the “Noncompetition Period”), the Recipient shall not undertake any employment or activity (including, but not limited to, consulting services) with a Competitor (as defined below), where the loyal and complete fulfillment of the duties of the competitive employment or activity would call upon the Recipient to reveal, to make judgments on or otherwise use any confidential business information or trade secrets of the business of the Company or any Subsidiary to which the Recipient had access during the Recipient’s employment with the Employer. In addition, the Recipient agrees that, during the Noncompetition Period applicable to the Recipient following termination of employment with the Employer, the Recipient shall not, directly or indirectly, solicit, interfere with, hire, offer to hire or induce any person, who is or was an employee of the Company or any of its Subsidiaries during the 12 month period prior to the date of such termination of employment, to discontinue his or her relationship with the Company or any of its Subsidiaries or to accept employment by, or enter into a business relationship with, the Recipient or any other entity or person. In the event that the Recipient breaches the covenants set forth in this first paragraph of Section 4, it shall be considered a Breach Event under Section 3 above.

For purposes of this Section 4: “Gain Realized” shall equal the difference between (x) the par value paid by the Recipient for the Common Stock issued in respect of the Performance Shares and (y) the greater of the Fair Market Value (as defined in the Plan) of the Common Stock issued in respect of the Performance Shares (I) on the date of transfer of such Common Stock or (II) on the date such competitive activity with a Competitor was commenced by the Recipient; and "Competitor” shall refer to any health maintenance organization or insurance company that provides managed health care or related services similar to those provided by the Company or any Subsidiary.

It is hereby further agreed that if any court of competent jurisdiction shall determine that the restrictions imposed in this Section 4 are unreasonable (including, but not limited to, the definition of Competitor or the time period during which this provision is applicable), the parties hereto hereby agree to any restrictions that such court would find to be reasonable under the circumstances.

The Recipient acknowledges that the services to be rendered by the Recipient to the Company are of a special and unique character, which gives this Performance Share Award Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by the Recipient of any of the provisions contained in this Section 4 will cause the Company irreparable injury. Recipient therefore agrees that the Company may be entitled, in addition to the remedies set forth above in this Section 4 and any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Recipient from any such violations or threatened violations.

4A. Compensation Recovery (Clawback). In the event that Recipient is subject to the Company’s Compensation Recovery Policy, as such policy may be amended from time to time (the “Compensation Recovery Policy”), notwithstanding anything in this Performance Share Award Agreement to the contrary, any Performance Shares granted hereunder shall be subject to the terms and conditions of the Compensation Recovery Policy.

5. No Rights as a Stockholder. The Recipient shall not be entitled to dividends, if any, that are paid with respect to the shares of Common Stock unless and until the Performance Shares have vested and shares of Common Stock have been delivered with respect thereto. Recipient shall also not have the right to vote any shares subject to the Performance Shares unless and until the Performance Shares shall have vested and shares of Common Stock have been delivered with respect thereto.

6. Notices. Any notice or communication given hereunder shall be in writing and shall be given electronically (e.g., email) or by fax or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of an email or a fax to the following addresses:

To the Recipient at: Address on record at Health Net, Inc. as of the date

any notice is to be delivered.

To the Company at: Health Net, Inc.
21650 Oxnard Street
Woodland Hills, California 91367
Attention: General Counsel

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7. Securities Laws Requirements. The Company shall not be obligated to transfer any shares of Common Stock from the Recipient to another party, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended from time to time (the “Securities Act”) (or any other federal or state statutes having similar requirements as may be in effect at that time). Further, the Company may require as a condition of transfer of any shares to the Recipient that the Recipient furnish a written representation that he or she is holding the shares for investment and not with a view to resale or distribution to the public. The Company either has or will file an appropriate Registration Statement on Form S-8 (or other applicable form), and has taken or will take such actions as necessary to keep the information therein current from time to time, in order to register the Common Stock under the Securities Act and shall use its commercially reasonable efforts to cause such Registration Statement to become effective and to maintain the effectiveness of such registration.

8. Protections Against Violations of Performance Share Award Agreement. This Performance Share Award Agreement is not transferable, other than by will or pursuant to the laws of descent and distribution.

9. Taxes. The Recipient understands that he or she (and not the Company) shall be responsible for any tax obligation that may arise as a result of the transactions contemplated by this Performance Share Award Agreement and shall pay to the Company, in any method as set forth in Section 8.6 of the Plan, the amount determined by the Company to be such tax obligation at the time such tax obligation arises. If the Recipient fails to make such payment, the number of shares necessary to satisfy the tax obligations shall be forfeited.

10. Change in Control. Notwithstanding the provisions of Section 3 hereof, in the event that there shall occur a Change in Control (as defined in the Plan), each Performance Share shall become fully vested immediately upon the occurrence of the Change in Control at target. Notwithstanding anything in the Plan or this Performance Share Award Agreement to the contrary, there shall be no acceleration of the payment of the Performance Shares if such accelerated payment would cause the Performance Shares to fail to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended.

11. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Performance Share Award Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12. Governing Law. This Performance Share Award Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

13. Amendments. This Performance Share Award Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto, and approved by the Committee. The Board may terminate or amend the Plan at any time; provided, however, that the termination or any modification or amendment of the Plan shall not, without the consent of the Recipient, impair the rights of the Recipient under this Performance Share Award Agreement.

14. Survival of Terms. This Performance Share Award Agreement shall apply to and bind the Recipient and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

15. Agreement Not a Contract for Services; Rights to Terminate Employment. Neither the grant of the Performance Shares, this Performance Share Award Agreement nor any other action taken pursuant to this Performance Share Award Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that the Recipient has a right to continue to provide services as an officer, director, employee or consultant of the Company and/or the Employer for any period of time or at any specific rate of compensation. Nothing in the Plan or in this Performance Share Award Agreement shall confer upon the Recipient the right to continue in the employment of an Employer or affect any right which an Employer may have to terminate the employment of the Recipient. The Recipient specifically acknowledges that the Employer intends to review the Recipient’s performance from time to time, and that the Company and/or the Employer has the right to terminate the Recipient’s employment at any time, including a time in close proximity to the Vesting Date, for any reason, with or without cause. The Recipient acknowledges that upon his or her termination of employment with an Employer for any reason, then all Performance Shares not yet vested shall be immediately forfeited at such time.

16. Decisions of Board or Committee. The Board or the Committee shall have the right to resolve all questions which may arise in connection with this Performance Share Award Agreement or the Performance Shares. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Performance Shares, the Plan or this Performance Share Award Agreement shall be final, binding and conclusive.

17. Failure to Execute Agreement. This Performance Share Award Agreement and the Performance Shares granted hereunder is subject to the Recipient returning a counter-signed copy of this Performance Share Award Agreement to the designated representative of the Company on or before 60 days after the date of its distribution to the Recipient. In the event that the Recipient fails to so return a counter-signed copy of this Performance Share Award Agreement within such 60-day period, then this Performance Share Award Agreement and the Performance Shares granted hereunder shall automatically become null and void and shall have no further force or effect. Electronic acceptance of this Performance Share Award Agreement shall constitute an execution of the Performance Share Award Agreement by the Recipient and a return of the counter-signed copy to the Company.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Performance Share Award Agreement on the day and year first above written.

Health Net, Inc.

Name:

Title:

RECIPIENT HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT HE/SHE IS AN EMPLOYEE AT WILL AND MAY BE TERMINATED BY THE EMPLOYER AT ANY TIME, WITH OR WITHOUT CAUSE.

Your acceptance of this Performance Share Award Agreement indicates that you accept and agree to all the terms and provisions of the foregoing Performance Share Award Agreement and attached Grant Notice, and to all the terms and provisions of the Health Net, Inc. 2006 Long-Term Incentive Plan, as amended to date, incorporated by reference herein.

APPENDIX I

PERFORMANCE PERIOD AND PERFORMANCE GOALS

Notice of Grant of Performance Share Award
Health Net, Inc.

Plan Name: Health Net, Inc. 2006 Long-Term Incentive Plan, as amended

Recipient Name:

Recipient ID:

Grant Date:

Grant Number:

Target Number:

FORM
RESTRICTED STOCK UNIT AGREEMENT

This Restricted Stock Unit Agreement (together with the Notice of Grant of Restricted Stock Units (the “Grant Notice”) attached hereto and incorporated by reference herein, the "Restricted Stock Unit Agreement”) is made and entered into as of the grant date set forth on the Grant Notice (the “Date of Grant”), by and between Health Net, Inc., a Delaware corporation (the “Company”), and the recipient identified on the Grant Notice, an employee of the Company or a subsidiary of the Company (the “Recipient”).

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors (the "Board”) of the Company has approved the grant (the “Grant”) of Restricted Stock Units, as hereinafter defined, to the Recipient as set forth below under the Company’s [NAME OF PLAN], as amended from time to time (the “Plan”). Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the covenants and agreements herein contained and intending to be legally bound hereby, the parties agree as follows:

1. Grant of Restricted Stock Units. The Company hereby grants to the Recipient the number of restricted stock units set forth on the Grant Notice (the “Restricted Stock Units”), each of which represent to rights to receive, upon vesting, a share of the Common Stock, par value $.001 per share (the “Common Stock”) of the Company, subject to all of the terms and conditions of this Restricted Stock Unit Agreement.

2. Lapse of Restrictions. Except as otherwise provided in Section 3 of this Restricted Stock Unit Agreement, the Restricted Stock Units shall vest in cumulative installments beginning on the first anniversary of the Grant Date to the extent of 25% of the Restricted Stock Units, and on each subsequent anniversary of the Grant Date to the extent of an additional 25% of the Restricted Stock Units, until the Grant has fully vested with respect to all of the Restricted Stock Units (the “Vesting Dates”). Upon each Vesting Date, the Recipient shall pay to the Company the par value for each share of Common Stock delivered pursuant to this Grant in such consideration as determined by the Committee in its sole discretion. Shares that have become vested may be evidenced by stock certificates, at the request of the Recipient, which certificates shall be registered in the name of the Recipient and delivered to Recipient within ten (10) days of such request.

3. Termination of Employment.

(a) Except as otherwise set forth in Section 10, if prior to a Vesting Date, the Recipient’s employment with the Company is terminated by either the Recipient or the Company for any reason (a "Termination Event”), then all of the unvested Restricted Stock Units shall be immediately forfeited at such time.

(b) If the Recipient violates the terms of Section 4 of this Agreement (a “Breach Event”), in addition to being subject to all remedies in law or equity that the Company may assert, then at any time thereafter the Company, in its sole and absolute discretion, may, with respect to any Common Stock attributable to a Restricted Stock Unit that has vested within six (6) months of the Recipient’s termination of employment: (i) to the extent that the Common Stock is beneficially owned by the Recipient, reacquire from the Recipient, in return for an amount equal to the par value of the Common Stock which was paid by the Recipient to the Company as described in Section 2 above, any or all of the shares of such Common Stock; and (ii) to the extent that the Common Stock has been sold, assigned or otherwise transferred by the Recipient, recover from the Recipient an amount equal to the Gain Realized (as defined in Section 4 below) from such sale, assignment or transfer.

(c) Upon the occurrence of a Breach Event, the Company may elect to purchase all or any portion of the Common Stock pursuant to this Section 3 by delivery of written notice (the "Repurchase Notice”) to the Recipient within ninety (90) days after the occurrence of such Breach Event.

4. Employment/Association with Company Competitor. The Recipient hereby agrees that, during (i) the six-month period following a termination of the Recipient’s employment with an Employer that entitles the Recipient to receive severance benefits under an agreement with or the policy of the Company or (ii) the twelve-month period following a termination of the Recipient’s employment with an Employer that does not entitle the Recipient to receive such severance benefits (the period referred to in either clause (i) or (ii), the “Noncompetition Period”), the Recipient shall not undertake any employment or activity (including, but not limited to, consulting services) with a Competitor (as defined below), where the loyal and complete fulfillment of the duties of the competitive employment or activity would call upon the Recipient to reveal, to make judgments on or otherwise use any confidential business information or trade secrets of the business of the Company or any Subsidiary to which the Recipient had access during the Recipient’s employment with the Employer. In addition, the Recipient agrees that, during the Noncompetition Period applicable to the Recipient following termination of employment with the Employer, the Recipient shall not, directly or indirectly, solicit, interfere with, hire, offer to hire or induce any person, who is or was an employee of the Company or any of its Subsidiaries during the 12 month period prior to the date of such termination of employment, to discontinue his or her relationship with the Company or any of its Subsidiaries or to accept employment by, or enter into a business relationship with, the Recipient or any other entity or person. In the event that the Recipient breaches the covenants set forth in this first paragraph of Section 4, it shall be considered a Breach Event under Section 3 above.

For purposes of this Section 4: “Gain Realized” shall equal the difference between (x) the par value paid by the Recipient for the Common Stock issued in respect of the Restricted Stock Units and (y) the greater of the Fair Market Value (as defined in the Plan) of the Common Stock issued in respect of the Restricted Stock Units (I) on the date of transfer of such Common Stock or (II) on the date such competitive activity with a Competitor was commenced by the Recipient; and "Competitor” shall refer to any health maintenance organization or insurance company that provides managed health care or related services similar to those provided by the Company or any Subsidiary.

It is hereby further agreed that if any court of competent jurisdiction shall determine that the restrictions imposed in this Section 4 are unreasonable (including, but not limited to, the definition of Competitor or the time period during which this provision is applicable), the parties hereto hereby agree to any restrictions that such court would find to be reasonable under the circumstances.

The Recipient acknowledges that the services to be rendered by the Recipient to the Company are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by the Recipient of any of the provisions contained in this Section 4 will cause the Company irreparable injury. Recipient therefore agrees that the Company may be entitled, in addition to the remedies set forth above in this Section 4 and any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Recipient from any such violations or threatened violations.

4A. Compensation Recovery (Clawback). In the event that Recipient is subject to the Company’s Compensation Recovery Policy, as such policy may be amended from time to time (the “Compensation Recovery Policy”), notwithstanding anything in this Restricted Stock Unit Agreement to the contrary, any Restricted Stock Units granted hereunder shall be subject to the terms and conditions of the Compensation Recovery Policy.

5. No Rights as a Stockholder. The Recipient shall not be entitled to dividends, if any, that are paid with respect to the shares of Common Stock unless and until the Restricted Stock Units have vested. Recipient shall also not have the right to vote any shares subject to the Restricted Stock Units unless and until the Restricted Stock Units shall have vested.

6. Notices. Any notice or communication given hereunder shall be in writing and shall be given electronically (e.g., email), or by fax or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of an email or a fax to the following addresses:

To the Recipient at: Address on record at Health Net, Inc. as of the date

any notice is to be delivered.

To the Company at: Health Net, Inc.
21650 Oxnard Street
Woodland Hills, California 91367
Attention: General Counsel

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7. Securities Laws Requirements. The Company shall not be obligated to transfer any shares of Common Stock from the Recipient to another party, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended from time to time (the “Securities Act”) (or any other federal or state statutes having similar requirements as may be in effect at that time). Further, the Company may require as a condition of transfer of any shares to the Recipient that the Recipient furnish a written representation that he or she is holding the shares for investment and not with a view to resale or distribution to the public. The Company either has or will file an appropriate Registration Statement on Form S-8 (or other applicable form), and has taken or will take such actions as necessary to keep the information therein current from time to time, in order to register the Common Stock under the Securities Act and shall use its commercially reasonable efforts to cause such Registration Statement to become effective and to maintain the effectiveness of such registration.

8. Protections Against Violations of Restricted Stock Unit Agreement. This Restricted Stock Unit Agreement is not transferable, other than by will or pursuant to the laws of descent and distribution.

9. Taxes. The Recipient understands that he or she (and not the Company) shall be responsible for any tax obligation that may arise as a result of the transactions contemplated by this Restricted Stock Unit Agreement and shall pay to the Company the amount determined by the Company to be such tax obligation at the time such tax obligation arises. Such tax obligation shall be satisfied through the withholding of shares by the Company or such other manner as determined by the Company in its sole discretion. If the Recipient fails to make such payment, the number of shares necessary to satisfy the tax obligations shall be forfeited.

10. Change of Control. Notwithstanding the provisions of Section 3 hereof, in the event that (i) there shall occur a Change in Control (as defined in the Plan) and (ii) the employment of the Recipient shall be terminated within the two-year period following the Change in Control but prior to the Vesting Date either (A) by the Company without Cause or (B) under circumstances which entitle the Recipient to Change in Control severance benefits under an effective employment agreement between the Recipient and the Company or under the Company’s Safety Net Security Program, each Restricted Stock Unit shall become fully vested upon such termination and the date of such vesting shall be deemed to be the Vesting Date hereunder. For purposes of this Section 10, “Cause” shall have the meaning set forth in the Plan.

11. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Restricted Stock Unit Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12. Governing Law. This Restricted Stock Unit Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

13. Amendments. This Restricted Stock Unit Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto, and approved by the Committee. The Board may terminate or amend the Plan at any time; provided, however, that the termination or any modification or amendment of the Plan shall not, without the consent of the Recipient, impair the rights of the Recipient under this Restricted Stock Unit Agreement.

14. Survival of Terms. This Restricted Stock Unit Agreement shall apply to and bind the Recipient and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

15. Agreement Not a Contract for Services; Rights to Terminate Employment. Neither the grant of the Restricted Stock Units, this Restricted Stock Unit Agreement nor any other action taken pursuant to this Restricted Stock Unit Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that the Recipient has a right to continue to provide services as an officer, director, employee or consultant of the Company and/or the Employer for any period of time or at any specific rate of compensation. Nothing in the Plan or in this Restricted Stock Unit Agreement shall confer upon the Recipient the right to continue in the employment of an Employer or affect any right which an Employer may have to terminate the employment of the Recipient. The Recipient specifically acknowledges that the Employer intends to review the Recipient’s performance from time to time, and that the Company and/or the Employer has the right to terminate the Recipient’s employment at any time, including a time in close proximity to any Vesting Date, for any reason, with or without cause. The Recipient acknowledges that upon his or her termination of employment with an Employer for any reason (other than as set forth in Section 10), then all Restricted Stock Units not yet vested shall be immediately forfeited at such time.

16. Decisions of Board or Committee. The Board or the Committee shall have the right to resolve all questions which may arise in connection with the Restricted Stock Units. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Restricted Stock Units, the Plan or this Restricted Stock Unit Agreement shall be final, binding and conclusive.

17. Failure to Execute Agreement. This Restricted Stock Unit Agreement and the Restricted Stock Units granted hereunder is subject to the Recipient returning a counter-signed copy of this Restricted Stock Unit Agreement to the designated representative of the Company on or before 60 days after the date of its distribution to the Recipient. In the event that the Recipient fails to so return a counter-signed copy of this Agreement within such 60-day period, then this Restricted Stock Unit Agreement and the Restricted Stock Units granted hereunder shall automatically become null and void and shall have no further force or effect. Electronic acceptance of this Restricted Stock Unit Agreement shall constitute an execution of the Restricted Stock Unit Agreement by the Recipient and a return of the counter-signed copy to the Company.

18. Section 409A. For purposes of determining whether the Recipient has experienced a termination of employment under Section 10 hereof, the Recipient will not be treated as having terminated employment unless such termination constitutes a “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h). If, as a result of Recipient’s “separation from service,” Recipient’s Restricted Stock Units vest pursuant to Section 10, the delivery of Common Stock in respect of such Restricted Stock Units shall be made on such date determined by the Company within five (5) days following Recipient’s “separation from service.” If the Recipient is a “specified employee” (as defined under the Health Net, Inc. Specified Employee Policy, or, in the absence of such policy, within the meaning of Section 409A) with respect to the Company at the time of a “separation from service” and the Recipient becomes vested in Restricted Stock Units as a consequence of such “separation from service,” and the delivery of Common Stock does not satisfy an exemption from Section 409A of the Code, including, without limitation, the exemptions under Treasury Regulation Section 1.409A-1(b)(4) or 1.409A-1(b)(9)(iii), then the delivery of Common Stock in respect of such Restricted Stock Units shall be delayed until the earliest date upon which such Common Stock may be delivered to Recipient without being subject to taxation under Section 409A.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Unit Agreement on the day and year first above written.

Health Net, Inc.

Name:

Title:

RECIPIENT HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT HE/SHE IS AN EMPLOYEE AT WILL AND MAY BE TERMINATED BY THE EMPLOYER AT ANY TIME, WITH OR WITHOUT CAUSE.

Your acceptance of this Restricted Stock Unit Agreement indicates that you accept and agree to all the terms and provisions of the foregoing Restricted Stock Unit Agreement and the attached Grant Notice, and to all the terms and provisions of the Plan, incorporated by reference herein.

Notice of Grant of Restricted Stock Units
Health Net, Inc.

Plan Name:

Recipient Name:

Recipient ID:

Grant Date:

Grant Number:

Number of Restricted Stock Units Granted:

Vesting Template: The Grant vests in equal installments over four years (25% per year)

beginning on the first anniversary of the Grant Date.

Vesting Schedule:

FORM
RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (this “Restricted Stock Agreement”) is made and entered into as of [DATE OF GRANT] (the “Date of Grant”), by and between Health Net, Inc., a Delaware corporation (the “Company”), and [NAME] (the “Recipient”).

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company has approved the grant of Restricted Stock, as hereinafter defined, to the Recipient as set forth below under the Company’s [NAME OF PLAN] (the “Plan”). Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the covenants and agreements herein contained and intending to be legally bound hereby, the parties agree as follows:

1. Grant of Restricted Stock. The Company hereby grants to the Recipient [NUMBER OF SHARES] restricted shares (the “Restricted Stock”) of the Common Stock, par value $.001 per share (the “Common Stock”) of the Company, subject to all of the terms and conditions of this Restricted Stock Agreement. As a condition of the effectiveness of this grant, the Recipient shall pay to the Company as soon as practicable the par value for each share of Restricted Stock subject to this grant in such consideration as determined by the Committee in its sole discretion. The Recipient’s grant and record of share ownership shall be kept on the books of the Company, until the restrictions on transfer have lapsed pursuant to Sections 2 or 3 below. Shares that have become vested pursuant to Sections 2 or 3 below may be evidenced by stock certificates, at the request of the Recipient, which certificates shall be registered in the name of the Recipient and delivered to Recipient within ten (10) days of such request.

2.  Lapse of Restrictions. Except as otherwise provided in Section 3 or 11 hereof, the restrictions on transfer set forth in Section 4 hereof shall lapse (the “Vesting Date”) with respect to all shares of the Restricted Stock on the [NUMBER] anniversary of the Grant Date.

3. Termination of Service.

(a) If prior to the Vesting Date, the Recipient’s employment or service with the Company is terminated (a “Termination Event”) by either the Recipient or the Company for any reason, then all shares of Restricted Stock not yet vested shall be immediately forfeited at such time, and the Company shall return to the Recipient an amount equal to the par value of the Restricted Stock which was paid by the Recipient to the Company as described in Section 1 above.

(b) If the Recipient violates the terms of Section 5 of this Agreement (a “Breach Event”), in addition to being subject to all remedies in law or equity that the Company may assert, then at any time thereafter the Company, in its sole and absolute discretion, may, with respect to any Restricted Stock that has vested within six (6) months of the Recipient’s termination of employment: (i) to the extent that the Restricted Stock is beneficially owned by the Recipient, reacquire from the Recipient, in return for an amount equal to the par value of the Restricted Stock which was paid by the Recipient to the Company as described in Section 1 above, any or all of the shares of Restricted Stock; and (ii) to the extent that the Restricted Stock has been sold, assigned or otherwise transferred by the Recipient, recover from the Recipient an amount equal to the Gain Realized (as defined in Section 5 below) from such sale, assignment or transfer.

(c) Upon the occurrence of a Breach Event, the Company may elect to purchase all or any portion of the Restricted Stock pursuant to this Section 3 by delivery of written notice (the “Repurchase Notice”) to the Recipient within ninety (90) days after the occurrence of such Breach Event.

4. Restrictions on Transfer. Unless earlier vested pursuant to Section 2 above, shares of Restricted Stock may not be transferred or otherwise disposed of by the Recipient prior to [DATE], including by way of sale, assignment, transfer, pledge or otherwise except by will or the laws of descent and distribution.

5. Employment/Association with Company Competitor. The Recipient hereby agrees that, during (i) the six-month period following a termination of the Recipient’s employment with an Employer that entitles the Recipient to receive severance benefits under an agreement with or the policy of the Company or (ii) the twelve-month period following a termination of the Recipient’s employment with an Employer that does not entitle the Recipient to receive such severance benefits (the period referred to in either clause (i) or (ii), the “Noncompetition Period”), the Recipient shall not undertake any employment or activity (including, but not limited to, consulting services) with a Competitor (as defined below), where the loyal and complete fulfillment of the duties of the competitive employment or activity would call upon the Recipient to reveal, to make judgments on or otherwise use any confidential business information or trade secrets of the business of the Company or any Subsidiary to which the Recipient had access during the Recipient’s employment with the Employer. In addition, the Recipient agrees that, during the Noncompetition Period applicable to the Recipient following termination of employment with the Employer, the Recipient shall not, directly or indirectly, solicit, interfere with, hire, offer to hire or induce any person, who is or was an employee of the Company or any of its Subsidiaries during the 12 month period prior to the date of such termination of employment, to discontinue his or her relationship with the Company or any of its Subsidiaries or to accept employment by, or enter into a business relationship with, the Recipient or any other entity or person. In the event that the Recipient breaches the covenants set forth in this first paragraph of Section 5, it shall be considered a Breach Event under Section 3 above.

For purposes of this Section 5: “Gain Realized” shall equal the difference between (x) the par value paid by the Recipient for the Restricted Stock and (y) the greater of the Fair Market Value (as defined in the Plan) of the Common Stock representing the Restricted Stock (I) on the date of transfer of such Restricted Stock or (II) on the date such competitive activity with a Competitor was commenced by the Recipient; and “Competitor” shall refer to any health maintenance organization or insurance company that provides managed health care or related services similar to those provided by the Company or any Subsidiary.

It is hereby further agreed that if any court of competent jurisdiction shall determine that the restrictions imposed in this Section 5 are unreasonable (including, but not limited to, the definition of Market Area or Competitor or the time period during which this provision is applicable), the parties hereto hereby agree to any restrictions that such court would find to be reasonable under the circumstances.

The Recipient acknowledges that the services to be rendered by the Recipient to the Company are of a special and unique character, which gives this Agreement a peculiar value to the Company, the loss of which may not be reasonably or adequately compensated for by damages in an action at law, and that a material breach or threatened breach by the Recipient of any of the provisions contained in this Section 5 will cause the Company irreparable injury. Recipient therefore agrees that the Company may be entitled, in addition to the remedies set forth above in this Section 5 and any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Recipient from any such violations or threatened violations.

5A. Compensation Recovery (Clawback). In the event that Recipient is subject to the Company’s Compensation Recovery Policy, as such policy may be amended from time to time (the “Compensation Recovery Policy”), notwithstanding anything in this Restricted Stock Agreement to the contrary, any Restricted Stock granted hereunder shall be subject to the terms and conditions of the Compensation Recovery Policy.

6. Rights as a Stockholder. The Company shall hold in escrow all dividends, if any, that are paid with respect to the shares of Restricted Stock until all restrictions on such shares have lapsed. Recipient agrees that the right to vote any shares for which the restrictions on transfer set forth in Section 4 hereof have not yet lapsed (the “Unvested Shares”) will be held by the Company and, accordingly, the Employee shall execute an Irrevocable Proxy in favor of the Company for all shares of Restricted Stock in the form supplied by the Company.

7. Notices. Any notice or communication given hereunder shall be in writing and shall be given electronically (e.g., email) or by fax or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of an email or a fax to the following addresses:

To the Recipient at:	[NAME]
	[ADDRESS]
	[EMAIL ADDRESS]
To the Company at:	Health Net, Inc. 21650 Oxnard Street Woodland Hills, California 91367 Attention: General Counsel

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

8. Securities Laws Requirements. The Company shall not be obligated to transfer any shares of Common Stock from the Recipient to another party, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended from time to time (the “Securities Act”) (or any other federal or state statutes having similar requirements as may be in effect at that time). Further, the Company may require as a condition of transfer of any shares to the Recipient that the Recipient furnish a written representation that he or she is holding the shares for investment and not with a view to resale or distribution to the public. The Company either has or will file an appropriate Registration Statement on Form S-8 (or other applicable form), and has taken or will take such actions as necessary to keep the information therein current from time to time, in order to register the Restricted Stock under the Securities Act and shall use its commercially reasonable efforts to cause such Registration Statement to become effective and to maintain the effectiveness of such registration.

9. Protections Against Violations of Restricted Stock Agreement. No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the shares of Restricted Stock by any holder thereof in violation of the provisions of this Restricted Stock Agreement or the Certificate of Incorporation or the By-Laws of the Company, shall be valid, and the Company will not transfer any of said shares of Restricted Stock on its books nor will any of said shares of Restricted Stock be entitled to vote, nor will any dividends be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce said provisions.

10. Taxes. The Recipient understands that he or she (and not the Company) shall be responsible for any tax obligation that may arise as a result of the transactions contemplated by this Restricted Stock Agreement and shall pay to the Company the amount determined by the Company to be such tax obligation at the time such tax obligation arises. If the Recipient fails to make such payment, the number of shares necessary to satisfy the tax obligations shall be forfeited. The Recipient shall promptly notify the Company of any election made pursuant to Section 83(b) of the Code.

THE RECIPIENT ACKNOWLEDGES THAT IT IS THE RECIPIENT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, IN THE EVENT THAT THE RECIPIENT DESIRES TO MAKE THE ELECTION.

11. Change of Control. Notwithstanding the provisions of Section 3 hereof, in the event that (i) there shall occur a Change in Control (as defined in the Plan) and (ii) the employment of the Recipient shall be terminated within the two year period following the Change in Control but prior to the Vesting Date either (A) by the Company without Cause or (B) under circumstances which entitle the Recipient to Change in Control severance benefits under an effective employment agreement between the Recipient and the Company or the Company’s Safety Net Security Program, each share of Restricted Stock shall become fully vested and the date of such vesting shall be deemed to be the Vesting Date hereunder. For purposes of this Section 11, “Cause” shall have the meaning set forth in the Plan.

12. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Restricted Stock Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

13. Governing Law. This Restricted Stock Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

14. Amendments. This Restricted Stock Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto, and approved by the Committee. The Board may terminate or amend the Plan at any time; provided, however, that the termination or any modification or amendment of the Plan shall not, without the consent of the Recipient, impair the rights of the Recipient under this Restricted Stock Agreement.

15. Survival of Terms. This Restricted Stock Agreement shall apply to and bind the Recipient and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

16. Agreement Not a Contract for Services; Rights to Terminate Employment. Neither the grant of the Restricted Stock, this Restricted Stock Agreement nor any other action taken pursuant to this Restricted Stock Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that the Recipient has a right to continue to provide services as an officer, director, employee or consultant of the Company and/or the Employer for any period of time or at any specific rate of compensation. Nothing in the Plan or in this Restricted Stock Agreement shall confer upon the Recipient the right to continue in the employment of an Employer or affect any right which an Employer may have to terminate the employment of the Recipient. The Recipient specifically acknowledges that the Employer intends to review the Recipient’s performance from time to time, and that the Company and/or the Employer has the right to terminate the Recipient’s employment at any time, including a time in close proximity to the Vesting Date, for any reason, with or without cause. The Recipient acknowledges that upon his or her termination of employment with an Employer for any reason, then all shares of Restricted Stock not yet vested shall be immediately forfeited at such time, and the Company shall return to the Recipient an amount equal to the par value of the Restricted Stock which was paid by the Recipient to the Company as is set forth in Section 3 of this Restricted Stock Agreement.

17. Decisions of Board or Committee. The Board or the Committee shall have the right to resolve all questions which may arise in connection with the Restricted Stock. Any interpretation, determination or other action made or taken by the Board or the Committee regarding the Restricted Stock, the Plan or this Restricted Stock Agreement shall be final, binding and conclusive.

18. Failure to Execute Agreement. This Restricted Stock Agreement and the Restricted Stock granted hereunder is subject to the Recipient returning a counter-signed copy of this Restricted Stock Agreement to the designated representative of the Company on or before 60 days after the date of its distribution to the Recipient. In the event that the Recipient fails to so return a counter-signed copy of this Agreement within such 60-day period, then this Restricted Stock Agreement and the Restricted Stock granted hereunder shall automatically become null and void and shall have no further force or effect.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Agreement on the day and year first above written.

Health Net, Inc.

Name:

Title:

THE UNDERSIGNED RECIPIENT HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT HE/SHE IS AN EMPLOYEE AT WILL AND MAY BE TERMINATED BY THE EMPLOYER AT ANY TIME, WITH OR WITHOUT CAUSE.

The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Restricted Stock Agreement and to all the terms and provisions of the Health Net, Inc. [PLAN NAME], as amended to date, incorporated by reference herein.

Recipient:

[NAME]

IRREVOCABLE PROXY

I, the undersigned, hereby irrevocably authorize and empower Jay M. Gellert, the President and Chief Executive Officer of Health Net, Inc. (the “Company”), and B. Curtis Westen, the Senior Vice President, General Counsel and Secretary of the Company, or each of their successors in the event either of them is no longer serving the Company in such capacity, (collectively, the “Proxies”) to represent me with respect to any and all shares of Restricted Stock (as such term is defined in the Restricted Stock Agreement (the “Restricted Stock Agreement”) by and between the Company and the undersigned) that are not yet vested, at any and all general meetings of the shareholders of the Company.

The Proxies are irrevocably authorized and empowered to receive, in my stead, any and all notices of and invitations to the Company’s general meetings, and to participate in all such general meetings; and the Proxies are authorized and empowered to vote all such unvested shares in such manner as the Proxies shall, in their sole discretion, deem to be in the best interests of the Company.

This proxy shall remain in full force and effect until the shares of Restricted Stock granted to me pursuant to the Restricted Stock Agreement have vested in accordance with the terms of the Restricted Stock Agreement, unless otherwise determined by the Company in writing.

NAME:       

DATE:       

SIGNATURE: