Exhibit 10.28

[DIRECTOR NAME]

[TYPE OF GRANT]

FORM OF

NONQUALIFIED STOCK OPTION AGREEMENT

FOR NON-EMPLOYEE DIRECTORS

UNDER THE HEALTH NET, INC.

2006 LONG-TERM INCENTIVE PLAN,

AS AMENDED

This agreement (the “Option Agreement”) is made as of [DATE] (the “Grant Date”),
between Health Net, Inc., a Delaware corporation (the “Company”), and [NAME], a
non-employee director of the Company (the “Optionee”).

Pursuant to the Health Net, Inc. 2006 Long-Term Incentive Plan, as amended (the
“Plan”), the Optionee is to be granted, on the terms and conditions set forth
herein, a nonqualified stock option (the “Option”) to purchase shares of Common
Stock of the Company, par value $.001 per share (the “Common Stock”).

1. Number of Shares and Option Price. The Option is to purchase [NUMBER OF
SHARES] shares of Common Stock (the “Option Shares”) at a price of [GRANT PRICE]
per share (the “Option Price”), which is equal to the Fair Market Value (as
defined in the Plan) of an Option Share as of the Grant Date.

2. Exercise of Option. The Option shall become exercisable on the date that is
one year after the Grant Date to the extent of 33 1/3 % of the Option Shares
covered by the Option, and shall become exercisable on each subsequent
anniversary of the Grant Date to the extent of an additional 33 1/3 % of the
Option Shares covered by the Option until the Option becomes fully exercisable.
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 Service.

(a) General Term. The term of the Option and this Option Agreement shall
commence on the date hereof. 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 in paragraphs (b) through (e) below, or
under the Plan.

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

(i) if the Optionee dies while serving as a member of the board of directors of
the Company (a “Director”), then the Option (subject to clause (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 service as a Director was terminated due to Permanent and
Total Disability (as defined in Section 22(e)(3) of the Internal Revenue Code of

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1986, as amended, or any successor thereto) (hereinafter, “Permanent and Total
Disability”) and the Optionee dies within one year after termination of service,
then the Option (subject to clause (g) below) may be exercised by the legatee(s)
or personal representative of the Optionee at any time during the remainder of
the period during which the Optionee would have been able to exercise the Option
had the Optionee not died; and

(iii) if the Optionee dies within three months after termination of service as a
Director and clause (ii) is not applicable, then the Option (subject to clause
(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) Permanent and Total Disability. If the Optionee’s service as a Director
shall terminate prior to the exercise of the Option as a result of Permanent and
Total Disability, then the Option (subject to clause (g) below) may be exercised
by the Optionee (or his or her personal representative) at any time within one
year after such termination of service as a Director.

(d) Removal by Stockholders for Cause. If the Optionee shall be removed from the
board of directors of the Company by the Company’s stockholders prior to the
exercise of the Option for cause (for these purposes, if such termination occurs
within 12 months after a Change in Control, as defined in Section 8.9 of the
Plan, removal for cause shall only mean a felony conviction for fraud,
misappropriation or embezzlement), then upon such removal the Option shall
immediately terminate.

(e) Removal by Stockholders Without Cause and Expiration of Term of Office. If
prior to the exercise of the Option, the Optionee’s service as a Director shall
be terminated as a result of expiration of the Director’s term of office without
an accompanying renomination or reelection of such Director, then the Option
(subject to clause (g) below) shall become exercisable at the time of such
termination and may be exercised at any time within three months after the
Optionee’s termination of service as a Director. If prior to the exercise of the
Option, the Optionee’s service as a Director shall be terminated as a result of
(i) removal by the Company’s stockholders without cause or (ii) the tendering of
the Optionee’s resignation as a Director upon expiration of his or her term of
office, then the Option (subject to clause (g) below) may be exercised at any
time within three months after the Optionee’s termination of service as a
Director.

(f) Termination for Other Reason. If prior to the exercise of the Option, the
Optionee’s service as a Director shall be terminated for any reason other than
as set forth in subsections (b) through (e) above, including as a result of the
tendering of the Optionee’s resignation as a Director during his or her then
current term of office, then the Option (subject to clause (g) below) held by
the Optionee may be exercised at any time within one month after the Optionee’s
termination of service as a Director.

(g) Post-Termination Exercisability. Notwithstanding any other provision of this
Section 3 to the contrary, following termination of Optionee’s service as a
Director for any reason: (i) the Option shall be exercisable during any of the
post-termination periods described in subparagraphs (b) through (f) of this
Section 3 if and only to the extent the Option was

 

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exercisable (i.e., vested) at the time of such termination and (2) no portion of
the Option shall be exercisable following the seventh anniversary of the Grant
Date.

(h) Service on Subsidiary Board. Notwithstanding anything to the contrary set
forth herein, if upon an Optionee’s termination of service as a Director, such
Optionee becomes a member of a board of directors of a subsidiary of the
Company, then such Optionee’s service shall not be treated as having terminated
hereunder until such Optionee’s termination of service as member of the board of
directors of such subsidiary.

4. Notices. Any notice required or permitted under the Plan shall be deemed
given when delivered personally, transmitted electronically by facsimile or
email, or when deposited in a United States Post Office, postage prepaid,
addressed, as appropriate, to the Optionee either at the last known address set
forth in the records of the Company or such other address as the Optionee may
designate in writing to the Company.

5. 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 or
thereof.

6. 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, constitute 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.

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

8. Change of Control. The Option shall become immediately fully vested and
exercisable upon the occurrence of a Change in Control, as such term is defined
in the Plan.

9. Rights of Removal. Nothing in the Plan or in this Option Agreement shall
confer upon the Optionee the right to continue as a director of the Company or
affect any right which the stockholders of the Company may have to remove the
Optionee as a director of the Company.

10. Amendment. The Plan may be terminated or amended pursuant to its terms 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.

11. 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

 

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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.

12. Tax Payments. The Optionee shall be responsible for all the taxes associated
with an exercise of the Option and subsequent sale of the Option Shares. No
taxes on the income from the exercise of the Option and sale of the Option
Shares will be deducted or withheld by the Company. In compliance with the
Internal Revenue Code, the Company will issue a Form 1099-Misc during January of
each year to report all non-employee compensation earned during the preceding
calendar year, including income from the exercise of the Option and sale of the
Option Shares. This Form 1099-Misc can be used to calculate the applicable
federal and state income taxes.

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

 

HEALTH NET, INC.

By:

 

 

Name:

 

Title:

  The undersigned hereby accepts and agrees to all the terms and provisions of
the foregoing Option Agreement and to all the terms and provisions of the Health
Net, Inc. 2006 Long-Term Incentive Plan, as amended, and as herein incorporated
by reference.

 

 

Optionee

Signature of Optionee

 

 

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