EX-10.2






[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




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 (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 tenth 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 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, provided that, if such termination occurs during a
Company trading blackout period established pursuant to the Company’s then existing Insider Trading
Policy (the “Trading Blackout”), such Option (subject to clause (g) below) may be exercised at any
time starting from the Optionee’s termination date through the last day of the third month
following the expiration date of such Trading Blackout period. 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, provided that, if such termination occurs during a Trading Blackout, such
Option (subject to clause (g) below) may be exercised at any time starting from the Optionee’s
termination date through the last day of the third month following the expiration date of such
Trading Blackout period.



(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, provided that, if such termination of the
Optionee’s service as a director occurs during a Trading Blackout, such Option (subject to clause
(g) below) may be exercised at any time starting from the Optionee’s termination date through the
last day of the first month following the expiration date of such Trading Blackout period.



(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
exercisable (i.e., vested) at the time of such termination and (2) no portion of the Option shall
be exercisable following the tenth 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, 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, affect 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
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 herein incorporated
by reference.



     Optionee



Signature of Optionee