WAIVER AND RELEASE OF CLAIMS

1.

Employee’s employment with the Company will terminate on July 12, 2005 (the “ Termination Date ”). Upon termination of employment, Employee will not represent to anyone that he is an employee of the Company and will not say or do anything purporting to bind the Company. Upon Employee’s termination of employment, Employee shall be deemed to have resigned from all other positions with the Company, if any, held by Employee.

2.

Employee’s termination of employment with the Company shall be considered a termination without Cause that is not within the first two (2) years after a Change in Control under Section 9(B) of the Employment Letter Agreement, and Employee is therefore eligible to receive (i) a lump sum cash payment equal to (x) twenty-four (24) months of Employee’s Base Salary, which, for avoidance of doubt, the Company and Employee agree is an amount equal to $1,050,000, and (y) provided that the closing price of the Company’s stock is $35.00 or more per share on the Termination Date, an “incentive bonus amount” equal to two (2) times the target incentive amount Employee is eligible to receive pursuant to the Company’s MIP for 2005, which, for the avoidance of doubt, the Company and Employee agree is an amount equal to $840,000, (ii) the continuation of medical, dental, and vision benefits for Employee and his dependents for six (6) months following the Termination Date, and (iii) after the expiration of such six (6) month benefit continuation, the continuation of his medical, dental, and vision benefits under COBRA for Employee and his dependents for an additional period of eighteen (18) months, provided Employee properly elects to continue those benefits under COBRA. The lump sum payment referred to above will be paid within thirty (30) days following the Termination Date and the Company will withhold the applicable tax withholdings from such lump sum payment.

3.

Employee and Company acknowledge and agree that all of the terms and conditions of the Nonqualified Stock Option Agreement (the “ Option Agreement ”) dated as of January 28, 2002 between the Company and Employee remain in effect, including that Employee shall have a period of three (3) months from the Termination Date to exercise any outstanding stock options which have

4.

Employee acknowledges that all unused accrued vacation and unused personal absence time will be paid in Employee’s final regular paycheck in keeping with the Company’s policy and practice or such shorter time as may be required by applicable law. Employee further acknowledges that no further vacation/paid-time-off benefits will accrue after the Termination Date.

5.

Employee’s participation in all Company employee benefit plans as an active employee shall cease on the Termination Date, and Employee shall not be eligible to make contributions to or to receive allocations under the Health Net, Inc. 401(k) Associate Savings Plan (the “ 401(k) Plan ”) or to make any deferrals pursuant to any deferred compensation plan of the Company after the Termination Date. For the avoidance of doubt, the parties hereto acknowledge and agree that nothing contained in this Section 5 shall restrict Employee from receiving any distribution under the 401(k) Plan or any deferred compensation plan of the Company to which Employee is entitled to receive in accordance with and pursuant to the terms of any such plan.

6.

In partial consideration of the Company providing Employee the payments and benefits set forth above and as a condition to receive such payments and benefits, Employee freely and voluntarily enters into this Release and by signing this Release Employee, on his own behalf and on behalf of his heirs, beneficiaries, successors, representatives, trustees, administrators and assigns, hereby waives and releases the Company, and each of its past, present and future officers, directors, shareholders, employees, consultants, accountants, attorneys, agents, managers, insurers, sureties, parent and sister corporations, divisions, subsidiary corporations and entities, partners, joint venturers, affiliates, beneficiaries, successors, representatives and assigns (collectively, the “ Released Parties ”), from any and all claims, demands, damages, debts, liabilities, controversies, obligations, actions or causes of action of any nature whatsoever, whether based on tort, statute, contract (specifically including, but not limited to, claims arising out of or related to the Employment Letter Agreement), indemnity, rescission or any other theory of recovery, including but not limited to claims arising under federal, state or local laws prohibiting discrimination in employment, including Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1866, as amended, claims of disability discrimination under the Americans with Disabilities Act, as amended, the Age Discrimination in Employment Act, as amended (“ ADEA ”), the Worker Adjustment and Retraining Notification Act (“ WARN ”), as amended, the Fair Labor Standards Act, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Family and Medical Leave Act, as amended, the California Fair Employment and Housing