Health Net 2000 Annual Report Download - page 46

44 HEALTH NET 2000 Annual Report
Subject to certain exceptions contained in the
Rights Agreement, in the event that any person shall
become an Acquiring Person or be declared an Adverse
Person, then the Rights will “flip-in”and entitle each
holder of a Right, other than any Acquiring Person or
Adverse Person, to purchase, upon exercise at the then-
current exercise price of such Right, that number of
shares of Class A Common Stock having a market value
of two times such exercise price.
In addition and subject to certain exceptions con-
tained in the Rights Agreement, in the event that the
Company is acquired in a merger or other business com-
bination in which the Class A Common Stock does not
remain outstanding or is changed or 50% of the assets or
earning power of the Company is sold or otherwise
transferred to any person, the Rights will “flip-over” and
entitle each holder of a Right, other than an Acquiring
Person or an Adverse Person, to purchase, upon exercise
at the then-current exercise price of such Right, that
number of shares of common stock of the acquiring
company which at the time of such transaction would
have a market value of two times such exercise price.
The Company may redeem the rights until the ear-
lier of 10 days following the date that any person
becomes the beneficial owner of 15% or more of the
outstanding Class A Common Stock and the date the
Rights expire at a price of $.01 per Right.
In connection with the FHS Combination, the
Company entered into Amendment No. 1 to the Rights
Agreement to exempt the FHS Combination and related
transactions from triggering the separation of the Rights.
In addition, the amendment modified certain terms of
the Rights Agreement applicable to the determination of
certain “Adverse Persons,”which modifications became
effective upon consummation of the FHS Combination.
NOTE 9 – Employee Benefit Plans
Defined Contribution Retirement Plans
The Company and certain subsidiaries sponsor defined
contribution retirement plans intended to qualify under
Section 401(a) and 401(k) of the Internal Revenue Code
of 1986, as amended (the “Code”). Participation in the
plans is available to substantially all employees who meet
certain eligibility requirements and elect to participate.
Employees may contribute up to the maximum limits
allowed by Sections 401(k) and 415 of the Code, with
Company contributions based on matching or other for-
mulas.The Company’s expense under the plans totaled
$8.6 million, $7.8 million and $7.4 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
Deferred Compensation Plans
Effective May 1, 1998, the Company adopted a deferred
compensation plan pursuant to which certain manage-
ment and highly compensated employees are eligible to
defer between 5% and 50% of their regular compensation
and between 5% and 100% of their bonuses, and non-
employee Board members are eligible to defer up to
100% of their directors compensation.The compensation
deferred under this plan is credited with earnings or
losses measured by the mirrored rate of return on invest-
ments elected by plan participants. Each plan participant
is fully vested in all deferred compensation and earnings
credited to his or her account.At December 31, 2000,
the employee deferrals were invested through a trust.
Prior to May 1997, certain members of manage-
ment, highly compensated employees and non-employee
Board members were permitted to defer payment of up
to 90% of their compensation under a prior deferred
compensation plan (the “Prior Plan”).The Prior Plan was
frozen in May 1997 at which time each participant’s
account was credited with three times the 1996
Company match (or a lesser amount for certain partici-
pants) and each participant became 100% vested in all
such contributions.The current provisions with respect to
the form and timing of payments under the Prior Plan
remain unchanged.At December 31, 2000 and 1999, the
liability under these plans amounted to $21.6 million and
$20.9 million, respectively.The Company’s expense under
these plans totaled $2.8 million, $1.9 million and $2.7
million for the years ended December 31, 2000, 1999 and
1998, respectively.
Pension and Other Postretirement Benefit Plans
Retirement Plans – The Company has two unfunded non-
qualified defined benefit pension plans, a Supplemental
Executive Retirement Plan (adopted in 1996) and a
Directors’Retirement Plan (collectively, the “HSI
SERPs”).These plans cover key executives, as selected by
the Board of Directors, and non-employee directors.
Benefits under the plans are based on years of service and
level of compensation.
Postretirement Health and Life Plans – Certain subsidiaries
of the Company sponsor postretirement defined benefit
health care plans that provide postretirement medical
benefits to directors, key executives, employees and
dependents who meet certain eligibility requirements.
Under these plans, the Company pays a percentage of the
costs of medical, dental and vision benefits during retire-
ment.The plans include certain cost-sharing features such
as deductibles, co-insurance and maximum annual benefit
amounts which vary based principally on years of cred-
ited service.
On December 31, 1998, the Company adopted
SFAS No. 132 “Employers’Disclosures about Pension and
Other Postretirement Benefits” (“SFAS No. 132”), which
revises employers’disclosures about pension and other
postretirement benefit plans. SFAS No. 132 standardizes
the disclosure requirements.The Company has chosen to
disclose the information required by SFAS No. 132 by
aggregating retirement plans into the “Pension Benefits”
category and postretirement plans into the “Other
Benefits”category.