Health Net 2004 Annual Report Download - page 111

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HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 7—Stock Option and Employee Stock Purchase Plans
We have various stock option plans which cover certain employees, officers and non-employee directors, and an employee stock
purchase plan under which substantially all of our full-time employees are eligible to participate. The stockholders have approved
these plans except for the 1998 Stock Option Plan which was adopted by our Board of Directors. During 2002, the stockholders
approved the 2002 Stock Option Plan. During 2004, 2003 and 2002, we issued 96,000, 190,000 and 80,000 shares of restricted stock,
respectively (see Note 2). During the second quarter ended June 30, 2002, certain option grants under the 1997 and 1998 plans
became vested as a result of our stock attaining a closing market price of $25 for 20 consecutive trading days pursuant to an
acceleration clause in the plans.
Under our various employee stock option plans and our non-employee director stock option plan, we grant options at prices at or
above the fair market value of the stock on the date of grant. The options carry a maximum term of up to 10 years and in general vest
ratably over three to five years, except for certain option grants under the 1997 and 1998 plans where vesting is accelerated by virtue
of attaining certain performance targets. We have reserved a total of 18.0 million shares of our Common Stock for issuance under the
stock option plans. As of December 31, 2004, 1.1 million outstanding options had accelerated vesting provisions.
Under our Employee Stock Purchase Plan, we provide employees with the opportunity to purchase stock through payroll
deductions. Eligible employees may purchase on a monthly basis our Common Stock at 85% of the lower of the market price on
either the first or last day of each month. See Note 18 regarding the termination of this plan.
Stock option activity and weighted average exercise prices for the years ended December 31 are presented below:
F-25
2004
2003
2002
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Outstanding at January 1
12,690,256
$23.32
12,767,849
$21.06
13,106,184
$18.25
Granted
3,196,413
27.38
3,694,313
25.13
4,873,731
23.74
Exercised
(897,030)
19.07
(2,685,966)
15.37
(3,504,250)
13.57
Canceled
(945,110)
24.79
(1,085,940)
23.83
(1,707,816)
21.40
Outstanding at December 31
14,044,529
$24.35
12,690,256
$23.32
12,767,849
$21.06
Exercisable at December 31
6,672,450
5,238,455
5,567,079