Health Net 2004 Annual Report Download - page 20

Subject to certain exceptions contained in the Rights Agreement dated as of June 1, 1996 by and between us and Harris Trust and
Savings Bank, as Rights Agent (as amended on October 1, 1996, May 3, 2001, May 14, 2004 and July 26, 2004, the “Rights
Agreement”), the Rights will separate from the Common Stock following any person, together with its affiliates and associates (an
“Acquiring Person”), becoming the beneficial owner of 15% or more of the outstanding common stock, the commencement of a
tender or exchange offer that would result in any person, together with its affiliates and associates, becoming the beneficial owner of
15% or more of the outstanding common stock or the determination by the Board of Directors that a person, together with its affiliates
and associates, has become the beneficial owner of 10% or more of the common stock and that such person is an “Adverse Person,”
as defined in the Rights Agreement. The Rights Agreement provides that certain passive institutional investors that beneficially own
less than 20% of the outstanding shares of our common stock shall not be deemed to be Acquiring Persons.
The Rights will first become exercisable on the Distribution Date and will expire on July 31, 2006, unless earlier redeemed by
us as described below.
Subject to certain exceptions contained in the Rights Agreement, in the event that any person shall become an Acquiring Person
or be declared to be 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
common stock having a market value of two times such exercise price.
In addition, and subject to certain exceptions contained in the Rights Agreement, in the event that we are acquired in a merger or
other business combination in which the 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 other 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, such 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.
We may redeem the Rights until the earlier of 10 days following the date that any person becomes the beneficial owner of 15%
or more of the outstanding common stock and the date the Rights expire at a price of $.01 per Right.
In July 2004, we appointed Wells Fargo Bank, N.A. to serve as the Rights Agent under the Rights Agreement.
The foregoing summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement, which is incorporated by reference in Exhibits 4.2, 4.3, 4.4, 4.5 and 4.6 to this Annual Report on Form 10-K,
and to Amendment No. 3 to our registration statement on Form 8-A/A filed with the SEC on July 26, 2004.
Potential Divestitures
We continue to evaluate the profitability realized or likely to be realized by our existing businesses and operations. We are
reviewing from a strategic standpoint which of such businesses or operations, if any, should be divested.
Risk Factors
The following discussion, as well as other portions of this Annual Report on Form 10-K, contain “forward-looking statements”
within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the
Securities Act of 1933, as amended, regarding our business, financial condition and results of operations. These forward-looking
statements involve risks and uncertainties. All statements other than statements of historical information provided or incorporated by
reference herein may be
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