Health Net 2010 Annual Report Download - page 130

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A summary of RSU and PSU activity under our various plans as of December 31, 2010, and changes during
the year then ended is presented below:
Number of
Restricted
Stock Units
and
Performance
Share Units
Weighted
Average
Grant-Date
Fair Value
Weighted
Average
Purchase
Price
Weighted Average
Remaining
Contractual Term
(Years)
Aggregate
Intrinsic Value
Outstanding at January 1, 2010 ........ 2,409,061 $37.06 $0.001
Granted .......................... 792,597 23.10 0.001
Vested ........................... (764,015) 42.07 0.001
Forfeited .......................... (243,471) 41.04 0.001
Outstanding at December 31, 2010 ..... 2,194,172 $29.83 $0.001 8.09 $59,876,760
Expected to vest at December 31, 2010
(reflecting estimated forfeiture rates
effective in 2010) ................. 1,979,081 $30.33 $0.001 8.05 $54,007,137
The fair values of restricted common stock, RSUs and PSUs are determined based on the market value of
the shares on the date of grant. We did not grant any restricted common stock during the years ended
December 31, 2010, 2009 and 2008. The aggregate intrinsic values of restricted shares vested during the years
ended December 31, 2010, 2009 and 2008, were $0, $0 and $40 thousand, respectively. The weighted-average
grant-date fair values of RSUs and PSUs granted during the years ended December 31, 2010, 2009 and 2008
were $23.10, $16.81 and $47.47, respectively. The aggregate intrinsic values of RSUs and PSUs vested during
the years ended December 31, 2010, 2009 and 2008, were $18.0 million, $4.5 million and $0.5 million,
respectively.
During the years ended December 31, 2010, 2009 and 2008, compensation expense recorded for stock
options was $6.3 million, $2.9 million and $4.8 million, respectively. During the years ended December 31,
2010, 2009 and 2008, compensation expense recorded for restricted common stock was $0, $0 and $2,000,
respectively. During the years ended December 31, 2010, 2009 and 2008, compensation expense recorded for
RSUs and PSUs was $26.8 million, $8.8 million and $19.3 million, respectively. As of December 31, 2010, the
total remaining unrecognized compensation cost related to non-vested stock options was $10.2 million and
non-vested RSUs and PSUs was $34.9 million, which is expected to be recognized over a weighted-average
period of 1.77 years and 1.15 years, respectively.
Under the Plans, employees and non-employee directors may elect for the Company to withhold shares to
satisfy minimum statutory federal, state and local tax withholding and/or exercise price obligations, as
applicable, arising from the exercise of stock options. For certain other equity awards, the Company has the right
to withhold shares to satisfy any tax obligations that may be required to be withheld or paid in connection with
such equity award, including any tax obligation arising on the vesting date. During the year ended December 31,
2010, we withheld 0.3 million shares of common stock to satisfy tax withholding and exercise price obligations
arising from stock option exercises and the vesting of RSUs.
We become entitled to an income tax deduction in an amount equal to the taxable income reported by the
holders of the stock options, restricted shares, RSUs and PSUs when vesting occurs, the restrictions are released
and the shares are issued. Stock options, restricted common stock, RSUs and PSUs are forfeited if the employees
terminate their employment prior to vesting.
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