Health Net 2010 Annual Report Download - page 131

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 9—Capital Stock
As of December 31, 2010, there were 145,121,000 shares of our common stock issued and 50,474,000
shares of common stock held in treasury, resulting in 94,647,000 shares of our common stock outstanding.
Shareholder Rights Plan
On July 27, 2006, our Board of Directors adopted a shareholder rights plan pursuant to a Rights Agreement
with Wells Fargo Bank, N.A. (the Rights Agent), dated as of July 27, 2006 (the Rights Agreement).
In connection with the Rights Agreement, on July 27, 2006, our Board of Directors declared a dividend
distribution of one right (a Right) for each outstanding share of Common Stock to stockholders of record at the
close of business on August 7, 2006 (the Record Date). Our Board of Directors also authorized the issuance of
one Right for each share of common stock issued after the Record Date and prior to the earliest of the
Distribution Date (as defined below) the redemption of the Rights and the expiration of the Rights and, in certain
circumstances, after the Distribution Date. Subject to certain exceptions and adjustment as provided in the Rights
Agreement, each Right entitles the registered holder to purchase from us one one-thousandth (1/1000th )ofa
share of Series A Junior Participating Preferred Stock, par value of $0.001 per share, at a purchase price of
$170.00 per Right (the Purchase Price). The terms of the Rights are set forth in the Rights Agreement.
Rights will attach to all common stock certificates representing shares outstanding and no separate Rights
certificates will be distributed. Subject to certain exceptions contained in the Rights Agreement, the Rights will
separate from the common stock on the date that is 10 business days following (i) any person, together with its
affiliates and associates (an Acquiring Person), becoming the beneficial owner of 15% or more of the outstanding
common stock, (ii) 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 (iii) 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 earliest of such dates being called the Distribution Date). 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 at the close of business on
July 31, 2016 unless such date is extended or the Rights are 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 and such person’s affiliates and associates, 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, cash flow 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 and such person’s affiliates and associates, 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.
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