Health Net 2011 Annual Report Download - page 140

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, other than in certain limited situations.
Note 9—Capital Stock
As of December 31, 2011, there were 146,804,000 shares of our common stock issued and 64,847,000
shares of common stock held in treasury, resulting in 81,957,000 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
certificates evidencing the Rights will be distributed. Subject to certain exceptions contained in the Rights
Agreement, the Rights will separate from the Common Stock upon the earliest of (i) 10 days following the public
announcement of 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) 10 business days following 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) 10 business
days following 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 or exchanged 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.
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