Health Net 2000 Annual Report Download - page 45

Notes to Consolidated Financial Statements HEALTH NET 43
On December 4, 1998, options representing approxi-
mately 1.9 million shares of stock granted during 1990
through 1997 at exercise prices ranging from $11.70 to
$35.25 were exchanged for options representing approxi-
mately 1.4 million shares of stock at an exercise price of
$12.94, which was the fair market value of the underly-
ing shares on the grant date.
As fair value criteria was not applied to option grants
and employee purchase rights prior to 1995, and addi-
tional awards in future years are anticipated, the effects
on net income and earnings per share in this pro forma
disclosure may not be indicative of future amounts.
NOTE 8 – Capital Stock
The Company has two classes of Common Stock.The
Company’s Class B Common Stock has the same eco-
nomic benefits as the Company’s Class A Common Stock
but is non-voting. As of December 31, 2000 there were
122,800,000 shares of the Company’s Class A Common
Stock outstanding and no shares of the Company’s Class
B Common Stock outstanding.
Public Offering
On May 15, 1996, the Company completed a public
offering in which the Company sold 3,194,374 shares of
Class A Common Stock and the California Wellness
Foundation (“CWF”) sold 6,386,510 shares of Class A
Common Stock (constituting 6,386,510 shares of Class B
Common Stock which automatically converted into
shares of Class A Common Stock upon the sale) for a per
share purchase price to the public of $30.00 (the
“Offering”).The proceeds received by the Company
from the sale of the 3,194,374 shares of Class A Common
Stock were approximately $92.4 million after deducting
underwriting discounts and commissions and estimated
expenses of the Offering payable by the Company.The
Company used its net proceeds from the Offering to
repurchase 3,194,374 shares of Class A Common Stock
from certain Class A Stockholders.The Company repur-
chased these shares of Class A Common Stock from the
Class A Stockholders at $30.00 per share less transaction
costs associated with the Offering, amounting to $1.08
per share. All of these 3,194,374 shares of Class A
Common Stock repurchased are currently held in trea-
sury.The Company did not receive any of the proceeds
from the sale of shares of Class A Common Stock in the
Offering by the CWF.
On June 27, 1997, the Company redeemed
4,550,000 shares of Class B Common Stock from the
CWF at a price of $24.469 per share.The Company pro-
vided its consent to permit the CWF to sell 3,000,000
shares of Class B Common Stock to an unrelated third
party in June of 1997 and the CWF had the right to sell
an additional 450,000 shares of Class B Common Stock
to unrelated third parties, which it did throughout August
of 1997. On November 6, 1997, the Company also pro-
vided its consent to permit the CWF to sell 1,000,000
shares of Class B Common Stock to unrelated third par-
ties. In addition, on June 1, 1998, the Company gave its
consent to permit the CWF to sell (and on June 18,
1998, the CWF sold) 5,250,000 shares of Class B
Common Stock to unrelated third parties. In 2000 and
1999, the CWF sold 2,138,000 and 2,909,600 shares
of Class B Common Stock to unrelated third parties,
respectively. As a result of such sale, the CWF no longer
holds any shares of Class B Common Stock. Pursuant to
the Company’s Certificate of Incorporation, all of such
shares of Class B Common Stock sold automatically con-
verted into shares of Class A Common Stock in the
hands of such third parties.
Shareholder Rights Plan
On May 20, 1996, the Board of Directors of the
Company declared a dividend distribution of one right
(a “Right”) for each outstanding share of the Company’s
Class A Common Stock and Class B Common Stock
(collectively, the “Common Stock”), to stockholders of
record at the close of business on July 31, 1996 (the
“Record Date”).The Board of Directors of the Company
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”the Rights
separate from the Common Stock under the circum-
stances described below and in accordance with the pro-
visions of the Rights Agreement, as defined below, the
redemption of the Rights, and the expiration of the
Rights and in certain other circumstances. Rights will
attach to all Common Stock certificates representing
shares then outstanding and no separate Rights
Certificates will be distributed. Subject to certain excep-
tions contained in the Rights Agreement (as amended),
the Rights will separate from the Common Stock follow-
ing any person, together with its affiliates and associates
(an “Acquiring Person”), becoming the beneficial owner
of 15% or more of the outstanding Class A 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 Class A 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 Class A
Common Stock and that such person is an “Adverse
Person,”as defined in the Rights Agreement.
The Rights will first become exercisable on the
Distribution Date and will expire on July 31, 2006, unless
earlier redeemed by the Company as described below.
Except as set forth below and subject to adjustment as
provided in the Rights Agreement, each Right
entitles its registered holder, upon the occurrence of a
Distribution Date, to purchase from the Company one
one-thousandth of a share of Series A Junior Participating
Preferred Stock, at a price of $170.00 per one-thou-
sandth share.