Health Net 2006 Annual Report Download - page 125

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
We may redeem the Rights at any time until the earlier of (i) 10 days following the date that any Acquiring
Person becomes the beneficial owner of 15% or more of the outstanding common stock and (ii) the date the
Rights expire at a price of $.01 per Right. In addition, at any time after a person becomes an Acquiring Person or
is determined to be and Adverse Person and prior to such person becoming (together with such person’s affiliates
and associates) the beneficial owner of 50% or more of the outstanding Common Stock, at the election of our
Board of Directors, the outstanding Rights (other than those beneficially owned by an Acquiring Person, Adverse
Person or an affiliate or associate of an Acquiring Person or Adverse Person) may be exchanged, in whole or in
part, for shares of Common Stock, or shares of preferred stock of the Company having essentially the same value
or economic rights as such shares.
Stock Repurchase Program
In September 2004, we placed our stock repurchase program on hold, primarily as a result of Moody’s and
S&P having downgraded our non-credit-enhanced, senior unsecured long-term debt rating to below investment
grade. Our Board of Directors had previously authorized us to repurchase up to $450 million of our common
stock under the stock repurchase program.
On October 14, 2006, the Board of Directors authorized the resumption of repurchases of our common stock
under the stock repurchase program. At that time, the outstanding amount under the stock repurchase program
was $215 million (which amount includes exercise proceeds and tax benefits the Company had received to date
from the exercise of employee stock options). The Board of Directors also increased the size of the stock
repurchase program by $235 million. As a result, the Company was then authorized under the stock repurchase
program to acquire shares of its common stock in an aggregate amount of up to $450 million. Although we are
currently limited to repurchases of our common stock in amounts not to exceed $450 million, additional amounts
may be added to the program based on exercise proceeds and tax benefits the Company receives from the
exercise of employee stock options. However, these additional amounts may not be used to purchase additional
shares of our common stock without further approval of the Board of Directors.
On November 9, 2006, we resumed repurchases of our common stock under our stock repurchase program
and repurchased 5,470,138 shares for approximately $250 million during the three months ended December 31,
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