Health Net 2009 Annual Report Download - page 21

and “—Changes to federal and state legislation and regulations affecting the managed health care industry could
adversely affect us.” We cannot predict the outcome of any of the pending legislative or regulatory proposals, nor
the extent to which we may be affected by the enactment of any such legislation or regulation.
Intellectual Property
We have registered and maintain various service marks, trademarks and trade names that we use in our
businesses, including marks and names incorporating the “Health Net” phrase, and from time to time we apply
for additional registrations of such marks. We utilize these and other marks and names in connection with the
marketing and identification of products and services. We believe such marks and names are valuable and
material to our marketing efforts.
Employees
As of December 31, 2009, Health Net, Inc. and its subsidiaries employed 8,719 persons on a full-time basis
and 203 persons on a part-time or temporary basis. These employees perform a variety of functions, including,
among other things, provision of administrative services for employers, providers and members; negotiation of
agreements with physician groups, hospitals, pharmacies and other health care providers; handling of claims for
payment of hospital and other services; and provision of data processing services. Our employees are not
unionized and we have not experienced any work stoppages since our inception. We consider our relations with
our employees to be very good.
Dependence Upon Customers
The federal government is the only customer of our Government Contracts segment, with premiums and
fees accounting for 100% of our Government Contracts revenue. See “Item 1A. Risk Factors—A significant
reduction in revenues from the government programs in which we participate could have an adverse effect on
our business, financial condition or results of operations.” In addition, the federal government is a significant
customer of our West Operations segment as a result of our contract with CMS for coverage of Medicare-eligible
individuals, including Part D prescription plans, state agencies for federally-subsidized Medicaid and CHIP
programs, and coverage of federal employees under the Federal Employees Health Benefits Program. Medicare
premiums accounted for 23% of our total premium revenue in 2009.
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) of a 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 then 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
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