Health Net 2004 Annual Report Download - page 19

Pending Federal and State Legislation
There are a number of other legislative initiatives and proposed regulations currently pending or previously proposed at the
federal and state levels which could increase regulation of and costs incurred by the health care industry. These measures and other
initiatives, if enacted, could have significant adverse effects on our operations. See “Risk Factors—Proposed federal and state
legislation affecting the managed health care industry could have an adverse effect on our operations” below. 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 filed for registration of and maintain several service marks, trademarks and tradenames that we use in our business,
including marks and names incorporating the “Health Net” phrase. 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, 2004, Health Net and its subsidiaries employed 8,284 persons on a full-time basis and 285 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.
Recent and Other Developments and Other Company Information
Amendment to Senior Credit Facility
On March 1, 2005, we entered into an amendment to our five-year revolving credit facility with Bank of America, N.A. as
Administrative Agent, Swing Line Lender and L/C Issuer, JP Morgan Chase Bank, as Syndication Agent and the other lenders party
thereto. The amendment, among other things, amends the definition of Consolidated EBITDA to exclude from the calculation of
Consolidated EBITDA during the five fiscal quarter periods commencing with the fiscal quarter ended December 31, 2004 and
ending with the fiscal quarter ended December 31, 2005, up to $375 million relating to cash and non-cash, non-recurring charges in
connection with litigation and provider settlement payments, any increase in medical claims reserves and any premiums relating to
the repayment or refinancing of our 8.375% Senior Notes due 2011 (“Senior Notes”) to the extent such charges cause a corresponding
reduction in Consolidated Net Worth (as defined in the senior credit facility). For additional information regarding our senior credit
facility see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources.”
Shareholder Rights Plan
On May 20, 1996, our Board of Directors declared a dividend distribution of one right (a “Right”) for each outstanding share of
our common stock to stockholders of record at the close of business on July 31, 1996 (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,” the redemption of the Rights and the expiration of the Rights, and in certain other circumstances, after the
Distribution Date. Except as set forth in the Rights Agreement (as defined below) and subject to adjustment as provided in the Rights
Agreement, each Right entitles the registered holder to purchase from us one one-thousandth of a share of Series A Junior
Participating Preferred Stock at a purchase price of $170 per Right. Rights will attach to all common stock certificates representing
shares then outstanding and no separate Rights certificates will be distributed.
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