Health Net 2013 Annual Report Download - page 24

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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 primary customer of our Government Contracts segment, with premiums and fees
accounting for approximately 95% of our Government Contracts revenue and 5% of our total revenues in 2013.
Premiums and fees from the federal government in connection with our TRICARE North Region contract accounted for
75%, 61% and 78% of our Government Contracts revenue in 2013, 2012 and 2011, respectively, and 4%, 4% and 10%
of total revenues in 2013, 2012 and 2011, respectively. In addition, the federal government and the state of California
are significant customers of our Western Region Operations segment as a result of our contract with CMS for coverage
of Medicare-eligible individuals and our contracts with California state agencies for federally-subsidized Medicaid and
CHIP programs. Medicare premiums accounted for 27%, 27% and 25% of our Western Region Operations segment
health plan services premium revenues in 2013, 2012 and 2011, respectively, and 25%, 25% and 21% of our total
revenues in 2013, 2012 and 2011, respectively. Medicaid premiums, including CHIP, accounted for 23%, 19% and 15%
of our Western Region Operations segment health plan services premium revenues in 2013, 2012 and 2011,
respectively, and 22%, 17% and 13% of our total revenues in 2013, 2012 and 2011, respectively. These percentages, and
our dependence on government funded revenues, will likely increase in 2014 as we begin operating the dual eligibles
demonstration program under the CCI. See “Item 1A. Risk Factors—A significant reduction in revenues from the
government programs in which we participate or other changes to these programs could have a material adverse effect
on our business, financial condition or results of operations.”
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 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 our 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 the 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.
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