Health Net 2011 Annual Report Download - page 133

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
or sell all or substantially all of our assets. In the event of the occurrence of both (1) a change of control of Health
Net, Inc. and (2) a below investment grade rating by any two of Fitch, Inc., Moody’s Investors Service, Inc. and
Standard & Poor’s Ratings Services within a specified period, we will be required to make an offer to purchase
the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes plus accrued and unpaid
interest to the date of repurchase. As of December 31, 2011, no default or event of default had occurred under the
indenture governing the Senior Notes.
The Senior Notes may be redeemed in whole at any time or in part from time to time, prior to maturity at our
option, at a redemption price equal to the greater of:
• 100% of the principal amount of the Senior Notes then outstanding to be redeemed; or
• the sum of the present values of the remaining scheduled payments of principal and interest on the
Senior Notes to be redeemed (not including any portion of such payments of interest accrued to the
date of redemption) discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the applicable treasury rate plus 30 basis points
plus, in each case, accrued and unpaid interest on the principal amount being redeemed to the redemption date.
Each of the following will be an Event of Default under the indenture governing the Senior Notes:
• failure to pay interest for 30 days after the date payment is due and payable; provided that an extension
of an interest payment period by us in accordance with the terms of the Senior Notes shall not
constitute a failure to pay interest;
• failure to pay principal or premium, if any, on any note when due, either at maturity, upon any
redemption, by declaration or otherwise;
• failure to perform any other covenant or agreement in the notes or indenture for a period of 60 days
after notice that performance was required;
• (A) our failure or the failure of any of our subsidiaries to pay indebtedness for money we borrowed or any
of our subsidiaries borrowed in an aggregate principal amount of at least $50 million, at the later of final
maturity and the expiration of any related applicable grace period and such defaulted payment shall not
have been made, waived or extended within 30 days after notice or (B) acceleration of the maturity of
indebtedness for money we borrowed or any of our subsidiaries borrowed in an aggregate principal
amount of at least $50 million, if that acceleration results from a default under the instrument giving rise
to or securing such indebtedness for money borrowed and such indebtedness has not been discharged in
full or such acceleration has not been rescinded or annulled within 30 days after notice; or
• events in bankruptcy, insolvency or reorganization of our Company.
Our Senior Notes payable balances were $398.9 million as of December 31, 2011 and $398.7 million as of
December 31, 2010, respectively.
Note 7—Fair Value Measurements
We record certain assets and liabilities at fair value in the consolidated balance sheets and categorize them
based upon the level of judgment associated with the inputs used to measure their fair value and the level of
market price observability. We also estimate fair value when the volume and level of activity for the asset or
liability have significantly decreased or in those circumstances that indicate when a transaction is not orderly.
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