Health Net 1998 Annual Report Download - page 46

4 4 F O U N D ATI O N H EALT H SYST EMS, I N C .
Revolving Credit Facility
The Company established in July 1997, a $1.5 billion
credit facility (the “Credit Facility”) with Bank
of A m e rica [as A d m i n i s t r a t ive Agent for the Lenders
t h e re t o, as amended in A p ri l , July and N ove m b e r
1998 and March 1999 (the “Amendments”)].All
previous revolving credit facilities were terminated
and rolled into the Credit Facility.At the election of
the Company, and subject to customary covenants,
loans are initiated on a bid or committed basis and
carry interest at offshore or domestic rates,at the
applicable LIBOR Rate plus margin or the bank
reference rate.Actual rates on borrowings under the
Credit Facility vary, based on competitive bids and
the Company ’s unsecured credit rating at the time of
the borrowing (6.19% and 5.98% at December 31,
1998 and 1997,re s p e c t i ve l y ) . Under the A m e n d m e n t s ,
the Company’s public issuer rating becomes the
exclusive means of setting the facility fee and bor-
rowing rates under the Credit Facility. In addition,
certain covenants including financial covenants were
amended.The Credit Facility is available for five
years,until July 2002, but it may be extended under
certain circumstances for two additional years.The
weighted average annual interest rate on the Com-
pany’s notes payable and capital leases was approxi-
mately 6.30%,6.24% and 6.39% for the years ended
December 31,1998,1997 and 1996.The maximum
amount outstanding under the Credit Facility dur-
ing 1998 was $1.39 billion.
As of December 31,1998,the Company was
in compliance with the financial covenants of the
Credit Facility, as amended in March 1999.
Scheduled principal re p a yments on notes
p aya bl e,capital leases and other financing arr a n g e m e n t s
for the next five ye a rs are as follows (in thousands):
1999 $ 1,760
2000 11,282
2001 865
2002 1,225,958
2003 1,060
Thereafter 15,113
Total notes payable and capital leases $1,256,038
Note 7 – Stock Option And Employee Stock Purchase Plans
The Company has various Stock Option plans
which cover certain employees,officers and non-
employee directors,and employee stock purchase
plans under which substantially all full-time employ-
ees of the Company are eligible to participate.The
stockholders have approved all of these plans except
for the 1998 Stock Option Plan which was adopted
by the Company’s Board of Directors.
Under the 1989,1990,1991,1992,1993,
1997 and 1998 employee stock option plans and the
non-employee director stock option plan,the Com-
pany grants options at prices at or above the fair
market value of the stock on the date of grant.The
options carry a maximum term of up to 10 years
and in general vest ratably over three to five years.
The Company has reserved a total of 23.2 million
shares of its Class A Common Stock for issuance
under the stock option plans.
Under the 1997 Employee Stock Purchase
plans, the Company provides employees with the
opportunity to purchase stock through payroll
deductions.Eligible employees may purchase on
a monthly basis the Company’s Class A Common
Stock at 85% of the lower of the market price
on either the first or last day of each month.
Note 6 – Not es Pa yable, Capita l Lease s a nd Other Financing Arr a n g e m e n t s
Notes payable, capital leases and other financing arrangements comprised the following at December 31 (amounts in
thousands):
1998 1997
Revolving credit facility, variable interest at LIBOR plus 1.50% at
December 31,1998,unsecured $1,225,000 $1,265,000
Note payable, due December 2000,interest at 7.95%,unsecured 10,500 22,500
Note payable to the California Wellness Foundation,
due quarterly with a balloon payment due 2006, variable interest
of 2.5% above 3 year Treasury Note auction rate, 8.16% and 10.27% at
December 31,1998 and 1997, respectively, secured by a cash collateral pledge 17,646 18,754
Capital leases and other notes payable 2,892 6,318
Total notes payable and capital leases 1,256,038 1,312,572
Less notes payable and capital leases – current portion 1,760 3,593
Notes payable and capital leases – noncurrent portion $1,254,278 $1,308,979