Health Net 1999 Annual Report Download - page 41

FOUNDATION HEALTH SYSTEMS, IN C. 39
Revolving Credit Facility
The Company established in July 1997, a $1.5 billion credit
facility (the “Credit Facility”) with Bank of America (as
Administrative Agent for the Lenders thereto, as amended
in April, July, and November 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 R ate plus margin or the bank reference
rate. Actual rates on borrowings under the Credit Facility
vary, based on competitive bids and the Company’s unse-
cured credit rating at the time of the borrowing.These rates
were 7.19% and 6.19% at December 31, 1999 and 1998,
respectively. Under the Amendments, the Company’s public
issuer rating becomes the exclusive means of setting the
facility fee and borrowing 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 cir-
cumstances for two additional years.The weighted average
annual interest rate on the Company’s notes payable and
capital leases was approximately 6.78%, 6.30% and 6.24%
for the years ended December 31, 1999, 1998 and 1997.
The maximum amount outstanding under the Credit Facil-
ity during 1999 was $1.225 billion and maximum commit-
ment level is $1.369 billion at December 31, 1999.
As of December 31, 1999, the Company was in com-
pliance with the financial covenants of the Credit Facility, as
amended in March 1999.The Company may be restricted
from paying dividends under certain circumstances from
time to time under this Credit Facility.
Scheduled principal repayments on notes payable, capi-
tal leases and other financing arrangements for the next five
years are as follows (in thousands):
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 employees of the Company are eligible to partici-
pate.The stockholders have approved these plans except for
the 1998 Stock O ption 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 plans, the Company 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 pur-
chase 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 – Notes Payable, Capital Leases and Other Financing Arrangements
Notes payable, capital leases and other financing arrangements comprised the following at December 31 (amounts in thousands):
1999 1998
R evolving credit facility, variable interest at LIBOR plus 1.50% at
December 31, 1999, unsecured $1,039,250 $1,225,000
Note payable, due December 2000, interest at 7.95%, unsecured – 10,500
Note payable to 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% at December 31, 1998
secured by a cash collateral pledge – 17,646
Capital leases and other notes payable 1,358 2,892
Total notes payable and capital leases 1,040,608 1,256,038
Notes payable and capital leases-current portion 1,256 1,760
Notes payable and capital leases-noncurrent portion $1,039,352 $1,254,278
2000 $ 1,256
2001 19
2002 1,039,333
2003 –
2004 –
Thereafter –
Total notes payable and capital leases $1,040,608