Health Net 2007 Annual Report Download - page 122

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Redemption of 8.375% Senior Notes
On August 14, 2006, we redeemed $400 million in aggregate principal amount of 8.375% senior notes,
which were scheduled to mature in April 2011 and refinanced the 8.375% senior notes with $500 million of
bridge and term loans. In connection with this refinancing, we incurred $70.1 million in costs, including $51.0
million in redemption premiums with respect to these senior notes, $11.1 million for the termination and
settlement of our interest rate swap agreements and $8.0 million for professional fees and other expenses.
Term Loan Credit Agreement
On June 23, 2006, we entered into a $300 million Term Loan Credit Agreement (Term Loan Agreement)
with JP Morgan Chase Bank, N.A., as administrative agent and lender, and Citicorp USA, Inc., as syndication
agent and lender. Borrowings under the Term Loan Agreement had a final maturity date of June 23, 2011. On
May 22, 2007 we repaid all of our outstanding borrowings under the Term Loan Agreement with the proceeds
from the offering of our Senior Notes.
Bridge Loan Agreement
On June 23, 2006, we entered into a $200 million Bridge Loan Agreement (Bridge Loan Agreement) with
The Bank of Nova Scotia, as administrative agent and lender. We repaid all of our outstanding borrowings under
the Bridge Loan Agreement on March 22, 2007.
Letters of Credit
We can obtain letters of credit in an aggregate amount of $400 million under our revolving credit facility.
The maximum amount available for borrowing under our revolving credit facility is reduced by the dollar amount
of any outstanding letters of credit. As of December 31, 2007 and December 31, 2006, we had outstanding letters
of credit for $120.8 million and $117.2 million, respectively, resulting in the maximum amount available for
borrowing under the revolving credit facility of $779.2 million as of December 31, 2007. As of December 31,
2007, no amounts have been drawn on any of these letters of credit. As of December 31, 2006, no amounts were
drawn on the letters of credit and the maximum amount available for borrowing under the revolving credit
facility was $582.8 million.
The weighted average annual interest rate on our financing arrangements was approximately 6.5%, 8.9%
and 9.9% for the years ended December 31, 2007, 2006 and 2005, respectively.
Note 7—Long-Term Equity Compensation
On December 31, 2007, the compensation cost that has been charged against income under our long-term
incentive plans (the Plans) was $24.3 million. The total income tax benefit recognized in the income statement
for share-based compensation arrangements was $9.4 million (See Note 2).
The Plans permit the grant of stock options and other equity awards, including but not limited to restricted
stock, restricted stock units (RSUs) and performance share awards to certain employees, officers and
non-employee directors. The grant of any award other than an option reduces the number of shares of common
stock available for issuance under the 2006 Long-Term Incentive Plan by two shares of common stock for each
award and is deemed to be an award of two shares of common stock for each share subject to the award. Stock
options are granted with an exercise price at or above the fair market value of the Company’s common stock on
the date of grant. Stock options carry a maximum term of ten years, and, in
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