Health Net 2007 Annual Report Download - page 71

an aggregate of 29,771,752 shares of our common stock under our stock repurchase program at an average price
of $34.16 for aggregate consideration of approximately $1,017.0 million (which amount includes exercise
proceeds and tax benefits the Company had received from the exercise of employee stock options).
Amortizing Financing Facility
On December 19, 2007, we entered into a five-year, non-interest bearing, $175 million amortizing financing
facility with a non-U.S. lender. For financial reporting purposes, this financing facility will have an effective
interest rate of zero as a result of imputed interest being offset by other income related to the financing facility.
The proceeds from the financing facility were used for general corporate purposes.
The financing facility requires one of our subsidiaries to pay semi-annual distributions, in the amount of
$17.5 million, to be paid to a participant in the financing facility. Unless terminated earlier, the final payment
under the facility is scheduled to be made on December 19, 2012.
The financing facility includes limitations (subject to specified exclusions) on our and certain of our
subsidiaries’ ability to incur debt; create liens; engage in certain mergers, consolidations and acquisitions; engage
in transactions with affiliates; enter into agreements which will restrict the ability to pay dividends or other
distributions with respect to any shares of capital stock or the ability to make or repay loans or advances; make
dividends; and alter the character of ours or their business conducted on the closing date of the financing facility.
In addition, the financing facility documentation also requires that we maintain a specified consolidated leverage
ratio and consolidated fixed charge coverage ratio throughout the term of the financing facility. As of
December 31, 2007, we were in compliance with all of the covenants under the financing facility.
The financing facility provides that it may be terminated through a series of put and call transactions (1) at
the option of one of our wholly-owned subsidiaries at any time after December 20, 2009, or (2) upon the
occurrence of certain defined acceleration events. These acceleration events, include, but are not limited to:
• nonpayment of certain amounts due by us or certain of our subsidiaries under the financing facility
documentation (if not cured within the related time period set forth therein);
• a change of control (as defined in the financing facility documentation);
• our failure to maintain the following ratings on our senior indebtedness by any two of the following
three rating agencies: (A) a rating of at least BB by Standard & Poor’s Ratings Services, (B) a rating of
at least BB by Fitch, Inc., and (C) a rating of at least Ba2 by Moody’s Investors Service, Inc.;
• cross-acceleration to other indebtedness of our Company in excess of $50 million;
• certain ERISA-related events;
• noncompliance by Health Net with any material term or provision of the HMO Regulations or
Insurance Regulations (as each such term is defined in the financing facility documentation);
• events in bankruptcy, insolvency or reorganization of our Company;
• undischarged, uninsured judgments in the amount of $50 million or more against our Company; or
• certain changes in law that could adversely affect a participant in the financing facility.
In addition, in connection with the financing facility, we entered into a guaranty which will require us to
guarantee the payment of the semi-annual distributions and any other amounts payable by one of our subsidiaries
to the financing facility participants under certain circumstances provided under the financing facility. Also in
connection with the financing facility, we entered into an interest rate swap agreement with a non-U.S. bank
affiliated with one of the financing facility participants. Under the interest rate swap agreement, we pay a floating
payment in an amount equal to LIBOR times a notional principal amount and receive a fixed payment in an
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