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File No. 333-
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As filed with the Securities and Exchange Commission on January 22, 1999.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNITED HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
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Minnesota 6324 41-1321939
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
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David J. Lubben, General Counsel
United HealthCare Corporation
300 Opus Center 300 Opus Center
9900 Bren Road East 9900 Bren Road East
Minnetonka, Minnesota 55343 Minnetonka, Minnesota 55343
(612) 936-1300 (612) 936-1300
(Address, including Zip Code, and (Name, address, including Zip Code,
telephone number, including area and telephone number, including area
code, of registrant's principal code, of agent for service)
executive offices)
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Copy to:
Patrick F. Courtemanche
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
(612) 340-5653
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Approximate date of proposed sale of securities to the public: As soon as
practicable after the effective date of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE PER UNIT PRICE REGISTRATION FEE
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6.60% Notes due 2003........................ $250,000,000 100.0%(1) $250,000,000(1) $69,500
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THE NEW NOTES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THE NEW NOTES AND IT IS NOT
SOLICITING AN OFFER TO BUY THE NEW NOTES IN ANY STATE WHERE, OR TO ANY PERSON TO
WHOM, THE OFFER OR SALE IS NOT PERMITTED.
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SUBJECT TO COMPLETION, DATED JANUARY 22, 1999
PROSPECTUS
UNITED HEALTHCARE CORPORATION
OFFER TO EXCHANGE
ITS $250,000,000 6.60% NOTES DUE DECEMBER 1, 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ALL OF ITS OUTSTANDING
$250,000,000 6.60% NOTES DUE DECEMBER 1, 2003
TERMS OF THE EXCHANGE OFFER
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME
ON , 1999, UNLESS WE EXTEND THAT DEADLINE.
- - We will not receive any proceeds from the issuance of the new notes or from
the exchange of the new notes for the old notes.
- - The new notes are almost identical to the old notes, except that the new
notes have been registered under the Securities Act, and therefore the
transfer restrictions and registration rights provisions applicable to the
old notes do not apply to the new notes, and the new notes will not provide
for an increase in interest rate thereon. The new notes are senior unsecured
debt of the company. Each of the new notes is of equal rank with the other
new notes and with all other senior unsecured debt of the company.
- - The new notes pay interest at an annual rate of 6.60%, payable on June 1 and
December 1 of each year, beginning June 1, 1999.
- - The exchange offer is not subject to any condition other than that the
exchange offer not violate applicable law or any applicable interpretation of
the staff of the SEC.
- - We will exchange all old notes validly tendered and not validly withdrawn.
- - Old notes validly tendered may be withdrawn at any time prior to 5:00 p.m.,
New York City time on the expiration date.
- - The exchange of old notes for new notes will not be a taxable exchange for
United States federal income tax purposes.
- - We do not intend to apply for listing of the new notes on any securities
exchange or for quotation through the NASD Automated Quotation System. We
cannot assure the development or liquidity of any market for the new notes.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR RISKS YOU SHOULD CONSIDER WHEN
EXCHANGING YOUR OLD NOTES FOR NEW NOTES.
Neither the SEC nor any state securities commission has approved or disapproved
of the new notes or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The date of this prospectus is , 1999
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TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information........................................................................ 3
Incorporation of Certain Documents by Reference............................................................ 3
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 12
Use of Proceeds from Sale of Old Notes..................................................................... 19
Capitalization............................................................................................. 19
Selected Consolidated Historical Financial Data............................................................ 20
Business................................................................................................... 22
The Exchange Offer......................................................................................... 22
Description of New Notes................................................................................... 33
Description of Old Notes................................................................................... 41
Certain United States Federal Income Tax Considerations.................................................... 41
Plan of Distribution....................................................................................... 42
Validity of New Notes...................................................................................... 43
Experts.................................................................................................... 43
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 with respect
to the new notes. This prospectus forms a part of that registration statement.
The registration statement contains some information not present in this
prospectus. For further information about us and about the securities we offer
hereby, you should consult the registration statement and the exhibits and
schedules thereto. You may read and copy the registration statement (and any
other documents we file with the SEC) at the SEC's Public Reference Rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at (800) SEC-0330 for further information on the Public Reference Rooms. You can
also access our SEC filings electronically at the SEC's home page on the
Internet (http://www.sec.gov). You may also obtain copies of our SEC filings at
the offices of the New York Stock Exchange. For further information on obtaining
copies of such filings at the New York Stock Exchange, you should call (212)
656-5060.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The company files annual, quarterly and special reports, proxy statements
and other information with the SEC. The SEC allows the company to "incorporate
by reference" the information we file with the SEC. This means that we can
disclose important information to you by referring you to those documents we
have already filed with the SEC. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update this prospectus.
We incorporate by reference into this prospectus the following documents:
- our Annual Report on Form 10-K for the year ended December 31, 1997;
- our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998;
- our reports on Form 8-K filed on May 29, 1998, June 16, 1998, December 1,
1998, and January 8, 1999; and
- all future filings we make under Section 13(a), 13(c), 14 and 15(d) of the
Exchange Act, until we complete the exchange offer.
This prospectus incorporates important business and financial information
about the company that is not included in or delivered with this document. You
may obtain this information at no charge upon request to United HealthCare
Corporation, 300 Opus Center, 9900 Bren Road East, Minnetonka, Minnesota 55343,
Attention: Investor Relations, telephone number (612) 936-1300. In order to
ensure timely delivery of the information, you should request such information
at least five days before expiration of the exchange offer. HOLDERS OF THE OLD
NOTES MUST REQUEST SUCH INFORMATION NO LATER THAN , 1999.
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PROSPECTUS SUMMARY
This summary contains basic information about the company and this offering.
It likely does not contain all the information that is important to you. For a
more complete understanding of this offering, we encourage you to read this
entire document and the documents we refer you to. The words "United
HealthCare," "company," "we," "our," "ours" and "us" refer to United HealthCare
Corporation, which operates under the name of, and is sometimes referred to in
this prospectus as, UnitedHealth Group. The term "old notes" refers to the 6.60%
unregistered notes due December 1, 2003 issued on November 24, 1998. The term
"new notes" refers to the 6.60% notes due December 1, 2003, which new notes have
been registered under the Securities Act, to be offered by the company in
exchange for the old notes.
The information in this prospectus is accurate as of the date on the front
cover. You should not assume that the information is accurate as of any other
date. Neither the delivery of this prospectus nor any sale made under it shall
imply that information in the prospectus is correct at any time after the date
of the prospectus.
You should rely only on the information incorporated by reference or
provided in the prospectus. We have not authorized anyone else to provide you
with different information.
THE COMPANY
UnitedHealth Group is a national leader in offering health care coverage and
related services, which it provides through the following six lines of business:
- Organized Health Systems;
- Insurance Services;
- Administrative Services;
- Health and well-being services for Retirees and Older Americans;
- Specialized Care Services; and
- Knowledge and Information Services.
See "BUSINESS."
Our principal executive offices are located at 300 Opus Center, 9900 Bren
Road East, Minnetonka, Minnesota 55343, where our main telephone number is
612/936-1300.
THE EXCHANGE OFFER
On November 24, 1998, we completed the private offering of $250 million
aggregate principal amount of 6.60% notes due December 1, 2003. At the time of
the offering, we entered into an Exchange and Registration Rights Agreement with
Goldman, Sachs & Co., as representative of the purchasers of the old notes, in
which we agreed, among other things, to:
- file a registration statement for the new notes within 60 days of the sale
of the old notes;
- use our best efforts to cause the registration statement to become
effective as soon as practicable after its filing, and no more than 180
days after the sale of the old notes;
- hold open the exchange offer for at least 30 days; and
- begin and complete the exchange offer within 45 days after the
registration statement becomes effective.
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If we fail to comply with any of these obligations, we will have to pay
additional interest on the old notes equal to 0.25% per annum, until we meet our
obligations. Under the exchange and registration rights agreement, you are
entitled to exchange your old notes for new notes with substantially identical
terms. You should read the discussion under the headings "SUMMARY OF TERMS OF
NEW NOTES" and "DESCRIPTION OF NEW NOTES" for more information about the new
notes.
We believe that you may resell the new notes issued in the exchange offer
without compliance with the registration and prospectus delivery requirements of
the Securities Act, subject to certain conditions. You should read the
discussion under the headings, "SUMMARY OF TERMS OF THE EXCHANGE OFFER" and the
"EXCHANGE OFFER" for further information regarding the exchange offer and
resales of the new notes.
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SUMMARY OF TERMS OF THE EXCHANGE OFFER
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The Exchange Offer................ In order to satisfy our obligations under the exchange
and registration rights agreement, we are offering to
exchange $1,000 principal amount of new notes, and
integral multiples thereof, for each $1,000 principal
amount of old notes, and integral multiples thereof. To
receive new notes in exchange for old notes, you must
properly tender your old notes. See "THE EXCHANGE OFFER
-- PROCEDURES FOR TENDERING OLD NOTES." All old notes
validly tendered and not validly withdrawn before the
expiration of the exchange offer will be exchanged. We
will issue new notes promptly after expiration of the
exchange offer.
As of the date of this prospectus, there are $250
million principal amount of old notes outstanding.
Expiration Date................... The exchange offer will expire at 5:00 p.m., New York
City time, on , 1999, unless we decide to
extend the expiration date. See "THE EXCHANGE OFFER --
EXPIRATION DATE; EXTENSIONS; AMENDMENTS."
Conditions to the Exchange
Offer......................... The exchange offer is not conditioned upon any minimum
amount of old notes being tendered, but is subject to
certain other conditions, which the company may waive in
its sole and absolute discretion. See "THE EXCHANGE
OFFER -- CONDITIONS TO THE EXCHANGE OFFER."
Procedures for Tendering Old
Notes......................... If you wish to tender old notes under the exchange
offer, you must, on or before the expiration date,
transmit to The Bank of New York, as exchange agent, at
the address on the cover page of the letter of
transmittal, either (1) a properly completed and
executed letter of transmittal (which accompanies this
prospectus) or a facsimile of same, including all other
documents required by the letter of transmittal or (2) a
computer generated message transmitted by means of DTC's
Automated Tender Offer Program system and received by
the exchange agent and forming a part of a confirmation
of book-entry transfer in which you acknowledge and
agree to be bound by the terms of the letter of
transmittal; and, either (a) a timely confirmation of
book-entry transfer of your outstanding notes into the
exchange agent's account at DTC pursuant to the
procedure for book-entry transfers described in this
prospectus under the heading "THE EXCHANGE OFFER --
PROCEDURES FOR TENDERING OLD NOTES;" or (b) the
documents necessary for compliance with the guaranteed
delivery procedures described below. By executing the
letter of transmittal, each holder will represent to us
that, among other things, (i) the new notes to be issued
in the exchange offer are being obtained in the ordinary
course of business of the person receiving such new
notes whether or not such person is the holder, (ii)
neither the holder nor any such other person has an
arrangement or understanding with any person to
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participate in the distribution of such new notes and
(iii) neither the holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities
Act, of the company. See "THE EXCHANGE OFFER --
PROCEDURES FOR TENDERING OLD NOTES."
Special Procedures for Beneficial
Owners........................ If you are the beneficial owner of old notes in
book-entry form and your name does not appear on a
security position listing of the DTC as the holder of
such book-entry notes and you wish to tender such
book-entry notes in the exchange offer, you should
promptly contact the person in whose name your
book-entry notes are registered and instruct that person
to tender on your behalf.
Withdrawal Rights................. You may withdraw the tender of old notes at any time
before 5:00 p.m., New York City time, on the expiration
date. See "THE EXCHANGE OFFER -- WITHDRAWAL RIGHTS."
Use of Proceeds................... We will not receive any cash proceeds from the issuance
of the new notes. See "USE OF PROCEEDS FROM SALE OF OLD
NOTES."
Certain United States Federal
Income Tax Considerations..... The exchange of old notes for the new notes will not be
a taxable event for United States federal income tax
purposes. We believe that you will not recognize any
taxable gain or loss as a result of the exchange.
Interest on the new notes will be taxable in the same
manner as interest on the old notes. See "CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS."
Resales of New Notes.............. Based on an interpretation by the staff of the SEC set
forth in no-action letters issued to third parties,
including "Exxon Capital Holdings Corporation"
(available May 13, 1988), "Morgan Stanley & Co.
Incorporated" (available June 5, 1991) and "Mary Kay
Cosmetics, Inc.," (available June 5, 1991), we believe
that you may resell the new notes issued in the exchange
offer without complying with the registration and
prospectus delivery requirements of the Securities Act,
provided that:
- the new notes issued in the exchange offer are being
acquired in the ordinary course of business;
- you are not participating, do not intend to
participate, and have no arrangement or understanding
with any person to participate, in the distribution of
the notes issued to you in the exchange offer;
- you are not a broker-dealer who purchased such
outstanding notes directly from us for resale pursuant
to Rule 144A or any other available exemption under
the Securities Act; and
- you are not an "affiliate" of ours.
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A broker-dealer may use this prospectus for an offer to
resell or a resale or other retransfer of the new notes
issued to it in the exchange offer. We have agreed for a
period of 180 days (subject to any extension) after the
date of this prospectus, to make this prospectus
available to any such broker-dealer for use in
connection with any such resales. Any participating
broker-dealer who is an "affiliate" of the company may
not rely on the interpretive letters and must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any resale transaction. We believe that no registered
holder of the old notes is an affiliate (as such term is
defined in rule 405 of the Securities Act) of the
company. Each broker-dealer that receives new notes in
the exchange offer for its own account in exchange for
old notes which were acquired by that broker-dealer as a
result of market making or other trading activities must
acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection
with any resale of the new notes issued in the exchange
offer. The letter of transmittal states that by so
acknowledging and by delivering a prospectus such
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
See "THE EXCHANGE OFFER -- RESALES OF NEW NOTES."
Consequences of Failure to
Exchange...................... Holders of old notes who do not tender their old notes
generally will not have any further registration rights.
Any holder of old notes that does not exchange its old
notes for new notes will continue to hold the untendered
old notes subject to the terms of the indenture, except
to the extent that such terms terminate or cease to have
further effect following the exchange offer. Old notes
that are not exchanged for new notes under the exchange
offer will remain restricted securities and continue to
bear a restrictive legend. Accordingly, holders of old
notes after we complete the exchange offer will be able
to sell their old notes only in limited circumstances.
See "THE EXCHANGE OFFER -- CONSEQUENCES OF FAILURE TO
EXCHANGE."
Accrued Interest on the Exchange
Notes and the Outstanding
Notes......................... The new notes will bear interest from November 24, 1998.
Holders of old notes whose old notes are accepted for
exchange will be deemed to have waived the right to
receive any payment of interest on such old notes
accrued from November 24, 1998 to the date of the
issuance of the new notes. Consequently, holders who
exchange their old notes for new notes will receive the
same interest payment on June 1, 1999 (the first
interest payment date with respect to the old notes and
the new notes to be issued in the exchange offer) that
they would have received had they not accepted the
exchange offer.
Guaranteed Delivery Procedures.... If you wish to tender your old notes and time will not
permit your required documents to reach the exchange
agent by the
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expiration date, the procedure for book-entry transfer
cannot be completed on time or certificates for
registered notes cannot be delivered on time, you may
tender your old notes pursuant to the procedures
described in this prospectus under the heading "THE
EXCHANGE OFFER -- GUARANTEED DELIVERY."
Exchange Agent.................... The Bank of New York is serving as exchange agent in
connection with the exchange offer. The exchange agent
can be contacted at: Corporate Trust Administration, 101
Barclay Street, Floor 21W, New York, NY 10286. For more
information with respect to the exchange offer, the
telephone number for the exchange agent is (212)
815-4997 and the facsimile number for the exchange agent
is (212) 815-4699.
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SUMMARY OF TERMS OF NEW NOTES
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Notes Offered..................... Up to $250 million aggregate principal amount of 6.60%
Notes due December 1, 2003.
Interest Payment Dates............ June 1 and December 1 of each year, beginning on June 1,
1999.
Denominations..................... We will issue the new notes in minimum denominations of
$1,000 and integral multiples of $1,000.
Ranking........................... The new notes are senior but unsecured obligations of
the company, and rank equal in right of payment with all
other senior unsecured indebtedness of the company.
Redemption........................ The new notes are not subject to redemption by the
company before their maturity date.
Sinking Fund...................... None.
Certain Covenants................. The indenture governing the new notes contains certain
covenants that, among other things, will:
- limit the ability of the company and certain of its
subsidiaries to grant liens under certain
circumstances on stock or indebtedness of certain of
the company's subsidiaries, or on certain property of
the company or certain of its subsidiaries, to secure
debt of the company or any other person; and
- prohibit the company from merging with another company
unless the company meets certain specified conditions.
Trustee........................... The Bank of New York will serve as trustee with respect
to the notes.
Form of New Notes................. The new notes will be issued in the form of one or more
registered notes in global form. These global note(s)
will then be deposited on the closing date with, or on
behalf of, DTC and registered in the name of Cede & Co.,
as nominee of DTC, or remain in the custody of the
trustee of the new notes according to a FAST Balance
Certificate Agreement between DTC and the trustee.
Absence of Public Market for the
New Notes..................... No public market currently exists for the new notes. The
company currently does not intend to apply for listing
of the new notes on any securities exchange or for
quotation through the NASD Automated Quotation System.
See "RISK FACTORS -- ABSENCE OF PUBLIC MARKET FOR THE
NEW NOTES."
Risk Factors...................... Holders of old notes should carefully consider all the
information contained in this prospectus. For a
description of the risks involved in an investment in
the new notes, you should review the section entitled
"RISK FACTORS."
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FOR FURTHER INFORMATION CONCERNING THE NEW NOTES, SEE "DESCRIPTION OF NEW
NOTES."
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RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated is
as follows:
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YEAR ENDED DECEMBER 31,
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1997 1996 1995 1994 1993
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Ratio of Earnings to Fixed Charges 10.8 8.6 11.5 17.8 13.9
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
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For purposes of computing these ratios, earnings represent income from
continuing operations before extraordinary items. Fixed charges represent
interest expense, including amounts capitalized plus the interest factor in
rental expense.
Earnings were insufficient to cover fixed charges by $250 million for the
nine months ended September 30, 1998. Excluding the realignment charge of $725
million taken by UnitedHealth Group in the second quarter of 1998, the pro forma
ratio of earnings to fixed charges would have been 8.26.
For current information on these ratios, please see United HealthCare
Corporation's most recent Form 10-K and 10-Q. See "WHERE YOU CAN FIND MORE
INFORMATION."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). The words or
phrases "believes," "anticipates," "intends," "will likely result," "estimates,"
"projects" and similar expressions identify such forward-looking statements.
Although we believe that the expectations reflected in our forward-looking
statements are reasonable, our business involves risks and uncertainties that
may cause our actual results to differ significantly from the results discussed
in the forward-looking statements. See "RISK FACTORS."
The following text under the heading "Risk Factors" contains cautionary
statements regarding our business and results of operations. These statements
discuss matters which may in part be contained elsewhere in this prospectus and
which may have been contained in other documents prepared by us under federal or
state securities laws. This discussion is intended to take advantage of the
"safe harbor" provisions of the PSLRA. In making these cautionary statements,
UnitedHealth Group does not undertake to address or update each factor in future
filings with the SEC or communications regarding UnitedHealth Group's business
or results, and does not undertake to address how any of these factors may have
caused results to differ from discussions or information contained in previous
filings or communications. In addition, any of the matters discussed below may
have affected UnitedHealth Group's past, as well as current, forward-looking
statements about future results, so that UnitedHealth Group's actual results in
the future may differ materially from those expressed in prior communications.
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING INFORMATION IN
CONJUNCTION WITH THE OTHER INFORMATION IN THIS PROSPECTUS.
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
There is no existing market for the new notes and we cannot assure the liquidity
of any markets that may develop for the new notes, the ability of the holders to
sell their new notes or the price at which holders will be able to sell their
new notes. Future trading prices of the new notes will depend on many factors
including, among other things, prevailing interest rates, the company's
operating results and the market for similar securities.
The initial purchasers have informed us that they intend to make a market in the
new notes; they are not, however, obligated to do so and they may terminate any
such market activity at any time without notice to the holders of the new notes.
In addition, such market-making activity will be subject to the Securities Act
and may be limited during the pendency of the exchange offer registration
statement.
We do not intend to apply for listing of the new notes on any securities
exchange or for quotation through the NASD Automated Quotation System.
Untendered old notes that are not exchanged for new notes pursuant to the
exchange offer will remain restricted securities. Old notes will continue to be
subject to the following restrictions on transfer: (i) old notes may be resold
only if registered pursuant to the Securities Act, if an exemption from
registration is available thereunder, or if neither such registration nor such
exemption is required by law, (ii) old notes shall bear a legend restricting
transfer in the absence of registration or an exemption therefrom and (iii) a
holder of old notes who desires to sell or otherwise dispose of all or any part
of its old notes under an exemption from registration under the Securities Act,
if requested by us, must deliver to us an opinion of independent counsel
experienced in Securities Act matters, reasonably satisfactory in form and
substance to us, that such exemption is available.
HEALTH CARE COSTS
We use a large portion of our revenue to pay the costs of health care services
and supplies delivered to our members. Our total health care costs are affected
by the number of individual services rendered and the cost of each service. Much
of our premium revenue is priced before services are delivered and the related
costs are incurred, usually on a prospective annual basis. Although we try to
base the premiums we charge in part on our estimate of future health care costs
over the fixed premium period, competition, regulations and other circumstances
may limit our ability to fully base premiums on estimated costs.
In addition, many factors may and often do cause actual health care costs to
exceed what we estimated and reflected in premiums. These factors include
increased use and cost of individual services, catastrophes, epidemics, the
introduction of new or costly treatments, general inflation, new mandated
benefits or other regulatory changes, and insured population characteristics.
The earnings we report for any particular quarter include estimates of covered
services incurred by our enrollees during that period for claims that have not
been received or processed. Because these are merely estimates, our earnings may
be adjusted later to reflect actual costs. Relatively insignificant changes in
the medical care ratio, because of the narrow margins of our health plan
business, can create significant changes in our earnings.
Our medical care ratio has generally increased over the past several fiscal
periods. Many factors contribute to this increase. They include new markets we
serve, new products we offer, new businesses we have entered, and increased
utilization driven by new therapies and technologies. We are addressing the
medical cost trend underlying our increase in the medical care ratio by altering
benefit designs, recontracting with providers, and further enhancing disease
specific and local medical
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management programs. We also are accelerating and intensifying the
contemporaneous and retrospective claim management activities that we have in
place. Our inability to implement these changes successfully could lead to
further increases in our medical care ratio. In addition, seasonal changes in
the level of health care use during the calendar year may affect our operating
results. Per member medical costs generally have been higher in the first half
than in the second half of each year, though we cannot assure that this trend
will continue.
NEGATIVE PUBLICITY REGARDING THE MANAGED CARE INDUSTRY
The managed care industry receives significant negative publicity. This
publicity has led to increased legislation, regulation and review of industry
practices. These factors may adversely affect our ability to market our products
or services, require us to change our products and services, and increase the
regulatory burdens under which we operate, further increasing the costs of doing
business and adversely affecting profitability.
COMPETITION
In many of our geographic or product markets, we compete with a number of other
entities, some of which may have certain characteristics or capabilities that
give them a competitive advantage. We believe the barriers to entry in these
markets are not substantial, so the addition of new competitors can occur
relatively easily. Moreover, consumers enjoy significant flexibility in moving
to new managed care providers. Certain of our customers may decide to perform
for themselves functions or services that we provide, which would decrease our
revenues. Certain of our providers may decide to market products and services to
our customers in competition with us. In addition, significant merger and
acquisition activity has occurred in the industry in which we operate and in
industries that act as suppliers to us, such as the hospital, physician,
pharmaceutical and medical device industries. To the extent that strong
competition exists or that competition intensifies in any market, our ability to
retain and add customers or providers, or maintain or increase our revenue
growth, pricing flexibility, control over medical cost trends and marketing
expenses may be adversely affected.
AARP CONTRACT
Under our long-term contract with the American Association of Retired Persons
("AARP"), we provide Medicare supplemental, hospital indemnity health insurance
and other products to AARP members. As a result of the agreement, the number of
members we serve, products we offer, and services we provide has grown
significantly. Our portion of the AARP's insurance program represents
approximately $3.5 billion in annual net premium revenue from more than 4
million AARP members. The success of the AARP arrangement will depend, in part,
on our ability to serve these new members, develop additional products and
services, price the products and services competitively, and respond effectively
to federal and state regulatory changes. Additionally, events that adversely
affect the AARP could have an adverse effect on the success of our arrangement
with the AARP.
MEDICARE OPERATIONS
In the second quarter of 1998, we experienced a significant rise in the medical
care ratio for our Medicare operations. The increase in medical costs was
primarily due to the business growth in new markets with higher and more
volatile medical cost trends, coupled with lower reimbursement rates. In
response, we announced in October 1998 our decision to withdraw Medicare product
offerings from 86 of the 206 counties we served at that time. The decision,
effective January 1, 1999, affected approximately 60,000, or 13%, of
then-current Medicare members. As a consequence of this withdrawal, we are
precluded from re-entering these counties with Medicare product offerings until
5 years after the effective date. We will continue to offer Medicare products in
strong and economically viable markets. However, our ability to improve the
financial results of our Medicare operations will depend on a number of factors,
including future premium increases, growth in markets where we have achieved
sufficient size to operate efficiently, benefit design, provider
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<PAGE>
contracting, and other factors. We cannot assure that we will be able to
successfully prevent future losses on our Medicare operations.
REALIGNMENT OF OPERATIONS
As we previously indicated would be necessary, in the second quarter of 1998 we
recognized a charge to earnings for our realignment. In January 1998, we
initiated a significant realignment of our operations into six businesses. As
part of the realignment, we are shifting resources and activities to more
directly support the operations of our businesses. Although we do not expect our
realignment efforts to negatively affect our product offerings, provider
relations, billing and collection disciplines, claims processing and payment
activities, or other business functions, we cannot assure that such negative
effects will not occur. Our second quarter charge to earnings for costs
associated with the realignment was $725 million. Although we believe such
charges are adequate, we cannot assure that the costs associated with our
realignment efforts will not exceed the charges we have taken for such costs.
GOVERNMENT PROGRAMS AND REGULATION
Our business is heavily regulated on federal, state and local levels. The laws
and rules governing our business and interpretations of those laws and rules are
subject to frequent change. The agencies administering those regulations have
broad latitude to enforce them. Existing or future laws and rules could force us
to change how we do business, restrict revenue and enrollment growth, increase
our health care and administrative costs and capital requirements, and increase
our liability for medical malpractice or other actions.
We must obtain and maintain regulatory approvals to market many of our products.
Delays in obtaining or failures to obtain or maintain these approvals could
adversely affect our revenue, number of members or costs.
A significant portion of our revenues relate to federal, state and local
government health care coverage programs. These types of programs, such as the
federal Medicare program and the federal and state Medicaid programs, generally
are subject to frequent change, including changes that may reduce the number of
persons enrolled or eligible, reduce the amount of reimbursement or payment
levels, or reduce or increase our administrative or health care costs under such
programs. Such changes have adversely affected our results and willingness to
participate in such programs in the past and may also do so in the future.
We are also subject to various governmental reviews, audits and investigations.
Such oversight could result in the loss of licensure or of the right to
participate in certain programs, or of the imposition of fines, penalties and
other sanctions. In addition, disclosure of any adverse investigation or audit
results or sanctions could damage our reputation in various markets and make it
more difficult for us to sell our products and services.
The National Association of Insurance Commissioners (the "NAIC") is expected to
adopt rules which, if implemented by the states, will require certain
capitalization levels for health care coverage provided by insurance companies,
health maintenance organizations and other risk-bearing health care entities.
The requirements would take the form of risk-based capital rules. Currently,
similar risk-based capital rules apply generally to insurance companies.
Depending on the nature and extent of the new minimum capitalization
requirements ultimately implemented, there could be an increase in the capital
required for certain of our subsidiaries and there may be some potential for
disparate treatment of competing products. Federal solvency regulation of
companies providing Medicare-related benefit programs may also be applied.
PROVIDER RELATIONS
One of the significant techniques we use to manage health care costs and
utilization and monitor the quality of care being delivered is contracting with
physicians, hospitals and other providers. Because our health plans are
geographically diverse and most of our plans contract with a large number of
providers, we currently believe our exposure to provider relations issues is
limited.
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<PAGE>
In any particular market, however, providers could refuse to contract, demand
higher payments, or take other actions that could result in higher health care
costs, less desirable products for customer and members, or difficulty meeting
regulatory or accreditation requirements. In some markets, certain providers,
particularly hospitals, physician/ hospital organizations or multi-specialty
physician groups, may have significant market positions or near monopolies. In
addition, physician or practice management companies, which aggregate physician
practices for administrative efficiency and marketing leverage, continue to
expand. These providers may compete directly with us. If these providers refuse
to contract with us, use their market position to negotiate favorable contracts,
or place us at a competitive disadvantage, those activities could adversely
affect our ability to market products or to be profitable in those areas.
LITIGATION AND INSURANCE
We may be a party to a variety of legal actions that affect any business, such
as employment and employment discrimination-related suits, employee benefit
claims, breach of contract actions, tort claims, shareholder suits, including
securities fraud, and intellectual property-related litigation. In addition,
because of the nature of our business, we are subject to a variety of legal
actions relating to our business operations. These could include: claims
relating to the denial of health care benefits; medical malpractice actions;
provider disputes over compensation and termination of provider contracts;
disputes related to self-funded business, including actions alleging claim
administration errors and the failure to disclose network rate discounts and
other fee and rebate arrangements; disputes over copayment calculations; and
claims relating to customer audits and contract performance. Recent court
decisions and legislative activity may increase our exposure for any of these
types of claims. In some cases, substantial non-economic or punitive damages may
be sought.
We currently have insurance coverage for some of these potential liabilities.
However, insurance may not cover other potential liabilities, insurers may
dispute coverage, or the amount of insurance may not be enough to cover the
damages awarded. In addition, insurance may not cover certain types of damages,
such as punitive damages, and insurance coverage for all or certain forms of
liability may become unavailable or prohibitively expensive in the future.
INFORMATION SYSTEMS
Our business depends significantly on effective information systems, and we have
many different information systems for our various businesses. Our information
systems require an ongoing commitment of resources for maintenance, enhancements
and the development of new systems in order to keep pace with continuing changes
in information processing technology, evolving industry standards and changing
customer preferences. In addition, we may from time to time obtain significant
portions of our systems-related or other services or facilities from independent
third parties, which may make our operations vulnerable to such third parties'
failure to perform adequately. As a result of our acquisition activities, we
have acquired additional systems and have been taking steps to reduce the number
of systems and have upgraded and expanded our information systems capabilities.
Failure to maintain effective and efficient information systems could cause loss
of existing customers, difficulty in attracting new customers, customer and
provider disputes, regulatory problems, increases in administrative expenses or
other adverse consequences.
YEAR 2000 ACTIVITIES
We are currently modifying our computer systems to accommodate the "Year 2000."
The "Year 2000" problem exists throughout the global marketplace because many
computer systems and applications recognize a given year as a two-digit number,
with the digits "00" being recognized as the year 1900 as a common business
practice.
Starting in 1995, our formal Year 2000 Project Office began implementing a
remediation plan to ensure that critical information systems applications,
end-user developed application tools, and critical business interfaces remain
intact, and can function properly through the
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<PAGE>
beginning of the next century. We are on schedule to complete, test, and certify
our Year 2000 remediation efforts by September 30, 1999. A more detailed
description and current status of our Year 2000 activities follows.
TECHNICAL INFRASTRUCTURE -- MAINFRAME TECHNOLOGY. In conjunction with our two
vendors that provide support for our data center operations, we have completed
100% of our hardware, operating system, and vendor software Year 2000 compliance
activities at the Minnesota data center installation. The Connecticut data
center is 100% compliant with respect to hardware and operating system and 96%
Year 2000 compliant regarding vendor software. We expect to have completed all
vendor software modifications at the Connecticut data center by the end of the
first quarter of 1999. In addition, we are in the process of reviewing some of
our smaller mainframe systems and making modifications as necessary. We have
also installed separate test environments (both mainframe and distributed) to
test our business applications in a simulated Year 2000 environment.
DESKTOP HARDWARE & SOFTWARE. We have recently inventoried all of our desktop
hardware and software -- over 40,000 computing devices of multiple makes and
models. We have identified all non-compliant desktop hardware and software will
modify or replace it with compliant systems by September 30, 1999. In addition,
all of our UNIX client server installations are compliant as of September 30,
1998.
TELECOMMUNICATIONS. We have inventoried all of our telecommunication systems --
over 28,000 telecommunication devices, including traffic routers and phone
switches. We are using two outside vendors to help us modify or replace
non-compliant telecommunication systems. As of September 30, 1998, we were
approximately 50% Year 2000 compliant with our data and voice networks. We
expect all our telecommunication networks and devices will be Year 2000
compliant by September 30, 1999.
BUSINESS APPLICATIONS SOFTWARE APPLICATIONS. We use 475 different software
applications that include over 80 million lines of computer code. We have
surveyed our software applications and have identified those systems that will
not be used after December 31, 1999, and those systems that will be modified for
Year 2000 compliance. We have determined that 37% of our software applications
will not be used after December 31, 1999 due to conversions, consolidations and
software replacements. Of the remaining applications, over 75% have been made
Year 2000 compliant, tested and certified or scheduled to be certified for
compliance, with the remaining 25% yet to be tested. We expect all Year 2000
software modifications to be completed by March 31, 1999, with further testing
and certification during 1999.
END-USER DEVELOPED APPLICATIONS. End-user developed applications are analysis
tools that have been internally developed by individual employees or operating
segments primarily running on personal computers or client servers. The Year
2000 Project Office has continuously communicated with all employees explaining
the risks of non-compliant applications and provided tools and techniques to
make them compliant. We are currently identifying, tracking, and assessing Year
2000 compliance issues with respect to all potentially critical end-user
applications.
OTHER YEAR 2000 MATTERS
NON-INFORMATION TECHNOLOGY SYSTEMS. We have approximately 300 owned or leased
facilities throughout the world. We have contacted all of our facility managers
regarding Year 2000 compliance issues. In addition, we have contracted with a
real estate management company to assist in our Year 2000 compliance efforts.
All facilities are scheduled to be Year 2000 compliant by September 1, 1999.
DEPENDENCE ON THIRD PARTIES. We use approximately 300,000 different medical
providers and over 92,000 vendors. We have identified approximately 2,000
vendors as critical business partners and suppliers. We are currently in
communication with these critical business partners to analyze their Year 2000
compliance efforts. We expect to complete our analysis of critical vendor
readiness and identification of alternative vendors, where necessary, by July
31, 1999. We will not contact all of the 300,000 medical providers we conduct
business with regarding Year 2000 compliance issues. We will,
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<PAGE>
however, test and verify the electronic collection of data with these providers
through our EDI (electronic data interface) clearinghouse vendors.
COSTS OF YEAR 2000 COMPLIANCE. The projected costs of our Year 2000 compliance
efforts and the date on which we plan to complete the necessary Year 2000
remediation efforts are based on management's best estimates, which we derived
using various assumptions of future events. We cannot guarantee that these
estimates will be accurate, and actual results could differ significantly from
our current plans. Specific factors that might cause significant differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct the relevant computer codes, and
the ability of our significant vendors, providers, customers and others with
which we conduct business to identify and resolve their own Year 2000 issues.
Costs associated with modifying internal use software for Year 2000 compliance
are charged to expense as incurred. Purchases of hardware or software that
replace existing hardware or software that is not Year 2000 compliant are
capitalized and amortized over their useful lives. As of September 30, 1998, our
historical and projected costs to complete our Year 2000 remediation plan are as
follows (amounts in millions):
<TABLE>
<CAPTION>
COST INCURRED TO DATE PROJECTED COSTS
------------------------------ ------------------------------
YEAR RESOURCES AMORTIZATION RESOURCES AMORTIZATION TOTAL
- ------------------------------------------------------- ------------- --------------- ------------- --------------- -----
<S> <C> <C> <C> <C> <C>
1996................................................... $ 1 $ -- $ -- $ -- $ 1
1997................................................... 12 -- -- -- 12
1998................................................... 12 -- 5 1* 18
1999................................................... -- -- 17 8* 25
2000................................................... -- -- 3 9* 12
2001................................................... -- -- -- 9* 9
2002................................................... -- -- -- 2* 2
--- --- --- --- ---
$ 25 $ -- $ 25 $ 29 $ 79
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
- ------------------------
* Amortization expense assumes a three year useful life for $29 million in
purchased hardware and software.
BUSINESS RISKS OF NON-COMPLIANT SYSTEMS.
Although we are committed to completing and testing our remediation plan well in
advance of the Year 2000, there are risks if we do not meet our objectives by
December 31, 1999. Operationally, the most severe risk is business interruption.
Specific examples of situations that could cause business interruption include,
but are not limited to:
- - computer hardware or application software processing errors or failures;
- - facilities or infrastructure failures; or
- - Year 2000-related failures of the systems of our providers, suppliers, or
customers.
Depending on the extent and duration of business interruption resulting from
non-compliant Year 2000 systems, such interruption may have a material adverse
effect on our results of operations, liquidity, and financial condition.
CONTINGENCY PLANS. Each area of our Year 2000 compliance effort is currently
developing contingency plans in the event we are unable to complete remediation
efforts by December 31, 1999. We expect to develop these contingency plans by
the end of the first quarter of 1999.
ADMINISTRATIVE AND MANAGEMENT.
Efficient and cost-effective administration of our operations is essential to
our profitability and competitive positioning. Although we attempt to
effectively manage such expenses, staff-related and other administrative
expenses may rise from time-to-time due to business or product start-ups or
expansions, growth or changes in business, acquisitions, regulatory requirements
or other reasons. These expense increases are not clearly predictable and may
adversely affect results.
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<PAGE>
We believe we currently have an experienced, capable management and technical
staff. The market for management and technical personnel, including information
systems professionals, in the health care industry is very competitive. The loss
of certain managers or a number of such managers or technical staff could
adversely affect our ability to administer and manage our business.
MARKETING
We market our products and services through employed salespeople and independent
sales agents. Although we have many sales employees and agents, the departure of
certain key sales employees or agents or a large subset of such individuals
could impair our ability to retain existing customers and members. In addition,
certain of our customers or potential customers consider rating, accreditation
or certification of the company by various private or governmental bodies or
rating agencies necessary or important. Certain of our health plans or other
business units may not have obtained or maintained, or may not desire or be able
to obtain or maintain, such rating accreditation or certification, which could
adversely affect our ability to obtain or retain business with these customers.
ACQUISITIONS AND DISPOSITIONS
The company has made several large acquisitions in recent years and has an
active, ongoing acquisition and disposition program under which it may engage in
transactions involving the acquisition or disposition of assets, products or
businesses, some or all of which may be material. These acquisitions may entail
certain risks and uncertainties and may affect ongoing business operations
because of unknown liabilities, unforeseen administrative needs or increased
efforts to integrate the acquired operations. Failure to identify liabilities,
anticipate additional administrative needs or effectively integrate acquired
operations could result in reduced revenues, increased administrative and other
costs, or customer confusion or dissatisfaction.
DATA AND PROPRIETARY INFORMATION
Many of the products of our knowledge and information-related business depend
significantly on the integrity of the data on which they are based. If the
information contained in our databases were found or perceived to be inaccurate,
or if such information were generally perceived to be unreliable, commercial
acceptance of our database-related products would be adversely and materially
affected.
Furthermore, the use by our knowledge and information-related business of
patient data is regulated at federal, state, and local levels. These laws and
rules are changed frequently by legislation or administrative interpretation.
These restrictions could adversely affect revenues from these products and, more
generally, affect our business, financial condition and results of operations.
The success of our knowledge and information-related business also depends
significantly on our ability to maintain proprietary rights to our products. We
rely on our agreements with customers, confidentiality agreements with
employees, and our trade secrets, copyrights and patents to protect our
proprietary rights. We cannot assure that these legal protections and
precautions will prevent misappropriation of our proprietary information. In
addition, substantial litigation regarding intellectual property rights exists
in the software industry, and we expect software products to be increasingly
subject to third-party infringement claims as the number of products and
competitors in this industry segment grows. Such litigation could have an
adverse effect on the ability of our knowledge and information-related business
to market and sell its products and on our business, financial condition and
results of operations.
MARKET VALUE OF THE NEW NOTES
General market trends, public communications regarding managed care, legislative
or regulatory actions, health care cost trends, pricing trends, competition,
earnings or membership reports of participants in our industry and acquisition
activity may affect the market value of the new notes. We can make no assurances
regarding the level or stability of the market value of the new notes in our
industry at any time or of the impact of these or any other factors on the
market value of the new notes.
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<PAGE>
USE OF PROCEEDS FROM SALE OF OLD NOTES
The company will not receive any cash proceeds from the issuance of the new
notes offered by this prospectus. As consideration for issuing the new notes in
exchange for old notes as described in this prospectus, the company will receive
old notes in the same principal amount. We will retire and cancel old notes
surrendered in exchange for the new notes. Accordingly, the issuance of the new
notes will not result in any change in the indebtedness of the company.
The company received net proceeds from the sale of the old notes totaling
approximately $248 million. The company used all of such net proceeds to redeem
shares of its 5.75% Series A Convertible Preferred Stock.
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
company at September 30, 1998, as adjusted to give effect to the exchange offer.
The issuance of new notes in exchange for old notes will not affect the
capitalization of the company. See "USE OF PROCEEDS FROM SALE OF OLD NOTES."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------
ACTUAL AS ADJUSTED(1)
--------- ---------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt...................................................... $ 85 $ 85
--------- ------
--------- ------
Long-term debt:
5.65% Notes due December 1, 1999................................... $ -- $ 400
6.60% Notes due December 1, 2003................................... -- 250
--------- ------
Total long-term debt............................................. -- 650
Convertible Preferred Stock.......................................... 500 --
Shareholders' equity:
Common Stock -- $.01 per share:
500,000,000 shares authorized, 187,454,000 issued and
outstanding.................................................... 2 2
Additional paid-in capital......................................... 1,263 1,263
Retained earnings.................................................. 2,779 2,759
Net unrealized holding gains on investments available for sale, net
of income tax effects............................................ 56 56
--------- ------
Total shareholders' equity....................................... 4,100 4,080
--------- ------
Total capitalization............................................. $ 4,600 $ 4,730
--------- ------
--------- ------
</TABLE>
- ------------------------
(1) The "As Adjusted" numbers give effect to the sale on November 24, 1998 of
the old notes and $400 million of 5.65% Notes due December 1, 1999
(collectively, the "notes"). The "As Adjusted" numbers also reflect the use
of the proceeds from the offering of the notes to redeem all of the
company's outstanding 5.75% Series A Convertible Preferred Stock. The
preferred stock was redeemed on December 24, 1998 at a per share redemption
price of $1,040.25, resulting in a premium of $20 million, which is
reflected as a reduction in retained earnings. The "As Adjusted" numbers do
not reflect the potential repurchase of outstanding common stock.
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<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table summarizes selected consolidated historical financial
data of the company on a consolidated basis. The financial data for the years
ended December 31, 1997, 1996 and 1995 and as of December 31, 1997 and 1996,
were derived from the audited consolidated financial statements incorporated
herein by reference. The selected financial data set forth below for the company
for the years ended December 31, 1994 and 1993 and as of December 31, 1995, 1994
and 1993 were derived from the audited consolidated financial statements not
included or incorporated herein. The financial data as of and for the nine
months ended September 30, 1998 and 1997 were derived from the unaudited
condensed consolidated financial statements of the company incorporated herein
by reference. In the opinion of the company's management, all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the financial data for the nine months ended September 30, 1998
and 1997 have been reflected therein. Operating results for the nine months
ended September, 1998 are not necessarily indicative of the results that may be
expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------ ------- ------- ------ ------ ------
(MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $12,710 $8,741 $11,794 $10,074 $5,671 $3,769 $3,115
Earnings (Loss) from Operations.... (256)(1) 550 742 596(2) 461(3) 506 336
Net Earnings (Loss) Before
Extraordinary Gain............... (298)(1) 341 460 356(2) 286(3) 288(4) 212
Extraordinary Gain on Sale of
Subsidiary, net.................. -- -- -- -- -- 1,377(5) --
------- ------ ------- ------- ------ ------ ------
Net Earnings (Loss)................ (298)(1) 341 460 356(2) 286(3) 1,665 212
Convertible Preferred Stock
Dividends........................ (22) (22) (29) (29) (7) -- --
------- ------ ------- ------- ------ ------ ------
Net Earnings (Loss) Applicable to
Common Shareholders.............. $ (320) $ 319 $ 431 $ 327 $ 279 $1,665 $ 212
------- ------ ------- ------- ------ ------ ------
------- ------ ------- ------- ------ ------ ------
Basic Net Earnings (Loss) per
Common Share Before Extraordinary
Gain............................. $ (1.67)(1) $ 1.71 $ 2.30 $ 1.80(2) $ 1.61(3) $ 1.69(4) $ 1.25
Extraordinary Gain............... -- -- -- -- -- 8.06(5) --
------- ------ ------- ------- ------ ------ ------
Basic Net Earnings (Loss) per
Common Share..................... $ (1.67)(1) $ 1.71 $ 2.30 $ 1.80(2) $ 1.61(3) $ 9.75 $ 1.25
------- ------ ------- ------- ------ ------ ------
------- ------ ------- ------- ------ ------ ------
Diluted Net Earnings (Loss) per
Common Share Before Extraordinary
Gain............................. $ (1.67)(1) $ 1.68 $ 2.26 $ 1.76(2) $ 1.57(3) $ 1.64(4) $ 1.23
Extraordinary Gain............... -- -- -- -- -- 7.86(5) --
------- ------ ------- ------- ------ ------ ------
Diluted Net Earnings (Loss) per
Common Share................... $ (1.67)(1) $ 1.68 $ 2.26 $ 1.76(2) $ 1.57(3) $ 9.50 $ 1.23
------- ------ ------- ------- ------ ------ ------
------- ------ ------- ------- ------ ------ ------
Dividends per Share:
Common Stock..................... $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $0.015
Convertible Preferred Stock...... 43.13 43.13 57.50 57.50 14.38 -- --
Weighted Average Number of Common
Shares Outstanding:
Basic............................ 192 186 187 182 174 171 170
Diluted.......................... 192 191 191 186 177 175 172
BALANCE SHEET DATA (AS OF):
Cash and Investments............... $ 4,048 $3,547 $ 4,041 $ 3,453 $3,078 $2,769 $1,169
Total Assets....................... 8,914 7,241 7,623 6,997 6,161 3,489 1,787
Long-Term Obligations.............. 22 21 19 31 39 24 39
Shareholders' Equity............... 4,100 4,271 4,534 3,823 3,188 2,795 1,085
</TABLE>
- ------------------------------
Notes:
(1) Includes operational realignment charges of $725 million and $175 million of
charges related to contracts associated with Medicare markets and other
medical cost adjustments. Excluding these charges, earnings from operations
and net earnings for the nine months ended September 30, 1998 would have
been $469 million and $406 million, or $1.96 diluted net earnings per share.
See the most recent Quarterly Report on Form 10-Q incorporated by reference
herein.
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(2) Excluding the nonoperating merger costs associated with the April 1996
acquisition of HealthWise of America, Inc. ("HealthWise") of $15 million ($9
million after tax, or $0.05 diluted net earnings per common share) and the
provision for future losses on two large multi-year contracts of $45 million
($27 million after tax, or $0.15 diluted net earnings per common share),
1996 earnings from operations and net earnings would have been $641 million
and $392 million, or $1.96 diluted net earnings per common share. The
HealthWise merger was accounted for using the pooling-of-interests method of
accounting; however, the company did not restate its historical financial
statements as the effects on the historical consolidated financial
statements were not material.
(3) Excluding restructuring charges associated with the October 1995 acquisition
of The MetraHealth Companies, Inc. ("MetraHealth") of $154 million ($97
million after tax, or $0.55 diluted net earnings per common share), 1995
earnings from operations and net earnings would have been $615 million and
$383 million, or $2.12 diluted net earnings per common share. The
MetraHealth acquisition was accounted for using the purchase method of
accounting and, accordingly, its operating results have been included in the
company's historical consolidated financial information from the acquisition
date.
(4) Excluding the nonoperating merger costs associated with the acquisition of
Complete Health Services, Inc. ("Complete") and Ramsey-HMO, Inc.
("Ramsey-HMO") of $36 million ($22 million after tax, or $0.13 diluted net
earnings per common share), 1994 net earnings before extraordinary gain
would have been $310 million, or $1.77 diluted net earnings per common
share. The Complete and Ramsey-HMO mergers were accounted for using the
pooling-of-interests method of accounting and, accordingly, the operating
results for each have been included in the company's historical consolidated
financial information for all periods presented.
(5) In May 1994, the company sold Diversified Pharmaceutical Services, Inc.
("Diversified") for $2.3 billion in cash and recognized an extraordinary
gain after transaction costs and income tax effects of $1.4 billion, or
$7.86 diluted net earnings per common share. Diversified's operating results
are included in the company's historical consolidated financial information
up to the disposition date.
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BUSINESS
UnitedHealth Group is a national leader in offering health care coverage and
related services, which it offers through the following six lines of business:
ORGANIZED HEALTH SYSTEMS. UnitedHealth Group, through its business named
UnitedHealthcare, organizes, operates and manages health systems, serving
customers in all 50 states. Health systems we offer include:
- Health Maintenance Organizations (HMOs), where we contract with health
care providers within a defined geographic area to provide an agreed-upon
set of preventive and health maintenance and treatment services to
enrolled members who pay a fixed, pre-paid premium;
- Preferred Provider Organizations (PPOs), in which we establish contracts
with a network of providers of medical care and encourage people to use
the "preferred providers" by offering better benefits and lower cost for
services received from preferred providers; and,
- Point-of-Service Plans (POS), which are health benefit plans that allow
the covered person to choose to receive service from a participating or
non-participating health care provider, with better benefit levels for
using participating providers. POS plans may be offered through HMOs or
PPOs, which are sometimes combined with managed indemnity and supplemental
insurance plans.
INSURANCE SERVICES. UnitedHealth Group's insurance affiliate, Unimerica,
underwrites the health insurance coverage provided through its organized health
systems, as well as its Medicare supplemental insurance.
ADMINISTRATIVE SERVICES. Our Uniprise business provides administrative support
services and strategic planning services to large employers who self-insure
their employee benefits programs. Services include: member enrollment, member
eligibility, claim processing, issuing documents, billing and banking, customer
service and production of plan descriptions, provider directories and ID cards.
HEALTH AND WELL-BEING SERVICES FOR RETIREES AND OLDER AMERICANS. Through
Ovations, we provide Medicare supplement insurance and hospital indemnity
coverage for members enrolled in the health insurance program of the American
Association of Retired Persons (AARP). The company also provides health care
benefits to elderly nursing home residents through EverCare, a program which
works with the Medicare program and arranges the delivery of health care
services in the nursing home for no extra premium cost.
SPECIALIZED CARE SERVICES. Through Specialized Care Services, UnitedHealth
Group arranges and offers benefits, networks of health care providers, and
services focused on highly specialized health care needs. These include employee
assistance/counseling programs, mental health/substance abuse services, a
contracted network of solid organ transplant programs and related services,
24-hour health information and counseling services and health publications.
KNOWLEDGE AND INFORMATION SERVICES. Our subsidiary Ingenix offers reporting,
research, publishing and consulting services to health care providers,
employers, pharmaceutical companies and government institutions.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the old notes, the company entered into an
exchange and registration rights agreement. In that agreement, the company
agreed to file with the SEC (and cause to become effective) a registration
statement for the new notes. This prospectus forms a part of that registration
statement. We have filed the exchange and registration rights
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agreement as an exhibit to the registration statement.
We are making the exchange offer to satisfy our contractual obligations under
the exchange and registration rights agreement. The form and terms of the new
notes are the same as the form and terms of the old notes except that the new
notes:
- - have been registered under the Securities Act and therefore will not be
subject to certain restrictions on transfer applicable to the old notes;
- - will not be entitled to registration and other rights under the exchange and
registration rights agreement; and
- - will not provide for liquidated damages thereon.
The exchange and registration rights agreement provides that if we do not:
- - file a registration statement for the new notes within 60 days of the sale of
the old notes;
- - cause the registration statement for the new notes to become effective within
180 days after the sale of the old notes;
- - hold the exchange offer open for at least 30 days;
- - begin and complete the exchange offer within 45 days after the registration
statement becomes effective,
we will be required to pay an additional 0.25% interest on the old notes, per
annum, until we meet our obligations under the exchange and registration rights
agreement.
Upon consummation of the exchange offer, holders of old notes will not be
entitled to any interest rate increases or any further registration rights under
the exchange and registration rights agreement, except under limited
circumstances. See EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, exhibit 4.2 to
the registration statement.
A participating broker-dealer may use this prospectus, as it may be amended or
supplemented from time to time, during the period referred to below in
connection with resales of new notes received in exchange for old notes where
the participating broker-dealer acquired the old notes as a result of market-
making or other trading activities. The company has agreed that for 180 days
after the expiration date, it will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "DESCRIPTION OF
NEW NOTES -- PLAN OF DISTRIBUTION."
The company is not making the exchange offer to, and will not accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or its acceptance would violate the securities or blue sky laws of that
jurisdiction.
Unless the context requires otherwise, the term "holder" in the context of the
exchange offer means:
- - any person in whose name the old notes are registered on the books of the
company;
- - any person who has obtained a properly completed bond power from the
registered holder; or
- - any person whose old notes are held of record by the DTC who desires to
deliver such old notes by book-entry transfer at the DTC.
TERMS OF THE EXCHANGE
The company hereby offers, upon the terms and subject to the conditions set
forth in this prospectus and in the accompanying letter of transmittal, to
exchange up to $250 million aggregate principal amount of new notes for the same
aggregate principal amount of old notes properly tendered on or before the
expiration date (as defined below) and not properly withdrawn in accordance with
the procedures described below.
The company will issue, promptly after the expiration date, an aggregate
principal amount of up to $250 million of new notes in exchange for the same
principal amount of outstanding old notes tendered and accepted in connection
with the exchange offer. Holders may tender their old notes in whole or in part
in a principal amount of $1,000 and integral multiples thereof, provided that if
any old note is tendered for
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exchange in part, the untendered principal amount thereof must be $1,000 or any
integral multiple of $1,000.
The exchange offer is not conditioned upon any minimum number of old notes being
tendered. As of the date of this prospectus $250 million aggregate principal
amount of the old notes is outstanding.
Holders of old notes do not have any appraisal or dissenters' rights in
connection with the exchange offer. Old notes which are not tendered for, or are
tendered but not accepted in connection with, the exchange offer will remain
outstanding and be entitled to the benefits of the indenture, but will not be
entitled to any further registration rights under the exchange and registration
rights agreement, except under limited circumstances. See "-- CONSEQUENCES OF
FAILURE TO EXCHANGE."
If any old notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or for any other reason,
certificates for those unaccepted old notes will be returned, without expense,
to the tendering holder promptly after the expiration date.
Holders who tender old notes in connection with the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of old
notes pursuant to the exchange offer. The company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the exchange offer. See "-- FEES AND EXPENSES."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING THEIR OLD NOTES UNDER THE EXCHANGE OFFER, NOR HAS THE COMPANY
AUTHORIZED ANYONE TO MAKE ANY SUCH RECOMMENDATION. A HOLDER OF OLD NOTES MUST
MAKE ITS OWN DECISION, BASED ON ITS OWN FINANCIAL POSITION AND REQUIREMENTS,
WHETHER, AND IF SO, HOW MUCH OF ITS OLD NOTES, TO TENDER UNDER THE EXCHANGE
OFFER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING
WITH ITS ADVISERS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on ,
1999 unless we extend the exchange offer (in which case "expiration date" will
mean the latest date and time to which we extend the exchange offer).
The company expressly reserves the right in its sole and absolute discretion,
subject to applicable law, at any time and from time to time:
- - to delay the acceptance of the old notes for exchange;
- - to terminate the exchange offer (whether or not any old notes have theretofore
been accepted for exchange) if the company determines, in its sole and
absolute discretion, that any of the events or conditions referred to under
"-- CONDITIONS TO THE EXCHANGE OFFER" have occurred or exist or have not been
satisfied;
- - to extend the expiration date of the exchange offer and retain all old notes
tendered under the exchange offer, subject, however, to the right of holders
of old notes to withdraw their tendered old notes as described under "--
WITHDRAWAL RIGHTS," and
- - to waive any condition or otherwise amend the terms of the exchange offer in
any respect. If we amend the exchange offer in a manner we determine
constitutes a material change, or we waive a material condition of the
exchange offer, we will promptly disclose such amendment by means of a
prospectus supplement that we will distribute to the registered holders of the
old notes, and will extend the exchange offer to the extent required by Rule
14e-1 under the Exchange Act.
We will follow any delay we make in acceptance, extension, termination or
amendment with oral or written notice to the exchange agent and by public
announcement. In the case of an extension, the announcement will be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date. Without limiting the manner in
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which we may choose to make any public announcement, and subject to applicable
law, we shall have no obligation to publish, advertise or otherwise communicate
any public announcement other than by issuing a release to an appropriate news
agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
We will deliver new notes in exchange for old notes validly tendered and
accepted for exchange under the exchange offer only after timely receipt by the
exchange agent of:
- - old notes or a book-entry confirmation of a book-entry transfer of old notes
into the exchange agent's account at DTC;
- - the letter of transmittal (or facsimile thereof), properly completed and
executed, with any required signature guarantees; and
- - any other documents required by the letter of transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-entry
transfer of old notes into the exchange agent's account at DTC.
The company will accept for exchange (and exchange) old notes by giving oral or
written notice to the exchange agent that the company has accepted the old notes
for exchange under the exchange offer.
The exchange agent will act as agent for the company for the purpose of
receiving tenders of old notes, letters of transmittal and related documents,
and as agent for tendering holders for the purpose of receiving old notes,
letters of transmittal and related documents and transmitting new notes to
validly tendering holders.
Promptly after the expiration date, the company will exchange, and will issue to
the exchange agent, new notes for old notes validly tendered and not withdrawn
(See "-- WITHDRAWAL RIGHTS"), subject to the terms and conditions of the
exchange offer.
If for any reason,
- - acceptance for exchange or the exchange of any old notes tendered under the
exchange offer is delayed (whether before or after the company's acceptance
for exchange of old notes), or
- - the company extends the exchange offer or is unable to accept for exchange or
exchange old notes tendered under the exchange offer,
then, without prejudice to the company's rights set forth herein, the exchange
agent may, on behalf of the company and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered old notes, and such old notes may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "-- WITHDRAWAL RIGHTS."
In the letter of transmittal, a holder of old notes will warrant and agree that:
- - it has full power and authority to tender, exchange, sell, assign and transfer
old notes;
- - the company will acquire good, marketable and unencumbered title to the
tendered old notes, free and clear of all liens, restrictions, charges and
encumbrances; and
- - the old notes tendered for exchange are not subject to any adverse claims or
proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the company or the
exchange agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the old notes tendered pursuant to the exchange
offer.
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER. In order to validly tender old notes, the holder must either
comply with the guaranteed delivery requirements described below or, on or
before the expiration date, deliver to the exchange agent at its address listed
under "-- EXCHANGE AGENT" a properly completed letter of transmittal (or
facsimile thereof) with any required signature guarantees and any other required
documents and:
- - the holder's old notes; or
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- - a book-entry confirmation (if the holder tenders its old notes under the
book-entry transfer procedures).
If a holder tenders less than all of its old notes, it should fill in the amount
of old notes being tendered in the appropriate box on the letter of transmittal.
We will exchange the entire amount of old notes delivered to the exchange agent
unless instructed otherwise.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS ARE AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER. WE
WILL CONSIDER DELIVERY TO HAVE OCCURRED ONLY UPON ACTUAL RECEIPT BY THE EXCHANGE
AGENT. IF THE HOLDER CHOOSES DELIVERY BY MAIL, WE RECOMMEND REGISTERED MAIL,
RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE. IN
ALL CASES, A HOLDER SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.
BOOK ENTRY TRANSFER. Within two business days after the date of this
prospectus, the exchange agent will establish an account at DTC for purposes of
the exchange offer. Any financial institution that is a participant in DTC's
book-entry transfer facility system may make a book-entry delivery of the old
notes by causing DTC to transfer the old notes into the exchange agent's account
at DTC according to DTC's procedures for transfers. However, although a holder
may effect delivery of old notes through book-entry transfer into the exchange
agent's account at DTC, the holder must still deliver the letter of transmittal
(or facsimile thereof), properly completed and executed, with any required
signature guarantees and any other required documents, to the exchange agent at
its address listed under "-- EXCHANGE AGENT" on or before the expiration date,
or the holder must comply with the guaranteed delivery procedure described
below.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT AMOUNT
TO DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES. A holder need not endorse its certificates for old notes
or obtain signature guarantees on the letter of transmittal unless:
- - the certificates are registered in a name other than that of the person
surrendering the certificates; or
- - the registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the letter of transmittal.
In the case of either of the two bullet points above, the holder must endorse
the certificates or provide a properly executed bond power, with the endorsement
or signature on the bond power and on the letter of transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution" (also referred to in this prospectus as an
"eligible institution"), unless the old notes are surrendered on behalf of such
eligible institution.
The term "eligible guarantor institution" includes:
- - a bank;
- - a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer;
- - a credit union;
- - a national securities exchange, registered securities association or clearing
agency; or
- - a savings association that is a participant in a Securities Transfer
Association.
See LETTER OF TRANSMITTAL, Instruction 1, exhibit 99.1 to the registration
statement.
GUARANTEED DELIVERY. If a holder desires to tender old notes under the exchange
offer and the certificates for such old notes are not immediately available,
time will not permit all required documents to reach the exchange agent on or
before the expiration date, or the procedures for book-entry transfer cannot be
completed on a timely basis, a holder may nevertheless tender such old notes,
provided that
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the holder complies with all of the following guaranteed delivery procedures:
- - the tenders are made by or through an eligible institution;
- - the holder delivers a properly completed and executed notice of guaranteed
delivery, substantially in the form accompanying the letter of transmittal, to
the exchange agent, as provided below, on or before the expiration date; and
- - the holder delivers the certificates (or a book-entry confirmation)
representing all tendered old notes, in proper form for transfer, together
with a properly completed and executed letter of transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the letter of transmittal, to the exchange agent within five New
York Stock Exchange trading days after the execution of the notice of
guaranteed delivery.
The notice of guaranteed delivery may be delivered by hand, facsimile or mail to
the exchange agent and must include a guarantee by an eligible institution in
the form set forth in the notice.
The company will deliver new notes in exchange for old notes tendered and
accepted for exchange under the exchange offer only after the old notes have
been validly tendered as described above.
Accordingly, we might not deliver new notes to all tendering holders at the same
time, depending on when the exchange agent receives old notes, book-entry
confirmations with respect to old notes and other required documents.
The company's acceptance for exchange of old notes tendered under any of the
procedures described above will constitute a binding agreement between the
tendering holder and the company upon the terms and subject of the conditions to
the exchange offer.
DETERMINATION OF VALIDITY. The company, in its sole discretion, will resolve all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tendered old notes. The company's
determination regarding these questions shall be final and binding on all
parties.
The company reserves the absolute right, in its sole and absolute discretion, to
reject any tender if it determines that it is not in proper form or the
company's counsel determines that the acceptance of the tender, or the related
exchange, may be unlawful.
The company also reserves the absolute right, subject to applicable law, to
waive any of the conditions to the exchange offer set forth under "-- CONDITIONS
TO THE EXCHANGE OFFER" or any condition or irregularity in any tender of old
notes whether or not the company waives similar conditions or irregularities in
the case of other holders.
The company's interpretation of the terms and conditions to the exchange offer
(including the letter of transmittal and its instructions) will be final and
binding. No tender of old notes will be considered validly made until all
irregularities with respect to that tender have been cured or waived. Neither
the company, any affiliates or assigns of the company, the exchange agent nor
any other person has any obligation to give notice of any irregularities in
tenders or any liability for failure to give any such notice.
When a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative capacity
signs any letter of transmittal, endorsement, bond power, power of attorney, or
any other document required by the letter of transmittal, that person must:
- - indicate below the person's signature the capacity in which the person is
signing; and
- - submit evidence of the person's authority to sign in such capacity to the
company, unless the company waives this requirement.
A person who beneficially owns old notes held by or registered in the name of a
broker, dealer, commercial bank, trust company or other nominee or custodian
should contact that entity promptly if the person wants to participate in the
exchange offer.
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If such beneficial holder wishes to tender on his own behalf, such beneficial
holder must, prior to completing and executing the letter of transmittal and
delivering his old notes, either make appropriate arrangements to register
ownership of the old notes in such holder's name or obtain a properly completed
bond power from the registered holder. The transfer of record ownership may take
considerable time.
RESALES OF NEW NOTES
The company is making the exchange offer in reliance on a position that the
staff of the SEC has taken in certain interpretive letters addressed to third
parties in other transactions. The company has not sought its own interpretive
letter for this transaction, and cannot assure that the staff would take the
same position with respect to the exchange offer as it has taken in letters to
third parties concerning other transactions.
Based on these interpretations, and subject to the preceding paragraph, the
company believes that new notes issued under the exchange offer may be offered
for resale, resold and otherwise transferred (except by a broker-dealer) without
further compliance with the registration and prospectus delivery requirements of
the Securities Act, as long as the holder acquires the new notes in the ordinary
course of its business and is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of the new notes.
However, a holder of old notes who is an "affiliate" of the company or intends
to participate in the exchange offer for the purpose of distributing new notes,
or a broker-dealer who purchased old notes from the company for resale under
Rule 144A or any other available exemption under the Securities Act:
- - may not rely on the interpretations of the staff of the SEC set forth in the
above-mentioned interpretive letters;
- - may not tender such old notes in the exchange offer; and
- - must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of the old notes
unless the sale is made under an exemption from such requirements.
In addition, as described below, if a broker-dealer holds old notes acquired for
its own account as a result of market-making or other trading activities and
exchanges those old notes for new notes, then the broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of the new notes.
Each holder of old notes who wants to exchange old notes for new notes in the
exchange offer must represent that:
- - it is not an "affiliate" (as defined under Rule 405 of the Securities Act), of
the company or, if it is an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act;
- - it is acquiring new notes in the ordinary course of its business;
- - it has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of new notes; and
- - if it is not a broker-dealer, it is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of new
notes.
Each broker-dealer that receives new notes for its own account where such old
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of new notes. See "PLAN OF
DISTRIBUTION." The letter of transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the SEC in the above-mentioned
interpretive letters, the company believes that broker-dealers that acquired old
notes for their own accounts as a result of market-making or other trading
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activities ("participating broker-dealers") may fulfill their prospectus
delivery requirements with respect to new notes received in exchange for such
old notes (other than old notes which represent an unsold allotment from the
original sale of the old notes) with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
as long as it contains a description of the plan of distribution with respect to
the resale of such new notes.
Accordingly, a participating broker-dealer may use this prospectus, as it may be
amended or supplemented from time to time, during the period referred to below
in connection with resales of new notes received in exchange for old notes where
such old notes were acquired by a participating broker-dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the exchange and registration rights agreement,
the company has agreed that a participating broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, in
connection with resales of such new notes until the earlier of:
- - 180 days after the expiration date (subject to extension under certain limited
circumstances described below); or
- - the disposition of all such new notes by the participating broker-dealer. See
"PLAN OF DISTRIBUTION."
Any Participating Broker-Dealer who is an "affiliate" of the company may not
rely on the above-mentioned interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each participating broker-dealer who surrenders old notes under
the exchange offer, by executing the letter of transmittal, will agree that,
upon:
- - receipt of notice from the company of the occurrence of any event or the
discovery of any fact which:
- makes any statement contained or incorporated by reference in this
prospectus untrue in any material respect, or
- causes this prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference herein, in
light of the circumstances under which they were made, not misleading; or
- - the occurrence of certain other events specified in the exchange and
registration rights agreement,
the participating broker-dealer will suspend the sale of new notes under this
prospectus until the company has:
- - amended or supplemented the prospectus to correct the misstatement or omission
and has furnished copies of the amended or supplemented prospectus to the
participating broker-dealer; or
- - given notice that the sale of the new notes may be resumed.
If the company gives notice to suspend the sale of the new notes, it shall
extend the 180-day period referred to above during which participating
broker-dealers are entitled to use this prospectus in connection with the resale
of new notes by the number of days during the period from and including the date
of the giving of such notice to and including:
- - the date when participating broker-dealers receive copies of the amended or
supplemented prospectus necessary to permit resales of the new notes; or
- - the date on which the company has given notice that the sale of new notes may
be resumed.
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WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, holders may withdraw tenders of
old notes at any time on or before the expiration date.
In order for a holder to validly withdraw old notes tendered for exchange, the
holder must deliver a written, telegraphic, telex or facsimile transmission of
the notice of withdrawal to the exchange agent at its addresses listed under "--
EXCHANGE AGENT" so that the exchange agent receives the notice on or before the
expiration date.
The notice of withdrawal must specify the name of the person who tendered the
old notes to be withdrawn, the aggregate principal amount of old notes to be
withdrawn, and (if certificates for such old notes have been tendered) the name
of the registered holder of the old notes as set forth on the old notes (if
different from that of the person who tendered the old notes).
If old notes have been delivered or otherwise identified to the exchange agent,
then in order for the holder to obtain the physical release of the old notes,
the holder must submit the serial numbers shown on the old notes to be withdrawn
and submit a guarantee of the signature on the notice of withdrawal, provided by
an eligible institution (unless the old notes are tendered for the account of an
eligible institution).
If old notes have been tendered pursuant to the procedures for book-entry
transfer set forth in "-- PROCEDURES FOR TENDERING OLD NOTES," the notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of old notes. In this case, a notice of withdrawal will be
effective if timely delivered to the exchange agent by written, telegraphic,
telex or facsimile transmission.
Withdrawals of tenders of old notes may not be rescinded. Holders that have
withdrawn their tenders may, however, retender their old notes at any time on or
before the expiration date by following the procedures described above under "--
PROCEDURES FOR TENDERING OLD NOTES."
The company, in its sole discretion, will resolve all questions as to the
validity, form and eligibility (including time of receipt) of withdrawal
notices. The company's determinations on such questions will be final and
binding on all parties. Neither the company, any affiliates or assigns of the
company, the exchange agent nor any other person has any duty to give notice of
any irregularities in any notice of withdrawal or any liability for failure to
give any such notice. Any old notes tendered and withdrawn before the expiration
date will be returned to the appropriate holder promptly after withdrawal.
INTEREST ON THE NEW NOTES
Each new note will bear interest at an annual rate of 6.60%:
- - from the most recent date to which interest has been paid or provided for on
the old note surrendered in exchange for such new note; or
- - if no interest has been paid or provided for on such old note, from November
24, 1998.
We will pay interest on the new notes semiannually on June 1 and December 1 of
each year, beginning June 1, 1999.
Holders of old notes which are accepted for exchange will not receive accrued
interest on such old notes for any period from and after the last interest
payment date to which interest has been paid or duly provided for on such old
notes before the original issue date of the new notes or, if no such interest
has been paid or duly provided for, will not receive any accrued interest on
such old notes, and will be deemed to have waived the right to receive any
interest on such old notes accrued from and after such interest payment date or,
if no such interest has been paid or duly provided for, from and after November
24, 1998.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, or any extension of
the exchange offer, the company will not be required to accept for exchange, or
to exchange, any old notes for any new notes, and, as described below, may
terminate the exchange offer (whether or not any old notes have already been
accepted for exchange) or may waive any conditions to or
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amend the exchange offer, if any of the following conditions has occurred,
exists or has not been satisfied:
- - any of the following occur which, in the company's judgment, would reasonably
be expected to impair the ability of the company to proceed with the exchange
offer:
- any action or proceeding is instituted or threatened in any court or by or
before any governmental agency or body with respect to the exchange offer;
- any law, statute, rule or regulation is adopted or enacted; or
- trading on the New York Stock Exchange or generally in the United States
over-the-counter market is suspended by order of the SEC or any other
governmental authority;
- - the SEC or any state securities authority issues a stop order suspending the
effectiveness of the registration statement, proceedings are initiated or, to
the knowledge of the company, threatened for that purpose; or
- - any change, or any development involving a prospective change, in the business
or financial affairs of the company or any of its subsidiaries has occurred
which, in the sole judgment of the company, might materially impair the
ability of the company to proceed with the exchange offer.
If the company determines in its sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied,
the company may, subject to applicable law, terminate the exchange offer
(whether or not any old notes have already been accepted for exchange) or may
waive any such condition or otherwise amend the terms of the exchange offer in
any respect. If such waiver or amendment constitutes a material change to the
exchange offer, the company will promptly disclose such waiver by means of a
prospectus supplement that it will distribute to the registered holders of the
old notes, and the company will extend the exchange offer to the extent required
by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The company has appointed The Bank of New York as exchange agent for the
exchange offer. Delivery of the letters of transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent as follows:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Jason Larragoity,
Reorganization Section 7-E
Telephone: (212) 815-4997
Facsimile: (212) 815-4699
DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
We have agreed to pay, and promptly reimburse others who have paid, the
following fees and expenses incurred in connection with the exchange offer and
issuance of the new notes:
- - SEC and NASD registration, filing and review fees and expenses;
- - fees and expenses incurred in complying with State securities and blue sky
laws;
- - expenses relating to the preparation and distribution of the registration
statement, prospectus, any amendments and supplements to those documents, and
the new notes;
- - the fees and expenses of the exchange agent and its attorneys;
- - the fees and expenses of the trustee and its attorneys;
- - the fees and expenses of our attorneys and our independent certified public
accountants; and
- - certain other fees expenses that may or may not be incurred.
For additional details concerning the fees and expenses we have agreed to pay in
connection with the exchange offer, see the EXCHANGE AND
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REGISTRATION RIGHTS AGREEMENT, exhibit 4.2 to the registration statement.
Holders who tender their old notes for exchange usually will not have to pay
transfer taxes in connection with the exchange. If, however, new notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the old notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of old notes in connection with the exchange
offer, then the holder will be obligated to pay any transfer taxes (whether
imposed on the registered holder or any other persons). If the tendering holder
does not submit satisfactory evidence of payment of, or an exemption from, such
taxes, the amount of such transfer taxes will be billed directly to the
tendering holder.
In addition, except as described in the preceding paragraphs concerning which
fees and expenses we will pay, holders of notes must pay all:
- - agency fees and commissions and underwriting discounts and commissions
attributable to the sales of the notes;
- - the fees and disbursements of their legal counsel or other advisors or
experts;
- - transfer taxes on resales of the notes; and
- - advertising and solicitation expenses.
CONSEQUENCES OF FAILURE TO EXCHANGE
By making this exchange offer, we will have fulfilled one of our obligations
under the exchange and registration rights agreement. Holders of old notes who
do not tender their notes generally will not have any further registration
rights, under the exchange and registration rights agreement or otherwise.
Accordingly, any holder of old notes that does not exchange its old notes for
new notes will continue to hold the untendered old notes and will be entitled to
the rights and limitations applicable to the old notes under the indenture,
except to the extent that such rights or limitations terminate or cease to have
further effect following the exchange offer.
Old notes that are not exchanged for new notes under the exchange offer will
remain restricted securities, and will continue to bear a restrictive legend. As
a result, holders of old notes may resell their old notes only:
- - to us;
- - under an effective registration statement under the Securities Act;
- - so long as the old notes are eligible for resale under Rule 144A, to a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A;
- - under an exemption from registration under the Securities Act provided by Rule
144 thereunder (if available); or
- - to an institutional accredited investor in a transaction exempt from the
registration requirements of the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
Participation in the exchange offer is voluntary and holders should carefully
consider whether to accept. Holders of the old notes are urged to consult their
financial and tax advisors in making their own decision on what action to take.
We may in the future seek to acquire untendered old notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. We have no present plans to acquire any old notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any untendered old notes.
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DESCRIPTION OF NEW NOTES
Under the exchange offer, we will issue up to $250 million aggregate principal
amount of 6.60% senior notes due December 1, 2003. We will pay interest on the
new notes semiannually on June 1 and December 1 of each year, beginning June 1,
1999, until the new notes mature on December 1, 2003. Each new note will bear
interest at an annual rate of 6.60% from the most recent date to which interest
has been paid or provided for on the old note surrendered in exchange for such
new note or, if no interest has been paid or provided for on such old note, from
November 24, 1998 (the date of original issuance of the old notes). Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The new notes will be issued under an indenture. See SENIOR INDENTURE, exhibit
4.1 to the registration statement. The indenture will be qualified under the
Trust Indenture Act. This section summarizes certain terms and provisions of the
indenture. The summary is not complete. You should read the indenture for
additional information before you exchange your old notes for new notes.
Capitalized terms used but not defined in this summary have the meanings
specified in the indenture.
GENERAL
New notes issued under the indenture will be issued as part of a series that
UnitedHealth Group has established under the indenture. The amount of new notes
offered by this prospectus will be limited to the amount of securities set forth
on the cover of this prospectus that UnitedHealth Group has not already issued
or reserved for issuance. The indenture does not limit the aggregate principal
amount of new notes which we may issue under the indenture.
The old notes and the new notes will constitute a single series of debt
securities under the indenture. If the exchange offer is consummated, holders of
the old notes who do not exchange their old notes for new notes will vote
together with the holders of new notes for all relevant purposes under the
indenture. In that regard, the indenture requires that certain actions by the
holders thereunder (including acceleration following an event of default) must
be taken, and certain rights must be exercised, by specified minimum percentages
of the aggregate principal amount of the outstanding debt securities of the
relevant series. In determining whether holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the indenture, any old notes which remain outstanding
after the exchange offer will be aggregated with the new notes and the holders
of such old notes and new notes will vote together as a single series for all
such purposes. Accordingly, all references herein to specified percentages in
aggregate principal amount of the outstanding old notes or new notes shall be
deemed to mean, at any time after the exchange offer is consummated, such
percentage in aggregate principal amount of the old notes and new notes then
outstanding.
The new notes are senior unsecured obligations of the company and will rank
equal in right of payment with all other senior unsecured indebtedness of the
company.
The new notes will be issued only in registered form, without coupons, in
denominations of $1,000 each or multiples of $1,000.
The new notes will be issued in the form of one or more global securities, as
described below under "GLOBAL NEW NOTES."
The company has appointed the Bank of New York to serve as registrar and paying
agent under the indenture at its offices in the Borough of Manhattan, City of
New York.
There will be no service charge for any registration of transfer or exchange of
the new notes, but we may require you to pay any tax or other governmental
charge payable in connection with a transfer or exchange of the new notes.
The new notes will not provide for an increase in the interest rate thereon. For
a discussion of the circumstances in which the interest rate on the old notes
may be increased, see "DESCRIPTION OF OLD NOTES."
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CONVERSION
The new notes are not convertible into any other securities of the company.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Please refer to
the indenture for full definitions of all such terms.
"CAPITAL STOCK" means:
- - corporate stock including, without limitation, common stock and preferred
stock;
- - any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
- - partnership interests (whether general or limited); and
- - any other interest or participation that confers on a person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing person.
"CONSOLIDATED NET WORTH" means, with respect to any person as of any date, the
sum of:
- - the consolidated equity of the common stockholders of such person and its
consolidated Subsidiaries as of such date; plus
- - the respective amounts reported on such person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such person upon issuance of such preferred stock; less
- - all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within 12 months after the acquisition of such business) subsequent to the
date of the indenture in the book value of any asset owned by such person or a
consolidated Subsidiary of such person; and
- - all unamortized debt discount and expense and unamortized deferred charges as
of such date,
all of the foregoing determined in accordance with GAAP.
"DEFAULT" means any event that is or with the passage of time or the giving of
notice or both would be an Event of Default under the indenture.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable),
or upon the happening of any event:
- - matures;
- - is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise;
or
- - is redeemable at the option of the holder of such Capital Stock,
in whole or in part, on or before the date that is 91 days after the date on
which the new notes mature.
"GAAP" means generally accepted accounting principles set forth in:
- - the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants; and
- - the statements and pronouncements of the Financial Accounting Standards Board
or such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect from
time to time.
"INDEBTEDNESS" means indebtedness for money borrowed.
"LIEN" means any:
- - mortgage;
- - pledge;
- - lien;
- - encumbrance;
- - charge; or
- - security interest of any kind.
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"PRINCIPAL PROPERTY" means:
- - the land;
- - the land improvements;
- - the building; and
- - the fixtures (to the extent they constitute real property interests)
(including any leasehold interest therein)
constituting UnitedHealth Group's principal corporate office or any other
discrete facility of UnitedHealth Group and its Subsidiaries (whether owned at
the date of initial issuance of the new notes or thereafter acquired), provided
in each case that such facility:
- - is owned by UnitedHealth Group or any Subsidiary;
- - is located within any of the present 50 states of the United States of America
or the District of Columbia;
- - has not been determined in good faith by UnitedHealth Group's Board of
Directors not to be of material importance to the business conducted by
UnitedHealth Group and its Subsidiaries taken as a whole; and
- - has a book value as on the date as of which the determination is being made in
excess of 5% of the Consolidated Net Worth of UnitedHealth Group as of the
most recent quarterly consolidated balance sheet of UnitedHealth Group
prepared in accordance with GAAP.
"RESTRICTED SUBSIDIARY" means
- - each Subsidiary as of the date of the indenture; and
- - each Subsidiary thereafter created or acquired, provided, however, that any
Subsidiary may be expressly excluded by resolution of the board of directors
of UnitedHealth Group before, or within 120 days following, such creation or
acquisition.
"SUBSIDIARY" means, with respect to any person:
- - any corporation, association or other business entity of which more than 50%
of the total voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such person or one or more of the other Subsidiaries of that
person (or a combination thereof); and
- - any partnership (a) the sole general partner or the managing general partner
of which is such person or a Subsidiary of such person; or
- - the only general partners of which are such person or of one or more
Subsidiaries of such person (or any combination thereof), with certain
exceptions.
CERTAIN COVENANTS
LIMITATION ON LIENS. The indenture provides that UnitedHealth Group will not,
and will permit any Restricted Subsidiary to, create, assume, incur or suffer to
exist:
- - any Lien upon any stock or indebtedness of any Restricted Subsidiary, whether
owned on the date of the indenture or thereafter acquired, to secure any
Indebtedness of UnitedHealth Group or any other person (other than the new
notes); or
- - any Lien upon any Principal Property, whether owned or leased on the date of
the indenture, or thereafter acquired, to secure any Indebtedness of
UnitedHealth Group or any other person (other than the new notes),
without in any such case making effective provision to secure all the
outstanding new notes equally and ratably with such Indebtedness.
The restriction referred to in the preceding paragraph does not include the
following Liens ("Permitted Liens"):
- - any Lien upon property, stock or indebtedness of any entity existing at the
time such entity becomes a Restricted Subsidiary;
- - any Lien upon property, stock or indebtedness existing at the time of the
acquisition thereof by UnitedHealth Group or a Restricted Subsidiary (whether
directly or by merger, consolidation or otherwise) or granted to secure
payment of any part of the purchase price thereof or granted to secure any
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Indebtedness incurred to finance the purchase thereof (provided that such
Indebtedness is incurred before, concurrently with or within 270 days after
the completion of such purchase);
- - any Lien upon property to secure any part of the cost of development,
construction, alteration, repair or improvement of such property or granted to
secure Indebtedness incurred to finance such cost (provided that such
Indebtedness is incurred before, concurrently with or within 270 days after
the completion of such development, construction, alteration, repair or
improvement);
- - any Lien securing Indebtedness of a Restricted Subsidiary owing to
UnitedHealth Group or to another Restricted Subsidiary;
- - any Lien existing on the date of initial issuance of the new notes;
- - any Lien on property of UnitedHealth Group or a Restricted Subsidiary in favor
of the United States of America or any State or political subdivision thereof,
or in favor of any other country or any political subdivision thereof, to
secure payment pursuant to any contract or statute, rule or regulation; and
- - any extension, renewal or replacement, in whole or in part, of any Lien
referred to in the foregoing six bullet points; provided, however, that the
principal amount of Indebtedness secured thereby shall not exceed the
principal amount of Indebtedness so secured at the time of such extension,
renewal or replacement; and provided, further, that such Lien shall be limited
to all or part of the property which was subject to the Lien so extended,
renewed or replaced.
Notwithstanding the two preceding paragraphs, UnitedHealth Group may, and may
permit any Restricted Subsidiary to, create, assume, incur or suffer to exist
any Lien upon any stock or indebtedness of any Restricted Subsidiary or upon any
Principal Property without equally and ratably securing the new notes. The
foregoing will only be permitted if the aggregate amount of all Indebtedness
then outstanding secured by such Lien and all similar Liens does not exceed 10%
of the Consolidated Net Worth of UnitedHealth Group as of the most recent
quarterly consolidated balance sheet of UnitedHealth Group prepared in
accordance with GAAP; provided, that Indebtedness secured by Permitted Liens
shall not be included in the amount of such secured Indebtedness.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. The indenture provides that we may
not merge with another company or sell or lease all of our property to another
company unless:
- - We are the continuing corporation, or the successor corporation is a domestic
corporation and expressly assumes the payment of principal and interest on the
new notes and the performance and observance of all the covenants and
conditions to the indenture binding on us;
- - immediately after the transaction, we, or our successor corporation, is not in
default in the performance of a covenant or condition in the indenture; and
- - We, or our successor corporation, will have Consolidated Net Worth immediately
after the transaction equal to or greater than our Consolidated Net Worth
immediately preceding the transaction.
REPORTS. The indenture provides that so long as any new notes are outstanding,
we will file with the trustee and furnish to the holders of new notes all
current, quarterly and annual reports on Forms 8-K, 10-Q and 10-K and all proxy
statements that we file with the SEC. If we no longer are subject to Section 13
or 15(d) of the Exchange Act, we will not be obligated to provide these reports
to the trustee and holders.
TRUSTEE. The Bank of New York will serve as trustee with respect to the new
notes.
ABSENCE OF CERTAIN COVENANTS. The indenture does not contain provisions
permitting the holders of new notes to require us to repurchase or redeem the
new notes in the event of a takeover, recapitalization or similar restructuring,
highly leveraged transaction, or downgrading of our debt ratings. We are not
required to make mandatory redemption or sinking fund payments with respect to
the new notes.
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EVENTS OF DEFAULT; REMEDIES
The indenture provides that each of the following constitutes an event of
default with respect to the new notes of any series issued under the indenture:
- - failure to pay interest on new notes for 30 days after payment is due;
- - failure to pay the principal of or premium, if any, on any new notes when due;
- - failure by UnitedHealth Group to comply with the provisions described above
under the heading "-- CERTAIN COVENANTS -- MERGER, CONSOLIDATION, OR SALE OF
ASSETS;"
- - failure by UnitedHealth Group to comply with any of its other agreements in
the indenture or the new notes for 60 days after notice from the trustee or
holders of at least 25% of the principal amount of the outstanding new notes;
and
- - certain events of bankruptcy or insolvency with respect to UnitedHealth Group
or any of its Subsidiaries.
If an event of default under the indenture occurs on new notes and continues,
the trustee or holders of at least 25% of the new notes may declare the
principal amount of all new notes to be due and payable immediately. Under
certain circumstances, holders of a majority of the new notes may rescind that
declaration.
Notwithstanding the foregoing, in the case of an event of default arising from
certain events of bankruptcy or insolvency with respect to UnitedHealth Group or
any of its Subsidiaries, all principal, premium, if any, and interest on new
notes will become due and payable without further action or notice. The trustee
may withhold from holders of the new notes notice of any continuing default or
event of default under the indenture (except a default or event of default in
payment on any new notes) if it determines that withholding notice is in their
best interest.
The holders of not less than a majority in principal amount of the outstanding
new notes by written notice to the trustee may waive an existing default or
event of default with respect to the new notes and its consequences. However,
such waiver does not apply to a continuing default or event of default in the
payment of the principal of, premium, if any, or interest on any new notes held
by a nonconsenting holder (other than a rescission of acceleration of such new
notes by the holders of at least a majority in principal amount of such new
notes and a waiver of the payment default resulting from such acceleration).
Upon any such waiver, such default shall cease to exist, and any event of
default with respect to the new notes arising from such default shall be deemed
to have been cured; but no such waiver shall extend to any subsequent or other
default or impair any future right with respect to such default.
Holders of a majority in principal amount of the outstanding new notes may
direct the time, method and place of conducting any proceeding for any remedy
available to, or exercising any trust or power conferred on, the trustee with
respect to the new notes. However, the trustee may refuse to follow any
direction that conflicts with law or the indenture that the trustee determines
may be unduly prejudicial to the rights of other holders of new notes or that
may involve the trustee in personal liability. The trustee may take any other
action which it deems proper which is not inconsistent with any such direction.
A holder of any new notes will have the right to institute any proceeding with
respect to the indenture or for any remedy only if:
- - the holder gives written notice to the trustee of a continuing event of
default under the indenture with respect to the new notes;
- - the holders of at least 25% in principal amount of the outstanding new notes
make a written request to the trustee to pursue the remedy;
- - such holder or holders offer and, if requested, provide the trustee indemnity
satisfactory to the trustee against any loss, liability or expense;
- - the trustee does not comply with the request within 60 days after receiving
the request and the offer and, if requested, the provision of indemnity; and
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- - the trustee has not received directions inconsistent with such request from
the holders of a majority in principal amount of the outstanding new notes
during such 60-day period.
The indenture also provides that a holder may not use the indenture to prejudice
the rights of another holder or to obtain a preference or priority over another
holder.
We are required to deliver to the trustee an annual certificate, signed by an
officer, about any default by us under any provisions of the indenture.
DEFEASANCE PROVISIONS
The indenture provides that, subject to certain limitations,
- - UnitedHealth Group shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding new notes, and to have satisfied
all its other obligations under the new notes and the indenture as it relates
to the new notes ("legal defeasance") and
- - UnitedHealth Group may omit to comply with certain restrictive covenants under
the indenture and shall have no liability in respect of any term, condition or
limitation set forth in any such restrictive covenant, and such omission to
comply shall not constitute a default or an event of default with respect to
the new notes under the indenture ("covenant defeasance"),
provided that the following conditions shall have been satisfied:
- - UnitedHealth Group deposits with the trustee, in trust, sufficient money or
government obligations to pay the principal, interest, any premium and other
sums due on the new notes on the date such payments are due under the
indenture and the terms of the new notes;
- - No event of default or default under the indenture shall have occurred on the
date of the deposit;
- - UnitedHealth Group shall have delivered to the trustee an opinion of counsel
which states that (i) holders of new notes will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and (ii)
after the 91st day following the deposit, the deposited funds will not be
subject to the effect of any applicable bankruptcy law;
- - The defeasance shall not result in a breach or violation of, or constitute a
default under the indenture or any other material agreement or instrument to
which UnitedHealth Group is a party or by which UnitedHealth Group is bound;
- - UnitedHealth Group shall have delivered an Officers' Certificate that states
that (i) the deposit was not made with the intent of preferring the holders of
the new notes to be defeased over other creditors of UnitedHealth Group and
(ii) all conditions precedent applicable to the legal defeasance or the
covenant defeasance, as the case may be, have been complied with.
MODIFICATION AND AMENDMENT OF INDENTURE
Under the indenture, UnitedHealth Group's rights and obligations and the rights
of the holders of new notes may be changed. Certain changes require the consent
of the holders of not less than a majority in aggregate principal amount of the
outstanding new notes, voting as one class. The following changes, however, may
not be made without the consent of each holder of the outstanding new notes:
- - changes to the stated maturity date of the principal or any interest
installment;
- - reductions in the principal amount or interest due;
- - changes to the place of payment or form of currency regarding payment of
principal;
- - impairment of the right to institute suit for the enforcement of payment;
- - reduction of the stated percentage of holders necessary to modify the
indenture; or
- - modifications to any of these requirements, or modifications to reduce the
percentage of outstanding new notes necessary to waive
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compliance with certain provisions of the indenture or to waive certain
defaults.
REGARDING THE TRUSTEE
The indenture provides that before an event of default under the indenture, the
trustee is required to perform only the specific duties stated in the indenture
and, after an event of default under the indenture, must exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs. In the absence of bad faith on its part, the trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
trustee and conforming to the requirements of the indenture. However, the
trustee is required to examine such certificates and opinions to determine
whether or not they conform to the requirements of the indenture.
The indenture provides that the trustee may resign at any time or may be removed
by the holders of a majority in principal amount of the outstanding new notes by
notice delivered to the trustee and UnitedHealth Group. The indenture also
provides that the trustee must resign if it ceases to meet certain
qualifications set forth in the indenture. In the event of the trustee's
resignation or removal, UnitedHealth Group or, if it fails to act, the holders
of a majority in principal amount of the outstanding new notes, may appoint a
successor trustee.
The Trust Indenture Act contains limitations on the rights of the trustee,
should it become a creditor of the company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The trustee is permitted to engage in
other transactions with the company and its subsidiaries from time to time,
provided that if the trustee acquires any conflicting interest it must eliminate
such conflict upon the occurrence of an event of default, or else resign.
GOVERNING LAW
The indenture and the new notes will be governed by, and construed in accordance
with, the laws of the State of New York.
GLOBAL NEW NOTES
The new notes will be issued in whole or in part in the form of one or more
global securities that will be deposited with, or on behalf of Cede & Co., as
nominee of DTC. See "-- BOOK-ENTRY ISSUANCE."
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for the new notes. The new notes will be
deposited with, and issued only as fully-registered securities registered in the
name of, Cede & Co. (DTC's nominee) or will remain in the custody of the trustee
pursuant to a FAST Balance Certificate Agreement between DTC and the trustee.
One or more fully registered global certificates will be issued for the new
notes, represent all of the new notes, and be deposited with DTC.
DTC is a limited purpose Trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered under the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants deposit with DTC. DTC also facilitates the
settlement among participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thus eliminating the need for physical
movement of securities certificates. "Direct participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its direct participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
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companies that clear through or maintain custodial relationships with direct
participants, either directly or indirectly ("indirect participants"). The rules
applicable to DTC and its participants are on file with the SEC.
Exchanges of old notes for new notes within the DTC system must be made by or
through direct participants, which will receive a credit for the new notes on
DTC's records. The ownership interest of each holder of new notes ("beneficial
owner") will in turn be recorded on the direct and indirect participants'
records. Beneficial owners will not receive written confirmation from DTC of
their interests in new notes, but are expected to receive written confirmations
providing details of the transactions in, as well as periodic statements of
their holdings of, the new notes from the direct or indirect participants
through which the beneficial owners tendered their old notes for exchange.
Transfers of ownership interests in the new notes will be accomplished by
entries made on the books of participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interests in new notes, except in the event that use of the book-entry system
for the new notes is discontinued.
DTC has no knowledge of the actual beneficial owners of the new notes; DTC's
records reflect only the identity of the direct participants to whose accounts
the new notes are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct participants, by
direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners and the voting rights of direct
participants, indirect participants and beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to the new notes is limited to the holders of
record of the new notes, in those instances in which a vote is required, neither
DTC nor Cede & Co. will itself consent or vote with respect to new notes.
Instead, the company expects that DTC will authorize its direct participants to
take the required action and the direct participants will, in turn, authorize
holders who beneficially own new notes through the direct participants to take
the required action.
The trustee will make payments of interest and principal on the new notes to
DTC. DTC's practice is to credit direct participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices and will be the responsibility of
such participant, DTC, the trustee or UnitedHealth Group, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of interest and principal to DTC is the responsibility of the trustee,
disbursement of such payments to direct participants is the responsibility of
DTC, and disbursements of such payments to the beneficial owners is the
responsibility of direct and indirect participants.
DTC may discontinue providing its services as securities depositary with respect
to the new notes at any time by giving reasonable notice to the trustee and
UnitedHealth Group. In the event that a successor securities depositary is not
obtained, the company will print and deliver definitive certificates
representing the new notes. UnitedHealth Group, at its option, may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary). After an event of default, the holders of a majority in
aggregate principal amount of the new notes under the indenture may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
the company will print and deliver definitive certificates representing the new
notes.
We have obtained the information in this section concerning DTC and DTC's
book-entry system from sources that the trustee and UnitedHealth Group believe
to be accurate, but UnitedHealth
40
<PAGE>
Group assumes no responsibility for the accuracy of such information.
UnitedHealth Group has no responsibility for the performance by DTC or its
participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
DESCRIPTION OF OLD NOTES
The old notes were issued pursuant to the indenture. See SENIOR INDENTURE,
exhibit 4.1 to the registration statement. You should read the indenture for
additional information on the old notes.
The terms of the old notes are identical in all material respects to the new
notes, except that (i) the old notes have not been registered under the
Securities Act, are subject to certain restrictions on transfer and are entitled
to certain registration rights under the exchange and registration rights
agreement (which rights will terminate upon consummation of the exchange offer,
except under limited circumstances); and (ii) unlike the old notes, the new
notes are not subject to additional interest in certain circumstances. In
addition, the old notes and the new notes will constitute a single series of
debt securities under the indenture. See "DESCRIPTION OF NEW NOTES -- GENERAL."
Accordingly, holders of old notes should review the information set forth under
"THE EXCHANGE OFFER -- CONSEQUENCES OF FAILURE TO EXCHANGE."
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS
The following describes the principal United States federal income tax
consequences to a holder of new notes who is (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity treated as a
corporation or a partnership for United States federal income tax purposes
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia (unless, in the case of a partnership,
Treasury regulations provide otherwise), (iii) an estate whose income is subject
to United States federal income tax regardless of its source, or (iv) a trust if
a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, as well as certain
trusts in existence on August 20, 1996, and treated as United States persons
before such date, that elect to continue to be treated as United States persons.
The following summary deals only with new notes held as capital assets by
purchasers of old notes at the issue price and not with special classes of
holders, such as dealers in securities or currencies, financial institutions,
life insurance companies, persons holding new notes as a hedge against or which
are hedged against currency risks, and persons whose functional currency is not
the U.S. dollar. A person considering the exchange of old notes for new notes
should consult his or her own tax advisor concerning these matters and the tax
treatment under foreign, state and local tax laws and regulations.
This summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied retroactively in a manner that
could cause the tax consequences to vary substantially from the consequences
described below, possibly adversely affecting a beneficial owner of the new
notes. The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the federal income tax
treatment of the purchase, ownership and disposition of the new notes may differ
from the treatment described below.
EXCHANGE OF NOTES
The exchange of old notes for new notes should not be a taxable event for
federal income tax purposes. The exchange of old notes for new notes pursuant to
the exchange offer should not be treated as an "exchange" for federal income tax
purposes because the new notes should not be considered to differ materially in
kind or extent from the old notes and because the exchange will occur by
operation of the terms of the old notes. If, however, the exchange of the
41
<PAGE>
old notes for new notes were treated as an exchange for federal income tax
purposes, such exchange should constitute a recapitalization for federal income
tax purposes. Accordingly, the new notes should have the same issue price as the
old notes, and a holder should have the same adjusted basis and holding period
in the new notes as the holder had in the old notes immediately before the
exchange.
INTEREST
As a general rule, interest paid or accrued on the new notes will be treated as
ordinary income to holders of new notes. A holder using the accrual method of
accounting for federal income tax purposes is required to include interest paid
or accrued on the new notes in ordinary income as such interest accrues, while a
holder using the cash receipts and disbursements method of accounting for
federal income tax purposes must include such interest in ordinary income when
payments are received (or made available for receipt) by such holder.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A holder's tax basis in a new note will generally be the same as the holder's
basis in the old note surrendered for the new note. Upon the sale, exchange or
retirement of a new note, a holder will generally recognize gain or loss equal
to the difference between the amount realized (not including any amounts
attributable to accrued and unpaid interest) and the holder's tax basis of the
note. Long-term capital gain of a non-corporate United States holder is
generally subject to a maximum tax rate of 20% in respect of property held for
more than one year.
WITHHOLDING TAXES AND REPORTING REQUIREMENTS
Interest payments, accrual of original issue discount and payments of principal
and any premium with respect to a note will be reported to the extent required
by the Code to holders and the IRS. Such amounts will ordinarily not be subject
to withholding of federal income tax. However, a backup withholding tax at a
rate of 31% may apply to such payments if a holder fails to supply the company
or its agent with the holder's taxpayer identification number or to report all
interest and dividends required to be shown on its federal income tax returns.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in connection
with the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by participating
broker-dealers during the period referred to below in connection with resales of
new notes received in exchange for old notes if such old notes were acquired by
such participating broker-dealers for their own accounts as a result of
market-making activities or other trading activities. The company has agreed
that this prospectus, as it may be amended or supplemented from time to time,
may be used by a participating broker-dealer in connection with resales of such
new notes for a period ending 180 days after the expiration date (subject to
extension under certain limited circumstances described herein) or, if earlier,
when all such new notes have been disposed of by such participating
broker-dealer. See "THE EXCHANGE OFFER -- RESALES OF NEW NOTES."
The company will not receive any cash proceeds from the issuance of the new
notes offered hereby. New notes received by broker-dealers for their own
accounts in connection with the exchange offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such new notes.
Any broker-dealer that resells new notes that were received by it for its own
account in connection with the exchange offer and any
42
<PAGE>
broker or dealer that participates in a distribution of such new notes may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any such resale of new notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by acknowledging that
it will deliver, and by delivering, a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The company has agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the new notes) other
than commissions or concessions of any broker-dealers and will indemnify the
holders of the new notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF NEW NOTES
Dorsey & Whitney LLP has passed upon the validity of the new notes offered by
this prospectus.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996, and the
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997, of United
HealthCare Corporation incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, which is incorporated herein by reference in reliance upon the
authority of said firm as experts in giving said reports.
With respect to the unaudited condensed interim financial information for the
quarters ended March 31, June 30, and September 30, 1998 and 1997 of United
HealthCare Corporation incorporated by reference in this prospectus and
elsewhere in the registration statement, Arthur Andersen LLP has applied limited
procedures in accordance with professional standards for a review of that
information. However, their separate reports thereon state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on that information should
be restricted in light of the limited nature of the review procedures applied.
In addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act for their reports on the unaudited condensed
interim financial information because these reports are not "reports" or "parts"
of the prospectus or the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
43
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Business Corporation Act provides that a
corporation shall indemnify any person who was or is made or is threatened to be
made a party to any proceeding, by reason of the former or present official
capacity (as defined) of such person, against judgments, penalties, fines,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding if
certain statutory standards are met. "Proceeding" means a threatened, pending or
complete civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of the corporation. Section
302A.521 contains detailed terms regarding such right of indemnification and
reference is made thereto for a complete statement of such indemnification
rights.
Our Bylaws provide for the indemnification of such persons, for such
expenses and liabilities, in such manner, under such circumstances and to such
extent of permitted by Section 302A.521 of the Minnesota Business Corporation
Act.
We maintain a standard policy of officers' and directors' insurance.
ITEM 21. EXHIBITS
<TABLE>
<C> <S>
4.1 Senior Indenture dated as of November 15, 1998, between United
HealthCare and the Bank of New York. (Incorporated by reference to
Registration Statement on Form S-3 filed by United HealthCare on
October 22, 1998 (file no. 333-66013)).
4.2 Exchange and Registration Rights Agreement, dated as of November 19,
1998, between United HealthCare and Goldman, Sachs & Co. as
representative of the Initial Purchasers.
*4.3 Form of Security for 6.60% Senior Notes due 2003 originally issued by
United HealthCare on November 24, 1998.
*4.4 Form of Security for 6.60% Senior Notes due 2003 to be issued by the
Company and registered under the Securities Act.
*5.1 Opinion of Dorsey & Whitney LLP re legality.
12.1 Computation of Ratios of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Information.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24 Powers of Attorney.
*25 Form T--1 Statement of Eligibility of The Bank of New York to act as
Trustee under the Senior Indenture.
*99.1 Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agency Agreement.
</TABLE>
- ------------------------
* To be filed by amendment
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
REG. S-K, ITEM 512(B) UNDERTAKING: The undersigned registrant hereby
undertakes that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
REG. S-K, ITEM 512(H) UNDERTAKING: Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
FORM S-4, ITEM 22(B) UNDERTAKING: The undersigned registrant hereby
undertakes to respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
FORM S-4, ITEM 22(C) UNDERTAKING: The undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minnetonka, State of
Minnesota, on January 22, 1999.
UNITED HEALTHCARE CORPORATION
By /s/ DAVID J. LUBBEN
-----------------------------------------
David J. Lubben, SECRETARY
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
on January 22, 1999.
SIGNATURE TITLE
- ------------------------------ ---------------------------
President, Chief Executive
/s/ WILLIAM W. MCGUIRE Officer and Director
- ------------------------------ (principal executive
William W. McGuire, M.D. officer)
/s/ ARNOLD H. KAPLAN Chief Financial Officer
- ------------------------------ (principal financial
Arnold H. Kaplan officer)
/s/ PATRICK J. ERLANDSON Chief Accounting Officer
- ------------------------------ (principal accounting
Patrick J. Erlandson officer)
Director
- ------------------------------
William C. Ballard, Jr.
* Director
- ------------------------------
Richard T. Burke
Director
- ------------------------------
James A. Johnson
Director
- ------------------------------
Thomas H. Kean
* Director
- ------------------------------
Douglas W. Leatherdale
II-3
<PAGE>
SIGNATURE TITLE
- ------------------------------ ---------------------------
- ------------------------------ Director
Walter F. Mondale
* Director
- ------------------------------
Mary O. Mundinger
* Director
- ------------------------------
Robert L. Ryan
* Director
- ------------------------------
William G. Spears
* Director
- ------------------------------
Gail R. Wilensky
<TABLE>
<S> <C> <C> <C>
*By: /s/ DAVID J. LUBBEN
-------------------------
David J. Lubben
AS ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ----
<C> <S> <C>
4.1 Senior Indenture dated as of November 15, 1998, between
United HealthCare and the Bank of New York. (Incorporated by
reference to Registration Statement on Form S-3 filed by
United HealthCare on October 22, 1998 (file no. 333-66013)).
4.2 Exchange and Registration Rights Agreement, dated as of
November 19, 1998, between United HealthCare and Goldman,
Sachs & Co. as representative of the Initial Purchasers.
*4.3 Form of Security for 6.60% Senior Notes due 2003 originally
issued by United HealthCare on November 24, 1998.
*4.4 Form of Security for 6.60% Senior Notes due 2003 to be
issued by United HealthCare and registered under the
Securities Act.
*5.1 Opinion of Dorsey & Whitney LLP re legality.
12.1 Computation of Ratios of Earnings to Fixed Charges.
15.1 Letter re Unaudited Interim Financial Information.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1).
24 Powers of Attorney.
*25 Form T--1 Statement of Eligibility of The Bank of New York
to act as Trustee under the Senior Indenture.
*99.1 Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agency Agreement.
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
UNITED HEALTHCARE CORPORATION
6.60% NOTES DUE DECEMBER 1, 2003
-------
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
November 19, 1998
Goldman, Sachs & Co.,
As representative of the several Purchasers
named in Schedule I to the Purchase Agreement
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
United HealthCare Corporation, a Minnesota corporation (the "Company"),
proposes to issue and sell to the Purchasers (as defined herein) upon the terms
set forth in the Purchase Agreement (as defined herein) its 6.60% Notes due
December 1, 2003. As an inducement to the Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Company agrees with the Purchasers for the benefit of
holders (as defined herein) from time to time of the Registrable Securities (as
defined herein) as follows:
1. CERTAIN DEFINITIONS. For purposes of this Exchange and
Registration Rights Agreement, the following terms shall have the following
respective meanings:
"BASE INTEREST" shall mean the interest that would otherwise accrue on
the Securities under the terms thereof and the Indenture, without giving
effect to the provisions of this Agreement.
The term "BROKER-DEALER" shall mean any broker or dealer registered with
the Commission under the Exchange Act.
"CLOSING DATE" shall mean the date on which the Securities are initially
issued.
"COMMISSION" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"EFFECTIVE TIME," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
<PAGE>
"ELECTING HOLDER" shall mean any holder of Registrable Securities that
has returned a completed and signed Notice and Questionnaire to the Company
in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"EXCHANGE OFFER" shall have the meaning assigned thereto in Section 2(a)
hereof.
"EXCHANGE REGISTRATION" shall have the meaning assigned thereto in
Section 3(c) hereof.
"EXCHANGE REGISTRATION STATEMENT" shall have the meaning assigned
thereto in Section 2(a) hereof.
"EXCHANGE SECURITIES" shall have the meaning assigned thereto in Section
2(a) hereof.
The term "HOLDER" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"INDENTURE" shall mean the Indenture, to be dated as of November 15,
1998, between the Company and The Bank of New York, as Trustee, as the same
shall be amended from time to time.
"NOTICE AND QUESTIONNAIRE" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
The term "PERSON" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement, dated as of
November 19, 1998, between the Purchasers and the Company relating to the
Securities.
"REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED, HOWEVER,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) hereof (PROVIDED that any Exchange Security that, pursuant to
the last two sentences of Section 2(a), is included in a prospectus for use
in connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 until resale of
such Registrable Security has been effected within the 180-day period
referred to in Section 2(a)); (ii) in the circumstances contemplated by
Section 2(b) hereof, a Shelf Registration Statement registering such
Security under the Securities Act has been declared or becomes effective and
such Security has been sold or otherwise transferred by the holder thereof
pursuant to and in a manner contemplated by such effective Shelf
Registration Statement; (iii) such Security is sold pursuant to Rule 144
under circumstances in which any legend borne by such Security relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture; (iv) such
Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or
(v) such Security shall cease to be outstanding.
2
<PAGE>
"REGISTRATION DEFAULT" shall have the meaning assigned thereto in
Section 2(c) hereof.
"REGISTRATION EXPENSES" shall have the meaning assigned thereto in
Section 4 hereof.
"RESALE PERIOD" shall have the meaning assigned thereto in Section 2(a)
hereof.
"RESTRICTED HOLDER" shall mean (i) a holder that is an affiliate of the
Company within the meaning of Rule 405, (ii) a holder who acquires Exchange
Securities outside the ordinary course of such holder's business, (iii) a
holder who has arrangements or understandings with any person to participate
in the Exchange Offer for the purpose of distributing Exchange Securities
and (iv) a holder that is a broker-dealer, but only with respect to Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer directly
from the Company.
"RULE 144," "RULE 405" AND "RULE 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"SECURITIES" shall mean, collectively, the 6.60% Notes due December 1,
2003 of the Company to be issued and sold to the Purchasers, and securities
issued in exchange therefor or in lieu thereof pursuant to the Indenture.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any successor
thereto, as the same shall be amended from time to time.
"SHELF REGISTRATION" shall have the meaning assigned thereto in Section
2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall have the meaning assigned thereto
in Section 2(b) hereof.
"SPECIAL INTEREST" shall have the meaning assigned thereto in
Section 2(c) hereof.
"TRUST INDENTURE ACT" shall mean the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. REGISTRATION UNDER THE SECURITIES ACT.
(a) Except as set forth in Section 2(b) below, the Company agrees to
file under the Securities Act, as soon as practicable, but no later than 60
days after the Closing Date, a registration statement relating to an offer
to exchange (such registration statement, the "Exchange Registration
Statement", and such offer, the "Exchange Offer") any and all of the
Securities for a like aggregate principal amount of debt securities issued
by the Company, which debt securities are substantially identical to the
Securities (and are entitled to the
3
<PAGE>
benefits of a trust indenture which is substantially identical to the
Indenture or is the Indenture and which has been qualified under the Trust
Indenture Act), except that they have been registered pursuant to an
effective registration statement under the Securities Act and do not contain
provisions for the additional interest contemplated in Section 2(c) below
(such new debt securities hereinafter called "Exchange Securities"). The
Company agrees to use its best efforts to cause the Exchange Registration
Statement to become effective under the Securities Act as soon as
practicable, but no later than 180 days after the Closing Date. The Exchange
Offer will be registered under the Securities Act on the appropriate form
and will comply with all applicable tender offer rules and regulations under
the Exchange Act. The Company further agrees to use its best efforts to
commence and complete the Exchange Offer promptly, but no later than 45 days
after such registration statement has become effective, hold the Exchange
Offer open for at least 30 days and exchange Exchange Securities for all
Registrable Securities that have been properly tendered and not withdrawn on
or prior to the expiration of the Exchange Offer. The Exchange Offer will be
deemed to have been "completed" only if the debt securities received by
holders other than Restricted Holders in the Exchange Offer for Registrable
Securities are, upon receipt, transferable by each such holder without
restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of a substantial
majority of the States of the United States of America. The Exchange Offer
shall be deemed to have been completed upon the earlier to occur of (i) the
Company having exchanged the Exchange Securities for all outstanding
Registrable Securities pursuant to the Exchange Offer and (ii) the Company
having exchanged, pursuant to the Exchange Offer, Exchange Securities for
all Registrable Securities that have been properly tendered and not
withdrawn before the expiration of the Exchange Offer, which shall be on a
date that is at least 30 days following the commencement of the Exchange
Offer. The Company agrees (x) to include in the Exchange Registration
Statement a prospectus for use in any resales by any holder of Exchange
Securities that is a broker-dealer and (y) to keep such Exchange
Registration Statement effective for a period (the "Resale Period")
beginning when Exchange Securities are first issued in the Exchange Offer
and ending upon the earlier of the expiration of the 180th day after the
Exchange Offer has been completed or such time as such broker-dealers no
longer own any Registrable Securities. With respect to such Exchange
Registration Statement, such holders shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and
(e) hereof.
(b) If (i) on or prior to the time the Exchange Offer is completed
existing Commission interpretations are changed such that the debt
securities received by holders other than Restricted Holders in the Exchange
Offer for Registrable Securities are not or would not be, upon receipt,
transferable by each such holder without restriction under the Securities
Act, (ii) the Exchange Offer has not been completed within 180 days
following the Closing Date or (iii) the Exchange Offer is not available to
any holder of the Securities, the Company shall, in lieu of (or, in the case
of clause (iii), in addition to) conducting the Exchange Offer contemplated
by Section 2(a), file under the Securities Act as soon as practicable, but
no later than the later of 45 days after the time such obligation to file
arises, a "shelf" registration statement providing for the registration of,
and the sale on a continuous or delayed basis by the holders of, all of the
Registrable Securities, pursuant to Rule 415 or any similar rule that may be
adopted by the Commission (such filing, the "Shelf Registration" and such
registration statement, the "Shelf Registration Statement"). The Company
agrees to use its best efforts (x) to cause the Shelf Registration Statement
to become or be declared effective no later than 120 days after such Shelf
Registration Statement is filed and to keep such Shelf Registration
Statement continuously effective for a
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period ending on the earlier of the second anniversary of the Closing Date
or such time as there are no longer any Registrable Securities outstanding,
PROVIDED, HOWEVER, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the prospectus
forming a part thereof for resales of Registrable Securities unless such
holder is an Electing Holder, and (y) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of
Registrable Securities that is not then an Electing Holder, to take any
action reasonably necessary to enable such holder to use the prospectus
forming a part thereof for resales of Registrable Securities, including,
without limitation, any action necessary to identify such holder as a
selling securityholder in the Shelf Registration Statement, PROVIDED,
HOWEVER, that nothing in this Clause (y) shall relieve any such holder of
the obligation to return a completed and signed Notice and Questionnaire to
the Company in accordance with Section 3(d)(iii) hereof. The Company further
agrees to supplement or make amendments to the Shelf Registration Statement,
as and when required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or rules and regulations thereunder for
shelf registration, and the Company agrees to furnish to each Electing
Holder copies of any such supplement or amendment prior to its being used or
promptly following its filing with the Commission.
(c) In the event that (i) the Company has not filed the Exchange
Registration Statement or Shelf Registration Statement on or before the date
on which such registration statement is required to be filed pursuant to
Section 2(a) or 2(b), respectively, or (ii) such Exchange Registration
Statement or Shelf Registration Statement has not become effective or been
declared effective by the Commission on or before the date on which such
registration statement is required to become or be declared effective
pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer
has not been completed within 45 days after the initial effective date of
the Exchange Registration Statement relating to the Exchange Offer (if the
Exchange Offer is then required to be made) or (iv) any Exchange
Registration Statement or Shelf Registration Statement required by Section
2(a) or 2(b) hereof is filed and declared effective but shall thereafter
either be withdrawn by the Company or shall become subject to an effective
stop order issued pursuant to Section 8(d) of the Securities Act suspending
the effectiveness of such registration statement (except as specifically
permitted herein) without being succeeded immediately by an additional
registration statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default" and each
period during which a Registration Default has occurred and is continuing, a
"Registration Default Period"), then, as liquidated damages for such
Registration Default, subject to the provisions of Section 9(b), special
interest ("Special Interest"), in addition to the Base Interest, shall
accrue at a per annum rate of 0.25% for the duration of the Registration
Default Period.
(d) The Company shall take all actions necessary or advisable to be
taken by it to ensure that the transactions contemplated herein are effected
as so contemplated.
(e) Any reference herein to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein
to any post-effective amendment to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time.
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3. REGISTRATION PROCEDURES.
If the Company files a registration statement pursuant to
Section 2(a) or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment
of a new trustee under the Indenture, the Company shall appoint a new
trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable
but no later than 60 days after the Closing Date, an Exchange
Registration Statement on any form which may be utilized by the
Company and which shall permit the Exchange Offer and resales of
Exchange Securities by broker-dealers during the Resale Period to be
effected as contemplated by Section 2(a), and use its best efforts to
cause such Exchange Registration Statement to become effective as soon
as practicable thereafter, but no later than 180 days after the
Closing Date;
(ii) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Exchange Registration
Statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such Exchange Registration
Statement for the periods and purposes contemplated in Section 2(a)
hereof and as may be required by the applicable rules and regulations
of the Commission and the instructions applicable to the form of such
Exchange Registration Statement, and promptly provide each
broker-dealer holding Exchange Securities with such number of copies
of the prospectus included therein (as then amended or supplemented),
in conformity in all material respects with the requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder, as such broker-dealer
reasonably may request prior to the expiration of the Resale Period,
for use in connection with resales of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration
statement, and confirm such advice in writing, (A) when such Exchange
Registration Statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Exchange Registration Statement
or any post-effective amendment, when the same has become effective,
(B) of any comments by the Commission and by the blue sky or
securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
Exchange Registration Statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Registration Statement
or the initiation or threatening of any proceedings for that purpose,
(D) if at any time the representations and warranties of the Company
contemplated by
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Section 5 cease to be true and correct in all material respects, (E)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Exchange Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding
for such purpose, or (F) at any time during the Resale Period when a
prospectus is required to be delivered under the Securities Act, that
such Exchange Registration Statement, prospectus, prospectus amendment
or supplement or post-effective amendment does not conform in all
material respects to the applicable requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder or contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(F) above, to notify any broker-dealers holding
Exchange Securities, without delay prepare and furnish to each such
holder a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to purchasers of such
Exchange Securities during the Resale Period, such prospectus shall
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Exchange Registration Statement
or any post-effective amendment thereto at the earliest practicable
date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a) no later than the
commencement of the Exchange Offer, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such
jurisdictions until the expiration of the Resale Period and (C) take
any and all other actions as may be reasonably necessary or advisable
to enable each broker-dealer holding Exchange Securities to consummate
the disposition thereof in such jurisdictions; PROVIDED, HOWEVER, that
the Company shall not be required for any such purpose to (1) qualify
as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this
Section 3(c)(vi), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its articles of
incorporation or by-laws or any agreement between it and its
stockholders;
(vii) use its best efforts to obtain the consent or approval of
each governmental agency or authority, whether federal, state or
local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Securities by
broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not
later than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable, but no later
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<PAGE>
than eighteen months after the effective date of such Exchange
Registration Statement, an earning statement of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the
Shelf Registration, if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable
but in any case within the time periods specified in Section 2(b), a
Shelf Registration Statement on any form which may be utilized by the
Company and which shall register all of the Registrable Securities for
resale by the holders thereof in accordance with such method or
methods of disposition as may be specified by such of the holders as,
from time to time, may be Electing Holders and use its best efforts to
cause such Shelf Registration Statement to become effective as soon as
practicable but in any case within the time periods specified in
Section 2(b);
(ii) not less than 30 calendar days prior to the Effective Time
of the Shelf Registration Statement, mail the Notice and Questionnaire
to the holders of Registrable Securities; no holder shall be entitled
to be named as a selling securityholder in the Shelf Registration
Statement as of the Effective Time, and no holder shall be entitled to
use the prospectus forming a part thereof for resales of Registrable
Securities at any time, unless such holder has returned a completed
and signed Notice and Questionnaire to the Company by the deadline for
response set forth therein; PROVIDED, HOWEVER, holders of Registrable
Securities shall have at least 28 calendar days from the date on which
the Notice and Questionnaire is first mailed to such holders to return
a completed and signed Notice and Questionnaire to the Company;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; PROVIDED that the Company shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed and
signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Shelf Registration Statement
and the prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Shelf Registration Statement for
the period specified in Section 2(b) hereof and as may be required by
the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Shelf Registration
Statement, and furnish to the Electing Holders copies of any such
supplement or amendment simultaneously with or prior to its being used
or filed with the Commission;
(v) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities
covered by such Shelf Registration Statement in accordance with the
intended methods of disposition by the Electing Holders provided for
in such Shelf Registration Statement;
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<PAGE>
(vi) provide (A) the Electing Holders, (B) the underwriters
(which term, for purposes of this Exchange and Registration Rights
Agreement, shall include a person deemed to be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act), if any,
thereof, (C) any sales or placement agent therefor, (D) counsel for
any such underwriter or agent and (E) not more than one counsel for
all the Electing Holders the opportunity to participate in the
preparation of such Shelf Registration Statement, each prospectus
included therein or filed with the Commission and each amendment or
supplement thereto;
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal
place of business or such other reasonable place for inspection by the
persons referred to in Section 3(d)(vi) who shall certify to the
Company that they have a current intention to sell the Registrable
Securities pursuant to the Shelf Registration such financial and other
information and books and records of the Company, and cause the
officers, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation
within the meaning of Section 11 of the Securities Act; PROVIDED,
HOWEVER, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential,
until such time as (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such registration
statement or otherwise, except by disclosure by such party in breach
of this Exchange and Registration Rights Agreement), or (B) such
person shall be required so to disclose such information pursuant to a
subpoena or order of any court or other governmental agency or body
having jurisdiction over the matter (subject to the requirements of
such order, and only after such person shall have given the Company
prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to
such Shelf Registration Statement or an amendment or supplement to
such prospectus in order that such Shelf Registration Statement,
prospectus, amendment or supplement, as the case may be, complies with
applicable requirements of the federal securities laws and the rules
and regulations of the Commission and does not contain an untrue
statement of a material fact or omit to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm such
advice in writing, (A) when such Shelf Registration Statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
Shelf Registration Statement or any post-effective amendment, when the
same has become effective, (B) of any comments by the Commission and
by the blue sky or securities commissioner or regulator of any state
with respect thereto or any request by the Commission for amendments
or supplements to such Shelf Registration Statement or prospectus or
for additional information, (C) of the issuance by the Commission of
any stop order suspending the effectiveness of such Shelf
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<PAGE>
Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) if at any time the representations
and warranties of the Company contemplated by Section 3(d)(xvii) or
Section 5 cease to be true and correct in all material respects, (E)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, or (F) if at any time when a prospectus is required
to be delivered under the Securities Act, that such Shelf Registration
Statement, prospectus, prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to
the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances then existing;
(ix) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(x) if requested by any managing underwriter or underwriters,
any placement or sales agent or any Electing Holder, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Electing Holder specifies should be
included therein relating to the terms of the sale of such Registrable
Securities, including information with respect to the principal amount
of Registrable Securities being sold by such Electing Holder or agent
or to any underwriters, the name and description of such Electing
Holder, agent or underwriter, the offering price of such Registrable
Securities and any discount, commission or other compensation payable
in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of
the Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(vi) an executed copy
(or, in the case of an Electing Holder, a conformed copy) of such
Shelf Registration Statement, each such amendment and supplement
thereto (in each case including all exhibits thereto (in the case of
an Electing Holder of Registrable Securities, upon request) and
documents incorporated by reference therein) and such number of copies
of such Shelf Registration Statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically so
requested by such Electing Holder, agent or underwriter, as the case
may be) and of the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus and any summary
prospectus), in conformity in all material respects with the
applicable requirements of the Securities Act and the Trust Indenture
Act and the rules and regulations of the Commission thereunder, and
such other documents, as such Electing Holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the
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Registrable Securities owned by such Electing Holder, offered or sold
by such agent or underwritten by such underwriter and to permit such
Electing Holder, agent and underwriter to satisfy the prospectus
delivery requirements of the Securities Act; and the Company hereby
consents to the use of such prospectus (including such preliminary and
summary prospectus) and any amendment or supplement thereto by each
such Electing Holder and by any such agent and underwriter, in each
case in the form most recently provided to such person by the Company,
in connection with the offering and sale of the Registrable Securities
covered by the prospectus (including such preliminary and summary
prospectus) or any supplement or amendment thereto;
(xii) use reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration
Statement under such securities laws or blue sky laws of such
jurisdictions as any Electing Holder and each placement or sales
agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution of Securities pursuant to such Shelf Registration
Statement and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; PROVIDED, HOWEVER, that
the Company shall not be required for any such purpose to (1) qualify
as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this
Section 3(d)(xii), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its articles of
incorporation or by-laws or any agreement between it and its
stockholders;
(xiii) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal,
state or local, which may be required to effect the Shelf Registration
or the offering or sale in connection therewith or to enable the
selling holder or holders to offer, or to consummate the disposition
of, their Registrable Securities;
(xiv) Unless any Registrable Securities shall be in book-entry
only form, cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates, if so required by any securities exchange
upon which any Registrable Securities are listed, shall be penned,
lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale
of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
(xvi) enter into not more than one underwriting agreement,
engagement letter, agency agreement, "best efforts" underwriting
agreement or similar agreement, as
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appropriate, including customary provisions relating to
indemnification and contribution, and take such other actions in
connection therewith as any Electing Holders aggregating at least 25%
in aggregate principal amount of the Registrable Securities at the
time outstanding shall request in order to expedite or facilitate the
disposition of such Registrable Securities;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into and whether or not any
portion of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent or
any other entity, (A) make such representations and warranties to the
Electing Holders and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as
are customarily made in connection with an offering of debt securities
pursuant to any appropriate agreement or to a registration statement
filed on the form applicable to the Shelf Registration; (B) obtain an
opinion or opinions of counsel to the Company (which may include the
Company's general counsel) in customary form and covering such
matters, of the type customarily covered by such an opinion, as the
managing underwriters, if any, or as any Electing Holders of at least
25% in aggregate principal amount of the Registrable Securities at the
time outstanding may reasonably request, addressed to such Electing
Holder or Electing Holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof and dated the effective
date of such Shelf Registration Statement (and if such Shelf
Registration Statement contemplates an underwritten offering of a part
or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it being agreed
that the matters to be covered by such opinion, subject to reasonable
qualifications and limitations, shall include the due incorporation
and good standing of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business
as foreign corporations; the due authorization, execution and delivery
of the relevant agreement of the type referred to in Section 3(d)(xvi)
hereof; the due authorization, execution, authentication and issuance,
and the validity and enforceability, of the Securities; the absence of
material legal or governmental proceedings involving the Company; the
absence of a breach by the Company or any of its subsidiaries of, or a
default under, material agreements binding upon the Company or any
subsidiary of the Company; the absence of governmental approvals
required to be obtained in connection with the Shelf Registration, the
offering and sale of the Registrable Securities, this Exchange and
Registration Rights Agreement or any agreement of the type referred to
in Section 3(d)(xvi) hereof, except such approvals as may be required
under state securities or blue sky laws; the material compliance as to
form of such Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and,
as of the date of the opinion and of the Shelf Registration Statement
or most recent post-effective amendment thereto, as the case may be,
such counsel has no reason to believe that such Shelf Registration
Statement and the prospectus included therein, as then amended or
supplemented, and the documents incorporated by reference therein (in
each case other than the financial statements and other financial
information contained therein) contains or contained an untrue
statement of a material fact or omits or omitted to state therein a
material fact necessary to make the statements therein not misleading
(in the case of such documents, in the light of the circumstances
existing at the time that such documents were filed with the
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Commission under the Exchange Act)); (C) obtain a "cold comfort"
letter or letters from the independent certified public accountants of
the Company addressed to the selling Electing Holders, the placement
or sales agent, if any, therefor or the underwriters, if any, thereof,
dated (i) the effective date of such Shelf Registration Statement and
(ii) the effective date of any prospectus supplement to the prospectus
included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such
prospectus (and, if such Shelf Registration Statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such Shelf Registration Statement or
post-effective amendment to such Shelf Registration Statement which
includes unaudited or audited financial statements as of a date or for
a period subsequent to that of the latest such statements included in
such prospectus, dated the date of the closing under the underwriting
agreement relating thereto), such letter or letters to be in customary
form and covering such matters of the type customarily covered by
letters of such type; (D) deliver such documents and certificates,
including officers' certificates, as may be reasonably requested by
any Electing Holders of at least 25% in aggregate principal amount of
the Registrable Securities at the time outstanding or the placement or
sales agent, if any, therefor and the managing underwriters, if any,
thereof to evidence the accuracy of the representations and warranties
made pursuant to clause (A) above or those contained in Section 5(a)
hereof and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations
relating to expense reimbursement, indemnification and contribution as
are provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable Securities of
any proposal by the Company to amend or waive any provision of this
Exchange and Registration Rights Agreement pursuant to Section 9(h)
hereof and of any amendment or waiver effected pursuant thereto, each
of which notices shall contain the text of the amendment or waiver
proposed or effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling group
or "assist in the distribution" (within the meaning of the Conduct
Rules (the "Conduct Rules) of the National Association of Securities
Dealers, Inc. ("NASD") or any successor thereto, as amended from time
to time) thereof, whether as a holder of such Registrable Securities
or as an underwriter, a placement or sales agent or a broker or dealer
in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of such Conduct Rules, including by
(A) if such Conduct Rules shall so require, engaging a "qualified
independent underwriter" (as defined in such Conduct Rules) to
participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the
offering contemplated by such Shelf Registration Statement is an
underwritten offering or is made through a placement or sales agent,
to recommend the yield of such Registrable Securities, (B)
indemnifying any such qualified independent underwriter to the extent
of the indemnification of underwriters provided in Section 6 hereof
(or to such other customary extent as may be requested by such
underwriter), and (C) providing such information to such broker-dealer
as may be
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required in order for such broker-dealer to comply with the
requirements of the Conduct Rules; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months
after the effective date of such Shelf Registration Statement, an
earnings statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(e) In the event that the Company would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement
or sales agent, if any, therefor and the managing underwriters, if any,
thereof, the Company shall without delay prepare and furnish to each of the
Electing Holders, to each placement or sales agent, if any, and to each such
underwriter, if any, a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers of
Registrable Securities, such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder and
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing. Each Electing Holder agrees that upon receipt of any notice from
the Company pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder
shall forthwith discontinue the disposition of Registrable Securities
pursuant to the Shelf Registration Statement applicable to such Registrable
Securities until such Electing Holder shall have received copies of such
amended or supplemented prospectus, and if so directed by the Company, such
Electing Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the
time of receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice
Questionnaire, the Company may require such Electing Holder to furnish to
the Company such additional information regarding such Electing Holder and
such Electing Holder's intended method of distribution of Registrable
Securities as may be required in order to comply with the Securities Act.
Each such Electing Holder agrees to notify the Company as promptly as
practicable of any inaccuracy or change in information previously furnished
by such Electing Holder to the Company or of the occurrence of any event in
either case as a result of which any prospectus relating to such Shelf
Registration contains or would contain an untrue statement of a material
fact regarding such Electing Holder or such Electing Holder's intended
method of disposition of such Registrable Securities or omits to state any
material fact regarding such Electing Holder or such Electing Holder's
intended method of disposition of such Registrable Securities required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall
not contain, with respect to such Electing Holder or the disposition of such
Registrable Securities, an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing.
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<PAGE>
(g) Until the expiration of three years after the Closing Date, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144) to, resell any of the Securities that have been reacquired by any
of them except pursuant to an effective registration statement under the
Securities Act.
4. REGISTRATION EXPENSES.
The Company agrees to bear and to pay or cause to be paid promptly
all expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD registration, filing and review fees and expenses, (b) all fees and
expenses in connection with the qualification of the Securities for offering and
sale under the State securities and blue sky laws referred to in Section
3(d)(xii) hereof, including any fees and disbursements of counsel for the
Electing Holders or underwriters in connection with such qualification and
determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
expenses of preparing the Securities for delivery and the expenses of printing
or producing any underwriting agreements, agreements among underwriters, selling
agreements and blue sky or legal investment memoranda and all other documents in
connection with the offering, sale or delivery of Securities to be disposed of
(including certificates representing the Securities), (d) messenger, telephone
and delivery expenses relating to the offering, sale or delivery of Securities
and the preparation of documents referred to in clause (c) above, (e) fees and
expenses of the Trustee under the Indenture, any agent of the Trustee and any
counsel for the Trustee and of any collateral agent or custodian, (f) internal
expenses (including all salaries and expenses of the Company's officers and
employees performing legal or accounting duties), (g) fees, disbursements and
expenses of counsel and independent certified public accountants of the Company
(including the expenses of any opinions or "cold comfort" letters required by or
incident to such performance and compliance), (h) fees, disbursements and
expenses of any "qualified independent underwriter" engaged pursuant to Section
3(d)(xix) hereof, (i) fees, disbursements and expenses of one counsel for the
Electing Holders retained in connection with a Shelf Registration, as selected
by the Electing Holders of at least a majority in aggregate principal amount of
the Registrable Securities held by Electing Holders (which counsel shall be
reasonably satisfactory to the Company), (j) any fees charged by securities
rating services for rating the Securities, and (k) fees, expenses and
disbursements of any other persons, including special experts, retained by the
Company in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities and the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above, transfer taxes on
resale of any of the Securities by such holders and any advertising or
solicitation expenses other than expenses specifically referred to above by or
on behalf of such holders in connection with any offers they may make.
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5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to, and agrees with, each
Purchaser and each of the holders from time to time of Registrable Securities
that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as
the case may be, and, in the case of an underwritten offering of Registrable
Securities, at the time of the closing under the underwriting agreement
relating thereto, will conform in all material respects to the requirements
of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
and at all times subsequent to the Effective Time when a prospectus would be
required to be delivered under the Securities Act, other than from (i) such
time as a notice has been given to holders of Registrable Securities
pursuant to Section 3(d)(viii)(F) or Section 3(c)(iii)(F) hereof until (ii)
such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(e) or Section 3(c)(iv) hereof, each such registration
statement, and each prospectus (including any summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof, as
then amended or supplemented, will conform in all material respects to the
requirements of the Securities Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities or any
placement or sales agent therefor or underwriter thereof expressly for use
therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and none of such documents will contain
or contained an untrue statement of a material fact or will omit or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any subsidiary of the
Company is a party or by which the Company or any subsidiary of the Company
is bound or to which any of the property or assets of the Company or any
subsidiary of the Company is subject, nor will such action result in any
violation of the provisions of the articles of incorporation, as amended, or
the by-laws of the Company or any statute or any order, rule
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or regulation of any court or governmental agency or body having
jurisdiction over the Company or any subsidiary of the Company or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by this Exchange and Registration Rights
Agreement, except the registration under the Securities Act of the
Securities, qualification of the Indenture under the Trust Indenture Act and
such consents, approvals, authorizations, registrations or qualifications as
may be required under State securities or blue sky laws in connection with
the offering and distribution of the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
harmless each of the holders of Registrable Securities included in an
Exchange Registration Statement, each of the Electing Holders of Registrable
Securities included in a Shelf Registration Statement and each person who
participates as a placement or sales agent or as an underwriter in any
offering or sale of such Registrable Securities against any losses, claims,
damages or liabilities, joint or several, to which such holder, agent or
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Exchange
Registration Statement or Shelf Registration Statement, as the case may be,
under which such Registrable Securities were registered under the Securities
Act, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, Electing Holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse such holder, such Electing Holder, such
agent and such underwriter for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company shall not be liable to any such person in any such case to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, or preliminary, final
or summary prospectus, or amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by such
person expressly for use therein.
(b) INDEMNIFICATION BY THE HOLDERS AND ANY AGENTS AND UNDERWRITERS. The
Company may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement or placement agreement with respect
thereto, that the Company shall have received an undertaking reasonably
satisfactory to it from the Electing Holder of such Registrable Securities
and from each underwriter named in any such underwriting agreement and each
placement agent or sales agent named in any placement agreement, severally
and not jointly, to (i) indemnify and hold harmless the Company, and all
other holders of Registrable Securities, against any losses, claims, damages
or liabilities to which the Company or such other holders of Registrable
Securities may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
17
<PAGE>
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, or any preliminary, final or summary prospectus
contained therein or furnished by the Company to any such Electing Holder,
agent or underwriter, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such Electing Holder or
underwriter expressly for use therein, and (ii) reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim as such expenses
are incurred; PROVIDED, HOWEVER, that no such Electing Holder shall be
required to undertake liability to any person under this Section 6(b) for
any amounts in excess of the dollar amount of the proceeds to be received by
such Electing Holder from the sale of such Electing Holder's Registrable
Securities pursuant to such registration.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Section 6, notify such
indemnifying party in writing of the commencement of such action; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under
the indemnification provisions of or contemplated by Section 6(a) or 6(b)
hereof. In case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the commencement thereof,
such indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. In no event shall the indemnifying party
or parties be liable for the fees and expenses of more than one counsel (in
addition to local counsel) for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances;
provided, however, that each indemnified party shall be entitled to separate
counsel (in addition to any local counsel) in each such jurisdiction to the
extent that such indemnified party may have interests conflicting with those
of the other indemnified party or parties. No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement
or compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
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(d) CONTRIBUTION. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
the indemnified party in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by such
indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 6(d)
were determined by pro rata allocation (even if the holders or any agents or
underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), no holder shall be required to contribute any amount in excess
of the amount by which the dollar amount of the proceeds received by such
holder from the sale of any Registrable Securities (after deducting any
fees, discounts and commissions applicable thereto) exceeds the amount of
any damages which such holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission,
and no underwriter or agent shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such underwriter or agent
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The holders' and any
underwriters' or agents' obligations in this Section 6(d) to contribute
shall be several in proportion to the principal amount of Registrable
Securities registered or underwritten, as the case may be, by them and not
joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the
Securities Act; and the obligations of the holders and any agents or
underwriters contemplated by this Section 6 shall be in addition to any
liability which the respective holder, agent or underwriter may otherwise
have and shall extend, upon the same terms and conditions, to each officer
and director of the Company (including any person who, with his consent, is
named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company within the
meaning of the Securities Act.
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7. UNDERWRITTEN OFFERINGS.
(a) SELECTION OF UNDERWRITERS. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be
designated by Electing Holders holding at least a majority in aggregate
principal amount of the Registrable Securities to be included in such
offering, provided that such designated managing underwriter or underwriters
is or are reasonably acceptable to the Company.
(b) PARTICIPATION BY HOLDERS. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (i)
agrees to sell such holder's Registrable Securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
8. RULE 144.
The Company covenants to the holders of Registrable Securities that
to the extent it shall be required to do so under the Exchange Act, the Company
shall timely file the reports required to be filed by it under the Exchange Act
or the Securities Act (including the reports under Section 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities which would be inconsistent with the terms contained in this
Exchange and Registration Rights Agreement.
(b) SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
would be no adequate remedy at law if the Company fails to perform any of
its obligations hereunder and that the Purchasers and the holders from time
to time of the Registrable Securities may be irreparably harmed by any such
failure, and accordingly agree that the Purchasers and such holders, in
addition to any other remedy to which they may be entitled at law or in
equity, shall be entitled to compel specific performance of the obligations
of the Company under this Exchange and Registration Rights Agreement in
accordance with the terms and conditions of this Exchange and Registration
Rights Agreement, in any court of the United States or any State thereof
having jurisdiction.
(c) NOTICES. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered
20
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by hand, if delivered personally or by courier, or three days after being
deposited in the mail (registered or certified mail, postage prepaid, return
receipt requested) as follows: If to the Company, to it at 300 Opus Center,
9900 Bren Road East, Minnetonka, Minnesota 55343, attention: Corporate
Secretary, and if to a holder, to the address of such holder set forth in
the security register or other records of the Company, or to such other
address as the Company or any such holder may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
(d) PARTIES IN INTEREST. All the terms and provisions of this Exchange
and Registration Rights Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by the parties hereto and the holders
from time to time of the Registrable Securities and the respective
successors and assigns of the parties hereto and such holders. In the event
that any transferee of any holder of Registrable Securities shall acquire
Registrable Securities, in any manner, whether by gift, bequest, purchase,
operation of law or otherwise, such transferee shall, without any further
writing or action of any kind, be deemed a beneficiary hereof for all
purposes and such Registrable Securities shall be held subject to all of the
terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to
receive the benefits of, and be conclusively deemed to have agreed to be
bound by all of the applicable terms and provisions of this Exchange and
Registration Rights Agreement. If the Company shall so request, any such
successor, assign or transferee shall agree in writing to acquire and hold
the Registrable Securities subject to all of the applicable terms hereof.
(e) SURVIVAL. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and
Registration Rights Agreement or made pursuant hereto shall remain in full
force and effect regardless of any investigation (or statement as to the
results thereof) made by or on behalf of any holder of Registrable
Securities, any director, officer or partner of such holder, any agent or
underwriter or any director, officer or partner thereof, or any controlling
person of any of the foregoing, and shall survive delivery of and payment
for the Registrable Securities pursuant to the Purchase Agreement and the
transfer and registration of Registrable Securities by such holder and the
consummation of an Exchange Offer.
(f) GOVERNING LAW. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.
(g) HEADINGS. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted
for convenience only, do not constitute a part of this Exchange and
Registration Rights Agreement and shall not affect in any way the meaning or
interpretation of this Exchange and Registration Rights Agreement.
(h) ENTIRE AGREEMENT; AMENDMENTS. This Exchange and Registration
Rights Agreement and the other writings referred to herein (including the
Indenture and the form of Securities) or delivered pursuant hereto which
form a part hereof contain the entire understanding of the parties with
respect to its subject matter. This Exchange and Registration Rights
Agreement supersedes all prior agreements and understandings between the
parties with respect to its subject matter. This Exchange and Registration
Rights Agreement may be amended and the observance of any term of this
Exchange and Registration Rights Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only
by a written instrument duly executed by the Company and the holders of at
least a majority in aggregate principal amount of the
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Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound
by any amendment or waiver effected pursuant to this Section 9(h), whether
or not any notice, writing or marking indicating such amendment or waiver
appears on such Registrable Securities or is delivered to such holder.
(i) INSPECTION. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights
Agreement and a complete list of the names and addresses of all the holders
of Registrable Securities shall be made available for inspection and copying
on any business day by any holder of Registrable Securities for proper
purposes only (which shall include any purpose related to the rights of the
holders of Registrable Securities under the Securities, the Indenture and
this Agreement) at the offices of the Company at the address thereof set
forth in Section 9(c) above and at the office of the Trustee under the
Indenture.
(j) COUNTERPARTS. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same
instrument.
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If the foregoing is in accordance with your understanding, please sign and
return to us ten counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
United HealthCare Corporation
By:
........................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner &
Smith Incorporation
Salomon Smith Barney Inc.
Chase Securities Inc.
First Chicago Capital Markets, Inc.
NationsBanc Montgomery Securities LLP
By: Goldman, Sachs & Co.
By:
.......................................
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
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EXHIBIT A
UNITED HEALTHCARE CORPORATION
INSTRUCTION TO DTC PARTICIPANTS
(DATE OF MAILING)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE](*)
The Depository Trust Company ("DTC") has identified you as a DTC Participant
through which beneficial interests in the United HealthCare Corporation (the
"Company") 6.60% Notes due December 1, 2003 (the "Securities") are held.
The Company is in the process of registering the Securities under the Securities
Act of 1933 for resale by the beneficial owners thereof. In order to have their
Securities included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
IT IS IMPORTANT THAT BENEFICIAL OWNERS OF THE SECURITIES RECEIVE A COPY OF THE
ENCLOSED MATERIALS AS SOON AS POSSIBLE as their rights to have the Securities
included in the registration statement depend upon their returning the Notice
and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact United HealthCare
Corporation, 300 Opus Center, 9900 Bren Road East, Minnetonka, Minnesota 55343,
612-936-1300.
- ---------------------------
(*) Not less than 28 calendar days from date of mailing.
A-1
<PAGE>
UNITED HEALTHCARE CORPORATION
Notice of Registration Statement
and
SELLING SECURITYHOLDER QUESTIONNAIRE
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between United HealthCare
Corporation (the "Company") and the Purchasers named therein. Pursuant to the
Exchange and Registration Rights Agreement, the Company has filed with the
United States Securities and Exchange Commission (the "Commission") a
registration statement on Form S-3 (the "Shelf Registration Statement") for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended
(the "Securities Act"), of the Company's 6.60% Notes due December 1, 2003 (the
"Securities"). A copy of the Exchange and Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is entitled
to have the Registrable Securities beneficially owned by it included in the
Shelf Registration Statement. In order to have Registrable Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the address set
forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial
owners of Registrable Securities who do not complete, execute and return this
Notice and Questionnaire by such date (i) will not be named as selling
securityholders in the Shelf Registration Statement and (ii) may not use the
Prospectus forming a part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related Prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related Prospectus.
The term "REGISTRABLE SECURITIES" is defined in the Exchange and Registration
Rights Agreement.
A-2
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Registration Rights
Agreement, as if the undersigned Selling Securityholder were an original party
thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:
A-3
<PAGE>
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
----------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Registrable Securities Listed in Item (3) below:
----------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not the same
as (b) above) Through Which Registrable Securities Listed in Item (3)
below are Held:
----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
-----------------------------------
-----------------------------------
-----------------------------------
Telephone:
-----------------------------------
Fax:
-----------------------------------
Contact Person:
-----------------------------------
(3) Beneficial Ownership of Securities:
EXCEPT AS SET FORTH BELOW IN THIS ITEM (3), THE UNDERSIGNED DOES NOT
BENEFICIALLY OWN ANY SECURITIES.
(a) Principal amount of Registrable Securities beneficially owned:
------------------
CUSIP No(s). of such Registrable Securities:
-------------------------
(b) Principal amount of Securities other than Registrable Securities
beneficially owned:
--------------------------------------------------
CUSIP No(s). of such other Securities:
-------------------------------
(c) Principal amount of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement:
---------------------------
CUSIP No(s). of such Registrable Securities to be included in the
Shelf Registration Statement:
----------------------------------------
(4) Beneficial Ownership of Other Securities of the Company:
EXCEPT AS SET FORTH BELOW IN THIS ITEM (4), THE UNDERSIGNED SELLING
SECURITYHOLDER IS NOT THE BENEFICIAL OR REGISTERED OWNER OF ANY OTHER
SECURITIES OF THE COMPANY, OTHER THAN THE SECURITIES LISTED ABOVE IN
ITEM (3).
State any exceptions here:
A-4
<PAGE>
(5) Relationships with the Company:
EXCEPT AS SET FORTH BELOW, NEITHER THE SELLING SECURITYHOLDER NOR ANY
OF ITS AFFILIATES, OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS (5%
OR MORE) HAS HELD ANY POSITION OR OFFICE OR HAS HAD ANY OTHER MATERIAL
RELATIONSHIP WITH THE COMPANY (OR ITS PREDECESSORS OR AFFILIATES)
DURING THE PAST THREE YEARS.
State any exceptions here:
(6) Plan of Distribution:
EXCEPT AS SET FORTH BELOW, THE UNDERSIGNED SELLING SECURITYHOLDER
INTENDS TO DISTRIBUTE THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM
(3) ONLY AS FOLLOWS (IF AT ALL): SUCH REGISTRABLE SECURITIES MAY BE
SOLD FROM TIME TO TIME DIRECTLY BY THE UNDERSIGNED SELLING
SECURITYHOLDER OR, ALTERNATIVELY, THROUGH UNDERWRITERS, BROKER-DEALERS
OR AGENTS. SUCH REGISTRABLE SECURITIES MAY BE SOLD IN ONE OR MORE
TRANSACTIONS AT FIXED PRICES, AT PREVAILING MARKET PRICES AT THE TIME
OF SALE, AT VARYING PRICES DETERMINED AT THE TIME OF SALE, OR AT
NEGOTIATED PRICES. SUCH SALES MAY BE EFFECTED IN TRANSACTIONS (WHICH
MAY INVOLVE CROSSES OR BLOCK TRANSACTIONS) (I) ON ANY NATIONAL
SECURITIES EXCHANGE OR QUOTATION SERVICE ON WHICH THE REGISTERED
SECURITIES MAY BE LISTED OR QUOTED AT THE TIME OF SALE, (II) IN THE
OVER-THE-COUNTER MARKET, (III) IN TRANSACTIONS OTHERWISE THAN ON SUCH
EXCHANGES OR SERVICES OR IN THE OVER-THE-COUNTER MARKET, OR (IV)
THROUGH THE WRITING OF OPTIONS. IN CONNECTION WITH SALES OF THE
REGISTRABLE SECURITIES OR OTHERWISE, THE SELLING SECURITYHOLDER MAY
ENTER INTO HEDGING TRANSACTIONS WITH BROKER-DEALERS, WHICH MAY IN TURN
ENGAGE IN SHORT SALES OF THE REGISTRABLE SECURITIES IN THE COURSE OF
HEDGING THE POSITIONS THEY ASSUME. THE SELLING SECURITYHOLDER MAY
ALSO SELL REGISTRABLE SECURITIES SHORT AND DELIVER REGISTRABLE
SECURITIES TO CLOSE OUT SUCH SHORT POSITIONS, OR LOAN OR PLEDGE
REGISTRABLE SECURITIES TO BROKER-DEALERS THAT IN TURN MAY SELL SUCH
SECURITIES.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M under the Exchange Act.
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
A-5
<PAGE>
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
(ii) With a copy to:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Company's counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Company and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above. This
Agreement shall be governed in all respects by the laws of the State of New
York.
A-6
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated:
-------------------
----------------------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:
------------------------------------------------------------------
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
-----------------------
-----------------------
-----------------------
-----------------------
-----------------------
A-7
<PAGE>
EXHIBIT B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
The Bank of New York
United HealthCare Corporation
c/o The Bank of New York
[ADDRESS OF TRUSTEE]
Attention: Trust Officer
Re: United HealthCare Corporation (the "Company")
6.60% Notes due December 1, 2003
Dear Sirs:
Please be advised that ______________________ has transferred
$___________________ aggregate principal amount of the above-referenced Notes
pursuant to an effective Registration Statement on Form S-3 (File No.
333-________) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated [DATE] or in supplements thereto, and that the aggregate principal amount
of the Notes transferred are the Notes listed in such Prospectus opposite such
owner's name.
Dated:
Very truly yours,
--------------------------
(Name)
By:
--------------------------
(Authorized Signature)
B-1
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
DOLLARS IN 000'S
<TABLE>
<CAPTION>
----------------------------------------------------
Year Ended December 31,
----------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings from Continuing Operations 742,000 596,000 461,000 506,000 336,000
Add Back
Fixed charges less interest capitalized 75,735 78,593 43,771 30,163 26,046
------- ------- ------- ------- -------
Total earnings 817,735 674,593 504,771 536,163 362,046
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Fixed Charges:
Interest, capitalized and expensed 3,735 593 771 2,163 3,046
Interest component of rental payments 72,000 78,000 43,000 28,000 23,000
------- ------- ------- ------- -------
Total fixed charges 75,735 78,593 43,771 30,163 26,046
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of Earnings to Fixed Charges 10.8 8.6 11.5 17.8 13.9
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
- ---------
For purposes of computing this ratio, earnings represent income from continuing
operations before extraordinary items. Fixed charges represent interest
expense, including amounts capitalized plus the interest factor in rental
expense. Earnings were insufficient to cover fixed charges by $250 million for
the nine months ended September 30, 1998. Excluding the realignment charge of
$725 million taken by the Company in the second quarter of 1998, the pro forma
ratio of earnings to fixed charges would have been 8.3.
<PAGE>
Exhibit 15.1
LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
January 21, 1999
United HealthCare Corporation:
We are aware that United HealthCare Corporation has incorporated by reference in
its Registration Statement No. 333-XXXXX on Form S-4 its Form 10-Q's for the
quarters ended March 31, June 30, and September 30, 1998, which include our
reports dated May 7, August 6, and November 5, 1998 covering the unaudited
interim financial information contained therein. Pursuant to Regulation C of the
Securities Act of 1933, those reports are not considered a part of the
registration statement prepared or certified by our firm or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated
February 12, 1998 incorporated by reference in United HealthCare Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997 and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 21, 1999
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints William W. McGuire, M.D., Stephen
J. Hemsley and David J. Lubben his or her true and lawful attorneys-in-fact and
agents, with full powers of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities to execute a
Registration Statement on Form S-4 to be filed under the Securities Act of 1933,
as amended, for the registration of the securities referred to therein and any
and all pre- and post-effective amendments thereto, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
Dated: January 22, 1999
- ----------------------------------- -----------------------------------
William C. Ballard, Jr. Walter F. Mondale
/s/ Richard T. Burke /s/ Mary O. Mundinger
- ----------------------------------- -----------------------------------
Richard T. Burke Mary O. Mundinger
/s/ Robert L. Ryan
- ----------------------------------- -----------------------------------
James A. Johnson Robert L. Ryan
/s/ William G. Spears
- ----------------------------------- -----------------------------------
Thomas H. Kean William G. Spears
/s/ Douglas W. Leatherdale /s/ Gail R. Wilensky
- ----------------------------------- -----------------------------------
Douglas W. Leatherdale Gail R. Wilensky
