<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1998
REGISTRATION NO. 333-53167
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PACIFICARE HEALTH SYSTEMS, INC.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4591529
(STATE OR OTHER JURISDICTION OF (I.R.S EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
3120 LAKE CENTER DRIVE, SANTA ANA, CALIFORNIA 92704 (714) 825-5200
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (TELEPHONE NUMBER)
</TABLE>
ALAN R. HOOPS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PACIFICARE HEALTH SYSTEMS, INC.
3120 LAKE CENTER DRIVE
SANTA ANA, CALIFORNIA 92704
(714) 825-5200
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENTS FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
MICHAEL R. JACOBSON, ESQ. JAMES R. WALTHER, ESQ.
COOLEY GODWARD LLP MAYER, BROWN & PLATT
5 PALO ALTO SQUARE 350 SOUTH GRAND AVENUE
3000 EL CAMINO REAL 25TH FLOOR
PALO ALTO, CALIFORNIA 94306-2155 LOS ANGELES, CALIFORNIA 90071-1503
(650) 843-5000 (213) 229-9500
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
=========================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
Senior Debt Securities... $250,000,000 100% $250,000,000(2) $73,750(3)
- -------------------------------------------------------------------------------------------------------------------------
Guarantees of
Subsidiaries........... N/A N/A N/A N/A(4)
=========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(2) If any Debt Securities are issued at an original issue discount, such
greater amount as shall result in an aggregate initial offering price of
$250 million.
(3) The registration fee for the $250,000,000 Senior Debt Securities was paid
with the initial filing of this Registration Statement.
(4) No separate registration fee is payable pursuant to 457(n).
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER OF INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER
--------------------------- -------------------------------- ---------------------
<S> <C> <C>
PacifiCare Operations, Inc. Delaware 33-0064895
FHP International Corporation Delaware 33-0072502
</TABLE>
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.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
The prospectus associated with this offering is presented in two parts: an
initial portion (labeled "Prospectus Supplement") containing more detailed
information about the Notes being offered hereby and a second portion (labeled
"Prospectus") containing more general information about the Notes and
PacifiCare. These two sections together constitute a single prospectus which
contains all required information (except information that may be omitted
pursuant to Rule 430A under the Securities Act of 1933, as amended).
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION: DATED JUNE 4, 1998
PROSPECTUS SUPPLEMENT
- ----------------------------------
(TO PROSPECTUS DATED JUNE , 1998)
$250,000,000
PACIFICARE LOGO
% SENIOR NOTES DUE 2008
------------------------
The % Senior Notes due 2008 (the "Notes" ) are being offered by
PacifiCare Health Systems, Inc. (the "Company" or "PacifiCare") in an aggregate
principal amount of $250,000,000. Interest on the Notes is payable semiannually
in arrears on and of each year, beginning on
, 1998, at the rate of % per annum. The Notes will be redeemable,
in whole or part, at the option of PacifiCare, at any time, at a redemption
price equal to the greater of (i) 100% of the principal amount of the Notes to
be redeemed or (ii) the sum of the present values of the Remaining Scheduled
Payments (as defined herein) thereon discounted to such redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate (as defined herein) plus basis points, plus in either case
accrued interest on the principal amount being redeemed to such redemption date.
The Notes will not be entitled to the benefit of any mandatory redemption or
sinking fund. The Notes will be unsecured obligations of the Company and will
rank equally with all senior unsecured indebtedness of the Company and will be
guaranteed by certain subsidiaries of the Company to the extent described
herein.
The Notes will be represented by a global security deposited with The
Depository Trust Company, New York, New York (the "Depository"), and registered
in the name of a nominee of the Depository. Interests in the global security
will be shown on, and transfer thereof will be effected through, records
maintained by the Depository and its participants. Except as described herein,
Notes in certificated form will not be issued. See "Description of
Notes -- Global Securities."
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are represented by a global security registered in the name of
the Depository or its nominee, the Notes will trade in the Depository's Same-Day
Funds Settlement System, secondary market trading activity in the Notes will
settle in immediately available funds and all payments of principal and interest
will be made by the Company in immediately available funds. See "Description of
Notes -- Same-Day Settlement and Payment."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
==============================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
- --------------------------------------------------------------------------------------------------------------
Per Note........................ $ $ $
- --------------------------------------------------------------------------------------------------------------
Total........................... $ $ $
==============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(3) Before deducting estimated expenses of $506,250 payable by the Company.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued and accepted by the Underwriters and certain other
conditions. The several Underwriters reserve the right to withdraw, cancel or
modify any such offer and to reject orders in whole or in part. It is expected
that the Notes will be delivered in book-entry form only through the facilities
of the Depository on or about June , 1998.
BANCAMERICA ROBERTSON STEPHENS CHASE SECURITIES INC.
------------------------
CITICORP SECURITIES, INC. SBC WARBURG DILLON READ INC.
The date of this Prospectus Supplement is June , 1998
<PAGE> 4
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
STABILIZING TRANSACTIONS AND THE PURCHASE OF NOTES TO COVER SHORT POSITIONS BY
THE UNDERWRITERS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain "forward looking statements" to encourage companies to
provide prospective information about themselves based on management estimates
and beliefs. This Prospectus Supplement contains forward-looking statements that
are based on the beliefs of, estimates and assumptions made by, and information
currently available to the Company's management. Actual results may differ
materially from those projected in the forward looking statements, which
statements involve risks and uncertainties. In addition, past financial
performance is not necessarily a reliable indicator of future performance and
investors should not use historical performance to anticipate results or future
trends. Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others: (i)
changes in the Company's membership; (ii) loss or inability to contract with
health care providers; (iii) increased health care costs; (iv) reductions in
premiums; (v) government audits; (vi) reimbursement to payors; (vii) potential
disposition losses; and (viii) changes in state and federal legislation.
Prospective investors are also directed to the other risks discussed herein and
in other documents filed by the Company with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 and the Company's Current Report on Form 8-K filed
June 4, 1998.
S-2
<PAGE> 5
THE COMPANY
PacifiCare(R) Health Systems, Inc. (the "Company" or "PacifiCare") is one
of the nation's leading managed health care services companies, serving nearly
3.7 million health maintenance organization ("HMO") members in its commercial
and government product lines as of March 31, 1998. The Company is also a leader
in the management, development and marketing of diversified HMO products and
related services. The Company operates HMOs in 10 states and Guam, and as of
March 31, 1998, had a combined commercial HMO membership of nearly 2.7 million
members and over one million members in its Secure Horizons(R) Medicare risk
programs. The Company believes that its ability to offer a comprehensive range
of products and services, combined with its long-term relationships with health
care providers, will enable the Company to respond effectively to the changing
needs of the health care marketplace.
THE OFFERING
ISSUER........................ PacifiCare Health Systems, Inc.
SECURITIES OFFERED............ $250,000,000 aggregate principal amount of
% Senior Notes due 2008.
MATURITY...................... , 2008.
INTEREST PAYMENT DATES........ and of
each year, commencing on ,
1998.
OPTIONAL REDEMPTION........... The Notes will be redeemable, in whole or part,
at the option of PacifiCare, at any time, at a
redemption price equal to the greater of (i)
100% of the principal amount of the Notes to be
redeemed or (ii) the sum of the present values
of the Remaining Scheduled Payments thereon
discounted to such redemption date on a
semiannual basis at the Treasury Rate plus
basis points, plus in either case
accrued interest on the principal amount being
redeemed to such redemption date. See
"Description of Notes -- Optional Redemption."
RANKING....................... The Notes will be unsecured obligations of the
Company and will rank equally with all other
senior unsecured indebtedness of the Company.
USE OF PROCEEDS............... To prepay a portion of the amount outstanding
under its Credit Facility. See "Use of
Proceeds."
S-3
<PAGE> 6
BUSINESS
The Company is one of the nation's leading managed health care services
companies, serving nearly 3.7 million HMO members in its commercial and
government product lines as of March 31, 1998. Members join the Company's
commercial plans primarily through employer groups while members of the
Company's government programs are individual Medicare and Medicaid
beneficiaries. The Company is also a leader in the management, development and
marketing of diversified HMO products and related services.
On February 14, 1997, the Company consummated the acquisition of FHP
International Corporation ("FHP") for a total purchase price, including
transaction costs, of approximately $2.2 billion (the "FHP Acquisition"). The
Company's commercial and government membership increased substantially as a
result of the FHP Acquisition. The FHP Acquisition has been accounted for as a
purchase and the Company's consolidated results of operations include the
results of FHP only from the date of the FHP Acquisition. Also during 1997, the
Company consummated the sale of its Florida, Illinois and New Mexico
subsidiaries and announced a proposed exit strategy for its Utah subsidiary,
including its potential sale.
BUSINESS STRATEGY
The current business strategy of the Company has a strong operational
focus. During 1998, the Company intends to:
- improve commercial gross margins through premium increases and improved
health care cost management through capitated arrangements with strong
provider organizations which align the interest of providers with that of
the Company and its members;
- focus on management tools, including medical and pharmacy management and
effective medical information reporting;
- exit geographic markets and product lines which do not fit within the
Company's profitability objectives;
- improve administrative and marketing efficiencies in order to reduce the
percentage of revenue spent on marketing, general and administrative
expenses; and
- increase the quality and service of its basic HMO products measured
through expanded National Committee for Quality Assurance accreditation
in 1998.
In addition, the Company continues to evaluate opportunities in new and
existing geographic markets that may be available through acquisitions and the
development of new products.
S-4
<PAGE> 7
OPERATIONS, PRODUCTS AND SERVICES
HMO Operations
The Company operates HMOs in 10 states and Guam and the Company's
membership at March 31, 1998 by state and program was as follows:
<TABLE>
<CAPTION>
GOVERNMENT
(MEDICARE &
COMMERCIAL MEDICAID) TOTAL
---------- ----------- ---------
<S> <C> <C> <C>
Arizona............................................ 111,100 88,700 199,800
California......................................... 1,578,000 605,900 2,183,900
Colorado........................................... 293,800 53,400 347,200
Guam............................................... 42,600 -- 42,600
Nevada............................................. 44,200 24,400 68,600
Ohio............................................... 48,700 14,000 62,700
Oklahoma........................................... 101,500 26,500 128,000
Oregon............................................. 114,100 38,200 152,300
Texas.............................................. 138,600 68,500 207,100
Utah............................................... 120,300 23,100 143,400
Washington......................................... 95,300 57,600 152,900
--------- --------- ---------
Total membership......................... 2,688,200 1,000,300 3,688,500
========= ========= =========
</TABLE>
Commercial Programs
The Company's commercial membership has grown from approximately 0.7
million members at December 31, 1992 to approximately 2.7 million members at
March 31, 1998. The Company offers a comprehensive range of products, including
HMOs, Preferred Provider Organization ("PPO") and Point of Service ("POS")
plans. PPOs are a defined network of providers which provide discounted
fee-for-service health care. POS plans combine the features of an HMO (a defined
provider network providing care to members with reduced deductibles and
co-payments) with the features of a traditional indemnity insurance product (the
option to use any physician, with higher deductibles and co-payments).
For the commercial employer market, the Company offers a range of benefit
plan designs that vary in the amount of member co-payments. The Company believes
that nominal co-payments are useful in helping contain the costs of health care
without providing a barrier to members seeking needed health care services. The
Company offers a variety of specialty managed health care products either as
supplements to its commercial programs or as stand-alone products. These
products include pharmacy benefit management, life and health insurance,
behavioral health services and dental and vision services. These optional
services are generally provided through subcontracting or referral relationships
with other health care providers. The Company is not dependent on any one
employer group or group of employers to sustain its commercial product revenue
stream.
Secure Horizons Programs
The Company offers health care services to Medicare beneficiaries through
its Secure Horizons programs. The Secure Horizons programs represent the largest
Medicare risk programs offered by a single company in the United States (as
measured by membership). Secure Horizons membership has grown from approximately
0.2 million members at December 31, 1992 to over 1.0 million members at March
31, 1998.
The Company has been offering Secure Horizons programs since 1985 pursuant
to annual risk contracts with the Health Care Financing Administration ("HCFA").
HCFA requires that an HMO be federally qualified or meet similar requirements as
a competitive medical plan to be eligible for
S-5
<PAGE> 8
Medicare risk contracts. These Medicare risk contracts entitle the Company to a
fixed per-member premium, which is currently based upon the average cost of
providing traditional fee-for-service Medicare benefits to the Medicare
population in each county. The risk contracts are subject to periodic unilateral
revisions by HCFA based upon updated demographic information relating to the
Medicare population and the cost of providing health care in a particular
geographic area. HCFA has the right to audit HMOs operating under Medicare risk
contracts to determine the quality of care being rendered and the degree of
compliance with HCFA's contracts and regulations. HCFA may unilaterally
terminate the Company's Medicare risk contracts if the Company fails to continue
to meet compliance and eligibility standards.
Because the average use of health care services by Medicare beneficiaries
greatly exceeds the use of services by those who are under the age of 65, the
Company's Medicare risk plans generate substantially larger per member revenue
than the Company's commercial plans. Premium revenue for each Secure Horizons
member is usually more than three times that of a commercial member, reflecting,
in part, the higher medical and administrative cost of serving a Medicare
member. As a result, although membership in the Secure Horizons programs
represented only approximately 27 percent of the Company's membership at March
31, 1998, such membership accounted for approximately 59 percent of the
consolidated premium revenue for the three months ended March 31, 1998 and an
even larger percentage of the Company's operating profit.
On August 5, 1997, President Clinton signed into law the Balanced Budget
Act of 1997 (the "1997 Budget Act"), which enacted numerous revisions to the
Medicare program. The 1997 Budget Act revised the formula by which Medicare risk
premiums are calculated, which could result in lower average Medicare premiums
being paid to the Company. The Company believes that any reduction in premiums
may be offset by other features of this new legislation which encourages the use
of managed care plans by Medicare beneficiaries. Each Secure Horizons member
enrolls individually and may disenroll by providing 30 days' notice. The Company
believes that its Secure Horizons programs have one of the lowest disenrollment
rates among Medicare risk plans.
The Company believes that the Medicare market continues to offer
significant growth opportunities since only approximately 15 percent of the
country's Medicare beneficiaries are enrolled in Medicare risk HMO programs such
as those offered by the Company. The 1997 Budget Act repeals the requirement
that at least half of a Medicare health plan's enrollment be drawn from
commercial contracts (the "50/50 Rule") beginning January 1, 1999, and gives the
Department of Health and Human Services broad authority to waive the 50/50 Rule
for certain plans beginning January 1, 1998. The Company believes that the
repeal of the 50/50 Rule will allow it to develop Medicare risk programs in
markets where it does not have operations through expansion of its Secure
Horizons programs and affiliations between Secure Horizons USA, Inc. ("SHUSA"),
its Medicare risk management subsidiary, and health plans or providers in such
markets (see "Specialty Managed Care Products and Services-Medicare Risk
Management").
The 1997 Budget Act replaces the risk contract program with a new
"Medicare+choice" program, which is intended to increase Medicare enrollment in
private health plans and will permit, beginning in 1999, provider sponsored
organizations (networks of doctors, hospitals and other providers -- "PSOs") to
contract directly with HCFA for Medicare risk contracts. PSOs, if successful,
will increase the Company's competition for new Medicare enrollees. The loss of
Medicare contracts or termination or modification of the HCFA risk-based
Medicare program could have a material adverse effect on the profitability,
operations and business prospects of the Company.
In response to the needs of employers to provide cost-effective health care
coverage to their retired employees who may or may not currently be entitled to
Medicare, the Company developed its Secure Horizons retiree product. This
product takes advantage of the Company's expertise in providing health care to
seniors. The provider networks are similar to those offered to the Company's
Secure Horizons enrollees and the premium is based on the revenue requirements
needed to provide services to Secure Horizons enrollees. Moreover, the retiree
product provides the Company with
S-6
<PAGE> 9
access to individuals who, once familiar with the Company's services and
delivery system, may enroll in Secure Horizons programs when they become
entitled to Medicare benefits.
Specialty Managed Care Products and Services
In addition to its HMO operations, the Company provides a range of
specialty managed care products and services to HMOs, insurers, employers,
governmental entities, providers and PPOs, including the following:
Medicare Risk Management. The Company formed SHUSA in March 1993 to take
advantage of the Company's expertise in the Medicare risk area. SHUSA licenses
the Secure Horizons name and provides management services, including, among
other things, marketing, provider contracting and administrative services, to
HMOs and health care delivery systems that want to engage in Medicare risk
contracting. SHUSA has entered into agreements in New Mexico with Presbyterian
Healthcare Services, in New England with Tufts Associated Health Maintenance
Organization, Inc. and in 1999, contingent upon HCFA approval, in Hawaii with
Queens Health Plans. SHUSA is currently engaged in discussions with a number of
health plans and delivery systems regarding future business development
opportunities in the Medicare risk market.
The Company anticipates that with the repeal of the 50/50 Rule and the
drive to enroll Medicare beneficiaries in HMOs, SHUSA may enter into licensing
arrangements in a variety of geographic areas thereby expanding the Company's
presence in new markets. While the Company currently expects the opportunities
created by the repeal of the 50/50 Rule to outweigh the potential adverse
effects of increased competition, HCFA has not adopted final regulations in
connection with this legislation and it is too early to predict the ultimate
effect, if any, this legislation will have on the Company.
Pharmacy Benefit Management. Prescription Solutions(R) was established in
May 1993 to offer pharmacy benefit management services. Clients of Prescription
Solutions, one of the industry's largest pharmacy benefit management companies,
have access to a pharmacy provider network that features independent and chain
pharmacies, as well as a variety of cost and quality management capabilities.
Prescription Solutions also provides its clients with an array of fully
integrated services, including mail order distribution, an extensive network of
retail pharmacies, claims processing and sophisticated drug utilization
reporting.
Life and Health Insurance. PacifiCare Life and Health Insurance Company
("PLHIC") and PacifiCare Life Assurance Company ("PLAC"), the Company's life and
health insurance subsidiaries, offer employer groups managed health care
insurance products which have been integrated with the Company's existing HMO
products to form multi-option health benefits programs. Together, PLHIC and PLAC
are licensed to operate in 38 states, the District of Columbia and Guam,
including the states in which the Company's HMOs operate.
Behavioral Health Services. PacifiCare Behavioral Health of California,
Inc. is a licensed specialized health care service plan which provides
behavioral health care services, including chemical dependency benefit programs,
in California directly to corporate customers and indirectly through the
Company's California HMO to its commercial members. Outside of California,
PacifiCare Behavioral Health, Inc. contracts with various HMOs, insurers and
employers to manage their respective mental health and chemical dependency
benefit programs.
Dental and Vision Services. California Dental Health Plan d/b/a PacifiCare
Dental and Vision ("PDV") is a licensed specialized health care service plan
which provides prepaid dental and optometry benefits for individuals, including
members of PacifiCare's California commercial and Secure Horizons programs and
employer groups. PDV continues to market independently of the Company's
California HMO and to provide dental and vision benefits to its members.
Recently, PacifiCare Dental of Colorado, Inc. received approval to offer
stand-alone dental care plans to people in selected areas of Colorado. The
stand-alone dental care plan works like an HMO and will allow employers to offer
the dental plan to members of any medical carrier.
S-7
<PAGE> 10
HEALTH CARE PROVIDER RELATIONSHIPS AND HEALTH CARE COSTS
The profitability of the Company and the success of its business strategy
is dependent on its ability to attract and retain a network of qualified health
care providers in each geographic area it serves. The Company's contracts with
physician groups and other health care providers typically have one year terms;
however, the Company has entered into multiple year contracts with certain
physician groups to ensure the quality and stability of its provider network.
The Company generally contracts with providers on a capitated basis (fixed
fee per member per month) with, in some cases, contractual risk sharing
arrangements that shift some of the risks of higher than expected health care
costs to the provider groups. Increased competition among health care providers
has resulted in the consolidation of such providers, resulting in larger
provider groups being created and fewer groups with which the Company can
contract. The consolidation among provider groups increased competition with
other HMOs and the inability of provider groups to effectively manage capitated
programs have made contracting on a cost-effective basis more difficult. If
provider groups face financial problems or become insolvent, the Company may
incur: (i) a loss of membership, if existing provider relationships are
disrupted; (ii) additional expenditures to enter into more expensive or
non-capitated provider contracts in order to provide alternative health care
services to its members in the areas covered by such providers; (iii) loss of
its ability to obtain contractual reimbursement from providers; and (iv)
potential claims from third parties. An inability to contract with new or
existing providers, at reasonable cost, the inability of providers to provide
adequate care, or insolvency of providers could adversely affect the
profitability, operations and business prospects of the Company.
FPA Medical Management, Inc. ("FPA"), is a publicly-traded medical care
provider which provides services to approximately 206,000 of the Company's
members, primarily in Arizona, California, Nevada and Texas. FPA has been the
subject of press reports regarding its financial problems and recently announced
that it had received a waiver of certain defaults on its bank credit agreements
through June 11, 1998 and that it expected cash on hand and cash flows to be
sufficient to meet its operating capital needs only through June 1998. The
Company is in active negotiations with FPA with respect to potential
renegotiation of provider contracts and other matters. The Company does not
expect that these actions or FPA's reported financial problems will materially
and adversely affect the Company's results of operations, cash flows, or
consolidated financial position. However, if FPA were to become insolvent, the
Company would likely be required to record a charge in the quarter of insolvency
and such charge might be material to the results of that quarter.
The Company's profitability is also dependent in part on its ability to
maintain effective control over health care costs while providing members with
quality care. Factors such as legislative or regulatory mandates or changes, the
level of utilization of health care services by members, new technologies,
hospital costs, epidemics and numerous other external influences may affect the
Company's health care costs.
RECENT DEVELOPMENTS
On May 22, 1998, the Company announced that it would redeem its Series A
Cumulative Convertible Preferred Stock ("Preferred Stock") on June 23, 1998, at
$25.75 per share plus accrued and unpaid dividends (approximately $0.02 per
share), for a total redemption price of approximately $25.77 per share (the
"Redemption Price"). Each share of Preferred Stock is convertible into
0.37419548 shares of the Company's Class B Common Stock through June 22, 1998.
The market value of the Class B Common Stock to be received upon conversion will
exceed the Redemption Price if the market value of Class B Common Stock exceeds
$68.87 per share. The Company has 10,517,044 outstanding shares of Preferred
Stock.
S-8
<PAGE> 11
USE OF PROCEEDS
The net proceeds to be received by PacifiCare from the sale of the Notes
offered hereby, after deducting estimated underwriting discounts and commissions
and expenses of the offering payable by PacifiCare, will be approximately
$ . All of the net proceeds will be used to prepay a portion of the
amount outstanding under the Company's Credit Facility. Application of the net
proceeds to the Credit Facility will result in a corresponding reduction in the
aggregate commitments available thereunder.
Bank of America, NT&SA, The Chase Manhattan Bank and Citicorp USA, Inc.,
which are affiliates of BancAmerica Robertson Stephens, Chase Securities Inc.
and Citicorp Securities, Inc., respectively, (and, in the case of The Chase
Manhattan Bank, of the Trustee), are lenders under the Credit Facility and will,
in the aggregate, receive approximately 17 percent of the net proceeds used to
prepay the Credit Facility.
S-9
<PAGE> 12
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1998 (i) on an actual basis and (ii) as adjusted to give
effect to the sale by the Company of the Notes being offered, less estimated
underwriting discounts and commissions and offering expenses totaling $2.0
million, and the application of the net proceeds therefrom as described under
"Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Current maturities of long-term debt...................... $ 152 $ 152
========== ==========
Long-term debt, excluding current maturities.............. $1,041,195 $ 793,195
% Senior Notes due 2008.............................. -- 250,000
Shareholders' equity........................................ 2,083,695 2,083,695
---------- ----------
Total capitalization...................................... $3,124,890 $3,126,890
========== ==========
</TABLE>
S-10
<PAGE> 13
SELECTED HISTORICAL AND OPERATING DATA
The following data for the year ended December 31, 1997, the three-month
period ended December 31, 1996, and each of the four fiscal years in the period
ended September 30, 1996 are derived from the audited consolidated financial
statements of PacifiCare. The following selected historical financial and
operating data for the three-month period ended March 31, 1998 and 1997 and the
twelve-month period ended December 31, 1996 are derived from the unaudited
consolidated financial statements of PacifiCare. The unaudited consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) which PacifiCare considers necessary for a fair
presentation of its financial position and results of operations for these
periods. The following selected financial and operating data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," found in the consolidated financial statements and
related notes and other financial information contained in PacifiCare's Form
10-K for the year ended December 31, 1997, Form 10-Q for the quarter ended March
31, 1998 and Current Report on Form 8-K filed on June 4, 1998, which are
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference" and "Available Information."
<TABLE>
<CAPTION>
(TRANSITION
PERIOD)
THREE MONTHS TWELVE THREE
ENDED MARCH 31, YEAR ENDED MONTHS ENDED MONTHS ENDED
----------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997(1) 1997(1) 1996(2) 1996
---------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenue..................... $2,381,950 $1,843,603 $8,982,680 $4,807,856 $1,234,875
Expenses:
Health care services................. 2,008,501 1,547,655 7,658,879 4,017,383 1,039,345
Other operating expenses............. 300,949 224,833 1,125,299 605,546 154,996
Impairment, disposition, -- -- 154,507 75,840 --
restructuring and other charges....
Office of Personnel Management -- -- -- 25,000 --
charge.............................
---------- ---------- ---------- ---------- ----------
Operating income...................... 72,500 71,115 43,995 84,087 40,534
Interest income, net.................. 7,786 7,966 16,129 44,696 12,302
---------- ---------- ---------- ---------- ----------
Income before income taxes and 80,286 79,081 60,124 128,783 52,836
cumulative effect of a change in
accounting principle.................
Provision for income taxes............ 38,940 35,587 81,825 53,052 21,079
---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative effect 41,346 43,494 (21,701) 75,731 31,757
of a change in accounting
principle............................
Cumulative effect on prior years of a -- -- -- -- --
change in accounting principle.......
---------- ---------- ---------- ---------- ----------
Net income (loss)..................... $ 41,346 $ 43,494 $ (21,701) $ 75,731 $ 31,757
========== ========== ========== ========== ==========
Preferred dividends................... (2,629) (904) (8,792) -- --
---------- ---------- ---------- ---------- ----------
Net income (loss) available to common $ 38,717 $ 42,590 $ (30,493) $ 75,731 $ 31,757
shareholders.........................
---------- ---------- ---------- ---------- ----------
Basic earnings (loss) per share (4)... $ 0.93 $ 1.17 $ (0.75) $ 2.43 $ 1.01
---------- ---------- ---------- ---------- ----------
Diluted earnings (loss) per $ 0.90 $ 1.12 $ (0.75) $ 2.39 $ 1.00
share(4).............................
========== ========== ========== ========== ==========
Ratio of earnings to fixed 4.7x 7.3x 1.8x 13.9x 31.5x
charges(5)(6)........................
========== ========== ========== ========== ==========
OPERATING STATISTICS
Medical care ratio (health care
services as a percent of premium
revenue)
Consolidated......................... 85.2% 84.5% 85.7% 84.5% 85.1%
Commercial........................... 83.1% 83.2% 85.8% 82.8% 84.4%
Government........................... 86.6% 85.4% 85.6% 85.6% 85.5%
Marketing, general and administrative 11.9% 11.6% 11.7% 12.4% 12.4%
expenses as a percent of operating
revenue..............................
Operating income...................... 3.0% 3.9% 0.5% 1.7% 3.3%
Effective tax rate(7)................. 48.5% 45.0% 136.1% 41.2% 39.9%
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
1996(2) 1995 1994(3) 1993
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating revenue..................... $4,637,305 $3,731,022 $2,893,252 $2,221,073
Expenses:
Health care services................. 3,872,747 3,077,135 2,374,258 1,850,469
Other operating expenses............. 585,081 505,644 398,064 283,360
Impairment, disposition, 75,840 -- -- --
restructuring and other charges....
Office of Personnel Management 25,000 -- -- --
charge.............................
---------- ---------- ---------- ----------
Operating income...................... 78,637 148,243 120,930 87,244
Interest income, net.................. 44,143 33,857 24,538 21,083
---------- ---------- ---------- ----------
Income before income taxes and 122,780 182,100 145,468 108,327
cumulative effect of a change in
accounting principle.................
Provision for income taxes............ 50,827 74,005 60,875 45,631
---------- ---------- ---------- ----------
Income (loss) before cumulative effect 71,953 108,095 84,593 62,696
of a change in accounting
principle............................
Cumulative effect on prior years of a -- -- 5,658 --
change in accounting principle.......
---------- ---------- ---------- ----------
Net income (loss)..................... $ 71,953 $ 108,095 $ 90,251 $ 62,696
========== ========== ========== ==========
Preferred dividends................... -- -- -- --
---------- ---------- ---------- ----------
Net income (loss) available to common $ 71,953 $ 108,095 $ 90,251 $ 62,696
shareholders.........................
---------- ---------- ---------- ----------
Basic earnings (loss) per share (4)... $ 2.31 $ 3.69 $ 3.30 $ 2.30
---------- ---------- ---------- ----------
Diluted earnings (loss) per $ 2.27 $ 3.62 $ 3.22 $ 2.25
share(4).............................
========== ========== ========== ==========
Ratio of earnings to fixed 12.3x 17.5x 21.5x 23.5x
charges(5)(6)........................
========== ========== ========== ==========
OPERATING STATISTICS
Medical care ratio (health care
services as a percent of premium
revenue)
Consolidated......................... 84.4% 83.6% 83.1% 84.1%
Commercial........................... 83.1% 82.5% 80.5% 82.5%
Government........................... 85.4% 84.3% 85.2% 85.6%
Marketing, general and administrative 12.4% 13.4% 13.6% 12.6%
expenses as a percent of operating
revenue..............................
Operating income...................... 1.7% 4.0% 4.2% 3.9%
Effective tax rate(7)................. 41.4% 40.6% 41.8% 42.1%
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31, AS OF SEPTEMBER 30,
----------------------- --------------------------- -----------------------------
1998 1997 1997 1996 1996 1995
---------- ---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MEMBERSHIP DATA
Commercial............................... 2,688,200 2,829,100 2,790,000 1,451,500 1,434,500 1,216,100
Government (Medicare and Medicaid)....... 1,000,300 1,019,400 1,001,100 593,600 596,200 541,000
---------- ---------- ---------- ---------- ---------- ----------
Total membership.................. 3,688,500 3,848,500 3,791,100 2,045,100 2,030,700 1,757,100
========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA
Cash and equivalents and marketable
securities.............................. $1,162,345 $1,005,760 $1,545,382 $ 962,482 $ 700,093 $ 811,525
Total assets...................... $4,494,881 $4,729,255 $4,867,958 $1,561,472 $1,299,462 $1,385,372
Medical claims and benefits payable...... $ 708,700 $ 655,700 $ 715,600 $ 278,800 $ 268,000 $ 288,400
Long-term debt, excluding current
maturities.............................. $1,041,195 $1,141,497 $1,011,234 $ 1,370 $ 5,183 $ 11,949
Shareholders' equity..................... $2,083,695 $2,102,318 $2,062,187 $ 860,102 $ 823,224 $ 732,024
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------
1994 1993
------------- -------------
<S> <C> <C>
MEMBERSHIP DATA
Commercial............................... 949,100 806,900
Government (Medicare and Medicaid)....... 409,100 290,100
---------- ----------
Total membership.................. 1,358,200 1,097,000
========== ==========
BALANCE SHEET DATA
Cash and equivalents and marketable
securities.............................. $ 710,608 $ 437,231
Total assets...................... $1,105,548 $ 693,646
Medical claims and benefits payable...... $ 302,900 $ 255,000
Long-term debt, excluding current
maturities.............................. $ 101,137 $ 21,821
Shareholders' equity..................... $ 413,358 $ 319,294
</TABLE>
S-11
<PAGE> 14
- ---------------
(1) The three months ended March 31, 1997 and year ended December 31, 1997
results of operations include the results for FHP from February 14, 1997.
The year ended December 31, 1997 results include $155 million of pretax
charges ($129 million or $3.18 diluted loss per share, net of tax) for the
impairment of long-lived assets, restructuring and certain other charges.
Operating income as a percentage of operating revenue before pretax charges
was 2.2 percent. Return on average shareholders' equity before pretax
charges was 7.3 percent.
(2) The 1996 results of operations include $101 million of pretax charges ($62
million or $1.96 and $1.97 diluted loss per share, net of tax for the year
ended September 30 and the twelve months ended December 31, respectively)
for the impairment of long-lived assets, potential government claims,
dispositions and certain restructuring charges. Operating income as a
percentage of operating revenue before pretax charges for 1996 was 3.8 and
3.9 percent, respectively, for the fiscal year ended September 30 and the
twelve months ended December 31. Return on average shareholders' equity
before pretax charges for the fiscal year ended September 30, 1996 and the
twelve months ended December 31, 1996 was 17.2 percent and 17.0 percent,
respectively.
(3) The 1994 results of operations reflect the cumulative effect on prior fiscal
years of a change in accounting principle. Diluted earnings per share before
cumulative effect of a change in accounting principle for the fiscal year
ended September 30, 1994 was $3.02 per share. The cumulative effect of a
change in accounting principle for the fiscal year ended September 30, 1994
was $0.20 per share. The fiscal year 1994 changes in net income and earnings
per share before cumulative effect of a change in accounting principle are
34.9 percent and 34.2 percent, respectively.
(4) Earnings per share have been restated to conform with the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share."
Basic earnings per share excludes the effect of all potentially dilutive
securities. Diluted earnings per share includes the effect of the
potentially dilutive securities. For the years ended September 30, 1993
through September 30, 1996 and for the three months and twelve months ended
December 31, 1996 the current presentation of diluted earnings per share is
identical to the Company's former presentation of primary earnings per
share. The potentially dilutive securities were not included in the
calculation of diluted loss per share for 1997 because they were
anti-dilutive.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
include income before fixed charges, provision for federal and state income
taxes and cumulative effect of accounting change. Fixed charges consist of
interest expense, including the interest component of capitalized leases,
and that portion of operating lease expense which management believes is
representative of the interest component of rental expense.
(6) Earnings for the year ended December 31, 1997, twelve months ended December
31, 1996 and the fiscal year ended September 30, 1996 include pretax charges
of $155 million, $101 million and $101 million, respectively. Excluding
these pretax charges for the year ended December 31, 1997, the twelve months
ended December 31, 1996 and the fiscal year ended September 30, 1996, the
ratio of earnings to fixed charges would have been 3.7x, 24.0x and 21.6x,
respectively.
(7) Effective income tax rate includes the effect of non-deductible pretax
charges.
S-12
<PAGE> 15
DESCRIPTION OF NOTES
The % Senior Notes due 2008 of the Company (the "Notes") are to be
issued under an indenture to be dated as of June 1, 1998, as supplemented from
time to time (the "Indenture"), between the Company, certain wholly owned
subsidiaries of the Company and Chase Manhattan Bank and Trust Company, National
Association, as trustee (the "Trustee"). The form of the Indenture is filed as
an exhibit to the Registration Statement of which this Prospectus Supplement
forms a part. The statements made under this heading and under "Description of
Debt Securities" in the Prospectus relating to the Notes and the Indenture are
summaries of the provisions thereof, do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Indenture, including the definitions therein of certain terms
that are not otherwise defined in this Prospectus Supplement or the Prospectus.
GENERAL
As of the date of this Prospectus Supplement, no Notes were outstanding
under the Indenture. The Notes constitute a single series for purposes of the
Indenture and are limited to $250,000,000 aggregate principal amount. The Notes
will bear interest from , 1998 at the rate per annum set
forth on the cover page hereof, which interest shall be payable semi-annually in
arrears on and of each year to the
holders of record at the close of business on the preceding
and , respectively, beginning on , 1998,
and will mature on , 2008. The Notes will be issued only in
fully registered form without coupons (to be deposited with the Depository
referred to below) and in denominations of $1,000 and integral multiples
thereof. The Notes will be unsecured obligations of the Company and will rank
equally in right of payment with all senior unsecured indebtedness of the
Company. The Notes will not be entitled to the benefit of any mandatory
redemption or sinking fund.
GUARANTEES
The obligations of the Company under the Notes will be guaranteed by
certain subsidiaries of the Company to the extent and for the limited period of
time described in the Prospectus. The Company and such subsidiaries are holding
companies and are subject to certain restrictions on their ability to receive
funds from their subsidiaries. See "Description of Debt Securities -- General;"
"-- Subsidiary Guarantees."
OPTIONAL REDEMPTION
The Notes will be redeemable, as a whole or in part, at any time, at the
option of the Company on any date (a "Redemption Date") at a redemption price
equal to the greater of (i) 100% of the principal amount of the Notes to be
redeemed or (ii) the sum of the present values of the Remaining Scheduled
Payments thereon discounted to such Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus basis points, plus in either case accrued interest on the
principal amount being redeemed to such Redemption Date.
"Comparable Treasury Issue" means the United States security selected by an
Independent Investment Banker as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (A)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest from such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date,
S-13
<PAGE> 16
the average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. on the third Business Day next preceding such redemption
date.
"Reference Treasury Dealer" means each of BancAmerica Robertson Stephens,
Chase Securities Inc., Citicorp Securities, Inc. and SBC Warburg Dillon Read
Inc. and their respective successors and, at the option of the Company,
additional Primary Treasury Dealers; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related Redemption Date but for such
redemption; provided, however, that, if such Redemption Date is not an Interest
Payment Date with respect to such Note, the amount of the next succeeding
scheduled interest payment thereon will be reduced by the amount of interest
accrued thereon to such Redemption date.
"Treasury Rate" means, with respect to any Redemption Date for the Notes,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an Optional Redemption, selection of such Notes for redemption will
be made by the Trustee on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided that no Notes of a principal
amount or principal amount at maturity, as the case may be, of $1,000 or less
shall be redeemed in part. Notice of redemption shall be mailed by first-class
mail at least 30 but not more than 90 days before the Redemption Date to each
Holder of Notes to be redeemed as its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount or principal amount at maturity, as
the case may be, thereof to be redeemed. A new Note in a principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the Redemption
Date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited funds sufficient to pay the
applicable Redemption Price with the Paying Agent for the Notes.
GLOBAL SECURITIES
The Indenture provisions relating to Registered Global Securities described
in the Prospectus under "Description of Debt Securities -- Global Securities"
will be applicable to the Notes. The Notes will be issued in the form of a
global security which will be deposited with or on behalf of the Depository and
registered in the name of the its nominee.
Redemption notices will be sent to the Depository. If less than all of the
Notes are to be redeemed, the Depository's practice is to determine by lot the
amount of the interest of each Direct Participant in such Notes to be redeemed.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, the Notes will trade in the Depository's Same-Day Funds Settlement
System, and secondary market trading in the Notes will therefore be required by
the Depository to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
S-14
<PAGE> 17
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Company has agreed to
sell to each of the underwriters named below (the "Underwriters"), and each of
such Underwriters has severally agreed to purchase, the principal amount of the
Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ---------
<S> <C>
BancAmerica Robertson Stephens.............................. $
Chase Securities Inc........................................ $
Citicorp Securities, Inc.................................... $
SBC Warburg Dillon Read Inc................................. $
--------
Total............................................. $
========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
% of the principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes but they are not obligated to do so and may
discontinue such market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
The Underwriters may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase a security so long as bids do not exceed a
specified maximum. Syndicate covering transactions would involve purchases of
Notes in the open market after the distribution has been completed in order to
cover syndicate short positions. Stabilizing and syndicate covering transactions
may cause the price of the Notes to be higher than would otherwise be the case
in the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
Each of the Underwriters or their affiliates have from time to time
provided, and may continue to provide, commercial banking and/or financial
advisory services to the Company. The net proceeds to the Company from the sale
of the Notes offered hereby will be used to repay a portion of the amount
outstanding under the Credit Facility extended to the Company by a syndicate of
commercial banking institutions for which the commercial banking affiliate of
BancAmerica Robertson Stephens is Agent and affiliates of Chase Securities Inc.
and Citicorp Securities, Inc. are Managing Agents. This offering is being
conducted in conformance with the provisions of Rule 2710(c)(8) of the Conduct
Rules of the National Association of Securities Dealers, Inc. ("NASD")
applicable to offerings in which more than 10% of the net proceeds of the
offering are to be paid to members of the NASD or affiliated or associated
persons. See "Use of Proceeds."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
The validity of the issuance of the Notes offered by PacifiCare hereby will
be passed upon for the Company by Cooley Godward LLP, Palo Alto, California.
Certain matters in connection with the issuance of the Notes will be passed upon
for the Underwriters by Mayer, Brown & Platt, Los Angeles, California.
S-15
<PAGE> 18
PROSPECTUS
PACIFICARE HEALTH SYSTEMS, INC.
SENIOR DEBT SECURITIES
PacifiCare Health Systems, Inc., a Delaware corporation ("PacifiCare" or
the "Company"), may offer, from time to time, one or more series of its
unsecured senior debt securities consisting of debentures, notes, bonds or other
evidences of indebtedness (the "Debt Securities"). The Debt Securities offered
by the Company may be offered separately, or together, in separate series, in
amounts, at prices and on terms to be determined at the time of the offering and
to be set forth in one or more supplements to this Prospectus (each a
"Prospectus Supplement") up to an aggregate principal amount of $250,000,000 (or
if issued at an original issue discount, such greater amount as shall result in
aggregate gross proceeds of $250,000,000).
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, the specific title, series,
aggregate principal amount, maturity, interest rate (or manner of calculation
thereof), time of payment of interest, form (which may be certificated or
global), authorized denominations, terms for redemption at the option of the
Company, terms for sinking fund payments and the initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and listing on a securities exchange, of the Debt Securities
covered by such Prospectus Supplement.
Unless otherwise specified in an accompanying Prospectus Supplement, the
Debt Securities will be senior securities of the Company, ranking equally with
all other senior unsecured indebtedness of the Company. Certain direct
subsidiaries of the Company may guarantee the obligations of the Company under
the Debt Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company may sell all or a portion of any offering of the Debt
Securities directly to investors, through agents designated from time to time,
or to or through underwriters or dealers. If any agents or any underwriters are
involved in the sale of the Debt Securities, their names and any applicable
purchase price, commission or discount arrangements between or among them will
be set forth, or will be calculable from the information set forth in, the
applicable Prospectus Supplement. See "Plan of Distribution." No Debt Securities
will be offered or sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such Debt Securities.
THE DATE OF THIS PROSPECTUS IS JUNE , 1998.
<PAGE> 19
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus or any Prospectus Supplement and,
if given or made, such information or representations must not be relied upon as
having been authorized. Neither this Prospectus nor any Prospectus Supplement
shall constitute an offer to sell or the solicitation of an offer to buy any of
the Debt Securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus or any
Prospectus Supplement nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that the information incorporated by
reference herein or therein is correct as of any time subsequent to the
respective dates of this Prospectus and any Prospectus Supplement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements, information statements and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at the principal offices of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's
regional offices located at Room 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511, and at Room 1300, Seven World
Trade Center, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Additionally the Commission
maintains a website (http://www.sec.gov) that contains reports, proxy statements
and information statements and other information regarding registrants that file
electronically with the Commission. The Series A Cumulative Convertible
Preferred Stock and the Class A and Class B Common Stock of PacifiCare are
traded on the Nasdaq National Market ("Nasdaq"). Reports, proxy statements and
other information concerning PacifiCare can be inspected at the offices of
Nasdaq.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), with respect to the Debt Securities. This Prospectus does not
contain all the information set forth or incorporated by reference in the
Registration Statement and the exhibits and schedules relating thereto, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the Debt
Securities, reference is made to the Registration Statement and the exhibits and
schedules thereto which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the above offices of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and are qualified in all
respects by such reference.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1997.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
3. The Company's Current Report on Form 8-K filed June 4, 1998.
All reports and other documents subsequently filed by the Registrant
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicates that all Debt Securities
offered have been sold or which deregisters all Debt Securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the time of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is, or is
2
<PAGE> 20
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herewith. The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents that are incorporated herein by reference, other than exhibits to
such documents not specifically incorporated by reference herein. Such requests
should be addressed to: Investor Relations, Attn.: David Erickson, PacifiCare
Health Systems, Inc., 3120 Lake Center Drive, Santa Ana, California 92704,
telephone: (714) 825-5200.
3
<PAGE> 21
THE COMPANY
PacifiCare(R) Health Systems, Inc. (the "Company" or "PacifiCare") is one
of the nation's leading managed health care services companies, serving nearly
3.7 million health maintenance organization ("HMO") members in its commercial
and government product lines as of March 31, 1998. Members join the Company's
commercial plans primarily through employer groups while members of the
Company's government programs are individual Medicare and Medicaid
beneficiaries. On February 14, 1997, the Company acquired FHP International
Corporation ("FHP") for a total purchase price, including transaction costs, of
approximately $2.2 billion (the "FHP Acquisition").The Company's commercial and
government membership substantially increased as a result of the FHP
Acquisition. The FHP Acquisition has been accounted for as a purchase and the
Company's consolidated results of operations include the results of FHP only
from the date of the FHP Acquisition. Also during 1997, the Company consummated
the sale of its Florida, Illinois and New Mexico subsidiaries and announced a
proposed exit strategy for its Utah subsidiary, including its potential sale.
The Company is also a leader in the management, development and marketing
of diversified HMO products and related services. The Company operates HMOs in
10 states and Guam, and as of March 31, 1998, had a combined commercial HMO
membership of nearly 2.7 million members. The Company's Secure Horizons(R)
programs, which operate the largest Medicare risk programs in the United States
(as measured by membership), had over 1.0 million members enrolled as of March
31, 1998. The Company believes that its Secure Horizons programs are attractive
to Medicare beneficiaries because such programs provide a more comprehensive
package of benefits than traditional Medicare and substantially reduce the
members' administrative responsibilities.
The Company believes that its ability to offer a comprehensive range of
products and services, combined with its long-term relationships with health
care providers, will enable the Company to respond effectively to the changing
needs of the health care marketplace.
In connection with the FHP Acquisition, the Company entered into a $1.5
billion credit facility with a syndicate of commercial banks for which Bank of
America, NT&SA is agent (the "Credit Facility"). The interest rate under the
Credit Facility is presently based on the London Interbank Offering Rate plus a
spread, with the average interest rate under the Credit Facility at March 31,
1998 being approximately six percent. As of March 31, 1998, the Company had $940
million outstanding under the Credit Facility. The terms of the Credit Facility
require mandatory reductions of its outstanding principal balance beginning
January 1999 with a final maturity on January 1, 2002. Such terms would not
require a reduction below the current $940 million outstanding principal balance
until July 1, 2001.
The Company's principal executive offices are located at 3120 Lake Center
Drive, Santa Ana, California 92704 and its telephone number is (714) 825-5200.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, all net
proceeds from the sale of the Debt Securities will be used to prepay a portion
of the amount outstanding under the Credit Facility.
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<PAGE> 22
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated. The ratio reflects the historical results
of the Company, excluding FHP, for all periods prior to 1997. For 1997, the
ratio includes FHP results from February 14, 1997.
<TABLE>
<CAPTION>
(TRANSITION
PERIOD)
TWELVE THREE
THREE MONTHS MONTHS MONTHS
ENDED YEAR ENDED ENDED ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------------------------------
1998 1997 1997(1) 1996(1) 1996 1996(1) 1995 1994 1993
----- ----- ------------ ------------ ------------ ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(2).............. 4.7x 7.3x 1.8x 13.9x 31.5x 12.3x 17.5x 21.5x 23.5x
===== ===== ===== ====== ====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Earnings for the year ended December 31, 1997, twelve months ended December
31, 1996 and the fiscal year ended September 30, 1996 include pretax charges
of $155 million, $101 million and $101 million, respectively. Excluding
these pretax charges for the year ended December 31, 1997, the twelve months
ended December 31, 1996 and the fiscal year ended September 30, 1996, the
ratio of earnings to fixed charges would have been 3.7x, 24.0x and 21.6x,
respectively.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
include income before fixed charges, provision for federal and state income
taxes and cumulative effect of accounting change. Fixed charges consist of
interest expense, including the interest component of capitalized leases,
and that portion of operating lease expense which management believes is
representative of the interest component of rental expense.
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<PAGE> 23
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Indenture"), between the Company, certain
wholly owned subsidiaries of the Company and Chase Manhattan Bank and Trust
Company, National Association, as trustee (the "Trustee"). A form of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The Debt Securities may be issued from time to time in
one or more series. The particular terms of each series, or of Debt Securities
forming a part of a series, which are offered by a Prospectus Supplement will be
described in such Prospectus Supplement.
The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indenture, including the definitions
therein of certain terms and with respect to any particular Debt Securities, to
the description of the terms thereof included in the Prospectus Supplement
relating thereto. Wherever particular sections or defined terms of the Indenture
are referred to herein or in a Prospectus Supplement, such sections or defined
terms are incorporated by reference herein or therein, as the case may be.
The Company is a holding company, conducting its operations through its
operating subsidiaries. Accordingly, the Company's ability to service the Debt
Securities is dependent, in part, on its ability to obtain funds from the
Company's subsidiaries. The subsidiaries pay fees for management services
rendered by the Company to the subsidiaries and cash dividends. Most of the
subsidiaries of the Company are subject to HMO or insurance regulations and are
subject to supervision by one or more HMO or insurance regulators. Subsidiaries
subject to regulation may be required to satisfy minimum equity, capital,
deposit and/or reserve requirements. These requirements, which limit the ability
of the Company's subsidiaries to transfer funds to the Company, may impact the
amount of funds that may be paid by the subsidiaries to the Company. In
addition, the rights of the Company and the rights of its creditors, including
Holders of the Debt Securities, to participate in any distribution of the assets
of a subsidiary upon the liquidation or recapitalization of such subsidiary will
be subject to the prior claims of the subsidiary's creditors, except to the
extent that the Company itself may be a creditor with recognized claims against
the subsidiary. Accordingly, Holders of the Debt Securities may be deemed to be
effectively subordinated to such claims. In connection with the FHP Acquisition,
the Company's California health plans provided undertakings to the California
Department of Corporations. As part of these undertakings, the California plans
are required to describe to all future holders of indebtedness that: (i) the
plans would not upstream funds in any manner, if such action would cause the
plans to be out of compliance with their tangible net equity requirements, would
result in insufficient working capital or cash flows necessary to provide for
the retirement of existing or proposed indebtedness of the plans or affect the
plans' ability to provide health care services; (ii) the plans would not
guarantee, cosign, assume or pledge any assets or stock to secure any portion of
the Credit Facility or any future indebtedness of the Company; (iii) the plans
would not lend any money to the Company without an evaluation by independent
financial accountants establishing the value of the loan to be equal to the
amount shown in the plan's financial statements; and (iv) any indebtedness of
the plans to the Company may be subordinated to the plans' obligations under
California laws and regulations.
The covenants in the Indenture will not necessarily afford the Holders of
the Debt Securities protection in the event of a decline in the Company's credit
quality resulting from highly leveraged or other transactions involving the
Company.
The Indenture provides that separate series of Debt Securities may be
issued under the Indenture from time to time without limitation as to aggregate
principal amount. The Company may specify a maximum aggregate principal amount
for the Debt Securities of any series. (Section 301). The Debt Securities are to
have such terms and provisions which are not inconsistent with the Indenture,
including as to maturity, principal and interest, as the Company may determine.
Except as provided in Section 1006, the Debt Securities will be unsecured
obligations of the Company, will rank on a parity with all other senior
unsecured indebtedness of the Company and, if so provided in a Prospectus
Supplement, will be guaranteed by certain
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<PAGE> 24
subsidiaries of the Company to the extent and for the limited period of time
described under "Subsidiary Guarantees" below.
The applicable Prospectus Supplement will set forth the price or prices at
which the Debt Securities to be offered will be issued and will describe the
following terms of such Debt Securities: (1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of the particular series of Debt
Securities; (3) the date or dates on which the principal of any of such Debt
Securities will be payable or the method by which such date or dates will be
determined or extended; (4) the rate or rates at which any of such Debt
Securities will bear interest, if any, or the method by which such rate or rates
shall be determined, the date or dates from which any such interest will accrue,
the Interest Payment Dates on which any such interest will be payable and the
Regular Record Date for any such interest payable on any Interest Payment Date,
or the method by which such date or dates shall be determined, and the basis
upon which interest shall be calculated if other than that of a 360-day year of
twelve 30-day months; (5) the place or places where the principal of, and any
premium and interest on any of such Debt Securities will be payable; (6) the
period or periods within which, the price or prices at which and the terms and
conditions upon which any of such Debt Securities may be redeemed, in whole or
in part, at the option of the Company and the manner in which any election by
the Company to redeem such Debt Securities shall be evidenced (if other than by
a Board Resolution); (7) the obligation, if any, of the Company to redeem or
purchase any of such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of the Holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions on which
any of such Debt Securities will be redeemed or purchased, in whole or in part,
pursuant to any such obligation; (8) the denominations in which any of such Debt
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (9) if the amount of principal of, or any premium or
interest on any of such Debt Securities may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts will be
determined; (10) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any premium
or interest on any of such Debt Securities will be payable (and the manner in
which the equivalent of the principal amount thereof in the currency of the
United States of America is to be determined for any purpose, including for the
purpose of determining the principal amount deemed to be Outstanding at any
time); (11) if the principal of or any premium or interest on any of such Debt
Securities is to be payable, at the election of the Company or the Holder
thereof, in one or more currencies or currency units other than those in which
such Debt Securities are stated to be payable, the currency, currencies or
currency units in which payment of any such amount as to which such election is
made will be payable, the periods within which and the terms and conditions upon
which such election is to be made and the amount so payable (or the manner in
which such amount is to be determined); (12) the percentage of the principal
amount at which such Debt Securities will be issued and, if other than the
entire principal amount thereof, the portion of the principal amount of any of
such Debt Securities which will be payable upon declaration of acceleration of
the Maturity thereof or the method by which such portion shall be determined;
(13) if the principal amount payable at the Stated Maturity of any of such Debt
Securities will not be determinable as of any one or more dates prior to the
Stated Maturity, the amount which will be deemed to be such principal amount as
of any such date for any purpose, including the principal amount thereof which
will be due and payable upon any Maturity other than the Stated Maturity or
which will be deemed to be Outstanding as of any such date (or, in any such
case, the manner in which such deemed principal amount is to be determined);
(14) any variation from the application of the provisions of the Indenture
described under "Defeasance and Covenant Defeasance -- Defeasance and Discharge"
or "Defeasance and Covenant Defeasance -- Defeasance of Certain Covenants" or
under both such captions and the manner in which any election of the Company to
defease such Debt Securities shall be evidenced (if other than by a Board
Resolution); (15) whether any of such Debt Securities will be issuable in whole
or in part in the form of one or more Global Securities and, if so, the
respective Depositaries for such Global Securities, the form of any legend or
legends to be borne by any such Global Securities in addition to or in lieu of
the legend referred to under "Form, Exchange and Transfer -- Global Securities"
and, if different from those described under such caption, any circumstances
under which any such Global Securities may be exchanged in whole or in part for
Debt Securities registered, and any transfer of such Global Securities in whole
or in part may be registered, in the name of Persons other than the Depositary
for such Global Securities or its nominee; (16) whether any of
7
<PAGE> 25
such Debt Securities will be subject to certain optional interest rate reset
provisions; (17) whether any of such Debt Securities will be subject to certain
optional extension of maturity provisions; (18) any addition to or change in the
Events of Default applicable to any of such Debt Securities and any change in
the right of the Trustee or the Holders of any such Debt Securities to declare
the principal amount of any of such Debt Securities and any change in the right
of the Trustee or the Holders of any of such Debt Securities to declare the
principal amount thereof due and payable; (19) any addition to or change in the
covenants in the Indenture applicable to any of such Debt Securities; (20)
whether such Debt Securities shall be guaranteed as herein described; and (21)
any other terms of such Debt Securities not inconsistent with the provisions of
the Indenture. (Section 301).
Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their principal amount. Special United States
federal income tax considerations (if any) applicable to Debt Securities sold at
an original issue discount may be described in the applicable Prospectus
Supplement. In addition, special United States federal income tax or other
considerations (if any) applicable to any Debt Securities which are denominated
in a currency or currency unit other than United States dollars may be described
in the applicable Prospectus Supplement.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issuable only in fully
registered form, without coupons, and, unless otherwise specified in the
applicable Prospectus Supplement, only in denominations of $1,000 and integral
multiples thereof. (Section 302).
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Debt Securities of each series will
be exchangeable for other Debt Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount. (Section 305).
Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed with the form of transfer
endorsed thereon duly executed) at the office of the Security Registrar or at
the office of any transfer agent designated by the Company for such purpose. No
service charge will be made for any registration at transfer or exchange of Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. Such transfer
or exchange will be effected upon the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request. The Company has appointed the Trustee as Security
Registrar. Any transfer agent (in addition to the Security Registrar) initially
designated by the Company for any Debt Securities will be named in the
applicable Prospectus Supplement. (Section 305). The Company may from time to
time designate additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which any transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each Place of Payment for the Debt Securities of each series. (Section
1002).
If the Debt Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company will not be required to (i) issue,
register the transfer of, or exchange any Debt Security of that series (or of
that series and specified tenor, as the case may be) during a period beginning
at the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security that may be selected for redemption and
ending at the close of business on the day of such mailing or (ii) register the
transfer of, or exchange any Debt Security so selected for redemption, in whole
or in part, except the unredeemed portion of any such Debt Security being
redeemed in part. (Section 305).
GLOBAL SECURITIES
To the extent provided in an applicable Prospectus Supplement, some or all
of the Debt Securities of any series may be represented, in whole or in part, by
one or more Global Securities which will have an aggregate principal amount
equal to that of the Debt Securities represented thereby. Unless otherwise
provided in the Prospectus Supplement, the Global Security representing Debt
Securities will be deposited with, or on behalf
8
<PAGE> 26
of, The Depository Trust Company ("DTC"), or other successor depository
appointed by the Company (DTC or such other depository is herein referred to as
the "Depository") and registered in the name of a nominee of the Depository and
such Global Security will bear a legend regarding the restrictions on exchange
and registration of transfer thereof referred to below and any such other
matters as may be provided for pursuant to the Indenture. Unless otherwise
provided in the Prospectus Supplement, Debt Securities will not be issued in
definitive form.
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Security may be exchanged in whole or in part for
Debt Securities registered, and no transfer of a Global Security in whole or in
part may be registered, in the name of any Person other than the Depository for
such Global Security or any nominee of such Depository unless (i) the Depository
has notified the Company that it is unwilling or unable to continue as
Depository for such Global Security or has ceased to be qualified to act as such
as required by the Indenture, (ii) there shall have occurred and be continuing
an Event of Default with respect to the Debt Securities represented by such
Global Security or (iii) there shall exist such circumstances, if any, in
addition to or in lieu of those described above as may be described in the
applicable Prospectus Supplement. All Debt Securities issued in exchange for a
Global Security or any portion thereof will be registered in such names as the
Depository may direct. (Sections 204 and 305).
DTC has advised the Company as follows: 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 pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its participants
("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, thereby 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 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 DTC's book-entry system is
also available to others, such as securities brokers and dealers, banks and
trust companies, that clear securities transactions through or maintain a
custodial relationship with a Direct Participant either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Upon the issuance by the Company of Debt Securities represented by a Global
Security, purchases of Debt Securities under the DTC System must be made by or
through Direct Participants, which will receive a credit for the Debt Securities
on DTC's records. The ownership interest of each actual purchaser of each Debt
Security (a "Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Debt Securities are to 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 Debt Securities, except in the event that use of the book-entry
system for the Debt Securities is discontinued. The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in a Global Security.
So long as the Depository for the Global Security, or its nominee, is the
registered owner of the Global Security, the Depository or its nominee, as the
case may be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture. Except
as described above, Beneficial Owners will not be entitled to have Debt
Securities represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
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<PAGE> 27
To facilitate subsequent transfers, all Debt Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Debt Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Debt Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Debt
Securities 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 will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to any Debt
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Debt Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payments of principal of, and interest, if any, on the Debt Securities
represented by the Global Security registered in the name of the Depository or
its nominee will be made by the Company through the Trustee under the Indenture
or a paying agent (the "Paying Agent"), which may also be the Trustee under the
Indenture, to the Depository or its nominee, as the case may be, as the
registered owner of the Global Security. Neither the Company, the Trustee, nor
the Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company has been advised that DTC will credit Direct Participants'
accounts on the payable 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 the payable date. Payments by Participants to Beneficial Owners will
be governed by standing instructions and customary practices, as in the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and not of
DTC, the Paying Agent or the Company, subject to any such statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the Company or the Paying
Agent, disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
The information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
Interest. (Section 307).
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of, and any premium and interest on the Debt Securities of a
particular series will be payable at the office of such Paying Agent or Paying
Agents as the Company may designate for such purpose from time to time, except
that at the option of the Company payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address appears in
the Security Register. Unless otherwise indicated in the applicable Prospectus
Supplement, the corporate trust office of the Trustee in New York, New York will
be designated as the Company's sole Paying Agent for payments with respect to
Debt Securities of each series. Any other Paying Agents initially designated by
the Company for the Debt Securities of a particular series will be named
10
<PAGE> 28
in the applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Debt Securities of a particular series. (Section 1002).
Any money paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remains
unclaimed at the end of two years after such principal, premium or interest, as
the case may be, has become due and payable may be repaid to the Company at the
Company's request. (Section 1003).
COVENANTS
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company shall not consolidate with or merge
with, or convey, transfer or lease its properties and assets substantially as an
entirety to, any Person (a "Successor Person"), and shall not permit any Person
to merge into, or convey, transfer or lease its properties and assets
substantially as an entirety to, the Company, unless (i) the Company is the
continuing and surviving entity or the Successor Person is a corporation,
partnership, trust, or other entity organized and validly existing under the
laws of any domestic jurisdiction and assumes the Company's obligations on the
Debt Securities and under the Indenture and (ii) immediately after giving effect
to the transaction (and treating any indebtedness which becomes an obligation of
the Company or any Subsidiary as a result of such transaction as having been
incurred at the time of such transaction), no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing. (Section 801). The Indenture provides
similar covenants with respect to the Subsidiary Guarantors, except that
transactions between the Subsidiary Guarantors and the Company (or with each
other) are freely permitted. If such a transaction results in the release of all
other guarantees of debt of the Company, the Subsidiary Guarantors (or their
successors) will be released from any guarantees of any series of Debt
Securities. (Sections 803 and 1507).
LIMITATION ON LIENS
The Indenture provides that the Company shall not, and shall not permit any
Restricted Subsidiary of the Company, to create or suffer to exist any Lien on
property or assets of the Company or such Subsidiary in connection with
incurring Debt without making effective provision whereby all of the Debt
Securities are equally and ratably secured with such borrowing, subject to the
following exceptions: (a) Liens upon or in the property acquired or existing in
such property at the time of acquisition, or in the case of an entity which
becomes a Subsidiary of the Company, existing with respect to its property at
the time it becomes a Subsidiary; (b) with respect to any series of Debt
Securities, Liens existing on the date of issuance of such series; (c) Liens
created by a Restricted Subsidiary as security for Debt owing to the Company or
any Restricted Subsidiary; (d) Liens otherwise prohibited by the covenant in the
Indenture relating to Liens, securing Debt which, together with the aggregate
outstanding principal amount of all other Debt of the Company and its Restricted
Subsidiaries which is secured by Liens that would otherwise be subject to such
covenant and the Attributable Debt of Sale and Leaseback Transactions effected
in accordance with this clause (d) does not exceed the greater of (A)
$50,000,000 or (B) 15% of Consolidated Net Tangible Assets; (e) Liens resulting
from the deposit of funds or evidences of indebtedness in trust for the purpose
of defeasing indebtedness of the Company or any of its Subsidiaries, (f) Liens
securing obligations pursuant to hedging transactions, including rate swaps,
basis swaps, forward rate transactions, commodity swaps and options, foreign
exchange transactions, cap, collar and floor transactions, currency swap
transactions and the like, and (g) any extension, renewal or refunding of any
Liens referred to in the foregoing clauses; provided, however, that in the case
of this clause (g), the principal amount of Debt secured thereby shall not
exceed the principal amount of Debt, plus any premium or fee payable in
connection with any such extension, renewal, replacement or refunding, so
secured at the time of such extension, renewal, replacement or refunding.
(Section 1006).
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LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company shall not, and the Company shall
not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction unless: (i) immediately prior to entering into such Sale and
Leaseback Transaction, the Company or such Restricted Subsidiary could create a
Lien on the property that is to be the subject of the Sale and Leaseback
Transaction in an amount equal to the Attributable Debt with respect to the Sale
and Leaseback Transaction without thereby causing an Event of Default, or (ii)
an amount equal to the greater of the net proceeds of such Sale and Leaseback
Transaction and the fair value (as determined by the Board of Directors) of the
property that is to be the subject thereof is used (x) to reduce the Debt of the
Company or any Subsidiary having an original term to maturity of twelve months
or greater or (y) to purchase assets for use in the same line of business as
that which the property that is the subject of the Sale and Leaseback
Transaction was used by the Company or the Restricted Subsidiary in each case
referred to in the preceding clauses (x) and (y) within 180 days after the
effective date of the sale of the property in the Sale and Leaseback
Transaction. (Section 1007).
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay
principal of, or any premium on any Debt Security of that series when due; (b)
failure to pay any interest on any Debt Securities of that series when due, and
continuance of such failure to make payment for 30 days; (c) failure to deposit
any sinking fund payment, when due, in respect of any Debt Security of the
applicable series; (d) failure to perform, or breach of, any other covenant or
warranty of the Company or any Subsidiary Guarantor in the Indenture (other than
a covenant included in the Indenture solely for the benefit of a series other
than the applicable series), continued for 90 days after written notice has been
given to the Company or any applicable Subsidiary Guarantor by the Trustee or
the Holders of at least 25% in principal amount of the outstanding Debt
Securities of that series, as provided in the Indenture; (e) a final judgment,
decree or order for the payment of money in excess of $75,000,000 is rendered
against the Company or any subsidiary and remains unsatisfied and in effect for
90 days without a stay of execution; (f) a default occurs under any instrument
or instruments (including the Indenture) under which there is at the time
outstanding, or by which there may be secured or evidenced, any Debt of the
Company or any subsidiary or any guarantee of payment by the Company or any
subsidiary of any obligation of any Person, which default results in
acceleration of, or the nonpayment at maturity (after giving effect to any
applicable grace period) of, such Debt or guarantee in an aggregate amount
exceeding $75,000,000 and such default is not cured or waived, and such
acceleration has not been rescinded or annulled, within 30 days after receipt by
the Company of notice as provided in the Indenture; and (g) certain events
involving bankruptcy, insolvency or reorganization. (Section 501).
If an Event of Default (other than an Event of Default described in clauses
(d) or (f) above that is applicable to all Outstanding Debt Securities) with
respect to the Debt Securities of any series at the time Outstanding Debt shall
occur and be continuing, either the Trustee or the Holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of that series by
notice as provided in the Indenture may declare the principal amount of the Debt
Securities of that series (or, in the case of any Debt Security that is an
Original Issue Discount Security or the principal amount of which is not then
determinable, such portion of the principal amount of such Debt Security, or
such other amount in lieu of such principal amount, as may be specified in the
terms of such Debt Security) to be due and payable immediately. If an Event of
Default described in clauses (d) or (f) of the preceding paragraph that is
applicable to all Outstanding Debt Securities shall occur and be continuing,
either the Trustee or the Holders of at least 25% in aggregate principal amount
of all the Debt Securities then outstanding (treated as one class) by notice as
provided in the Indenture may declare the principal amount (or, if any Debt
Securities are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms thereof) of all the Debt Securities then
Outstanding to be due and payable immediately. After any such acceleration of a
series, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
non-payment of
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accelerated principal (or other specified amount) have been cured or waived as
provided in the Indenture. (Section 502). For information as to waiver or
defaults, see "Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603) Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of that
series. (Section 512).
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt Securities
of that series have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding and
(iii) the Trustee has failed to institute such proceeding, and has not received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent with such request,
within 60 days after such notice, request and offer. (Section 507). However,
such limitations do not apply to a suit instituted by a Holder of a Debt
Security for the enforcement of payment of the principal of or any premium or
interest on such Debt Security on or after the applicable due date specified in
such Debt Security. (Section 508).
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the performance or observance of any of the terms, provisions
and conditions of the Indenture and, if so, specifying all such known defaults.
(Section 1004).
SUBSIDIARY GUARANTEES
If provided in an applicable Prospectus Supplement, the obligations of the
Company to pay the principal of, premium, if any, and interest on any series of
Debt Securities will be guaranteed by PacifiCare Operations, Inc. ("PACO") and
FHP, each a direct, wholly-owned subsidiary of the Company and, under
circumstances described in the Indenture, other Subsidiaries (the "Subsidiary
Guarantors"). PACO and FHP have also guaranteed the obligations of the Company
under the Credit Facility. The terms of the Subsidiary Guarantees will be
substantially the same as the guarantees provided by PACO and FHP with respect
to the Company's obligations under the Credit Facility and are intended solely
to cause the Company's obligations to pay principal, premium, if any, and
interest on any series of Debt Securities to be pari passu with the Company's
obligations under the Credit Facility. Accordingly, the Subsidiary Guarantees
will terminate when the guarantees relating to the Credit Facility (and if there
should be any, guarantees of any other Debt of the Company) terminate or are
released for any reason. The termination date of the guarantees of the Credit
Facility is January 1, 2002, which date may be extended under certain
circumstances. The Subsidiary Guarantors have not guaranteed any other
obligations of the Company, nor have any other subsidiaries of the Company
provided guarantees with respect to the Company's obligations under the Credit
Facility or with respect to any series of Debt Securities.
The Subsidiary Guarantees are intended to be general unsecured joint and
several obligations of each respective Subsidiary Guarantor ranking pari passu
in right of payment with all existing and future senior unsecured indebtedness
of such Subsidiary Guarantor. (Section 1502).
The Indenture provides that if any direct or indirect Subsidiary of the
Company guarantees or becomes primarily obligated with respect to any Debt of
the Company, other than the Debt Securities, at any time subsequent to the date
on which any Debt Securities are originally issued, then the Company will cause
the Debt Securities to be equally and ratably guaranteed by such Subsidiary,
which will thereupon become a Subsidiary Guarantor. (Section 1506(a)) The
Indenture also provides that a Subsidiary Guarantor may be
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released from its Subsidiary Guarantee obligations if such Subsidiary Guarantor
is not a guarantor of, or primary obligor under any Debt of the Company other
than the Debt Securities, provided that no Event of Default under the Indenture
has occurred and is continuing. (Section 1507).
Although Holders of the Debt Securities will be direct creditors of the
Subsidiary Guarantors by virtue of the Subsidiary Guarantees, existing or future
creditors of the Subsidiary Guarantors, a trustee in bankruptcy, or a Subsidiary
Guarantor as debtor-in-possession could seek to avoid or subordinate the
Subsidiary Guarantees under federal or state fraudulent conveyance laws if it
were successful in establishing that (i) the Subsidiary Guarantees were incurred
with intent to hinder, delay or defraud any present or future creditor, or (ii)
the Subsidiary Guarantor did not receive fair consideration or reasonably
equivalent value for issuing the Subsidiary Guarantees and that it (a) was
insolvent at the time of the issuance, (b) was rendered insolvent by reason of
the issuance, (c) was engaged in a business or a transaction for which it had
unreasonably small capital, or (d) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured. Among other
things, a legal challenge of the Subsidiary Guarantees on fraudulent conveyance
grounds may focus on the benefits, if any, realized by a Subsidiary Guarantor as
a result of the issuance by the Company of the Debt Securities guaranteed. To
the extent the Subsidiary Guarantees were avoided as fraudulent conveyances or
held unenforceable for any other reason, the Holders of the Debt Securities
guaranteed would cease to have any claim in respect of a Subsidiary Guarantor,
would be creditors solely of the Company, and might be required to return all
amounts received pursuant to the avoided Subsidiary Guarantees. The measure of
insolvency for purposes of the foregoing will vary depending upon the law of the
jurisdiction that is being applied. Generally, however, a company may be
considered insolvent for such purposes if the sum of its debts is greater than
all of its property at a fair valuation, or if the present fair saleable value
of its assets is less than the amount that will be required to pay its probable
liability on its existing debts as they become absolute and matured.
The obligations of each Subsidiary Guarantor are limited to such maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal, state or foreign law. (Section 1503)
Rights of subrogation under the Subsidiary Guarantees will be subordinated
to the prior right of holders of the Securities to be paid in full. (Section
1502(e))
The Company has provided in its Current Report on Form 8-K filed June 4,
1998 and incorporated herein by reference certain consolidating condensed
financial statements relating to the Subsidiary Guarantors (on an aggregate
basis) but has not provided full financial statements of the Subsidiary
Guarantors because management has determined that such information would not be
material to investors in view of (i) the limited purpose for which the
Subsidiary Guarantees are to be provided and (ii) the fact that the aggregate
consolidated assets, liabilities, earnings and equity of the Subsidiary
Guarantors comprise substantially all of the Company's consolidated assets,
liabilities, earnings and equity. The Subsidiary Guarantors are themselves
holding companies, rather than operating companies, and most of their
subsidiaries are subject to HMO or insurance regulations. The subsidiaries that
are subject to regulation may be required to satisfy minimum equity, capital,
deposit and/or reserve requirements. These requirements, which limit the ability
of the subsidiaries of the Subsidiary Guarantors to transfer funds to the
Subsidiary Guarantors, may impact the amount of funds that may be paid by the
subsidiaries to the Subsidiary Guarantors. In addition, the rights of the
Subsidiary Guarantors and the rights of their creditors, including Holders of
the Debt Securities, to participate in any distribution of the assets of a
subsidiary upon the liquidation or recapitalization of such subsidiary will be
subject to the prior claims of the subsidiary's creditors, except to the extent
that a Subsidiary Guarantor itself may be a creditor with recognized claims
against the subsidiary. Accordingly, Holders of the Debt Securities may,
notwithstanding the existence of the Subsidiary Guarantees, be deemed to be
effectively subordinated to such claims.
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AMENDMENT, MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, or any premium or interest on, any Debt Security, (c)
reduce the amount of principal of an Original Issue Discount Security or any
other Debt Security payable upon acceleration of the maturity thereof, (d)
change the place or currency of payment of principal, of or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on, or with respect to, any Debt Security, (f) reduce
the percentage in principal amount of Outstanding Debt Securities of any series,
the consent of whose Holders is required for modification or amendment of the
Indenture, (g) reduce the percentage in principal amount of Outstanding Debt
Securities of any series necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, or (h) make
certain modifications to such provisions with respect to modification and
waiver. (Section 902).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of any series may waive any past default or compliance with
certain restrictive provisions under the Indenture, except a default in the
payment of principal, premium or interest and certain covenants and provisions
of the Indenture which cannot be amended without the consent of the Holder of
each Outstanding Debt Security of such series affected. (Sections 513 and 1010).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under the Indenture
as of any date, (i) the principal amount of Original Issue Discount Security
that will be deemed to be Outstanding will be the amount or the principal
thereof that would be due and payable as of such date upon acceleration of the
maturity thereof to such date, (ii) if, as of such date, the principal amount
payable at the Stated Maturity or a Debt Security is not determinable (for
example, because it is based on an index), the principal amount of such Debt
Security deemed to be Outstanding as of such date will be an amount determined
in the manner prescribed for such Debt Security and (iii) the principal amount
of a Debt Security denominated in one or more foreign currencies or currency
units that will be deemed to be Outstanding will be the U.S. dollar equivalent,
determined as of such date in the manner prescribed for such Debt Security, of
the principal amount of such Debt Security (or, in the case of a Debt Security
described in clause (i) or (ii) above, of the amount described in such clause).
Certain Debt Securities, including those for whom payment or redemption money
has been deposited or set aside in trust for the Holders and those that have
been fully defeased pursuant to Section 1402, will not be deemed to be
Outstanding. (Section 101).
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Debt Securities of any series entitled to give or take any
direction, notice, consent, waiver or other action under the Indenture, in the
manner and subject to the limitations provided in the Indenture. In certain
limited circumstances, the Trustee will be entitled to set a record date for
action by Holders. If a record date is set for any action to be taken by Holders
of a particular series, such action may be taken only by persons who are Holders
of Outstanding Debt Securities of that series on the record date. To be
effective, such action must be taken by Holders of the requisite principal
amount of such Debt Securities within a specified period following the record
date. For any particular record date, this period will be 180 days or such
shorter period as may be specified by the Company (or the Trustee, if the
Trustee set the record date) and may be shortened or lengthened (but not beyond
180 days) from time to time. (Section 104).
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the applicable Prospectus Supplement, the
provisions of Section 1402, relating to defeasance and discharge of
indebtedness, or Section 1403, relating to defeasance of certain
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restrictive covenants in the Indenture, shall apply to the Debt Securities of
any series or to any specified part of a series. (Section 1401).
Defeasance and Discharge. Section 1402 of the Indenture provides that the
Company and the Subsidiary Guarantors will be discharged from all of its
obligations with respect to such Debt Securities (except for certain obligations
to exchange or register the transfer of Debt Securities, to replace stolen, lost
or mutilated Debt Securities, to maintain paying agencies and to hold monies for
payment in trust) upon the deposit in trust for the benefit of the Holders of
such Debt Securities of money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indenture and
such Debt Securities. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Company has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or there has been a change
in tax law, in either case to the effect that Holders of such Debt Securities
will not recognize gain or loss for federal income tax purposes as a result or
such deposit, defeasance and discharge and will be subject to federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge were not to occur. (Sections
1402 and 1404).
Defeasance of Certain Covenants. Section 1403 of the Indenture provides
that, in certain circumstances, the Company and the Subsidiary Guarantors may
omit to comply with certain restrictive covenants, including those described
under "Certain Covenants," and any that may be described in the applicable
Prospectus Supplement, and that in those circumstances the occurrence of certain
Events of Default, which are described above (with respect to such restrictive
covenants) in clause (d) in the first paragraph under "Events of Default" and
any that may be described in the applicable Prospectus Supplement, will be
deemed not to be or result in an Event of Default, in each case with respect to
such Debt Securities. The Company, in order to exercise such option, will be
required to deposit, in trust for the benefit of the Holders of such Debt
Securities, money or U.S. Government Obligations, or both, which, through the
payment of principal and interest in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
any premium and interest on such Debt Securities on the respective Stated
Maturities in accordance with the terms of the Indenture and such Debt
Securities. The Company will also be required, among other things, to deliver to
the Trustee an Opinion of Counsel to the effect that Holders of such Debt
Securities will not recognize gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain obligations and will be subject
to federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit and defeasance were not to
occur. In the event that the Company were to exercise this option with respect
to any Debt Securities and such Debt Securities were declared due and payable
because of the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations so deposited in trust would be sufficient to pay amounts
due on such Debt Securities at the time of their respective Stated Maturities
but might not be sufficient to pay amounts due on such Debt Securities upon any
acceleration resulting from such Event of Default. In such case, the Company
would remain liable for such payments. (Sections 1403 and 1404).
NOTICES
Notice to Holders of Debt Securities will be given by mail to the addresses
of such Holders as they may appear in the Security Register. (Sections 101 and
106).
CERTAIN DEFINITIONS
"Attributable Debt" means, as to any particular lease under which any
person is liable as lessee, and at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof, discounted from the
respective due dates thereof to such date at a rate per annum equivalent to the
rate inherent in such lease compounded semi-annually, including any termination
penalty in the case of a lease terminable by the lessee.
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"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
"Consolidated Net Tangible Assets" means, with respect to the Company, the
total amount of assets (less applicable valuation allowances) after deducting
(a) all current liabilities (excluding the amount of liabilities which are by
their terms extendable or renewable at the option of the obligor to a date more
than 12 months after the date as of which the amount is being determined) and
(b) all goodwill, tradenames, trademarks, patents, unamortized debt discount and
expense and other like intangible assets, all as set forth on the most recent
balance sheet of the Company and its consolidated Subsidiaries and determined on
a consolidated basis in accordance with generally accepted accounting
principles.
"Debt" means indebtedness for money borrowed.
"Lien" means any mortgage, pledge, lien or any other encumbrance.
"Maturity", when used with respect to any Debt Security, means the date on
which the principal of such Debt Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, call for redemption or otherwise.
"Restricted Subsidiary" means, at any time, each Subsidiary which has
guaranteed any series of Securities and any Subsidiary having at such time
either (i) gross revenues for the preceding four fiscal quarter periods in
excess of 5% of the consolidated gross revenues of the Company and its
Subsidiaries or (ii) total assets, as of the last day of the preceding fiscal
quarter, in excess of 5% of the consolidated total assets of the Company and its
Subsidiaries, in each case, based upon the Company's most recent annual or
quarterly financial statements.
"Sale and Leaseback Transaction" means any arrangement with any person
pursuant to which the Company or any Subsidiary leases any material property
that has been or is to be sold or transferred by the Company or the Subsidiary
to such person, other than (a) leases for a term, including renewals at the
option of the lessee, of not more than three years, (b) leases between the
Company and a Subsidiary or between Subsidiaries, and (c) leases of material
property executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the commencement
of commercial operation, of such material property.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable."
"Subsidiary" means (i) a corporation more than 50% of the outstanding
securities having ordinary voting power of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries and (ii) any partnership, limited
liability company or other entity more than 50% of the ownership interest having
ordinary voting power of which is at the time so owned. For the purposes of this
definition, "securities having ordinary voting power" means stock and other
securities which ordinarily have voting power for the election of directors, or
persons having management power with respect to such entity, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Subsidiary Guarantee" means any guarantee of Debt Securities by any
Subsidiary Guarantor in accordance with the provisions described under
"Subsidiary Guarantees" above.
"Subsidiary Guarantor" means each of PACO and FHP, any other direct or
indirect Subsidiary of the Company that may become required to deliver a
Subsidiary Guarantee pursuant to the provisions described under "Subsidiary
Guarantees" above and each of their respective successors and assigns, but
excluding any Subsidiary released from its Subsidiary Guarantee pursuant to the
terms of the Indenture.
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TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 309).
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws or the State of New York. (Section 112).
INFORMATION REGARDING THE TRUSTEE
Affiliates of the Trustee, Chase Manhattan Bank and Trust Company, National
Association, have lending and other customary banking relationships with the
Company.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through an underwriter or
underwriters, (ii) through dealers, (iii) through agents, (iv) directly to
purchasers, including affiliates of the Company, or (v) through a combination of
any such methods of sale. The applicable Prospectus Supplement will set forth
the terms of the offerings of any Debt Securities, including the method of
distribution, the name or names of any underwriters, dealers or agents, any
managing underwriter or underwriters, the purchase price of the Debt Securities
and the proceeds to the Company from the sale, any underwriting discounts,
agency fees and other items constituting underwriters' compensation and any
discount or concessions allowed or reallowed to dealers which may be changed
from time to time. The expected time of delivery of the Debt Securities in
respect of which this Prospectus is delivered will be set forth in the
applicable Prospectus Supplement.
If underwriters are used in the sale of the Debt Securities, the
underwriting agreement will provide that the obligations of the underwriters are
subject to certain conditions precedent and that the underwriters with respect
to a sale of Debt Securities will be obligated to purchase all such Debt
Securities if any are purchased. In connection with the sale of Debt Securities,
underwriters may receive compensation from the Company or from purchasers of
Debt Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Debt Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Underwriters, agents or dealers participating in the distribution of Debt
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Debt
Securities may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Debt Securities may be sold in one or more transactions either at a
fixed price or prices which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company may also offer and sell the Debt Securities in
exchange for one or more of its outstanding issues of debt or convertible debt
securities or in the satisfaction of indebtedness.
Underwriters, agents or dealers who participate in the distribution of Debt
Securities may be entitled, under agreements which may be entered into with the
Company, to indemnification by the Company against certain liabilities,
including liabilities under the Act, or to contribution by the Company to
payments that such underwriters, dealers or agents or any of their controlling
persons may be required to make in respect thereof. Underwriters, agents or
dealers may be customers of, engage in transactions with or perform services for
the Company or subsidiaries of the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers and agents to solicit offers by certain institutions to
purchase Debt Securities from the Company pursuant to delayed delivery contracts
providing for payment and delivery on the date stated in the Prospectus
18
<PAGE> 36
Supplement. Such contracts will be subject only to those conditions set forth in
the Prospectus Supplement. The Prospectus Supplement will also set forth the
commissions payable for solicitation of such contracts.
Offers to purchase Debt Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional investors
or others who may be deemed to be underwriters within the meaning of the Act
with respect to any resale thereof. The terms of any such sales will be
described in the Prospectus Supplement relating thereto. Except as set forth in
the applicable Prospectus Supplement, no director, officer or employee of the
Company will solicit or receive a commission with direct sales by the Company of
the Debt Securities, although such persons may respond to inquiries by potential
purchasers and perform ministerial and clerical work in connection with any such
direct sales.
LEGAL MATTERS
The validity of the issuance of the Debt Securities offered by PacifiCare
hereby will be passed upon for the Company by Cooley Godward LLP, Palo Alto,
California. Certain matters in connection with the issuance of the Debt
Securities will be passed upon for the underwriters, dealers or agents, if any,
by Mayer, Brown & Platt, Los Angeles, California.
EXPERTS
The consolidated financial statements of PacifiCare included in
PacifiCare's Annual Report on Form 10-K for the year ended December 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
19
<PAGE> 37
=========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER
THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE OFFERED DEBT SECURITIES IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AND AN OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR IN THE
AFFAIRS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES SINCE THE RESPECTIVE DATES OF
THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business................................. S-4
Use of Proceeds.......................... S-9
Capitalization........................... S-10
Selected Historical and Operating Data... S-11
Description of Notes..................... S-13
Underwriting............................. S-15
Legal Matters............................ S-15
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Documents by
Reference.............................. 2
The Company.............................. 4
Use of Proceeds.......................... 4
Ratio of Earnings to Fixed Charges....... 5
Description of Debt Securities........... 6
Plan of Distribution..................... 18
Legal Matters............................ 19
Experts.................................. 19
</TABLE>
=========================================================
======================================================
PacifiCare Logo
$250,000,000
% SENIOR NOTES
DUE 2008
-----------------
PROSPECTUS
SUPPLEMENT
JUNE , 1998
-----------------
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
SBC WARBURG DILLON READ INC.
======================================================
<PAGE> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 73,750
Rating Agency Fees.......................................... 162,500
Printing and Engraving...................................... 70,000
Legal Fees and Expenses (other than Blue Sky)............... 100,000
Blue Sky Fees and Expenses.................................. 20,000
Accounting Fees and Expenses................................ 40,000
Trustee Fees and Expenses................................... 10,000
Miscellaneous............................................... 30,000
--------
Total............................................. $506,250
========
</TABLE>
All of the above items except the registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Registrant,
PACO and FHP (together, the "Additional Registrants") have broad powers to
indemnify their directors and officers against liabilities they may incur in
such capacities, including liabilities under the Securities Act of 1933, as
amended (the "Act"). The Registrant's and the Additional Registrants' bylaws
provide that the Registrant and the Additional Registrants will indemnify their
respective directors and officers to the maximum extent consistent with the
provisions of the Delaware General Corporation Law.
In addition, the Registrant's and PacifiCare Operations, Inc.'s Certificate
of Incorporation provides that, and, in the case of FHP International
Corporation its Bylaws provide that, pursuant to Delaware law, their directors
shall not be liable for monetary damages for breach of the directors' fiduciary
duty of care to the Registrant and the Additional Registrants and their
stockholders. This provision in the Certificates of Incorporation or Bylaws, as
the case may be, does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of such director's
duty of loyalty to the Registrant and the Additional Registrants, for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, for actions leading to improper personal benefit to such
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Registrant maintains a policy providing directors' and officers'
liability insurance, which insures directors and officers of the Registrant and
the Additional Registrants in certain circumstances.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Registrant and the
Additional Registrants pursuant to the foregoing provisions, the Registrant and
the Additional Registrants have been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
II-1
<PAGE> 39
ITEM 16. EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement*
4.1 Form of Indenture to be dated as of June 1, 1998, between
PacifiCare Health Systems, Inc., the Subsidiary Guarantors
named therein and Chase Manhattan Bank and Trust Company,
National Association, as trustee
5.1 Opinion of Cooley Godward LLP
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges*
23.1 Consent of Ernst & Young LLP
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1)
24.1 Power of Attorney of the Registrant*
24.2 Power of Attorney of PacifiCare Operations, Inc. (appears on
signature page)
24.3 Power of Attorney of FHP International Corporation (appears
on signature page)
25.1 Statement of Eligibility and Qualification on Form T-1 of
Chase Manhattan Bank and Trust Company, National
Association, as trustee, under the Trust Indenture Act*
</TABLE>
- ---------------
* Previously filed
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any fact or events arising after
the effective date of the registrations statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(ii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
II-2
<PAGE> 40
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 section 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.
(c) 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 such 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.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-3
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Ana, State of
California, on this 3rd day of June, 1998.
PACIFICARE HEALTH SYSTEMS, INC.
By: /s/ ALAN R. HOOPS
------------------------------------
Alan R. Hoops
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* Chairman of the Board June 3, 1998
- ------------------------------------------
Terry O. Hartshorn
/s/ ALAN R. HOOPS President and Chief Executive Officer and June 3, 1998
- ------------------------------------------ Director (Principal Executive Officer)
Alan R. Hoops
* Executive Vice President and Chief June 3, 1998
- ------------------------------------------ Financial Officer (Principal Financial
Wayne B. Lowell Officer)
* Vice President and Corporate Controller June 3, 1998
- ------------------------------------------ (Principal Accounting Officer)
Mary C. Langsdorf
* Director June 3, 1998
- ------------------------------------------
Jack R. Anderson
* Director June 3, 1998
- ------------------------------------------
Craig T. Beam
* Director June 3, 1998
- ------------------------------------------
Richard M. Burdge
* Director June 3, 1998
- ------------------------------------------
Bradley C. Call
* Director June 3, 1998
- ------------------------------------------
David R. Carpenter
* Director June 3, 1998
- ------------------------------------------
Gary L. Leary
* Director June 3, 1998
- ------------------------------------------
David A. Reed
</TABLE>
II-4
<PAGE> 42
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
* Director June 3, 1998
- ------------------------------------------
Warren E. Pinckert II
Director June 3, 1998
- ------------------------------------------
Lloyd E. Ross
* Director June 3, 1998
- ------------------------------------------
Jean Bixby Smith
*By: /s/ ALAN HOOPS June 3, 1998
------------------------------------
Alan Hoops
Attorney-in-fact
</TABLE>
II-5
<PAGE> 43
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Ana, State of
California on this 3rd day of June 1998.
PACIFICARE OPERATIONS, INC.
By: /s/ ALAN R. HOOPS
------------------------------------
Alan R. Hoops
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned whose signature
appears below constitutes and appoints Alan R. Hoops, Wayne B. Lowell and Joseph
S. Konowiecki and each of them (with full power of each of them to act alone),
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and on his behalf, and in his name,
place and stead, in any all capacities to execute and sign any and all
amendments or post-effective amendments to this registration statement, 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, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in
fact and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof and the Registrant hereby
confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ ALAN R. HOOPS President and Chief Executive Officer and June 3, 1998
- ------------------------------------------ Director (Principal Executive Officer)
Alan R. Hoops
/s/ WAYNE B. LOWELL Executive Vice President, June 3, 1998
- ------------------------------------------ Chief Financial Officer and Director
Wayne B. Lowell (Principal Financial Officer)
/s/ MARY C. LANGSDORF Vice President and Corporate Controller June 3, 1998
- ------------------------------------------ (Principal Accounting Officer)
Mary C. Langsdorf
/s/ JOSEPH S. KONOWIECKI General Counsel, Secretary and Director June 3, 1998
- ------------------------------------------
Joseph S. Konowiecki
</TABLE>
II-6
<PAGE> 44
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Ana, State of
California on this 3rd day of June 1998.
FHP INTERNATIONAL CORPORATION
By: /s/ ALAN R. HOOPS
------------------------------------
Alan R. Hoops
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each of the undersigned whose signature
appears below constitutes and appoints Alan R. Hoops, Wayne B. Lowell and Joseph
S. Konowiecki and each of them (with full power of each of them to act alone),
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and on his behalf, and in his name,
place and stead, in any all capacities to execute and sign any and all
amendments or post-effective amendments to this registration statement, 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, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in
fact and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof and the Registrant hereby
confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ ALAN R. HOOPS President and Chairman of the Board June 3, 1998
- ------------------------------------------ (Principal Executive Officer)
Alan R. Hoops
/s/ WAYNE B. LOWELL Chief Financial Officer and Director June 3, 1998
- ------------------------------------------ (Principal Financial Officer)
Wayne B. Lowell
/s/ MARY C. LANGSDORF Corporate Controller June 3, 1998
- ------------------------------------------ (Principal Accounting Officer)
Mary C. Langsdorf
/s/ JOSEPH S. KONOWIECKI Secretary and Director June 3, 1998
- ------------------------------------------
Joseph S. Konowiecki
</TABLE>
II-7
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
4.1 Form of Indenture, to be dated as of June 1, 1998, between
PacifiCare Health Systems, Inc., the Subsidiary Guarantors
named therein and Chase Manhattan Bank and Trust Company,
National Association, as trustee.
5.1 Opinion of Cooley Godward LLP.
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges.*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney of the Registrant*.
24.2 Power of Attorney of Pacific Operations, Inc. (appears on
the signature page).
24.3 Power of Attorney of FHP International Corporation (appears
on the signature page).
25.1 Statement of Eligibility and Qualifications on Form T-1 of
Chase Manhattan Bank and Trust Company, National
Association, as trustee under the Trust Indenture Act.*
</TABLE>
- ---------------
* Previously filed
<PAGE> 1
EXHIBIT 4.1
================================================================================
PACIFICARE HEALTH SYSTEMS, INC.
Issuer,
SUBSIDIARY GUARANTORS NAMED HEREIN
and
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
Trustee
INDENTURE
Dated as of June 1, 1998
---------------
================================================================================
<PAGE> 2
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310
THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- --------------- ------------------
<S> <C>
ss. 310(a)(1) .............................................................. 609
(a)(2) .............................................................. 609
(a)(3) .............................................................. Not Applicable
(a)(4) .............................................................. Not Applicable
(b) .............................................................. 608
610
ss. 311(a) .............................................................. 613
(b) .............................................................. 613
ss. 312(a) .............................................................. 701
702
(b) .............................................................. 702
(c) .............................................................. 702
ss. 313(a) .............................................................. 703
(b) .............................................................. 703
(c) .............................................................. 703
(d) .............................................................. 703
ss. 314(a) .............................................................. 704
(a)(4) .............................................................. 101
1004
(b) .............................................................. Not Applicable
(c)(1) .............................................................. 102
(c)(2) .............................................................. 102
(c)(3) .............................................................. Not Applicable
(d) .............................................................. Not Applicable
(e) .............................................................. 102
ss. 315(a) .............................................................. 601
(b) .............................................................. 602
(c) .............................................................. 601
(d) .............................................................. 601
(e) .............................................................. 514
</TABLE>
- -------------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
- --------------- ------------------
<S> <C>
ss. 316(a) .............................................................. 101
(a)(1)(A) .............................................................. 502
512
(a)(1)(B) .............................................................. 513
(a)(2) .............................................................. Not Applicable
(b) .............................................................. 508
(c) .............................................................. 104
ss. 317(a)(1) .............................................................. 503
(a)(2) .............................................................. 504
(b) .............................................................. 1003
ss. 318(a) .............................................................. 107
</TABLE>
- -----------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions...................................................................1
SECTION 102. Compliance Certificates and Opinions..........................................9
SECTION 103. Form of Documents Delivered to Trustee.......................................10
SECTION 104. Acts of Holders; Record Dates................................................10
SECTION 105. Notices, Etc., to Trustee and Company and Subsidiary Guarantors..............12
SECTION 106. Notice to Holders; Waiver....................................................13
SECTION 107. Conflict with Trust Indenture Act............................................13
SECTION 108. Effect of Headings and Table of Contents.....................................13
SECTION 109. Successors and Assigns.......................................................13
SECTION 110. Separability Clause..........................................................14
SECTION 111. Benefits of Indenture........................................................14
SECTION 112. Governing Law................................................................14
SECTION 113. Legal Holidays...............................................................14
SECTION 114. Counterparts.................................................................14
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally..............................................................14
SECTION 202. Form of Face of Security.....................................................15
SECTION 203. Form of Reverse of Security..................................................17
SECTION 204. Form of Legend for Global Securities.........................................22
SECTION 205. Form of Trustee's Certificate of Authentication..............................23
SECTION 206. Form of Notation Relating to Subsidiary Guarantees...........................23
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.........................................23
SECTION 302. Denominations................................................................26
SECTION 303. Execution, Authentication, Delivery and Dating...............................26
SECTION 304. Temporary Securities.........................................................28
</TABLE>
i
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 305. Registration, Registration of Transfer and Exchange..........................29
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.............................30
SECTION 307. Payment of Interest; Interest Rights Preserved; Optional Interest Reset......31
SECTION 308. Optional Extension of Maturity...............................................33
SECTION 309. Persons Deemed Owners........................................................34
SECTION 310. Cancellation.................................................................35
SECTION 311. Computation of Interest......................................................35
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture......................................35
SECTION 402. Application of Trust Money...................................................36
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default............................................................37
SECTION 502. Acceleration of Maturity; Rescission and Annulment...........................39
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee..............40
SECTION 504. Trustee May File Proofs of Claim.............................................40
SECTION 505. Trustee May Enforce Claims Without Possession of Securities..................41
SECTION 506. Application of Money Collected...............................................41
SECTION 507. Limitation on Suits..........................................................41
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest..........................................................42
SECTION 509. Restoration of Rights and Remedies...........................................42
SECTION 510. Rights and Remedies Cumulative...............................................42
SECTION 511. Delay or Omission Not Waiver.................................................43
SECTION 512. Control by Holders...........................................................43
SECTION 513. Waiver of Past Defaults......................................................43
SECTION 514. Undertaking for Costs........................................................44
SECTION 515. Waiver of Usury, Stay or Extension Laws......................................44
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities..........................................44
SECTION 602. Notice of Defaults...........................................................45
SECTION 603. Certain Rights of Trustee....................................................45
SECTION 604. Not Responsible for Recitals or Issuance of Securities.......................47
</TABLE>
ii
<PAGE> 6
<TABLE>
<S> <C> <C>
SECTION 605. May Hold Securities..........................................................47
SECTION 606. Money Held in Trust..........................................................47
SECTION 607. Compensation and Reimbursement...............................................48
SECTION 608. Conflicting Interests........................................................48
SECTION 609. Corporate Trustee Required; Eligibility......................................48
SECTION 610. Resignation and Removal; Appointment of Successor............................49
SECTION 611. Acceptance of Appointment by Successor.......................................50
SECTION 612. Merger, Conversion, Consolidation or Succession to Business..................51
SECTION 613. Preferential Collection of Claims Against Company............................52
SECTION 614. Appointment of Authenticating Agent..........................................52
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders....................53
SECTION 702. Preservation of Information; Communications to Holders.......................54
SECTION 703. Reports by Trustee...........................................................54
SECTION 704. Reports by Company...........................................................54
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.........................55
SECTION 802. Company Successor Substituted................................................56
SECTION 803. Subsidiary Guarantors May Consolidate, Etc. Only on Certain Terms............56
SECTION 804. Subsidiary Guarantor Successor Substituted...................................57
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders...........................57
SECTION 902. Supplemental Indentures With Consent of Holders..............................59
SECTION 903. Execution of Supplemental Indentures.........................................60
SECTION 904. Effect of Supplemental Indentures............................................60
SECTION 905. Conformity with Trust Indenture Act..........................................61
SECTION 906. Reference in Securities to Supplemental Indentures...........................61
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest..................................61
SECTION 1002. Maintenance of Office or Agency.............................................61
SECTION 1003. Money for Securities Payments to Be Held in Trust...........................62
SECTION 1004. Statement by Officers as to Default.........................................63
SECTION 1005. Existence...................................................................63
SECTION 1006. Limitation on Liens.........................................................63
SECTION 1007. Limitation on Sale and Leaseback Transactions...............................64
SECTION 1008. Waiver of Certain Covenants.................................................65
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article....................................................65
SECTION 1102. Election to Redeem; Notice to Trustee.......................................65
SECTION 1103. Selection by Trustee of Securities to Be Redeemed...........................66
SECTION 1104. Notice of Redemption........................................................66
SECTION 1105. Deposit of Redemption Price.................................................67
SECTION 1106. Securities Payable on Redemption Date.......................................67
SECTION 1107. Securities Redeemed in Part.................................................68
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article....................................................68
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.......................68
SECTION 1203. Redemption of Securities for Sinking Fund...................................69
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF THE HOLDERS
SECTION 1301. Applicability of Article....................................................69
SECTION 1302. Repayment of Securities.....................................................69
SECTION 1303. Exercise of Option..........................................................70
SECTION 1304. When Securities Presented for Repayment Become Due and Payable..............70
SECTION 1305. Securities Repaid in Part...................................................71
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance................71
SECTION 1402. Defeasance and Discharge....................................................71
SECTION 1403. Covenant Defeasance.........................................................72
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.............................72
SECTION 1405. Acknowledgment of Discharge By Trustee......................................74
SECTION 1406. Deposited Money and U.S. Government Obligations to Be Held in Trust;
Miscellaneous Provisions.............................................74
SECTION 1407. Reinstatement...............................................................75
ARTICLE FIFTEEN
GUARANTEES OF SECURITIES
SECTION 1501. Applicability of Article....................................................75
SECTION 1502. Unconditional Guarantees....................................................76
SECTION 1503. Limitation of Subsidiary Guarantors' Liability..............................79
SECTION 1504. Contribution................................................................79
SECTION 1505. Execution and Delivery of Subsidiary Guarantees.............................79
SECTION 1506. Addition of Secondary Subsidiary Guarantors.................................80
SECTION 1507. Release of Subsidiary Guarantee.............................................80
ARTICLE SIXTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES
SECTION 1601. Exemption from Individual Liability.........................................81
</TABLE>
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<PAGE> 9
INDENTURE, dated as of June 1, 1998, between PACIFICARE HEALTH SYSTEMS,
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 3120 Lake
Center Drive, Santa Ana, California 92704, the Primary Subsidiary Guarantors (as
defined hereinafter) and CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association duly organized and existing under
the laws of the United States of America, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its debentures, notes
or other evidences of indebtedness (herein called the "Securities"), to be
issued in one or more series as in this Indenture provided.
Each of the Subsidiary Guarantors (as defined hereinafter) initially a
party hereto is a direct wholly-owned subsidiary of the Company. Such Subsidiary
Guarantors will derive direct and indirect benefits from the issuance of the
Securities. Accordingly, such Subsidiary Guarantors have authorized the
guarantee of the Company's obligations under this Indenture and the Securities,
and to provide therefor such Subsidiary Guarantors have each duly authorized the
execution and delivery of this Indenture.
All things necessary to make this Indenture a valid agreement of the
Company and of each of the Subsidiary Guarantors initially a party hereto, in
accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities (together with the related Subsidiary Guarantees) by the Holders
thereof, it is mutually agreed, for the equal and proportionate benefit of all
Holders of the Securities or of a series thereof (together with the related
Subsidiary Guarantees), as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
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(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of
such computation;
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the amount by which the fair value of the assets of such Subsidiary Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
the Subsidiary Guarantee given by such Subsidiary Guarantor, of such Subsidiary
Guarantor at such date.
"Attributable Debt" means, as to any particular lease under which any
Person is liable as lessee, and at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof, discounted from the
respective due dates thereof to such date at a rate per annum equivalent to the
rate inherent in such lease compounded semi-annually, including any termination
penalty in the case of a lease terminable by the lessee.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
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"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board or the board of directors of any
Subsidiary or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or a Subsidiary of the
Company to have been duly adopted by the Board of Directors or any such
Subsidiary, as the case may be, and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its Chief Executive Officer, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means, with respect to the Company,
the total amount of assets (less applicable valuation allowances) after
deducting (a) all current liabilities (excluding the amount of liabilities which
are by their terms extendable or renewable at the option of the obligor to a
date more than 12 months after the date as of which the amount is being
determined) and (b) all goodwill, tradenames, trademarks, patents, unamortized
debt discount and expense and other like intangible assets, all as set forth on
the most recent balance sheet of the Company and its consolidated Subsidiaries
and determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Corporate Trust Office" means the office of the Trustee in San
Francisco, California, at which at any particular time its corporate trust
business shall be administered, which office at the date hereof is 101
California Street, Ste. 2725, San Francisco, California 94111, except that with
respect to the presentation of Securities (or coupons, if any, representing an
installment of interest) for payment or for registration of transfer and
exchange, such term shall mean the office or the agency of the Trustee in New
York, New York at which at any particular time its corporate agency business
shall be conducted.
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"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1403.
"Debt" means indebtedness for money borrowed.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1402.
"Depositary" means, with respect to Securities of any series issuable
in whole or in part in the form of one or more Global Securities, a clearing
agency registered under the Exchange Act that is designated to act as Depositary
for such Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Guaranteed Securities" has the meaning specified in Section 1501.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an instalment of interest on such Security."
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<PAGE> 13
"Internal Revenue Code" means the Internal Revenue Code of 1986 and any
statute successor thereto, in each case as amended from time to time.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
"Issue Date" means the date on which Securities are originally issued
under this Indenture.
"Lien" means any mortgage, pledge, lien or any other encumbrance.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an instalment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 501(4).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President or any Vice President, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary, of the Company or a Subsidiary
Guarantor, as the case may be, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if
such Securities are to be redeemed, notice of such redemption has been
duly given
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<PAGE> 14
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the principal amount of
such Security (or, in the case of a Security described in Clause (A) or (B)
above, of the amount determined as provided in such Clause), and (D) Securities
owned by the Company, any Subsidiary Guarantor, or any other obligor upon the
Securities or any Affiliate of the Company, any Subsidiary Guarantor, or of such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company, any Subsidiary Guarantor, or any other obligor
upon the Securities or any Affiliate of the Company, any Subsidiary Guarantor,
or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
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<PAGE> 15
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Primary Subsidiary Guarantors" means PacifiCare Operations, Inc. and
FHP International Corporation.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Repayment Date" means, when used with respect to any Security to be
repaid at the option of the Holder, the date fixed for such repayment by or
pursuant to this Indenture.
"Responsible Officer", when used with respect to the Trustee, means the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers to a
particular corporate trust matter hereunder, whom is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means, at any time, each Subsidiary which has
guaranteed any series of Securities and any Subsidiary having at such time
either (i) gross revenues for the preceding four fiscal quarters in excess of 5%
of the consolidated gross revenues of the Company and its Subsidiaries or (ii)
total assets, as of the last day of the preceding fiscal quarter, in excess of
5% of the consolidated total assets of the Company and its Subsidiaries, in each
case, based upon the Company's most recent annual or quarterly financial
statements.
"Sale and Leaseback Transaction" means any arrangement, transaction or
series of transactions with any Person pursuant to which the Company or any
Restricted Subsidiary leases any property, whether real, personal or intangible,
that has been or is to be sold or transferred by
7
<PAGE> 16
the Company or any Restricted Subsidiary to any such Person or any affiliate of
such Person, other than (a) any such sales and leases between the Company and a
Subsidiary or between Subsidiaries, (b) leases for a term, including renewals at
the option of the lessee, of not more than three years, and (c) leases of
property executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the commencement
of commercial operation of such property.
"Secondary Subsidiary Guarantors" means any Subsidiary, whether direct
or indirect, of the Company that is required to deliver a Subsidiary Guarantee
pursuant to Section 1506 hereof, and in each case their respective successors
and assigns.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date specified in
such Security as the fixed date on which the principal of such Security or such
instalment of principal or interest is due and payable.
"Subsidiary" means (i) a corporation more than 50% of the outstanding
securities having ordinary voting power of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries and (ii) any partnership, limited
liability company or other entity more than 50% of the ownership interest having
ordinary voting power of which is at the time so owned. For the purposes of this
definition, "securities having ordinary voting power" means stock and other
securities which ordinarily have voting power for the election of directors, or
persons having management power with respect to such entity, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Subsidiary Guarantee" means a guarantee required to be made by a
Subsidiary of the Company pursuant to Section 1502 hereof.
"Subsidiary Guarantor" means (i) each Primary Subsidiary Guarantor, and
(ii) each Secondary Subsidiary Guarantor, if any, in each case only for so long
as such Primary Subsidiary Guarantor or Secondary Subsidiary Guarantor remains
obligated under a Subsidiary Guarantee.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1404.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Yield to Maturity" means the yield to maturity, computed at the time
of issuance of a Security (or, if applicable, at the most recent redetermination
of interest on such Security) and as set forth in such Security in accordance
with generally accepted United States bond yield computation principles.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company or of a
Subsidiary Guarantor, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and any other
requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include,
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify,
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
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The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to
11
<PAGE> 20
this paragraph, the Holders of Outstanding Securities of such series on such
record date, and no other Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities of such series on
such record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities of the relevant series on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Company
in writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Company and Subsidiary
Guarantors.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any
Subsidiary Guarantor shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration,
or
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<PAGE> 21
(2) the Company or any Subsidiary Guarantor by the Trustee or
by any Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company addressed to it at the
address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing
to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid or by overnight delivery
service, to each Holder affected by such event, at his address as it appears in
the Security Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice. In
any case where notice to Holders is given by mail or by overnight delivery
service, neither the failure to mail or send such notice, nor any defect in any
notice so mailed or sent, to any particular Holder shall affect the sufficiency
of such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give notice by mail on
overnight delivery service, then such notification as shall be made with the
approval of the Trustee shall constitute a sufficient notification for every
purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Subsidiary Guarantors shall bind their respective successors and assigns,
whether so expressed or not.
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<PAGE> 22
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture, the Subsidiary Guarantees and the Securities shall be
governed by and construed in accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity.
SECTION 114. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions,
14
<PAGE> 23
substitutions and other variations as are required or permitted by this
Indenture (including the notations thereon relating to the Subsidiary Guarantees
contemplated by Section 206, if applicable), and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or
Depositary therefor or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof. If
the form of Securities of any series is established by action taken pursuant to
a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities or notations of Subsidiary Guarantees,
if applicable, as evidenced by their execution of such Securities or notations
of Subsidiary Guarantees, if applicable.
Neither the Company nor the Trustee shall have any responsibility for
any defect in the CUSIP number that appears on any Security, check, advice of
payment or redemption notice, and any such document may contain a statement to
the effect that CUSIP numbers have been assigned by an independent service for
convenience of reference and that neither the Company nor the Trustee shall be
liable for any inaccuracy in such numbers.
SECTION 202. Form of Face of Security.
[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND
THE REGULATIONS THEREUNDER.]
------------------------------
----------------------------------------
No. __________ $----------
PacifiCare Health Systems, Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _______________, or
registered assigns, the principal sum of ____________________ Dollars on
____________________ [if the Security is to bear interest prior to Maturity,
insert:, and to pay interest thereon from _______________ or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on __________ and __________ in each year, commencing
__________, at the rate of _____% per annum, until the principal hereof is paid
or made available for payment [if applicable, insert: , provided that any
principal and premium, and any such instalment of interest, which is overdue
shall bear interest at the rate of _____% per annum (to the extent that the
payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or made available for
15
<PAGE> 24
payment, and such interest shall be payable on demand]. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the __________ or
__________ (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert: The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of _____% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. [Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the rate
of _____% per annum (to the extent that the payment of such interest on interest
shall be legally enforceable), from the date of such demand until the amount so
demanded is paid or made available for payment. Interest on any overdue interest
shall be payable on demand.]]
Payment of the principal of (and premium, if any) and [if applicable,
insert: any such] interest on this Security will be made at the office or agency
of the Company maintained for that purpose in __________, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [if applicable, insert: ;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
- ------------------- ------------------------
By ________________________
Attest:
- -------------------
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of __________ (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and _______________, as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
and reference is hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof [if applicable, insert: , limited in
aggregate principal amount to $__________].
[If applicable, insert: The interest rate (or the spread or spread
multiplier used to calculate such interest rate, if applicable) on this Security
may be reset by the Company on ____________ (each an "Optional Reset Date"). The
Company may exercise such option with respect to this Security by notifying the
Trustee of such exercise at least 50 but not more than 60 days prior to an
Optional Reset Date for this Security. Not later than 40 days prior to each
Optional Reset Date, the Trustee shall transmit, in the manner provided for in
Section 106 of the Indenture, to the Holder of this Security a notice (the
"Reset Notice") indicating whether the Company has elected to reset the interest
rate (or the spread or spread multiplier used to calculate such interest rate,
if applicable), and if so (i) such new interest rate (or such new spread or
spread multiplier, if applicable) and (ii) the provisions, if any, for
redemption during the period from such Optional Reset Date to the next Optional
Reset Date or if there is no such next Optional Reset Date, to the Stated
Maturity of this Security (each such period a "Subsequent Interest Period"),
including the date or dates on which or the period or periods during which and
the price or prices at which such redemption may occur during the Subsequent
Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to the
Optional Reset Date, the Company may, at its option, revoke the interest rate
(or the spread or spread multiplier used to calculate such interest rate, if
applicable) provided for in the Reset Notice and establish an
17
<PAGE> 26
interest rate (or a spread or spread multiplier used to calculate such interest
rate, if applicable) that is higher than the interest rate (or the spread or
spread multiplier, if applicable) provided for in the Reset Notice, for the
Subsequent Interest Period by causing the Trustee to transmit, in the manner
provided for in Section 106 of the Indenture, notice of such higher interest
rate (or such higher spread or spread multiplier, if applicable) to the Holder
of this Security. Such notice shall be irrevocable. All Securities of this
series with respect to which the interest rate (or the spread or spread
multiplier used to calculate such interest rate, if applicable) is reset on an
Optional Reset Date, and with respect to which the Holders of such Securities
have not tendered such Securities for repayment (or have validly revoked any
such tender) pursuant to the next succeeding paragraph, will bear such higher
interest rate (or such higher spread or spread multiplier, if applicable).
The Holder of this Security will have the option to elect repayment by
the Company of the principal of this Security on each Optional Reset Date at a
price equal to the principal amount hereof plus interest accrued to such
Optional Reset Date. In order to obtain repayment on an Optional Reset Date, the
Holder must follow the procedures set forth in Article Thirteen of the Indenture
for repayment at the option of Holders except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days prior
to such Optional Reset Date and except that, if the Holder has tendered this
Security for repayment pursuant to the Reset Notice, the Holder may, by written
notice to the Trustee, revoke such tender or repayment until the close of
business on the tenth day before such Optional Reset Date.
[If applicable, insert: The Stated Maturity of this Security may be
extended at the option of the Company for _______________ (each an "Extension
Period") up to but not beyond ____________ (the "Final Maturity"). The Company
may exercise such option with respect to this Security by notifying the Trustee
of such exercise at least 50 but not more than 60 days prior to the Stated
Maturity of this Security in effect prior to the exercise of such option (the
"Original Stated Maturity"). If the Company exercises such option, the Trustee
shall transmit, in the manner provided for in Section 106 of the Indenture, to
the Holder of this Security not later than 40 days prior to the Original Stated
Maturity a notice (the "Extension Notice") indicating (i) the election of the
Company to extend the Maturity, (ii) the new Stated Maturity, (iii) the interest
rate applicable to the Extension Period and (iv) the provisions, if any, for
redemption during such Extension Period. Upon the Trustee's transmittal of the
Extension Notice, the Stated Maturity of this Security shall be extended
automatically and, except as modified by the Extension Notice and as described
in the next paragraph, this Security will have the same terms as prior to the
transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days before the
Original Stated Maturity of this Security, the Company may, at its option,
revoke the interest rate provided for in the Extension Notice and establish a
higher interest rate for the Extension Period by causing the Trustee to
transmit, in the manner provided for in Section 106, notice of such higher
interest rate to the Holder of this Security. Such notice shall be irrevocable.
All Securities of this series with respect to which the Stated Maturity is
extended will bear such higher interest rate.
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<PAGE> 27
If the Company extends the Maturity of this Security, the Holder will
have the option to elect repayment of this Security by the Company on the
Original Stated Maturity at a price equal to the principal amount hereof, plus
interest accrued to such date. In order to obtain repayment on the Original
Stated Maturity once the Company has extended the Maturity hereof, the Holder
hereof must follow the procedures set forth in Article Thirteen of the Indenture
for repayment at the option of Holders, except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days prior
to the Original Stated Maturity and except that, if the Holder has tendered this
Security for repayment pursuant to an Extension Notice, the Holder may, by
written notice to the Trustee, revoke such tender for repayment until the close
of business on the tenth day before the Original Stated Maturity.
[If applicable, insert: The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert:
(1) on __________ in any year commencing with the year _____ and ending with the
year _____ through operation of the sinking fund for this series at a Redemption
Price equal to 100% of the principal amount, and (2)] at any time [if
applicable, insert: on or after ____________, ____], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [if applicable, insert: on or
before __________, _____%, and if redeemed] during the 12-month period beginning
__________ of the years indicated,
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
- ---- ----- ---- -----
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption [if applicable, insert: (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert: The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on __________ in any
year commencing with the year _____ and ending with the year _____ through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert: on or after __________], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning __________ of the years indicated,
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<PAGE> 28
<TABLE>
<CAPTION>
Redemption Price For Redemption
Redemption Price for Redemption Otherwise Than Through Operation
Year Through Operation of the Sinking Fund of the Sinking Fund
- ---- ------------------------------------- --------------------------------
<S> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert: Notwithstanding the foregoing, the Company may
not, prior to __________, redeem any Securities of this series as contemplated
by [if applicable, insert: Clause (2) of] the preceding paragraph as a part of,
or in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than _____% per annum.]
[If applicable, insert: The sinking fund for this series provides for
the redemption on __________ in each year beginning with the year _____ and
ending with the year _____ of [if applicable, insert: not less than $__________
("mandatory sinking fund") and not more than] $__________ aggregate principal
amount of Securities of this series. Securities of this series acquired or
redeemed by the Company otherwise than through [if applicable, insert:
mandatory] sinking fund payments may be credited against subsequent [if
applicable, insert: mandatory] sinking fund payments otherwise required to be
made [if applicable, insert: , in the inverse order in which they become due].]
[If the Security is subject to redemption of any kind, insert: In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert: The Indenture contains provisions for
defeasance at any time of [the entire indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
the Indenture.]
[If the Security is not an Original Issue Discount Security, insert: If
an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
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<PAGE> 29
[If the Security is an Original Issue Discount Security, insert: If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to: insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
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<PAGE> 30
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $__________ and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
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SECTION 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
--------------------------------
As Trustee
By _____________________________
Authorized Officer
SECTION 206. Form of Notation Relating to Subsidiary Guarantees.
The form of notation to be set forth on each Guaranteed Security
relating to the Subsidiary Guarantees shall be in substantially the following
form:
The obligations of the Company under the Indenture shall be guaranteed
as set forth in the Indenture.
Each Subsidiary Guarantor shall be deemed to have signed on each
Guaranteed Security issued hereunder any required notation of guarantee to the
same extent as if the signature of such Subsidiary Guarantor appeared on such
Guaranteed Security. The notation of a guarantee set forth on any Guaranteed
Security shall be null and void and of no further effect with respect to the
Subsidiary Guarantee of any Subsidiary Guarantor which is released from such
Subsidiary Guarantee pursuant to the Indenture.
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
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(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to Section 303, are
deemed never to have been authenticated and delivered hereunder);
(3) the date or dates on which the principal of any Securities
of the series is payable, or the method by which such date or dates
shall be determined or extended;
(4) the rate or rates at which the Securities of the series
shall bear interest, if any, or the method by which such rate or rates
shall be determined, the date or dates from which such interest shall
accrue, or the method by which such date or dates shall be determined,
the Interest Payment Dates on which such interest shall be payable and
the Regular Record Date, if any, for the interest payable on any
Interest Payment Date, or the method by which such date or dates shall
be determined, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(5) the place or places where the principal of and any premium
and interest on any Securities of the series shall be payable;
(6) the period or periods within which, the price or prices at
which and the term and conditions upon which any Securities of the
series may be redeemed, in whole or in part, at the option of the
Company and, if other than by a Board Resolution, the manner in which
any election by the Company to redeem the Securities shall be
evidenced;
(7) the obligation, if any, of the Company to redeem or
purchase any Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(8) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
(9) if the amount of principal of or any premium or interest
on any Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts shall
be determined;
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(10) if other than the currency of the United States of
America, the currency, currencies or currency units in which the
principal of or any premium or interest on any Securities of the series
shall be payable and the manner of determining the equivalent thereof
in the currency of the United States of America for any purpose,
including for purposes of the definition of "Outstanding" in Section
101;
(11) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency
units other than that or those in which such Securities are stated to
be payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Securities as to which
such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount shall be
determined);
(12) the percentage of the principal amount at which such
Securities will be issued and, if other than the principal amount
thereof, the portion of the principal amount of Securities of the
series that shall be payable upon declaration of acceleration of the
Maturity thereof pursuant to Section 502 or the method by which such
portion shall be determined;
(13) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof which shall be due and payable upon any Maturity other
than the Stated Maturity or which shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(14) if applicable, that the Securities of the series, in
whole or any specified part, shall not be defeasible or shall be
defeasible in a manner varying from Section 1402 and Section 1403 and,
if other than by a Board Resolution, the manner in which any election
by the Company to defease such Securities shall be evidenced;
(15) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositaries for such
Global Securities, the form of any legend or legends which shall be
borne by any such Global Security in addition to or in lieu of that set
forth in Section 204 and any circumstances in addition to or in lieu of
those set forth in Clause (2) of the last paragraph of Section 305 in
which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in
whole or in part may be registered, in the name or names of Persons
other than the Depositary for such Global Security or a nominee
thereof;
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(16) if applicable, that the Securities of the series, in
whole or any specified part, shall be subject to the optional interest
reset provisions of Section 307(b);
(17) if applicable, that the Securities of the series, in
whole or any specified part, shall be subject to the optional extension
of maturity provisions of Section 308;
(18) any addition to or change in the Events of Default which
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to Section 502;
(19) any addition to or change in the covenants set forth in
Article Ten which applies to Securities of the series;
(20) if applicable, that such series is to be guaranteed by
one or more Subsidiary Guarantors; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by Section 901(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its
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Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company and, if applicable to such series, having the notation of Subsidiary
Guarantees thereon, if applicable, to the Trustee for authentication, together
with a Company Order for the authentication and delivery of such Securities, and
the Trustee in accordance with the Company Order shall authenticate and deliver
such Securities. If the form or terms of the Securities of the series have been
established by or pursuant to one or more Board Resolutions as permitted by
Sections 201 and 301, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such
form has been established in conformity with the provisions of this
Indenture, including its requirements for notations thereon relating to
the Subsidiary Guarantees, if applicable;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, and, if applicable,
the Subsidiary Guarantees, will constitute valid and legally binding
obligations of the Company and, if applicable, the Subsidiary
Guarantors, if applicable, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to
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deliver the Officers' Certificate otherwise required pursuant to Section 301 or
the Company Order and Opinion of Counsel otherwise required pursuant to such
preceding paragraph at or prior to the authentication of each Security of such
series if such documents are delivered at or prior to the authentication upon
original issuance of the first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued, having the notations of Subsidiary Guarantees thereon, if
applicable, and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities and notations of
Subsidiary Guarantees, if applicable, may determine, as evidenced by their
execution of such Securities and notations of Subsidiary Guarantees, if
applicable.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount and having the notations of Subsidiary
Guarantees thereon, if applicable. Until so exchanged, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series and tenor.
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SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Company in a Place of Payment for that series,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of the same series, of any authorized denominations and of like tenor and
aggregate principal amount, each such Security having a notation of Subsidiary
Guarantees thereon, if applicable.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities (including the notations thereon
relating to the Subsidiary Guarantees contemplated by Section 206, if
applicable) which the Holder making the exchange is entitled to receive.
All Securities and the Subsidiary Guarantees noted thereon, if
applicable, issued upon any registration of transfer or exchange of Securities
shall be the valid obligations of the Company and such Subsidiary Guarantors, if
applicable, evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Securities surrendered upon such registration of transfer
or exchange. Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company shall not be required (A) to issue,
register the transfer of or exchange any Securities of that series (or of that
series and specified tenor, as the case may be) during a period
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beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of any such Securities selected for redemption under
Section 1103 and ending at the close of business on the day of such mailing, or
(B) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) registered in the name of the Depositary designated for
such Global Security or a nominee thereof and delivered to such
Depositary or a nominee thereof or custodian therefor, and each such
Global Security shall constitute a single Security for all purposes of
this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof unless (A) such
Depositary (i) has notified the Company that it is unwilling or unable
to continue as Depositary for such Global Security or (ii) has ceased
to be a clearing agency registered under the Exchange Act, (B) there
shall have occurred and be continuing an Event of Default with respect
to such Global Security or (C) there shall exist such circumstances, if
any, in addition to or in lieu of the foregoing as have been specified
for this purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section,
Section 304, 306, 906 or 1107 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security (including
the notations thereon relating to the Subsidiary Guarantees
contemplated by Section 206, if applicable), unless such Security is
registered in the name of a Person other than the Depositary for such
Global Security or a nominee thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series (including the notations thereon
relating to the Subsidiary Guarantees contemplated by Section
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206, if applicable) and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, and the respective Subsidiary
Guarantors, if any, whether or not the destroyed, lost or stolen Security shall
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Securities
of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved; Optional
Interest Reset.
(1) Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (A) or (B) below:
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(A) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be given to each Holder of Securities
of such series in the manner set forth in Section 106, not less than 10
days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (B).
(B) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security
.
(2) The provisions of this Section 307(2) may be made applicable to any
series of Securities pursuant to Section 301 (with such modifications, additions
or substitutions as may be specified pursuant to such Section 301). The interest
rate (or the spread or spread multiplier used to calculate such interest rate,
if applicable) on any Security of such series may be reset by the Company on the
date or dates specified on the face of such Security (each an "Optional Reset
Date"). The Company may exercise such option with respect to such Security by
notifying the Trustee of such exercise at least 50 but not more than 60 days
prior to an Optional Reset Date for
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such Security. Not later than 40 days prior to each Optional Reset Date, the
Trustee shall transmit, in the manner provided for in Section 106, to the Holder
of any such Security a notice (the "Reset Notice") indicating whether the
Company has elected to reset the interest rate (or the spread or spread
multiplier used to calculate such interest rate, if applicable), and if so (i)
such new interest rate (or such new spread or spread multiplier, if applicable)
and (ii) the provisions, if any, for redemption during the period from such
Optional Reset Date to the next Optional Reset Date or if there is no such next
Optional Reset Date, to the Stated Maturity of such Security (each such period a
"Subsequent Interest Period"), including the date or dates on which or the
period or periods during which and the price or prices at which such redemption
may occur during the Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to the
Optional Reset Date, the Company may, at its option, revoke the interest rate
(or the spread or spread multiplier used to calculate such interest rate, if
applicable) provided for in the Reset Notice and establish an interest rate (or
a spread or spread multiplier used to calculate such interest rate, if
applicable) that is higher than the interest rate (or the spread or spread
multiplier, if applicable) provided for in the Reset Notice, for the Subsequent
Interest Period by causing the Trustee to transmit, in the manner provided for
in Section 106, notice of such higher interest rate (or such higher spread or
spread multiplier, if applicable) to the Holder of such Security. Such notice
shall be irrevocable. All Securities with respect to which the interest rate (or
the spread or spread multiplier used to calculate such interest rate, if
applicable) is reset on an Optional Reset Date, and with respect to which the
Holders of such Securities have not tendered such Securities for repayment (or
have validly revoked any such tender) pursuant to the next succeeding paragraph,
will bear such higher interest rate (or such higher spread or spread multiplier,
if applicable).
The Holder of any such Security will have the option to elect repayment
by the Company of the principal of such Security on each Optional Reset Date at
a price equal to the principal amount thereof plus interest accrued to such
Optional Reset Date. In order to obtain repayment on an Optional Reset Date, the
Holder must follow the procedures set forth in Article Thirteen for repayment at
the option of Holders except that the period for delivery or notification to the
Trustee shall be at least 25 but not more than 35 days prior to such Optional
Reset Date and except that, if the Holder has tendered any Security for
repayment pursuant to the Reset Notice, the Holder may, by written notice to the
Trustee, revoke such tender or repayment until the close of business on the
tenth day before such Optional Reset Date.
Subject to the foregoing provisions of this Section and Section 305,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Optional Extension of Maturity.
The provisions of this Section 308 may be made applicable to any series
of Securities pursuant to Section 301 (with such modifications, additions or
substitutions as may be specified
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pursuant to such Section 301). The Stated Maturity of any Security of such
series may be extended at the option of the Company for the period or periods
specified on the face of such Security (each an "Extension Period") up to but
not beyond the date (the "Final Maturity") set forth on the face of such
Security. The Company may exercise such option with respect to any Security by
notifying the Trustee of such exercise at least 50 but not more than 60 days
prior to the Stated Maturity of such Security in effect prior to the exercise of
such option (the "Original Stated Maturity"). If the Company exercises such
option, the Trustee shall transmit, in the manner provided for in Section 106,
to the Holder of such Security not later than 40 days prior to the Original
Stated Maturity a notice (the "Extension Notice") indicating (i) the election of
the Company to extend the Maturity, (ii) the new Stated Maturity, (iii) the
interest rate applicable to the Extension Period and (iv) the provisions, if
any, for redemption during such Extension Period. Upon the Trustee's transmittal
of the Extension Notice, the Stated Maturity of such Security shall be extended
automatically and, except as modified by the Extension Notice and as described
in the next paragraph, such Security will have the same terms as prior to the
transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days before the
Original Stated Maturity of such Security, the Company may, at its option,
revoke the interest rate provided for in the Extension Notice and establish a
higher interest rate for the Extension Period by causing the Trustee to
transmit, in the manner provided for in Section 106, notice of such higher
interest rate to the Holder of such Security. Such notice shall be irrevocable.
All Securities with respect to which the Stated Maturity is extended will bear
such higher interest rate.
If the Company extends the Maturity of any Security, the Holder will
have the option to elect repayment of such Security by the Company on the
Original Stated Maturity at a price equal to the principal amount thereof, plus
interest accrued to such date. In order to obtain repayment on the Original
Stated Maturity once the Company has extended the Maturity thereof, the Holder
must follow the procedures set forth in Article Thirteen for repayment at the
option of Holders, except that the period for delivery or notification to the
Trustee shall be at least 25 but not more than 35 days prior to the Original
Stated Maturity and except that, if the Holder has tendered any Security for
repayment pursuant to an Extension Notice, the Holder may, by written notice to
the Trustee, revoke such tender for repayment until the close of business on the
tenth day before the Original Stated Maturity.
SECTION 309. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Subsidiary Guarantors, the Trustee and any agent of the
Company, the Subsidiary Guarantors, or the Trustee may treat the Person in whose
name such Security is registered as the owner of such Security for the purpose
of receiving payment of principal of and any premium and (subject to Section
307) any interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and none of the Company, the Subsidiary
Guarantors, the Trustee nor any agent of the Company, the Subsidiary Guarantors,
or the Trustee shall be affected by notice to the contrary.
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SECTION 310. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
canceled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of as directed by a Company Order.
SECTION 311. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture, and all Subsidiary Guarantees given pursuant hereto,
shall upon Company Request cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee
for cancellation; or
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(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to
the Trustee for the giving of notice of
redemption by the Trustee in the name, and
at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for such purpose money in an amount sufficient
to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to
the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
of that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of or any premium
on any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of a Security of that series; or
(4) default in the performance, or breach (including breach by
repudiation), of any covenant, guaranty or warranty of the Company or
any Subsidiary Guarantor in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of
Securities other than that series), and continuance of such default or
breach for a period of 90 days after there has been given, by
registered or certified mail or overnight delivery service, to the
Company (and, if applicable, the Subsidiary Guarantors) by the Trustee
or to the Company, the Secondary Subsidiary Guarantor, if applicable,
and the Trustee by the Holders of at least 25% in principal amount of
the Outstanding Securities of that series a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company or a
Restricted Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company or
such Subsidiary a bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or such Subsidiary under
any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or such Subsidiary or of any substantial part
of its or such Subsidiary's
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property, or ordering the winding up or liquidation of its or such
Subsidiary's affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for
a period of 90 consecutive days; or
(6) the commencement by the Company or a Restricted
Subsidiary, as the case may be, of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it or such
Subsidiary to the entry of a decree or order for relief in respect of
the Company or such Subsidiary in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it or such
Subsidiary, or the filing by it or such Subsidiary of a petition or
answer or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by it or such Subsidiary to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or such Subsidiary or of any
substantial part of its or such Subsidiary's property, or the making by
it or such Subsidiary of an assignment for the benefit of creditors, or
the admission by it or such Subsidiary in writing of its or such
Subsidiary's inability to pay its debts generally as they become due,
or the taking of corporate action by the Company or such Subsidiary in
furtherance of any such action; or
(7) the rendering against the Company or any Subsidiary of a
final judgment, decree or order for the payment of money in excess of
$75,000,000 and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 90 consecutive days without
a stay of execution; or
(8) (i) a default occurs under any instrument or instruments
(including this Indenture) under which there is at the time
outstanding, or by which there may be secured or evidenced, any Debt of
the Company or any Subsidiary or any guarantee of payment by the
Company or any Subsidiary of any obligation of any Person, which
default results in acceleration of (whether by declaration or
automatically), or the nonpayment at maturity (after giving effect to
any applicable grace period) of, such Debt or guarantee in an aggregate
amount exceeding $75,000,000, in which case the Company shall
immediately give notice to the Trustee of such acceleration or
nonpayment and (ii) there shall have been a failure to cure such
default or to discharge all such defaulted Debt and guarantees or such
default is not otherwise waived, and such acceleration has not been
rescinded or annulled, within 30 days after receipt by the Company from
the Trustee or by the Company and the Trustee from the Holders of at
least 25% in principal amount of the Securities then Outstanding
(excluding, if such defaulted Debt includes any series of Securities,
such series of Securities) of a written notice thereof, by registered
or certified mail, and stating that such notice is a "Notice of
Default" hereunder; or
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(9) any other Event of Default provided with respect to
Securities of that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(4) or another Event of Default under Section 501(7) which is common
to all Outstanding series of Securities) with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount of all
the Securities of that series (or, if any Securities of that series are Original
Issue Discount Securities, such portion of the principal amount of such
Securities as may be specified by the terms thereof) to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable. If an Event of Default
specified in Section 501(4) or another Event of Default under Section 501(7)
which is common to all Outstanding series of Securities occurs and is
continuing, then in every such case, the Trustee or the Holders of not less than
25% in aggregate principal amount of all the Securities then Outstanding
hereunder (treated as one class), by a notice in writing to the Company (and to
the Trustee if given by Holders) may declare the principal amount (or, if any
Securities are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms thereof) of all the Securities then
Outstanding to be due and payable immediately, and upon any such declaration
such principal amount (or specified amount) shall become immediately due and
payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made, the Holders of a majority in principal
amount of the Outstanding Securities of that series, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company or any Subsidiary Guarantor has paid or
deposited with the Trustee a sum sufficient to pay all amounts due the
Trustee under Section 607 hereof;
(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513; and
(3) such rescission and annulment would not conflict with any
judgment or decree.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series
against the Company, any applicable Subsidiary Guarantor or any other obligor
with respect to such Securities by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company or the
Subsidiary Guarantors (or any other obligor upon the Securities), or the
property or the creditors of the Company or any of the Subsidiary Guarantors,
the Trustee shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under the Trust Indenture
Act in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement,
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adjustment or composition in any bankruptcy or similar proceeding affecting the
Securities or the rights of any Holder thereof or the Subsidiary Guarantees or
to authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding; provided, however, that the Trustee may, on behalf of the
Holders, vote for the election of a trustee in bankruptcy or similar official
and be a member of a creditors' or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
or the Subsidiary Guarantees may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment, first, of the amounts then due and
unpaid for principal of and, second, any premium and interest on, the
Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
principal and any premium and interest, respectively.
THIRD: To the payment of the remainder, if any, to the Company
or any other Person or Persons entitled thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein
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conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series; provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
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Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, the court may in its discretion require the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and such
court may in its discretion assess reasonable costs including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
provided, that the provisions of this Section 514 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder or group of
Holders holding in the aggregate more than 10 per cent in principal amount of
the Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of or interest on any Security, on
or after the respective due dates expressed in such Security. Neither this
Section 514 nor the Trust Indenture Act shall be deemed to authorize any court
to require such an undertaking or such an assessment in any proceeding
instituted by the Company or the Subsidiary Guarantors.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
Each of the Company and the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any usury, stay or extension law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and each of the Company and the Subsidiary Guarantors (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
Except as specifically provided herein, the duties and responsibilities
of the Trustee shall be as provided by the Trust Indenture Act.
The Trustee shall, prior to the occurrence of an Event of Default and
after curing of all Events of Default which may have occurred, perform such
duties and only such duties as are specifically set forth in this Indenture and
no implied covenants, duties or obligations shall be
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read into this Indenture against the Trustee. The Trustee shall, during the
existence of an Event of Default (which has not been cured), exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
SECTION 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4) with respect to Securities of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
The Trustee shall not be deemed to have knowledge of any default or
Event of Default hereunder unless and until a Responsible Officer shall have
actual knowledge thereof, or shall have received written notice thereof at its
Corporate Trust Office. In the absence of such actual knowledge or notice, the
Trustee may conclusively assume that no default has occurred and is continuing
under this Indenture. Except as otherwise expressly provided herein, the Trustee
shall not be bound to ascertain or inquire as to the performance or observance
of any of the terms, conditions, covenants or agreements herein or of any of the
documents executed in connection with the Securities, or as to the existence of
a default or Event of Default hereunder.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, request and rely upon an
Officers' Certificate;
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(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; and
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
(8) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty unless so
specified herein.
(9) The Trustee may become the Holder of Securities with the
same rights it would have if it were not Trustee and, to the extent
permitted by law, may act as depositary for and permit any of its
officers or directors to act as a member of, or in any other capacity
with respect to, any committee formed to protect the rights of Holders,
whether or not such committee shall represent the Holders of a majority
in principal amount of the Outstanding Securities
(10) The Trustee shall not be liable for any error of judgment
made by a Responsible Officer, unless the Trustee shall have been
negligent in ascertaining the pertinent facts.
(11) No provisions of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers.
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(12) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by it
to be authorized or within the discretion or rights or powers conferred
upon it by this Indenture; the Trustee shall not be liable in
connection with the performance of its duties hereunder, except for its
own negligence or willful misconduct.
(13) Whether or not expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of
the Trustee shall be subject to the provisions of this Article Six and
shall extend to the Authenticating Agent, Securities Registrar, Paying
Agents, and employees and agents of the Trustee.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities and the notations
of Subsidiary Guarantees thereon, if any, except the Trustee's certificates of
authentication, shall be taken as the statements of the Company or the
Subsidiary Guarantors, as the case may be, and neither the Trustee nor any
Authenticating Agent assumes any responsibility for their correctness. The
Trustee makes no representations as to the validity, sufficiency or priority of
this Indenture or of the Securities, including the notations of Subsidiary
Guarantees thereon, if any. Neither the Trustee nor any Authenticating Agent
shall be accountable for the use or application by the Company of Securities or
the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company or any Subsidiary Guarantor, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 608 and 613, may otherwise deal with the Company and
the Subsidiary Guarantors with the same rights it would have if it were not
Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other
agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company or any Subsidiary Guarantor.
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SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or wilful misconduct; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
wilful misconduct or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
SECTION 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be Trustee hereunder for
Securities of one or more other series. Each Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus (or, in the case of a corporation included in a bank holding
company system, the related bank holding company shall have) of at least
$50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such Person or such
bank holding company shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions
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of this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or
(4) the Trustee increases fees to the Company and such
increases result in fees for services that are materially higher than
commercially available to the Company from other entities qualifying
under Section 609 and at the time of removal no Default or Event of
Default exists, then, in any such case, (A) the Company by a Board
Resolution may remove the Trustee with respect to all Securities, or
(B) with respect to items (i), (ii) and (iii) only, subject to Section
514, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
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If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and
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to vest in, each successor Trustee all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates, (2) if the retiring
Trustee is not retiring with respect to all Securities, shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any, of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company or
any Subsidiary Guarantor (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act regarding the
collection of claims against the Company or any Subsidiary Guarantor (or any
such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus (or, in the case of a corporation
included in a bank holding company system, the related bank holding company
shall have) of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
or such bank holding company shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at
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any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 106 to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
--------------------------------
As Trustee
By _____________________________
Authenticating Agent
By _____________________________
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than June 15 and December 15 in
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders of Securities of each series
as of the preceding June 1 or December 1 as the case may be, and
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(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company, the Subsidiary Guarantors and the Trustee that neither the
Company nor the Subsidiary Guarantors nor the Trustee nor any agent of either of
them shall be held accountable by reason of any disclosure of information as to
names and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company, and the Subsidiary Guarantors, if applicable, shall file
with the Trustee and the Commission, and transmit to the Holders, such
information, documents and other reports, and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or 15(d)
of
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the Exchange Act shall be filed with the Trustee within 15 days after the same
is so required to be filed with the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) the Company shall be the surviving and continuing entity,
or in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership, trust or other entity, shall be organized and
validly existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and any premium and interest on all the
Securities and the performance or observance of every covenant and
condition of this Indenture on the part of the Company to be performed
or observed;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
any Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with; provided, however, that the delivery of an Officers' Certificate
or an Opinion of Counsel is not required with respect to any
consolidation, merger, conveyance, transfer or lease involving the
Company and any wholly-owned subsidiary of the Company.
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SECTION 802. Company Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
SECTION 803. Subsidiary Guarantors May Consolidate, Etc., Only on
Certain Terms.
A Subsidiary Guarantor may consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person if (A) such transaction would otherwise be permitted
pursuant to this Indenture and would permit the concurrent release of the
Subsidiary Guarantee of such Subsidiary Guarantor (or its successor) pursuant to
Section 1507, or (B) such transaction is with, between or among such Subsidiary
Guarantor and the Company or any other Subsidiary Guarantor, or (C) each of the
following requirements is complied with:
(1) the Subsidiary Guarantor shall be the surviving and
continuing entity, or in case the Subsidiary Guarantor shall
consolidate with or merge into another Person or convey, transfer or
lease its properties and assets substantially as an entirety to any
Person, the Person formed by such consolidation or into which the
Subsidiary Guarantor is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and assets of
the Subsidiary Guarantor substantially as an entirety shall be a
corporation, partnership, trust or other entity, shall be organized and
validly existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all
the Securities required by this Indenture to be guaranteed by the
Subsidiary Guarantor and the performance or observance of every
covenant and condition of this Indenture on the part of the Subsidiary
Guarantor to be performed or observed, in each case equally with
obligations of such Subsidiary Guarantor then existing with respect to
other Debt of the Company assumed by such Person;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Subsidiary
Guarantor, the Company or any other Subsidiary as a result of such
transaction as having been incurred by the Subsidiary Guarantor, the
Company or any such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing; and
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(3) the Subsidiary Guarantor has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 804. Subsidiary Guarantor Successor Substituted.
Upon any consolidation of a Subsidiary Guarantor with, or merger of a
Subsidiary Guarantor into, any other Person or any conveyance, transfer or lease
of the properties and assets of a Subsidiary Guarantor substantially as an
entirety, in each case, in accordance with clause (C) of Section 803, the
successor Person formed by such consolidation or into which the Subsidiary
Guarantor is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of, a
Subsidiary Guarantor under this Indenture with the same effect as if such
successor Person had been named as a Subsidiary Guarantor herein, and
thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, the Subsidiary Guarantors, when authorized by applicable Board
Resolutions, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the
Company or a Subsidiary Guarantor and the assumption by any such
successor of the covenants of the Company or the Subsidiary Guarantor
herein and in the Securities or in the Subsidiary Guarantee, as
applicable; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
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(3) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of such series),
provided, however, that in respect of any such additional Events of
Default such supplemental indenture may provide for a particular period
of grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to
the Trustee upon such default or may limit the right of the Holders of
a majority in aggregate principal amount of that or those series of
Securities to which such additional Events of Default apply to waive
such default; or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change or elimination (A) shall neither (i)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (ii) modify the rights of the Holder of any such Security
with respect to such provision or (B) shall become effective only when
there is no such Security Outstanding; or
(6) to secure the Securities pursuant to the requirements of
Section 1006 or otherwise; or
(7) to establish the form or terms of Securities of any series
as permitted by Sections 201 and 301; or
(8) to provide for uncertificated securities in addition to
certificated securities; or
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611; or
(10) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this Clause (9) shall not adversely affect the
rights of the Holders of Securities of any series in any material
respect; or
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(11) to supplement any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the
defeasance and discharge of any series of Securities pursuant to
Section 401, 1402 and 1403; provided that any such action shall not
adversely affect the interests of the holders of Securities of such
series or any other series of Securities in any material respect; or
(12) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Eight; or
(13) to comply with the rules or regulations of any securities
exchange on which any of the Securities may be listed; or
(14) to add to, change or eliminate any of the provisions of
this Indenture as shall be necessary or desirable in accordance with
any amendments to the Trust Indenture Act, provided that such action
does not adversely affect the rights of any Holder of Securities in any
material respect; or
(15) to add any Person as a Secondary Subsidiary Guarantor as
provided in Section 1506 hereof, or to limit the ability of a Secondary
Subsidiary Guarantor to be released from its obligations under the
Indenture or the Subsidiary Guarantee of such Secondary Subsidiary
Guarantor pursuant to Section 1507 hereof; or
(16) to release a Subsidiary Guarantor from its Subsidiary
Guarantee pursuant to Section 1507.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, the Subsidiary
Guarantors, when authorized by a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security or any other Security
which would be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to Section 502, or change any Place of
Payment where, or the coin or
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currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1010, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in
the references to "the Trustee" and concomitant changes in this Section
and Section 1010, or the deletion of this proviso, in accordance with
the requirements of Sections 611 and 901(9).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company with the notations of Subsidiary
Guarantees thereon, if applicable, and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series, the related
Subsidiary Guarantees and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company and each of the Subsidiary Guarantors from time to time, hereby appoints
the Trustee as its agent to receive all such presentations, surrenders, notices
and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such
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designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for
Securities of any series for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate to the extent required by law and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal and any premium
and interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will provide to a Paying Agent a sum sufficient to pay
the principal of or any premium or interest on any Securities of that series,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company within 60 days of such date and upon such payment all
liability of the Trustee or any Paying Agent with respect to such funds shall
thereupon cease and the holders shall be entitled to look only to the Company
for payment thereof; provided, however, that the Trustee or such Paying Agent,
before being required to
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make any such repayment, may at the expense of the Company cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
The Company shall have no right, title or interest in or to any moneys
held by the Trustee pursuant to this Section. The Trustee shall not be liable to
the Company or any Holder for interest in funds held by it for the payment and
discharge of the principal, interest, or premium on any of the Securities to any
Holder.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof, after due inquiry, the Company or any Subsidiary Guarantor is in
default in the performance and observance of any of the terms, provisions and
conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company or any Subsidiary
Guarantor shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Limitation on Liens.
The Company will not, and will not permit any Restricted Subsidiary to,
create or suffer to exist any Lien, assignment or transfer upon or of any of its
properties or its assets, whether real, personal or intangible, and now owned or
hereafter acquired, to secure any indebtedness for money borrowed without making
effective provision whereby all of the Securities shall be directly secured
equally and ratably with the indebtedness secured by such Lien, assignment or
transfer; excluding, however, from the operation of the foregoing provision:
(1) Liens (which term for purposes of this Section 1006 shall
include conditional sale agreements or other title retention agreements
and leases in the nature of title retention agreements) upon the
property acquired, or Liens existing in such property at the time of
acquisition thereof, or, in the case of any corporation or other entity
which
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hereafter becomes a Subsidiary, Liens upon or in its property, existing
at the time such corporation or other entity becomes a Subsidiary,
provided, that no such Lien extends or shall extend to or cover any
property of the Company or any Subsidiary, other than the property or
Subsidiary, as the case may be, then being acquired, including fixed
improvements then or thereafter to be erected upon any such property
being acquired;
(2) Liens created by any Restricted Subsidiary as security for
Debt owing to the Company or any other Restricted Subsidiary.
(3) with respect to any series of Securities, Liens existing
on the date of issuance of such series;
(4) Liens otherwise prohibited by this covenant securing Debt
which, together with the aggregate outstanding principal amount of all
other Debt of the Company and its Restricted Subsidiaries which is
secured by Liens that would otherwise be prohibited by this covenant
and the Attributable Debt of Sale and Leaseback Transactions effected
in accordance with this clause (4), does not exceed the greater of (A)
$50,000,000 and (B) 15% of Consolidated Net Tangible Assets;
(5) Liens resulting from the deposit of funds or evidences of
indebtedness in trust for the purpose of defeasing indebtedness of the
Company or any of its Subsidiaries;
(6) Liens securing obligations pursuant to hedging
transactions, including rate swaps, basis swaps, forward rate
transactions, commodity swaps and options, foreign exchange
transaction, cap, collar and floor transactions, currency swap
transactions and the like; and
(7) any extension, renewal or refunding of any Liens referred
to in the foregoing clauses; provided, however, that in the case of
this clause (7), the principal amount of Debt secured thereby shall not
exceed the principal amount of Debt, plus any premium or fee payable in
connection with any such extension, renewal, replacement or refunding,
so secured at the time of such extension, renewal, replacement or
refunding.
SECTION 1007. Limitation on Sale and Leaseback Transactions.
The Company will not, and the Company will not permit any Restricted
Subsidiary to, enter into any Sale and Leaseback Transaction, directly or
indirectly, unless (i) immediately prior to entering into such Sale and
Leaseback Transaction, the Company or such Subsidiary could create a Lien on the
property that is to be the subject of the Sale and Leaseback Transaction in an
amount equal to the Attributable Debt with respect to the Sale and Leaseback
Transaction without thereby causing an Event of Default, or (ii) an amount equal
to the greater of the net proceeds of such Sale and Leaseback Transaction or the
fair value (as determined by the Board of Directors) of the property to be the
subject thereof is used to (x) reduce Debt of the Company or any Subsidiary
having an original term to maturity of twelve months or greater or
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(y) purchase assets for use in the same line of business as that in which the
property that is the subject of the Sale and Leaseback Transaction was used by
the Company or the Subsidiary, in each case within 180 days after the effective
date of the sale of the property in the Sale and Leaseback Transaction.
SECTION 1008. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(19),
901(2) or 901(7) for the benefit of the Holders of such series or in Sections
1006 or 1007 or Article 15, if the Holders of at least a majority in principal
amount of the Outstanding Securities of such series shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution or in another manner specified as contemplated by Section
301 for such Securities. In case of any redemption at the election of the
Company of less than all the Securities of any series (including any such
redemption affecting only a single Security), the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date, of the principal amount of Securities of such series to be redeemed and,
if applicable, of the tenor of the Securities to be redeemed. In the case of any
redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
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SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security. If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
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(3) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such
Securities, the principal amounts) of the particular Securities to be
redeemed and, if less than all the Outstanding Securities of any series
consisting of a single Security are to be redeemed, the principal
amount of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the
case.
Notice of redemption of Securities to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company and shall be irrevocable.
SECTION 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any Securities, the cash amount of any
sinking fund payment may be subject to reduction as provided in Section 1202.
Each sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited
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shall be received and credited for such purpose by the Trustee at the Redemption
Price, as specified in the Securities so to be redeemed, for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 45 days prior to each such sinking fund payment date,
the Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF THE HOLDERS
SECTION 1301. Applicability of Article.
Repayment of Securities of any series before their Stated Maturity at
the option of Holders thereof shall be made in accordance with the terms of such
Securities and (except as otherwise specified as contemplated by Section 301 for
Securities of any series) in accordance with this Article.
SECTION 1302. Repayment of Securities.
Securities of any series subject to repayment in whole or in part at
the option of the Holders thereof will, unless otherwise provided in the terms
of such Securities, be repaid at a price equal to the principal amount thereof,
together with interest and/or premium, if any, thereon accrued to the Repayment
Date specified in or pursuant to the terms of such Securities. The Company
covenants that on or before the Repayment Date it will deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the principal (or, if so provided by the terms of the
Securities of any series, a percentage of the principal) of, the premium, if
any, and (except if the Repayment Date shall be an Interest Payment Date)
accrued interest on, all the Securities or portions thereof, as the case may be,
to be repaid on such date.
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SECTION 1303. Exercise of Option.
Securities of any series subject to repayment at the option of the
Holders thereof will contain an "Option to Elect Repayment" form on the reverse
of such Securities. To be repaid at the option of the Holder, any Security so
providing for such repayment, with the "Option to Elect Repayment" form on the
reverse of such Security duly completed by the Holder (or by the Holder's
attorney duly authorized in writing), must be received by the Company at the
Place of Payment therefor specified in the terms of such Security (or at such
other place or places of which the Company shall from time to time notify the
Holders of such Securities) not earlier than 45 days nor later than 30 days
prior to the Repayment Date. If less than the entire principal amount of such
Security is to be repaid in accordance with the terms of such Security, the
principal amount of such Security to be repaid, in increments of the minimum
denomination for Securities of such series, the premium, if any, to be paid, and
the denomination or denominations of the Security or Securities to be issued to
the Holder for the portion of the principal amount of such Security surrendered
that is not to be repaid, must be specified. The principal amount of any
Security providing for repayment at the option of the Holder thereof may not be
repaid in part if, following such repayment, the unpaid principal amount of such
Security would be less than the minimum authorized denomination of Securities of
the series of which such Security to be repaid is a part. Except as otherwise
may be provided by the terms of any Security providing for repayment at the
option of the Holder thereof and as provided in Sections 307(b) and 308,
exercise of the repayment option by the Holder shall be irrevocable unless
waived by the Company.
SECTION 1304. When Securities Presented for Repayment Become Due and
Payable.
If Securities of any series providing for repayment at the option of
the Holders thereof shall have been surrendered as provided in this Article and
as provided by or pursuant to the terms of such Securities, such Securities or
the portions thereof, as the case may be, to be repaid shall become due and
payable and shall be paid by the Company on the Repayment Date therein
specified, and on and after such Repayment Date (unless the Company shall
default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest.
Upon surrender of any such Security for repayment in accordance with such
provisions, the principal amount of such Security so to be repaid shall be paid
by the Company, together with accrued interest and/or premium, if any, to the
Repayment Date; provided, however, that installments of interest, if any, whose
Stated Maturity is on or prior to the Repayment Date shall be payable (but
without interest thereon, unless the Company shall default in the payment
thereof) to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.
If the principal amount of any Security surrendered for repayment shall
not be so repaid upon surrender thereof, such principal amount (together with
interest, if any, thereon accrued to such Repayment Date) shall, until paid,
bear interest from the Repayment Date at the rate of
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interest or Yield to Maturity (in the case of Original Issue Discount
Securities) set forth in such Security.
SECTION 1305. Securities Repaid in Part.
Upon surrender of any Security which is to be repaid in part only, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security, without service charge and at the expense of the
Company, a new Security or Securities of the same series, of any authorized
denomination specified by the Holder, in an aggregate principal amount equal to
and in exchange for the portion of the principal of such Security so surrendered
which is not to be repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may elect, at its option at any time, to have Section 1402
or Section 1403 applied to any Securities or any series of Securities, as the
case may be (unless designated pursuant to Section 301 as not being defeasible
pursuant to such Section 1402 or 1403), in accordance with any applicable
requirements provided pursuant to Section 301 and upon compliance with the
conditions set forth below in this Article. Any such election shall be evidenced
by a Board Resolution or in another manner specified as contemplated by Section
301 for such Securities.
SECTION 1402. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company and the Subsidiary Guarantors shall be deemed to have been discharged
from their respective obligations with respect to such Securities as provided in
this Section on and after the date the conditions set forth in Section 1404 are
satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Securities and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), subject to the following which shall
survive until otherwise terminated or discharged hereunder: (1) the rights of
Holders of such Securities to receive, solely from the trust fund described in
Section 1404 and as more fully set forth in such Section, payments in respect of
the principal of and any premium and interest on such Securities when payments
are due, (2) the Company's and, to the extent applicable, the Subsidiary
Guarantors' respective obligations with respect to such Securities under
Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties
and
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immunities of the Trustee hereunder and (4) this Article. Subject to compliance
with this Article, the Company may exercise its option (if any) to have this
Section applied to any Securities notwithstanding the prior exercise of its
option (if any) to have Section 1403 applied to such Securities.
SECTION 1403. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, (1)
the Company shall be released from its obligations under Section 801(3),
Sections 1006 and 1007 and any covenants provided pursuant to Section 301(19),
901(2) or 901(7) for the benefit of the Holders of such Securities and (2) the
Subsidiary Guarantors shall be released from all their obligations with respect
to the Securities of such series under this Indenture, and (3) the occurrence of
any event specified in Sections 501(4) (with respect to any of Section 801(3),
Sections 1006 and 1007, inclusive, and any such covenants provided pursuant to
Section 301(19), 901(2) or 901(7)), and 501(7) shall be deemed not to be or
result in an Event of Default, in each case with respect to such Securities as
provided in this Section on and after the date the conditions set forth in
Section 1404 are satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that, with respect to such Securities,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such specified Section (to
the extent so specified in the case of Section 501(4)), whether directly or
indirectly by reason of any reference elsewhere herein to any such Section or by
reason of any reference in any such Section to any other provision herein or in
any other document, but the remainder of this Indenture and such Securities
shall be unaffected thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
1402 or Section 1403 to any Securities or any series of Securities, as the case
may be:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefits of the Holders
of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying trustee) to pay
and discharge, the principal of and any premium and interest on such
Securities on the respective Stated Maturities, in accordance with the
terms of this Indenture and such Securities. As used
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herein, "U.S. Government Obligation" means (x) any security which is
(i) a direct obligation of the United States of America for the payment
of which the full faith and credit of the United States of America is
pledged or (ii) an obligation of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of
the issuer thereof, and (y) any depositary receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with
respect to any U.S. Government Obligation which is specified in Clause
(x) above and held by such bank for the account of the holder of such
depositary receipt, or with respect to any specific payment of
principal of or interest on any U.S. Government Obligation which is so
specified and held, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal or interest evidenced by such
depositary receipt.
(2) In the event of an election to have Section 1402 apply to
any Securities or any series of Securities, as the case may be, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
date of this instrument, there has been a change in the applicable
Federal income tax law, in either case (A) or (B) to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Securities will not recognize gain or loss for Federal income tax
purposes as a result of the deposit, Defeasance and discharge to be
effected with respect to such Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the same times
as would be the case if such deposit, Defeasance and discharge were not
to occur.
(3) In the event of an election to have Section 1403 apply to
any Securities or any series of Securities, as the case may be, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of such Securities will not recognize gain
or loss for Federal income tax purposes as a result of the deposit and
Covenant Defeasance to be effected with respect to such Securities and
will be subject to Federal income tax on the same amount, in the same
manner and at the same times as would be the case if such deposit and
Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that neither such Securities nor
any other Securities of the same series, if then listed on any
securities exchange, will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such Securities
or any other Securities shall have occurred and be continuing at the
time of such deposit or, with regard to any such event
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specified in Sections 501(5) and (6), at any time on or prior to the
90th day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such trust
shall be registered under such Act or exempt from registration
thereunder.
(9) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 1405. Acknowledgment of Discharge By Trustee.
Subject to Section 1407 below and after the Company has delivered to
the Trustee an Officer's Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in Section 1404, as the case may be,
relating to the defeasance or satisfaction and discharge of this Indenture have
been complied with, the Trustee upon request of the Company or any applicable
Subsidiary Guarantor shall acknowledge in writing the defeasance or the
satisfaction and discharge, as the case may be, of this Indenture and the
discharge of the Company's obligations and those of such Subsidiary Guarantors
under this Indenture, including the provisions of Article Fifteen.
SECTION 1406. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 1406, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1404 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
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and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1404 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.
SECTION 1407. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities and the related Subsidiary Guarantees from which
the Company or any Subsidiary Guarantor has been discharged or released pursuant
to Section 1402 or 1403 shall be revived and reinstated as though no deposit had
occurred pursuant to this Article with respect to such Securities, until such
time as the Trustee or Paying Agent is permitted to apply all money held in
trust pursuant to Section 1405 with respect to such Securities in accordance
with this Article; provided, however, that if the Company or any Subsidiary
Guarantor makes any payment of principal of or any premium or interest on any
such Security following such reinstatement of its obligations, the Company or
the Subsidiary Guarantor, as the case may be, shall be subrogated to the rights
(if any) of the Holders of such Securities to receive such payment from the
money so held in trust.
ARTICLE FIFTEEN
GUARANTEES OF SECURITIES
SECTION 1501. Applicability of Article.
The provisions of this Article shall be applicable to any series of
Securities which is to be guaranteed by one or more Subsidiary Guarantors (the
"Guaranteed Securities").
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SECTION 1502. Unconditional Guarantees.
(a) For value received, the Subsidiary Guarantors, jointly and
severally, hereby fully, unconditionally and absolutely guarantee to the Holders
and to the Trustee the due and punctual payment, subject to any applicable grace
period provided for such payment by the terms of this Indenture or the specific
terms of such Guaranteed Securities, of the principal of, and premium, if any,
and interest on the Guaranteed Securities and all other amounts due and payable
under this Indenture and the Guaranteed Securities by the Company when and as
such principal, premium, if any, and interest shall become due and payable,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise, according to the terms of the Guaranteed Securities and
this Indenture.
(b) Each Subsidiary Guarantee hereunder is intended to be a general,
unsecured, senior obligation of each Subsidiary Guarantor, ranking pari passu in
right of payment with all indebtedness of each such Subsidiary Guarantor that is
not, by its terms, expressly subordinated in right of payment to the Subsidiary
Guarantee of such Subsidiary Guarantor. Each of the Subsidiary Guarantors hereby
agrees that its obligations hereunder shall be full, unconditional and absolute,
irrespective of the validity, regularity or enforceability of the Guaranteed
Securities, any of the Subsidiary Guarantees or this Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Guaranteed Securities with respect to any provisions hereof or thereof, any
release of any other Subsidiary Guarantor, the recovery of any judgment against
the Company, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
Subsidiary Guarantor. Each of the Subsidiary Guarantors hereby agrees that in
the event of a default in payment of the principal of, or premium, if any, or
interest on the Guaranteed Securities, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise, legal proceedings
may be instituted by the Trustee on behalf of the Holders or, subject to the
Section 507, by the Holders, on the terms and conditions set forth in this
Indenture, directly against each of the Subsidiary Guarantors to enforce the
Subsidiary Guarantees without first proceeding against the Company.
(c) Subject to the terms of this Indenture, the obligations of each
Subsidiary Guarantor under this Article Fifteen shall be, as aforesaid, full,
unconditional and absolute and shall not be impaired, modified, released or
limited by any occurrence or condition whatsoever, including, without
limitation, (i) any compromise, settlement, release, waiver, renewal, extension,
indulgence or modification of, or any change in, any of the obligations and
liabilities of the Company or any Subsidiary Guarantor contained in the
Securities or this Indenture, (ii) any impairment, modification, release or
limitation of the liability of the Company, any Subsidiary Guarantor or any of
their estates in bankruptcy, or any remedy for the enforcement thereof,
resulting from the operation of any present or future provision of any
applicable bankruptcy law, as the same may be amended from time to time, or
other statute or from the decision of any court, (iii) the assertion or exercise
by the Company, any Subsidiary Guarantor or the Trustee of any rights or
remedies under any of the Securities or this Indenture or their delay in or
failure to assert or exercise any such rights or remedies, (iv) the assignment
or the
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purported assignment of any property as security for any of the Securities,
including all or any part of the rights of the Company or any Subsidiary
Guarantor under this Indenture, (v) the extension of the time for payment by the
Company or any Subsidiary Guarantor of any payments or other sums or any part
thereof owing or payable under any of the terms and provisions of any of the
Securities or this Indenture or of the time for performance by the Company or
any Subsidiary Guarantor of any other obligations under or arising out of any
such terms and provisions or the extension or the renewal of any thereof, (vi)
the modification or amendment (whether material or otherwise) of any duty,
agreement or obligation of the Company or any Subsidiary Guarantor set forth in
this Indenture, except in accordance with this Indenture, (vii) the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all of the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
proceeding affecting, the Company or any of the Subsidiary Guarantors or any of
their respective assets, or the disaffirmance of any of the Securities, the
Subsidiary Guarantees or this Indenture in any such proceeding, (viii) the
release or discharge of the Company or any Subsidiary Guarantor from the
performance or observance of any agreement, covenant, term or condition
contained in any of such instruments by operation of law, (ix) the
unenforceability of any of the Securities, the Subsidiary Guarantees or this
Indenture or (x) any other circumstance which might otherwise constitute a legal
or equitable discharge of a surety or guarantor.
(d) Each of the Subsidiary Guarantors hereby (i) waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
the merger, insolvency or bankruptcy of the Company or a Subsidiary Guarantor,
all demands whatsoever, all benefits of any otherwise applicable statutes of
limitations, all suretyship defenses and rights of every nature that might
otherwise be asserted to be available under California law or the laws of any
other jurisdiction, including without limitation all defenses arising under
Sections 2787 through 2855, inclusive, and Sections 2899 and 3433 of the
California Civil Code and any successor provisions of those Sections, and all
other rights and defenses the assertion or exercise of which would in any way
diminish the liability of the Subsidiary Guarantors or the Company pursuant to
the Securities and (ii) acknowledges that any agreement, instrument or document
evidencing the Subsidiary Guarantees may be transferred and that the benefit of
its obligations hereunder shall extend to each holder of any agreement,
instrument or document evidencing the Subsidiary Guarantees without notice to
them and (iii) acknowledges and covenants that the Subsidiary Guarantees will
not be discharged except by complete performance of the Subsidiary Guarantees or
otherwise in accordance with this Indenture. Each Subsidiary Guarantor and the
Company further agrees that if at any time all or any part of any payment
theretofore applied by any Person to any Subsidiary Guarantee is, or must be,
rescinded or returned for any reason whatsoever, including without limitation,
the insolvency, bankruptcy or reorganization of the Company or any Subsidiary
Guarantor, such Subsidiary Guarantee shall, to the extent that such payment is
or must be rescinded or returned, be deemed to have continued in existence
notwithstanding such application, and the Subsidiary Guarantees shall continue
to be effective or be reinstated, as the case may be, as though such application
had not been made.
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(e) Each Subsidiary Guarantor shall be subrogated to all rights of the
Holders and the Trustee against the Company in respect of any amounts paid by
such Subsidiary Guarantor pursuant to the provisions of this Indenture,
provided, however, that no Subsidiary Guarantor shall be entitled to enforce or
to receive any payments arising out of, or based upon, such right of subrogation
until all of the Guaranteed Securities and the Subsidiary Guarantees shall have
been paid in full or discharged.
(f) A director, officer, employee or stockholder, as such, of any
Subsidiary Guarantor shall not have any liability for any obligations of such
Subsidiary Guarantor under this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation.
(g) (i) In the event the obligations of the Company or any Subsidiary
Guarantor pursuant to any Securities or hereunder becomes secured by real or
personal property, each Subsidiary Guarantor authorizes the Trustee, at its sole
option, without notice or demand and without affecting the liability of the
Subsidiary Guarantors hereunder, to release and reconvey (with or without the
receipt of any consideration) any Lien against any or all real or personal
property security for such obligations, to foreclose any or all deeds of trust,
mortgages, security agreements or other instruments or agreements by judicial or
nonjudicial sale, and to exercise any other remedy against the Company, any
security or any Subsidiary Guarantor or any other guarantor, all without
affecting the liability of the Subsidiary Guarantors hereunder;
(ii) each Subsidiary Guarantor waives any defenses or
benefits that may be derived from California Code of Civil Procedure Sections
580a, 580b, 580d or 726, or comparable provisions of the laws of the State of
California or any other jurisdiction, and each Subsidiary Guarantor waives any
right to receive notice of any judicial or nonjudicial sale or foreclosure of
any real property, and any failure to receive such notice shall not impair or
affect Guarantor's liability hereunder;
(iii) each Subsidiary Guarantor waives all rights and defenses
arising out of any election of remedies by the Trustee, even if such election of
remedies, including nonjudicial foreclosure with respect to security for a
guaranteed obligation, may destroy such Subsidiary Guarantor's rights of
subrogation and reimbursement against the Company or any other principal by
operation of Section 580d of the California Code of Civil Procedure or
otherwise;
(iv) each Subsidiary Guarantor acknowledges that it has hereby
waived (to the extent stated herein) any and all rights of subrogation and
reimbursement and any other rights and defenses available to such Subsidiary
Guarantor by reason of Sections 2787 to 2855, inclusive, of the California Civil
Code, including (A) any defenses such Subsidiary Guarantor may have to its
guaranty obligations by reason of an election of remedies by the Trustee and (B)
any rights or defenses such Subsidiary Guarantor may have by reason of
protection afforded to the Company or any other principal with respect to the
obligation so guaranteed pursuant to the antideficiency or other laws of the
State of California limiting or discharging the Company's indebtedness,
including, without limitation, Sections 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
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SECTION 1503. Limitation of Subsidiary Guarantors' Liability.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of any federal or state law. To
effectuate the foregoing intention, the Holders and each Subsidiary Guarantor
hereby irrevocably agree that the obligations of each Subsidiary Guarantor under
its Subsidiary Guarantee shall be limited to such maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
Section 1504, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.
SECTION 1504. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor
shall be entitled to a contribution from each other Subsidiary Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor
(including the Funding Guarantor) for all payments, damages and expenses
incurred by the Funding Guarantor in discharging the Company's obligations with
respect to the Securities or any other Subsidiary Guarantor's obligations with
respect to its Subsidiary Guarantee.
SECTION 1505. Execution and Delivery of Subsidiary Guarantees.
To further evidence the Subsidiary Guarantees set forth in Section
1502, each Subsidiary Guarantor hereby agrees that a notation relating to such
Subsidiary Guarantees shall be endorsed on each Guaranteed Security
authenticated and delivered by the Trustee in the form provided for in Section
206.
Each Subsidiary Guarantor shall be deemed to have signed on each
Guaranteed Security issued hereunder any required notation of guarantee to the
same extent as if the signature of such Subsidiary Guarantor appeared on such
Guaranteed Security. The notation of a guarantee set forth on any Guaranteed
Security shall be null and void and of no further effect with respect to the
Subsidiary Guarantee of any Subsidiary Guarantor which, pursuant to Section
1507, is released from such Subsidiary Guarantee.
Each of the Subsidiary Guarantors hereby agrees that its Subsidiary
Guarantee set forth in Section 1502 shall remain in full force and effect
notwithstanding any failure to endorse on each Guaranteed Security a notation
relating to such Subsidiary Guarantee.
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The delivery of any Guaranteed Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any
Subsidiary Guarantee set forth in this Indenture on behalf of the Subsidiary
Guarantor.
SECTION 1506. Addition of Secondary Subsidiary Guarantors.
(a) If any Restricted Subsidiary of the Company guarantees or becomes
primarily obligated with respect to any Debt of the Company, other than the
Guaranteed Securities and other than any Debt owed to a Subsidiary, at any time
subsequent to the Issue Date (including, without limitation, following release
of such Restricted Subsidiary pursuant to Section 1507 from any Subsidiary
Guarantee previously provided by it pursuant to this Indenture), and prior to
the first date on which all Subsidiary Guarantors have been released from their
Subsidiary Guarantees pursuant to Section 1507, provided that there shall not
then exist any agreement or understanding for any renewal or replacement of such
Subsidiary Guarantees, then the Company shall (i) cause the Guaranteed
Securities to be equally and ratably guaranteed by such Subsidiary, but only to
the extent that the Securities are not already guaranteed by such Subsidiary on
reasonably comparable terms and (ii) cause such Subsidiary to execute and
deliver a supplemental indenture evidencing its provision of a Subsidiary
Guarantee in accordance with clause (b) below.
(b) Any Person that was not a Subsidiary Guarantor on the Issue Date
may become a Subsidiary Guarantor, whether or not required to do so by Section
1506(a), by executing and delivering to the Trustee (i) a supplemental indenture
in form and substance satisfactory to the Trustee, which subjects such Person to
the provisions (including the representations and warranties) of this Indenture
as a Subsidiary Guarantor and (ii) an Opinion of Counsel and Officers'
Certificate to the effect that such supplemental indenture has been duly
authorized and executed by such Person and constitutes the legal, valid, binding
and enforceable obligation of such Person (subject to such customary exceptions
concerning creditors' rights and equitable principles as may be acceptable to
the Trustee in its discretion). In the case of any Person not required to become
a Subsidiary Guarantor pursuant to Section 1506(a), such election to become a
Subsidiary Guarantor may be conditional or for a limited period of time.
SECTION 1507. Release of Subsidiary Guarantee.
Notwithstanding anything to the contrary in this Indenture, in the
event that any Subsidiary Guarantor shall no longer be a guarantor of or primary
obligor under any Debt of the Company other than the Securities (or shall cease
to be a guarantor or primary obligor under any such Debt simultaneously with the
release of its obligations under this Indenture), or in the event of a
transaction described in Section 803(B) and so long as no Event of Default shall
have occurred and be continuing, such Subsidiary Guarantor, upon the Trustee's
receipt of an Officers' Certificate to the foregoing effect, shall be deemed to
be released from all of its obligations under this Indenture and the Subsidiary
Guarantee of such Subsidiary Guarantor shall be of no further force or effect.
Following the receipt by the Trustee of any such Officers' Certificate, the
Company shall cause this Indenture to be amended as provided in Section 901
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hereof; provided, however, that the failure to so amend this Indenture shall not
affect the validity of the termination of the Subsidiary Guarantee of such
Subsidiary Guarantor.
ARTICLE SIXTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES
SECTION 1601. Exemption from Individual Liability.
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Security and the related Subsidiary Guarantees, or for any
claim based thereon or otherwise in respect thereof, shall be had against any
incorporator, stockholder, officer, director or employee, as such, past, present
or future, of the Company or any Subsidiary Guarantor or of any successor
corporation, either directly or through the Company or any Subsidiary Guarantor,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations of the Company and the Subsidiary Guarantors, and that no
such personal liability whatever shall attach to, or is or shall be incurred by,
the incorporators, stockholders, officers, directors, or employees, as such, of
the Company or any Subsidiary Guarantor or of any successor corporation, or any
of them, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Securities and the related Subsidiary Guarantees or
implied therefrom; and that any and all such personal liability, either at
common law or in equity or by constitution or statute, of, and any and all such
rights and claims against, every such incorporator, stockholder, officer,
director or employee, as such, because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities and the
related Subsidiary Guarantees or implied therefrom, are hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of such Securities and the related Subsidiary
Guarantees.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: PACIFICARE HEALTH SYSTEMS, INC.
_____________________________ By:__________________________________
Attest: PACIFICARE OPERATIONS, INC.
_____________________________ By:__________________________________
Attest: FHP INTERNATIONAL CORPORATION
_____________________________ By:__________________________________
CHASE MANHATTAN BANK AND TRUST
Attest: COMPANY, NATIONAL ASSOCIATION
_____________________________ By:__________________________________
82
<PAGE> 91
STATE OF _________________________ )
) ss.:
COUNTY OF ________________________ )
On the ___ day of ________, 1998, before me personally came
___________________ to me known, who being by me duly sworn, did depose and say
that he is ________________ of ____________________, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
- -----------------------------------------
STATE OF _________________________ )
) ss.:
COUNTY OF ________________________ )
On the ___ day of ________, 1998, before me personally came
___________________ to me known, who being by me duly sworn, did depose and say
that he is ________________ of ____________________, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
- -----------------------------------------
83
<PAGE> 92
STATE OF _________________________ )
) ss.:
COUNTY OF ________________________ )
On the ___ day of ________, 1998, before me personally came
___________________ to me known, who being by me duly sworn, did depose and say
that he is ________________ of ____________________, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
- -----------------------------------------
STATE OF _________________________ )
) ss.:
COUNTY OF ________________________ )
On the ___ day of ________, 1998, before me personally came
___________________ to me known, who being by me duly sworn, did depose and say
that he is ________________ of ____________________, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
- -----------------------------------------
84
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
June 3, 1998
PacifiCare Health Systems, Inc.
3120 Lake Center Drive
Santa Ana, CA 92704
RE: PACIFICARE HEALTH SYSTEMS, INC. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by PacifiCare Health Systems, Inc. (the "Company") and two of
its wholly-owned subsidiaries, PacifiCare Operations, Inc. and FHP International
Corporation (the "Subsidiary Guarantors") of a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities and Exchange Commission
with respect to up to $250,000,000 of debt securities (the "Debt Securities") of
the Company and certain guarantees provided by each Subsidiary Guarantor (the
"Guarantees"), each to be issued pursuant to the Indenture filed as Exhibit 4.1
to the Registration Statement (the "Indenture") between the Company and Chase
Manhattan Bank & Trust Company, National Association, as trustee.
In connection with this opinion, we have examined the Indenture, the
Registration Statement and related Prospectus, the Certificate of Incorporation
and Bylaws of the Company and each Subsidiary Guarantor, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, the due execution,
delivery and binding effect of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof, and that there are no extrinsic
agreements or understandings among the parties that would modify or interpret
the terms of the agreements or the respective rights or obligations of the
parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the General Corporation Law of the State of Delaware and the
laws of the State of California. We express no opinion as to whether the laws of
any particular jurisdiction other than those identified above are applicable to
the subject matter hereof; accordingly, our opinions in paragraphs 1, 2 and 3
below as to the validity, binding effect and enforceability of the Indenture,
Debt Securities and Guarantees are premised on the result that would obtain if a
California court were to apply the internal laws of the State of California
(notwithstanding the designation of the laws of the State of New York) to the
interpretation and enforcement of the Indenture, Debt Securities and Guarantees.
<PAGE> 2
[COOLEY GODWARD LLP LETTERHEAD]
PacificCare Health Systems, Inc.
June 3, 1998
Page Two
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that:
1. The Indenture, when duly executed and delivered by the Company, the
Subsidiary Guarantors, and the Trustee in the form filed as Exhibit 4.1 to the
Registration Statement, will constitute a valid and binding obligation of the
Company, subject to (a) applicable bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, suretyship, dissolution, moratorium,
receivership or other similar laws affecting creditors' rights generally; (b)
general equity principles and the limitations on the availability of equitable
relief, including, without limitation, specific performance; (c) limitations
created by or arising under statute or case law on a debtor's or guarantor's
ability to waive rights or benefits; (d) limitations imposed by law and public
policy on indemnification and contribution; (e) limitations on the right of a
lender to impose added charges for late payments or defaults by a borrower or
guarantor where it is determined that such charges bear no reasonable relation
to the damage suffered by the lender as a result of such late payments or
defaults; and (f) limitations on corporate distributions to stockholders.
2. When each series of Debt Securities is duly executed and authenticated
by the Trustee in the manner provided in the Indenture and delivered against
payment to the Company of the purchase price of such series of Securities in
accordance with authorization of the Company's Board of Directors, each such
series of Debt Securities will have been legally issued and will constitute
valid and binding obligations of the Company, subject to (a) applicable
bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance,
suretyship, dissolution, moratorium, receivership or other similar laws
affecting creditors' rights generally; (b) general equity principles and the
limitations on the availability of equitable relief, including, without
limitation, specific performance; (c) limitations created by or arising under
statute or case law on a debtor's or guarantor's ability to waive rights or
benefits; (d) limitations imposed by law and public policy on indemnification
and contribution; (e) limitations on the right of a lender to impose added
charges for late payments or defaults by a borrower or guarantor where it is
determined that such charges bear no reasonable relation to the damage suffered
by the lender as a result of such late payments or defaults; and (f) limitations
on corporate distributions to stockholders.
3. The Guarantees have been duly authorized and when notated in the manner
provided in the Indenture, will have been legally issued and will constitute
valid and binding obligations of such Subsidiary Guarantor, subject to (a)
applicable bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance, suretyship, dissolution, moratorium, receivership or other similar
laws affecting creditors' rights generally; (b) general equity principles and
the limitations on the availability of equitable relief, including, without
limitation, specific performance; (c) limitations created by or arising under
statute or case law on a debtor's or guarantor's ability to waive rights or
benefits; (d) limitations imposed by law and public policy on indemnification
and contribution; (e) limitations on the right of a lender to impose added
charges for late payments or defaults by a borrower or guarantor where it is
determined that such charges bear no reasonable relation to the damage suffered
by the lender as a result of such late payments or defaults; and (f) limitations
on corporate distributions to stockholders.
<PAGE> 3
COOLEY GODWARD LLP
PacifiCare Health Systems, Inc.
June 3, 1998
Page Three
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward LLP
By: /s/ MICHAEL R. JACOBSON
-------------------------
Michael R. Jacobson
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3) and related Prospectus
of PacifiCare Health Systems, Inc. for the registration of $250,000,000 of Debt
Securities and to the incorporation by reference therein of (i) our report dated
February 24, 1998 with respect to the consolidated financial statements and
schedule of PacifiCare Health Systems, Inc., included in the Annual Report on
Form 10-K for the year ended December 31, 1997, and (ii) our report dated
February 24, 1998 [except for Note 11, as to which the date is June 2, 1998]
with respect to the consolidated financial statements of PacifiCare Health
Systems, Inc. included in its Current Report on Form 8-K dated June 4, 1998,
filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Los Angeles, California
May 29, 1998
