Prepared by MERRILL CORPORATION




HEALTH
NET, INC. 


$400,000,000



83/8%
Senior Notes due 2011 


PURCHASE AGREEMENT


April 9,
2001 



JPMORGAN,
a division of

CHASE SECURITIES INC.

BANC OF AMERICA SECURITIES LLC

FLEET SECURITIES, INC.

MIZUHO INTERNATIONAL PLC

SALOMON SMITH BARNEY INC.

SCOTIA CAPITAL (USA) INC.

c/o Chase Securities Inc.

270 Park Avenue, 4th floor

New York, New York 10017 


Ladies
and Gentlemen: 


    Health
Net, Inc., a Delaware corporation (the "Company"), proposes to issue and sell $400,000,000 aggregate principal amount of
its 83/8% Senior Notes due 2011 (the "Securities"). The Securities will be issued pursuant to an Indenture to be dated as of
April 12, 2001 (the "Indenture") between the Company and U.S. Bank Trust National Association, as trustee (the
"Trustee"). The Company hereby confirms its agreement with JPMorgan, a division of Chase Securities Inc.
("JPMorgan"), Banc of America Securities LLC, Fleet Securities, Inc., Mizuho International plc, Salomon Smith Barney Inc. and Scotia
Capital (USA), Inc. (together with JPMorgan, the "Initial Purchasers") concerning the purchase of the Securities from the Company by the several
Initial Purchasers. 


    The
Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon an exemption therefrom. The Company has prepared a preliminary offering memorandum dated March 30, 2001 (including the documents filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and incorporated by reference therein, the "Preliminary Offering Memorandum") and will
prepare an offering memorandum dated the date hereof (including the documents filed under the Exchange Act and incorporated by reference therein, the "Offering
Memorandum") setting forth information concerning the Company and the Securities. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum
will be, delivered by the Company to the Initial Purchasers pursuant to the terms of this Agreement. Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be
deemed to include all amendments and supplements thereto, unless otherwise noted. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with Section 2. 


    Holders
of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights
Agreement, substantially in the form attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to which the Company will agree to file
with the Securities and Exchange Commission (the "Commission") a registration statement under the Securities Act (the "Exchange
Offer Registration Statement") registering an issue of senior notes of the Company (the "Exchange Securities") which are
identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and, under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). 



    Capitalized
terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. 





 


    1.  Representations, Warranties and Agreements of the Company.  The Company represents and warrants to,
and agrees with, the several Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: 



    (a) Each
of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will
not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in
or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company
by or on behalf of any Initial Purchaser specifically for use therein as specified in Section 16 hereof (the "Initial Purchasers' Information"). 


    (b) The
documents incorporated by reference in the Preliminary Offering Memorandum and the Offering Memorandum (the "Exchange Act
Reports"), when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission
thereunder and none of such documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements in the Offering Memorandum, in light of the
circumstances under which they were made, not misleading, and any further documents so filed and incorporated by reference in the Preliminary Offering Memorandum and the Offering Memorandum, when such
documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder and shall not contain
an untrue statement of a material fact or omit to a state a material fact necessary to make the statements in the Offering Memorandum, in light of the circumstances under which they were made, not
misleading. 


    (c) Assuming
the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set
forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers
in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). 


    (d) Except
as identified on Schedule 2 hereto, the Company and each of its subsidiaries which is a "significant subsidiary" within the meaning of
Regulation S-X under the Securities Act have been duly incorporated and are validly existing corporations in good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except
where the failure to so qualify or have such power or authority could not, singularly or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or
otherwise), results of operations or business of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). 


    (e) The
Company has an authorized capitalization as set forth in the Offering Memorandum under the heading "Capitalization"; all of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; and the capital stock of the Company conforms in all material respects to the
description thereof contained in the Offering Memorandum. All of the outstanding shares of capital stock of each subsidiary of the 



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Company have been duly authorized and validly issued, are fully paid and non-assessable and, except with respect to the subsidiaries identified on Schedule 3 hereto, are owned
directly or indirectly by the
Company, free and clear of any lien, charge, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party. 


    (f)  The
Company has the requisite corporate power and authority to execute and deliver this Agreement, the Indenture, the Registration Rights Agreement and the
Securities (collectively, the "Transaction Documents") and to perform its obligations hereunder and thereunder; and all corporate action required to be
taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby have been duly and validly taken. 


    (g) This
Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company, except that
rights to indemnification and contribution may be limited by public policy considerations or law. 


    (h) The
Registration Rights Agreement has been duly authorized by the Company and, when duly executed and delivered in accordance with its terms by each of the parties
thereto, will constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law) and except that rights to indemnification and contribution may be limited by public policy considerations or law. 


    (i)  The
Indenture has been duly authorized by the Company and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law). 


    (j)  On
the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder. 


    (k) The
Securities have been duly authorized by the Company for issuance and sale to the Initial Purchasers pursuant to this Agreement and, when duly executed,
authenticated, issued and delivered as provided in the Indenture (assuming the Indenture is the valid and legally binding obligation of the Trustee and due authentication of the Securities by the
Trustee) and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). 


    (l)  The
Exchange Securities have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture and the
Registration Rights Agreement (assuming the Indenture is the valid and legally binding obligation of the Trustee) will constitute a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium 



3





 


and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). 


    (m) Each
Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum. 



    (n) The
execution, delivery and performance by the Company of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities and
compliance by the Company with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of
the provisions of (A) the charter or by-laws (or any other comparable organizational documents) of the Company or any of its subsidiaries or (B) any statute or any judgment,
order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, except
with respect to the Company's subsidiaries in the case of clause (B) such violations which could not reasonably be expected to have a Material Adverse Effect; and no consent, approval,
authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required
for the execution, delivery and performance by the Company of each of the Transaction Documents, the issuance, authentication, sale and delivery of the Securities and compliance by the Company with
the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications
(i) which shall have been obtained or made prior to the Closing Date and (ii) in the case of the Registration Rights Agreement, as may be required to be obtained or made under the
Securities Act and applicable state securities laws. 


    (o) Deloitte &
Touche LLP are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of
the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The
historical financial statements (including the related notes and supporting schedules) contained or incorporated by reference in the Offering Memorandum comply as to form in all material respects with
the applicable requirements under the Securities Act and the Exchange Act (except that certain supporting schedules are omitted); such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the
respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained or incorporated by reference in the
Offering Memorandum is derived from the accounting records of the Company and its subsidiaries and fairly present the information purported to be shown thereby. The pro forma financial information
contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the pro forma adjustments
specified therein), includes all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Securities Act
and the Exchange Act to reflect the transactions described in the Offering Memorandum, gives effect to assumptions made on a reasonable basis and fairly presents the historical and proposed
transactions contemplated by the Offering 



4





 


Memorandum and the Transaction Documents. The other historical financial and statistical information and data included in the Offering Memorandum subject to the explanation of such data as set forth
therein are, in all material respects, fairly presented. 


    (p) Except
as disclosed in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or
of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect, and to the best knowledge of the Company, no such proceedings are threatened or contemplated by governmental authorities or threatened by
others. 


    (q) No
action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body (other than "Blue Sky"
laws, regulations or orders) that prevents the issuance of the Securities or suspends the sale of the Securities in any jurisdiction; no injunction, restraining order or order of any nature by any
federal or state court of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries which would prevent or suspend the issuance or sale of the Securities or the use
of the Preliminary Offering Memorandum or the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with
or adversely affect the issuance of the Securities, the transactions contemplated by the Transaction Documents in any material respect or question the enforceability of the Securities or the Exchange
Securities; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Preliminary Offering Memorandum and
the Offering Memorandum. 


    (r) Neither
the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws (or other comparable organizational documents),
(ii) in default and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject
or (iii) in violation in any respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except in the case of
(ii) and (iii) for such defaults or violations which could not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. 


    (s) The
Company and each of its subsidiaries possess all licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with,
the appropriate federal, state or foreign regulatory agencies or bodies as are necessary for the ownership of their respective properties or the conduct of their respective businesses as described in
the Offering Memorandum, except where the failure to possess or make the same could not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such
license, certificate, authorization or permit will not be renewed in the ordinary course, except where the revocation or modification of any such license, certificate, authorization or permit, or the
failure to renew any such license, certificate, authorization or permit could not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. 



    (t)  The
Company and each of its subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns required to be filed through
the date hereof and have 



5





 


paid all taxes due thereon except for taxes being contested in good faith for which adequate reserves have been provided, and no tax deficiency has been determined adversely to the Company or any of
its subsidiaries which has had (nor does the Company or any of its subsidiaries have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have) a Material Adverse Effect. 


    (u) All
reinsurance treaties and arrangements to which any subsidiary of the Company engaged in the business of insurance (an "Insurance
Subsidiary") is party are in full force and effect and no Insurance Subsidiary is in violation of or in default in the performance, observance or fulfillment of, any
obligation, agreement, covenant or condition contained therein, which violation or default could reasonably be expected, singularly or in the aggregate, to have a Material Adverse Effect; no Insurance
Subsidiary has received any notice from any of the other parties to such treaties, contracts or agreements that such other party intends not to perform such treaty and, to the best knowledge of the
Company, the Company and Insurance Subsidiaries have no reason to believe that any of the other parties to such treaties or arrangements will be unable to perform such treaty or arrangement except to
the extent adequately and properly reserved for in the consolidated financial statements of the
Company included in the Offering Memorandum or except where such non-performance could not reasonably be expected to have a Material Adverse Effect. No insurance regulatory authority has
required that the Company made a capital contribution to a subsidiary which requirement will not have been satisfied as of the Closing Date. 



    (v) The
Company is not an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and the rules and regulations of the Commission thereunder. 


    (w) The
Company and each of its subsidiaries own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses; and the conduct of their respective businesses will not conflict with, and the Company and its subsidiaries have not
received any notice of any claim of conflict with, any such rights of others, except as could not reasonably be expected to have a Material Adverse Effect. 


    (x) The
Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and
personal property which are material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except
such as do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or could not reasonably be expected to have a Material Adverse
Effect. 


    (y) No
"prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code")) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of
ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of
the Company or any of its subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance with applicable law, including ERISA and
the Code, except where such non-compliance could not reasonably be expected to have a Material Adverse Effect; the Company and each of its subsidiaries have not incurred and do not expect
to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the 



6





 


Company or any of its subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material
respects. 


    (z) No
labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company is contemplated or
threatened that, singularly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 


    (aa) There
has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or
other hazardous substances by, due to or caused by the Company or any of its subsidiaries (or, to the best knowledge of the Company, any other entity (including any predecessor) for whose acts or
omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries,
or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule
of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability that could not reasonably be expected to have, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any of its subsidiaries has any knowledge, except for any such
disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material
Adverse Effect. 


    (bb) Neither
the Company nor any of its subsidiaries owns any "margin securities" as that term is defined in Regulations T and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Securities will be used, directly or indirectly, for
the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any
other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation T, U or X of the Federal Reserve Board. 


    (cc) Neither
the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim
against the Company or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. 


    (dd) The
Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. 


    (ee) None
of the Company, any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term is
defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering
restrictions requirement of Regulation S to the extent applicable. 


    (ff) Neither
the Company nor any of its affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities
under the Securities Act. 


    (gg) None
of the Company or any of its affiliates or any other person acting on its or their behalf has engaged, in connection with the offering of the Securities, in
any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. 



7





 


    (hh) Neither the Company nor any of its affiliates has taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange
Act in connection with the offering of the Securities. 


    (ii) No
forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. 


    (jj) Since
the date as of which information is given in the Offering Memorandum (exclusive of amendments or supplements after the date hereof), except as otherwise
stated therein, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition (financial or otherwise), results of operations
or business of the Company and its subsidiaries, taken as a whole, whether or not arising in the ordinary course of business, (ii) none of the Company or any of its subsidiaries has incurred
any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) none of the Company or any of its subsidiaries has entered into any material
transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or
any dividend or distribution of any kind declared, paid or made by the Company or any of its subsidiaries on any class of its capital stock, or any redemption in respect thereof. 




    2.  Purchase and Resale of the Securities.  (a) On the basis of the representations, warranties
and agreements contained herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each
of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company, the principal amount of Securities set forth opposite the name of such Initial Purchaser on Schedule 1
hereto at a purchase price equal to 98.769% of the principal amount thereof. The Company shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be
purchased as provided herein. 



    (b) Each
of the Initial Purchasers represents and warrants (as to itself only) that it is a qualified institutional buyer ("Qualified
Institutional Buyer") as defined in Rule 144A under the Securities Act ("Rule 144A"). The Initial Purchasers have
advised the Company that they propose to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally
and not jointly, represents and warrants to, and agrees with the Company, that (i) it is purchasing the Securities pursuant to a private sale exempt from registration under the Securities Act,
(ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or
deliver the Securities, as part of their initial offering, only (A) within the United States to persons whom it reasonably believes to be Qualified Institutional Buyers, or if any such person
is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional
Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and, in each case, in transactions in accordance with Rule 144A and
(B) outside the United States to persons other than U.S. persons in reliance on Regulation S under the Securities Act ("Regulation S"). 



8





 


    (c) In connection with the offer and sale of Securities in reliance on Regulation S, each Initial Purchaser, severally and not jointly, represents, warrants and
agrees that: 



     (i) it
has complied with and will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has
in its possession or distributed the Preliminary Offering Memorandum or the Offering Memorandum; 


    (ii) the
Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of,
U.S. persons except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act; 


    (iii) such
Initial Purchaser has offered and sold the Securities, and will offer and sell the Securities, (A) as part of its distribution at any time and
(B) otherwise until 40 days after the later of the commencement of the offering of the Securities and the Closing Date, only in accordance with Regulation S or Rule 144A or
any other available exemption from registration under the Securities Act; 


    (iv) none
of such Initial Purchaser or any of its affiliates or any other person acting on its or their behalf has engaged or will engage in any directed selling
efforts (as such term is defined in
Regulation S) with respect to the Securities, and all such persons have complied and will comply with the offering restrictions requirement of Regulation S; 


    (v) at
or prior to the confirmation of sale of any Securities sold in reliance on Regulation S, it will have sent to each distributor, dealer or other person
receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: 



"The
Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered
or sold within the United States or to, or for the account or benefit of U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later
of the commencement of the offering of the Securities and the date of original issuance of the Securities, except in accordance with Regulation S or Rule 144A or any other available
exemption from registration under the Securities Act. Terms used above have the meanings given to them by Regulation S."; and 




    (vi) it
has not and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its affiliates
or with the prior written consent of the Company. 





Terms
used in this Section 2(c) have the meanings given to them by Regulation S. 



    (d) Each
Initial Purchaser, severally and not jointly, represents, warrants and agrees that (i) it has not offered or sold and prior to the date six months after
the Closing Date will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Public
Offers of Securities Regulations 1995 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment 



9





 


Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. 


    (e) Each
Initial Purchaser, severally and not jointly, agrees that, prior to or simultaneously with the confirmation of sale by such Initial Purchaser to any purchaser
of any of the Securities purchased by such Initial Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and any
amendment or supplement thereto that the Company shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale where required by applicable law). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 5(d) and (e), counsel
for the Company and for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements
contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. 


    (f)  The
Company acknowledges and agrees that the Initial Purchasers may sell Securities to any affiliate of an Initial Purchaser and that any such affiliate may sell
Securities purchased by it to an Initial Purchaser. 


    (g) The
Initial Purchasers agree to notify the Company of the completion of the initial distribution of the Securities. 




    3.  Delivery of and Payment for the Securities.  (a) Delivery of and payment for the Securities
shall be made at the offices of Simpson Thacher & Bartlett, New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M.,
New York City time, on April 12, 2001, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such
date and time of payment and delivery being referred to herein as the "Closing Date"). 



    (b) On
the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of
same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against
delivery to the Initial Purchasers of the certificates evidencing the Securities. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Securities shall be in global form, registered in such names and in such denominations as JPMorgan on behalf of the
Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Securities
available for inspection by JPMorgan on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 




    4.  Further Agreements of the Company.  The Company agrees with each of the several Initial Purchasers: 



    (a) to
advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material
fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading; to advise the Initial Purchasers promptly of any order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of the qualification of the Securities for offering or sale in any jurisdiction and of the initiation or threatening of
any proceeding for any such purpose; and to use its reasonable best efforts to prevent the issuance of 



10





 


any such order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to obtain
the lifting thereof at the earliest possible time; 


    (b) at
any time prior to being advised by the Initial Purchasers of the completion of the initial distribution of the Securities, to furnish promptly to each of the
Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum (and any amendments or supplements thereto)
as may be reasonably requested; 


    (c) prior
to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial
Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Company after a reasonable period to review; 



    (d) if,
at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is
necessary, in the opinion of counsel for the Initial Purchasers or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an
untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to
correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; 



    (e) for
so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to
holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being
for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); 


    (f)  for
so long as the Securities are outstanding, to furnish to the Initial Purchasers copies of any annual reports, quarterly reports and current reports filed by
the Company with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports
and information as shall be furnished by the Company to the Trustee or to the holders of the Securities pursuant to the Indenture or the Exchange Act or any rule or regulation of the Commission
thereunder; 


    (g) to
promptly take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to
arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchasers may reasonably request;  provided that the Company and its
subsidiaries shall not be obligated to qualify as foreign corporations or limited liability companies in any
jurisdiction in which they are not so qualified or to file a general consent to service of process or to subject themselves to taxation in respect of doing business in any jurisdiction; 


    (h) to
assist the Initial Purchasers in arranging for the Securities to be eligible for clearance and settlement through The Depositary Trust Company ("DTC"); 



11





 


    (i)  not to, and to cause its affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as such term is
defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require registration of the Securities under the Securities Act; 


    (j)  except
following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause its
affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation
or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; 



    (k) for
a period of 90 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file a registration statement for, or
announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities) without the prior
written consent of the Initial Purchasers; 


    (l)  during
the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchasers, not to, and not permit
any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any
of its affiliates and resold in a transaction registered under the Securities Act; 


    (m) in
connection with the offering of the Securities, until JPMorgan on behalf of the Initial Purchasers shall have notified the Company of the completion of the
resale of the Securities, not to, and to cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Securities, or attempt to induce any person to purchase any Securities; and not to, and to
cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent active trading in or of raising the price of the Securities; 


    (n) to
furnish to each of the Initial Purchasers on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the
accountants rendering such report; 


    (o) to
do and perform all things required to be done and performed by it under this Agreement that are within its control prior to or after the Closing Date, and to use
its reasonable best efforts to satisfy all conditions precedent on its part to the delivery of the Securities; 


    (p) not
to take any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the
covenants contained in the Indenture; 


    (q) prior
to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company,
its condition (financial or otherwise), or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the
past practices of the Company and of which the Initial Purchasers are notified), without the prior written consent of the 



12





 


Initial Purchasers, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; 


    (r) not
to engage, and to cause its affiliates or any person acting on its behalf not to engage, in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Securities, and to comply, and to cause its affiliates or any person acting on its behalf to comply, with the offering restriction requirements of
Regulation S; and 


    (s) to
apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds". 




    5.  Conditions of Initial Purchasers' Obligations.  The respective obligations of the several Initial
Purchasers hereunder are subject to the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company contained herein, to the accuracy of the
statements of the Company and its officers made in any certificates delivered pursuant hereto, to the performance by the Company of its obligations hereunder, and to each of the following additional
terms and conditions: 



    (a) The
Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as is
reasonably practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order suspending the sale of the Securities
in any jurisdiction shall have been issued and no proceedings for the purpose shall have been commenced or shall be pending or threatened. 



    (b) None
of the Initial Purchasers shall have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the opinion of such counsel is
material and is required to be stated therein or is necessary to make the statements therein not misleading. 


    (c) All
corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum,
and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be reasonably satisfactory in all material respects to the Initial Purchasers, and
the Company shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. 


    (d) Skadden,
Arps, Slate, Meagher & Flom (Illinois) shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, and Michael
E. Jansen, Esq., as Assistant General Counsel for the Company, shall have furnished to the Initial Purchasers his written opinion, in each case addressed to the Initial Purchasers and dated the
Closing Date, in the forms previously delivered to the Initial Purchasers, subject in each case to customary assumptions and exceptions. 


    (e) The
Initial Purchasers shall have received from Simpson Thacher & Bartlett, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing
Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they reasonably request for
the purpose of enabling them to pass upon such matters. 


    (f)  The
Company shall have furnished to the Initial Purchasers a letter (the "Initial Letter") of Deloitte &
Touche LLP, addressed to the Initial Purchasers and dated the date hereof, in the form previously delivered to the Initial Purchasers. 



13







  



    (g) The
Company shall have furnished to the Initial Purchasers a letter (the "Bring-Down Letter") of
Deloitte & Touche LLP, addressed to the Initial Purchasers and dated the Closing Date (A) confirming that they are independent public accountants with respect to the Company and its
subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (B) stating, as of the date of the
Bring-Down Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum,
as of a date not more than three business days prior to the date of the Bring-Down Letter), that the conclusions and findings of such accountants with respect to the financial information
and other matters covered by the Initial Letter are accurate and (C) confirming in all material respects the conclusions and findings set forth in the Initial Letter. 


    (h) The
Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its chief financial officer and another authorized officer
stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a
material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading, and since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Closing Date, the representations and warranties of the Company in
this Agreement are true and correct in all material respects, the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior
to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum (exclusive of amendments or supplements after the date hereof), there has
been no material adverse change in the financial position or results of operation of the Company or any of its subsidiaries, or any change, or any development including a prospective change, in or
affecting the condition (financial or otherwise), results of operations or business of the Company and its subsidiaries taken as a whole, except as set forth in the Offering Memorandum (exclusive of
amendments or supplements after the date hereof). 


    (i)  The
Initial Purchasers shall have received a counterpart of the Registration Rights Agreement which shall have been executed and delivered by a duly authorized
officer of the Company. 


    (j)  The
Indenture shall have been duly executed and delivered by the Company and the Trustee, and the Securities shall have been duly executed and delivered by the
Company and duly authenticated by the Trustee. 


    (k) If
any event shall have occurred that requires the preparation of an amendment or supplement to the Offering Memorandum under Section 4(d), such amendment or
supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers
reasonably in advance of the Closing Date. 


    (l)  There
shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or
regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which in the reasonable judgment of the Initial Purchasers
would materially 



14





 


impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities contemplated hereby. 


    (m) Subsequent
to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any
amendment or supplement thereto), there shall not have been any change in the capital stock or long-term debt or any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), results of operations or business of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described above, is, in
the reasonable judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the
manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). 


    (n) No
action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would,
as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance or sale of the Securities. 


    (o) Subsequent
to the execution and delivery of this Agreement no downgrading shall have occurred in the rating accorded the Securities or any of the Company's other
debt securities or preferred stock by a "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act and no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive
implications of a possible upgrading), its rating of the Securities or any of the Company's other debt securities or preferred stock. 


    (p) Subsequent
to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the NASDAQ National Market shall have been suspended or limited, or minimum prices shall have been established on any such exchange or market by the
Commission, by any such exchange or by any other regulatory body or governmental authority having jurisdiction, or trading in any securities of the Company on any exchange or in the NASDAQ National
Market shall have been suspended or (ii) any moratorium on commercial banking activities shall have been declared by federal or New York state authorities or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a national emergency or war or (iv) a material adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United States shall be such) the effect of which, in the case of this clause (iv), is, in the reasonable judgment of the
Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Securities on the terms and in the manner contemplated by this
Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). 




    All
opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory in all material respects to Simpson Thacher & Bartlett. 


    6.  Termination.  The obligations of the Initial Purchasers hereunder may be terminated by the Initial
Purchasers, in their absolute discretion, by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in
Section 5(l), (m), (n), (o) or (p) shall have occurred and be continuing. 


15





 


    7.  Defaulting Initial Purchasers.  (a) If, on the Closing Date, any Initial Purchaser defaults
in the performance of its obligations under this Agreement, the non-defaulting Initial Purchasers may make arrangements for the purchase of the Securities which such defaulting Initial
Purchaser agreed but failed to purchase by other persons satisfactory to the Company and the non-defaulting Initial Purchasers, but if no such arrangements are made within 36 hours
after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers or the Company, except that the Company will continue to be liable
for the payment of expenses to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement,
the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 1 hereto that, pursuant to this
Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. 



    (b) Nothing
contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company or any non-defaulting Initial
Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Securities of a defaulting Initial Purchaser, any of the
non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the
Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or
supplement to the Offering Memorandum that effects any such changes. 




    8.  Reimbursement of Initial Purchasers' Expenses.  If (a) this Agreement shall have been
terminated pursuant to Section 6 or 7, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchasers for any reason permitted under this Agreement or
(c) the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement, the Company shall reimburse the Initial Purchasers for such
out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this
Agreement and the proposed purchase and resale of the Securities. If this Agreement is terminated pursuant to Section 7 by reason of the default of one or more of the Initial Purchasers, the
Company shall not be obligated to reimburse any defaulting Initial Purchaser on account of such expenses. 


    9.  Indemnification.  (a) The Company shall indemnify and hold harmless each Initial Purchaser,
its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which that Initial Purchaser may
become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or
the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Company pursuant to Section 4(e) or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall
reimburse each Initial Purchaser promptly upon demand for any legal or other documented out-of-pocket expenses reasonably incurred by that Initial Purchaser in connection with
investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred;  provided, however,
 that the Company shall not be liable in any such case to the 


16





 


extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Initial Purchasers' Information; and provided, further, that with respect to any such untrue
statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 9(a) shall not inure to the benefit of any such Initial Purchaser to the
extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by such Initial Purchaser and any such loss, claim, damage, liability or action of
or with respect to such Initial Purchaser results from the fact that both (A) to the extent required by applicable law, a copy of the Offering Memorandum was not sent or given to such person at
or prior to
the written confirmation of the sale of such Securities to such person and (B) the untrue statement in or omission from the Preliminary Offering Memorandum was corrected in the Offering
Memorandum unless, in either case, such failure to deliver the Offering Memorandum was a result of non-compliance by the Company with Section 4(b). 



    (b) Each
Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this
Section 9(b) and Section 10 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become
subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the
Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with any Initial Purchasers' Information, and shall reimburse the Company for any legal or other documented
out-of-pocket expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such expenses are incurred. 


    (c) Promptly
after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if
a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this
Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided,
further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this
Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable documented
out-of-pocket costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and
other 



17





 


charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing
by the
indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the
indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases the reasonable documented out-of-pocket fees, disbursements and other charges of counsel will
be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified
party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in
the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not
be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or reasonably could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such
proceeding. 




    The
obligations of the Company and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company or the Initial
Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 


    10.  Contribution.  If the indemnification provided for in Section 9 is unavailable or
insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid
or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one
hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company, on the one hand, and the
total discounts and commissions received by the Initial Purchasers with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the
Securities under this Agreement. The relative fault shall be determined 


18





 


by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company or
information supplied by the Company on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omissions. The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this
Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any
other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any documented
out-of-pocket legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or
claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions
received by such Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this
Section 10 are several in proportion to their respective purchase obligations and not joint. 


    11.  Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided
in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company and the Initial Purchasers and in Section 4(e)
with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this
Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 


    12.  Expenses.  The Company agrees with the Initial Purchasers to pay (a) the costs incident to
the authorization, issuance, sale, preparation and delivery of the Securities to the Initial Purchasers and any taxes payable in that connection; (b) the costs incident to the preparation,
printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the
Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable
upon issuance of the Securities; (e) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(g) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the
Initial Purchasers); (g) any fees charged by rating agencies for rating the Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses
of any counsel to such parties); (i) all expenses and application fees incurred in connection with the approval of the Securities for book-entry transfer by DTC; and (j) all
other costs and expenses
incident to the performance of the obligations of the Company under this Agreement which are not otherwise specifically provided for in this Section 12;  provided, however, that except as provided in this Section 12 and Section 8, the Initial
Purchasers shall pay their own costs and expenses. 


    13.  Survival.  The respective indemnities, rights of contribution, representations, warranties and
agreements of the Company and the Initial Purchasers contained in this Agreement or made by or on 


19





 


behalf of the Company or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in
full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers,
directors, employees, representatives, agents or controlling persons. 


    14.  Notices, etc.  All statements, requests, notices and agreements hereunder shall be in writing, and: 



    (a) if
to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to JPMorgan, a division of Chase Securities Inc., 270 Park Avenue,
New York, New York 10017, Attention: Legal Department (telecopier no.: (212) 270-7487); or 



    (b) if
to the Company, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: Curtis
Westen, Esq. (telecopier no.: (818) 676-7503); 




provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall also be delivered or sent by mail to such Initial Purchaser at
its address set forth on the signature page hereof. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by JPMorgan. 



    15.  Definition of Terms.  For purposes of this Agreement, (a) the term "business day" means any
day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except
where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 


    16.  Initial Purchasers' Information.  The parties hereto acknowledge and agree that, for all purposes of
this Agreement, the Initial Purchasers' Information consists solely of the following information in the Preliminary Offering Memorandum and the Offering Memorandum: (i) the first paragraph on
the front cover page concerning the terms of the offering by the Initial Purchasers; and (ii) the statements concerning the Initial Purchasers contained in the third, fifth, tenth, eleventh,
twelfth and thirteenth paragraphs under the heading "Plan of Distribution". 


    17.  Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.


    18.  Counterparts.  This Agreement may be executed in one or more counterparts (which may include
counterparts delivered by telecopier) and, if executed in more than one counterpart, the executed agreement, counterparts shall each be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument. 


    19.  Amendments.  No amendment or waiver of any provision of this Agreement, nor any consent or approval
to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 


    20.  Headings.  The headings herein are inserted for convenience of reference only and are not intended
to be part of, or to affect the meaning or interpretation of, this Agreement. 


20







    If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding
agreement between the Company and the several Initial Purchasers in accordance with its terms. 



	 	 	Very truly yours,
	

 	
 	

HEALTH NET, INC.
	

 	
 	

By	
 	

/s/ STEVEN P. ERWIN   

	 	 	 	 	Name:	 	Steven P. Erwin
	 	 	 	 	Title:	 	Executive Vice President and

Chief Financial Officer





Accepted:

CHASE SECURITIES INC.

BANC OF AMERICA SECURITIES LLC

FLEET SECURITIES, INC.

MIZUHO INTERNATIONAL PLC

SALOMON SMITH BARNEY INC.

SCOTIA CAPITAL (USA) INC. 



	By	 	/s/ JOSE C. PADILLA   
	 	 
	 	 	Authorized Signatory

	 	 



Address for notices pursuant to Section 9(c):

1 Chase Manhattan Plaza, 26th floor

New York, New York 10081

Attention: Legal Department 






ANNEX A 


    [Form
of Exchange and Registration Rights Agreement]