Document:

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                                                                    EXHIBIT 4.13

                         PACIFICARE HEALTH SYSTEMS, INC.
                                     ISSUER

                                       AND

                         U.S. BANK NATIONAL ASSOCIATION
                                     TRUSTEE

                                 ---------------

                                    INDENTURE

                           DATED AS OF AUGUST 12, 2003

                                 ---------------

                          SUBORDINATED DEBT SECURITIES

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                                TABLE OF CONTENTS

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ARTICLE 1         DEFINITIONS.......................................................................    1

         Section 1.01      Definitions of Terms.....................................................    1

ARTICLE 2         ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF SECURITIES.....    5

         Section 2.01      Designation and Terms of Securities......................................    5

         Section 2.02      Form of Securities and Trustee's Certificate.............................    7

         Section 2.03      Denominations: Provisions for Payment....................................    7

         Section 2.04      Execution and Authentications............................................    9

         Section 2.05      Registration of Transfer and Exchange....................................   10

         Section 2.06      Temporary Securities.....................................................   11

         Section 2.07      Mutilated, Destroyed, Lost or Stolen Securities..........................   11

         Section 2.08      Cancellation.............................................................   12

         Section 2.09      Benefits of Indenture....................................................   12

         Section 2.10      Authenticating Agent.....................................................   13

         Section 2.11      Global Securities........................................................   13

ARTICLE 3         REDEMPTION OF SECURITIES AND SINKING FUND PROVISIONS..............................   14

         Section 3.01      Redemption...............................................................   14

         Section 3.02      Notice of Redemption.....................................................   14

         Section 3.03      Payment Upon Redemption..................................................   16

         Section 3.04      Sinking Fund.............................................................   16

         Section 3.05      Satisfaction of Sinking Fund Payments with Securities....................   16

         Section 3.06      Redemption of Securities for Sinking Fund................................   17

ARTICLE 4         COVENANTS.........................................................................   17

         Section 4.01      Payment of Principal, Premium and Interest...............................   17

         Section 4.02      Maintenance of Office or Agency..........................................   17

         Section 4.03      Paying Agents............................................................   18

         Section 4.04      Appointment to Fill Vacancy in Office of Trustee.........................   19

         Section 4.05      Compliance with Consolidation Provisions.................................   19

ARTICLE 5         SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.................   19
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                                       i.

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                                TABLE OF CONTENTS
                                   (CONTINUED)

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         Section 5.01      Company to Furnish Trustee Names and Addresses of Securityholders........   19

         Section 5.02      Preservation Of Information; Communications With Securityholders.........   20

         Section 5.03      Reports by the Company...................................................   20

         Section 5.04      Reports by the Trustee...................................................   20

ARTICLE 6         REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT...................   21

         Section 6.01      Events of Default........................................................   21

         Section 6.02      Collection of Indebtedness and Suits for Enforcement by Trustee..........   22

         Section 6.03      Application of Moneys Collected..........................................   24

         Section 6.04      Limitation on Suits......................................................   24

         Section 6.05      Rights and Remedies Cumulative; Delay or Omission Not Waiver.............   25

         Section 6.06      Control by Securityholders...............................................   25

         Section 6.07      Undertaking to Pay Costs.................................................   26

ARTICLE 7         CONCERNING THE TRUSTEE............................................................   26

         Section 7.01      Certain Duties and Responsibilities of Trustee...........................   26

         Section 7.02      Certain Rights of Trustee................................................   27

         Section 7.03      Trustee Not Responsible for Recitals or Issuance or Securities...........   29

         Section 7.04      May Hold Securities......................................................   29

         Section 7.05      Moneys Held in Trust.....................................................   29

         Section 7.06      Compensation and Reimbursement...........................................   29

         Section 7.07      Reliance on Officers' Certificate........................................   30

         Section 7.08      Disqualification; Conflicting Interests..................................   30

         Section 7.09      Corporate Trustee Required; Eligibility..................................   30

         Section 7.10      Resignation and Removal; Appointment of Successor........................   31

         Section 7.11      Acceptance of Appointment By Successor...................................   32

         Section 7.12      Merger, Conversion, Consolidation or Succession to Business..............   33

         Section 7.13      Preferential Collection of Claims Against the Company....................   33
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                                       ii.

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                                TABLE OF CONTENTS
                                   (CONTINUED)

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         Section 7.14      Notice of Default........................................................   33

ARTICLE 8         CONCERNING THE SECURITYHOLDERS....................................................   34

         Section 8.01      Evidence of Action by Securityholders....................................   34

         Section 8.02      Proof of Execution by Securityholders....................................   34

         Section 8.03      Who May be Deemed Owners.................................................   35

         Section 8.04      Certain Securities Owned by Company Disregarded..........................   35

         Section 8.05      Actions Binding on Future Securityholders................................   35

ARTICLE 9         SUPPLEMENTAL INDENTURES...........................................................   36

         Section 9.01      Supplemental Indentures Without the Consent of Securityholders...........   36

         Section 9.02      Supplemental Indentures With Consent of Securityholders..................   37

         Section 9.03      Effect of Supplemental Indentures........................................   37

         Section 9.04      Securities Affected by Supplemental Indentures...........................   38

         Section 9.05      Execution of Supplemental Indentures.....................................   38

ARTICLE 10        SUCCESSOR ENTITY..................................................................   38

         Section 10.01     Company May Consolidate, Etc.............................................   38

         Section 10.02     Successor Entity Substituted.............................................   39

         Section 10.03     Evidence of Consolidation, Etc. to Trustee...............................   39

ARTICLE 11        SATISFACTION AND DISCHARGE........................................................   40

         Section 11.01     Satisfaction and Discharge of Indenture..................................   40

         Section 11.02     Discharge of Obligations.................................................   40

         Section 11.03     Deposited Moneys to be Held in Trust.....................................   41

         Section 11.04     Payment of Moneys Held by Paying Agents..................................   41

         Section 11.05     Repayment to Company.....................................................   41

ARTICLE 12        IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS...................   41

         Section 12.01     No Recourse..............................................................   41

ARTICLE 13        MISCELLANEOUS PROVISIONS..........................................................   42

         Section 13.01     Effect on Successors and Assigns.........................................   42

         Section 13.02     Actions by Successor.....................................................   42

         Section 13.03     Surrender of Company Powers..............................................   42
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                                      iii.

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                                TABLE OF CONTENTS
                                   (CONTINUED)

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         Section 13.04     Notices..................................................................   42

         Section 13.05     Governing Law............................................................   43

         Section 13.06     Treatment of Securities as Debt..........................................   43

         Section 13.07     Compliance Certificates and Opinions.....................................   43

         Section 13.08     Payments on Business Days................................................   43

         Section 13.09     Conflict with Trust Indenture Act........................................   44

         Section 13.10     Counterparts.............................................................   44

         Section 13.11     Separability.............................................................   44

         Section 13.12     Compliance Certificates..................................................   44

ARTICLE 14        SUBORDINATION OF SECURITIES.......................................................   44

         Section 14.01     Subordination Terms......................................................   44
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(1)      This Table of Contents does not constitute part of the Indenture and
         shall not have any bearing on the interpretation of any of its terms
         or provisions.

                                      iv.

<PAGE>

                                    INDENTURE

         INDENTURE, dated as of August 12, 2003, among PACIFICARE HEALTH
SYSTEMS, INC., a Delaware corporation (the "Company"), and U.S. BANK NATIONAL
ASSOCIATION, as trustee (the "Trustee"):

         WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of subordinated debt securities (hereinafter referred to as the
"Securities"), in an unlimited aggregate principal amount to be issued from time
to time in one or more series as in this Indenture provided, as registered
Securities without coupons, to be authenticated by the certificate of the
Trustee;

         WHEREAS, to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture; and

         WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.

         NOW, THEREFORE, in consideration of the premises and the purchase of
the Securities by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of Securities:

                                    ARTICLE 1

                                   DEFINITIONS

         SECTION 1.01      DEFINITIONS OF TERMS.

         The terms defined in this Section (except as in this Indenture or any
indenture supplemental hereto otherwise expressly provided or unless the context
otherwise requires) for all purposes of this Indenture and of any indenture
supplemental hereto shall have the respective meanings specified in this Section
and shall include the plural as well as the singular. All other terms used in
this Indenture that are defined in the Trust Indenture Act of 1939, as amended,
or that are by reference in such Act defined in the Securities Act of 1933, as
amended (except as herein or any indenture supplemental hereto otherwise
expressly provided or unless the context otherwise requires), shall have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this instrument.

         "Authenticating Agent" means an authenticating agent with respect to
all or any of the series of Securities appointed by the Trustee pursuant to
Section 2.10.

         "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.

                                       1.

<PAGE>

         "Board of Directors" means the Board of Directors of the Company 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 to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.

         "Business Day" means, with respect to any series of Securities, any day
other than a day on which federal or state banking institutions in the Borough
of Manhattan, the City of New York, are authorized or obligated by law,
executive order or regulation to close.

         "Certificate" means a certificate signed by the chairman of the Board
of Directors, any principal executive officer, any chief executive officer, any
president, any senior vice president, any vice president, any principal
financial officer or any principal accounting officer, any treasurer or any
assistant treasurer, any controller or any assistant controller, any secretary
or any assistant secretary of the Company. The Certificate need not comply with
the provisions of Section 13.07.

         "Company" means PACIFICARE HEALTH SYSTEMS, INC., a corporation duly
organized and existing under the laws of the State of Delaware, and, subject to
the provisions of Article Ten, shall also include its successors and assigns.

         "Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at U.S. Bank National
Association, 633 West 5th Street, 24th Floor, LM-CA-T24T, Los Angeles,
California 90071; Attention: Corporate Trust Services, except that whenever a
provision herein refers to an office or agency of the Trustee in the Borough of
Manhattan, the City of New York, such office is located, at the date hereof, at
U.S. Bank Trust National Association, 100 Wall Street, Suite 1600, New York, NY
10005, Attn: Corporate Trust Services.

         "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

         "Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.

         "Depositary" means, with respect to Securities of any series for which
the Company shall determine that such Securities will be issued as a Global
Security, The Depository Trust Company, New York, New York, another clearing
agency, or any successor registered as a clearing agency under the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), or other applicable
statute or regulation, which, in each case, shall be designated by the Company
pursuant to either Section 2.01 or 2.11.

         "Event of Default" means, with respect to Securities of a particular
series, any event specified in Section 6.01, continued for the period of time,
if any, therein designated.

                                       2.

<PAGE>

         "Global Security" means, with respect to any series of Securities, a
Security executed by the Company and delivered by the Trustee to the Depositary
or pursuant to the Depositary's instruction, all in accordance with the
Indenture, which shall be registered in the name of the Depositary or its
nominee.

         "Governmental Obligations" means securities that are (a) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (b) obligations 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 that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
Governmental Obligation or a specific payment of principal of or interest on any
such Governmental Obligation held by such custodian for the account of the
holder of such depositary receipt; provided, however, 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 Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.

         "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.

         "Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.

         "Interest Payment Date", when used with respect to any installment of
interest on a Security of a particular series, means the date specified in such
Security or in a Board Resolution or in an indenture supplemental hereto with
respect to such series as the fixed date on which an installment of interest
with respect to Securities of that series is due and payable.

         "Officers' Certificate" means a certificate signed by a chief executive
officer, a president, a senior vice president or a vice president and by the
chief financial officer or the treasurer or an assistant treasurer or the
controller or an assistant controller or the secretary or an assistant secretary
of the Company that is delivered to the Trustee in accordance with the terms
hereof. Each such certificate shall include the statements provided for in
Section 13.07, if and to the extent required by the provisions thereof.

         "Opinion of Counsel" means an opinion in writing subject to customary
exceptions of legal counsel, who may be an employee of or counsel for the
Company, that is delivered to the Trustee in accordance with the terms hereof.
Each such opinion shall include the statements provided for in Section 13.07, if
and to the extent required by the provisions thereof.

         "Outstanding", when used with reference to Securities of any series,
means, subject to the provisions of Section 8.04, as of any particular time, all
Securities of that series theretofore authenticated and delivered by the Trustee
under this Indenture, except (a) Securities theretofore

                                       3.

<PAGE>

canceled by the Trustee or any paying agent, or delivered to the Trustee or any
paying agent for cancellation or that have previously been canceled; (b)
Securities or portions thereof for the payment or redemption of which moneys or
Governmental Obligations in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the Company
shall act as its own paying agent); provided, however, that if such Securities
or portions of such Securities are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in Article Three provided, or
provision satisfactory to the Trustee shall have been made for giving such
notice; and (c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to the terms of
Section 2.07.

         "Person" means any individual, corporation, partnership, joint venture,
joint-stock company, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

         "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 2.07 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.

         "Responsible Officer" when used with respect to the Trustee means any
officer in the Corporate Trust Office of the Trustee, or to whom any corporate
trust matter is referred because of his or her knowledge of and familiarity with
the particular subject.

         "Securities" means the debt Securities authenticated and delivered
under this Indenture.

         "Securityholder", "holder of Securities", "registered holder", or other
similar term, means the Person or Persons in whose name or names a particular
Security shall be registered on the books of the Company kept for that purpose
in accordance with the terms of this Indenture.

         "Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by such
Person, or by one or more of its Subsidiaries, or by such Person and one or more
of its Subsidiaries and (iii) any limited partnership of which such Person or
any of its Subsidiaries is a general partner.

         "Trustee" means U.S. Bank National Association, and, subject to the
provisions of Article Seven, shall also include its successors and assigns, and,
if at any time there is more than one Person acting in such capacity hereunder,
"Trustee" shall mean each such Person. The term "Trustee" as used with respect
to a particular series of the Securities shall mean the trustee with respect to
that series.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.

                                       4.

<PAGE>

         "Voting Stock", as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.

                                    ARTICLE 2

             ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND
                             EXCHANGE OF SECURITIES

         SECTION 2.01      DESIGNATION AND TERMS OF SECURITIES.

                  (a)      The aggregate principal amount of Securities that may
be authenticated and delivered under this Indenture is unlimited. The Securities
may be issued in one or more series up to the aggregate principal amount of
Securities of that series from time to time authorized by or pursuant to a Board
Resolution or pursuant to one or more indentures supplemental hereto. Prior to
the initial issuance of Securities of any series, there shall be established in
or pursuant to a Board Resolution, and set forth in an Officers' Certificate, or
established in one or more indentures supplemental hereto:

                           (1)      the title of the Securities of the series
(which shall distinguish the Securities of that series from all other
Securities);

                           (2)      any limit upon the aggregate principal
amount of the Securities of that series that 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 that series);

                           (3)      the date or dates on which the principal of
the Securities of the series is payable, any original issue discount that may
apply to the Securities of that series upon their issuance, the principal amount
due at maturity, and the place(s) of payment;

                           (4)      the rate or rates at which the Securities of
the series shall bear interest or the manner of calculation of such rate or
rates, if any;

                           (5)      the date or dates from which such interest
shall accrue, the Interest Payment Dates on which such interest will be payable
or the manner of determination of such Interest Payment Dates, the place(s) of
payment, and the record date for the determination of holders to whom interest
is payable on any such Interest Payment Dates or the manner of determination of
such record dates;

                           (6)      the right, if any, to extend the interest
payment periods and the duration of such extension;

                                       5.

<PAGE>

                           (7)      the period or periods within which, the
price or prices at which and the terms and conditions upon which Securities of
the series may be redeemed, in whole or in part, at the option of the Company;

                           (8)      the obligation, if any, of the Company to
redeem or purchase Securities of the series pursuant to any sinking fund,
mandatory redemption, or analogous provisions (including payments made in cash
in satisfaction of future sinking fund obligations) or at the option of a holder
thereof and the period or periods within which, the price or prices at which,
and the terms and conditions upon which, Securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such obligation;

                           (9)      the form of the Securities of the series
including the form of the Certificate of Authentication for such series;

                           (10)     if other than denominations of one thousand
U.S. dollars ($1,000) or any integral multiple thereof, the denominations in
which the Securities of the series shall be issuable;

                           (11)     any and all other terms (including terms, to
the extent applicable, relating to any auction or remarketing of the Securities
of that series and any security for the obligations of the Company with respect
to such Securities) with respect to such series (which terms shall not be
inconsistent with the terms of this Indenture, as amended by any supplemental
indenture) including any terms which may be required by or advisable under
United States laws or regulations or advisable in connection with the marketing
of Securities of that series;

                           (12)     whether the Securities are issuable as a
Global Security and, in such case, the terms and the identity of the Depositary
for such series;

                           (13)     whether the Securities will be convertible
into or exchangeable for shares of common stock or other securities of the
Company or any other Person and, if so, the terms and conditions upon which such
Securities will be so convertible or exchangeable, including the conversion or
exchange price, as applicable, or how it will be calculated and may be adjusted,
any mandatory or optional (at the Company's option or the holders' option)
conversion or exchange features, and the applicable conversion or exchange
period;

                           (14)     if other than the principal amount thereof,
the portion of the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the maturity thereof pursuant to
Section 6.01;

                           (15)     any additional or different Events of
Default or restrictive covenants (which may include, among other restrictions,
restrictions on the Company's ability or the ability of the Company's
Subsidiaries to: incur additional indebtedness; issue additional securities;
create liens; pay dividends or make distributions in respect of their capital
stock; redeem capital stock; place restrictions on such Subsidiaries placing
restrictions on their ability to pay dividends, make distributions or transfer
assets; make investments or other restricted payments; sell or otherwise dispose
of assets; enter into sale-leaseback transactions; engage in transactions with
stockholders and affiliates; issue or sell stock of their Subsidiaries; or
effect a

                                       6.

<PAGE>

consolidation or merger) or financial covenants (which may include, among other
financial covenants, financial covenants that require the Company and its
Subsidiaries to maintain specified interest coverage, fixed charge, cash
flow-based or asset-based ratios) provided for with respect to the Securities of
the series;

                           (16)     if other than dollars, the coin or currency
in which the Securities of the series are denominated (including, but not
limited to, foreign currency);

                           (17)     the terms and conditions, if any, upon which
the Company shall pay amounts in addition to the stated interest, premium, if
any and principal amounts of the Securities of the series to any Securityholder
that is not a "United States person" for federal tax purposes;

                           (18)     any restrictions on transfer, sale or
assignment of the Securities of the series; and

                           (19)     the subordination terms of the Securities of
the series.

         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 any such Board Resolution or in any indentures supplemental hereto.

         If any of the terms of the series are established by action taken
pursuant to a Board Resolution of the Company, 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 of the Company setting forth the terms of the series.

         Securities of any particular series may be issued at various times,
with different dates on which the principal or any installment of principal is
payable, with different rates of interest, if any, or different methods by which
rates of interest may be determined, with different dates on which such interest
may be payable and with different redemption dates.

         SECTION 2.02      FORM OF SECURITIES AND TRUSTEE'S CERTIFICATE.

         The Securities of any series and the Trustee's certificate of
authentication to be borne by such Securities shall be substantially of the
tenor and purport as set forth in one or more indentures supplemental hereto or
as provided in a Board Resolution, and set forth in an Officers' Certificate,
and they may have such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any securities exchange on which Securities of that series may be listed, or
to conform to usage.

         SECTION 2.03      DENOMINATIONS: PROVISIONS FOR PAYMENT.

         The Securities shall be issuable as registered Securities and in the
denominations of one thousand U.S. dollars ($1,000) or any integral multiple
thereof, subject to Section 2.01(10). The

                                       7.

<PAGE>

Securities of a particular series shall bear interest payable on the dates and
at the rate specified with respect to that series. The principal of and the
interest on the Securities of any series, as well as any premium thereon in case
of redemption thereof prior to maturity, shall be payable in the coin or
currency of the United States of America that at the time is legal tender for
public and private debt, at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, the City and State of New York. Each
Security shall be dated the date of its authentication. Interest on the
Securities shall be computed on the basis of a 360-day year composed of twelve
30-day months.

         The interest installment on any Security that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Securities of that series shall be paid to the Person in whose name said
Security (or one or more Predecessor Securities) is registered at the close of
business on the regular record date for such interest installment. In the event
that any Security of a particular series or portion thereof is called for
redemption and the redemption date is subsequent to a regular record date with
respect to any Interest Payment Date and prior to such Interest Payment Date,
interest on such Security will be paid upon presentation and surrender of such
Security as provided in Section 3.03.

         Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Securities of the
same series (herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered holder on the relevant regular record date by virtue
of having been such holder; and such Defaulted Interest shall be paid by the
Company, at its election, as provided in clause (1) or clause (2) below:

                           (1)      The Company may make payment of any
Defaulted Interest on Securities to the Persons in whose names such Securities
(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 such Security 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 not be more than 15 nor 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
mailed, first class postage prepaid, to each Securityholder at his or her
address as it appears in the Security Register (as hereinafter defined), 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 mailed as aforesaid, such Defaulted Interest shall be paid to the Persons
in whose names such Securities (or their respective Predecessor Securities) are
registered on such special record date.

                                       8.

<PAGE>

                           (2)      The Company may make payment of any
Defaulted Interest on any Securities 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.

         Unless otherwise set forth in a Board Resolution or one or more
indentures supplemental hereto establishing the terms of any series of
Securities pursuant to Section 2.01 hereof, the term "regular record date" as
used in this Section with respect to a series of Securities and any Interest
Payment Date for such series shall mean either the fifteenth day of the month
immediately preceding the month in which an Interest Payment Date established
for such series pursuant to Section 2.01 hereof shall occur, if such Interest
Payment Date is the first day of a month, or the last day of the month
immediately preceding the month in which an Interest Payment Date established
for such series pursuant to Section 2.01 hereof shall occur, if such Interest
Payment Date is the fifteenth day of a month, whether or not such date is a
Business Day.

         Subject to the foregoing provisions of this Section, each Security of a
series delivered under this Indenture upon transfer of or in exchange for or in
lieu of any other Security of such series shall carry the rights to interest
accrued and unpaid, and to accrue, that were carried by such other Security.

         SECTION 2.04      EXECUTION AND AUTHENTICATIONS.

         The Securities shall be signed on behalf of the Company by its chief
executive officer, or one of its presidents, or one of its senior vice
presidents, or one of its vice presidents, or its chief financial officer, or
its chief legal officer, or its treasurer, or one of its assistant treasurers,
or its controller or one of its assistant controllers, or its secretary, or one
of its assistant secretaries, under its corporate seal attested by its secretary
or one of its assistant secretaries. Signatures may be in the form of a manual
or facsimile signature.

         The Company may use the facsimile signature of any Person who shall
have been a chief executive officer, president, senior vice president or vice
president thereof, chief financial officer, chief legal officer, treasurer or
assistant treasurer, controller or assistant controller, secretary or assistant
secretary thereof, notwithstanding the fact that at the time the Securities
shall be authenticated and delivered or disposed of such Person shall have
ceased to be such an officer of the Company. The seal of the Company may be in
the form of a facsimile of such seal and may be impressed, affixed, imprinted or
otherwise reproduced on the Securities. The Securities may contain such
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication by the
Trustee.

         A Security shall not be valid until authenticated manually by an
authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Security so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture. 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 to the Trustee for authentication, together
with a written order of the Company for the authentication and delivery of such
Securities, signed by a chief executive

                                       9.

<PAGE>

officer, president, senior vice president or any vice president, chief financial
officer, chief legal officer, treasurer or assistant treasurer, controller or
assistant controller, and its secretary or any assistant secretary, and the
Trustee in accordance with such written order shall authenticate and deliver
such Securities.

         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 7.01) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.

         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 that is not reasonably acceptable to the
Trustee.

         SECTION 2.05      REGISTRATION OF TRANSFER AND EXCHANGE.

                  (a)      Securities of any series may be exchanged upon
presentation thereof at the office or agency of the Company designated for such
purpose in the Borough of Manhattan, the City and State of New York, for other
Securities of such series of authorized denominations, and for a like aggregate
principal amount, upon payment of a sum sufficient to cover any tax or other
governmental charge in relation thereto, all as provided in this Section. In
respect of any Securities so surrendered for exchange, the Company shall
execute, the Trustee shall authenticate and such office or agency shall deliver
in exchange therefor the Security or Securities of the same series that the
Securityholder making the exchange shall be entitled to receive, bearing numbers
not contemporaneously outstanding.

                  (b)      The Company shall keep, or cause to be kept, at its
office or agency designated for such purpose in the Borough of Manhattan, the
City and State of New York, or such other location designated by the Company, a
register or registers (herein referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
register the Securities and the transfers of Securities as in this Article
provided and which at all reasonable times shall be open for inspection by the
Trustee. The registrar for the purpose of registering Securities and transfer of
Securities as herein provided shall be appointed as authorized by Board
Resolution (the "Security Registrar").

         Upon surrender for transfer of any Security at the office or agency of
the Company designated for such purpose, the Company shall execute, the Trustee
shall authenticate and such office or agency shall deliver in the name of the
transferee or transferees a new Security or Securities of the same series as the
Security presented for a like aggregate principal amount.

         All Securities presented or surrendered for exchange or registration of
transfer, as provided in this Section, shall be accompanied (if so required by
the Company or the Security Registrar) by a written instrument or instruments of
transfer, in form satisfactory to the Company or the Security Registrar, duly
executed by the registered holder or by such holder's duly authorized attorney
in writing.

                                       10.

<PAGE>

                  (c)      Except as provided pursuant to Section 2.01 pursuant
to a Board Resolution, and set forth in an Officers' Certificate, or established
in one or more indentures supplemental to this Indenture, no service charge
shall be made for any exchange or registration of transfer of Securities, or
issue of new Securities in case of partial redemption of any series, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge in relation thereto, other than exchanges pursuant to
Section 2.06, Section 3.03(b) and Section 9.04 not involving any transfer.

                  (d)      The Company shall not be required (i) to issue,
exchange or register the transfer of any Securities during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption of less than all the Outstanding Securities of the same series and
ending at the close of business on the day of such mailing, nor (ii) to register
the transfer of or exchange any Securities of any series or portions thereof
called for redemption, other than the unredeemed portion of any such Securities
being redeemed in part. The provisions of this Section 2.05 are, with respect to
any Global Security, subject to Section 2.11 hereof.

         SECTION 2.06      TEMPORARY SECURITIES.

         Pending the preparation of definitive Securities of any series, the
Company may execute, and the Trustee shall authenticate and deliver, temporary
Securities (printed, lithographed or typewritten) of any authorized
denomination. Such temporary Securities shall be substantially in the form of
the definitive Securities in lieu of which they are issued, but with such
omissions, insertions and variations as may be appropriate for temporary
Securities, all as may be determined by the Company. Every temporary Security of
any series shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with like
effect, as the definitive Securities of such series. Without unnecessary delay
the Company will execute and will furnish definitive Securities of such series
and thereupon any or all temporary Securities of such series may be surrendered
in exchange therefor (without charge to the holders), at the office or agency of
the Company designated for the purpose in the Borough of Manhattan, the City and
State of New York, and the Trustee shall authenticate and such office or agency
shall deliver in exchange for such temporary Securities an equal aggregate
principal amount of definitive Securities of such series, unless the Company
advises the Trustee to the effect that definitive Securities need not be
executed and furnished until further notice from the Company. Until so
exchanged, the temporary Securities of such series shall be entitled to the same
benefits under this Indenture as definitive Securities of such series
authenticated and delivered hereunder.

         SECTION 2.07      MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES.

         In case any temporary or definitive Security shall become mutilated or
be destroyed, lost or stolen, the Company (subject to the next succeeding
sentence) shall execute, and upon the Company's request the Trustee (subject as
aforesaid) shall authenticate and deliver, a new Security of the same series,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Security, or in lieu of and in substitution for the Security
so destroyed, lost or stolen. In every case the applicant for a substituted
Security shall furnish to the Company and the Trustee such security or indemnity
as may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to

                                       11.

<PAGE>

the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Security and of the ownership thereof. The
Trustee may authenticate any such substituted Security and deliver the same upon
the written request or authorization of any officer of the Company. Upon the
issuance of any substituted Security, 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.

         In case any Security that has matured or is about to mature shall
become mutilated or be destroyed, lost or stolen, the Company may, instead of
issuing a substitute Security, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Security) if the applicant
for such payment shall furnish to the Company and the Trustee such security or
indemnity as they may require to save them harmless, and, in case of
destruction, loss or theft, evidence to the satisfaction of the Company and the
Trustee of the destruction, loss or theft of such Security and of the ownership
thereof.

         Every replacement Security issued pursuant to the provisions of this
Section shall constitute an additional contractual obligation of the Company
whether or not the mutilated, destroyed, lost or stolen Security shall be found
at any time, or be enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Securities of the same series duly issued hereunder. All Securities shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities, and shall preclude (to the extent lawful) any and all
other rights or remedies, notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.

         SECTION 2.08      CANCELLATION.

         All Securities surrendered for the purpose of payment, redemption,
exchange or registration of transfer shall, if surrendered to the Company or any
paying agent, be delivered to the Trustee for cancellation, or, if surrendered
to the Trustee, shall be cancelled by it, and no Securities shall be issued in
lieu thereof except as expressly required or permitted by any of the provisions
of this Indenture. On request of the Company at the time of such surrender, the
Trustee shall deliver to the Company canceled Securities held by the Trustee. In
the absence of such request the Trustee may dispose of canceled Securities in
accordance with its standard procedures and deliver a certificate of disposition
to the Company. If the Company shall otherwise acquire any of the Securities,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Securities unless and until the same are
delivered to the Trustee for cancellation.

         SECTION 2.09      BENEFITS OF INDENTURE.

         Nothing in this Indenture or in the Securities, express or implied,
shall give or be construed to give to any Person, other than the parties hereto
and the holders of the Securities (and, with respect to the provisions of
Article Fourteen, the holders of any indebtedness of the Company to which the
Securities of any series are subordinated) any legal or equitable right,

                                       12.

<PAGE>

remedy or claim under or in respect of this Indenture, or under any covenant,
condition or provision herein contained; all such covenants, conditions and
provisions being for the sole benefit of the parties hereto and of the holders
of the Securities (and, with respect to the provisions of Article Fourteen, the
holders of any indebtedness of the Company to which the Securities of any series
are subordinated).

         SECTION 2.10      AUTHENTICATING AGENT.

         So long as any of the Securities of any series remain Outstanding there
may be an Authenticating Agent for any or all such series of Securities which
the Trustee shall have the right to appoint. Said Authenticating Agent shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series issued upon exchange, transfer or partial redemption thereof, 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. All references in this Indenture to the authentication of
Securities by the Trustee shall be deemed to include authentication by an
Authenticating Agent for such series. Each Authenticating Agent shall be
acceptable to the Company and shall be a corporation that has a combined capital
and surplus, as most recently reported or determined by it, sufficient under the
laws of any jurisdiction under which it is organized or in which it is doing
business to conduct a trust business, and that is otherwise authorized under
such laws to conduct such business and is subject to supervision or examination
by federal or state authorities. If at any time any Authenticating Agent shall
cease to be eligible in accordance with these provisions, it shall resign
immediately.

         Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.

         SECTION 2.11      GLOBAL SECURITIES.

                  (a)      If the Company shall establish pursuant to Section
2.01 that the Securities of a particular series are to be issued as a Global
Security, then the Company shall execute and the Trustee shall, in accordance
with Section 2.04, authenticate and deliver, a Global Security that (i) shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, all of the Outstanding Securities of such series, (ii)
shall be registered in the name of the Depositary or its nominee, (iii) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instruction and (iv) shall bear a legend substantially to the following effect:
"Except as otherwise provided in Section 2.11 of the Indenture, this Security
may be transferred, in whole but not in part, only to another nominee of the
Depositary or to a successor Depositary or to a nominee of such successor
Depositary."

                                       13.

<PAGE>

                  (b)      Notwithstanding the provisions of Section 2.05, the
Global Security of a series may be transferred, in whole but not in part and in
the manner provided in Section 2.05, only to another nominee of the Depositary
for such series, or to a successor Depositary for such series selected or
approved by the Company or to a nominee of such successor Depositary.

                  (c)      If at any time the Depositary for a series of the
Securities notifies the Company that it is unwilling or unable to continue as
Depositary for such series or if at any time the Depositary for such series
shall no longer be registered or in good standing under the Exchange Act, or
other applicable statute or regulation, and a successor Depositary for such
series is not appointed by the Company within 90 days after the Company receives
such notice or becomes aware of such condition, as the case may be, or if an
Event of Default has occurred and is continuing and the Company has received a
request from the Depositary, this Section 2.11 shall no longer be applicable to
the Securities of such series and the Company will execute, and subject to
Section 2.04, the Trustee will authenticate and deliver the Securities of such
series in definitive registered form without coupons, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security of such series in exchange for such Global
Security. In addition, the Company may at any time determine that the Securities
of any series shall no longer be represented by a Global Security and that the
provisions of this Section 2.11 shall no longer apply to the Securities of such
series. In such event the Company will execute and, subject to Section 2.04, the
Trustee, upon receipt of an Officers' Certificate evidencing such determination
by the Company, will authenticate and deliver the Securities of such series in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the Global
Security of such series in exchange for such Global Security. Upon the exchange
of the Global Security for such Securities in definitive registered form without
coupons, in authorized denominations, the Global Security shall be canceled by
the Trustee. Such Securities in definitive registered form issued in exchange
for the Global Security pursuant to this Section 2.11(c) shall be registered in
such names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the
Depositary for delivery to the Persons in whose names such Securities are so
registered.

                                    ARTICLE 3

              REDEMPTION OF SECURITIES AND SINKING FUND PROVISIONS

         SECTION 3.01      REDEMPTION.

         The Company may redeem the Securities of any series issued hereunder on
and after the dates and in accordance with the terms established for such series
pursuant to Section 2.01 hereof.

         SECTION 3.02      NOTICE OF REDEMPTION.

                  (a)      In case the Company shall desire to exercise such
right to redeem all or, as the case may be, a portion of the Securities of any
series in accordance with any right the Company reserved for itself to do so
pursuant to Section 2.01 hereof, the Company shall, or shall

                                       14.

<PAGE>

cause the Trustee to, give notice of such redemption to holders of the
Securities of such series to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and not more than 90
days before the date fixed for redemption of that series to such holders at
their last addresses as they shall appear upon the Security Register, unless a
shorter period is specified in the Securities to be redeemed. Any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the registered holder receives the notice. In any
case, failure duly to give such notice to the holder of any Security of any
series designated for redemption in whole or in part, or any defect in the
notice, shall not affect the validity of the proceedings for the redemption of
any other Securities of such series or any other series. 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 any such restriction.

         Each such notice of redemption shall specify the date fixed for
redemption and the redemption price at which Securities of that series are to be
redeemed, and shall state that payment of the redemption price of such
Securities to be redeemed will be made at the office or agency of the Company in
the Borough of Manhattan, the City and State of New York, upon presentation and
surrender of such Securities, that interest accrued to the date fixed for
redemption will be paid as specified in said notice, that from and after said
date interest will cease to accrue and that the redemption is for a sinking
fund, if such is the case. If less than all the Securities of a series are to be
redeemed, the notice to the holders of Securities of that series to be redeemed
in part shall specify the particular Securities to be so redeemed.

         In case any Security is to be redeemed in part only, the notice that
relates to such Security shall state the portion of the principal amount thereof
to be redeemed, and shall state that on and after the redemption date, upon
surrender of such Security, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof will be issued.

                  (b)      If less than all the Securities of a series are to be
redeemed, the Company shall give the Trustee at least 45 days' notice in advance
of the date fixed for redemption as to the aggregate principal amount of
Securities of the series to be redeemed, and thereupon the Trustee shall select,
by lot or in such other manner as it shall deem appropriate and fair in its
discretion and that may provide for the selection of a portion or portions
(equal to one thousand U.S. dollars ($1,000) or any integral multiple thereof)
of the principal amount of such Securities of a denomination larger than $1,000,
the Securities to be redeemed and shall thereafter promptly notify the Company
in writing of the numbers of the Securities to be redeemed, in whole or in part.
The Company may, if and whenever it shall so elect, by delivery of instructions
signed on its behalf by its chief executive officer, president or any senior
vice president or vice president, instruct the Trustee or any paying agent to
call all or any part of the Securities of a particular series for redemption and
to give notice of redemption in the manner set forth in this Section, such
notice to be in the name of the Company or its own name as the Trustee or such
paying agent may deem advisable. In any case in which notice of redemption is to
be given by the Trustee or any such paying agent, the Company shall deliver or
cause to be delivered to, or permit to remain with, the Trustee or such paying
agent, as the case may be, such Security Register, transfer books or other
records, or suitable copies or extracts therefrom, sufficient to

                                       15.

<PAGE>

enable the Trustee or such paying agent to give any notice by mail that may be
required under the provisions of this Section.

         SECTION 3.03      PAYMENT UPON REDEMPTION.

                  (a)      If the giving of notice of redemption shall have been
completed as above provided, the Securities or portions of Securities of the
series to be redeemed specified in such notice shall become due and payable on
the date and at the place stated in such notice at the applicable redemption
price, together with interest accrued to the date fixed for redemption and
interest on such Securities or portions of Securities shall cease to accrue on
and after the date fixed for redemption, unless the Company shall default in the
payment of such redemption price and accrued interest with respect to any such
Security or portion thereof. On presentation and surrender of such Securities on
or after the date fixed for redemption at the place of payment specified in the
notice, said Securities shall be paid and redeemed at the applicable redemption
price for such series, together with interest accrued thereon to the date fixed
for redemption (but if the date fixed for redemption is an interest payment
date, the interest installment payable on such date shall be payable to the
registered holder at the close of business on the applicable record date
pursuant to Section 2.03).

                  (b)      Upon presentation of any Security of such series that
is to be redeemed in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Security is presented shall
deliver to the holder thereof, at the expense of the Company, a new Security of
the same series of authorized denominations in principal amount equal to the
unredeemed portion of the Security so presented.

         SECTION 3.04      SINKING FUND.

         The provisions of Sections 3.04, 3.05 and 3.06 shall be applicable to
any sinking fund for the retirement of Securities of a series, except as
otherwise specified as contemplated by Section 2.01 for Securities of such
series.

         The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series 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 Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 3.05. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.

         SECTION 3.05      SATISFACTION OF SINKING FUND PAYMENTS WITH
SECURITIES.

         The Company (i) may deliver Outstanding Securities of a series and (ii)
may apply as a credit Securities of a series that 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 the Securities of such series required to
be made pursuant to the terms of such Securities as provided for by the terms of
such series,

                                       16.

<PAGE>

provided that such Securities have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee at the
redemption price specified in such Securities for redemption through operation
of the sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.

         SECTION 3.06      REDEMPTION OF SECURITIES FOR SINKING FUND.

         Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of the series, the portion thereof, if any,
that is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 3.05 and the basis for such credit and will, together with
such Officers' Certificate, deliver to the Trustee any Securities to be so
delivered. Not less than 30 days before 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 3.02 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 3.02. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Section 3.03.

                                    ARTICLE 4

                                    COVENANTS

         SECTION 4.01      PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

         The Company will duly and punctually pay or cause to be paid the
principal of (and premium, if any) and interest on the Securities of that series
at the time and place and in the manner provided herein and established with
respect to such Securities. Payments of principal on the Securities may be made
at the time provided herein and established with respect to such Securities by
U.S. dollar check drawn on and mailed to the address of the Securityholder
entitled thereto as such address shall appear in the Security Register, or U.S.
dollar wire transfer to, a U.S. dollar account (such a wire transfer to be made
only to a Securityholder of an aggregate principal amount of Securities of the
applicable series in excess of U.S. $2,000,000 and only if such Securityholder
shall have furnished wire instructions to the Trustee no later than 15 days
prior to the relevant payment date). Payments of interest on the Securities may
be made at the time provided herein and established with respect to such
Securities by U.S. dollar check mailed to the address of the Securityholder
entitled thereto as such address shall appear in the Security Register, or U.S.
dollar wire transfer to, a U.S. dollar account (such a wire transfer to be made
only to a Securityholder of an aggregate principal amount of Securities of the
applicable series in excess of U.S. $2,000,000 and only if such Securityholder
shall have furnished wire instructions in writing to the Security Registrar and
the Trustee no later than 15 days prior to the relevant payment date).

         SECTION 4.02      MAINTENANCE OF OFFICE OR AGENCY.

         So long as any series of the Securities remain Outstanding, the Company
agrees to maintain an office or agency in the Borough of Manhattan, the City and
State of New York, with

                                       17.

<PAGE>

respect to each such series and at such other location or locations as may be
designated as provided in this Section 4.02, where (i) Securities of that series
may be presented for payment, (ii) Securities of that series may be presented as
herein above authorized for registration of transfer and exchange, and (iii)
notices and demands to or upon the Company in respect of the Securities of that
series and this Indenture may be given or served, such designation to continue
with respect to such office or agency until the Company shall, by written notice
signed by any officer authorized to sign an Officers' Certificate and delivered
to the Trustee, designate some other office or agency for such purposes or any
of them. 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, notices and demands may be made or served at the Corporate
Trust Office of the Trustee, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, notices and demands. The Company
initially appoints the corporate trust office of U.S. Bank Trust National
Association, an affiliate of the Trustee, located in the Borough of Manhattan,
the City of New York as its paying agent with respect to the Securities.

         SECTION 4.03      PAYING AGENTS.

                  (a)      If the Company shall appoint one or more paying
agents for all or any series of the Securities, other than the Trustee, the
Company will cause each such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section:

                           (1)      that it will hold all sums held by it as
such agent for the payment of the principal of (and premium, if any) or interest
on the Securities of that series (whether such sums have been paid to it by the
Company or by any other obligor of such Securities) in trust for the benefit of
the Persons entitled thereto;

                           (2)      that it will give the Trustee notice of any
failure by the Company (or by any other obligor of such Securities) to make any
payment of the principal of (and premium, if any) or interest on the Securities
of that series when the same shall be due and payable;

                           (3)      that it will, at any time during the
continuance of any failure referred to in the preceding paragraph (a)(2) above,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such paying agent; and

                           (4)      that it will perform all other duties of
paying agent as set forth in this Indenture.

                  (b)      If the Company shall act as its own paying agent with
respect to any series of the Securities, it will on or before each due date of
the principal of (and premium, if any) or interest on Securities of that series,
set aside, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay such principal (and premium, if any) or interest
so becoming due on Securities of that series until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of such action, or any failure (by it or any other obligor on
such Securities) to take such action. Whenever the Company shall have one or
more paying agents for any series of Securities, it will, prior to each

                                       18.

<PAGE>

due date of the principal of (and premium, if any) or interest on any Securities
of that series, deposit with the paying agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of this action or failure so to act.

                  (c)      Notwithstanding anything in this Section to the
contrary, (i) the agreement to hold sums in trust as provided in this Section is
subject to the provisions of Section 11.05, and (ii) 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 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 terms and conditions as those upon
which such sums were held by the Company or such paying agent; and, upon such
payment by the Company or any paying agent to the Trustee, the Company or such
paying agent shall be released from all further liability with respect to such
money.

         SECTION 4.04      APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.

         The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 7.10, a
Trustee, so that there shall at all times be a Trustee hereunder.

         SECTION 4.05      COMPLIANCE WITH CONSOLIDATION PROVISIONS.

         The Company will not, while any of the Securities remain Outstanding,
consolidate with or merge into any other Person, in either case where the
Company is not the survivor of such transaction, or sell or convey all or
substantially all of its property to any other Person unless the provisions of
Article Ten hereof are complied with.

                                    ARTICLE 5

        SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

         SECTION 5.01      COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
SECURITYHOLDERS.

         The Company will furnish or cause to be furnished to the Trustee (a) on
each regular record date (as defined in Section 2.03) a list, in such form as
the Trustee may reasonably require, of the names and addresses of the holders of
each series of Securities as of such regular record date, provided that the
Company shall not be obligated to furnish or cause to furnish such list at any
time that the list shall not differ in any respect from the most recent list
furnished to the Trustee by the Company and (b) 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; provided, however, that,
in either case, no such list need be furnished for any series for which the
Trustee shall be the Security Registrar .

                                       19.

<PAGE>

         SECTION 5.02      PRESERVATION OF INFORMATION; COMMUNICATIONS WITH
SECURITYHOLDERS.

                  (a)      The Trustee shall preserve, in as current a form as
is reasonably practicable, all information as to the names and addresses of the
holders of Securities contained in the most recent list furnished to it as
provided in Section 5.01 and as to the names and addresses of holders of
Securities received by the Trustee in its capacity as Security Registrar (if
acting in such capacity).

                  (b)      The Trustee may destroy any list furnished to it as
provided in Section 5.01 upon receipt of a new list so furnished.

                  (c)      Securityholders may communicate as provided in
Section 312(b) of the Trust Indenture Act with other Securityholders with
respect to their rights under this Indenture or under the Securities, and, in
connection with any such communications, the Trustee shall satisfy its
obligations under Section 312(b) of the Trust Indenture Act in accordance with
the provisions of Section 312(b) of the Trust Indenture Act.

         SECTION 5.03      REPORTS BY THE COMPANY.

         The Company covenants and agrees to provide a copy to the Trustee,
within 15 days after the Company is required to file the same with the
Securities and Exchange Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Securities and Exchange Commission may from time to time by
rules and regulations prescribe) that the Company may be required to file with
the Securities and Exchange Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act.

         SECTION 5.04      REPORTS BY THE TRUSTEE.

                  (a)      On or before May 1 in each year in which any of the
Securities are Outstanding, the Trustee shall transmit by mail, first class
postage prepaid, to the Securityholders, as their names and addresses appear
upon the Security Register, a brief report dated as of the preceding May 1, if
and to the extent required under Section 313(a) of the Trust Indenture Act.

                  (b)      The Trustee shall comply with Section 313(b) and
313(c) of the Trust Indenture Act.

                  (c)      A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with the Company, with
each securities exchange upon which any Securities are listed (if so listed) and
also with the Securities and Exchange Commission. The Company agrees to notify
the Trustee when any Securities become listed on any securities exchange.

                                       20.

<PAGE>

                                    ARTICLE 6

         REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT

         SECTION 6.01      EVENTS OF DEFAULT.

                  (a)      Whenever used herein with respect to Securities of a
particular series, "Event of Default" means any one or more of the following
events that has occurred and is continuing:

                           (1)      the Company defaults in the payment of any
installment of interest upon any of the Securities of that series, as and when
the same shall become due and payable, and such default continues for a period
of 90 days; provided, however, that a valid extension of an interest payment
period by the Company in accordance with the terms of any indenture supplemental
hereto shall not constitute a default in the payment of interest for this
purpose;

                           (2)      the Company defaults in the payment of the
principal of (or premium, if any, on) any of the Securities of that series as
and when the same shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise, or in any payment required by any
sinking or analogous fund established with respect to that series; provided,
however, that a valid extension of the maturity of such Securities in accordance
with the terms of any indenture supplemental hereto shall not constitute a
default in the payment of principal or premium, if any;

                           (3)      the Company fails to observe or perform any
other of its covenants or agreements with respect to that series contained in
this Indenture or otherwise established with respect to that series of
Securities pursuant to Section 2.01 hereof (other than a covenant or agreement
that has been expressly included in this Indenture solely for the benefit of one
or more series of Securities other than such series) for a period of 90 days
after the date on which written notice of such failure, requiring the same to be
remedied and stating that such notice is a "Notice of Default" hereunder, shall
have been given to the Company by the Trustee, by registered or certified mail,
or to the Company and the Trustee by the holders of at least 25% in principal
amount of the Securities of that series at the time Outstanding;

                           (4)      the Company pursuant to or within the
meaning of any Bankruptcy Law (i) commences a voluntary case, (ii) consents to
the entry of an order for relief against it in an involuntary case, (iii)
consents to the appointment of a Custodian of it or for all or substantially all
of its property or (iv) makes a general assignment for the benefit of its
creditors; or

                           (5)      a court of competent jurisdiction enters an
order under any Bankruptcy Law that (i) is for relief against the Company in an
involuntary case, (ii) appoints a Custodian of the Company for all or
substantially all of its property or (iii) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for 90 days.

                                       21.

<PAGE>

                  (b)      In each and every such case (other than an Event of
Default specified in clause (4) or clause (5) above), unless the principal of
all the Securities of that series shall have already become due and payable,
either the Trustee or the holders of not less than 25% in aggregate principal
amount of the Securities of that series then Outstanding hereunder, by notice in
writing to the Company (and to the Trustee if given by such Securityholders),
may declare the principal of (and premium, if any, on) and accrued and unpaid
interest on all the Securities of that series to be due and payable immediately,
and upon any such declaration the same shall become and shall be immediately due
and payable. If an Event of Default specified in clause (4) or clause (5) above
occurs, the principal of and accrued and unpaid interest on all the Securities
of that series shall automatically be immediately due and payable without any
declaration or other act on the part of the Trustee or the holders of the
Securities.

                  (c)      At any time after the principal of (and premium, if
any, on) and accrued and unpaid interest on the Securities of that series shall
have been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the holders of a majority in aggregate principal amount of the
Securities of that series then Outstanding hereunder, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if: (i) the Company has paid or deposited with the Trustee a sum
sufficient to pay all matured installments of interest upon all the Securities
of that series and the principal of (and premium, if any, on) any and all
Securities of that series that shall have become due otherwise than by
acceleration (with interest upon such principal and premium, if any, and, to the
extent that such payment is enforceable under applicable law, upon overdue
installments of interest, at the rate per annum expressed in the Securities of
that series to the date of such payment or deposit) and the amount payable to
the Trustee under Section 7.06, and (ii) any and all Events of Default under the
Indenture with respect to such series, other than the nonpayment of principal on
(and premium, if any, on) and accrued and unpaid interest on Securities of that
series that shall not have become due by their terms, shall have been remedied
or waived as provided in Section 6.06.

         No such rescission and annulment shall extend to or shall affect any
subsequent default or impair any right consequent thereon.

                  (d)      In case the Trustee shall have proceeded to enforce
any right with respect to Securities of that series under this Indenture and
such proceedings shall have been discontinued or abandoned because of such
rescission or annulment or for any other reason or shall have been determined
adversely to the Trustee, then and in every such case, subject to any
determination in such proceedings, the Company and the Trustee shall be restored
respectively to their former positions and rights hereunder, and all rights,
remedies and powers of the Company and the Trustee shall continue as though no
such proceedings had been taken.

         SECTION 6.02      COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.

                  (a)      The Company covenants that (i) in case it shall
default in the payment of any installment of interest on any of the Securities
of a series, and such default shall have continued for a period of 90 Business
Days, or (ii) in case it shall default in the payment of the principal of (or
premium, if any, on) any of the Securities of a series when the same shall have
become due and payable, whether upon maturity of the Securities of a series or
upon redemption

                                       22.

<PAGE>

or upon declaration or otherwise, or in any payment required by any sinking or
analogous fund established with respect to that series as and when the same
shall have become due and payable, then, upon demand of the Trustee, the Company
will pay to the Trustee, for the benefit of the holders of the Securities of
that series, the whole amount that then shall have been become due and payable
on all such Securities for principal (and premium, if any) or interest, or both,
as the case may be, with interest upon the overdue principal (and premium, if
any) and (to the extent that payment of such interest is enforceable under
applicable law) upon overdue installments of interest at the rate per annum
expressed in the Securities of that series; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, and the amount payable to the Trustee under Section 7.06.

                  (b)      If the Company shall fail to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Company or
other obligor upon the Securities of that series and collect the moneys adjudged
or decreed to be payable in the manner provided by law or equity out of the
property of the Company or other obligor upon the Securities of that series,
wherever situated.

                  (c)      In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or judicial
proceedings affecting the Company, or its creditors or property, the Trustee
shall have power to intervene in such proceedings and take any action therein
that may be permitted by the court and shall (except as may be otherwise
provided by law) be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the holders of Securities of such series allowed for the entire
amount due and payable by the Company under the Indenture at the date of
institution of such proceedings and for any additional amount that may become
due and payable by the Company after such date, and to collect and receive any
moneys or other property payable or deliverable on any such claim, and to
distribute the same after the deduction of the amount payable to the Trustee
under Section 7.06; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the holders of Securities of such
series to make such payments to the Trustee, and, in the event that the Trustee
shall consent to the making of such payments directly to such Securityholders,
to pay to the Trustee any amount due it under Section 7.06.

                  (d)      All rights of action and of asserting claims under
this Indenture, or under any of the terms established with respect to Securities
of that series, may be enforced by the Trustee without the possession of any of
such Securities, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or 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 payment to the Trustee of any
amounts due under Section 7.06, be for the ratable benefit of the holders of the
Securities of such series.

         In case of an Event of Default hereunder, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights,

                                       23.

<PAGE>

either at law or in equity or in bankruptcy or otherwise, whether for the
specific enforcement of any covenant or agreement contained in the Indenture or
in aid of the exercise of any power granted in this Indenture, or to enforce any
other legal or equitable right vested in the Trustee by this Indenture or by
law.

         Nothing contained herein shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities of that series or the rights of any holder thereof or to authorize
the Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.

         SECTION 6.03      APPLICATION OF MONEYS COLLECTED.

         Any moneys collected by the Trustee pursuant to this Article with
respect to a particular series of Securities shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of principal (or premium, if any) or
interest, upon presentation of the Securities of that series, and notation
thereon of the payment, if only partially paid, and upon surrender thereof if
fully paid:

         FIRST: To the payment of reasonable costs and expenses of collection
and of all amounts payable to the Trustee under Section 7.06;

         SECOND: To the payment of all indebtedness of the Company to which such
series of Securities is subordinated to the extent required by Article Fourteen;

         THIRD: To the payment of the amounts then due and unpaid upon
Securities of such series for principal (and premium, if any) and interest, 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 premium, if any) and
interest, respectively; and

         FOURTH: To the payment of the remainder, if any, to the Company or any
other Person lawfully entitled thereto.

         SECTION 6.04      LIMITATION ON SUITS.

         No holder of any Security of any series shall have any right by virtue
or by availing of any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless (i) such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof
with respect to the Securities of such series specifying such Event of Default,
as hereinbefore provided; (ii) the holders of not less than 25% in aggregate
principal amount of the Securities of such series then Outstanding shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder; (iii) such holder or holders
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby;
(iv) the Trustee for 90 days after its receipt of such notice, request

                                       24.

<PAGE>

and offer of indemnity, shall have failed to institute any such action, suit or
proceeding and (v) during such 90 day period, the holders of a majority in
principal amount of the Securities of that series do not give the Trustee a
direction inconsistent with the request.

         Notwithstanding anything contained herein to the contrary or any other
provisions of this Indenture, the right of any holder of any Security to receive
payment of the principal of (and premium, if any) and interest on such Security,
as therein provided, on or after the respective due dates expressed in such
Security (or in the case of redemption, on the redemption date), or to institute
suit for the enforcement of any such payment on or after such respective dates
or redemption date, shall not be impaired or affected without the consent of
such holder and by accepting a Security hereunder it is expressly understood,
intended and covenanted by the taker and holder of every Security of such series
with every other such taker and holder and the Trustee, that no one or more
holders of Securities of such series shall have any right in any manner
whatsoever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of the holders of any other of such
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities of such series. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.

         SECTION 6.05      RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT
WAIVER.

                  (a)      Except as otherwise provided in Section 2.07, all
powers and remedies given by this Article to the Trustee or to the
Securityholders shall, to the extent permitted by law, be deemed cumulative and
not exclusive of any other powers and remedies available to the Trustee or the
holders of the Securities, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to such Securities.

                  (b)      No delay or omission of the Trustee or of any holder
of any of the Securities to exercise any right or power accruing upon any Event
of Default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 6.04, every
power and remedy given by this Article or by law to the Trustee or the
Securityholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Securityholders.

         SECTION 6.06      CONTROL BY SECURITYHOLDERS.

         The holders of a majority in aggregate principal amount of the
Securities of any series at the time Outstanding, determined in accordance with
Section 8.04, 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 such series;
provided, however, that such direction shall not be in conflict with any rule of
law or with this Indenture. Subject to the provisions of Section 7.01, the
Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or officers

                                       25.

<PAGE>

of the Trustee, determine that the proceeding so directed, subject to the
Trustee's duties under the Trust Indenture Act, would involve the Trustee in
personal liability or might be unduly prejudicial to the Securityholders not
involved in the proceeding. The holders of a majority in aggregate principal
amount of the Securities of any series at the time Outstanding affected thereby,
determined in accordance with Section 8.04, may on behalf of the holders of all
of the Securities of such series waive any past default in the performance of
any of the covenants contained herein or established pursuant to Section 2.01
with respect to such series and its consequences, except a default in the
payment of the principal of, or premium, if any, or interest on, any of the
Securities of that series as and when the same shall become due by the terms of
such Securities otherwise than by acceleration (unless such default has been
cured and a sum sufficient to pay all matured installments of interest and
principal and any premium has been deposited with the Trustee (in accordance
with Section 6.01(c)). Upon any such waiver, the default covered thereby shall
be deemed to be cured for all purposes of this Indenture and the Company, the
Trustee and the holders of the Securities of such series shall be restored to
their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or impair any right consequent
thereon.

         SECTION 6.07      UNDERTAKING TO PAY COSTS.

         All parties to this Indenture agree, and each holder of any Securities
by such holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, 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 filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that 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; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding more than 10% in aggregate principal amount of the
Outstanding Securities of any series, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security of such series, on or after the
respective due dates expressed in such Security or established pursuant to this
Indenture.

                                    ARTICLE 7

                             CONCERNING THE TRUSTEE

         SECTION 7.01      CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE.

                  (a)      The Trustee, prior to the occurrence of an Event of
Default with respect to the Securities of a series and after the curing of all
Events of Default with respect to the Securities of that series that may have
occurred, shall undertake to perform with respect to the Securities of such
series such duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants shall be read into this Indenture against
the Trustee. In case an Event of Default with respect to the Securities of a
series has occurred (that has not been cured or waived), the Trustee shall
exercise with respect to Securities of that series such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their

                                       26.

<PAGE>

exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.

                  (b)      No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

                  (i)      prior to the occurrence of an Event of Default with
respect to the Securities of a series and after the curing or waiving of all
such Events of Default with respect to that series that may have occurred:

                           (A)      the duties and obligations of the Trustee
shall with respect to the Securities of such series be determined solely by the
express provisions of this Indenture, and the Trustee shall not be liable with
respect to the Securities of such series except for the performance of such
duties and obligations as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and

                           (B)      in the absence of bad faith on the part of
the Trustee, the Trustee may with respect to the Securities of such series
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions that by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirement of
this Indenture;

                  (ii)     the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;

                  (iii)    the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of not less than a majority in principal amount of the
Securities of any series at the time Outstanding relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee under this Indenture
with respect to the Securities of that series; and

                  (iv)     None of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers if there is reasonable ground for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Indenture or adequate indemnity against
such risk is not reasonably assured to it.

         SECTION 7.02      CERTAIN RIGHTS OF TRUSTEE.

         Except as otherwise provided in Section 7.01:

                                       27.

<PAGE>

                  (a)      The Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
security or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;

                  (b)      Any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by a Board Resolution
or an instrument signed in the name of the Company by any authorized officer of
the Company (unless other evidence in respect thereof is specifically prescribed
herein);

                  (c)      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 or suffered or
omitted hereunder in good faith and in reliance thereon;

                  (d)      The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request, order
or direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default with respect to a series of the Securities (that has not been cured
or waived), to exercise with respect to Securities of that series such of the
rights and powers vested in it by this Indenture, and to 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;

                  (e)      The Trustee shall not be liable for any action taken
or omitted to be taken by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture;

                  (f)      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, consent, order,
approval, bond, security, or other papers or documents, unless requested in
writing so to do by the holders of not less than a majority in principal amount
of the Outstanding Securities of the particular series affected thereby
(determined as provided in Section 8.04); provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a condition
to so proceeding. The reasonable expense of every such examination shall be paid
by the Company or, if paid by the Trustee, shall be repaid by the Company upon
demand; and

                  (g)      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.

                                       28.

<PAGE>

         SECTION 7.03      TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OR
SECURITIES.

                  (a)      The recitals contained herein and in the Securities
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.

                  (b)      The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.

                  (c)      The Trustee shall not be accountable for the use or
application by the Company of any of the Securities or of the proceeds of such
Securities, or for the use or application of any moneys paid over by the Trustee
in accordance with any provision of this Indenture or established pursuant to
Section 2.01, or for the use or application of any moneys received by any paying
agent other than the Trustee.

         SECTION 7.04      MAY HOLD SECURITIES.

         The Trustee or any paying agent or Security Registrar, in its
individual or any other capacity, may become the owner or pledgee of Securities
with the same rights it would have if it were not Trustee, paying agent or
Security Registrar.

         SECTION 7.05      MONEYS HELD IN TRUST.

         Subject to the provisions of Section 11.05, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but 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 moneys received by it hereunder except such as it
may agree with the Company to pay thereon.

         SECTION 7.06      COMPENSATION AND REIMBURSEMENT.

                  (a)      The Company covenants and agrees to pay to the
Trustee, and the Trustee shall be entitled to, such reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) as the Company and the Trustee
may from time to time agree in writing, for all services rendered by it in the
execution of the trusts hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee, and, except as otherwise
expressly provided herein, the Company will pay or reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all Persons not regularly in its employ), except any such
expense, disbursement or advance as may arise from its negligence or bad faith
and except as the Company and Trustee may from time to time agree in writing.
The Company also covenants to indemnify the Trustee (and its officers, agents,
directors and employees) for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on the part of the
Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the reasonable costs and expenses of
defending itself against any claim of liability in the premises.

                                       29.

<PAGE>

                  (b)      The obligations of the Company under this Section to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
reasonable expenses, disbursements and advances shall constitute indebtedness of
the Company to which the Securities are subordinated. Such additional
indebtedness shall be secured by a lien prior to that of the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the holders of particular Securities.

         SECTION 7.07      RELIANCE ON OFFICERS' CERTIFICATE.

         Except as otherwise provided in Section 7.01, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
reasonably necessary or desirable that a matter be proved or established prior
to taking or suffering or omitting to take any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Trustee and such certificate, in the absence of negligence or
bad faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken, suffered or omitted to be taken by it under the provisions of
this Indenture upon the faith thereof.

         SECTION 7.08      DISQUALIFICATION; CONFLICTING INTERESTS.

         If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.

         SECTION 7.09      CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

         There shall at all times be a Trustee with respect to the Securities
issued hereunder which shall at all times be a corporation organized and doing
business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia, or a corporation or other
Person permitted to act as trustee by the Securities and Exchange Commission,
authorized under such laws to exercise corporate trust powers, having (or, in
the case of a subsidiary of a bank holding company, its bank holding company
parent shall have) a combined capital and surplus of at least fifty million U.S.
dollars ($50,000,000), and subject to supervision or examination by federal,
state, territorial, or District of Columbia authority.

         If such corporation or other Person publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation or other Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. The Company may not, nor may any Person directly or
indirectly controlling, controlled by, or under common control with the Company,
serve as Trustee. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect specified in Section 7.10.

                                       30.

<PAGE>

         SECTION 7.10      RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

                  (a)      The Trustee or any successor hereafter appointed may
at any time resign with respect to the Securities of one or more series by
giving written notice thereof to the Company and by transmitting notice of
resignation by mail, first class postage prepaid, to the Securityholders of such
series, as their names and addresses appear upon the Security Register. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee with respect to Securities of such series by written
instrument, in duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the mailing 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
Securities of such series, or any Securityholder of that series who has been a
bona fide holder of a Security or Securities for at least six months may on
behalf of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.

                  (b)      In case at any time any one of the following shall
occur:

                           (i)      the Trustee shall fail to comply with the
provisions of Section 7.08 after written request therefor by the Company or by
any Securityholder who has been a bona fide holder of a Security or Securities
for at least six months; or

                           (ii)     the Trustee shall cease to be eligible in
accordance with the provisions of Section 7.09 and shall fail to resign after
written request therefor by the Company or by any such Securityholder; or

                           (iii)    the Trustee shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary
bankruptcy proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, 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;

         then, in any such case, the Company may remove the Trustee with respect
to all Securities and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee, or any Securityholder who has been a bona fide holder of a
Security or Securities for at least six months may, on behalf of that holder and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.

                  (c)      The holders of a majority in aggregate principal
amount of the Securities of any series at the time Outstanding may at any time
remove the Trustee with respect to such series by so notifying the Trustee and
the Company and may appoint a successor Trustee for such series with the consent
of the Company.

                                       31.

<PAGE>

                  (d)      Any resignation or removal of the Trustee and
appointment of a successor trustee with respect to the Securities of a series
pursuant to any of the provisions of this Section shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 7.11.

                  (e)      Any successor trustee appointed pursuant to this
Section may be appointed with respect to the Securities of one or more series or
all of such series, and at any time there shall be only one Trustee with respect
to the Securities of any particular series.

         SECTION 7.11      ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

                  (a)      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.

                  (b)      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 (i) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and 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, (ii) 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 (iii) 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, 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 that no Trustee shall be responsible
for any act or failure to act on the part of any other Trustee hereunder; 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, such retiring Trustee shall with respect to the Securities of that or
those series to which the appointment of such successor trustee relates have no
further responsibility for the exercise of rights and powers or for the
performance of the duties and obligations vested in the Trustee under this
Indenture, 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

                                       32.

<PAGE>

successor trustee, such retiring Trustee shall duly assign, transfer and deliver
to such successor trustee, to the extent contemplated by such supplemental
indenture, the 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.

                  (c)      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 paragraph (a) or (b) of this Section, as the case may be.

                  (d)      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.

                  (e)      Upon acceptance of appointment by a successor trustee
as provided in this Section, the Company shall transmit notice of the succession
of such trustee hereunder by mail, first class postage prepaid, to the
Securityholders, as their names and addresses appear upon the Security Register.
If the Company fails to transmit such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be transmitted at the expense of the Company.

         SECTION 7.12      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 of the corporate trust
business of the Trustee (including the administration of the trust created by
this Indenture), shall be the successor of the Trustee hereunder, provided that
such corporation shall be qualified under the provisions of Section 7.08 and
eligible under the provisions of Section 7.09, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. 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.

         SECTION 7.13      PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE
COMPANY.

         The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent included therein.

         SECTION 7.14      NOTICE OF DEFAULT

         If any Default or any Event of Default occurs and is continuing and if
such Default or Event of Default is known to a Responsible Officer of the
Trustee, the Trustee shall mail to each Securityholder in the manner and to the
extent provided in Section 313(c) of the Trust Indenture

                                       33.

<PAGE>

Act notice of the Default or Event of Default within 45 days after it occurs,
unless such Default or Event of Default has been cured; provided, however, that,
except in the case of a default in the payment of the principal of (or premium,
if any) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interest of the Securityholders.

                                    ARTICLE 8

                         CONCERNING THE SECURITYHOLDERS

         SECTION 8.01      EVIDENCE OF ACTION BY SECURITYHOLDERS.

         Whenever in this Indenture it is provided that the holders of a
majority or specified percentage in aggregate principal amount of the Securities
of a particular series may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action the holders
of such majority or specified percentage of that series have joined therein may
be evidenced by any instrument or any number of instruments of similar tenor
executed by such holders of Securities of that series in person or by agent or
proxy appointed in writing.

         If the Company shall solicit from the Securityholders of any series any
request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for such series for the determination
of Securityholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of Outstanding Securities of that series have authorized or agreed or consented
to such request, demand, authorization, direction, notice, consent, waiver or
other action, and for that purpose the Outstanding Securities of that series
shall be computed as of the record date; provided, however, that no such
authorization, agreement or consent by such Securityholders on the record date
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.

         SECTION 8.02      PROOF OF EXECUTION BY SECURITYHOLDERS.

         Subject to the provisions of Section 7.01, proof of the execution of
any instrument by a Securityholder (such proof will not require notarization) or
his agent or proxy and proof of the holding by any Person of any of the
Securities shall be sufficient if made in the following manner:

                  (a)      The fact and date of the execution by any such Person
of any instrument may be proved in any reasonable manner acceptable to the
Trustee.

                                       34.

<PAGE>

                  (b)      The ownership of Securities shall be proved by the
Security Register of such Securities or by a certificate of the Security
Registrar thereof.

The Trustee may require such additional proof of any matter referred to in this
Section as it shall deem necessary.

         SECTION 8.03      WHO MAY BE DEEMED OWNERS.

         Prior to the due presentment for registration of transfer of any
Security, the Company, the Trustee, any paying agent and any Security Registrar
may deem and treat the Person in whose name such Security shall be registered
upon the books of the Company as the absolute owner of such Security (whether or
not such Security shall be overdue and notwithstanding any notice of ownership
or writing thereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and (subject to Section 2.03) interest on such Security and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor any
Security Registrar shall be affected by any notice to the contrary.

         SECTION 8.04      CERTAIN SECURITIES OWNED BY COMPANY DISREGARDED.

         In determining whether the holders of the requisite aggregate principal
amount of Securities of a particular series have concurred in any direction,
consent or waiver under this Indenture, the Securities of that series that are
owned by the Company or any other obligor on the Securities of that series or by
any Person directly or indirectly controlling or controlled by or under common
control with the Company or any other obligor on the Securities of that series
shall be disregarded and deemed not to be Outstanding for the purpose of any
such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Securities of such series that the Trustee actually knows are so owned
shall be so disregarded. The Securities so owned that have been pledged in good
faith may be regarded as Outstanding for the purposes of this Section, if the
pledgee shall establish to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In case of a dispute
as to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.

         SECTION 8.05      ACTIONS BINDING ON FUTURE SECURITYHOLDERS.

         At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 8.01, of the taking of any action by the holders of the
majority or percentage in aggregate principal amount of the Securities of a
particular series specified in this Indenture in connection with such action,
any holder of a Security of that series that is shown by the evidence to be
included in the Securities the holders of which have consented to such action
may, by filing written notice with the Trustee, and upon proof of holding as
provided in Section 8.02, revoke such action so far as concerns such Security.
Except as aforesaid any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Security, and of any Security issued in exchange therefor, on

                                       35.
<PAGE>

registration of transfer thereof or in place thereof, irrespective of whether or
not any notation in regard thereto is made upon such Security. Any action taken
by the holders of the majority or percentage in aggregate principal amount of
the Securities of a particular series specified in this Indenture in connection
with such action shall be conclusively binding upon the Company, the Trustee and
the holders of all the Securities of that series.

                                    ARTICLE 9

                             SUPPLEMENTAL INDENTURES

         SECTION 9.01      SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF
SECURITYHOLDERS.

         In addition to any supplemental indenture otherwise authorized by this
Indenture, the Company and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as then in effect), without the
consent of the Securityholders, for one or more of the following purposes:

                  (a)      to cure any ambiguity, defect, or inconsistency
herein or in the Securities of any series;

                  (b)      to comply with Article Ten;

                  (c)      to provide for uncertificated Securities in addition
to or in place of certificated Securities;

                  (d)      to add to the covenants, restrictions, conditions or
provisions relating to the Company for the benefit of the holders of all or any
series of Securities (and if such covenants, restrictions, conditions or
provisions are to be for the benefit of less than all series of Securities,
stating that such covenants, restrictions, conditions or provisions are
expressly being included solely for the benefit of such series), to make the
occurrence, or the occurrence and the continuance, of a default in any such
additional covenants, restrictions, conditions or provisions an Event of
Default, or to surrender any right or power herein conferred upon the Company;

                  (e)      to add to, delete from, or revise the conditions,
limitations, and restrictions on the authorized amount, terms, or purposes of
issue, authentication, and delivery of Securities, as herein set forth;

                  (f)      to make any change that does not adversely affect the
rights of any Securityholder in any material respect;

                  (g)      to provide for the issuance of and establish the form
and terms and conditions of the Securities of any series as provided in Section
2.01, to establish the form of any certifications required to be furnished
pursuant to the terms of this Indenture or any series of Securities, or to add
to the rights of the holders of any series of Securities;

                  (h)      to evidence and provide for the acceptance of
appointment hereunder by a successor trustee; or

                                       36.

<PAGE>

                  (i)      to comply with any requirements of the Securities and
Exchange Commission or any successor in connection with the qualification of
this Indenture under the Trust Indenture Act.

         The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.

         Any supplemental indenture authorized by the provisions of this Section
may be executed by the Company and the Trustee without the consent of the
holders of any of the Securities at the time Outstanding, notwithstanding any of
the provisions of Section 9.02.

         SECTION 9.02      SUPPLEMENTAL INDENTURES WITH CONSENT OF
SECURITYHOLDERS.

         With the consent (evidenced as provided in Section 8.01) of the holders
of not less than a majority in aggregate principal amount of the Securities of
each series affected by such supplemental indenture or indentures at the time
Outstanding, the Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as then in effect) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of any supplemental indenture or of modifying in any manner not covered by
Section 9.01 the rights of the holders of the Securities of such series under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the holders of each Security then Outstanding and
affected thereby, (a) extend the fixed maturity of any Securities of any series,
or reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof or (b) reduce the aforesaid percentage of Securities, the holders of
which are required to consent to any such supplemental indenture.

         It shall not be necessary for the consent of the Securityholders of any
series affected thereby under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.

         SECTION 9.03      EFFECT OF SUPPLEMENTAL INDENTURES.

         Upon the execution of any supplemental indenture pursuant to the
provisions of this Article or of Section 10.01, this Indenture shall, with
respect to such series, be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Securities of the series affected thereby shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.

                                       37.

<PAGE>

         SECTION 9.04      SECURITIES AFFECTED BY SUPPLEMENTAL INDENTURES.

         Securities of any series affected by a supplemental indenture,
authenticated and delivered after the execution of such supplemental indenture
pursuant to the provisions of this Article or of Section 10.01, may bear a
notation in form approved by the Company, provided such form meets the
requirements of any securities exchange upon which such series may be listed, as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of that series so modified as to conform, in the
opinion of the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Securities of
that series then Outstanding.

         SECTION 9.05      EXECUTION OF SUPPLEMENTAL INDENTURES.

         Upon the request of the Company, accompanied by its Board Resolutions
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders required
to consent thereto as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion but shall not be
obligated to enter into such supplemental indenture. The Trustee, subject to the
provisions of Section 7.01, may receive an Officers' Certificate or an Opinion
of Counsel as conclusive evidence that any supplemental indenture executed
pursuant to this Article is authorized or permitted by, and conforms to, the
terms of this Article and that it is proper for the Trustee under the provisions
of this Article to join in the execution thereof; provided, however, that such
Officers' Certificate or Opinion of Counsel need not be provided in connection
with the execution of a supplemental indenture that establishes the terms of a
series of Securities pursuant to Section 2.01 hereof.

         Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, setting forth in
general terms the substance of such supplemental indenture, to the
Securityholders of all series affected thereby as their names and addresses
appear upon the Security Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.

                                   ARTICLE 10

                                SUCCESSOR ENTITY

         SECTION 10.01     COMPANY MAY CONSOLIDATE, ETC.

         Except as provided pursuant to Section 2.01 pursuant to a Board
Resolution, and set forth in an Officers' Certificate, or established in one or
more indentures supplemental to this Indenture, nothing contained in this
Indenture shall prevent any consolidation or merger of the Company with or into
any other Person (whether or not affiliated with the Company) or successive
consolidations or mergers in which the Company or its successor or successors
shall

                                       38.

<PAGE>

be a party or parties, or shall prevent any sale, conveyance, transfer or other
disposition of the property of the Company or its successor or successors as an
entirety, or substantially as an entirety, to any other corporation (whether or
not affiliated with the Company or its successor or successors) authorized to
acquire and operate the same; provided, however, the Company hereby covenants
and agrees that, upon any such consolidation or merger (in each case, if the
Company is not the survivor of such transaction), sale, conveyance, transfer or
other disposition, (a) the due and punctual payment of the principal of
(premium, if any) and interest on all of the Securities of all series in
accordance with the terms of each series, according to their tenor, and the due
and punctual performance and observance of all the covenants and conditions of
this Indenture with respect to each series or established with respect to such
series pursuant to Section 2.01 to be kept or performed by the Company shall be
expressly assumed, by supplemental indenture (which shall conform to the
provisions of the Trust Indenture Act, as then in effect) reasonably
satisfactory in form to the Trustee executed and delivered to the Trustee by the
entity formed by such consolidation, or into which the Company shall have been
merged, or by the entity which shall have acquired such property and (b) in the
event that the Securities of any series then Outstanding are convertible into or
exchangeable for shares of common stock or other securities of the Company, such
entity shall, by such supplemental indenture, make provision so that the
Securityholders of Securities of that series shall thereafter be entitled to
receive upon conversion or exchange of such Securities the number of securities
or property to which a holder of the number of shares of common stock or other
securities of the Company deliverable upon conversion or exchange of those
Securities would have been entitled had such conversion or exchange occurred
immediately prior to such consolidation, merger, sale, conveyance, transfer or
other disposition.

         SECTION 10.02     SUCCESSOR ENTITY SUBSTITUTED.

                  (a)      In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition and upon the assumption by the
successor entity by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the obligations set forth
under Section 10.01 on all of the Securities of all series Outstanding, such
successor entity shall succeed to and be substituted for the Company with the
same effect as if it had been named as the Company herein, and thereupon the
predecessor corporation shall be relieved of all obligations and covenants under
this Indenture and the Securities.

                  (b)      In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition, such changes in phraseology and form
(but not in substance) may be made in the Securities thereafter to be issued as
may be appropriate.

                  (c)      Nothing contained in this Article shall require any
action by the Company in the case of a consolidation or merger of any Person
into the Company where the Company is the survivor of such transaction, or the
acquisition by the Company, by purchase or otherwise, of all or any part of the
property of any other Person (whether or not affiliated with the Company).

         SECTION 10.03     EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.

         The Trustee, subject to the provisions of Section 7.01, may receive an
Officers' Certificate or an Opinion of Counsel as conclusive evidence that any
such consolidation, merger,

                                       39.

<PAGE>

sale, conveyance, transfer or other disposition, and any such assumption, comply
with the provisions of this Article.

                                   ARTICLE 11

                           SATISFACTION AND DISCHARGE

         SECTION 11.01     SATISFACTION AND DISCHARGE OF INDENTURE.

         If at any time: (a) the Company shall have delivered to the Trustee for
cancellation all Securities of a series theretofore authenticated and not
delivered to the Trustee for cancellation (other than any Securities that shall
have been destroyed, lost or stolen and that shall have been replaced or paid as
provided in Section 2.07 and Securities for whose payment money or Governmental
Obligations have theretofore been deposited in trust or segregated and held in
trust by the Company and thereupon repaid to the Company or discharged from such
trust, as provided in Section 11.05); or (b) all such Securities of a particular
series not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit or cause to be deposited with the Trustee as trust funds
the entire amount in moneys or Governmental Obligations or a combination
thereof, 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 at maturity or upon redemption all Securities
of that series not theretofore delivered to the Trustee for cancellation,
including principal (and premium, if any) and interest due or to become due to
such date of maturity or date fixed for redemption, as the case may be, and if
the Company shall also pay or cause to be paid all other sums payable hereunder
with respect to such series by the Company then this Indenture shall thereupon
cease to be of further effect with respect to such series except for the
provisions of Sections 2.03, 2.05, 2.07, 4.01, 4.02, 4.03 and 7.10, that shall
survive until the date of maturity or redemption date, as the case may be, and
Sections 7.06 and 11.05, that shall survive to such date and thereafter, and the
Trustee, on demand of the Company and at the cost and expense of the Company
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture with respect to such series.

         SECTION 11.02     DISCHARGE OF OBLIGATIONS.

         If at any time all such Securities of a particular series not
heretofore delivered to the Trustee for cancellation or that have not become due
and payable as described in Section 11.01 shall have been paid by the Company by
depositing irrevocably with the Trustee as trust funds moneys or an amount of
Governmental Obligations sufficient to pay at maturity or upon redemption all
such Securities of that series not theretofore delivered to the Trustee for
cancellation, including principal (and premium, if any) and interest due or to
become due to such date of maturity or date fixed for redemption, as the case
may be, and if the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company with respect to such series, then after the
date such moneys or Governmental Obligations, as the case may be, are deposited
with the Trustee the obligations of the Company under this Indenture with
respect to such series shall cease to be of further effect except for the
provisions of Sections 2.03, 2.05,

                                       40.

<PAGE>

2.07, 4,01, 4.02, 4,03, 7.06, 7.10 and 11.05 hereof that shall survive until
such Securities shall mature and be paid.

         Thereafter, Sections 7.06 and 11.05 shall survive.

         SECTION 11.03     DEPOSITED MONEYS TO BE HELD IN TRUST.

         All moneys or Governmental Obligations deposited with the Trustee
pursuant to Sections 11.01 or 11.02 shall be held in trust and shall be
available for payment as due, either directly or through any paying agent
(including the Company acting as its own paying agent), to the holders of the
particular series of Securities for the payment or redemption of which such
moneys or Governmental Obligations have been deposited with the Trustee.

         SECTION 11.04     PAYMENT OF MONEYS HELD BY PAYING AGENTS.

         In connection with the satisfaction and discharge of this Indenture all
moneys or Governmental Obligations then held by any paying agent under the
provisions of this Indenture shall, upon demand of the Company, be paid to the
Trustee and thereupon such paying agent shall be released from all further
liability with respect to such moneys or Governmental Obligations.

         SECTION 11.05     REPAYMENT TO COMPANY.

         Any moneys or Governmental Obligations deposited with any paying agent
or the Trustee, or then held by the Company, in trust for payment of principal
of or premium, if any, or interest on the Securities of a particular series that
are not applied but remain unclaimed by the holders of such Securities for at
least two years after the date upon which the principal of (and premium, if any)
or interest on such Securities shall have respectively become due and payable,
or such other shorter period set forth in applicable escheat or abandoned or
unclaimed property law, shall be repaid to the Company on May 31 of each year or
upon the Company's request or (if then held by the Company) shall be discharged
from such trust; and thereupon the paying agent and the Trustee shall be
released from all further liability with respect to such moneys or Governmental
Obligations, and the holder of any of the Securities entitled to receive such
payment shall thereafter, as a general creditor, look only to the Company for
the payment thereof.

                                   ARTICLE 12

         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

         SECTION 12.01     NO RECOURSE.

         No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Security, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, officer or
director, past, present or future as such, of the Company or of any predecessor
or successor corporation, either directly or through the Company or any

                                       41.

<PAGE>

such predecessor or successor corporation, 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, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, the
incorporators, stockholders, officers or directors as such, of the Company or of
any predecessor or 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 or implied therefrom; and that any and all such personal
liability of every name and nature, 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 or director 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 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 issuance of such Securities.

                                   ARTICLE 13

                            MISCELLANEOUS PROVISIONS

         SECTION 13.01     EFFECT ON SUCCESSORS AND ASSIGNS.

         All the covenants, stipulations, promises and agreements in this
Indenture made by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.

         SECTION 13.02     ACTIONS BY SUCCESSOR.

         Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
corresponding board, committee or officer of any corporation that shall at the
time be the lawful successor of the Company.

         SECTION 13.03     SURRENDER OF COMPANY POWERS.

         The Company by instrument in writing executed by authority of its Board
of Directors and delivered to the Trustee may surrender any of the powers
reserved to the Company, and thereupon such power so surrendered shall terminate
both as to the Company and as to any successor corporation.

         SECTION 13.04     NOTICES.

         Except as otherwise expressly provided herein, any notice, request or
demand that by any provision of this Indenture is required or permitted to be
given, made or served by the Trustee or by the holders of Securities or by any
other Person pursuant to this Indenture to or on the Company may be given or
served by being deposited in first class mail, postage prepaid, addressed (until
another address is filed in writing by the Company with the Trustee), as
follows: PACIFICARE HEALTH SYSTEMS, INC., 5995 Plaza Drive, Cypress, CA 90630.
Any notice,

                                       42.

<PAGE>

election, request or demand by the Company or any Securityholder or by any other
Person pursuant to this Indenture to or upon the Trustee shall be deemed to have
been sufficiently given or made, for all purposes, if given or made in writing
at the Corporate Trust Office of the Trustee.

         SECTION 13.05     GOVERNING LAW.

         This Indenture and each Security shall be deemed to be a contract made
under the internal laws of the State of New York, and for all purposes shall be
construed in accordance with the laws of said State, except to the extent that
the Trust Indenture Act is applicable.

         SECTION 13.06     TREATMENT OF SECURITIES AS DEBT.

         It is intended that the Securities will be treated as indebtedness and
not as equity for federal income tax purposes. The provisions of this Indenture
shall be interpreted to further this intention.

         SECTION 13.07     COMPLIANCE CERTIFICATES AND OPINIONS.

                  (a)      Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.

                  (b)      Each certificate or opinion provided for in this
Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant in this Indenture shall include (i) a statement that the
Person making such certificate or opinion has read such covenant or condition;
(ii) 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; (iii) a statement that, in the opinion of such
Person, he has made such examination or investigation as is reasonably necessary
to enable him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and (iv) a statement as to whether or not,
in the opinion of such Person, such condition or covenant has been complied
with.

         SECTION 13.08     PAYMENTS ON BUSINESS DAYS.

         Except as provided pursuant to Section 2.01 pursuant to a Board
Resolution, and set forth in an Officers' Certificate, or established in one or
more indentures supplemental to this Indenture, in any case where the date of
maturity of interest or principal of any Security or the date of redemption of
any Security shall not be a Business Day, then payment of interest or principal
(and premium, if any) may be made on the next succeeding Business Day with the
same force and effect as if made on the nominal date of maturity or redemption,
and no interest shall accrue for the period after such nominal date.

                                       43.

<PAGE>

         SECTION 13.09     CONFLICT WITH TRUST INDENTURE ACT.

         If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

         SECTION 13.10     COUNTERPARTS.

         This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

         SECTION 13.11     SEPARABILITY.

         In case any one or more of the provisions contained in this Indenture
or in the Securities of any series shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Indenture or of
such Securities, but this Indenture and such Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.

         SECTION 13.12     COMPLIANCE CERTIFICATES.

         The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year during which any Securities of any series were outstanding,
an Officers' Certificate stating whether or not the signers know of any Default
or Event of Default that occurred during such fiscal year. Such certificate
shall contain a certification from the principal executive officer, principal
financial officer or principal accounting officer of the Company that a review
has been conducted of the activities of the Company and the Company's
performance under this Indenture and that the Company has complied with all
conditions and covenants under this Indenture. For purposes of this Section
13.12, such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture. If any of the officers
of the Company signing such certificate has knowledge of such a Default or Event
of Default, the certificate shall describe any such Default or Event of Default
and its status.

                                   ARTICLE 14

                           SUBORDINATION OF SECURITIES

         SECTION 14.01     SUBORDINATION TERMS.

         The payment by the Company of the principal of, premium, if any, and
interest on any series of Securities issued hereunder shall be subordinated to
the extent set forth in an indenture supplemental hereto relating to such
Securities.

                                       44.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.

                                   PACIFICARE HEALTH SYSTEMS, INC.

                                   By: /s/ Coy F. Baugh
                                      ------------------------------------------

                                   Name: Coy F. Baugh
                                        ----------------------------------------

                                   Title: Vice President, Treasurer
                                         ---------------------------------------

                                   U.S. BANK NATIONAL ASSOCIATION, as Trustee

                                   By: /s/ Paula M. Oswald
                                      ------------------------------------------

                                   Name: Paula M. Oswald
                                        ----------------------------------------

                                   Title: Vice President
                                         ---------------------------------------

                                       45.

<PAGE>

CROSS-REFERENCE TABLE (1)

<TABLE>
<CAPTION>
SECTION OF TRUST INDENTURE ACT OF 1939, AS AMENDED          SECTION OF INDENTURE
--------------------------------------------------          --------------------
<S>                                                         <C>
                        310(a)                              7.09
                        310(b)                              7.08
                                                            7.10
                        310(c)                              Inapplicable
                        311(a)                              7.13
                        311(b)                              7.13
                        311(c)                              Inapplicable
                        312(a)                              5.01
                                                            5.02(a)
                        312(b)                              5.02(c)
                        312(c)                              5.02(c)
                        313(a)                              5.04(a)
                        313(b)                              5.04(b)
                        313(c)                              5.04(a)
                                                            5.04(b)
                        313(d)                              5.04(c)
                        314(a)                              5.03
                                                            13.12
                        314(b)                              Inapplicable
                        314(c)                              13.07(a)
                        314(d)                              Inapplicable
                        314(e)                              13.07(b)
                        314(f)                              Inapplicable
                        315(a)                              7.01(a)
                                                            7.01(b)
                        315(b)                              7.14
                        315(c)                              7.01
                        315(d)                              7.01(b)
                        315(e)                              6.07
                        316(a)                              6.06
                                                            8.04
                        316(b)                              6.04
                        316(c)                              8.01
                        317(a)                              6.02
                        317(b)                              4.03
                        318(a)                              13.09
</TABLE>

-----------------

(1)  This Cross-Reference Table does not constitute part of the Indenture and
     shall not have any bearing on the interpretation of any of its terms or
     provisions.

                                      46.<PAGE>

                                                                    EXHIBIT 4.16

                         PACIFICARE HEALTH SYSTEMS, INC.

                                       and

                       _________________, AS WARRANT AGENT

                              FORM OF COMMON STOCK
                                WARRANT AGREEMENT

                        DATED AS OF______________________

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   PAGE
<S>                                                                                                                <C>
ARTICLE 1   ISSUANCE OF WARRANTS AND EXECUTION AND DELIVERY OF WARRANT CERTIFICATES............................     1

      1.1   Issuance of Warrants...............................................................................     1

      1.2   Execution and Delivery of Warrant Certificates.....................................................     1

      1.3   Issuance of Warrant Certificates...................................................................     2

ARTICLE 2   WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS...................................................     3

      2.1   Warrant Price......................................................................................     3

      2.2   Duration of Warrants...............................................................................     3

      2.3   Exercise of Warrants...............................................................................     3

ARTICLE 3   OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANT CERTIFICATES.............................     4

      3.1   No Rights as Warrant Securityholder Conferred by Warrants or Warrant Certificates..................     4

      3.2   Lost, Stolen, Mutilated or Destroyed Warrant Certificates..........................................     4

      3.3   Holder of Warrant Certificate May Enforce Rights...................................................     5

      3.4   Adjustments........................................................................................     5

      3.5   Notice to Warrantholders...........................................................................     8

      3.6   [If the Warrants are subject to acceleration by the Company, insert--Acceleration
            of Warrants by the Company.........................................................................     8]

ARTICLE 4   EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES......................................................     9

      4.1   Exchange and Transfer of Warrant Certificates......................................................     9

      4.2   Treatment of Holders of Warrant Certificates.......................................................    10

      4.3   Cancellation of Warrant Certificates...............................................................    10

ARTICLE 5   CONCERNING THE WARRANT AGENT.......................................................................    10

      5.1   Warrant Agent......................................................................................    10

      5.2   Conditions of Warrant Agent's Obligations..........................................................    10

      5.3   Resignation and Appointment of Successor...........................................................    12

ARTICLE 6   MISCELLANEOUS......................................................................................    13

      6.1   Amendment..........................................................................................    13

      6.2   Notices and Demands to the Company and Warrant Agent...............................................    13

      6.3   Addresses..........................................................................................    14
</TABLE>

                                      -i-

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                   PAGE
<S>                                                                                                                <C>
      6.4   Governing Law......................................................................................    14

      6.5   Delivery of Prospectus.............................................................................    14

      6.6   Obtaining of Governmental Approvals................................................................    14

      6.7   Persons Having Rights Under Warrant Agreement......................................................    14

      6.8   Headings...........................................................................................    14

      6.9   Counterparts.......................................................................................    14

      6.10  Inspection of Agreement............................................................................    14
</TABLE>

                                      -ii-
<PAGE>

                         PACIFICARE HEALTH SYSTEMS, INC.
                     Form of Common Stock Warrant Agreement

         COMMON STOCK WARRANT AGREEMENT, dated as of _______ between PACIFICARE
HEALTH SYSTEMS, INC., a Delaware corporation (the "COMPANY") and
___________________, a [corporation] [national banking association] organized
and existing under the laws of ___________ and having a corporate trust office
in ____________, as warrant agent (the "WARRANT AGENT").

         WHEREAS, the Company proposes to sell [if Warrants are sold with other
securities - [title of such other securities being offered] (the "OTHER
SECURITIES") with] warrant certificates evidencing one or more warrants (the
"WARRANTS" or individually a "WARRANT") representing the right to purchase
Common Stock of the Company, par value $0.01 per share (the "WARRANT
SECURITIES"), such warrant certificates and other warrant certificates issued
pursuant to this Agreement being herein called the "WARRANT CERTIFICATES"; and

         WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange, exercise and replacement of the
Warrant Certificates, and in this Agreement wishes to set forth, among other
things, the form and provisions of the Warrant Certificates and the terms and
conditions on which they may be issued, registered, transferred, exchanged,
exercised and replaced;

         NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:

                                   ARTICLE 1

                     ISSUANCE OF WARRANTS AND EXECUTION AND
                        DELIVERY OF WARRANT CERTIFICATES

         1.1      ISSUANCE OF WARRANTS. [If Warrants alone - Upon issuance, each
Warrant Certificate shall evidence one or more Warrants.] [If Other Securities
and Warrants - Warrants shall be [initially] issued in connection with the
issuance of the Other Securities [but shall be separately transferable on and
after ___________________________________ (the "DETACHABLE DATE")] [and shall
not be separately transferable] and each Warrant Certificate shall evidence one
or more Warrants.] Each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase one Warrant
Security. [If Other Securities and Warrants - Warrant Certificates shall be
initially issued in units with the Other Securities and each Warrant Certificate
included in such a unit shall evidence _____________ Warrants for each
[$__________ principal amount] [________ shares] of Other Securities included in
such unit.]

         1.2      EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Each Warrant
Certificate, whenever issued, shall be in registered form substantially in the
form set forth in Exhibit A hereto, shall be dated the date of its
countersignature by the Warrant Agent and may have such

                                       1

<PAGE>

letters, numbers, or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved thereon as the
officers of the Company executing the same may approve (execution thereof to be
conclusive evidence of such approval) and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any securities exchange on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be signed on behalf of the Company by any
of its present or future chief executive officers, presidents, senior vice
presidents, vice presidents, chief financial officers, chief legal officers,
treasurers, assistant treasurers, controllers, assistant controllers,
secretaries or assistant secretaries under its corporate seal reproduced
thereon. Such signatures may be manual or facsimile signatures of such
authorized officers and may be imprinted or otherwise reproduced on the Warrant
Certificates. The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates.

         No Warrant Certificate shall be valid for any purpose, and no Warrant
evidenced thereby shall be exercisable, until such Warrant Certificate has been
countersigned by the manual signature of the Warrant Agent. Such signature by
the Warrant Agent upon any Warrant Certificate executed by the Company shall be
conclusive evidence that the Warrant Certificate so countersigned has been duly
issued hereunder.

         In case any officer of the Company who shall have signed any of the
Warrant Certificates either manually or by facsimile signature shall cease to be
such officer before the Warrant Certificates so signed shall have been
countersigned and delivered by the Warrant Agent, such Warrant Certificates may
be countersigned and delivered notwithstanding that the person who signed
Warrant Certificates ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by such persons as, at the
actual date of the execution of such Warrant Certificate, shall be the proper
officers of the Company, although at the date of the execution of this Agreement
any such person was not such officer.

         The term "holder" or "holder of a Warrant Certificate" as used herein
shall mean any person in whose name at the time any Warrant Certificate shall be
registered upon the books to be maintained by the Warrant Agent for that purpose
[If Other Securities and Warrants are not immediately detachable - or upon the
registration of the Other Securities prior to the Detachable Date. Prior to the
Detachable Date, the Company will, or will cause the registrar of the Other
Securities to, make available at all times to the Warrant Agent such information
as to holders of the Other Securities as may be necessary to keep the Warrant
Agent's records up to date].

         1.3      ISSUANCE OF WARRANT CERTIFICATES. Warrant Certificates
evidencing the right to purchase Warrant Securities may be executed by the
Company and delivered to the Warrant Agent upon the execution of this Warrant
Agreement or from time to time thereafter. The Warrant Agent shall, upon receipt
of Warrant Certificates duly executed on behalf of the Company, countersign such
Warrant Certificates and shall deliver such Warrant Certificates to or upon the
order of the Company.

                                       2.
<PAGE>

                                   ARTICLE 2

                WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS

         2.1      WARRANT PRICE. During the period specified in Section 2.2,
each Warrant shall, subject to the terms of this Warrant Agreement and the
applicable Warrant Certificate, entitle the holder thereof to initially purchase
the number of Warrant Securities specified in the applicable Warrant Certificate
at an initial exercise price of $_______ per Warrant Security, subject to
adjustment upon the occurrence of certain events, as hereinafter provided. Such
purchase price per Warrant Security is referred to in this Agreement as the
"WARRANT PRICE."

         2.2      DURATION OF WARRANTS. Each Warrant may be exercised in whole
or in part at any time, as specified herein, on or after [the date thereof]
[________] and at or before [________] p.m., [City] time, on ________ or such
later date as the Company may designate by notice to the Warrant Agent and the
holders of Warrant Certificates mailed to their addresses as set forth in the
record books of the Warrant Agent (the "EXPIRATION DATE"). Each Warrant not
exercised at or before [________] p.m., [City] time, on the Expiration Date
shall become void, and all rights of the holder of the Warrant Certificate
evidencing such Warrant under this Agreement shall cease.

         2.3      EXERCISE OF WARRANTS.

                  (a)      During the period specified in Section 2.2, the
Warrants may be exercised to purchase a whole number of Warrant Securities in
registered form by providing certain information as set forth on the reverse
side of the Warrant Certificate and by paying in full, in lawful money of the
United States of America, [in cash or by certified check or official bank check
in New York Clearing House funds] [by bank wire transfer in immediately
available funds] the Warrant Price for each Warrant Security with respect to
which a Warrant is being exercised to the Warrant Agent at its corporate trust
office, provided that such exercise is subject to receipt within five business
days of such payment by the Warrant Agent of the Warrant Certificate with the
form of election to purchase Warrant Securities set forth on the reverse side of
the Warrant Certificate properly completed and duly executed. The date on which
payment in full of the Warrant Price is received by the Warrant Agent shall,
subject to receipt of the Warrant Certificate as aforesaid, be deemed to be the
date on which the Warrant is exercised; provided, however, that if, at the date
of receipt of such Warrant Certificates and payment in full of the Warrant
Price, the transfer books for the Warrant Securities purchasable upon the
exercise of such Warrants shall be closed, no such receipt of such Warrant
Certificates and no such payment of such Warrant Price shall be effective to
constitute the person so designated to be named as the holder of record of such
Warrant Securities on such date, but shall be effective to constitute such
person as the holder of record of such Warrant Securities for all purposes at
the opening of business on the next succeeding day on which the transfer books
for the Warrant Securities purchasable upon the exercise of such Warrants shall
be opened, and the certificates for the Warrant Securities in respect of which
such Warrants are then exercised shall be issuable as of the date on such next
succeeding day on which the transfer books shall next be opened, and until such
date the Company shall be under no duty to deliver any certificate for such
Warrant Securities. The Warrant Agent shall deposit all funds received by it in
payment of the Warrant Price in an account of the Company maintained with it and
shall advise the Company by

                                       3.
<PAGE>

telephone at the end of each day on which a payment for the exercise of Warrants
is received of the amount so deposited to its account. The Warrant Agent shall
promptly confirm such telephone advice to the Company in writing.

                  (b)      The Warrant Agent shall, from time to time, as
promptly as practicable, advise the Company of (i) the number of Warrant
Securities with respect to which Warrants were exercised, (ii) the instructions
of each holder of the Warrant Certificates evidencing such Warrants with respect
to delivery of the Warrant Securities to which such holder is entitled upon such
exercise, (iii) delivery of Warrant Certificates evidencing the balance, if any,
of the Warrants for the remaining Warrant Securities after such exercise, and
(iv) such other information as the Company shall reasonably require.

                  (c)      As soon as practicable after the exercise of any
Warrant, the Company shall issue to or upon the order of the holder of the
Warrant Certificate evidencing such Warrant the Warrant Securities to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder. If fewer than all of the Warrants evidenced
by such Warrant Certificate are exercised, the Company shall execute, and an
authorized officer of the Warrant Agent shall manually countersign and deliver,
a new Warrant Certificate evidencing Warrants for the number of Warrant
Securities remaining unexercised.

                  (d)      The Company shall not be required to pay any stamp or
other tax or other governmental charge required to be paid in connection with
any transfer involved in the issue of the Warrant Securities, and in the event
that any such transfer is involved, the Company shall not be required to issue
or deliver any Warrant Security until such tax or other charge shall have been
paid or it has been established to the Company's satisfaction that no such tax
or other charge is due.

                  (e)      Prior to the issuance of any Warrants there shall
have been reserved, and the Company shall at all times through the Expiration
Date keep reserved, out of its authorized but unissued Warrant Securities, a
number of shares sufficient to provide for the exercise of the Warrants.

                                   ARTICLE 3

                       OTHER PROVISIONS RELATING TO RIGHTS
                       OF HOLDERS OF WARRANT CERTIFICATES

         3.1      NO RIGHTS AS WARRANT SECURITYHOLDER CONFERRED BY WARRANTS OR
WARRANT CERTIFICATES. No Warrant Certificate or Warrant evidenced thereby shall
entitle the holder thereof to any of the rights of a holder of Warrant
Securities, including, without limitation, the right to receive the payment of
dividends or distributions, if any, on the Warrant Securities or to exercise any
voting rights, except to the extent expressly set forth in this Agreement or the
applicable Warrant Certificate.

         3.2      LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES.
Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it and
the Company of the ownership of and the loss, theft, destruction or mutilation
of any Warrant Certificate and/or indemnity

                                       4.
<PAGE>

reasonably satisfactory to the Warrant Agent and the Company and, in the case of
mutilation, upon surrender of the mutilated Warrant Certificate to the Warrant
Agent for cancellation, then, in the absence of notice to the Company or the
Warrant Agent that such Warrant Certificate has been acquired by a bona fide
purchaser, the Company shall execute, and an authorized officer of the Warrant
Agent shall manually countersign and deliver, in exchange for or in lieu of the
lost, stolen, destroyed or mutilated Warrant Certificate, a new Warrant
Certificate of the same tenor and evidencing Warrants for a like number of
Warrant Securities. Upon the issuance of any new Warrant Certificate under this
Section 3.2, 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 Warrant Agent) in
connection therewith. Every substitute Warrant Certificate executed and
delivered pursuant to this Section 3.2 in lieu of any lost, stolen or destroyed
Warrant Certificate shall represent an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 3.2 are exclusive and shall preclude (to the extent lawful) all other
rights and remedies with respect to the replacement of mutilated, lost, stolen
or destroyed Warrant Certificates.

         3.3      HOLDER OF WARRANT CERTIFICATE MAY ENFORCE RIGHTS.
Notwithstanding any of the provisions of this Agreement, any holder of a Warrant
Certificate, without the consent of the Warrant Agent, the holder of any Warrant
Securities or the holder of any other Warrant Certificate, may, in such holder's
own behalf and for such holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
or otherwise in respect of, such holder's right to exercise the Warrants
evidenced by such holder's Warrant Certificate in the manner provided in such
holder's Warrant Certificate and in this Agreement.

         3.4      ADJUSTMENTS.

                  (a)      In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the Warrant
Price in effect immediately prior to such subdivision shall be proportionately
reduced and the number of Warrant Securities purchasable under the Warrants
shall be proportionately increased. Conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Warrant Price in effect immediately prior to such combination shall
be proportionately increased and the number of Warrant Securities purchasable
under the Warrants shall be proportionately decreased.

                  (b)      If at any time or from time to time the holders of
Common Stock (or any shares of stock or other securities at the time receivable
upon the exercise of the Warrants) shall have received or become entitled to
receive, without payment therefore,

                           (i)      Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution;

                                       5.
<PAGE>

                           (ii)     any cash paid or payable otherwise than as a
cash dividend paid or payable out of the Company's current or retained earnings;

                           (iii)    any evidence of the Company's indebtedness
or rights to subscribe for or purchase the Company's indebtedness; or

                           (iv)     Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement
(other than shares of Common Stock issued as a stock split or adjustments in
respect of which shall be covered by the terms of Section 3.4(a) above),

then and in each such case, the holder of each Warrant shall, upon the exercise
of the Warrant, be entitled to receive, in addition to the number of Warrant
Securities receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and property
(including cash and indebtedness (or rights to subscribe for or purchase
indebtedness) which such holder would hold on the date of such exercise had he
been the holder of record of such Warrant Securities as of the date on which
holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.

                  (c)      In case of (i) any reclassification, capital
reorganization, or change in the Common Stock of the Company (other than as a
result of a subdivision, combination, or stock dividend provided for in Section
3.4(a) or Section 3.4(b) above), (ii) share exchange, merger or similar
transaction of the Company with or into another person or entity (other than a
share exchange, merger or similar transaction in which the Company is the
acquiring or surviving corporation and which does not result in any change in
the Common Stock other than the issuance of additional shares of Common Stock)
or (iii) the sale, exchange, lease, transfer or other disposition of all or
substantially all of the properties and assets of the Company as an entirety (in
any such case, a "REORGANIZATION EVENT"), then, as a condition of such
Reorganization Event, lawful provisions shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be
delivered to the holders of the Warrants, so that the holders of the Warrants
shall have the right at any time prior to the expiration of the Warrants to
purchase, at a total price equal to that payable upon the exercise of the
Warrants, the kind and amount of shares of stock and other securities and
property receivable in connection with such Reorganization Event by a holder of
the same number of Warrant Securities as were purchasable by the holders of the
Warrants immediately prior to such Reorganization Event. In any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of the Warrants so that the provisions hereof shall thereafter be
applicable with respect to any shares of stock or other securities and property
deliverable upon exercise the Warrants, and appropriate adjustments shall be
made to the Warrant Price payable hereunder provided the aggregate purchase
price shall remain the same. In the case of any transaction described in clauses
(ii) and (iii) above, the Company shall thereupon be relieved of any further
obligation hereunder or under the Warrants, and the Company as the predecessor
corporation may thereupon or at any time thereafter be dissolved, wound up or
liquidated. Such successor or assuming entity thereupon may cause to be signed,
and may issue either in its own name or in the name of the Company, any or all
of the Warrants issuable hereunder which heretofore shall not have been signed
by the Company, and may execute and deliver securities in its own name, in

                                       6.
<PAGE>

fulfillment of its obligations to deliver Warrant Securities upon exercise of
the Warrants. All the Warrants so issued shall in all respects have the same
legal rank and benefit under this Agreement as the Warrants theretofore or
thereafter issued in accordance with the terms of this Agreement as though all
of such Warrants had been issued at the date of the execution hereof. In any
case of any such Reorganization Event, such changes in phraseology and form (but
not in substance) may be made in the Warrants thereafter to be issued as may be
appropriate.

         The Warrant Agent may receive a written opinion of legal counsel as
conclusive evidence that any such Reorganization Event complies with the
provisions of this Section 3.4.

                  (d)      The Company may, at its option, at any time until the
Expiration Date, reduce the then current Warrant Price to any amount deemed
appropriate by the Board of Directors of the Company for any period not
exceeding twenty consecutive days (as evidenced in a resolution adopted by such
Board of Directors), but only upon giving the notices required by Section 3.5 at
least ten days prior to taking such action.

                  (e)      Except as herein otherwise expressly provided, no
adjustment in the Warrant Price shall be made by reason of the issuance of
shares of Common Stock, or securities convertible into or exchangeable for
shares of Common Stock, or securities carrying the right to purchase any of the
foregoing or for any other reason whatsoever.

                  (f)      No fractional Warrant Securities shall be issued upon
the exercise of Warrants. If more than one Warrant shall be exercised at one
time by the same holder, the number of full Warrant Securities which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of Warrant Securities purchased pursuant to the Warrants so exercised.
Instead of any fractional Warrant Security which would otherwise be issuable
upon exercise of any Warrant, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the last sales price
(or bid price if there were no sales) per Warrant Security, in either case as
reported on the New York Stock Exchange Composite Tape on the business day which
next precedes the day of exercise or, if the Warrant Securities are not then
listed or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the Warrant Securities are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), or if the
Warrant Securities are not then listed or admitted to trading on any national
securities exchange or quoted on the National Market System of NASDAQ, the
average of the closing high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ, or such other system then in use, or if on any
such date the Warrant Securities are not quoted by any such organization, an
amount equal to the same fraction of the average of the closing bid and asked
prices as furnished by any New York Stock Exchange firm selected from time to
time by the Company for that purpose at the close of business on the business
day which next precedes the day of exercise.

                  (g)      Whenever the Warrant Price then in effect is adjusted
as herein provided, the Company shall mail to each holder of the Warrants at
such holder's address as it shall appear on the books of the Company a statement
setting forth the adjusted Warrant Price then and

                                       7.

<PAGE>

thereafter effective under the provisions hereof, together with the facts, in
reasonable detail, upon which such adjustment is based.

         3.5      NOTICE TO WARRANTHOLDERS. In case the Company shall (a) effect
any dividend or distribution described in Section 3.4(b), (b) effect any
Reorganization Event, (c) make any distribution on or in respect of the Common
Stock in connection with the dissolution, liquidation or winding up of the
Company, or (d) reduce the then current Warrant Price pursuant to Section
3.4(d), then the Company shall mail to each holder of Warrants at such holder's
address as it shall appear on the books of the Warrant Agent, at least ten days
prior to the applicable date hereinafter specified, a notice stating (x) the
record date for such dividend or distribution, or, if a record is not to be
taken, the date as of which the holders of record of Common Stock that will be
entitled to such dividend or distribution are to be determined, (y) the date on
which such Reorganization Event, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
Reorganization Event, dissolution, liquidation or winding up, or (z) the first
date on which the then current Warrant Price shall be reduced pursuant to
Section 3.4(d). No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect any such transaction or any adjustment in the
Warrant Price required by Section 3.4.

         3.6      [IF THE WARRANTS ARE SUBJECT TO ACCELERATION BY THE COMPANY,
INSERT--ACCELERATION OF WARRANTS BY THE COMPANY.

                  (a)      At any time on or after ___________, the Company
shall have the right to accelerate any or all Warrants at any time by causing
them to expire at the close of business on the day next preceding a specified
date (the "ACCELERATION DATE"), if the Market Price (as hereinafter defined) of
the Common Stock equals or exceeds ____________ percent (_____%) of the then
effective Warrant Price on any twenty Trading Days (as hereinafter defined)
within a period of thirty consecutive Trading Days ending no more than five
Trading Days prior to the date on which the Company gives notice to the Warrant
Agent of its election to accelerate the Warrants.

                  (b)      "Market Price" for each Trading Day shall be, if the
Common Stock is listed or admitted for trading on the New York Stock Exchange,
the last reported sale price, regular way (or, if no such price is reported, the
average of the reported closing bid and asked prices, regular way) of Common
Stock, in either case as reported on the New York Stock Exchange Composite Tape
or, if the Common Stock is not listed or admitted to trading on the New York
Stock Exchange, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the National Market System of
NASDAQ or, if not listed or admitted to trading on any national securities
exchange or quoted on the National Market System of NASDAQ, the average of the
closing high bid and low asked prices in the over-the-counter market, as
reported by NASDAQ, or such other system then in use, or if on any such date the
shares of Common Stock are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by any New York Stock Exchange
firm selected from time to time by the Company for that purpose. "Trading Day"
shall be each Monday through Friday, other than any day on which securities are
not traded in the system or on the exchange that is the

                                       8.

<PAGE>

principal market for the Common Stock, as determined by the Board of Directors
of the Company.

                  (c)      In the event of an acceleration of less than all of
the Warrants, the Warrant Agent shall select the Warrants to be accelerated by
lot, pro rata or in such other manner as it deems, in its discretion, to be fair
and appropriate.

                  (d)      Notice of an acceleration specifying the Acceleration
Date shall be sent by mail first class, postage prepaid, to each registered
holder of a Warrant Certificate representing a Warrant accelerated at such
holder's address appearing on the books of the Warrant Agent not more than sixty
days nor less than thirty days before the Acceleration Date. Such notice of an
acceleration also shall be given no more than twenty days, and no less than ten
days, prior to the mailing of notice to registered holders of Warrants pursuant
to this Section 3.6, by publication at least once in a newspaper of general
circulation in the City of New York.

                  (e)      Any Warrant accelerated may be exercised until
[_____] p.m., [City] time, on the business day next preceding the Acceleration
Date. The Warrant Price shall be payable as provided in Section 2.]

                                    ARTICLE 4

                  EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES

         4.1      EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. [If Other
Securities with Warrants which are immediately detachable - Upon] [If Other
Securities with Warrants which are not immediately detachable - Prior to the
Detachable Date, a Warrant Certificate may be exchanged or transferred only
together with the Other Security to which the Warrant Certificate was initially
attached, and only for the purpose of effecting or in conjunction with an
exchange or transfer of such Other Security. Prior to any Detachable Date, each
transfer of the Other Security shall operate also to transfer the related
Warrant Certificates. After the Detachable Date, upon] surrender at the
corporate trust office of the Warrant Agent, Warrant Certificates evidencing
Warrants may be exchanged for Warrant Certificates in other denominations
evidencing such Warrants or the transfer thereof may be registered in whole or
in part; provided that such other Warrant Certificates evidence Warrants for the
same aggregate number of Warrant Securities as the Warrant Certificates so
surrendered. The Warrant Agent shall keep, at its corporate trust office, books
in which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and exchanges and transfers of outstanding Warrant
Certificates, upon surrender of the Warrant Certificates to the Warrant Agent at
its corporate trust office for exchange or registration of transfer, properly
endorsed or accompanied by appropriate instruments of registration of transfer
and written instructions for transfer, all in form satisfactory to the Company
and the Warrant Agent. No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that may be imposed in connection with any such exchange or
registration of transfer. Whenever any Warrant Certificates are so surrendered
for exchange or registration of transfer, an authorized officer of the Warrant
Agent shall manually countersign and deliver to the person or persons entitled
thereto a Warrant Certificate or Warrant Certificates duly authorized and
executed by the

                                       9.

<PAGE>

Company, as so requested. The Warrant Agent shall not be required to effect any
exchange or registration of transfer which will result in the issuance of a
Warrant Certificate evidencing a Warrant for a fraction of a Warrant Security or
a number of Warrants for a whole number of Warrant Securities and a fraction of
a Warrant Security. All Warrant Certificates issued upon any exchange or
registration of transfer of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations and entitled to the same
benefits under this Agreement as the Warrant Certificate surrendered for such
exchange or registration of transfer.

         4.2      TREATMENT OF HOLDERS OF WARRANT CERTIFICATES. [If Other
Securities and Warrants are not immediately detachable - Prior to the Detachable
Date, the Company, the Warrant Agent and all other persons may treat the owner
of the Other Security as the owner of the Warrant Certificates initially
attached thereto for any purpose and as the person entitled to exercise the
rights represented by the Warrants evidenced by such Warrant Certificates, any
notice to the contrary notwithstanding. After the Detachable Date and prior to
due presentment of a Warrant Certificate for registration of transfer, the]
[T]he Company, the Warrant Agent and all other persons may treat the registered
holder of a Warrant Certificate as the absolute owner thereof for any purpose
and as the person entitled to exercise the rights represented by the Warrants
evidenced thereby, any notice to the contrary notwithstanding.

         4.3      CANCELLATION OF WARRANT CERTIFICATES. Any Warrant Certificate
surrendered for exchange, registration of transfer or exercise of the Warrants
evidenced thereby shall, if surrendered to the Company, be delivered to the
Warrant Agent and all Warrant Certificates surrendered or so delivered to the
Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be
reissued and, except as expressly permitted by this Agreement, no Warrant
Certificate shall be issued hereunder in exchange therefor or in lieu thereof.
The Warrant Agent shall deliver to the Company from time to time or otherwise
dispose of canceled Warrant Certificates in a manner satisfactory to the
Company.

                                    ARTICLE 5

                          CONCERNING THE WARRANT AGENT

         5.1      WARRANT AGENT. The Company hereby appoints _____________ as
Warrant Agent of the Company in respect of the Warrants and the Warrant
Certificates upon the terms and subject to the conditions herein set forth, and
_____________ hereby accepts such appointment. The Warrant Agent shall have the
powers and authority granted to and conferred upon it in the Warrant
Certificates and hereby and such further powers and authority to act on behalf
of the Company as the Company may hereafter grant to or confer upon it. All of
the terms and provisions with respect to such powers and authority contained in
the Warrant Certificates are subject to and governed by the terms and provisions
hereof.

         5.2      CONDITIONS OF WARRANT AGENT'S OBLIGATIONS. The Warrant Agent
accepts its obligations herein set forth upon the terms and conditions hereof,
including the following to all of which the Company agrees and to all of which
the rights hereunder of the holders from time to time of the Warrant
Certificates shall be subject:

                                      10.

<PAGE>

                  (a)      COMPENSATION AND INDEMNIFICATION. The Company agrees
promptly to pay the Warrant Agent the compensation to be agreed upon with the
Company for all services rendered by the Warrant Agent and to reimburse the
Warrant Agent for reasonable out-of-pocket expenses (including reasonable
counsel fees) incurred without negligence, bad faith or willful misconduct by
the Warrant Agent in connection with the services rendered hereunder by the
Warrant Agent. The Company also agrees to indemnify the Warrant Agent for, and
to hold it harmless against, any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on the part of the Warrant Agent,
arising out of or in connection with its acting as Warrant Agent hereunder,
including the reasonable costs and expenses of defending against any claim of
such liability.

                  (b)      AGENT FOR THE COMPANY. In acting under this Warrant
Agreement and in connection with the Warrant Certificates, the Warrant Agent is
acting solely as agent of the Company and does not assume any obligations or
relationship of agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.

                  (c)      COUNSEL. The Warrant Agent may consult with counsel
satisfactory to it, which may include counsel for the Company, and the written
advice of such 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 accordance with the advice of such counsel.

                  (d)      DOCUMENTS. The Warrant Agent shall be protected and
shall incur no liability for or in respect of any action taken or omitted by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper parties.

                  (e)      CERTAIN TRANSACTIONS. The Warrant Agent, and its
officers, directors and employees, may become the owner of, or acquire any
interest in, Warrants, with the same rights that it or they would have if it
were not the Warrant Agent hereunder, and, to the extent permitted by applicable
law, it or they may engage or be interested in any financial or other
transaction with the Company and may act on, or as depositary, trustee or agent
for, any committee or body of holders of Warrant Securities or other obligations
of the Company as freely as if it were not the Warrant Agent hereunder. Nothing
in this Warrant Agreement shall be deemed to prevent the Warrant Agent from
acting as trustee under any indenture to which the Company is a party.

                  (f)      NO LIABILITY FOR INTEREST. Unless otherwise agreed
with the Company, the Warrant Agent shall have no liability for interest on any
monies at any time received by it pursuant to any of the provisions of this
Agreement or of the Warrant Certificates.

                  (g)      NO LIABILITY FOR INVALIDITY. The Warrant Agent shall
have no liability with respect to any invalidity of this Agreement or any of the
Warrant Certificates (except as to the Warrant Agent's countersignature
thereon).

                  (h)      NO RESPONSIBILITY FOR REPRESENTATIONS. The Warrant
Agent shall not be responsible for any of the recitals or representations herein
or in the Warrant Certificates (except

                                      11.

<PAGE>

as to the Warrant Agent's countersignature thereon), all of which are made
solely by the Company.

                  (i)      NO IMPLIED OBLIGATIONS. The Warrant Agent shall be
obligated to perform only such duties as are herein and in the Warrant
Certificates specifically set forth and no implied duties or obligations shall
be read into this Agreement or the Warrant Certificates against the Warrant
Agent. The Warrant Agent shall not be under any obligation to take any action
hereunder which may tend to involve it in any expense or liability, the payment
of which within a reasonable time is not, in its reasonable opinion, assured to
it. The Warrant Agent shall not be accountable or under any duty or
responsibility for the use by the Company of any of the Warrant Certificates
authenticated by the Warrant Agent and delivered by it to the Company pursuant
to this Agreement or for the application by the Company of the proceeds of the
Warrant Certificates. The Warrant Agent shall have no duty or responsibility in
case of any default by the Company in the performance of its covenants or
agreements contained herein or in the Warrant Certificates or in the case of the
receipt of any written demand from a holder of a Warrant Certificate with
respect to such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to initiate any
proceedings at law or otherwise or, except as provided in Section 6.2 hereof, to
make any demand upon the Company.

         5.3      RESIGNATION AND APPOINTMENT OF SUCCESSOR.

                  (a)      The Company agrees, for the benefit of the holders
from time to time of the Warrant Certificates, that there shall at all times be
a Warrant Agent hereunder until all the Warrants have been exercised or are no
longer exercisable.

                  (b)      The Warrant Agent may at any time resign as agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; provided that
such date shall not be less than three months after the date on which such
notice is given unless the Company otherwise agrees. The Warrant Agent hereunder
may be removed at any time by the filing with it of an instrument in writing
signed by or on behalf of the Company and specifying such removal and the
intended date when it shall become effective. Such resignation or removal shall
take effect upon the appointment by the Company, as hereinafter provided, of a
successor Warrant Agent (which shall be a bank or trust company authorized under
the laws of the jurisdiction of its organization to exercise corporate trust
powers) and the acceptance of such appointment by such successor Warrant Agent.
The obligation of the Company under Section 5.2(a) shall continue to the extent
set forth therein notwithstanding the resignation or removal of the Warrant
Agent.

                  (c)      In case at any time the Warrant Agent shall resign,
or shall be removed, or shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or shall commence a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or under any other applicable
Federal or state bankruptcy, insolvency or similar law or shall consent to the
appointment of or taking possession by a receiver, custodian, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Warrant Agent
or its property or affairs, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or shall take corporate action in furtherance of any such
action, or a decree or order for relief by a court having jurisdiction in the
premises shall have

                                      12.

<PAGE>

been entered in respect of the Warrant Agent in an involuntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or similar law, or a decree
or order by a court having jurisdiction in the premises shall have been entered
for the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or similar official) of the Warrant Agent or of its property or
affairs, or any public officer shall take charge or control of the Warrant Agent
or of its property or affairs for the purpose of rehabilitation, conservation,
winding up or liquidation, a successor Warrant Agent, qualified as aforesaid,
shall be appointed by the Company by an instrument in writing, filed with the
successor Warrant Agent. Upon the appointment as aforesaid of a successor
Warrant Agent and acceptance by the successor Warrant Agent of such appointment,
the Warrant Agent shall cease to be Warrant Agent hereunder.

                  (d)      Any successor Warrant Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the authority, rights, powers, trusts, immunities, duties and
obligations of such predecessor with like effect as if originally named as
Warrant Agent hereunder, and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to transfer, deliver
and pay over, and such successor Warrant Agent shall be entitled to receive, all
monies, securities and other property on deposit with or held by such
predecessor, as Warrant Agent hereunder.

                  (e)      Any corporation into which the Warrant Agent
hereunder may be merged or converted or any corporation with which the Warrant
Agent may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all the assets and business of the Warrant Agent, provided that it
shall be qualified as aforesaid, shall be the successor Warrant Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto.

                                    ARTICLE 6

                                  MISCELLANEOUS

         6.1      AMENDMENT. This Agreement may be amended by the parties
hereto, without the consent of the holder of any Warrant Certificate, for the
purpose of curing any ambiguity, or of curing, correcting or supplementing any
defective provision contained herein, or making any other provisions with
respect to matters or questions arising under this Agreement as the Company and
the Warrant Agent may deem necessary or desirable; provided that such action
shall not materially adversely affect the interests of the holders of the
Warrant Certificates.

         6.2      NOTICES AND DEMANDS TO THE COMPANY AND WARRANT AGENT. If the
Warrant Agent shall receive any notice or demand addressed to the Company by the
holder of a Warrant Certificate pursuant to the provisions of the Warrant
Certificates, the Warrant Agent shall promptly forward such notice or demand to
the Company.

                                      13.

<PAGE>

         6.3      ADDRESSES. Any communication from the Company to the Warrant
Agent with respect to this Agreement shall be addressed to ______________,
Attention: ____________ and any communication from the Warrant Agent to the
Company with respect to this Agreement shall be addressed to PacifiCare Health
Systems, Inc., 5995 Plaza Drive, Cypress, California 90630, Attention: General
Counsel (or such other address as shall be specified in writing by the Warrant
Agent or by the Company).

         6.4      GOVERNING LAW. This Agreement and each Warrant Certificate
issued hereunder shall be governed by and construed in accordance with the laws
of the State of [____________].

         6.5      DELIVERY OF PROSPECTUS. The Company shall furnish to the
Warrant Agent sufficient copies of a prospectus meeting the requirements of the
Securities Act of 1933, as amended, relating to the Warrant Securities
deliverable upon exercise of the Warrants (the "PROSPECTUS"), and the Warrant
Agent agrees that upon the exercise of any Warrant, the Warrant Agent will
deliver to the holder of the Warrant Certificate evidencing such Warrant, prior
to or concurrently with the delivery of the Warrant Securities issued upon such
exercise, a Prospectus.

The Warrant Agent shall not, by reason of any such delivery, assume any
responsibility for the accuracy or adequacy of such Prospectus.

         6.6      OBTAINING OF GOVERNMENTAL APPROVALS. The Company will from
time to time take all action which may be necessary to obtain and keep effective
any and all permits, consents and approvals of governmental agencies and
authorities and securities act filings under United States Federal and state
laws (including without limitation a registration statement in respect of the
Warrants and Warrant Securities under the Securities Act of 1933, as amended),
which may be or become requisite in connection with the issuance, sale,
transfer, and delivery of the Warrant Securities issued upon exercise of the
Warrants, the issuance, sale, transfer and delivery of the Warrants or upon the
expiration of the period during which the Warrants are exercisable.

         6.7      PERSONS HAVING RIGHTS UNDER WARRANT AGREEMENT. Nothing in this
Agreement shall give to any person other than the Company, the Warrant Agent and
the holders of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement.

         6.8      HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

         6.9      COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which as so executed shall be deemed to be an original,
but such counterparts shall together constitute but one and the same instrument.

         6.10     INSPECTION OF AGREEMENT. A copy of this Agreement shall be
available at all reasonable times at the principal corporate trust office of the
Warrant Agent for inspection by the holder of any Warrant Certificate. The
Warrant Agent may require such holder to submit his Warrant Certificate for
inspection by it.

                                      14.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.

                                            PACIFICARE HEALTH SYSTEMS, INC.

                                            By_____________________________

                                            Its____________________________

Attest:

__________________________________

                                            _______________________________
                                            Warrant Agent

                                            By_____________________________

                                            Its____________________________

Attest:

__________________________________

               [SIGNATURE PAGE TO COMMON STOCK WARRANT AGREEMENT]

<PAGE>

                                    EXHIBIT A

                           FORM OF WARRANT CERTIFICATE
                          [FACE OF WARRANT CERTIFICATE]

[Form if Warrants are attached to        Prior to _____________, this Warrant
Other Securities and are not             Certificate cannot be transferred or
immediately detachable.                  exchanged unless attached to a [Title
                                         of Other Securities].]

[Form of Legend if Warrants are not      Prior to _____________, Warrants
immediately exercisable.                 evidenced by this Warrant Certificate
                                         cannot be exercised.]

                EXERCISABLE ONLY IF COUNTERSIGNED BY THE WARRANT
                            AGENT AS PROVIDED HEREIN

           VOID AFTER [_______] P.M., [CITY] TIME, ON ______________,

                         PACIFICARE HEALTH SYSTEMS, INC.

                        WARRANT CERTIFICATE REPRESENTING
                              WARRANTS TO PURCHASE
                     COMMON STOCK, PAR VALUE $0.01 PER SHARE

No. ____________                                             __________ Warrants

         This certifies that _________________ or registered assigns is the
registered owner of the above indicated number of Warrants, each Warrant
entitling such owner [if Warrants are attached to Other Securities and are not
immediately detachable - , subject to the registered owner qualifying as a
"Holder" of this Warrant Certificate, as hereinafter defined),] to purchase, at
any time [after [________] p.m., [City] time, on ________ and] on or before
[____] p.m., [City] time, on __________, ________ shares of Common Stock, par
value $0.01 per share (the "WARRANT SECURITIES"), of PacifiCare Health Systems,
Inc. (the "COMPANY") on the following basis: during the period from _________,
through and including ____________, the exercise price per Warrant Security will
be $_________, subject to adjustment as provided in the Warrant Agreement (as
hereinafter defined) (the "WARRANT PRICE"). The Holder may exercise the Warrants
evidenced hereby by providing certain information set forth on the back hereof
and by paying in full, in lawful money of the United States of America, [in cash
or by certified check or official bank check in New York Clearing House funds]
[by bank wire transfer in immediately available funds], the Warrant Price for
each Warrant Security with respect to which this Warrant is exercised to the
Warrant Agent (as hereinafter defined) and by surrendering this Warrant
Certificate, with the purchase form on the back hereof duly executed, at the
corporate trust office of [name of Warrant Agent], or its successor as warrant
agent (the "WARRANT AGENT"), which is, on the date hereof, at the address
specified on the reverse hereof, and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement (as hereinafter
defined).

                                      A-1

<PAGE>

         The term "HOLDER" as used herein shall mean [if Warrants are attached
to Other Securities and are not immediately detachable - prior to ____________,
_____ (the "DETACHABLE DATE"), the registered owner of the Company's [title of
Other Securities] to which this Warrant Certificate was initially attached, and
after such Detachable Date,] the person in whose name at the time this Warrant
Certificate shall be registered upon the books to be maintained by the Warrant
Agent for that purpose pursuant to Section 4 of the Warrant Agreement.

         The Warrants evidenced by this Warrant Certificate may be exercised to
purchase a whole number of Warrant Securities in registered form. Upon any
exercise of fewer than all of the Warrants evidenced by this Warrant
Certificate, there shall be issued to the Holder hereof a new Warrant
Certificate evidencing Warrants for the number of Warrant Securities remaining
unexercised.

         This Warrant Certificate is issued under and in accordance with the
Warrant Agreement dated as of _____________, ____ (the "WARRANT AGREEMENT"),
between the Company and the Warrant Agent and is subject to the terms and
provisions contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
Copies of the Warrant Agreement are on file at the above-mentioned office of the
Warrant Agent.

         [If Warrants are attached to Other Securities and are not immediately
detachable - Prior to the Detachable Date, this Warrant Certificate may be
exchanged or transferred only together with the [Title of Other Securities] (the
"OTHER SECURITIES") to which this Warrant Certificate was initially attached,
and only for the purpose of effecting or in conjunction with, an exchange or
transfer of such Other Security. Additionally, on or prior to the Detachable
Date, each transfer of such Other Security on the register of the Other
Securities shall operate also to transfer this Warrant Certificate. After such
date, transfer of this] [If Warrants are attached to Other Securities and are
immediately detachable - Transfer of this] Warrant Certificate may be registered
when this Warrant Certificate is surrendered at the corporate trust office of
the Warrant Agent by the registered owner or such owner's assigns, in the manner
and subject to the limitations provided in the Warrant Agreement.

         [If Other Securities with Warrants which are not immediately detachable
- Except as provided in the immediately preceding paragraph, after] [If Other
Securities with Warrants which are immediately detachable or Warrants alone -
After] countersignature by the Warrant Agent and prior to the expiration of this
Warrant Certificate, this Warrant Certificate may be exchanged at the corporate
trust office of the Warrant Agent for Warrant Certificates representing Warrants
for the same aggregate number of Warrant Securities.

         This Warrant Certificate shall not entitle the Holder hereof to any of
the rights of a holder of the Warrant Securities, including, without limitation,
the right to receive payments of dividends or distributions, if any, on the
Warrant Securities (except to the extent set forth in the Warrant Agreement) or
to exercise any voting rights.

         Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

                                      A-2

<PAGE>

         This Warrant Certificate shall not be valid or obligatory for any
purpose until countersigned by the Warrant Agent.

         IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its name and on its behalf by the facsimile signatures of its duly authorized
officers.

Dated:____________________________       PACIFICARE HEALTH SYSTEMS, INC.

                                         By________________________________

                                         Its_______________________________

Attest:

_________________________________

Countersigned:

_________________________________
As Warrant Agent

By_______________________________
  Authorized Signature

                                      A-3

<PAGE>

                        [REVERSE OF WARRANT CERTIFICATE]

                     (Instructions for Exercise of Warrant)

         To exercise any Warrants evidenced hereby for Warrant Securities (as
hereinafter defined), the Holder must pay, in lawful money of the United States
of America, [in cash or by certified check or official bank check in New York
Clearing House funds] [by bank wire transfer in immediately available funds],
the Warrant Price in full for Warrants exercised, to [Warrant Agent] [address of
Warrant Agent], Attn: _____________, which payment must specify the name of the
Holder and the number of Warrants exercised by such Holder. In addition, the
Holder must complete the information required below and present this Warrant
Certificate in person or by mail (certified or registered mail is recommended)
to the Warrant Agent at the appropriate address set forth above. This Warrant
Certificate, completed and duly executed, must be received by the Warrant Agent
within five business days of the payment.

                   (To be executed upon exercise of Warrants)

         The undersigned hereby irrevocably elects to exercise __________
Warrants, evidenced by this Warrant Certificate, to purchase __________ shares
of the Common Stock, par value $0.01 per share (the "WARRANT SECURITIES"), of
PacifiCare Health Systems, Inc. and represents that he has tendered payment for
such Warrant Securities, in lawful money of the United States of America, [in
cash or by certified check or official bank check in New York Clearing House
funds] [by bank wire transfer in immediately available funds], to the order of
PacifiCare Health Systems, Inc., c/o [insert name and address of Warrant Agent],
in the amount of $__________ in accordance with the terms hereof. The
undersigned requests that said Warrant Securities be in fully registered form in
the authorized denominations, registered in such names and delivered all as
specified in accordance with the instructions set forth below.

         If the number of Warrants exercised is less than all of the Warrants
evidenced hereby, the undersigned requests that a new Warrant Certificate
evidencing the Warrants for the number of Warrant Securities remaining
unexercised be issued and delivered to the undersigned unless otherwise
specified in the instructions below.

Dated_______________________________     Name________________________________
                                                    (Please Print)

                                         Address______________________________

                                         _____________________________________

                                      A-4

<PAGE>

                                   ____________________________________________
                                   (Insert Social Security or Other Identifying
                                   Number of Holder)

Signature Guaranteed               ___________________________________________
                                   Signature

                                   (Signature must conform in all respects to
                                   name of holder as specified on the face of
                                   this Warrant Certificate and must bear a
                                   signature guarantee by a bank, trust company
                                   or member broker of the New York, Midwest or
                                   Pacific Stock Exchange)

This Warrant may be exercised at the following addresses:

         By hand at ___________________________________________________________

                    ___________________________________________________________

                    ___________________________________________________________

         By mail at ___________________________________________________________

                    ___________________________________________________________

                    ___________________________________________________________

[Instructions as to form and delivery of Warrant Securities and, if applicable,
Warrant Certificates evidencing Warrants for the number of Warrant Securities
remaining unexercised - complete as appropriate.]

                                      A-5

<PAGE>

                                   ASSIGNMENT

                      [Form of assignment to be executed if
                   Warrant Holder desires to transfer Warrant)

         FOR VALUE RECEIVED, ___________________ hereby sells, assigns and
transfers unto:

__________________________________________

__________________________________________

__________________________________________      _______________________________
(Please print name and address including zip    Please insert Social Security or
code)                                           other identifying number

the right represented by the within Warrant to purchase _______ shares of [Title
of Warrant Securities] of PacifiCare Health Systems, Inc. to which the within
Warrant relates and appoints ____________ attorney to transfer such right on the
books of the Warrant Agent with full power of substitution in the premises.

Dated ___________________                  ____________________________________
                                           Signature

                                           (Signature must conform in all
                                           respects to name of holder as
                                           specified on the face of the Warrant)

Signature Guaranteed

________________________

                                      A-6

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