Document:

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                                                                     Exhibit 4.6

                      BOSTON PROPERTIES LIMITED PARTNERSHIP

                                     ISSUER

                                       to

                              THE BANK OF NEW YORK

                                     TRUSTEE

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

                          Supplemental Indenture No. 3

                           Dated as of March 18, 2003

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

                                  $300,000,000

                                       of

                          5.625% Senior Notes due 2015

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                                TABLE OF CONTENTS

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                                                                                                      PAGE
   <S>              <C>                                                                                 <C>
                                   ARTICLE ONE
                    RELATION TO SENIOR INDENTURE; DEFINITIONS

   SECTION 1.1.         Relation to Senior Indenture.....................................................1
   SECTION 1.2.         Definitions......................................................................2

                                   ARTICLE TWO
                                    THE NOTES

   SECTION 2.1.         Title of the Securities.........................................................12
   SECTION 2.2.         Limitation on Aggregate Principal Amount........................................12
   SECTION 2.3.         Interest and Interest Rates; Maturity Date of Notes.............................13
   SECTION 2.4.         Limitations on Incurrence of Debt...............................................14
   SECTION 2.5.         Optional Redemption.............................................................15
   SECTION 2.6.         Places of Payment...............................................................16
   SECTION 2.7.         Method of Payment...............................................................16
   SECTION 2.8.         Currency........................................................................16
   SECTION 2.9.         Registered Securities; Global Form..............................................16
   SECTION 2.10.         Form of Notes..................................................................17
   SECTION 2.11.         Transfer and Exchange..........................................................17
   SECTION 2.12.         General Provisions Relating to Transfers and Exchanges.........................25
   SECTION 2.13.         Registrar and Paying Agent.....................................................26
   SECTION 2.14.         Defeasance.....................................................................26
   SECTION 2.15.         Provision of Financial Information.............................................26
   SECTION 2.16.         Waiver of Certain Covenants....................................................27
   SECTION 2.17.         No Sinking Fund................................................................27
   SECTION 2.18.         No Repayment at Option of Holders..............................................27
   SECTION 2.19.         Designation of CBD Properties..................................................27

                                  ARTICLE THREE
                            MISCELLANEOUS PROVISIONS

   SECTION 3.1.         Ratification of Senior Indenture................................................28
   SECTION 3.2.         Governing Law...................................................................28
   SECTION 3.3.         Counterparts....................................................................28
   SECTION 3.4.         Trustee.........................................................................28

   SCHEDULE A           -   SC-A-1
   SCHEDULE B           -   SC-B-1
   EXHIBIT A            -   A-1
   EXHIBIT B            -   B-1
   EXHIBIT C            -   C-1
</Table>

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     THIS SUPPLEMENTAL INDENTURE NO. 3, dated as of March 18, 2003 (the "Third
Supplemental Indenture"), between BOSTON PROPERTIES LIMITED PARTNERSHIP, a
limited partnership organized under the laws of the State of Delaware (herein
called the "Company"), and THE BANK OF NEW YORK, a New York banking corporation,
as trustee (herein called the "Trustee").

                             RECITALS OF THE COMPANY

     The Company has heretofore delivered to the Trustee an Indenture dated as
of December 13, 2002 (the "Senior Indenture"), providing for the issuance by the
Company from time to time of its senior debt securities evidencing its unsecured
and unsubordinated indebtedness (the "Securities").

     Section 3.01 of the Senior Indenture provides for various matters with
respect to any series of Securities issued under the Senior Indenture to be
established in an indenture supplemental to the Senior Indenture.

     Section 9.01(7) of the Senior Indenture provides for the Company and the
Trustee to enter into an indenture supplemental to the Senior Indenture to
establish the form or terms of Securities of any series as provided by Sections
2.01 and 3.01 of the Senior Indenture.

     The Board of Directors of Boston Properties, Inc., the general partner of
the Company, has duly adopted resolutions authorizing the Company to execute and
deliver this Third Supplemental Indenture.

     All of the conditions and requirements necessary to make this Third
Supplemental Indenture, when duly executed and delivered, a valid and binding
agreement in accordance with its terms and for the purposes herein expressed,
have been performed and fulfilled.

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the series of
Securities provided for herein by the Holders thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of Securities
of such series, as follows:

                                   ARTICLE ONE

                    RELATION TO SENIOR INDENTURE; DEFINITIONS

     SECTION 1.1.   RELATION TO SENIOR INDENTURE.

     This Third Supplemental Indenture constitutes an integral part of the
Senior Indenture.

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     SECTION 1.2.   DEFINITIONS.

     For all purposes of this Third Supplemental Indenture, except as otherwise
expressly provided for or unless the context otherwise requires:

          (1) Capitalized terms used but not defined herein shall have the
     respective meanings assigned to them in the Senior Indenture; and

          (2) All references herein to Articles and Sections, unless otherwise
     specified, refer to the corresponding Articles and Sections of this Third
     Supplemental Indenture.

     "ADDITIONAL INTEREST" has the meaning specified in Section 2.3(d) hereof.

     "ANNUALIZED CONSOLIDATED EBITDA" means, for any quarter, the product of
Consolidated EBITDA for such period of time multiplied by four (4), PROVIDED
that any non-recurring item that is an expense shall be added back to net income
in determining such Consolidated EBITDA before such multiplication and deducted
once from such product, and FURTHER PROVIDED that any non-recurring item that is
income shall be added to such product once and shall not be multiplied by four.

     "ANNUALIZED INTEREST EXPENSE" means, for any quarter, the Interest Expense
for that quarter multiplied by four (4).

     "ANOTHER PERSON'S SHARE" means, in connection with the defined term
"Contingent Liabilities of Boston Properties Limited Partnership and
Subsidiaries", (1) the aggregate direct and indirect interests of each Person
other than the Company or any of its Subsidiaries in the equity capital of the
applicable Partially-Owned Entity, calculated by subtracting from 100% the
Percentage Interest with respect to such Partially-Owned Entity, or (2) in the
case of reimbursement owed to the Company or any of its Subsidiaries by a third
party in respect of payment made under a guaranty, the amount to be reimbursed
to the Company or any of its Subsidiaries by such third party.

     "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear or Clearstream, as the case may be, that apply to such
transfer or exchange.

     "CAPITALIZATION RATE" means: (i) 9.0% for properties other than the CBD
Properties, and (ii) 8.5% for properties which are CBD Properties.

     "CAPITALIZED PROPERTY VALUE" means, as of any date, the sum of (1) with
respect to CBD Properties and non-CBD Properties, in each case that are not
hotel properties, the aggregate sum of all Property EBITDA for each such CBD
Property and non-CBD Property for the Latest Completed Quarter prior to such
date, annualized (i.e., multiplied by four (4)), and capitalized at the
applicable Capitalization Rate PLUS (2) with respect to CBD Properties and
non-CBD Properties, in each case that are hotel properties, the aggregate sum of
all Property EBITDA for each such CBD Property and non-CBD Property for the most
recent four (4) consecutive completed fiscal quarters, capitalized at

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the applicable Capitalization Rate; PROVIDED, HOWEVER, that if the value of a
particular property calculated pursuant to clause (1) or (2) above, as
applicable, is less than the undepreciated book value of such property, as
determined in accordance with GAAP, such undepreciated book value shall be used
in lieu thereof with respect to such property.

     "CBD PROPERTIES" means each of the properties set forth on SCHEDULE A
attached hereto, together with each additional property which is, from time to
time, designated by the Company as a CBD Property in accordance with Section
2.19 hereof.

     "CBD MARKETS" means each of the markets set forth on SCHEDULE B attached
hereto.

     "CLOSING DATE" has the meaning assigned to such term in the Registration
Rights Agreement.

     "COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of such
Notes.

     "COMPARABLE TREASURY PRICE" means, with respect to any Redemption Date, (a)
the bid price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) at 4:00 P.M. on the third business day preceding such
Redemption Date, as set forth on "Telerate Page 500" (or such other page as may
replace Telerate Page 500), or (b) if such page (or any successor page) is not
displayed or does not contain such bid prices at such time (i) the average of
the Reference Treasury Dealer Quotations obtained by the Trustee for such
Redemption Date, after excluding the highest and lowest of four such Reference
Treasury Dealer Quotations, or (ii) if the Trustee is unable to obtain at least
four such Reference Treasury Dealers Quotations, the average of all Reference
Treasury Dealer Quotations obtained by the Trustee.

     "CONSOLIDATED EBITDA" means, for any period of time, without duplication
(1) net income (loss), excluding net derivative gains and gains (losses) on
dispositions of real estate, before deductions for (i) Interest Expense, (ii)
taxes, (iii) depreciation, amortization, net derivative losses and all other
non-cash items, as determined in good faith by the Company, deducted in arriving
at net income (loss), (iv) extraordinary items, (v) non-recurring items, as
determined in good faith by the Company (including prepayment penalties), and
(vi) minority interest, of the Company and its Subsidiaries; PLUS (2) the
product of (A) net income (loss), excluding net derivative gains and gains
(losses) on dispositions of real estate, before deductions for (i) interest
expense, (ii) taxes, (iii) depreciation, amortization, net derivative losses and
all other non-cash items, as determined in good faith by the Company, deducted
in arriving at net income (loss), (iv) extraordinary items, and (v)
non-recurring items, as determined in good faith by the Company (including
prepayment penalties), of Partially-Owned Entities, multiplied by (B) the
Company's and its Subsidiaries' percentage share of such Partially-Owned
Entities; MINUS (3) the Company's income (loss) from Partially-Owned Entities.
In each

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of cases (1), (2) and (3) for such period, amounts shall be as reasonably
determined by the Company in accordance with GAAP, except to the extent GAAP is
not applicable with respect to the determination of all non-cash and
non-recurring items. Consolidated EBITDA shall be adjusted, without duplication,
to give pro forma effect: (x) in the case of any assets having been
placed-in-service or removed from service since the beginning of the period and
on or prior to the date of determination, to include or exclude, as the case may
be, any Consolidated EBITDA earned or eliminated as a result of the placement of
such assets in service or removal of such assets from service as if the
placement of such assets in service or removal of such assets from service
occurred at the beginning of the period; and (y) in the case of any acquisition
or disposition of any asset or group of assets since the beginning of the period
and on or prior to the date of determination, including, without limitation, by
merger, or stock or asset purchase or sale, to include or exclude, as the case
may be, any Consolidated EBITDA earned or eliminated as a result of the
acquisition or disposition of those assets as if the acquisition or disposition
occurred at the beginning of the period.

     "CONSOLIDATED FINANCIAL STATEMENTS" means, with respect to any Person,
collectively, the consolidated financial statements and notes to those financial
statements, of that Person and its subsidiaries prepared in accordance with
GAAP. For purposes of this definition, if as of any date or for any period
actual consolidated financial statements of any Person have not been prepared,
then this term shall include the books and records of that Person ordinarily
used in the preparation of such financial statements.

     "CONTINGENT LIABILITIES OF BOSTON PROPERTIES LIMITED PARTNERSHIP AND
SUBSIDIARIES" means, as of any date, without duplication, those liabilities of
the Company or any of its Subsidiaries consisting of indebtedness for borrowed
money, as determined in accordance with GAAP, that are or would be stated and
quantified as contingent liabilities in the notes to the Consolidated Financial
Statements of the Company as of that date; PROVIDED, HOWEVER, that Contingent
Liabilities of Boston Properties Limited Partnership and Subsidiaries shall
exclude Another Person's Share of Duplicated Obligations.

     "DEBT" means, as of any date, without duplication, (1) in the case of the
Company, all indebtedness and liabilities for borrowed money, secured or
unsecured, of the Company, including the Notes to the extent outstanding from
time to time; (2) in the case of the Company's Subsidiaries, all indebtedness
and liabilities for borrowed money, secured or unsecured, of the Subsidiaries,
including in each of cases (1) and (2) mortgage and other notes payable, but
excluding in each of cases (1) and (2) any indebtedness, including mortgages and
other notes payable, which is secured by cash, cash equivalents or marketable
securities or defeased (it being understood that cash collateral shall be deemed
to include cash deposited with a trustee with respect to third party
indebtedness; PROVIDED that such trustee holds such cash for not more than 60
days from the date of deposit); and (3) all Contingent Liabilities of Boston
Properties Limited Partnership and Subsidiaries. It is understood that Debt
shall not include any redeemable equity interest in the Company.

     "DEFAULTED INTEREST" has the meaning specified in Section 2.3 hereof.

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     "DEFINITIVE NOTE" means a certificated Note in the form of EXHIBIT A
hereto, registered in the name of the Holder thereof and issued in accordance
with Section 2.11 hereof, except that such Note shall not bear the Global Note
Legend.

     "DEPOSITARY" has the meaning assigned to it in Section 2.9(a) hereof.

     "DUPLICATED OBLIGATIONS" means, as of any date, collectively, all those
payment guaranties in respect of indebtedness and other liabilities, secured or
unsecured, of Partially-Owned Entities, including mortgage and other notes
payable, for which (1) the Company or any of its Subsidiaries, on the one hand,
and another Person or Persons, on the other hand, are jointly and severally
liable or (2) the Company or any of its Subsidiaries are entitled to
reimbursement in respect of payment under such guaranties from another Person or
Persons.

     "EXCHANGE NOTES" means the debt securities of the Company to be offered to
Holders in exchange for Initial Notes pursuant to the Exchange Offer or
otherwise pursuant to a registration of debt securities containing terms
identical in all material respects to the Notes for which they are exchanged.

     "EXCHANGE OFFER" means the exchange offer by the Company of Exchange Notes
for Initial Notes pursuant to the Registration Rights Agreement.

     "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning assigned to such
term in the Registration Rights Agreement.

     "GAAP" means generally accepted accounting principles in the United States,
consistently applied, as in effect from time to time.

     "GLOBAL NOTES" means, individually or collectively, any of the Notes issued
as Global Securities under the Senior Indenture.

     "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.03 of the
Senior Indenture, which is required to be placed on all Global Notes issued
under the Senior Indenture.

     "HOLDERS" has the meaning specified in Section 2.3 hereof.

     "INCUR" means, with respect to any Debt or other obligation of any Person,
to create, assume, guarantee or otherwise become liable in respect of the Debt
or other obligation, and "Incurrence" and "Incurred" have the meanings
correlative to the foregoing.

     "INDEPENDENT INVESTMENT BANKER" means Salomon Smith Barney Inc., Banc of
America Securities LLC, J.P. Morgan Securities Inc. or such other independent
investment banking institution of national standing appointed by the Company.

     "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a
Global Note through a Participant.

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     "INITIAL NOTES" means the Notes issued under this Third Supplemental
Indenture which are not Exchange Notes.

     "INITIAL PURCHASERS" has the meaning assigned to such term in the
Registration Rights Agreement.

     "INTERCOMPANY DEBT" means, as of any date, Debt to which the only parties
are Boston Properties, the Company, any Subsidiary of either of them as of that
date or any Partially-Owned Entity.

     "INTEREST EXPENSE" means, for any period of time, the aggregate amount of
interest recorded in accordance with GAAP for such period of time by the Company
and its Subsidiaries, but EXCLUDING: (i) interest reserves funded from the
proceeds of any loan and (ii) amortization of deferred financing costs; and
INCLUDING, without duplication: (A) effective interest in respect of original
issue discount as determined in accordance with GAAP; and (B) without limitation
or duplication, the interest expense (determined as provided above) of
Partially-Owned Entities, multiplied by the Company's Percentage Interest of the
Partially-Owned Entity Outstanding Debt in such Partially-Owned Entities, in all
cases as reflected in the applicable Consolidated Financial Statements.

         "INTEREST PAYMENT DATE" has the meaning specified in Section 2.3
hereof.

     "LATEST COMPLETED QUARTER" means the most recently ended fiscal quarter of
the Company for which Consolidated Financial Statements of the Company have been
completed, it being understood that at any time when the Company is subject to
the informational requirements of the Exchange Act, and in accordance therewith
files annual and quarterly reports with the Commission, the term "Latest
Completed Quarter" shall be deemed to refer to the fiscal quarter covered by the
Company's most recently filed Quarterly Report on Form 10-Q, or, in the case of
the last fiscal quarter of the year, the Company's Annual Report on Form 10-K.

     "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.

     "LIEN" means, without duplication, any lien, mortgage, trust deed, deed of
trust, deed to secure debt, pledge, security interest, assignment for collateral
purposes, deposit arrangement, or other security agreement, excluding any right
of setoff but including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and any other like agreement granting or
conveying a security interest; PROVIDED, that for purposes hereof, "Lien" shall
not include any mortgage that has been defeased by the Company, any of its
Subsidiaries or any of the Partially-Owned Entities in accordance with the
provisions thereof through the deposit of cash, cash equivalents or marketable
securities (it being understood that cash collateral shall be deemed to include
cash deposited with a trustee with respect to third party indebtedness).

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     "NON-U.S. PERSON" means a Person who is not a U.S. Person.

     "NOTES" has the meaning specified in Section 2.1 hereof. For all purposes
of this Third Supplemental Indenture, the term "Notes" shall include the Initial
Notes and any Exchange Notes to be issued and exchanged for any Initial Notes
pursuant to the Registration Rights Agreement and this Third Supplemental
Indenture and, for purposes of this Third Supplemental Indenture, all Initial
Notes and Exchange Notes shall vote together as one series of Notes under the
Senior Indenture.

     "PARTIALLY-OWNED ENTITY" means, at any time, any of the partnerships,
associations, corporations, limited liability companies, trusts, joint ventures
or other business entities in which the Company, directly, or indirectly through
full or partial ownership of another entity, owns an equity interest, but which
is not required in accordance with GAAP to be consolidated with the Company for
financial reporting purposes.

     "PARTIALLY-OWNED ENTITY OUTSTANDING DEBT" means, as of any date, the
aggregate principal amount of all outstanding indebtedness and liabilities for
borrowed money, secured or unsecured, of the applicable Partially-Owned Entity,
including mortgage and other notes payable but excluding any indebtedness which
is secured by cash, cash equivalents or marketable securities or defeased (it
being understood that cash collateral shall be deemed to include cash deposited
with a trustee with respect to third party indebtedness), all as reflected in
the Consolidated Financial Statements of such Partially-Owned Entity as of such
date.

     "PARTICIPANT" means, with respect to Euroclear, Clearstream or the
Depositary, a Person who has an account with Euroclear, Clearstream or the
Depositary, as the case may be (and, with respect to The Depository Trust
Company, shall include Euroclear and Clearstream).

     "PARTICIPATING BROKER-DEALER" has the meaning assigned to such term in the
Registration Rights Agreement.

     "PERCENTAGE INTEREST" means, with respect to a Partially-Owned Entity, the
Company's direct or indirect interest in the equity capital of such entity
without giving effect to any incentive or performance-based sharing in the
entity's cash flow from operations or proceeds from capital transactions in
excess of such equity interest.

     "PROPERTY EBITDA" means for any property, CBD Property or non-CBD Property,
for any period of time, without duplication, (1) if the property is owned by the
Company or any of its Subsidiaries, the net income (loss) derived from such
property, excluding net derivative gains and gains (losses) on dispositions of
real estate, before deductions for (i) Interest Expense, (ii) taxes, (iii)
depreciation, amortization, net derivative losses and all other non-cash items,
as determined in good faith by the Company, deducted in arriving at net income
(loss), (iv) extraordinary items, (v) non-recurring items, as determined in good
faith by the Company (including prepayment penalties), and (vi) minority
interest, and (2) if the property is owned by a Partially-Owned

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Entity, the product of (A) net income (loss) derived from such property,
excluding net derivative gains and gains (losses) on dispositions of real
estate, before deductions for (i) interest expense, (ii) taxes, (iii)
depreciation, amortization, net derivative losses and all other non-cash items,
as determined in good faith by the Company, deducted in arriving at net income
(loss), (iv) extraordinary items, and (v) non-recurring items, as determined in
good faith by the Company (including prepayment penalties), multiplied by (B)
the Company's and its Subsidiaries' percentage share of such Partially-Owned
Entity. In each of cases (1) and (2) for such period, amounts shall be as
reasonably determined by the Company in accordance with GAAP, except to the
extent GAAP is not applicable with respect to the determination of all non-cash
and non-recurring items. Property EBITDA shall be adjusted, without duplication,
to give pro forma effect: (x) in the case of any assets having been
placed-in-service or removed from service since the beginning of the period and
on or prior to the date of determination, to include or exclude, as the case may
be, any Property EBITDA earned or eliminated as a result of the placement of
such assets in service or removal of such assets from service as if the
placement of such assets in service or removal of such assets from service
occurred at the beginning of the period; and (y) in the case of any acquisition
or disposition of any asset or group of assets since the beginning of the period
and on or prior to the date of determination, including, without limitation, by
merger, or stock or asset purchase or sale, to include or exclude, as the case
may be, any Property EBITDA earned or eliminated as a result of the acquisition
or disposition of those assets as if the acquisition or disposition occurred at
the beginning of the period. For purposes of this definition, in the case of (1)
and (2) above, Property EBITDA shall exclude general and administrative expenses
as reflected in the Company's audited year-end Consolidated Financial Statements
or reviewed interim Consolidated Financial Statements available for the Latest
Completed Quarter or the most recent four (4) consecutive completed fiscal
quarters, as applicable.

     "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

     "QUALIFIED PERSON" means a "qualified person" within the meaning of Code
Section 49(a)(1)(D)(iv).

     "REFERENCE TREASURY DEALER" means, Salomon Smith Barney Inc., Banc of
America Securities LLC and J.P. Morgan Securities Inc. (and their respective
successors) or such other primary U.S. Government securities dealer appointed by
the Company and three other primary U.S. Government securities dealers in New
York City selected by the Independent Investment Banker (each, a "Primary
Treasury Dealer"); PROVIDED, HOWEVER, that if any of the foregoing shall cease
to be a Primary Treasury Dealer, the Company shall substitute therefor another
Primary Treasury Dealer.

     "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each
Reference Treasury Dealer and any Redemption Date for the Notes, an average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue for the Notes (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third business day preceding
such Redemption Date.

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     "REGISTRABLE SECURITIES" has the meaning assigned to such term in the
Registration Rights Agreement.

     "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of March 11, 2003, among the Company and the Initial Purchasers.

     "REGULAR RECORD DATE" has the meaning specified in Section 2.3 hereof.

     "REGULATION S GLOBAL NOTE" means a Global Note in the form of EXHIBIT A
hereto bearing the Global Note Legend and the legend in Section 2.11(f)(i)
hereof and deposited with or on behalf of the Depositary and registered in the
name of the Depositary or its nominee.

     "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Restricted
Legend.

     "RESTRICTED LEGEND" means the legend initially set forth on the Initial
Notes in the form set forth in Section 2.11(f)(ii).

     "RESTRICTED PERIOD" means the period beginning on the date hereof and
ending on the later of April 27, 2003 and the completion of the distribution of
the Notes by the Initial Purchasers.

     "RULE 144" means Rule 144 promulgated under the Securities Act, any
successor rule or regulation to substantially the same effect or any additional
rule or regulation under the Securities Act that permits transfers of restricted
securities without registration such that the transferee thereof holds
securities that are freely tradeable under the Securities Act.

     "RULE 144A" means Rule 144A promulgated under the Securities Act or any
successor rule or regulation to substantially the same effect.

     "RULE 144A GLOBAL NOTE" means a Global Note in the form of EXHIBIT A hereto
bearing the Global Note Legend and the Restricted Legend and deposited with or
on behalf of, and registered in the name of, the Depositary or its nominee.

     "RULE 903" means Rule 903 promulgated under the Securities Act or any
successor rule or regulation substantially to the same effect.

     "RULE 904" means Rule 904 promulgated under the Securities Act or any
successor rule or regulation substantially to the same effect.

     "SECURED DEBT" means, as of any date, that portion of Total Outstanding
Debt as of that date that is secured by a Lien on properties or other assets of
the Company, any of its Subsidiaries or any of the Partially-Owned Entities.

     "SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.

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     "SHELF REGISTRATION STATEMENT" has the meaning assigned to such term in the
Registration Rights Agreement.

     "SPECIAL RECORD DATE" has the meaning specified in Section 2.3 hereof.

     "SUBSIDIARY" means, with respect to any Person, a corporation, partnership
association, joint venture, trust, limited liability company or other business
entity which is required to be consolidated with the Company or Boston
Properties in accordance with GAAP.

     "TARGET FILING DATE" has the meaning specified in Section 2.3 hereof.

     "TARGET REGISTRATION DATE" has the meaning specified in Section 2.3 hereof.

     "TOTAL ASSETS" means, with respect to any Incurrence of Debt or Secured
Debt, as of any date, in each case as determined by the Company without
duplication, the sum of: (1) Capitalized Property Value; (2) cash, cash
equivalents and marketable securities of the Company and its Subsidiaries,
determined in accordance with GAAP; (3) with respect to notes receivable and
mortgages, the lesser of (i) the aggregate amount of principal under such note
or mortgage that will be due and payable to the Company or its Subsidiaries and
(ii) the purchase price paid by the Company or its Subsidiaries to acquire such
note or mortgage; (4) with respect to real estate assets which are undeveloped
land, the book value thereof in accordance with GAAP; (5) without duplication,
the cost basis of properties of the Company and its Subsidiaries that are under
development, determined in accordance with GAAP, as of the end of the quarterly
period used for purposes of clause (1) above; (6) without duplication, the
proceeds of the Debt or Secured Debt or the assets to be acquired in exchange
for such proceeds, as the case may be, other than Intercompany Debt, Incurred
from the end of the Latest Completed Quarter prior to the Incurrence of the Debt
or Secured Debt, as the case may be, to the date of determination; and (7) the
Company's and its Subsidiaries' percentage share of Partially-Owned Entities'
assets described in clauses (1), (2), (3), (4), (5) and (6) above.

     "TOTAL OUTSTANDING DEBT" means, as of any date, the sum, without
duplication, of (1) the aggregate principal amount of all outstanding Debt of
the Company as of that date; (2) the aggregate principal amount of all
outstanding Debt of the Company's Subsidiaries, all as of that date; and (3) the
sum of the aggregate principal amount of all Partially-Owned Entity Outstanding
Debt of each of the Partially-Owned Entities multiplied by the Company's
respective Percentage Interest in such Partially-Owned Entity as of that date.

     "TREASURY YIELD" means, with respect to any Redemption Date applicable to
the Notes, the rate per annum equal to the semiannual equivalent yield to
maturity (computed as of the third business day immediately preceding such
Redemption Date) of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the applicable Comparable Treasury Price for such Redemption Date.

                                       10
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     "UNENCUMBERED ASSETS" means, as of any date, in each case as determined by
the Company without duplication, the sum of: (1) Unencumbered Capitalized
Property Value; (2) cash, cash equivalents and marketable securities of the
Company and its Subsidiaries, other than restricted cash, cash equivalents and
marketable securities pledged to secure Debt, determined in accordance with
GAAP; (3) with respect to notes receivable and mortgages, the lesser of (i) the
aggregate amount of principal under such note or mortgage that will be due and
payable to the Company or its Subsidiaries and (ii) the purchase price paid by
the Company or its Subsidiaries to acquire such note or mortgage, except any
notes receivable or mortgages that are serving as collateral for Secured Debt;
(4) with respect to real estate assets which are undeveloped land, the book
value thereof in accordance with GAAP, except any land that is serving as
collateral for Secured Debt; (5) without duplication, the cost basis of
properties of the Company and its Subsidiaries that are under development,
determined in accordance with GAAP, as of the end of the quarterly period used
for purposes of clause (1) above, except any properties that are serving as
collateral for Secured Debt; (6) without duplication, the proceeds of the Debt
or Secured Debt or the assets to be acquired in exchange for such proceeds, as
the case may be, other than Intercompany Debt, Incurred from the end of the
Latest Completed Quarter prior to such date to the date of determination, except
in each case any proceeds or assets that are serving as collateral for Secured
Debt; and (7) the Company's and its Subsidiaries' percentage share, of
Partially-Owned Entities' assets described in clauses (1), (2), (3), (4), (5)
and (6) above. For the avoidance of doubt, cash held by a "qualified
intermediary" in connection with proposed like-kind exchanges pursuant to
Section 1031 of the Code which may be classified as "restricted" for GAAP
purposes shall nonetheless be included in clause (2) above, so long as the
Company or any of its Subsidiaries has the right to (i) direct the qualified
intermediary to return such cash to the Company or such Subsidiary if and when
the Company or such Subsidiary fails to identify or acquire the proposed
like-kind property or at the end of the 180-day replacement period or (ii)
direct the qualified intermediary to use such cash to acquire like-kind
property.

     "UNENCUMBERED CAPITALIZED PROPERTY VALUE" means, as of any date, the sum of
(1) with respect to CBD Properties and non-CBD Properties, in each case that are
not hotel properties, the aggregate of all Unencumbered Property EBITDA for each
such CBD Property and non-CBD Property for the Latest Completed Quarter prior to
such date, annualized (i.e., multiplied by four (4)), and capitalized at the
applicable Capitalization Rate PLUS, (2) with respect to CBD Properties and
non-CBD Properties, in each case that are hotel properties, the aggregate of all
Unencumbered Property EBITDA for each such CBD Property and non-CBD Property for
the most recent four (4) consecutive complete fiscal quarters, capitalized at
the applicable Capitalization Rate; PROVIDED, HOWEVER, that if the value of a
particular property calculated pursuant to clause (1) or (2) above, as
applicable, is less than the undepreciated book value of such property
determined in accordance with GAAP, such undepreciated book value shall be used
in lieu thereof with respect to such property.

     "UNENCUMBERED CONSOLIDATED EBITDA" means, for any period of time,
Consolidated EBITDA for such period of time less any portion thereof
attributable to assets serving as collateral for Secured Debt.

                                       11
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     "UNENCUMBERED PROPERTY EBITDA" means, for any period of time, Property
EBITDA for such period of time less any portion thereof attributable to assets
serving as collateral for Secured Debt.

     "UNRESTRICTED GLOBAL NOTE" means a Global Note (other than a Regulation S
Global Note) in the form of EXHIBIT A hereto that bears the Global Note Legend,
and that is deposited with or on behalf of and registered in the name of the
Depositary, but that does not bear and is not required to bear the Restricted
Legend.

     "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do
not bear and are not required to bear the Restricted Legend.

     "UNSECURED DEBT" means, as of any date, that portion of Total Outstanding
Debt as of that date that is neither Secured Debt nor Contingent Liabilities of
Boston Properties Limited Partnership and Subsidiaries.

     "U.S. PERSON" means a "U.S. Person" as defined in Rule 902(k) under the
Securities Act.

                                   ARTICLE TWO

                                    THE NOTES

     SECTION 2.1.   TITLE OF THE SECURITIES.

     There shall be a series of Securities designated the "5.625% Senior Notes
due 2015" (the "Notes").

     SECTION 2.2.   LIMITATION ON INITIAL AGGREGATE PRINCIPAL AMOUNT; FURTHER
                    ISSUANCES.

     The aggregate principal amount of the Notes initially shall be limited to
$300,000,000. The Company may, from time to time, subject to Section 2.4 of this
Third Supplemental Indenture and applicable law, create and issue additional
Notes under this Third Supplemental Indenture ranking equally and ratably with
the outstanding Notes in all respects (or in all respects except for the payment
of interest accruing prior to the issue date of such additional Notes or except
for the first payment of interest following the issue date of such additional
Notes) without notice to or the consent of the Holders of outstanding Notes. The
initially issued Notes and any additional Notes subsequently issued shall be
consolidated and form a single series with the outstanding Notes for all
purposes of this Third Supplemental Indenture and shall have the same terms as
to status, redemption or otherwise as the outstanding Notes. Any such additional
Notes referred to in this Section 2.2 will be issued under a further
supplemental indenture.

     Nothing contained in this Section 2.2 or elsewhere in this Third
Supplemental Indenture, or in the Notes, is intended to or shall limit execution
by the Company or

                                       12
<Page>

authentication or delivery by the Trustee of Notes under the circumstances
contemplated by Sections 3.03, 3.04, 3.05, 3.06, 9.06, 11.07 and 13.05 of the
Senior Indenture.

     SECTION 2.3.   INTEREST AND INTEREST RATES; MATURITY DATE OF NOTES.

     (a) The Notes shall bear interest at 5.625% per annum from March 18, 2003
or from the immediately preceding Interest Payment Date (as defined below) to
which interest has been paid, payable semi-annually in arrears on April 15 and
October 15 of each year, commencing October 15, 2003 (each, an "Interest Payment
Date"), to the persons (the "Holders") in whose name the applicable Notes are
registered in the Security Register at the close of business 15 calendar days
prior to such Interest Payment Date (I.E., April 1 and October 1, respectively)
(regardless of whether such day is a Business Day, as defined below), as the
case may be (each, a "Regular Record Date"). Interest on the Notes shall be
computed on the basis of a 360-day year of twelve 30-day months. Interest, if
any, not punctually paid or duly provided for on any Interest Payment Date with
respect to a Note ("Defaulted Interest") shall forthwith cease to be payable to
the Holder on the applicable Regular Record Date and may either be paid to the
person in whose name such Note is registered at the close of business on a
special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee, notice of which shall be given to
the Holder of such Note not less than ten days prior to such Special Record
Date, or may be paid at any time in any other lawful manner, as more
particularly described in the Senior Indenture.

     (b) If any Interest Payment Date or Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or Maturity, as the case may be.

     (c) The Notes shall mature on April 15, 2015.

     (d) In the event that the Exchange Offer Registration Statement or the
Shelf Registration Statement, if required pursuant to the Registration Rights
Agreement, has not been filed on or prior to the date which is 90 days after the
Closing Date (the "Target Filing Date"), the Company shall pay additional
interest (in addition to interest otherwise due on the Notes as provided herein)
("Additional Interest") to each Holder at a per annum rate equal to 0.25% from
the Target Filing Date up to but excluding the date on which the Exchange Offer
Registration Statement or the Shelf Registration Statement, if required pursuant
to the Registration Rights Agreement, is filed. In the event that either (i) the
Exchange Offer has not been completed on or prior to the date which is 210 days
after the Closing Date (the "Target Registration Date") or (ii) the Shelf
Registration Statement, if required pursuant to the Registration Rights
Agreement, is not declared effective by the SEC on or prior to the Target
Registration Date, the Company shall pay Additional Interest to each Holder at a
per annum rate equal to 0.25% from the Target Registration Date up to but
excluding the date on which the Exchange Offer is completed or the Shelf
Registration Statement, if required pursuant to the Registration Rights
Agreement, is declared effective by the SEC. In the event that either (x) the
Exchange

                                       13
<Page>

Offer has not been completed on or prior to the date which is 300 days after the
Closing Date (the "Extended Registration Date") or (y) the Shelf Registration
Statement, if required pursuant to the Registration Rights Agreement, is not
declared effective by the SEC on or prior to the Extended Registration Date, the
Company shall pay Additional Interest to each Holder at a per annum rate equal
to 0.25% from the Extended Registration Date up to but excluding the date on
which the Exchange Offer is completed or the Shelf Registration Statement, if
required pursuant to the Registration Rights Agreement, is declared effective by
the SEC. Notwithstanding the foregoing, (i) no Additional Interest shall be
payable to any Holder of Notes pursuant to this Section 2.3(d) if such Notes
have ceased to be Registrable Securities and (ii) in no event shall the
Additional Interest payable pursuant to this Section 2.3(d) exceed 0.50% per
annum. The Company shall pay such Additional Interest on each Interest Payment
Date, and payment of Additional Interest shall be subject to the terms and
conditions of the Registration Rights Agreement.

     (e) There shall also be payable in respect of each Note all Additional
Interest that may have accrued on such Note for which the Note was exchanged
pursuant to the Exchange Offer, such Additional Interest to be calculated in
accordance with the terms of such Note and payable at the same time and in the
same manner as periodic interest on such Note.

     SECTION 2.4.   LIMITATIONS ON INCURRENCE OF DEBT.

     In addition to the covenants set forth in Article Ten of the Senior
Indenture, there are established pursuant to Section 9.01(2) of the Senior
Indenture the following covenants for the benefit of the Holders of the Notes
and to which the Notes shall be subject:

     (a) The Company shall not, and shall not permit any Subsidiary to, Incur
any Debt, other than Intercompany Debt, if, immediately after giving effect to
the Incurrence of the additional Debt and any other Debt, other than
Intercompany Debt, Incurred since the end of the Latest Completed Quarter prior
to the Incurrence of the additional Debt and the application of the net proceeds
of the additional Debt and such other Debt, Total Outstanding Debt would exceed
60% of Total Assets, in each case determined as of the end of such Latest
Completed Quarter.

     (b) The Company shall not, and shall not permit any Subsidiary to, Incur
any Secured Debt, other than Secured Debt that is also Intercompany Debt, if,
immediately after giving effect to the Incurrence of the additional Secured Debt
and any other Secured Debt, other than Intercompany Debt, Incurred since the end
of the Latest Completed Quarter prior to the Incurrence of the additional
Secured Debt and the application of the net proceeds of the additional Secured
Debt and such other Secured Debt, the aggregate principal amount of all
outstanding Secured Debt is greater than 50% of Total Assets determined as of
the end of such Latest Completed Quarter.

     (c) The Company shall not, and shall not permit any Subsidiary to, Incur
any Debt, other than Intercompany Debt, if, immediately after giving effect to
the Incurrence

                                       14
<Page>

of the additional Debt, the ratio of Annualized Consolidated EBITDA for the
Latest Completed Quarter prior to the Incurrence of the additional Debt, to
Annualized Interest Expense for that quarter would be less than 1.50 to 1.00 on
a pro forma basis after giving effect to the Incurrence of the additional Debt
and to the application of the net proceeds therefrom, and calculated on the
assumption, without duplication, that: (i) the additional Debt and any other
Debt Incurred by the Company, any of its Subsidiaries or any of the
Partially-Owned Entities from the first day of that quarter to the date of
determination, which was outstanding at the date of determination, had been
Incurred at the beginning of that period and continued to be outstanding
throughout that period, and the application of the net proceeds of that Debt,
including to refinance (1) Debt under any revolving credit facility or (2) other
Debt, had occurred at the beginning of that period; (ii) the repayment or
retirement of any other Debt repaid or retired by the Company, any of its
Subsidiaries or any of the Partially-Owned Entities from the first day of that
quarter to the date of determination occurred at the beginning of that period;
PROVIDED that, except as set forth in clause (i) or (iii) of this Section
2.4(c), in determining the amount of Debt so repaid or retired, the amount of
Debt under any revolving credit facility shall be computed based upon the
average daily balance of such Debt during that period; and (iii) in the case of
any acquisition or disposition of any asset or group of assets or the placement
of any assets in service or removal of any assets from service by the Company,
any of its Subsidiaries or any of the Partially-Owned Entities from the first
day of that quarter to the date of determination, including, without limitation,
by merger, or stock or asset purchase or sale, (1) the acquisition, disposition,
placement in service or removal from service had occurred as of the first day of
that period, with the appropriate adjustments to Annualized Interest Expense
with respect to the acquisition, disposition, placement in service or removal
from service being included in that pro forma calculation and (2) the
application of the net proceeds from a disposition to repay or refinance Debt,
including, without limitation, Debt under any revolving credit facility, had
occurred on the first day of that period.

     (d) The Company and its Subsidiaries shall maintain at all times
Unencumbered Assets of not less than 150% of the aggregate principal amount of
all outstanding Unsecured Debt of the Company and its Subsidiaries.

     SECTION 2.5.   OPTIONAL REDEMPTION.

     The Notes shall be redeemable, at the option of the Company, in whole at
any time or in part from time to time, upon not less than 30 days but not more
than 60 days' prior notice mailed to the registered address of each Holder of
Notes to be so redeemed, at a redemption price equal to the greater of (i) 100%
of the principal amount of the Notes to be redeemed or (ii) the sum of (A) the
present values as of the Redemption Date of the remaining scheduled payments of
principal and interest thereon from the Redemption Date to the date of Maturity
(except for currently accrued but unpaid interest) discounted to the Redemption
Date, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months), at the applicable Treasury Yield, plus 35 basis points, plus (B)
accrued interest to the Redemption Date.

                                       15
<Page>

     SECTION 2.6.   PLACES OF PAYMENT.

     The Places of Payment where the Notes may be presented or surrendered for
payment, where the Notes may be surrendered for registration of transfer or
exchange and where notices and demands to and upon the Company in respect of the
Notes and the Senior Indenture may be served shall be in the Borough of
Manhattan, The City of New York, and the office or agency for such purpose shall
initially be located at c/o The Bank of New York, 101 Barclay Street-21W, New
York, NY 10286.

     SECTION 2.7.   METHOD OF PAYMENT.

     Payment of the principal of and interest on the Notes shall be made at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York (which shall initially be an office or agency of
the Trustee), in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
PROVIDED, HOWEVER, that at the option of the Company, payments of principal and
interest on the Notes (other than payments of principal and interest due at
Maturity) may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or (ii) by wire
transfer to an account maintained by the Person entitled thereto located within
the United States.

     SECTION 2.8.   CURRENCY.

     Principal and interest on the Notes shall be payable in Dollars.

     SECTION 2.9.   REGISTERED SECURITIES; GLOBAL FORM.

     (a)  GENERAL. The Notes shall be issuable and transferable in fully
registered form as Registered Securities, without coupons. The Notes shall
initially be issued in the form of one or more permanent Global Notes, with the
Restricted Legend affixed thereto. The depository for the Notes shall be The
Depository Trust Company (the "Depositary"). The Notes shall not be issuable in
definitive form except as provided in Section 3.05 of the Senior Indenture.

     (b)  RULE 144A GLOBAL NOTES. Notes offered and sold to QIBs pursuant to
Rule 144A shall be issued initially in the form of one or more Rule 144A Global
Notes, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee. Each Rule 144A Global
Note shall represent such of the outstanding Notes as shall be specified therein
and each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time as conclusively reflected in the books and
records of the Trustee endorsed thereon and that the aggregate principal amount
of outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any change in
the principal amount of a Rule 144A Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee as the custodian for the
Depositary, at

                                       16
<Page>

the direction of the Security Registrar, in accordance with instructions given
by the Holder thereof as required by Section 2.11 hereof.

     (c)  REGULATION S GLOBAL NOTES. Notes offered and sold to QIBs which are
Qualified Persons in reliance on Regulation S shall be issued initially in the
form of one or more Regulation S Global Notes, which shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee. During the Restricted Period, interests in a Regulation S Global
Note must be held through Euroclear or Clearstream, if the holders are
Participants in such systems, or indirectly through organizations that are
Participants in such systems. Following the termination of the Restricted
Period, beneficial interests in a Regulation S Global Note may be held, directly
or indirectly, in the account of any Participant of the Depositary. Each
Regulation S Global Note shall represent such of the outstanding Notes as shall
be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time as
conclusively reflected in the books and records of the Trustee endorsed thereon
and that the aggregate principal amount of outstanding Notes represented thereby
may from time to time be reduced or increased, as appropriate, to reflect
exchanges and redemptions. Any change in the principal amount of a Regulation S
Global Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee as the custodian for the Depositary, at the direction of the Security
Registrar, in accordance with instructions given by the Holder thereof as
required by Section 2.11 hereof.

     SECTION 2.10.  FORM OF NOTES.

     The Notes shall be substantially in the form attached as EXHIBIT A hereto.

     SECTION 2.11.  TRANSFER AND EXCHANGE.

     (a)  TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes shall be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary stating that it is unwilling or unable to continue to
act as a clearing agency for the Notes or is no longer a clearing agency
registered under the Exchange Act or other applicable law and, in either case, a
successor Depositary is not appointed by the Company within 90 days after the
date of such notice; or (ii) the Company in its sole discretion determines that
the Global Notes (in whole but not in part) should be exchanged for Definitive
Notes and delivers a written notice to such effect to the Trustee; PROVIDED,
that in no event shall a Regulation S Global Note be exchanged by the Company
for Definitive Notes prior to the expiration of the Restricted Period. Upon the
occurrence of any of the preceding events, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee.

                                       17
<Page>

          (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary in accordance with the provisions of the Senior
Indenture and the applicable procedures of the Depositary. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:

                    (i)    TRANSFER OF BENEFICIAL INTERESTS IN THE SAME OF
GLOBAL NOTE. Beneficial interests in any Rule 144A Global Note may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in a Rule 144A Global Note in accordance with the transfer restrictions
set forth in the Restricted Legend. Beneficial interests in any Regulation S
Global Note may be transferred to Persons who take delivery thereof in the form
of a beneficial interest in a Regulation S Global Note; PROVIDED, HOWEVER, that
prior to the expiration of the Restricted Period beneficial interests in a
Regulation S Global Note may only be held through Euroclear or Clearstream, if
the holders are Participants in such systems, or indirectly through
organizations that are Participants in such systems. Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the Security
Registrar to effect the transfers described in this Section 2.11(b)(i).

                    (ii)   ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL
INTERESTS IN GLOBAL NOTES. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.11(b)(i) above, and,
subject to any other requirement in this Section 2.11, the transferor of such
beneficial interest must deliver to the Security Registrar either: (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary, Euroclear or Clearstream in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in a Global Note of another type in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B), subject to Section
2.11(a), (1) a written order from a Participant or an Indirect Participant given
to the Depositary, Euroclear or Clearstream in accordance with the Applicable
Procedures directing the Depositary, Euroclear or Clearstream to cause to be
issued a Definitive Note in an amount equal to the beneficial interest to be
exchanged and (2) instructions given by the Depositary, Euroclear or Clearstream
to the Security Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the exchange; PROVIDED
that in no event shall Definitive Notes be issued upon the exchange of
beneficial interests in a Regulation S Global Note prior to the expiration of
the Restricted Period. Upon satisfaction of all of the requirements for transfer
or exchange of beneficial interests in Global Notes contained herein and in the
Senior Indenture and the Notes or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global Note(s)
pursuant to Section 2.11(h) hereof.

                                       18
<Page>

                    (iii)  TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A
RULE 144A GLOBAL NOTE FOR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A
beneficial interest in a Rule 144A Global Note may be exchanged by any holder
thereof for a beneficial interest in an Unrestricted Global Note or transferred
to a Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note if (x) the exchange or transfer complies with the
requirements of Section 2.11(b)(ii) above and (y):

                                (A) such exchange or transfer is effected
          pursuant to the Exchange Offer in accordance with the Registration
          Rights Agreement and the holder of the beneficial interest to be
          transferred, in the case of an exchange, or the transferee, in the
          case of a transfer, certifies in the applicable Letter of Transmittal
          or via the Depositary's book-entry system that it is not (1) a
          broker-dealer, (2) a Person participating in the distribution of the
          Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
          144) of the Company, and such Letter of Transmittal or book-entry
          system certification shall satisfy the requirements of Section
          2.11(b)(ii);

                                (B) such transfer is effected pursuant to the
          Shelf Registration Statement in accordance with the Registration
          Rights Agreement;

                                (C) such transfer is effected by a Participating
          Broker-Dealer pursuant to the Exchange Offer Registration Statement in
          accordance with the Registration Rights Agreement; or

                                (D) a certificate in the form of EXHIBIT B with
          the certification set forth in paragraph 3(d) or 4 thereof is
          completed, and, if the Security Registrar so requests or the
          Applicable Procedures so require, an Opinion of Counsel to the effect
          that the transfer is permitted, and that upon transfer the Notes will
          not be restricted under the Securities Act, is furnished to the
          Security Registrar.

     If any such transfer is effected at a time when an Unrestricted Global Note
has not yet been issued, the Company shall issue and, upon receipt of a Company
Order in accordance with the Senior Indenture, the Trustee shall authenticate
one or more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests so transferred.

                    (iv)   TRANSFER OF BENEFICIAL INTERESTS TO AND FROM
REGULATION S GLOBAL NOTES.

                                (A) TRANSFER OF BENEFICIAL INTERESTS IN A
          REGULATION S GLOBAL NOTE PRIOR TO THE TERMINATION OF THE RESTRICTED
          PERIOD FOR BENEFICIAL INTERESTS IN A RULE 144A GLOBAL NOTE. A
          beneficial interest in any Regulation S Global Note may be transferred
          to a Person who takes

                                       19
<Page>

          delivery thereof in the form of a beneficial interest in a Rule 144A
          Global Note if (x) the transfer complies with the requirements of
          Section 2.11(b)(ii) above and (y) the holder of the beneficial
          interest in the Regulation S Global Note delivers to the Trustee and
          the Security Registrar a certificate in the form of EXHIBIT B hereto
          with the certification set forth in paragraph 1 thereof completed.

                                (B) TRANSFER OF BENEFICIAL INTERESTS IN A
          REGULATION S GLOBAL NOTE FOLLOWING THE TERMINATION OF THE RESTRICTED
          PERIOD FOR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A
          beneficial interest in any Regulation S Global Note following the
          termination of the Restricted Period may be transferred to a Person
          who takes delivery thereof in the form of a beneficial interest in an
          Unrestricted Global Note if (x) the transfer complies with the
          requirements of Section 2.11(b)(ii) above and (y) the holder of the
          Regulation S Global Note delivers to the Security Registrar a
          certificate in the form of EXHIBIT B hereto with the certification set
          forth in paragraph 3(d) or 4 thereof completed.

                                (C) TRANSFER OF BENEFICIAL INTERESTS IN A RULE
          144A GLOBAL NOTE FOR BENEFICIAL INTERESTS IN A REGULATION S GLOBAL
          NOTE. A beneficial interest in any Rule 144A Global Note may be
          transferred to a Person who takes delivery thereof in the form of a
          beneficial interest in a Regulation S Global Note if (x) the transfer
          complies with the requirements of Section 2.11(b)(ii) above and (y)
          the holder of the beneficial interest in the Rule 144A Global Note
          delivers to the Security Registrar a certificate in the form of
          EXHIBIT B hereto with the certification set forth in paragraph 2
          thereof completed.

     (c)  EXCHANGE OF BENEFICIAL INTERESTS IN GLOBAL NOTES FOR DEFINITIVE NOTES.

                    (i)  BENEFICIAL INTERESTS IN RULE 144A GLOBAL NOTES OR
REGULATION S GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. Subject to Section
2.11(a), a holder of a beneficial interest in a Rule 144A Global Note or
Regulation S Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note only if such exchange is in accordance with the
Applicable Procedures, and, if the Security Registrar so requests or the
Applicable Procedures so require, an Opinion of Counsel or other certification
to the effect that the exchange is permitted, and that upon exchange the Notes
will not be restricted under the Securities Act, is furnished to the Security
Registrar.

                    (ii)   BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO
UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in an
Unrestricted Global Note may, in the circumstances described in Section 2.11(a),
exchange such beneficial interest for an Unrestricted Definitive Note.

     Any exchange pursuant to this Section 2.11(c) shall satisfy the
requirements of Section 2.11(b)(ii). In any such case, the Trustee shall cause
the aggregate principal

                                       20
<Page>

amount of the applicable Global Note to be reduced accordingly pursuant to
Section 2.11(h) hereof, and the Company shall execute and the Trustee, upon
receipt of a Company Order in accordance with the Senior Indenture, shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Restricted Definitive
Note issued in exchange for a beneficial interest in a Global Note pursuant to
this Section 2.11(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Security Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are so
registered.

     (d)  TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.11(d), the Security Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Security
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Security Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.11(d).

                    (i)    RESTRICTED DEFINITIVE NOTES TO RESTRICTED
DEFINITIVE NOTES. Any Restricted Definitive Note may be transferred to and
registered in the name of a Person who takes delivery thereof in the form of a
Restricted Definitive Note if the Security Registrar receives the following:

                                (A) if the transfer will be made pursuant to
          Rule 144A, then the transferor must deliver a certificate in the form
          of EXHIBIT B hereto with the certification set forth in paragraph 1
          thereof completed,

                                (B) if the transfer will be made to a Non-U.S.
          Person which is a QIB and a Qualified Person in an offshore
          transaction in accordance with Rule 903 or Rule 904, then the
          transferor must deliver a certificate in the form of EXHIBIT B hereto
          with the certification set forth in paragraph 2 thereof completed; and

                                (C) if the transfer will be made pursuant to any
          other exemption from the registration requirements of the Securities
          Act, then the transferor must deliver an Opinion of Counsel and/or
          other certification in form and substance acceptable to the Security
          Registrar and the Company.

                    (ii)   RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED
DEFINITIVE NOTES. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person or
Persons who take delivery thereof in the form of an Unrestricted Definitive Note
if:

                                       21
<Page>

                                (A) such exchange or transfer is effected
          pursuant to the Exchange Offer in accordance with the Registration
          Rights Agreement and the Holder, in the case of an exchange, or the
          transferee, in the case of a transfer, certifies in the applicable
          Letter of Transmittal, that it is not (1) a broker-dealer, (2) a
          Person participating in the distribution of the Exchange Notes or (3)
          a Person who is an affiliate (as defined in Rule 144) of the Company;

                                (B) any such transfer is effected pursuant to
          the Shelf Registration Statement in accordance with the Registration
          Rights Agreement;

                                (C) any such transfer is effected by a
          Participating Broker-Dealer pursuant to the Exchange Offer
          Registration Statement in accordance with the Registration Rights
          Agreement; or

                                (D) a certificate in the form of EXHIBIT B
          hereto with the certification set forth in paragraph 3(d) or 4 thereof
          completed, and, if the Trustee and the Security Registrar so request
          or the Applicable Procedures so require, an Opinion of Counsel to the
          effect that the transfer is permitted, and that upon transfer the
          Notes will not be restricted under the Securities Act, is furnished to
          the Trustee and the Securities Registrar.

                    (iii)  UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Security Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.

     (e)  EXCHANGE OFFER; SHELF REGISTRATION STATEMENT.

                    (i) Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Company shall issue and, upon
receipt of a Company Order in accordance with the Senior Indenture, the Trustee
shall authenticate (x) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Rule 144A Global Notes and Regulation S Global Notes tendered for acceptance
by Persons that certify in the applicable Letters of Transmittal that (A) they
are not broker-dealers, (B) they are not participating in a distribution of the
Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (y) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Rule 144A Global Notes and/or
Regulation S Global Notes to be reduced accordingly, and the Company shall
execute and the Trustee shall, upon receipt of a Company Order in accordance
with the Senior Indenture, authenticate

                                       22
<Page>

and deliver to the Persons designated by the Holders of the Restricted
Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate
principal amount.

                    (ii)   Following the effectiveness of a Shelf Registration
Statement, if any, the Company shall issue and, upon receipt of a Company Order
in accordance with the Senior Indenture, the Trustee shall authenticate from
time to time (x) one or more Unrestricted Global Notes, or, if there shall be at
the time one or more Unrestricted Global Notes outstanding and such increase can
be effected in accordance with the Applicable Procedures, the Trustee shall
increase or cause to be increased the aggregate principal amount thereof, in
each case in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Global Notes sold by Persons that certify as to the
consummation of such sale under the Shelf Registration Statement in a manner
acceptable to the Trustee and the Company and (y) Unrestricted Definitive Notes
in an aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes sold by Persons that certify as to the consummation of such
sale under the Shelf Registration Statement in a manner acceptable to the
Trustee and the Company. Concurrently with the issuance of such Unrestricted
Global Notes, the Trustee shall cause the aggregate principal amount of the
applicable Rule 144A Global Notes and/or the Regulation S Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall, upon
receipt of a Company Order in accordance with the Senior Indenture, authenticate
and deliver to the Persons designated by the Holders of Restricted Definitive
Notes so sold Unrestricted Definitive Notes in the appropriate principal amount.

     (f)  LEGENDS.

                    (i)    RESTRICTED LEGEND. Except as otherwise provided in
Section 2.11(g), each Initial Note shall bear the following legend on the face
thereof:

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. EACH PURCHASER OF THIS NOTE
IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.

     THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN
BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, FOR THE BENEFIT OF BOSTON PROPERTIES LIMITED PARTNERSHIP (THE
"ISSUER"), THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (A) TO THE ISSUER, (B) PURSUANT TO A

                                       23
<Page>

REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) TO A QUALIFIED INSTITUTIONAL BUYER WHICH IS A
"QUALIFIED PERSON" WITHIN THE MEANING OF INTERNAL REVENUE CODE SECTION
49(a)(1)(D)(iv) OUTSIDE THE UNITED STATES IN A TRANSACTION COMPLYING WITH THE
PROVISIONS OF RULE 904 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, OR (F) UNDER ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IF
THE PURCHASER REPRESENTS THAT IT IS A "QUALIFIED PERSON" WITHIN THE MEANING OF
INTERNAL REVENUE CODE SECTION 49(a)(1)(D)(iv), AND IN THE CASE OF (A) THROUGH
(F) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION. EACH HOLDER WILL NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERENCED ABOVE.

THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS
AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH
THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.

                    (ii)   REGULATION S GLOBAL NOTE LEGEND. The Regulation S
Global Note shall bear the following legend on the face thereof:

DURING THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF), INTERESTS IN THIS REGULATION S GLOBAL NOTE MAY ONLY BE HELD
THROUGH EUROCLEAR AND CLEARSTREAM.

     (g)  (i) If the Company determines (upon the advice of counsel and such
other certifications as the Company may reasonably require) that any Note is
eligible for resale pursuant to Rule 144(k) under the Securities Act (or a
successor provision) and that the Restricted Legend is no longer necessary or
appropriate in order to ensure that subsequent transfers of such Note (or a
beneficial interest therein) are effected in compliance with the Securities Act,
or (ii) after an Initial Note is (x) sold pursuant to an effective registration
statement under the Securities Act, pursuant to the Registration Rights
Agreement or otherwise, or (y) exchanged for an Exchange Note, the Company

                                       24
<Page>

may instruct the Trustee to cancel such Note and issue to the Holder thereof (or
to its transferee) a new Note of like tenor and amount, registered in the name
of the Holder thereof (or its transferee), that does not bear the Restricted
Legend and the Trustee will comply with such instruction.

     (h)  CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with the terms of the Senior
Indenture. At any time prior to such cancellation, if any beneficial interest in
a Global Note is exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note or for
Definitive Notes, the principal amount of Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note, such other Global Note shall be increased accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary to reflect
such increase.

     SECTION 2.12.  GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.

     (a) The Trustee and the Security Registrar will retain copies of all
certificates, opinions and other documents received in connection with the
transfer or exchange of a Note (or a beneficial interest therein), and the
Company will have the right to inspect and make copies thereof at any reasonable
time upon written notice to the Trustee or the Security Registrar, as the case
may be.

     (b) By its acceptance of any Note bearing the Restricted Legend, each
Holder acknowledges the restrictions on transfer of such Note set forth in this
Third Supplemental Indenture and in the Restricted Legend and agrees that it
will transfer such Note only as provided in this Third Supplemental Indenture.
The Security Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Third Supplemental Indenture. In connection with any transfer of a Note,
each Holder agrees by its acceptance of such Note to furnish the Security
Registrar or the Company such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; PROVIDED, that
the Security Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.

     (c) Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Third Supplemental
Indenture or applicable United States federal or state securities law.

                                       25
<Page>

     (d) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Third Supplemental Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or among
members of, or Participants or Indirect Participants in, the Depositary or
beneficial owners of interests in any Global Note) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Third Supplemental Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.

     SECTION 2.13.  REGISTRAR AND PAYING AGENT.

     The Trustee shall initially serve as Security Registrar and Paying Agent
for the Notes.

     SECTION 2.14.  DEFEASANCE.

     The provisions of Sections 14.02 and 14.03 of the Senior Indenture,
together with the other provisions of Article Fourteen of the Senior Indenture,
shall be applicable to the Notes. The provisions of Section 14.03 of the Senior
Indenture shall apply to the covenants set forth in Sections 2.4 and 2.15 of
this Third Supplemental Indenture and to those covenants specified in Section
14.03 of the Senior Indenture.

     SECTION 2.15.  PROVISION OF FINANCIAL INFORMATION.

     Whether or not the Company is subject to Section 13 or 15(d) of the
Exchange Act, the Company shall, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to such Section 13 or 15(d) if the Company were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject.

     The Company shall also in any event (x) within 15 days of each Required
Filing Date (i) if the Company is not then subject to Section 13 or 15(d) of the
Exchange Act, transmit by mail to all Holders, as their names and addresses
appear in the Security Register, without cost to such Holders, copies of the
annual reports and quarterly reports which the Company would have been required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
if the Company were subject to such Sections, and (ii) file with the Trustee
copies of annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Company were subject to such Sections and
(y) if filing such documents by the Company with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the

                                       26
<Page>

reasonable cost of duplication and delivery, supply copies of such documents to
any prospective Holder.

     SECTION 2.16.  WAIVER OF CERTAIN COVENANTS.

     Notwithstanding the provisions of Section 10.09 of the Senior Indenture,
the Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 10.04 to 10.08, inclusive, of the
Senior Indenture, with Sections 2.4 and 2.15 of this Third Supplemental
Indenture and with any other term, provision or condition with respect to the
Notes (except any such term, provision or condition which could not be amended
without the consent of all Holders of the Notes), if before or after the time
for such compliance the Holders of at least a majority in principal amount of
all outstanding Notes, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such covenant or condition.
Except to the extent so expressly waived, and until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.

     SECTION 2.17.  NO SINKING FUND.

     The provisions of Article Twelve of the Senior Indenture shall not be
applicable to the Notes.

     SECTION 2.18.  NO REPAYMENT AT OPTION OF HOLDERS.

     The provisions of Article Thirteen of the Senior Indenture shall not be
applicable to the Notes.

     SECTION 2.19.  DESIGNATION OF CBD PROPERTIES.

     From time to time, the Company may designate one or more additional
properties as CBD Properties by delivering an Officers' Certificate, in
substantially the form attached hereto as EXHIBIT C, to the Trustee (i) setting
forth the name of such property and (ii) certifying that, in the good faith
opinion of such officers, such property is located in the central business
district of a CBD Market. Upon delivery of such Officers' Certificate to the
Trustee, such property shall be a CBD Property for all purposes of this Third
Supplemental Indenture.

                                       27
<Page>

                                  ARTICLE THREE

                            MISCELLANEOUS PROVISIONS

     SECTION 3.1.   RATIFICATION OF SENIOR INDENTURE.

     Except as expressly modified or amended hereby, the Senior Indenture
continues in full force and effect and is in all respects confirmed, ratified
and preserved.

     SECTION 3.2.   GOVERNING LAW.

     This Third Supplemental Indenture and each Note shall be governed by and
construed in accordance with the laws of the State of New York. This Third
Supplemental Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, and shall, to the extent applicable, be governed by such
provisions.

     SECTION 3.3.   COUNTERPARTS.

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

     SECTION 3.4.   TRUSTEE.

     The Trustee makes no representations as to the validity or sufficiency of
this Third Supplemental Indenture. The statements and recitals herein are deemed
to be those of the Company and not of the Trustee.

                                       28
<Page>

     IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental
Indenture to be duly executed by their respective officers hereunto duly
authorized, all as of the day and year first written above.

                                           BOSTON PROPERTIES LIMITED PARTNERSHIP

                                           By:  Boston Properties, Inc.,
                                                its general partner

                                           By: /s/ Douglas T. Linde
                                              ----------------------------------
                                              Name: Douglas T. Linde
                                              Title: Senior Vice President,
                                                     Chief Financial Officer
                                                     and Treasurer

                                           THE BANK OF NEW YORK, as Trustee

                                           By: /s/ Ming J. Ryan
                                              ----------------------------------
                                              Name: Ming J. Ryan
                                              Title: Vice President

                                       29
<Page>

                                                                      SCHEDULE A

                                 CBD PROPERTIES

         PROPERTY                                        LOCATION
         --------                                        --------
         265 Franklin Street                             Boston, MA
         Prudential Center Tower                         Boston, MA
         101 Huntington Avenue                           Boston, MA
         Prudential Center Retail                        Boston, MA
         Prudential Lord & Taylor                        Boston, MA
         Prudential Saks 5th Avenue                      Boston, MA
         111 Huntington Retail                           Boston, MA
         111 Huntington Avenue                           Boston, MA
         Huntington Retail Parcel                        Boston, MA
         Prudential Center Garage                        Boston, MA
         Cambridge Center One                            Cambridge, MA
         Cambridge Center Three                          Cambridge, MA
         Cambridge Center Eight                          Cambridge, MA
         Cambridge Center Ten                            Cambridge, MA
         Cambridge Center Eleven                         Cambridge, MA
         Cambridge Center Fourteen                       Cambridge, MA
         University Place                                Cambridge, MA
         Cambridge Center North Garage                   Cambridge, MA
         Citigroup Center                                New York, NY
         599 Lexington Avenue                            New York, NY
         280 Park Avenue                                 New York, NY
         5 Times Square                                  New York, NY
         Times Square Tower                              New York, NY
         399 Park Avenue                                 New York, NY
         100 East Pratt Street                           Baltimore, MD
         Riverfront Plaza                                Richmond, VA
         Embarcadero Center One                          San Francisco, CA
         Embarcadero Center Two                          San Francisco, CA
         Embarcadero Center Three                        San Francisco, CA
         Embarcadero Center Four                         San Francisco, CA
         Federal Reserve                                 San Francisco, CA
         West Tower                                      San Francisco, CA
         Metropolitan Square                             Washington, DC
         Market Square North                             Washington, DC
         1301 New York Avenue                            Washington, DC
         Capital Gallery                                 Washington, DC
         500 E Street                                    Washington, DC
         Sumner Square                                   Washington, DC

                                     SC-A-1
<Page>

         PROPERTY                                        LOCATION
         --------                                        --------
         Shaw Pittman Building                           Washington, DC
         901 New York Avenue                             Washington, DC

                                     SC-A-2
<Page>

                                                                      SCHEDULE B

                                   CBD MARKETS

Los Angeles, California
Orange County, California
San Francisco, California
San Jose, California
Denver, Colorado
Washington, D.C.
Miami, Florida
Atlanta, Georgia
Chicago, Illinois
Baltimore, Maryland
Boston, Massachusetts
Cambridge, Massachusetts
Detroit, Michigan
Minneapolis, Minnesota
New York, New York
Portland, Oregon
Philadelphia, Pennsylvania
Dallas, Texas
Houston, Texas
Richmond, Virginia
Seattle, Washington

                                     SC-B-1
<Page>

                                                                       EXHIBIT A

                                  FORM OF NOTE

                               [Face of Security]

     [IF THIS SECURITY IS AN INITIAL NOTE, INSERT: THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF
AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, FOR
THE BENEFIT OF BOSTON PROPERTIES LIMITED PARTNERSHIP (THE "ISSUER"), THAT THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (A) TO
THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO A QUALIFIED
INSTITUTIONAL BUYER WHICH IS A "QUALIFIED PERSON" WITHIN THE MEANING OF INTERNAL
REVENUE CODE SECTION 49(a)(1)(D)(iv) OUTSIDE THE UNITED STATES IN A TRANSACTION
COMPLYING WITH THE PROVISIONS OF RULE 904 UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, OR (F) UNDER ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT IF THE PURCHASER REPRESENTS THAT IT IS A "QUALIFIED PERSON" WITHIN THE
MEANING OF INTERNAL REVENUE CODE SECTION 49(a)(1)(D)(iv), AND IN THE CASE OF (A)
THROUGH (F) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION.

                                       A-1
<Page>

EACH HOLDER WILL NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERENCED ABOVE.

THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS
AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH
THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]

[IF THIS SECURITY IS A REGULATION S GLOBAL NOTE, INSERT: DURING THE RESTRICTED
PERIOD (AS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF),
INTERESTS IN THIS REGULATION S GLOBAL NOTE MAY ONLY BE HELD THROUGH EUROCLEAR
AND CLEARSTREAM.]

[IF THE HOLDER OF THIS SECURITY (AS INDICATED BELOW) IS THE DEPOSITORY TRUST
COMPANY ("DTC") OR A NOMINEE OF DTC, INSERT: UNLESS THIS SECURITY IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND SUCH SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO., OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL THIS SECURITY IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER NOMINEE OF
DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH
SUCCESSOR.]

                      BOSTON PROPERTIES LIMITED PARTNERSHIP
                          5.625% Senior Notes due 2015

No. ________                                                      $___________
CUSIP No. ________

     BOSTON PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership
(herein referred to as the "Company," which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value
received, hereby promises to pay to ________________________ or registered
assigns the principal sum of _______ Dollars on April 15, 2015 (the "Stated
Maturity Date") or earlier at the option of the Company as provided herein (the
"Redemption Date") and to pay interest thereon from March 18, 2003 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on April 15 and

                                       A-2
<Page>

October 15 in each year (each, an "Interest Payment Date"), commencing October
15, 2003, at the rate of 5.625% per annum, until the principal hereof is paid or
duly provided for. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Holder in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the April 1 or October 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date at
the office or agency of the Company maintained for such purpose; PROVIDED,
HOWEVER, that such interest may be paid, at the Company's option, by mailing a
check to such Holder at its registered address or by transfer of funds to an
account maintained by such Holder within the United States. Any such interest
not so punctually paid or duly provided for shall forthwith cease to be payable
to the Holder on such Regular Record Date, and may be paid to the Holder in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.

     The principal of this Security payable on the Stated Maturity Date or the
principal of, premium or Make-Whole Amount, if any, and, if the Redemption Date
is not an Interest Payment Date, interest on this Security payable on the
Redemption Date, will be paid against presentation of this Security at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public
and private debts.

     Interest payable on this Security on any Interest Payment Date and on the
Stated Maturity Date or Redemption Date, as the case may be, will include
interest accrued from and including the next preceding Interest Payment Date in
respect of which interest has been paid or duly provided for (or from and
including March 18, 2003, if no interest has been paid on this Security) to but
excluding such Interest Payment Date or the Stated Maturity Date or Redemption
Date, as the case may be. If any Interest Payment Date or the Stated Maturity
Date or Redemption Date falls on a day that is not a Business Day, as defined
below, principal, premium or Make-Whole Amount, if any, and/or interest payable
with respect to such Interest Payment Date or Stated Maturity Date or Redemption
Date, as the case may be, will be paid on the next succeeding Business Day with
the same force and effect as if it were paid on the date such payment was due,
and no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date or Stated Maturity Date or Redemption Date, as
the case may be. "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in The
City of New York are required or authorized by law, regulation or executive
order to close.

                                       A-3
<Page>

     [IF THIS SECURITY IS A GLOBAL NOTE, INSERT: All payments of principal,
premium or Make-Whole Amount, if any, and interest in respect of this Security
will be made by the Company in immediately available funds.]

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

     Unless the Certificate of Authentication hereon has been executed by the
Trustee by manual signature of one of its authorized signatories, this Security
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.

                                       A-4
<Page>

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its facsimile corporate seal.

Dated:
     --------------------------

                                           BOSTON PROPERTIES LIMITED PARTNERSHIP

                                           By:  Boston Properties, Inc., its
                                           general partner

                                                By:
                                                   -----------------------------
                                                Name:
                                                Title:

Attest:

-------------------------------
Secretary

                          CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

                                           THE BANK OF NEW YORK,
                                           as Trustee

Dated:                                     By:
     --------------------------                ---------------------------------
                                                    Authorized Signatory

                                       A-5
<Page>

                              [Reverse of Security]

                      BOSTON PROPERTIES LIMITED PARTNERSHIP

     This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of December 13, 2002, as supplemented by
Supplemental Indenture No. 3, dated as of March 18, 2003 (as so supplemented,
herein called the "Indenture"), each between the Company and The Bank of New
York, as Trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of which this Security is
a part), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The aggregate principal amount of the Securities to
be issued under such series is initially limited to $300,000,000 (except for
Securities authenticated and delivered upon transfer of, or in exchange for, or
in lieu of other Securities). All terms used in this Security which are defined
in the Indenture shall have the meanings assigned to them in the Indenture.

     If an Event of Default, as defined in the Indenture, with respect to the
Securities shall occur and be continuing, the principal of the Securities of
this series may be declared due and payable in the manner and with the effect
provided in the Indenture.

     The Securities are subject to redemption, at the option of the Company, in
whole at any time or in part from time to time at a redemption price equal to
the greater of (i) 100% of the principal amount of the Securities to be redeemed
or (ii) the sum of (A) the present values of the remaining scheduled payments of
principal and interest thereon from the Redemption Date to the date of Maturity
(except for currently accrued but unpaid interest) discounted to the Redemption
Date, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months), at the applicable Treasury Yield, plus 35 basis points, plus (B)
accrued interest to the Redemption Date.

     Notice of redemption will be given by mail to Holders of Securities, not
less than 30 nor more than 60 days prior to the Redemption Date, all as provided
in the Indenture.

     In the event of redemption of this Security in part only, a new Security or
Securities for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.

     In the event that the Exchange Offer Registration Statement or the Shelf
Registration Statement, if required pursuant to the Registration Rights
Agreement, has not been filed on or prior to the date which is 90 days after the
Closing Date (the "Target Filing Date"), the Company shall pay additional
interest (in addition to interest otherwise due on the Notes as provided herein)
("Additional Interest") to each Holder at a per annum rate equal to 0.25% from
the Target Filing Date up to but excluding the date on which the Exchange Offer
Registration Statement or the Shelf Registration Statement, if

                                       A-6
<Page>

required pursuant to the Registration Rights Agreement, is filed. In the event
that either (i) the Exchange Offer has not been completed on or prior to the
date which is 210 days after the Closing Date (the "Target Registration Date")
or (ii) the Shelf Registration Statement, if required pursuant to the
Registration Rights Agreement, is not declared effective by the SEC on or prior
to the Target Registration Date, the Company shall pay Additional Interest to
each Holder at a per annum rate equal to 0.25% from the Target Registration Date
up to but excluding the date on which the Exchange Offer is completed or the
Shelf Registration Statement, if required pursuant to the Registration Rights
Agreement, is declared effective by the SEC. In the event that either (x) the
Exchange Offer has not been completed on or prior to the date which is 300 days
after the Closing Date (the "Extended Registration Date") or (y) the Shelf
Registration Statement, if required pursuant to the Registration Rights
Agreement, is not declared effective by the SEC on or prior to the Extended
Registration Date, the Company shall pay Additional Interest to each Holder at a
per annum rate equal to 0.25% from the Extended Registration Date up to but
excluding the date on which the Exchange Offer is completed or the Shelf
Registration Statement, if required pursuant to the Registration Rights
Agreement, is declared effective by the SEC. Notwithstanding the foregoing, (i)
no Additional Interest shall be payable to any Holder of Securities pursuant to
this provision if such Securities have ceased to be Registrable Securities and
(ii) in no event shall the Additional Interest payable pursuant to this
provision exceed 0.50% per annum. The Company shall pay such Additional Interest
on each Interest Payment Date, and payment of Additional Interest shall be
subject to the terms and conditions of the Registration Rights Agreement.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority of the aggregate principal amount of all Securities issued
under the Indenture at the time Outstanding and affected thereby. The Indenture
also contains provisions permitting the Holders of not less than a majority of
the aggregate principal amount of the Outstanding Securities, on behalf of the
Holders of all such Securities, to waive compliance by the Company with certain
provisions of the Indenture. Furthermore, provisions in the Indenture permit the
Holders of not less than a majority of the aggregate principal amount, in
certain instances, of the Outstanding Securities of any series to waive, on
behalf of all of the Holders of Securities of such series, certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and other Securities issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

     No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium or Make-Whole
Amount, if any) and interest on this Security at the times, places and rate, and
in the coin or currency, herein prescribed.

                                       A-7
<Page>

     As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register of
the Company upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and premium
or Make-Whole Amount, if any) and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or by his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

     As provided in the Indenture and subject to certain limitations therein set
forth, this Security is exchangeable for a like aggregate principal amount of
Securities of different authorized denominations but otherwise having the same
terms and conditions, as requested by the Holder hereof surrendering the same.

     The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.

     No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

     No recourse shall be had for the payment of the principal of or premium or
Make-Whole Amount, if any, or the interest on this Security, or for any claim
based hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any past, present or
future stockholder, employee, officer or director, as such, of Boston Properties
or of any successor, either directly or through Boston Properties or any
successor, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.

     The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely in such State.

                                      A-8
<Page>

                                 ASSIGNMENT FORM

To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to

--------------------------------------------------------------------------------
                  (Insert assignee's soc. sec. or tax I.D. no.)

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

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

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

--------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code

and irrevocably appoint_________________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.

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

Date:                                      Your Signature:
    -----------------------                               ----------------------
                                           (Sign exactly as your name appears on
                                           the face of this Security)

                                           Tax Identification No:
                                                                 ---------------

                                           SIGNATURE GUARANTEE:

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

                                           Signatures must be guaranteed by an
                                           "eligible guarantor institution"
                                           meeting the requirements of the
                                           Security Registrar, which
                                           requirements include membership or
                                           participation in the Security
                                           Transfer Agent Medallion Program
                                           ("STAMP") or such other "signature
                                           guarantee program" as may be
                                           determined by the Security Registrar
                                           in addition to, or in substitution
                                           for, STAMP, all in accordance with
                                           the Securities Exchange Act of 1934,
                                           as amended.

                                       A-9
<Page>

             SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE1

     The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:

<Table>
<Caption>
                                                                       Principal amount of
                           Amount of decrease    Amount of increase      this Global Note         Signature of
                              in principal          in principal          following such       authorized officer
                             amount of this        amount of this            decrease             of Trustee or
   Date of Exchange           Global Note           Global Note            (or increase)          Note Custodian
-----------------------  ---------------------  ---------------------  ---------------------- ----------------------
<S>                      <C>                    <C>                    <C>                    <C>

</Table>

                                      A-10
<Page>

                                                                       EXHIBIT B

                                     FORM OF
                              TRANSFER CERTIFICATE

Boston Properties Limited Partnership
800 Boylston Street
Suite 400
Boston, Massachusetts 02199
Attention:[______________]

The Bank of New York
101 Barclay Street-21W
New York, New York 10286
Attention:[______________]

                  Re:   5.625% SENIOR NOTES DUE 2015

                  Reference is hereby made to Supplemental Indenture No. 3,
dated as of March 18, 2003 (the "Third Supplemental Indenture"), between Boston
Properties Limited Partnership (the "Company") and The Bank of New York, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Third Supplemental Indenture.

                  _______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $__________________ in such Note[s] or interests (the
"Transfer"), to _______________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby certifies
that:

                             [CHECK ALL THAT APPLY]

(1)  - CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A 144A
GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Restricted Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Restricted Definitive Note for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Third Supplemental
Indenture, the transferred beneficial interest or Restricted Definitive Note
will be subject to the restrictions on transfer enumerated in the Restricted
Legend printed on the 144A Global Note and/or the Restricted Definitive Note and
in the Third Supplemental Indenture and under the Securities Act.

(2)  - CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A
REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION
S. The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and,

                                       B-1
<Page>

accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act, (iv) the transfer is being made to a person
which is a QIB and a Qualified Person and (v) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
one of the Initial Purchasers). Upon consummation of the proposed transfer in
accordance with the terms of the Third Supplemental Indenture, the transferred
beneficial interest or Restricted Definitive Note will be subject to the
restrictions on Transfer enumerated in the Restricted Legend printed on the
Regulation S Global Note and/or the Restricted Definitive Note and in the Third
Supplemental Indenture and under the Securities Act.

(3)  - CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A DEFINITIVE NOTE
PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR
REGULATION S. The Transfer is being effected in compliance with the transfer
restrictions applicable to beneficial interests in Restricted Global Notes and
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):

          (a) - such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;

          (b) - such Transfer is being effected to the Company or a subsidiary
thereof;

          (c) - such Transfer is being effected to an institutional "accredited
investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act); or

          (d) - such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.

                                       B-2
<Page>

(4)  - CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.

          (a) - CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Third
Supplemental Indenture and any applicable blue sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in the
Third Supplemental Indenture and the Restricted Legend are not required in order
to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Third Supplemental
Indenture, the transferred beneficial interest or Definitive Note will no longer
be subject to the restrictions on transfer enumerated in the Restricted Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Third Supplemental Indenture.

          (b) - CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Third Supplemental Indenture and any applicable blue sky securities laws of
any state of the United States and (ii) the restrictions on transfer contained
in the Third Supplemental Indenture and the Restricted Legend are not required
in order to maintain compliance with the Securities Act. Upon consummation of
the proposed Transfer in accordance with the terms of the Third Supplemental
Indenture, the transferred beneficial interest or Definitive Note will no longer
be subject to the restrictions on transfer enumerated in the Restricted Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Third Supplemental Indenture.

          (c) - CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Third Supplemental Indenture and any applicable blue sky securities laws of
any State of the United States and (ii) the restrictions on transfer contained
in the Third Supplemental Indenture and the Restricted Legend are not required
in order to maintain compliance with the Securities Act. Upon consummation of
the proposed Transfer in accordance with the terms of the Third Supplemental
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Restricted Legend
printed on the Restricted Global Notes or Restricted Definitive Notes and in the
Third Supplemental Indenture.

          This certificate and the statements contained herein are made for the
benefit of the Trustee and the Company.

                                                   [Insert Name of Transferor]

                                                   By:
                                                      --------------------------
                                                      Name:
                                                      Title:

Dated:
       --------------------

                                       B-3
<Page>

                                                                         ANNEX A

1.   The Transferor owns and proposes to transfer the following:

                            [CHECK ONE OF (a) OR (b)]

     (a)  - a beneficial interest in the:

          (i)   - 144A Global Note (CUSIP __________), or

          (ii)  - Regulation S Global Note (CUSIP __________); or

     (b)  - a Restricted Definitive Note.

2. After the Transfer the Transferee will hold:

                                   [CHECK ONE]

     (a)  - a beneficial interest in the:

          (i)   -  144A Global Note (CUSIP __________), or

          (ii)  - Regulation S Global Note (CUSIP __________); or

          (iii) - Unrestricted Global Note (CUSIP __________); or

     (b)  - a Restricted Definitive Note; or

     (c)  - an Unrestricted Definitive Note,

          in accordance with the terms of the Third Supplemental
          Indenture.

                                    ANNEX A-1
<Page>

                                                                       EXHIBIT C

                                     FORM OF
                              OFFICERS' CERTIFICATE

     Reference is made to Supplemental Indenture No. 3, dated as of March 18,
2003 (the "Third Supplemental Indenture"), between Boston Properties Limited
Partnership (the "Company") and The Bank of New York, as trustee. Pursuant to
Section 2.19 of the Third Supplemental Indenture, each of the undersigned
officers of Boston Properties, Inc., the general partner of the Company, hereby
certifies that in his good faith judgment the properties listed on the schedule
attached hereto are located in a central business district of a CBD Market (as
such term is defined in the Third Supplemental Indenture). In accordance with
Section 2.19 of the Third Supplemental Indenture, each such property listed on
such schedule shall be a CBD Property for all purposes of the Third Supplemental
Indenture.

                                                   -----------------------------
                                                   Name:
                                                   Title:

                                                   -----------------------------
                                                   Name:
                                                   Title:

Dated:
     -----------------

                                       C-1Exhibit 10.1  

        PURCHASE AND SALE AGREEMENT  

 BY AND BETWEEN  

 SAFEGUARD HEALTH ENTERPRISES, INC.

Purchaser  

 and  

 HEALTH NET, INC.

Seller  

 DATED AS OF APRIL 7, 2003  

 
 Table of Contents  

	ARTICLE I DEFINITIONS	 	1
	

 	
 	

Section 1.1	
 	

Certain Definitions	
 	

1
	 	 	Section 1.2	 	Other Definitions	 	4
	

ARTICLE II THE TRANSACTIONS	
 	

6
	

 	
 	

Section 2.1	
 	

General	
 	

6
	 	 	Section 2.2	 	Purchase and Sale of the Shares	 	6
	 	 	Section 2.3	 	Assumption and Indemnity Reinsurance Agreement	 	6
	 	 	Section 2.4	 	HNL Contracts	 	6
	 	 	Section 2.5	 	Non-Assignable Contracts.	 	6
	 	 	Section 2.6	 	Books and Records	 	7
	 	 	Section 2.7	 	Strategic Relationship	 	7
	 	 	Section 2.8	 	Transition Services Agreement	 	7
	 	 	Section 2.9	 	Network Access Agreement	 	7
	 	 	Section 2.10	 	Purchase Price	 	7
	 	 	Section 2.11	 	Distribution of Excess Tangible Net Equity	 	7
	 	 	Section 2.12	 	Purchase Price Allocation	 	8
	 	 	Section 2.13	 	Closing	 	8
	 	 	Section 2.14	 	Adjustment to Purchase Price.	 	8
	 	 	Section 2.15	 	Deliveries at the Closing by Seller	 	9
	 	 	Section 2.16	 	Deliveries at the Closing by Purchaser	 	10
	

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER	
 	

10
	

 	
 	

Section 3.1	
 	

Organization of Seller	
 	

10
	 	 	Section 3.2	 	Authorization, Validity and Enforceability	 	10
	 	 	Section 3.3	 	No Violation or Breach	 	11
	 	 	Section 3.4	 	Consents and Approvals	 	11
	 	 	Section 3.5	 	Organization and Qualification of the Company	 	11
	 	 	Section 3.6	 	Organization and Qualification of HNL	 	11
	 	 	Section 3.7	 	Capitalization of the Company	 	12
	 	 	Section 3.8	 	Title to the Shares	 	12
	 	 	Section 3.9	 	Options or Other Rights	 	12
	 	 	Section 3.10	 	Financial Statements.	 	12
	 	 	Section 3.11	 	No Material Adverse Change	 	13
	 	 	Section 3.12	 	Permits	 	14
	 	 	Section 3.13	 	Compliance with Law.	 	14
	 	 	Section 3.14	 	Legal Proceedings	 	14
	 	 	Section 3.15	 	Contracts.	 	14
	 	 	Section 3.16	 	Employees.	 	16
	 	 	Section 3.17	 	Employee Benefit Matters.	 	16
	 	 	Section 3.18	 	No Brokers	 	17
	 	 	Section 3.19	 	Title to and Condition of Properties	 	17
	 	 	Section 3.20	 	Real Property Leases	 	17
	 	 	Section 3.21	 	Insurance	 	17
	 	 	Section 3.22	 	Environmental Matters	 	17
	 	 	Section 3.23	 	Software	 	17
	 	 	Section 3.24	 	Transactions With Affiliates	 	17
	 	 	Section 3.25	 	Improper Payments	 	17
	 	 	 	 	 	 	 

i

 

	

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER	
 	

18
	

 	
 	

Section 4.1	
 	

Organization of Purchaser	
 	

18
	 	 	Section 4.2	 	Authorization, Validity and Enforceability	 	18
	 	 	Section 4.3	 	No Violation or Breach	 	18
	 	 	Section 4.4	 	Consents and Approvals	 	18
	 	 	Section 4.5	 	Legal Proceedings	 	19
	 	 	Section 4.6	 	Certain Governmental Consents	 	19
	 	 	Section 4.7	 	Investment Representation	 	19
	 	 	Section 4.8	 	No Brokers	 	19
	 	 	Section 4.9	 	Investigation by Purchaser	 	19
	

ARTICLE V COVENANTS OF PURCHASER AND SELLER	
 	

20
	

 	
 	

Section 5.1	
 	

Conduct of Business	
 	

20
	 	 	Section 5.2	 	Consents and Approvals.	 	21
	 	 	Section 5.3	 	Cooperation and Further Assurances	 	22
	 	 	Section 5.4	 	Access to Information	 	22
	 	 	Section 5.5	 	Notice of Litigation and Requests.	 	22
	 	 	Section 5.6	 	Notice of Changes and Defaults	 	22
	 	 	Section 5.7	 	Confidentiality.	 	23
	 	 	Section 5.8	 	Publicity	 	23
	 	 	Section 5.9	 	Distribution of Excess Tangible Net Equity	 	24
	 	 	Section 5.10	 	Transfer of HNL Contracts	 	24
	 	 	Section 5.11	 	Reinsurance Agreement	 	24
	 	 	Section 5.12	 	Strategic Relationship Agreement	 	24
	 	 	Section 5.13	 	Transition Service Agreement	 	24
	 	 	Section 5.14	 	Network Access Agreement	 	24
	 	 	Section 5.15	 	Termination of Contracts	 	24
	 	 	Section 5.16	 	Employment Matters; Severance.	 	24
	 	 	Section 5.17	 	Name Change	 	25
	 	 	Section 5.18	 	Sale of MediCal and Healthy Families Business	 	25
	 	 	Section 5.19	 	Interaffiliate Accounts	 	25
	 	 	Section 5.20	 	Non-Competition	 	26
	

ARTICLE VI CONDITIONS TO PURCHASER'S OBLIGATIONS	
 	

26
	

 	
 	

Section 6.1	
 	

Representations, Warranties and Covenants	
 	

26
	 	 	Section 6.2	 	No Proceeding or Litigation	 	26
	 	 	Section 6.3	 	Corporate Action	 	26
	 	 	Section 6.4	 	Consents and Approvals	 	27
	 	 	Section 6.5	 	Resignation of Officers and Directors	 	27
	 	 	Section 6.6	 	Transfer of HNL Contracts	 	27
	 	 	Section 6.7	 	Strategic Relationship Agreement	 	27
	 	 	Section 6.8	 	Transfer of Books and Records	 	27
	 	 	Section 6.9	 	Reinsurance Agreement	 	27
	 	 	Section 6.10	 	Network Access Agreement	 	27
	 	 	Section 6.11	 	Transition Services Agreement.	 	27
	

ARTICLE VII CONDITIONS TO SELLER'S OBLIGATIONS	
 	

27
	

 	
 	

Section 7.1	
 	

Representations, Warranties and Covenants	
 	

27
	 	 	Section 7.2	 	No Proceeding or Litigation	 	27
	 	 	Section 7.3	 	Corporate Action	 	28
	 	 	 	 	 	 	 

ii

 

	 	 	Section 7.4	 	Consents and Approvals	 	28
	 	 	Section 7.5	 	Purchase Price	 	28
	 	 	Section 7.6	 	Strategic Relationship Agreement	 	28
	 	 	Section 7.7	 	Reinsurance Agreement	 	28
	 	 	Section 7.8	 	Network Access Agreement	 	28
	 	 	Section 7.9	 	Transition Services Agreement.	 	28
	

ARTICLE VIII SURVIVAL, INDEMNIFICATION AND ARBITRATION	
 	

28
	

 	
 	

Section 8.1	
 	

Survival	
 	

28
	 	 	Section 8.2	 	Indemnification	 	28
	 	 	Section 8.3	 	Treatment of Indemnity Payments.	 	29
	 	 	Section 8.4	 	Mitigation of Loss	 	29
	 	 	Section 8.5	 	Subrogation	 	29
	 	 	Section 8.6	 	Tax Indemnification	 	30
	 	 	Section 8.7	 	Exclusive Remedy	 	30
	 	 	Section 8.8	 	Arbitration	 	31
	

ARTICLE IX TAX MATTERS	
 	

31
	

 	
 	

Section 9.1	
 	

Seller Indemnification	
 	

31
	 	 	Section 9.2	 	Purchaser and the Company Indemnification	 	32
	 	 	Section 9.3	 	Preparation of Tax Returns	 	32
	 	 	Section 9.4	 	Refunds or Credits	 	32
	 	 	Section 9.5	 	Section 338(h)(10) Election.	 	32
	 	 	Section 9.6	 	Mutual Cooperation	 	33
	 	 	Section 9.7	 	Contests	 	34
	 	 	Section 9.8	 	Survival of Obligations	 	34
	

ARTICLE X TERMINATION	
 	

34
	

 	
 	

Section 10.1	
 	

Termination	
 	

34
	 	 	Section 10.2	 	Effect of Termination	 	34
	

ARTICLE XI MISCELLANEOUS	
 	

35
	

 	
 	

Section 11.1	
 	

Notices	
 	

35
	 	 	Section 11.2	 	Fees and Expenses	 	36
	 	 	Section 11.3	 	Entire Agreement; Waivers and Amendments	 	36
	 	 	Section 11.4	 	Assignment; Binding Effect	 	36
	 	 	Section 11.5	 	Severability	 	36
	 	 	Section 11.6	 	Force Majeure	 	36
	 	 	Section 11.7	 	Governing Law	 	36
	 	 	Section 11.8	 	Headings	 	36
	 	 	Section 11.9	 	Counterparts	 	36
	 	 	Section 11.10	 	No Third Party Beneficiaries	 	36

SCHEDULES

EXHIBIT
A REINSURANCE AGREEMENT 

EXHIBIT
B STRATEGIC RELATIONSHIP AGREEMENT 

EXHIBIT
C NETWORK ACCESS AGREEMENT 

EXHIBIT
D SEVERANCE PLAN 

EXHIBIT
E HEALTH NET SEVERANCE POLICY 

iii

PURCHASE AND SALE AGREEMENT  

        This PURCHASE AND SALE AGREEMENT is made and entered into as of April 7, 2003, among SafeGuard Health Enterprises, Inc., a Delaware corporation, or its Designee
("Purchaser") and Health Net, Inc., a Delaware corporation ("Seller"). 

W I T N E S S E T H: 

        WHEREAS,
Seller is the beneficial and record owner of 475 shares of common stock, $.10 par value per share (the "Shares"), of Health Net Dental, Inc., a California specialized health
care service plan (the "Company"), which Shares constitute all of the issued and outstanding capital stock of the Company; 

        WHEREAS,
the Company provides prepaid dental HMO coverage for both commercial and government members in California and administers dental PPO and dental indemnity products underwritten
by Health Net Life Insurance Company, a wholly-owned subsidiary of Seller ("HNL"), in California, Oregon and Arizona; 

        WHEREAS,
Purchaser desires to purchase the Shares from Seller, and Seller desires to sell the Shares to Purchaser, upon the terms and subject to the conditions set forth herein; 

        WHEREAS,
Purchaser desires to purchase from HNL, and HNL desires to sell to Purchaser or its Designee, all of the California, Arizona and Oregon dental PPO and dental indemnity insurance
business underwritten and/or controlled by HNL, including all the group and individual dental insurance policies and certificates, dental provider agreements and agent contracts comprising the Dental
Business Assets; 

        WHEREAS,
Seller and Purchaser agree that those dental PPO and dental indemnity policies and the liabilities relating thereto shall be transferred by HNL to SafeHealth Life Insurance
Company, an Affiliate of Purchaser ("SafeHealth"), through an Assumption and Indemnity Reinsurance Agreement (the "Reinsurance Agreement"); 

        WHEREAS,
Purchaser and Seller desire to enter into a strategic relationship agreement whereby each party will market the products of the other party in California, Arizona and Oregon
(the "Strategic Relationship Agreement"); and 

        WHEREAS,
the transactions contemplated by this Agreement, the Reinsurance Agreement, the Strategic Relationship Agreement, the Transition Services Agreement and the Network Access
Agreement constitute the "Transactions." 

        NOW,
THEREFORE, in consideration of the promises set forth above and of the representations, warranties, covenants and agreements contained herein, Seller and Purchaser hereby agree as
follows: 

ARTICLE I

DEFINITIONS  

        Section
1.1    Certain Definitions.    The following terms shall, when used in this Agreement, have the following
meanings: 

        "Affiliate" means, with respect to any Person, any entity that directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of this definition and the definition of "Subsidiaries" below, "control" (or "controlled", "controlled by" and "under common
control with" as the context may require) of a Person means the possession, direct or indirect, of the power to vote fifty percent (50%) or more of the voting securities of such Person. 

        "Books and Records" means the originals or copies of all books and records (including computer generated or stored information) in the
possession or control of HNL, the Company or the Seller and relating primarily to and necessary for the operation by Purchaser of the Dental Business, including 

 

lists
of dental PPO and dental indemnity insureds of HNL, claims files, information files and data related to the dental PPO and dental indemnity dental insurance underwritten by HNL, communications,
inventory of current forms, business records, claim forms, sales records, underwriting records, financial records, personnel records and compliance records, but excluding (i) personnel records
relating to Employees terminated by Seller as of the Closing Date to the extent transfer of such personnel records is limited by applicable Law, (ii) except to the extent expressly provided herein,
information constituting proprietary information, trade secrets, or know-how of Seller, HNL or their Affiliates, including internal management reports but excluding such Books and Records that are
required by Purchaser to operate the Dental Business, and (iii) any records that Seller or HNL is required by any applicable Law to retain. 

        "Business Day" means any day except a Saturday, Sunday or a day on which banks located in Los Angeles, California are required or are
authorized by Law or by executive order to close. 

        "Closing Balance Sheet" means that balance sheet of the Company as of the Closing Date prepared by Seller in accordance with SAP
separately setting forth the Excess Tangible Net Equity, the other assets, properties, liabilities and stockholders equity of the Company as of the Closing Date. 

        "Code" means the Internal Revenue Code of 1986 and the Treasury Regulations promulgated thereunder, as in effect on the date hereof. 

        "Dental Business" means (i) the pre-paid dental HMO coverage for both commercial and government members in California provided by the
Company, and (ii) the dental PPO and dental indemnity insurance policies and certificates underwritten by HNL and providing coverage to subscribers and their dependents in California, Arizona and
Oregon. 

        "Dental Business Assets" means (i) the dental PPO and dental indemnity insurance policies and certificates underwritten by HNL in
California, Arizona and Oregon, (ii) the Books and Records and (iii) the HNL Contracts. 

        "Department" means the California Department of Managed Health Care. 

        "Designee" means an Affiliate or Subsidiary of Purchaser approved by Seller. 

        "Effective Date" means effective date of the Reinsurance Agreement. 

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 

        "GAAP" means generally accepted accounting principles consistently applied throughout the specified period and in the comparable period in
the immediately preceding year. 

        "Governmental Authority" means any government or political subdivision thereof, whether federal, state or local, or any agency,
commission, department or other instrumentality of any such government or political subdivision. 

        "Knowledge of Seller" means the actual knowledge of David W. Anderson, Roupen Berberian, Ivan N. Berger, Douglas A. King, Susan Klarner,
Juanell Hefner, Gerald Nosewicz and Christopher P. Wing. 

        "Knowledge of Purchaser" means the actual knowledge of James E. Buncher, Dennis L. Gates and Ronald I. Brendzel. 

        "Law" means all applicable laws, decisions, rules, regulations, ordinances, codes, statutes, judgements, injunctions, orders, decrees,
licenses, permits, policies, administrative interpretations and other requirements of Governmental Authorities. 

        "Liabilities" means, with respect to any Person, any direct or indirect indebtedness, liability, claim, loss, damage, deficiency or
obligation required to be set forth or otherwise disclosed on a financial statement of such Person under GAAP or SAP, as appropriate. 

2

 

        "Lien" means any lien, pledge, mortgage, security interest, claim, charge, lease, easement, option, right of first refusal or other
limitation on transfer, or other encumbrance or restriction. 

        "Litigation" means any action, suit, claim or administrative or arbitration proceeding. 

        "Material Contract" means any written contract, agreement, arrangement, instrument, bond, commitment, franchise, indemnity, indenture,
lease, license, or understanding (other than the
Transaction Documents) to which the Company is subject or which is a HNL Contract that (i) obligates the Company or HNL to pay an amount in excess of $50,000 in any twelve-month period or $100,000 in
any two year period; (ii) provides for the extension of credit to an unaffiliated third party in an amount greater than $50,000 (other than capitation payments made in the ordinary course of
business); (iii) provides for a guaranty by the Company or HNL of obligations of others in excess of $50,000; (iv) constitutes an employment agreement or personal service contract not terminable on
less than sixty (60) days' notice without penalty; or (v) expressly limits, in any material respect, the ability of the Company or HNL to engage in any line of business, compete with any person or
expand the nature or geographic scope of its business. Notwithstanding the foregoing, the term "Material Contract(s)" does not include (i) agreements with dentists, dental service providers and
providers of dental supplies, or purchasers of dental coverage entered into by the Company in the ordinary course of business, unless such contract includes a provision for a minimum payment in excess
of $50,000 in any twelve-month period or $100,000 in any two year period. 

        "Person" means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company,
trust, unincorporated association, Governmental Authority or other entity or organization. 

        "Policy Liabilities" means those liabilities of HNL reinsured and assumed by SafeHealth pursuant to the Reinsurance Agreement and as more
specifically defined by the Reinsurance Agreement. 

        "Purchaser Material Adverse Effect" means any material adverse change in, or material adverse effect on, the business, financial condition
or operations of Purchaser and its Subsidiaries, taken as a whole; provided, however, that the effects
of changes that are generally applicable to (i) the industries or markets in which Purchaser and its Subsidiaries operate; (ii) the United States economy or local economy in which the Purchaser
operates; or (iii) the United States securities markets shall be excluded from the determination of Purchaser Material Adverse Effect; and provided,  further, that any adverse effect on Purchaser and its Subsidiaries resulting from the execution of this Agreement and the Transactions contemplated
hereby shall also be excluded from the determination of Purchaser Material Adverse Effect. 

        "SAP" means statutory accounting principles prescribed or permitted by the Department consistently applied throughout the specified period
and in the comparable period in the immediately preceding year in connection with the preparation of the Financial Statements of the Company. 

        "Seller Material Adverse Effect" means any material adverse change in, or material adverse effect on, the business, financial conditions
or operations of the Company or the HNL Dental Business, taken as a whole; provided, however, that the
effects of changes that are generally applicable to (i) the industries or markets in which Seller, the HNL Dental Business or Company operate; (ii) the United States economy or local economy in which
Seller, the HNL Dental Business or the Company operate; or (iii) the United States securities markets shall be excluded from the determination of Seller Material Adverse Effect; and  provided,
further, that any adverse effect on Seller, the HNL Dental Business or the Company resulting
from the execution of this Agreement, the transactions contemplated hereby, any facts or circumstances primarily related to Purchaser, or changes in the business, financial conditions or operations of
Seller, the HNL Dental Business or the Company resulting from the continuation of an existing trend shall also be excluded from the determination of Seller Material Adverse Effect. 

3

 

        "Statutory Tangible Net Equity" means the minimum Tangible Net Equity required of the Company by Title 28, section 1300.76 of the
California Code of Regulations. 

        "Subsidiaries" means, with respect to any Person, each entity controlled by such Person. For purposes of this definition, "controlled" has
the meaning specified in the definition of "Affiliate." 

        "Tangible Net Equity" means the actual tangible net equity of the Company calculated in accordance with Title 28, section 1300.76 of the
California Code of Regulations. 

        "Tax" means any federal, state, county, local, foreign or other tax (including, without limitation, income taxes, premium taxes, excise
taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes, severance taxes, capital levy taxes, transfer taxes, withholding, employment and payroll-related taxes, property
taxes and import duties), and includes interest, additions to tax assessments, fines and penalties with respect thereto. 

        "Tax Returns" means any report, return, statement, or other written information required to be supplied to a taxing authority in
connection with Taxes. 

        "Transaction Documents" means this Agreement, the Assumption and Indemnity Reinsurance Agreement, the Strategic Relationship Agreement,
the Transition Services Agreement, the Network Access Agreement, and each other agreement and document required to be executed and delivered in connection with this Agreement, the Assumption and
Indemnity Agreement, the Strategic Relationship Agreement, the Transition Services Agreement and the Network Access Agreement. 

        "WARN" means the Worker Adjustment and Retraining Notification Act (29 U.S.C. ! 2101 et seq.) 

        Section
1.2    Other Definitions.    The following terms shall, when used in this Agreement, have the meanings
ascribed to such terms in the Sections set forth below: 

	Term
 
	 	Section
	 
	338 Elections	 	9.5	(a)
	

Additional States	
 	

5.20	
 
	

Allocation	
 	

9.5	
(b)
	

ASO	
 	

3.15	
(g)
	

Balance Sheet Accountants	
 	

2.14	
 
	

Closing	
 	

2.13	
 
	

Closing Date	
 	

2.13	
 
	

Company	
 	

Recitals	
 
	

Competitor	
 	

5.20	
 
	

Dispute	
 	

8.8	
 
	

Employees	
 	

3.16	
 
	

Employee Plans	
 	

3.17	
 
	

Excess Tangible Net Equity	
 	

2.11	
 
	

FHC Lease	
 	

5.15	
 
	

Final Balance Sheet	
 	

2.14	
 
	

Financial Statements	
 	

3.10	
 
	 	 	 	 

4

 

	

HNL	
 	

Recitals	
 
	

HNL Contracts	
 	

2.4	
 
	

HNL Financial Information	
 	

3.10	
(e)
	

Indemnifiable Loss	
 	

8.3	
 
	

Indemnified Party	
 	

8.2	
 
	

Indemnifying Party	
 	

8.2	
 
	

Indemnitee	
 	

8.3	
 
	

Indemnity Payment	
 	

8.3	
 
	

JAMS	
 	

8.8	
(a)
	

Multi-Business Company	
 	

5.20	
 
	

Network Access Agreement	
 	

2.9	
 
	

Optional Termination Date	
 	

10.1	
 
	

Permit(s)	
 	

3.12	
 
	

Proposed Adjustment Notice	
 	

2.14	
 
	

Purchase Price	
 	

2.10	
 
	

Purchaser	
 	

Preamble	
 
	

Reinsurance Agreement	
 	

Recitals	
 
	

Retained Employees	
 	

5.16	
 
	

SafeHealth	
 	

Recitals	
 
	

Securities Act	
 	

4.7	
 
	

Seller	
 	

Preamble	
 
	

Seller Entity	
 	

5.20	
 
	

Shares	
 	

Recitals	
 
	

Software	
 	

3.23	
 
	

Strategic Relationship Agreement	
 	

Recitals	
 
	

Survival Period	
 	

8.1	
 
	

Transactions	
 	

Recitals	
 
	

Transition Services Agreement	
 	

2.8	
 

5

 
ARTICLE II

THE TRANSACTIONS  

        Section
2.1    General.    Subject to the terms, provisions and conditions of this Agreement, on the Closing Date,
Seller shall, or shall cause the appropriate Seller Subsidiary to, (i) sell, convey, transfer, assign, deliver or otherwise transfer to Purchaser or its Designee, and Purchaser or its Designee shall
acquire from Seller, or the appropriate Seller Subsidiary, the Dental Business Assets and the Shares, and (ii) enter into the Transactions with the Purchaser or its Designee. The designation of a
Designee by Purchaser shall not affect any liability of Purchaser hereunder, and except as Seller may otherwise agree in writing, Purchaser shall be liable for all obligations of any Designee under
this Agreement and the other Transaction Documents. The material assets and properties owned or leased by the Company are set forth in Schedule 2.1. 

        Section
2.2    Purchase and Sale of the Shares.    Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, Seller shall sell, transfer, assign and deliver to Purchaser, and Purchaser shall purchase and acquire the Shares from Seller. 

        Section
2.3    Assumption and Indemnity Reinsurance Agreement.    On the Closing Date, Seller shall cause HNL and
Purchaser shall cause SafeHealth to enter into the Reinsurance Agreement attached hereto as Exhibit A, whereby effective on the Effective Date, HNL
shall cede to SafeHealth, and SafeHealth shall reinsure and assume the Policy Liabilities. 

        Section
2.4    HNL Contracts.    On the Closing Date, except as provided in Section 2.5, Seller shall cause HNL to
transfer and assign to Purchaser, or its Designee, all of HNL's right, title and interest in its agreements with providers of dental services and dental supplies, producers and other contracts or
agreements set forth on Schedule 2.4 which contracts represent all of the dental provider agreements of HNL relating to the Dental Business in
California, Oregon and Arizona, and the producers as of December 31, 2002 to whom or which HNL paid commission in connection with the sale of dental PPO or dental indemnity insurance products
(collectively, the "HNL Contracts"); and Purchaser or its Designee shall assume the liabilities of HNL under the HNL Contracts, provided,  however, that
neither Purchaser nor any Purchaser Designee shall assume (x) any obligation to pay any amounts (whether or not due at Closing) arising
under the HNL Contracts prior to the Closing, or (y) any liability attributable to a failure by HNL to comply with its obligations under the HNL Contracts prior to the
Closing Date. Any such assignment and transfer shall be evidenced by an assignment and assumption agreement or such other agreement as the parties reasonably determine is necessary or appropriate. 

        Section
2.5    Non-Assignable Contracts.    

        (a)   Notwithstanding
anything to the contrary in this Agreement, to the extent that any HNL Contract would be subject to termination or restriction or is not capable of being
assigned, transferred or sublicensed without the consent or waiver of the other party thereto or any third party (which consent or waiver has not been obtained), or if such assignment, transfer or
sublicense would constitute a breach thereof or a violation of any Law, this Agreement and the other Transaction Agreements shall not constitute an assignment, transfer, sublease or sublicense
thereof. 

        (b)   Seller
agrees to use commercially reasonable efforts prior to the Closing to obtain consents and waivers and to attempt to eliminate any impediments to an assignment of
any HNL Contract referred to above and to obtain any other consents and waivers necessary to assign and transfer the HNL Contracts to Purchaser or Purchaser's Designee at the Closing. 

        (c)   To
the extent that any HNL Contract cannot be transferred, then Seller and Purchaser or its Designee shall enter into such commercially reasonable arrangements
(including subcontracting if permitted) to provide to the parties the economic (taking into account Tax costs and benefits) and 

6

 

operational
equivalent, to the extent permitted, of obtaining such consent or waivers necessary to assign and transfer the HNL Contracts. 

        Section
2.6    Books and Records.    On the Closing Date, Seller shall sell, convey, assign, deliver or otherwise
transfer to Purchaser or its Designee the Books and Records, provided that Seller may retain copies of any such Books and Records as Seller or HNL may reasonably determine are necessary or desirable
to conduct their businesses. Nothing in this Section 2.6 shall require Seller or HNL to transfer to Purchaser or its Designee any Books and Records that Seller or HNL is required by any applicable Law
to retain and such Books and Records shall remain the property of Seller or HNL to the extent required by such Law. Seller shall allow and Seller shall cause HNL to allow Purchaser or its Designee
reasonable access to, and the right at Purchaser's written request and at its own expense to make and retain copies of, any Books and Records described in the preceding sentence, on and after the
Closing Date. 

        Section
2.7    Strategic Relationship.    On the date hereof, Seller and Purchaser or its Designee shall enter into
the Strategic Relationship Agreement, substantially in the form attached hereto as Exhibit B, effective as of the Closing Date, pursuant to which the
parties will, among other things, market and sell
the dental products of Purchaser through Seller's sales distribution channels and Seller's medical products and ancillary products through Purchaser's sale distribution channels. 

        Section
2.8    Transition Services Agreement.    Seller and Purchaser shall negotiate in good faith the terms of a
transition service agreement (the "Transition Service Agreement"), pursuant to which Seller or its designees shall agree to provide or arrange for the provision of certain administrative and support
functions on or after the Closing Date, including but not limited to, accounting and information systems support, reasonably necessary or appropriate for the proper management and administration of
the Dental Business at commercially reasonable pricing, and Purchaser shall cause the Company or its Designee to provide certain administrative and support functions at commercially reasonable pricing
on or after the Closing Date necessary to support Seller's vision business. 

        Section
2.9    Network Access Agreement.    On the date hereof, Seller and Purchaser shall cause their respective
Affiliates to enter into a network access agreement substantially in the form attached hereto as Exhibit C (the "Network Access Agreement"), effective
as of the Closing Date, pursuant to which Seller shall use its commercially reasonable efforts to provide Purchaser and the Company continued access after the Closing to the dentists and other
ancillary providers of dental related services with a contract with HNL to provide such services in the event such contracts by their terms cannot be assigned by HNL to Purchaser. 

        Section
2.10    Purchase Price.    As consideration for the Transactions, Purchaser shall pay to Seller on the Closing
Date, an amount equal to (i) nine million US Dollars ($9,000,000) in cash or by wire transfer of immediately available funds to such account as Seller shall designate at least two (2) Business Days
prior to the Closing, plus (ii) if a positive number, an amount equal to the Excess Tangible Net Equity of the Company on the Closing Date (the "Purchase Price"). In addition, at Closing, Seller shall
deliver to Purchaser the Closing Balance Sheet. The Purchase Price shall be subject to adjustment as provided in Section 2.14. 

        Section
2.11    Distribution of Excess Tangible Net Equity.    Prior to Closing, Seller shall cause the Company to
request from the Department permission to reduce the Tangible Net Equity of the Company to an amount equal to the Statutory Tangible Net Equity. The difference, if any, between the Tangible Net Equity
of the Company and the Statutory Tangible Net Equity of the Company as of the date the Tangible Net Equity is determined shall be referred to herein as the "Excess Tangible Net Equity." Upon approval
of the Department, Seller shall cause the Company to dividend or otherwise distribute to Seller, that portion of the Excess Tangible Net Equity authorized by the Department. 

7

 

        Section
2.12    Purchase Price Allocation.    The parties agree that the Purchase Price shall be allocated among the
Transactions in accordance with the allocation set forth in Schedule 2.12. The parties shall file such forms as are necessary or appropriate with the
Internal Revenue Service in accordance with
the Code reflecting such allocation. All Tax Returns filed and positions taken with respect to the allocation of the Purchase Price by the Company and Purchaser shall be on a basis consistent with the
allocation agreed upon by the parties in Schedule 2.12. 

        Section
2.13    Closing.    Subject to the satisfaction or waiver of all of the conditions precedent to closing set
forth in Articles VI and VII hereof, the closing of the Transactions (the "Closing") shall take place at the offices of Health Net, Inc., 21650 Oxnard Street, Woodland Hills, California 91367 at 12:00
p.m., local time, on or before September 30, 2003, or such other time, date or location as Purchaser and Seller may mutually agree upon (the "Closing Date"). 

        Section
2.14    Adjustment to Purchase Price.    

        (a)   Not
more than 180 days following the Closing Date, Purchaser shall deliver to Seller a balance sheet of the Company as of the Closing Date (the "Final Balance Sheet")
which shall be prepared in accordance with SAP utilizing the same methodologies and procedures used to prepare the Closing Balance Sheet. The Final Balance Sheet shall provide a categorization of the
assets and liabilities comprising the Excess Tangible Net Equity of the Company and the other assets and liabilities of the Company as of the Closing Date. At the same time Purchaser delivers the
Final Balance Sheet to Seller, Purchaser shall also deliver to Seller a statement setting forth in reasonable detail the calculation of the Excess Tangible Net Equity and the other assets and
liabilities of the Company used to prepare the Final Balance Sheet. 

        (b)   Seller
shall be afforded the opportunity to review the Final Balance Sheet and shall be provided full access to the books, records and other relevant documents
containing information on which the Final Balance Sheet is based, including but not limited to, work papers, reserve schedules and actuarial reports, as well as access to the accountants of Purchaser
responsible for the preparation of the Final Balance Sheet. The Final Balance Sheet shall become final and binding on the parties on the sixtieth (60th) day following the date such Final
Balance Sheet is delivered to Seller by Purchaser, unless (i) Seller delivers to Purchaser during such sixty (60) day period a notice identifying proposed adjustment(s) to the Final Balance Sheet and
explaining the reasons therefor (a "Proposed Adjustment Notice"), in which event such matter shall be handled as set forth in paragraph (c) below, or (ii) Seller, in connection with its review of the
Final Balance Sheet, does not receive all documents and materials and/or access to or cooperation from Purchaser or its outside accountants that are reasonably requested, in which event said period
for delivering a Proposed Adjustment Notice shall be extended until the twentieth (20th) day following the date on which Seller receives all such documents, materials, access and
cooperation. Any Dispute regarding the adequacy of the documents and materials provided by Purchaser to Seller shall be resolved by the Balance Sheet Accountants as provided in paragraph (c) below. 

        (c)   If
a Proposed Adjustment Notice is delivered within the period set forth above, then Seller and Purchaser shall negotiate in good faith to attempt to resolve any Dispute
with respect to any proposed adjustments contained in the Proposed Adjustment Notice. If Seller and Purchaser cannot resolve such Dispute within ten (10) Business Days commencing on the date of
delivery of the Proposed Adjustment Notice, then either Purchaser or Seller may recommend a firm of independent certified public accountants of nationally recognized standing that is not providing
services to either Purchaser, Seller or their Affiliates to review the disputed calculation, and whose determination shall be binding upon the parties. The firm of independent certified public
accounts retained to make a determination with respect to any disputed calculation shall be designated by agreement between Seller and Purchaser (the "Balance Sheet Accountants");  provided, however, if the parties fail to agree, the 

8

 

Balance
Sheet Accountants shall be PriceWaterhouseCoopers. If PriceWaterhouseCoopers acts as the Balance Sheet Accountants, no principal of PriceWaterhouseCoopers with a pre-existing professional or
familial relationship with either of the parties or any of their respective officers or directors may be utilized. In making its determination with respect to whether any adjustments to the Final
Balance Sheet are appropriate, the Balance Sheet Accountants shall evaluate those items or amounts in the disputed calculation to which Seller has objected and shall determine whether such items have
been prepared in accordance with the terms of this Agreement and any applicable accounting principles. The fees and expenses of the Balance Sheet Accountants, if any, shall be borne pro-rata by Seller
and Purchaser, based upon the difference between their respective calculations and the final calculations of the Balance Sheet Accountants. 

        (d)   After
all disputes with respect to the Final Balance Sheet have been resolved pursuant to the procedures set forth in this Section 2.14, (i) if the amount of the Excess
Tangible Net Equity on the Final Balance Sheet exceeds the Excess Tangible Net Equity on the Closing Balance Sheet, then Purchaser shall pay to Seller cash equal to the difference between the Excess
Tangible Net Equity on the Final Balance Sheet and the Excess Tangible Net Equity on the Closing Balance Sheet; and (ii) if the Excess Tangible Net Equity on the Final Balance Sheet is less than the
Excess Tangible Net Equity on the Closing Balance Sheet, Seller shall pay to Purchaser cash equal to the amount of the difference between the Excess Tangible Net Equity on the Final Balance Sheet and
the Excess Tangible Net Equity on the Closing Balance Sheet. 

        (e)   Purchaser
shall not compromise or settle any claim or account receivable of the Company for less than the full value assigned to such claim or account receivable on the
Closing Balance Sheet in exchange for any direct or indirect benefit prior to final resolution of all Disputes respecting the Purchase Price without the prior written consent of Seller. 

        Section
2.15    Deliveries at the Closing by Seller.    At the Closing, Seller shall deliver or cause to be delivered
to Purchaser: 

        (a)   a
stock certificate or certificates representing the Shares, accompanied by duly executed stock powers, in a form reasonably satisfactory to Purchaser; 

        (b)   written
assignments of the HNL Contracts, as applicable; 

9

   
        (c)   a receipt for the Purchase Price; 

        (d)   the
opinions, certificates and other documents required to be delivered by Seller to Purchaser at the Closing pursuant to this Agreement; 

        (e)   the
Books and Records and such seals and stock certificates of the Company in the control of Seller as Purchaser shall reasonably request; 

        (f)    the
Closing Balance Sheet; 

        (g)   the
Reinsurance Agreement, duly executed by HNL; 

        (h)   the
Strategic Relationship Agreement, duly executed by Seller; 

        (i)    the
Network Access Agreement, duly executed by HNL; and 

        (j)    the
Transition Services Agreement duly executed by Seller. 

        Section
2.16    Deliveries at the Closing by Purchaser.    At the Closing, Purchaser shall deliver or cause to be
delivered to Seller: 

        (a)   the
Purchase Price in cash or by wire transfer of immediately available funds to such account or accounts as Seller shall instruct Purchaser in writing at least two (2)
Business Days prior to the Closing Date; 

        (b)   a
receipt for the Shares; 

        (c)   the
opinions, certificates and other documents required to be delivered by Purchaser to Seller at the Closing pursuant to this Agreement; 

        (d)   the
Reinsurance Agreement, duly executed by SafeHealth; 

        (e)   the
Strategic Relationship Agreement, duly executed by Purchaser or its Designee; 

        (f)    the
Network Access Agreement, duly executed by Purchaser or its Designee; and 

        (g)   the
Transition Services Agreement, duly executed by Purchaser. 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER  

        Seller hereby represents and warrants to Purchaser as follows: 

        Section
3.1    Organization of Seller.    Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate power and authority to own the Shares and to conduct its business as it is presently being conducted except where
failure to be so organized, existing and in good standing or to have such power and authority would not have a Seller Material Adverse Effect. 

        Section
3.2    Authorization, Validity and Enforceability.    Seller, and its respective Affiliates that are parties
to any of the Transaction Documents, have the corporate power and authority to execute, deliver and perform their obligations under the Transaction Documents to which they are parties. Seller, or its
respective Affiliates that are parties to any of the Transaction Documents, have taken all necessary corporate action to authorize the execution, delivery and performance of the Transaction Documents
to which they are parties and the consummation of the transactions contemplated thereby. The Transaction Documents to which Seller, or its respective Affiliates, are parties have been duly executed
and delivered by Seller, or its respective Affiliate, and assuming due and valid authorization, execution and delivery thereof by all other parties thereto, constitute the legal, valid and binding
obligations of Seller, or its respective Affiliate, enforceable against Seller, or its respective Affiliate, in accordance with their respective terms, except as such enforcement may be limited by
applicable 

10

 

bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of creditors and by general principles of equity regardless of whether enforcement is sought in a proceeding at law
or in equity. 

        Section
3.3    No Violation or Breach.    Except as set forth in Schedule
3.3 hereto, Seller's execution, delivery and performance of this Agreement and the other Transaction Documents to which it is party, and the consummation by Seller of the
transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof, do not and will not conflict with, constitute a violation or breach of, constitute a
default or give rise to any right of termination or acceleration of any right or obligation of Seller, HNL, solely with respect to the Dental Business, or the Company, or result in the creation or
imposition of any Lien upon the property of Seller, the Company or the Dental Business of HNL by reason of the terms of (a) the Certificate of Incorporation or By-laws of Seller, HNL or the Company,
(b) any contract, agreement, lease, indenture or other instrument to which Seller, HNL or the Company is a party or by or to which Seller or its assets or properties, or the Company or its assets or
properties, or the Dental Business Assets of HNL may be bound or subject, or (c) to the Knowledge of Seller, any order, judgment, injunction, award or decree of any court, arbitrator or Governmental
Authority or any statute, law or regulation applicable to Seller, the Company or the Dental Business of HNL, except for such violations, breaches or defaults which would (A) not have a Seller Material
Adverse Effect or (B) become applicable as a result of the business or activities in which Purchaser is or proposes to be engaged or as a result of any acts or omissions by, or the status of any facts
pertaining to, Purchaser. 

        Section
3.4    Consents and Approvals.    Except as set forth in Schedule
3.4 hereto, no consent, approval, authorization or order of, registration or filing with, or notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by Seller, HNL or the Company in connection with the execution, delivery and performance by Seller, HNL and the Company of this Agreement or any other Transaction Document to
which Seller, HNL or the Company is party or for the consummation by Seller, HNL or the Company of the transactions contemplated hereby or thereby except for such filings, registrations,
notifications, authorizations, consents or approvals the failure of which to obtain would (A) not have a Seller Material Adverse Effect and would not materially adversely affect the ability of Seller,
HNL or the Company to consummate the transactions contemplated by this Agreement and the Transaction Documents or (B) become applicable as a result of the business or activities in which Purchaser is
or proposes to be engaged or as a result of any acts or omissions by, or the status of any facts pertaining to, Purchaser. 

        Section
3.5    Organization and Qualification of the Company.    The Company is a California corporation operating as
a specialized health care service plan duly organized, validly existing and in good standing under the laws of the State of California. The Company has all requisite corporate power and authority to
own its assets and to conduct its business as such assets and business are presently owned and conducted except where the failure to have such power and authority, either individually or in the
aggregate, would not have a Seller Material Adverse Effect. Except as set forth in Schedule 3.5 hereto, on the date of this Agreement, the Company is
duly licensed or qualified to do business and is in good standing in each jurisdiction in which the operation of its business or the properties owned by it make such licensing or qualification
necessary or desirable except where failure to be licensed as qualified to do business, and to be in good standing would not have a Seller Material Adverse Effect. The Company does not have any
Subsidiaries. 

        Section
3.6    Organization and Qualification of HNL.    HNL is a California corporation operating as a life and
disability insurance company duly organized, validly existing and in good standing under the laws of the State of California. HNL has all requisite corporate power and authority to own the Dental
Business Assets owned by it and to conduct its Dental Business as such assets and business are presently owned and conducted except where the failure to have such power and authority, either
individually or in the aggregate, would not have a Seller Material Adverse Effect. Except as set forth in 

11

 

 Schedule 3.6 hereto, on the date of this Agreement, HNL is duly licensed or qualified to do business and is in good standing in Arizona and Oregon to operate its Dental
Business and own the Dental Business Assets owned by it, except where failure to be licensed or qualified to do business, and to be in good standing would not have a Seller Material Adverse Effect. 

        Section
3.7    Capitalization of the Company.    As of the date hereof, the Company's authorized capital stock
consists of 1,000 shares of common stock, $.10 par value per share, of which 475 have been issued and are outstanding. Seller is the record and beneficial owner of the Shares which constitute all of
the issued and outstanding capital stock of the Company. The Shares are duly authorized, validly issued, fully paid and non-assessable, and are free of any contractual or statutory preemptive rights. 

        Section
3.8    Title to the Shares.    Upon delivery of the certificate or certificates representing the Shares in
accordance with this Agreement, Purchaser will acquire good and marketable title to the Shares, free and clear of any Liens (except for any Liens arising from acts of Purchaser or any of its
Affiliates or representatives), subject to the restrictions on transferability imposed by applicable federal and state securities Law. 

        Section
3.9    Options or Other Rights.    Except for this Agreement, there is no (a) outstanding right, subscription,
warrant, call, unsatisfied preemptive right, option or other contract or agreement of any kind to purchase or otherwise to receive from the Company or Seller or any Affiliate thereof any
outstanding, authorized but unissued, unauthorized or treasury shares of common stock or any other security of the Company, (b) outstanding security of any kind of the Company other than the Shares,
or (c) outstanding contract or other agreement to purchase, redeem or otherwise acquire any outstanding shares of common stock or any other security of the Company. 

        Section
3.10    Financial Statements.    

        (a)   Seller
has heretofore made available to Purchaser true and complete copies of the annual statutory financial statements and audited statutory financial statements of the
Company for the calendar years ending December 31, 2000, December 31, 2001, and unaudited statutory financial statements for the four quarters of calendar year 2002 in each case filed with the
Department (the "Financial Statements"). The Financial Statements, at the time such Financial Statements were prepared, present fairly, in all material respects, the statutory financial condition of
the Company as of the dates thereof and the statutory results of operations for each of the periods ended at such dates in each case in accordance with SAP. 

        (b)   Except
as disclosed on Schedule 3.10(b) hereto and except (a) for liabilities and obligations incurred in the ordinary
course of business after December 31, 2002, (b) for liabilities and obligations disclosed in or covered by the audited statutory financial statement of the Company as of December 31, 2002, and (c) for
liabilities and obligations incurred in connection with the transactions contemplated hereby or otherwise as contemplated by this Agreement, since December 31, 2002, the Company has not incurred any
liabilities or obligations that would be required to be reflected or reserved against in a balance sheet of the Company, prepared in accordance with SAP as applied in preparing the unaudited
consolidated balance sheet of the Company, as included in the Financial Statements. Seller has made available to Purchaser copies of all material disclosed on Schedule
3.10(b). 

        (c)   To
the Knowledge of Seller, all accounts receivable, notes receivable and other receivables of the Company, whether or not reflected in the Financial Statements, arise
out of transactions in the ordinary course of business. Aged accounts receivable reports of the Company dated as of December 31, 2002 are attached as Schedule
3.10(c). Except as reflected in the aged accounts receivable reports and to the extent of the accrued reserve, if any, to the Knowledge of Seller, none of such accounts
receivable have been disputed or denied or is uncollectible for any reasons or subject to any legitimate offsets of any kind. 

12

 

        (d)   To
the Knowledge of Seller, the accounts payable and accrued expenses reflected on the Financial Statements, except those to be reflected on the Closing Balance Sheet,
reflect all material amounts owed by the Company in respect of trade accounts due and other payables required by SAP to be identified on such Company Financial Statement. To the Knowledge of Seller,
no account payable or accrued expenses of the Company is past due or otherwise in default in any material respect by the Company. 

        (e)   Schedule 3.10 (e) sets forth the 2002 consolidated year to date financial information for the HNL Dental Business (the
"HNL Financial Information"). The HNL Financial Information, at the time such HNL Financial Information was prepared, presents fairly, in all material respects, the unaudited results of operation of
the HNL Dental Business as of the dates thereof. 

        Section
3.11    No Material Adverse Change.    Since December 31, 2002, except as (i) contemplated hereby or relating
to the Transactions contemplated hereby (ii) disclosed on Schedule 3.11 hereto, or (iii) disclosed in the Financial Statements: 

        (a)   the
Company and the Dental Business of HNL have not suffered any change constituting a Seller Material Adverse Effect; 

        (b)   the
Company has not agreed to the attaching, placing or granting of, or the agreement to attach, place or grant, any Lien on any asset of the Company, or any agreement
relating to or contemplating any of the foregoing not in the ordinary course of business, and HNL has not agreed to the attaching, placing or granting of, or the agreement to attach, place or grant,
any Lien on any of the HNL Dental Business Assets, or any agreement relating to or contemplating any of the foregoing not in the ordinary course of business; 

        (c)   the
Company has not sold or transferred assets of the Company worth in excess of $50,000 in the aggregate, excluding the disposition of damaged or obsolete equipment in
the ordinary course of business; 

        (d)   HNL
has not sold or transferred any of the Dental Business Assets of HNL worth in excess of $50,000 in the aggregate; 

        (e)   the
Company and HNL, solely with respect to HNL's Dental Business, have not made any material change in its accounting systems, policies or practices; 

        (f)    the
Company and HNL, solely with respect to HNL's Dental Business, have not entered into or terminated any contract or any other commitment, contract, agreement, or
transaction (including, without limitation, any material borrowing or capital expenditure or sale or other disposition of any material assets), in excess of $50,000 outside the ordinary course of
business; 

        (g)   the
Company has not authorized any redemption, repurchase, or other acquisition of, or redeemed, repurchased or acquired, any of its capital stock; 

        (h)   the
Company has not authorized any issuance of or issued any of its capital stock or securities convertible into or rights to acquire any such capital stock; 

        (i)    the
Company has not suffered any default or breach in any material respect under any Material Contract or Permit that is material to the Dental Business, and HNL, solely
with respect to HNL's Dental Business, has not suffered any default or breach in any material respect under any Material Contract or any Permit that is material to HNL's Dental Business; 

        (j)    the
Company has not authorized any material change to (i) increase Employee compensation levels, (ii) change the manner in which Employees are compensated, (iii)
increased supplemental, fringe, or health and welfare benefits provided to any employees, or (iv) paid any bonuses to Employees or officers of the Company; and 

13

 

        (k)   the
Company and HNL have not made any agreements or commitments by the Company or HNL, respectively, to do any of the foregoing. 

        Section
3.12    Permits.    Except as listed on Schedule 3.12, the
Company has the lawful authority and all governmental authorizations, certificates of authority, licenses or permits necessary for or required to conduct its business operations as presently conducted
as a Knox-Keene Specialized Health Care Service Plan and HNL has the lawful authority and all governmental authorizations, certificates of authority, licenses or permits necessary to conduct its
Dental Business as presently conducted (collectively, the "Permits"). As of the date of this Agreement, there are no pending or, to the Knowledge of Seller, threatened legal, administrative,
arbitration, or other proceedings of any kind nor any pending or, to the Knowledge of Seller, threatened governmental investigations by any Governmental Authority or by any public or private group,
with respect to revocation, cancellation, suspension or nonrenewal of any Permit, or which assert or allege any material violation of, or non-compliance with, any governmental requirements or which
would have a Seller Material Adverse Effect. 

        Section
3.13    Compliance with Law    . 

        (a)   Except
as listed on Schedule 3.13, to the Knowledge of Seller, the Company has made all material filings with
Governmental Authorities in all states in which the Company operates, required for the conduct of its business operations as such are presently conducted, and HNL has made all material filings with
Governmental Authorities required for the conduct of the Dental Business in all states in which HNL operates the Dental Business. Except as listed on Schedule
3.13, the Company currently satisfies in all material respects the requirements under the regulations of the Department for its operation as a Specialized Knox-Keene Health
Care Service Plan, and HNL currently satisfies in all material respects the requirements for the operation of the Dental Business under the regulations of the California Department of Insurance and
the other states in which HNL operates the Dental Business, except where the Company's and HNL's failure to satisfy any requirement would not, individually or in the aggregate, have a Seller Material
Adverse Effect. 

        (b)   There
are no judgments, consent decrees, or injunctions of any court, or Governmental Authority by which the Company or HNL are bound or to which the Company and/or
HNL's Dental Business is subject, except such judgments, decrees or injunctions which would not have a Seller Material Adverse Effect. To the Knowledge of Seller, except as set forth on  Schedule 3.13,
the Company and HNL, solely with respect to HNL's Dental Business, are not subject to and have not received any request for information,
notice, demand letter, administrative inquiry or formal or informal complaint or claim from any Governmental Authority. Except as set forth on Schedule
3.13, the Company's and HNL's operation of the Dental Business as presently conducted, do not violate or fail to comply in any material respect with any applicable Law, except
those which would not have a Seller Material Adverse Effect, and, to the Knowledge of Seller, the Company and HNL have not received any notices alleging any such violation or non-compliance. 

        Section
3.14    Legal Proceedings.    Except as set forth on Schedule
3.14 hereto, there is no pending or, to the Knowledge of Seller, threatened Litigation, against or involving the Company or the Dental Business of HNL. 

        Section
3.15    Contracts.    

        (a)   Seller
has delivered or made available to Purchaser, copies of all the Material Contracts in effect on the date of this Agreement. Except as set forth on  Schedule 3.15(a), to the Knowledge of Seller, the
Company is not in violation or in breach of, or default under any Material Contract. To the Knowledge
of Seller, (i) the Company has not received any written notice of cancellation with respect to any Material Contract or been advised that the other party thereto intends to cancel any such agreement;
(ii) there are no outstanding disputes under any Material Contract; (iii) each such contract is with an unrelated third party entered into on an arms-length basis in the ordinary course of business, 

14

 

(iv)
there are no verbal amendments, modifications or other understandings relating to such contracts that are legally binding on the parties thereto; and (v) there are no obligations that have
accrued to refund all or any portion of the fees that have been paid under any Material Contract. To the Knowledge of Seller, except as set forth on Schedule
3.15(a), the Company is not party to a provider or broker agreement that contains pricing terms materially different from the dental provider agreements referred to in Section
3.15(b), the dental service provider agreements referred to in Section 3.15(c) or the broker agreements referred to in Section 3.15(i). 

        (b)   Dentist Provider Contracts. Seller has made available to Purchaser copies of all representative forms of dentist provider
contracts to which the Company and HNL were a party as of December 31, 2002. As of December 31, 2002, the Company was party to approximately 3,027 dentist provider contracts and HNL was party to
approximately 6,974 dentist provider contracts. Attached hereto as Schedule 3.15(b) is a list of all dentist providers who or which were a party to a
dentist provider contract with the Company as of December 31, 2002. 

        (c)   Dental Service Provider Contracts. As of December 31, 2002, the Company was not a party to any dental service provider
contracts (other than dentist provider contracts) and HNL was not a party to any dental service provider contracts (other than dentist provider contracts). 

        (d)   Group Contracts. Seller has made available to Purchaser copies of all representative forms employer group agreements with
200 or more employees/subscribers to which the Company or HNL in connection with the Dental Business were a party as of December 31, 2002. As of December 31, 2002, the Company was a party to
approximately 59 employer group agreements with 200 or more subscribers, and HNL in connection with the Dental Business was party to approximately 16 employer group agreements with 200 or more
subscribers. 

        (e)   Individual Subscriber Contracts. Seller has made available to Purchaser copies of all representative forms of all
individual subscriber agreements to which the Company or HNL with respect to the Dental Business were a party as of December 31, 2002. As of December 31, 2002, the Company was a party to approximately
11,168 individual subscriber agreements, and HNL in connection with the Dental Business was a party to approximately 414 individual subscriber agreements. 

        (f)    Management Contracts. Schedule 3.15(f) lists all management services
agreements, marketing, administrative services and third-party administrator contracts to which the Company or HNL in connection with its Dental Business were a party as of December 31, 2002. Copies
of all such contracts have been made available to Purchaser. 

        (g)   ASO Contracts. As of December 31, 2002, the Company was not a party to any ASO contracts and HNL in connection with its
Dental Business was not a party to any ASO contracts. 

        (h)   Commission Agreements. Schedule 3.15(h) lists all the contracts with
other entities to which the Company or HNL in connection with its Dental Business were a party and by which the Company or HNL in connection with its Dental Business received commission or fee income
as of December 31, 2002. Copies of all such contracts have been made available to Purchaser. 

        (i)    Producer Agreements. Seller has made available to Purchaser copies of all representative forms of contracts with brokers
or agents with whom or which the Company or HNL in connection with the Dental Business were a party as of December 31, 2002. As of December 31, 2002, the Company paid commission in connection with the
sale of dental HMO products to approximately 1096 producers, and HNL paid commission in connection with the sale of dental PPO and dental indemnity insurance products to approximately 343 producers.
Attached hereto as Schedule 3.15(i) is a list of all producers paid a commission by the Company in connection with the sale of its dental HMO products
as of December 31, 2002. 

15

 

        Section
3.16    Employees.    

        (a)   Schedule 3.16(a) hereto lists (i) all employees of the Company and all persons employed by the Company or Health Net
Vision, Inc., an Affiliate of the Company, on the date hereof that support or service the Dental Business ("Employees"), (ii) their job titles, (iii) annual rates of compensation, (iv) accrued
vacation and personal days as of the most recent regular payroll date immediately preceding December 31, 2002, (v) other fringe benefits, if any, (vi) a description of any severance arrangements, if
any, and (vii) the amounts payable with respect to such accrued vacation and personal days as of the most recent payroll date immediately preceding December 31, 2002 and the rate at which such
vacation and personal days will accrue after the date of this Agreement. 

        (b)   Except
as shown on Schedule 3.16(b), the Company is not bound by any written contract of employment or any consulting or
similar agreement with any Employee of the Company and, subject to applicable Law, all oral employment contracts are terminable at will. A copy of all such employment, consulting or similar agreements
have been made available to Purchaser. 

        (c)   Except
as set forth in Schedule 3.16(c), the Company is not a party to any employment or other agreement with an Employee
of the Company, whether written or oral, pursuant to which the Company has agreed to make a loan to, or guarantee any loan of, any Employee of the Company, or relating to any bonus, deferred
compensation, severance pay or similar plan, agreement, arrangement or understanding. 

        (d)   Except
as specified in the written agreements identified in Schedule 3.16(d), the Company is not bound, and following the
Closing will not be bound, by any express or implied contract or agreement to employ, directly or as a consultant or otherwise, any person for any specific period of time or until any specific age. 

        (e)   Except
as listed on Schedule 3.16(e), to the Knowledge of Seller, no "leased employees" within the meaning of Section
414(n)(2) of the Code or independent contractors work, on average, more than ten hours per week for the Company, or as of the date of this Agreement have worked for the Company for more than six
months, except for providers who or which contracted with the Company to provide dental services or dental supplies to subscribers in connection with the Dental Business. 

        Section
3.17    Employee Benefit Matters.    

        (a)   Schedule 3.17 includes a correct and complete list of, and Seller has made available to Purchaser true and correct copies
of material employee benefit plans maintained for the benefit of employees or former employees of the Company or dependents or beneficiaries of any employee or former employee of the Company, whether
or not subject to ERISA (the "Employee Plans"). 

        (b)   Each
Employee Plan has been operated and administered in all material respects in accordance with its terms and applicable Law, including without limitation ERISA and
the Code, except where the failure to administer the Employee Plan would not reasonably be expected to have a Seller Material Adverse Effect. 

        Section
3.18    No Brokers.    Except as set forth on Schedule 3.18,
no broker, finder or investment banker has been retained or engaged on behalf of Seller or the Company or is entitled to any brokerage, finder's or other fee, commission or compensation from Seller or
the Company in connection with the transactions contemplated by this Agreement. Seller shall pay any brokerage, finder's or other fee, commission or compensation owing to any broker, finder or
investment banker retained or engaged on behalf of Seller or the Company, and Seller shall indemnify and hold Purchaser harmless for any such fees, commission or compensation. 

        Section
3.19    Title to and Condition of Properties.    Except as set forth on Schedule
3.19, the Company has good and marketable title, or valid and effective leasehold rights in the case of leased property, to all of the assets reflected on the Financial
Statements, and all personal property owned or 

16

 

leased
by it or used by it in the conduct of its business are used in such a manner as to create the appearance or reasonable expectation that the same is owned or leased by it, free and clear of all
Liens. HNL has good and marketable title to all of the Dental Business Assets owned by it and such Dental Business Assets are used by HNL in the conduct of the Dental Business of HNL in such a manner
as to create the appearance or reasonable expectation that the same is owned by it, free and clear of all Liens. To the Knowledge of Seller, there is no potential action or assertion of rights by any
party, governmental or other, and no proceedings with respect thereto have been instituted of which Seller, the Company or HNL has notice, that have a Seller Material Adverse Effect. To the Knowledge
of Seller, the Company has not received any notices of default or other violations from any landlord or lessor regarding any properties leased by the Company which, either individually or in the
aggregate, is reasonably likely to have a Seller Material Adverse Effect. None of the assets owned, leased or used by the Company in the operation of its business, or by HNL in operation of its Dental
Business, violates or fails to comply in any material respect with any applicable Law and the Company and HNL have not received any notice of an alleged violation thereof except such alleged
violations that would not have a Seller Material Adverse Effect. 

        Section
3.20    Real Property Leases.    The Company is not a party to any real property leases. 

        Section
3.21    Insurance.    Schedule 3.21 lists all insurance
policies and coverages maintained by or for the Company, including but not limited to, real and personal property insurance, comprehensive liability insurance, automobile liability insurance, workers'
compensation insurance, stop loss insurance, reinsurance, medical malpractice insurance and professional liability insurance. Schedule 3.21 lists all
stop loss or reinsurance policies and coverages maintained by or for HNL with respect to the Dental Business. Except as reflected on Schedule 3.21, all
such insurance shall remain in full force and effect after the Closing. 

        Section
3.22    Environmental Matters.    To the Knowledge of Seller, the Company has not received any notice from any
Governmental Authority or private person or entity advising it that the Company, its assets or its business operations, is or has been in violation of any environmental law or any applicable
environmental permit or that the Company is responsible (or potentially responsible) for the cleanup of any pollutants, contaminants, hazardous or toxic wastes, substances or materials. To the
Knowledge of Seller, the Company is not the subject of federal, state, local or private litigation or proceedings involving a demand for damages or other potential liability with respect to violations
of environmental laws except such litigation or proceeding which would not have a Seller Material Adverse Effect. 

        Section
3.23    Software.    Schedule 3.23 sets forth a true and
complete list of all software programs and other information technology owned directly by the Company or licensed directly by the Company (the "Software"). Except for the Software, the Company shall
not, as of the Closing Date, own or otherwise
have the right to use by license or otherwise, any software programs, technologies, information systems or other information technology used by the Company. 

        Section
3.24    Transactions With Affiliates.    Except as disclosed on Schedule
3.24, to the Knowledge of Seller, other than dental benefits provided by the Company or HNL, there are no loans, leases, agreements, contracts or other transactions between the
Company and any Affiliate of the Company. 

        Section
3.25    Improper Payments.    Except as listed on Schedule
3.25, to the Knowledge of Seller, neither the Company nor HNL, with respect to the HNL Dental Business, nor any stockholder, director, officer, employee or agent of the Company
or HNL has made any improper bribes, kickbacks or other payments to, or received any such payments from, customers, vendors, suppliers or other persons contracting with the Company or HNL, with
respect to the HNL Dental Business, and has not proposed or offered to make or receive any such payments. 

17

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER  

        Purchaser represents and warrants to Seller as follows: 

        Section
4.1    Organization of Purchaser.    Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its assets and properties and to conduct its business as presently being
conducted except where failure to be so organized, existing, and in good standing or to have such power and authority would not have a Purchaser Material Adverse Effect. 

        Section
4.2    Authorization, Validity and Enforceability.    Purchaser, and its respective Affiliates that are
parties to any of the Transaction Documents, have the corporate power and authority to execute, deliver and perform their obligations under the Transaction Documents to which they are parties.
Purchaser, or its Affiliates that are parties to any of the Transaction Documents, have taken all necessary corporate action to authorize the execution, delivery and performance of the Transaction
Documents to which they are parties and the consummation of the transactions contemplated thereby. The Transaction Documents to which Purchaser, or its Affiliates, are parties have been duly executed
and delivered by Purchaser, or its Affiliate, and, assuming due and valid authorization, execution, and delivery by all of the other parties thereto constitute the legal, valid and binding obligations
of Purchaser, or its Affiliate, enforceable against Purchaser, or its Affiliate, in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency,
reorganization, moratorium or similar laws affecting rights of creditors generally and by general principles of equity regardless of whether enforcement is sought in a proceeding at law or in equity. 

        Section
4.3    No Violation or Breach.    Except as set forth in Schedule
4.3, Purchaser's and Purchaser's Affiliates' execution, delivery and performance of this Agreement and the other Transaction Documents to which Purchaser or its Affiliate is
party, and the consummation by Purchaser and its Affiliates of the transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof, do not and will not
conflict with, constitute a violation or breach of, constitute a default or give rise to any right of termination or acceleration of any right or obligation of Purchaser or any of its Affiliates
under, or result in the creation or imposition of any Lien upon the property of Purchaser by reason of the terms of (a) the Certificate of Incorporation or By-laws of Purchaser or any of its
Affiliates, (b) any contract, agreement, lease, indenture or other instrument to which Purchaser or any of its Affiliates is a party or by or to which Purchaser's or any of its Affiliate's assets or
properties may be bound or subject, or (c) to the Knowledge of Purchaser, any order, judgment, injunction, award or decree of any court, arbitrator or Governmental Authority or any Law applicable to
Purchaser or any of its Affiliates except for such violations, breaches or defaults which would (A) not have a Purchaser Material Adverse Effect or (B) become applicable as a result of business
activities in which Seller is or proposes to be engaged or as a result of any acts or omissions by, or the status of any facts pertaining to, Seller. 

        Section
4.4    Consents and Approvals.    Except as set forth in Schedule
4.4 hereto, no consent, approval, authorization or order of, registration or filing with, or notice to, any Governmental Authority or any other Person is necessary to be
obtained, made or given by Purchaser or any of its Affiliates in connection with the execution, delivery and performance by Purchaser of this Agreement or the other Transaction Documents to which
Purchaser or any of its Affiliates is party or for the consummation by Purchaser or any of its Affiliates of the transactions contemplated hereby or thereby except for such filings, registrations,
notifications, authorizations, consents or approvals the failure of which to obtain would (A) not have a Purchaser Material Adverse Effect and would not materially adversely affect the ability of
Purchaser to consummate the transactions contemplated by this Agreement and the Transaction Documents or (B) become applicable as a result of the business or 

18

 

activities
in which Seller is or proposes to be engaged or as a result of any acts or omissions by, or the status of any facts pertaining to, Seller. 

        Section
4.5    Legal Proceedings.    Except as set forth in Schedule
4.5 hereto, Purchaser is not bound by or subject to any order, judgment, injunction, award or decree of any court, Governmental Authority or arbitration tribunal which, either
individually or in the aggregate, is reasonably likely to have a Purchaser Material Adverse Effect. Except as set forth in Schedule 4.5, there is no
pending or, to the Knowledge of Purchaser, threatened Litigation against or involving Purchaser or any Affiliate that is a party to a Transaction Document which, either individually or in the
aggregate, is reasonably likely to have a Purchaser Material Adverse Effect. 

        Section
4.6    Certain Governmental Consents.    As of the date hereof, to the Knowledge of Purchaser, there is no
reason to believe that any Person, judicial authority, or Governmental Authority whose authorization, consent, or approval of the transactions contemplated by this Agreement or any other Transaction
Document to which it or any of its Affiliates is party is required to be obtained will not give such authorization, approval, or consent based solely on facts and circumstances relating to Purchaser,
any of its Affiliates or the past operations of Purchaser or any Affiliate of Purchaser. 

        Section
4.7    Investment Representation.    Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its investment in the Shares. Purchaser has been given the opportunity to examine all documents provided by, conduct due diligence and
ask questions of, and to receive answers from, Seller and the Company and their representatives concerning the terms and conditions of an investment in the Shares;  provided, however, that the representations and warranties made by Seller pursuant to Article III, shall
be unaffected by any such examination, due diligence or any information which may have been discovered by Purchaser as a result thereof. Purchaser is purchasing the Shares for its own account for
investment purposes only and without a view to the public distribution or resale thereof or of any interest therein. Purchaser acknowledges that the offering and sale of the Shares as contemplated by
this Agreement are intended to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(1) of the Securities Act, and may not be resold by
Purchaser except pursuant to an effective registration statement under the Securities Act or an exemption from registration thereunder and pursuant to registration or qualification (or exemption
therefrom) under applicable state securities laws. 

        Section
4.8    No Brokers.    No broker, finder or investment banker has been retained or engaged on behalf of
Purchaser or is entitled to any brokerage, finder's or other fee, commission or compensation from Purchaser in connection with the transactions contemplated by this Agreement. 

        Section
4.9    Investigation by Purchaser.    In entering into this Agreement, Purchaser: 

        (a)   acknowledges
that, except for the specific representations and warranties of Seller contained in Article III hereof, none of Seller, the Company, HNL, or any of their
respective directors, officers, employees, Affiliates, controlling persons, agents, advisors or representatives, makes or shall be deemed to have made any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information (including, without limitation, any reserve estimates, projections, forecasts, budgets or other forward-looking information)
provided or otherwise made available to Purchaser or any of its directors, officers, employees, Affiliates, controlling persons, agents, advisors or representatives (including, without limitation, in
any management presentations, supplemental information or other materials or information with respect to any of the above). With respect to any such reserve estimate, projection or forecast delivered
by or on behalf of Seller to Purchaser, except for the representations and warranties of Seller in Article III, Purchaser acknowledges that: (A) there are uncertainties inherent in attempting to make
such projections and forecasts or reserve calculations; (B) it is familiar with such uncertainties; (C) it is taking full responsibility for making its own evaluation of the adequacy and accuracy of
all such projections and 

19

 

forecasts
or reserve calculations so furnished to it; (D) it is not acting in reliance on any such projection or forecast or reserve calculation so furnished to it; and (E) except for proposed Final
Balance Sheet adjustments consistent with the procedure set forth in Section 2.14, it shall have no claim against any such Person with respect to any such projection or forecast or reserve
calculation; and 

        (b)   agrees,
to the fullest extent permitted by Law, that Seller and its directors, officers, employees, Affiliates, controlling persons, agents, advisors or representatives
shall not have any liability or responsibility whatsoever to Purchaser or any of its directors, officers, employees, Affiliates, controlling persons, agents, advisors or representatives on any basis
(including, without limitation, in contract or tort, under federal or state securities laws or otherwise) based upon any information provided or otherwise made available, or statements made, (or
omissions to so provide, make available or state), to Purchaser or any of its directors, officers, employees, Affiliates, controlling persons, agents, advisors or representatives, including, without
limitation, in respect of the specific written representations and warranties of Seller set forth in Article III hereof, except as and only to the extent expressly set forth in this Agreement with
respect to such representations and warranties and subject to the limitations and restrictions contained in this Agreement; provided,  however, that nothing
contained in this Section 4.9(b) shall limit liability for the specific written representations and warranties of Seller set forth
in Article III hereof. 

ARTICLE V

COVENANTS OF PURCHASER AND SELLER  

        Purchaser and Seller hereby covenant and agree as follows: 

        Section
5.1    Conduct of Business.    From and after the date hereof and prior to the Closing Date, except as
otherwise required or contemplated hereunder, disclosed on Schedule 5.1, hereto or as consented to in writing by Purchaser, Seller shall use its
reasonable best efforts to: 

        (a)   cause
the Company and HNL to carry on the Dental Business in the ordinary course and substantially in the same manner as heretofore carried on; 

        (b)   cause
the Company to use its reasonable best efforts to preserve its assets and cause HNL to use its reasonable best efforts to preserve the Dental Business Assets; 

        (c)   cause
the Company not to enter into any contract or agreement and cause HNL not to enter into any contract or agreement relating to the Dental Business, other than (i)
such contracts or agreements that are entered into in the ordinary course of business consistent with past practice; and (ii) any such contract or agreement not entered into in the ordinary course of
business consistent with past practice and pursuant to which the Company or HNL receives or is reasonably expected to receive payments, or makes or is reasonably expected to make payments of less than
$50,000 per calendar year; 

        (d)   cause
the Company and HNL, solely with respect to the HNL Dental Business, not to make without prior written notice to Purchaser (i) any material change, except in the
ordinary course of business, in its assets (including, but not limited to, any change in the composition of such assets so as to materially alter the proportion of cash thereof) or liabilities, or
(ii) any commitment for any capital expenditures including, without limitation, replacements of equipment in the ordinary course of business, involving, in the aggregate, more than $50,000; 

        (e)   cause
the Company and Health Net Vision, Inc. not to (i) make any increase in the compensation payable or to become payable to any of the Employees of the Company or
Health Net Vision, Inc. (including any bonus or incentive payment or arrangement), other than normal yearly salary increases and scheduled increases under presently existing compensation plans, and
currently anticipated bonuses pursuant to existing bonus arrangements; or (ii) make, amend, or enter into any written employment or consulting contract with any Employee or independent consultant or
any bonus, stock option, profit sharing, pension, retirement or other similar payment or arrangement other than in the ordinary course of business; 

20

   
        (f)    cause the Company not to enter into any agreement for the purchase of capital stock of any other entity; 

        (g)   cause
the Company not to carry on any negotiations with other parties relating to the acquisition of capital stock or any material assets of the Company or merge or
consolidate with or into any entity or sell or otherwise dispose of, or purchase, any material assets or properties (other than sales of obsolete inventory or equipment and purchases of items of
inventory or equipment in replacement therefor, in the ordinary course of business consistent with past business practice) or enter into any agreement in respect of such merger, consolidation,
purchases, sales, and dispositions; 

        (h)   cause
HNL not to carry on any negotiations or enter any agreement with other parties relating to the sale of any of HNL's Dental Business Assets; 

        (i)    cause
the Company not to enter into or engage in any material transaction with any officer, director, shareholder or Affiliate of the Company except for the payment of
salaries in the ordinary course of business; 

        (j)    cancel,
surrender or let lapse any insurance or reinsurance policies issued to the Company or to HNL, solely as such policies relate to HNL's Dental
Business; 

        (k)   not
permit the Company, except in the ordinary course of business, to (i) create, incur or assume any indebtedness for borrowed money; (ii) mortgage,
pledge or otherwise encumber or subject to any Lien any of its properties or assets; or (iii) create or assume any other indebtedness; 

        (l)    not
permit the Company to issue any shares of capital stock of any class or grant any warrants, options or rights to subscribe for any shares of capital stock of any
class or securities convertible into or exchangeable for, or which otherwise confer on the holder any right to acquire, any shares of capital stock of any class; 

        (m)  inform
Purchaser regarding all discussions, correspondence or negotiations relating to any existing or proposed new group dental HMO, dental PPO or dental indemnity
contracts of the Company or HNL involving 1,000 or more subscribers; 

        (n)   not
modify, amend or renew any group dental HMO, dental PPO or dental indemnity contract of the Company or HNL involving 1,000 or more subscribers without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld or delayed other than in the ordinary course of business; 

        (o)   advise
Purchaser promptly in writing of any material adverse change in the financial condition of the Company or HNL's Dental Business; and 

        (p)   cause
the Company and HNL to use reasonable efforts not to take any action that would prevent compliance with any of the conditions in  Article VI of this Agreement. 

        Section 5.2    Consents and Approvals.    

        (a)   Within
thirty (30) days of the date hereof, the parties hereto shall file with the appropriate Governmental Authority any applications, notices or other documents
necessary to obtain any authorizations, consents or approvals that are required to be obtained, made or given to consummate the Transactions contemplated hereby and each of the parties shall use their
reasonable best efforts to obtain any such necessary authorization, consent, approval from such Governmental Authority as is required to be obtained, made or given by such party to consummate the
Transactions contemplated by this Agreement. 

        (b)   The
parties hereto shall cooperate and coordinate with each other, and Seller shall cause the Company and HNL to cooperate with Purchaser, in seeking to obtain any
necessary authorization, consent, approval or other action of any judicial authority or Governmental Authority as is required to 

21

 

be
obtained by such other party to consummate the Transactions contemplated by this Agreement and the parties shall provide, and Seller shall cause the Company and HNL to provide, such information and
communications to such judicial authorities and Governmental Authorities as may be required by such judicial authorities and Governmental Authorities in connection therewith or as the other party may
reasonably request in connection therewith. 

        Section
5.3    Cooperation and Further Assurances.    Subject to the terms and conditions hereof, each of the parties
hereto covenants and agrees to use its reasonable best efforts to take, or cause to be taken, all actions or do, or cause to be done, all things necessary, proper or appropriate to consummate and make
effective the transactions contemplated hereby and to cause the fulfillment of the parties' obligations hereunder and to satisfy the conditions set forth in Articles VI and VII, to the extent within
its control. 

        Section
5.4    Access to Information.    Prior to the Closing Date, subject to Section 5.7 hereof, Seller shall
make available and allow Purchaser and its authorized representatives, at Purchaser's expense, to have reasonable access to the Company's books, records, contracts, facilities and personnel and to
HNL's books, records, contracts, facilities and personnel relating solely to the Dental Business, and to personnel of Seller having knowledge of the Company or the Dental Business of
HNL, for inspection, examination or verification. Any such access or examination shall be conducted upon reasonable prior notice and under reasonable circumstances during normal business hours and
shall not unreasonably interfere with the operations and activities of Seller, HNL or the Company. Seller shall cause its employees and representatives, and those of the Company and HNL, to cooperate
in good faith with Purchaser and its representatives in connection with any such access and examination, provided,  however, that nothing herein shall
require Seller, HNL or the Company to disclose any information to Purchaser if such disclosure would violate
applicable Law or the provisions of any confidentiality agreement to which Seller, HNL or the Company or any of their Affiliates is a party. If information requested by Purchaser is withheld pursuant
to this Section 5.4 and not disclosed by Seller, HNL or Company, Seller, HNL or the Company, as appropriate, shall notify Purchaser that certain requested information shall not be disclosed and
provide a general description of the type of information withheld and the basis for nondisclosure. Unless otherwise required by Law and until the Closing Date, Purchaser shall hold any such
information which is nonpublic in confidence in accordance with Section 5.7 of this Agreement. 

        Section 5.5    Notice of Litigation and Requests.    

        (a)   From
the date hereof through the Closing Date, Seller shall promptly notify Purchaser of any Litigation of the type required to be disclosed in Section 3.14
hereof that is commenced or, to the Knowledge of Seller, threatened against the Company, or against any property or asset of the Company, or against any officer or director of the Company with respect
to the affairs of the Company, or with respect to the Dental Business of HNL, and of any request for additional information or documentary materials by any Governmental Authority, in connection with
the transactions contemplated hereby. 

        (b)   From
the date hereof through the Closing Date, Purchaser shall promptly notify Seller of any Litigation of the type required to be described in Section 4.5 hereof
that is commenced or to the Knowledge of Purchaser, threatened against Purchaser, or against any property or asset of Purchaser, or against any officer or director of Purchaser with respect to the
affairs of Purchaser, or against any Affiliate of Purchaser that is party to a Transaction Document and of any request for additional information or documentary materials by any Governmental
Authority, in connection with the transactions contemplated hereby. 

        Section
5.6    Notice of Changes and Defaults.    From the date hereof through the Closing Date, (i) Seller
shall promptly notify Purchaser of the occurrence or the non-occurrence of any event, condition or circumstance, or the discovery of an inaccuracy, omission or mistake, of which it becomes 

22

 

aware
during such period that would have a Seller Material Adverse Effect, and (ii) Purchaser shall promptly notify Seller of the occurrence or the non-occurrence of any event,
condition or circumstance, or the discovery of any inaccuracy, omission or mistake, of which it becomes aware during such period that would have a Purchaser Material Adverse Effect. 

        Section 5.7    Confidentiality.    

        (a)   From
the date hereof through the Closing Date, Purchaser, its Affiliates and their respective representatives shall keep all non-public information with
respect to Seller, the Company, HNL and their Affiliates provided to it by Seller or any of its representatives in connection with the transactions contemplated hereby strictly confidential, and shall
not disclose any of the same without obtaining Seller's prior written consent, unless otherwise required by applicable Law or Governmental Authority. In the event that this Agreement is terminated,
Purchaser and its Affiliates shall return to Seller all non-public documents, and copies thereof, provided to Purchaser or its Affiliates by Seller or any of its representatives, and shall
otherwise continue to comply with the foregoing provisions of this Section 5.7. From and after the Closing Date, Purchaser and its Affiliates and their respective representatives shall keep,
and Purchaser shall cause the Company and its representatives to keep, all non-public information with respect to Seller, its Affiliates other than the Company, and the
pre-Closing business and operations of the Company and HNL provided to it by Seller, the Company, HNL or any of their representatives strictly confidential, and shall not disclose any of
the same without obtaining Seller's prior written consent unless otherwise required by applicable Law or Governmental Authority. Before any disclosure of information, Purchaser shall give reasonable
prior notice to Seller of the intended disclosure and, if requested by Seller, shall use reasonable efforts to obtain a protective order or similar protection for Seller, HNL and the Company. 

        (b)   Seller
and its representatives shall keep all non-public information with respect to Purchaser and its Affiliates provided to it by Purchaser or any of its
representatives in connection with the transactions contemplated hereby strictly confidential, and shall not disclose any of the same without obtaining Purchaser's prior written consent unless
otherwise required by applicable Law or Governmental Authority. Before any disclosure of information, Seller shall give reasonable prior notice to Purchaser of the intended disclosure and, if
requested by Purchaser, shall use reasonable efforts to obtain a protective order or similar protection for Purchaser. In the event that this Agreement is terminated, Seller shall return to Purchaser
all non-public documents, and copies thereof, provided to Seller by Purchaser or any of its representatives. 

        Section
5.8    Publicity.    Except as may be required under applicable Law or stock exchange rules, from the date
hereof through the Closing Date, each of the parties hereto shall use its best efforts to prevent, and shall cause its Affiliates and all representatives to not engage in, encourage or support any
publicity, announcement or disclosure of any kind or form in connection with this Agreement or the transactions contemplated hereby, unless the parties hereto agree in advance on the form, timing and
content of any such publicity, announcement or disclosure, whether to the financial community, Governmental Authorities or members of the public. If any such announcement or disclosure is required by
applicable Law or stock exchange rules, the party required to make such disclosure shall use its reasonable best efforts to provide the other party with prior notice of the required disclosure.
Notwithstanding the foregoing, Seller acknowledges that Purchaser will be required to disclose and generally describe this Agreement and the Transactions contemplated by this Agreement in public
filings with the Securities and Exchange Commission. Purchaser shall share drafts of any filings Purchaser is required to make with the Securities and Exchange Commission prior to making such filings
and Purchaser shall incorporate any revisions to such filings reasonably requested by Seller which are provided to Purchaser by Seller within ten (10) days after receipt by Seller of a proposed
draft of such filing. The parties shall jointly prepare and issue a press release regarding the Transactions, in such form as is mutually agreeable to the parties. 

23

 

        Section
5.9    Distribution of Excess Tangible Net Equity.    At or prior to the Closing, subject to receipt of all
necessary regulatory approvals therefor, Seller shall cause the Company to dividend or otherwise distribute that portion of the Excess Tangible Net Equity authorized by the Department. 

        Section
5.10    Transfer of HNL Contracts.    At the Closing, subject to receipt of necessary regulatory approvals
therefor, if any, and subject to the limitations of Section 2.5 hereof, Seller shall cause HNL to transfer and assign to Purchaser, or its Designee, all of HNL's right, title and
interest in the HNL Contracts; and Purchaser or its Designee shall assume the liabilities of HNL under the HNL Contracts provided,  however, that neither
Purchaser nor any Purchaser Designee shall assume (x) any obligation to pay any amounts (whether or not due at Closing)
arising under the HNL Contracts prior to the Closing, or (y) any liability attributable to a failure by HNL to comply with the foregoing prior to the Closing Date. Any such assignment and
transfer shall be evidenced by an assignment and assumption agreement or such other agreement as the parties reasonably determine is necessary or appropriate. 

        Section
5.11    Reinsurance Agreement.    Seller and Purchaser shall cause their respective Affiliates to enter into,
effective as of the Closing Date, the Reinsurance Agreement. 

        Section
5.12    Strategic Relationship Agreement.    Seller and Purchaser or its Designee shall enter into, effective
as of the Closing Date, the Strategic Relationship Agreement. 

        Section
5.13    Transition Service Agreement.    Seller and Purchaser shall negotiate in good faith and enter into on
or after the Closing, the Transition Service Agreement. 

        Section
5.14    Network Access Agreement.    Seller and Purchaser shall cause their respective Affiliates to enter
into, effective as of the Closing Date, the Network Access Agreement. 

        Section
5.15    Termination of Contracts.    Except for any (i) inter-Affiliate contracts necessary to
administer the Dental Business on or after the Closing Date, (ii) any contract under which the Company is obligated to provide, arrange for the provision of, or indemnify for the costs of
dental services and supplies of the employees of Seller and its Affiliates and (iii) the arrangement related to that certain real property lease dated April 9, 1997 by and between
Foundation Health Corporation and The Irvine Company (the "FHC Lease"), all contracts between the Company and any Affiliate of the Company shall be terminated effective as of the Closing Date. Seller
and Purchaser agree to use their commercially reasonable efforts and exercise good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary and proper to
settle expeditiously any obligations arising from any inter-Affiliate contract terminated as required by this Section 5.15. With respect to the FHC Lease, Seller shall make available for use by
the Company until May 31, 2004, the 49,920 rentable square feet ("RSF") subject to the FHC Lease, and the Company shall pay rent to Seller for the use of such space at a base rent of $1.40 per
RSF per month and a common area charge of $.33 per RSF per month. The Company shall have the right to terminate its occupancy of the of the space subject to the FHC Lease upon sixty (60) days
notice to Seller and payment of one month's base rent. 

        Section 5.16    Employment Matters; Severance.    

        (a)   Purchaser
may, but is not required by this Agreement, to offer continued employment to the Employees after the Closing Date. Purchaser shall pay all costs associated
with any such continued employment, including all salary, benefits, relocation expenses, and other compensation to Employees accruing from and after the Closing Date.  Schedule 5.16 contains a
summary of the benefit plans and arrangements Purchaser intends to provide Employees retained after the Closing. Not
later than ninety (90) days prior to the Closing Date, Purchaser shall provide Seller with a list of those Employees it intends to retain after the Closing (the "Retained Employees") and the
list of Retained Employees may be amended by Purchaser prior to Closing unless any proposed amendment would result in any cost, liability or prejudice to Seller or any Employee. Purchaser shall offer
or cause the Company to offer Retained Employees cash compensation for a period of six (6) months after the Closing equivalent to 

24

 

their
most recent base compensation immediately preceding the Closing Date, provided, however, Purchaser
shall have the right to negotiate with individual Retained Employees for the purpose of offering such Retained Employees alternative positions with cash compensation appropriate for such positions
which may be less than their most recent base compensation immediately preceding the Closing Date. On or prior to the Closing Date, Seller may terminate or transfer any Employee other than the
Retained Employees. Seller and Purchaser shall pay severance to those Employees so terminated and any Retained Employee terminated by Purchaser after the Closing in accordance with the severance
methodology set forth as Exhibit D hereto, provided,  however, to the extent a "Group One" Employee (as
that term is defined in Exhibit D hereto) is
retained as an employee by Seller or any Affiliate of Seller instead of terminated by Seller, the Vision Severance Credit shall be reduced by that percentage of each such retained Group One Employee's
time spent on vision business as set forth on Schedule 3.16(a) multiplied by the total severance obligations attributable to each such Employee
as of the Closing Date. Any Employee terminated pursuant to this Section 5.16 shall be provided severance (i) according to Seller's severance policy set forth as  Exhibit E hereto, if such
Employee is terminated at Closing or within the six (6) month period following the Closing; or
(ii) according to Purchaser's then current severance policy, if such Employee is terminated after expiration of such six (6) month period. Calculation of all employee benefits provided
to Retained Employees by Purchaser, including but not limited to, severance for any Retained Employee terminated by Purchaser after the expiration of the six (6) month period shall include
credit for such Retained Employee's time as an employee of the Company. 

        (b)   Seller
shall provide any notice required by WARN resulting from the termination of Employees prior to the Closing Date, and Purchaser shall provide any notice required
by WARN resulting from the termination of any Retained Employees. 

        Section
5.17    Name Change.    Except in accordance with the terms of the Strategic Relationship Agreement, Purchaser
shall cease using any and all trade names, trademarks, logos and trade dress belonging to Seller or its Affiliates, including, without limitation, those containing the words "Health Net" "Health Net
Dental," "Health Net Life" or any other name, term or identification that suggests, simulates or is confusing due to its similarity to any of the foregoing, in its literature, inventory, products,
labels packaging, supplies or other materials relating to the Company as soon as practicable, but in any event, subject to any applicable approval by Governmental Authorities, within one hundred and
twenty (120) days after the Closing Date. Unless otherwise provided in the Strategic Relationship Agreement, after one hundred and twenty (120) days, any inventory of Company supplies
utilized by Purchaser shall be relabeled (by sticker or other reasonable method) with Purchaser's own trade name
and trade marks. Insofar as the Company's name is used in the Company's outstanding agreements, Purchaser and the Company shall be entitled to use the names set forth therein to the extent necessary
to enforce fully the provisions of those agreements until the termination or renewal of those agreements in the ordinary course. 

        Section
5.18    Sale of MediCal and Healthy Families Business.    If within one (1) year of the Closing Date,
Purchaser enters into one or more definitive agreements to sell or otherwise transfer the Company's MediCal or Healthy Families business to an unaffiliated entity or entities, Purchaser shall pay
Seller upon the consummation of such transaction(s) one-third (1/3) of the gross consideration received by Purchaser in connection with any such transactions. 

        Section
5.19    Interaffiliate Accounts.    The parties acknowledge that all interaffiliate accounts of the Company
may not be settled as of the Closing and that any post-Closing settlements of interaffiliate accounts shall be settled within sixty (60) days after the Closing, provided that any
further adjustments required thereafter shall be taken into account in the preparation of the Final Balance Sheet. Purchaser agrees to cooperate as necessary to settle any such interaffiliate
accounts. 

25

 

        Section
5.20    Non-Competition.    Except as provided below, during the sixty (60) months
immediately following the Closing Date, Seller agrees that neither it nor any of its Affiliates (a "Seller Entity") shall, without the prior written consent of the Purchaser: 

        (a)   directly
or indirectly acquire a majority interest (whether by merger, consolidation, purchase of stock or assets, or otherwise) of any Competitor (as defined below); or 

        (b)   engage,
directly or indirectly, in the dental HMO, dental PPO or dental indemnity insurance business in California, Arizona and Oregon, and to the extent Seller
exercises its option to extend the Strategic Relationship Agreement to additional states, engage directly or indirectly in the dental HMO, dental PPO or dental indemnity insurance business in any such
additional states (the "Additional States"). 

        For
purposes of this Section, a "Competitor" shall mean an entity that derives 25% or more of its gross revenue during the calendar year next preceding the date of determination, from
the dental HMO, dental PPO or dental indemnity insurance business in California, Arizona, Oregon, or if relevant, any Additional States. Notwithstanding the foregoing, the restrictions contained in
this Section 5.20 shall not prohibit the acquisition by a Seller Entity of ownership of an entity that offers or operates a dental HMO, dental PPO or dental indemnity insurance business in the
states of California, Arizona or Oregon, or if relevant, any Additional States and is part of an organization with multiple businesses (a
"Multi-Business Company"), whether the ownership by a Seller Entity results from the consummation of a transaction in which the Multi-Business Company is either acquired by a Seller Entity or in which
the Multi-Business Company acquires a Seller Entity, or by merger or consolidation; provided that the dental HMO, dental PPO and dental indemnity
insurance business of the Multi-Business Company does not account for more than thirty (30%) percent of the annual gross revenues of the combined operations of the Multi-Business Company and the
Seller Entity. 

        The
restrictions contained in this Section 5.20 shall have no further force or effect in the event the Strategic Relationship Agreement is terminated based upon a breach thereof
by Purchaser. 

ARTICLE VI

CONDITIONS TO PURCHASER'S OBLIGATIONS  

        The obligation of Purchaser to purchase the Shares at the Closing is subject to the satisfaction or waiver on or prior to the Closing Date of the following
conditions: 

        Section
6.1    Representations, Warranties and Covenants.    All of the representations and warranties of Seller
contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, except that
any such representation and warranty that is given as of a particular date and relates solely to a particular date or period shall be true as of such date or period, and Seller shall have performed
and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Seller on or prior to the Closing Date. Seller shall have
delivered to Purchaser a certificate dated the Closing Date and signed by an executive officer of Seller to the foregoing effect. 

        Section
6.2    No Proceeding or Litigation.    No injunction, order, decree or other relief having the force of law
shall have been issued by any judicial authority or Governmental Authority and be in effect, restraining, prohibiting, modifying or preventing the consummation of the transactions contemplated hereby.
No action, suit or proceeding shall have been instituted and be continuing by any Governmental Authority or any other Person to restrain, modify or prevent the consummation of the transactions
contemplated hereby. 

        Section
6.3    Corporate Action.    Seller shall have delivered to Purchaser a copy of the resolutions duly adopted by
the Board of Directors of Seller authorizing the execution and delivery of this 

26

 

Agreement
and the performance of the transactions contemplated hereby by Seller, certified by the Secretary or an Assistant Secretary of Seller. 

        Section
6.4    Consents and Approvals.    All approvals, authorizations, consents and other actions required to be
obtained from, and all filings and notices required to be made with or given to, any judicial authority or Governmental Authority in connection with the transactions contemplated by this Agreement
shall have been obtained, made or given, as the case may be, and shall be in full force and effect (without any term, condition or restriction reasonably unacceptable to Purchaser), and any waiting
period required by applicable Law or any Governmental Authority shall have expired or been earlier terminated. Purchaser shall have been furnished with appropriate evidence, reasonably satisfactory to
it and its counsel, of the granting of such approvals, authorizations, consents and other actions, the making of such filings and the giving of such notices. 

        Section
6.5    Resignation of Officers and Directors.    Seller shall have caused the officers and directors of the
Company to have tendered to the Company their resignations as officers and directors of the Company, effective as of the Closing Date. 

        Section
6.6    Transfer of HNL Contracts.    Subject to the limitations contained in Section 2.5, Seller shall
have caused HNL to assign or otherwise transfer the HNL Contracts to Purchaser, or its Designee. 

        Section
6.7    Strategic Relationship Agreement.    Seller and Purchaser, or its Designee, shall have entered into the
Strategic Relationship Agreement. 

        Section
6.8    Transfer of Books and Records.    HNL and Seller shall transfer to Purchaser or its Designee the Books
and Records. 

        Section
6.9    Reinsurance Agreement.    HNL and SafeHealth shall have entered into the Reinsurance Agreement. 

        Section
6.10    Network Access Agreement.    Seller and Purchaser shall have entered into the Network Access
Agreement. 

        Section 6.11    Transition Services Agreement.    The Seller and Purchaser shall have entered into the
Transition Services Agreement. 

ARTICLE VII

CONDITIONS TO SELLER'S OBLIGATIONS  

        The obligation of Seller to sell the Shares to Purchaser at the Closing is subject to the satisfaction or waiver on or prior to the Closing Date of the following
conditions: 

        Section
7.1    Representations, Warranties and Covenants.    All of the representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, and Purchaser
shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Purchaser on or prior to the Closing Date.
Purchaser shall have delivered to Seller a certificate dated the Closing Date and signed by an executive officer of Purchaser to the foregoing effect. 

        Section
7.2    No Proceeding or Litigation.    No injunction, order, decree or other relief having the force of law
shall have been issued by any judicial authority or Governmental Authority and be in effect, restraining, prohibiting, modifying or preventing the consummation of the transactions contemplated hereby.
No action, suit or proceeding shall have been instituted and be continuing by any Governmental Authority or any other Person to restrain, modify or prevent the consummation of the transactions
contemplated hereby. 

27

 

        Section
7.3    Corporate Action.    Purchaser shall have delivered to Seller a copy of the resolutions duly adopted by
the Board of Directors of Purchaser authorizing the execution and delivery of this Agreement and the performance of the transactions contemplated hereby by Purchaser, certified by the Secretary or an
Assistant Secretary of Purchaser. 

        Section
7.4    Consents and Approvals.    All approvals, authorizations, consents and other actions required to be
obtained from, and all filings and notices required to be made with or given to, any judicial authority or Governmental Authority in connection with the transactions contemplated by this Agreement
shall have been obtained, made or given, as the case may be, and shall be in full force and effect (without any term, condition or restriction reasonably unacceptable to Seller), and any waiting
period required by applicable Law or any Governmental Authority shall have expired or been earlier terminated. Seller shall have been furnished with appropriate evidence, reasonably satisfactory to it
and its counsel, of the granting of such approvals, authorizations, consents and other actions, the making of such filings and the giving of such notices. 

        Section
7.5    Purchase Price.    Seller shall have received the Purchase Price in the manner specified in
Section 2.8. 

        Section
7.6    Strategic Relationship Agreement.    Seller and Purchaser, or its Designee, shall have entered into the
Strategic Relationship Agreement. 

        Section
7.7    Reinsurance Agreement.    HNL and SafeHealth shall have entered into the Reinsurance Agreement. 

        Section
7.8    Network Access Agreement.    Seller and Purchaser shall have entered into the Network Access Agreement. 

        Section 7.9    Transition Services Agreement.    Seller and Purchaser shall have entered into the Transition
Services Agreement. 

ARTICLE VIII

SURVIVAL, INDEMNIFICATION AND ARBITRATION  

        Section
8.1    Survival.    The representations and warranties of the parties contained herein, or in any Schedule
hereto or certificate delivered as provided hereunder, shall survive until the second annual anniversary of the Closing Date (the "Survival Period");  provided, however, that the representations and warranties made in Section 9.1 shall survive for
the period set forth in Section 9.7. 

        Section
8.2    Indemnification.    Seller hereby agrees to indemnify Purchaser against and to hold Purchaser harmless
from any damages, liabilities, losses or costs (including, without limitation, reasonable attorneys' fees and expenses) (i) arising out of or due to any inaccuracy in any representation or
breach of any warranty of Seller contained herein (or in any Schedule hereto or certificate delivered as provided hereunder) or in any other Transaction Document to which it is party, or the breach or
nonfulfillment of any covenant, agreement or other obligation of Seller under this Agreement or any other Transaction Document to which it is party,  provided, however, that Seller shall have no liability to Purchaser as a result of the breach of any
representation or warranty to the extent that Purchaser had actual knowledge that such representation or warranty was incorrect or untrue prior to the Closing Date, and (ii) arising out of or
due to any Litigation pending or hereafter instituted respecting actions or omissions by the Company occurring prior to the Closing Date, including but not limited to, any matters set forth in  Schedule 3.14. Any provision or reserve for damages, liabilities, losses or costs
relating to any Litigation pending or threatened against the Company included on Financial Statements of the Company shall be reversed prior to the Closing. 

        (a)   Purchaser
hereby agrees to indemnify Seller against and to hold Seller harmless from any damages, liabilities, losses or costs (including, without limitation, reasonable
attorneys' fees and 

28

 

expenses)
arising out of or resulting directly or indirectly from any inaccuracy in any representation or breach of any warranty of Purchaser contained herein (or in any Schedule hereto or certificate
delivered as provided hereunder) or in any other Transaction Document to which it is party or the breach or nonfulfillment of any covenant, agreement or other obligation of Purchaser under this
Agreement or any other Transaction Document to which it is party, provided, however, that Purchaser
shall have no liability to Seller as a result of the breach of any representation or warranty to the extent that Seller had actual knowledge that such representation or warranty was incorrect or
untrue prior to the Closing Date. 

        (b)   The
right of any party hereto to indemnification shall be limited to claims asserted in writing delivered by such party to the other party hereto during the Survival
Period. The indemnification to which either party hereto is entitled from the other party hereto pursuant to this Section 8.2 shall become effective only after the amount of such liability
suffered or incurred by the party entitled to indemnification exceeds in the aggregate $250,000 and such liability shall be limited to those amounts in excess thereof. In any event, the maximum
indemnification amount to which either party hereto is entitled from the other party hereto pursuant to this Section 8.2 shall not exceed $5,000,000. 

        (c)   Any
dispute with respect to any amounts owed by Seller to Purchaser or by Purchaser to Seller under this indemnification provision shall be subject to arbitration as
provided in Section 8.8 hereunder. 

        (d)   The
party seeking indemnification under this Section (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the
"Indemnifying Party") of the assertion of any claim, or the commencement of any claim, suit, action or arbitration in respect of which indemnity may be sought under this Section. The Indemnifying
Party may, and at the request of the Indemnified Party shall, participate in and control the defense of any such claim, suit, action or arbitration proceeding at its own expense. The Indemnifying
Party shall not be liable under this Section for any settlement effected without its consent (which shall not be unreasonably withheld or delayed) of any claim, suit, action or proceeding in respect
of which indemnity may be sought hereunder. 

        Section 8.3    Treatment of Indemnity Payments.    

        (a)   The
parties agree that any payment made under Section 8.2 hereof will be treated by Seller and/or Purchaser on their Tax Returns as an adjustment to the Purchase
Price. The amount which an Indemnifying Party is required to pay to, for or on behalf of the other party (hereinafter referred to as an "Indemnitee")
pursuant to this Article VIII shall be adjusted (including, without limitation, retroactively) (i) by any insurance proceeds actually recovered by or on behalf of such Indemnitee in
reduction of the related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take account of any Tax benefit realized as a result of any
Indemnifiable Loss. Amounts required to be paid, as so reduced, are hereinafter sometimes called an "Indemnity Payment." If an Indemnitee has received
or has had paid on its behalf an Indemnity Payment for an Indemnifiable Loss and subsequently receives insurance proceeds for such an Indemnifiable Loss, or realizes any Tax benefit as a result of
such Indemnifiable Loss, then the Indemnitee shall (i) promptly notify the Indemnifying Party of the amount and nature of such proceeds and benefits and (ii) pay to the Indemnifying
Party the amount of such insurance proceeds or Tax benefits or, if lesser, the amount of the Indemnity Payment. 

        Section
8.4    Mitigation of Loss.    Each Indemnitee is obligated to use reasonable efforts to mitigate the amount of
any Loss for which it is entitled to seek indemnification hereunder, and the Indemnifying Party shall not be required to make any payment to an Indemnitee in respect of such Loss to the extent such
Indemnitee failed to comply with the foregoing obligation. 

        Section
8.5    Subrogation.    Upon making any Indemnity Payment, the Indemnifying Party will, to the extent of such
payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Loss to which the payment relate; provided,  however, that
until the Indemnitee recovers 

29

 

full
payment of its Loss, any and all claims of the Indemnifying Party against any such third party on account of such payment are hereby made expressly subordinated and subjected in right of payment
of the Indemnitee's rights against such third party. Without limiting the generality of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above described subrogation and subordination rights. 

        Section
8.6    Tax Indemnification.    Notwithstanding anything in this Article VIII to the contrary, the
rights and obligations of the parties with respect to indemnification (and all limitations applicable to such indemnification) for any and all representations, warranties, covenants, and other
agreements set forth in Article IX shall be governed solely by the indemnification provisions of Article IX. 

        Section
8.7    Exclusive Remedy.    Following the Closing, the indemnities provided for in this Article VIII
shall be the sole and exclusive remedies of the parties and their respective officers, directors, employees, Affiliates, agents, representatives, successors and assigns for any breach of or inaccuracy
in any representation or warranty or any breach, nonfulfillment or default in the performance of any of the covenants or agreements contained in this Agreement (but not any such covenants or
agreements to the extent they are by their terms to be performed after the Closing Date). The parties shall not be entitled to a rescission of this Agreement or to any further indemnification rights
or claims of any nature whatsoever in respect thereof (whether by contract, common law, statute, law, regulation or
otherwise, including, without limitation, under the Racketeer Influence and Corrupt Organizations Act of 1970, as amended), all of which the parties hereby waive,  provided, however, nothing herein is intended to waive any claims for intentional fraud. 

30

   
        Section 8.8    Arbitration.    In the event of any dispute between the parties hereto relating to, arising out of,
or
in connection with any provision of this Agreement or any other Transaction Document (hereinafter a "Dispute"), the parties to this Agreement and their representatives, designees, successors and
assigns agree that any such Dispute shall be settled by binding arbitration to take place in Orange County, California; provided,  however, that nothing
herein shall preclude the parties from seeking equitable judicial relief pending arbitration, including but not limited to
injunctive or other provisional relief. The parties agree that this agreement to arbitrate shall survive any termination of this Agreement or any other Transaction Document. 

        (a)   Any
arbitration hereunder shall be conducted by a single arbitrator chosen from the panel of arbitrators of the Judicial Arbitration & Mediation Services ("JAMS")
with experience and expertise in the dental HMO or dental indemnity insurance business. If a JAMS arbitrator with specific experience in the dental HMO or dental indemnity insurance business is not
available, the arbitrator must have general experience in the health insurance industry. Within ten (10) days of notice of a Dispute from Seller to Purchaser or notice from Purchaser to Seller,
the Seller and Purchaser shall use their best efforts to choose a mutually agreeable arbitrator. If the Purchaser and the Seller cannot agree on an arbitrator, the arbitrator shall promptly be
selected by JAMS. 

        (b)   The
party submitting a Dispute to arbitration hereunder shall present its case to the arbitrator and the other party hereto in written form within twenty
(20) days after the appointment of the arbitrator. The other party hereto shall then have twenty (20) days to submit a written response to the arbitrator and the original party who
submitted the Dispute to arbitration. After timely receipt of each party's case, the arbitrator shall have twenty (20) days to render his or her decision. 

        (c)   The
arbitrator is relieved from judicial formalities and, in addition to considering the rules of law, the limitations contained in this Agreement and the customs and
practices of the health care industry, shall make his or her award with a view to effectuating the intent of this Agreement. The decision of the arbitrator shall be final and binding upon the parties,
and judgment may be entered thereon in a court of competent jurisdiction. Each party shall bear its own cost of arbitration, and the costs of the arbitrator shall be shared equally among each party to
a Dispute. 

ARTICLE IX

TAX MATTERS  

        Section
9.1    Seller Indemnification.    Seller shall be liable for, and shall indemnify and hold Purchaser harmless
against, all Taxes of the Company payable for any taxable year or taxable period ending on or before the Closing Date, but only to the extent such Taxes exceed the amount of Taxes that have been
reserved for in the Financial Statements, and any premium taxes arising on account of any premium with respect to the HNL Dental Business allocable to coverage prior to the Closing Date. To
appropriately apportion any income Taxes relating to any taxable year beginning before (and ending after) the Closing Date, the parties shall apportion such income Taxes to the taxable period ending
on or before the Closing Date by a closing of the Company's books consistent with its past practice for reporting items, except that (i) exemptions, allowances or deductions that are calculated
on a time basis, such as the deduction for depreciation, shall be apportioned on a time basis and (ii) all Taxes relating to actions outside the ordinary course of business, occurring after the
Closing shall be apportioned to the period ending after the Closing Date and all Taxes relating to actions outside the ordinary course of business, occurring prior to the Closing shall be apportioned
to the period ending on the Closing Date. To appropriately apportion any non-income Taxes relating to any taxable year beginning before (and ending after) the Closing Date, the parties
shall apportion such non-income Taxes to the taxable period ending on or before the Closing Date as follows: (x) ad valorem Taxes
(including, without limitation, real and personal property taxes) shall be accrued on a daily basis over the period for which such Taxes are levied, or if it cannot be determined over the period such
Taxes are 

31

 

being
levied, over the fiscal period of the relevant taxing authority, in each case irrespective of the lien or assessment date of such Taxes, (y) all Taxes relating to actions outside the
ordinary course of business occurring after the Closing shall be apportioned to the period ending after the Closing Date and (z) franchise and other privilege Taxes not measured by income shall
be accrued on a daily basis over the period to which the privilege relates. 

        Section
9.2    Purchaser and the Company Indemnification.    Purchaser and the Company shall be liable for, and shall
indemnify and hold Seller and any of its Affiliates harmless against, any and all Taxes imposed on the Company relating or apportioned to any taxable year or portion thereof ending after the Closing
Date including, without limitation, all Taxes relating to actions outside the ordinary course of business occurring after the Closing, on the Closing Date. 

        Section
9.3    Preparation of Tax Returns.    Seller shall prepare and file, or cause to be filed, all Tax Returns
(including amended Tax Returns) relating to the Company for any Tax period ending on or prior to the Closing Date. Purchaser shall prepare and file, or cause to be filed, all other Tax Returns
relating to the Company. 

        Section
9.4    Refunds or Credits.    Purchaser or the Company shall promptly pay to Seller any refunds or credits
(including interest paid by the IRS thereon) relating to Taxes for which Seller may be liable under Section 9.1 hereof except to the extent such refund or credit is included as an asset on the
Closing Balance Sheet and used to calculate the Excess Tangible Net Equity. If Purchaser or Company receives a refund from the IRS relating to Taxes for which Seller may be liable under
Section 9.1 hereof
and fails to pay such refund to Seller within thirty (30) days of receipt, Purchaser shall pay interest on such refund at the rate of one-percent (1%) until such amount is paid to
Seller. For purposes of this Section 9.4, the terms "refund" and "credit" shall include a reduction in Taxes and the use of an overpayment of Taxes as an audit or other Tax offset. Receipt of a
refund shall occur upon the filing of a Tax Return or an adjustment thereto using such reduction, overpayment or offset, or upon the receipt of cash. Upon the request of Seller, Purchaser shall
prepare and file, or cause to be prepared and filed, all claims for refunds relating to such Taxes; provided,  however, that Purchaser shall not be required
to file such claims for refund to the extent such claims for refund would have a Purchaser Material
Adverse Effect in future periods or to the extent the claims for refund relate to a carryback of an item. Purchaser shall be entitled to all other refunds and credits of Taxes;  provided, however, that Purchaser will not allow the amendment of any Tax Return relating to any Taxes
for a period (or portion thereof) ending on or prior to the Closing Date or the carryback of an item to a period ending prior to Closing without Seller's consent. 

        Section 9.5    Section 338(h)(10) Election.    

        (a)   Purchaser
shall have the right, but not the obligation, to require Seller upon written request delivered to Seller within one hundred and eighty (180) days after
the Closing Date, to join with Purchaser in making the elections provided for in section 338(g) and section 338(h)(10) of the Code (the "338 Elections"). If Purchaser exercises its right
to make the 338 Elections, Purchaser and Seller shall also make such other similar elections as may be necessary for state and local income tax purposes provided that such elections achieve
substantially the same results to Purchaser, Seller and the Company as the 338 Elections achieve for federal income tax purposes and, for purposes of this Agreement, the term "338 Elections" shall be
deemed to include any such state and local income tax elections. Purchaser and Seller shall comply fully with all filings and other requirements necessary to effectuate the 338 Elections on a timely
basis and agree to cooperate in good faith with each other in the preparation and timely filing of all Tax Returns required to be filed in connection with the making of the 338 Elections, including
the exchange of information and the joint preparation and filing of Form 8023 (including related schedules). 

        (b)   The
fair market value, "aggregate deemed sales price," and "adjusted grossed-up basis" (as those terms are defined in the Treasury Regulations promulgated
under section 338 of the Code) of 

32

 

each
asset of the Company shall be determined in accordance with the allocation (the "Allocation") mutually agreed upon, in writing, by Purchaser and Seller. Purchaser and Seller shall
(i) assist each other in the preparation of the Allocation; (ii) agree to act in accordance with the Allocation in the preparation and filing of all Tax Returns and in the course of any
tax audits, appeals, or litigation relating thereto; and (iii) each notify the other as soon as reasonably practicable of any audit adjustment or proposed audit adjustment by any taxing
authority that affects or may affect the Allocation. 

        (c)   If
Purchaser and Seller make the 338 Elections, the Tax attributable to the gain realized by the Company on the deemed sale of its assets pursuant to the 338 Elections
shall be allocated and paid (i) by Seller, to the extent of the amount of Tax that, if the 338 Elections had not been made, would have been imposed on the gain realized by Seller on the sale of
the Shares pursuant to this Agreement, and (ii) by Purchaser, to the extent of the remaining portion of such Tax. Any Tax imposed upon Seller that is attributable to the 338 Elections and that
is in excess of the amount described in clause (i) of the immediately preceding sentence shall be paid by Purchaser to Seller at least five (5) Business Days prior to the due date for
payment of such Tax. 

        (d)   For
purposes of Section 9.5(c), the "amount of the Tax that, if the 338 Elections had not been made, would have been imposed on the gain realized by Seller on the
sale of the Shares pursuant to this Agreement" shall be the excess of (i) the aggregate amount of Tax that would have been imposed on Seller (or the consolidated, combined, or unitary group of
which Seller is a member) for the taxable period that includes the Closing Date if the 338 Elections had not been made over (ii) the aggregate amount of Tax that would have been imposed on
Seller (or the consolidated, combined, or unitary group of which Seller is a member) for such taxable period if the 338 Elections had not been made and Seller recognized no gain on the sale of the
Shares. Within sixty (60) days following the Closing Date, Seller shall provide Purchaser a calculation of such excess, showing all information necessary to the computation, and which shall
include a schedule that sets forth the determination (including any and all adjustments made pursuant to the federal consolidated tax return rules as provided in sections 1502 and 1503 of the Code and
the Treasury Regulations promulgated pursuant to such sections) of Seller's adjusted tax basis in the Shares as of the Closing Date. 

        (e)   The
Tax described in Sections 9.5(c) and 9.5(d) shall be increased or decreased, as the case may be, by any adjustments to such Tax that occur after the Closing Date. 

        (f)    Each
party shall use its best efforts to minimize the amount of any Tax allocable to the other pursuant to Section 9.5(c). 

        (g)   Notwithstanding
anything in this Article IX to the contrary, if Purchaser and Seller make the 338 Elections, Purchaser shall pay or cause to be paid all Tax
allocable to Purchaser pursuant to Section 9.2(c). 

        Section
9.6    Mutual Cooperation.    As soon as practicable, but in any event within fifteen (15) days after
either Seller's or Purchaser's request, as the case may be, Purchaser shall deliver to Seller or Seller shall deliver to Purchaser, as the case may be, such information and other data relating to the
Tax Returns and Taxes of the Company and shall provide such other assistance as may reasonably be requested, to cause the completion and filing of all Tax Returns or to respond to audits by any taxing
authorities with respect to any Tax Returns or taxable periods or to otherwise enable Seller, Purchaser or the Company to satisfy their accounting or Tax requirements. For a period of five years from
and after the Closing, Purchaser and Seller shall, and shall cause their Affiliates to, maintain and make available to the other party, on such other party's reasonable request, copies of any and all
information, books and records referred to in this Section 9.6. After such five-year period, Purchaser or Seller may dispose of such information, books and records, provided that
prior to such disposition, Purchaser or Seller shall give the other party the opportunity to take possessions of such information, books and records. 

33

 

        Section
9.7    Contests.    Whenever any taxing authority asserts a claim, makes an assessment or otherwise disputes
the amount of Taxes for which Seller is or may be liable under this Agreement, Purchaser shall, if informed of such an assertion, promptly inform Seller within five (5) Business Days, and
Seller shall have the right to control any resulting proceedings and to determine whether and when to settle any such claim, assessment or dispute to the extent such proceedings or determinations
affect the amount of Taxes for which Seller may be liable under the Agreement. If Purchaser fails to provide such notice and such failure shall prejudice Seller's ability to defend such assessment,
then Seller's obligation under Section 9.1 shall be null and void with regard to such assessment. Whenever any taxing authority asserts a claim, makes an assessment or otherwise disputes the
amount of Taxes for which Purchaser is liable under this Agreement, Purchaser shall have the right to control any resulting proceedings and to determine whether and when to settle any such claim,
assessment or dispute, except to the extent such proceedings affect the amount of Taxes for which Seller may be liable under this Agreement. 

        Section
9.8    Survival of Obligations.    The obligations of the parties set forth in this Article IX shall be
unconditional and absolute, and shall remain in effect until 30 days after the expiration of the applicable statute of limitations. 

ARTICLE X

TERMINATION  

        Section
10.1    Termination.    This Agreement may be terminated at any time prior to the Closing Date: 

        (a)   by
mutual agreement of the parties hereto in writing; 

        (b)   at
the election of either party hereto if any of the conditions to its obligation to consummate the transactions contemplated hereby have not been fulfilled as of
June 30, 2003 (the "Optional Termination Date"), provided, however, that in the event the Closing
of the transactions contemplated hereby has not occurred prior to the Optional Termination Date solely because of the failure to obtain consents, approvals, permits or authorizations as required by
the conditions set forth in Sections 6.4 or 7.4, despite the responsible party using its commercially reasonable efforts to obtain such consents, approvals permits or authorizations, the Optional
Termination Date will automatically be amended to be September 30, 2003; or 

        (c)   at
the election of Seller if Purchaser has failed to provide reasonably satisfactory written evidence of the availability of, or commitment for, sufficient funds in an
aggregate amount of not less than the anticipated Purchase Price, as may be adjusted pursuant to Section 2.4 hereof, plus all contemplated fees and expenses expected to be incurred by Purchaser
related to the Transactions contemplated by this Agreement within fifteen (15) days of the date of this Agreement. 

        Section
10.2    Effect of Termination.    If this Agreement is terminated pursuant to Section 10.1, this
Agreement shall thereafter become void and of no force and effect, and neither party hereto shall have any liability to the other party hereto in respect of this Agreement, except that Sections 5.9
(Confidentiality), Section 8.8 (Arbitration) and 11.2 (Fees and Expenses), and this Article X shall survive any such termination. 

34

 
ARTICLE XI

MISCELLANEOUS  

        Section
11.1    Notices.    Any notice or other communication required or permitted hereunder shall be in writing and
shall be delivered by hand by certified process server, certified or registered mail (postage prepaid and return receipt requested), by a nationally recognized overnight courier service (appropriately
marked for overnight delivery) or by facsimile (with request for immediate confirmation of receipt in a manner customary for communications of such respective type). Notices shall be effective upon
receipt and shall be addressed as follows: 

        (a)   if
to Purchaser to: 

SafeGuard
Health Enterprises, Inc.

95 Enterprise, Suite 100

Aliso Viejo, California 92656

Attn.: James E. Buncher

President and Chief Executive Officer

Tel: (949) 425-4100

Fax: (949) 425-4101 

with
a copy to: 

Ronald
I. Brendzel

Senior Vice President and General Counsel

SafeGuard Health Enterprises, Inc.

95 Enterprise, Suite 100

Aliso Viejo, California 92656

Tel: (949) 425-4110

Fax: (949) 425-4586 

and

David
K. Meyercord

Strasburger and Price, LLP

901 Main Street, Ste. 4300

Dallas, Texas 75202-3794

Tel: (214) 651-4525

Fax: (214) 659-4023 

        (b)   if
to Seller to: 

Health
Net, Inc.

Att: General Counsel

21650 Oxnard Street

Woodland Hills, California 91367

Tel: (818) 676-7601

Fax: (818) 676-7503 

with
a copy to: 

Kenneth
B. Schnoll

Sonnenschein Nath & Rosenthal

685 Market Street

San Francisco, CA 94105

Tel: (415) 882-0210

Fax: (415) 543-5472 

35

 

or
to such other respective addresses as Seller or Purchaser shall designate to the other by notice in writing, provided that notice of a change of address shall be effective only upon receipt. 

        Section
11.2    Fees and Expenses.    Except as otherwise provided herein, each of the parties to this Agreement shall
pay its respective fees and expenses (including, without limitation, the fees and expenses of any investment bankers, counsel, actuaries, accountants or other representatives) incurred in connection
with this Agreement and the transactions contemplated hereby, whether or not such transactions are consummated. 

        Section
11.3    Entire Agreement; Waivers and Amendments.    This Agreement (including the Exhibits and the Schedules
hereto) and the other Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements written or oral,
with respect hereto and thereto. This Agreement and the other Transaction Documents may be amended or modified, and the terms hereof and thereof may be waived, only by a writing signed by parties
hereto or thereto, as the case may be, or, in the case of a waiver, by the party waiving compliance. 

        Section
11.4    Assignment; Binding Effect.    This Agreement and the other Transaction Documents may not be assigned
or delegated, in whole or in part, by any party hereto or thereto without the prior written consent of the other hereto or thereto, which consent shall not be unreasonably withheld. This Agreement and
the other Transaction Documents shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective permitted successors and assigns. 

        Section
11.5    Severability.    In the event that any provision of this Agreement or any other Transaction Document
shall be declared invalid or unenforceable by a court of competent jurisdiction, such provision, to the extent declared invalid or unenforceable, shall not affect the validity or enforceability
of the other provisions of this Agreement or any other Transaction Document, as the case may be. In the event that any such provision shall be declared unenforceable due to its scope, breadth or
duration, then it shall be modified to the scope, breadth or duration permitted by law or judicial authority and shall continue to be fully enforceable as so modified. 

        Section
11.6    Force Majeure.    No party hereto shall be liable for any delay or failure in the performance of any
obligation under this Agreement or for any loss or damage (including indirect or consequential damage) to the extent that such nonperformance, delay, loss or damage results from any contingency which
is beyond the control of such party, provided such contingency is not caused by the fault or negligence of such party. A contingency for purposes of this Agreement shall be acts of God, fires, floods,
earthquakes, explosions, storms, wars, hostilities, acts of terrorism, blockades, public disorders, quarantines, restrictions, embargoes, strikes or other labor disturbances, and compliance with any
Law, order or control of, or insistence of any Governmental Authority or military authority. 

        Section
11.7    Governing Law.    This Agreement and the other Transaction Documents shall be governed by and
construed in accordance with the internal laws of the State of California, without giving effect to the principles of conflicts of law thereof. 

        Section
11.8    Headings.    The Article and Section headings in this Agreement and the other Transaction Documents
are inserted for convenience of reference only, and shall not affect the interpretation of this Agreement or the other Transaction Documents. 

        Section
11.9    Counterparts.    This Agreement and any of the other Transaction Documents may be executed in
counterparts, each of which shall be deemed an original and both of which shall together constitute one fully executed agreement. 

        Section
11.10    No Third Party Beneficiaries.    Nothing in this Agreement or in any other Transaction Document is
intended to give any Person, other than the parties to the Transaction Documents, their successors, and permitted assigns, any legal or equitable right or remedy hereunder or thereunder, or in respect
to any provision hereof or thereof. 

[Balance of Page Intentionally Left Blank]

36

 

        IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the date first above written. 

	 	 	SAFEGUARD HEALTH ENTERPRISES, INC.

        Purchaser
	

 	
 	

By:	

/s/  JAMES E. BUNCHER      
 Name: James E. Buncher

Title: President and Chief Executive Officer
	

 	
 	

By:	

/s/  RONALD I. BRENDZEL      
 Name: Ronald I. Brendzel

Title: Senior Vice President and Secretary
	

 	
 	

HEALTH NET, INC.

        Seller
	

 	
 	

By:	

/s/  B. CURTIS WESTEN      
 Name: B. Curtis Westen

Title: Senior Vice President, General Counsel and Secretary

37

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