<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PACIFICARE HEALTH SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4591529
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
3120 LAKE CENTER DRIVE
SANTA ANA, CALIFORNIA 92704
TELEPHONE: (714) 825-5200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ALAN R. HOOPS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
PACIFICARE HEALTH SYSTEMS, INC.
3120 LAKE CENTER DRIVE
SANTA ANA, CALIFORNIA 92704
TELEPHONE: (714) 825-5200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
BARBARA L. BORDEN, ESQ.
COOLEY GODWARD LLP
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
(619) 550-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
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Common Stock, par value $0.01 per
share................................ 6,194,500 $62.97 $390,059,022 $108,437
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</TABLE>
(1) Estimated in accordance with Rule 457(c) solely for the purpose of computing
the amount of the registration fee based on the average of the high and low
prices of the Registrant's Common Stock as reported on the Nasdaq National
Market System on July 14, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS INCOMPLETE AND MAY BE AMENDED.
WE HAVE FILED A REGISTRATION STATEMENT RELATING TO THESE SECURITIES WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE CANNOT SELL THESE SECURITIES OR ACCEPT
OFFERS TO BUY THESE SECURITIES PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE
OFFER, SOLICITATION OR SALE WOULD NOT BE PERMITTED.
SUBJECT TO COMPLETION DATED JULY 16, 1999
PROSPECTUS
6,194,500 SHARES
PACIFICARE HEALTH SYSTEMS, INC.
COMMON STOCK
------------------------
UniHealth Foundation, our largest stockholder, is offering and selling up to
6,194,500 shares of PacifiCare common stock under this prospectus. We will not
receive any of the proceeds from the sale of the shares by the selling
stockholder.
UniHealth may offer its PacifiCare common stock through public or private
transactions, on or off the Nasdaq National Market System, at prevailing market
prices or at privately negotiated prices.
PacifiCare common stock is listed on the Nasdaq National Market System and
trades on the exchange with the ticker symbol "PHSY." On July 15, 1999, the
closing price of one share of our stock on the Nasdaq National Market System was
$64.69.
See "Risk Factors" beginning on page 5.
------------------------
THE PACIFICARE SHARES OFFERED OR SOLD UNDER THIS PROSPECTUS HAVE NOT BEEN
APPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE
ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY , 1999
<PAGE> 3
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE SEC. THE
REGISTRATION STATEMENT INCLUDES EXHIBITS AND ADDITIONAL INFORMATION NOT INCLUDED
IN THE PROSPECTUS.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE YOU ANY SUPPLEMENTAL INFORMATION OR
MAKE ANY REPRESENTATIONS FOR US. YOU SHOULD ONLY RELY ON INFORMATION ABOUT
PACIFICARE THAT IS CONTAINED IN THIS PROSPECTUS OR IN ONE OF PACIFICARE'S PUBLIC
REPORTS FILED WITH THE SEC AND INCORPORATED INTO THIS PROSPECTUS. INFORMATION
CONTAINED IN THIS PROSPECTUS OR IN OUR PUBLIC REPORTS MAY BECOME STALE. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE OR
COMPLETE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS. WE
ARE NOT MAKING AN OFFER OF SECURITIES IN ANY STATE WHERE THAT OFFER IS
PROHIBITED.
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
The Company................................................. 4
Risk Factors................................................ 5
Business Strategy........................................... 6
Nature of Operations........................................ 7
Use of Proceeds............................................. 9
Selling Stockholder......................................... 9
Repurchase of UniHealth Stock............................... 9
Description of Capital Stock................................ 10
Plan of Distribution........................................ 11
Where You Can Find Additional Information................... 11
Legal Matters............................................... 12
Experts..................................................... 12
</TABLE>
3
<PAGE> 5
THE COMPANY
OVERVIEW
We are one of the leading health care services companies in the United States,
serving approximately 3.6 million members in the Medicare and commercial lines
of business as of May 31, 1999.
HMOS AND HMO RELATED PRODUCTS AND SERVICES. We offer HMO and HMO related
products and services primarily to the Medicare and commercial markets. An HMO
is a health care organization that combines aspects of a health care insurer
with those of a health care provider by arranging for health care services for
its members through a defined provider network at a reduced deductible or a
nominal copayment. Our Medicare programs and commercial plans are designed to
deliver quality health care and customer service to members at cost-effective
prices.
- - SECURE HORIZONS(R). For Medicare beneficiaries, PacifiCare offers health care
services through its Secure Horizons(R) programs which are the largest
Medicare+Choice programs in the United States (as measured by membership). Our
Secure Horizons programs had approximately one million members on May 31,
1999.
- - COMMERCIAL. For the commercial employer market, PacifiCare offers a range of
products and benefit plan designs that vary in the amount of member
co-payments. These options allow employers flexibility in selecting
cost-effective benefits packages for employees. PacifiCare had approximately
2.6 million commercial members on May 31, 1999. We also offer a variety of
specialty managed care products that employers can purchase as a supplement to
our basic commercial plans or as stand-alone products. These products include
behavioral health services, life and health insurance, dental and vision
services and pharmacy benefit management. We generally provide these specialty
services through subcontracts or referral relationships with other health care
providers.
We believe that our ability to offer a comprehensive range of products and
services, combined with long-term relationships with our health care providers,
will enable us to respond effectively to the changing needs of the health care
marketplace.
Our executive offices are located at 3120 Lake Center Drive, Santa Ana,
California 92704 and our telephone number is (714) 825-5200.
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<PAGE> 6
RISK FACTORS
Except for historical information, this prospectus and our SEC reports contain
"forward looking" statements and information about our expected future business
and performance. The statements about our plans, strategies, intentions,
expectations and prospects throughout this prospectus are based on current
expectations. Our actual operating results and financial performance may prove
to be very different from what we might have predicted as of the date of this
prospectus. In addition, our past financial performance is not necessarily a
reliable indicator of future performance and you should not use historical
performance to anticipate results or future period trends. Described below are
some of the factors that may affect our future operating results and financial
performance. You are also directed to the risks discussed in other documents
filed by us with the SEC.
A LOSS OF PROFITABLE MEMBERSHIP IN OUR HEALTHCARE PROGRAMS COULD RESULT IN
REDUCED REVENUES, WHICH COULD NEGATIVELY IMPACT THE VALUE OF YOUR INVESTMENT. An
unforeseen loss of profitable membership could negatively affect our financial
position, results of operations and cash flows. Factors that could contribute to
the loss of membership include:
- - Our failure to obtain new customers or retain existing customers;
- - The effect of premium increases and benefit changes;
- - Our exit from certain markets;
- - Reductions in work force by existing customers;
- - Negative publicity and news coverage;
- - Inability of our marketing and sales plans to attract new customers; or
- - Our loss of key executives or key employees.
INCREASED PREMIUMS COULD RESULT IN MEMBERSHIP LOSSES, WHICH COULD NEGATIVELY
IMPACT THE VALUE OF YOUR INVESTMENT. We could experience membership losses as a
result of expected premium increases in both our commercial and Medicare lines
of business. A loss of Medicare membership may also be experienced with the
introduction of premiums payable by our members in our Secure Horizons programs
commencing in January 2000. Our emphasis continues to be on renewing commercial
employer contracts with price increases sufficient to maintain or improve margin
performance. The price increases in our commercial product line are expected to
range from zero to 12 percent depending upon employer size, benefit design,
geographic market and other factors. We also could lose members as a result of
our decision to exit unprofitable markets.
INCREASES IN OUR MEDICAL CARE RATIO COULD RESULT IN REDUCED REVENUES, WHICH
COULD NEGATIVELY IMPACT THE VALUE OF YOUR INVESTMENT. Increases in the Medicare
and/or commercial medical care ratio (health care services as a percentage of
premium) could have an adverse effect on our profitability. Uncertainties that
could have an impact on our medical care ratio, include:
- - Medical and prescription drug costs that rise faster than premium increases;
- - Increases in utilization and costs of medical services;
- - The effect of federal and/or state legislation on our ability to secure
cost-effective contracts with providers;
- - The effect of actions by competitors or groups of providers; or
- - Termination of provider contracts, provider insolvency or renegotiation of
such contracts at less favorable rates or terms of payment. See "Health Care
Provider Contracts."
CHANGES IN STATE OR FEDERAL LEGISLATION AND REGULATION MAY NEGATIVELY IMPACT OUR
FINANCIAL AND OPERATING RESULTS AND THE VALUE OF YOUR INVESTMENT MAY
DECLINE. Changes in state and federal legislation or regulation could cause
actual results to differ materially from anticipated results. These changes may
increase our medical care ratios, decrease our membership or otherwise adversely
affect our revenues and our profitability. As of March 31, 1999, approximately
60 percent of our revenue and an even greater percentage of our profit
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came from our government programs, the majority of which was Medicare business.
Changes that could effect us materially include:
- - Limitations on premium levels;
- - Increases in minimum capital, reserves, and other financial viability
requirements;
- - Prohibition or limitation of capitated arrangements or provider financial
incentives;
- - New benefit mandates (including mandatory length of stay and emergency room
coverage, many of which have become effective in 1999);
- - Limitations on the ability to manage care and utilization due to willing
provider and direct access laws; and
- - Adoption on the federal and/or state level of legislation that holds HMOs
liable for malpractice.
Legislation and regulation could also include adverse actions of governmental
payors, including reduced Medicare premiums; discontinuance of, or limitation
on, governmentally funded programs; recovery by governmental payors of
previously paid amounts; the inability to increase premiums or prospective or
retroactive reductions to premium rates for federal employees; and adverse
regulatory actions.
IF WE FAIL TO SECURE COST-EFFECTIVE HEALTH CARE PROVIDER CONTRACTS, OUR FUTURE
REVENUES MAY BE NEGATIVELY IMPACTED AND THE VALUE OF YOUR INVESTMENT MAY
DECLINE. Our failure to secure cost-effective health care provider contracts may
result in a loss in membership or a higher medical care ratio. In addition, our
inability to contract with providers, including hospitals, loss of contracts
with providers, inability of providers to provide adequate care, or insolvency
of providers could materially affect us. We have and may continue to incur
additional costs as a result of entering into new contracts. Our profitability
depends, in part, on our ability to control health care costs while providing
quality care. The profitability and the success of our business strategy also
depends on our ability to attract and retain a network of qualified health care
providers in each geographic area we serve. Securing cost-effective contracts
with existing and new physician groups and hospitals has become more difficult
due to increased competition. Additionally, our negotiation of provider
contracts may be impacted by unfavorable state and federal legislation and
regulation discussed above. The effect of these risks and the need for
additional provider reserves could have a material effect on the results of our
operations or cash flows.
BUSINESS STRATEGY
Our current business strategy continues to focus on growing and improving our
operating performance. During 1999, we intend to increase operating income by:
- - Increasing commercial membership at improved commercial premium prices;
- - Managing health care costs through arrangements with strong provider
organizations that align the interests of their providers with ours and those
of our members; and
- - Improving our administrative and marketing efficiencies to reduce the
percentage of revenue spent on marketing, general and administrative expenses.
We continue to evaluate opportunities in new and existing geographic markets
that may be available through acquisitions and the development of new products.
We continuously assess our existing geographic markets and product lines to
determine if any do not fit within our profitability objectives and current
business strategy.
We will also focus on improving quality and service in 1999. Our goals include:
- - Increasing Medicare and commercial member satisfaction;
- - Improving the quality and service of our basic HMO products;
- - Receiving National Committee for Quality Assurance ("NCQA") accreditation in
Texas, where 1999 is our initial year of application;
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- - Maintaining NCQA accreditation in all other states; and
- - Participating in the formation of the Coalition for Affordable Quality
Healthcare to inform and educate the public about managed care.
NATURE OF OPERATIONS
SECURE HORIZONS PROGRAMS
GENERAL. We have offered Secure Horizons programs to Medicare beneficiaries
since 1985 through participation in the Medicare risk program with the Health
Care Financing Administration or HCFA. Beginning January 1, 1999, we participate
in the new Medicare+Choice program which replaced the Medicare risk program.
HCFA requires that HMOs be either federally qualified or meet similar
requirements as state licensed plans to be eligible for Medicare+Choice
contracts. All of our HMO operations meet these requirements. Our
Medicare+Choice contracts entitle us to annual fixed per-member premiums. Under
current law, our premiums are based upon the average cost of providing
traditional fee-for-service Medicare benefits to the Medicare population in each
county, subject to annual limits on the growth of our premiums. Our premium
growth is also limited by an overall cap on the growth of all payments under all
Medicare+Choice contracts. Future premiums from HCFA will be impacted by new
payment methods being developed by HCFA.
Our per-member premium revenue for the Secure Horizons programs usually is, and
will continue to be, more than three times higher than for our commercial plans
primarily because of the higher medical and administrative costs of serving a
Medicare member. As a result of the premium differences, the Secure Horizons
programs accounted for approximately 60 percent of our consolidated premium
revenue for the three months ended March 31, 1999. The Secure Horizons programs
accounted for an even larger percentage of our operating profit, even though it
represented only 28 percent of our total membership at March 31, 1999. The
Secure Horizons programs are subject to certain risks relative to our commercial
plans, such as higher comparative medical costs, higher levels of utilization,
government and regulatory reporting requirements, the possibility of reduced or
insufficient government reimbursement in the future and higher marketing and
advertising costs associated with selling to individuals rather than to employer
groups. These risks may adversely affect our operating margins on these programs
and our overall profitability. In addition, each Secure Horizons member enrolls
individually in our program, and may disenroll by providing 30 days notice. We
believe that our Secure Horizons programs have one of the lowest disenrollment
rates among Medicare+Choice plans.
HCFA may unilaterally revise our Medicare+Choice contracts based on updated
demographic information relating to the Medicare population and the cost of
providing health care in a particular geographic area. PacifiCare's
Medicare+Choice contracts are automatically renewed every 12 months unless we or
HCFA elect to terminate them. HCFA may also terminate our Medicare+Choice
contracts if we fail to continue to meet compliance and eligibility standards.
Termination of our Medicare+Choice contracts would have an adverse effect on our
financial position, results of operations, cash flows or business prospects. We
have had these contracts in some states for over 13 years. We have no reason to
believe that these terminations will occur.
COMMERCIAL PROGRAMS
GENERAL. PacifiCare's commercial plans offer a comprehensive range of products
to employer groups, including HMO, Preferred Provider Organization ("PPO") and
Point of Service ("POS") plans. A PPO is a selected group of providers, such as
medical groups, that offers discounted fee-for-service health care. POS plans
combine the features of an HMO with the features of a traditional indemnity
insurance product, allowing members to choose from a network of providers at a
lower cost or from other physicians at a higher deductible or co-payment. Our
HMOs also have commercial contracts with the United States Office of Personnel
Management ("OPM") to provide managed care health services to approximately
176,000
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members at May 31, 1999 under the Federal Employee Health Benefits Program
("FEHBP") for federal employees, annuitants and their dependents.
COMMERCIAL RETIREE PRODUCTS. In response to the needs of employers to provide
cost-effective health care coverage to their retired employees who may or may
not be currently entitled to Medicare, we offer the Secure Horizons retiree
product. This product draws on our Medicare expertise by offering provider
benefits that are similar to those offered to our Secure Horizons enrollees. Our
premiums are generally set based on the same revenue requirements needed to
provide services to Secure Horizons members. The retiree product gives us access
to individuals who, once familiar with our services and delivery system, may
enroll in Secure Horizons programs when they become eligible for Medicare
benefits.
HMO RELATED PRODUCTS AND SERVICES. PacifiCare provides a range of specialty
managed care products which supplement HMO products and are primarily sold in
our commercial programs. These include:
- - Behavioral Health Services. PacifiCare Behavioral Health of California, Inc.
is a California licensed specialized health care service plan that provides
behavioral health care services, including chemical dependency benefit
programs, primarily to our California and other HMO commercial members.
Outside of California, PacifiCare Behavioral Health, Inc. contracts with our
HMOs, other insurers and employers to manage their respective mental health
and chemical dependency benefit programs.
- - Life and Health Insurance. PacifiCare's life and health insurance
subsidiaries, PacifiCare Life and Health Insurance Company and PacifiCare Life
Assurance Company, offer employer groups managed health care insurance
products. We integrate these products with our existing HMO products to form
multi-option health benefits programs, including our PPO and POS plans.
Together, our insurance subsidiaries are licensed to operate in 38 states,
including each of the states where our HMOs operate, the District of Columbia,
and Guam.
- - Dental and Vision Services. PacifiCare Dental and Vision is a California
licensed, specialized health care service plan that provides prepaid dental
and optometry benefits directly to individuals and employer groups and
indirectly to our California Secure Horizons and commercial HMO members.
- - Pharmacy Benefit Management. PacifiCare Pharmacy Centers, Inc., dba
Prescription Solutions(R), is one of the industry's largest pharmacy benefit
management companies. Prescription Solutions offers pharmacy benefit
management services for prescription drugs to HMOs and self-insured employer
groups. Clients of Prescription Solutions have access to a pharmacy provider
network that features independent and chain pharmacies and a variety of cost
and quality management capabilities. Prescription Solutions also provides its
clients with an array of fully integrated services, including mail order
distribution, an extensive network of retail pharmacies, claims processing and
sophisticated drug utilization reporting.
- - Medicare+Choice Management. Formed to promote our expertise in the Medicare
risk area, Secure Horizons USA, Inc., ("SHUSA") licenses the Secure Horizons
name and provides management services to HMOs and health care delivery systems
that seek participation in the Medicare+Choice program. The fee charged by
SHUSA is generally based on a percentage of the licensee's revenue. SHUSA's
management services include, among others, marketing, provider contracting and
administrative services. SHUSA has agreements in New Mexico with Presbyterian
Healthcare Services, Inc., in New England with Tufts Associated Health
Maintenance Organization, Inc., and in Hawaii with Queens Health Plans. We
anticipate that Queens Health Plan will commence offering a product similar to
Secure Horizons beginning in the summer of 1999, if HCFA approval is received.
We anticipate that with the repeal of the 50/50 Rule (the requirement that 50
percent of a Medicare health plan's enrollment be drawn from commercial
contracts) and the drive to enroll Medicare beneficiaries in HMOs, SHUSA may
expand into new markets by entering into licensing arrangements in a variety
of geographic areas.
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PacifiCare's membership at May 31, 1999 and 1998, respectively, was as follows:
<TABLE>
<CAPTION>
AT MAY 31, 1999(1) AT MAY 31, 1998(1)
--------------------------------- ---------------------------------
SECURE SECURE
HORIZONS COMMERCIAL TOTAL HORIZONS COMMERCIAL TOTAL
-------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Arizona........................... 81,600 101,300 182,900 88,800 108,200 197,000
California........................ 614,000 1,653,500 2,267,500 602,500 1,565,000 2,167,500
Colorado.......................... 66,700 291,600 358,300 54,800 293,900 348,700
Guam.............................. -- 41,300 41,300 -- 41,200 41,200
Nevada............................ 22,500 38,700 61,200 24,600 44,100 68,700
Ohio.............................. 19,400 43,100 62,500 14,700 47,100 61,800
Oklahoma.......................... 27,600 86,000 113,600 26,600 100,900 127,500
Oregon............................ 38,600 114,700 153,300 38,600 115,500 154,100
Texas............................. 59,900 131,300 191,200 68,800 141,200 210,000
Washington........................ 64,500 76,600 141,100 59,100 95,800 154,900
------- --------- --------- ------- --------- ---------
Total membership............. 994,800 2,578,100 3,572,900 978,500 2,552,900 3,531,400
======= ========= ========= ======= ========= =========
</TABLE>
- ---------------
(1) Membership at May 31, 1999 and May 31, 1998 does not include the membership
of our Utah HMO which was sold on September 30, 1998.
USE OF PROCEEDS
All net proceeds from the sale of the PacifiCare shares offered and sold under
this prospectus will go to UniHealth.
SELLING STOCKHOLDER
In 1998, UniHealth, our largest stockholder, converted into a charitable
foundation under the Internal Revenue Code. As a result of UniHealth's new
status, UniHealth determined it was in its best interest to diversify its
holdings and reduce the number of shares of PacifiCare common stock it owns.
UniHealth's current ownership of PacifiCare common stock is:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING SHARES AFTER OFFERING
-------------------- BEING --------------------
SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
UniHealth Foundation..................... 6,194,500 13.5% 6,194,500 0 0
3400 Riverside Drive
Burbank, CA 91505
</TABLE>
REPURCHASE OF UNIHEALTH STOCK
In June 1999, our stockholders approved an amended and restated certificate of
incorporation that combined and reclassified our voting and non-voting classes
of common stock into a single class of common stock. The reclassified common
stock has the same rights, powers and limitations as the prior voting common
stock. See "Description of Capital Stock." To assist UniHealth in its
diversification and to effect the reclassification of PacifiCare common stock,
on May 4, 1999, we entered into a stock purchase agreement with UniHealth to
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repurchase approximately 5.9 million shares of PacifiCare common stock currently
held by UniHealth. The repurchase of the UniHealth shares will occur on the
following dates and in the following installments:
<TABLE>
<CAPTION>
AGGREGATE
PER SHARE REPURCHASE PRICE
----------- ----------------
APPROXIMATE PURCHASE DATE SHARES LOW HIGH LOW HIGH
------------------------- --------- --- ---- ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
August 9, 1999..................................... 1,000,000 $70 $120 $ 70 $120
November 15, 1999.................................. 1,000,000 75 120 75 120
February 15, 2000.................................. 750,000 75 120 56 90
May 15, 2000....................................... 750,000 75 120 56 90
August 15, 2000.................................... 750,000 75 120 56 90
November 15, 2000.................................. 750,000 75 120 56 90
February 15, 2001.................................. 909,500 75 120 68 109
--------- ---- ----
Repurchase shares................................ 5,909,500 437 709
=========
One time payment (Paid June 24, 1999).............. 60 60
---- ----
Total payment range................................ $497 $769
==== ====
</TABLE>
The purchase price for the UniHealth shares will equal the average fair value of
the stock for the 30 trading days preceding a scheduled purchase date. We are
not required to buy the shares if the stock price is greater than $120 per share
and UniHealth is not required to sell the shares if the stock price is less than
$75 per share ($70 on the initial purchase date). In consideration of the
agreements and covenants contained in the stock purchase agreement between
PacifiCare and UniHealth, PacifiCare agreed to pay UniHealth $60 million. This
payment was made on June 24, 1999 and was recorded by PacifiCare as a reduction
to shareholders' equity.
UniHealth's shares of PacifiCare common stock have been registered under the
Securities Act of 1933 to enable UniHealth to sell any of the shares not
repurchased by PacifiCare on any installment date or the 285,000 shares of
common stock which formerly were shares of PacifiCare's Class B Common Stock. We
have agreed to assist in an underwritten offering of any shares of PacifiCare
common stock owned by UniHealth after February 15, 2001.
DESCRIPTION OF CAPITAL STOCK
As of the date of this prospectus, our certificate of incorporation authorizes
us to issue 200,000,000 shares of common stock, par value $0.01 per share and
40,000,000 shares of preferred stock, par value $0.01 per share. As of June 30,
1999, 46,032,300 shares of common stock were outstanding and no shares of
preferred stock were outstanding.
COMMON STOCK
Voting. Common stockholders are entitled to one (1) vote per share for the
election of directors and on all other matters that require stockholder
approval. Under our certificate of incorporation, the affirmative vote of the
holders of a majority of the outstanding shares of common stock entitled to vote
is required (i) to amend the certificate of incorporation; (ii) to authorize
additional shares of common stock; (iii) to approve any merger or consolidation
of PacifiCare with or into any other corporation; and (iv) to approve the
dissolution of PacifiCare.
Dividends and Other Distributions. Holders of PacifiCare common stock are
entitled to equal cash dividends and dividends per share paid in PacifiCare
common stock or property, when, as and if dividends are declared by our board of
directors and paid out of legally available assets.
Distribution on Dissolution, Etc. In the event of a liquidation, dissolution or
winding up of PacifiCare, holders of PacifiCare common stock are entitled to
share ratably in the assets remaining after payment of liabilities and the
liquidation preferences of any outstanding preferred stock.
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Preemptive Rights. PacifiCare common stock does not carry any preemptive rights
enabling a holder to subscribe for, or receive shares of any class of PacifiCare
common stock or any other securities convertible into shares of any class of
PacifiCare common stock.
PREFERRED STOCK
The Board of Directors may issue shares of the preferred stock at any time, in
one or more series without stockholder approval. The Board of Directors
determines the designation, relative rights, preferences and limitations of each
series of preferred stock.
The transfer agent for our common stock is ChaseMellon Shareholder Services LLC.
PLAN OF DISTRIBUTION
UniHealth may offer its shares of PacifiCare common stock that we do not
purchase at various times in one or more of the following transactions:
- - on the Nasdaq National Market System or any other exchange where our common
stock is listed;
- - in the over-the-counter market;
- - in negotiated transactions not on an exchange or over-the-counter;
- - by pledge to secure debts or other obligations;
- - in connection with the writing of call options, in hedge transactions and in
settlement of other transactions; or
- - in a combination of any of the above transactions.
UniHealth may sell its shares at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at negotiated prices or at
fixed prices. Before UniHealth sells any of its shares of PacifiCare common
stock, UniHealth must first give PacifiCare the opportunity, upon 10 days
notice, to purchase the shares at the same price as the proposed sale.
UniHealth may use broker-dealers to sell its shares. If broker-dealers are used,
they will either receive discounts or commissions from UniHealth, or they will
receive commissions from the purchasers of shares for whom they acted as agents.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can get a copy of our SEC filings and any
information we have incorporated by reference in this prospectus free of charge
by contacting our Investor Relations Department at (714) 825-5491 or mailing
your request to 3120 Lake Center Drive, Santa Ana, California 92704. You may
read and copy any document at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on public reference rooms. Our SEC
filings are also available to the public from the SEC's Website at
http://www.sec.gov. We also have a Website at http://www.pacificare.com with
links to our SEC filings.
The SEC allows us to "incorporate by reference" the information we file with
them. This means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below
11
<PAGE> 13
and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934:
1. Annual Report on Form 10-K/A for the year ended December 31, 1998; and
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
LEGAL MATTERS
For purposes of this offering, Cooley Godward LLP, San Diego, California, is
giving its opinion on the validity of the issuance of the shares.
EXPERTS
The consolidated financial statements of PacifiCare appearing in PacifiCare's
Annual Report on Form 10-K/A for the year ended December 31, 1998, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1999 and March 31, 1998,
incorporated by reference in this prospectus, Ernst & Young LLP have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report,
included in PacifiCare Health Systems, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, and incorporated herein by reference, states
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted considering the limited nature of the
review procedures applied. The independent auditors are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 (the "Act") for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the Registration Statement prepared or
certified by the auditors within the meaning of Sections 7 and 11 of the Act.
12
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by us in connection with the
sale of the common stock being registered. All the amounts shown are estimates
except for the registration fee.
<TABLE>
<S> <C>
SEC registration fee...................................... $108,437
Legal fees and expenses................................... 30,000
Accounting fees and expenses.............................. 7,000
Printing and Engraving.................................... 25,000
Miscellaneous............................................. 5,063
--------
Total........................................... $175,500
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, we have broad powers
to indemnify our directors and officers against liabilities they may incur in
such capacities, including liabilities under the Securities Act of 1933, as
amended. Our bylaws provide that we will indemnify our directors and officers to
the maximum extent consistent with the provisions of the Delaware General
Corporation Law.
In addition, our certificate of incorporation provides that, pursuant to
Delaware law, our directors shall not be liable for monetary damages for breach
of the directors' fiduciary duty of care to us and our stockholders. This
provision in the Certificate of Incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to us, for acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect a director's
responsibility under any other law, such as the federal securities laws or state
or federal environmental laws.
We maintain a policy providing directors' and officers' liability insurance,
that insures our directors and officers in certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission this indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- -----------------------
<C> <S>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (appears on signature page).
99.1 Amended and Restated Certificate of Incorporation of
PacifiCare Health Systems, Inc.
99.2 Bylaws of PacifiCare Health Systems, Inc.
99.3 Stock Purchase Agreement, dated as of May 4, 1999, between
PacifiCare Health Systems, Inc. and UniHealth Foundation
[incorporated by reference to Exhibit B to PacifiCare's
Proxy Statement, dated May 25, 1999].
99.4 Registration Rights Agreement, dated as of May 4, 1999,
between PacifiCare Health Systems, Inc. and UniHealth
Foundation.
</TABLE>
II-1
<PAGE> 15
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that clauses (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by these clauses is
contained in periodic reports filed by the Registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement;
(2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement Form S-3 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Ana, County of Orange, State of California, on
July 15, 1999.
PACIFICARE HEALTH SYSTEMS, INC.
By: /s/ ALAN R. HOOPS
--------------------------------------
Alan R. Hoops
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan R. Hoops, Robert B. Stearns and Joseph S.
Konowiecki and each of them (with full power of each of them to act alone), his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and on his behalf, and in his name, place, and
stead, in any and all capacities, to execute and sign any and all amendments
(including post-effective amendments, exhibits thereto and other documents in
connection therewith) to this Registration Statement and any subsequent
registration statement filed by the registrant pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, which relates to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ ALAN R. HOOPS Chairman of the Board and July 15, 1999
- ------------------------------------------------ Chief Executive Officer
Alan R. Hoops (Principal Executive Officer)
/s/ ROBERT B. STEARNS Executive Vice President and July 15, 1999
- ------------------------------------------------ Chief Financial Officer
Robert B. Stearns (Principal Financial Officer)
/s/ MARY C. LANGSDORF Senior Vice President of Finance and July 15, 1999
- ------------------------------------------------ Corporate Controller
Mary C. Langsdorf (Principal Accounting Officer)
/s/ JACK R. ANDERSON Director July 15, 1999
- ------------------------------------------------
Jack R. Anderson
/s/ CRAIG T. BEAM Director July 15, 1999
- ------------------------------------------------
Craig T. Beam
</TABLE>
II-3
<PAGE> 17
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ RICHARD M. BURDGE Director July 15, 1999
- ------------------------------------------------
Richard M. Burdge
/s/ BRADLEY C. CALL Director July 15, 1999
- ------------------------------------------------
Bradley C. Call
/s/ DAVID R. CARPENTER Director July 15, 1999
- ------------------------------------------------
David R. Carpenter
/s/ TERRY O. HARTSHORN Vice Chairman of the Board July 15, 1999
- ------------------------------------------------
Terry O. Hartshorn
/s/ GARY L. LEARY Director July 15, 1999
- ------------------------------------------------
Gary L. Leary
/s/ WARREN E. PINCKERT II Director July 15, 1999
- ------------------------------------------------
Warren E. Pinckert II
/s/ DAVID A. REED Director July 15, 1999
- ------------------------------------------------
David A. Reed
/s/ LLOYD E. ROSS Director July 15, 1999
- ------------------------------------------------
Lloyd E. Ross
/s/ JEAN BIXBY SMITH Director July 15, 1999
- ------------------------------------------------
Jean Bixby Smith
</TABLE>
II-4
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------
----------------------------------------------
<C> <S>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (appears on signature page).
99.1 Amended and Restated Certificate of Incorporation of
PacifiCare Health Systems, Inc.
99.2 Bylaws of PacifiCare Health Systems, Inc.
99.3 Stock Purchase Agreement, dated as of May 4, 1999, between
PacifiCare Health Systems, Inc. and UniHealth Foundation
[incorporated by reference to Exhibit B to PacifiCare's
Proxy Statement, dated May 25, 1999].
99.4 Registration Rights Agreement, dated as of May 4, 1999,
between PacifiCare Health Systems, Inc. and UniHealth
Foundation.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
July 15, 1999
PacifiCare Health Systems, Inc.
3120 Lake Center Drive
Santa Ana, California 92704
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by PacifiCare Health Systems, Inc., a Delaware corporation (the
"Company"), of a Registration Statement on Form S-3 (the "Registration
Statement"), including a related prospectus filed with the Registration
Statement (the "Prospectus"), with the Securities and Exchange Commission
covering the registration of 6,194,500 shares of the Company's Common Stock, par
value $.01 (the "Shares"), to be sold by a certain stockholder, as described in
the Registration Statement.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Certificate of Incorporation and Bylaws and such other documents,
records, certificates, memoranda and other instruments as we deem necessary as a
basis for this opinion. We have assumed the genuineness and authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies thereof, and the due execution and delivery
of all documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares are validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
Barbara L. Borden
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of PacifiCare Health
Systems, Inc. (the "Company") for the registration of 6,194,500 shares of the
Company's Common Stock and to the incorporation by reference therein of our
report dated February 9, 1999 with respect to the consolidated financial
statements and schedule of the Company included in its Annual Report (Form
10-K/A) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Los Angeles, California
July 9, 1999
<PAGE> 1
EXHIBIT 99.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PACIFICARE HEALTH SYSTEMS, INC.
PACIFICARE HEALTH SYSTEMS, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: The original Certificate of Incorporation was filed with the
Secretary of State of Delaware on August 2, 1996 under the name N-T Holdings,
Inc.
SECOND: The Amended and Restated Certificate of Incorporation of
PacifiCare Health Systems, Inc. in the form attached hereto as Exhibit A has
been duly adopted in accordance with the provisions of Sections 242 and 245 of
the General Corporation Law of the State of Delaware by the directors and
stockholders of the Corporation.
THIRD: The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its President on this ____ day of ____, 1999.
PACIFICARE HEALTH SYSTEMS, INC.
By:_____________________________________
Jeffrey M. Folick, President
1.
<PAGE> 2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PACIFICARE HEALTH SYSTEMS, INC.
I.
The name of this Corporation is: PacifiCare Health Systems, Inc.
II.
The address of its registered office in the State of Delaware is 1209
Orange Street, County of New Castle, Wilmington, Delaware. The name of its
registered agent at such address is the Corporation Trust Company.
III.
The nature of business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
IV.
A. PacificCare Health Systems, Inc. (the "Corporation") is authorized to
issue two classes of shares of stock to be designated, respectively, "Common
Stock" and "Preferred Stock." The total number of shares of stock which the
Corporation shall have authority to issue is two hundred forty million
(240,000,000). The total number of shares of Common Stock which the Corporation
shall have authority to issue is two hundred million (200,000,000), and the par
value of each share of such Common Stock shall be one cent ($0.01). The total
number of shares of Preferred Stock which the Corporation shall have the
authority to issue is forty million (40,000,000), and the par value of each
share of Preferred Stock shall be one cent ($0.01). Upon filing of this Amended
and Restated Certificate of Incorporation, each Class A Common Share and each
Class B Common Share outstanding immediately prior to such filing shall
automatically be changed, reclassified and converted, without any action on the
part of any holder thereof, into one (1) share of Common Stock.
B. The powers, preferences and rights of the holders of Common Stock,
and the qualifications, limitations or restrictions thereof, shall be in all
respects identical, except as otherwise required by law, and subject to the
powers, preferences and rights of the holders of Preferred Stock, as provided in
or as otherwise determined by the Board of Directors pursuant to paragraph C of
this Article IV.
1. DIVIDENDS. Dividends may be declared and paid to the holders
of the Common Stock in cash, property, or other securities of the Corporation
out of any funds legally available therefor. If and when dividends on the Common
Stock are declared from time to time by the Board of Directors, whether payable
in cash, in property or in securities of the
1.
<PAGE> 3
Corporation, the holders of the Common Stock shall be entitled to share equally,
on a per share basis in such dividends.
2. DISTRIBUTION ON DISSOLUTION, ETC. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the remaining net assets of the Corporation shall, after payment in full of the
liquidation preference, if any, of any outstanding Preferred Stock, be
distributed pro rata to the holders of the Common Stock.
3. VOTING RIGHTS. At each annual or special meeting of the
stockholders, each holder of the Common Stock shall be entitled to one (1) vote
in person or by proxy for each share of Common Stock standing in his name on the
stock transfer records of the corporation in connection with the election of
directors and all other actions submitted to a vote of stockholders.
C. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions thereof, and to establish from time to time the number of shares
constituting any such series; and, subject to the express terms of any series of
Preferred Stock outstanding, to increase or decrease the number of shares of any
series subsequent to the issuance of shares of that series, but not below the
number of shares of such series then outstanding. The Board of Directors shall
designate each series to distinguish it from other series and classes of stock
of the Corporation, shall specify the number of shares to be included in the
series, and shall fix the terms, rights, restrictions and qualifications of the
shares of the series, including, without limitation, any preferences, voting
powers, dividend rights and redemption, sinking fund and conversion rights.
Subject to the express terms of any series of Preferred Stock outstanding, the
Board of Directors may increase or decrease the number of shares or alter the
designation or classify or reclassify any unissued shares of a particular series
of Preferred Stock by fixing or altering in any one or more respects from time
to time before issuing the shares, any terms, rights, restrictions and
qualifications of the shares. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series (unless the
Preferred Stock Designation relating thereto provides otherwise).
V.
The number of Directors of the Corporation shall be twelve. The number
of Directors may hereafter be fixed from time to time by bylaw or amendment to
this Certificate of Incorporation duly adopted by the Board of Directors,
provided, however, that the number of Directors shall not be more than twelve
nor less than five.
VI.
A. The Board of Directors shall be and is divided into three classes,
Class I, Class II and Class III, respectively. The number of Directors in each
class shall be the whole number contained in the quotient arrived at by dividing
the authorized number of Directors by three, and
2.
<PAGE> 4
if a fraction is also contained in such quotient then if such fraction is
one-third (1/3) the extra Director shall be a member of Class I and if the
fraction is two-thirds (2/3) one of the extra Directors shall be a member of
Class I and the other shall be a member of Class II. Each Director shall serve
for a term to expire at the third annual meeting following the annual meeting at
which such Director was elected, provided, however, that the Directors initially
appointed to Class I shall serve for a term to expire at the third annual
meeting next following February 14, 1997, the Directors initially appointed to
Class II shall serve for a term to expire at the second annual meeting next
following February 14, 1997, and the Directors initially appointed to Class III
shall serve for a term to expire at the first annual meeting next following
February 14, 1997.
B. In the event of any increase or decrease in the authorized number of
Directors, (1) each Director then serving as such shall nevertheless continue as
a Director of the class of which he is a member until the expiration of his
current term, or his prior death, resignation or removal, and (2) the newly
created or eliminated Directorships resulting from such increase or decrease
shall be apportioned by the Board of Directors to such class or classes as
shall, so far as possible and subject to clause (1) of this paragraph, bring the
number of Directors in the respective classes into conformity with the formula
in this Article, as applied to the new authorized number of Directors.
C. Notwithstanding any of the foregoing provisions of this Article, each
Director shall serve until his successor is elected and qualified or until his
death, resignation or removal. A Director shall not be removed from office prior
to the expiration of his term except by the affirmative vote or written consent
of stockholders entitled to cast not less than sixty-six and two-thirds percent
(66 2/3%) of the total votes entitled to be cast in an election of Directors.
Should a vacancy occur or be created, the remaining Directors (even though less
than a quorum) may fill the vacancy for the full term of the class in which the
vacancy occurs or is created.
VII.
A. In addition to requirements of any applicable statute, the
affirmative vote or written consent of not less than 66 2/3% of the total votes
entitled to be cast in an election of Directors, considered for purposes of this
Article as one class, shall be required for approval or authorization of any
Business Transaction (as hereinafter defined) between the Corporation and any
Control Person (as hereinafter defined), provided, however, that such additional
voting requirement shall not be applicable if:
(1) The Business Transaction was approved by a two-thirds
vote of the Board of Directors of the Corporation prior to the acquisition by
the Control Person, together with its Affiliates and Associates (as hereinafter
defined), of stock of the Corporation, which, in the aggregate, bears the rights
to 10% or more of the total votes entitled to be cast in an election of
Directors; or
(2) The Business Transaction was approved by a two-thirds
vote of the Board of Directors of the Corporation after the acquisition by the
Control Person, together with its Affiliates and Associates, of stock of the
Corporation, which, in the aggregate, bears the rights to 10% or more of the
total votes entitled to be cast in an election of
3.
<PAGE> 5
Directors, and such acquisition by such Control Person and its Affiliates and
Associates was unanimously approved by the Board of Directors of Corporation; or
(3) The Business Transaction is solely between the
Corporation and another corporation, 50% or more of the voting stock of which is
owned by the Corporation and none of which is owned by a Control Person, and
each holder of stock of the Corporation receives the same type of consideration
in proportion to his holdings; or
(4) Both of the following are satisfied:
(A) the cash or fair market value of the property,
securities or other consideration to be received per share in the Business
Transaction by holders of the stock of the Corporation is not less than the
higher of (i) the highest price per share (including brokerage commissions,
soliciting dealers' fees, dealer-management compensation, and other expenses,
including, but not limited to, newspaper advertisements, printing and attorney's
fees) paid by such Control Person in acquiring any of its holdings of the
Corporation's stock, or (ii) the highest per share market price of the stock of
the Corporation during the 3-month period immediately preceding the date of the
proxy statement described in (B) below; and
(B) a proxy statement satisfying the requirements
of the 1934 Act shall be mailed to public stockholders of the Corporation for
the purpose of soliciting stockholder approval of such Business Transaction and
shall contain at the front thereof, in a prominent place, any recommendations as
to the advisability (or inadvisability) of the Business Transaction which the
Continuing Directors, or any of them, may choose to state, and, if deemed
advisable by a majority of the Continuing Directors, an opinion of a reputable
investment banking firm as to the fairness (or unfairness) of the terms of such
Business Transaction, from the point of view of the remaining public
stockholders of the Corporation (such investment banking firm to be selected by
a majority of the Continuing Directors and to be paid a reasonable fee for their
services by the Corporation upon receipt of such opinion).
B. For the purposes of this Article:
1. The term "Control Person" shall mean and include any
individual, corporation, partnership or other person or entity which, together
with its Affiliates and Associates, "beneficially owns" (as this term is defined
on the date on which this Article becomes effective in Rule 13d-3 of the General
Rules and Regulations under the 1934 Act) in the aggregate, stock of the
Corporation, which bears the rights to 10% or more of the total votes entitled
to be cast in an election of Directors, and any Affiliate or Associate (as those
terms are defined on the date of which this Article is adopted in Rule 12b-2 of
the General Rules and Regulations under the 1934 Act) of any such individual,
corporation, partnership or other person or entity;
2. The term "Business Transaction" shall mean (a) any merger or
consolidation of the Corporation with or into a Control Person, (b) any sale,
lease, exchange, transfer or other disposition, including without limitation a
mortgage or any other security device, of all or any Substantial Part (as
hereinafter defined) of the assets of the Corporation (including, without
limitation, any voting securities of a subsidiary) or of a subsidiary, to a
4.
<PAGE> 6
Control Person, (c) any merger of consolidation of a Control Person with or into
the Corporation or a subsidiary of the Corporation, (d) any sale, lease,
exchange, transfer or other disposition of all or any Substantial Part (as
hereinafter defined) of the assets of a Control Person to the Corporation or a
subsidiary of the Corporation, (e) the issuance of any securities of the
Corporation or a subsidiary of the Corporation to a Control Person, (f) the
acquisition by the Corporation or a subsidiary of the Corporation of any
securities of a Control Person, (g) any reclassification or recapitalization
(including any reverse stock split) involving stock of the Corporation,
consummated within five (5) years after a Control Person becomes a Control
Person, (h) any plan or proposal by a Control Person for the dissolution or
liquidation of the Corporation, and (i) any agreement, contract or other
arrangement providing for any of the transactions described in this definition
of Business Transaction;
3. The term "Continuing Director" shall mean any Director who was
elected by the public stockholders of the Corporation prior to the acquisition
by the Control Person, together with its Affiliates and Associates, in the
aggregate, of stock of the Corporation, which bears the rights to 10% or more of
the total votes entitled to be cast in an election of Directors, or a person
recommended to succeed a Continuing Director by a majority of Continuing
Directors;
4. The term "Substantial Part" shall mean more than 10% of the
total assets of the Corporation in question as of the end of its most recent
fiscal year ending prior to the time that the determination is being made;
5. Without limitation, any stock of the Corporation which any
Control Person has the right to acquire at any time pursuant to any agreement,
or upon exercise of conversion rights, warrants or options, or otherwise, shall
be deemed outstanding and beneficially owned by such Control Person for purposes
of this Article only;
6. For the purpose of subparagraph 4 of paragraph A of this
Article, the phrase, "other consideration to be received" shall include, without
limitation, stock of the Corporation retained by its existing public
stockholders in the event of a Business Transaction with such Control Person in
which the Corporation is the surviving corporation.
C. The provisions set forth in this Article shall not be repealed
or amended in any respect or in any manner, including in any merger or
consolidation of the Corporation with any other corporation, unless the
surviving or resulting corporation's Certificate of Incorporation contains an
Article to the same effect as this Article, except by the affirmative vote or
written consent of not less than 66 2/3% of the total votes entitled to be cast
in an election of Directors attributable to stock owned by persons other than a
Control Person.
D. A majority of the Continuing Directors shall have the power
and duty to determine for purposes of this Article on the basis of information
known to them:
1. Whether any proposed transaction is a Business Transaction and
within the scope of this Article;
2. Whether a stockholder is a Control Person; and
5.
<PAGE> 7
3. For the purposes of subparagraph 4 of paragraph A, the per
share market value to be paid to stockholders in the Business Transaction and
the highest per share price paid by the Control Person in acquiring any of its
holdings of the Corporation's stock.
VIII.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter or repeal the
Bylaws of the Corporation.
IX.
No Director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 174 of Title 8 of the Delaware Code (relating to the Delaware General
Corporation Law) or any amendment thereto or successor provision thereto or
shall be liable by reason that, in addition to any and all other requirements
for such liability, he (i) shall have breached his duty of loyalty to the
corporation or its stockholders, (ii) shall not have acted in good faith, (iii)
shall have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law or, (iv) shall have derived
an improper personal benefit. Neither the amendment nor repeal of this Article
Nine, nor the adoption of any provision of the Certificate of Incorporation
inconsistent with this Article Nine, shall eliminate or reduce the effect of
this Article Nine in respect of any matter occurring or any cause of action,
suit or claim that, but for this Article Nine would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
6.
<PAGE> 1
EXHIBIT 99.2
BYLAWS
OF
PACIFICARE HEALTH SYSTEMS, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I Offices................................................................................1
Section 1. Registered Office......................................................................1
Section 2. Other Offices..........................................................................1
ARTICLE II Corporate Seal.........................................................................1
Section 3. Corporate Seal.........................................................................1
ARTICLE III Stockholders' Meetings.................................................................1
Section 4. Place of Meetings......................................................................1
Section 5. Annual Meeting.........................................................................1
Section 6. Special Meetings.......................................................................3
Section 7. Notice of Meetings.....................................................................4
Section 8. Quorum.................................................................................5
Section 9. Adjournment and Notice of Adjourned Meetings...........................................5
Section 10. Voting Rights..........................................................................5
Section 11. Joint or Beneficial Owners of Stock....................................................6
Section 12. List of Stockholders...................................................................6
Section 13. Action without Meeting.................................................................6
Section 14. Organization...........................................................................7
ARTICLE IV Directors..............................................................................7
Section 15. Number and Term of Office..............................................................7
Section 16. Powers.................................................................................8
Section 17. Vacancies..............................................................................8
Section 18. Resignation............................................................................8
Section 19. Removal................................................................................8
Section 20. Meetings...............................................................................8
(a) Annual Meetings........................................................................8
(b) Regular Meetings.......................................................................9
(c) Special Meetings.......................................................................9
(d) Telephone Meetings.....................................................................9
(e) Notice of Meetings.....................................................................9
(f) Waiver of Notice.......................................................................9
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 21. Quorum and Voting......................................................................9
Section 22. Action without Meeting................................................................10
Section 23. Fees and Compensation.................................................................10
Section 24. Committees............................................................................10
(a) Committees............................................................................10
(b) Term..................................................................................10
(c) Meetings..............................................................................11
Section 25. Organization..........................................................................11
ARTICLE V Officers..............................................................................11
Section 26. Officers Designated...................................................................11
Section 27. Tenure and Duties of Officers.........................................................12
(a) General...............................................................................12
(b) Duties of Chairman of the Board of Directors..........................................12
(c) Duties of Vice Chairman of the Board of Directors.....................................12
(d) Duties of Chief Executive Officer.....................................................12
(e) Duties of President and Chief Operating Officer.......................................12
(f) Duties of Vice Presidents.............................................................13
(g) Duties of Secretary...................................................................13
(h) Duties of Chief Financial Officer or Treasurer........................................13
Section 28. Delegation of Authority...............................................................13
Section 29. Resignations..........................................................................13
Section 30. Removal...............................................................................14
ARTICLE VI Execution Of Corporate Instruments And Voting Of Securities Owned By The
Corporation...........................................................................14
Section 31. Execution of Corporate Instruments....................................................14
Section 32. Voting of Securities Owned by the Corporation.........................................14
ARTICLE VII Shares Of Stock.......................................................................15
Section 33. Form and Execution of Certificates....................................................15
Section 34. Lost Certificates.....................................................................15
Section 35. Transfers.............................................................................15
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 36. Fixing Record Dates...................................................................16
Section 37. Registered Stockholders...............................................................17
ARTICLE VIII Other Securities Of The Corporation...................................................17
Section 38. Execution of Other Securities.........................................................17
ARTICLE IX Dividends.............................................................................17
Section 39. Declaration of Dividends..............................................................17
Section 40. Dividend Reserve......................................................................17
ARTICLE X Fiscal Year...........................................................................18
Section 41. Fiscal Year...........................................................................18
ARTICLE XI Indemnification.......................................................................18
Section 42. Indemnification of Directors, Officers, Employees and Other Agents....................18
(a) Directors and Executive Officers......................................................18
(b) Other Officers, Employees and Other Agents............................................18
(c) Good Faith............................................................................18
(d) Expenses..............................................................................19
(e) Enforcement...........................................................................19
(f) Non-Exclusivity of Rights.............................................................20
(g) Survival of Rights....................................................................20
(h) Insurance.............................................................................20
(i) Amendments............................................................................20
(j) Saving Clause.........................................................................20
(k) Certain Definitions...................................................................21
ARTICLE XII Notices...............................................................................21
Section 43. Notices...............................................................................21
(a) Notice to Stockholders................................................................21
(b) Notice to Directors...................................................................22
(c) Affidavit of Mailing..................................................................22
(d) Time Notices Deemed Given.............................................................22
(e) Methods of Notice.....................................................................22
</TABLE>
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(f) Failure to Receive Notice.............................................................22
(g) Notice to Person with Whom Communication is Unlawful..................................22
(h) Notice to Person with Undeliverable Address...........................................22
ARTICLE XIII Amendments............................................................................23
Section 44. Amendments............................................................................23
ARTICLE XIV Loans To Officers.....................................................................23
Section 45. Loans to Officers.....................................................................23
</TABLE>
<PAGE> 6
BYLAWS
OF
PACIFICARE HEALTH SYSTEMS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by
any stockholder of the corporation who was a stockholder of record at the time
of giving of notice provided for in the following paragraph,
1.
<PAGE> 7
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 5.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of
these Bylaws: (i) the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation; (ii) such other business must be a
proper matter for stockholder action under the Delaware General Corporation Law;
(iii) if the stockholder, or the beneficial owner on whose behalf any such
proposal or nomination is made, has provided the corporation with a Solicitation
Notice (as defined in this Section 5(b)), such stockholder or beneficial owner
must, in the case of a proposal, have delivered a proxy statement and form of
proxy to holders of at least the percentage of the corporation's voting shares
required under applicable law to carry any such proposal, or, in the case of a
nomination or nominations, have delivered a proxy statement and form of proxy to
holders of a percentage of the corporation's voting shares reasonably believed
by such stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice; and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii)
2.
<PAGE> 8
whether either such stockholder or beneficial owner intends to deliver a proxy
statement and form of proxy to holders of, in the case of the proposal, at least
the percentage of the corporation's voting shares required under applicable law
to carry the proposal or, in the case of a nomination or nominations, a
sufficient number of holders of the corporation's voting shares to elect such
nominee or nominees (an affirmative statement of such intent, a "Solicitation
Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation's proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the President, or (iv) the
Board of Directors, pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
3.
<PAGE> 9
previously authorized directorships at the time any such resolution is presented
to the Board for adoption) and shall be held at such place, on such date, and at
such time as they or he shall fix.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or sent by
registered mail or by telegraphic or other facsimile transmission to the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
any Vice President, or the Secretary of the corporation (or if called by one of
such officers to an alternative officer listed above) for delivery to the Board
of Directors. No business may be transacted at such special meeting otherwise
than specified in such notice. The Board of Directors shall determine the time
and place of such special meeting, which shall be held not less than thirty-five
(35) nor more than one hundred twenty (120) days after the date of the receipt
of the request. Upon determination of the time and place of the meeting, the
officer receiving the request shall cause notice to be given to the stockholders
entitled to vote, in accordance with the provisions of Section 7 of these
Bylaws. If the notice is not given within one hundred (100) days after the
receipt of the request, the person or persons properly requesting the meeting
may set the time and place of the meeting and give the notice. Nothing contained
in this paragraph (b) shall be construed as limiting, fixing, or affecting the
time when a meeting of stockholders called by action of the Board of Directors
may be held.
(c) Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the corporation's notice of meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law,
written notice of each meeting of stockholders shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting, such notice to specify the place,
date and hour and purpose or purposes of the meeting. Notice of the time, place
and purpose of any meeting of stockholders may be waived in writing, signed by
the person entitled to notice thereof, either before or after such meeting, and
will be waived by any stockholder by his attendance thereat in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction
4.
<PAGE> 10
of any business because the meeting is not lawfully called or convened. Any
stockholder so waiving notice of such meeting shall be bound by the proceedings
of any such meeting in all respects as if due notice thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, by Articles VI(C) and VII of the Certificate of
Incorporation relating to removal of directors and approval of certain Business
Transactions, or these Bylaws, in all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote subject matter shall be
the act of the stockholders. Except as otherwise provided by statute or these
Bylaws, directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Where a separate vote by a class or classes or series
is required, except as otherwise provided by statute, by Articles VI(C) and VII
of the Certificate of Incorporation relating to removal of directors and
approval of certain Business Transactions or these Bylaws, a majority of the
outstanding shares of such class or classes or series, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and, except where otherwise provided by
statute, the aforementioned Articles of the Certificate of Incorporation or
these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast by the holders of shares of such
class or classes or series shall be the act of such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS.
For the purpose of determining those stockholders entitled to vote at any
meeting of the stockholders, except as otherwise provided by law, only persons
in whose names shares stand on the stock records of the corporation on the
record date, as provided in Section 12 of these Bylaws, shall be entitled to
vote at any meeting of stockholders. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or agents
authorized
5.
<PAGE> 11
by a proxy granted in accordance with Delaware law. An agent so appointed need
not be a stockholder. No proxy shall be voted after three (3) years from its
date of creation unless the proxy provides for a longer period.
SECTION 11. JOINT OR BENEFICIAL OWNERS OF STOCK.
(a) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members of
a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the Delaware General Corporation Law, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this subsection
(c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Any action required by statute to be taken at any annual
or special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded.
6.
<PAGE> 12
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.
(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies, and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless, and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be twelve (12). Directors need not be
stockholders unless so required by the Certificate of Incorporation. If for any
cause, the directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
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SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. VACANCIES.
(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of Directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the Director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 17 in the
case of the death, removal or resignation of any Director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.
SECTION 18. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 19. REMOVAL. Subject to any limitation imposed by law, any
individual director or directors may be removed with or without cause by the
affirmative vote of at least two-thirds of the voting power of the corporation
entitled to vote at an election of directors.
SECTION 20. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and
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such meeting shall be held for the purpose of electing officers and transacting
such other business as may lawfully come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least two (2)
days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
Directors fixed from time to time in accordance with Section 15 hereof, but not
less than one (1), a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with Section 15 of these Bylaws, but not less than
one (1); provided, however, at any meeting whether a quorum be present or
otherwise, a majority of the Directors present may
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adjourn from time to time until the time fixed for the next regular meeting of
the Board of directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 24. COMMITTEES.
(a) COMMITTEES. The Board of Directors may from time to time
appoint such committees as may be permitted by law. Such committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors, and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall any such committee have the power or authority in reference to (i)
approving or adopting, or recommending to the stockholders, any action or matter
expressly required by the Delaware General Corporation Law to be submitted to
stockholders for approval, or (ii) adopting, amending or repealing any bylaw of
the corporation.
(b) TERM. Each member of a committee of the Board of Directors
shall serve a term on such committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw, may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously
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appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
(c) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of any committee appointed pursuant to this Section 24
shall be held at such times and places as are determined by the Board of
Directors, or by any such committee, and when notice thereof has been given to
each member of such committee, no further notice of such regular meetings need
be given thereafter. Special meetings of any such committee may be held at any
place which has been determined from time to time by such committee, and may be
called by any director who is a member of such committee, upon written notice to
the members of such committee of the time and place of such special meeting
given in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
SECTION 25. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a Director), or if the President is absent, the
most senior Vice President (if a Director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
include a Chief Executive Officer (who shall be either the Chairman of the Board
or President, as provided in these Bylaws), a President, a Chief Operating
Officer, a Secretary and a Chief Financial Officer or Treasurer. The Corporation
may also have, at the discretion of the Board of Directors such other officers
as are desired, including a Chairman of the Board of Directors, a Vice Chairman
of the Board of Directors, one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents with such powers and duties as it shall deem necessary, all of whom shall
be elected at the annual organizational meeting of the Board of Directors. The
order of the seniority of the Vice Presidents shall be in the order of their
nomination, unless otherwise determined by the Board of Directors. The Board of
Directors may assign such additional titles to one or more of the officers as it
shall deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law. The
salaries and other compensation of the officers of the corporation shall be
fixed by or in the manner designated by the Board of Directors.
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SECTION 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, if such an officer is elected, shall preside when
present at all meetings of the stockholders and the Board of Directors. The
Chairman of the Board of Directors shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors shall designate from time to time. If there is
a Chairman of the Board of Directors and if the Board of Directors designates
such Chairman of the Board of Directors as the Chief Executive Officer of the
corporation, then the Chairman of the Board of Directors shall also have the
powers and duties prescribed in paragraph (d) of this Section 27.
(c) DUTIES OF VICE CHAIRMAN OF THE BOARD OF DIRECTORS. The
Vice Chairman of the Board, if such an officer is elected, shall be a director
and shall preside at all meetings of the Board of Directors for which the
Chairman of the Board is absent or unavailable. The Vice Chairman shall perform
such other duties as may be prescribed periodically by the Chairman of the Board
or the Board of Directors.
(d) DUTIES OF CHIEF EXECUTIVE OFFICER. If there is a Chairman
of the Board and the Board of Directors designates the Chairman of the Board as
the Chief Executive Officer, then the Chairman of the Board shall be the Chief
Executive Officer of the corporation. Otherwise, the President shall be the
Chief Executive Officer of the corporation. The Chief Executive Officer shall
preside at all meetings of the stockholders and at all meetings of the Board of
Directors, unless a Chairman or Vice Chairman of the Board of Directors has been
appointed and is present. The Chief Executive Officer shall be an ex-officio
member of all committees and shall, subject to the control of the Board of
Directors and such supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board or the Vice Chairman of the Board, if
there be such officers, shall have general supervision, direction and control of
the business and officers of the corporation, shall have such duties and
authority as are normally incident to the office of chief executive officer of a
corporation and such duties and authority as may be prescribed from time to time
by the Board of Directors or as are provided for elsewhere in these Bylaws.
(e) DUTIES OF PRESIDENT AND CHIEF OPERATING OFFICER. If there
is a Chairman of the Board who is also the Chief Executive Officer, then the
President shall be the Chief Operating Officer. If the President is the Chief
Executive Officer, then the President shall also serve as the Chief Operating
Officer unless the Board of Directors designates another officer of the
corporation as the Chief Operating Officer. Subject to the direction and control
of the Chief Executive Officer and the Board of Directors, the President and
Chief Operating Officer shall supervise and control the operations of the
corporation, shall have the duties and authority as are normally incident to the
office of president and chief operating officer of a corporation and such
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other duties as may be prescribed from time to time by the Chief Executive
Officer or the Board of Directors, and, in the absence or disability of the
Chief Executive Officer, shall have the authority and perform the duties of the
Chief Executive Officer.
(f) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the
order of their seniority, may assume and perform the duties of the President in
the absence or disability of the President or whenever the office of President
is vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(g) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders, and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other duties
given him in these Bylaws and other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.
(h) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the President. The Chief Financial
Officer or Treasurer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
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SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or otherwise
required by law. promissory notes, deeds of trust, mortgages and other evidences
of indebtedness of the corporation, and other corporate instruments or documents
requiring the corporate seal, and certificates of shares of stock owned by the
corporation, shall be executed, signed or endorsed by the Chairman of the Board
of Directors, or the President or any Vice President, and by the Secretary or
Chief Financial Officer or Treasurer or any Assistant Secretary or Assistant
Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by thc person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating , optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 35. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
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(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the Delaware General Corporation Law.
SECTION 36. FIXING RECORD DATES.
(a) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall, subject to applicable law, not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
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SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon. shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and applicable law.
SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property
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of the corporation, or for such other purpose as the Board of Directors shall
think conducive to the interests of the corporation, and the Board of Directors
may modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law or any other applicable law;
provided, however, that the corporation may modify the extent of such
indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person or any proceeding by such person
against the corporation or its Directors, officers, employees or other agents
unless (i) such indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the Board of Directors of the corporation or
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the Delaware
General Corporation Law or any other applicable law or (iv) such indemnification
is required to be made under subsection (e).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The
corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law or any other
applicable law. The Board of Directors shall have the power to delegate the
determination of whether indemnification shall be given to any such person,
except executive officers, to such officers or other persons as the Board of
Directors shall determine.
(c) GOOD FAITH.
(1) For purposes of any determination under this Bylaw, a
Director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his conduct was unlawful, if his action
is based on information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or presented by:
(i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;
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(ii) counsel, independent accountants or other
persons as to matters which the Director or executive officer believed to be
within such person's professional competence; and
(iii) with respect to a Director, a committee of
the Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to merit
confidence; so long as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
he had reasonable cause to believe that his conduct was unlawful.
(3) The provisions of this paragraph (c) shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth by
the Delaware General Corporation Law.
(d) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer of the corporation or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(f) of this Bylaw, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive
officer is or was a director of the corporation in which event this paragraph
shall not apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(e) ENFORCEMENT. Without the necessity of entering into an
express contract all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
19.
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enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law or any other applicable law for the corporation
to indemnify the claimant for the amount claimed. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law or any other applicable law, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(g) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(h) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law or any other applicable law, the corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw
(i) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(j) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
42 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the fullest extent under any other applicable law.
20.
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(k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall
apply:
(1) The term "PROCEEDING" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "EXPENSES" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(3) The term the "CORPORATION" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "DIRECTOR," "EXECUTIVE OFFICER,"
"OFFICER," "EMPLOYEE," or "AGENT" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "OTHER ENTERPRISES" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"SERVING AT THE REQUEST OF THE CORPORATION" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF THE
CORPORATION" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions
of these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly
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deposited in the United States mail, postage prepaid, and addressed to his last
known post office address as shown by the stock record of the corporation or its
transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to
any director may be given by the method stated in subsection (a), or by
overnight delivery service, facsimile, electronic mail, telex or telegram,
except that such notice other than one which is delivered personally shall be
sent to such address as such director shall have filed in writing with the
Secretary, or, in the absence of such filing, to the last known post office
address of such Director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed
by a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or
by overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the
same method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and
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all notices of meetings or of the taking of action by written consent without a
meeting to such person during the period between such two consecutive annual
meetings, or (ii) all, and at least two, payments (if sent by first class mail)
of dividends or interest on securities during a twelve month period, have been
mailed addressed to such person at his address as shown on the records of the
corporation and have been returned undeliverable, the giving of such notice to
such person shall not be required. Any action or meeting which shall be taken or
held without notice to such person shall have the same force and effect as if
such notice had been duly given. If any such person shall deliver to the
corporation a written notice setting forth his then current address, the
requirement that notice be given to such person shall be reinstated. In the
event that the action taken by the corporation is such as to require the filing
of a certificate under any provision of the Delaware General Corporation Law,
the certificate need not state that notice was not given to persons to whom
notice was not required to be given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Subject to paragraph (i) of Section 42 of the
Bylaws, the Bylaws may be altered, amended or repealed and new Bylaws adopted by
the affirmative vote of the stockholders entitled to vote thereon. The Board of
Directors shall also have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
23.
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EXHIBIT 99.4
REGISTRATION RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. INTRODUCTION.........................................................................1
2. REGISTRATION UNDER SECURITIES ACT....................................................1
2.1 Shelf Registration............................................................1
(a) Registration...........................................................1
(b) Shares Eligible for Sale...............................................1
(c) Notice of Sale.........................................................1
(d) Expenses...............................................................2
(e) No Underwriters........................................................2
2.2 Request for Underwritten Offering.............................................2
(a) Request................................................................2
(b) Selection of Underwriters..............................................2
2.3 Registration Procedures.......................................................2
(a) Procedures.............................................................2
(b) Information Concerning Distribution....................................5
(c) Other Registration Rights..............................................5
(d) Suspension of Effectiveness of Registration Statement..................5
2.4 Indemnification and Contribution..............................................5
(a) Indemnification by PacifiCare..........................................5
(b) Indemnification by UniHealth...........................................6
(c) Notices of Claims, etc.................................................7
(d) Contribution...........................................................7
(e) Other Indemnification and Contribution.................................8
(f) Payments...............................................................8
3. GENERAL..............................................................................8
3.1 Amendments and Waivers........................................................8
3.2 Notices.......................................................................8
3.3 Certain Definitions...........................................................9
3.4 Miscellaneous................................................................10
3.5 Arbitration..................................................................10
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.6 Attorneys' Fees..............................................................11
</TABLE>
ii.
<PAGE> 4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of May 4, 1999 by and between PACIFICARE HEALTH SYSTEMS, INC., a Delaware
corporation ("PacifiCare"), and UNIHEALTH FOUNDATION, a California nonprofit
public benefit corporation ("UniHealth").
1. INTRODUCTION. UniHealth and PacifiCare have entered into a Stock Purchase
Agreement dated as of the date hereof (the "Stock Purchase Agreement") providing
for the repurchase by PacifiCare of up to an aggregate of 5,909,500 shares of
common stock of PacifiCare held by UniHealth (the "UniHealth Shares") on the
terms and conditions set forth therein. In connection with the execution of the
Stock Purchase Agreement, PacifiCare has agreed to (i) file a shelf registration
statement to enable UniHealth to sell any UniHealth Shares which may be released
from PacifiCare's repurchase obligation pursuant to the terms set forth in
Sections 8.5 and 9.2 of the Stock Purchase Agreement (the "Released Shares") and
any of the 285,000 shares of Class B Common Stock owned by UniHealth and the
shares of PacifiCare Common Stock to be exchanged for such shares of Class B
Common Stock following the Approval ("Class B Shares"), and (ii) reasonably
cooperate with UniHealth if UniHealth desires to sell any Released Shares or
Class B Shares it continues to own after February 15, 2001 (the "Remaining
Released Shares") through an underwritten offering. For purposes of this
Agreement, each of UniHealth Shares, Released Shares, Class B Shares and
Remaining Released Shares shall include any shares of Common Stock issued as a
dividend or other distribution with respect to, in exchange for or in
replacement of, such UniHealth Shares, Released Shares, Class B Shares and
Remaining Released Shares, as applicable. Certain capitalized terms used in this
Agreement are defined in Section 3.3.
2. REGISTRATION UNDER SECURITIES ACT.
2.1 SHELF REGISTRATION.
(a) REGISTRATION. Within thirty (30) days following the date of
the Approval, PacifiCare shall prepare and file with the Securities and Exchange
Commission a shelf registration statement on Form S-3 (or any successor form
thereto) with respect to the resale of UniHealth Shares that are not purchased
by PacifiCare at the Initial Closing and the Class B Shares (including or
incorporating by reference such audited financial statements as may be required
by the Securities Act or the rules and regulations promulgated thereunder) (the
"Shelf Registration Statement") and use its reasonable efforts to cause the
Shelf Registration Statement to become and remain effective.
(b) SHARES ELIGIBLE FOR SALE. The shares eligible for sale under
the registration pursuant to this Section 2.1 shall be limited to the Released
Shares.
(c) NOTICE OF SALE. UniHealth shall provide PacifiCare with
written notice of any proposed sales to be made under the Shelf Registration
Statement pursuant to this Section 2.1 (the "Notice") at least ten (10) days
prior to any such proposed sale. The Notice shall
1.
<PAGE> 5
describe the nature of the shares proposed to be sold in sufficient detail to
establish that such shares are Released Shares.
(d) EXPENSES. PacifiCare will pay all Authorized Registration
Expenses in connection with the registration pursuant to this Section 2.1,
including the Underwritten Offering pursuant to Section 2.2. UniHealth will pay
all Excluded Registration Expenses in connection with the registration pursuant
to this Section 2.1.
(e) NO UNDERWRITERS. Until the Final Closing under the Stock
Purchase Agreement, UniHealth will not retain an underwriter in connection with
any proposed sale under the Shelf Registration Statement.
2.2 REQUEST FOR UNDERWRITTEN OFFERING.
(a) REQUEST. Subject to the conditions of this Section 2.2 and
the other terms and conditions of this Agreement, during the one year period
commencing on February 15, 2001, and ending on February 14, 2002, upon the
written request of UniHealth for an underwritten offering under the Shelf
Registration Statement for all Remaining Released Shares ("Underwritten
Offering"), PacifiCare shall reasonably cooperate in one Underwritten Offering,
provided that PacifiCare shall not be obligated to maintain the effectiveness of
any prospectus for the Underwritten Offering for more than ninety (90) days, and
provided further that PacifiCare shall have no obligation to participate in an
Underwritten Offering if the market value of the Remaining Released Shares if
less than $25,000,000.
(b) SELECTION OF UNDERWRITERS. If UniHealth elects an
Underwritten Offering pursuant to Section 2.2(a), UniHealth shall select and
obtain the investment banker or investment bankers and manager or managers that
will administer the offering, provided that such selection shall be subject to
PacifiCare's approval, which approval shall not unreasonably be withheld.
2.3 REGISTRATION PROCEDURES.
(a) PROCEDURES. If and whenever PacifiCare is required by the
provisions of this Agreement to use all reasonable efforts to effect or cause
the registration of any Released Shares or Class B Shares (including the
Remaining Released Shares) under the Securities Act or the sale of any Released
Shares or Class B Shares registered on the Shelf Registration Statement as
provided in this Agreement, PacifiCare shall, as expeditiously as possible:
(i) prepare and file with the Securities and Exchange
Commission the Shelf Registration Statement on Form S-3 (or any successor form
thereto) with respect to resale on a continuous basis of such Released Shares or
Class B Shares (including or incorporating by reference such audited financial
statements as may be required by the Securities Act or the rules and regulations
promulgated thereunder in order to maintain its effectiveness) and use its
reasonable efforts to cause such registration statement to become and remain
effective, provided that before filing such registration statement or any
amendment or supplement thereto, PacifiCare will furnish to the counsel selected
by UniHealth copies of all such documents proposed to be filed for review and
comment;
2.
<PAGE> 6
(ii) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to maintain the
effectiveness of the Shelf Registration Statement and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until (i) if no Underwritten
Offering is requested under Section 2.2(a), on February 14, 2002, and (ii) if
UniHealth elects an Underwritten Offering, until the earlier to occur of the
completion of the offering pursuant to such prospectus and the expiration of
ninety (90) days after the final prospectus for the Underwritten Offering
becomes effective;
(iii) furnish to UniHealth and each underwriter, if any,
such number of copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus and supplements thereto included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as UniHealth or any underwriter, if any, may reasonably request in
order to facilitate the public sale or other disposition of the Released Shares
or Class B Shares;
(iv) use all reasonable efforts to register or qualify all
UniHealth Shares and Class B Shares covered by such registration statement under
such other state securities laws or blue sky laws of such United States
jurisdictions as UniHealth or any underwriter, if any, shall reasonably request,
to keep such registrations or qualifications in effect for so long as the
registration statement filed under the Securities Act remains in effect and to
do any and all other acts and things which may be reasonably necessary or
advisable to enable UniHealth and such underwriter, if any, to consummate the
disposition in such jurisdictions of such Released Shares or Class B Shares,
provided, however, that PacifiCare shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this clause (iv) be obligated
to be qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(v) notify UniHealth, at any time when a prospectus
relating to the UniHealth Shares and Class B Shares is required to be delivered
under the Securities Act, of PacifiCare's becoming aware that the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and promptly prepare and furnish to
UniHealth and each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Released Shares or Class B Shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(vi) advise UniHealth, promptly after it receives notice
thereof, of the time when such registration statement or any amendment thereto
has become effective or any related prospectus or any supplement to such
prospectus or any amendment to such prospectus has been filed, of the issuance
by the Securities and Exchange Commission of any stop order or
3.
<PAGE> 7
of any order preventing or suspending the use of any related preliminary
prospectus or prospectus, of the suspension of the qualification of such
Released Shares or Class B Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of any
request by the Securities and Exchange Commission for the amending or
supplementing of such registration statement or prospectus or for additional
information; and in the event of the issuance of any stop order or of any order
preventing or suspending the use of any such preliminary prospectus or
prospectus or suspending any such qualification, to use promptly all reasonable
efforts to obtain withdrawal of such order;
(vii) file promptly all documents required to be filed
with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d)
of the Exchange Act subsequent to the time such registration statement becomes
effective and during any period when any related prospectus is required to be
delivered;
(viii) otherwise use all reasonable efforts to comply with
all applicable provisions of the Securities Act and all applicable rules and
regulations of the Securities and Exchange Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement which
shall satisfy the provisions of Section 11(a) of the Securities Act;
(ix) in connection with the Underwritten Offering pursuant
to Section 2.2 hereof, furnish, at the request of UniHealth on the date such
securities are delivered to the underwriters for sale pursuant to such
registration (i) an opinion, dated such date, of counsel representing PacifiCare
for purposes of such registration, addressed to the underwriters, covering such
legal matters with respect to such registration as UniHealth may reasonably
request and are customarily included in such an opinion, and (ii) letters, dated
the effective date of the amendment to the registration statement containing the
prospectus for the Underwritten Offering and the date such securities are
delivered to the underwriters for sale pursuant to such registration, from the
independent certified public accountants of PacifiCare, addressed to the
underwriters and to UniHealth covering such financial, statistical and
accounting matters with respect to such registration as UniHealth may reasonably
request and are customarily included in such letters; and
(x) in connection with the Underwritten Offering pursuant
to Section 2.2 hereof, at the request of UniHealth, cause its executive officers
to reasonably participate in a roadshow for the Underwritten Offering; provided
that the roadshow is scheduled, with the reasonable prior consent of PacifiCare,
so as not to disrupt the normal business operations and existing scheduled
events of PacifiCare or its affected executive officers.
Upon receipt of any notice from PacifiCare of the occurrence of any event of the
kind described in clause (vi) of this Section 2.3(a), UniHealth will forthwith
discontinue UniHealth's disposition of Released Shares or Class B Shares
pursuant to the registration statement covering such Released Shares or Class B
Shares until UniHealth's receipt of the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 2.3(a) and, if so
directed by PacifiCare, will deliver to PacifiCare all copies, other than
permanent file copies, then in UniHealth's possession of the prospectus covering
such Released Shares or Class B Shares current at the time of receipt of such
notice. In the event Pacificare shall give any such notice,
4.
<PAGE> 8
the period mentioned in clause (ii) of this Section 2.3(a) shall be extended by
the length of the period from and including the date when PacifiCare shall have
given such notice to and including the date when UniHealth shall have received
the copies of the supplemented or amended prospectus contemplated by clause (vi)
of this Section 2.3(a).
(b) INFORMATION CONCERNING DISTRIBUTION. As a condition to filing
or effecting the Shelf Registration Statement pursuant to Section 2.1 or
amending the Shelf Registration Statement for an Underwritten Offering,
PacifiCare may require UniHealth to furnish PacifiCare such information
regarding UniHealth and the distribution of such securities as PacifiCare may
reasonably request in writing for inclusion in the registration statement in
accordance with the rules and regulations of the Securities and Exchange
Commission or in connection with any registration, qualification, compliance or
filing for an exemption under state securities laws.
(c) OTHER REGISTRATION RIGHTS. PacifiCare represents and warrants
to UniHealth that, as of the date of this Agreement, it has not agreed to
register any securities of PacifiCare under the Securities Act or the laws of
any other jurisdiction pursuant to registration rights which conflict with those
granted pursuant to this Agreement.
(d) SUSPENSION OF EFFECTIVENESS OF REGISTRATION STATEMENT.
Notwithstanding any other provision of this Agreement, following the
effectiveness of the Shelf Registration Statement hereunder, PacifiCare may, at
any time, suspend the effectiveness of the registration statement for up to no
longer forty-five (45) days, as appropriate (a "Suspension Period"), by giving
notice to UniHealth that in the good faith judgment of the Board of Directors of
PacifiCare, it would be seriously detrimental to PacifiCare and its stockholders
to disclose any previously undisclosed material corporate development that would
be required to be disclosed if the registration statement is not suspended.
PacifiCare will use its best efforts to minimize the length of any Suspension
Period. UniHealth agrees that, upon receipt of any notice from PacifiCare of a
Suspension Period, UniHealth will not sell any Released Shares or Class B Shares
until (i) UniHealth is advised in writing by PacifiCare that the use of the
applicable prospectus may be resumed, (ii) UniHealth has received copies of any
additional supplemental or amended prospectus, if applicable, and (iii)
UniHealth has received copies of any additional or supplemental filings which
are incorporated or deemed to be incorporated by reference in such prospectus.
2.4 INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY PACIFICARE. With respect to the Shelf
Registration Statement and any amendment or supplement thereto, to the extent
permitted by law, PacifiCare will indemnify and hold harmless UniHealth, its
directors, officers, employees and agents, each other Person who participates as
an underwriter in the offering or sale of such Released Shares or Class B Shares
and each other Person, if any, who controls UniHealth or any such underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (whether arising out of a claim of a
party hereto, a third party or otherwise), to which UniHealth or any such
director or officer or underwriter or controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
5.
<PAGE> 9
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Shelf Registration Statement, any preliminary prospectus, final prospectus,
summary prospectus, notification or offering circular contained therein or
otherwise used or approved for use by PacifiCare in the offering pursuant
thereto, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and PacifiCare will
reimburse UniHealth and each such director, officer, employee, agent,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding or successfully enforcing the
provisions hereof; provided, however, that (i) PacifiCare shall not be liable in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, notification, offering circular, amendment
or supplement in reliance upon and in conformity with information furnished to
PacifiCare in writing by UniHealth or, if the Person seeking indemnification is
an underwriter, by such underwriters, in either case expressly for use therein,
and (ii) the provisions of this Section 2.4(a) shall not inure to the benefit of
any underwriter (or any Person controlling such underwriter) on account of any
losses, claims, damages, liabilities or actions arising from the sale of
securities to any Person if such underwriter failed to send or give a copy of
the related prospectus, as the same may be then amended or supplemented, to such
Person within the time required by the Securities Act. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of UniHealth or any such director, officer, employee, agent, underwriter
or controlling person and shall survive the transfer of such securities by
UniHealth.
(b) INDEMNIFICATION BY UNIHEALTH. PacifiCare may require, as a
condition to including any Released Shares or Class B Shares in the Shelf
Registration Statement or amending the Shelf Registration Statement for the
Underwritten Offering, that PacifiCare shall have received an undertaking
satisfactory to it from UniHealth, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 2.4(a) hereof) PacifiCare,
each director of PacifiCare (or each person performing a similar function), each
officer of PacifiCare (or each person performing a similar function), each
employee and agent of PacifiCare and each other Person, if any, who controls
PacifiCare within the meaning of the Securities Act, each Person who
participates as an underwriter in the offering or sale of such Released Shares
or Class B Shares and each other Person, if any, who controls such underwriter
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus, summary prospectus,
notification or offering circular contained therein, or any amendment or
supplement thereto, if and to the extent such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
information furnished to PacifiCare in writing by UniHealth expressly for use
therein; provided, however, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any preliminary
prospectus, no such undertaking shall apply to the extent that any loss, claim,
damage, liability or expense results from the fact that a current copy of the
prospectus was not sent or given to the Person asserting any such loss, claim,
damage, liability or expense at or prior to the written confirmation of the sale
of the Released Shares or Class B Shares concerned to
6.
<PAGE> 10
such Person if it is determined that it was the responsibility of PacifiCare to
provide such Person with such current copy of the prospectus and such current
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage, liability or expense; and provided, further, that the maximum
obligation of UniHealth pursuant to any such undertaking shall be limited to an
amount equal to the aggregate sales price of the Released Shares and Class B
Shares sold pursuant thereto. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of PacifiCare or any
such director, officer, employee, agent or controlling person and shall survive
the transfer of such securities by UniHealth.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.4(a) or 2.4(b) hereof, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give prompt written notice to the latter of the commencement
of such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under Section 2.4(a) or 2.4(b) hereof except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof (unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
counsel chosen by such indemnifying party is not reasonably satisfactory to such
indemnified party or the indemnifying party does not in fact assume such
defense), the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of investigation
or enforcement. No indemnifying party shall consent to entry of any judgment or
enter into any settlement without the consent of the indemnified party (which
shall not be unreasonably withheld) if it does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a complete and unconditional release from all liability in respect of such
claim or litigation without any payment or consideration provided by such
indemnified party other than a payment or consideration as to which such
indemnified party is concurrently indemnified by an equal payment to such
indemnified party. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party
(which shall not be unreasonably withheld).
(d) CONTRIBUTION. If the indemnification provided for in Section
2.4(a) or 2.4(b) hereof is unavailable to a party that would have been an
indemnified party under such Section in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
therein, then each party that would have been an indemnifying party thereunder
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and such indemnified party on the other
7.
<PAGE> 11
in connection with the statements or omissions or alleged statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof); provided, however, that the
liability of UniHealth shall be limited to an amount equal to the aggregate
sales price under the Shelf Registration Statement of the Released Shares and
Class B Shares. The relative fault shall be determined by reference to, among
other things, whether the untrue statement or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or such indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. PacifiCare and
UniHealth agree that it would not be just and equitable if contribution pursuant
to this Section 2.4(d) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this Section 2.4(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this Section 2.4(d) shall
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim
(which shall be limited as provided in Section 2.4(d) hereof if the indemnifying
party has assumed the defense of any such action in accordance with the
provisions thereof) and of successfully enforcing the provisions hereof. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) OTHER INDEMNIFICATION AND CONTRIBUTION. Indemnification and
contribution similar to that specified in Sections 2.4(a), 2.4(b), 2.4(c) and
2.4(d) hereof (with appropriate modifications) shall be given by PacifiCare and
UniHealth with respect to any required registration or other qualification of
such Released Shares or Class B Shares under any federal or state law or
regulation of any governmental authority, other than the Securities Act.
(f) PAYMENTS. The indemnification and contribution required by
this Section 2.4 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
3. GENERAL.
3.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only with
the written consent of PacifiCare and UniHealth.
3.2 NOTICES. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telex or telecopy) addressed as hereinafter provided and if either (x) actually
delivered at said address (evidenced in the case of a telex or telecopy by
receipt of the correct answerback or other communication) or (y) in the case of
a letter, five business days shall have elapsed after the same shall have been
deposited in the mails, postage prepaid and registered or certified: (a) if to
UniHealth, at its registered address as set forth in the register kept by
PacifiCare, (b) if to PacifiCare, to the attention of the Chief Executive
Officer at 3120 Lake Center Drive, Santa Ana, California 92704-6917, or at such
8.
<PAGE> 12
other address as PacifiCare shall have furnished to each holder of Released
Shares or Class B Shares at the time outstanding.
3.3 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the following respective meanings:
"AFFILIATE" has the meaning set forth in Rule 405 under the Securities
Act.
"APPROVAL" has the meaning set forth in the Recitals to the Stock
Purchase Agreement.
"AUTHORIZED REGISTRATION EXPENSES" means all expenses incident to
PacifiCare's performance of or compliance with Section 2.1 hereof, including all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all expenses of formatting for electronic
submission to the Securities and Exchange Commission, messenger and delivery
expenses, the fees and disbursements of counsel for PacifiCare and of its
independent public accountants, provided that, in any case where any
registration expenses are not to be borne by PacifiCare, such expenses shall not
include salaries or fringe benefits of PacifiCare personnel or general overhead
expenses of PacifiCare, and shall not include premiums or other expenses
relating to liability insurance required by underwriters or PacifiCare, or other
expenses for the preparation of financial statements or other data normally
prepared by PacifiCare in the ordinary course of its business or which
PacifiCare would have incurred in any event.
"CLASS B SHARES" has the meaning set forth in Section 1 of this
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Securities and Exchange
Commission thereunder, all as the same shall be amended from time to time.
"EXCLUDED REGISTRATION EXPENSES" means all expenses, fees and
disbursements of counsel retained by UniHealth, all expenses, fees and
disbursements of any underwriters, any printing costs incurred at the election
of UniHealth, all accounting fees incurred in connection with any comfort letter
for the Underwritten Offering, if any, and all other expenses, fees and
disbursements incident to any registration either initiated or effected pursuant
to this Agreement which are not explicitly included as Authorized Registration
Expenses.
"INITIAL CLOSING" has the meaning set forth in Section 1 of the Stock
Purchase Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"PACIFICARE" has the meaning set forth in the Preamble to this
Agreement.
"PERSON" means a corporation, an association, a partnership, an
organization, a trust, a business, an individual, a government or political
subdivision thereof, a governmental agency or any other entity.
"RELEASED SHARES" has the meaning set forth in Section 1 of this
Agreement.
9.
<PAGE> 13
"REMAINING RELEASED SHARES" has the meaning set forth in Section 1 of
this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Securities and Exchange
Commission thereunder, all as the same shall be amended from time to time.
"SECURITIES AND EXCHANGE COMMISSION" means the U.S. Securities and
Exchange Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for the
particular purpose.
"STOCK PURCHASE AGREEMENT" has the meaning set forth in Section 1 of
this Agreement.
"UNIHEALTH" has the meaning set forth in the Preamble to this Agreement.
"UNIHEALTH SHARES" has the meaning set forth in Section 1 of this
Agreement.
3.4 MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the holders from time to time of Released
Shares and Class B Shares, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between PacifiCare and UniHealth and
supersedes all prior agreements and understandings relating to the subject
matter hereof. This Agreement shall be construed and enforced in accordance with
and governed by the domestic substantive laws of the State of California,
without reference to any choice or conflict of laws principles which could cause
the application of the domestic substantive laws of any other jurisdiction. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
3.5 ARBITRATION. A party asserting the existence of any dispute or
controversy arising out of or in connection with this Agreement (a "Dispute"),
including any Dispute relating to the existence, materiality or cure of a
claimed material breach, shall notify the other parties to this Agreement in
writing of the existence and subject matter of the Dispute. For a thirty (30)
day period following such notification, the parties shall meet and negotiate in
good faith to attempt the resolve the Dispute and shall escalate the Dispute to
the respective Chief Executive Officers of the parties if resolution is not made
within the first fifteen (15) days. If such efforts do not resolve the Dispute
within such thirty (30) day period, the Dispute shall be referred to and finally
resolved by arbitration under the rules of the American Arbitration Association,
and except for proceedings commenced to enforce an arbitration award, each party
hereby irrevocably waives its right to commence any proceeding in any court with
respect to any matter arising under this Agreement. The tribunal shall consist
of a sole arbitrator appointed jointly by the parties. In the case of the
parties failing to choose a sole arbitrator, the tribunal shall consist of three
arbitrators, two of whom shall be appointed by the respective parties and the
third arbitrator shall be appointed jointly by the first two. The place of
arbitration shall be Orange County, California or such other location as the
parties shall agree. The language of the arbitration shall be English. No
arbitrator shall be an Affiliate, employee, officer or director of either party
or of their respective Affiliates, nor shall any Arbitrator have any interest
that would be affected in any material respect by the outcome of the Dispute.
The decision of the sole arbitrator or of a
10.
<PAGE> 14
majority of the arbitrators, where applicable, shall be final and binding on the
parties and their respective successors and assigns. The decision shall not be
subject to appeal or judicial review except in circumstances of fraud. The
prevailing party in any such arbitration shall be entitled to recover reasonable
fees of attorneys and other professionals in addition to all court costs and
arbitrator's fees which that party may incur as a result. Judgment upon the
award granted by the arbitrator(s) may be entered in any court having
jurisdiction over the relevant party or its assets.
3.6 ATTORNEYS' FEES. In any action at law or in equity to enforce any of
the provisions or rights under this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and expenses incurred in such
action, in addition to any other relief to which such party shall be entitled.
[THIS SPACE INTENTIONALLY LEFT BLANK]
11.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed on the date first written above.
PACIFICARE HEALTH SYSTEMS, INC.,
a Delaware corporation
By: ____________________________________
Alan Hoops
Chairman of the Board & Chief
Executive Officer
UNIHEALTH FOUNDATION,
a California nonprofit public benefit
corporation
By: ____________________________________
David R. Carpenter
Chairman of the Board
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
