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Pursuant to Rule 424(b)(2)
Registration Statement No. 333-83069
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 August 6, 1999, the
closing price of one share of our stock on the Nasdaq National Market System was
$67.75.
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 AUGUST 6, 1999
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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.
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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>
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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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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
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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.
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