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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 17, 1994
FHP INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 0-14796 33-0072502
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
9900 Talbert Avenue, Fountain Valley, California 92708
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code: (714) 963-7233
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
On June 17, 1994 (the "Effective Time"), FHP
International Corporation (the "Registrant" or "FHP") completed
the previously announced acquisition of TakeCare, Inc.
("TakeCare"), a Delaware Corporation, by merging (the "Merger")
TakeCare with and into FHP Sub, Inc., a Delaware Corporation and
a wholly-owned subsidiary of the Registrant ("FHP Sub"). The
Merger was consummated pursuant to an Agreement and Plan of
Merger, dated as of March 3, 1994 (incorporated by reference
herein as Exhibit 2.1), as amended by Amendment No. 1 to the
Merger Agreement, dated as of April 29, 1994 (incorporated by
reference herein as Exhibit 2.2) and Amendment No. 2 to the
Merger Agreement, dated as of May 25, 1994 (incorporated by
reference herein as Exhibit 2.3) (as amended, the "Merger
Agreement") each by and among FHP, FHP Sub and TakeCare.
At the Effective Time each outstanding share of common
stock, $0.10 par value per share, of TakeCare (the "TakeCare
Common Stock") (other than TakeCare Common Stock beneficially
owned by FHP, TakeCare or their subsidiaries) was converted into
the right to receive without interest, the following
consideration (the "Merger Consideration"): (i) 0.4800 of a
share of common stock, $0.05 par value per share, of FHP (the
"FHP Common Stock"); plus (ii) 1.6 shares of Series A Cumulative
Convertible Preferred Stock, $0.05 par value per share, of FHP
(the "Series A Preferred Stock"); plus (iii) subject to certain
reductions for certain expenses of TakeCare incurred in
connection with the Merger, either 1.1136 shares of Series B
Adjustable Rate Cumulative Preferred Stock, $0.05 par value per
share, of FHP (the "Series B Preferred Stock") or, at the
election of the holder of such share (the "Cash Election"), an
amount in cash equal to $27.84 per share of TakeCare Common
Stock. Cash will be issued in lieu of fractional shares.
In addition, except as described below, each option
issued and outstanding at the Effective Time (whether or not then
vested) entitling the holder thereof to purchase any shares of
TakeCare Common Stock was converted into the right to receive,
upon the surrender thereof, an option to purchase a number of
shares of FHP Common Stock equal to the number of shares of
TakeCare Common Stock subject to such option immediately prior to
the Effective Time multiplied by 3.2. The terms (including the
vesting schedule) and the aggregate exercise price of the FHP
Common Stock options are the same as the terms and the aggregate
exercise price of the original TakeCare Common Stock options, but
the per share exercise price was adjusted appropriately. Each
holder of a vested stock option to purchase TakeCare Common Stock
was entitled at the Effective Time to surrender such vested
option in exchange for the Merger Consideration (as if the Cash
Election had been made) less the applicable exercise price and
any required withholding taxes.
The value of the Merger Consideration was determined
through arms-length negotiations between representatives of the
Registrant and TakeCare. The cash amount of the Merger
Consideration was funded by FHP by the use of approximately $100
million of internally generated funds and by drawing under that
certain Credit Agreement, dated as of March 24, 1994, among FHP,
the lenders named therein and Chemical Bank, as Administrative
Agent.
In connection with the Merger, FHP amended its Restated
Certificate of Incorporation (see Item 5).
TakeCare, through its direct and indirect subsidiaries,
is a managed health care company that provides comprehensive
health care services to approximately 788,000 members as of
March 31, 1994, through its HMOs operating in California,
Colorado, Illinois and Ohio. FHP has no present plans for
disposition of the material property, plant and equipment or
other assets of TakeCare. It is contemplated that the
substantial majority of TakeCare's property will continue to be
used in generally the same manner and for the same purposes in
the general health care operations of FHP as it was used by
TakeCare. There can be no assurance, however, that in the future
FHP will not deem it advisable to consolidate operations or
dispose of material businesses or assets including those acquired
in the Merger.
Item 5. Other Events
In connection with the Merger, the Registrant's
stockholders voted to amend the Registrant's Restated Certificate
of Incorporation to increase its authorized shares of common
stock to 100,000,000 and to increase its authorized shares of
preferred stock to 40,000,000. Copies of the Registrant's
Restated Certificate of Incorporation and the amendment thereto
are incorporated by reference herein as Exhhibits 3.1 and 3.2,
respectively. The Registrant also created two new series of
preferred stock: the Series A Preferred Stock and the Series B
Preferred Stock. Copies of the Certificates of Designation for
the Series A Preferred Stock and the Series B Preferred Stock are
included herewith as Exhibits 3.3 and 3.4, respectively.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
Item 7(a). Financial Statements of Business Acquired.
It is impracticable to provide the required financial
statements relative to the business acquired at the
present time. The required financial statements will
be provided as soon as possible, but in any event no
later than 60 days from the date of filing of this
Current Report on Form 8-K.
Item 7(b). Pro Forma Financial Information.
It is impracticable to provide the required pro forma
financial information relative to the business acquired
at the present time. The required pro forma financial
information will be provided as soon as possible, but
in any event no later than 60 days from the date of
filing of this Current Report on Form 8-K.
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Item 7(c). Index of Exhibits.
2.1 Agreement and Plan of Merger, dated March 3, 1994
(incorporated by reference to Exhibit 2.1 of
Registrant's Registration Statement on Form S-4 (file
no. 33-53431) filed with the Commission on May 2,
1994).
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated
April 29, 1994 (incorporated by reference to Exhibit
2.2 of Registrant's Registration Statement on Form S-4
(file no. 33-53431) filed with the Commission on May 2,
1994).
2.3 Amendment No. 2 to Agreement and Plan of Merger, dated
May 25, 1994 (incorporated by reference to Exhibit 2.1
of Registrant's Current Report on Form 8-K, filed with
the Commission on May 26, 1994).
3.1 Restated Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 3.1 of
Registrant's Registration Statement on Form S-4 (file
no. 33-53431) filed with the Commission on May 2,
1994).
3.2 Amendment to Restated Certificate of Incorporation of
Registrant (incorporated by reference to Exhibit 3.2 of
Registrant's Registration Statement on Form S-4 (file
no. 33-53431) filed with the Commission on May 2,
1994).
3.3 Certificate of Designation for Series A Cumulative
Convertible Preferred Stock of FHP.
3.4 Certificate of Designation for Series B Adjustable Rate
Cumulative Preferred Stock of FHP.
99.1 Press Release announcing consummation of the Merger,
dated June 17, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
FHP INTERNATIONAL CORPORATION
By Jack D. Massimino
Jack D. Massimino
Executive Vice President
Date: June 30, 1994
CERTIFICATE OF DESIGNATION OF
POWERS, PREFERENCES AND RIGHTS OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
FHP INTERNATIONAL CORPORATION
FHP International Corporation, a Delaware corporation
(the "Company"), pursuant to Section 151 of the General
Corporation Law of the State of Delaware does hereby make this
Certificate of Designation of Powers, Preferences and Rights
(this "Certificate of Designation") and does hereby state and
certify that pursuant to the authority expressly vested in the
Board of Directors of the Company (the "Board") by the Restated
Certificate of Incorporation of the Company (the "Restated
Certificate of Incorporation"), the Board duly adopted the
following resolutions:
RESOLVED, that pursuant to Article IV of the Restated
Certificate of Incorporation (which authorizes 40,000,000 shares
of preferred stock, $0.05 par value per share), the Board hereby
fixes the designation, powers and preferences, and the relative
participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, of a series
of preferred stock designated as "Series A Cumulative Convertible
Preferred Stock."
RESOLVED, that each share of this series of preferred
stock shall rank equally in all respects and shall be subject to
the following provisions:
SECTION 1. Designation, Rank. This series of
preferred stock shall be designated the "Series A Cumulative
Convertible Preferred Stock," with a par value of $0.05 per share
(the "Convertible Preferred Stock"). The Convertible Preferred
Stock will rank, with respect to dividend rights and rights on
liquidation, winding-up and dissolution, (i) senior to all
classes of common stock of the Company, as they exist on the date
hereof or as such stock may be constituted from time to time (the
"Common Stock"), and each other class of capital stock or series
of preferred stock established by the Board to the extent the
terms of such stock do not expressly provide that it ranks senior
to or on a parity with the Convertible Preferred Stock as to
dividend rights and rights on liquidation, winding-up and
dissolution (collectively, together with the Common Stock, the
"Junior Securities"); (ii) on a parity with the Series B
Adjustable Rate Cumulative Preferred Stock and each other class
of capital stock or series of preferred stock issued by the
Company established by the Board to the extent the terms of such
stock expressly provide that it will rank on a parity with the
Convertible Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively, the
"Parity Securities"); and (iii) junior to each other class of
capital stock or series of preferred stock established by the
Board to the extent the terms of such stock expressly provide
that it will rank senior to the Convertible Preferred Stock as to
dividend rights and rights on liquidation, winding-up and
dissolution (collectively, the "Senior Securities").
SECTION 2. Authorized Number. The authorized number
of shares constituting the Convertible Preferred Stock shall be
22,000,000 shares.
SECTION 3. Dividends. Holders of Convertible
Preferred Stock will be entitled to receive, when, as and if
declared by the Board out of funds of the Company legally
available therefor, cash dividends at an annual rate of 5.0% per
share of Convertible Preferred Stock, payable quarterly in
arrears on March 15, June 15, September 15 and December 15, of
each year, commencing September 15, 1994. Each dividend will be
payable to holders of record as they appear on the books of the
Company at the close of business on a record date, not more than
60 nor less than 15 days before the payment date, fixed by the
Board. Dividends will be cumulative from the date of original
issuance of the Convertible Preferred Stock. Dividends for each
full dividend period will be computed by dividing the annual
dividend rate by four. Dividends payable for any period less
than a full dividend period will be computed on the basis of a
360-day year consisting of twelve 30-day months. The Convertible
Preferred Stock will not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative
dividends. No interest, or sum of money in lieu of interest,
will be payable in respect of any accrued and unpaid dividends.
No full dividends may be declared or paid or funds set
apart for the payment of dividends on any Parity Securities
(except dividends on Parity Securities paid in shares of Junior
Securities) for any period unless full cumulative dividends to be
paid hereunder prior to the date thereof shall have been paid or
set apart for such payment on the Convertible Preferred Stock.
If full dividends are not so paid, the Convertible Preferred
Stock shall share dividends pro rata with the Parity Securities
according to the amount of dividends due and payable with respect
to each. No dividends may be paid or set apart for such payment
on Junior Securities (except dividends on Junior Securities paid
in additional shares of Junior Securities), and no Convertible
Preferred Stock, Parity Securities or Junior Securities may be
repurchased, redeemed or otherwise retired nor may funds be set
apart for payment with respect thereto, nor shall the Company
permit any corporation or entity directly or indirectly
controlled by the Company to purchase any Convertible Preferred
Stock, Parity Securities or Junior Securities, if full cumulative
dividends to be paid hereunder prior to the date thereof have not
been paid on the Convertible Preferred Stock. Notwithstanding
the foregoing, the Company may (i) make redemptions, purchases or
other acquisitions of Convertible Preferred Stock, Parity
Securities or Junior Securities payable in Junior Securities or
repurchases of Convertible Preferred Stock, Parity Securities or
Junior Securities in the ordinary course of business pursuant to
the terms of any current or future employee stock incentive plan
or similar plan adopted by the Board and (ii) make redemptions of
Rights (as defined in Section 6 below) distributed pursuant to
the Rights Agreement (as defined in Section 6 below).
SECTION 4. Liquidation Rights. The Stated Value of
each share of Convertible Preferred Stock shall be $25.00. In
the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, after satisfaction of
the claims of creditors and before any payment or distribution of
assets is made on any Junior Securities, including, without
limitation, the Common Stock, (i) the holders of Convertible
Preferred Stock shall receive a liquidation preference equal to
the Stated Value of their shares, and shall be entitled to
receive an amount equal to all accrued and unpaid dividends
through the date of distribution (whether or not declared), and
(ii) the holders of any Parity Securities shall be entitled to
receive an amount equal to the full respective liquidation
preferences (including any premium) to which they are entitled
and shall receive an amount equal to all accrued and unpaid
dividends with respect to their respective shares through and
including the date of distribution (whether or not declared).
If, upon such a voluntary or involuntary liquidation, dissolution
or winding-up of the Company, the assets of the Company are
insufficient to pay in full the amounts described above as
payable with respect to the Convertible Preferred Stock and any
Parity Securities, the holders of the Convertible Preferred Stock
and such Parity Securities will share ratably in any distribution
of assets of the Company, first in proportion to their respective
liquidation preferences until such preferences are paid in full,
and then in proportion to their respective amounts of accrued but
unpaid dividends. After payment of any such liquidation
preference and accrued but unpaid dividends, the Convertible
Preferred Stock will not be entitled to any further participation
in any distribution of assets by the Company. Neither the sale
or transfer of all or any part of the assets of the Company, nor
the merger or consolidation of the Company into or with any other
corporation or a merger of any other corporation with or into the
Company, will be deemed to be a liquidation, dissolution or
winding-up of the Company.
SECTION 5. Voting Rights.
(a) Except as provided below or as may be required by
Delaware law or provided by the resolution creating any other
series of preferred stock, the holders of Convertible Preferred
Stock will not be entitled to vote. So long as any shares of
Convertible Preferred Stock are outstanding, the vote or consent
of the holders of 66-2/3% of the outstanding shares of
Convertible Preferred Stock, voting together as a single class,
shall be necessary to (i) increase or decrease the par value of
the shares of Convertible Preferred Stock or (ii) alter or change
the powers, preferences, or special rights of the shares of
Convertible Preferred Stock so as to affect them adversely or
(iii) authorize or issue any additional class or series of Parity
Securities (other than the Series B Adjustable Rate Cumulative
Preferred Stock) or Senior Securities, or any security
convertible into Parity Securities or Senior Securities.
(b) (i) In the event that any accrued dividends
(whether or not declared) on the Convertible Preferred Stock
shall not have been paid in an aggregate amount equal to or
greater than six quarterly dividends, the maximum authorized
number of directors of the Company will be automatically
increased by two, and holders of Convertible Preferred Stock
shall be entitled to vote their shares of Convertible
Preferred Stock, together with the holders of any Parity
Securities upon which like voting rights have been conferred
and are exercisable (the "Voting Parity Securities"), in
accordance with the procedures set forth below, to elect, as
a class, an additional two directors. So long as any shares
of Convertible Preferred Stock shall be outstanding, the
holders of Convertible Preferred Stock shall retain the
right to vote and elect, with the holders of such Voting
Parity Securities, as a class, two directors until all
accrued but unpaid dividends on the Convertible Preferred
Stock are paid in full or declared and set aside for
payment. The period during which holders of Convertible
Preferred Stock retain such right is referred to as a
"Default Period".
(ii) So long as any shares of Convertible
Preferred Stock shall be outstanding, during any Default
Period, the voting right described in subsection (i) above
may be exercised initially at a special meeting called
pursuant to subsection (iii) below or at any annual meeting
of stockholders. The absence of a quorum of holders of
Common Stock (or any class thereof) shall not affect the
exercise of such voting rights by the holders of Convertible
Preferred Stock and Voting Parity Securities. Holders of
Convertible Preferred Stock and Voting Parity Securities
shall be entitled, as among the class of holders of
Convertible Preferred Stock and Voting Parity Securities, to
one vote for each $25.00 of liquidation preference
represented by the shares so held.
(iii) Unless the holders of Convertible
Preferred Stock and Voting Parity Securities, if any are
then outstanding, have, during an existing Default Period,
previously exercised their right to elect directors, the
Board may, and upon the request of the holders of record of
not less than 10% of the aggregate liquidation preference of
Convertible Preferred Stock and Voting Parity Securities,
the Board shall, order the calling of a special meeting of
holders of Convertible Preferred Stock and Voting Parity
Securities, if any are then outstanding, which meeting shall
thereupon be called by the President, a Vice President or
the Secretary of the Company. Notice of such meeting and of
any annual meeting at which holders of Convertible Preferred
Stock and Voting Parity Securities are entitled to vote
pursuant to this subsection (iii) shall be given to each
holder of record of Convertible Preferred Stock by mailing a
copy of such notice to such holder at such holder's last
address as it appears on the books of the Company. Such
meeting shall be called for a date not later than 90 days
after such order or request, or, in default of the calling
of such meeting within 90 days after such order or request,
such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less
than 10% of the aggregate liquidation preference of the
Convertible Preferred Stock and Voting Parity Securities.
Notwithstanding the provisions of this subsection (iii), the
Company shall not be required to call such a special meeting
if such request is received less than 120 days before the
date fixed for the next ensuing annual meeting of
stockholders of the Company, at which meeting such newly
created directorships shall be filled by vote of the holders
of Convertible Preferred Stock and Voting Parity Securities.
(iv) During any Default Period, the holders of
Common Stock, and other classes of stock of the Company, if
applicable, shall continue to be entitled to elect all of
the directors unless and until the holders of Convertible
Preferred Stock and Voting Parity Securities shall have
exercised their right to elect two directors voting as a
class. After the exercise of this right (x) the directors
so elected by the holders of Convertible Preferred Stock and
Voting Parity Securities shall continue in office until the
earlier of (A) such time as their successors shall have been
elected by such holders and (B) the expiration of the
Default Period, and (y) any vacancy in the Board with
respect to a directorship to be elected pursuant to this
Section by the holders of Convertible Preferred Stock and
Voting Parity Securities may be filled by vote of the
remaining director previously elected by such holders.
References in this subsection (b) to directors elected by
the holders of a particular class of stock shall include
directors elected by such directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a Default
Period, (x) the right of the holders of Convertible
Preferred Stock to elect directors pursuant to this Section
shall cease, (y) the term of any directors elected by the
holders of Convertible Preferred Stock and Voting Parity
Securities pursuant to this Section shall terminate, and
(z) the number of directors shall be such number as may be
provided for in the Restated Certificate of Incorporation or
bylaws irrespective of any increase made pursuant to
subsection (i) of this subsection (b) (such number being
subject, however, to subsequent change in any manner
provided by law or in the Restated Certificate of
Incorporation or bylaws).
SECTION 6. Conversion.
(a) Right to Convert. Each share of Convertible
Preferred Stock will be convertible (the rights to convert
described in this subsection (a) are referred to as the
"Conversion Rights") at any time after December 19, 1994, at the
option of the holder thereof, into such number of fully paid and
non-assessable shares of Common Stock (together with any Rights
(as defined in subsection (b)(iii) below) associated therewith)
as is equal to (A) the sum of the Stated Value of the Convertible
Preferred Stock plus accrued but unpaid dividends in arrears
thereon to which the holder converting such shares is entitled,
divided by (B) the Conversion Price then in effect. The initial
"Conversion Price" for the Convertible Preferred Stock shall be
$31.00 and shall be subject to adjustment as described below.
The holders of Convertible Preferred Stock at the close of
business on a dividend payment record date shall be entitled to
receive the dividend payable on such shares on the corresponding
dividend payment date notwithstanding the conversion of such
Convertible Preferred Stock or the Company's default on payment
of the dividend due on such dividend payment date. However,
shares of Convertible Preferred Stock surrendered for conversion
during the period from the close of business on any record date
for the payment of dividends on such shares to the opening of
business on the corresponding dividend payment date (except
shares called for redemption to occur during the period from the
record date to the close of business on the payment date pursuant
to Section 7 below) must be accompanied by payment of an amount
equal to the dividend payable on such shares on such dividend
payment date. A holder of Convertible Preferred Stock on a
dividend payment record date who (or whose transferee) tenders
shares of Convertible Preferred Stock on a dividend payment date
will be entitled to receive the dividend payable on such shares
by the Company on such date, and such converting holder need not
include payment in the amount of such dividend upon surrender of
shares of Convertible Preferred Stock for conversion. Except as
provided above, no payment or adjustment will be made on account
of accrued or unpaid dividends upon the conversion of shares of
Convertible Preferred Stock. Shares of Convertible Preferred
Stock called for redemption will not be convertible after the
close of business on the day preceding the date fixed for
redemption, unless the Company defaults in payment of the
redemption price.
(b) Anti-dilution Provisions. The Conversion Price is
subject to adjustment after the issuance of the Convertible
Preferred Stock from time to time as follows:
(i) In case the Company shall (1) pay a dividend
or make a distribution on Common Stock in shares of Common
Stock, (2) subdivide its outstanding shares of Common Stock
into a greater number of shares or (3) combine its
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to
such action shall be adjusted so that the holder of any
Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares
of Common Stock which such holder would have been entitled
to receive immediately following such action had the
holder's Convertible Preferred Stock been converted
immediately prior thereto. An adjustment made pursuant to
this subsection (i) shall become effective immediately
(except as provided in subsection (vi) below) after the
record date in the case of a dividend or distribution and
shall become effective immediately after the effective date
in the case of a subdivision or combination.
(ii) In case the Company shall issue rights,
options or warrants to all holders of its outstanding shares
of Common Stock entitling them, for a period expiring within
45 days after the record date mentioned below, to subscribe
for or purchase shares of Common Stock at a price per share
less than the Current Market Price per share (as defined in
subsection (v) below) of the Common Stock on the record date
mentioned below, then the Conversion Price in effect
immediately prior thereto shall be adjusted so that it shall
equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of issuance of
such rights, options or warrants by a fraction of which
(1) the numerator shall be the sum of (A)
the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants
immediately prior to such issuance plus (B) the number
of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would
purchase at such Current Market Price (determined by
multiplying such total number of shares offered for
subscription or purchase by the sum of the exercise
price of such rights, options or warrants plus the
value of any consideration per share paid to the
Company for such rights, options or warrants and
dividing the product so obtained by such Current Market
Price), and
(2) the denominator shall be the sum of (A)
the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants
immediately prior to such issuance plus (B) the number
of additional shares of Common Stock which are so
offered for subscription or purchase.
Such adjustment shall be made successively
whenever any rights, options or warrants are issued, and
shall become effective immediately (except as provided in
subsection (vi) below) after the record date for the
determination of stockholders entitled to receive such
rights, options or warrants; provided, however, in the event
that all the shares of Common Stock offered for subscription
or purchase are not delivered upon the exercise of such
rights, options or warrants, upon the expiration of such
rights, options or warrants the Conversion Price shall be
readjusted to the Conversion Price which would have been in
effect had the numerator and the denominator of the
foregoing fraction and the resulting adjustment been made
based upon the number of shares of Common Stock actually
delivered upon the exercise of such rights, options or
warrants rather than upon the number of shares of Common
Stock offered for subscription or purchase. In determining
the value of any consideration received by the Company for
such rights, options or warrants, the determination of the
Board in good faith shall be conclusive and shall be
described in a Board resolution.
(iii) Notwithstanding subsection (ii) above,
any adjustments to the Conversion Price to account for the
issuance of "Rights," as defined in and governed by that
certain Rights Agreement, dated as of June 8, 1990, between
the Company and American Stock Transfer and Trust Company,
as heretofore and hereafter amended (the "Rights
Agreement"), and any similar rights, options or warrants
adopted or issued subsequent to the date hereof shall be
made when such Rights or similar rights, options or warrants
are exercised or exchanged by the Company for Common Stock
(Common Stock issued pursuant to the exercise of, or
exchange by the Company for, such Rights or similar rights,
options and warrants are referred to as "Rights Stock")
pursuant to the Rights Agreement or a similar agreement at a
price per share less than the Current Market Price per share
of Common Stock on the date of such exercise or exchange.
The Conversion Price in effect immediately prior to such
exercise or exchange shall be adjusted so that it shall
equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of such
exercise or exchange by a fraction of which
(1) the numerator shall be the sum of (A)
the number of shares of Common Stock outstanding on the
date of issuance of such Rights Stock immediately prior
to such issuance plus (B) the number of shares of
Common Stock which the aggregate consideration received
for the total number of shares of Rights Stock so
issued would purchase at such Current Market Price
(determined by multiplying such total number of shares
of Rights Stock by the consideration received per share
of such Rights Stock and dividing the product so
obtained by such Current Market Price), and
(2) the denominator shall be the sum of (A)
the number of shares of Common Stock outstanding on the
date of issuance of such Rights Stock immediately prior
to such issuance plus (B) the number of additional
shares of Rights Stock which are so issued.
Such adjustment shall be made successively
whenever any Rights Stock is issued, and shall become
effective immediately (except as provided in subsection (vi)
below) after the issuance of Rights Stock. If after the
"Distribution Date" (as defined in the Rights Agreement or a
similar date defined in a similar agreement), holders
converting shares of Convertible Preferred Stock are, for
any reason, not entitled to receive the Rights or similar
rights, options or warrants which would otherwise be
attributable (but for the date of conversion) to the shares
of Common Stock received upon such conversion, then a
reducing adjustment shall be made in the Conversion Price to
reflect the fair market value of the Rights or similar
rights, options or warrants. If such an adjustment is made
and the Rights or similar rights, options or warrants are
later exchanged, redeemed, invalidated or terminated, then a
corresponding reversing adjustment shall be made to the
Conversion Price, on an equitable basis, to take account of
such event. However, the Company may elect to provide that
such shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock, whether or not issued after the
Distribution Date for such Rights or such similar date for
such similar rights, options or warrants, will be
accompanied by the Rights or such similar rights, options or
warrants which would otherwise be attributable (but for the
date of conversion) to such shares of Common Stock, in which
event the preceding two sentences shall not apply.
(iv) In case the Company shall distribute to
substantially all holders of Common Stock evidences of
indebtedness, equity securities (including equity interests
in the Company's subsidiaries) other than Common Stock or
other assets (other than cash dividends paid out of earned
surplus of the Company or, if there shall be no earned
surplus, out of net profits for the fiscal year in which the
dividend is made and/or the preceding fiscal year), or shall
distribute to substantially all holders of Common Stock
rights, options or warrants to subscribe to securities
(other than any Rights, rights, options or warrants referred
to in subsection (ii) or subsection (iii) above), then in
each such case the Conversion Price shall be adjusted so
that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of
such distribution by a fraction of which the numerator shall
be the Current Market Price per share of the Common Stock on
the record date mentioned below less the then fair market
value of the portion of the assets, evidences of
indebtedness and equity securities so distributed, or of
such subscription rights, warrants or options, applicable to
one share of Common Stock, and of which the denominator
shall be such Current Market Price. For the purposes of
this subsection (iv), in the event of a distribution of
shares of capital stock or other securities of any
subsidiary of the Company as a dividend on shares of Common
Stock, the "then fair market value" of the shares or other
securities so distributed shall be the value of such shares
or other securities on the record date mentioned below as
determined by the Board, whose good faith determination
shall be conclusive evidence of such value, and shall be
described in a Board resolution. Such adjustment shall
become effective immediately (except as provided in
subsection (vi) below) after the record date for the
determination of stockholders entitled to receive such
distribution.
(v) For the purpose of any computation under
subsection (ii), subsection (iii) or subsection (iv) above,
the "Current Market Price" per share of stock on any date
shall be deemed to be the average of the last sale prices of
a share of such stock for the fifteen consecutive trading
days commencing 20 trading days before the earliest of the
date in question and the date before the "ex date" with
respect to the issuance or distribution requiring such
computation. For purposes of this subsection (v), the term
"ex date", when used with respect to any issuance or
distribution, means the first date on which the stock trades
regular way on the principal national securities exchange on
which the stock is listed or admitted to trading (or if not
so listed or admitted, on NASDAQ, or a similar organization
if NASDAQ is no longer reporting trading information)
without the right to receive such issuance or distribution.
(vi) In any case in which this Section shall
require that an adjustment be made immediately following a
record date or immediately following the exercise of, or
exchange of Rights Stock for, a Right or similar right,
option or warrant, the Company may elect to defer the
effectiveness of such adjustment (but in no event until a
date later than the later of the "ex date" as defined above
and the effective date of the event giving rise to such
adjustment), in which case the Company shall, with respect
to any Convertible Preferred Stock converted after the date
of such exercise or exchange or such record date, as the
case may be, and before such adjustment shall have become
effective (1) defer making any cash payment or issuing to
the holder of such Convertible Preferred Stock the number of
shares of Common Stock and other capital stock of the
Company issuable upon such conversion in excess of the
number of shares of Common Stock and other capital stock of
the Company issuable thereupon only on the basis of the
Conversion Price prior to adjustment, and (2) not later than
five business days after such adjustment shall have become
effective, pay to such holder the appropriate cash payment
and issue to such holder the additional shares of Common
Stock and other capital stock of the Company issuable on
such conversion.
(vii) No adjustment in the Conversion Price
shall be required if the holders of Convertible Preferred
Stock are to participate in the transaction on a basis and
with notice that the Board determines in good faith to be
fair and appropriate in light of the basis and notice on
which holders of Common Stock participate in the
transaction. In addition, no adjustment in the Conversion
Price shall be required unless such adjustment (plus any
adjustments not previously made by reason of this subsection
(vii)) would require an increase or decrease of at least 1%
in the Conversion Price; provided, that any adjustments
which by reason of this subsection (vii) are not required to
be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this
Section shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(viii) Whenever the Conversion Price is
adjusted as provided above:
(1) the Company shall compute the adjusted
Conversion Price and shall promptly file with the stock
transfer or conversion agent, as appropriate, for the
Convertible Preferred Stock, a certificate signed by a
principal financial officer of the Company setting
forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment
is based and the computation thereof; and
(2) a notice stating that the Conversion
Price has been adjusted and setting forth the adjusted
Conversion Price shall, as soon as practicable, be sent
by first-class mail to the holders of record of the
Convertible Preferred Stock.
In case:
(A) the Company shall take any action which
would require an adjustment to the Conversion Price
pursuant to subsection (iv) above;
(B) the Company shall authorize the granting
to the holders of its Common Stock of rights, options
or warrants entitling them to subscribe for or purchase
any shares of capital stock of any class or of any
other rights;
(C) of any reorganization or
reclassification of the Common Stock (other than a
subdivision or combination of its outstanding Common
Stock), or of any consolidation or merger to which the
Company is a party and for which approval of any
stockholders of the Company is required, or of the
sale, lease or transfer of all or substantially all the
assets of the Company; or
(D) of the voluntary or involuntary
liquidation, dissolution or winding-up of the Company;
then the Company shall cause to be mailed to the stock
transfer or conversion agent, as appropriate, for the
Convertible Preferred Stock and to the holders of record of
Convertible Preferred Stock, at least 20 days (or 10 days in
any case described in subsections (A) or (B) above) prior to
the applicable record date or effective date specified
below, a notice stating (x) the date as of which the holders
of record of Common Stock to be entitled in such dividend,
distribution, rights, options or warrants are to be
determined, or (y) the date on which such reorganization,
reclassification, consolidation, merger, sale, lease,
transfer, liquidation, dissolution or winding-up is expected
to become effective, and the date as of which it is expected
that holders of record of Common Stock shall be entitled to
exchange their shares for securities or other property, if
any, deliverable upon such reorganization, reclassification,
consolidation, merger, sale, lease, transfer, liquidation,
dissolution or winding-up. Neither the failure to give the
notice required by this subsection (viii), nor any defect
therein, to any particular holder shall affect the
sufficiency of the notice or the legality or validity of any
such dividend, distribution, right, option, warrant,
reorganization, reclassification, consolidation, merger,
sale, lease, transfer, liquidation, dissolution or winding-
up, or the vote authorizing any such action with respect to
the other holders.
(ix) To the extent permitted by law, the Company
from time to time may reduce the Conversion Price by any
amount for any period of at least 20 days (or such other
period as may then be required by applicable law) if the
Board has made a determination in good faith that such
reduction would be in the best interests of the Company,
which determination shall be conclusive. No reduction in
the Conversion Price pursuant to this subsection (ix) shall
become effective unless the Company shall have mailed a
notice, at least 15 days prior to the date on which such
reduction is scheduled to become effective, to each holder
of Convertible Preferred Stock. Such notice shall be given
by first-class mail, postage prepaid, at such holder's
address as it appears on the books of the Company. Such
notice shall state the amount per share by which the
Conversion Price will be reduced and the period for which
such reduction will be in effect.
(x) At its option, the Company may make such
reduction in the Conversion Price, in addition to those
otherwise required by this Section 6, as the Board deems
advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated
as such for income tax purposes; provided that any such
reduction shall not be effective until written evidence of
the action of the Board authorizing such reduction shall be
filed with the Secretary of the Company and notice thereof
shall have been given by first-class mail, postage prepaid,
to each holder of Convertible Preferred Stock at such
holder's address as it appears on the books of the Company.
(c) Consolidation, Merger or Sale of Assets. If any
transaction shall occur, including without limitation (i) any
recapitalization or reclassification of shares of Common Stock
(other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a
subdivision or combination of the Common Stock), (ii) any
consolidation or merger of the Company with or into another
person or any merger of another person into the Company (other
than a merger in which the Company is the surviving corporation
and that does not result in a reclassification, conversion,
exchange or cancellation of Common Stock), (iii) any sale, lease
or transfer of all or substantially all of the assets of the
Company, or (iv) any compulsory share exchange, pursuant to any
of which holders of Common Stock shall be entitled to receive
other securities, cash or other property, then appropriate
provision shall be made so that the holder of each share of
Convertible Preferred Stock then outstanding shall have the right
thereafter to convert such share only into the kind and amount of
the securities, cash or other property that would have been
receivable upon such recapitalization, reclassification,
consolidation, merger, sale, lease, transfer, or share exchange
by a holder of the number of shares of Common Stock issuable upon
conversion of such share of Convertible Preferred Stock
immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, lease, transfer or share exchange,
and the Company shall not enter into any such merger,
consolidation, sale, lease, transfer or share exchange unless the
company formed by such consolidation or resulting from such
merger or that acquires such assets or that acquires the
Company's shares, as the case may be, shall make provisions in
its certificate or articles of incorporation or other constituent
document to establish such right. Such certificate or articles
of incorporation or other constituent document shall provide for
adjustments that, for events subsequent to the effective date of
such certificate or articles of incorporation or other
constituent documents, shall be as nearly equivalent as may be
practicable to the relevant adjustments provided for in the
preceding subsections (a) and (b) and in this subsection (c).
(d) Accrued Dividends and Fractional Shares.
Dividends shall cease to accrue on shares of the Convertible
Preferred Stock surrendered for conversion into Common Stock
pursuant to this Section or Section 8 below. No fractional
shares of Common Stock shall be issued upon conversion of the
Convertible Preferred Stock, and any portion of Convertible
Preferred Stock surrendered for conversion which would otherwise
result in a fractional share of Common Stock shall be redeemed
for cash in an amount equal to the product of such fraction
multiplied by the closing price of the Common Stock on the last
business day prior to conversion.
(e) Mechanics of Conversion. Before any holder of
Convertible Preferred Stock shall be entitled to convert such
stock into shares of Common Stock and to receive certificates
therefor, such holder shall surrender the certificate or
certificates for the Convertible Preferred Stock to be converted,
duly endorsed, at the office of the Company or of any transfer
agent for the Convertible Preferred Stock, and shall give written
notice to the Company at such office that such holder elects to
convert the same. The Company shall, within 10 days after such
delivery, issue and deliver at such office to such holder of the
Convertible Preferred Stock (or to any other person specified in
the notice delivered by such holder) a certificate or
certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and a check payable to
the holder for any cash amounts payable as the result of a
conversion into fractional shares of Common Stock. Such
conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares
of Convertible Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such
date. In case any certificate for shares of the Convertible
Preferred Stock shall be surrendered for conversion of only a
part of the shares represented thereby, the Company shall deliver
within 10 days at such office to or upon the written order of the
holder thereof, a certificate or certificates for the number of
shares of Convertible Preferred Stock represented by such
surrendered certificate which are not being converted.
Notwithstanding the foregoing, the Company shall not be obligated
to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing
the Convertible Preferred Stock are either delivered to the
Company or its transfer agent or the Company or its transfer
agent shall have received evidence satisfactory to it evidencing
that such certificates have been lost, stolen or destroyed and
the holder of such Convertible Preferred Stock executes an
agreement satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection with such
certificates. The issuance of certificates of shares of Common
Stock issuable upon conversion of shares of Convertible Preferred
Stock shall be made without charge to the converting holder for
any tax imposed in respect of the issuance thereof; provided that
the Company shall not be required to pay any tax which may be
payable with respect to any transfer involved in the issue and
delivery of any certificate in a name other than that of the
holder of the shares of Convertible Preferred Stock being
converted.
Section 7. Optional Redemption. On or after June 17,
1998, the Company may, at its option, redeem all or from time to
time any part of the shares of Convertible Preferred Stock, out
of funds legally available therefor, upon giving a notice of
redemption as set forth below, at the following redemption prices
per share (expressed as percentages of the Stated Value thereof),
plus an amount equal to accrued and unpaid dividends, if any
(whether or not declared), up to but excluding the date fixed for
redemption, if redeemed during the twelve-month period commencing
on June 17 of the years indicated below:
Redemption
Year Price
____ __________
1998 103.0%
1999 102.5
2000 102.0
2001 101.5
2002 101.0
2003 100.5
2004 100.0
If fewer than all of the outstanding shares of the
Convertible Preferred Stock are to be redeemed, the number of
shares to be redeemed shall be determined by the Board in good
faith and the shares to be redeemed will be determined pro rata
as nearly as practicable, or by such other method as the Board
may determine to be fair and appropriate. Convertible Preferred
Stock may not be redeemed unless full cumulative dividends have
been paid on the Convertible Preferred Stock for all past
dividend periods.
Notice of redemption of Convertible Preferred Stock
will be given by (i) first-class mail, not less than 30 nor more
than 60 days prior to the date fixed for redemption thereof, to
each record holder of shares of Convertible Preferred Stock to be
redeemed at the address of such holder in the books of the
Company and (ii) publication in The Wall Street Journal. On the
date such notices are mailed, the Company shall issue a press
release announcing the redemption. The mailed and published
notice shall state, as appropriate: (1) the redemption date and
record date for purposes of such redemption; (2) the number of
shares of Convertible Preferred Stock to be redeemed and, if
fewer than all shares of Convertible Preferred Stock held by any
holder are to be redeemed, the number of shares to be redeemed
from such holder; (3) the place or places at which certificates
for such shares are to be surrendered; (4) the then current
redemption price; and (5) that dividends on the Convertible
Preferred Stock to be redeemed shall cease to accrue on such
Redemption Date, except as otherwise provided herein. If such
notice of redemption has been given, from and after the specified
redemption date (unless the Company defaults in making payment of
the redemption price), dividends on the Convertible Preferred
Stock so called for redemption will cease to accrue, such shares
will no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Company (except the right
to receive the redemption price and any dividends due on a
dividend payment date after the redemption date relating to a
dividend record date prior to such redemption date) will cease.
SECTION 8. Change in Control. If there occurs a
Change in Control (as defined below) with respect to the Company,
then each share of Convertible Preferred Stock may be converted
(the rights to convert described in this Section referred to as
the "Special Conversion Rights"), at the option of the holder
thereof at any time from the date of such Change in Control until
the expiration of 60 days after the date of the Conversion Notice
(as defined below) by the Company to all holders of the
Convertible Preferred Stock, into, at its option, either (A) such
number of fully paid and non-assessable shares of Common Stock as
is equal to the Stated Value of the Convertible Preferred Stock
divided by the Special Conversion Price or (B) an amount in cash
equal to the Stated Value of the Convertible Preferred Stock plus
an amount equal to any accrued but unpaid dividends thereon. The
"Special Conversion Price" shall be the closing price of the
Common Stock on the last business day prior to the date the
Company gives the Conversion Notice (as defined below) to the
holders of Convertible Preferred Stock.
Within five days after the occurrence of a Change in
Control, the Company shall give notice of the occurrence of the
Change in Control and of the Special Conversion Rights set forth
herein in accordance with the procedures set forth below to each
holder of Convertible Preferred Stock (the "Conversion Notice").
Each Conversion Notice shall state:
(1) that a Change in Control has occurred (and
shall specify the date of occurrence), and that the
holder's Special Conversion Rights may be exercised in
accordance with this Section;
(2) the expiration date of the Special Conversion
Rights;
(3) that a holder of Convertible Preferred Stock,
in order to exercise Special Conversion Rights, must
deliver on or before the fifth day prior to the
expiration date of the Special Conversion Rights
written notice to the Company of the holder's exercise
of those rights, together with the certificate
evidencing such holder's shares with respect to which
the rights are being exercised, duly endorsed for
transfer;
(4) the Special Conversion Price and the
Conversion Price which would otherwise be applicable;
(5) a description of the procedure which a holder
must follow to exercise its Special Conversion Rights;
and
(6) that holders of Convertible Preferred Stock
electing to have such shares converted will be required
to surrender the certificates evidencing such shares
for delivery of shares of Common Stock.
The Conversion Notice shall be given by first-class
mail, postage paid, to the holders of record of Convertible
Preferred Stock at their respective addresses as they appear on
the books of the Company.
No failure of the Company to give the Conversion Notice
shall limit any holder's right to exercise its Special Conversion
Rights.
Exercise of the Special Conversion Rights by a holder
of Convertible Preferred Stock will be irrevocable. The Company
shall not enter into any consolidation, merger or sale of assets,
unless in connection therewith the holders of Convertible
Preferred Stock exercising Special Conversion Rights will be
entitled to receive the same consideration as received for the
number of shares of Common Stock into which their shares of
Convertible Preferred Stock would have been converted pursuant to
the Special Conversion Rights. The Special Conversion Rights are
in addition to the regular Conversion Rights that apply to the
Convertible Preferred Stock.
The Company may, at its option, elect to pay holders of
Convertible Preferred Stock exercising Special Conversion Rights
an amount in cash equal to the Stated Value of the Convertible
Preferred Stock plus an amount equal to any accrued but unpaid
dividends thereon.
"Change in Control" means any of the following: (i)
the sale, lease, conveyance or other disposition of all or
substantially all of the Company's assets as an entirety or
substantially as an entirety to any person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) in one or a
series of transactions, provided that a transaction where the
holders of Common Stock immediately prior to such transaction
own, directly or indirectly, 50% or more of the Common Stock of
such person or group immediately after such transactions shall
not be a Change in Control; (ii) the acquisition by the Company
and/or any of its subsidiaries of 50% or more of the aggregate
voting power of the Common Stock in one transaction or a series
of related transactions; (iii) the liquidation or dissolution of
the Company, provided that a liquidation or dissolution of the
Company which is part of a transaction or series of related
transactions that does not constitute a Change in Control under
the "provided" clause of clause (i) above shall not constitute a
Change in Control under this clause (iii); or (iv) any
transaction or series of transactions (as a result of a tender
offer, merger, consolidation or otherwise) that results in, or
that is in connection with, (a) any person, including a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) that
includes such person, acquiring "beneficial ownership" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% or more of the aggregate voting power of the
Common Stock of the Company or any person that possesses
"beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act), directly, of 50% or more of the aggregate voting
power of the Common Stock, or (b) less than 50% (measured by the
aggregate voting power of all classes) of the Company's Common
Stock being registered under Section 12(b) or 12(g) of the
Exchange Act.
SECTION 9. Status of Reacquired Shares. If shares of
Convertible Preferred Stock are converted pursuant to Section 6
hereof or redeemed pursuant to Section 7 hereof, the shares so
converted or redeemed shall, upon compliance with any statutory
requirements, assume the status of authorized but unissued shares
of preferred stock of the Company, but may not be reissued as
Convertible Preferred Stock.
SECTION 10. Reserved Shares. So long as any shares of
Convertible Preferred Stock remain outstanding, the Company
agrees to keep reserved for issuance in connection with the
conversion of the Convertible Preferred Stock at all times a
number of authorized but unissued shares of Common Stock at least
equal to 150% of the number of shares of Common Stock issuable
upon conversion at the Conversion Price of all of the Convertible
Preferred Stock outstanding at such time. The Company shall take
all action necessary so that Common Stock so issued will be
validly issued, fully paid and non-assessable. The Company shall
use its best efforts to list the Common Stock required to be
delivered upon conversion of the shares of Convertible Preferred
Stock, prior to such conversion, upon each national securities
exchange, if any, upon which the outstanding Common Stock is
listed at the time of such delivery.
SECTION 11. Preemptive Rights. The Convertible
Preferred Stock is not entitled to any preemptive or subscription
rights in respect of any securities of the Company.
SECTION 12. Notices. Except as otherwise provided
herein, all notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered by and when sent by telex or telecopier
(with receipt confirmed), provided a copy is also sent by express
(overnight, if possible) courier, addressed (i) in the case of a
holder of Convertible Preferred Stock, to such holder's address
as it appears on the books of the Company, and (ii) in the case
of the Company, to the Company's principal executive offices to
the attention of the Company's President.
SECTION 13. Severability of Provisions. Whenever
possible, each provision hereof shall be interpreted in a manner
as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or
otherwise adversely affecting the remaining provisions hereof.
If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were
increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective
and valid under applicable law.
IN WITNESS WHEREOF, FHP International Corporation has
caused this Certificate of Designation to be duly executed by its
duly authorized officer and attested by its Secretary this 17th
day of June, 1994.
FHP INTERNATIONAL CORPORATION
By: Westcott W. Price III
Name: Westcott W. Price III
Title: President
ATTEST:
Michael J. Weinstock
Name: Michael J. Weinstock
Title: Secretary
CERTIFICATE OF DESIGNATION OF
POWERS, PREFERENCES AND RIGHTS OF
SERIES B ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK OF
FHP INTERNATIONAL CORPORATION
FHP International Corporation, a Delaware corporation
(the "Company"), pursuant to Section 151 of the General
Corporation Law of the State of Delaware does hereby make this
Certificate of Designation of Powers, Preferences and Rights
(this "Certificate of Designation") and does hereby state and
certify that pursuant to the authority expressly vested in the
Board of Directors of the Company (the "Board") by the Restated
Certificate of Incorporation of the Company (the "Restated
Certificate of Incorporation"), the Board duly adopted the
following resolutions:
WHEREAS, the Board has previously authorized the
issuance of a series of preferred stock consisting of 22,000,000
shares designated as "Series A Cumulative Convertible Preferred
Stock"; and
WHEREAS, the Board now desires to fix the powers,
preferences and rights of a second series of preferred stock;
RESOLVED, that pursuant to Article IV of the Restated
Certificate of Incorporation (which authorizes 40,000,000 shares
of preferred stock, $0.05 par value per share), the Board hereby
fixes the designation, powers and preferences, and the relative
participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, of a series
of preferred stock designated as "Series B Adjustable Rate
Cumulative Preferred Stock."
RESOLVED, that each share of this series of preferred
stock shall rank equally in all respects and shall be subject to
the following provisions:
SECTION 1. Designation, Rank. This series of
preferred stock shall be designated the "Series B Adjustable Rate
Cumulative Preferred Stock," with a par value of $0.05 per share
(the "Series B Preferred Stock"). The Series B Preferred Stock
will rank, with respect to dividend rights and rights on
liquidation, winding-up and dissolution, (i) senior to all
classes of common stock of the Company, as they exist on the date
hereof or as such stock may be constituted from time to time (the
"Common Stock"), and each other class of capital stock or series
of preferred stock established by the Board to the extent the
terms of such stock do not expressly provide that it ranks senior
to or on a parity with the Series B Preferred Stock as to
dividend rights and rights on liquidation, winding-up and
dissolution (collectively, together with the Common Stock, the
"Junior Securities"); (ii) on a parity with the Series A
Cumulative Convertible Preferred Stock and with each other class
of capital stock or series of preferred stock issued by the
Company established by the Board to the extent the terms of such
stock expressly provide that it will rank on a parity with the
Series B Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively, the
"Parity Securities"); and (iii) junior to each other class of
capital stock or series of preferred stock established by the
Board to the extent the terms of such stock expressly provide
that it will rank senior to the Series B Preferred Stock as to
dividend rights and rights on liquidation, winding-up and
dissolution (collectively, the "Senior Securities").
SECTION 2. Authorized Number. The authorized number
of shares constituting the Series B Preferred Stock shall be
15,500,000 shares.
SECTION 3. Dividends.
(a) Dividend Periods and Rates. Holders of Series B
Preferred Stock will be entitled to receive, when, as and if
declared by the Board out of funds of the Company legally
available therefor, cash dividends payable quarterly in arrears
on March 15, June 15, September 15 and December 15 of each year,
commencing September 15, 1994 (each a "Dividend Payment Date").
Dividends will be payable at a per annum rate (calculated as a
percentage of Stated Value) equal to (i) 93.0% of the Thirty-Year
Constant Maturity Rate (as hereinafter defined) for the dividend
period ending September 15, 1994 and (ii) the Applicable Rate (as
defined in subsection (c) below) in effect from time to time for
each subsequent dividend period. Each dividend will be payable
to holders of record as they appear on the books of the Company
at the close of business on a record date, not more than 60 nor
less than 15 days before the related Dividend Payment Date, fixed
by the Board. Dividends will be cumulative from the date of
original issuance of the Series B Preferred Stock. Dividends for
each full dividend period will be computed by dividing the per
annum dividend rate by four. Dividends payable for any period
less than a full dividend period will be computed on the basis of
a 360-day year consisting of twelve 30-day months. The Series B
Preferred Stock will not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative
dividends. No interest, or sum of money in lieu of interest,
will be payable in respect of any accrued and unpaid dividends.
(b) Priority. No full dividends may be declared or
paid or funds set apart for the payment of dividends on any
Parity Securities (except dividends on Parity Securities paid in
shares of Junior Securities) for any period unless full
cumulative dividends to be paid hereunder prior to the date
thereof shall have been paid or set apart for such payment on the
Series B Preferred Stock. If full dividends are not so paid, the
Series B Preferred Stock shall share dividends pro rata with the
Parity Securities according to the amount of dividends due and
payable with respect to each. No dividends may be paid or set
apart for such payment on Junior Securities (except dividends on
Junior Securities paid in additional shares of Junior Securities)
and no Series B Preferred Stock, Parity Securities or Junior
Securities may be repurchased, redeemed or otherwise retired nor
may funds be set apart for payment with respect thereto, nor
shall the Company permit any corporation or entity directly or
indirectly controlled by the Company to purchase any Series B
Preferred Stock, Parity Securities or Junior Securities, if full
cumulative dividends to be paid hereunder prior to the date
thereof have not been paid on the Series B Preferred Stock.
Notwithstanding the foregoing, the Company may (i) make
redemptions, purchases or other acquisitions of Series B
Preferred Stock, Parity Securities or Junior Securities payable
in Junior Securities or repurchases of Series B Preferred Stock,
Parity Securities or Junior Securities in the ordinary course of
business pursuant to the terms of any current or future employee
stock incentive plan or similar plan adopted by the Board and
(ii) make, pursuant to that certain Rights Agreement (the "Rights
Agreement"), dated as of June 8, 1990, between the Company and
American Stock Transfer and Trust Company, redemptions of Rights
(as defined in the Rights Agreement) distributed pursuant to the
Rights Agreement.
(c) Applicable Rate. Except as provided below in this
subsection (c), the "Applicable Rate" for any dividend period
shall be a per annum rate equal to the product of (A) the highest
of the Treasury Bill Rate (as defined in subsection (i) below),
the Ten-Year Constant Maturity Rate (as defined in subsection
(ii) below) and the Thirty-Year Constant Maturity Rate (as
defined in subsection (iii) below) for such dividend period,
multiplied by (B) 93.0%. In the event that the Company
determines in good faith that for any reason one or more of the
rates described in clause (A) of the preceding sentence cannot be
determined for any dividend period, then the Applicable Rate for
such dividend period shall be the product of (x) the higher of
whichever of such rates can be determined, multiplied by (y)
93.0%; provided, that in the event that the Company determines in
good faith that for any reason none of such rates can be
determined for any dividend period, then the Applicable Rate for
such dividend period shall be the Applicable Rate in effect for
the preceding dividend period. In no event shall the Applicable
Rate for any dividend period be less than 5% per annum or greater
than 11% per annum.
(i) Except as provided below in this subsection
(i), the "Treasury Bill Rate" for any dividend period will
be the arithmetic average of the two most recent weekly per
annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be
published during the relevant Calendar Period (as defined in
subsection (e) below)) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the
Calendar Period immediately prior to the ten calendar days
immediately preceding the Dividend Payment Date prior to the
dividend period for which the Applicable Rate is being
determined. In the event that the Federal Reserve Board
does not publish a weekly per annum market discount rate
during such Calendar Period, then the Treasury Bill Rate for
the related dividend period shall be the arithmetic average
of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during such Calendar
Period) for three-month U.S. Treasury bills, as published
weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected
by the Company. In the event that a weekly per annum market
discount rate for three-month U.S. Treasury bills shall not
be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for
the related dividend period shall be the arithmetic average
of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during such Calendar
Period) for all U.S. Treasury bills then having maturities
of not less than 80 nor more than 100 days, as published
during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such rates,
by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that the Company determines in good faith that for any
reason no such U.S. Treasury bill rates are published during
such Calendar Period or that the Company cannot determine
the Treasury Bill Rate for any dividend period as provided
above in this subsection, then the Treasury Bill Rate for
such dividend period shall be the arithmetic average of the
per annum market discount rates, based upon the closing bids
during such Calendar Period, for each of the issues of
marketable interest bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Company
by at least three recognized U.S. Government securities
dealers selected by the Company.
(ii) Except as provided below in this subsection
(ii), the "Ten-Year Constant Maturity Rate" for any dividend
period shall be the arithmetic average of the two most
recent weekly per annum Ten-Year Average Yields (or the one
weekly per annum Ten-Year Average Yield, if only one such
Ten-Year Average Yield shall be published during the
relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately
prior to the ten calendar days immediately preceding the
Dividend Payment Date prior to the dividend period for which
the Applicable Rate is being determined. In the event that
the Federal Reserve Board does not publish such a weekly per
annum Ten-Year Average Yield during such Calendar Period,
then the Ten-Year Constant Maturity Rate for the related
dividend period shall be the arithmetic average of the two
most recent weekly per annum Ten-Year Average Yields (or the
one weekly per annum Ten-Year Average Yield, if only one
such Ten-Year Average Yield shall be published during such
Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that a weekly per annum Ten-Year Average Yield shall not be
published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Ten-Year Constant
Maturity Rate for the related dividend period shall be the
arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield
to maturity, if only one such yield shall be published
during such Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities
(other than Special Securities (as defined in subsection (e)
below)) then having maturities of not less than eight nor
more than twelve years, as published during such Calendar
Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency
selected by the Company. In the event that the Company
determines in good faith that for any reason it cannot
determine the Ten-Year Constant Maturity Rate for any
dividend period as provided above in this subsection, then
the Ten-Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the per annum average
yields to maturity, based upon the closing bids during such
Calendar Period, for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date
not less than eight nor more than twelve years from the date
of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily quotations
shall not be generally available) to the Company by at least
three recognized U.S. Government securities dealers selected
by the Company.
(iii) Except as provided below in this
subsection (iii), the "Thirty-Year Constant Maturity Rate"
for any dividend period shall be the arithmetic average of
the two most recent weekly per annum Thirty-Year Average
Yields (or the one weekly per annum Thirty-Year Average
Yield, if only one such Thirty-Year Average Yield shall be
published during the relevant Calendar Period), as published
weekly by the Federal Reserve Board during the Calendar
Period immediately prior to the ten calendar days
immediately preceding the Dividend Payment Date prior to the
dividend period for which the Applicable Rate is being
determined. In the event that the Federal Reserve Board
does not publish such a weekly per annum Thirty-Year Average
Yield during such Calendar Period, then the Thirty-Year
Constant Maturity Rate for the related dividend period shall
be the arithmetic average of the two most recent weekly per
annum Thirty-Year Average Yields (or the one weekly per
annum Thirty-Year Average Yield, if only one such Thirty-
Year Average Yield shall be published during such Calendar
Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that a weekly per annum Thirty-Year Average Yield shall not
be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Thirty-Year Constant
Maturity Rate for the related dividend period shall be the
arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield shall be
published during such Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) than having
maturities of not less than twenty-eight nor more than
thirty years, as published during such Calendar Period by
the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such yields, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by
the Company. In the event that per annum average yields to
maturity for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than twenty-
eight nor more than thirty years shall not be published by
the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such
Calendar Period, then the Thirty-Year Constant Maturity Rate
for the related dividend period shall be determined in the
manner specified in the preceding sentence based upon all of
the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) then having
maturities of not less than twenty-five years or, in their
absence, twenty years. In the event that the Company
determines in good faith that for any reason it cannot
determine the Thirty-Year Constant Maturity Rate for any
dividend period as provided above in this subsection, then
the Thirty-Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids
during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final
maturity date not less than twenty-eight nor more than
thirty years (or, in their absence, with a final maturity
date not less than twenty-five years or, in their absence,
twenty years) from the date of each such quotation, as
quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally
available) to the Company by at least three recognized U.S.
Government securities dealers selected by the Company.
The Treasury Bill Rate, the Ten-Year Constant Maturity
Rate and the Thirty-Year Constant Maturity Rate shall each be
rounded to the nearest one-hundredth of a percentage point.
(d) Confirmation and Publication of Applicable Rate.
The Applicable Rate with respect to each dividend period will be
calculated as promptly as practicable by the Company according to
the appropriate method described above. The mathematical
accuracy of each such calculation will be confirmed in writing by
independent accountants of recognized standing. Except for the
dividend rate for the initial dividend period, the Company will
cause each dividend rate to be published in a newspaper of
general circulation in New York City prior to the commencement of
the new dividend period to which it applies and will cause notice
of such Applicable Rate to be enclosed with the dividend payment
next mailed to the holders of Series B Preferred Stock.
(e) Definitions. As used in this Section, the term
"Calendar Period" means a period of fourteen consecutive calendar
days; the term "Special Securities" means securities (i) which
can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or (ii) which provide tax
benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or substantial
discount; the term "Ten-Year Average Yield" means the average
yield to maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant maturities
of ten years); and the term "Thirty-Year Average Yield" means the
average yield to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to constant
maturities of thirty years).
SECTION 4. Liquidation Rights. The Stated Value of
each share of Series B Preferred Stock shall be $25.00. In the
event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, after satisfaction of the claims of
creditors and before any payment or distribution of assets is
made on any Junior Securities, including, without limitation, the
Common Stock, (i) the holders of Series B Preferred Stock shall
receive a liquidation preference equal to the Stated Value of
their shares, and shall be entitled to receive an amount equal to
all accrued and unpaid dividends through the date of distribution
(whether or not declared), and (ii) the holders of any Parity
Securities shall be entitled to receive an amount equal to the
full respective liquidation preferences (including any premium)
to which they are entitled and shall receive an amount equal to
all accrued and unpaid dividends with respect to their respective
shares through and including the date of distribution (whether or
not declared). If, upon such a voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the assets
of the Company are insufficient to pay in full the amounts
described above as payable with respect to the Series B Preferred
Stock and any Parity Securities, the holders of the Series B
Preferred Stock and such Parity Securities will share ratably in
any distribution of assets of the Company, first in proportion to
their respective liquidation preferences until such preferences
are paid in full, and then in proportion to their respective
amounts of accrued but unpaid dividends. After payment of any
such liquidation preference and accrued but unpaid dividends, the
Series B Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Company.
Neither the sale or transfer of all or any part of the assets of
the Company, nor the merger or consolidation of the Company into
or with any other corporation or a merger of any other
corporation with or into the Company, will be deemed to be a
liquidation, dissolution or winding-up of the Company.
SECTION 5. Voting Rights.
(a) Except as provided below, as may be required by
Delaware law or provided by the resolution creating any other
series of preferred stock, the holders of Series B Preferred
Stock will not be entitled to vote. So long as any shares of
Series B Preferred Stock are outstanding, the vote or consent of
the holders of 66-2/3% of the outstanding shares of Series B
Preferred Stock, voting together as a single class, shall be
necessary to (i) increase or decrease the par value of the shares
of Series B Preferred Stock or (ii) alter or change the powers,
preferences, or special rights of the shares of Series B
Preferred Stock so as to affect them adversely or (iii) authorize
or issue any additional class or series of Parity Securities
(other than the Series A Cumulative Convertible Preferred Stock)
or Senior Securities, or any security convertible into Parity
Securities or Senior Securities.
(b) (i) In the event that any accrued dividends
(whether or not declared) on the Series B Preferred Stock
shall not have been paid in an aggregate amount equal to or
greater than six quarterly dividends, the maximum authorized
number of directors of the Company will be automatically
increased by two, and holders of Series B Preferred Stock
shall be entitled to vote their shares of Series B Preferred
Stock, together with the holders of any Parity Securities
upon which like voting rights have been conferred and are
exercisable (the "Voting Parity Securities"), in accordance
with the procedures set forth below, to elect, as a class,
an additional two directors. So long as any shares of
Series B Preferred Stock shall be outstanding, the holders
of Series B Preferred Stock shall retain the right to vote
and elect, with the holders of such Voting Parity
Securities, as a class, two directors until all accrued but
unpaid dividends on the Series B Preferred Stock are paid in
full or declared and set aside for payment. The period
during which holders of Series B Preferred Stock retain such
right is referred to as a "Default Period".
(ii) So long as any shares of Series B Preferred
Stock shall be outstanding, during any Default Period, the
voting right described in subsection (i) above may be
exercised initially at a special meeting called pursuant to
subsection (iii) below or at any annual meeting of
stockholders. The absence of a quorum of holders of Common
Stock (or any class thereof) shall not affect the exercise
of such voting rights by the holders of Series B Preferred
Stock and Voting Parity Securities. Holders of Series B
Preferred Stock and Voting Parity Securities shall be
entitled, as among the class of holders of Series B
Preferred Stock and Voting Parity Securities, to one vote
for each $25.00 of liquidation preference represented by the
shares so held.
(iii) Unless the holders of Series B Preferred
Stock and Voting Parity Securities, if any are then
outstanding, have, during an existing Default Period,
previously exercised their right to elect directors, the
Board may, and upon the request of the holders of record of
not less than 10% of the aggregate liquidation preference of
Series B Preferred Stock and Voting Parity Securities, the
Board shall, order the calling of a special meeting of
holders of Series B Preferred Stock and Voting Parity
Securities, if any are then outstanding, which meeting shall
thereupon be called by the President, a Vice President or
the Secretary of the Company. Notice of such meeting and of
any annual meeting at which holders of Series B Preferred
Stock and Voting Parity Securities are entitled to vote
pursuant to this subsection (iii) shall be given to each
holder of record of Series B Preferred Stock by mailing a
copy of such notice to such holder at such holder's last
address as it appears on the books of the Company. Such
meeting shall be called for a date not later than 90 days
after such order or request, or, in default of the calling
of such meeting within 90 days after such order or request,
such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less
than 10% of the aggregate liquidation preference of Series B
Preferred Stock and Voting Parity Securities.
Notwithstanding the provisions of this subsection (iii), the
Company shall not be required to call such a special meeting
if such request is received less than 120 days before the
date fixed for the next ensuing annual meeting of
stockholders of the Company, at which meeting such newly
created directorships shall be filled by vote of the holders
of Series B Preferred Stock and Voting Parity Securities.
(iv) During any Default Period, the holders of
Common Stock, and other classes of stock of the Company, if
applicable, shall continue to be entitled to elect all of
the directors unless and until the holders of Series B
Preferred Stock and Voting Parity Securities shall have
exercised their right to elect two directors voting as a
class. After the exercise of this right (x) the directors
so elected by the holders of Series B Preferred Stock and
Voting Parity Securities shall continue in office until the
earlier of (A) such time as their successors shall have been
elected by such holders and (B) the expiration of the
Default Period, and (y) any vacancy in the Board with
respect to a directorship to be elected pursuant to this
Section by the holders of Series B Preferred Stock and
Voting Parity Securities may be filled by vote of the
remaining director previously elected by such holders.
References in this subsection (b) to directors elected by
the holders of a particular class of stock shall include
directors elected by such directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a Default
Period, (x) the right of the holders of Series B Preferred
Stock to elect directors pursuant to this Section shall
cease, (y) the term of any directors elected by the holders
of Series B Preferred Stock and Voting Parity Securities
pursuant to this Section shall terminate, and (z) the number
of directors shall be such number as may be provided for in
the Restated Certificate of Incorporation or bylaws
irrespective of any increase made pursuant to subsection (i)
of this subsection (b) (such number being subject, however,
to subsequent change in any manner provided by law or in the
Restated Certificate of Incorporation or bylaws).
SECTION 6. Optional Redemption. On or after March 17,
1995, the Company may, at its option, redeem all or any part of
the shares of Series B Preferred Stock, out of funds legally
available therefor, on any Dividend Payment Date upon giving a
notice of redemption as set forth below, at the Stated Value
thereof plus an amount equal to accrued and unpaid dividends, if
any (whether or not declared), up to but excluding the Dividend
Payment Date fixed for redemption.
If fewer than all of the outstanding shares of the
Series B Preferred Stock are to be redeemed, the number of shares
to be redeemed shall be determined by the Board in good faith and
the shares to be redeemed will be determined pro rata as nearly
as practicable, or by such other method as the Board may
determine to be fair and appropriate. Series B Preferred Stock
may not be redeemed unless full cumulative dividends have been
paid on the Series B Preferred Stock for all past dividend
periods.
Notice of redemption of Series B Preferred Stock will
be given by (i) first-class mail, not less than 15 nor more than
45 days prior to the date fixed for redemption thereof, to each
record holder of shares of Series B Preferred Stock to be
redeemed at the address of such holder in the books of the
Company and (ii) publication in the Wall Street Journal. On the
date such notices are mailed, the Company shall issue a press
release announcing the redemption. The mailed and published
notice shall state, as appropriate: (1) the redemption date and
record date for purposes of such redemption; (2) the number of
shares of Series B Preferred Stock to be redeemed and, if fewer
than all shares of Series B Preferred Stock held by any holder
are to be redeemed, the number of shares to be redeemed from such
holder; (3) the place or places at which certificates for such
shares are to be surrendered; (4) the then current redemption
price; and (5) that dividends on the Series B Preferred Stock to
be redeemed shall cease to accrue on such redemption date, except
as otherwise provided herein. If a notice of redemption has been
given, from and after the specified redemption date (unless the
Company defaults in making payment of the redemption price),
dividends on the Series B Preferred Stock so called for
redemption will cease to accrue, such shares will no longer be
deemed to be outstanding, and all rights of the holders thereof
as stockholders of the Company (except the right to receive the
redemption price and any dividend due on a Dividend Payment Date
after the redemption date relating to a dividend record date
prior to such redemption date) will cease.
SECTION 7. Status of Reacquired Shares. If shares of
Series B Preferred Stock are redeemed pursuant to Section 6
hereof, the shares so redeemed shall, upon compliance with any
statutory requirements, assume the status of authorized but
unissued shares of preferred stock of the Company, but may not be
reissued as Series B Preferred Stock.
SECTION 8. Preemptive Rights. The Series B Preferred
Stock is not entitled to any preemptive or subscription rights in
respect of any securities of the Company.
SECTION 9. Notices. Except as otherwise provided
herein, all notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered by and when sent by telex or telecopier
(with receipt confirmed), provided a copy is also sent by express
(overnight, if possible) courier, addressed (i) in the case of a
holder of Series B Preferred Stock, to such holder's address as
it appears on the books of the Company, and (ii) in the case of
the Company, to the Company's principal executive offices to the
attention of the Company's President.
SECTION 10. Severability of Provisions. Whenever
possible, each provision hereof shall be interpreted in a manner
as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or
otherwise adversely affecting the remaining provisions hereof.
If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were
increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective
and valid under applicable law.
IN WITNESS WHEREOF, FHP International Corporation has
caused this Certificate of Designation to be duly executed by its
duly authorized officer and attested by its Secretary this 17th
day of June, 1994.
FHP INTERNATIONAL CORPORATION
By: Westcott W. Price III
Name: Westcott W. Price III
Title: President
ATTEST:
Michael J. Weinstock
Name: Michael J. Weinstock
Title: Secretary
[LOGO] NEWS RELEASE
FOR IMMEDIATE RELEASE
Investor Contact: Anna Marie Dunlap, 714-378-5585
Media Contact: Ria Marie Carlson, 714-378-5750
FHP COMPLETES ITS ACQUISITION OF TAKE CARE
Three New Divisions Unveiled
FOUNTAIN VALLEY, Calif., June 17, 1994 -- FHP International
Corporation (NASDAQ: FHPC) announced today that it has
consummated its $1.1 billion acquisition of TakeCare, Inc., the
largest acquisition in health maintenance organization (HMO)
history.
The new company is the fifth largest HMO in the nation, with
more than 1.7 million members in 11 states and Guam. It is also
one of the largest publicly traded HMOs, generating more than $3
billion in annual revenue.
"FHP is now a leader in nearly every state in which we
operate," said Westcott W. Price, FHP President and Chief
Executive Officer. "We are the largest HMO in Colorado and Utah,
and one of the top three in California, Arizona, New Mexico,
Nevada and Guam. FHP now also operates in Ohio, Illinois,
Indiana, Kentucky and Texas, and our new Preferred Provider
Organization (PPO) is in nine states."
Mark B. Hacken, also of FHP's Office of the Chief Executive,
and Westcott Price unveiled FHP's new organizational structure
that the executives say will "support FHP's leadership position
well into the future."
FHP subsidiaries will be organized into three operating
groups: 1) Health Care Delivery (staff model HMO) -- the
operation of all FHP-owned medical and dental centers, hospitals,
pharmacies and laboratories; 2) Health Plans (IPA HMOs) -- the
independent practice association (IPA) operations, which contract
with physicians and medical groups, hospitals, and pharmacies,
including FHP facilities; 3) Insurance -- includes FHP's
indemnity life and health insurance companies and workers'
compensation insurance company.
Dr. Ryan Trimble, who was most recently Senior Vice
President of FHP's California and Utah HMO subsidiaries, has been
named President of the Health Care Delivery Division. R. Judd
Jessup, former President of TakeCare, Inc., has been named
President of FHP's Health Plans Division. Burke Gumbiner, who
has been with FHP since 1972, will head the insurance division.
The three division heads report to Jack Massimino, Executive Vice
President and Chief Operating Officer.
"The new structure is customer-driven," said Massimino. "It
is based on how our members choose to receive their health care,
through either company-operated facilities or private physicians
and hospitals under contract with FHP."
FHP is a diversified health care services company with
headquarters in Fountain Valley, Calif. In addition to its HMO,
FHP operates a health and life indemnity insurer, a workers'
compensation insurer, a national HMO network, and national
preferred provider organization. FHP is the largest provider of
prepaid Medicare services in the United States.
