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EXHIBIT 4.7
DIRECTOR STOCK OPTION AGREEMENT
THIS AGREEMENT, dated ___________________, is made by and between
PacifiCare Health Systems, Inc., a Delaware corporation (the "Company"), and
_______________________ (the "Optionee"):
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its Common Stock;
WHEREAS, the Optionee is a non-officer director of the Company; and
WHEREAS, the Company has determined that it would be to the advantage and
best interest of the Company and its stockholders that the Optionee receive the
Stock Options provided for herein as an incentive for the Optionee to continue
to work for the best interests of the Company and its stockholders and has
instructed the undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary.
Section 1.1 -- Board
"Board" shall mean the Company's Board of Directors.
Section 1.2 -- Chief Financial Officer
"Chief Financial Officer" shall mean the Chief Financial Officer of the
Company.
Section 1.3 -- Committee
"Committee" shall mean a committee of the Board of Directors authorized to
administer the Company's stock option plans.
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Section 1.4 -- Common Stock
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
Section 1.5 -- Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.6- Option
"Option" shall mean the Stock Option to purchase shares of the Common Stock
granted under this Agreement.
Section 1.7 -- Pronouns
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
Section 1.8 -- Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.9 -- Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.10 -- Termination of Directorship
"Termination of Directorship" shall mean eight months from the time the
Optionee voluntarily or involuntarily ceases to serve as a director of the
Company, unless Optionee ceases to be a director as a result of his/her death or
disability.
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ARTICLE II
GRANT OF OPTION
Section 2.1 -- Grant of Option
In consideration of the Optionee's agreement to render services to the
Company and for other good and valuable consideration, the Company irrevocably
grants to the Optionee the option to purchase any part or all of an aggregate of
______ shares of its Common Stock upon the terms and conditions set forth in
this Agreement. The date of grant of this Option is ____________.
Section 2.2 -- Purchase Price
The purchase price of the shares of stock covered by the Option shall be
$_____ per share without commission or other charge.
Section 2.3 -- Consideration to Company
This Option is being granted in consideration of the Optionee's agreement
to render services to the Company as a member of the Company's board of
directors.
Section 2.4 -- Adjustments in Option
(a) In the event that the outstanding shares of the Common Stock subject
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company or of another corporation by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock split, stock dividend or combination of shares, or in the event of
extraordinary cash or non-cash dividends being declared with respect to
outstanding shares of Common Stock or similar transactions, proportionate
adjustments shall be made by the Committee in the number and kind of shares as
to which the Option, or portions thereof then unexercised, shall be exercisable,
to the end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the Option
shall be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the exercise price per share. Any such adjustment
made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.
(b) In the event that the outstanding shares of Common Stock of the Company
are hereafter changed into or exchanged for a different number or kind of shares
or other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, stock dividend or combination of shares, or in the event of extraordinary
cash or non-cash dividends being declared with respect
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to the outstanding shares of Common Stock or other similar transactions, the
Committee shall make proportionate adjustments in the number and kind of shares
as to which the Option, or portions thereof then unexercised, shall be
exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustments shall be consistent with comparable adjustments made pursuant to the
corresponding provision in the Employee Plan. Such adjustment in the Option
shall be made without change in the total price applicable to the Option or the
unexercised portion thereof (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the exercise price per share. Any such
adjustment made by the Committee shall be final and binding upon the Optionees,
the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 -- Commencement of Exercisability
a. Subject to Sections 3.3, and 3.4, the Option shall be fully vested and
exercisable on the date the Option is granted; provided, however, that the
underlying shares of Common Stock may not be sold within the first six (6)
months of the date the Option is granted.
Section 3.2 -- Duration of Exercisability
The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until such installment becomes unexercisable under Section 3.3.
Section 3.3 -- Expiration of Option
The Option may not be exercised to any extent by anyone after the first to
occur of the following events:
a. The expiration of 10 years from the date the Option was granted;
b. Optionee's Termination of Directorship, unless such Termination of
Directorship results from his death or his disability;
c. The expiration of one year from the date of the Optionee's Termination
of Employment by reason of his disability; or
d. The expiration of one year from the date of the Optionee's death.
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For purposes of this Section 3.3, "disability" shall mean a medically
determinable physical or mental impairment which has lasted or can be expected
to last for a continuous period of not less than 12 months and which renders the
Optionee substantially unable to function as a director of the Company. Nothing
contained herein shall be construed to confer on any Optionee any right to
continue as a director of the Company.
Section 3.4 -- Acceleration of Exercisability
a. Notwithstanding anything to the contrary in Section 3.3 hereof, this
Option, if held for at least six months, shall be exercisable as to all the
shares covered hereby immediately upon the effective date of a "Change of
Control" notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1(a); provided, however, that the acceleration of
exercisability shall not take place if this Option becomes unexercisable under
Section 3.3 prior to said effective date.
b. For purposes of this Section 3.4, the term "Change of Control" shall
mean the occurrence of any of the following: (i) a business combination
effectuated through the merger or consolidation of the Company with or into
another entity where the Company is not the Surviving Organization; (ii) any
business combination effectuated through the merger or consolidation of the
Company with or into another entity where the Company is the Surviving
Organization and such business combination occurred with an entity whose market
capitalization prior to the transaction was greater than 50 percent of the
Company's market capitalization prior to the transaction; (iii) the sale in a
transaction or series of transactions of all or substantially all of the
Company's assets; (iv) any "person" or "group" (within the meaning of Sections
13(d)and 14(d) of the Exchange Act) other than UniHealth Foundation, a
California non-profit public benefit corporation ("UniHealth"), acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act),
directly or indirectly, of 20 percent or more of the voting common stock of the
Company and the beneficial ownership of the voting common stock of the Company
owned by UniHealth at that date is less than or equal to the beneficial
ownership interest of voting securities attributable to such other person or
group; (v) a dissolution or liquidation of the Company; or (vi) the Company
ceases to be subject to the reporting requirements of the Exchange Act as a
result of a "going private transaction" (within the meaning of the Exchange
Act). For purposes hereof, "Surviving Organization" shall mean any entity where
the majority of the members of such entity's board of directors are persons who
were members of the Company's board of directors prior to the merger,
consolidation or other business combination and the senior management of the
surviving entity includes all of the individuals who were the Company's
executive management (the chief executive officer and those individuals who
report directly to the Company's chief executive officer) prior to the merger,
consolidation or other business combination and such individuals are in at least
comparable positions with such entity. Optionee shall receive at least 10 days
notice prior to the effective date of the Change of Control that the Option will
be exercisable upon the effective date of the Change of Control.
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c. By a resolution adopted after this Option is granted the Committee may
in its absolute discretion, on such terms and conditions as it may determine to
be appropriate and subject to Sections 3.1, 3.2 and 3.3 accelerate the time at
which such Option or any portion thereof may be exercised.
d. The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with a Change in Control and acceleration of exercisability, including, without
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction. All such determinations by the Committee shall be
conclusive.
ARTICLE IV
EXERCISE OF OPTIONS
Section 4.1 -- Person Eligible to Exercise
During the lifetime of the Optionee, only he, his guardian or legal
representative may exercise the Option or any portion thereof. After the death
of the Optionee, any exercisable portion of the Option may, prior to the time
when the Option becomes unexercisable under Article III, be exercised by his
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.
Section 4.2 -- Partial Exercise
Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Article III;
provided, however, that each partial exercise shall be for not less than 100
shares (or the minimum installment set forth in Section 3.1, if a smaller number
of shares) and shall be for whole shares only.
Section 4.3 -- Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or Chief Financial Officer or their respective offices
of all of the following prior to the time when the Option or such portion
becomes unexercisable under Section 3.3:
a. Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or portion
is thereby exercised, such notice complying with all applicable rules
established by the Committee;
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b. (i) Full payment (in cash or by check) for the shares with respect to
which such Option or portion is exercised;
(ii) With the consent of the Committee, shares of any class of the
Company's stock owned by the Optionee duly endorsed for transfer to the
Company with a Fair Market Value (as determinable by the Committee) on the
date of delivery equal to the aggregate Option price of the shares with
respect to which such Option or portion is exercised (which shares shall be
owned by the Optionee for more than six months at the time they are
delivered);
(iii) With the consent of the Committee and provided the use of the
following procedure by an Optionee would not violate Rule 16(b) under the
Exchange Act delivery to the Company of (x) irrevocable instructions to
deliver the stock certificates representing the shares for which the Option
is being exercised directly to a broker, and (y) instructions to the broker
to sell such shares and promptly deliver to the Company the portion of the
sale proceeds equal to the aggregate Option exercise price;
(iv) With the consent of the Committee, any other form of cashless
exercise permitted under Section 4.4 hereof; or
(v) Any combination of the consideration provided in the foregoing
subparagraphs (i), (ii), (iii) and (iv);
c. A bona fide written representation and agreement, in a form satisfactory
to the Committee, signed by the Optionee or other person then entitled to
exercise such Option or portion, stating that the shares of stock are being
acquired for his own account, for investment and without any present intention
of distributing or reselling said shares or any of them except as may be
permitted under the Securities Act of 1933, as amended (the "Act"), and then
applicable rules and regulations thereunder, and that the Optionee or other
person then entitled to exercise such Option or portion will indemnify the
Company against and hold it free and harmless from any loss, damage, expense or
liability resulting to the Company if any sale or distribution of the shares by
such person is contrary to the representation and agreement referred to above.
The Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate to insure the observance and performance of such
representation and agreement and to effect compliance with the Act and any other
federal or state securities laws or regulations. Without limiting the generality
of the foregoing, the Committee may require an opinion of counsel acceptable to
it to the effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued
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pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares;
d. Full payment to the Company of all amounts which, under federal, state
or local law, it is required to withhold upon exercise of the Option; and
e. In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.
The date of exercise of the Option shall be deemed to be the date all of
the foregoing conditions are met.
Section 4.4 -- Cashless Exercise Procedures
The Company, in its sole discretion, may establish procedures whereby the
Optionee, subject to the requirements of Rule 16b-3 under the Exchange Act,
Regulation T issued by the Board of Governors of the Federal Reserve System
pursuant to the Exchange Act, federal income tax laws, and other federal, state
and local tax and securities laws, can exercise the Option or a portion thereof
without making a direct payment of the Option price to the Company. If the
Company so elects to establish a cashless exercise program, the Company shall
determine, in its sole discretion and from time to time, such administrative
procedures and policies as it deems appropriate and such procedures and policies
shall be binding on the Optionee should he elect to utilize the cashless
exercise program.
Section 4.5 -- Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares of
Common Stock or issued shares of Common Stock which have then been reacquired by
the Company. Such shares shall be fully paid and nonassessable. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of the Option or portion thereof
prior to fulfillment of all of the following conditions:
a. The admission of such shares of Common Stock to listing on all stock
exchanges which such class of stock is then listed;
b. The completion of any registration or other qualification of such shares
under any state or federal law or under rulings or regulations of the Securities
and Exchange Commission or of any other governmental regulatory body, which the
Committee shall, in its absolute discretion, deem necessary or advisable;
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c. The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
d. The payment to the Company of all amounts which, under federal, state or
local law, it is required to withhold upon exercise of the Option; and
e. The lapse of such reasonable period of time following the exercise of
the Option as the Committee may from time to time establish for reasons of
administrative convenience.
Section 4.6 -- Rights as Stockholder
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares of Common
Stock receivable upon the exercise of any part of the Option unless and until
certificates representing such shares of Common Stock shall have been issued by
the Company to such holder.
ARTICLE V
MISCELLANEOUS
Section 5.1 -- Administration
The Committee shall have the power to interpret this Agreement and to adopt
such rules for the administration, interpretation and application of this
Agreement as are consistent therewith and to interpret, amend or revoke any such
rules. All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Optionee, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Option.
Section 5.2 -- Options Not Transferable
Neither the Option nor any interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
Section 5.3 -- Shares to Be Reserved
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The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.
Section 5.4 -- Withholding
(a) The Optionee granted hereunder may elect to deliver shares to the
Company or have the Company withhold shares otherwise issuable upon the exercise
of an Option in order to satisfy federal and state withholding tax liability (a
"share withholding election"), provided: (i) the Board or, if so designated, the
Committee, shall not have revoked its advance approval of the holder's share
withholding election; and (ii) the share withholding election is made on or
prior to the date on which the amount of withholding tax liability is determined
(the "Tax Date").
(b) A share withholding election shall be deemed made when written notice
of such election, signed by Optionee, has been delivered or transmitted by
registered or certified mail to the Secretary or Chief Financial Officer of the
Company at its then principal office. Delivery of said notice shall constitute
an irrevocable election to have shares withheld.
(c) Upon exercise of an Option by the Optionee, the Company shall transfer
the total number of shares of Common Stock of the Company subject to the Option
to the holder on the date of exercise, less any shares the holder elects to
withhold.
Section 5.5 -- Notices
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary or Chief Financial
Officer and any notice to be given to the Optionee shall be addressed to him at
the address given beneath his signature hereto. By a notice given pursuant to
this Section 5.5, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be given to the
Optionee shall, if the Optionee is then deceased, be given to the Optionee's
personal representative if such representative has previously informed the
Company of his status and address by written notice under this Section 5.5. Any
notice shall have been deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in
a post office or branch post office regularly maintained by the United States
Postal Service.
Section 5.6 -- Titles
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
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Section 5.7 -- Choice of Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of California.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.
PACIFICARE HEALTH SYSTEMS, INC.
By:
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Optionee
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Address
Social Security Number:
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