<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
_______________________________________
WELLPOINT HEALTH NETWORKS INC.
(Exact name of Registrant as specified in its charter)
_______________________________________
DELAWARE 95-4635504
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
21555 OXNARD STREET
WOODLAND HILLS, CALIFORNIA 91367
(Address of principal executive offices) (zip code)
________________________________________
WELLPOINT HEALTH NETWORKS INC. STOCK OPTION\AWARD PLAN
(Full title of the plan)
_________________________________________
THOMAS C. GEISER
Executive Vice President, General Counsel and Secretary
WELLPOINT HEALTH NETWORKS Inc.
21555 Oxnard Street, Woodland Hills, California 91367
(Name and address of agent for service)
(818) 703-4000
(Telephone number, including area code, of agent for service)
Copies to:
Barry W. Homer, Esq.
Brobeck, Phleger & Harrison LLP
One Market Plaza
Spear Street Tower
San Francisco, California 94105
_________________________________________
This Registration Statement shall become effective immediately upon
filing with the Securities and Exchange Commission in accordance with
Section 8(a) of the Securities Act of 1933 and Rule 462 thereunder.
CALCULATION OF REGISTRATION FEE
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===========================================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered (1) Registered (2) per Share (3) Price (3) Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value, issued
pursuant to:
WellPoint Health Networks Inc. Stock 2,400,000 $48.875 $117,300,000.00 $35,546.00
Option\Award Plan
===========================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this Registration Statement also covers an indeterminate amount of
plan interests to be offered or sold pursuant to the Salary Deferral
Savings Program of WellPoint Health Networks Inc.
(2) This Registration Statement also covers any additional shares of
Common Stock that are acquired under the employee benefit plans listed
above by reason of any stock dividend, stock split, recapitalization
or other similar transaction effected without the receipt of
consideration which results in an increase in the number of the
Registrant's outstanding shares of Common Stock.
(3) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933 on the basis of the average of the high and
low selling price per share of Common Stock of WellPoint Health
Networks Inc. on August 1, 1997, as reported by the New York Stock
Exchange.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The following documents of the Registrant's predecessor,
WellPoint California, filed with the Commission (File No. 1-14340) are
incorporated by reference:
(a) WellPoint California's Annual Report on Form 10-K for the year
ended December 31, 1996;
(b) WellPoint California's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997;
(c) WellPoint California's Current Reports on Form 8-K, filed
January 2, 1997, and March 14, 1997, (as amended by Amendment
No. 1 on Form 8-K/A filed May 14, 1997); and
(d) WellPoint California's Definitive Proxy Statement on Schedule
14A filed May 8, 1997.
The following documents of the Registrant filed with the
Commission (File No. 001-13803) are incorporated by reference:
(a) The Registrant's Registration Statement on Form 8-B filed on
June 12, 1997, pursuant to Section 12(g) of the Exchange Act;
and
(b) The Registrant's Current Report on Form 8-K, filed August 5,
1997.
All reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 after the date of this Registration Statement and prior to the
filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then
remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
The Registrant is a Delaware corporation. Section 145 of the
General Corporate law of the state of Delaware (the "Delaware Law") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such
II-1.
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corporation), by reason of fact that such person was an officer or director of
such corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided that such officer
or director acted in good faith and in a manner he reasonably believed to be in
or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his conduct was illegal. A
Delaware corporation may indemnify officers and directors in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of his
duty. Where an officer or director is successful on the merits or otherwise in
the defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually and reasonably
incurred.
The Registrant's Certificate of Incorporation provides that
the liability of the Registrant's directors to the Registrant or the
Registrant's stockholders for monetary damages for breach of fiduciary duty
will be eliminated to the fullest extent permissible under Delaware law except
for (i) breaches of the duty of loyalty; (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violations of the law;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which a director received an improper
personal benefit.
The effect of these provisions is to eliminate the rights of
the Registrant and its stockholders (through stockholders' derivative suits on
behalf of the Registrant) to recover monetary damages against a director for
breach of fiduciary duty of care as a director (including breaches resulting
from negligent or grossly negligent behavior) except in certain limited
situations. These provisions do not limit or eliminate the rights of the
Registrant or any stockholder to seek non-monetary relief such as an injunction
or recision in the event of a breach of a director's duty of care. These
provisions will not alter the liability of directors under federal securities
law.
The Registrant's Bylaws provide that the Registrant will
indemnify each present and former director and officer of the Registrant or a
predecessor company and each of their respective subsidiaries, as such
companies exist or have existed, and such agents of the Registrant as the Board
of Directors shall determine, to the fullest extent provided by Delaware law.
In addition, the Registrant has entered into indemnification
agreements with its directors and certain officers that provide for the maximum
indemnification permitted by law.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
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Exhibit Number Exhibit
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<S> <C>
4.1 Restated Certificate of Incorporation of WellPoint Delaware. Incorporated by reference to
Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed August 5, 1997.
4.2 Bylaws of WellPoint Delaware. Incorporated by reference to Appendix B to the Proxy Statement
of WellPoint California on Schedule 14A, dated May 8, 1997, and incorporated by reference
herein pursuant to Item 3(d).
4.3 Agreement of Merger dated as of July 22, 1997, by and among the Registrant, WellPoint Health
Networks Inc., a California corporation, and WLP Acquisition Corp. Incorporated
</TABLE>
II-2.
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<TABLE>
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by reference to Exhibit 3.3 to the Registrant's Current Report on Form 8-K filed August 5, 1997.
4.4 Agreement and Plan of Reorganization. Incorporated by reference to Exhibit 99.1 to Registrant's
Current Report on Form 8-K, filed August 5, 1997.
4.5 Specimen Stock Certificate of WellPoint Delaware, incorporated by reference to Exhibit 4.4 of
Registrant's Registration
Statement No. 000-13083 on Form 8-B and incorporated by reference herein pursuant to Item 3(c).
5.1 Opinion of Brobeck Phleger & Harrison L.L.P.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young, L.L.P.
23.3 Consent of Brobeck Phleger & Harrison L.L.P. is contained in Exhibit 5.
24 Power of Attorney. Reference is made to the signature page of this Registration Statement.
99.1 WellPoint Health Networks Inc. Stock Option\Award Plan
</TABLE>
Item 9. Undertakings.
A. The undersigned Registrant hereby undertakes: (1)
to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference into the
Registration Statement; and (2) that for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and (3) to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
into the Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question
II-3.
<PAGE> 5
whether such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-4.
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SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, California, on the 6th
day of August, 1997.
WELLPOINT HEALTH NETWORKS Inc.
By: /s/ Leonard D. Schaeffer
-----------------------------------------------
Leonard D. Schaeffer
Chairman of the Board and Chief Executive
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Leonard D. Schaeffer
and Thomas C. Geiser, and each one of them, his true and lawful
attorneys-in-fact and agents, each with full power and authority to do any and
all acts and things and to execute any and all instruments which said attorney
and agent determines may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any
rules or regulations or requirements of the Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both
pre-effective and post-effective, and supplements to this Registration
Statement and to any and all instruments or documents filed as part of or in
conjunction with this Registration Statement or amendment or supplements
thereof, and each of the undersigned hereby ratifies and confirms all that said
attorneys and agents, or any one of them, shall do or cause to be done by
virtue hereof.
This Power of Attorney may be executed in several counterparts, each
of which shall be deemed an original, but which taken together shall constitute
an instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 6th day of August, 1997.
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Signatures Title
- ---------- -----
<S> <C>
/s/ Leonard D. Schaeffer Chairman of the Board and Chief Executive Officer (Principal
- -------------------------------- Executive Officer)
Leonard D. Schaeffer
/s/ Howard G. Phanstiel Executive Vice President, Finance and Information Services
- -------------------------------- (Principal Financial Officer)
Howard G. Phanstiel
/s/ S. Louise McCrary Vice President, Chief Accounting Officer and Controller
- -------------------------------- (Principal Accounting Officer)
S. Louise McCrary
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II-5.
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Signatures Title
- ---------- -----
<S> <C>
/s/ DAVID R. BANKS Director
- --------------------------------
David R. Banks
/s/ W. TOLIVER BESSON Director
- --------------------------------
W. Toliver Besson
/s/ ROGER E. BIRK Director
- --------------------------------
Roger E. Birk
/s/ SHEILA P. BURKE Director
- --------------------------------
Sheila P. Burke
/s/ STEPHEN L. DAVENPORT Director
- --------------------------------
Stephen L. Davenport
/s/ JULIE A. HILL Director
- --------------------------------
Julie A. Hill
/s/ ELIZABETH A. SANDERS Director
- --------------------------------
Elizabeth A. Sanders
</TABLE>
II-6.
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EXHIBIT INDEX
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<CAPTION>
Exhibit
Number Exhibit
- ----- -------
<S> <C>
4.1 Restated Certificate of Incorporation of WellPoint Delaware. Incorporated by reference to Exhibit 3.1
to the Registrant's Current Report on Form 8-K filed August 5, 1997.
4.2 Bylaws of WellPoint Delaware, attached as Appendix B to the Definitive Proxy Statement of WellPoint
California on Schedule 14A, dated May 8, 1997, and incorporated by reference herein pursuant to
Item 3(d).
4.3 Agreement of Merger dated as of July 22, 1997, by and among the Registrant, WellPoint Health Networks
Inc., a California corporation, and WLP Acquisition Corp. Incorporated by reference to Exhibit 3.3 to
the Registrant's Current Report on Form 8-K filed on August 5, 1997.
4.4 Agreement and Plan of Reorganization. Incorporated by reference to Exhibit 99.1 to Registrant's Current
Report on Form 8-K filed August 5, 1997.
4.5 Specimen Stock Certificate of WellPoint Delaware, incorporated by reference to Exhibit 4.4 of
Registrant's Registration Statement No. 001-13083 on Form 8-B, and incorporated by reference herein
pursuant to Item 3(c).
5.1 Opinion of Brobeck Phleger & Harrison L.L.P.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young, L.L.P.
23.3 Consent of Brobeck Phleger & Harrison L.L.P. is contained in Exhibit 5.
24 Power of Attorney. Reference is made to the signature page of this Registration Statement.
99.1 WellPoint Health Networks Inc. Stock Option\Award Plan
</TABLE>
<PAGE> 1
August 5, 1997
WellPoint Health Networks Inc.
21555 Oxnard Street
Woodland Hills, CA 91367
Re: Registration Statement on Form S-8 ("Registration Statement") of
WellPoint Health Networks Inc.
Ladies and Gentlemen:
We have acted as counsel to WelllPoint Health Networks
Inc., a Delaware corporation (the "Registrant"), with respect to the issuance
of this opinion relating to the proposed offering by the Registrant of up to
Five Million (5,000,000) shares (the "Shares") of the Common Stock of the
Registrant, par value $.01 per share (the "Common Stock"), pursuant to the
Registrant's Stock Option/Award Plan (the "Plan").
As such counsel, we have examined such corporate records,
certificates and other documents and have made such other factual and legal
investigations as we have deemed relevant and necessary as the basis for the
opinions hereinafter expressed. In such examinations, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals and the conformity to original documents of all documents
submitted to us as conformed or photostatic copies.
Based on the foregoing, we are of the opinion that:
1. The issuance by the Registrant of the Shares
pursuant to the Plan has been duly authorized by all necessary corporate action
on the part of the Registrant.
2. When issued pursuant to the Plans, the Shares will
be duly and validly issued and outstanding, fully paid and non- assessable
shares of Common Stock.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON L.L.P.
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of WellPoint Health Networks Inc., on Form S-8 (File No. 333- )
of our report dated February 14, 1997, on our audits of the consolidated
financial statements of WellPoint Health Networks Inc.
/s/ COOPERS & LYBRAND LLP
COOPERS & LYBRAND LLP
Los Angeles, California
July 31, 1997
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference, in the Registration
Statement (Form S-8) of WellPoint Health Networks Inc. for the registration of
2,400,000 shares of its common stock pertaining to the WellPoint Health
Networks Inc. Stock Option\Award Plan, of our report dated May 12, 1997, with
respect to the combined financial statements of The Group Benefits Operations
of John Hancock Mutual Life Insurance Company and subsidiaries included in
Amendment No. 1 on Form 8-K/A to WellPoint Health Networks Inc.'s Current
Report on form 8-K dated March 1, 1997, filed with the Securities Exchange
Commission.
ERNST & YOUNG, L.L.P.
Boston, Massachusetts
August 1, 1997
<PAGE> 1
WELLPOINT HEALTH NETWORKS INC. STOCK OPTION/AWARD PLAN
[AS AMENDED THROUGH JANUARY 15, 1997]
ARTICLE ONE
GENERAL PROVISIONS
1.1 PURPOSE OF THE PLAN
This WellPoint Health Networks Inc. Stock Option\Award Plan ("Plan"),
originally adopted effective January 1, 1994 ("Effective Date"), is intended to
enable WellPoint Health Networks Inc. ("Company") to offer options, restricted
stock, performance shares, performance units, phantom stock, and automatic
stock appreciation rights to the following eligible individuals ("Eligible
Individuals"): Key employees and officers, consultants and independent
contractors of the Company or of an affiliate ("Affiliate") of the Company
linked to the Company by a 50% or greater chain of ownership. For these
purposes, ownership means ownership of stock possessing 50% or more of the
total combined voting power of the owned entity. In addition to the
aforementioned discretionary grants, this Plan provides for automatic stock
grants to non- employee members of the Board of Directors of the Company
("Board").
1.2 ADMINISTRATION OF THE PLAN
A. Committee. The Plan will be administered by a committee
or committees appointed by the Board and consisting of two or more members of
the Board. The Board may delegate responsibility for administration of the
Plan with respect to designated grant and award recipients to different
committees, subject to such limitations as the Board deems appropriate.
Members of a committee will serve for such term as the Board may determine, and
may be removed by the Board at any time. The term "Committee," when used in
this Plan, refers to the committee that has been delegated authority with
respect to a matter.
In determining the composition of any committee or subcommittee, the
Board or committee, as the case may be, shall consider the desirability of
compliance with the compositional requirements of (i) Rule 16b-3 of the
Securities and Exchange Commission with respect to award holders who are
subject to the trading restrictions of Section 16(b) of the Securities and
Exchange Act of 1934 ("1934 Act") with respect to securities of the Corporation
and (ii) Section 162(m) of the Internal Revenue Code ("Code") with respect to
performance units, but shall not be bound by such compliance.
B. Authority. Each Committee has full authority to
administer the Plan within the scope of its delegated responsibilities,
including authority to interpret and construe any relevant provision of the
Plan, to adopt rules and regulations that it deems necessary, to determine
which individuals are Eligible Individuals and which Eligible Individuals are
to receive grants and/or awards under the Plan, to determine the amount and/or
number of shares subject to such a grant or award, and to determine the terms
of such a grant or award made under the Plan (which terms need not be
identical). Decisions of a Committee made within the discretion delegated to
it by the Board are final and binding on all persons.
1.3 STOCK SUBJECT TO THE PLAN
A. Number of Shares. Shares of the Company's Common Stock
("Common Stock") available for issuance under the Plan will be drawn from the
Company's authorized but unissued shares of
<PAGE> 2
Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Company on the open market. The number of shares of Common
Stock that may be issued under the Plan will not exceed 5 million, after
adjustment for the Company's 1996 recapitalization and subject to further
adjustment in accordance with the terms of the Plan. Not more than 5 million
shares, after adjustment for the Company's 1996 recapitalization and subject to
further adjustment as provided in Paragraph 1.3.D., may be subject to Incentive
Options (as defined below).
B. Affiliate Stock. Subject to such limits, regulatory
approvals and stockholder approvals as the Committee determines to be
necessary, Common Stock issuable under the Plan may include the stock of an
Affiliate, a subsidiary, or a joint venture in which the Company is a
participant.
C. Expired Grants and Awards. If any outstanding grant or
award under the Plan expires, is terminated, is cancelled or is forfeited for
any reason before the full number of shares governed by the grant or award are
issued, those remaining shares will not be charged against the limit in
Paragraph A above and will become available for subsequent grants and awards
under the Plan. Shares forfeited to or repurchased by the Company pursuant to
its forfeiture and repurchase rights under this Plan will become available for
subsequent grants and awards under the Plan. Notwithstanding the foregoing,
shares for which a cash payment is made in lieu of payment in stock will not be
available for subsequent grants and awards under this Plan.
D. Adjustments. If any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without receipt of
consideration, then appropriate adjustments will be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the number
and/or class of securities and price per share in effect under automatic option
grants to directors and each outstanding grant and award under the Plan and
(iii) the maximum number of shares issuable to one individual pursuant to
Paragraph 1.3.E. The purpose of these adjustments will be to preclude the
enlargement or dilution of rights and benefits under the grants and awards.
E. Individual Limit. No Eligible Individual will receive
options, restricted stock, performance shares, performance units, phantom
stock, automatic stock appreciation rights or any combination of each under
this Plan for more than 1 million shares (subject to adjustment as provided in
Paragraph 1.3.D.) during any five-year period.
ARTICLE TWO
OPTIONS
2.1 TERMS AND CONDITIONS OF OPTIONS
A. Type and Term. The Committee has full authority to
determine whether options are to be incentive stock options ("Incentive
Options") that satisfy the requirements of Section 422 of the Internal Revenue
Code or non-qualified options not intended to satisfy those requirements
("Non-Qualified Options"), the time or times at which grants become
exercisable, and the maximum term for which grants remain outstanding. No
grants under the Plan will be exercisable after the expiration of 10 years from
the date of grant.
B. Price. The option price per share will be fixed by the
Committee; provided, however, that in no event will the option price per share
for Incentive Options be less than 100% of the Fair Market Value of a share of
Common Stock on the date of the grant.
<PAGE> 3
C. Exercise and Payment. After any option granted under the
Plan becomes exercisable, it may be exercised by notice to the Company at any
time before termination of the option. The option price will be payable in
full in cash or check made payable to the Company; provided, however, that the
Committee may, either at the time the option is granted or at any subsequent
time, and subject to such limitations as it may determine, authorize payment of
all or a portion of the option price in one or more of the following
alternative forms:
(1) in shares of Common Stock valued as of the Exercise
Date (defined below) and held for the requisite period to avoid a charge to
earnings; or
(2) through a sale and remittance procedure under which
the option holder delivers a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale proceeds to pay the option price.
For purposes of Subparagraph (2) immediately above, the "Exercise Date" is the
date on which written notice of the exercise of the option is delivered to the
Company. In all other cases, the Exercise Date is the date on which written
notice and actual payment is received by the Company.
D. Stockholder Rights. An option holder will have no
stockholder rights with respect to any shares covered by an option before the
Exercise Date of the option, as defined in the immediately preceding Paragraph.
E. Separation from Service. The Committee will determine and
set forth in each option whether the option will continue to be exercisable,
and the terms of such exercise, on and after the date that an optionee ceases
to be employed by or to provide services to the Company or an Affiliate. The
date of termination of an optionee's employment or services will be determined
by the Committee, which determination will be final.
F. Incentive Options. Options granted under the Plan that
are intended to be Incentive Options and will be subject to the following
additional terms:
(1) Dollar Limit. To the extent that the aggregate fair
market value (determined as of the respective date or dates of grant) of shares
with respect to which options that would otherwise be Incentive Options are
exercisable for the first time by any individual during any calendar year under
the Plan (or any other plan of the Company, a parent or subsidiary corporation
or predecessor thereof) exceeds the sum of $100,000 (or a greater amount
permitted under the Internal Revenue Code), whether by reason of acceleration
or otherwise, those options will not be treated as Incentive Options. In
making this determination, options will be taken into account in the order in
which they were granted.
(2) 10% Stockholder. If any employee to whom an
Incentive Option is to be granted is, on the date of grant, the owner of stock
(determined using the attribution rules of Section 424(d) of the Internal
Revenue Code) possessing more than 10% of the total combined voting power of
all classes of stock of his or her employer corporation or of its parent or
subsidiary ("10% Stockholder"), then the following special provisions will
apply to the option granted to that individual:
(i) The option price per share of the stock
subject to that Incentive Option will not be less than 110% of the Fair Market
Value of the option shares on the date of grant; and
(ii) The option will not have a term in excess of 5 years from the date of
grant.
(3) Parent and Subsidiary. For purposes of this
Paragraph, "parent" and "subsidiary" will have the meaning attributed to those
terms, as they are used in Section 422(b) of the Internal Revenue Code.
<PAGE> 4
(4) Employees. Incentive Options may only be granted to
employees of the Company or of a parent or subsidiary.
G. Transferability. During the lifetime of the optionee,
options will be exercisable only by the optionee and will not be assignable or
transferable by the optionee otherwise than by Will or by the laws of descent
and distribution following the optionee's death. However, if and to the extent
that the Committee so authorizes at the time an award is granted or amended, an
option or other award may, in connection with the holder's estate plan, be
assigned in whole or in part during the grantee's lifetime to one or more
members of the grantee's immediate family or to a trust established exclusively
for one or more such family members. Rights under the assigned portion may
only be exercised by the person or persons who acquire a proprietary interest
in the award pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the award immediately prior to
such assignment and shall be set forth in such documents issued to the assignee
as the Committee may deem appropriate.
2.2 CORPORATE TRANSACTIONS
A. Termination. In the event of the disposition of all or
substantially all of the assets or outstanding capital stock of the issuer of
Common Stock by means of a sale, merger, reorganization, or liquidation, each
award under this Plan will terminate unless assumed pursuant to a written
agreement by the successor corporation or a parent or subsidiary thereof.
B. Corporate Structure. The grant of awards under this Plan
will in no way affect the right of the issuer of Common Stock to adjust,
reclassify, reorganize, or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
2.3 REPURCHASE RIGHTS
The Committee may in its discretion determine that it shall be a term
and condition of one or more options exercised under the Plan that the Company
or its assigns will have the right, exercisable upon the optionee's separation
from service with the Company and/or its Affiliates, to repurchase any or all
of the shares of Common Stock previously acquired by the optionee upon the
exercise of that option. Any such repurchase right will be exercisable on such
terms and conditions (including the establishment of the appropriate vesting
schedule and other provisions for the expiration of the repurchase right in one
or more installments) as the Committee may specify in the instrument evidencing
the right. The Committee will also have full power and authority to provide
for the automatic termination of repurchase rights, in whole or in part,
thereby accelerating the vesting of any or all of the purchased shares.
ARTICLE THREE
RESTRICTED STOCK, PERFORMANCE SHARES,
PERFORMANCE UNITS, AND PHANTOM STOCK
3.1 RESTRICTED STOCK
Restricted stock granted under the Plan consists of shares of Common
Stock (together with cash dividend equivalents if so determined by the
Committee), the retention and transfer of which is subject to such terms,
conditions and restrictions (whether based on performance standards or periods
of service or otherwise and including repurchase and/or forfeiture rights in
favor of the Company) as the Committee shall
<PAGE> 5
determine. The terms, conditions and restrictions to which restricted stock is
subject will be evidenced by such instruments as the Committee may from time to
time approve and may vary from grant to grant. The Committee has the absolute
discretion to determine whether any consideration (other than the services of
the potential award holder) is to be received by the Company or its Affiliates
as a condition precedent to the issuance of restricted stock.
3.2 PERFORMANCE SHARES
Performance shares granted under the Plan consist of the right, subject
to such terms, conditions and restrictions as the Committee may determine
(including, but not limited to performance standards), to receive a share of
Common Stock. Performance shares will be evidenced by such instruments as the
Committee may from time to time approve. The Committee has the absolute
discretion to determine whether any consideration (other than the services of
the potential award holder) is to be received by the Company or its Affiliates
as a condition precedent to the issuance of shares pursuant to performance
shares. The terms, conditions and restrictions to which performance shares are
subject may vary from grant to grant.
3.3 PHANTOM STOCK
Phantom stock granted under the Plan consists of the right to receive
an amount in cash equal to the Fair Market Value of one share of Common Stock
on the date of valuation of the phantom stock (together with cash dividend
equivalents if so determined by the Committee) less such amount, if any, as the
Committee shall specify. Phantom stock will be evidenced by such instruments
as the Committee may from time to time approve. The date of valuation and
payment of cash under phantom stock and the conditions, if any, to which such
payment will be subject (whether based on performance standards or periods of
service or otherwise) will be determined by the Committee.
3.4 PERFORMANCE UNITS
Performance units granted under the Plan consist of the right to
receive cash, subject to such terms, conditions and restrictions (including,
but not limited to performance standards) as the Committee may determine.
Performance units will be evidenced by such instruments as the Committee may
from time to time approve. The terms, conditions and restrictions to which
performance units are subject may vary from grant to grant.
3.5 CASH PAYMENTS
The Committee may provide award holders with an election, or require a
holder, to receive a portion of the total value of the Common Stock subject to
restricted stock or performance shares in the form of a cash payment, subject
to such terms, conditions and restrictions as the Committee may specify.
3.6 ELECTIVE AND TANDEM AWARDS
The Committee may award stock options, restricted stock, performance
shares, phantom stock and performance units independently of other compensation
or in lieu of other compensation whether at the election of the potential award
holder or otherwise. The number of shares subject to options or shares of
restricted stock, phantom stock, performance shares, or performance units to be
awarded in lieu of other compensation will be determined by the Committee in
its sole discretion and need not be equal to the foregone compensation in Fair
Market Value. In addition, stock options, restricted stock, performance
<PAGE> 6
shares, phantom stock and performance units may be awarded in tandem, so that a
portion of that award becomes payable or becomes free of restrictions only if
and to the extent that the tandem award is not exercised or is forfeited,
subject to such terms and conditions as the Committee may specify.
ARTICLE FOUR
AUTOMATIC STOCK GRANTS TO NON-EMPLOYEE DIRECTORS
In consideration of their past services, individuals who have been
non-employee members of the Board for at least six full calendar months on the
Automatic Grant Date defined below ("Independent Directors") will automatically
be granted Common Stock ("Automatic Stock Grants") for the number of shares of
Common Stock set forth below (subject to adjustment under Paragraph 1.3.D. of
this Plan) on the dates and terms set forth below.
A. No Discretion. No person will have any discretion to
select which Independent Directors will be granted Common Stock or to determine
the number of shares of Common Stock to be granted to Independent Directors;
provided, however, that nothing in this Plan will be construed to prevent an
Independent Director from declining to receive Common Stock under this Plan.
B. Grants. On the last business day of the second
quarter of each fiscal year of the Company that occurs after all approvals
referenced in Paragraph 5.4.C. of the Plan have been obtained ("Automatic Grant
Date") each continuing Independent Director will automatically receive 800
shares of Common Stock; provided that with respect to the initial Automatic
Grant Date on June 30, 1996, the grant will consist of 500 shares and the
delivery of 167 of those shares will be deferred until, and conditioned upon,
shareholder approval of the amendment to the Plan increasing the number of
shares from 333 to 500 (all figures are as adjusted for the Company's 1996
recapitalization and are subject to further adjustment under Section 1.3.D).
ARTICLE FIVE
MISCELLANEOUS
5.1 AMENDMENT
A. Board Action. The Board may amend, suspend or discontinue
the Plan in whole or in part at any time; provided, however, that (1) except
to the extent necessary to qualify as Incentive Options any or all options
granted under the Plan that are intended to so qualify, such action shall not
adversely affect a holder's rights and obligations with respect to grants and
awards at the time outstanding under the Plan and (2) certain amendments may,
as determined by the Board in its sole discretion, require stockholder approval
pursuant to applicable laws or regulations.
B. Modification of Grants and Awards. The Committee has full
power and authority to modify or waive any or all of the terms, conditions or
restrictions applicable to any outstanding grant or award under the Plan (other
than an Automatic Stock Grant), to the extent not inconsistent with the Plan;
provided, however, that no such modification or waiver shall, without the
consent of the holder of the grant or award, adversely affect the holder's
rights thereunder.
5.2 TAX WITHHOLDING
<PAGE> 7
A. Obligation. The Company's obligation to deliver shares or
cash upon the exercise of grants and awards under the Plan is subject to the
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements.
B. Stock Withholding. The Committee may require or permit,
in its discretion and upon such terms and conditions as it may deem appropriate
(including the applicable safe-harbor provisions of SEC Rule 16b-3) any or all
holders of outstanding grants or awards under the Plan to elect to have the
Company withhold, from the shares of Common Stock otherwise issuable pursuant
to such grant or award, one or more of such shares with an aggregate Fair
Market Value equal to the Federal, State and local employment and income taxes
("Taxes") incurred in connection with the acquisition of such shares. Holders
of grants or awards under the Plan may also be granted the right to deliver
previously acquired shares of Common Stock held for the requisite period to
avoid a charge to earnings in satisfaction of such Taxes. The withheld or
delivered shares will be valued at Fair Market Value on the applicable
determination date for such Taxes.
5.3 VALUATION
For all purposes under this Plan, the fair market value per share of
Common Stock on any relevant date under the Plan ("Fair Market Value") will be
determined as follows:
(1) National Exchange. If the Common Stock is at the
time listed or admitted to trading on any national stock exchange, then the
Fair Market Value will be the closing selling price per share of Common Stock
on the day before the date in question on the stock exchange determined by the
Committee to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Common Stock on such exchange on the day before
the date in question, then the Fair Market Value will be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.
(2) NASDAQ. If the Common Stock is not at the time
listed or admitted to trading on any national stock exchange but is traded in
the over-the-counter market, the fair market value will be the mean between the
highest bid and lowest asked prices (or, if such information is available, the
closing selling price) per share of Common Stock on the date in question in the
over-the-counter market, as such prices are reported by the National
Association of Securities Dealers through its NASDAQ system or any successor
system. If there are no reported bid and asked prices (or closing selling
price) for the Common Stock on the date in question, then the mean between the
highest bid price and lowest asked price (or the closing selling price) on the
last preceding date for which such quotations exist will be determinative of
fair market value.
(3) Committee. Notwithstanding the foregoing, if the
Committee determines that, as a result of circumstances existing on any date,
the use of the above rules is not a reasonable method of determining Fair
Market Value on that date or if Common Stock is not at the time listed or
admitted to trading as outlined above, the Committee may use such other method
as, in its judgment, is reasonable.
5.4 EFFECTIVE DATE AND TERM OF PLAN
A. Effective Date. This Plan will become effective on the
Effective Date, but no Common Stock will be issued under the Plan before the
Plan is approved by the holders of at least a majority of the Company's voting
stock. If such stockholder approval is not obtained within twelve (12) months
of the Effective Date of the Plan, then all grants and awards under the Plan
will terminate, and no further grants or awards will be made under the Plan.
<PAGE> 8
B. Term. No options or other awards may be granted under the
Plan after June 10, 2002 ("Termination Date"), the date five years following
approval of the Plan, as amended through January 15, 1997, by the shareholders
of the Company. Subject to this limit, the Committee may make grants and
awards under the Plan at any time after the Effective Date of the Plan and
before the Termination Date.
C. Approvals. The Plan was originally approved by
shareholders on May 10, 1994 and its implementation was approved by the
California Department of Corporations in connection with the Company's 1996
Recapitalization. The Board subsequently amended the Plan, as reflected in
this document, for submission to the shareholders at the Company's 1997 annual
meeting of shareholders. If shareholder approval of such amendments is not
obtained at such meeting, the Plan shall continue in accordance with its terms
as in existence before such amendments; provided, however, that the maximum
number of shares with respect to which awards may be made to a single
individual shall be increased to 1,000,000 shares and the maximum number of
shares issuable under the Plan shall be increased solely to the extent to
permit full exercise or settlement of awards made by the Committee through
February, 1997. The Board may, in its discretion, condition any award under
the Plan upon obtaining any other required or desired regulatory approvals.
5.5 USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares
pursuant to grants and awards under the Plan will be used for general corporate
purposes.
5.6 NO EMPLOYMENT/SERVICE RIGHTS
Neither the establishment of this Plan, nor any action taken under the
terms of this Plan, nor any provision of this Plan will be construed to grant
any individual the right to remain in the employ or service of the Company (or
any subsidiary or parent of the Company) for any period of specific duration,
and the Company (or any subsidiary or parent of the Company retaining the
services of such individual) may terminate such individual's employment or
service at any time and for any reason, with or without cause. Nothing
contained in this Plan or in any grant or award under this Plan will affect any
contractual rights of an employee or other service provider pursuant to a
written employment or service agreement executed by both parties.
