SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TRIGON HEALTHCARE, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[Trigon logo here]
TRIGON HEALTHCARE, INC.
2015 STAPLES MILL ROAD
RICHMOND, VIRGINIA 23230
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 16, 1997
TO THE HOLDERS OF TRIGON HEALTHCARE, INC. CLASS A COMMON STOCK:
The annual meeting of shareholders of Trigon Healthcare, Inc. (the
"Company") will be held at the Company's headquarters, 2015 Staples Mill Road,
Richmond, Virginia, on Wednesday, April 16, 1997, at 9:00 a.m., Eastern Daylight
Time, for the following purposes:
1. To elect five directors to three-year terms to serve on the Company's
Board of Directors;
2. To consider and vote upon the Company's 1997 Stock Incentive Plan;
3. To consider and vote upon the Company's Employee Stock Purchase Plan;
4. To consider and vote upon the Company's Non-Employee Directors Stock
Incentive Plan;
5. To ratify the selection of KPMG Peat Marwick LLP as the independent
auditors for the Company for 1997; and
6. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of shares of Class A Common Stock at the close of
business on March 6, 1997, will be entitled to vote at the meeting and any
adjournments thereof.
Whether or not you plan to attend the meeting, please fill in, date, sign
and return the enclosed proxy promptly in the enclosed envelope.
You are cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ J. Christopher Wiltshire
-----------------------------------
J. Christopher Wiltshire, Secretary
Richmond, Virginia
March 13, 1997
<PAGE>
PROXY STATEMENT
Trigon Healthcare, Inc.
2015 Staples Mill Road
Richmond, Virginia 23230
This Proxy Statement, mailed to shareholders on or about March 14, 1997, is
furnished in connection with the solicitation by Trigon Healthcare, Inc. (the
"Company") of proxies in the accompanying form for use at the annual meeting of
shareholders to be held on April 16, 1997, and at any adjournments thereof. A
copy of the annual report of the Company for the fiscal year ended December 31,
1996 is being mailed to you with this Proxy Statement. The annual report
includes financial results for Trigon Insurance Company, d/b/a Trigon Blue Cross
Blue Shield, formerly Blue Cross and Blue Shield of Virginia, a wholly-owned
subsidiary of the Company and its principal operating subsidiary ("Trigon
BCBS").
In addition to the solicitation of proxies by mail, the Company's officers
and regular employees, without compensation other than regular compensation, may
solicit proxies by telephone, telegraph, electronic means and personal
interview. The Company may also engage, at its sole cost, a proxy solicitation
firm to assist in the solicitation of proxies of shareholders of record and
those shareholders whose shares are held in street name by brokers, banks and
other institutions.
On March 6, 1997, the date for determining shareholders entitled to vote at
the meeting, 42,300,022 shares of Class A Common Stock of the Company ("Common
Stock") were outstanding and entitled to vote. Each such share of Common Stock
entitles the holder thereof to one vote.
Any shareholder giving a proxy may revoke it at any time before it is voted
by delivering another proxy or written notice of revocation to the Company's
Secretary. A proxy, if executed and not revoked, will be voted FOR the election
of the nominees for director named herein, FOR the approval of the Company's
1997 Stock Incentive Plan, FOR the approval of the Company's Employee Stock
Purchase Plan, FOR the approval of the Company's Non-Employee Directors Stock
Incentive Plan and FOR the ratification of KPMG Peat Marwick LLP as the
Company's independent auditors for 1997, unless it contains specific
instructions to the contrary, in which event it will be voted in accordance with
such instructions.
A majority of the votes entitled to be cast on matters to be considered at
the meeting constitutes a quorum. If a share is represented for any purpose at
the meeting, it is deemed to be present for quorum purposes and for all other
matters as well. Abstentions and shares held of record by a broker or its
nominee ("Broker Shares") that are voted on any matter are included in
determining the number of votes present or represented at the meeting. Broker
Shares that are not voted on any matter at the meeting will not be included in
determining whether a quorum is present at such meeting. If a shareholder
returns a duly executed proxy card and no choice is specified, the shareholder's
shares will be voted FOR Items 1-5 on the proxy card and at the discretion of
the proxyholder for any other matters as may be properly brought before the
meeting or any adjournment thereof.
Votes will be tabulated by one or more Inspectors of Elections. The
election of each nominee for director requires the affirmative vote of the
holders of a plurality of the shares of Common Stock cast in the election of
directors. Votes that are withheld and Broker Shares that are not voted in the
election of directors will not be included in determining the number of votes
cast and, therefore, will have no effect on the election of directors. The
affirmative vote of the holders of a majority of the votes cast will be required
to act on all other matters to come before the Annual Meeting, including (i) the
approval of the Company's 1997 Stock Incentive Plan, (ii) the approval of the
Company's Employee Stock Purchase Plan, (iii) the approval of the Company's
Non-Employee Directors Stock Incentive Plan and (iv) the ratification of the
selection of KPMG Peat Marwick LLP as the independent auditors for the Company
for 1997.
ITEM ONE -- ELECTION OF DIRECTORS
The Company's Board of Directors (the "Board") presently consists of 18
directors, who are divided into three classes with staggered terms. The terms of
Hunter B. Andrews, Lenox D. Baker, Jr., M.D., John L. Colley, Jr., Ph.D., Frank
C. Martin, Jr., Donald B. Nolan, M.D. and Hubert R. Stallard as directors of the
Company will expire at the time of the 1997 Annual Meeting of shareholders. With
the exception of Dr. Colley, each such director has been nominated for
reelection at the 1997 Annual Meeting. After 16 years of service on the Board,
Dr. Colley is not standing for reelection. The Company is extremely grateful for
Dr. Colley's years of valued service. After the 1997 Annual Meeting, the Board
will reduce the number of directors from 18 to 17; therefore, there will be no
vacancies on the Board.
Pursuant to Trigon BCBS's Amended and Restated Plan of Demutualization
dated October 31, 1996, in February 1997 the Company caused to be elected as
directors two nominees, one of whom was selected from a list of nominees
submitted by the Virginia Attorney General and one of whom was selected from a
list of nominees submitted by the Joint Rules Committee of the Virginia General
Assembly. Messrs. Andrews and Stallard are the two directors elected pursuant to
these provisions.
<PAGE>
Although all the nominees have consented to being named as a nominee in the
Proxy Statement and have indicated their willingness to serve if elected, if at
the time of the meeting any nominee is unable to or unwilling to serve, shares
represented by properly executed proxies will be voted at the discretion of the
persons named therein for such other person as the Board may designate.
Information, including their business experience for the past five years,
about the nominees for election as directors, about other directors of the
Company whose terms of office do not expire this year and about the Company's
executive officers appears below. For the purposes of determining when a
director was first elected to the Board, reference is made to the year when the
respective director was first elected to the Board of Directors of the Company
or Trigon BCBS.
NOMINEES FOR ELECTION TO A THREE-YEAR TERM
HUNTER B. ANDREWS was elected to the Board in February 1997. He has been an
attorney in private practice for more than five years. He was a member of the
Virginia State Senate from 1964 to 1996. Mr. Andrews is 75.
LENOX D. BAKER, JR., M.D. was elected to the Board in 1985. He has been a
Norfolk cardiac and thoracic surgeon, and has been affiliated with Mid-Atlantic
Cardiothoracic Surgeons, Ltd., since 1979. He is also chief of the Division of
Cardiac and Thoracic Surgery at Sentara Hospitals, and an assistant professor of
surgery at the Medical College of Hampton Roads. Dr. Baker is President of the
Medical Staff at Sentara Norfolk General Hospital. Dr. Baker is 55.
FRANK C. MARTIN, JR. was elected to the Board in 1975. He is Chairman,
Founder, and since 1970 has been Chief Executive Officer of Martin Research,
Inc., in Roanoke, Virginia. Mr. Martin is 64.
DONALD B. NOLAN, M.D. was elected to the Board in 1983. He has been a
practicing neurologist in the Roanoke, Virginia area since 1971, and is
currently affiliated with the Roanoke Neurological Associates and is Director of
the Electro-Diagnostic Laboratory at Roanoke Memorial Hospital. Dr. Nolan is 57.
HUBERT R. STALLARD was elected to the Board in February 1997. He is
President and Chief Executive Officer of Bell Atlantic-Virginia, Inc., a
position he has held for more than five years. He is a director of NationsBank,
N.A., Universal Corporation and Bell Atlantic-Virginia, Inc. Mr. Stallard is 60.
DIRECTORS WHOSE TERMS DO NOT EXPIRE THIS YEAR
JAMES K. CANDLER was elected to the Board in 1984. He has been President
and owner of Candler Oil Company in Lynchburg since 1960. Mr. Candler is a
director of Central Health, Inc. and First Federal Savings Bank of Lynchburg.
Mr. Candler is 61 and his term as a director will expire in 1998.
JOHN COLE, JR., M.D. was elected to the Board in 1972 and is a past
Chairman of the Board. He is a Roanoke ear, nose, and throat specialist, and has
been President of Roanoke Ear, Nose and Throat Clinic, Inc. since 1990, prior to
which he held the position of Vice President beginning in 1975. Dr. Cole is 64
and his term as a director will expire in 1999.
NORWOOD H. DAVIS, JR. joined Trigon BCBS in 1968, and was elected to the
Board in 1975. Since 1989, he has served as Chairman of the Board and Chief
Executive Officer of Trigon BCBS. He became Chairman of the Company in June
1995. Mr. Davis is a director of Signet Banking Corporation, Altris Software
Inc. and Hilb, Rogal & Hamilton Co. Mr. Davis is 57 and his term as a director
will expire in 1999.
ROBERT M. FREEMAN was elected to the Board in 1993. He was Chairman of
Signet Banking Corporation from 1990 through December 1996 and served as Chief
Executive Officer from April 1989 to May 1996. Mr. Freeman is a director of
Signet Banking Corporation. Mr. Freeman is 55 and his term as a director will
expire in 1999.
WILLIAM R. HARVEY, PH.D. was elected to the Board in 1992. He has been
President of Hampton University in Hampton, Virginia, since 1978 and owner of
the Pepsi-Cola Bottling Company, Houghton, Michigan since 1986. Dr. Harvey is a
director of Signet Banking Corporation. Dr. Harvey is 56 and his term as a
director will expire in 1998.
ELIZABETH G. HELM was elected to the Board in 1993. She has been President
of Glaize Developments, Inc. in Winchester, Virginia, since 1980. Ms. Helm is a
director of Signet Banking Corporation and Shenandoah Life Insurance Company.
Ms. Helm is 65 and her term as a director will expire in 1999.
GARY A. JOBSON was elected to the Board in 1987. He has been a marketing
and product development consultant through his company, Maritime Productions
since 1978. He is a director of the Blakeslee Group and Sunfish/Laser, Inc. Mr.
Jobson is 46 and his term as a director will expire in 1998.
2
<PAGE>
WILLIAM N. POWELL was elected to the Board in 1980. He has been President
of Salem Tools, Inc. since 1981, and is a director of Central Fidelity Bank
(regional) and the Mechanical Development Company, Inc. Mr. Powell is 53 and his
term as a director will expire in 1998.
J. CARSON QUARLES was elected to the Board in 1977. He has been Chairman of
the Board of Friendship Manor, Inc. in Roanoke, Virginia since 1981. At the end
of 1994 he retired from an eight-year term as President of the Southwestern
Region of Central Fidelity Bank. Mr. Quarles is 60 and his term as a director
will expire in 1998.
R. GORDON SMITH was elected to the Board in 1995. He has been a partner
with McGuire, Woods, Battle & Boothe, L.L.P. in Richmond, Virginia since 1969.
Mr. Smith serves on the board of Scott & Stringfellow Financial, Inc. Mr. Smith
is 58 and his term as a director will expire in 1998.
JACKIE M. WARD was elected to the Board in 1993. She is a founder and has
served as Chief Executive Officer of Atlanta-based Computer Generation
Incorporated since 1970. Ms. Ward serves on the boards of NationsBank, Matria
Healthcare, Inc. and SCI Systems Inc. Ms. Ward is 58 and her term as a director
will expire in 1999.
STIRLING L. WILLIAMSON, JR. was elected to the Board in 1979. He has been
President of S.L. Williamson Company, Inc. in Charlottesville, Virginia since
1971. Mr. Williamson is a director of Jefferson National Bank. Mr. Williamson is
61 and his term as a director will expire in 1999.
OTHER EXECUTIVE OFFICERS OF THE COMPANY AND ITS SUBSIDIARIES
PHYLLIS L. COTHRAN joined Trigon BCBS in 1972. She held various positions
in the Finance Department prior to becoming the Chief Financial Officer of
Trigon BCBS in 1981. She was elected to the position as President and Chief
Operating Officer of Trigon BCBS in November 1990. She became President of the
Company in June 1995. Ms. Cothran serves as a director of Ethyl Corporation,
Tredegar Industries, Inc. and Central Fidelity Banks, Inc. Ms. Cothran is 50. On
February 19, 1997, Ms. Cothran announced her resignation from the Company and
its subsidiaries effective March 31, 1997.
RONALD H. BARGATZE has held a variety of positions since joining Trigon
BCBS in 1974. From 1987 to 1990 he served as Vice President of Consolidated
Healthcare, Inc., an affiliate of Trigon BCBS, until being named Senior Vice
President and Chief Operating Officer of the Small Business Unit of Trigon BCBS
in 1990. He became Executive Vice President for Operations Support and Chief
Operating Officer of the Small Business Unit of Trigon BCBS in 1992, and was
appointed to his current position of Executive Vice President and Chief
Operating Officer of Integrated Health Systems in April 1994. Mr. Bargatze is
46.
JOHN C. BERRY joined Trigon BCBS in 1987. He served as Chief Operating
Officer of Government and Individual Business from 1987 through 1989 and as
Senior Vice President and Chief Operating Officer of Government and Individual
Business during 1990. In71991, he was appointed to his current position of
Executive V ice President and Chief Operating Officer of Government and
Individual Business. Mr. Berry is 59.
ELMOND A. KENYON joined Trigon BCBS in October 1996 as Senior Vice
President, Local Markets. Prior to joining Trigon BCBS, he was employed by CIGNA
Corporation since 1986. Since July 1995, he served CIGNA Corporation as Vice
President/General Manager, Cigna Health Care of Ohio. From September 1994 to
July 1995 he served as General Manager, Cigna Health of Ohio. From June 1990 to
September 1994, he served as a CIGNA Regional Marketing and Sales Officer. Mr.
Keynon is 48.
PAUL F. NEZI joined Trigon BCBS in October 1996 as Senior Vice President,
Marketing and Underwriting. Prior to joining Trigon BCBS, he served as Executive
Vice President and Chief Marketing Officer of Choice Care in Cincinnati, Ohio
since 1993. Beginning in November 1995, he also served as President of Choice
Care's Development Division. From 1991 through 1992, he served as Vice President
and General Manager for the Advanced Imaging Products group of AM Graphics, a
division of AM International in Dayton, Ohio. Mr. Nezi is 49.
THOMAS G. SNEAD, JR. joined Trigon BCBS in 1985. He served as Group
Financial Officer of Trigon BCBS from 1989 to 1990, when he was appointed to his
current position of Senior Vice President and Chief Financial Officer. He became
Treasurer of the Company in June 1995. Mr. Snead is 43.
J. CHRISTOPHER WILTSHIRE joined Trigon BCBS in October 1996 as Senior Vice
President, General Counsel and Corporate Secretary. He also became Secretary of
the Company in October 1996. Prior to joining the Company, he was employed by
the law firm, McGuire, Woods, Battle & Boothe, L.L.P. for 17 years, the last
nine years as partner. Mr. Wiltshire is 42.
3
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information about the equity securities of
the Company beneficially owned as of March 1, 1997, by (i) each of the five
executive officers named in the Summary Compensation Table (the "Named Executive
Officers"); (ii) each director of the Company; (iii) the directors and executive
officers as a group; and (iv) each person who is known by the Company to own
beneficially more than 5 percent of the Company's outstanding equity securities.
Unless otherwise noted, each individual has sole voting power and sole
investment power with respect to securities beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED AS OF PERCENT OF
NAME MARCH 1, 1997 CLASS
- ---- ------------------------ ----------
<S> <C>
NAMED EXECUTIVE OFFICERS
Norwood H. Davis, Jr.** 50,300(1) *
Phyllis L. Cothran(2) 2,000 *
Ronald H. Bargatze 3,000 *
Manuel Deese(3) 0 *
John C. Berry 2,500 *
DIRECTORS/DIRECTOR NOMINEES
Hunter B. Andrews 1,000 *
Lenox D. Baker, Jr., M.D. 7,700 *
James K. Candler 3,500(4) *
John Cole, Jr., M.D. 1,000(5) *
John L. Colley, Jr., Ph.D. 1,000 *
Robert M. Freeman 5,000 *
William R. Harvey, Ph.D. 7,000 *
Elizabeth G. Helm 7,000 *
Gary A. Jobson 3,500 *
Frank C. Martin, Jr. 2,000(6) *
Donald B. Nolan, M.D. 4,000 *
William N. Powell 2,000(7) *
J. Carson Quarles 7,500(8) *
R. Gordon Smith 5,092(9) *
Hubert R. Stallard 500 *
Jackie M. Ward 2,000 *
Stirling L. Williamson, Jr. 1,000(10) *
All Directors, Director Nominees and Executive Officers as a group (26
persons) 130,192(11) *
BENEFICIAL OWNERS OF MORE THAN 5%
Fidelity Management and Research Company
82 Devonshire Street
Boston, MA 02109 2,874,600(12) 6.8%
</TABLE>
* Less than one percent of the Common Stock outstanding as of March 1, 1997.
** Mr. Davis is also a Director of the Company.
(1) Includes 200 shares owned by Mr. Davis' spouse.
(2) On February 19, 1997 Ms. Cothran announced her resignation from the Company
and its subsidiaries effective March 31, 1997.
(3) Mr. Deese retired from Trigon BCBS effective January 10, 1997.
(4) Excludes 1,718 shares held by Candler Oil Company, of which Mr. Candler is
the President and a shareholder. Mr. Candler disclaims beneficial ownership
of such shares.
(5) Excludes 611 shares held by Roanoke Ear, Nose and Throat Clinic, Inc., of
which Dr. Cole is the President. Dr. Cole disclaims beneficial ownership of
such shares.
4
<PAGE>
(6) Excludes 488 shares held by Martin Research, Inc., of which Mr. Martin is
Chairman and Chief Executive Officer. Mr. Martin disclaims beneficial
ownership of such shares.
(7) Excludes 6,841 shares held by Salem Tools, Inc., of which Mr. Powell is
President. Mr. Powell disclaims beneficial ownership of such shares.
(8) Excludes 7,018 shares held by Friendship Manor, Inc., of which Mr. Quarles
is Chairman. Mr. Quarles disclaims beneficial ownership of such shares.
(9) Excludes 11,098 shares held by McGuire, Woods, Battle & Boothe, L.L.P., of
which Mr. Smith is a partner. Mr. Smith disclaims beneficial ownership of
such shares.
(10) Excludes 8,541 shares held by S.L. Williamson Company, Inc., of which Mr.
Williamson is President. Mr. Williamson disclaims beneficial ownership of
such shares.
(11) Excludes 36,315 shares as to which the directors, director nominees and
executive officers as a group disclaim beneficial ownership.
(12) Fidelity Management and Research Company ("FMR") is the investment manager
for the Fidelity Investments group of mutual funds (the "Fidelity Funds").
FMR has advised the Company that as of March 6, 1997, the Fidelity Funds in
the aggregate held 2,874,600 shares of the Company's Common Stock
representing about 6.8% of the Common Stock outstanding. The largest
holding by any single Fidelity Fund was about 3.1% of the Common Stock
outstanding. The Company understands that FMR has the power to vote all of
the Common Stock held by the Fidelity Funds.
Trigon BCBS uses the Blue Cross and Blue Shield service marks and trade
names throughout most of Virginia pursuant to a trademark license from Blue
Cross and Blue Shield Association ("BCBSA"). The trademark license will
automatically terminate if any person acquires 20% or more of the Common
Stock of the Company. In addition, BCBSA may terminate the trademark
license if (i) any person acquires 5% or more of the Common Stock of the
Company, (ii) BCBSA concludes that such stock ownership is detrimental to
the Blue Cross and Blue Shield service marks and trade names, and (iii) a
super-majority of the disinterested members of BCBSA votes for termination.
BCBSA has advised the Company that it is reviewing the ownership of Common
Stock by the Fidelity Funds and that it may adopt guidelines that will
specify when stock ownership of between 5% and 20% will not be considered
detrimental to the service marks and trade names. Although the Company
cannot determine what conclusion BCBSA may reach, the Company does not
believe that BCBSA will conclude that Fidelity's ownership is detrimental
to the Blue Cross and Blue Shield service marks and trade names or that
BCBSA will seek to obtain the super-majority vote required to terminate the
trademark license.
CERTAIN INFORMATION CONCERNING THE
BOARD OF DIRECTORS AND ITS COMMITTEES
COMMITTEES OF THE BOARD
The Executive Committee is composed of J. Carson Quarles (Chairman), Lenox
D. Baker, Jr., M.D., James K. Candler, John L. Colley, Jr., Norwood H. Davis,
Jr., Elizabeth G. Helm and William N. Powell. Between meetings of the Board, the
Executive Committee has the authority of the Board, except to the extent such
authority is limited by the provisions of the Company's Articles of
Incorporation, the Bylaws or by Virginia law.
The Audit Committee is composed of James K. Candler (Chairman), Gary A.
Jobson, Frank C. Martin, Jr., Donald B. Nolan, M.D., R. Gordon Smith, Hubert R.
Stallard and Stirling L. Williamson, Jr. The Audit Committee has authority to
investigate the financial reporting processes and internal controls of the
Company and to report thereon and make its recommendations to the Board and to
the Executive Committee. The Audit Committee reviews the adequacy of internal
financial controls, reviews with the Company's independent public accountants
their reports, and recommends the selection of the Company's independent public
accountants.
The Human Resources, Compensation and Employee Benefits Committee is
composed of John L. Colley, Jr. (Chairman), Lenox D. Baker, Jr., M.D., William
R. Harvey, Elizabeth G. Helm, William N. Powell, Hubert R. Stallard and Jackie
M. Ward. The Human Resources, Compensation, and Employee Benefits Committee
considers management proposals, makes recommendations to the Board and, where
express authority is conferred by the Board, approves the compensation and
benefits programs for the officers and employees of the Company and its
subsidiaries.
5
<PAGE>
The Finance and Investment Committee is composed of William N. Powell
(Chairman), Hunter B. Andrews, John L. Colley, Jr., Robert M. Freeman, Frank C.
Martin, Jr., R. Gordon Smith and Jackie M. Ward. The Finance and Investment
Committee oversees the financial affairs and investments of the Company and its
subsidiaries and periodically reports to the Board on these affairs and
investments.
The Nominating and Corporate Governance Committee is composed of Elizabeth
G. Helm (Chairperson), Hunter B. Andrews, John Cole, Jr., M.D., Robert M.
Freeman, William7R. Harvey and Gary A. Jobson. The Nominating and Corporate
Governance Committee recommends to the Board those persons to be nominated for
election as directors of the Company. The Committee also recommends to the Board
persons to be elected as chairmen and members of the Executive Committee and
standing Board committees (except Chairman of the Audit Committee), and officers
of the Company. The Committee may also make recommendations to the Board on
corporate governance issues. The Nominating and Corporate Governance Committee
also reviews any actual or potential conflicts of interest involving any officer
or director of the Company.
The Provider Policy Committee is composed of Lenox D. Baker, Jr., M.D.
(Chairman), James K. Candler, John Cole, Jr., M.D., Donald B. Nolan, M.D. and
Stirling L. Williamson, Jr. The Provider Policy Committee reviews management
proposals, and makes recommendations to the Board with respect to the Company's
policies and procedures that have or will have a substantial impact upon
institutional and professional providers of health care services.
ATTENDANCE AT MEETINGS
As the Company was a wholly-owned subsidiary of Trigon BCBS prior to
February 5, 1997, the Board held only one meeting during 1996. Drs. Colley and
Harvey were not in attendance. There were no committee meetings held in 1996
because Board committees were not formed until January 1997.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company receive no
compensation as such for service as members of the Board or committees thereof.
Directors who are not officers or employees of the Company receive a quarterly
retainer of $3,500, a quarterly retainer of $250 to serve as a Committee
Chairman, a fee of $1,000 for each Board meeting attended, a fee of $250 for
attending a Committee meeting on a day on which a Board meeting is also held, a
fee of $500 for attending a Committee meeting on a day on which a Board meeting
is not held, a fee of $350 for attendance at a Board meeting held by conference
call and a fee of $100 for attending other Board related meetings. Fees paid to
Directors may be deferred under the Company's non-qualified deferred
compensation plan. See "Compensation of Executive Officers -- Deferred
Compensation." In addition, see the information contained in Item Four herein
concerning the provisions of the Company's Non-Employee Director Stock Incentive
Plan, which, if approved by shareholders at the 1997 Annual Meeting, will alter
the compensation paid to non-employee directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Human Resources, Compensation and Employee Benefits Committee of the
Board includes: John L. Colley, Jr. (Chairman), Lenox D. Baker, Jr., M.D.,
William R. Harvey, Elizabeth G. Helm, William N. Powell, Hubert R. Stallard and
Jackie M. Ward. None of the Committee members is or was an officer or employee
of the Company. There are executives and directors of the Company that also
serve on the Board of Directors of other entities. However, there are no
Compensation Committee interlocks between the Company and other entities.
NOMINATIONS FOR DIRECTORS
In accordance with the Company's Bylaws, a shareholder who is interested in
nominating a person to the Board should submit to the Secretary of the Company
written notice of his or her intent to make such nomination. To be timely, a
shareholder's notice must be given, either by personal delivery to the Secretary
or an Assistant Secretary of the Company at the principal office of the Company,
or by first class United States mail, with postage thereon prepaid, addressed to
the Secretary of the Company at the principal office of the Company. Any such
notice must be received (i) on or after the first day of February and before the
first day of March of the year in which the meeting will be held if the meeting
is to be an annual meeting and clause (ii) is not applicable, or (ii) not less
than 60 days before an annual meeting, if the date of the applicable annual
meeting, as prescribed in the Company's Bylaws, has been changed by more than 30
days, or (iii) not later than the close of business on the tenth day following
the day on which notice of a special meeting of shareholders called for the
purpose of electing directors is first given to shareholders. The contents of
such notice must be as specified in the Company's Bylaws, a copy of which may be
obtained by any shareholder who directs a written request for the same to the
Secretary of the Company.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company or any
of its subsidiaries to the chief executive officer and the other four most
highly compensated executive officers of the Company or any of its subsidiaries
for the year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION PAYOUTS
--------------------------------------------------------- ------------
OTHER ANNUAL LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) COMPENSATION ($)(2) PAYOUTS ($)
- --------------------------- ---- ------------- --------- ------------------- ------------
<S> <C>
Norwood H. Davis, Jr. 1996 $ 650,000 $ 0 $ 9,327 $ 0
Chairman of the Company; Chairman
and Chief Executive Officer of
Trigon BCBS
Phyllis L. Cothran (4) 1996 370,000 0 658 0
President of the Company;
President and Chief Operating
Officer of Trigon BCBS
Ronald H. Bargatze 1996 233,700 0 1,393 0
Executive VP & COO, Integrated
Health Systems, Trigon BCBS
Manuel Deese (5) 1996 211,800 0 828 0
Executive VP & COO, Major
Accounts, Trigon BCBS
John C. Berry 1996 200,700 0 1,478 20,070(6)
Executive VP & COO Government &
Individual Business, Trigon BCBS
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION ($)(3)
- --------------------------- -------------------
<S> <C>
Norwood H. Davis, Jr. $32,869
Chairman of the Company; Chairman
and Chief Executive Officer of
Trigon BCBS
Phyllis L. Cothran (4) 15,647
President of the Company;
President and Chief Operating
Officer of Trigon BCBS
Ronald H. Bargatze 10,967
Executive VP & COO, Integrated
Health Systems, Trigon BCBS
Manuel Deese (5) 8,673
Executive VP & COO, Major
Accounts, Trigon BCBS
John C. Berry 9,086
Executive VP & COO Government &
Individual Business, Trigon BCBS
</TABLE>
(1) Includes amounts deferred under Trigon BCBS's 401(k), 401(k) Restoration and
nonqualified deferred compensation plans.
(2) None of the named individuals received perquisites or other personal
benefits in excess of the lesser of $50,000 or 10% of the total of their
salary and bonus. Each named executive received a 1996 car allowance of
$9,400, which is not included above, but does exceed 25% of the aggregate
perquisite amount. Includes Medicare tax and related income tax gross-up
paid by Trigon BCBS or any of its subsidiaries for named executives on the
present value of their vested non-qualified Supplemental Executive
Retirement Plan benefit earned in 1996 in the amounts of $8,415 for Mr.
Davis, $1,248 for Mr. Bargatze, $735 for Mr. Deese, and $1,375 for Mr.
Berry. Includes Medicare tax and related income tax gross-up paid by Trigon
BCBS for named executives with respect to employer contributions under the
401(k) non-qualified Restoration Plan in the amounts of $393 for Mr. Davis,
$195 for Ms. Cothran, $145 for Mr. Bargatze, $93 for Mr. Deese, and $103 for
Mr. Berry. Includes income tax gross-up on spousal travel paid by Trigon
BCBS in the amount of $463 for Ms. Cothran. Includes income tax gross-up
paid by Trigon BCBS on a Trigon BCBS-sponsored non-cash Eagle Award of $519
for Mr. Davis.
(3) Includes matching contributions under Trigon BCBS's 401(k) and 401(k)
Restoration Plans in the amount of $22,050 for Mr. Davis, $13,200 for Ms.
Cothran, $10,967 for Mr. Bargatze, $8,673 for Mr. Deese, and $9,086 for Mr.
Berry. Includes actuarial equivalent of the benefit to the executive from
payment of annual premiums by Trigon BCBS under a split dollar life
insurance program in the amounts of $10,713 for Mr. Davis and $2,447 for Ms.
Cothran. Includes above-market interest credited for future payment on
deferred compensation in the amount of $106 for Mr. Davis.
(4) On February 19, 1997, Ms. Cothran announced her resignation from the Company
and its subsidiaries effective March 31, 1997.
(5) Mr. Deese retired from Trigon BCBS effective January 10, 1997.
(6) Payout of long-term cash award in 1997 for three year performance period
beginning January 1, 1994 and ending on December 31, 1996.
7
<PAGE>
The Long-Term Incentive Plan Table below provides information concerning
estimated award ranges for the cash plan initiated in 1996 based on the
performance period January 1, 1996 through December 31, 1998. Trigon BCBS's
Long-Term Incentive Plan is based on 3-year overlapping performance cycles.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE OR UNDER NON-STOCK PRICE BASED PLANS
UNITS OR OTHER OTHER PERIOD ---------------------------------
RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME # OR PAYOUT $ $ $
- ---- -------------- ---------------- --------- -------- --------
<S> <C>
Norwood H. Davis, Jr. N/A 1996-1998 $ 130,000 $260,000 $520,000
Phyllis L. Cothran N/A 1996-1998 64,750 129,500 259,000
Ronald H. Bargatze N/A 1996-1998 29,213 58,425 116,850
Manuel Deese N/A 1996-1998 26,475 52,950 105,900
John C. Berry N/A 1996-1998 25,088 50,175 100,350
</TABLE>
(1) Strategic performance objectives are set in advance of the three-year period
and are measured at the end of the period. The current performance
objectives focus on average annual growth in consolidated operating income
over the three-year period and the commercial medical loss ratio versus the
Company's peer group for the third year of the three-year period. The awards
are paid in a single lump sum at the end of three years depending on the
achievement of specified performance measures. Each three-year cycle
provides target awards between 10% and 40% of a participant's salary. Each
objective will have a performance range and potential payout from Threshold
to Maximum.
RETIREMENT PLAN
Trigon BCBS sponsors a non-contributory retirement program (the "Retirement
Plan") for certain employees that is qualified under Internal Revenue Code
(section mark) 401(a) and subject to ERISA. Trigon BCBS also sponsors the
Supplemental Executive Retirement Plan, which provides additional benefits,
payable out of general Trigon BCBS assets to certain employees. The benefits are
equal to the benefits these employees cannot receive under the qualified
retirement program because of Internal Revenue Code limits on benefits and
restrictions on participation by highly compensated employees.
The following table shows the projected annual benefit (not including
offsets for primary social security) for the remuneration level and years of
credited service indicated that would be payable in the form of a straight life
annuity commencing at age 65 under the present benefit formula of the Retirement
Plan. The amounts shown include the benefits payable under the Retirement Plan
and the Supplemental Executive Retirement Plan.
8
<PAGE>
PENSION PLAN TABLE(1)
YEARS OF SERVICE
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
$300,000 $ 90,000 $120,000 $150,000 $180,000 $180,000
350,000 105,000 140,000 175,000 210,000 210,000
400,000 120,000 160,000 200,000 240,000 240,000
450,000 135,000 180,000 225,000 270,000 270,000
500,000 150,000 200,000 250,000 300,000 300,000
550,000 165,000 220,000 275,000 330,000 330,000
600,000 180,000 240,000 300,000 360,000 360,000
650,000 195,000 260,000 325,000 390,000 390,000
700,000 210,000 280,000 350,000 420,000 420,000
750,000 225,000 300,000 375,000 450,000 450,000
800,000 240,000 320,000 400,000 480,000 480,000
850,000 255,000 340,000 425,000 510,000 510,000
900,000 270,000 360,000 450,000 540,000 540,000
950,000 285,000 380,000 475,000 570,000 570,000
1,000,000 300,000 400,000 500,000 600,000 600,000
(1) Compensation covered by the retirement plans includes: W-2 earnings,
deferred compensation, 401(k) plan and 401(k) Restoration plan contributions
and amounts excluded from income under Section 125 of the Code (flexible
spending accounts and flex benefit amounts). Under the Retirement Plan's
formula, a participant's annual retirement benefit at normal retirement age
(65 years) is equal to 60% of the average of the participant's highest five
consecutive years' salary in the last ten years, minus 50% of the
participant's primary social security benefit, all multiplied by years of
credited service and divided by 30. Participants become vested in the plans
with five years of credited service. The Pension Plan Table and Summary
Compensation Table may be used to estimate pension benefits for each of the
named executive officers based on their credited years of service as of
December 31, 1996: Mr. Davis, 29 years; Ms. Cothran, 25 years; Mr. Bargatze,
20 years; Mr. Deese, 11 years; and Mr. Berry, 10 years. The covered
compensation under both the Retirement Plan and the Supplemental Executive
Retirement Plan for 1996 was: Mr. Davis, $785,611; Ms. Cothran, $462,225;
Mr. Bargatze, $381,872; Mr. Deese, $305,296; and Mr. Berry, $321,100.
DEFERRED COMPENSATION
The Company offers a non-qualified deferred compensation plan to all Board
members and officers of Trigon BCBS at or above the level of Vice President.
Interest credited to plan participants is funded through Trigon BCBS-owned life
insurance. The plan is called The Limited Fixed Return Plan. Interest rates are
guaranteed in four-year increments and are initially set at the dividend
reinvestment rate specified by the life insurance carrier. Those electing to
defer may begin receiving benefit payouts no sooner than age 55. As of December
31, 1996, 26 officers have deferred a balance of $1,054,059. Interest credited
in 1996 to the various participants equaled $83,358. As of December 31, 1996,
eight directors and three past directors have deferred a balance of $1,651,372
and interest credited to the various participants in 1996 equaled $128,585.
Mr. Davis also has a separate defined salary deferral plan established in
1989. To date $43,000 of his compensation has been deferred. No amounts were
deferred for 1996. Amounts deferred are invested by Trigon BCBS in investments
selected by a Trigon BCBS-appointed investment manager. Mr. Davis bears all risk
of gain or loss with respect to the investments made. Distribution of plan
assets will be upon termination of employment.
EMPLOYMENT AGREEMENTS
Norwood H. Davis, Jr., Chairman of the Board of the Company and Chairman of
the Board and Chief Executive Officer of Trigon BCBS, entered into an employment
agreement with Trigon BCBS as of March 13, 1996. This agreement superseded all
prior agreements. Under Mr. Davis' agreement, his employment is at will and he
may resign at any time. Also, Trigon BCBS may discharge Mr. Davis at any time,
with or without cause. Mr. Davis is entitled to receive an annual base salary of
an amount determined by the Board which can be adjusted upward each year as
determined by the Board. He is also eligible for an award of incentive
compensation each year. While employed by Trigon BCBS, Mr. Davis is entitled to
benefits offered to all employees. In addition, Trigon BCBS will provide an
automobile allowance, tax and financial planning services and reimbursement for
other business expenses. Also, if Mr. Davis becomes disabled and is entitled to
receive
9
<PAGE>
benefits under the Long-Term Disability Program, Trigon BCBS will make
supplemental monthly payments so that the entire benefit is equal to 60% of his
base salary. Under this agreement, Mr. Davis agrees not to compete as an equity
owner or employee with Trigon BCBS or its affiliates for three years after his
resignation as an employee or his termination with cause. The agreement also
provides that upon termination of Mr. Davis's employment for any reason (other
than a termination resulting from his resignation if he fails to give Trigon
BCBS at least six months' prior written notice of the resignation), Mr. Davis is
entitled to receive a severance payment equal to three times the highest annual
cash compensation received by him during the three calendar years preceding the
termination of his employment.
The employment agreement also sets forth an enhanced retirement benefit for
Mr. Davis. Under the enhanced benefit, Trigon BCBS agrees to pay Mr. Davis an
amount equal to the difference between (i) the benefit Mr. Davis would receive
under the Retirement Plan and the Supplemental Executive Retirement Plan if Mr.
Davis had remained in the employ of Trigon BCBS receiving credited service until
age 65 (3/10/2005) (assuming continued annual compensation at a rate equal to
his highest annual compensation during the three calendar years immediately
preceding retirement) and (ii) the benefit Mr. Davis actually receives under the
Retirement Plan and Supplemental Executive Retirement Plan. If retirement occurs
at or after age 61 (3/10/2001) 100% of the enhanced benefit is payable. If
retirement occurs at age 60 (3/10/2000) 96% of the difference between the
enhanced and basic benefit is payable. For each additional year of retirement
earlier than age 61 the percentage difference between the enhanced and basic
benefit decreases by four percentage points.
Phyllis L. Cothran, President of the Company and President and Chief
Operating Officer of Trigon BCBS, also has an employment agreement which is
similar to Mr. Davis', with the exception of the special retirement benefits.
Base salary for Ms. Cothran is determined annually by the Chief Executive
Officer and the Human Resources, Compensation and Employee Benefits Committee of
the Board. Ms. Cothran is eligible to participate in Trigon BCBS's Annual
Incentive Program, Long-Term Incentive Program, and in any similar incentive
plans that are made available to senior executives of Trigon BCBS. On February
19, 1997, Ms. Cothran announced her resignation from the Company and all of its
subsidiaries effective March 31, 1997.
SEVERANCE AGREEMENTS
Messrs. Bargatze, Deese and Berry have entered into severance agreements
with Trigon BCBS. The agreements provide for payments upon resignation or
termination (other than for cause or in the case of death) and an agreement not
to compete as an equity owner or employee with Trigon BCBS or its affiliates for
a certain period after such resignation or termination. The severance agreement
between Trigon BCBS and Mr. Bargatze provides for two years of payments and two
years of noncompetition. The severance agreements between Trigon BCBS and
Messrs. Deese and Berry provide for one year of payments and one year of
noncompetition. Mr. Deese retired from Trigon BCBS on January 10, 1997,
commencing his one year severance period. In addition, in February 1997 Trigon
BCBS awarded Mr. Deese a one-time payment of $514,273 in recognition of his
contributions during 11 years of valued service.
REPORT OF THE HUMAN RESOURCES, COMPENSATION
AND EMPLOYEE BENEFITS COMMITTEE
The Human Resources, Compensation and Employee Benefits Committee of the
Board of Directors (the "Committee") reviews and approves, subject to Board
ratification, actions regarding the executive compensation programs of the
Company and its subsidiaries. The Committee is composed entirely of outside
directors.
The purpose of the Company's compensation program is to attract, motivate,
and retain the executive management necessary to enhance profitability of the
Company and increase shareholder value. The philosophy underlying the Company's
executive compensation program is to create:
-- a competitive total compensation level that appropriately rewards both
short and long-term success; and
-- variable pay opportunities that subject a significant portion of the
executive's total compensation to performance risk.
The goal is a compensation program that results in total compensation
generally at the median for the market level when the Company's performance is
at the desired level as compared with its competitors and above or below market
levels when performance varies.
The Company's executive compensation program is currently composed of three
basic elements: base salary, an annual cash incentive program, and a long-term
cash incentive program. The Committee supports executive stock ownership as a
10
<PAGE>
means to link management interests and shareholder interests. The Company is
seeking shareholder approval for a stock incentive program at the 1997 Annual
Meeting of Shareholders as explained further below.
BASE SALARY -- Base salaries are targeted at the average of the competitive
market, consisting of national managed care companies, national insurance
companies, and local financial institutions. Base salary levels are targeted at
the market median pay for each executive. The base salary compensation of senior
officers of the Company and its subsidiaries is reviewed by the Committee every
twelve months and any changes must be approved by the Committee.
ANNUAL MANAGEMENT INCENTIVE -- Trigon BCBS's annual cash incentive program
is based on yearly performance objectives. Program participants include
executives and key management employees. The Chief Executive Officer recommends
the amount of potential awards and the targeted performance goals for
participants. For each performance objective, a performance range and potential
payout from "Threshold" to "Maximum" is determined. The Committee reviews and
approves objectives, performance targets and potential payouts for all senior
officers. The Board of Directors ratifies the objectives, targets and potential
payouts for the Chief Executive Officer. After the end of the fiscal year, the
Committee measures the Company's performance against the objectives and
certifies the amount of payment, if any. The 1996 annual corporate performance
objectives for the Chief Executive Officer and corporate staff participants
included consolidated operating income, administrative expense per policy month,
net growth in policies and an individual performance measure. The 1996 annual
program for business unit employees included the same objectives at the business
unit level. For 1996, each participant's award contained a minimum consolidated
operating income level that had to be reached before any annual payments would
be made. During 1996, target award opportunities represented between 11% and 50%
of a participant's salary. For 1996, the Company's consolidated operating income
did not reach the minimum level for payment of annual incentives and there were
no payments made to the Named Executive Officers under the program for 1996.
LONG-TERM MANAGEMENT INCENTIVE -- The Trigon BCBS long-term cash management
incentive program is based on the achievement of three-year strategic
performance objectives. Most officers, including all the Named Executive
Officers, participate in the program. The program provides incentives based on
rolling three-year performance periods. Company performance measures are set at
the beginning of the three-year period and are measured at the end of the
period. The awards are paid in a single lump sum at the end of the period, based
on the degree of achievement of the specified performance goals. Each of the
three-year performance periods currently in operation measures average annual
growth in consolidated operating income and the Company's commercial medical
loss ratio versus the Company's peer group for the third year of the performance
cycle. Each three-year cycle provides target awards between 10% and 40% of a
participant's salary. A performance range and potential payout from "Threshold"
to "Maximum" is established by the Committee for each cycle. The Committee
reviews and approves objectives, performance targets, and potential payouts for
all senior officers. The Board of Directors ratifies the objectives, targets and
potential payouts for the Chief Executive Officer. After the end of the three-
year cycle, the Committee measures the Company's performance against the
objectives and certifies the amount of payment, if any. Awards under the
1994-1996 performance cycle for Named Executive Officers are included in the
Summary Compensation Table.
STOCK INCENTIVE PLAN -- The Committee and the Board of Directors approved
the 1997 Stock Incentive Plan on February 19, 1997, subject to approval by
shareholders at the annual meeting on April 16, 1997. The 1997 Stock Incentive
Plan is described in Exhibit A of this proxy statement. If the 1997 Stock
Incentive Plan is approved by shareholders, the Committee currently intends to
include equity-based compensation for employees in the Company's compensation
structure. The Committee believes that stock compensation will provide
additional incentives to employees, including management, to focus on
enhancements to shareholder value.
CHIEF EXECUTIVE OFFICER -- The Company's Chief Executive Officer, Norwood
H. Davis, Jr., participates in each of compensation programs available to
executives. Other aspects of Mr. Davis' compensation are described under
"Employment Agreements". The Chief Executive Officer's base salary is based on
the same market criteria used for other senior officers and is ratified by the
Board of Directors. Mr. Davis' base salary for 1996 was slightly below the
average of the peer group of managed care companies. The Chief Executive Officer
did not receive an award under the 1996 annual management incentive program or
the 1994-1996 cycle of the long-term management incentive program.
INTERNAL REVENUE CODE 162(M) COMPLIANCE -- The Company's pay philosophy is
to have a large percentage of potential total compensation as performance
focused for executives. In support of this compensation philosophy, executives
can be rewarded at or above market levels when the Company performs above
expectations. Section 162(m) of the Internal Revenue Code provides generally
that compensation paid to the Named Executive Officers in excess of $1 million
is deductible only if paid pursuant to qualifying performance-based compensation
plans approved by shareholders. The 1997 Stock Incentive Plan would allow the
use of short and long-term cash compensation and stock compensation that
qualifies as performance-based
11
<PAGE>
compensation under Section 162(m). If the 1997 Stock Incentive Plan is approved,
the Committee currently intends to take the necessary steps so that all
compensation paid is deductible for federal income tax purposes. In the future,
the Committee will take actions to maximize the effectiveness of the Company's
compensation programs and preserve tax deductibility to the extent consistent
with the best interests of the Company and its shareholders.
This report is submitted by the Human Resources, Compensation and Employee
Benefits Committee of the Company's Board of Directors.
John L. Colley, Jr., Chairman
Lenox D. Baker, Jr., M.D.
William R. Harvey
Elizabeth G. Helm
William N. Powell
Hubert R. Stallard
Jackie M. Ward
ITEM TWO -- APPROVAL OF THE
TRIGON HEALTHCARE, INC. 1997 STOCK INCENTIVE PLAN
INTRODUCTION
The Board has adopted, and recommends that the shareholders approve, the
Company's 1997 Stock Incentive Plan (the "Incentive Plan"). The Incentive Plan
is intended to provide a means for employees of the Company and its subsidiaries
to increase their personal financial interest in the Company, thereby
stimulating the efforts of these employees and strengthening their desire to
remain with the Company and its subsidiaries.
The Incentive Plan was adopted by the Board on February 19, 1997, subject
to shareholder approval. Unless sooner terminated by the Board, the Incentive
Plan will terminate on February 18, 2007. No incentive awards may be made under
the Incentive Plan after termination.
The principal features of the Incentive Plan are summarized below. The
summary is qualified by reference to the complete text of the Incentive Plan,
which is attached as Exhibit A. Capitalized terms used in this Item Two but not
defined herein shall have the meanings assigned to them in Exhibit A.
GENERAL
The Incentive Plan authorizes the reservation of 3,550,000 shares of Common
Stock for issuance pursuant to incentive awards made under the Incentive Plan.
Such incentive awards may be in the form of stock options, stock appreciation
rights, restricted stock or performance stock. The Incentive Plan also provides
for cash performance awards. No more than 300,000 shares may be subjected to
stock awards for any single employee in any year. The maximum cash amount
payable under the Plan to any individual Participant in any Plan Year shall not
exceed $2,000,000.
If an incentive award is canceled, terminates or lapses unexercised, any
unissued shares allocated to such incentive award may be subjected again to an
incentive award. If shares of restricted stock are reacquired by the Company,
such shares may again be subjected to an incentive award under the Incentive
Plan. Shares subject to options granted under the Incentive Plan that are not
issued under the Incentive Plan because such options are canceled, expire or
otherwise terminate unexercised may be subjected to an incentive award and
issued under the Incentive Plan.
Adjustments will be made in the number of shares that may be issued under
the Incentive Plan in the event of a future stock dividend, stock split or
similar pro rata change in the number of outstanding shares of Common Stock or
the future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of Common Stock or Preferred Stock.
The Common Stock is traded on the New York Stock Exchange, and on March 6,
1997, the closing price was $18 1/2. The Company presently intends to register
the shares issuable under the Incentive Plan under the Securities Act of 1933
after shareholder approval is received.
No awards had been granted under the Incentive Plan as of March 6, 1997.
12
<PAGE>
ELIGIBILITY
All present and future employees of the Company or its subsidiaries are
eligible to receive incentive awards under the Incentive Plan.
ADMINISTRATION
An independent committee (the "Committee") will administer the Incentive
Plan. It is anticipated that the Committee will be the Human Resources,
Compensation and Employee Benefits Committee of the Board. The Committee has the
power and complete discretion to determine when to grant incentive awards; which
eligible employees will receive incentive awards; whether the award will be an
option, stock appreciation right, restricted stock, performance stock or a
performance award; whether stock appreciation rights will be attached to
options; and the number of shares to be allocated to each incentive award. The
Committee may impose conditions on the exercise of options and stock
appreciation rights and upon the transfer of restricted stock received under the
Incentive Plan, and may impose such other restrictions and requirements as it
may deem appropriate, including reserving the right for the Company to reacquire
shares issued pursuant to an incentive award. The Committee is also expressly
authorized to make an award under the Incentive Plan conditioned upon the
surrender for cancellation of an existing incentive award.
PERFORMANCE AWARDS
For each Plan Year, the Committee will select the Performance Criteria to
be used for that Plan Year. The permissible Performance Criteria include any of
the following areas of performance of the Company or any subsidiary as
determined by generally accepted accounting principles or as publicly reported
by the Company: asset growth; combined net worth; debt to equity ratio; earnings
per share; revenues; operating income (with or without investment income or
income taxes); operating cash flow; investment performance; net income, before
or after taxes; earnings before interest, taxes, depreciation and/or
amortization; return on total capital, equity, revenue or assets; medical loss
ratio; or number of policyholders or insureds. The Committee will also determine
the appropriate weight to be given to any applicable Performance Criteria for a
Plan Year. A Performance Criteria may be used with or without adjustment for
extraordinary or nonrecurring items.
For each Performance Criteria, the Committee will establish one or more
Performance Goals. During a Plan Year, the Committee may increase, but not
decrease, a Performance Goal. For each performance award, the Committee will
establish the amount of cash or Common Stock payable at specified levels of
performance, based on the Performance Goal for each Performance Criteria. Any
grant of a performance award will be made not later than 90 days after the start
of the period for which the performance award relates and will be made prior to
the completion of 25% of such period. The Committee may not increase during a
Plan Year the amount of cash or Common Stock that would otherwise be payable
upon achievement of the Performance Goals but may reduce or eliminate the
payments as provided in a performance award. The Performance Criteria and
Performance Goals may vary among participants for a Plan Year.
Performance awards will be paid in cash, Common Stock or both, at such time
or times as are provided in the participant's award agreement. The Committee may
provide in the award agreement that the Participant may make a prior election to
defer the payment under a performance award subject to such terms and conditions
as the Committee may determine.
STOCK OPTIONS
Options to purchase shares of Common Stock granted under the Incentive Plan
may be "incentive stock options" or nonstatutory stock options. Incentive stock
options qualify for favorable income tax treatment under Section 422 of the
Internal Revenue Code (the "Code"), while nonstatutory stock options do not. The
option price of Common Stock covered by an incentive stock option may not be
less than 100 percent (or, in the case of an incentive stock option granted to a
10 percent shareholder, 110 percent) of the fair market value of the Common
Stock on the date of the option grant. The option price of Common Stock covered
by a nonstatutory option may not be less than 100 percent of the fair market
value of the Common Stock on the date of grant. In addition, no more than
$100,000 of incentive stock options, based on the exercise price, may be
initially exercisable in any calendar year under the Incentive Plan or any other
similar plan maintained by the Company.
Options may only be exercised at such times as may be specified by the
Committee, provided, however, that incentive stock options may not be exercised
after the first to occur of (i) ten years (or, in the case of an incentive stock
option granted to a 10 percent shareholder, five years) from the date on which
the incentive stock option was granted, (ii) three months from the optionee's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment
because of death or disability.
13
<PAGE>
If the option so provides or the Committee authorizes, an optionee
exercising an option may pay the purchase price in cash; by delivering or
causing to be withheld from the option shares, shares of Common Stock; by
delivering a promissory note; or by delivering an exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds from the option shares to pay the exercise
price.
CHANGE OF CONTROL
The Committee may, in its discretion, include provisions in stock options
granted under the Incentive Plan that will make the options become fully
exercisable upon a Change of Control, or upon the occurrence of one or more
events subsequent to a Change of Control, notwithstanding other conditions on
exercisability in the option. A "Change of Control" will be deemed to have taken
place if:
(i) any person, including a "group" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934 becomes the owner or beneficial owner of
Company securities having 20% or more of the stock of the Company
(excluding any acquisition by the Company or any subsidiary or an employee
benefit plan of the Company);
(ii) the incumbent Board (including certain later elected directors)
on the date the Incentive Plan is approved by shareholders ceases to
constitute at least a majority of the Board;
(iii) approval by Company shareholders of a reorganization, merger or
consolidation, in which the owners of the stock of the Company do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of the stock of the corporation
resulting from such reorganization, merger or consolidation; or
(iv) a complete liquidation or dissolution of the Company occurs, or
the sale or other disposition of all or substantially all of the assets of
the Company.
STOCK APPRECIATION RIGHTS
The Committee may award stock appreciation rights under the Incentive Plan
either with or without related options, or the Committee may subsequently award
and attach stock appreciation rights to a previously awarded nonstatutory
option, and impose such conditions upon their exercise as it deems appropriate.
When the stock appreciation right is exercisable, the holder may surrender to
the Company all or a portion of his unexercised stock appreciation right and
receive in exchange an amount equal to the difference between (i) the fair
market value on the date of exercise of the Common Stock covered by the
surrendered portion of the stock appreciation right and (ii) the exercise price
of the Common Stock under the related option or, if not related to an option,
the fair market value of Common Stock on the date the stock appreciation right
was awarded. The Committee may limit the amount which can be received when a
stock appreciation right is exercised. When a stock appreciation right related
to an option is exercised, the underlying option, to the extent surrendered,
will no longer be exercisable. Similarly, when an option is exercised, any stock
appreciation rights attached to the option will no longer be exercisable. The
Company's obligation arising upon exercise of a stock appreciation right may be
paid in Common Stock or in cash, or in any combination of the two, as the
Committee may determine.
Stock appreciation rights may only be exercised when the fair market value
of the Common Stock covered by the stock appreciation right exceeds the exercise
price of the underlying option, or, if there is no underlying option, the Common
Stock on the date the stock appreciation right was granted. In addition, it is
possible under the Incentive Plan for stock appreciation rights to be awarded
which are exercisable only during a specified period of time following a Change
of Control. Insiders may exercise Change of Control stock appreciation rights in
accordance with their terms.
RESTRICTED STOCK
Restricted stock issued pursuant to the Incentive Plan is subject to the
following general restrictions: (i) none of such shares may be sold,
transferred, pledged, or otherwise encumbered or disposed of until the
restrictions on such shares lapse or been removed under the provisions of the
Incentive Plan, and (ii) if a holder of restricted stock ceases to be employed
by the Company, he will forfeit any shares of restricted stock on which the
restrictions have not lapsed or been otherwise removed. The Committee is also
authorized to impose further restrictions on restricted stock awards, including
additional events of forfeiture.
The Committee will establish as to each share of restricted stock issued
under the Incentive Plan the terms and conditions upon which the restrictions on
such shares will lapse. Such terms and conditions may include, without
limitation, the lapsing of such restrictions at the end of a specified period of
time, as a result of the disability, death or retirement of the
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participant, or as a result of the occurrence of a Change of Control. In
addition, the Committee may at any time, in its sole discretion, accelerate the
time at which any or all restrictions will lapse or remove any and all such
restrictions.
During the period of restriction, participants holding shares of restricted
stock may exercise full voting rights with respect to those shares and are
entitled to receive all dividends and other distributions paid with respect to
those shares.
PERFORMANCE STOCK
Performance Stock may be issued from time to time by the Committee when
performance criteria established by the Committee have been achieved and
certified by the Committee. More than one award of Performance Stock may be
established by the Committee for a Participant and the awards may operate
concurrently or for varied periods of time. Performance Stock will be issued
only subject to the award and the Incentive Plan and consistent with meeting the
goal or goals set by the Committee in the award. The Committee may at any time,
in its sole discretion remove or revise any and all performance criteria for an
award of Performance Stock.
TRANSFERABILITY OF INCENTIVE AWARDS
Options or stock appreciation rights granted under the Incentive Plan will
be transferable only as provided in the terms of the incentive award. Incentive
stock options may not be sold, transferred, pledged, or otherwise disposed of,
other than by will or by the laws of descent and distribution. All incentive
stock options granted to a participant under the Incentive Plan will be
exercisable during his lifetime only by such participant, or his guardians or
legal representatives. Upon the death of a participant, his personal
representative or beneficiary may exercise his incentive stock options under the
Incentive Plan.
AMENDMENT OF THE INCENTIVE PLAN AND INCENTIVE AWARDS
The Board may amend the Incentive Plan in such respects as it deems
advisable; provided that the shareholders of the Company must approve any
amendment, to the extent required by the Code, that would (i) materially
increase the benefits accruing to participants under the Incentive Plan, (ii)
materially increase the number of shares of Common Stock that may be issued
under the Incentive Plan, or (iii) materially modify the requirements of
eligibility for participation in the Incentive Plan. Incentive awards granted
under the Incentive Plan may be amended with the consent of the participant so
long as the amended award is consistent with the terms of the Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
An employee will not incur federal income tax when he is granted a
nonstatutory stock option, an incentive stock option, a stock appreciation
right, restricted stock, or an award of future Performance Stock.
Upon exercise of a nonstatutory option or a stock appreciation right, an
employee generally will recognize ordinary compensation income, which is subject
to income tax withholding by the Company, equal to the difference between the
fair market value of the Common Stock on the date of the exercise and the option
price. When an employee exercises an incentive stock option, he generally will
not recognize income, unless he is subject to the alternative minimum tax.
An employee may deliver shares of Common Stock instead of cash to acquire
shares under an incentive stock option or nonstatutory stock option, without
having to recognize taxable gain (except in some cases with respect to
"statutory option stock") on any appreciation in value of the shares delivered.
However, if an employee delivers shares of "statutory option stock" in
satisfaction of all, or any part, of the exercise price under an incentive stock
option, and if the applicable holding periods of the "statutory option stock"
have not been met, he will be considered to have made a taxable disposition of
the "statutory option stock." "Statutory option stock" is stock acquired upon
the exercise of incentive stock options.
In general, an employee who has received shares of restricted stock will
include in his gross income as compensation income an amount equal to the fair
market value of the shares of restricted stock at the time the restrictions
lapse or are removed. An employee will also include in his gross income as
compensation income an amount equal to the fair market value of the shares of
Performance Stock at the time the shares are delivered. Such amount will be
included in income in the tax year in which such event occurs. The income
recognized will be subject to income tax withholding by the Company.
The Committee has authority under the Incentive Plan to adopt procedures to
give a participant the right to deliver already owned Common Stock or to have a
portion of the shares he would otherwise acquire under an incentive award
withheld to cover his tax liabilities. The election will be effective only if
made in compliance with the procedures established by the Committee.
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The Company usually will be entitled to a business expense deduction at the
time and in the amount that the recipient of an incentive award recognizes
ordinary compensation income in connection therewith. As stated above, this
usually occurs upon exercise of nonstatutory options and stock appreciation
rights and, with respect to restricted stock, when the restrictions lapse or are
removed. No deduction is allowed in connection with an incentive stock option,
unless the employee disposes of Common Stock received upon exercise in violation
of the holding period requirements. Moreover, there can be circumstances when
the Company may not be entitled to a deduction for certain transfers of Common
Stock or payments to an employee upon the exercise of an incentive award that
has been accelerated as a result of a Change of Control.
In addition to the limitations described above on the Company's right to a
corresponding business expenses deduction, Code Section 162(m) generally imposes
a $1 million limitation on the amount of annual compensation deduction allowable
to a publicly held company in respect of its chief executive officer and its
other four most highly paid executive officers. An exception is provided for
certain performance-based compensation if certain shareholder approval and
outside director administration requirements are satisfied. The Plan is designed
to qualify under Code Section 162(m) for stock options and to allow the grant of
other incentive awards under terms and conditions that would qualify payments
under the awards for deductibility under Code Section 162(m). This action is
consistent with the Board's policy concerning Section 162(m) as explained under
"Report of Human Resources, Compensation and Employee Benefits Committee".
VOTE REQUIRED
The 1997 Stock Incentive Plan will be approved if the votes cast in favor
of approval of the Incentive Plan at the Annual Meeting exceed the votes cast
against approval.
THE BOARD BELIEVES THAT APPROVAL OF THE 1997 STOCK INCENTIVE PLAN IS IN THE
BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE "FOR" THE
PROPOSED 1997 STOCK INCENTIVE PLAN.
ITEM THREE -- APPROVAL OF THE
TRIGON HEALTHCARE, INC. EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
The Board has adopted, and recommends that the shareholders approve, the
Company's Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan
is intended to provide a means through which the Company can encourage and
assist employees of the Company and its subsidiaries in acquiring a stock
ownership interest in the Company in order to assist the Company and its
subsidiaries in retaining the services of its employees, to secure and retain
the services of new employees, and to provide incentives for such employees to
exert maximum efforts for the success of the Company.
The following is a summary of the terms of the Purchase Plan. The summary
is qualified in its entirety by the full text of the Purchase Plan, which is
attached as Exhibit B. Capitalized terms used in this Item Three but not defined
herein shall have the meanings assigned to them in Exhibit B.
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees
of the Company and its subsidiaries can be given an opportunity to purchase the
Company's Common Stock through payroll deductions. The Purchase Plan is an
employee stock purchase plan under Code Section 423. That section provides
certain tax benefits to employees, as explained below. The Purchase Plan
authorizes the reservation of 1,000,000 shares of Common Stock for issuance
under the Purchase Plan.
ADMINISTRATION
The Purchase Plan is administered by the Human Resources, Compensation and
Employee Benefits Committee of the Board (the "Committee"). The Committee has
the full power, discretion and authority to interpret and administer the
Purchase Plan and the rights granted under it.
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ELIGIBILITY
Once the Purchase Plan becomes effective, any person who is employed by the
Company or its subsidiaries is eligible to participate in the Purchase Plan on
the first day of any payroll period following the employee's commencement of
employment with the Company. An employee is not eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company, including any stock that the employee may
purchase under all outstanding options. No employee will be permitted to
purchase more than $25,000 worth of stock (determined at the fair market value
of the shares at the time such rights are granted) under all employee stock
purchase plans of the Company in any calendar year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by electing
payroll deductions from 1% to 15% of gross compensation. All such payroll
deductions must be in increments of 1% of gross compensation.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan equals the lower of (a) 85% of the fair market value of a share of Common
Stock on the first trading day of the calendar quarter (a "Grant Date"), or (b)
85% of the fair market value of a share of Common Stock on the Investment Date
for that calendar quarter. The Committee may increase the percentage above 85%.
PAYROLL DEDUCTIONS
Payroll deductions are accumulated during each calendar quarter and applied
towards the purchase of Common Stock of the Company on the last trading day of
each calendar quarter (each an "Investment Date"). An employee may terminate his
participation in the Purchase Plan at any time, but may not participate again
for six months. An employee may change his payroll deduction up to four times
per calendar year. An election may not be revoked for the remainder of the
payroll period. An employee who sells or withdraws shares of Common Stock from
his Investment Account may not participate for six months.
PURCHASE OF STOCK
By executing an election to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. On each Investment Date, the
Company will apply the funds in the participant's account to the purchase of
shares of its Common Stock in full and fractional shares. If the aggregate
number of shares to be purchased on any Investment Date would exceed the maximum
aggregate number available under the Purchase Plan, the shares available will be
allocated among such participants in proportion to their contributions during
the quarter. The shares may be purchased from the Company or on the open market.
If shares are purchased on the open market, the Company pays any brokerage and
other costs and discount below the market price.
TERMINATION OF EMPLOYMENT
An employee's participation in the Purchase Plan will be terminated when
the employee retires, terminates active employment, or dies. The employee will
receive a certificate for the shares in his Investment Account and a cash refund
of his Payroll Deduction Account. A participant may elect to have the shares in
his Investment Account sold and receive the sale proceeds less expenses.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted, except: (a) to the
extent that an employee is permitted to designate a beneficiary as provided in
the Purchase Plan, (b) to the extent permitted by will or the laws of descent
and distribution if no such beneficiary has been designated, and (c) pursuant to
a qualified domestic relations order.
DURATION, AMENDMENT AND TERMINATION
The Committee or the Board may suspend or terminate the Purchase Plan at
any time. Unless earlier terminated by action of the Board or the Committee, the
Purchase Plan will remain in effect until such time as no shares of Common Stock
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remain available for issuance under the Purchase Plan and the Company and
employees have no further rights or obligations under the Purchase Plan.
The Committee or the Board may amend the Purchase Plan at any time. Any
amendment of the Purchase Plan must be approved by the shareholders within
twelve (12) months of its adoption by the Board if the amendment would: (a)
increase the number of shares of Common Stock reserved for issuance under the
Purchase Plan (other than for appropriate adjustments for stock dividend, stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, acquisition, separation or like change in the capital structure
of the Company), (b) modify the requirements relating to eligibility for
participation in the Purchase Plan, or (c) modify any other provision of the
Purchase Plan in a manner that would materially increase the benefits accruing
to participants under the Purchase Plan, if such approval is required in order
to comply with the requirements of Code Section 423.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify under the
provisions of Code Sections 421 and 423. Under these provisions, a participant
will be taxed on amounts withheld for the purchase of shares as if such amounts
were actually received. Other than this tax, no income will be taxable to a
participant until disposition of the shares acquired, and the method of taxation
will depend upon the holding period of the purchased shares.
If the stock is disposed of at least two years after the Grant Date and
more than one year after the stock is transferred to the participant, then the
lesser of (a) the excess of the fair market value of the stock at the time of
such disposition over the purchase price, or (b) the excess of the fair market
value of the stock as of the Grant Date over the purchase price (determined as
of the Grant Date) will be treated as ordinary income. Any further gain or any
loss will be taxed as a long-term capital gain or loss.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the Investment Date over the purchase price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the date of purchase, the same amount of ordinary income is
attributed to the participant, and a capital loss will be recognized equal to
the difference between the sales price and the fair market value of the stock on
such purchase date. Any capital gain or loss will be long-or short-term
depending on whether the stock has been held for more than one year.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company generally
is entitled to a deduction to the extent amounts are taxed as ordinary income to
a participant.
VOTE REQUIRED
The Purchase Plan will be approved if the votes cast in favor of approval
of the Purchase Plan at the Annual Meeting exceed the votes cast against
approval.
THE BOARD BELIEVES THAT APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN IS IN
THE BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE "FOR"
THE PROPOSED EMPLOYEE STOCK PURCHASE PLAN.
ITEM FOUR -- APPROVAL OF THE
TRIGON HEALTHCARE, INC. NON-EMPLOYEE
DIRECTORS STOCK INCENTIVE PLAN
INTRODUCTION
The Board has adopted, and recommends that the shareholders approve, the
Company's Non-Employee Directors Stock Incentive Plan (the "Directors Plan").
The Directors Plan is intended to encourage ownership of Common Stock by non-
employee members of the Board as a means to promote long-term shareholder value
and to provide non-employee members of the Board with an incentive to continue
as directors of the Company.
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The Directors Plan became effective February 19, 1997, subject to
shareholder approval. Unless sooner terminated by the Board, the Directors Plan
will terminate on February 18, 2007. No awards may be made under the Directors
Plan after termination.
The principal features of the Directors Plan are summarized below. The
summary is qualified by reference to the complete text of the Directors Plan,
which is attached as Exhibit C. Capitalized terms used in this Item Four but not
defined herein shall have the meanings assigned to them in Exhibit C.
GENERAL
The Directors Plan authorizes the reservation of 550,000 shares of Common
Stock for issuance pursuant to awards made under the Directors Plan. Such awards
may be in the form of stock options or Common Stock. Shares subject to options
granted under the Directors Plan that are not issued under the Directors Plan
because such options are canceled, expire or otherwise terminate unexercised may
be subjected to another award under the Directors Plan. Adjustments will be made
in the number of shares that may be issued under the Directors Plan in the event
of a future stock dividend, stock split or similar pro rata change in the number
of outstanding shares of Common Stock or the future creation or issuance to
shareholders generally of rights, options or warrants for the purchase of Common
Stock or Preferred Stock.
The Common Stock is traded on the New York Stock Exchange, and on March 6,
1997, the closing price was $18 1/2. The Company presently intends to register
the shares issuable under the Directors Plan under the Securities Act of 1933
after shareholder approval of the Directors Plan is received.
ELIGIBILITY
Each director of the Company who is not an employee of the Company or any
subsidiary and has not been an employee of the Company or any subsidiary for at
least one year is eligible to participate in the Directors Plan (a "Director").
The Company currently has 16 non-employee directors eligible to participate.
STOCK OPTIONS
The Directors Plan provides that an initial grant of an option for 10,000
shares will be made to all Directors at the 1997 Annual Meeting if the Directors
Plan is approved by shareholders. Thereafter, each Director who is elected for
the first time to be a non-employee director will be granted an option to
purchase 10,000 shares of Common Stock, upon the date of his initial election.
The Directors Plan provides that these options vest in annual installments over
three years.
In addition to the initial grants, the Directors Plan provides for annual
option grants of 5,000 shares to each non-employee director. The grants will be
made on the date of each Annual Meeting. These annual grants will vest in annual
installments over three years.
Options to purchase shares of Common Stock granted under the Directors Plan
are nonstatutory stock options. The option price of Common Stock covered by an
option is 100 percent of the fair market value of the Common Stock on the date
of a grant. If the Directors Plan is approved, for the initial grant at the 1997
Annual Meeting, the option price is the higher of the fair market value on the
date of the Annual Meeting or the average of the Common Stock's fair market
value for the 20 trading days preceding the Annual Meeting.
Once vested, options may be exercised until the first to occur of (i) ten
years from the date on which the option was granted, or (ii) three years from
the Director's termination of service as a director of the Company. Upon a
Change of Control, all outstanding options become fully vested.
NEW PLAN BENEFITS
NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
NAME AND POSITION NUMBER OF UNITS (1)
- ----------------- -------------------
Executive Group...................................... 0
Non-Executive Director Group......................... 160,000
Non-Executive Officer Employee Group................. 0
- -------------
(1) The units represent the number of shares under the stock options which will
be granted to Directors if the Directors Plan is approved by shareholders.
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ELECTION OF STOCK FOR FEES
Directors may elect in advance to receive all or a part of their Directors'
fees in the form of Common Stock. The number of shares of Common Stock is the
amount of the fees divided by the fair market value of the Common Stock on the
last trading day of each calendar quarter. If a Director elects to receive 100%
of his or her fees for a year as Common Stock, the Director also receives
additional Common Stock equal to 30% of the fees.
DEFERRAL OF STOCK
Directors may elect in advance to defer the receipt of the Common Stock
that is received in lieu of fees. If a Director elects to defer receipt of the
Common Stock, the amount of the fees or an equivalent amount of Common Stock is
contributed by the Company to a trust. The trustee purchases Common Stock on the
open market with the fees. The trust holds any Common Stock in the name of the
Director and reinvests dividends in Common Stock. When the Director ceases to be
on the Board for any reason, all Common Stock held in the trust pursuant to the
Directors Plan is paid out to the Director pursuant to the Director's election.
TRANSFERABILITY OF INCENTIVE AWARDS
Options granted under the Directors Plan will not be transferable except to
members of the Director's immediate family, family trusts or family partnerships
as provided in the terms of the award. Upon the death of a Director, his or her
personal representative or beneficiary may exercise the options.
AMENDMENT OF THE DIRECTORS PLAN AND AWARDS
The Board may amend the Directors Plan in such respects as it deems
advisable; provided that the shareholders of the Company must approve any
amendment that would (i) materially increase the benefits accruing to Directors
under the Directors Plan, or (ii) materially increase the number of shares of
Common Stock that may be issued under the Directors Plan. Awards granted under
the Directors Plan may be amended with the consent of the Director so long as
the amended award is consistent with the terms of the Directors Plan.
FEDERAL INCOME TAX CONSEQUENCES
A Director will not incur federal income tax when he is granted a
nonstatutory stock option. Upon exercise of a nonstatutory option, a Director
generally will recognize ordinary earned income equal to the difference between
the fair market value of the Common Stock on the date of the exercise and the
option price.
A Director generally may deliver shares of Common Stock instead of cash to
acquire shares under a stock option, without having to recognize taxable gain on
any appreciation in value of the shares delivered.
In general, a Director who has deferred shares of Common Stock will include
in his gross income as earned income an amount equal to the fair market value of
the shares of Common Stock at the time the shares are distributed from trust.
Such amount will be included in income in the tax year in which such event
occurs.
The Company usually will be entitled to a business expense deduction at the
time and in the amount that the Director recognizes as ordinary income.
VOTE REQUIRED
The Non-Employee Directors Stock Incentive Plan will be approved if the
votes cast in favor of approval of the Directors Plan at the Annual Meeting
exceed the votes cast against approval.
THE BOARD BELIEVES THAT APPROVAL OF THE NON-EMPLOYEE DIRECTORS STOCK
INCENTIVE PLAN IS IN THE BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY,
RECOMMENDS A VOTE "FOR" THE PROPOSED NON-EMPLOYEE DIRECTORS STOCK INCENTIVE
PLAN.
ITEM FIVE -- RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS
The Board, upon the recommendation of its Audit Committee, has selected
KPMG Peat Marwick LLP as independent auditors to examine and report upon the
financial statements of the Company and its consolidated subsidiaries for the
year
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1997 and is submitting this matter to shareholders for their ratification. KPMG
Peat Marwick LLP has served as the independent auditors of Trigon BCBS and its
predecessors since 1971. If shareholders do not ratify the selection of KPMG
Peat Marwick LLP, other independent auditors will be considered. One or more
partners of the firm of KPMG Peat Marwick LLP will be present at the Annual
Meeting to make a statement if they desire to do so and to respond to
appropriate questions that may be asked by shareholders.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS TO EXAMINE AND REPORT
UPON THE FINANCIAL STATEMENTS OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES
FOR THE YEAR 1997.
ITEM SIX -- OTHER BUSINESS
If any other business properly comes before the meeting, your proxy may be
voted by the persons named in it in such manner as they deem proper. At this
time the Company does not know of any other business that will be presented to
the meeting.
PROPOSALS BY SHAREHOLDERS FOR PRESENTATION
AT THE 1998 ANNUAL MEETING
Proposals that any shareholder desires to have included in the proxy
statement for the 1998 Annual Meeting of shareholders must be received by the
Company no later than November 14, 1997.
Section 1.3 of the Company's Bylaws provides that, in addition to other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must give timely written notice to the
Secretary or an Assistant Secretary at the principal office of the Company. To
be timely, a shareholder's notice must be given, either by personal delivery to
the Secretary or an Assistant Secretary of the Company at the principal office
of the Company, or by first class United States mail, with postage thereon
prepaid, addressed to the Secretary of the Company at the principal office of
the Company. Any such notice must be received (i) on or after the first day of
February and before first day of March of the year in which the meeting will be
held, if clause (ii) is not applicable, or (ii) not less than 60 days before the
date of the meeting if the date of such meeting, as prescribed in the Company's
Bylaws, has been changed by more than 30 days. Each such shareholder's notice
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting (i) the name and address, as they appear on the Company's stock
transfer books, of the shareholder proposing business, (ii) the class and number
of shares of stock of the Company beneficially owned by such shareholder, (iii)
a representation that such shareholder is a shareholder of record at the time of
the giving of the notice and intends to appear in person or by proxy at the
meeting to present the business specified in the notice, (iv) a brief
description of the business desired to be brought before the meeting, including
the complete text of any resolutions to be presented and the reasons for wanting
to conduct such business, and (v) any interest which the shareholder may have in
such business.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
MAY BE OBTAINED BY ANY SHAREHOLDER AFTER MARCH 31, 1997, FREE OF CHARGE, UPON
WRITTEN REQUEST TO CHERYL F. MIDKIFF, OFFICE OF INVESTOR RELATIONS, TRIGON
HEALTHCARE, INC., P.O. BOX 27401, RICHMOND, VIRGINIA 23279, OR BY CALLING (804)
354-3224.
By Order of the Board of Directors
/s/ J. Christopher Wiltshire
-----------------------------------
J. Christopher Wiltshire, Secretary
March 13, 1997
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EXHIBIT A
TRIGON HEALTHCARE, INC.
1997 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this Trigon Healthcare, Inc. 1997 Stock Incentive Plan is to
further the long term stability and financial success of Trigon Healthcare,
Inc., and its Subsidiaries, by attracting and retaining key employees through
the use of cash and stock incentives. It is believed that ownership of Company
Stock and the use of cash incentives will stimulate the efforts of those
employees upon whose judgment and interests the Employers are and will be
largely dependent for the successful conduct of its business. It is also
believed that Incentive Awards granted to such employees under this Plan will
strengthen their desire to remain employed with the Employers and will further
the identification of those employees' interests with those of the Trigon
Healthcare, Inc. shareholders. The Plan is intended to operate in compliance
with the provisions of Securities and Exchange Commission Rule 16b-3.
2. DEFINITIONS
As used in the Plan, the following terms have the meanings indicated:
(a) ACT means the Securities Exchange Act of 1934, as amended.
(b) APPLICABLE WITHHOLDING TAXES means the aggregate amount of federal,
state and local income and payroll taxes that an Employer is required to
withhold in connection with any Performance Award, any lapse of restrictions on
Restricted Stock, any grant of Performance Stock, or any exercise of a
Nonstatutory Stock Option or Stock Appreciation Right.
(c) BOARD means the Board of Directors of Trigon Healthcare, Inc.
(d) CHANGE OF CONTROL means an event described in (i), (ii), (iii), or
(iv):
(i) The acquisition by a Group of Beneficial Ownership of 20% or more
of the Stock of the Company, but excluding for this purpose any acquisition
by the Company (or a subsidiary) or an employee benefit plan of the
Company. "Group" means any individual, entity or group within the meaning
of Sections 13(d)(3) or 14(d)(2) of the Act, "Beneficial Ownership" has the
meaning in Rule 13d-3 promulgated under the Act, and "Stock" means the then
outstanding shares of Class A common stock of the Company.
(ii) Individuals who constitute the Board on the date of approval of
this Plan by shareholders (the "Incumbent Board") cease to constitute at
least a majority of the Board, provided that any director whose nomination
was approved by a majority of the Incumbent Board shall be considered a
member of the Incumbent Board.
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, in which the owners of the Stock of
the Company do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of the Stock of the
corporation resulting from such reorganization, merger or consolidation.
(iv) A complete liquidation or dissolution of the Company, or the sale
or other disposition of all or substantially all of the assets of the
Company.
(e) CODE means the Internal Revenue Code of 1986, as amended.
(f) COMMITTEE means the Human Resources, Compensation and Employee Benefits
Committee of the Board, provided that, if any member of the Human Resources
Committee does not qualify as both an outside director for purposes of Code
section 162(m) and a non-employee director for purposes of Rule 16b-3, the
remaining members of the committee (but not be less than two members) shall be
constituted as a subcommittee of the Human Resources, Compensation and Employee
Benefits Committee to act as the Committee for purposes of the Plan.
(g) COMPANY means Trigon Healthcare, Inc.
(h) COMPANY STOCK means Class A Common Stock of the Company. In the event
of a change in the capital structure of the Company (as provided in Section 15),
the shares resulting from such a change shall be deemed to be Company Stock
within the meaning of the Plan.
(i) DATE OF GRANT means the date on which an Incentive Award is granted by
the Committee.
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(j) DISABILITY or DISABLED means, as to an Incentive Stock Option, a
Disability within the meaning of Code section 22(e)(3). As to all other
Incentive Awards, the Committee shall determine whether a Disability exists and
such determination shall be conclusive.
(k) EMPLOYER means the Company, and each Subsidiary that employs one or
more Participants.
(l) FAIR MARKET VALUE means the closing trading price of a share of Company
Stock, as reported in THE WALL STREET JOURNAL as of the last day on which
Company Stock is traded preceding the Date of Grant or preceding any other date
for which the value of Company Stock must be determined under the Plan.
(m) INCENTIVE AWARD means, collectively, a Performance Award or the award
of Restricted Stock, Performance Stock, an Option, or a Stock Appreciation Right
under the Plan.
(n) INCENTIVE STOCK OPTION means an Option intended to meet the
requirements of, and qualify for favorable federal income tax treatment under,
Code section 422.
(o) MATURE SHARES means shares of Company Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (i) has held for at least six months or (ii) has purchased on
the open market.
(p) NONSTATUTORY STOCK OPTION means an Option that does not meet the
requirements of Code section 422, or, even if meeting the requirements of Code
section 422, is not intended to be an Incentive Stock Option and is so
designated.
(q) OPTION means a right to purchase Company Stock granted under the Plan,
at a price determined in accordance with the Plan.
(r) PARTICIPANT means any employee of the Company or an Subsidiary who
receives an Incentive Award under the Plan.
(s) PERFORMANCE AWARD means an Incentive Award made pursuant to Section 6.
(t) PERFORMANCE CRITERIA means any of the following areas of performance of
the Company, or any Subsidiary as determined under generally accepted accounting
principles or as publicly reported by the Company: asset growth; combined net
worth; debt to equity ratio; earnings per share; revenues; investment
performance; operating income (with or without investment income or income
taxes); operating cash flow; net income, before or after taxes; earnings before
interest, taxes, depreciation and/or amortization; return on total capital,
equity, revenue or assets; medical loss ratio; or number of policyholders or
insured. Any Performance Criteria may be used with or without adjustment for
extraordinary items or nonrecurring items.
(u) PERFORMANCE GOAL means an objectively determinable performance goal
established by the Committee with respect to a given Performance Award or grant
of Restricted Stock that relates to one or more Performance Criteria.
(v) PERFORMANCE STOCK means Company Stock awarded when performance goals
are achieved pursuant to an award as provided in Section 8.
(w) RESTRICTED STOCK means Company Stock awarded upon the terms and subject
to the restrictions set forth in Section 7.
(x) RULE 16B-3 means Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Act. A reference in the Plan to Rule 16b-3 shall include a
reference to any corresponding rule (or number redesignation) of any amendments
to Rule 16b-3 enacted after the effective date of the Plan's adoption.
(y) STOCK APPRECIATION RIGHT means a right to receive amounts from the
Employer granted under Section 10.
(z) SUBSIDIARY means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, as of the Date of
Grant, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
(aa) TAXABLE YEAR means the fiscal period used by the Company for reporting
taxes on income under the Code.
3. GENERAL
The following types of Incentive Awards may be granted under the Plan:
Performance Awards, Restricted Stock, Performance Stock, Options, or Stock
Appreciation Rights. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options.
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4. STOCK
Subject to Section 15 of the Plan, there shall be reserved for issuance
under the Plan an aggregate of 3,550,000 shares of Company Stock, which shall be
authorized, but unissued shares. Shares allocable to Options, Restricted Stock
or portions thereof granted under the Plan that expire, are forfeited, or
otherwise terminate unexercised may again be subjected to an Incentive Award
under the Plan. The Committee is expressly authorized to make an Incentive Award
to a Participant conditioned upon the surrender for cancellation of an option
granted under an existing Incentive Award. No more than 300,000 shares may be
allocated to the Incentive Awards, including the maximum amounts payable under a
Performance Award, that are granted to any individual Participant during any
single Taxable Year.
5. ELIGIBILITY
(a) All present and future employees of the Company or an Subsidiary
(whether now existing or hereafter created or acquired) whom the Committee
determines to have contributed or who can be expected to contribute
significantly to the Company or an Subsidiary shall be eligible to receive
Incentive Awards under the Plan. The Committee shall have the power and complete
discretion, as provided in Section 16, to select eligible employees to receive
Incentive Awards and to determine for each employee the nature of the award and
the terms and conditions of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate an Employer to pay
an employee any particular amount of remuneration, to continue the employment of
the employee after the grant or to make further grants to the employee at any
time thereafter.
6. PERFORMANCE AWARDS
(a) Each Performance Award shall be evidenced by an agreement (an "Award
Agreement") setting forth the Performance Goals for the award, including the
Performance Criteria, the target and maximum amounts payable and such other
terms and conditions as are applicable to the Performance Award. Each
Performance Award shall be awarded and administered to comply with the
requirements of Code section 162(m). The aggregate maximum cash amount payable
under the Plan to any individual Participant in any Plan Year shall not exceed
$2,000,000. In the event of any conflict between an Award Agreement and the
Plan, the terms of the Plan shall govern.
(b) The Committee shall establish the Performance Goals for Performance
Awards to Participants. The Committee shall determine the extent to which any
Performance Criteria shall be used and weighted in determining Performance
Awards. The Committee may vary the Performance Criteria, Performance Goals and
weightings from Participant to Participant, Performance Award to Performance
Award and Plan Year to Plan Year. The Committee may increase, but not decrease,
any Performance Goal during a Plan Year.
(c) The Committee shall establish for each Performance Award the amount of
cash or Company Stock payable at specified levels of performance, based on the
Performance Goal for each Performance Criteria. Any Performance Award shall be
made not later than 90 days after the start of the period for which the
Performance Award relates and shall be made prior to the completion of 25% of
such period. All determinations regarding the achievement of any Performance
Goals will be made by the Committee. The Committee may not increase during a
Plan Year the amount of cash or Common Stock that would otherwise be payable
upon achievement of the Performance Goal or Goals but may reduce or eliminate
the payments as provided in a Performance Award.
(d) The actual payments to a Participant under a Performance Award will be
calculated by applying the achievement of a Performance Criteria to the
Performance Goal as established in the Award Agreement. All calculations of
actual payments shall be made by the Committee and the Committee shall certify
in writing the extent, if any, to which the Performance Goals have been met.
(e) Performance Awards will be paid in cash, Company Stock or both, at such
time or times as are provided in the Award Agreement. The Committee may provide
in the Award Agreement that the Participant may make a prior election to defer
the payment under a Performance Award subject to such terms and conditions as
the Committee may determine.
(f) Nothing contained in the Plan will be deemed in any way to limit or
restrict any Employer or the Committee from making any award or payment to any
person under any other plan, arrangement or understanding, whether now existing
or hereafter in effect.
(g) A Participant who receives a Performance Award payable in Company Stock
shall have no rights as a shareholder until the Company Stock is issued pursuant
to the terms of the Performance Award. The Company Stock may be issued without
cash consideration.
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(h) A Participant's interest in a Performance Award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(i) Whenever payments under a Performance Award are to be made in cash, the
Employer will withhold therefrom an amount sufficient to satisfy any Applicable
Withholding Taxes. Each Participant shall agree as a condition of receiving a
Performance Award payable in the form of Company Stock, to pay to the Employer,
or make arrangements satisfactory to the Employer regarding the payment to the
Employer of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the Grant Agreement
so provides or the Committee subsequently authorizes, the Participant may elect
(i) to deliver Mature Shares (valued at their Fair Market Value) or (ii) to have
the Employer retain that number of shares of Company Stock (valued at their Fair
Market Value) that would satisfy all or a specified portion of the Applicable
Withholding Taxes.
7. RESTRICTED STOCK AWARDS
(a) The Committee may make grants of Restricted Stock to Participants.
Whenever the Committee deems it appropriate to grant Restricted Stock, notice
shall be given to the Participant stating the number of shares of Restricted
Stock granted and the terms and conditions to which the Restricted Stock is
subject. This notice, when accepted in writing by the Participant shall become
an award agreement between the Employer and the Participant. Restricted Stock
may be awarded by the Committee in its discretion without cash consideration.
(b) No shares of Restricted Stock may be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered or disposed of until the
restrictions on such shares as set forth in the Participant's award agreement
have lapsed or been removed pursuant to paragraph (d) or (e) below.
(c) Upon the acceptance by a Participant of an award of Restricted Stock,
such Participant shall, subject to the restrictions set forth in paragraph (b)
above, have all the rights of a shareholder with respect to such shares of
Restricted Stock, including, but not limited to, the right to vote such shares
of Restricted Stock and the right to receive all dividends and other
distributions paid thereon. Certificates representing Restricted Stock shall be
held by the Company until the restrictions lapse and the Participant shall
provide the Company with appropriate stock powers endorsed in blank.
(d) The Committee shall establish as to each award of Restricted Stock the
terms and conditions upon which the restrictions set forth in paragraph (b)
above shall lapse. The terms and conditions may include the achievement of a
Performance Goal which shall be governed by the provisions of Section 6 to the
extent that the award is intended to comply with the requirements of Code
section 162(m). Such terms and conditions may also include, without limitation,
the lapsing of such restrictions as a result of the Disability, death or
retirement of the Participant or the occurrence of a Change of Control.
(e) Notwithstanding the provisions of paragraph (b) above, the Committee
may at any time, in its sole discretion, accelerate the time at which any or all
restrictions will lapse or remove any and all such restrictions, subject to the
restrictions of Section 6 as to any Performance Goal if the award is intended to
comply with the requirements of Code section 162(m).
(f) Each Participant shall agree at the time his or her Restricted Stock is
granted, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the Grant Agreement
so provides or the Committee subsequently authorizes, the Participant may elect
(i) to deliver Mature Shares (valued at their Fair Market Value) or (ii) to have
the Employer retain that number of shares of Company Stock (valued at their Fair
Market Value) that would satisfy all or a specified portion of the Applicable
Withholding Taxes.
8. PERFORMANCE STOCK AWARDS
(a) The Committee may make grants of Performance Stock to Participants.
Whenever the Committee deems it appropriate to grant Performance Stock, notice
shall be given to the Participant stating the number of shares of Performance
Stock granted and the terms and conditions to which the Performance Stock is
subject. This notice, when accepted in writing by the Participant shall become
an award agreement between the Employer and the Participant.
(b) Performance Stock may be issued pursuant to the Plan from time to time
by the Committee when performance criteria established by the Committee have
been achieved and certified by the Committee.
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(c) Whenever the Committee deems it appropriate, the Committee may
establish a performance criteria for an award of Performance Stock and notify
Participants of their receipt of an award of Performance Stock. More than one
award of Performance Stock may be established by the Committee for a Participant
and the awards may operate concurrently or for varied periods of time.
Performance Stock will be issued only subject to the award and the Plan and
consistent with meeting the goal or goals set by the Committee in the award. A
Participant shall have no rights as a shareholder until the Committee has
certified that the performance objectives of the Performance Stock award have
been met and the Performance Stock is issued. Performance Stock may be issued
without cash consideration.
(d) A Participant's interest in a Performance Stock award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(e) The Committee may at any time, in its sole discretion, remove or revise
any and all performance criteria for an award of Performance Stock.
(f) Each Participant shall agree at the time of receiving an award of
Performance Stock, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the Grant Agreement
so provides or the Committee subsequently authorizes, the Participant may elect
(i) to deliver Mature Shares (valued at their Fair Market Value) or (ii) to have
the Employer retain that number of shares of Company Stock (valued at their Fair
Market Value) that would satisfy all or a specified portion of the Applicable
Withholding Taxes.
9. STOCK OPTIONS
(a) The Committee may make grants of Options to Participants. Whenever the
Committee deems it appropriate to grant Options, notice shall be given to the
Participant stating the number of shares for which Options are granted, the
Option price per share, whether the Options are Incentive Stock Options or
Nonstatutory Stock Options, the extent to which Stock Appreciation Rights are
granted (as provided in Section 10), and the conditions to which the grant and
exercise of the Options are subject. This notice, when duly accepted in writing
by the Participant, shall become a stock option agreement.
(b) The exercise price of shares of Company Stock covered by an Option
shall be not less than 100% of the Fair Market Value of such shares on the Date
of Grant.
(c) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement; provided
that the exercise provisions for Incentive Stock Options shall in all events not
be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first to
occur of (x) ten years from the Date of Grant, (y) three months following
the date of the Participant's retirement or termination of employment with
all Employers for reasons other than Disability or death, or (z) one year
following the date of the Participant's termination of employment on
account of Disability or death.
(ii) An Incentive Stock Option by its terms, shall be exercisable in
any calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to
which Incentive Stock Options are exercisable for the first time during the
calendar year does not exceed $100,000 (the "Limitation Amount"). Incentive
Stock Options granted under the Plan and all other plans of any Employer
shall be aggregated for purposes of determining whether the Limitation
Amount has been exceeded. The Committee granting the Option may impose such
conditions as it deems appropriate on an Incentive Stock Option to ensure
that the foregoing requirement is met. If Incentive Stock Options that
first become exercisable in a calendar year exceed the Limitation Amount,
the excess Options will be treated as Nonstatutory Stock Options to the
extent permitted by law.
10. STOCK APPRECIATION RIGHTS
(a) Whenever the Committee deems it appropriate, Stock Appreciation Rights
may be granted in connection with all or any part of an Option to a Participant
or in a separate Incentive Award.
(b) The following provisions apply to all Stock Appreciation Rights that
are granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant, upon
exercise of all or any part of the Stock Appreciation Rights, to surrender
to the Employer unexercised that portion of the underlying Option relating
to the same number of shares of Company Stock as is covered by the Stock
Appreciation Rights (or the portion of the Stock Appreciation
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Rights so exercised) and to receive in exchange from the Employer an amount
equal to the excess of (x) the Fair Market Value on the date of exercise of
the Company Stock covered by the surrendered portion of the underlying
Option over (y) the exercise price of the Company Stock covered by the
surrendered portion of the underlying Option. The Committee may limit the
amount that the Participant will be entitled to receive upon exercise of
Stock Appreciation Rights.
(ii) Upon the exercise of a Stock Appreciation Right and surrender of
the related portion of the underlying Option, the Option, to the extent
surrendered, shall not thereafter be exercisable.
(iii) Subject to any further conditions upon exercise imposed by the
Board, a Stock Appreciation Right shall be exercisable only to the extent
that the related Option is exercisable and a Stock Appreciation Right shall
expire no later than the date on which the related Option expires.
(iv) A Stock Appreciation Right may only be exercised at a time when
the Fair Market Value of the Company Stock covered by the Stock
Appreciation Right exceeds the exercise price of the Company Stock covered
by the underlying Option.
(c) The following provisions apply to all Stock Appreciation Rights that
are not granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant, upon
exercise of all or any part of the Stock Appreciation Rights, to receive in
exchange from the Employer an amount equal to the excess of (x) the Fair
Market Value on the date of exercise of the Company Stock covered by the
surrendered Stock Appreciation Right over (y) the price of the Company
Stock on the Date of Grant of the Stock Appreciation Right. The Committee
may limit the amount that the Participant will be entitled to receive upon
exercise of Stock Appreciation Rights.
(ii) A Stock Appreciation Right may only be exercised at a time when
the Fair Market Value of the Company Stock covered by the Stock
Appreciation Right exceeds the Fair Market Value of the Company Stock on
the Date of Grant of the Stock Appreciation Right.
(d) The manner in which the Employer's obligation arising upon the exercise
of a Stock Appreciation Right shall be paid shall be determined by the Committee
and shall be set forth in the Incentive Award. The Incentive Award may provide
for payment in Company Stock or cash, or a fixed combination of Company Stock or
cash, or the Committee may reserve the right to determine the manner of payment
at the time the Stock Appreciation Right is exercised. Shares of Company Stock
issued upon the exercise of a Stock Appreciation Right shall be valued at their
Fair Market Value on the date of exercise.
11. METHOD OF EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
(a) Options and Stock Appreciation Rights may be exercised by the
Participant giving written notice of the exercise to the Employer, stating the
number of shares the Participant has elected to purchase under the Option or the
number of Stock Appreciation Rights the Participant has elected to exercise. In
the case of the purchase of shares under an Option, such notice shall be
effective only if accompanied by the exercise price in full in cash; provided,
however, that if the terms of an Option so permit, the Participant may (i)
deliver Mature Shares (valued at their Fair Market Value) in satisfaction of all
or any part of the exercise price, (ii) cause to be withheld from the Option
shares, shares of Company Stock (valued at their Fair Market Value) in
satisfaction of all or any part of the exercise price, (iii) deliver a properly
executed exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock, the amount
necessary to pay the exercise price and, if required by the terms of the Option,
Applicable Withholding Taxes, or (iv) deliver an interest bearing promissory
note, payable to the Company, in payment of all or part of the exercise price
together with such collateral as may be required by the Committee at the time of
exercise. The interest rate under any such promissory note shall be established
by the Committee and shall be at least equal to the minimum interest rate
required at the time to avoid imputed interest under the Code.
(b) The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option or a Stock Appreciation Right any legend
deemed desirable by the Company's counsel to comply with federal or state
securities laws, and the Company may require a customary written indication of
the Participant's investment intent. Until the Participant has made any required
payment, including any Applicable Withholding Taxes, and has had issued a
certificate for the shares of Company Stock acquired, he or she shall possess no
shareholder rights with respect to the shares.
(c) Each Participant shall agree as a condition of the exercise of an
Option or a Stock Appreciation Right, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued upon the exercise of an Option or cash paid upon the exercise of
a Stock Appreciation Right.
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(d) As an alternative to making a cash payment to the Employer to satisfy
Applicable Withholding Taxes, if the Option or Stock Appreciation Rights
agreement so provides or the Committee subsequently authorizes, the Participant
may elect (i) to deliver Mature Shares (valued at their Fair Market Value) or
(ii) to have the Employer retain that number of shares of Company Stock (valued
at their Fair Market Value) that would satisfy all or a specified portion of the
Applicable Withholding Taxes.
12. NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
Options and Stock Appreciation Rights by their terms, shall be transferable
to the extent specifically provided in the Incentive Award. Incentive Stock
Options, by their terms, shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable, during the Participant's
lifetime, only by the Participant.
13. EFFECTIVE DATE OF THE PLAN
The effective date of the Plan is February 19, 1997. The Plan shall be
submitted to the shareholders of the Company for approval. Until (i) the Plan
has been approved by the Company's shareholders, and (ii) the requirements of
any applicable Federal or State securities laws have been met, no Restricted
Stock or Performance Stock shall be awarded that is not contingent on these
events and no Option or Stock Appreciation Right granted shall be exercisable.
14. TERMINATION, MODIFICATION, CHANGE
If not sooner terminated by the Board, this Plan shall terminate at the
close of business on February 18, 2007. No Incentive Awards shall be made under
the Plan after its termination. The Board may amend or terminate the Plan in
such respects as it shall deem advisable; provided that, if and to the extent
required by the Code, no change shall be made that increases the total number of
shares of Company Stock reserved for issuance pursuant to Incentive Awards
granted under the Plan (except pursuant to Section 15), materially modifies the
requirements as to eligibility for participation in the Plan, or materially
increases the benefits accruing to Participants under the Plan, unless such
change is authorized by the shareholders of the Company. Notwithstanding the
foregoing, the Board may unilaterally amend the Plan and Incentive Awards with
respect to Participants as it deems appropriate to ensure compliance with Rule
16b-3 and to cause Incentive Stock Options to meet the requirements of the Code
and regulations thereunder. Except as provided in the preceding two sentences, a
termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect a Participant's rights under an Incentive Award
previously granted to him or her.
15. CHANGE IN CAPITAL STRUCTURE
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or merger in which the Company is the surviving corporation or
other change in the Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options or warrants
for the purchase of common stock or preferred stock of the Company), the number
and kind of shares of stock or securities of the Company to be subject to the
Plan and to Options then outstanding or to be granted thereunder, the maximum
number of shares or securities which may be delivered under the Plan, the
maximum number of shares or securities that can be granted to an individual
Participant under Section 4, the exercise price, the terms of Incentive Awards
and other relevant provisions shall be appropriately adjusted by the Committee,
whose determination shall be binding on all persons. If the adjustment would
produce fractional shares with respect to any unexercised Option, the Committee
may adjust appropriately the number of shares covered by the Option so as to
eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Committee may take such actions with respect to outstanding
Incentive Awards as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Committee may
take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.
16. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall have
general authority to impose any limitation or condition upon an Incentive Award
the Committee deem appropriate to achieve the objectives of the Incentive Award
and
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the Plan and, without limitation and in addition to powers set forth elsewhere
in the Plan, shall have the following specific authority:
(a) The Committee shall have the power and complete discretion to determine
(i) which eligible employees shall receive Incentive Awards and the nature of
each Incentive Award, (ii) the terms and conditions of any Performance Award,
(iii) whether all or any part of an Incentive Award shall be accelerated upon a
Change of Control, (iv) the number of shares of Company Stock to be covered by
each Incentive Award, (v) whether Options shall be Incentive Stock Options or
Nonstatutory Stock Options, (vi) when, whether and to what extent Stock
Appreciation Rights shall be granted, (vii) the time or times when an Incentive
Award shall be granted, (viii) whether an Incentive Award shall become vested
over a period of time and when it shall be fully vested, (ix) when Options and
Stock Appreciation Rights may be exercised, (x) whether a Disability exists,
(xi) the manner in which payment will be made upon the exercise of Options or
Stock Appreciation Rights, (xii) conditions relating to the length of time
before disposition of Company Stock received upon the exercise of Options or
Stock Appreciation Rights is permitted, (xiii) whether to authorize a
Participant (A) to deliver Mature Shares to satisfy Applicable Withholding Taxes
or (B) to have the Employer withhold from the shares to be issued upon the
exercise of a Nonstatutory Stock Option or Stock Appreciation Right the number
of shares necessary to satisfy Applicable Withholding Taxes, (xiv) the terms and
conditions applicable to Restricted Stock awards, (xv) the terms and conditions
on which restrictions upon Restricted Stock shall lapse, (xvi) whether to
accelerate the time at which any or all restrictions with respect to Restricted
Stock will lapse or be removed, (xvii) the terms and conditions applicable to
Performance Stock awards, (xviii) notice provisions relating to the sale of
Company Stock acquired under the Plan, and (xix) any additional requirements
relating to Incentive Awards that the Committee deems appropriate.
Notwithstanding the foregoing, no "tandem stock options" (where two stock
options are issued together and the exercise of one option affects the right to
exercise the other option) may be issued in connection with Incentive Stock
Options. The Committee shall have the power to amend the terms of previously
granted Incentive Awards so long as the terms as amended are consistent with the
terms of the Plan and provided that the consent of the Participant is obtained
with respect to any amendment that would be detrimental to him or her, except
that such consent will not be required if such amendment is for the purpose of
complying with Rule 16b-3 or any requirement of the Code applicable to the
Incentive Award.
(b) The Committee may adopt rules and regulations for carrying out the Plan
with respect to Participants. The interpretation and construction of any
provision of the Plan by the Committee shall be final and conclusive as to any
Participant. The Committee may consult with counsel, who may be counsel to the
Employer, and shall not incur any liability for any action taken in good faith
in reliance upon the advice of counsel.
(c) A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members, and any action so taken shall be fully effective as if it had been
taken at a meeting.
17. NOTICE
All notices and other communications required or permitted to be given
under this Plan shall be in writing and shall be deemed to have been duly given
if delivered personally or mailed first class, postage prepaid, as follows (a)
if to an Employer -- at the principal business address of the Company to the
attention of the Treasurer; (b) if to any Participant -- at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
18. INTERPRETATION
The terms of this Plan are subject to all present and future regulations
and rulings of the Secretary of the Treasury or his or her delegate relating to
the qualification of Incentive Stock Options under the Code. If any provision of
the Plan conflicts with any such regulation or ruling, then that provision of
the Plan shall be void and of no effect. The terms of this Plan shall be
governed by the laws of the Commonwealth of Virginia.
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EXHIBIT B
TRIGON HEALTHCARE, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE AND EFFECT OF PLAN
The purpose of the Plan is to secure for the Company and its stockholders
the benefits of the incentive inherent in the ownership of Common Stock by
present and future employees of the Company and its Subsidiaries. The Plan is
intended to comply with the terms of Code section 423 and Rule 16b-3 of the Act.
2. SHARES RESERVED FOR THE PLAN
There shall be reserved for issuance and purchase by employees under the
Plan an aggregate of 1,000,000 shares of Common Stock, subject to adjustment as
provided in Section 13. Shares subject to the Plan shall be authorized but
unissued shares. Shares needed to satisfy the needs of the Plan may be newly
issued by the Company or acquired by purchases at the expense of the Company on
the open market or in private transactions.
3. DEFINITIONS
Where indicated by initial capital letters, the following terms shall have
the following meanings:
(a) ACT: The Securities Exchange Act of 1934.
(b) BOARD: The Board of Directors of the Company.
(c) CODE: The Internal Revenue Code of 1986, as amended, or any
subsequently enacted federal revenue law. A reference to a particular section of
the Code shall include a reference to any regulations issued under the section
and to the corresponding section of any subsequently enacted federal revenue
law.
(d) COMMITTEE: The committee established pursuant to Section 4 to be
responsible for the general administration of the Plan.
(e) COMMON STOCK: The Company's Class A Common Stock.
(f) COMPANY: Trigon Healthcare, Inc., a Virginia corporation, and any
successor by merger, consolidation or otherwise.
(g) COMPENSATION: The total earnings, prior to withholding, paid to an
Eligible Employee during the applicable pay period, including bonuses, overtime
and salary reduction contributions pursuant to Code section 401(k) plan.
Compensation shall exclude salary reduction contributions and flex dollars
pursuant to a Code section 125 plan, tax gross ups, relocation expenses,
referral bonuses, tuition reimbursement, the imputed value of group life
insurance, the economic value attributable to the employee under split dollar
life insurance, car allowances, contest earnings (other than marketing or sales
incentives) and any employer contributions (other than salary reduction
contributions) to a 401(k) plan.
(h) CUSTODIAN: A financial institution or other corporate entity selected
by the Company from time to time to act as custodian for the Plan.
(i) ELIGIBLE EMPLOYEE: Any employee of the Company or its Subsidiaries who
meets the eligibility requirements of Section 5 and Section 9.
(j) ENROLLMENT FORM: The form filed by a Participant with the Committee
authorizing payroll deductions pursuant to Section 6.
(k) FAIR MARKET VALUE: The closing trading price of the Common Stock on the
New York Stock Exchange as reported in the WALL STREET JOURNAL on the date in
question, or, if the Common Stock was not quoted on such date, the closing
trading price on the last day prior thereto on which the Common Stock was
quoted.
(l) GRANT DATE: The first business day of each calendar quarter on which
shares of Common Stock are or could be traded on the New York Stock Exchange.
(m) INVESTMENT ACCOUNT: The account established for each Participant to
hold Common Stock purchased under the Plan pursuant to Section 7.
(n) INVESTMENT DATE: The last business day of each calendar quarter on
which shares of Common Stock are or could be traded on the New York Stock
Exchange.
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(o) PARENT: Any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company if, as of an Investment Date, each of
the corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(p) PARTICIPANT: An Eligible Employee who elects to participate in the Plan
by filing an Enrollment Form pursuant to Section 6.
(q) PAYROLL DEDUCTION ACCOUNT: The account established for a Participant to
hold payroll deductions pursuant to Section 6.
(r) PLAN: The "Trigon Healthcare, Inc. Employee Stock Purchase Plan," as
set forth herein and as amended from time to time.
(s) PURCHASE PRICE: A percentage of the lower of the Fair Market Value of a
share of Common Stock on the Grant Date or on the Investment Date. The
percentage shall be eighty-five percent (85%) unless the Committee, in its sole
discretion, increases the percentage at any time. After any such increase, the
Committee, in its sole discretion, may decrease the percentage, but not below
eighty-five percent (85%), at any time. Any increase or decrease shall be
communicated to Eligible Employees not less than thirty (30) days prior to the
first Grant Date affected by the change.
(t) SUBSIDIARY OR SUBSIDIARIES: Any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, as of an
Investment Date, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee, consisting of not less
than two members appointed by the Board. The Committee shall be the Human
Resources, Compensation and Employee Benefits Committee of the Board unless the
Board shall appoint another committee to administer the Plan. The Board from
time to time may appoint members previously appointed and may fill vacancies,
however caused, in the Committee.
Subject to the express provisions of the Plan, the Committee shall have the
authority to take any and all actions (including directing the Custodian as to
the acquisition of shares) necessary to implement the Plan and to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to it, and
to make all other determinations necessary or advisable in administering the
Plan. All of such determinations shall be final and binding upon all persons. A
quorum of the Committee shall consist of a majority of its members and the
Committee may act by vote of a majority of its members at a meeting at which a
quorum is present, or without a meeting by a written consent to their action
taken signed by all members of the Committee. The Committee may request advice
or assistance or employ such other persons as are necessary for proper
administration of the Plan. The Committee may delegate administration of the
Plan to one or more employees of the Company or any Subsidiary.
5. ELIGIBLE EMPLOYEES
All employees of the Company or its Subsidiaries shall be eligible to
participate in the Plan as of the first day of the payroll period coincident
with or following commencement of employment, or as soon as administratively
practicable thereafter. Eligibility to participate is also subject to the
provisions of Section 9.
No director of the Company or of any Subsidiary who is not an employee
shall be eligible to participate in the Plan. No independent contractor who is
not an employee shall be eligible to participate in the Plan.
6. ELECTION TO PARTICIPATE
Each Eligible Employee may become a Participant by filing with the
Committee an Enrollment Form authorizing specified regular payroll deductions
from his Compensation. Such regular payroll deductions shall be in one percent
(1%) increments of Compensation subject to a minimum deduction of one percent
(1%) and a maximum deduction of fifteen percent (15%) of Compensation per pay
period. All regular payroll deductions shall be credited to the Payroll
Deduction Account that the Company has established in the name of the
Participant.
A Participant may cease his participation in the Plan at any time. An
Eligible Employee who has ceased to be a Participant may not again become a
Participant for six (6) months. Not more than four (4) times during any calendar
year, a Participant may increase or decrease his payroll deduction by filing a
new Enrollment Form. The change will be effective as
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of the payroll period following the date of the Participant's election change.
Once an election is in place, it may not be revoked for the remainder of the
payroll period.
A Participant selling or withdrawing shares of Common Stock in his
Investment Account (which includes requesting a certificate) shall cease to be a
Participant for six (6) months and shall not become a Participant until a new
election is made pursuant to Section 6. Such six (6) month suspension shall be
effective as of the first day of the payroll period coincident with or following
the Participant's withdrawal.
Enrollment Forms must be filed before the beginning of a payroll period to
be effective for that payroll period unless a different period of time is
prescribed by the Committee. An Enrollment Form not filed within the prescribed
filing period shall be effective the first day of the next payroll period.
7. METHOD OF PURCHASE AND INVESTMENT ACCOUNTS
Each Participant having eligible funds in his Payroll Deduction Account on
an Investment Date shall be deemed, without any further action, to have
purchased the number of shares (excluding fractional shares unless otherwise
determined by the Committee) which the eligible funds in his Payroll Deduction
Account could purchase at the Purchase Price on that Investment Date. All shares
purchased shall be maintained by the Custodian in a separate Investment Account
for each Participant. All cash dividends paid with respect to shares of the
Common Stock shall be added to a Participant's Payroll Deduction Account and
shall be used to purchase shares of Common Stock for the Participant's
Investment Account. Expenses incurred in the purchase of such shares shall be
paid by the Company.
All dividends of Common Stock distributed in-kind shall be added to the
shares held for a Participant in his Investment Account. Any distribution of
shares with respect to shares of Common Stock held for a Participant, other than
a dividend of Common Stock, shall be distributed to the Participant as soon as
practicable. Certificates for full shares will be issued and fractional shares
will be sold and the proceeds of sale, less selling expenses, distributed to the
Participant.
8. STOCK PURCHASES
The Custodian shall acquire shares of Company Stock for Participants as of
each Investment Date from the Company or, if directed by the Committee, by
purchases on the open market or in private transactions using total payroll
deduction amounts received by the Custodian. If shares are purchased in one or
more transactions on the open market or in private transactions at the direction
of the Committee, the Company will pay the Custodian the difference between the
Purchase Price and the price at which such shares are purchased for
Participants.
9. LIMITATION ON PURCHASES
No Participant may purchase during any one calendar year under the Plan (or
combined with any other plan qualified under Code section 423) shares of Common
Stock having a Fair Market Value (determined by reference to the Fair Market
Value on each Grant Date) in excess of $25,000. This limitation shall be
interpreted to comply with Code section 423(b)(8).
A Participant's Payroll Deduction Account may not be used to purchase
Common Stock on any Investment Date to the extent that after such purchase the
Participant would own (or be considered as owning within the meaning of Code
section 424(d)) stock possessing 5 percent or more of the total combined voting
power of the Company or its Parent or Subsidiary. For this purpose, stock which
the Participant may purchase under any outstanding option shall be treated as
owned by such Participant. As of the first Investment Date on which this
paragraph limits a Participant's ability to purchase Common Stock, the employee
shall cease to be a Participant.
10. TITLE OF ACCOUNTS
The Custodian shall maintain an Investment Account for each Participant.
Each Investment Account shall be in the name of the Participant or, if he so
indicates on his Enrollment Form, in his name jointly with a member of his
family, with right of survivorship. A Participant who is a resident of a
jurisdiction which does not recognize such a joint tenancy may have an
Investment Account in his name as tenant in common with a member of his family,
without right of survivorship.
11. RIGHTS AS A SHAREHOLDER
A Participant shall have the right at any time to obtain a certificate for
the full shares of Common Stock credited to his Investment Account. A
Participant shall have the right at any time to direct that any full shares in
his Investment Account be sold and that the proceeds, less expenses of sale, be
remitted to him. When a Participant ceases to be a Participant, the
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Participant may elect to have his shares sold by the Custodian and the proceeds,
after selling expenses, remitted to him or the Participant may elect to have a
certificate for the full shares of Common Stock credited to his Investment
Account forwarded to him. In either event, the Custodian will sell any
fractional interest held in his Investment Account to the Company and remit the
proceeds of such sale, less selling expenses, and the balance in his Payroll
Deduction Account to him.
As a condition of participation in the Plan, each Participant agrees to
notify the Company if he sells or otherwise disposes of any of his shares of
Common Stock within two years of the Grant Date on which such shares were
purchased.
12. RIGHTS NOT TRANSFERABLE
Rights under the Plan are not transferable by a Participant, except by will
or by the laws of descent and distribution.
13. CHANGE IN CAPITAL STRUCTURE.
In the event of a stock dividend, spinoff, stock split or combination of
shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company to
be subject to the Plan, the maximum number of shares or securities which may be
delivered under the Plan, the selling price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons.
If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Committee may take such actions with respect to the Plan as the
Committee deems appropriate.
Notwithstanding anything in the Plan to the contrary, the Committee may
take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.
14. RETIREMENT, TERMINATION AND DEATH
In the event of a Participant's retirement, termination of active
employment, or death, the amount in his Payroll Deduction Account shall be
refunded to him, and, unless otherwise elected, certificates will be issued for
full shares held in his Investment Account. If a Participant elects to have his
shares sold, he will receive the proceeds of the sale, less selling expenses. In
the event of his death, the amount in his Payroll Deduction Account and all
shares in his Investment Account shall be delivered to the beneficiary
designated by the Participant in a writing filed with the Company. If no
beneficiary has been designated, or if the designated beneficiary does not
survive the Participant, such amount and all shares shall be delivered to his
estate.
15. AMENDMENT OF THE PLAN
The Board of Directors may at any time, or from time to time, amend the
Plan in any respect; provided, however, that the shareholders of the Company
must approve any amendment that would materially (i) increase the benefits
accruing to Participants under the Plan, (ii) increase the number of securities
that may be issued under the Plan, or (iii) modify the requirements as to
eligibility for participation in the Plan.
16. TERMINATION OF THE PLAN
The Plan and all rights of employees hereunder shall terminate:
(a) on the Investment Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares
remaining available for purchase; or
(b) at any prior date at the discretion of the Board of Directors.
In the event that the Plan terminates under circumstances described in (a)
above, reserved shares remaining as of the termination date shall be issued to
Participants on a prorata basis. Upon termination of the Plan, all amounts in an
employee's Payroll Deduction Account that are not used to purchase Common Stock
will be refunded.
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17. EFFECTIVE DATE OF PLAN
The Plan was approved by the Board of Directors on February 19, 1997
subject to approval by the Company's shareholders, and, if approved, the Plan
shall become effective on the date designated by the Committee subsequent to
such approval.
18. GOVERNMENT AND OTHER REGULATIONS
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and the Company's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such approvals by
any regulatory or government agency as may, in the opinion of counsel for the
Company, be required.
19. INDEMNIFICATION OF COMMITTEE
Service on the Committee shall constitute service as a director of the
Company so that members of the Committee shall be entitled to indemnification
and reimbursement as directors of the Company pursuant to its Articles of
Incorporation and Bylaws.
20. GOVERNING LAW
The Plan shall be construed and administered in accordance with the laws of
the Commonwealth of Virginia.
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EXHIBIT C
TRIGON HEALTHCARE, INC.
NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the Trigon Healthcare, Inc. Non-Employee Directors Stock
Incentive Plan (the "Plan") is to encourage ownership in the Company by
non-employee members of the Board to promote long-term shareholder value and to
provide non-employee members of the Board with an incentive to continue as
directors of the Company.
2. DEFINITIONS
As used in the Plan, the following terms have the meanings indicated:
(a) ACT means the Securities Exchange Act of 1934, as amended.
(b) ANNUAL MEETING means the annual meeting of shareholders at which a
class of members of the Board are routinely elected.
(c) BOARD means the Board of Directors of the Company.
(d) CHANGE OF CONTROL means an event described in (i), (ii), (iii), or
(iv):
(i) The acquisition by a Group of Beneficial Ownership of 20% or more
of the Stock of the Company, but excluding for this purpose any acquisition
by the Company (or a subsidiary) or an employee benefit plan of the
Company. "Group" means any individual, entity or group within the meaning
of Sections 13(d)(3) or 14(d)(2) of the Act, "Beneficial Ownership" has the
meaning in Rule 13d-3 promulgated under the Act, and "Stock" means the then
outstanding shares of Class A common stock of the Company.
(ii) Individuals who constitute the Board on the date of approval of
this Plan by shareholders (the "Incumbent Board") cease to constitute at
least a majority of the Board, provided that any director whose nomination
was approved by a majority of the Incumbent Board shall be considered a
member of the Incumbent Board.
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, in which the owners of the Stock of
the Company do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of the Stock of the
corporation resulting from such reorganization, merger or consolidation.
(iv) A complete liquidation or dissolution of the Company, or the sale
or other disposition of all or substantially all of the assets of the
Company.
(e) COMPANY means Trigon Healthcare, Inc.
(f) COMPANY STOCK means the Class A Common Stock of the Company. In the
event of a change in the capital structure of the Company (as provided in
Section 13), the shares resulting from such a change shall be deemed to be the
Company Stock within the meaning of the Plan.
(g) DATE OF GRANT means the date as of which a director is automatically
awarded an Option pursuant to Section 6.
(h) EFFECTIVE DATE means the date the Plan is adopted by shareholders of
the Company.
(i) ELIGIBLE DIRECTOR means a member of the Board who is not an employee of
the Company or any Subsidiary.
(j) FAIR MARKET VALUE means the closing trading price of a share of Company
Stock, as reported in THE WALL STREET JOURNAL as of the last day on which
Company Stock is traded preceding the Date of Grant or preceding any other date
for which the value of Company Stock must be determined under the Plan.
(k) FEES means all amounts payable to an Eligible Director for services
rendered as a director, including retainer fees, meeting fees, and committee
fees, but excluding travel and other out of pocket expense reimbursements.
(l) OPTION means a right to purchase Company Stock granted under the Plan,
at a price determined in accordance with the Plan.
(m) PLAN YEAR means the period on the date of an Annual Meeting and ending
on the day before the next Annual Meeting.
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(n) SUBSIDIARY means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, as of the Date of
Grant, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
3. PARTICIPATION IN THE PLAN
Each Eligible Director who was not an employee of the Company or Subsidiary
for at least one year before the Date of Grant of an Option under the Plan shall
be eligible to receive Options under Section 6. Each Eligible Director shall be
eligible to elect to receive Company Stock in lieu of Fees under Section 7 and
to elect to defer receipt of Company Stock under Section 8.
4. STOCK SUBJECT TO THE PLAN
The maximum number of shares of Company Stock that may be issued upon
exercise of Options granted pursuant to the Plan shall be 550,000, subject to
adjustment as provided in Section 13. Shares that have not been issued under the
Plan allocable to Options and portions of Options that expire or terminate
unexercised may again be subject to a new Option.
5. NON-STATUTORY STOCK OPTIONS
All Options granted under the Plan shall be non-statutory in nature and
shall not be entitled to special tax treatment under Internal Revenue Code
section 422.
6. AWARD, TERMS, CONDITIONS AND FORM OF OPTIONS
Each Option shall be evidenced by a written agreement in such form as the
Board shall from time to time approve, which agreement shall comply with and be
subject to the following terms and conditions:
(a) AUTOMATIC AWARD OF OPTION. Options for the purchase of shares of
Company Stock shall be awarded at the times and for the number of shares as
follows:
(i) Each Eligible Director on the Effective Date of the Plan shall
automatically receive an Option to purchase 10,000 shares as of the
Effective Date.
(ii) After the Effective Date, each first-time newly-elected director
who is an Eligible Director on the date of his or her first election to the
Board shall automatically receive an Option to purchase 10,000 shares as of
the date of the annual meeting of the Company's shareholders at which he or
she is first elected.
(iii) Each year after the Effective Date, each Eligible Director
(other than a first-time newly-elected director or a director not
reelected) shall automatically receive an Option to purchase 5,000 shares
as of the date of the annual meeting of the Company's shareholders.
If at any time under the Plan there are not sufficient shares available to
permit fully the automatic Option grants described in this paragraph, the Option
grants shall be reduced pro rata (to zero if necessary) so as not to exceed the
number of shares available.
(b) OPTION EXERCISE PRICE. The Option exercise price shall be the Fair
Market Value of the Company Stock on the Date of Grant. For the grant on the
Effective Date, the Option exercise price shall be the higher of the Fair Market
Value of the Company Stock on the Date of Grant or the average of the Fair
Market Value of the Company Stock on the twenty trading days immediately
preceding the Date of Grant.
(c) EXERCISE OF OPTIONS. Subject to Section 6(e) below, all Options shall
become exercisable as follows: one-third on the day before the first annual
meeting of shareholders after the Date of Grant; one-third on the day before the
second annual meeting after the Date of Grant; and the remainder on the day
before the third annual meeting of shareholders after the Date of Grant;
provided that the Eligible Director is a director of the Company on that day. If
the Eligible Director ceases to be a director of the Company before an Option is
fully exercisable, the unexercisable portion of the Option shall be forfeited
immediately. Once exercisable, all or any portion of an Option may be exercised
until the earlier of:
(i) thirty-six months of the date the Eligible Director ceases to be a
director of the Company for any reason, including death or disability; or
(ii) the expiration of ten (10) years from the Date of Grant.
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(d) METHOD OF EXERCISE. An Option may be exercised by written notice to the
Company at its principal office, stating the number of shares the optionee has
elected to purchase, accompanied by payment in cash, or by delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of the sale or loan
proceeds to pay the amount of the full Option exercise price for the shares of
Company Stock being acquired pursuant to the exercise notice.
(e) CHANGE OF CONTROL. Options shall become fully exercisable upon a Change
of Control.
7. RECEIPT OF FEES IN STOCK
(a) An Eligible Director may elect to receive up to 100 percent of his or
her Fees in shares of Company Stock (a "Stock Election"). A Stock Election must
be in writing and shall be delivered to the Corporate Secretary of the Company
prior to the Annual Meeting for the Plan Year to which the Stock Election
pertains. Except as provided in Section 7(c), a Stock Election may be revoked
prior to the last day of any calendar quarter for all calendar quarters
beginning after the revocation. A Stock Election must specify the applicable
percentage of the Fees that the Eligible Director wishes to receive in shares of
Company Stock (the "Designated Percentage").
(b) If a Stock Election is made, the amount of Fees to be paid to an
Eligible Director during each calendar quarter shall be determined on the last
day of the quarter. The number of shares of Company Stock to be issued in lieu
of the Fees shall be determined by multiplying the Designated Percentage times
the Fees otherwise payable for the quarter and dividing that product by the Fair
Market Value of the Company Stock on the last day of the quarter. If this
formula produces a fractional share, the Eligible Director shall be paid in cash
the Fair Market Value of the fractional share.
(c) If the Designated Percentage in a Stock Election is 100 percent, the
number of shares of Company Stock as determined under Section 7(b) shall be
increased by 30 percent, rounded down to the next whole share. To receive the
increased amount of Company Stock, the Stock Election must be irrevocable in
respect to the Plan Year to which it pertains.
8. DEFERRALS OF STOCK
(a) An Eligible Director may elect to defer the payment of some or all of
the shares of Company Stock otherwise payable under Section 7 by completing a
deferral election (a "Deferral Election"). A Deferral Election must be in
writing and shall be delivered to the Corporate Secretary of the Company prior
to the Annual Meeting for the Plan Year to which the Deferral Election pertains.
A Deferral Election shall be irrevocable in respect to the Plan Year to which it
pertains. A Deferral Election must specify the applicable percentage of the
shares of Common Stock that the Eligible Director wishes to defer. A Deferral
Election may be made for a single Plan Year or may be made applicable to all
future Plan Years until revoked. Any revocation shall be effective as of the
last day of the Plan Year in which the revocation is made.
(b) With respect to all shares of Company Stock for which a Deferral
Election is made, the Company shall transfer shares of Company Stock or other
assets equal in value to the shares (plus an amount equal to any acquisition
costs) to a trust. The trust shall secure the Company's obligation to pay shares
of Common Stock to the Eligible Director. The trust and its assets shall remain
subject to the claims of the Company's creditors and any interest the
Participant may be deemed to have in the trust may not be sold, hypothecated or
transferred (including, without limitation, transfer by gift), except by will or
the laws of descent and distribution. The certificates for shares issued to the
trust shall be issued in the name of the trustee. For accounting purposes, the
trustee shall maintain a separate account for each Eligible Director. All
dividends and other distributions paid or made with respect to the Company Stock
in a separate account shall be held in the account. All cash dividends or other
distributions shall be invested in additional shares of Company Stock. The
Eligible Director shall have the right to direct the trustee as to the voting of
shares of Company Stock in the Eligible Director's account.
(c) A Deferral Election shall provide for payment of the Company Stock at a
future date or dates elected by the Eligible Director. In addition, the Eligible
Director may elect to receive his account in the trust in a single lump sum
payment upon the occurrence of a Change of Control in lieu of any other form
that would otherwise be payable pursuant to a prior election. The single lump
sum payment shall be paid in shares of Company Stock as soon as practicable
after the Change of Control occurs. Except for an election made within 30 days
of adoption of this Plan which shall be immediately effective, any election or
revocation of an election by the Eligible Director shall be effective six months
after it is made.
(d) A beneficiary may elect to receive the balance of any unpaid benefit in
a single lump sum payment upon the occurrence of a Change of Control in lieu of
the benefit that would otherwise be payable. The single lump sum payment shall
be paid in shares of Company Stock as soon as practicable after the Change of
Control occurs. Except for an election made
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within 30 days of becoming a beneficiary which shall be immediately effective,
any election or revocation of an election by the beneficiary shall be effective
six months after it is made.
9. WITHHOLDING
If at any time it is determined that the Company is obligated to withhold
income taxes upon the transfer of Company Stock as a result of the exercise of
an Option by an optionee, the Company shall have the right to retain or sell
without notice shares of Company Stock having a Fair Market Value sufficient on
such date or dates as may be determined by the Board (but not more than five
business days prior to the date on which such shares would otherwise have been
delivered) to cover the amount of any federal or state income tax if required to
be withheld or otherwise deducted and paid with respect to such payment and the
exercise of the Option, remitting any balance to the optionee; provided,
however, that the optionee shall have the right to make other arrangements
satisfactory to the Company or to provide the Company with the funds to enable
it to pay such tax. Notwithstanding the foregoing, the Company shall not sell
shares of Company Stock if such sale will cause the optionee to incur a
liability under Section 16(b) of the Act.
10. TRANSFERABILITY
An Option shall not be transferable by the optionee otherwise than by will,
or by the laws of descent and distribution, and shall be exercised during the
lifetime of the optionee only by him; provided that an Eligible Director may
transfer any Option to members of the Eligible Directors' immediate family or
trusts or family partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Board. Except as specifically
provided in an written option agreement, no Option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during his or
hers lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
11. ADMINISTRATION
The Plan shall be administered by the Board. Grants of Options under the
Plan shall be automatic as described in Section 6. The Board shall have all
powers necessary to administer the Plan, including, without limitation, the
authority (within the limitations described herein) to prescribe the form of the
agreement embodying awards of Options under the Plan, to construe the Plan, to
determine all questions arising under the Plan, and to adopt and amend rules and
regulations for the administration of the Plan as it may deem desirable. Any
decision of the Board in the administration of the Plan shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that members thereof may authorize any one or more of their number or any
officer of the Company to execute and deliver documents on behalf of the Board.
No member of the Board shall be liable for anything done or omitted to be done
by him or any other member of the Board in connection with the Plan, except for
his or hers own willful misconduct or as expressly provided by statute.
12. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Except for the terms of an Option contained in Section 6, the Board shall
have the power to modify, extend or renew outstanding Options and to authorize
the grant of new Options in substitution therefor, provided that any such action
may not have the effect of altering, enhancing or impairing any rights or
obligations of any person under any Option previously granted without the
consent of the optionee.
13. TERMINATION
The Plan shall terminate upon the earlier of:
(a) the adoption of a resolution of the Board terminating the Plan;
(b) the date shares of Company Stock are no longer available under the Plan
for the automatic award of Option shares;
or
(c) the tenth anniversary of the Effective Date.
No termination of the Plan shall without his or her consent materially and
adversely affect any of the rights or obligations of any person under any Option
previously granted under the Plan.
C-4
<PAGE>
14. LIMITATION OF RIGHTS
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan nor the granting
of an Option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain any person as a director for any period of time.
(b) NO SHAREHOLDERS RIGHTS UNDER OPTIONS. An optionee shall have no rights
as a shareholder with respect to Shares covered by his or her Options until the
date of exercise of the Option, and, except as provided in Section 13, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such exercise.
15. CHANGES IN CAPITAL STRUCTURE
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or merger in which the Company is the surviving corporation or
other change in the Company's capital stock (including, but not limited to, the
creation or issuance to shareholders generally of rights, options or warrants
for the purchase of common stock or preferred stock of the Company), the number
and kind of shares of stock or securities of the Company to be subject to the
Plan and to Options then outstanding or to be granted thereunder, the maximum
number of shares or securities which may be delivered under the Plan, the number
of shares to be granted to an Eligible Director under Section 6, the exercise
price, and other relevant provisions shall be appropriately adjusted by the
Board, whose determination shall be binding on all persons. If the adjustment
would produce fractional shares with respect to any unexercised Option, the
Board may adjust appropriately the number of shares covered by the Option so as
to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Board may take such actions with respect to outstanding Options as
the Board deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Board may
take the foregoing actions without the consent of any Participant, and the
Board's determination shall be conclusive and binding on all persons for all
purposes.
16. AMENDMENT OF THE PLAN
The Board (except as provided below) may suspend or discontinue the Plan or
revise or amend the Plan in any respect; provided, however, that without
approval of the shareholders no revision or amendment shall increase the number
of Shares subject to the Plan (except as provided in Section 13), or materially
increase the benefits accruing to Eligible Directors under the Plan, including
amendments to the option price and number of shares provided in Section 6.
17. NOTICE
All notices and other communications required or permitted to be given
under this Plan shall be in writing and shall be deemed to have been duly given
if delivered personally or mailed first class, postage prepaid, as follows: (a)
if to the Company -- at its principal business address to the attention of the
Treasurer; (b) if to any Participant -- at the last address of the Participant
known to the sender at the time the notice or other communication is sent.
18. CONSTRUCTION
The terms of this Plan shall be governed by the laws of the Commonwealth of
Virginia.
C-5
<PAGE>
Trigon Healthcare, Inc.
P
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
APRIL 16, 1997
O
X The undersigned, having received the Annual Report to the Shareholders
and the accompanying Notice of Annual Meeting of Shareholders and Proxy
Y Statement dated March 13, 1997, hereby appoints Ronald M. Nash and J.
Christopher Wiltshire, and each of them, proxies, with full power of
substitution, and hereby authorizes them to represent and vote the
shares of Class A Common Stock of Trigon Healthcare, Inc. (the
"Company") which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company to be held
on Wednesday, April 16, 1997, at 9:00 a.m., Eastern Daylight Time, and
any adjournment thereof, and especially to vote as set forth on the
reverse hereof.
Election of Directors, Nominees:
Hunter B. Andrews, Lenox D. Baker, Jr., M.D.,
Frank C. Martin, Jr., Donald B. Nolan, M.D.,
Hubert R. Stallard
(CONTINUED ON REVERSE)
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^ FOLD AND DETACH HERE ^
[Trigon Logo] TRIGON(R)
Trigon Healthcare, Inc.
Directions to Annual Meeting
2015 Staples Mill Road
Richmond, Virginia 23230
<TABLE>
<S> <C>
Arriving from the East on I-64 Arriving from the North on I-95
from Williamsburg, VA Beach, etc. from Fredericksburg, Washington, D.C.
DO NOT TAKE I-295 North I-95 exit DO NOT TAKE I-295 to I-64 West exit
- --------------------------------- -----------------------------------
FOLLOW I-64 WEST RICHMOND FOLLOW I-95 SOUTH RICHMOND
1. Take I-64 West to I-95/I-64 Interchange. 1. Take I-95 South to I-64 West, exit 79.
2. Take I-64 West again exit 79 off of I-95 North. 2. Take Staples Mill Road exit 185 off of I-64 West
3. Take Staples Mill Road exit 185 off of I-64 West and and follow signs to Route 33 East.
follow signs to Route 33 East. 3. Go 1/2 mile on Staples Mill Road to Trigon
4. Go 1/2 mile on Staples Mill Road to Trigon Headquarters on your left.
Headquarters on your left.
Arriving from the West on I-64
Arriving from the South on I-95 from Charlottesville, etc.
from Petersburg, North Carolina, etc. DO NOT TAKE I-295 to North I-95 exit
1. Take I-95 North to I-64 West. ------------------------------------
2. Take Staples Mill Road exit 185 off of I-64 West and Take I-64 EAST RICHMOND
follow signs to Route 33 East.
3. Go 1/2 mile on Staples Mill Road to Trigon 1. Take I-64 East to the Staples Mill Road exit 185B
Headquarters on your left. and follow signs to Route 33 East.
2. Go 1/2 mile on Staples Mill Road to Trigon
Headquarters on your left.
</TABLE>
PAGE
<PAGE>
[X] Please mark your
vote as in this 0904
example.
IF YOU SPECIFY A CHOICE AS TO THE ACTION TO BE TAKEN ON AN ITEM, THIS PROXY WILL
BE VOTED IN ACCORDANCE WITH SUCH CHOICE. IF YOU DO NOT SPECIFY A CHOICE, IT WILL
BE VOTED FOR THE NAMED NOMINEES IN THE PROXY STATEMENT AND FOR ITEMS 2, 3, 4
AND 5.
<TABLE>
<CAPTION>
<S> <C>
1. Election of FOR WITHHELD 2. Approval of the FOR AGAINST ABSTAIN
Directors [ ] [ ] Company's 1997 [ ] [ ] [ ]
(see reverse) Stock Incentive
Plan.
For, except vote withheld from the following nominee(s):
3. Approval of the [ ] [ ] [ ]
- ------------------------------------------------- Company's
Employee Stock
Purchase Plan
</TABLE>
4. Approval of the FOR AGAINST ABSTAIN
Company's Non- [ ] [ ] [ ]
Employee Directors
Stock Incentive Plan.
5. Approval of [ ] [ ] [ ]
Independent
Auditors.
6. IN THEIR DISCRETION the proxies are authorized to vote
upon such other business as may properly come before
the meeting and any adjournments thereof.
Will attend annual meeting [ ]
Any proxy or proxies previously given for the meeting
are revoked.
SIGNATURE(S) DATE:
------------------------------------------------ -----------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
[TRIGON LOGO] TRIGON(R)
Trigon Healthcare, Inc.
Annual Meeting of Shareholders
Wednesday, April 16, 1997
9:00 a.m.
2015 Staples Mill Road
Richmond, Virginia 23230
If you have any questions, please call 1-800-619-1697 (toll free)
