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EXHIBIT 4.2
2000 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN
1. PURPOSE.
This 2000 Non-Employee Directors Stock Option Plan (the "Plan") of
PacifiCare Health Systems, Inc., a Delaware corporation (the "Company"), is
intended to promote the best interests of the Company and its stockholders by
strengthening the Company's ability to attract and retain the services of
experienced and knowledgeable non-employee directors and to provide additional
incentive for such directors to continue to work for the best interests of the
Company and its stockholders. The options granted hereunder are not intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), as incentive stock options.
2. AMOUNT AND SOURCE OF STOCK.
The shares of stock subject to options shall be shares of the Company's
Common Stock, par value $0.01 per share (the "Common Stock"). The total number
of shares of Common Stock which may be the subject of options granted pursuant
to this Plan shall be limited so that the total number of shares of Common Stock
issued upon the exercise of options granted under this Plan shall not exceed
400,000, subject to adjustment as provided in Section 10 of this Plan. In the
event that any option granted hereunder expires or is terminated or canceled
prior to its exercise in full for any reason, the shares subject to such option
shall be added to the shares of Common Stock otherwise available for issuance
pursuant to the exercise of options under this Plan.
3. ADMINISTRATION OF THE PLAN.
(a) Duties and Powers of the Committee. This Plan shall be administered
by a committee of the Board of Directors of the Company (the "Board") comprised
of two or more members of the Board, selected by the Board (the "Committee").
Such members of the Committee shall be, Non-Employee Directors as defined in
Rule 16b-3(b)(3) (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). It shall be the duty of
the Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this Plan
and the respective option agreements and to adopt such rules for the
administration, interpretation and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
(b) Majority Rule. The Committee shall act by a majority of its members
in office. The Committee may act either by vote at a meeting or by a memorandum
or other written instrument signed by a majority of the Committee.
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(c) Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall not receive compensation for their services as members
but all expenses and liabilities they incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all optionees, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or the options and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
4. GRANT OF STOCK OPTIONS.
(a) Eligibility. All non-employee directors of the Company shall be
eligible to receive options hereunder (the "Eligible Directors").
(b) Stock Option Grants.
(i) The Committee shall, subject to the applicable limits of this
Plan, automatically grant each Eligible Director, upon being elected to
the Board, options to purchase 10,000 shares of Common Stock.
(ii) The Committee shall, subject to the applicable limits of
this Plan, automatically grant each Eligible Director annually options
to purchase 5,000 shares of Common Stock on the 30th day of June in each
calendar year, except for the Chairman of the Board who will receive
10,000 shares of Common Stock on the 30th day of June in each calendar
year, commencing June 30, 2000. If additional Eligible Directors are
hereafter appointed to the Board, the Committee shall, subject to the
applicable limits of this Plan, automatically grant annually each such
person options to purchase 5,000 shares of Common Stock on the 30th day
of June in each calendar year commencing with the first June 30th
following the date on which such director was appointed; so long as the
director is then eligible for the granting of options pursuant to this
Plan and has not been eligible to receive options under the 1996 Stock
Option Plan for Officers and Key Employees (the "1996 Plan") for all of
the preceding 12-month period, and, such director shall have served on
the Board the entire preceding 12-month period. If the number of shares
of Common Stock which may be the subject of options under this Plan is
not sufficient to make all automatic grants required to be made pursuant
to this Plan on the applicable date, the number of shares of Common
Stock subject to the options granted to each director shall be reduced
on a pro rata basis.
(iii) Subject to the applicable limits of this Plan, the
Committee shall have the
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authority, from time to time, to (x) grant, in its absolute discretion,
such additional options under the Plan (a "Discretionary Option Grant")
to any Eligible Director and (y) determine the number of shares of
Common Stock to be granted under such Discretionary Option Grant to an
Eligible Director. All other terms and conditions of a Discretionary
Option Grant shall be consistent with terms of the Plan.
(c) Option Price. The exercise price for the shares of Common Stock
purchasable under any option granted hereunder shall be an amount equal to 100
percent of the Fair Market Value of the Common Stock on the date of grant. For
purposes of this Plan, the "Fair Market Value" of the Common Stock on a given
date shall be based upon: (i) the closing price per share of the Common Stock on
the principal exchange on which the Common Stock is then trading, if any, on
such date, or, if the Common Stock was not traded on such date, then on the next
preceding trading day during which a sale occurred; or (ii) if the Common Stock
was not traded on an exchange but is quoted on the National Association of
Securities Dealers Automatic Quotation System or a successor quotation system,
(1) the last sales price (if the Common Stock is then listed as a National
Market Issue under the Nasdaq National Market System), or (2) the mean between
the closing representative bid and asked prices (in all other cases) for the
Common Stock on such date as reported by Nasdaq or such successor quotation
system; or (iii) if the Common Stock is not publicly traded on an exchange and
not quoted on Nasdaq or a successor quotation system, the mean between the
closing bid and asked prices for the Common Stock on such date as determined in
good faith by the Committee; or (iv) if the Common Stock is not publicly traded,
the fair market value established by the Committee acting in good faith.
5. TERMS AND CONDITIONS OF OPTIONS; VESTING.
(a) Commencement of Exercisability. Subject to Sections 5(b), 7 and 13,
each option granted under this Plan shall be fully vested and exercisable on the
date of grant; provided , however, that the underlying shares of common stock
may not be sold within the first six months of the date of grant.
(b) Stock Option Agreement. Subject to Section 13, the grant of options
by the Committee shall be effective as of the date of grant; provided, however,
that no option granted hereunder shall be exercisable unless and until the
holder shall enter into an individual option agreement with the Company that
shall set forth the terms and conditions of such option. Each such agreement
shall expressly incorporate by reference the provisions of this Plan (a copy of
which shall be made available for inspection by the optionee during normal
business hours at the principal office of the Company) and shall state that in
the event of any inconsistency between the provisions hereof and the provisions
of such agreement, the provisions of this Plan shall govern.
6. EXERCISE OF OPTIONS.
(a) Person Eligible to Exercise. During the lifetime of the optionee,
only he, his
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guardian, legal representative or other person approved by the Committee in its
sole discretion and described in the terms of the agreement documenting the
option may exercise an option granted to him, or any portion thereof. After the
death of the optionee, any exercisable portion of an option may, prior to the
time when such option becomes unexercisable under Section 7, be exercised by his
personal representative or by any person empowered to do so under the deceased
optionee's will or under the applicable laws of descent and distribution.
(b) Partial Exercise. At any time and from time to time prior to when
any exercisable option or exercisable portion thereof becomes unexercisable
under Section 7, such option or portion thereof may be exercised in whole or in
part; provided, however, that the Company shall not be required to issue
fractional shares and the number of shares for which an option may be partially
exercised shall be not less than 100 shares.
(c) Manner of Exercise. An exercisable option, or any exercisable
portion thereof, may be exercised solely by delivery to the Secretary or Chief
Financial Officer of the Company or their respective offices of all of the
following prior to the time when such option or such portion becomes
unexercisable under this Plan:
(i) Notice in writing signed by the optionee or other person then
entitled to exercise such option or portion, stating that such option or
portion is exercised, such notice complying with all applicable rules
established by the Committee;
(ii) (A) Full payment (in cash or by check) for the shares with
respect to which such option or portion is hereby exercised;
(B) With the consent of the Committee, shares of any class
of the Company's stock owned by the optionee either duly endorsed
for transfer to the Company or duly attested as to ownership with
a Fair Market Value (as determinable under Section 4(c)) on the
date of delivery equal to the aggregate option price of the
shares of Common Stock with respect to which such option or
portion is thereby exercised (which shares shall be owned by the
optionee for more than six months at the time they are
delivered);
(C) With the consent of the Committee, any other form of
cashless exercise permitted under Section 6(d) hereof; or
(D) Any combination of the consideration provided in the
foregoing subsections (A), (B) and (C);
(iii) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as
amended, and any other federal or state securities laws or regulations.
The Committee may, in its absolute discretion, also take
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whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share
certificates and issuing stop transfer orders to transfer agents and
registrars; and
(iv) In the event that the option, or portion thereof, shall be
exercised by any person or persons other than the optionee, appropriate
proof of the right of such person or persons to exercise the option or
portion thereof.
(d) Cashless Exercise. The Company, in its sole discretion, may
establish procedures whereby an optionee, to the extent permitted by and subject
to the requirements of Rule 16b-3 under the Exchange Act, Regulation T issued by
the Board of Governors of the Federal Reserve System pursuant to the Exchange
Act, federal income tax laws, and other federal, state and local tax and
securities laws, can exercise an option or a portion thereof without making a
direct payment of the option price to the Company. If the Company so elects to
establish a cashless exercise program, the Company shall determine, in its sole
discretion and from time to time, such administrative procedures and policies as
it deems appropriate provided such procedures and policies are consistent with
those of any cashless exercise program established pursuant to the 1996 Plan.
Such procedures and policies shall be binding on any optionee wishing to utilize
the cashless exercise program.
7. EXPIRATION OF OPTIONS.
No option may be exercised to any extent by anyone after the first to
occur of the following events:
(i) The expiration of 10 years from the date the option was
granted; or
(ii) The expiration of one year from the time the optionee shall
voluntarily or involuntarily cease to continue to serve as a director of
the Company (a "Termination of Directorship"), including a Termination
of Directorship by reason of death or disability.
For purposes of this Section 7, "disability" shall mean a medically
determinable physical or mental impairment which has lasted or can be expected
to last for a continuous period of not less than 12 months and which renders a
director substantially unable to function as a director of the Company. Nothing
contained herein or in any option agreement shall be construed to confer on any
optionee any right to continue as a director of the Company.
8. NON-TRANSFERABILITY OF OPTIONS.
No option or interest or right therein or part thereof shall be liable
for the debts, contracts or engagements of the optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law or judgment,
levy,
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attachment, garnishment or any other legal or equitable proceedings (including
bankruptcy) and any attempted disposition thereof shall be null and void and of
no effect; provided, however, that nothing in this Section 9 shall prevent
transfers by will or by the applicable laws of descent and distribution or by
other methods to any approved person pursuant to Section 6(a).
9. ADJUSTMENTS UPON CERTAIN EVENTS.
(a) Changes in Company's Shares. In the event that the outstanding
shares of Common Stock of the Company are hereafter changed into or exchanged
for a different number or kind of shares or other securities of the Company, or
of another corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the outstanding shares of Common Stock or other similar
transactions, proportionate adjustments shall be made by the Committee in the
number and kind of shares for the purchase of which options may be granted
(including adjustments of the limitation on the maximum number and kind of
shares which may be issued on exercise of options), which adjustments shall be
consistent with comparable adjustments made pursuant to the corresponding
provision in the 1996 Plan.
(b) Adjustments in Outstanding Awards. In the event that the outstanding
shares of Common Stock of the Company are hereafter changed into or exchanged
for a different number or kind of shares or other securities of the Company, or
of another corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend or combination
of shares, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the outstanding shares of Common Stock or other similar
transactions, the Committee shall make proportionate adjustments in the number
and kind of shares as to which all outstanding options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustments shall be consistent with comparable adjustments
made pursuant to the corresponding provision in the 1996 Plan. Such adjustment
in an outstanding option shall be made without change in the total price
applicable to the option or the unexercised portion of the option (except for
any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in option
price per share. Any such adjustment made by the Committee shall be final and
binding upon all optionees, the Company and all other interested persons.
10. GENERAL RESTRICTIONS.
(a) Conditions to Issuance of Stock Certificates. The shares of Common
Stock issuable and deliverable upon the exercise of any option, or any portion
thereof, may be either previously authorized but unissued shares of Common Stock
or issued shares of Common Stock which have then been reacquired by the Company.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of Common Stock purchased upon the exercise
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of any option or portion thereof prior to fulfillment of all of the following
conditions:
(i) The admission of such shares of Common Stock to listing on
all stock exchanges on which such class of stock is then listed;
(ii) The completion of any registration or other qualification of
such shares of Common Stock under any state or federal law or under the
rulings or regulations of the Securities and Exchange Commission or any
other governmental regulatory body, which the Committee shall, in its
absolute discretion, deem necessary or advisable;
(iii) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its
absolute discretion, determine to be necessary or advisable;
(iv) The payment to the Company of all amounts which it is
required to withhold under federal, state or local law in connection
with the exercise of the option; and
(v) The lapse of such reasonable period of time following the
exercise of the option as the Committee may establish from time to time
for reasons of administrative convenience.
(b) Rights as Stockholders. The holders of options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares of Common Stock receivable upon the exercise of any part of an
option unless and until certificates representing the shares of Common Stock
have been issued by the Company to such holders.
11. WITHHOLDING TAX LIABILITY.
(a) A holder of an option granted hereunder may elect to deliver shares
of Common Stock to the Company or have the Company withhold shares otherwise
issuable upon the exercise of an option in order to satisfy federal, state and
local withholding tax liability (a "share withholding election"), provided: (i)
the Board or, if so designated, the Committee, shall not have revoked its
advance approval of the holder's share withholding election; and (ii) the share
withholding election is made on or prior to the date on which the amount of
withholding tax liability is determined (the "Tax Date"). Notwithstanding the
foregoing, a holder whose transactions in the Company's equity securities are
subject to Section 16(b) of the Exchange Act may make a share withholding
election only if the following additional conditions are met: (i) the
withholding is made at least six months after the date of the grant of the
option; and (ii) either (x) the share withholding election is irrevocably made
at least six months in advance of the withholding, or (y) the share withholding
election and the share withholding take place during the period beginning on the
third business day following the date of release of the Company's quarterly or
annual financial results and ending on the twelfth business day following
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such date.
(b) A share withholding election shall be deemed made when written
notice of such election, signed by the holder, has been delivered or transmitted
by registered or certified mail to the Secretary or Chief Financial Officer of
the Company at its then principal office. Delivery of said notice shall
constitute an irrevocable election to have shares withheld.
(c) Upon exercise of an option by a holder, the Company shall transfer
the total number of shares of Common Stock subject to the option to the holder
on the date of exercise, less any shares of Common Stock the holder elects to
withhold.
12. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
This Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board; provided
that the Board may not amend or modify this Plan without the approval of the
stockholders of the Company if stockholder approval would be required under
Section 422 of the Code or any law or rule of any governmental authority, stock
exchange or other self-regulatory organization to which the Company is subject.
Neither the amendment, suspension nor termination of this Plan shall, without
the consent of the holder of the option, impair any rights or obligations under
any option theretofore granted. The Committee may amend or otherwise modify the
terms of an option granted hereunder, from time to time, but no amendment or
modification shall, without the consent of the holder of such option impair any
rights or obligations of such option. No option may be granted during any period
of suspension nor after termination of this Plan, and in no event may any option
be granted under this Plan after exhaustion of the shares reserved for shares
subject to options granted pursuant to this Plan.
13. APPROVAL OF PLAN BY STOCKHOLDERS.
This Plan will be submitted for the approval of the Company's
stockholders within 12 months after the date of the Board's initial adoption of
this Plan and as determined necessary or desirable for actions taken pursuant to
Section 12. Options may be granted prior to such stockholder approval; provided,
however, that such options shall not be exercisable prior to the time when this
Plan is approved by the stockholders; provided, further, that if such approval
has not been obtained at the end of said 12-month period, all options previously
granted under this Plan shall thereupon be canceled and become null and void.
14. EFFECTIVE DATE OF PLAN.
Subject to Section 14, the effective date of this Plan shall be June 22,
2000 and shall remain in effect until June 30, 2004.
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