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
REGAN HOLDING CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) and 0-11.
Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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):
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<PAGE>
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
REGAN HOLDING CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 21, 1999
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Regan Holding
Corp. (the "Company"), to be held at Embassy Suites, 101 McInnis Parkway, San
Rafael, California, on May 21, 1999, at 10:00 a.m. Pacific time, to consider and
act upon the matters listed below:
(1) Election of four (4) Directors to hold office until the Annual Meeting
of Shareholders in 2000 and until their successors are duly elected;
(2) Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the year ended December 31, 1999;
(3) Approval of the Amended and Restated Regan Holding Corp. 1998 Stock
Option Plan (the "Employee Plan");
(4) Approval of the Amended and Restated Regan Holding Corp. Producer
Stock Award and Option Plan (the "Producer Plan"); and
(5) Consideration of any other matters which may properly come before the
meeting or any adjournments of the meeting.
Shareholders of record at the close of business on April 5, 1999, are
entitled to notice of and to vote at the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE MEETING IN
PERSON, BUT WHETHER YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING,
YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
<PAGE>
1179 N. McDowell Boulevard
Petaluma, California 94954
April 21, 1999
REGAN HOLDING CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held May 21, 1999
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Regan Holding Corp., a California
corporation, with its principal executive offices located at 1179 N. McDowell
Boulevard, Petaluma, California 94954 (the "Company"), for use at the Annual
Meeting of Shareholders to be held at Embassy Suites, 101 McInnis Parkway, San
Rafael, California, on May 21, 1999, at 10:00 a.m., Pacific time. Accompanying
this Proxy Statement is the Board of Directors' Proxy for the Annual Meeting
which you may use to indicate your vote on the proposals described in this Proxy
Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will
unless otherwise directed be voted in accordance with the recommendations of the
Board of Directors set forth in this Proxy Statement. A shareholder may revoke
his or her Proxy at any time before it is voted either by filing with the
Secretary of the Company, at its principal executive offices, a written notice
of revocation or a duly executed proxy bearing a later date, or by attending the
Annual Meeting and expressing a desire to vote his or her shares in person.
The close of business on April 5, 1999, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof. As of the record date, the Company
had outstanding 25,992,437 shares of Common Stock-Series A, no par value (the
"Series A Stock"), and 598,633 shares of Common Stock-Series B, no par value
(the "Series B Stock"). As of the date of this Proxy Statement, the Company is
not in arrears in dividends or in default in principal or interest with respect
to any of its outstanding securities. The shares of Series A Stock and Series B
Stock are collectively referred to herein as "Common Stock" and the holders of
shares of Common Stock vote together as a single class. Commencing approximately
April 21, 1999, the Company is mailing its Annual Report on Form 10-K for the
year ended December 31, 1998, together with this Proxy Statement and the
enclosed Proxy, to holders of Common Stock as of the record date.
The shares of Common Stock are the only outstanding voting securities of
the Company. A holder of Common Stock is entitled to cast one vote for each
share held of record by such holder on the record date on all matters to be
considered at the Annual Meeting. As explained under Item 1 of this Proxy
Statement, cumulative voting will be permitted with respect to the election of
Directors.
The holders of a majority of the votes entitled to be cast, present either
in person or by proxy, shall constitute a quorum for purposes of the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining whether a quorum is present on any matter. For actions requiring
approval based on a percentage of votes cast, abstentions and broker non-votes
will not affect the outcome of the vote. For actions requiring approval based on
the number of shares outstanding, abstentions and broker non-votes will have the
same effect as a negative vote.
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of Directors to be elected
at four (4). The Board of Directors has nominated the persons identified below
to serve as Directors until the next Annual Meeting of Shareholders and until
their respective successors shall be elected and shall qualify. All four of the
nominees are currently Directors of the Company.
<TABLE>
<CAPTION>
Name Principal Occupation Director Since
<S> <C> <C>
Lynda L. Regan Ms. Regan, born in 1948, has served as Chairman 1990
and Chief Executive Officer of the Company since
1992. She was Senior Vice President and
Treasurer from 1990 to 1992.
Steven C. Anderson, CLU, ChFC, Mr. Anderson, born in 1948, has been a partner 1990
LUTCF in Hoalst Anderson, an independent insurance
agency, since 1983. He is a member of the
National Association of Life Underwriters and
Society of Financial Service Professionals.
R. Preston Pitts Mr. Pitts, born in 1951, has served as Chief 1995
Financial Officer of the Company since 1994, as
President and Secretary of the Company since
February 1997, and as Chief Operating Officer of
the Company since April, 1998. Prior to joining
the Company, he owned Pitts Company, a CPA firm
specializing in services for insurance
companies, served as financial officer for
United Family Life Insurance Company and
American Security Insurance Group, both
Fortis-owned companies, and was Audit Manager
for Ernst & Young.
Ute Scott-Smith Ms. Scott-Smith, born in 1960, served as Senior 1997
Vice-President of the Company from 1990 to April
of 1997.
</TABLE>
Although it is not contemplated that the nominees will decline or be unable
to serve, the Proxies will be voted by the Proxy holders at their discretion for
another person if such a contingency should arise. Unless otherwise directed in
the accompanying Proxy, or as specified above, the Proxies will be voted FOR the
election of nominees named above.
A plurality vote is required for election of Directors. The Bylaws provide
that each shareholder is entitled to cumulate such shareholder's votes and give
one nominee a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
normally entitled, or distribute the shareholder's votes on the same principle
among as many nominees as the shareholder considers appropriate. This cumulative
voting right may not be exercised unless the nominee's name has been placed in
nomination prior to the voting and one or more shareholders has given notice at
the meeting prior to the voting of the shareholder's intent to cumulate such
shareholder's vote. The proxy holders may exercise this cumulative voting right
at their discretion.
Under an insurance brokerage agreement among the Company, Lynda L. Regan
and Moody Insurance Group ("MIG"), Ms. Regan has agreed that, so long as the
brokerage agreement remains in effect, she will vote her shares in favor of the
election of Robert Moody, Jr., MIG's president and sole shareholder, as a
Director of the Company should he wish to be elected. However, at the present
time, MIG engages in business activities that compete with the Company.
Therefore, in order to avoid any issue as to the propriety of Mr. Moody's
serving on the Company's Board, Mr. Moody has agreed to relinquish his right to
serve on the Board for a period of one year in return for nominal consideration
from the Company. The termination of the brokerage agreement with MIG would not
have a material effect on the Company.
Executive Officers
In addition to the Directors who serve as executive officers of the Company
and who are identified above, the following individuals serve as officers of the
Company:
H. Lynn Stafford served as Vice President of Operations of the Company from
1995 to July, 1997, and as Chief Information Officer since August, 1997. Prior
to that time, he served as Chief Operating Officer for Lincoln Liberty Life
Insurance Company and First Delaware Life Insurance Company.
Gregory C Egger has served as Chief Marketing Officer of the Company since
August, 1997. Prior to that time, Mr. Egger was Executive Vice President for
American Security Group.
David A. Skup has served as Chief Financial Officer of the Company since
July, 1997. Previously, Mr. Skup was Vice President in Charge of Internal Audit
for Independent Insurance Group, Inc. and was Senior Audit Manager for Deloitte,
Haskins & Sells.
Beneficial Share Ownership of Directors and Executive Officers
The following table shows the number of shares and the percentage of the
shares of the Company's Class A Stock beneficially owned by each of the
Directors and executive officers of the Company as of March 31, 1999. No
Director or officer owns any Series B Common Stock.
<TABLE>
<CAPTION>
Name Position Total Percent
<S> <C> <C> <C>
Lynda L. Regan Director, Chairman & Chief
Executive Officer 11,383,222 (1) 43.8%
R. Preston Pitts Director, President & Chief
Operating Officer 830,300 (2) 3.2%
Ute Scott-Smith Director 451,739 (3) 1.7%
Steven C. Anderson Director 79,716 (3) *
Gregory C Egger Chief Marketing Officer 40,000 (2) *
David A. Skup Chief Financial Officer 40,000 (2) *
H. Lynn Stafford Chief Information Officer 40,000 (2) *
--------------- -----------
Directors and
officers as a group 12,864,977 (4) 49.5%
=============== ===========
</TABLE>
(1) Includes 25,000 shares issuable pursuant to stock options that are
exercisable within 60 days.
(2) Includes 40,000 shares issuable pursuant to stock options that are
exercisable within 60 days.
(3) Includes 10,000 shares issuable pursuant to stock options that are
exercisable within 60 days.
(4) Includes 205,000 shares issuable pursuant to stock options that are
exercisable within 60 days.
*Indicates that the percentage of the outstanding shares beneficially owned
is less than one percent (1%).
Certain Shareholders
The Company knows of no person who is the beneficial owner of more than
five percent of any class of the Company's outstanding Common Stock other than
Lynda L. Regan, Chairman and Chief Executive Officer of the Company, whose
ownership is listed above.
Committees
The Company has an Audit Committee consisting of Steven C. Anderson and Ute
Scott-Smith, both of whom are outside Directors. The Audit Committee oversees
management's discharge of its financial reporting responsibilities and
recommends appointment of the Company's independent auditors. During 1998, the
Audit Committee held two meetings.
<PAGE>
The Company does not currently have a nominating or compensation committee.
The functions normally performed by these committees are performed by the entire
Board of Directors.
Directors' Meetings
During the fiscal year ended December 31, 1998, four meetings of the Board
of Directors of the Company were held.
Directors' Compensation
The Company compensates outside Directors for attending Board and committee
meetings at $2,000 per meeting. Currently, Steven C. Anderson and Ute
Scott-Smith are the only outside Directors of the Company. The other Directors
are otherwise employed by the Company and are not compensated for serving as
Directors or attending Board or committee meetings.
Executive Compensation
The following Summary Compensation Table sets forth the compensation of the
Company's Chief Executive Officer and all other executive officers for services
in all capacities to the Company and its subsidiaries during 1998, 1997, and
1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation All Other
Name and Position Year Annual Salary Annual Bonus (1) Other Compensation
----------------- ---- ------------- ---------------- ------ ------------
<S> <C> <C> <C> <C> <C>
Lynda L. Regan, 1998 $ 435,781 $ 249,612 $ 5,000 (2) --
Chief Executive Officer 16,824 (4)
1997 407,712 167,916 4,750 (2) --
16,825 (4)
1996 408,894 52,290 4,750 (2) --
16,824 (4)
R. Preston Pitts, 1998 $ 336,211 $ 205,175 $ 5,000 (2) --
President and Chief 1997 300,000 149,916 4,750 (2) --
Operating Officer 1996 300,000 72,290 4,750 (2) --
Gregory C Egger, (3) 1998 $ 232,788 $ 124,868 $ 5,000 (2) --
Chief Marketing Officer 1997 77,885 52,046 -- --
David A. Skup, (3) 1998 $ 167,254 $ 95,426 $ 5,000 (2) --
Chief Financial Officer 1997 60,577 20,661 -- --
H. Lynn Stafford, 1998 $ 155,192 $ 109,835 $ 5,000 (2) --
Chief Information Officer 1997 139,231 73,416 4,750 (2) --
1996 130,059 31,790 4,750 (2) --
Ute Scott-Smith, (5) 1997 $ 66,754 $ -- $ 4,750 (2) --
Senior Vice President 1996 177,318 47,290 4,750 (2) --
</TABLE>
(1) Includes bonuses in the year in which they were earned.
(2) The Company matches contributions made to its 401(k) plan at a rate of $.50
for every $1.00 deferred, up to 6% of total annual salary.
(3) Mr. Skup and Mr. Egger were elected officers of the Company in July, 1997,
and August, 1997, respectively.
(4) The Company pays interest on debt related to a split dollar life insurance
policy under which Ms. Regan is the beneficiary.
(5) Ms. Scott-Smith resigned effective April 4, 1997, and became a Director in
August, 1997.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth grants of stock options to the executive
officers during the fiscal year ended December 31, 1998. No SARs were granted
during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual
Grants % of
Number of Total Potential Realizable
Securities Options/SARs Value at Assumed
Underlying Granted to Exercise or Annual Rates of Stock
Options/SARs Employees in Base Price Price Appreciation
Name Granted Fiscal Year (3) ($/Share) (1) Expiration Date for Option Term (2)
---- ------- --------------- ------------- --------------- -----------------------
5% ($) 10% ($)
------ -------
<S> <C> <C> <C> <C> <C> <C>
Lynda L. Regan 100,000 6.6% $.80 12/31/02 (4) 22,102 49,841
R. Preston Pitts 200,000 13.2% $.73 12/31/07 (5) 91,818 232,686
Gregory C Egger 200,000 13.2% $.73 12/31/07 (5) 91,818 232,686
David A. Skup 200,000 13.2% $.73 12/31/07 (5) 91,818 232,686
H. Lynn Stafford 200,000 13.2% $.73 12/31/07 (5) 91,818 232,686
</TABLE>
(1) All options set forth in this table were granted at fair market value on
the date of the grant as determined by the Board of Directors of the
Company.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules
promulgated by the SEC and do not reflect the Company's estimate of future
stock price growth. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the timing of such exercise and the
future performance of the Common Stock. There can be no assurance that the
rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
(3) Based on options to purchase an aggregate of 1,513,000 shares of Common
Stock granted to all employees of the Company in fiscal 1998.
(4) The dates of exercisability for the options are as follows: (i) 25% on
January 1, 1999; (ii) 25% on January 1, 2000; (iii) 25% on January 1, 2001;
and (iv) 25% on January 1, 2002.
(5) The dates of exercisability are as follows: (i) 20% on January 1, 1999;
(ii) 20% on January 1, 2000; (iii) 20% on January 1, 2001; (iv) 20% on
January 1, 2002; and (v) 20% on January 1, 2003.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth certain information concerning the
number and value of unexercised options held by each of the executive officers
as of December 31, 1998. No stock options were exercised by the executive
officers during fiscal year 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs at in-the-money Options/SARs
Acquired on Value Fiscal Year End (#) at Fiscal Year End (1) ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Lynda L. Regan -- -- 25,000/75,000 11,750/32,250
R. Preston Pitts -- -- 40,000/160,000 18,800/75,200
Gregory C Egger -- -- 40,000/160,000 18,800/75,200
David A. Skup -- -- 40,000/160,000 18,800/75,200
H. Lynn Stafford -- -- 40,000/160,000 18,800/75,200
</TABLE>
(1) Calculated on the basis of the difference between the closing price of the
underlying securities on December 31, 1998 and the exercise price of the
option.
<PAGE>
Report on Executive Compensation
The Company does not have a compensation committee. The Board of Directors
develops and administers the Company's executive compensation policies and
programs. These policies and programs are generally intended to (i) relate the
compensation of the Company's executives to the success of the Company and to
the creation of shareholder value; and, (ii) attract, motivate and retain highly
qualified managers. In establishing a level of compensation, the Board considers
a number of factors, including: (i) the financial condition and performance of
the Company; (ii) the compensation levels of executives in comparable positions
at companies in industries in which the Company competes for executives,
primarily the financial services and insurance industries; and, (iii) the
abilities of the executives and their contributions to the Company's goals and
performance.
Each year, the Board of Directors reviews the Company's executive
compensation policies and programs with respect to the linkage between executive
compensation and the creation of shareholder value, as well as the
competitiveness of the compensation programs. In conducting this review, the
Board considers changes in the Company's mission and goals and evaluates the
competitiveness of its compensation program based on published surveys, proxy
statement analysis and advice of consultants.
Compensation for executives consists of two components: base pay and
bonuses. Base pay for executives is determined based on the factors set forth
above. It is the Board's policy to position executive salaries in general in the
third quartile (i.e. the top 51% to 75%) of compensation levels for comparable
positions in the market, although individual salaries may be higher or lower
based on the considerations discussed above.
For 1998, the Chief Executive and President were eligible to receive a cash
bonus of up to 60% and 50% of base salary, respectively, the Chief Marketing
Officer was eligible to receive a cash bonus of up to 40% of base salary, and
each of the other executive officers was eligible to receive a cash bonus of up
to 30% of base salary. Achievement of this bonus was contingent upon the
individual executive achieving performance goals designed to increase
shareholder value. Examples of performance goals for 1998 included: (i)
achievement of targeted increases in net income; (ii) development of long-term
strategic plans; and, (iii) design and implementation of monthly management
reporting processes.
In addition to the salary based bonuses described above, a bonus based on
the performance of the Company during 1998 was allocated to each executive
officer. An amount equal to 1.25% of the Company's net income for 1998 was
allocated to each of the five individuals who served as executive officers as of
the end of 1998. One third of the amount allocated to each officer was paid in
February of 1999. The remaining two-thirds will be paid in equal installments in
February of 2000 and 2001, contingent upon the Company achieving net income
growth of 15% per year in 1999 and 2000, respectively, and provided that such
individual is employed with the Company on the date that the installment is to
be paid.
In determining Lynda L. Regan's level of compensation for 1998, the Board
considered her success in maintaining relationships with key distribution groups
and insurance carriers with which the Company contracts. The Board also
considered the compensation level of Ms. Regan compared to that of individuals
holding similar positions in companies operating in comparable industries. Based
on these considerations, the Board approved Ms. Regan's base salary and bonus
for 1998 at $435,781 and $249,612, respectively.
Respectfully submitted,
Lynda L. Regan
Steven C. Anderson
R. Preston Pitts
Ute Scott-Smith
<PAGE>
Performance Data
The Company's Common Stock became subject to the Securities Exchange Act of
1934 (the "Exchange Act") in November of 1991 as a result of the issuance of
shares of Common Stock in connection with the acquisition of LifeSurance
Corporation, a Delaware corporation. Since that time, there has been no active
trading in the Common Stock and, accordingly, information as to market price per
share is not available. Prior to 1996, the only available measure of the value
of the shares of Common Stock was book value based on the financial statements
of the Company. The book value of each share of Common Stock (including
redeemable Common Stock) was negative $.0027 as of December 31, 1993, compared
with $.20 as of December 31, 1994, $.38 as of December 31, 1995, and $.48 as of
December 31, 1996. In 1996, the Company began repurchasing the stock of certain
shareholders entitled to sell their stock to the Company. The price paid for
such stock, which was based on an independent appraisal conducted on behalf of
the Company for the purpose of such repurchases, was as follows:
Appraisal Date Price Per Share
December 31, 1995...............................................$0.55
June 30, 1996...................................................$0.70
December 31, 1996...............................................$0.78
June 30, 1997...................................................$0.84
December 31, 1997...............................................$0.96
June 30, 1998...................................................$1.35
December 31, 1998...............................................$1.66
Compensation Committee Interlocks and Insider Participation
As noted above, the Company does not have a compensation committee. The
compensation of executive officers is determined by the Board of Directors.
Lynda Regan, who is Chief Executive Officer of the Company, is also Chairman of
the Board of Directors and R. Preston Pitts, who is President and Chief
Operating Officer, is also a Director. None of the executive officers of the
Company serve as a Director or member of the compensation committee of an
entity, any of whose executive officers serves as a Director of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the year ended December 31, 1998, and Forms 5
and amendments thereto furnished to the Company with respect to the year ended
December 31, 1997, no reports required by Section 16(a) of the Exchange Act with
respect to the Company were delinquent during the year ended December 31, 1998.
ITEM 2
RATIFICATION OF APPOINTMENT OF PRINCIPAL INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders vote FOR
ratification of the appointment of PricewaterhouseCoopers LLP as principal
independent auditors for the year ended December 31, 1999, and your proxy will
be so voted unless you specify otherwise.
The Board of Directors has appointed the firm of PricewaterhouseCoopers
LLP, as principal independent auditors for the Company for the year ended
December 31, 1999. Representatives of PricewaterhouseCoopers LLP are expected to
be present at the Annual Meeting and will be available to respond to appropriate
questions. Those representatives will have the opportunity to make a statement
if they desire to do so.
The approval of this appointment requires the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy and voting.
<PAGE>
ITEMS 3 & 4
APPROVAL OF THE AMENDED AND RESTATED 1998 EMPLOYEE STOCK OPTION PLAN AND
APPROVAL OF THE AMENDED AND RESTATED PRODUCER STOCK AWARD AND OPTION PLAN
The Board of Directors recommends that the shareholders vote FOR approval
of the Amended and Restated 1998 Employee Stock Option Plan and vote FOR
approval of the Amended and Restated Producer Stock Award and Option Plan, and
your proxy will be so voted unless you specify otherwise.
In February, 1999, the Board of Directors adopted amendments to the 1998
Employee Stock Option Plan (the "Employee Plan") and the Producer Stock Award
and Option Plan (the "Producer Plan", and collectively with the Employee Plan,
the "Plans"), which will remain effective unless approval by the Company's
shareholders is not obtained.
The complete text of the Plans is set forth as Exhibit "A" hereto. The
following is a summary of the material features of the Plans and is qualified in
its entirety by reference to Exhibit "A."
DESCRIPTION OF THE PLANS
The Board of Directors of the Company (the "Board") has adopted the
Producer Plan and the Employee Plan. The purpose of the Producer Plan is to
provide an incentive to Producers who market products on behalf of the Company's
subsidiaries, by aligning the interest of such individuals with those of the
shareholders of the Company. The purpose of the Employee Plan is to provide an
incentive to Directors of the Company and employees of its subsidiaries, to
increase their interest in the welfare of the Company, and to aid in attracting
and retaining employees and Directors of outstanding ability.
Participation/Types of Awards
The Employee Plan provides for grants of options to purchase shares of the
Company's unissued Series A Common Stock ("Shares") to Directors and employees
of the Company and certain of its subsidiaries. Under the Employee Plan,
employees and employee-Directors of the Company and of certain of its
subsidiaries may be granted incentive stock options ("ISOs") as well as
non-qualified stock options ("Non-Qualified Options"). Non-employee Directors of
the Company and of certain of its subsidiaries, may only be granted
Non-Qualified Options under the Employee Plan. (ISOs and Non-Qualified Options
collectively referred to herein as "Options.")
The Producer Plan provides for grants of Non-Qualified Options and awards
of Shares ("Awards") to Producers. ISOs may not be granted under the Producer
Plan.
Administration - Each of the Plans is administered by one or more
committees (each a "Committee" and collectively the "Committees"). The Committee
that administers the Producer Plan consists of Lynda L. Regan, R. Preston Pitts,
and David A. Skup, each an officer of the Company. The Committee that
administers the Employee Plan consists of Lynda L. Regan, R. Preston Pitts,
David A. Skup, Gregory C Egger, and H. Lynn Stafford, who collectively
constitute all of the officers of the Company. In addition, a special committee
consisting of Steven C. Anderson and Ute Scott-Smith, each a non-employee
Director of the Company and each of whom is a "disinterested person" under Rule
16b-3 of the Securities Exchange Act of 1934 (the "Exchange Act"), administers
the Employee Plan for the purposes of Rule 16b-3 with respect to employees and
Directors who are subject to Section 16 of the Exchange Act. Subject to the
provisions of each of the Plans, the Committees have authority to (i) determine
eligibility of Producers, employees and Directors to participate in the
respective Plans, (ii) grant Options and Awards under the Plans, (iii) determine
whether the Options granted under the Employee Plan will be Non-Qualified
Options or ISOs, (iv) interpret the Plans, (v) prescribe, amend, and rescind
rules and regulations relating to each of the Plans, (vi) determine the terms
and provisions of written agreements evidencing the granting of Options under
either of the Plans ("Option Agreement") or the granting of Awards under the
Producer Plan, and (vi) make all other determinations necessary or advisable for
the administration of the Plans. Any controversy or claim arising out of or
related to one of the Plans shall be determined unilaterally by and at the sole
discretion of the respective Committee. Any determination, decision or action of
a Committee in connection with the construction, interpretation, administration,
implementation or maintenance of the respective Plan shall be final, conclusive
and binding upon all persons to whom an Option or Award is granted (each a
"Grantee") and all persons claiming under or through any Grantee.
Term and Termination - Each of the Plans became effective on January 1,
1998. The Board may, at any time, alter, amend, suspend, discontinue, or
terminate either of the Plans, provided that no such action shall adversely
affect the right of any holder of an Option or Award previously granted under
either of the Plans, and provided that certain amendments to the Employee Plan
are subject to the approval of the shareholders of the Company.
Shares Subject to the Plan - The total number of Shares underlying Options
to be granted during the term of the Employee Plan may not exceed 5.5 million in
the aggregate, provided that approval of the shareholders of the Company is
required with respect to 4.0 million of such Shares, and the total number of
Shares underlying Awards and Options to be granted during the term of the
Producer Plan may not exceed 9.5 million in the aggregate. In the event of any
change in capitalization affecting the Shares, including without limitation, a
stock dividend or other distribution, stock split, reverse stock split,
recapitalization, consolidation, subdivision, split-up, spin-off, split-off,
combination or exchange of shares or other form of reorganization or
recapitalization, or any other change affecting the Shares, the Board shall
authorize and make such proportionate adjustments to the Options, if any, as the
Board deems appropriate to reflect such change.
During the effectiveness of this offering - Options granted pursuant to the
Plans to officers, Directors and direct or indirect beneficial owners of more
than ten percent (10%) of the Company's equity securities shall not exceed
twenty percent (20%) of the issued and outstanding shares of the Company's
equity securities on the date such Options are granted.
Payment of Exercise Price - The purchase price for Shares subject to an
Option is payable upon exercise of an Option in cash or by check, bank draft or
postal or express money order, or, in the discretion of the respective
Committee, in shares of Common Stock.
Termination of Producer/Employment/Director Status - Under the terms of the
Producer Plan, in the event that a Grantee's status as a Producer is terminated
for any reason, all options held by the Grantee which have not vested as of the
date of such termination shall expire immediately, provided, that the
termination of a Grantee's status as a Producer shall not affect the Grantee's
rights with respect to the exercise of any options which have vested as of the
date of such termination.
Under the terms of the Employee Plan, if a Grantee is an officer or
non-employee Director of the Company and such Grantee's employment with the
Company or status as a Director of the Company is terminated as a result of
retirement at or after age 62, or by reason of disability (as defined in the
Plan) or death, all Options held by the Grantee on the date of such termination
shall immediately vest and become fully exercisable provided that such Options
are exercised by the earlier of 6 months after the date of termination, or the
date the Option would otherwise expire, and any such Options which are not
exercised during the 6-month period immediately following the date of
termination shall be forfeited. If a Grantee is not an officer or non-employee
Director of the Company, and such Grantee's employment with the Company is
terminated as a result of retirement at or after age 62, or by reason of
disability (as defined in the Plan) or death, all options held by such Grantee
that were exercisable on the date of such termination shall be exercisable by
the earlier of 6 months after the date of termination, or the date the Option
would otherwise expire, and any such Options which are not exercised during the
6-month period immediately following the date of termination shall be forfeited.
If a Grantee's employment with the Company or status as a Director of the
Company is terminated for cause (as defined in the Employee Plan), all
unexercised options held by such Grantee on the date of such termination shall
be forfeited. If the Grantee's employment with the Company or status as a
Director is voluntarily terminated other than as a result of retirement at or
after age 62, all unexercised Options held by the Grantee on the date of such
termination shall be exercisable to the extent they were exercisable on the date
of such termination provided that such options are exercised by the earlier of
30 days after the date of such termination, or the date such Option would
otherwise expire, and any such Options which are not exercised during the 30-day
period immediately following the date of such termination shall be forfeited. If
a Grantee's employment with the Company or the status as a Director of the
Company is terminated for any reason other than as previously set forth, only
those Options which were vested and fully exercisable at the time of such
termination may be exercised provided that such Options are exercised by the
earlier of 3 months after the date of termination, or the date the Option would
otherwise expire, and any such Options which are not exercised during the
3-month period immediately following the date of termination shall be forfeited.
Any of the foregoing provisions may be altered by the Committee provided that
such altered terms are reflected in the applicable Option Agreement.
Grant Information - The Employee Plan limits the number of Shares that may
be subject to ISOs granted to any individual which ISOs become exercisable for
the first time during a particular calendar year. If the fair market value of
Shares subject to one or more ISOs which become exercisable for the first time
during a particular calendar year, combined with the fair market value of shares
under ISOs granted to such individual under other plans of the Company or of it
subsidiaries, determined at the time of grant, exceeds $100,000, the Shares in
excess of such amount will be treated as having been granted pursuant to
Non-Qualified Options.
Federal Income Tax Aspects of the Plans
Optionholders
Grant - There are no federal income tax consequences to the holder of an
Option solely by reason of the grant of an ISO or a Non-Qualified Option under
either of the Plans, provided that, in the case of a Non-Qualified Option, the
Option does not have a readily ascertainable fair market value at the date of
grant.
Exercise - The exercise of an ISO is not a taxable event for regular
federal income tax purposes. However, such exercise may give rise to an
alternative minimum tax liability. Upon the exercise of a Non-Qualified Option,
the holder of the Option will generally recognize ordinary income in an amount
equal to the excess of the fair market value of the Shares at the time of
exercise over the amount paid as the exercise price. The ordinary income
recognized in connection with the exercise by a holder of a Non-Qualified Option
will be subject to both wage and employment tax withholding.
The holder's tax basis in the Shares acquired pursuant to the exercise of
an Option will be the amount paid upon exercise plus, in the case of a
Non-Qualified Option, the amount of ordinary income recognized by the
optionholder upon exercise.
Qualifying Disposition - If an optionholder disposes of Shares acquired
upon exercise of an ISO in a taxable transaction, and such disposition occurs
more than two years from the date on which the Option is granted and more than
one year after the date on which the Shares are transferred to the optionholder,
the optionholder will recognize long-term capital gain or loss equal to the
difference between the amount realized upon such disposition and the
optionholder's adjusted basis in such Shares (generally the option exercise
price.)
Disqualifying Disposition - If an optionholder disposes of Shares acquired
upon exercise of an ISO (other than in certain tax-free transactions) within two
years from the date on which the ISO is granted or within one year after the
transfer of the Shares to the optionholder, then at the time of disposition the
optionholder will generally recognize ordinary income equal to the lesser of (a)
the excess of such Shares' fair market value on the date of exercise over the
exercise price paid by the optionholder or (b) the optionholder's actual gain
(i.e., the excess, if any, of the amount realized on the disposition over the
exercise price paid by the optionholder). If the amount realized on a taxable
disposition of the Shares obtained pursuant to the exercise of an ISO exceeds
the fair market value of such Shares on the date of the exercise, then the
optionholder will recognize a capital gain in the amount of such excess. If the
optionholder incurs a loss on such a disposition (i.e., if the amount realized
is less than the exercise price paid by the optionholder), then the loss will be
a capital loss. The capital gain or loss will be long-term or short term
depending on whether the Shares were held for more than one year from the date
such Shares were transferred to the optionholder.
Other Disposition - If an optionholder disposes of Shares acquired upon
exercise of a Non-Qualified Option in a taxable transaction, the optionholder
will recognize capital gain or loss in an amount equal to the difference between
the optionholder's basis (as discussed above) in the Shares sold and the amount
realized upon disposition. Any such capital gain or loss (and any capital gain
or loss recognized on a disqualifying disposition of Shares acquired upon
exercise of ISOs as discussed above) will be long-term or short-term depending
on whether the Shares were held for more than one year from the date such Shares
were transferred to the optionholder.
Alternative Minimum Tax - The exercise of ISOs (but not Non-Qualified
Options) will generally result in an upward adjustment to the optionholder's
alternative minimum taxable income ("AMTI") in the year of exercise by an amount
equal to the excess, if any, of the fair market value of the Shares on the date
of exercise over the exercise price. The basis of the Shares acquired, for
alternative minimum tax purposes, will equal the exercise price increased by the
prior upward adjustment of the taxpayer's AMTI due to the exercise of the ISO.
This will result in a corresponding downward adjustment to the optionholder's
AMTI in the year the Shares are disposed.
Award Recipients
Grant - Upon the grant of an Award, the recipient of the Award will
generally recognize ordinary income in an amount equal to the fair market value
of the Shares received pursuant to the Award. The recipient's tax basis in the
Shares acquired pursuant to the Award will be equal to the amount of ordinary
income recognized by the recipient upon the grant.
Disposition - If the recipient of an Award disposes of Shares acquired
pursuant to such Award in a taxable transaction, the recipient of the Award will
recognize capital gain or loss in an amount equal to the difference between the
recipient's basis (as discussed above) in the Shares sold and the amount
realized upon disposition. Any such capital gain or loss (and any capital gain
or loss recognized on a disqualifying disposition of Shares acquired upon
exercise of ISOs as discussed above) will be long-term or short-term depending
on whether the Shares were held for more than one year from the date such Shares
were awarded.
Consequences to the Company
There are no federal income tax consequences to the Company by reason of
the grant of ISOs or Non- Qualified Options or the exercise of ISOs (other than
disqualifying dispositions).
At the time the optionholder recognizes ordinary income from the exercise
of a Non-Qualified Option, or an Award recipient recognizes ordinary income upon
the receipt of Shares pursuant to an Award, the Company will be entitled to a
federal income tax deduction in the amount of the ordinary income so recognized
(as described above), provided that the Company satisfies its withholding
obligations described below. To the extent the optionholder recognizes ordinary
income by reason of a disqualifying disposition of the shares of Common Stock
acquired upon exercise of ISOs, the Company will be entitled to a corresponding
deduction in the year in which the disqualifying disposition occurs.
The Company will be required to report to the Internal Revenue Service any
ordinary income recognized by any optionholder by reason of the exercise of a
Non-Qualified Option or a disqualifying disposition of an ISO or by the
recipient of an Award. The Company will be required to withhold income and
employment taxes (and pay the employer's share of employment taxes) with respect
to ordinary income recognized by the optionholder upon the exercise of
Non-Qualified Options or a disqualifying disposition of an ISO or by the
recipient of an Award.
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN POTENTIAL MATERIAL U.S. FEDERAL
INCOME TAX ASPECTS OF THE RECEIPT OF AN AWARD OR THE RECEIPT AND EXERCISE OF
OPTIONS UNDER THE PLANS AND IS INCLUDED FOR GENERAL INFORMATION ONLY. THE
FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND
CIRCUMSTANCES OR TAX STATUS OR ATTRIBUTES OF EACH GRANTEE. AS A RESULT, THE
INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO
EACH GRANTEE. ACCORDINGLY, EACH GRANTEE SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE RECEIPT OF AN AWARD OR
THE RECEIPT AND EXERCISE OF OPTIONS UNDER THE PLANS, INCLUDING, BUT NOT LIMITED
TO, THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN SUCH LAWS.
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will act in respect thereof in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the next Annual
Meeting of Shareholders for inclusion in the Company's Proxy Statement and Proxy
form relating to such meeting must submit such proposal by January 31, 2000, to
the Company at its principal executive offices.
OTHER MATTERS
Management knows of no other matters other than as set forth in this Proxy
Statement which are to be considered at the meeting. If any other business shall
properly come before the meeting, the proxy holders will, as to such items, vote
the shares represented by management proxies in accordance with their best
judgment.
SOLICITATION OF PROXIES
It is expected that proxy solicitation will be primarily by mail. The cost
of solicitation by management will be borne by the Company. The Company will
reimburse brokerage firms and other persons representing beneficial owners of
shares for their reasonable disbursements in forwarding solicitation material to
such beneficial owners. Proxies may also be solicited by certain of the
Company's Directors and officers, without additional compensation, personally or
by mail, telephone, facsimile, telegram or otherwise.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, is being furnished to shareholders concurrently with this
Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
April 21, 1999
<PAGE>
A.1-10
EXHIBIT A.1
REGAN HOLDING CORP.
1998 STOCK OPTION PLAN
(As Amended and Restated Effective February 10, 1999)
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the Regan Holding Corp. 1998 Stock Option Plan
is to provide an incentive to Employees and Directors of Regan Holding Corp. and
its Affiliates who are in a position to contribute materially to the long-term
success of the Corporation and/or its Affiliates, to increase their interest in
the welfare of the Corporation and its Affiliates and to aid in attracting and
retaining Employees and Directors of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the meanings set forth below:
a. "Affiliate" shall mean any parent or subsidiary of the Corporation
which meets the requirements of Section 425 of the Code.
b. "Board" shall mean the Board of Directors of the Corporation.
c. "Cause" shall mean repeated failure to properly perform assigned
duties, gross negligence, insubordination, commission of a felony or any
act injurious to the Corporation or an Affiliate involving dishonesty or
breach of any duty of confidentiality or loyalty.
d. "Change of Control" shall mean the happening of any of the
following events:
(i) the Corporation receives a report on Schedule 13D filed with
the Securities and Exchange Commission pursuant to Section 13(d) of
the Exchange Act disclosing that any person, group, corporation or
other entity is the beneficial owner, directly or indirectly, of
thirty percent or more of the total combined voting power of all
classes of stock of the Corporation;
(ii) any person (as such term is defined in Section 13(d) of the
Exchange Act), group, corporation or other entity other than the
Corporation or a wholly-owned subsidiary of the Corporation, purchases
shares of any common stock of the Corporation (or securities
convertible into common stock) pursuant to a tender offer or exchange
offer for cash, securities or any other consideration, provided that
after consummation of the offer, the person, group, corporation or
other entity in question is the beneficial owner (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of thirty percent or more of the total combined voting power of all
classes of stock of the Corporation (calculated as provided in
paragraph (d) of Rule 13d-3 under the Exchange Act in the case of
rights to acquire common stock);
(iii) the shareholders of the Corporation approve (a) any
consolidation or merger of the Corporation in which the Corporation is
not the continuing or surviving corporation or pursuant to which
shares of Stock would be converted into cash, securities or other
property, or (b) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation; or
(iv) there shall have been a change in a majority of the members
of the Board of Directors of the Corporation within a 24 month period
unless the election or nomination for election by the Corporation's
shareholders of each new Director was approved by the vote of
two-thirds of the Directors then still in office who were in office at
the beginning of the 24 month period.
e. "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
f. "Committee" shall mean a committee designated by the Board which
committee shall administer the Plan as set forth in Section 4 of this
Article I of the Plan.
g. "Corporation" shall mean Regan Holding Corp., a California
corporation.
h. "Director" shall mean any individual who is a member of the Board
and/or a member of the Board of Directors of an Affiliate.
i. "Disability" shall mean the inability of an individual to provide
meaningful service for the Corporation due to a medically determinable
physical or mental impairment, which service is reasonably consistent with
the individual's past service for the Corporation, training and experience.
Such determination of disability shall be made by the Committee.
Notwithstanding the foregoing, if an individual qualifies for Federal
Social Security disability benefits or for payments under a long-term
disability income Plan of the Corporation or the Affiliate which employs
such individual, based upon his physical or mental condition, such
individual shall be deemed to suffer from a Disability hereunder.
j. "Employee" shall mean any employee, including officers, of the
Corporation or any of its Affiliates.
k. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
l. "Fair Market Value" shall mean on any date, (i) if the Stock is not
listed on a national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq"),
the fair market value of the Stock on that date as determined by the Board,
or (ii) if the Stock is listed on a national securities exchange or is
quoted on Nasdaq, the closing price reported on the composite tape for
issues listed on such exchange on such date, or the closing price or the
average of the closing dealer "bid" and "asked" prices of the Stock on the
date of grant as quoted by Nasdaq, or if no trades shall have been reported
for such date, on the next preceding date on which there were trades
reported; provided, however, that if no quotations shall have been made
within the 10 business days preceding such date, the Fair Market Value
shall be determined by the Board as provided in clause (i) above.
m. "Grantee" shall mean an Employee or Director who has been granted a
Stock Option under the Plan.
n. "Incentive Stock Option" shall mean a Stock Option granted pursuant
to the Incentive Stock Option provisions as set forth in Article II of the
Plan.
o. "Non-Qualified Stock Option" shall mean a Stock Option granted
pursuant to the Non-Qualified Stock Option provisions as set forth in
Article III of the Plan.
p. "Option Period" shall mean the term of a Stock Option as fixed by
the Committee.
q. "Plan" shall mean the Regan Holding Corp. 1998 Stock Option Plan as
set forth herein and as amended from time to time.
r. "Stock" shall mean authorized but unissued shares of the Series A
Common Stock of the Corporation, no par value, or reacquired shares of the
Corporation's Series A Common Stock.
s. "Stock Option" shall mean an option, which shall include
Non-Qualified Stock Options and Incentive Stock Options, granted pursuant
to the Plan to purchase shares of Stock.
t. "Stock Option Agreement" shall mean the written instrument
evidencing the grant of one or more Stock Options under the Plan and which
shall contain the terms and conditions applicable to such grant.
u. "Ten Percent Shareholder" shall mean an Employee or Director who at
the time a Stock Option is granted thereto owns stock possessing more than
10% of the total combined voting power of all stock of the Corporation or
of its Affiliates.
3. Shares of Stock Subject to the Plan. There are hereby reserved for
issuance under the Plan 5,500,000 shares of Stock. Subject to the provisions of
Section 1 of Article IV, the Stock which may be issued pursuant to Stock Options
authorized to be granted under the Plan and the Stock which is subject to
outstanding but unexercised Stock Options under the Plan shall not exceed
5,500,000 shares of Stock in the aggregate. If a Stock Option shall expire and
terminate for any reason, in whole or in part, without being exercised, the
number of shares of Stock as to which such expired or terminated Stock Option
shall not have been exercised may again become available for the grant of Stock
Options.
There shall be no terms and conditions in a Stock Option which provide that
the exercise of an Incentive Stock Option reduces the number of shares of Stock
for which an outstanding Non-Qualified Stock Option may be exercised; and there
shall be no terms and conditions in a Stock Option which provide that the
exercise of a Non-Qualified Stock Option reduces the number of shares of Stock
for which an outstanding Incentive Stock Option may be exercised.
4. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan, the Committee shall
have authority to determine the eligibility of Employees and Directors to
participate in the Plan, to grant Stock Options under the Plan and to determine
whether Stock Options granted under the Plan shall be Non-Qualified Stock
Options or Incentive Stock Options, to interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to the Plan, to determine the terms
and provisions of Stock Option Agreements and to make all other determinations
necessary or advisable for the administration of the Plan. Any controversy or
claim arising out of or related to the Plan shall be determined unilaterally by
and at the sole discretion of the Committee. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration, implementation or maintenance of the Plan shall be final,
conclusive and binding upon all Grantees and all person(s) claiming under or
through any Grantees.
There shall be 2 Committees under the Plan. Solely with respect to the
participation in the Plan of Employees and Directors who are subject to Section
16 of the Exchange Act or any successor statute ("Section 16"), a special
Committee comprised solely of 2 or more "non-employee directors" (as such term
is defined in Rule 16b-3(d)(1) promulgated by the Securities and Exchange
Commission under the Exchange Act) shall administer the Plan solely for purposes
of the Plan and the Stock Options granted under the Plan to satisfy the
applicable requirements of Rule 16b-3 promulgated by the Securities Exchange
Commission under the Exchange Act ("Rule 16b-3") with respect to such Employees
and Directors. For all other purposes of the Plan, a committee comprised of 3 or
more officers of the Corporation designated by the Board shall serve as the
Committee. Notwithstanding anything contained in this Section 4 to the contrary,
no member of the Committee shall have the authority to render any decision with
respect to his or her participation in or entitlement to benefits under the
Plan.
5. Amendment or Termination. The Board may, at any time, alter, amend,
suspend, discontinue, or terminate the Plan; provided, however, that no such
action shall adversely affect the right of any Grantee under any Stock Option
previously granted thereto hereunder.
6. Effective Date of Plan. The Plan became effective on January 1, 1998;
this amendment and restatement of the Plan shall become effective on November 1,
1998, subject to approval of the shareholders of the Corporation.
II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
a. Solely Employees of the Corporation or its Affiliates shall be
eligible to receive Incentive Stock Options under the Plan.
b. When granting an Incentive Stock Option, the Committee shall
determine the purchase price of the Stock subject thereto, provided, that
the purchase price of each share of Stock subject to an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of a share of
the Stock on the date the Incentive Stock Option is granted; and provided,
further, that the purchase price of each share of Stock subject to an
Incentive Stock Option granted to a Ten Percent Shareholder shall not be
less than 110% of the Fair Market Value of a share of the Stock on the date
the Incentive Stock Option is granted.
c. No Incentive Stock Option shall be exercisable more than 10 years
from the date the Incentive Stock Option was granted; provided, however,
that an Incentive Stock Option granted to a Ten Percent Shareholder shall
not be exercisable more than 5 years from the date the Incentive Stock
Option was granted.
d. The Committee shall determine and shall designate from time to time
those Employees who are to be granted Incentive Stock Options and shall
specify the number of shares of Stock subject to each Incentive Stock
Option.
e. Notwithstanding any other provisions hereof, the aggregate Fair
Market Value (determined at the time the option is granted) of Stock with
respect to which Incentive Stock Options are exercisable for the first time
by an Employee during any calendar year (under all such plans of the
Corporation and its Affiliates) shall not exceed $100,000.
f. The Committee, in its sole discretion, shall determine whether any
particular Incentive Stock Option shall become exercisable in one or more
installments, shall specify the installment dates, and, within the
limitations herein provided, shall determine the total period during which
the Incentive Stock Option is exercisable. Further, the Committee may make
such other provisions as may appear generally acceptable or desirable to
the Committee or necessary to qualify its grants under the provisions of
Section 422 of the Code.
g. The Committee may grant at any time new Incentive Stock Options to
an Employee who has previously received Incentive Stock Options or other
options whether such prior Incentive Stock Options or other options are
still outstanding, have previously been exercised in whole or in part or
are canceled in connection with the issuance of new Incentive Stock
Options. The purchase price of the new Incentive Stock Options may be
established by the Committee without regard to the existing Incentive Stock
Options or other options.
2. Exercise of Incentive Stock Options. The purchase price of Stock subject
to an Incentive Stock Option shall be payable on exercise of the Option in cash
or by check, bank draft or postal or express money order. The Committee, in its
discretion, may permit a Grantee to make partial or full payment of the purchase
price by the surrender of Stock owned by the Grantee prior to the date of
exercise. Shares of Stock surrendered in payment of the purchase price as
provided above shall be valued at the Fair Market Value thereof on the date of
exercise. Surrender of such stock shall be evidenced by delivery of the
certificate(s) representing such shares in such manner, and endorsed in such
form, or accompanied by stock powers endorsed in such form, as the Committee may
determine.
3. Termination of Employment. Except as provided otherwise in the
applicable Stock Option Agreement (in which case the provisions of the Stock
Option Agreement shall control over the provisions of this Section 3):
a. If a Grantee's employment with the Corporation or an Affiliate is
terminated for Cause, all then outstanding Incentive Stock Options held by
the Grantee shall expire immediately and such Stock Options shall not be
exercisable after the date of the termination of Grantee's employment. If
the Grantee shall have voluntarily terminated employment with the Company
other than by retirement at or after age 62, such Incentive Stock Options
must be exercised within 30 days after such termination of employment (but
in no event after expiration of the Option Period) and shall be exercisable
only to the extent such Incentive Stock Options were exercisable as of the
date of such termination or they shall be forfeited.
b. If the employment of any Grantee who is an officer or director of
the Corporation or an Affiliate is terminated by reason of death,
Disability, or retirement at or after age 62, notwithstanding the otherwise
applicable vesting periods set forth in the Stock Option Agreement, all
Incentive Stock Options held by such Grantees shall immediately vest and
become fully exercisable. Such Incentive Stock Options must be exercised
within 6 months after such termination of employment (but in no event after
expiration of the Option Period) and shall be exercisable only to the
extent such Incentive Stock Options were exercisable as of the date of such
termination or they shall be forfeited.
If the employment of any Grantee who is not an officer or director of
the Company or an Affiliate is terminated by reason of death, Disability,
or retirement at or after age 62, such Incentive Stock Options must be
exercised within 6 months after such termination of employment (but in no
event after expiration of the Option Period)and shall be exercisable only
to the extent such Incentive Stock Options were exercisable as of the date
of such termination.
c. If a Grantee's employment with the Corporation or an Affiliate is
terminated for any reason other than as set forth in subparagraph (a) or
subparagraph (b) of this Section 3, only those Incentive Stock Options held
by the Grantee which were vested and fully exercisable at the date of the
Grantee's termination shall be exercisable by the Grantee following the
termination of the Grantee's employment; provided, however, that such
Incentive Stock Options must be exercised by the earlier of (i) 3 months
from the date of the Grantee's termination, or (ii) the expiration of the
Option Period, or they shall be forfeited.
III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Non-Qualified Stock Options.
a. Employees and Directors of the Corporation or its Affiliates shall
be eligible to receive Non-Qualified Stock Options under the Plan.
b. The Committee shall determine and shall designate from time to time
those Employees and Directors who are to be granted Non-Qualified Stock
Options and shall specify the number of shares of Stock subject to each
Non-Qualified Stock Option.
c. The Committee may grant at any time new Non-Qualified Stock Options
to an Employee or Director who has previously received Non-Qualified Stock
Options or other options, whether such prior Non-Qualified Stock Options or
other options are still outstanding, have previously been exercised in
whole or in part or are canceled in connection with the issuance of new
Non-Qualified Stock Options.
d. When granting a Non-Qualified Stock Option, the Committee shall
determine the purchase price of the Stock subject thereto.
e. The Committee, in its sole discretion, shall determine whether any
particular Non-Qualified Stock Option shall become exercisable in one or
more installments, specify the installment dates and, within the
limitations herein provided, determine the total period during which the
Non-Qualified Stock Option is exercisable. Further, the Committee may make
such other provisions as may appear generally acceptable or desirable to
the Committee.
2. Exercise of Non-Qualified Stock Options. The purchase price of Stock
subject to a Non-Qualified Stock Option shall be payable on exercise of the
Option in cash or by check, bank draft or postal or express money order. The
Committee, in its discretion, may permit a Grantee to make partial or full
payment of the purchase price by the surrender of Stock owned by the Grantee
prior to the date of exercise. Shares of Stock surrendered in payment of the
purchase price as provided above shall be valued at the Fair Market Value
thereof on the date of exercise, surrender of such to be evidenced by delivery
of the certificates(s) representing such shares in such manner, and endorsed in
such form, or accompanied by stock powers endorsed in such form, as the
Committee may determine.
3. Termination of Employment or Director Status. Except as provided
otherwise in the applicable Stock Option Agreement (in which case the provisions
of the Stock Option Agreement shall control over the provisions of this Section
3):
a. If the employment or status as a Director of any Grantee who is an
officer or director of the Corporation or an Affiliate is terminated by
reason of death, Disability, or retirement at or after age 62,
notwithstanding the otherwise applicable vesting periods set forth in the
Stock Option Agreement, all Non-Qualified Stock Options held by such
Grantees shall immediately vest and become fully exercisable. Such
Non-Qualified Stock Options must be exercised within 6 months after such
termination of employment (but in no event after expiration of the Option
Period) and shall be exercisable only to the extent such Non-Qualified
Stock Options were exercisable as of the date of such termination or they
shall be forfeited.
If the employment of any Grantee who is not an officer or director of
the Company or an Affiliate is terminated by reason of death, Disability,
or retirement at or after age 62, such Non-Qualified Stock Options must be
exercised within 6 months after such termination of employment (but in no
event after expiration of the Option Period) and shall be exercisable only
to the extent such Non-Qualified Stock Options were exercisable as of the
date of such termination.
b. If a Grantee's employment with the Corporation or an Affiliate or
status as a Director is terminated for Cause, all then outstanding
Non-Qualified Stock Options held by such Grantee shall expire immediately
and such Non-Qualified Stock Options shall not be exercisable after the
date of the termination of the Grantee's employment or status as a
Director. If the Grantee shall have voluntarily terminated employment with
the Company other than by retirement at or after age 62, such Non-Qualified
Stock Options must be exercised within 30 days after such termination or
employment (but in no event after expiration of the Option Period) or they
shall be forfeited.
c. If a Grantee's employment with the Corporation or an Affiliate or
status as a Director is terminated for any reason other than as set forth
in subparagraph (a) or subparagraph (b) of this Section 3, only those
Non-Qualified Stock Options held by the Grantee which were vested and fully
exercisable at the date of the Grantee's termination shall be exercisable
by the Grantee following the termination of the Grantee's employment or
status as a Director; provided, however, that such Non-Qualified Stock
Options must be exercised by the earlier of (i) 3 months from the date of
the Grantee's termination, or (ii) the expiration of the Option Period, or
they shall be forfeited.
IV. GENERAL PROVISIONS
1. Recapitalization Adjustments.
a. In the event of any change in capitalization affecting the Stock,
including, without limitation, a stock dividend or other distribution,
stock split, reverse stock split, recapitalization, consolidation,
subdivision, split-up, spin-off, split-off, combination or exchange of
shares or other form of reorganization or recapitalization, or any other
change affecting the Stock, the Board shall authorize and make such
proportionate adjustments, if any, as the Board deems appropriate to
reflect such change, including, without limitation, with respect to the
aggregate number of shares of Stock for which Stock Options in respect
thereof may be granted under the Plan, the number of shares of Stock
covered by each outstanding Stock Option, and the purchase price per share
of Stock in respect of outstanding Stock Options.
b. Any provision hereof to the contrary notwithstanding, in the event
the Corporation is a party to a merger or other reorganization, outstanding
Stock Options shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Stock Options by the surviving corporation or its
parent, for their continuation by the Corporation (if the Corporation is a
surviving corporation) for accelerated vesting and accelerated expiration
or for settlement in cash; provided, however, that any accelerated vesting
of such Stock Options shall be limited to officers and directors of the
Corporation.
2. General.
a. Each Stock Option shall be evidenced by a Stock Option Agreement.
b. The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any right to be
retained as an Employee or Director, and all Employees and Directors shall
remain subject to discharge or removal to the same extent as if the Plan
were not in effect.
c. No Employee or Director, and no beneficiary or other person
claiming under or through him or her, shall have any right, title or
interest by reason of any Stock Option to any particular assets of the
Corporation, or any shares of Stock allocated or reserved for the purposes
of the Plan or subject to any Stock Option except as set forth herein. The
Corporation shall not be required to establish any fund or make any other
segregation of assets to assure the exercise of any Stock Option.
d. No Stock Option or right under the Plan shall or may be sold,
exchanged, assigned, pledged, encumbered, or otherwise hypothecated or
disposed of except by will or the laws of descent and distribution, and a
Stock Option shall be exercisable during the Grantee's lifetime only by the
Grantee or his conservator.
e. Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver any
certificate or certificates for shares of Stock under a Stock Option, and
the transferability of Stock acquired by exercise of a Stock Option, shall
be subject to all of the following conditions:
(1) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining in effect
of any such registration or other qualification which the Board shall,
in its absolute discretion upon the advice of counsel, deem necessary
or advisable;
(2) The obtaining of any other consent, approval, or permit from
any state or federal governmental agency which the Board shall, in its
absolute discretion upon the advice of counsel, determine to be
necessary or advisable; and
(3) Each stock certificate issued pursuant to a Stock Option
shall bear such legends which the Corporation shall determine, in its
absolute discretion, are necessary or advisable, or which in the
opinion of counsel to the Corporation are required under applicable
federal or state securities laws.
f. All payments to Grantees or to their legal representatives shall be
subject to any applicable tax, community property, or other statutes or
regulations of the United States or of any state having jurisdiction
thereof. The Grantee may be required to pay to the Corporation the amount
of any withholding taxes which the Committee, in its sole discretion, deems
necessary to be withheld in order to comply with any applicable statutes or
regulations with respect to a Stock Option or its exercise. In the event
that such payment is not made when due, the Corporation shall have the
right to deduct, to the extent permitted by law, from any payment or
settlement of any kind otherwise due to such person all or part of the
amount required to be withheld. If the Committee, in its sole discretion,
permits shares of Stock to be used to satisfy any such tax withholding,
such Stock shall be valued based upon the Fair Market Value of such Stock
as of the date the tax withholding is required to be made, such date to be
determined by the Committee. The Corporation shall not be required to issue
Stock until such obligations are satisfied.
g. In the case of a grant of a Stock Option to any Employee or
Director of an Affiliate of the Corporation, the Corporation may, if the
Committee so directs, issue or transfer the shares, if any, covered by the
Stock Option to the Affiliate, for such lawful consideration as the
Committee may specify, upon the condition or understanding that the
Affiliate will transfer the shares to the Employee or Director in
accordance with the terms of the Stock Option specified by the Committee
pursuant to the provisions of the Plan.
h. A Grantee entitled to Stock as a result of the exercise of an
Option shall not be deemed for any purpose to be, or have rights as, a
shareholder of the Corporation by virtue of such exercise, except to the
extent a stock certificate is issued therefor and then only from the date
such certificate is issued. No adjustments shall be made for dividends or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as otherwise provided herein.
The Corporation shall issue any stock certificates required to be issued in
connection with the exercise of a Stock Option with reasonable promptness
after such exercise.
i. The Plan and the grant or exercise of Stock Options granted under
the Plan shall be subject to, and shall in all respects comply with,
applicable California law.
j. Should the participation of any Employee or Director in the Plan be
subject to Section 16, it is the express intent of the Corporation that the
Plan and the Stock Options granted under the Plan satisfy and be
interpreted in a manner to achieve the result that the applicable
requirements of Rule 16b-3 shall be satisfied with respect to such
Employees and Directors, with the result that such Employees and Directors
shall be entitled to the benefits of Rule 16b-3 or other applicable
exemptive rules under Section 16. If any provision of the Plan or of any
Stock Option would otherwise frustrate or conflict with the intent of the
Corporation expressed in the immediately preceding sentence, to the extent
possible, such provision shall be interpreted and deemed amended so as to
avoid such conflict, and, to the extent of any remaining irreconcilable
conflict with such intent, the provision shall, solely with respect to
Employees and Directors subject to Section 16, be deemed void.
k. Any Person that receives the Corporation's securities pursuant to
this Plan shall receive financial statements of the Corporation at least
annually; provided, however, that the Corporation need not provide such
financial statements to its key individuals whose duties in connection with
the Corporation assure them access to equivalent information.
<PAGE>
A.2-1
EXHIBIT A.2
REGAN HOLDING CORP.
PRODUCER STOCK AWARD AND OPTION PLAN
(As Amended and Restated Effective February 10, 1999)
I. ESTABLISHMENT OF PLAN; DEFINITIONS
A. Purpose. The purpose of the Regan Holding Corp. Producer Stock Award and
Option Plan is to provide an incentive to individuals marketing annuity, life
insurance, and other investment products on behalf of Regan Holding Corp. and
its subsidiaries, by aligning the interests of such individuals with those of
the shareholders of Regan Holding Corp.
B. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the meanings set forth below:
a. "Board" shall mean the Board of Directors of the Corporation.
b. "Committee" shall mean a committee designated by the Board which
committee shall administer the Plan as set forth in Section 4 of this
Article I of the Plan.
c. "Corporation" shall mean Regan Holding Corp., a California
corporation.
d. "Fair Market Value" shall mean on any date, (i) if the Stock is not
listed on a national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq"),
the fair market value of Stock on that date as determined by the Board, or
(ii) if the Stock is listed on a national securities exchange or is quoted
on the Nasdaq, the closing price reported on the composite tape for issues
listed on such exchange on such date, or the closing price or the average
of the closing dealer "bid" and "asked" prices of the Stock on the date of
grant as quoted as Nasdaq, or if no trades shall have been reported for
such date, on the next preceding date on which there were trades reported;
provided, however, that if no quotations shall have been made within the 10
business days preceding such date, the Fair Market Value shall be
determined by the Board as provided in clause (i) above.
e. "Grantee" shall mean a Producer who has been granted a Stock Award
or a Stock Option under the Plan.
f. "Person" shall mean an individual, a corporation, a limited
liability company, or a partnership.
g. "Plan" shall mean the Regan Holding Corp. Producer Stock Award and
Option Plan as set forth herein and as amended from time to time.
h. "Producer" shall mean a Person who has entered into an agreement
with the Corporation, or one of its subsidiaries, pursuant to which such
person agrees to market annuity, life insurance, and other investment
products on behalf of the Corporation, or one of its subsidiaries.
i. "Stock" shall mean authorized but unissued shares of the Series A
Common Stock of the Corporation, no par value, or reacquired shares of the
Corporation's Series A Common Stock.
j. "Stock Awards" shall mean shares of Stock granted to a Grantee
pursuant to the Plan.
k. "Stock Option" shall mean an option granted pursuant to the Plan to
purchase shares of Stock.
l. "Stock Option Agreement" shall mean the written instrument
evidencing the grant of one or more Stock Options under the Plan and which
shall contain the terms and conditions applicable to such grant.
C. Shares of Stock Subject to the Plan. There are hereby reserved for
issuance under the Plan 9.5 million shares of Stock. Subject to the provisions
of Section 1 of Article IV, the Stock which may be issued pursuant to Stock
Awards and Stock Options authorized to be granted under the Plan and the Stock
which is subject to outstanding but unexercised Stock Options under the Plan
shall not exceed 9.5 million shares of Stock in the aggregate. If a Stock Option
shall expire and terminate for any reason, in whole or in part, without being
exercised, the number of shares of Stock as to which such expired or terminated
Stock Option shall not have been exercised may again become available for the
grant of Stock Options.
D. Administration of the Plan. The Plan shall be administered by the
Committee which shall consist of 3 or more officers of the Corporation
designated by the Board. Subject to the express provisions of the Plan, the
Committee shall have authority to determine the eligibility of Producers to
participate in the Plan, to grant Stock Awards and Stock Options under the Plan,
to interpret the Plan, to prescribe, amend, and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of Stock Awards and
Stock Option Agreements and to make all other determinations necessary or
advisable for the administration of the Plan. Any controversy or claim arising
out of or related to the Plan shall be determined unilaterally by and at the
sole discretion of the Committee. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and binding
upon all Grantees and all person(s) claiming under or through any Grantees.
E. Amendment or Termination. The Board may, at any time, alter, amend,
suspend, discontinue, or terminate the Plan; provided, however, that no such
action shall adversely affect the right of any Grantee under any Stock Award or
Stock Option previously granted thereto hereunder.
F. Effective Date of Plan. The Plan became effective on January 1, 1998;
this Amendment and restatement of the Plan shall become effective November 1,
1998, subject to the approval of the Board.
<PAGE>
II. STOCK OPTION PROVISIONS
1. Granting of Stock Options.
a. The Committee shall determine and shall designate from time to time
those Producers who are to be granted Stock Options and shall specify the
number of shares of Stock subject to each Stock Option.
b. When granting a Stock Option, the Committee shall determine the
purchase price of the Stock subject to the Stock Option.
c. The Committee, in its sole discretion, shall determine whether any
particular Stock Option shall become exercisable in one or more
installments, shall specify the installment dates, and shall determine the
total period during which the Stock Option shall be exercisable.
d. In addition to the powers set forth in this Section 1, the
Committee shall have the exclusive responsibility and authority to set all
terms and conditions applicable to Stock Options granted under the Plan.
2. Exercise of Stock Options. The purchase price of Stock subject to a
Stock Option shall be payable on exercise of the Option in cash or by check,
bank draft or postal or express money order.
3. Termination of Producer Status. In the event that a Grantee's status as
a Producer is terminated for any reason, all Stock Options held by the Grantee
which have not vested as of the date of such termination shall expire
immediately, provided, that the termination of a Grantee's status as a Producer
shall not effect the Grantee's rights with respect to the exercise of any Stock
Options which have vested as of the date of the termination of the Grantee's
status as a Producer.
III. STOCK AWARD PROVISIONS
The Committee shall determine and shall designate from time to time those
Producers who are to be granted Stock Awards and shall specify the number of
shares of Stock subject to each Stock Award and the terms and conditions, if
any, applicable thereto.
IV. GENERAL PROVISIONS
1. Recapitalization Adjustments.
a. In the event of any change in capitalization affecting the Stock,
including, without limitation, a stock dividend or other distribution,
stock split, reverse stock split, recapitalization, consolidation,
subdivision, split-up, spin-off, split-off, combination or exchange of
shares or other form of reorganization or recapitalization, or any other
change affecting the Stock, the Board shall authorize and make such
proportionate adjustments, if any, as the Board deems appropriate to
reflect such change,
<PAGE>
including, without limitation, with respect to the aggregate number of
shares of Stock for which Stock Awards or Stock Options may be granted
under the Plan, the number of shares of Stock covered by each outstanding
Stock Option, the purchase price per share of Stock in respect of
outstanding Stock Options, and such adjustments with respect to the Stock
Awards as the Board deems appropriate.
1. Any provision hereof to the contrary notwithstanding, in the
event the Corporation is a party to a merger or other reorganization,
outstanding Stock Options shall be subject to the agreement of merger
or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Stock Options by the surviving
corporation or its parent, for their continuation by the Corporation
(if the Corporation is a surviving corporation) for accelerated
vesting and accelerated expiration or for settlement in cash;
provided, however, that any accelerated vesting of such Stock Options
shall be limited to officers, directors and Producers of the
Corporation.
2. General.
a. Each Stock Option shall be evidenced by a Stock Option Agreement.
b The granting of a Stock Award or a Stock Option in any year shall
not give the Grantee any right to similar grants in future years or any
right to be retained as a Producer, and all Producers shall remain subject
to discharge or removal to the same extent as if the Plan were not in
effect.
2. No Grantee, and no beneficiary or other person claiming under or
through him or her, shall have any right, title or interest by reason of
any Stock Option to any particular assets of the Corporation, or any shares
of Stock allocated or reserved for the purposes of the Plan or subject to
any Stock Option except as set forth herein. The Corporation shall not be
required to establish any fund or make any other segregation of assets to
assure the exercise of any Stock Option.
3. No Stock Option or right under the Plan shall or may be sold,
exchanged, assigned, pledged, encumbered, or otherwise hypothecated or
disposed of except by will or the laws of descent and distribution, and a
Stock Option shall be exercisable during the Grantee's lifetime only by the
Grantee or his conservator, provided that Committee shall have the right to
grant exceptions to the foregoing restrictions on terms and conditions to
be determined by the Committee.
4. Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver any
certificate or certificates for shares of Stock under a Stock Award or a
Stock Option, and the transferability of Stock acquired upon a Stock Award
or by exercise of a Stock Option, shall be subject to all of the following
conditions:
a) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining in effect
of any such registration or other qualification which the Board shall,
in its absolute discretion upon the advice of counsel, deem necessary
or advisable;
b) The obtaining of any other consent, approval, or permit from
any state or federal governmental agency which the Board shall, in its
absolute discretion upon the advice of counsel, determine to be
necessary or advisable; and
c) Each stock certificate issued pursuant to a Stock Award or a
Stock Option shall bear such legends which the Corporation shall
determine, in its absolute discretion, are necessary or advisable, or
which in the opinion of counsel to the Corporation are required under
applicable federal or state securities laws.
5. All payments to Grantees or to their legal representatives shall be
subject to any applicable tax, community property, or other statutes or
regulations of the United States or of any state having jurisdiction
thereof. The Grantee may be required to pay to the Corporation the amount
of any withholding taxes which the Committee, in its sole discretion, deems
necessary to be withheld in order to comply with any applicable statutes or
regulations with respect to a Stock Award or a Stock Option or its
exercise. In the event that such payment is not made when due, the
Corporation shall have the right to deduct, to the extent permitted by law,
from any payment or settlement of any kind otherwise due to such person all
or part of the amount required to be withheld. If the Committee, in its
sole discretion, permits shares of Stock to be used to satisfy any such tax
withholding, such Stock shall be valued based upon the Fair Market Value of
such Stock as of the date the tax withholding is required to be made, such
date to be determined by the Committee. The Corporation shall not be
required to issue Stock until such obligations are satisfied.
6. A Grantee entitled to Stock as a result of the exercise of an
Option or a grant of a Stock Award shall not be deemed for any purpose to
be, or have rights as, a shareholder of the Corporation by virtue of such
exercise, except to the extent a stock certificate is issued therefor and
then only from the date such certificate is issued. No adjustments shall be
made for dividends or distributions or other rights for which the record
date is prior to the date such stock certificate is issued, except as
otherwise provided herein. The Corporation shall issue any stock
certificates required to be issued in connection with the exercise of a
Stock Option with reasonable promptness after such exercise.
7. The Plan and the grant of Stock Awards under the Plan and the grant
or exercise of Stock Options granted under the Plan shall be subject to,
and shall in all respects comply with, applicable California law.
8. Any Person that receives the Corporation's securities pursuant to
this Plan shall receive financial statements of the Corporation at least
annually; provided, however, that the Corporation need not provide such
financial statements to its key individuals whose duties in connection with
the Corporation assure them access to equivalent information.
