AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 1997
REGISTRATION NO. 333-
- ------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
FOUNDATION HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
----------------
21600 OXNARD STREET, WOODLAND HILLS, CALIFORNIA 91367 (818) 719-6775
3400 DATA DRIVE, RANCHO CORDOVA, CALIFORNIA 95670 (916) 631-5000
225 NORTH MAIN STREET, PUEBLO, COLORADO 81003 (719) 542-0500
(Addresses, including ZIP Codes, and telephone numbers,
including area codes, of Registrant's principal executive offices)
----------------
DELAWARE 95-4288333
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
FOUNDATION HEALTH CORPORATION EMPLOYEE STOCK PURCHASE PLAN
FOUNDATION HEALTH CORPORATION PROFIT SHARING AND 401(K) PLAN (AMENDED
AND RESTATED EFFECTIVE JANUARY 1, 1994)
1990 STOCK OPTION PLAN OF FOUNDATION HEALTH CORPORATION
1992 NONSTATUTORY STOCK OPTION PLAN OF FOUNDATION HEALTH CORPORATION
1989 STOCK PLAN OF BUSINESS INSURANCE CORPORATION
MANAGED HEALTH NETWORK, INC. INCENTIVE STOCK OPTION PLAN
MANAGED HEALTH NETWORK, INC. AMENDED AND RESTATED 1991 STOCK OPTION PLAN
1993 NONSTATUTORY STOCK OPTION PLAN OF FOUNDATION HEALTH
CORPORATION (AMENDED AND RESTATED EFFECTIVE SEPTEMBER 7, 1995)
(Full Title of Plans)
MICHAEL E. JANSEN, ESQ.
FOUNDATION HEALTH SYSTEMS, INC.
225 NORTH MAIN STREET, PUEBLO, COLORADO 81003 (719) 542-0500
(Name, address, including ZIP Code, and telephone number, including
area code, of agent for service)
Copies to:
ALLEN J. MARABITO, ESQ. B. CURTIS WESTEN, ESQ.
FOUNDATION HEALTH SYSTEMS, INC. FOUNDATION HEALTH SYSTEMS, INC.
3400 DATA DRIVE 225 NORTH MAIN STREET
RANCHO CORDOVA, CALIFORNIA 95670 PUEBLO, COLORADO 81003
(916) 631-5000 (719) 542-0500
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities to be Amount to be Offering Price Aggregate Offering Registration
Registered Registered Per Unit Price Fee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
par value $.001 per
share.................... 4,762,006 shares $ 28.3125 (1) $ 134,824,295 (1) $ 40,856 (1)
Rights to Purchase
Series A Junior
Participating Preferred
Stock.................... -- (2) -- (2) -- (2) -- (3)
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) and (h) under the Securities Act of 1933 based
upon the average of the high ($28.625) and low ($28.00) reported sales
prices of the Registrant's Class A Common Stock, par value $.001 per
share, as reported on the New York Stock Exchange Composite
Transactions Tape on April 2, 1997.
(2) Such number of Rights as are associated with the shares of Common
Stock registered hereby from time to time pursuant to the terms of the
Registrant's Stockholder Rights Plan. Initially, the Rights are
attached to and trade with the shares of Common Stock.
(3) Pursuant to Rule 457, no additional registration fee is required for
the Rights.
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION
Not required to be filed with this Registration Statement.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
Not required to be filed with this Registration Statement.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Foundation Health Systems, Inc. (the "Registrant") hereby
incorporates the following documents herein by reference:
(a) The Annual Report on Form 10-K of the Registrant for the year
ended December 31, 1996;
(b) All reports of the Registrant filed pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1996;
(c) The description of the Registrant's Class A Common Stock, $.001
par value per share (the "Class A Common Stock"), contained in the
Registrant's Registration Statement on Form 8-A dated January 21, 1994
(File No, 1-12718);
(d) The description of the Registrant's Rights to purchase Series A
Junior Participating Preferred Stock contained in the Registrant's
Registration Statement on Form 8-A dated July 16, 1996 (File No. 1-12718);
and
(e) All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the
filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document
which also is incorporated or deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
None.
ITEMS 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware
GCL") permits indemnification of directors, officers and employees of a
corporation against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement of litigation under certain conditions and
subject to certain limitations. The Fourth Amended and Restated Certificate
of Incorporation of the Registrant (the "Certificate") provides that a
director shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except: (i) for any breach of the duty of loyalty; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violations of law; (iii) for liability under Section 174 of the
Delaware GCL (relating to certain unlawful dividends, stock repurchases or
stock redemptions); or (iv) for any transaction from which the director
derived any improper personal benefit. The effect of this provision in the
Certificate is to eliminate the right of the Registrant and its
stockholders (through stockholders' derivative suits on behalf of the
Registrant) to recover monetary damages against a director for breach of
the fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in certain limited
situations. This provision does not limit or eliminate the right of the
Registrant or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of
care. These provisions will not alter the liability of directors under
federal securities laws.
Article VI of the Certificate and Article VI of the Registrant's
Restated Bylaws provide that the Registrant shall indemnify each director
and officer to the fullest extent and in the manner set forth in and
permitted by the Delaware GCL and other applicable laws and that the
Registrant may indemnify employees or agents of the Registrant to the
extent and in the manner set forth in and permitted by the Delaware GCL and
other applicable laws. In addition, the Registrant has entered into various
Indemnification Agreements with certain of its officers and directors to
contractually provide indemnification coverage consistent with such Bylaws.
In addition, the Registrant maintains an officers' and directors'
liability insurance policy insuring the Registrant's officers and directors
against certain liabilities and expenses incurred by them in their
capacities as such, and insuring the Registrant, under certain
circumstances, in the event that indemnification payments are made by the
Registrant to such officers and directors.
Pursuant to Section 7.12 of the Agreement and Plan of Merger, dated
October 1, 1996 (the "Merger Agreement"), among the Registrant, FH
Acquisition Corp. and Foundation Health Corporation ("FHC"), the Registrant
has agreed that, for a period of six years following the Effective Time (as
defined in the Merger Agreement), (a) the Registrant will continue and
guarantee the performance of the indemnification rights of present and
former directors and officers of the Registrant and FHC provided for in the
Certificate of Incorporation, Bylaws and Indemnification Agreements of the
Registrant and FHC, with respect to indemnification for acts and omissions
occurring prior to the Effective Time, and (b) the Registrant will cause to
be maintained the current policies of the officers' and directors'
liability insurance maintained by the Registrant and FHC covering persons
who are presently covered by each company's officers' and directors'
liability insurance policies with respect to acts and omissions occurring
prior to the Effective Time; provided that policies with third-party
insurers of similar or better A.M. Best rating whose terms, conditions and
coverage are no less advantageous may be substituted therefor, and provided
further that in no event shall the Registrant be required to expend to
maintain or procure insurance coverage an amount in excess of 150% of the
current annual premiums for the twelve-month period ended June 30, 1997.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
2.1 Agreement and Plan of Merger, dated October 1, 1996 among Health
Systems International, Inc., Foundation Health Corporation and FH
Acquisition Corp. (included as Annex A to the Joint Proxy
Statement/Prospectus filed with the Registrant's Registration
Statement on Form S-4 (File No. 333-19273)) is hereby incorporated
by reference.
*4.1 Fourth Amended and Restated Certificate of Incorporation of the
Registrant, a copy of which is filed herewith.
*4.2 Fourth Amended and Restated Bylaws of the Registrant, a copy of
which is filed herewith.
*4.3 Foundation Health Corporation Employee Stock Purchase Plan, a copy
of which is filed herewith.
*4.4 Foundation Health Corporation Profit Sharing and 401(k) Plan
(Amended and Restated effective January 1, 1994), a copy of which
is filed herewith.
*4.5 1990 Stock Option Plan of Foundation Health Corporation, a copy of
which is filed herewith.
*4.6 1992 Nonstatutory Stock Option Plan of Foundation Health
Corporation, a copy of which is filed herewith.
*4.7 1989 Stock Plan of Business Insurance Corporation (as Amended and
Restated Effective September 22, 1992), a copy of which is filed
herewith.
*4.8 Managed Health Network, Inc. Incentive Stock Option Plan, a copy of
which is filed herewith.
*4.9 Managed Health Network, Inc. Amended and Restated 1991 Stock Option
Plan, a copy of which is filed herewith.
*4.10 1993 Nonstatutory Stock Option Plan of Foundation Health
Corporation (as amended and restated effective September 7, 1995),
a copy of which is filed herewith.
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel
to the Registrant, as to the legality of the securities being
registered, a copy of which is filed herewith.
*23.1 Consent of Deloitte & Touche LLP, a copy of which is filed
herewith.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(included in their opinion filed as Exhibit 5.1).
24.1 Powers of Attorney (included at pages II-7 and II-8).
- -------------------
* A copy of which is filed herewith
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective amendment
to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply to the
information required to be included in a post-effective amendment by those
paragraphs if contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and each filing of
the annual report of the plans pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification of liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pueblo, State of Colorado, on
April 4, 1997.
FOUNDATION HEALTH SYSTEMS, INC.
By /s/ Malik M. Hasan, M.D.
-----------------------------
Malik M. Hasan, M.D.
President and Chief Executive
Officer
(Principal Executive Officer)
By /s/ Jeffrey L. Elder
-----------------------------
Jeffrey L. Elder
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Malik M. Hasan, M.D., Daniel D.
Crowley and Michael E. Jansen, and each of them, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents
or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 4th day of April, 1997.
/s/ Malik M. Hasan, M.D. Director, President and Chief April 4, 1997
- ------------------------- Executive Officer (Principal
Malik M. Hasan, M.D. Executive Officer)
/s/ Jeffrey L. Elder Senior Vice President and April 4, 1997
- ------------------------- Chief Financial Officer
Jeffrey L. Elder (Principal Financial and
Accounting Officer)
/s/ Daniel D. Crowley Director and April 4, 1997
- ------------------------- Chairman of the Board
Daniel D. Crowley
/s/ J. Thomas Bouchard Director April 4, 1997
- -------------------------
J. Thomas Bouchard
/s/ George Deukmejian Director April 4, 1997
- -------------------------
George Deukmejian
/s/ Earl B. Fowler Director April 4, 1997
- -------------------------
Earl B. Fowler
/s/ Thomas T. Farley Director April 4, 1997
- -------------------------
Thomas T. Farley
/s/ Patrick Foley Director April 4, 1997
- -------------------------
Patrick Foley
/s/ Roger F. Greaves Director April 4, 1997
- -------------------------
Roger F. Greaves
/s/ Richard W. Hanselman Director April 4, 1997
- -------------------------
Richard W. Hanselman
/s/ Richard J. Stegemeier Director April 4, 1997
- -------------------------
Richard J. Stegemeier
/s/ Raymond S. Troubh Director April 4, 1997
- -------------------------
Raymond S. Troubh
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ----------
2.1 Agreement and Plan of Merger, dated N/A
October 1, 1996 among Health Systems
International, Inc., Foundation
Health Corporation and FH Acquisition
Corp. (included as Annex A to the
Joint Proxy Statement/Prospectus
filed with the Registrant's
Registration Statement on Form S-4
(File No. 333-19273)) is hereby
incorporated by reference.
*4.1 Fourth Amended and Restated
Certificate of Incorporation of the
Registrant, a copy of which is filed
herewith.
*4.2 Fourth Amended and Restated Bylaws of
the Registrant, a copy of which is
filed herewith.
*4.3 Foundation Health Corporation Employee
Stock Purchase Plan, a copy of which
is filed herewith.
*4.4 Foundation Health Corporation Profit
Sharing and 401(k) Plan (Amended and
Restated effective January 1, 1994), a
copy of which is filed herewith.
*4.5 1990 Stock Option Plan of Foundation
Health Corporation, a copy of which is
filed herewith.
*4.6 1992 Nonstatutory Stock Option Plan of
Foundation Health Corporation, a copy
of which is filed herewith.
*4.7 1989 Stock Plan of Business Insurance
Corporation (as Amended and Restated
Effective September 22, 1992), a copy
of which is filed herewith.
*4.8 Managed Health Network, Inc. Incentive
Stock Option Plan, a copy of which is
filed herewith.
*4.9 Managed Health Network, Inc. Amended
and Restated 1991 Stock Option Plan, a
copy of which is filed herewith.
*4.10 1993 Nonstatutory Stock Option Plan of
Foundation Health Corporation (as
amended and restated effective
September 7, 1995), a copy of which is
filed herewith.
*5.1 Opinion of Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel to
the Registrant, as to the legality of
the securities being registered, a
copy of which is filed herewith.
*23.1 Consent of Deloitte & Touche LLP, a
copy of which is filed herewith.
23.3 Consent of Skadden, Arps, Slate, N/A
Meagher & Flom (Illinois) (included in
their opinion filed as Exhibit 5.1).
24.1 Powers of Attorney (included at pages
II-7 and II-8).
- ---------------
* A copy of which is filed herewith
Exhibit 4.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HEALTH SYSTEMS INTERNATIONAL, INC.
Health Systems International, Inc., a
corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is Health
Systems International, Inc. Health Systems
International, Inc. was originally incorporated under the
name of HN Management Holdings, Inc., and the original
Certificate of Incorporation was filed with the Delaware
Secretary of State on June 7, 1990.
2. The First Amended and Restated Certificate
of Incorporation was filed with the Delaware Secretary of
State on July 19, 1991.
3. The Second Amended and Restated Certificate
of Incorporation was filed with the Delaware Secretary of
State on January 15, 1992.
4. The Third Amended and Restated Certificate
of Incorporation was filed with the Delaware Secretary of
State on January 28, 1994.
5. Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware, this
Fourth Amended and Restated Certificate of Incorporation
amends and restates the provisions of the Third Amended
and Restated Certificate of Incorporation of the
corporation.
6. Attached hereto as Exhibit A is a copy of
the Certificate of Designation as filed with the Delaware
Secretary of State on July 31, 1996 which shall remain in
full force and effect following the filing of the Fourth
Amended and Restated Certificate of Incorporation as
follows.
7. The text of the Certificate of
Incorporation is hereby amended and restated to read in
its entirety as follows:
ARTICLE I
NAME
The name of the corporation (hereinafter called the
"Corporation") is Foundation Health Systems, Inc.
ARTICLE II
PRINCIPAL OFFICE
The registered office of the Corporation in the
State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801,
County of New Castle. The name of the Corporation's
registered agent is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose for which the Corporation is organized
is to engage in any lawful act or activity for which
corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
SECTION 1. The total number of shares of all
classes of stock which the Corporation shall have
authority to issue is Three Hundred Ninety Million
(390,000,000) shares as follows: (a) Three Hundred Fifty
Million (350,000,000) shares of Class A Common Stock,
$.001 par value per share ("Class A Common Stock"), (b)
Thirty Million (30,000,000) shares of Class B Convertible
Common Stock, $.001 par value per share ("Class B Common
Stock") and (c) Ten Million (10,000,000) shares of
Preferred Stock, $.001 par value per share ("Preferred
Stock").
SECTION 2. The designations, preferences,
qualifications, privileges, limitations and restrictions
of the classes of stock of the Corporation and the
express grant of authority to the Board of Directors of
the Corporation (the "Board of Directors") to fix by
resolution the designations, preferences, qualifications,
privileges, limitations, and restrictions relating to the
classes of stock of the Corporation which are not fixed
by this Certificate of Incorporation are as follows:
CLASS A COMMON STOCK
A. DIVIDENDS.
Subject to any other provisions of this Certificate
of Incorporation, as amended from time to time, holders
of Class A Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or
property of the Corporation as may be declared thereon
from time to time by the Board of Directors out of assets
or funds of the Corporation legally available therefor.
B. VOTING.
(i) At every meeting of the stockholders, every
holder of Class A Common Stock shall be entitled to one
(1) vote in person or by proxy for each share of Class A
Common Stock standing in his or her name on the transfer
books of the Corporation.
(ii) The provisions of this Article IV of this
Certificate of Incorporation shall not be modified,
revised, altered or amended, repealed or rescinded, in
whole or in part, without the affirmative vote of the
holders of a majority of the shares of Class A Common
Stock.
CLASS B COMMON STOCK
C. DIVIDENDS.
Subject to any other provisions of this Certificate
of Incorporation, as amended from time to time, holders
of Class B Common Stock shall be entitled to receive such
dividends and other distributions in cash, common stock
or property of the Corporation as may be declared on the
Class A Common Stock from time to time by the Board of
Directors out of the assets or funds of the Corporation
legally available therefor.
D. VOTING.
(i) The holders of Class B Common Stock shall have
no right to vote on any matters to be voted on by the
stockholders of the Corporation (including, without
limitation, any election or removal of the directors of
the Corporation), and the Class B Common Stock shall not
be included in determining the number of shares voting or
entitled to vote on such matters. No amendment,
modification or waiver of any provision of this portion
of Article IV titled Class B Common Stock or any
provision of this Certificate of Incorporation applicable
to or affecting the rights of the Class B Common Stock
(or the number required to approve such amendment,
modification or waiver) will be effective without the
prior written consent of the holders of a majority of
shares of Class B Common Stock at the time outstanding.
No amendment, modification or waiver of any provision of
this portion of Article IV titled Class B Common Stock
will extend to or affect any obligation not expressly
amended, modified or waived or impair any right
consequent thereon. No course of dealing, and no failure
to exercise or delay in exercising any right, remedy,
power or privilege under this portion of Article IV
titled Class B Common Stock will act as a waiver,
amendment or modification of any provision of this
portion of Article IV entitled Class B Common Stock.
(ii) Upon the occurrence of an Adjustment Event (as
defined below), the holders of Class B Common Stock
shall, voting as a class, be entitled to elect a number
of members of the Board of Directors equal to the number
of members of the Board of Directors then serving plus
one (1). The remaining members of the Board of Directors
shall be elected separately by the holders of Class A
Common Stock. At such time as all Adjustment Events
which gave rise to the exercise of voting rights provided
for in this paragraph shall have been cured and no other
Adjustment Event shall have occurred and remain uncured,
the contingent rights of the holders of the Class B
Common Stock shall cease, subject to renewal from time to
time upon the same terms and conditions.
(iii) At any time after the voting power to elect
members of the Board of Directors shall have become
vested in the holders of the Class B Common Stock as
provided above, the President or any Executive Vice
President of the Corporation may, and upon the request of
the record holders of Class B Common Stock shall, call a
special meeting of the holders of Class A Common Stock
and Class B Common Stock and such other classes of the
Corporation's stock as shall then have the right to vote
for the election of directors, to be held at the place
and upon the notice provided in the By-laws of the
Corporation for the holding of meetings of the
stockholders. If the meeting shall not be so called
within ten (10) days after personal service of the
request, or within fifteen (15) days after mailing of the
request by registered mail within the United States of
America, then the record holders of the Class B Common
Stock may call the meeting, and may call for the meeting
at the place and upon the notice above provided, and for
that purpose shall have access to the stock books of the
Corporation.
(iv) When the limited rights of the holders of
Class B Common Stock to vote as provided above have
ceased, the term of office of the persons elected by it
as directors pursuant thereto as a result of an
Adjustment Event shall terminate and the vacancies may
(but need not) be filled by the remaining members of the
Board of Directors.
(v) The term "Adjustment Event" shall mean any one
or more of the following events, which shall be deemed to
have occurred ninety (90) days after the date on which
the holders of Class B Common Stock give notice in
writing ("Notice") to the Corporation of the Adjustment
Event:
(1) There shall have occurred an Event of
Default (as defined below) under that certain
Nonnegotiable Senior Secured Promissory Note by Health
Net, a California corporation ("Health Net"), in the
original principal amount of One Hundred Fifty Million
Dollars ($150,000,000).
(2) There shall have occurred an Event of
Default (as defined below) under that certain
Nonnegotiable Subordinated Secured Promissory Note by
Health Net, in the original principal amount of Seventy-
five Million Dollars ($75,000,000).
(3) There shall have occurred an Event of
Default (as defined below) under that certain Senior
Security Agreement dated as of January 28, 1992, by and
between The California Wellness Foundation, a California
nonprofit public benefit corporation (the "Foundation"),
and Health Net.
(4) There shall have occurred an Event of
Default (as defined below) under that certain
Subordinated Security Agreement dated as of January 28,
1992, by and between the Foundation and Health Net.
(5) There shall have occurred an Event of
Default (as defined below) under that certain Cash Pledge
Agreement dated as of January 28, 1992, by and between
the Foundation and Health Net.
(6) There shall have occurred an Event of
Default (as defined below) under that certain Sinking
Fund Agreement dated as of January 28, 1992, by and
between the Foundation and Health Net.
The term "Event of Default" as used above shall
have the meaning ascribed to it in the document listed in
subsections D(v)(1)-(6) above.
E. CONVERSION.
(i) Upon the transfer of any whole number of all of
the shares of Class B Common Stock to a third party
affiliated with the original owner, the transferred
shares of Class B Common Stock shall convert into fully
paid and nonnegotiable shares of Class A Common Stock at
the rate of one share of Class A Common Stock for each
share of Class B Common Stock so converted. The
conversion shall be effected at the time the holders of
Class B Common Stock surrender such holders' certificate
or certificates for Class B Common Stock to be
transferred, duly endorsed, at the office of the
Corporation or any transfer agent for Class B Common
Stock. Promptly thereafter, the Corporation shall issue
and deliver to the assignee, a certificate or
certificates for the number of shares of Class A Common
Stock to which the assignee shall be entitled as
aforesaid. The conversion shall be deemed to have been
made at the close of business on the date of the
surrender and the person or persons entitled to receive
shares of Class A Common Stock issuable on the conversion
shall be treated for all purposes as the record holder or
holders of the shares of Class A Common Stock on that
date.
(ii) The Corporation shall at all times reserve and
keep available out of the authorized and unissued shares
of Class A Common Stock, solely for the purpose of
effecting the conversion of the outstanding Class B
Common Stock, such number of shares of Class A Common
Stock as shall from time to time be sufficient to effect
a conversion of all shares of Class B Common Stock, and
if, at any time, the number of authorized and unissued
shares of Class A Common Stock shall not be sufficient to
effect conversion of the then outstanding Class B Common
Stock, the Corporation shall take such corporate action
as may be necessary to increase the number of authorized
and unissued shares of Class A Common Stock to such
number as shall be sufficient for such purposes.
F. REDEMPTION.
The Corporation shall have the right to redeem the
Class B Common Stock in accordance with that certain
Amended Foundation Shareholder Agreement (the
"Agreement") dated as of January 28, 1992, by and among
the Corporation, the Foundation and the holders of Class
A Common Stock listed on Schedule 1 to the Agreement; a
copy of the Agreement is available for inspection at the
Corporation's principal place of business.
G. ADJUSTMENTS.
The initial number of shares of Class A Common Stock
into which shares of Class B Common Stock are convertible
shall be subject to adjustment from time to time, after
the date hereof, in case the Corporation shall:
(i) Pay a dividend in, or make a distribution of,
shares of Class A Common Stock;
(ii) Subdivide its outstanding shares of Class A
Common Stock into a greater number of such shares;
(iii) Combine its outstanding shares of Class A
Common Stock into a smaller number of such shares; or
(iv) Consolidate or merge with or into another
corporation (other than a consolidation or merger which
does not result in any reclassification or change of the
Class A Common Stock), or sell or convey all or
substantially all of the Corporation's assets as an
entirety to another corporation.
The total number of shares of Class A Common Stock and
the number of shares of capital stock convertible into
Class A Common Stock shall be adjusted so that the holder
of Class B Common Stock thereafter surrendered for
conversion shall be entitled to receive the number of
shares of Class A Common Stock which it would have owned
or have been entitled to receive immediately following
the happening of any of the events described above had
such Class B Common Stock been converted immediately
following the happening of such event. An adjustment
made pursuant to this Section shall, in the case of a
stock dividend or distribution, become effective as of
the record date therefor and, in the case of a
subdivision, combination, grant, conveyance or merger, be
made as of the effective date thereof.
PREFERRED STOCK
The Board of Directors is authorized to provide, by
resolution, for the issuance of one or more series of
Preferred Stock out of the unissued shares of Preferred
Stock. Except as may be required by law, the shares in
any series of Preferred Stock or any shares of stock of
any other class need not be identical to any other series
of Preferred Stock or any other class. Before any shares
of Preferred Stock of any series are issued, the Board of
Directors shall fix, and is hereby expressly empowered to
fix, by resolution, the following provisions regarding
such shares:
(i) The designations of such series, the number of
shares to constitute such series and the stated value
thereof if different from the par value thereof;
(ii) Whether the shares of such series shall have
voting rights, and, if so, the terms of the voting right,
which may be general or limited;
(iii) The dividends, if any, payable on the Series,
whether any dividends shall be cumulative, and, if so,
from what dates; the conditions and dates upon which the
dividends shall be payable; the preference or relation
which the dividends shall bear to the dividends payable
on any shares of stock of any other series of Preferred
Stock;
(iv) Whether the shares of the series shall be
subject to redemption by the Corporation and, if so, the
times, prices and other conditions of the redemption;
(v) The amount or amounts payable upon shares of
the series, and the rights of the holders of such series
in the event of voluntary or involuntary liquidation,
dissolution or winding up, or upon any distribution of
the assets, of the Corporation;
(vi) Whether the shares of the series shall be
subject to the operation of a retirement or sinking fund
and, if so, the extent to and manner in which such
retirement or sinking fund shall be applied to the
purchase or redemption of the shares of the series for
retirement or other corporate purposes and the terms and
provisions relative to the operation thereof;
(vii) Whether the shares of the series shall be
convertible into, or exchangeable for, shares of Class A
Common Stock or any other series of Preferred Stock or
any other securities (whether or not issued by the
Corporation), and, if so, the price or prices or the rate
or rates of conversion or exchange and the method, if
any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
(viii) The limitations and restrictions, if any, to
be effective upon the payment of dividends or the making
of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of,
Class A Common Stock, Class B Common Stock or shares of
stock of any other class or any other series of Preferred
Stock;
(ix) The conditions or restrictions, if any, upon
the creation of indebtedness of the Corporation or upon
the issuance of any additional stock, including
additional shares of the series or any other series of
Preferred Stock or any other class of stock;
(x) The ranking (be it pari passu, junior or
senior) of each class or series vis-a-vis any other class
or series of any class of Preferred Stock as to the
payment of dividends, the distribution of assets and all
other matters; and
(xi) Any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof,
insofar as they are not inconsistent with the provisions
of this Certificate of Incorporation, to the full extent
permitted in accordance with the laws of the State of
Delaware.
The powers, preferences and relative, participating,
optional and other special rights of each series of
Preferred Stock, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding.
ARTICLE V
COMPOSITION OF BOARD OF DIRECTORS
AND STOCKHOLDER MEETINGS
The following provisions are inserted for the
management of the business and for the conduct of the
affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
SECTION 1. The business and affairs of the
Corporation shall be managed by or under the direction of
a Board of Directors consisting of not less than three
nor more than twenty directors, the exact number of
directors to be determined in accordance with the By-laws
of the Corporation. The directors shall be divided into
three classes, designated Class I, Class II and Class
III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors
constituting the entire Board of Directors. At each
annual meeting of stockholders beginning in 1994,
successors to the class of directors whose term expires
at that annual meeting shall be elected for a three year
term. If the number of directors is changed, any
increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each
class as nearly equal as possible, but in no case shall a
decrease in the number of directors shorten the term of
any incumbent director. A director shall hold office
until the annual meeting for the year in which his term
expires and until his successor shall be elected and
shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from
office.
SECTION 2. Subject to the rights of holders of any
series of Preferred Stock then outstanding or any other
securities of the Corporation (including Class B Common
Stock pursuant to Section 2(D) of Article IV hereof), any
vacancy on the Board of Directors that results from an
increase in the number of directors (subject to Section 1
of this Article V) may be filled by a majority of the
Board of Directors then in office, provided that a quorum
is present, and any other vacancy occurring in the Board
of Directors may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to
fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the
remaining term of that class. Any director elected to
fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as
that of his predecessor.
SECTION 3. Subject to the rights of holders of any
series of Preferred Stock then outstanding, any director
or the entire Board of Directors may be removed only for
cause by an affirmative vote of the holders of sixty-six
and two-thirds percent (66 %) of the then outstanding
shares of Voting Stock (as defined in Article VIII);
provided, however, that if a proposal to remove a
director for cause is made by or on behalf of an
Interested Stockholder (as defined in Article VIII) or a
director affiliated with an Interested Stockholder, then
such removal shall require the affirmative vote of the
holders of a majority of the Disinterested Shares. For
purposes of this Section 3, "Disinterested Shares" means,
as to any Interested Stockholder, shares of Voting Stock
held by stockholders other than such Interested
Stockholder. For purposes of this Section 3, "cause"
shall mean the willful and continuous failure of a
director substantially to perform his or her duties to
the Corporation (other than a failure resulting from
incapacity because of physical or mental illness) or the
willful engaging by a director in gross misconduct
materially and demonstrably injurious to the Corporation.
SECTION 4. Notwithstanding the foregoing, whenever
the holders of any one or more series of Preferred Stock
issued by the Corporation or of any other securities of
the Corporation (including Class B Common Stock pursuant
to Section 2(D) of Article IV hereof) shall have the
right, voting separately by series, to elect directors at
an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other
features of such directorships shall be governed by the
terms of this Certificate of Incorporation, and such
directors so elected shall not be divided into classes
pursuant to this Article V unless expressly provided by
such terms.
SECTION 5. Election of directors need not be by
ballot unless the By-laws so provide.
SECTION 6. In addition to the powers and
authorities hereinabove or by statute expressly conferred
upon them, the Board of Directors is hereby empowered to
exercise all powers and do all acts and things as may be
exercised or done by the Corporation; subject,
nevertheless, to the provisions of the statutes of
Delaware, of this Certificate of Incorporation, and to
any by-laws from time to time made by the stockholders;
provided, however, that no by-law so made shall
invalidate any prior act of the Board of Directors which
would have been valid if that by-law had not been made.
SECTION 7. The Board of Directors shall have the
concurrent power with the stockholders to make, alter,
amend, change, add to or repeal (collectively referred to
as a "Change") the By-laws of the Corporation; provided
that any Change of the By-laws must be approved either by
(i) seventy-five percent (75%) of the authorized number
of directors and, if one or more Interested Stockholder
exists, by a majority of the directors who are Continuing
Directors (as defined in Article VIII), or (ii) the
affirmative vote of the holders of not less than eighty
percent (80%) of the then outstanding shares of Voting
Stock and, if the Change is proposed by or on behalf of
an Interested Stockholder or a director affiliated with
an Interested Stockholder, by the affirmative vote of the
holders of a majority of the Disinterested Shares.
SECTION 8. No action required or permitted to be
taken at any annual or special meeting of stockholders of
the Corporation may be taken by written consent without a
meeting of such stockholders.
SECTION 9. Special meetings of the stockholders of
the Corporation for any purpose or purposes may be called
at any time by the Chairman of the Board, or by a
majority of the members of the Board of Directors;
provided, however, that where a proposal requiring
stockholder approval is made by or on behalf of an
Interested Stockholder or director affiliated with an
Interested Stockholder, or where an Interested
Stockholder otherwise seeks action requiring stockholder
approval, then the affirmative vote of a majority of the
Continuing Directors shall also be required to call a
special meeting of stockholders for the purpose of
considering such proposal or obtaining such approval.
Such special meeting may not be called by any other
person or persons or in any other manner.
ARTICLE VI
INDEMNIFICATION
SECTION 1. The Corporation shall indemnify any
person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact
that he or she is or was a director or an officer of the
Corporation, against expenses (including but not limited
to, attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding to
the fullest extent and in the manner set forth in and
permitted by the General Corporation Law of the State of
Delaware, and any other applicable law, as from time to
time in effect. To the maximum extent permitted by law,
the Corporation shall advance expenses (including
attorneys' fees) incurred by such person indemnified
hereunder in defending any civil, criminal,
administrative or investigative action, suit or
proceeding upon an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be
determined that he or she is not entitled to be
indemnified by the Corporation. Such rights of
indemnification and advancement of expenses shall not be
deemed to be exclusive of any other rights to which such
director or officer may be entitled apart from the
foregoing provisions. The foregoing provisions of this
Section 1 shall be deemed to be a contract between the
Corporation and each director and officer who serves in
such capacity at any time while this Section 1 and the
relevant provisions of the General Corporation Law of the
State of Delaware and other applicable law, if any, are
in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing, with
respect to any state of facts then or theretofore
existing, or any action, suit or proceeding theretofore
or thereafter brought or threatened based in whole or in
part upon any such state of facts.
SECTION 2. The Corporation may indemnify any person
who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or
was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation, as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise,
against expenses (including, but not limited to,
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding to the
extent and in the manner set forth in and permitted by
the General Corporation Law of the State of Delaware and
any other applicable law as from time to time in effect.
Such right of indemnification shall not be deemed to be
exclusive of any other rights to which any such person
may be entitled apart from the foregoing provisions.
ARTICLE VII
LIABILITY FOR BREACH OF FIDUCIARY DUTY
No director shall be personally liable to the
Corporation or its stockholders for monetary damages for
any breach of fiduciary duty by the director as a
director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by
applicable law (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for any transaction
from which the director derived an improper personal
benefit. No amendment to or repeal of this Article VII
shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for
or with respect to any act or omission of a director
occurring prior to such amendment.
ARTICLE VIII
BUSINESS COMBINATIONS
SECTION 1. In addition to any affirmative vote
required by law or this Certificate of Incorporation or
the By-laws of the Corporation, and except as otherwise
expressly provided in Section 2 of this Article VIII, a
Business Combination (as defined below) with, or proposed
by or on behalf of, any Interested Stockholder or any
Affiliate (as defined below) or Associate (as defined
below) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such
Interested Stockholder shall require the affirmative vote
of not less than eighty percent (80%) of the votes
entitled to be cast by the holders of all the then
outstanding shares of Voting Stock, voting together as a
single class, excluding Voting Stock beneficially owned
by the Interested Stockholder. Such affirmative vote
shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage or separate
class vote may be specified, by law or in any agreement
with any national securities exchange or otherwise.
SECTION 2. The provisions of Section 1 of this
Article VIII shall not be applicable to any particular
Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is
required by law or by any other provision of this
Certificate of Incorporation or the By-laws of the
Corporation, or any agreement with any national
securities exchange, if all of the conditions specified
in either of the following paragraph (a) or (b) are met,
or in the case of a Business Combination not involving
the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as defined
below), if the conditions specified in the following
paragraph (a) are met:
(a) The Business Combination shall have been
approved, either specifically or as a transaction which
is within an approved category of transactions, by a
majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or
public disclosure of the intention to acquire, beneficial
ownership of the Voting Stock that caused the Interested
Stockholder to become an Interested Stockholder) of the
Continuing Directors.
(b) All of the following conditions shall have been
met:
(i) The aggregate amount of cash and the Fair
Market Value (as defined below), as of the date of
the consummation of the Business Combination, of
consideration other than cash to be received per
share by holders of Common Stock (as defined below)
in such Business Combination shall be at least equal
to the highest amount determined under clauses (A)
and (B) below.
(A) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested
Stockholder for any share of Class A Common
Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership
of shares of Class A Common Stock (x) within
the two-year period immediately prior to the
first public announcement of the proposed
Business Combination (the "Announcement Date")
or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in
either case as adjusted for any subsequent
stock split, subdivision or reclassification
with respect to the Class A Common Stock; and
(B) The Fair Market Value per share of
the Class A Common Stock on the Announcement
Date or on the date on which the Interested
Stockholder became an Interested Stockholder
(the "Determination Date"), whichever is
higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or
reclassification with respect to the Common
Stock.
(ii) The aggregate amount of cash and the Fair
Market Value, as of the date of the consummation of
the Business Combination, of consideration other
than cash to be received per share by holders of
shares of any class or series of outstanding Capital
Stock, other than Common Stock, shall be at least
equal to the highest amount determined under clauses
(A), (B) and (C) below:
(A) (if applicable) the highest per share
price (including any brokerage commission,
transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested
Stockholder for any share of such class or
series of Capital Stock in connection with the
acquisition by the Interested Stockholder of
beneficial ownership of shares of such class or
series of Capital Stock (x) within the two year
period immediately prior to the Announcement
Date or (y) in the transaction in which it
became an Interested Stockholder, whichever is
higher, in either case as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with respect to
such class or series of Capital Stock;
(B) The Fair Market Value per share of
such class or series of Capital Stock on the
Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with respect to
such class or series of Capital Stock; and
(C) (if applicable) the highest
preferential amount per share to which the
holders of shares of such class or series of
Capital Stock would be entitled in the event of
any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the
Corporation regardless of whether the Business
Combination to be consummated constitutes such
an event.
The provisions of this paragraph (b) shall be
required to be met with respect to every class or
series of outstanding Capital Stock, whether or not
the Interested Stockholder has previously acquired
beneficial ownership of any shares of a particular
class or series of Capital Stock.
(iii) The consideration to be received by
holders of a particular class or series of
outstanding Capital Stock shall be in cash or in the
same form as previously has been paid by or on
behalf of the Interested Stockholder in connection
with its direct or indirect acquisition of
beneficial ownership of shares of such class or
series of Capital Stock. If the consideration so
paid for shares of any class or series of Capital
Stock varied as to form, the form of consideration
for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial
ownership of the largest number of shares of such
class or series of Capital Stock previously issued
by the Interested Stockholder.
(iv) After the Determination Date or prior to
the consummation of such Business Combination, (A)
except as approved by a majority of the Continuing
Directors, there shall have been no failure to
declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative)
payable in accordance with the terms of any
outstanding Capital Stock; (B) there shall have been
no reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the
Common Stock) except as approved by a majority of
the Continuing Directors; (C) there shall have been
an increase in the annual rate of dividends paid on
the Common Stock as necessary to reflect any
reclassification (including any reverse stock
split), recapitalization, reorganization or any
similar transaction that has the effect of reducing
the number of outstanding shares of Common Stock,
unless the failure so to increase such annual rate
is approved by a majority of the Continuing
Directors; and (D) such Interested Stockholder shall
not have become the beneficial owner of any
additional shares of Capital Stock except as part of
the transaction that results in such Interested
Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving the
effect thereto, would not result in any increase in
the Interested Stockholder's percentage beneficial
ownership of any class or series of Capital Stock.
(v) After the Determination Date, such
Interested Stockholder shall not have received the
benefit, directly or indirectly (except
proportionately as a stockholder of the
Corporation), of any loans, advances, guarantees,
pledges or other financial assistance or any tax
credits or other tax advantages provided by the
Corporation, whether in anticipation of or in
connection with such Business Combination or
otherwise.
(vi) A proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") (or any
subsequent provisions replacing such Exchange Act,
rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days
prior to the consummation of such Business
Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to the Exchange Act or subsequent
provisions). The proxy or information statement
shall contain on the first page thereof, in a
prominent place, any statement as to the
advisability (or inadvisability) of the Business
Combination that the Continuing Directors, or any of
them, may choose to make and, if deemed advisable by
a majority of the Continuing Directors, the opinion
of an investment banking firm selected by a majority
of the Continuing Directors as to the fairness (or
unfairness) of the terms of the Business Combination
from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the
Interested Stockholder and its Affiliates or
Associates, such investment banking firm to be paid
a reasonable fee for its services by the
Corporation.
(vii) Such Interested Stockholder shall not
have made any major change in the Corporation's
business or equity capital structure without the
approval of a majority of the Continuing Directors.
SECTION 3. The following definitions shall apply
with respect to this Article VIII:
(a) The term "Business Combination" shall mean:
(i) any merger or consolidation of the
Corporation or any Subsidiary (as defined below)
with (x) any Interested Stockholder or (y) any other
corporation (whether or not itself an Interested
Stockholder) which is or after such merger or
consolidation would be an Affiliate or Associate of
an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or security
arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension
of credit, joint venture participation or other
arrangement (in one transaction or a series of
transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder involving any assets,
securities or commitments of the Corporation, any
Subsidiary or any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder
which, together with all other such arrangements
(including all contemplated future events), has an
aggregate Fair Market Value and/or involves
aggregate commitments of $10,000,000 or more or
constitutes more than five percent (5%) of the book
value of the total assets (in the case of
transactions involving assets or commitments other
than Capital Stock) or five percent (5%) of the
stockholders' equity (in the case of transactions in
Capital Stock) of the entity in question (the
"Substantial Part"), as reflected in the most recent
fiscal year-end consolidated balance sheet of such
entity existing at the time the stockholders of the
Corporation would be required to approve or
authorize the Business Combination involving the
assets, securities and/or commitments constituting
any Substantial Part; or
(iii) the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation or
for any amendment to the Corporation's By-laws or to
this Certificate of Incorporation proposed by or on
behalf of an Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder; or
(iv) any reclassification of securities
(including any reverse stock split), or
recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or
not with or otherwise involving an Interested
Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of
any class or series of Capital Stock, or any
securities convertible into Capital Stock or into
equity securities of any Subsidiary, that is
beneficially owned by any Interested Stockholder or
any Affiliate or Associate of any Interested
Stockholder; or
(v) any agreement, contract or other
arrangement providing for any one or more of the
actions specified in the foregoing clauses (i) to
(iv).
(b) The term "Capital Stock" shall mean all capital
stock of the Corporation authorized to be issued from
time to time under Article IV of this Certificate of
Incorporation. The term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all
matters submitted to stockholders of the Corporation
generally. The term "Common Stock" shall mean
collectively the Class A Common Stock, the Class B Common
Stock and any other classes of common stock of the
Corporation as may be issued from time to time under
Article IV of this Certificate of Incorporation.
(c) The term "person" shall mean any individual,
firm, corporation or other entity and shall include any
group comprised of any person and any other person with
whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding,
directly or indirectly, for the purpose of acquiring,
holding, voting or disposing of Capital Stock.
(d) The term "Interested Stockholder" shall mean
any person (other than the Corporation or any Subsidiary
and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or
fiduciary with respect to any such plan when acting in
such capacity or the Co-Presidents of the Corporation on
the date of the filing of this Certificate of
Incorporation) who (i) is or has announced or publicly
disclosed a plan or intention to become the beneficial
owner of Voting Stock representing ten percent (10%) or
more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Stock; or (ii) is
an Affiliate or Associate (other than the Co-Presidents
of the Corporation on the date of the filing of this
Certificate of Incorporation) of the Corporation and at
any time within the two year period immediately prior to
the date in question was the beneficial owner of Voting
Stock representing ten percent (10%) or more of the votes
entitled to be cast by the holders of all then
outstanding shares of Voting Stock.
(e) A person shall be a "beneficial owner" of any
Capital Stock (i) which such person or any of its
Affiliates or Associates beneficially owns, directly or
indirectly; (ii) which such person or any of its
Affiliates or Associates has, directly or indirectly,
(A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of
time), pursuant to an agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement,
arrangement or understanding; or (iii) which is
beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Capital Stock. For
the purpose of determining whether a person is an
Interested Stockholder pursuant to paragraph (d) of this
Section 3, the number of shares of Capital Stock deemed
to be outstanding shall include shares deemed
beneficially owned by such person through application of
this paragraph (e) of Section 3 but shall not include any
other shares of Capital Stock that may be issuable
pursuant to any agreement, arrangement or understanding,
or upon exercise of conversion rights, warrants or
options, or otherwise.
(f) The terms "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in
Rule 12b-2 under the Exchange Act as in effect on the
date of filing of this Certificate of Incorporation with
the Secretary of State of the State of Delaware (the term
"registrant" in said Rule 12b-2 meaning in this case the
Corporation).
(g) The term "Subsidiary" means any company of
which a majority of any class of equity security is
beneficially owned by the Corporation; provided, however,
that for the purposes of the definition of Interested
Stockholder set forth in paragraph (d) of this Section 3,
the term "Subsidiary" shall mean only a company of which
a majority of each class of equity security is
beneficially owned by the Corporation.
(h) The term "Continuing Director" means any member
of the Board of Directors, while such person is a member
of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder
and was a member of the Board of Directors prior to the
time that an Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director
while such successor is a member of the Board of
Directors, who is not an Affiliate or Associate or
representative of the Interested Stockholder and is
recommended or elected to succeed the Continuing Director
by a majority of the Continuing Directors.
(i) "Fair Market Value" means (i) in the case of
cash, the amount of such cash; (ii) in the case of stock,
the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of
such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted
on the Composite Tape, on the New York Stock Exchange,
or, if such stock is not listed on such exchange, on the
principal United States securities exchange registered
under the Exchange Act on which such stock is listed, or,
if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in
question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar
system then in use, or if no such quotations are
available, the fair market value on the date in question
of a share of such stock as determined by a majority of
the Continuing Directors in good faith; and (iii) in the
case of property other than cash or stock, the Fair
Market Value of such property on the date in question as
determined in good faith by a majority of the Continuing
Directors.
(j) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration
other than cash to be received" as used in paragraphs
(b)(i) and (b)(ii) of Section 2 of this Article VIII
shall include the shares of Common Stock and/or the
shares of any other class or series of Capital Stock
retained by the holders of such shares.
SECTION 4. A majority of the Continuing Directors
shall have the power and duty to determine for the
purpose of this Article VIII, on the basis of information
known to them after reasonable inquiry, all questions
arising under this Article VIII, including, without
limitation, (i) whether a person is an Interested
Stockholder, (ii) the number of shares of Capital Stock
or other securities beneficially owned by any person,
(iii) whether a person is an Affiliate or Associate of
another, (iv) whether a Proposed Action (as defined
below) is with, or proposed by, or on behalf of an
Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, (v) whether the assets that are
the subject of any Business Combination have or the
consideration to be received for the issuance or transfer
of securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregated Fair Market Value
of Ten Million Dollars ($10,000,000) or more and (vi)
whether the assets or securities that are the subject of
any Business Combination constitute a Substantial Part.
Any such determination made in good faith shall be
binding and conclusive on all parties.
SECTION 5. Nothing contained in this Article VIII
shall be construed to relieve any Interested Stockholder
from any fiduciary obligation imposed by law.
SECTION 6. The fact that any Business Combination
complies with the provisions of Section 2 of this Article
VIII shall not be construed to impose any fiduciary duty,
obligation or responsibility on the Board of Directors,
or any member thereof, to approve such Business
Combination or recommend its adoption or approval to the
stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any
manner the Board of Directors, or any member thereof,
with respect to evaluations of, or actions and responses
taken with respect to, such Business Combination.
SECTION 7. For purposes of this Article VIII, a
Business Combination or any proposal to amend, repeal or
adopt any provision of this Certificate of Incorporation
inconsistent with this Article VIII (collectively,
"Proposed Action") is presumed to have been proposed by,
or on behalf of, an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (i) after the
Interested Stockholder became such, the Proposed Action
is proposed following the election of any director of the
Corporation who, with respect to such Interested
Stockholder, would not qualify to serve as a Continuing
Director or (ii) such Interested Stockholder, Affiliate,
Associate or person votes for or consents to the adoption
of any such Proposed Action, unless as to such Interested
Stockholder, Affiliate, Associate or person, a majority
of the Continuing Directors makes a good-faith
determination that such Proposed Action is not proposed
by or on behalf of such Interested Stockholder,
Affiliate, Associate or person, based on information
known to them after reasonable inquiry.
SECTION 8. Notwithstanding any other provisions of
this Certificate of Incorporation or the By-laws of the
Corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by
law, this Certificate of Incorporation or the By-law of
the Corporation), the affirmative vote of the holders of
not less than eighty percent (80%) of the votes entitled
to be cast by the holders of all the then outstanding
shares of Voting Stock, voting together as a single
class, excluding Voting Stock beneficially owned by such
Interested Stockholder, shall be required to amend or
repeal, or adopt any provisions inconsistent with, this
Article VIII; provided, however, that this Section 8
shall not apply to, and such eighty percent (80%) vote
shall not be required for, any amendment, repeal or
adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would
be eligible to serve as Continuing Directors within the
meaning of Section 3, paragraph (h), of this Article
VIII.
ARTICLE IX
BOOKS AND RECORDS
The books and records of the Corporation may be kept
(subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as
may be designated from time to time by the Board of
Directors or in the By-laws of the Corporation.
ARTICLE X
RIGHT TO AMEND CERTIFICATE OF INCORPORATION
The Corporation reserves the right to Change (as
defined in Article V) any provision contained in this
Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this
reservation; provided, however, that subject to the
powers and rights provided for herein with respect to
Preferred Stock issued by the Corporation, if any, but
notwithstanding anything else contained in this
Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least eighty
percent (80%) of the then outstanding shares of the
Voting Stock (as defined in Article VIII), voting
together as a single class, shall be required to Change
Article V, Article VI, Article VII, Article VIII, or this
Article X.
IN WITNESS WHEREOF, Health Systems
International, Inc. has caused this Fourth Amended and
Restated Certificate of Incorporation to be signed by Jay
M. Gellert, its President and Chief Operating Officer,
and attested to by B. Curtis Westen, its Senior Vice
President, General Counsel and Secretary, this th day
of February, 1997.
HEALTH SYSTEMS INTERNATIONAL, INC.
a Delaware corporation
By: ___________________________
Jay M. Gellert
President and Chief
Operating Officer
ATTEST:
By _________________________________
B. Curtis Westen, Esq.
Senior Vice President, General Counsel
and Secretary
Exhibit 4.2
FOURTH AMENDED AND
RESTATED BYLAWS
OF
HEALTH SYSTEMS INTERNATIONAL, INC.
ARTICLE I
OFFICES
Section 1.1 Registered Office. The registered
office of Health Systems International, Inc. (the
"Corporation") in the State of Delaware shall be at
Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the
Corporation's registered agent at such address is The
Corporation Trust Company.
Section 1.2 Executive Offices. The
Corporation will maintain its executive offices in such
location as may be determined by the Corporation's board
of directors (the "Board of Directors").
Section 1.3 Other Offices. The Corporation
may also have an office or offices and keep the books and
records of the Corporation, except as may otherwise be
required by law, at such other place or places, either
within or outside of the State of Delaware, as the Board
of Directors may from time to time determine or as the
business of the Corporation requires.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Meeting. Meetings of
stockholders shall be held at any place within or outside
the State of Delaware designated by the Board of
Directors. In the absence of any such designation by the
Board of Directors, stockholders' meetings shall be held
at the principal executive office of the Corporation.
Section 2.2 Annual Meetings. The annual
meeting of the Stockholders for the election of directors
and for the transaction of such other business as may
properly come before such meeting shall be held on the
second Friday of May each year at 10:00 A.M., if not a
legal holiday under the laws of the place where such
meeting is to be held, and if a legal holiday, then on
the next succeeding day not a legal holiday under the
laws of that place, or on such other date and at such
hour as may be fixed from time to time by a majority of
the Board of Directors.
Section 2.3 Special Meetings. Subject to the
rights of the holders of any class or series of stock
having a preference over the Corporation's common stock
(the "Common Stock") as to dividends or upon liquidation,
special meetings of the Stockholders for any purpose or
purposes may be called only by a majority of the entire
Board of Directors. Only the business specified in the
notice of any special meeting of the Stockholders shall
come before such meeting.
Section 2.4 Notice of Meetings. Written
notice of each meeting of the Stockholders, whether
annual or special, shall be given, either by personal
delivery or by mail, not less than 10 days nor more than
60 days before the date of such meeting to each
Stockholder of record entitled to notice of the meeting.
If mailed, the notice shall be deemed to be given when
deposited in the United States of America mail, postage
prepaid, directed to the Stockholder at the Stockholder's
address as it appears on the records of the Corporation.
Each notice shall state the place, date and hour of the
meeting and the purpose or purposes for which the meeting
is called.
Notice of any meeting of Stockholders shall be
deemed waived by any Stockholder who shall attend the
meeting in person or by proxy without protesting, prior
to or at the commencement of the meeting, the lack of
proper notice or who shall waive notice thereof as
provided in Article X of these By-laws. Notice of
adjournment of a meeting of Stockholders need not be
given if the time and place to which it is adjourned are
announced at the meeting, unless the adjournment is for
more than 30 days or, after adjournment, a new record
date is fixed for the adjourned meeting.
Section 2.5 Quorum. The holders of a majority
of the votes entitled to be cast by the Stockholders
entitled to vote, which if any vote is to be taken by
classes shall mean the holders of a majority of the votes
entitled to be cast by the Stockholders of each class,
present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the
Stockholders.
Section 2.6 Adjournments. In the absence of a
quorum, the holders of a majority of the votes entitled
to be cast by the Stockholders, present in person or by
proxy, may adjourn the meeting from time to time.
Whether or not a quorum is present at such meeting, the
chairman of the meeting may adjourn the meeting from time
to time. At any adjourned meeting at which a quorum may
be present, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 2.7 Order of Business. At each
meeting of the Stockholders, the Chairman of the Board,
or, in his absence, such person designated by the Board
of Directors, shall act as chairman.
Section 2.8 List of Stockholders. It shall be
the duty of the Secretary or other officer of the
Corporation who has charge of the stock ledger to prepare
and make, at least 10 days before each meeting of the
Stockholders, a complete list of the Stockholders
entitled to vote thereat, arranged in alphabetical order,
and showing the address of each Stockholder and the
number of shares registered in the Stockholder's name.
The list shall be produced and kept available at the
times and places required by law.
Section 2.9 Voting. Each Stockholder of
record of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation shall be entitled at each meeting of the
Stockholders to that number of votes for each share of
the stock as may be fixed in the Corporation's
Certificate of Incorporation (the "Certificate of
Incorporation") or in the resolution or resolutions
adopted by the Board of Directors providing for the
issuance of the stock. Unless specifically provided
otherwise in the Certificate of Incorporation or in
resolutions adopted by the Board of Directors providing
for the issuance of a class or series of Common Stock,
each Stockholder of record of Common Stock shall be
entitled at each meeting of the Stockholders to one vote
for each share of the stock registered in that
Stockholder's name on the books of the Corporation:
(a) on the date fixed pursuant to Section
7.6 of Article VII of these Bylaws as the record date for
the determination of Stockholders entitled to notice of
and to vote at the meeting; or
(b) if no record date shall have been
fixed, then at the close of business on the day next
preceding the day on which notice of the meeting is
given, or if notice is waived, then at the close of
business on the day next preceding the day on which the
meeting is held.
Each Stockholder entitled to vote at any
meeting of the Stockholders may authorize not in excess
of three persons to act for the Stockholder by a proxy
signed by the Stockholder or the Stockholder's attorney-
in-fact. Any proxy shall be delivered to the Secretary
of the Corporation at or prior to the time designated for
holding the meeting, but in any event not later than the
time designated in the order of business for so
delivering proxies. No proxy shall be voted or acted
upon after three years from its date, unless the proxy
provides for a longer period.
Except as provided in the Certificate of
Incorporation, at each meeting of the Stockholders, all
corporate actions to be taken by vote of the Stockholders
shall be authorized by a majority of the votes cast by
the Stockholders entitled to vote thereon, present in
person or represented by proxy, and where a separate vote
by class is required, a majority of the votes cast by the
Stockholders of that class, present in person or
represented by proxy, shall be the act of the class.
Unless required by law or determined by the
chairman of the meeting to be advisable, the vote on any
matter, including the election of directors, need not be
by written ballot, In the case of a vote by written
ballot, each ballot shall be signed by the Stockholder
voting, or by the Stockholder's proxy, and shall state
the number of shares voted.
Section 2.10 Inspectors. Either the Board of
Directors or, in the absence of designation of inspectors
by the Board of Directors, the chairman of the meeting
of the Stockholders may, in its or such person's
discretion, appoint one or more inspectors to act at any
meeting of the Stockholders. The inspectors shall
perform such duties as shall be specified by the Board of
Directors or the chairman of the meeting. Inspectors
need not be Stockholders. No director or nominee for the
office of director shall be appointed as an inspector.
Section 2.11 Consent in Lieu of Meeting.
Notwithstanding anything contained in these Bylaws to the
contrary, no action required or permitted to be taken at
any meeting of Stockholders of this Corporation may be
taken by written consent without a meeting of
Stockholders.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 General Powers. The business and
affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, which may
exercise all powers of the Corporation and do all lawful
acts and things as are not by law or by the Certificate
of Incorporation directed or required to be exercised or
done by the Stockholders.
Section 3.2 Number, Qualification and
Election. Subject to Article XIII, the Board of
Directors shall consist of not less than three (3) nor
more than twenty (20) directors, the exact number of
which shall be fixed from time to time by the Board of
Directors.
Each of the directors of the Corporation shall
hold office for the term for which he is elected and
until (i) his successor has been elected and qualified
or (ii) his earlier death, resignation or removal. The
directors of the Corporation shall be classified, with
respect to the time for which they hold office, into
three classes as nearly equal in number as possible:
Class I whose term expires at the annual meeting of
Stockholders held in 1997, Class II whose term expires at
the annual meeting of Stockholders held in 1998 and Class
III whose term expires at the annual meeting of
Stockholders held in 1999, with each class to hold office
until its successors are elected and qualified. If the
number of directors is changed by the Board of
Directors, then any newly created directorships or any
decrease in directorships shall be so apportioned among
the classes as to make all classes as nearly equal as
possible; provided that no decrease in the number of
directors shall shorten the term of any incumbent
director. At each annual meeting of the Stockholders,
subject to the rights of the holders of any class or
series of stock having a preference over the Common Stock
as to dividends or upon liquidation, the successors of
the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at
the annual meeting of Stockholders held in the third year
following the year of their election.
Directors need not be Stockholders. In any
election of directors, the persons receiving a plurality
of the votes cast, up to the number of directors to be
elected in such election, shall be deemed to be elected.
Section 3.3 Notification of Nominations.
Subject to the rights of the holders of any class or
series of stock having a preference over the Common Stock
as to dividends or upon liquidation, nominations for the
election of directors shall be made by the Nominating
Committee as provided in Article IV, Section 4.4, or by
any Stockholder entitled to vote for the election of
directors.
A Stockholder's nomination shall be made by
giving timely notice in proper written form thereof to
the Secretary of the Corporation. To be timely, a
Stockholder's notice shall be delivered to or mailed and
received at the executive offices of the Corporation not
less than 60 calendar days nor more than 90 calendar days
prior to the meeting; provided that, in the event that
less than 40 calendar days' notice or prior public
disclosure of the date of the meeting is given or made to
the Stockholders, notice by the Stockholder to be timely
must be so received not later than the close of business
on the tenth calendar day following the day on which the
notice of the date of the meeting was mailed or public
disclosure was made.
To be in proper written form, a Stockholder's
notice shall set forth in writing: (i) as to each person
whom the Stockholder proposes to nominate for election as
a director, all information relating to that person that
is required to be disclosed in solicitations of proxies
for the election of directors or is otherwise required,
in each case pursuant to Regulation 14A promulgated under
the Securities Exchange Act of 1934, as amended,
including, but not limited to, the person's written
consent to being named in the proxy statement as a
nominee and to serving as a director if elected; and (ii)
as to the Stockholder giving the notice, (w) the name and
record address, as they appear on the Corporation's
books, of the Stockholder, (x) the class and number of
shares of stock of the Corporation which are owned
beneficially or of record by the Stockholder, (y) a
description of all arrangements or understandings between
the Stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to
which the nominations are to be made by the Stockholder
and (z) a representation that the Stockholder intends to
appear in person or by proxy at the meeting to nominate
the persons named in the notice. At the request of the
Board of Directors, any person nominated by the
Nominating Committee for election as a director shall
furnish to the Secretary of the Corporation the
information required to be set forth in a Stockholder's
notice of nomination which pertains to the nominee.
In the event that a Stockholder seeks to
nominate one or more directors, the Secretary shall
appoint an inspector, who shall not be affiliated with
the Corporation, to determine whether the Stockholder has
complied with this Section 3.3. If the inspector shall
determine that the Stockholder has not complied with this
Section 3.3, then the inspector shall direct the chairman
of the meeting to declare to the meeting that a
nomination was not made in accordance with the procedures
prescribed by these Bylaws, and the chairman shall so
declare to the meeting and the defective nomination shall
be disregarded.
Section 3.4 Quorum and Manner of Acting.
Except as may otherwise be provided by these Bylaws or
the Certificate of Incorporation, a majority of the
entire Board of Directors shall constitute a quorum for
the transaction of business at any meeting of the Board
of Directors, and the vote of a majority of the directors
present at any meeting at which a quorum is present shall
be the act of the Board of Directors. In the absence of
a quorum, a majority of the directors present may adjourn
the meeting to another time and place. At any adjourned
meeting at which a quorum is present, any business may be
transacted which might have been transacted at the
meeting as originally called.
Section 3.5 Place of Meeting. The Board of
Directors may hold its meetings, both regular and
special, at such place or places within or without the
State of Delaware as the Board of Directors may from time
to time determine, or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
Section 3.6 Regular Meetings. Regular
meetings of the Board of Directors shall be held at such
times as the Board of Directors shall from time to time
by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday under the laws of the
place where the meeting is to be held, then the meeting
which would otherwise be held on that day shall be held
at the same hour on the next succeeding business day.
Section 3.7 Special Meetings. Special
meetings of the Board of Directors shall be held whenever
called by the Chairman of the Board or by a majority of
the Board of Directors.
Section 3.8 Notice of Meetings. Notice of
regular meetings of the Board of Directors or of any
adjourned meeting thereof need not be given. Notice of
each special meeting of the Board of Directors shall be
mailed to each director, addressed to the director at the
director's residence or usual place of business, at least
one calendar day before the day on which the meeting is
to be held or shall be sent to the director at such place
by telegraph or be given personally or by telephone or
telecopy not later than one calendar day before the
meeting is to be held, but notice need not be given to
any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall
attend the meeting without protesting, prior to or at its
commencement, the lack of notice. Every notice shall
state the time and place but need not state the purpose
of the meeting.
Section 3.9 Order of Business. The Chairman
of the Board shall preside at meetings of the Board of
Directors and shall call such meetings to order and may
adjourn such meetings from time to time. In the absence
of the Chairman of the Board, the President and Chief
Executive Officer shall preside at meetings of the Board
of Directors.
Section 3.10 Participation in Meeting by Means
of Communications Equipment. Any one or more members of
the Board of Directors or any committee thereof may
participate in any meeting of the Board of Directors or
of any such committee by means of conference telephone or
similar communications equipment by means of which all
persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute
presence in person at the meeting.
Section 3.11 Action Without Meeting. Any
action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be
taken without a meeting if all of the members of the
Board of Directors or of the committee consent thereto in
writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or of
the committee.
Section 3.12 Resignations. Any director of
the Corporation may at any time resign by giving written
notice to the Board of Directors, the Chairman of the
Board, the President or the Secretary of the Corporation.
Such resignation shall take effect at the time specified
therein, or, if the time is not specified, upon receipt
thereof; and, unless otherwise specified therein, the
acceptance of the resignation shall not be necessary to
make it effective.
Section 3.13 Removal of Directors. Any
director may be removed at any time only for cause by an
affirmative vote of the holders of sixty-six and two-
thirds percent (66 %) of the then outstanding shares of
voting stock. A vacancy in the Board of Directors caused
by any removal may be filled by the Stockholders at that
meeting or as provided in Section 3.14 of these Bylaws.
Section 3.14 Vacancies. Subject to Article
XIII, in the case of any vacancy on the Board of
Directors or in the case of any newly created
directorship, a director elected to fill the vacancy or
the newly created directorship for the unexpired portion
of the term being filled shall be filled by the
Nominating Committee. The director elected to fill a
vacancy shall hold office for the unexpired term in
respect of which the vacancy occurred and until his
successor shall be elected and shall qualify or until his
earlier death, resignation or removal in the manner
provided by these Bylaws.
Section 3.15 Compensation. Each director who
shall not at the time also be a salaried officer or
employee of the Corporation or any of its subsidiaries
(hereinafter referred to as an "outside director"), in
consideration of such person serving as a director, shall
be entitled to receive from the Corporation such amount
per annum and such fees for attendance at meetings of the
Board of Directors or of committees of the Board of
Directors, or both, as the Board of Directors shall from
time to time determine. In addition, each director,
whether or not an outside director, shall be entitled to
receive from the Corporation reimbursement for the
reasonable expenses incurred by such person in connection
with the performance of such person's duties as a
director. Nothing contained in this Section 3.15 shall
preclude any director from serving the Corporation or any
of its subsidiaries in any other capacity and receiving
proper consideration therefor.
ARTICLE IV
COMMITTEES
Section 4.1 Committees. The standing
committees of the Board of Directors of the Corporation
shall be a Compensation and Stock Option Committee, an
Audit Committee, an Investment Policy Committee and a
Nominating Committee. Subject to Article XIII, members
of each committee of the Board of Directors, including
committees established under Section 4.6 hereof, shall be
designated by a majority of the Board of Directors.
Subject to the terms of Article XIII, the Chairman of the
Board shall appoint the chairman of each committee.
Section 4.2 Compensation and Stock Option
Committee. The Compensation and Stock Option Committee
shall have the exclusive power:
(a) To recommend to the Board of
Directors the compensation, including direct regular
compensation, stock options or other appropriate
incentive plans, and perquisites, if any, of the two most
highly compensated Corporate Officers of the Corporation,
which recommendation shall be subject to ratification,
modification or rejection by the Board of Directors;
(b) To approve the compensation,
including direct regular compensation, stock options or
other appropriate incentive plans, and perquisites, if
any, of the other Corporate Officers not covered in
Subsection (a) above and all other officers from Senior
Vice-Presidents and above of the Corporation and its
operating Subsidiaries;
(c) To review and approve, on a general
and policy level basis only, the compensation and
benefits of officers, managers and employees other than
those identified in (a) and (b) above, and such
compensation and benefit matters shall be deemed within
the Committee's general oversight;
(d) To recommend to the Board of
Directors corporate-wide policies with respect to direct
regular compensation, stock options or other appropriate
incentive plans, and perquisites, if any;
(e) To administer the Corporation's stock
option or other stock-based and equity-based plans (the
"Plans");
(f) To fulfill the purposes of the Plans,
including, without limitation, through the conditional
grant of options and other benefits under the Plans;
(g) To recommend to the Board of
Directors any revisions or additions to the Plans;
(h) To recommend to the Board of
Directors appropriate actions with respect to
modification, revision or termination of trusteed
employee benefit or welfare plans (such as 401(k) or
pension plans), with action with respect to such trusteed
plans being reserved to the Board of Directors; and
(i) To review and report to the Board of
Directors, when so requested, on any compensation matter.
Section 4.3 Audit Committee. The Audit
Committee shall have the following responsibilities:
(a) To review the scope, cost, and
results of the independent audit of the Corporation's
books and records, including the annual financial
statements, through conferences and direct communication
with the independent auditors;
(b) To review the results of the
independent audit of the annual financial statements with
management and the internal auditors;
(c) To review the adequacy of the
Corporation's accounting, financial, and operating
controls, and the recommendations of the independent
auditors related thereto, through conferences and direct
communication with the internal auditors and other
responsible corporate executives;
(d) To recommend annually to the Board of
Directors the selection of the independent auditors;
(e) To approve the appointment or removal
of the independent audit manager;
(f) To consider proposals made by the
Corporation's independent auditors for consulting work
other than normal auditing and to judge whether or not
such work could result in a loss of "independence"; and
(g) To review and report to the Board of
Directors, when so requested, on any accounting or
financial matters.
Section 4.4 Nominating Committee. Subject to
the terms of Article XIII, the Nominating Committee shall
have the following responsibilities:
(a) To review qualifications of
candidates for Board of Directors membership from
whatever source received;
(b) (i) To nominate candidates for
election to the Board of Directors at each annual meeting
of Stockholders of the Corporation and (ii) to fill
vacancies on the Board of Directors which occur between
annual meetings of Stockholders;
(c) To recommend to the Board of
Directors criteria relating to tenure as a director, such
as retirement age, limitations on the number of times a
director may stand for reelection, the continuation of
directors in an honorary or similar capacity and the
definition of independence as it relates to the
directors; and
(d) To recommend to the Board of
Directors the actual assignments of individual directors
(by name) to Board of Directors committees.
Section 4.5 Investment Policy Committee. The
Investment Policy Committee shall have the following
responsibilities:
(a) To review the Corporation's
investment policies and guidelines;
(b) To monitor performance of the
Corporation's investment portfolio;
(c) To review the Corporation's financial
structure and operations in light of the Corporation's
long-term objectives and to coordinate such review with
the Audit Committee; and
(d) To review and recommend to the Board
of Directors appropriate action on proposed acquisitions
and divestitures.
Section 4.6 Other Committees. The Board of
Directors may, by resolution adopted by a majority of the
entire Board of Directors, designate from among its
members one or more other committees, each of which shall
have such authority of the Board of Directors as may be
specified in the resolution of the Board of Directors
designating such committee.
Section 4.7 Procedures. Any committee of the
Board of Directors may adopt such rules and regulations
not inconsistent with the provisions of law, the
Certificate of Incorporation or these Bylaws for the
conduct of its meetings as the committee may deem to be
proper. A majority of the members of a committee of the
Board of Directors shall constitute a quorum for the
transaction of business at any meeting, and the vote of a
majority of the members thereof present at a meeting at
which a quorum is present shall be the act of the
committee. No meeting of any committee of the Board of
Directors may be held unless notice has been given and/or
waived by the members of the committee. Meetings may be
held at such times and places as shall be fixed by
resolution adopted by a majority of the members thereof.
Special meetings of any committee of the Board of
Directors shall be called at the request of any member
thereof. Notice of each committee meeting of the Board
of Directors shall be sent by mail telegraph or telephone
or delivered personally to each member thereof not later
than one calendar day before the day on which the
meetings is to be held, but notice need not be given to
any member who shall, either before or after the
meeting, submit a signed waiver of notice or who shall
attend the meeting without protesting prior to or at its
commencement the lack of notice. Any special meeting of
any committee of the Board of Directors shall be a legal
meeting without any notice thereof having been given if
all of the members thereof shall be present thereat and
shall not protest the holding of the meeting. Any
committee of the Board of Directors shall keep written
minutes of its proceedings and shall report on its
proceedings to the Board of Directors.
ARTICLE V
OFFICERS
Section 5.1 Election. Subject to Article
XIII, the officers of the Corporation shall be a Chairman
of the Board (who must be a director), a President and
Chief Executive Officer, a Chief Operating Officer, a
Secretary and a Treasurer and any other officer
designated as a Corporate Officer from time to time by a
resolution of the Board of Directors, each of whom shall
be elected by the Board of Directors and shall hold
office for such term and shall exercise such powers and
perform such duties as set forth in these Bylaws and as
shall be determined from time to time by the Board of
Directors (collectively, the Chairman of the Board,
President and Chief Executive Officer, Chief Operating
Officer, Secretary and Treasurer, the "Corporate
Officers"). The Board of Directors or the President and
Chief Executive Officer, in its or his discretion, may
also choose one or more Executive Vice Presidents, Senior
Vice Presidents, Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers, each of whom
shall hold office for such term and shall exercise such
powers and perform such duties as set forth in these
Bylaws and as shall be determined from time to time by
the Board of Directors, if such officer was appointed by
the Board of Directors, or the President and Chief
Executive Officer, if such officer was appointed by the
President and Chief Executive Officer. Any number of
offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or
these Bylaws. The officers of the Corporation need not
be stockholders of the Corporation nor, except in the
case of the Chairman of the Board of Directors, need such
officers be directors of the Corporation. Subject to
Article XIII, any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors or
by President and Chief Executive Officer in accordance
with this Section 5.1.
Section 5.2 Removal. All officers of the
Corporation shall hold office until their successors are
chosen and qualified, or until their earlier resignation
or removal. Subject to Article XIII, any officer
(including any Corporate Officer) may be removed at any
time by the affirmative vote of a majority of the Board
of Directors. Subject to Article XIII, any officer
other than a Corporate Officer may be removed at any time
by the Chairman of the Board or the President and Chief
Executive Officer or by the affirmative vote of a
majority of the Board of Directors.
Section 5.3 Resignation. Any officer may
resign at any time by giving notice to the Board of
Directors, the President and Chief Executive Officer or
the Secretary of the Corporation. Any resignation shall
take effect at the date of receipt of the notice of
resignation or at any later date specified therein, but
the acceptance of the resignation shall not be necessary
to make it effective.
Section 5.4 Vacancies. A vacancy in any
office because of death, resignation, removal or any
other cause may be filled for the unexpired portion of
the term in the manner prescribed in these Bylaws for
election to the office.
Section 5.5 Chairman of the Board. The duties
of the Chairman of the Board shall be to preside at
meetings of the Board of Directors and, if present, to
preside at the meetings of the Stockholders. Subject to
Article XIII, the Chairman of the Board shall preside as
chairman of the meetings of the Board of Directors or of
any committee on which he serves, and shall preside as
chairman of the Stockholder meetings. The Chairman shall
work in cooperation with the President and Chief
Executive Officer to prepare agendas and presentations
for all meetings of the Board of Directors and of
Stockholders. Except where by law the signature of the
President is required the Chairman of the Board shall
possess the same power as the President to sign all
contracts, certificates and other instruments of the
Corporation that may be authorized by the Board of
Directors. The Chairman of the Board shall perform such
other duties and may exercise such other powers as from
time to time may be assigned to him by the Bylaws or by
the Board of Directors, subject to the terms of
applicable employment agreements.
Section 5.6 President and Chief Executive
Officer. The President and Chief Executive Officer of
the Corporation shall, subject to the control of the
Board of Directors, have general supervision of the
business of the Corporation and shall see that all orders
and resolutions of the Board of Directors are carried
into effect. In the absence of the Chairman of the
Board, the President and Chief Executive Officer shall
preside at all meetings of the Stockholders and the Board
of Directors and otherwise exercise and discharge all the
duties of the Chairman. The President and Chief
Executive Officer shall perform such other duties as the
Board of Directors may from time to time determine,
subject to the terms of applicable employment agreements.
Section 5.7 Chief Operating Officer. The
Chief Operating Officer shall, subject to the control of
the President and Chief Executive Officer, have general
supervision of the executives in charge of the business
of the Corporation in each region or territory in which
the Corporation operates and shall see that all orders of
the President and Chief Executive Officer are carried
into effect. The Chief Operating Officer shall perform
such other duties as the Chairman of the Board may from
time to time determine, subject to the terms of
applicable employment agreements. During the absence or
disability of the President, the Chief Operating Officer
shall exercise all the powers and discharge all the
duties of the President and Chief Executive Officer.
Section 5.8 Treasurer. The Treasurer shall
perform all duties incident to the office of Treasurer
and such other duties as from time to time may be
assigned to him by the Chairman of the Board or the Board
of Directors.
Section 5.9 Executive Vice Presidents, Senior
Vice Presidents and Vice Presidents. Each Executive Vice
President, Senior Vice President and Vice President shall
have such powers and duties as shall be prescribed by the
President and Chief Executive Officer or the Board of
Directors.
Section 5.10 Secretary. The Secretary shall
see that all notices required to be given by the
Corporation are duly given and served. The Secretary
shall be custodian of the seal of the Corporation and
shall affix the seal or cause it to be affixed to all
certificates of stock of the Corporation (unless the seal
of the Corporation on the certificates shall be a
facsimile, as hereinafter provided) and to all documents,
the execution of which on behalf of the Corporation under
its seal is duly authorized in accordance with the
provisions of these Bylaws. The Secretary shall have
charge of the stock ledger and also of the other books,
records and papers of the Corporation and shall see that
the reports, statements and other documents required by
law are properly kept and filed, and the Secretary shall
in general perform all of the duties incident to the
office of Secretary and such other duties as from time to
time may be assigned by the Chairman of the Board or the
Board of Directors.
Section 5.11 Assistant Treasurers and
Assistant Secretaries. The Assistant Treasurers and
Assistant Secretaries, if any, shall perform such duties
as shall be assigned to them by the Chairman of the Board
or the Board of Directors, and in the absence of the
Secretary or Treasurer, as the case may be, or in the
event of his disability or refusal to act, shall perform
the duties of the Secretary or Treasurer, respectively,
and when so acting shall have all the powers of and be
subject to all the restrictions upon the Secretary or
Treasurer, respectively.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Directors and Officers. The
Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a
director or an officer of the Corporation, against
expenses (including, but not limited to, attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection
with such action, suit or proceeding to the fullest
extent and in the manner set forth in and permitted by
the General Corporation Law of the State of Delaware and
any other applicable law as from time to time may be in
effect. To the maximum extent permitted by law, the
Corporation shall advance expenses (including attorneys'
fees) incurred by any person indemnified hereunder in
defending any civil, criminal, administrative or
investigative action, suit or proceeding upon any
undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation.
Such right of indemnification and advancement of expenses
shall not be deemed to be exclusive of any other rights
to which such director or officer may be entitled apart
from the foregoing provisions. The foregoing provisions
of this Section 6.1 shall be deemed to be a contract
between the Corporation and each director or officer who
serves in such capacity at any time while this Section
6.1 and the relevant provisions of the General
Corporation Law of the State of Delaware and other
applicable law, if any, are in effect, and any repeal or
modification thereof shall not affect any right or
obligation then existing, with respect to any state of
facts then or theretofore existing, or any action, suit
or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state
of facts.
Section 6.2 Agents and Employees. The
Corporation may indemnify any person who was or is a
party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was an
employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise,
against expenses (including, but not limited to,
attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding to the
extent and in the manner set forth in and permitted by
the General Corporation Law of the State of Delaware and
any other applicable law as from time to time may be in
effect. Such right of indemnification shall not be
deemed to be exclusive of any other right to which such
person may be entitled apart from the foregoing
provisions.
ARTICLE VII
CAPITAL STOCK
Section 7.1 Certificates of Shares.
Certificates representing shares of stock of each class
of the Corporation, whenever authorized by the Board of
Directors, shall be in such form as shall be approved by
the Board of Directors. The certificates representing
shares of stock of each class shall be signed by, or in
the name of the Corporation by, the Chairman of the Board
or the President and Chief Executive Officer or a Vice
President and by the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer of the
Corporation, and sealed with the seal of the Corporation,
which may be a facsimile thereof. Any or all signatures
may be facsimiles if countersigned by a transfer agent or
registrar. If any officer, transfer agent or registrar
whose manual or facsimile signature is affixed to any
certificate ceases to be an officer, transfer agent or
registrar before the certificate has been issued, it may
nevertheless be issued by the Corporation with the same
effect as if the officer, transfer agent or registrar
were still such at the date of its issue.
Section 7.2 Transfer of Shares. Transfers of
shares of stock of each class of the Corporation shall be
made only on the books of the Corporation by the holder
thereof or by such holder's attorney thereunto authorized
by a power of attorney duly executed and filed with the
Secretary of the Corporation or a transfer agent for such
stock, if any, and on surrender of the certificate or
certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power and
the payment of all taxes thereon. The person in whose
name such shares of stock stand on the books of the
Corporation shall be deemed to be the owner thereof for
all purposes as regards the Corporation; provided that
whenever any transfer of shares of stock shall be made
for collateral security and not absolutely, and written
notice thereof shall be given to the Secretary or to such
transfer agent, such fact shall be stated in the stock
ledger entry for the transfer. No transfer of shares of
stock shall be valid as against the Corporation, its
stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the
Corporation to the extent provided by law, until it shall
have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
Section 7.3 Addresses of Stockholders. Each
Stockholder shall designate to the Secretary or transfer
agent of the Corporation an address at which notice of
meetings and all other corporate notices may be served or
mailed to such person, and, if any Stockholder shall fail
to designate such address, corporate notices may be
served upon such person by mail directed to the person at
the person's post office address, if any, as the same
appears on the stock record books of the Corporation or
at such person's last known post office address.
Section 7.4 Lost, Destroyed and Mutilated
Certificates. The holder of any share of stock of the
Corporation shall immediately notify the Corporation of
any loss, theft, destruction or mutilation of the
certificate therefor. The Corporation may issue to such
holder a new certificate or certificates for such shares
of stock, upon the surrender of the mutilated
certificates or, in the case of loss, theft or
destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction. The Board of
Directors, or a committee designated thereby, or the
transfer agents and registrars for the stock, may, in
their discretion, require the owner of the lost, stolen
or destroyed certificate, or such person's legal
representative, to give the Corporation a bond in such
sum and with such surety or sureties as they may direct
to indemnify the Corporation and such transfer agents and
registrars against any claim that may be made on account
of the alleged loss, theft or destruction of any
certificate or the issuance of a new certificate.
Section 7.5 Regulations. The Board of
Directors may make such additional rules and regulations
as it may deem to be expedient concerning the issue and
transfer of certificates representing shares of stock of
each class of the Corporation and may make such rules and
take such action as it may deem to be expedient
concerning the issue of certificates in lieu of
certificates claimed to have been lost, destroyed, stolen
or mutilated.
Section 7.6 Fixing Date for Determination of
Stockholders of Record. In order that the Corporation
may determine the Stockholders entitled to notice of or
to vote at any meeting of the Stockholders or any
adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment or any
right, or entitled to exercise any right in respect of
any change, conversion or exchange of stock or for the
purpose of any lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more
than 60 calendar days nor less than 10 calendar days
before the date of such meeting, nor more than 60
calendar days prior to any other action. A determination
of the Stockholders entitled to notice or to vote at a
meeting of the Stockholders shall apply to any
adjournment of the meeting; provided that the Board of
Directors may fix a new record date for the adjourned
meeting.
ARTICLE VIII
SEAL
The Board of Directors shall provide a
corporate seal, which shall bear the full name of the
Corporation and such other words and figures as the Board
of Directors may approve and adopt. The seal may be used
by causing it or a facsimile thereof to be impressed or
affixed or in any other manner reproduced.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall end on
the 31st day of December in each year.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatsoever is required to
be given by these Bylaws, by the Certificate of
Incorporation or by law, the person entitled thereto may,
either before or after the meeting or other matter in
respect of which such notice is to be given, waive such
notice in writing, which writing shall be filed with or
entered upon the records of the meeting or the records
kept with respect to such other matter, as the case may
be, and in such event such notice need not be given to
such person and such waiver shall be deemed to be
equivalent to such notice.
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power to
amend, alter or repeal these Bylaws and to adopt new
Bylaws from time to time by an affirmative vote of
seventy-five percent (75%) of the entire Board of
Directors, as then constituted.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Execution of Documents. The
Board of Directors or any committee thereof shall
designate the officers, employees and agents of the
Corporation who shall have the power to execute and
deliver deeds, contracts, mortgages, bonds, debentures,
notes, checks and other orders for the payment of money
and other documents for and in the name of the
Corporation and may authorize such officers, employees
and agents to delegate such power (including, but not
limited to, the authority to redelegate) by written
instrument to other officers, employees or agents of the
Corporation. Such delegation may be by resolution or
otherwise and the authority granted shall be general or
confined to specific matters, all as the Board of
Directors or any such committee may determine. In the
absence of such designation referred to in the first
sentence of this Section 12.1, the officers of the
Corporation shall have such power so referred to, to the
extent incident to the normal performance of their
duties.
Section 12.2 Deposits. All funds of the
Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or
otherwise as the Board of Directors or any committee
thereof or any officer of the Corporation to whom power
in that respect shall have been delegated by the Board of
Directors or any such committee shall select.
Section 12.3 Checks. All checks, drafts, and
other orders for the payment of money out of the funds of
the Corporation, and all notes or other evidences of
indebtedness of the Corporation, shall be signed on
behalf of the Corporation in such manner as shall from
time to time be determined by resolution of the Board of
Directors or of any committee thereof.
Section 12.4 Proxies in Respect of Stock or
Other Securities of Other Corporations. The Board of
Directors or any committee thereof shall designate the
officers of the Corporation who shall have the authority
from time to time to appoint an agent or agents of the
Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation
may have as the holder of stock or other securities in
any other corporation and to vote or consent in respect
of such stock or securities. Such designated officers
may instruct the person or persons so appointed as to the
manner of exercising such powers and rights, and such
designated officers may execute or cause to be executed
in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, such written proxies,
powers of attorney or other instruments as they may deem
to be necessary or proper so that the Corporation may
exercise its powers and rights. In the absence of any
such designation, the President shall have the authority
granted under this Section 12.4.
Section 12.5 Bylaws Subject to Law and
Certificate of Incorporation. Each provision of these
Bylaws is subject to any contrary provision contained in
the Certificate of Incorporation or of any applicable law
as from time to time may be in effect, and, to the extent
any such provision is inconsistent therewith, such
provision shall be superseded thereby for as long as and
in any case in which it is inconsistent, but for all
other purposes these Bylaws shall continue in full force
and effect.
ARTICLE XIII
TRANSITION PERIOD MATTERS
Notwithstanding anything else contained in
these Bylaws to the contrary, the provisions of this
Article XIII are intended to reflect certain transitional
matters set forth in the Agreement and Plan of Merger,
dated October 1, 1996, by and among the Corporation, FH
Acquisition Corp. and Foundation Health Corporation
("FHC") (the "Merger Agreement"). The provisions set
forth below shall become effective as of the Effective
Date:
A. The designees for the classes of the Board of
Directors expiring in 1997, 1998 and 1999 as set forth in
Section 3.2 hereof shall consist of (i) for the 1997
class, four members for the class, consisting of Daniel
D. Crowley, Malik M. Hasan, M.D., (or their respective
replacements) one Independent Director appointed from the
Corporation's Designees and one Independent Director
appointed from FHC's Designees, (ii) for the 1998 class,
three members for the class, consisting of two
Independent Directors appointed from FHC's Designees and
one Independent Director appointed from the Corporation's
Designees and (iii) for the 1999 class, four members for
the class, consisting of two Independent Directors
appointed from the Corporation's Designees and two
Independent Directors appointed from FHC's Designees.
For purposes of these Bylaws, the "FHC Designees" shall
mean the directors selected by FHC as set forth in
Section 2.01(c) of the Merger Agreement and any FHC
Replacement Designees (as defined below), and the
"Corporation Designees" shall mean the directors selected
by the Corporation as set forth in Section 2.01(c) of the
Merger Agreement and any Corporation Replacement
Designees (as defined below).
B. During the Transition Period (as defined
below), the committees of the Board shall be constituted
as follows:
(i) the Compensation and Stock Option
Committee shall consist of four members, two Independent
Directors selected from FHC's Designees and two
Independent Directors selected from the Corporation's
Designees, and the Chairman of such Committee shall be
selected from the Corporation's Designees;
(ii) the Audit Committee shall consist of four
members, two Independent Directors selected from FHC's
Designees and two Independent Directors selected from the
Corporation's Designees, and the Chairman of such
Committee shall be selected from FHC's Designees;
(iii) the Investment Policy Committee shall
consist of an equal number of FHC's Designees (initially
including Mr. Crowley and one Independent Director) and
Corporation's Designees (initially including Dr. Hasan
and one Independent Director), and the Chairman of such
Committee shall be selected from the Corporation's
Designees;
(iv) the Nominating Committee shall consist of
four members, two Independent Directors selected from
FHC's Designees, and two Independent Directors selected
from the Corporation's Designees and the Chairman of such
Committee shall be selected from FHC's Designees; and
(v) there will be no Executive Committee.
Following the Transition Period a majority of
the Board of Directors shall select the directors (which
do not have to be Independent Directors unless required
by law or applicable exchange regulation) to serve on the
committees to the Board of Directors.
C. The Board of Directors shall cause the
following individuals to be designated as Corporate
Officers of the Corporation, and the Corporation will
honor the employment contracts and related agreements
which exist or entered into simultaneously with such
individuals and certain other individuals, as described
in the Merger Agreement, as follows: Mr. Crowley as
Chairman of the Board, Dr. Hasan as Chief Executive
Officer and President, Jay M. Gellert as Chief Operating
Officer, Jeffrey L. Elder as Treasurer and B. Curtis
Westen, Esq. as Secretary. Mr. Crowley will be Chairman
of the Board for the period ending on the earlier of:
(i) the date one (1) year following the Effective Date,
or (ii) the date of Mr. Crowley's death, resignation or
removal as Chairman of the Board, upon which date Dr.
Hasan shall become Chairman of the Board and Chief
Executive Officer.
D. During the period beginning on the Effective
Date and:
(i) except as hereinafter
provided, ending on the date five (5) years
following the Effective Date the number of
directors comprising the full Board of
Directors shall be eleven (11), and initially
six (6) of such directors (Mr.Crowley and five
(5) other Independent Directors) shall be
designated by FHC and five (5) of such
directors (Dr. Hasan and four (4) other
Independent Directors) shall be designated by
the Corporation; provided that for a period
beginning on the Effective Date and up to, but
not including, the election of directors at the
May, 2000 Annual Meeting of Stockholders ( the
"Transition Period"), if Dr. Hasan, at any
time, is not the Chief Executive Officer of the
Corporation and not on the Board of Directors,
then prior to the next meeting of the Board of
Directors following such occurrence, the other
Corporation Designees will select a Corporation
Replacement Designee to replace Dr. Hasan as
director, and either (y) a FHC Designee will
resign so that the Board shall consist of ten
(10) directors, of whom five shall be
Corporation Designees and five shall be FHC
Designees, or (z) the directors will take
actions to increase the board size to twelve
(12) and the Corporation Designees shall select
a Corporation Replacement Designee to fill the
vacancy created by such increase in the board's
size and following any date that the Board of
Directors consists of ten (10) or twelve (12)
directors pursuant to this paragraph, such
Board shall be entitled to increase the size of
the Board by one (1) in order to fill such new
directorship with the new Chief Executive
Officer of the Corporation. A Corporation
Replacement Designee shall mean an Independent
Director designated to replace a Corporation
Designee by the other remaining Corporation
Designees and shall be selected from (i) the
Independent Directors of the Corporation's
board of directors as of the date of the Merger
Agreement or (ii) any other individual who
qualifies as an Independent Director and who is
approved by at least one FHC Designee, which
approval shall not be unreasonably withheld. A
FHC Replacement Designee shall mean an
Independent Director designated to replace a
FHC Designee by the other remaining FHC
Designees and shall be selected from (i) the
Independent Directors of FHC's board of
directors as of the date of the Merger
Agreement or (ii) any other individual who
qualifies as an Independent Director and who is
approved by at least one Corporation Designee,
which approval shall not be unreasonably
withheld;
(ii) during the Transition
Period, except as provided in clause (i) above,
the nominating committee shall nominate for
election to the board of directors at the 1997,
1998 and 1999 Annual Meetings of Stockholders,
the FHC Designees and Corporation Designees
appointed to the class pursuant to these Bylaws
and the Merger Agreement;
(iii) during the Transition
Period, (w) the affirmative vote of at least
eight (8) of the members of the Board shall be
required for the Board of Directors to approve,
authorize or otherwise take any action pursuant
to Article II, Sections 2.2 and 2.3 (in each
case only with respect to the applicable
portion of the meetings for the election or
removal of directors, amendment of the Bylaws
or other actions inconsistent with the terms of
the Merger Agreement); Article III, Section
3.2; Article IV, Section 4.6; and all of XI,
(x) in the event of the death, resignation,
removal or failure to stand for reelection of
any of the directors originally designated by
FHC or the Corporation pursuant to the Merger
Agreement, the vacancy or nomination shall be
filled with a FHC Replacement Designee or a
Corporation Replacement Designee, as the case
may be, (y) in the event of the death,
resignation or removal of any member of a
committee, the vacancy will be filled with a
FHC Designee or a Corporation Designee
director, as the case may be, to maintain an
equal representation on such committee, and (z)
the Board of Directors of the Corporation shall
waive all age limitations related to a persons'
ability to serve as a director on the Board of
Directors of the Corporation;
(iv) until the date (2) years
after Mr. Crowley is no longer employed by the
Corporation as an employee or officer, the
employment agreements entered into between the
Corporation or FHC on the one hand and Mr.
Crowley on the other hand shall not be renewed,
extended or amended, nor may Mr. Crowley be
rehired without the affirmative vote of at
least eight (8) of the members of the Board of
Directors; and
(v) until the earlier of the
date: (y) 18 months after the Effective Date or
(z) six months following the date of Mr.
Crowley's death, resignation or removal as
Chairman of the Board, Dr. Hasan shall not be
removed or otherwise replaced as the Chief
Executive Officer without the affirmative vote
of at least eight (8) of the members of the
Board of Directors.
E. No action may be taken which could be deemed to
be inconsistent with this Article XIII or the terms of
the Merger Agreement, including without limitation the
provisions of Sections 2.01, 2.02, 7.08 and 7.12 of the
Merger Agreement without the consent of at least eight
(8) members of the Board of Directors.
F. For the purposes of this Article XIII, an
"Independent Director" shall mean (i) any individual who
is not a past or present employee or officer of the
Corporation, FHC or their Affiliates or any Affiliate of
such an employee or officer or (ii) notwithstanding
clause (i), any of the existing directors of FHC and the
Corporation (other than such individuals who were
officers or employees of the Corporation or FHC as of
September 30, 1996); provided that, after the Effective
Date each Independent Director shall have no financial
relationship with the Corporation (other than employment
and retirement awards granted prior to the Effective Date
and benefits and future director compensation and
benefits); provided that with respect to such
Independent Directors whose law firms are providing legal
services to the Corporation, such law firms may complete
work on existing assignments that in the judgment of the
Corporation, cannot be reasonably terminated; provided
further that such financial relationship restriction will
not apply to New FHS director George Deukmejian, with
respect to his current law firm. For the purposes of
these Bylaws, "Affiliate" or "Affiliates" shall be
defined as (i) any other Person directly or indirectly
controlling or controlled by or under direct or indirect
common control with such specified Person and (ii) any
family members of such Person. For purposes of this
definition, "Person" shall mean any individual,
partnership, firm, corporation, association, joint
venture, trust or other entity. "Control" when used with
respect to any specified Person shall mean the power to
direct the management and policies of such Person,
directly and indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Exhibit 4.3
FOUNDATION HEALTH CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE.
The Plan was established to provide Eligible Employees with
an opportunity to increase their proprietary interest in the
success of the Company by purchasing Stock from the Company on
favorable terms and to pay for such purchases through payroll
deductions. The Plan is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended.
SECTION 2. DURATION ; PARTICIPATION PERIODS;
SHARES AUTHORIZED.
The Plan shall be in effect from October l, 1990 to June 30,
2000. While the Plan is in effect, there shall be 117
Participation Periods, consisting of calendar months. The
maximum aggregate number of shares of Stock available for
purchase under the Plan shall be 500,000, subject to adjustment
as provided in Section 11.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Board of
Directors. The interpretation and construction by the Board of
Directors of any provision of the Plan or of any right to
purchase Stock granted under the Plan shall be conclusive and
binding on all persons.
(b) The Board of Directors may delegate the administration
of the Plan to its Compensation Committee. The Committee may
adopt such regulations and rules under the Plan as it considers
appropriate.
SECTION 4. ELIGIBILITY AND PARTICIPATION.
(a) Any individual who, on the date preceding the first day
of a Participation Period, qualified as an Eligible Employee and
has been employed by a Participating Company for not less than
six months may elect to become a Participant in the Plan for a
Participation Period by executing the enrollment form prescribed
for such purpose by the Board of Directors. The enrollment form
shall be filed with the Company not later than the 15th working
day prior to the commencement of such Participation Period. The
Eligible Employee shall designate on the enrollment form the
percentage of his or her Compensation which he or she elects to
have withheld for the purchase of Stock, which shall be a whole
percentage of the Eligible Employee's Compensation, but not less
than two percent (2%) nor more than ten percent (10%).
(b) By enrolling in the Plan, a Participant is given the
right to purchase the maximum number of whole and fractional
shares of Stock which can be purchased with the amount of the
Participant's Compensation which has been withheld during the
Participation Period; provided, however, that with respect to any
Participation Period no Participant shall purchase more than a
maximum of 167 shares of Stock nor shares of Stock in excess of
the amounts set forth in Section 12.
(c) Once enrolled, a Participant shall continue to
participate in the Plan for each succeeding Participation Period
until he or she withdraws from the Plan or ceases to be an
Eligible Employee. A Participant who withdraws from the Plan in
accordance with Section 8 may again become a Participant, if he
or she then is an Eligible Employee, by following the procedure
described in Section 4(a).
SECTION 5. EMPLOYEE CONTRIBUTIONS.
A Participant may purchase shares of Stock solely by means
of payroll deductions. Payroll deductions, as designated by the
Participant pursuant to Section 4(a), shall commence with the
first payroll period in the Participation Period and shall
continue in each subsequent payroll period during participation
in the Plan. If a Participant wishes to change the rate of
payroll withholding, he or she may do so by filing a new
enrollment form with the Company not later than the 15th working
day prior to the commencement of the Participation Period for
which such change is to be effective.
SECTION 6. PLAN ACCOUNTS; PURCHASE OF SHARES.
(a) The Company shall maintain a Plan Account on its books
in the name of each Participant. As of the close of each payroll
period in a Participation Period, the amount deducted from the
Participant's Compensation shall be credited to the Participant's
Plan Account. No interest shall be credited to Plan Accounts.
(b) As of the last day of each Participation Period, the
Participant is deemed to have elected to purchase the number of
whole and fractional shares of Stock calculated in accordance
with this subsection (b), unless the Participant has previously
elected to withdraw from the Plan in accordance with Section 8.
The amount then in the Participant's Plan Account shall be
divided by the Purchase Price, and the number of whole and
fractional shares which results (subject to the limitations
described in subsection 4(b) and subsection (c) below) shall be
purchased from the Company with the funds in the Participant's
Plan Account. At the election of the Participant, share
certificates representing the number of shares of Stock so
purchased shall be issued and delivered to the Participant as
soon as reasonably practicable after the close of the
Participation Period or a notation of noncertificated shares
shall be made on the Stock records of the Company.
(c) In the event that the aggregate number of shares which
all Participants elect to purchase during a Participation Period
exceeds the number of shares remaining available for issuance
under the Plan, then the number of shares to which each
Participant is entitled shall be determined by multiplying the
number of shares available for issuance by a fraction, the
numerator of which is the number of shares which such Participant
has elected to purchase and the denominator of which is the
number of shares which all Participants have elected to purchase.
(d) Any amount remaining in the Participant's Plan Account
which represents cash equal to less than the price of the
smallest fractional share which may be purchased under the Plan
shall be carried over in the Participant's Plan Account to the
next Participation Period. Any amount remaining in the
Participant's Plan Account which represents the Purchase Price
for whole and fractional shares which could not be purchased
under subsection 4(b) or Subsection (c) above shall be refunded
to the Participant in cash, without interest.
SECTION 7. PURCHASE PRICE.
The Purchase Price for each share of Stock shall be 85
percent of the Fair Market Value of such share on the last
trading day in the Participation Period.
SECTION 8. WITHDRAWAL FROM THE PLAN.
A Participant may elect to withdraw from the Plan at any
time before the last day of a Participation Period by filing the
prescribed form with the Company. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the
amount credited to the Participant's Plan Account shall be
refunded to him or her in cash, without interest. A Participant
who has withdrawn from the Plan shall not be a Participant in
future Participation Periods, unless he or she again enrolls
under Section 4.
SECTION 9. EFFECT OF TERMINATION OF EMPLOYMENT.
Termination of employment as an Eligible Employee for any
reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 8. A transfer from one
Participating Company to another shall not be treated as a
termination of employment.
SECTION 10. RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any
Participant's interest in any Stock or moneys to which he or she
may be entitled under the Plan, shall not be transferable by
voluntary or involuntary assignment or by operation of law, or in
any other manner other than by will or the laws of descent and
distribution. If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or
interest under the Plan, other than by will or the laws of
descent and distribution, then such act shall be treated as an
election by the Participant to withdraw from the Plan under
Section 8.
SECTION 11. RECAPITALIZATIONS, ETC.
(a) The aggregate number of shares of Stock offered under
the Plan and the number and price of shares which any Participant
has elected to purchase shall be adjusted proportionately by the
Board of Directors for any increase or decrease in the number of
outstanding shares of Stock resulting from a subdivision or
consolidation of shares, the payment of a stock dividend, or
another increase or decrease in such shares effected without
receipt or payment of consideration by the Company.
(b) In the event of a dissolution or liquidation of the
Company, or a merger or consolidation to which the Company is a
constituent corporation, the Plan shall terminate, unless the
plan of merger, consolidation or reorganization provides
otherwise, and all amounts which have been withheld but not yet
applied to purchase Stock hereunder shall be refunded, without
interest. The Plan shall in no event be construed to restrict in
any way the Company's right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.
SECTION 12. LIMITATION ON STOCK OWNERSHIP.
Any other provision hereof to the contrary notwithstanding,
no Participant shall be granted a right to purchase Stock under
the Plan if (a) such Participant, immediately after his or her
election to purchase such Stock, would own stock possessing more
than five percent (5%) of the total combined voting power or
value of all classes of stock of the Company or any parent or
Subsidiary of the Company or (b) under the terms of the Plan such
Participant's rights to purchase stock under this and all other
qualified employee stock purchase plans of the Company or any
parent or Subsidiary of the Company would accrue at a rate which
exceeds $25,000 of the fair market value of such stock
(determined at the time when such right is granted) for each
calendar year for which such right or option is outstanding at
any time. Ownership of stock shall be determined after applying
the attribution rules of Section 425(d) of the Internal Revenue
Code of 1986, as amended. For purposes of this Section 12, each
Participant shall be considered to own any stock which he or she
has a right or option to purchase under this or any other plan,
and each Participant shall be considered to have the right to
purchase 167 shares of Stock under this Plan with respect to each
Participation Period.
SECTION 13. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan shall be construed to give any person
the right to remain in the employ of a Participating Company.
Each Participating Company reserves the right to terminate the
employment of any person at any time, with or without cause.
SECTION 14. NO RIGHTS AS A STOCKHOLDER.
A Participant shall have no rights as a stockholder with
respect to any shares which he or she may have purchased, or may
have a right to purchase, under the Plan until the date of
issuance of a stock certificate for such shares or the date a
notation of noncertificated shares shall have been made on the
stock records of the Company.
SECTION 15. AMENDMENT OR DISCONTINUANCE.
The Board of Directors shall have the right to amend, modify
or terminate the Plan at any time and without notice; provided
that no Participant's existing rights are adversely affected
thereby and that, except as provided in Section 11, any increase
in the aggregate number of shares of Stock to be issued under the
Plan shall be subject to approval by a vote of the stockholders
of the Company in the manner provided in Section 16.
SECTION 16. STOCKHOLDER APPROVAL.
The Plan and all elections to purchase shares hereunder
shall be void, and all amounts which have been paid toward the
Purchase Price of Stock hereunder shall be refunded without
interest, unless the Plan is approved and ratified by the holders
of the Company's outstanding voting shares within 12 months
before or after the date when the Plan is adopted by the Board of
Directors. The provisions of Section 6 notwithstanding, no stock
certificates shall be issued to any Participant until the Plan
has been approved and ratified in the above manner.
SECTION 17. DEFINITIONS.
(a) Board of Directors means the Board of Directors of the
Company, as constituted from time to time.
(b) Committee means the committee (if any) appointed to
administer the Plan, as provided in Section 3(b).
(c) Company means Foundation Health Corporation, a Delaware
corporation.
(d) Compensation means the base compensation paid to a
Participant by the Participating Companies, including shift
differentials but excluding bonuses, commissions, overtime or any
other pay for work outside the regular work schedule, as
determined by the Board of Directors.
(e) Eligible Employee means any employee of a Participating
Company who is customarily employed for more than twenty (20)
hours per week and more than five (5) months per calendar year.
(f) Fair Market Value shall mean the market price of Stock,
determined by the Board of Directors as follows:
(i) If the Stock was traded over-the-counter on the date in
question but was not classified as a national market issue, then
the Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted by the NASDAQ
system for such date;
(ii) If the Stock was traded over-the-counter on the date
in question and was classified as a national market issue, then
the Fair Market Value shall be equal to the last-transaction
price quoted by the NASDAQ system for such date;
(iii) If the Stock was traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable composite-
transactions report for such date; and
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Board of
Directors in good faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Board
of Directors shall be conclusive and binding on all persons.
(g) Participant means an Eligible Employee who elects to
participate in the Plan, as provided in Section 4(a).
(i) Participating Company means the Company and each
present or future Subsidiary, except Subsidiaries excluded by the
Board of Directors.
(h) Participation Period means a period during which
contributions may be made toward the purchase of Stock under the
Plan, as determined pursuant to Section 2.
(i) Plan means this Foundation Health Corporation Employee
Stock Purchase Plan, as it may be amended from time to time.
(j) Plan Account means the account established for each
Participant pursuant to Section 6.
(k) Purchase Price means the price at which Participants
may purchase Stock under the Plan, as determined pursuant to
Section 7.
(l) Stock means the Common Stock of the Company.
(m) Subsidiary means a corporation, 50 percent or more of
the total combined voting power of all classes of stock of which
is owned by the Company or by another Subsidiary.
SECTION 18. EXECUTION.
To record the adoption of the Plan by the Board of Directors
on June 14, 1990, effective as of October 1, 1990, the Company
has caused its authorized officer to execute the same this 14th
day of September, 1990.
FOUNDATION HEALTH CORPORATION
By: /s/ Daniel D. Crowley
Exhibit 4.4
FOUNDATION HEALTH CORPORATION
PROFIT SHARING AND
401(K) PLAN
(Amended and Restated Effective January 1, 1994)
Plan Number: 001
EIN: 68-0014772
TABLE OF CONTENTS
Page
ARTICLE 1 INTRODUCTION . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . 1
2.1 "Accounts" . . . . . . . . . . . . . . . . . 1
2.2 "Account Balance" . . . . . . . . . . . . . 2
2.3 "Actual Deferral Percentage" . . . . . . . . 2
2.4 "Adjustment Factor" . . . . . . . . . . . . . 2
2.5 "Administrator" . . . . . . . . . . . . . . . 2
2.6 "Affiliated Group" . . . . . . . . . . . . . 2
2.7 "After-Tax Contributions" . . . . . . . . . . 2
2.8 "After-Tax Contribution Account" . . . . . . 2
2.9 "After-Tax Contribution Election" . . . . . 3
2.10 "Annuity Starting Date" . . . . . . . . . . . 3
2.11 "Average Actual Deferral Percentage" . . . . 3
2.12 "Average Contribution Percentage" . . . . . . 3
2.13 "Beneficiary" . . . . . . . . . . . . . . . . 3
2.14 "Board of Directors" . . . . . . . . . . . . 3
2.15 "Code" . . . . . . . . . . . . . . . . . . . 3
2.16 "Company" . . . . . . . . . . . . . . . . . . 3
2.17 "Compensation" . . . . . . . . . . . . . . . 3
2.18 "Contribution Percentage" . . . . . . . . . . 4
2.19 "Deferral Election" . . . . . . . . . . . . . 4
2.20 "Deferred Salary Account" . . . . . . . . . . 4
2.21 "Deferred Salary Contribution" . . . . . . . 4
2.22 "Disability Retirement Date" . . . . . . . . 4
2.23 "Disabled" . . . . . . . . . . . . . . . . . 4
2.24 "Early Retirement Date" . . . . . . . . . . . 4
2.25 "Effective Date" . . . . . . . . . . . . . . 5
2.26 "Employee" . . . . . . . . . . . . . . . . . 5
2.27 "Employer" . . . . . . . . . . . . . . . . . 5
2.28 "Employer Account" . . . . . . . . . . . . . 5
2.29 "Employer Contributions" . . . . . . . . . . 6
2.30 "Employment Commencement Date" . . . . . . . 6
2.31 "ERISA" . . . . . . . . . . . . . . . . . . . 6
2.32 "Family Member" . . . . . . . . . . . . . . . 6
2.33 "FHC Stock" . . . . . . . . . . . . . . . . . 6
2.34 "FHC Stock Fund" . . . . . . . . . . . . . . 6
2.35 "Highly Compensated Employee" . . . . . . . . 6
2.36 "Hour of Service" . . . . . . . . . . . . . . 8
2.37 "Investment Funds" . . . . . . . . . . . . . 7
2.38 "Leased Employee" . . . . . . . . . . . . . . 8
2.39 "Leave of Absence" . . . . . . . . . . . . . 8
2.40 "Married Participant" . . . . . . . . . . . . 8
2.41 "Matching Rate" . . . . . . . . . . . . . . . 8
2.42 "Nonhighly Compensated Employee" . . . . . . 8
2.43 "Normal Retirement Age" . . . . . . . . . . . 8
2.44 "Normal Retirement Date" . . . . . . . . . . 9
2.45 "One-Year Period of Severance" . . . . . . . 9
2.46 "Participant" . . . . . . . . . . . . . . . . 9
2.47 "Participation Commencement Date" . . . . . . 9
2.48 "Period of Service" . . . . . . . . . . . . . 9
2.49 "Period of Severance" . . . . . . . . . . . . 9
2.50 "Plan" . . . . . . . . . . . . . . . . . . . 9
2.51 "Plan Year" . . . . . . . . . . . . . . . . . 9
2.52 "Postponed Retirement Date" . . . . . . . . . 9
2.53 "Prior Plan" . . . . . . . . . . . . . . . . 9
2.54 "Qualified Joint and Survivor Annuity" . . 10
2.55 "Qualified Matching Contribution" and
"Qualified Nonelective Contribution" . . . 10
2.56 "Reemployment Commencement Date" . . . . . 10
2.57 "Retirement Date" . . . . . . . . . . . . . 10
2.58 "Rollover Account" . . . . . . . . . . . . 10
2.59 "Rollover Contribution" . . . . . . . . . . 10
2.60 "Severance From Service Date" . . . . . . . 10
2.61 "Spouse" or "Surviving Spouse " . . . . . . 11
2.62 "Top-Paid Group" . . . . . . . . . . . . . 11
2.63 "Total Compensation" . . . . . . . . . . . 11
2.64 "Total Compensation Plus Deferrals" . . . . 12
2.65 "Trust Agreement" . . . . . . . . . . . . . 12
2.66 "Trustee" . . . . . . . . . . . . . . . . . 12
2.67 "Trust Fund" . . . . . . . . . . . . . . . 12
2.68 "Valuation Date" . . . . . . . . . . . . . 12
2.69 "Year of Service" . . . . . . . . . . . . . 12
ARTICLE 3 PARTICIPATION . . . . . . . . . . . . . . . 12
3.1 Plan Entry Date . . . . . . . . . . . . . . 12
3.2 Rehired Employee . . . . . . . . . . . . . 13
3.3 Loss of Participant Status . . . . . . . . 13
3.4 Suspension of Participation . . . . . . . . 13
ARTICLE 4 DEFERRED SALARY CONTRIBUTIONS AND
AFTER-TAX CONTRIBUTIONS . . . . . . . . . . 14
4.1 Deferred Salary Contributions . . . . . . . 14
4.2 Deferral Election . . . . . . . . . . . . . 15
4.3 Suspension of, or Change in, Deferral
Election . . . . . . . . . . . . . . . . . 15
4.4 Deferral Percentage Limitation . . . . . . 15
4.5 Special Rules on Deferral Percentage
Limitation . . . . . . . . . . . . . . . . 16
4.6 Adjustment of Deferrals . . . . . . . . . . 17
4.7 After-Tax Contributions . . . . . . . . . . 17
4.8 After-Tax Contribution Election . . . . . . 17
4.9 Suspension of, or Change in, After-Tax
Contributions . . . . . . . . . . . . . . . 18
ARTICLE 5 EMPLOYER CONTRIBUTIONS . . . . . . . . . . 18
5.1 Employer Discretionary Contributions . . . 18
5.2 Employer Matching Contributions
(Effective Until 9/30/94) . . . . . . . . . 19
5.2 Employer Matching Contributions
(Effective 10/1/94) . . . . . . . . . . . . 19
5.3 Percentage Limitation on Employer
Matching Contributions and
After-Tax Contributions . . . . . . . . . . 20
5.4 Special Rules for Contribution
Percentage Limit Testing . . . . . . . . . 21
5.5 Overall Limitation on Annual Additions . . 21
5.6 Special Rules . . . . . . . . . . . . . . . 22
5.7 Definitions . . . . . . . . . . . . . . . . 24
5.8 Reversion of Employer Contributions . . . . 25
5.9 Timing of Employer Contributions . . . . . 25
ARTICLE 6 PARTICIPANTS' ACCOUNTS . . . . . . . . . . 25
6.1 Separate Accounts . . . . . . . . . . . . . 25
6.2 Valuation of Funds . . . . . . . . . . . . 26
6.3 Investment of Contributions . . . . . . . . 26
6.4 Change of Investment Election . . . . . . . 27
6.5 Restrictions on Investment Elections of
Certain Participants . . . . . . . . . . . 27
6.6 Statements . . . . . . . . . . . . . . . . 27
ARTICLE 7 INVESTMENT OF FUNDS . . . . . . . . . . . . 27
7.1 Trust Agreement . . . . . . . . . . . . . . 27
7.2 Trust Fund . . . . . . . . . . . . . . . . 28
7.3 Independent Qualified Public Accountant . . 28
ARTICLE 8 BENEFIT ELECTION AND BENEFICIARY
DESIGNATION PROCEDURES . . . . . . . . . . 29
8.1 Elections as to Form of Distribution . . . 29
8.2 Information on Form of Distribution . . . . 30
8.3 Designation of Beneficiary for Death
Benefit . . . . . . . . . . . . . . . . . . 30
8.4 Information on Death Benefits . . . . . . . 32
ARTICLE 9 DISTRIBUTION OF BENEFITS . . . . . . . . . 32
9.1 Time of Distribution: General Rule . . . . 32
9.2 Earliest Time of Distribution . . . . . . . 33
9.3 Latest Time of Distribution . . . . . . . . 33
9.4 Normal Form of Benefit . . . . . . . . . . 33
9.5 Optional Forms of Benefit . . . . . . . . . 34
9.6 Qualified Pre-Retirement Survivor Annuity . 34
9.7 Small Benefits: Immediate Lump Sum . . . . 35
9.8 Investment of Account Balance of
Terminated Participant . . . . . . . . . . 35
9.9 Required Distributions . . . . . . . . . . 35
9.10 Direct Rollovers . . . . . . . . . . . . . 36
ARTICLE 10 VESTING, RETIREMENT, AND TERMINATION
OF EMPLOYMENT . . . . . . . . . . . . . . 37
10.1 Vesting in Deferred Salary, After-Tax and
Rollover Contributions . . . . . . . . . . 37
10.2 Vesting in Employer Account . . . . . . . . 37
10.3 Vesting After Prior Distributions . . . . . 38
10.4 Forfeitures . . . . . . . . . . . . . . . . 38
ARTICLE 11 WITHDRAWALS . . . . . . . . . . . . . . . 39
11.1 Hardship Withdrawals . . . . . . . . . . . 39
11.2 Withdrawal of After-Tax Contributions . . . 41
11.3 Loans to Participants . . . . . . . . . . . 41
ARTICLE 12 DISTRIBUTION OF EXCESS DEFERRALS,
EXCESS CONTRIBUTIONS AND EXCESS
AGGREGATE CONTRIBUTIONS . . . . . . . . . 44
12.1 Distribution of Excess Deferrals . . . . . 44
12.2 Distribution of Excess Aggregate
Contributions . . . . . . . . . . . . . . . 46
ARTICLE 13 ADMINISTRATION OF THE PLAN . . . . . . . . 48
13.1 Plan Administrator . . . . . . . . . . . . 48
13.2 Selection of Committee . . . . . . . . . . 48
13.3 Powers of the Administrator . . . . . . . . 49
13.4 Selection and Replacement of Trustee . . . 50
13.5 Selection of Other Professional
Counselors . . . . . . . . . . . . . . . . 50
13.6 Reliance on Professional Counselors . . . . 51
13.7 Plan Claim Procedures . . . . . . . . . . . 51
13.8 Source of Payment of Expenses . . . . . . . 52
13.9 Compensation of the Administrator . . . . . 53
13.10 Fiduciary Liability Insurance . . . . . . 53
ARTICLE 14 AMENDMENT OR TERMINATION . . . . . . . . . 53
14.1 Right to Amend . . . . . . . . . . . . . . 53
14.2 Right to Discontinue Plan . . . . . . . . . 54
14.3 Obligations Upon Merger, Consolidation
or Transfer . . . . . . . . . . . . . . . . 54
14.4 Obligations Upon Termination, Partial
Termination or Discontinuance . . . . . . . 54
14.5 Continued Funding After Plan Termination . 55
14.6 Distribution Upon Sale of Assets . . . . . 55
ARTICLE 15 GENERAL PROVISIONS . . . . . . . . . . . . 55
15.1 No Implied Employment Contract . . . . . . 55
15.2 Benefits Not Assignable . . . . . . . . . . 56
15.3 Facility of Payment . . . . . . . . . . . . 56
15.4 Source of Benefits . . . . . . . . . . . . 56
15.5 Lost Participants or Beneficiaries . . . . 56
15.6 Service in Several Fiduciary Capacities . . 57
15.7 Construction of Plan . . . . . . . . . . . 57
15.8 Governing Law . . . . . . . . . . . . . . . 57
15.9 Intent to Comply With Legal Requirements . 57
15.10 Annuity Contracts . . . . . . . . . . . . . 57
15.11 Voting Rights . . . . . . . . . . . . . . . 58
15.12 Other Instructions by Participants . . . . 58
ARTICLE 16 ROLLOVER CONTRIBUTIONS AND TRANSFERS . . . 59
16.1 Transfers From Other Plans . . . . . . . . 59
16.2 Rollover of Funds From Conduit
Individual Retirement Account (IRA) . . . . 60
16.3 Mistaken Rollover . . . . . . . . . . . . . 60
ARTICLE 17 TOP-HEAVY PROVISIONS . . . . . . . . . . . 61
17.1 Top-Heavy Plan Defined . . . . . . . . . . 61
17.2 Other Definitions . . . . . . . . . . . . . 62
17.3 Top-Heavy Vesting . . . . . . . . . . . . . 63
17.4 Top-Heavy Contributions . . . . . . . . . . 64
17.5 Adjustment to Limitation on Annual
Additions . . . . . . . . . . . . . . . . . 64
FOUNDATION HEALTH CORPORATION
PROFIT SHARING AND
401(k) PLAN
(Amended and Restated Effective January 1, 1994)
ARTICLE 1
INTRODUCTION
The Plan was most recently amended and restated,
generally effective January 1, 1994, to read as set forth
herein. The Plan was originally adopted effective
April 1, 1989 as an amendment, restatement and
continuation of the CPI Profit Sharing Plan sponsored by
International Central Bank and Trust Corporation. The
purpose of the Plan is to provide participating employees
with retirement benefits by affording them the
opportunity to elect to have a portion of their salary
paid directly into the Plan on their behalf by the
Company and the other Employers. This Plan is intended
to qualify as a profit sharing plan under Section 401(a)
of the Code and contains a cash or deferred arrangement
intended to qualify under Section 401(k) of the Code.
The Trust Agreement entered into in connection with this
Plan shall continue in full force and effect pursuant to
the applicable provisions of the Plan and is incorporated
by reference and made part of this Plan.
The Plan is subject to amendment or termination at any
time pursuant to Article 14, including (without
limitation) amendments to meet regulations and rules
issued by the Secretary of the Treasury or his delegate
or the Secretary of Labor. Certain capitalized terms
used in the text of the Plan are defined in Article 2 in
alphabetical order.
ARTICLE 2
DEFINITIONS
The following words and phrases as used herein shall have
the following meanings and the masculine and feminine
gender shall be deemed to include the others, unless a
different meaning is plainly required by the context:
2.1 "Accounts" means the accounts that are
maintained for a Participant (or former
Participant) under the Plan, including the
Deferred Salary Account, the Rollover Account,
the After-Tax Contribution Account and the
Employer Account.
2.2 "Account Balance" means the sum of the amounts
credited to a Participant's (or former
Participant's) Accounts, including interest and
earnings as of any date.
2.3 "Actual Deferral Percentage" means the ratio
(expressed as a percentage) of the Deferred
Salary Contributions made on behalf of the
Participant for the Plan Year to the
Participant's Compensation for the Plan Year.
2.4 "Adjustment Factor" means the cost of living
adjustment factor prescribed by the Secretary
of the Treasury under Section 415(d) of the
Code for years beginning after December 31,
1987, as applied to such items and in such
manner as the Secretary shall provide.
2.5 "Administrator" means the individual or
committee described in Article 13 which is
responsible for the administration of the Plan.
2.6 "Affiliated Group" means a group of one or more
chains of corporations connected through stock
ownership with the Company, if:
(A) Stock possessing at least 80% of the total
combined voting power of all classes of
stock entitled to vote or at least 80% of
the total value of shares of all classes
of stock of each of the corporations,
except the Company, is owned by one or
more of the other corporations; and
(B) The Company owns stock possessing at least
80% of the total combined voting power of
all classes of stock entitled to vote or
at least 80% of the total value of shares
of all classes of stock of at least one of
the other corporations excluding, in
computing such voting power or value,
stock owned directly by such other
corporations.
In addition, the term 'Affiliated Group'
includes any other entity that the Company has
designated in writing as a member of the
Affiliated Group for purposes of the Plan. An
entity shall be considered a member of the
Affiliated Group only with respect to periods
for which such designation is in effect or
during which the relationship described in
Paragraphs (A) and (B) above exists.
2.7 "After-Tax Contributions" means any amounts
contributed to the Plan by the Participant
pursuant to Section 4.7.
2.8 "After-Tax Contribution Account" means the
Account described in Section 4.7.
2.9 "After-Tax Contribution Election" means the
election made by a Participant pursuant to
Article 4.8.
2.10 "Annuity Starting Date" means the first day of
the first period for which an amount is payable
as an annuity or, in the case of a benefit not
payable as an annuity, the first day on which
all events have occurred which entitle the
Participant to such benefit.
2.11 "Average Actual Deferral Percentage" means the
average (expressed as a percentage) of the
Actual Deferral Percentages of the Participants
in a group.
2.12 "Average Contribution Percentage" means the
average (expressed as a percentage) of the
Contribution Percentages of the Participants in
a group.
2.13 "Beneficiary" means the person, persons or
entity designated in writing by the Participant
(or by the Plan) pursuant to Article 8.
2.14 "Board of Directors" means the Board of
Directors of the Company, as constituted from
time to time.
2.15 "Code" means the Internal Revenue Code of 1986,
as amended from time to time.
2.16 "Company" means Foundation Health Corporation.
2.17 "Compensation" means the total compensation
received from the Employer for personal
services rendered by a Participant during the
Plan Year, including base salary, bonuses,
commissions, overtime, shift differentials and
amounts contributed to the Plan as Deferred
Salary Contributions and After-Tax
Contributions.
By way of illustration, but not by way of
limitation, amounts not included in the
definition of Compensation include relocation
bonuses, author incentives, auto allowances or
referral bonuses, income realized as a result
of participation in any stock option, stock
purchase or similar arrangement maintained by
the Employer and tuition or other
reimbursements.
The foregoing provision notwithstanding, for
purposes of determining a Participant's Actual
Deferral Percentage used in performing the
average deferral percentage nondiscrimination
test described in Section 4.4 (and Section
401(k)(3) of the Code) and his or her
Contribution Percentage used in performing the
average contribution percentage
nondiscrimination test described in Section 5.3
(and Section 401(m)(2) of the Code),
Compensation means the total compensation paid
to the Participant by the Employer, other than
compensation in the form of qualified or
previously qualified deferred compensation,
that is currently includable in the gross
income of the Participant for income tax
purposes.
Compensation for a Plan Year shall not exceed
$150,000 (or such other amount as may be
adopted by the Commissioner of Internal Revenue
under Section 401(a)(17) of the Code). For
purposes of the preceding sentence,
Compensation of an individual who is one of the
10 most highly compensated Highly Compensated
Employees or a five-percent owner shall be
deemed to include the Compensation of such
individual's spouse and any descendants under
age 19. If such aggregated Compensation
exceeds the Code Section 401(a)(17) limit, then
the Compensation taken into account under the
Plan for the individuals in each family
aggregation group shall be reduced to meet such
limit, and the reduced amount of Compensation
taken into account be allocated among such
individuals in proportion to Compensation
(without regard to family aggregation).
2.18 "Contribution Percentage" means the ratio
(expressed as a percentage) of the Employer
Matching Contributions and After-Tax
Contributions made under the Plan on behalf of
the Participant for the Plan Year to the
Participant's Compensation for the Plan Year.
2.19 "Deferral Election" means the portion of the
enrollment application on which a Participant
authorizes and elects the percentage of his
Compensation to be withheld by the Employer and
contributed on behalf of the Participant to his
Deferred Salary Account.
2.20 "Deferred Salary Account" means the Account
described in Section 4.1.
2.21 "Deferred Salary Contribution" means the amount
withheld from the Compensation of a Participant
and contributed by the Employer on behalf of a
Participant pursuant to Section 4.1.
2.22 "Disability Retirement Date" means a
Participant's Retirement Date, which shall be
the first of any month following a
Participant's termination of employment after
becoming Disabled.
2.23 "Disabled" mean a physical or mental condition
which totally and permanently prevents a
Participant from engaging in any substantial
gainful employment, provided the Participant is
eligible for, and is receiving, disability
benefits under the Social Security Act.
2.24 "Early Retirement Date" means a Participant's
Retirement Date, which shall be the first of
any month coincident with or following
termination of employment and attainment of his
55th birthday.
2.25 "Effective Date" means April 1, 1989.
2.26 "Employee" means any employee of an Affiliated
Group member except the following:
(A) Any employee who is included in a unit of
employees covered by an agreement that the
Secretary of Labor finds to be a
collective bargaining agreement between
employee representative and an Employer if
there is evidence that retirement benefits
were the subject of good faith bargaining
between the employee representative and
the Employer; and
(B) Any person who is an independent
contractor; and
(C) Any employee who is a nonresident alien
who receives no earned income (within the
meaning of Section 911(d)(2) of the Code)
from the Employer which constitutes income
from sources within the United States; and
(D) Any other group of individuals that the
Company has designated in writing as
ineligible for Employee status.
Notwithstanding the foregoing, the term
'Employee' shall also include Leased Employees;
provided, however, if such Leased Employees
constitute less than twenty (20) percent of the
Affiliated Group's Nonhighly Compensated
Workforce, then the term 'Employee' shall not
include such Leased Employees as are covered by
a safe harbor plan under Code Section
414(n)(5).
2.27 "Employer" means the Company and each other
member of the Affiliated Group which has been
designated as an Employer by the Company and
which has elected to contribute to the Plan.
In addition, a particular division or separate
operating unit of a member of the Affiliated
Group may be designated as a separate Employer
from the Affiliated Group member of which it is
a part, including the ability to make separate
elections as to the amount of Employer
Contributions. A member of the Affiliated
Group and/or a division or separate operating
unit of an existing Employer may be designated
as a separate Employer as of the first day of
any calendar month only if the designation is
made before such date.
2.28 "Employer Account" means the account into which
Employer Contributions made on behalf of a
Participant pursuant to Article 5, and earnings
on those contributions, shall be credited.
2.29 "Employer Contributions" means "Employer
Discretionary Contributions" and/or "Employer
Matching Contributions" contributed on behalf
of a Participant as described in Article 5.
2.30 "Employment Commencement Date" means the date
on which an Employee first performs an Hour of
Service for an Affiliated Group member.
2.31 "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to
time.
2.32 "Family Member" means the spouse, lineal
ascendants and descendants of the Employee and
the spouse of such lineal ascendants and
descendants.
2.33 "FHC Stock" means the common stock, $0.01 par
value, of the Company.
2.34 "FHC Stock Fund" means a part of the Trust
Fund, as described in Section 7.2. The FHC
Stock Fund shall be invested and reinvested
exclusively in FHC Stock, except that, pending
investment in FHC Stock, amounts designated for
investment in the FHC Stock Fund may be
invested temporarily in interest-bearing short-
term investment instruments selected by the
Trustee.
2.35 "Highly Compensated Employee" for any Plan Year
means:
(A) Any active Employee who was a five percent
(5%) owner at any time during the look-
back year or the determination year;
(B) Any active Employee who, during the look-
back year:
(1) Received Total Compensation Plus
Deferrals of more than $75,000 (or
such larger amount as may be adopted
by the Commissioner of Internal
Revenue to reflect a cost-of-living
adjustment);
(2) Received Total Compensation Plus
Deferrals of more than $50,000 (or
such larger amount as may be adopted
by the Commissioner of Internal
Revenue to reflect a cost-of-living
adjustment) and was a member of the
Top-Paid Group; or
(3) Was an officer of a member of the
Affiliated Group and received Total
Compensation Plus Deferrals of more
than fifty percent (50%) of the
dollar limitation in effect under
Section 415(b)(1)(A) of the Code; and
(C) Any active Employee who, during the
determination year:
(1) Met one of the three requirements set
forth in Paragraph (B) above; and
(2) Was one of the 100 Employees who
received the highest Total
Compensation Plus Deferrals from the
Affiliated Group.
If no officer has satisfied the Total
Compensation Plus Deferrals requirement of
Subparagraph (B)(3) above during a
determination year or a look-back year (as the
case may be), then the highest paid officer for
such year shall be treated as a Highly
Compensated Employee.
If an Employee is, during a determination year
or a look-back year, a Family Member of a five
percent (5%) owner who is an active or former
Employee or of a Highly Compensated Employee
who is one of the 10 most Highly Compensated
Employees ranked on the basis of Total
Compensation Plus Deferrals paid during such
year, then the Family Member and the five
percent (5%) owner or top-10 Highly
Compensation Employee shall be aggregated. In
that event, the Family Member and the five
percent (5%) owner or top-10 Highly Compensated
Employee shall be treated as a single Employee
receiving the compensation and Plan
contributions of the Family Member and the five
percent (5%) owner or top-10 Highly Compensated
Employee.
For purposes of this Section 2.35, the
determination year shall be the Plan Year. The
look-back year shall be the 12-month period
immediately preceding the determination year.
The term 'Highly Compensated Employee' shall
also include a former Employee who separated
from service (or was deemed to have separated
from service) prior to the determination year,
performs no service for any member of the
Affiliated Group during the determination year,
and was a Highly Compensated Employee as an
active Employee for either the separation year
or any determination year ending on or after
the Employee's 55th birthday.
The determination of who is a Highly
Compensated Employee, including the
determinations of the number and identity of
Employees in the Top-Paid Group, the top 100
Employees, the number of Employees treated as
officers and the Total Compensation Plus
Deferrals that is considered, shall be made in
accordance with Section 414(q) of the Code and
the regulations thereunder.
2.36 "Hour of Service" means each hour for which an
Employee is directly or indirectly paid or
entitled to payment for the performance of
duties for an Affiliated Group member.
2.37 "Investment Funds" means, to the extent
applicable, one or more of the FHC Stock Fund
and the other investment funds offered under
the Plan.
2.38 "Leased Employee" means an individual (i) who
does not have a common-law employment
relationship with a member of the Affiliated
Group, (ii) who has provided services to a
member or members of the Affiliated Group of a
type performed by individuals who are common-
law employees of members of the Affiliated
Group, on a substantially full-time basis for a
period of at least one year and (iii) who
provides services to a member or members of the
Affiliated Group pursuant to an agreement
between a member or members of the Affiliated
Group and another individual.
2.39 "Leave of Absence" means an absence authorized
by the Employer under its standard personnel
practices as applied in an uniform and non-
discriminatory manner to all persons similarly
situated, provided the Employee resumes service
with the Employer within the period specified
in the authorization for the Leave of Absence.
For purposes of determining an Employee's
Severance From Service Date, a Leave of Absence
shall not exceed a period of twelve (12)
consecutive months. Service in the Armed
Forces of the United States of America shall
constitute an authorized leave of absence
provided (i) the Employee leaves the employ of
the Employer to enter the service of the Armed
Forces of the United States of America through
the operation of a compulsory military service
law or pursuant to leave granted by the
Employer, and (ii) the Employee returns to the
employ of the Employer within the period
provided by law for the protection of his re-
employment rights.
2.40 "Married Participant" means a Participant who
is lawfully married on the date benefits are
elected or become payable under the Plan.
2.41 "Matching Rate" is defined in Paragraph (A) of
Section 5.2.
2.42 "Nonhighly Compensated Employee" shall mean an
Employee who is neither a Highly Compensated
Employee nor a Family Member.
2.43 "Normal Retirement Age" means age 65.
2.44 "Normal Retirement Date" means the first day of
the month coincident with or next following a
Participant's attainment of Normal Retirement
Age.
2.45 "One-Year Period of Severance" means a twelve
(12) consecutive month period beginning on a
Severance From Service Date and ending on the
first anniversary of such date, provided the
Employee has not performed an Hour of Service
for an Affiliated Group member during such
period.
2.46 "Participant" means an Employee who becomes a
Participant pursuant to Article 3 and who
continues to be entitled to any benefits under
the Plan.
2.47 "Participation Commencement Date" means the
date on which an Employee first becomes a
Participant, which shall be the first day of
January, April, July or October.
2.48 "Period of Service" means a period of service
commencing on an Employee's Employment
Commencement Date or Reemployment Commencement
Date, whichever is applicable, and ending on
his Severance From Service Date. All Periods
of Service shall be aggregated.
If an Employee severs from service by reason of
a quit, discharge, or retirement and the
Employee then performs an Hour of Service
within twelve (12) months of the Severance From
Service Date, then such Period of Severance
shall be taken into account for purposes of
eligibility and vesting.
2.49 "Period of Severance" means the period of time
commencing on an Employee's Severance From
Service Date and ending on the date on which
the Employee again performs an Hour of Service
for an Affiliated Group member.
2.50 "Plan" means this Foundation Health Corporation
Profit Sharing and 401(k) Plan, as amended and
restated from time to time.
2.51 "Plan Year" means the calendar year.
2.52 "Postponed Retirement Date" means a
Participant's Retirement Date, which shall be
the first of any month coincident with or next
following his termination of employment after
his Normal Retirement Date.
2.53 "Prior Plan" means the CPI Profit Sharing Plan,
as in effect immediately prior to the Effective
Date.
2.54 "Qualified Joint and Survivor Annuity" (or
"QJSA") means an annuity payable for the life
of the Participant with a survivor annuity for
the life of the Surviving Spouse which is equal
to at least 50%, but no more than 100%, of the
annuity payable during the joint lives of the
Participant and Spouse that can be purchased
with the Participant's Account Balance.
2.55 "Qualified Matching Contribution" and
"Qualified Nonelective Contribution" means an
Employer Contribution described in Section
5.1(D) which is subject to the
nonforfeitability and distribution limitations
of Treasury Regulation Section 1.401(k)-1(c)
and (d).
2.56 "Reemployment Commencement Date" means the
first day following a Period of Severance on
which an Employee performs an Hour of Service
for an Employer.
2.57 "Retirement Date" means a Participant's date of
actual retirement which shall be his Normal
Retirement Date, Early Retirement Date,
Postponed Retirement Date or Disability
Retirement Date, whichever is applicable.
2.58 "Rollover Account" means the Account described
in Article 16.
2.59 "Rollover Contribution" means the contributions
received by the Plan from a Participant
pursuant to Article 16 and maintained in the
Rollover Account.
2.60 "Severance From Service Date" means the earlier
of:
(A) The date on which an Employee quits,
retires, is discharged, or dies; or
(B) (1) The first anniversary of the first
day of a period in which an Employee
remains absent from service (with or
without pay) with the Affiliated
Group member for any reason other
than quit, retirement, discharge or
death, such as vacation, holiday,
sickness, disability, Leave of
Absence or lay-off; or
(2) The second anniversary of the first
day of a period in which an Employee
remains absent from service (with or
without pay) with an Affiliated Group
member by reason of pregnancy, the
birth of the Employee's child, the
placement of a child with the
Employee in connection with the
adoption of such child by such
Employee, or the need to care for
such Employee's child during the
period immediately following such
child's birth or placement.
A Participant shall receive credit
under the Plan for an absence from
service under the foregoing paragraph
on account of pregnancy, the birth of
the Employee's child, child placement
or child care, effective on or after
January 1, 1985, provided, however,
that the Participant shall not be so
credited unless such Employee
furnishes the Administrator such
timely information as the
Administrator may require to
establish that the absence from
employment is for such reasons.
2.61 "Spouse" or "Surviving Spouse" means a
Participant's current spouse or surviving
spouse, provided, however, that a former spouse
will be treated as a Spouse or Surviving Spouse
to the extent provided under a qualified
domestic relations order as described in
Section 414(p) of the Code and procedures
adopted by the Company.
2.62 "Top-Paid Group" for any Plan Year means the
top 20% (in terms of Total Compensation Plus
Deferrals) of all Employees of the Affiliated
Group, excluding the following:
(A) Any Employee covered by a collective
bargaining agreement who is not eligible
to become a Participant;
(B) Any Employee who is a nonresident alien
with respect to the United States who
receives no income from a source within
the United States from a member of the
Affiliated Group;
(C) Any Employee who has not completed a six-
month Period of Service at the end of the
Plan Year;
(D) Any Employee who normally works less than
171/2 hours per week;
(E) Any Employee who normally works not more
than six months during a year; and
(F) Any Employee who has not attained the age
of 21 at the end of the Plan Year.
2.63 "Total Compensation" means "wages" as defined
in Section 3401(a) of the Code for purposes of
income tax withholding at the source, but
determined without regard to any rules that
limit the remuneration included in "wages"
based on the nature or location of the
employment or the services performed (such as
the exception for agricultural labor in Section
3401(a)(2) of the Code). Total Compensation
shall be subject to the $150,000 limit
described in Section 2.17.
2.64 "Total Compensation Plus Deferrals" means Total
Compensation as defined in the preceding
Section 2.63, but modified:
(A) To include all amounts deferred but not
refunded under a cafeteria plan, as such
term is defined in Section 125(c) of the
Code, or under a plan, including this
Plan, qualified under Section 401(k) of
the Code; and
(B) To include Total Compensation for each
Plan Year in excess of the $150,000 limit
described in Section 2.17 above.
2.65 "Trust Agreement" means the trust agreement
between the Company and the Trustee,
established for the purpose of funding benefits
under the Plan, or any successor trust
agreement or agreements.
2.66 "Trustee" means the trustee acting as such
pursuant to the Trust Agreement, or any
successor or successors.
2.67 "Trust Fund" means all such money or other
property which is held by the Trustee, pursuant
to the terms of the Agreement.
2.68 "Valuation Date" means the last business day of
each month.
2.69 "Year of Service" means a Period of Service
equal to three hundred sixty-five (365) days of
service included in a Period of Service.
ARTICLE 3
PARTICIPATION
3.1 Plan Entry Date
(A) An Employee other than a Leased Employee,
who was a Participant in the Prior Plan
immediately prior to the Effective Date
shall become a Participant in the Plan on
the Effective Date.
(B) An Employee other than a Leased Employee
not described in subsection (A) shall
become a Participant in the Plan on the
first Participation Commencement Date
following the date on which he performs an
Hour of Service for an Employer; provided,
however that if such Participation
Commencement Date shall occur within a
period during which the Employee is absent
from service for any reason other than a
quit, discharge or retirement, then such
Employee shall become a Participant
retroactively as of such Participation
Commencement Date on the date he
subsequently performs an Hour of Service
for an Employer. The foregoing
notwithstanding, an Employer which has
become an Affiliated Group member as the
result of a merger, acquisition,
consolidation or similar transaction with
the Company, may designate the
Participation Commencement Date as of
which any of its Employees, other than
Leased Employees, shall first commence
participation in the Plan.
3.2 Rehired Employee
A Participant whose participation ceased
because of a separation from service and who
again becomes an Employee shall become eligible
to participate on his Reemployment Commencement
Date. Deferred Salary Contributions and/or
After-Tax Contributions shall be made on behalf
of such Participant as soon as administratively
practicable after the Participant records the
appropriate elections with the Administrator.
3.3 Loss of Participant Status
An Employee who becomes a Participant shall
continue to be a Participant in the Plan until
his entire plan benefit has been distributed,
whether or not he continues to make Deferred
Salary Contributions or After-Tax
Contributions.
3.4 Suspension of Participation
A Participant who ceases to be an Employee but
remains an employee of an Employer shall be a
"suspended participant" and shall have his
participation suspended. A suspended
participant shall not be entitled to make
After-Tax Contributions to the Plan, to have
Deferred Salary Contributions made on his
behalf to the Plan, or to receive an allocation
of Employer Contributions. During the period
of suspension, the suspended participant's
service shall continue to be considered for
Plan vesting purposes and investment earnings
shall continue to accrue with respect to the
suspended participant's Account.
The suspension shall be removed and a suspended
participant shall again become eligible to
participate and elect to make Deferred Salary
Contributions and/or After-Tax Contributions
when he again becomes an Employee by completing
a new Deferral Election and After-Tax
Contribution Election.
ARTICLE 4
DEFERRED SALARY CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS
4.1 Deferred Salary Contributions
(A) Subject to the limitations established by
this Article and Article 5, each
Participant who is not a Highly
Compensated Employee may elect to have his
Employer contribute from two percent (2%)
to ten percent (10%) of the Participant's
Compensation directly into the Plan
instead of paying such amount to the
Participant. Contributions made in this
manner shall be called Deferred Salary
Contributions. Subject to the
limitations established by this Article
and Article 5, each Participant who is a
Highly Compensated Employee may elect to
have his or her Employer contribute from
two percent (2%) to six percent (6%) of
such Participant's Compensation directly
into the Plan instead of paying such
amount to the Participant. A
Participant's Deferred Salary
Contributions shall be credited to his
Deferred Salary Account.
(B) All Deferred Salary Contributions shall be
forwarded by the Employer to the Trustee
as soon as administratively practicable
after the contributions have been
withheld. In no event shall Deferred
Salary Contributions be forwarded to the
Trustee later than ninety (90) days from
the date on which such amounts were
withheld and would have otherwise been
payable to the Participant as
Compensation.
(C) Notwithstanding the foregoing, no
Participant's Deferred Salary
Contributions during any Plan Year (not
including any Deferred Salary
Contributions distributed to any
Participant for the Plan Year ending with
such calendar year pursuant to Section
12.1), together with any other elective
deferrals (within the meaning of Section
402(g)(3) of the Code) under all plans,
contracts or arrangements of the
Affiliated Group, shall exceed $9,240 (or
such larger amount as may be provided on
account of cost-of-living adjustments
pursuant to Sections 402(g)(5) and 415(d)
of the Code. The limitation set by this
paragraph (C) applies on an individual
basis to all elective deferrals made by
each Participant during a year under this
or any other qualified plan.
(D) It shall be the responsibility of each
Participant to coordinate his or her
salary deferrals as needed to meet this
limit in connection with any other plan or
plans. The Company will not take account
of deferrals made to any other plan and,
except as required by law, no deferrals
made under this Plan will be returned
because the Participant's deferrals under
another plan caused his total deferrals
for a year to exceed the limit set forth
in subsection (C), above.
4.2 Deferral Election
Each Participant may deliver to the
Administrator a Deferral Election in accordance
with procedures prescribed by the
Administrator, directing his Employer to reduce
his Compensation within the limits set forth in
Section 4.1. Such election shall become
effective as of the date agreed upon between
the Administrator and the Participant, provided
that such date shall be subsequent to receipt
of the Deferral Election by the Administrator.
4.3 Suspension of, or Change in, Deferral Election
(A) Suspension. A Participant may elect to
suspend all Deferred Salary Contributions
at any time by giving notice to the
Administrator in a manner prescribed for
that purpose by the Administrator. Any
such election shall be effective as soon
as administratively practicable following
the date such notice is received by the
Administrator.
By giving the Administrator such advance
notice as may be prescribed by the
Administrator, a Participant who has
suspended all Deferred Salary
Contributions may resume such
contributions as of the first day of the
calendar quarter next following receipt of
such notice by the Administrator.
(B) Change of Deferral Percentage. A
Participant may elect to change the amount
of his Deferred Salary Contribution on any
January 1, April 1, July 1 or October 1,
provided the Participant gives such prior
notice to the Administrator as may be
required by the Administrator in
accordance with procedures established by
the Administrator. The new deferral
amount shall become effective as of the
January 1, April 1, July 1 or October 1
following the expiration of the notice
period with respect to contributions made
subsequent to that January 1, April 1,
July 1 or October 1.
4.4 Deferral Percentage Limitation
Subject to the special rules of Section 4.5 and
at such intervals as it shall deem proper, the
Administrator shall review each Participant's
Deferral Election in order to determine that
the Deferred Salary Contributions with respect
to all Participants satisfy one of the
following tests:
(A) The Average Actual Deferral Percentage for
Participants who are Highly Compensated
Employees for the Plan Year shall not
exceed the Average Actual Deferral
Percentage for Participants who are
Nonhighly Compensated Employees for the
Plan Year multiplied by 1.25; or
(B) The Average Actual Deferral Percentage for
Participants who are Highly Compensated
Employees for the Plan Year shall not
exceed the Average Actual Deferral
Percentage for Participants who are
Nonhighly Compensated Employees for the
Plan Year multiplied by 2, provided that
the Average Actual Deferral Percentage for
Participants who are Highly Compensated
Employees does not exceed the Average
Actual Deferral Percentage for
Participants who are Nonhighly Compensated
Employees by more than 2 percentage
points. Notwithstanding the foregoing,
the limit set forth in this subsection (B)
shall be adjusted in accordance with
Treasury Regulation Section 1.401(m)-2 to
avoid duplicate use of the limit for any
Highly Compensated Employee.
4.5 Special Rules on Deferral Percentage Limitation
(A) For purposes of this Article, the Actual
Deferral Percentage for any Participant
who is a Highly Compensated Employee for
the Plan Year and who is eligible to have
Deferred Salary Contributions allocated to
his account under two or more plans or
arrangements described in Section 401(k)
of the Code that are maintained by the
Employer or an affiliated Employer shall
be determined as if all such Deferred
Salary Contributions were made under a
single arrangement.
(B) For purposes of determining the Actual
Deferral Percentage of an Employee who is
a Highly Compensated Employee to the
extent provided in Code Section
414(q)(6)(A), the Deferred Salary
Contributions and Compensation of such
Employee shall include the Deferred Salary
Contributions and Compensation of Family
Members; and such Family Members shall be
disregarded in determining the Average
Actual Deferral Percentage for
Participants who are Nonhighly Compensated
Employees.
(C) The determination and treatment of the
Deferred Salary Contributions and Actual
Deferral Percentage of any Participant
shall satisfy such other requirements as
may be prescribed by the Secretary of the
Treasury.
(D) In the event that this Plan is aggregated
with one or more other plans in order to
satisfy the requirements of Code Sections
401(a), 401(k) or 410(b), then all such
aggregated plans, including the Plan,
shall be treated as a single plan for all
purposes under all such Code Sections
(except for purposes of the average
benefit percentage provisions in Code
Section 410(b)(2)(A)(ii).
4.6 Adjustment of Deferrals
In the event the Administrator determines that
one of the tests set forth in Section 4.4 is
not satisfied at the time of its review
hereunder, it may require that one or more
Participants adjust their Deferral Election for
the next and subsequent payroll periods, in
order that the test set forth in Section 4.4(A)
or (B) is thereafter satisfied. In addition,
Article 12 shall apply if, at the end of the
Plan Year, a test in Section 4.4(A) or (B)
above is not satisfied.
4.7 After-Tax Contributions
(A) Subject to the limitations set forth in
Sections 5.3 and 5.5, each Participant who
is not a Highly Compensated Employee may
contribute from two percent (2%) to ten
percent (10%) of the Participant's
Compensation to the Plan as After-Tax
Contributions. A Participant's After-Tax
Contributions shall be credited to his
After-Tax Contributions Account. Subject
to the limitations set forth in Sections
5.3 and 5.5, each Participant who is a
Highly Compensated Employee may contribute
from two percent (2%) to six percent (6%)
of such Participant's Compensation to the
Plan as After-Tax Contributions.
(B) All After-Tax Contributions shall be
forwarded by the Employer to the Trustee
as soon as administratively practicable
but in no even later than ninety (90) days
from the date on which such amounts were
withheld and would have otherwise been
payable to the Participant as
Compensation.
4.8 After-Tax Contribution Election
Each Participant may make an After-Tax
Contribution Election in accordance with
procedures prescribed by the Administrator
directing his Employer to withhold After-Tax
Contributions from the Participant's
Compensation within the limits set forth in
Section 4.7(A). Such election shall become
effective as of a date agreed upon between the
Administrator and the Participant, provided
that such date shall be subsequent to the
receipt of the election by the Administrator.
4.9 Suspension of, or Change in, After-Tax
Contributions
(A) A Participant may elect to suspend After-
Tax Contributions at any time by giving
notice to the Administrator in accordance
with the procedures established for that
purpose by the Administrator. Any such
election shall be effective as soon as
administratively practicable following the
date such notice is received by the
Administrator. By giving the
Administrator such advance notice as the
Administrator may require, a Participant
who has suspended all After-Tax
Contributions may resume After-Tax
Contributions as of the first day of the
calendar quarter next following receipt of
such notice by the Administrator.
(B) A Participant may elect to change the
amount of his After-Tax Contributions on
any January 1, April 1, July 1, or
October 1, provided the Participant gives
such advance notice as the Administrator
may require in accordance with procedures
established by the Administrator. The new
contribution amount shall become effective
as of the January 1, April 1, July 1, or
October 1 following the expiration of the
notice period with respect to
contributions made subsequent to that
January 1, April 1, July 1, or October 1.
ARTICLE 5
EMPLOYER CONTRIBUTIONS
5.1 Employer Discretionary Contributions
(A) Employer Discretionary Contributions, if
any, for each Plan Year shall be made in
such amounts (or under such formula) as
each Employer shall determine annually in
its discretion; provided, however, that
such Employer Discretionary Contributions
shall not be made for any Plan Year in
amounts which cannot be allocated to any
Participant's Account by reason of the
limitation described in Sections 5.5 and
5.6.
(B) All Employer Discretionary Contributions
shall be invested in accordance with the
provisions of Article 6 and shall be made
in cash or FHC Stock or a combination of
cash and FHC Stock.
(C) Subject to the limitations otherwise
contained in this Article, Employer
Discretionary Contributions made pursuant
to this Section shall be allocated to the
Employer Account of each Participant who
is an Employee of the Employer on the last
business day of the Plan Year. A
Participant who has a Severance From
Service Date during the Plan Year because
of death or retirement on a Retirement
Date shall be deemed to be an Employee on
the last business day of the Plan Year.
If Employer Discretionary Contributions
are made in FHC Stock, FHC Stock shall be
valued at the last-transaction price on
the New York Stock Exchange (or such other
national securities exchange on which the
Company's stock is primarily trading) and
reported by The Wall Street Journal with
respect to the date as of which Employer
Discretionary Contributions are allocated
to Employer Accounts under this Section.
If the Valuation Date falls on other than
a trading day, FHC Stock shall be valued
as of the most recent trading day
preceding the Valuation Date.
(D) Employer Discretionary Contributions made
pursuant to this Section shall be
allocated in the manner designated by the
Employer at the time such contribution is
made; provided, however, that such manner
of allocation does not discriminate in
favor of Participants who are Highly
Compensated Employees. It is the
intention of the Company and the other
Employers that Employer Discretionary
Contributions be allocated either (i) to
all Participants of the Employer in the
proportion that the Compensation of each
such Participant for the Plan Year bears
to the total Compensation of all of such
Participants for such Plan Year, or
(ii) as Qualified Nonelective
Contributions or Qualified Matching
Contributions to be allocated only to
certain Nonhighly Compensated Employees as
designated by the Employer for the purpose
of ensuring that the Plan satisfies the
deferral percentage and contribution
percentage limitations described in
Sections 4.4 and 5.3. If no allocation
method is specified at the time of
contribution, Qualified Nonelective
Contributions and Qualified Matching
Contributions will be allocated to
Nonhighly Compensated Employees based upon
Compensation in accordance with Section
5.1(D)(i) above.
5.2 Employer Matching Contributions
(A) For each calendar month, each Employer may
make an Employer Matching Contribution to
the Plan. The amount of an Employer's
Matching Contribution for a calendar month
shall be equal to:
(1) The Employer's Matching Rate
multiplied by the aggregate of the
Deferred Salary Contributions and/or
After-Tax Contributions (as limited
by Section 5.3) made for such month
by all Participants employed by the
Employer during such month; less
(2) Any forfeiture from Employer Accounts
attributable to former Employees of
the Employer.
Monthly Deferred Salary Contributions
and/or After-Tax Contributions on behalf
of each Participant in excess of 6% of his
or her Compensation for such month shall
be disregarded.
For purposes of this Paragraph (A) of this
Section 5.2, the 'Matching Rate' means a
percentage from 0% to 100%, as determined
by each Employer for a Plan Year or for
the balance of a Plan Year. An Employer's
Matching Rate shall remain in effect until
changed by the Employer to another
permissible rate.
5.3 Percentage Limitation on Employer Matching
Contributions and After-Tax Contributions
At such intervals as it shall deem proper, the
Administrator shall review the Employer
Matching Contributions made for Participants in
order to determine that such Employer Matching
Contributions and After-Tax Contributions, with
respect to all Participants, satisfy one of the
following tests:
(A) The Average Contribution Percentage for
Participants who are Highly Compensated
Employees for the Plan Year shall not
exceed the Average Contribution Percentage
for Participants who are Nonhighly
Compensated Employees for the Plan Year
multiplied by 1.25; or
(B) The Average Contribution Percentage for
Participants who are Highly Compensated
Employees for the Plan Year shall not
exceed the Average Contribution Percentage
for Participants who are Nonhighly
Compensated Employees for the Plan Year
multiplied by 2, provided that the Average
Contribution Percentage for Participants
who are Highly Compensated Employees does
not exceed the Average Contribution
Percentage for Participants who are
Nonhighly Compensated Employees by more
than 2 percentage points. Notwithstanding
the foregoing, the limit set forth in this
subsection (B) shall be adjusted in
accordance with Treasury Regulation
Section 1.401(m)-2 to avoid duplicate use
of the limit for any Highly Compensated
Employee.
5.4 Special Rules for Contribution Percentage Limit
Testing
(A) For purposes of this Article, the
Contribution Percentage for any
Participant who is a Highly Compensated
Employee for the Plan Year and who is
eligible to make After-Tax Contributions
or to receive Employer Matching
Contributions allocated to his Account
under two or more plans described in
Section 401(a) of the Code that are
maintained by the Employer shall be
determined as if all such After-Tax
Contributions and Employer Matching
Contributions were made under a single
plan.
(B) In the event that this Plan satisfies the
requirements of Section 410(b) of the Code
only if aggregated with one or more other
plans, or if one or more other plans
satisfy the requirements of Section 410(b)
of the Code only if aggregated with this
Plan, then this Article shall be applied
by determining the Contribution
Percentages of Participants as if all such
plans were a single plan.
(C) For purposes of determining the
Contribution Percentage of a Participant
who is a Highly Compensated Employee,
After-Tax Contributions, Employer Matching
Contributions and Compensation of such
Participant shall include the After-Tax
Contributions, Employer Matching
Contribution and Compensation of Family
Members, and such Family Members shall be
disregarded in determining the
Contribution Percentage for Participants
who are Nonhighly Compensated Employees.
(D) The determination and treatment of the
Contribution Percentage of any Participant
shall satisfy such other requirements as
may be prescribed by the Secretary of the
Treasury.
5.5 Overall Limitation on Annual Additions
Any other provision of this Plan
notwithstanding, in no event shall the Annual
Additions allocated to a Participant for any
Limitation Year exceed the lesser of:
(A) Twenty-five percent (25%) of the
Participant's Total Compensation for the
Limitation Year; or
(B) Thirty thousand dollars ($30,000) (or, if
greater, 1/4 of the amount in effect under
Section 415(b)(1)(A) of the Code for such
Limitation Year.)
The compensation limitation referred to in
Paragraph (A) shall not apply to:
(1) Any contribution for medical benefits
(within the meaning of Section
(A)(f)(2) of the Code) after
separation from service which is
otherwise treated as an Annual
Addition, or
(2) Any amount otherwise treated as an
Annual Addition under Section
415(l)(1) of the Code.
If a Participant's Annual Additions would
exceed the foregoing limitation, then such
Annual Additions shall be reduced in the order
in which they are listed in Section 5.7(a). If
a Participant's Annual Additions would exceed
the foregoing limitation as a result of a
reasonable error in estimating a Participant's
Total Compensation or under other limited facts
and circumstances which the Commissioner of
Internal Revenue finds justifies this method of
allocation, the excess amount shall be withheld
or taken from a Participant's Account and held
in a suspense account to be used to reduce
future contributions for the Participant (or,
if the Participant ceases to be an Employee,
for remaining active Participants) in
succeeding Limitation Years, as necessary.
5.6 Special Rules
(A) Participation in Other Defined
Contribution Plan. The limitation of
Section 5.5 and 5.6 with respect to any
Participant who at any time has
participated in any other qualified
defined contribution plan (as defined in
Section 3(34) of ERISA and Section 414(i)
of the Code) maintained by the Company
shall apply as if the total contributions
allocated under all such defined
contribution plans in which the
Participant has participated were
allocated under one plan.
(B) Participation in This Plan and a Defined
Benefit Plan. If a Participant has at any
time been a participant in a qualified
defined benefit plan (as defined in
Section 3(35) of ERISA and Section 414(j)
of the Code) and that is not part of a
floor-offset arrangement (as defined in
Section 414(k) of the Code) maintained by
the Company, the sum of the Participant's
Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction for any year
shall not exceed one (1).
In the event said sum of the Defined
Benefit Plan Fraction and the Defined
Contribution Plan Fraction would otherwise
exceed 1.0 for any Plan Year, the
projected annual retirement income benefit
under the Company-sponsored defined
benefit plan shall be limited, to the
extent necessary, to reduce said Defined
Benefit Plan Fraction so that the sum of
the two fractions hereunder does not
exceed the foregoing 1.0 limitation.
For purposes of the foregoing paragraph
only:
(1) The "Defined Benefit Plan Fraction"
for any Limitation Year is a
fraction, the numerator of which is
the Participant's projected annual
retirement income benefit under all
defined benefit plans, maintained by
the Company determined as of the end
of the Limitation Year, and the
denominator of which is the lesser
of:
(a) The product of 1.25 multiplied
by the dollar limitation in
effect under Code Section
415(b)(1)(A) for the Limitation
Year; or
(b) The product of 1.4 multiplied by
one hundred percent (100%) of
the Participant's average Total
Compensation for the three (3)
consecutive calendar years
during which his Total
Compensation was the highest.
(2) The "Defined Contribution Plan
Fraction" for any Limitation Year is
a fraction, the numerator of which is
the sum of the Annual Additions to
the accounts of the Participant in
all defined contribution plans
maintained by the Company (as of the
end of the Limitation Year) for the
Limitation Year and all preceding
Limitation Years, and the denominator
of which is the sum of the lesser of
the following amounts, determined for
such Limitation Year and for each
prior Limitation Year of service with
the Company:
(a) The product of 1.25 multiplied
by $30,000 (as adjusted pursuant
to Section 415(d)(1)(B)); or
(b) The product of 1.4 multiplied by
twenty-five percent (25%) of the
Participant's Total Compensation
for such Limitation Year.
(C) Adjustment of Limitation for Years of
Service or Participation
(1) In the case of a Participant who has
completed less than ten years of
participation in any Company-
sponsored defined benefit plans, the
limitation set forth in Section
5.6(B)(1)(a) shall be adjusted by
multiplying such amount by a
fraction, the numerator of which is
the Participant's number of years (or
part thereof) of participation in
Company-sponsored defined benefit
plans and the denominator of which is
ten.
(2) If a Participant has completed less
than ten years of service with the
Company, the limitation set forth in
Section 5.6(B)(1)(b) shall be
adjusted by multiplying such amount
by a fraction, the numerator of which
is the Participant's number of years
of service (or part thereof) and the
denominator of which is ten.
5.7 Definitions
For purposes of Sections 5.5 and 5.6, the
following definitions shall apply:
(A) "Annual Addition" shall mean the amount
allocated to a Participant's Account
during the Limitation Year that
constitutes:
(1) Deferred Salary Contributions,
(2) After-Tax Contributions,
(3) Employer Contributions,
(4) voluntary contributions (if any)
(5) forfeitures, and
(6) amounts described in Section
415(l)(1) and 419A(d)(2) of the Code.
Rollover Contributions shall not be
included in Annual Additions.
(B) "Company" shall include any other employer
or employers (whether or not incorporated)
which together with the Employers adopting
the Plan are under common control as
members of the same controlled group of
corporations or affiliated service group
as determined under Sections 414(b), (c)
or (m) of the Code, as modified by Section
415(h), but only for the period during
which such relationship exits.
(C) "Limitation Year" shall mean the Plan
Year.
5.8 Reversion of Employer Contributions
Except as provided in the following
paragraphs (A), (B), and (C), the assets of the
Plan shall never inure to the benefit of any
Employer, and shall be held for the exclusive
purposes of providing benefits to Participants
and/or their Beneficiaries, and for defraying
the expenses of administering the Plan.
(A) In the case of an Employer Contribution
which is made by virtue of a mistake of
fact, such contribution shall be returned
to the Employer within one (1) year after
the payment of the contribution.
(B) Employer Contributions are conditioned
upon the deductibility of the contribution
under Section 404 of the Code, or any
successor provision thereto and to the
extent the deduction of such Employer
Contribution is disallowed such Employer
Contribution (to the extent disallowed),
shall be returned to the Employer within
one (1) year after such disallowance of
the deduction.
5.9 Timing of Employer Contributions
The Employer shall forward Employer
Discretionary Contributions and Employer
Matching Contributions to the Trustee for
investment in the Trust Fund at such times as
the Employer shall determine, but not later
than the time prescribed by law for filing the
Employer's Federal income tax return for the
Plan Year plus extensions.
ARTICLE 6
PARTICIPANTS' ACCOUNTS
6.1 Separate Accounts
The Administrator shall maintain or cause to be
maintained separate Accounts for each
Participant which shall consist of his Deferred
Salary Account, After-Tax Contributions
Account, Rollover Account and Employer Account.
To the extent necessary or appropriate, the
Administrator may also maintain, or cause to be
maintained, on behalf of each Participant, a
separate accounting as to Employer
Discretionary Contributions and Employer
Matching Contributions contributed to the
Employer Account, the earnings and losses
thereon and expenses attributable thereto.
6.2 Valuation of Funds
There shall be determined as of each Valuation
Date, but prior to crediting of contributions
made by each Employer and Employee since the
preceding Valuation Date, the fair market value
of all assets of each of the Investment Funds
maintained pursuant to Article 7. The fair
market value of FHC Stock shall be the last
transaction price on the New York Stock
Exchange and reported by The Wall Street
Journal with respect to the Valuation Date. If
the Valuation Date falls on other than a
trading day, FHC Stock shall be valued as of
the most recent trading day preceding the
Valuation Date. Such valuation shall be
determined in accordance with the principles of
Section 3(26) of ERISA and shall give effect to
brokerage fees, transfer taxes, contributions,
earnings, gains and losses, forfeitures,
expenses, disbursements, and all other
transactions during the valuation period since
the preceding Valuation Date.
In making such determinations and in crediting
net appreciation or depreciation to the
Participant's Accounts, the Administrator may
employ such accounting methods as the
Administrator may deem appropriate in order to
fairly reflect the fair market values of the
Investment Funds and each Participant's
Account. For this purpose the Administrator
may rely upon information provided by the
Trustee, the investment manager, or other
persons believed by the Administrator to be
competent.
6.3 Investment of Contributions
A Participant shall make an investment election
which shall cover his Deferred Salary
Contributions, After-Tax Contributions,
Rollover Contributions and Employer
Contributions. The investment election shall
be made in such minimum percentages as may be
established by the Company from time to time to
be invested in one or more of the Investment
Funds available under the Plan. Any investment
election made by a Participant shall be a
continuing direction until changed in
accordance with procedures established by the
Company.
Each Participant is solely responsible for the
selection of his investment options. The
Trustee, the Administrator, the Employer and
the officers, supervisors and other employees
of the Employer are not empowered to advise a
Participant as to the manner in which his
Account shall be invested. The fact that an
Investment Fund is available to a Participant
for investment under the Plan shall not be
construed as a recommendation for investment in
that Investment Fund. In the event no election
is made by a Participant, amounts subject to
his election will be invested by the
Administrator in a money market fund or such
other offered fund which shall provide the most
safety for purposes of the protection of
principal.
6.4 Change of Investment Election
A Participant may change his investment
directions as to his Account Balances among and
between the Investment Funds offered under the
Plan in accordance with procedures established
by the Company from time to time.
6.5 Restrictions on Investment Elections of Certain
Participants
Any investment elections relating to FHC Stock
that are made by Participants who are officers,
directors or ten percent shareholders of the
Company for purposes of Section 16(b) of the
Securities Exchange Act of 1934 shall be
subject to such restrictions as the Company may
establish to enable such Participants and the
Plan to comply with, or qualify for an
exemption from, the restrictions of
Section 16(b) of the Securities Exchange Act of
1934.
6.6 Statements
At least once annually the Administrator shall
cause to be furnished to each Participant a
statement showing the status of his Accounts as
of the most recent Valuation Date and
containing such other information as the
Administrator shall determine.
ARTICLE 7
INVESTMENT OF FUNDS
7.1 Trust Agreement
(A) The Company shall enter into a Trust
Agreement which shall be a part of the
Plan. All contributions made pursuant to
the provisions of the Plan shall be paid
into the Investment Funds maintained
pursuant to the Plan and the Trust
Agreement. All such payments and
increments thereon shall be held and
disbursed in accordance with the
provisions of the Plan and Trust
Agreement, as each shall be applicable
under the circumstances. No person shall
have any interest in, or right to, any
part of the funds so held in the Trust
Fund, except as expressly provided in the
Plan or Trust Agreement.
(B) The Trustee shall have the exclusive
authority and discretion to invest, manage
and control the assets of the Plan, except
to the extent that Participants have been
given authority to direct the investment
of their Accounts pursuant to Article 6
and Sections 15.11 and 15.12 and to the
extent the Company has allocated the
authority to manage Plan assets to one or
more investment managers (within the
meaning of Section 3(38) of ERISA). Any
investment manager appointed by the
Company shall have the exclusive authority
to manage, including the power to direct
the acquisition and disposition of, the
Plan assets assigned to it by the Company.
The Trustee may invest funds received in a
temporary investment fund, or any other
fund selected by the Trustee, until such
time as he is directed to invest such
funds by the investment manager(s), if
any.
(C) From time to time, the Company shall
estimate the Plan benefits and
administrative expenses to be paid out of
the Trust Fund during the period for which
the estimate is made and shall estimate
the contributions to be made to the Plan
during such period by Participants and by
participating Employers. The Company
shall inform the Trustee of the estimated
cash needs of the Plan for each period
with respect to which such estimates are
made. Such estimates shall be made on an
annual, quarterly, monthly or other basis,
as the Company shall determine.
7.2 Trust Fund
The Trust Fund shall be comprised of one or
more Investment Funds, as determined from time
to time by the Company, including (without
limitation), the FHC Stock Fund. Such
Investment Funds may be evidenced by
appropriate bookkeeping entries or by a
physical segregation of assets. At its
discretion, and in a nondiscriminatory manner,
the Company may change or eliminate one or more
of the Investment Funds offered under the Plan.
7.3 Independent Qualified Public Accountant
The Company shall engage an independent
qualified public accountant to conduct such
examinations and to render such opinions as may
be required by Section 103(a)(3) of ERISA. The
Company in its discretion may remove and
discharge the person so engaged, but in such
case it shall first appoint a successor
independent qualified public accountant to
perform such examinations and render such
opinions.
ARTICLE 8
BENEFIT ELECTION AND
BENEFICIARY DESIGNATION PROCEDURES
8.1 Elections as to Form of Distribution
(A) The Participant's election of an optional
form of distribution under Section 9.2
shall be made on the prescribed form and
filed with the Administrator. Such
election may be made only during an
election period consisting of the 90
consecutive days ending on the
Participant's Annuity Starting Date. A
Participant may revoke any election of an
optional form of distribution (without the
consent of the Administrator) at any time
prior to the end of such election period.
If the Participant, having revoked a prior
election, does not make another election
within such election period, then his or
her Account Balance shall be distributed
in the form specified in Section 9.1.
(B) Any election involving a waiver of the
Qualified Joint and Survivor Annuity form
of benefit shall not take effect unless
the Participant's Spouse consents in
writing to the election during such
election period. The Spouse's consent
shall (i) acknowledge the effect of the
Participant's election, (ii) designate a
form of benefits or a Beneficiary which
may not be changed without spousal consent
(or the consent of the Spouse must
expressly permit designations by the
Participant without further requirement of
consent by the Spouse), and (iii) shall be
witnessed by a notary public or, if
permitted by the Company, by a
representative of the Plan. Any consent
under this Section shall be valid only
with respect to the Spouse who signs the
consent. An election made by a
Participant and consented to by the Spouse
may be revoked by the Participant, in
writing, without the consent of the
Spouse, anytime prior to the Participant's
Annuity Starting Date. Any new election
must comply with the requirements of this
Section.
The Spouse's consent shall not be required
if the Participant (a) establishes to the
Company's satisfaction that the Spouse's
consent cannot be obtained because the
Spouse cannot be located or because of
other reasons deemed acceptable under
applicable regulations and (b) agrees in
writing that if the Company is compelled
by a court of competent jurisdiction or
other authority to pay all or any portion
of the Participant's Account Balance to or
on behalf of such Spouse, the Participant
will indemnify the Company by paying to
the Company, upon written demand, an
amount equal to such payment, together
with reasonable attorneys' fees and
expenses.
8.2 Information on Form of Distribution
(A) Notice of Distribution. The Administrator
shall provide each Participant eligible to
receive benefits under the Plan a general
notice of distribution no less than thirty
(30) and no more than ninety (90) days
before the Participant's Annuity Starting
Date. The notice must be in writing and
contain an explanation of the eligibility
requirements for, the material features
of, and sufficient additional information
to explain the relative values of, the
optional forms of benefit available under
the Plan. If the Participant is married
at the time he receives the general
notice, the notice shall also include a
description in non-technical language of
the Qualified Joint and Survivor Annuity,
the circumstances in which it will be
provided unless a contrary election is
made, the availability of an election not
to receive benefits in the form of the
Qualified Joint and Survivor Annuity, the
ability to revoke the election and the
financial effect of an election (or
revocation of an election) not to receive
benefits in the form of the Joint and
Survivor Annuity and the rights of the
Participant's Spouse with respect to the
Joint and Survivor Annuity.
(B) Election of Optional Benefit Form. Upon
receipt of the general notice of
distribution, a Participant may elect to
receive his benefits in an optional form.
The election shall be made only during an
election period consisting of the
90 consecutive days ending on the
Participant's Annuity Starting Date, or,
if the Participant makes a timely request
for additional information, at least sixty
(60) days following the date such specific
information is furnished to the
Participant. Benefit payments shall be
delayed if necessary to provide the full
election period. Any election made under
this paragraph may be revoked in writing
during the election period, and after the
election has been revoked, another
election may be made during the election
period.
8.3 Designation of Beneficiary for Death Benefit
(A) Each Participant may, at or after the time
he becomes a Participant, designate one or
more persons as a Beneficiary upon death.
If more than one Beneficiary is named, the
Participant may specify the sequence
and/or proportion in which payments shall
be made to each Beneficiary. The
designation shall be made on the form and
in a manner prescribed by the
Administrator and shall become effective
when filed with the Administrator. A
Participant may, from time to time, change
his Beneficiary by filing a new
designation form with the Administrator.
Any designation or change in designation
shall be effective only if the Participant
designates his current Spouse as the
Beneficiary, or, if the Participant
designates someone other than the Spouse,
such Spouse consents in writing to the
designation in a manner consistent with
the spousal consent rules described in
Section 8.1. Prior to the death of the
Participant, no designated Beneficiary
shall acquire any interest in any
Participant's Account Balance and no
designation shall be effective unless the
Administrator receives such designation
before the Participant's death.
(B) Should the Participant designate a person
other than (or in addition to) his Spouse
as Beneficiary and not obtain the Spouse's
consent to such designation, then any
benefits payable under the Plan upon the
Participant's death shall be paid to the
Surviving Spouse unless the Surviving
Spouse then consents to such other or
additional designation in a manner
consistent with Section 8.1.
(C) Should the Participant die without having
any effectively-designated surviving
Beneficiary and if there is no surviving
Spouse, then the Beneficiary shall be the
Participant's then living children, if
any, in equal shares. If the Participant
has neither Spouse nor children living at
the time payment is to be made, then the
estate of the Participant shall be the
Beneficiary.
(D) If there is doubt as to the right of any
Beneficiary to receive any amount, the
Trustee, on instructions of the
Administrator, may retain such amount
until the rights thereto are determined,
or it may pay such amount into any court
of appropriate jurisdiction, in either of
which events neither the Plan, Employer,
Administrator or Trustee shall be under
any other liability to any person in
respect of such amount.
(E) The death of any individual Beneficiary
prior to the death of the Participant
shall void the designation as to such
Beneficiary, but in the event of the death
of any Beneficiary, subsequent to the
death of the Participant, the right to
receive amounts included in the
designation shall (unless the Participant
shall otherwise have instructed the
Administrator in writing) pass under such
Beneficiary's will, or by the laws of
descent and distribution applicable to
such Beneficiary.
(F) The marriage of a Participant shall void the
designation of a Benefi- ciary, and any death
benefits shall be subject to distribution in
accordance with the provisions of Section 9.6.
If the Participant shall again become an
unmarried Participant, through divorce or
death of a Spouse, the Participant shall again
be entitled to make a Beneficiary designation
pursuant to this Section.
8.4 Information on Death Benefits
The Administrator shall provide to each Married
Participant a written expla- nation of the
Qualified Pre-Retirement Survivor Annuity described
in Section 9.6 comparable to the information on
distribution options described in Section 8.2.
Such explanation shall be provided within whichever
of the following periods ends last:
(A) The three-year period beginning with the first
day of the Plan Year in which the Participant
attains age 32;
(B) The three-year period beginning with the first
day of the first Plan Year for which the
individual is a Participant; or
(C) In the case of a Participant who ceases to be
an Employee before attaining age 35, the two-
year period beginning one year before the
Participant ceases to be an Employee and
ending one year after the Participant ceases
to be an Employee provided, however, that if
the individual again becomes an Employee, the
explanation shall be provided in accordance
with subsection (A) or (B), above.
ARTICLE 9
DISTRIBUTION OF BENEFITS
9.1 Time of Distribution: General Rule
Subject to Sections 9.2 and 9.3, a Participant's
vested Account Balance shall be distributed to him
or her on or about the date that he or she has
elected. Within the 60-day period commencing
90 days before the Annuity Starting Date, the
Company shall provide to each Participant the
written explanation of his or her distribution
options (including his or her right to defer
receipt of the distribution) described in
Article 8. The distribution election shall be made
in writing on the prescribed form, which shall be
signed by the Participant and filed with the
Company after he or she has received such
explanation. Where applicable, the distribution
election form shall include the written consent of
the Participant to the distribution of his or her
Plan Benefit before he or she attains age 65.
9.2 Earliest Time of Distribution
Except as required by Section 9.3, a Participant's
vested Account Balance shall not be distributed to
him or her prior to the later of:
(A) The date when the Participant ceases to
be an Employee;
or
(B) The date when the Company receives a
completed distribution election form (as
described in Section 9.1).
9.3 Latest Time of Distribution
If a Participant's Severance From Service Date
occurs prior to his Normal Retirement Date, he may
elect to receive his vested Account Balance at any
time following his Severance From Service Date but
no later than sixty days following his attainment
of the Normal Retirement Age under the Plan. If
an Employee continues to provides services for an
Employer beyond Normal Retirement Age, he may
elect to defer the receipt of his vested Account
Balance beyond his Normal Retirement Date, but in
no event shall such a Participant's vested Account
Balance be distributed to him or her after the
April 1 next following the close of the calendar
year in which the Participant attains age 701/2
(whether or not the Participant ceased to be an
Employee). If a Participant's vested Account
Balance is (or at the time of any prior
distribution was) greater than $3,500, but such
Participant (and the Spouse if the Participant is
a Married Participant) fails to consent to a
distribution, the Participant's Account Balance
shall be retained in the Plan until distributed
pursuant to this Article no later than sixty (60)
days following the Participant's attainment of his
Normal Retirement Age under the Plan. If the
Participant fails to file a timely distribution
election form, Article 15.5 (relating to unlocated
Plan Participants) may apply.
9.4 Normal Form of Benefit
Subject to Article 8 and Section 9.4, and unless a
Participant has elected an alternate method of
distribution pursuant to Section 9.2,
distributions of a Participant's vested Account
Balance shall be made in the form of an annuity to
be purchased from an insurance company in
accordance with specifications contained in the
Participant's retirement or distribution request.
In the case of a Married Participant the annuity
shall be in the form of a fifty percent (50%)
Qualified Joint and Survivor Annuity. The amount
used to purchase such annuity shall be the
Participant's vested Account Balance as of the
most recent practicable Valuation Date preceding
his Annuity Starting Date.
9.5 Optional Forms of Benefit
In lieu of the method of payment described in
Section 9.1, a Participant may (subject to the
election procedures described in Article 8) elect,
by written notice delivered to the Administrator
and signed by the Participant prior to the date on
which benefit payments would commence, to have his
vested Account Balance distributed in one of the
optional forms described in this Section.
(A) Lump Sum Option: The Participant's vested
Account Balance shall be determined as of the
most recent practicable Valuation Date
preceding the date the Participant's
distribution is to be made in the form of a
single lump sum in cash.
(B) Installment Option: The Participant's vested
Account Balance shall be distributed to the
Participant in cash payments in quarterly,
semiannual or annual installments of
substantially nonincreasing designated
amounts over a period of years certain.
If a Participant elects the installment
option, during the installment period, the
remaining Account Balance shall be credited
with a share of gains, losses, income and
expenses of the Trust Fund in accordance with
Articles 6 and 7, and the investment election
procedure described in Section 6.3 shall
remain available to Participants receiving
installment distributions.
9.6 Qualified Pre-Retirement Survivor Annuity
If a Participant dies prior to the commencement of
payment of benefits under the Plan, the Surviving
Spouse shall receive a survivor annuity for the
life of the Surviving Spouse that can be purchased
with the Participant's Account Balance unless the
Participant waives the Qualified Pre-Retirement
Survivor Annuity, with spousal consent. The
Surviving Spouse may elect to receive a single
lump sum payment equal to the Participant's
Account Balance in lieu of the survivor annuity.
A Participant may waive the Qualified Pre-
Retirement Survivor Annuity with spousal consent
on or after the first day of the Plan Year in
which the Participant attains age 35. A
Participant may waive the Qualified Pre-Retirement
Survivor Annuity prior to age 35, with spousal
consent, provided that the Participant has
received the information set forth in Section 8.4
prior to his waiver, and provided further that
such waiver shall become invalid upon the
beginning of the Plan Year in which the
Participant's 35th birthday occurs. If there is
no new waiver after such date, the Participant's
Surviving Spouse must receive the Qualified Pre-
Retirement Survivor Annuity upon the Participant's
death.
Any Qualified Pre-Retirement Survivor Annuity
payable hereunder shall be provided by purchasing
an annuity from a duly licensed insurance company.
Upon purchase of such annuity in accordance with
the terms of the Plan and transfer to the
Participant or his Surviving Spouse, the Plan and
the Trust Fund shall be discharged of all
liability for benefits payable under the Plan, and
the Participant and/or Surviving Spouse shall look
solely to the insurance company for the payment of
benefits.
Except as provided in Section 9.7, the
distribution of a Participant's vested Account
Balance to his or her Surviving Spouse pursuant to
this Section 9.6 may be made prior to the date
that the Participant attained or would have
attained his or her Normal Retirement Age only if
such Surviving Spouse consents to such
distribution in writing not more than 90 days
before the Annuity Starting Date.
9.7 Small Benefits: Immediate Lump Sum
If a Participant's vested Account Balance
(determined as of the Valuation Date coincident
with or next following the date of termination of
employment) is not greater than $3,500, and such
vested Account Balance was not greater than $3,500
at the time of any prior distribution, then it
will be paid to the Participant in a single lump
sum in cash as soon as administratively
practicable. In the event that a Participant who
receives a distribution pursuant to this
subsection, which is less than one hundred percent
(100%) of the value of his Account Balance again
becomes an Employee prior to incurring five (5)
consecutive One-Year Periods of Severance, as
described in Section 10.3, any forfeited amount
shall be restored, as provided in Section 10.3.
9.8 Investment of Account Balance of Terminated
Participant
In the event a Participant's employment with the
Employer is terminated and the Participant elects
to leave his Account Balance in the Plan, such
Account Balance shall continue to be invested
pursuant to the provisions of the Plan. In the
event any investment alternative ceases to be
offered as an investment alternative under the
Plan, the portion of the Participant's Account
Balance invested in such discontinued investment
fund shall be liquidated and reinvested in a money
market fund or such other offered fund which shall
provide the most safety for purposes of the
protection of principal.
9.9 Required Distributions
In the event that a Participant dies after
distribution of his or her Plan benefit has begun,
then his or her remaining benefit shall be
distributed at least as rapidly as under the
distribution method in use at his or her death.
In the event that a Participant dies before any
distribution of his or her Plan benefit has begun,
then distribution of any death benefit under the
Plan must be made (A) to a Beneficiary who is not
the Participant's Surviving Spouse, over the
Beneficiary's life or life expectancy, beginning
not later than one year after the Participant's
death; (B) to the Participant's Surviving Spouse,
over the Surviving Spouse's life or life
expectancy, beginning not later than the later of
one year after the Participant's death or the
date that the Participant attained or would have
attained age 701/2; or (C) in all other cases,
within five years after the Participant's death.
All distributions under the Plan shall be made in
accordance with the Income Tax Regulations under
Section 401(a)(9) of the Code, including Income
Tax Regulations Section 1.401(a)(9)-2 or its
successor. Such regulations are incorporated in
the Plan by reference and shall override any
inconsistent provisions of the Plan.
9.10 Direct Rollovers
(i) The Direct Rollover Option. Notwithstanding
any provision of the Plan to the contrary that
would otherwise limit a Distributee's election
under this Section 9.10, effective January 1,
1993, a Distributee may elect, at the time and in
the manner prescribed by the Administrator, to
have any portion of an Eligible Rollover
Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a
Direct Rollover.
(ii) Definition of Eligible Rollover Distribution.
An Eligible Rollover Distribution is any
distribution of all or any portion of the balance
to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include:
any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or
life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the
Distributee and the Distributee's designated
beneficiary, or for a specified period of 10 years
or more; any distribution to the extent such
distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution
that is not includable in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(iii) Definition of Eligible Retirement Plan.
An Eligible Retirement Plan is an individual
retirement account described in Section 408(a) of
the Code, an individual retirement annuity
described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section
401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is
an individual retirement account or individual
retirement annuity.
(iv) Definition of Distributee. A Distributee
includes an Employee or former Employee. In
addition, the Employee's or former Employee's
surviving spouse or former spouse who is the
Alternate Payee under a QDRO are Distributees with
regard to the interest of the spouse or former
spouse.
(v) Definition of Direct Rollover. A Direct
Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
ARTICLE 10
VESTING, RETIREMENT, AND
TERMINATION OF EMPLOYMENT
10.1 Vesting in Deferred Salary, After-Tax and Rollover
Contributions
A Participant shall at all times have a one
hundred percent (100%) vested and nonforfeitable
interest in the value of his Deferred Salary
Account, After-Tax Contributions Account and
Rollover Account, if any.
10.2 Vesting in Employer Account
(A) A Participant shall at all times have a one
hundred percent (100%) vested and
nonforfeitable interest in the value of his
Employer Contributions (and earnings thereon)
made prior to the Effective Date.
(B) A Participant shall have a one hundred
percent (100%) vested and nonforfeitable
interest in the value of all funds credited
to his Employer Account at his Normal
Retirement Age or if the Participant's
employment is terminated due to death,
becoming Disabled or retirement on a Normal,
Early or Postponed Retirement Date.
(C) A Participant whose employment is terminated
prior to his Retirement Date (and for any
reason other than death, becoming Disabled or
termination on an Early, Normal or Postponed
Retirement Date) shall have a vested and
nonforfeitable right to any Employer
Contributions (and earnings thereon) in his
Employer Account in accordance with the
following schedule:
Years of Service Percentage Vested
less than 1 0%
1 but less than 2 33-1/3%
2 but less than 3 66-2/3%
3 or more 100%
For all new Participants of the Plan whose
employment commences on or after January 1,
1995, a Participant shall have a vested and
nonforfeitable right to any Employer
Contributions (and earnings thereon) in his
Employer Account in accordance with the
following schedule:
Years of Service Percentage Vested
less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
10.3 Vesting After Prior Distributions
Section 10.2 shall be applied as set forth in this
Section 10.3 in the case of any Participant who
received one or more prior withdrawals or
distributions from his Employer Account, who
thereafter has not incurred five (5) consecutive
One-Year Periods of Severance and who is not yet
100% vested in the Employer Account. The vested
portion of such Participant's Employer Account
shall be determined in two steps. First, the
Participant's vested percentage under Section 10.2
shall be applied to the sum of (a) the value of
the Employer Account plus (b) the aggregate amount
of the Participant's prior withdrawals or
distributions from such Account. Then, the
aggregate amount of the Participant's prior
withdrawals or distributions from such Account
shall be subtracted.
10.4 Forfeitures
(A) If a Participant's employment is terminated,
any portion of his Account Balance in which
the Participant does not have a
nonforfeitable interest shall be
provisionally forfeited as of his Severance
From Service Date.
(B) If a Participant who has had a provisional
forfeiture shall again become an Employee
prior to incurring five (5) consecutive One-
Year Periods of Severance, the Employer shall
reinstate (as of the Participant's
Reemployment Commencement Date) the dollar
amount of his Account Balance forfeited,
unadjusted for any gains or losses which
occurred during said Periods of Severance.
If such Participant received a distribution
upon termination, reinstatement of the prior
forfeited amount will be provided
automatically without requiring repayment of
the amount of any prior distribution.
Thereafter, Section 10.3 may be applicable to
the determination of the vested portion of
the Participant's Employer Account.
(C) If the Participant is not rehired before
incurring five (5) consecutive One-Year
Periods of Severance, the amount of his
provisional forfeiture shall be forfeited
permanently.
(D) Any provisional forfeitures resulting from
the operation of this Section shall be held
until the last business day of the Plan Year
and shall be used first to reinstate prior
forfeitures pursuant to paragraph (B). Any
amounts remaining after such reinstatement
shall be used, as of the last business day of
the Plan Year, to reduce Employer
Contributions which are due or may become due
under the Plan. To the extent the available
forfeitures are insufficient to fully
reinstate Participants' previously nonvested
amounts, the Employer will make an additional
contribution to the Plan sufficient to fully
reinstate such amounts.
ARTICLE 11
WITHDRAWALS
11.1 Hardship Withdrawals
(A) The Administrator shall direct the Trustee to
make a distribution to a Participant in
accordance with this Section in the event of
a Participant's Hardship and request for
withdrawal. For purposes of this Section, a
distribution will be on account of Hardship
only if the distribution:
(1) Is made on account of an immediate and
heavy financial need of the Participant;
and
(2) Is necessary to satisfy such immediate
and heavy financial need and does not
exceed the amount required to relieve
such need and is not reasonably
available from other resources of the
Participant.
(B) Immediate and heavy financial needs
recognized by the Plan shall include and be
limited to:
(1) Medical expenses (as described in
Section 213(d) of the Code) incurred by
the Participant, the Participant's
Spouse or any dependent of the
Participant (as defined in Section 152
of the Code);
(2) Purchase (excluding mortgage payments)
of a principal residence for the
Participant;
(3) Payment of tuition and related
educational fees for the next 12 months
of post-secondary education for the
Participant or the Participant's Spouse,
children or dependents;
(4) The need to prevent eviction of the
Participant from his principal residence
or foreclosure on the mortgage of the
Participant's principal residence; or
(5) Such other immediate and heavy financial
needs as determined by the Commissioner
of the Internal Revenue Service and
announced by publication of revenue
rulings, notices and other documents of
general applicability.
(C) A distribution will be deemed necessary to
satisfy the immediate and heavy financial
need of the Participant if:
(1) The distribution is not in excess of the
amount of the immediate and heavy
financial need;
(2) The Participant has obtained all
distributions, other than hardship
distributions, and all nontaxable loans
currently available under all plans
maintained by the Employer;
(3) The Plan, and all other plans maintained
by the Employer, other than health care
plans, provide that the Participant's
elective contributions and employee
contributions, if any, will be suspended
for at least 12 months after receipt of
the hardship distribution; and
(4) The Plan, and all other plans maintained
by the Employer, provide that the
Participant may not make elective
contributions for the Participant's
taxable year immediately following the
taxable year of the hardship
distribution in excess of the applicable
limit under Section 402(g) of the Code
for such next taxable year less the
amount of such Participant's elective
contributions for the taxable year of
the Hardship distribution.
(D) The Administrator may require the submission
of such evidence as it may reasonably deem
necessary to confirm the existence of such a
Hardship. In the case of a married
Participant, a requested Hardship withdrawal
shall not be paid unless the Participant's
Spouse has consented in writing to the
payment of such withdrawal in the form of a
lump sum (instead of a Qualified Joint and
Survivor Annuity). The Spouse's consent
shall be given within the 90-day period
preceding payment of the withdrawal. A
request for distribution pursuant to this
Section shall be approved or denied by
written instrument given by the Administrator
to the Participant at his address as provided
to the Administrator, within sixty (60) days
after the date the written request, complete
with all evidence with respect thereto
requested by the Administrator, is given to
the Administrator by the Participant. In the
event that such request is approved, the
distribution shall be made within thirty (30)
days after notice of approval is given by the
Administrator to the Participant from such
portions of the Participant's Account as he
shall designate; provided, however, that
under no circumstances may Employer
Contributions and earnings thereon, or
earnings on the Participant's Deferred Salary
Contributions, be distributed pursuant to
this Section.
11.2 Withdrawal of After-Tax Contributions
Upon written request to the Plan Administrator, a
Participant may withdraw all or any part of the
amount credited to his After-Tax Contributions
Account, provided, however, that the Participant
may make such withdrawal only once each Plan Year.
All such withdrawals shall be made within sixty
(60) days of the receipt of the Participant's
written request by the Administrator, or as soon
thereafter as practicable.
11.3 Loans to Participants
11.3.1 Amount of Loans. With the Company's
prior written consent, a Participant who
is an Employee (or who otherwise is a
'party in interest' as defined in
Section 3(14) of ERISA) may obtain a
cash loan from the Participant's
Accounts. The minimum amount of the
loan shall be $1,000. Subject to
Section 11.3.2, the maximum amount of
the loan shall be 50% of the value of
the vested portion of the Participant's
Accounts.
11.3.2 Aggregate Loan Limitation. No loan
shall be granted under the Plan if it
would cause the aggregate balance of all
loans which a Participant thereafter has
outstanding under this Plan or under any
other qualified plan maintained by any
member of the Affiliated Group to exceed
$50,000, less the amount by which such
aggregate balance has been reduced
through repayments during the period of
12 consecutive months ending on the day
before a new loan is made.
11.3.3 Terms of Loans. A loan to a Participant
shall be made on such terms and
conditions as the Company may determine,
provided that the loan shall:
(a) Be evidenced by a promissory note signed
by the Participant and secured by no
more than 50% of the value of the vested
portion of all of his or her Accounts
(regardless of the amount of the loan or
the source of the loan funds);
(b) Bear interest at a fixed rate equal to
the prime interest rate in effect at the
New York main office of Citibank, N.A.,
plus 1% on the last business day of the
month immediately preceding the date on
which the Company receives the
prescribed loan request form;
(c) Provide for declining balance
amortization over its term with payments
at quarterly or more frequent intervals,
as determined by the Company;
(d) Provide for loan payments of not less
than $10 per payment;
(e) Provide for loan payments (i) to be
withheld whenever possible through
periodic payroll deductions from the
Participant's compensation from the
Company or (ii) to be paid by check or
money order whenever payroll withholding
is not possible;
(f) Provide for repayment in full on or
before the earlier of (i) the date when
the Participant ceases to be an Employee
or (ii) the date five years after the
loan is made (or the date 15 years after
the loan is made if the loan is used to
acquire a dwelling which, within a
reasonable period of time, is to be used
as the principal residence of the
Participant); and
(g) Provide that a Participant's Accounts
shall not be applied to the satisfaction
of the Participant's loan obligations
before the Accounts become distributable
under Article 9, unless the Company
determines that the loan obligations are
in default and takes such actions as the
Company deems necessary or appropriate
to cause the Plan to realize on its
security for the loan. Such actions may
include (without limitation) an
involuntary withdrawal from the
Participant's vested Accounts, whether
or not the withdrawal would be permitted
under Section 11.5 on a voluntary basis;
provided that an involuntary withdrawal
from vested Company contributions paid
within the most recent 24 months or from
Deferred Salary Accounts shall be made
only to the extent that the requirements
of Section 11.5 are met. The Company
may take such action as it deems
necessary to recover the balance of a
loan secured by such Company
contributions or by Deferred Salary
Accounts. If an involuntary withdrawal
from Deferred Salary Accounts or
Employer Account occurs, the Participant
shall be subject to the consequences
described in Article 9. If any
involuntary withdrawal occurs, the
Participant shall not be permitted to
obtain a new loan under the Plan for a
period of 12 months, commencing as of
the last day of the payroll period in
which the involuntary withdrawal occurs.
The consent of the Participant's Spouse
shall not be required at the time of any
action taken by the Company under this
Section 11.3.3(g).
11.3.4 Company Consent. The Company, based on
the borrower's creditworthiness and the
criteria set forth in this Section 11.3,
may withhold its consent to any loan or
may consent only to the borrowing of a
part of the amount requested by the
Participant. The Company shall act upon
requests for loans in a uniform and
nondiscriminatory manner, consistent
with the requirements of Section 401(a),
Section 401(k) and related provisions of
the Code and Section 408(b)(1) of ERISA
and the regulations thereunder.
11.3.5 Restrictions on Loans. No Participant
shall have more than one loan under this
Section 11.3 outstanding at the same
time. A Participant shall not be
permitted to obtain more than one loan
under this Section 11.3 in any period of
12 consecutive months. A married
Participant shall not be permitted to
obtain any loan under this Section 11.3
unless his or her Spouse has consented
in writing to the assignment of his or
her Accounts as security and to any
actions that the Company subsequently
may take under Section 11.3.3(g), except
to the extent the portion of the
Participant's Accounts used as security
for the loan does not exceed $3,500.
11.3.6 Disbursement and Source of Loans. A
Participant may request a loan by filing
a request with the Company in accordance
with procedures established by the
Company. A loan shall be disbursed as
soon as reasonably practicable after the
date on which the Company receives the
loan request (subject to the Company's
consent). For purposes of this Section
11.3, the value and vested percentage of
a Participant's Accounts shall be
determined on the last business day of
the quarter immediately preceding the
date when the Trustee effects the loan
transaction or such other more current
valuation date that the Company may
determine. If a Participant requests
and is granted a loan, the amount of the
loan shall be transferred from the
Participant's Accounts. If more than
one Account is available to make a
transfer, the transfer shall be made
proportionately from each Account,
subject to such other ordering rules as
the Company may adopt. The promissory
note executed by the Participant shall
be held by the Trustee or its agent as
part of the Trust Fund.
11.3.7 Loan Payments and Defaults. Principal
and interest payments on a Participant's
loan shall be credited as soon as
reasonably practicable to the
Participant's Accounts proportionately,
subject to the ordering rules, if any,
adopted by the Company. Any loss caused
by nonpayment or other default on a
Participant's loan obligations shall be
borne solely by that Participant's
Accounts.
11.3.8 Loan Fees. A Participant who obtains a
loan under this Section 11.3 shall be
required to pay such fees as the Trustee
or its agent may impose in order to
defray the cost of administering loans
from the Plan.
ARTICLE 12
DISTRIBUTION OF EXCESS DEFERRALS, EXCESS CONTRIBUTIONS
AND EXCESS AGGREGATE CONTRIBUTIONS
12.1 Distribution of Excess Contributions
(A) Notwithstanding any other provision of the
Plan, Excess Contributions (as hereinafter
defined) and income allocable thereto,
including income for periods after the close
of the Plan Year to which the Excess
Contributions applies, if appropriate, shall
be distributed as soon as administratively
possible, but in no event later than the last
day of each Plan Year, to Participants on
whose behalf such Excess Contributions were
made for the preceding Plan Year.
(B) For purposes of this Section, 'Excess
Contributions' for any Plan Year means the
aggregate amount of Deferred Salary
Contributions of Highly Compensated Employees
for any Plan Year (not including any such
Deferred Salary Contributions that exceed the
$9,240 limit of Section 402(g)(3) of the Code
and are distributed to Participants for the
calendar year ending with such Plan Year
pursuant to Section 4.1(C)) that exceeds the
limitations described in Section 4.4.
(C) The amount of such Excess Contributions
distributable to Highly Compensated Employees
shall be determined by reducing the Actual
Deferral Percentage of the Highly Compensated
Employee with the highest Actual Deferral
Percentage to the extent required to
(1) Enable the cash or deferred arrangement
to satisfy the deferral percentage test
limitation described in Section 4.4; or
(2) Cause such Highly Compensated Employee's
Actual Deferral Percentage to equal the
Actual Deferral Percentage of the Highly
Compensated Employee with the next
highest Actual Deferral Percentage.
This process must be repeated until the cash
or deferred arrangement satisfies one of the
deferral percentage tests described in
Section 4.4.
Any Excess Contributions of any of the 10
most highly compensated Highly Compensated
Employees and any five percent (5%) owner
affected by the family aggregation rules
described in the definition of the term
'Highly Compensated Employee' in Section 2.35
above shall be allocated among the
individuals in each family aggregation group
in proportion to the Deferred Salary
Contributions taken into account under
Section 4.4 for each such individual.
Any Excess Aggregate Contributions of any of
the 10 most highly compensated Highly
Compensated Employees and any five percent
(5%) owner affected by the family aggregation
rules described in the definition of the term
'Highly Compensated Employee' in Section 2.35
above shall be allocated among the
individuals in each family aggregation group
in proportion to the After-Tax Contributions
and Employer Matching Contributions taken
into account under Section 5.3 for each such
individual.
(D) The income allocable to Excess Contributions
shall be determined by multiplying income
allocable to the Participant's Deferred
Salary Contributions and Employer
Contributions for the Plan Year by a
fraction, the numerator of which is the
Excess Contribution on behalf of the
Participant for the preceding Plan Year and
the denominator of which is the sum of the
Participant's account balances attributable
to Deferred Salary Contributions and Employer
Contributions on the last day of the
preceding Plan Year.
Income allocable to Excess Contributions for
the Plan Year and for the "gap period"
between the end of the Plan Year and the date
of distribution shall be determined pursuant
to Proposed Regulation Section 1.401(k)-
1(f)(4).
(E) The Excess Contributions which would
otherwise be distributed to the Participant
shall be adjusted for income in accordance
with regulations and other official
pronouncements from the Secretary of the
Treasury.
(F) Amounts distributed pursuant to this Section
shall first be treated as distributions from
the Participant's Deferred Salary Account and
shall be treated as distributed from the
Participant's Employer Contributions only to
the extent such Excess Contributions exceed
the balance in the Participant's Deferred
Salary Account.
12.2 Distribution of Excess Aggregate Contributions
(A) Excess Aggregate Contributions and income
allocable thereto shall be forfeited,
pursuant to this Section, if otherwise
forfeitable under the terms of this Plan, or
if not forfeitable, distributed no later than
the last day of each Plan Year to
Participants who made After-Tax Contributions
for the preceding Plan Year or who received
an Employer Matching Contribution for the
preceding Plan Year.
(B) For purposes of this Section, 'Excess
Aggregate Contributions' shall mean the
amount described in Section 401(m)(6)(B) of
the Code.
(C) The Employer shall rank its Highly
Compensated Employees by Contribution
Percentage in descending order. The Employer
shall then reduce the amount of Employer
Matching Contributions and After-Tax
Contributions taken into account in computing
the Contribution Percentage which were made
on the behalf of the Highly Compensated
Employee with the Highest Contribution
Percentage until the following occurs:
(1) The Plan satisfies the limitations set
forth in Section 5.3; or
(2) The Contribution Percentage for such
Highly Compensated Employee is reduced
to a percentage which equals the
Contribution Percentage of the Highly
Compensated Employee with the next
highest Contribution Percentage.
In applying the reduction mechanism set forth
in this Section, the After-Tax Contributions
made by a Highly Compensated Employee shall
be reduced before the Employer Matching
Contributions made on behalf of such Highly
Compensated Employee are reduced.
(D) The income allocable to Excess Aggregate
Contributions shall be determined by
multiplying the income allocable to the
Employer Matching Contributions and After-Tax
Contributions for the Plan Year by a
fraction, the numerator of which is the
Excess Aggregate Contributions made on behalf
of the Participant for the preceding Plan
Year and the denominator of which is the sum
of the Participant's account balance
attributable to Employer Matching
Contributions and After-Tax Contributions.
Income allocable to Excess Aggregate
Contributions for the Plan Year and for the
"gap period" between the end of the Plan Year
and the date of distribution (or forfeiture)
shall be determined pursuant to Proposed
Regulations Section 1.401(m)-1(e)(3).
(E) The Excess Aggregate Contributions to be
distributed to a Participant shall be
adjusted for income, and, if there is a loss
allocable to the Excess Aggregate
Contributions, shall in no event be less than
the lesser of the Participant's Account
Balance under the Plan or the Participant's
Employer Matching Contributions and After-Tax
Contributions for the Plan Year.
(F) Excess Aggregate Contributions shall be
distributed from the Participant's After-Tax
Contributions Account and forfeited, if
otherwise forfeitable under the terms of the
Plan (or, if not forfeitable, distributed),
from the Participant's Matching Contribution
Account in proportion to the Participant's
Matching Contributions for the Plan Year.
(G) Amounts forfeited by Highly Compensated
Employees under this Section shall be:
(1) Treated as Annual Additions under
Sections 5.6 and 5.7 of the Plan; and
(2) Allocated, after all other forfeitures
under the Plan, to the same Participants
and in the same manner as such other
forfeitures of Employer Matching
Contributions are allocated to
Participants under the Plan; provided,
however, that no such forfeitures
arising under this Section shall be
allocated to the account of any Highly
Compensated Employee.
ARTICLE 13
ADMINISTRATION OF THE PLAN
13.1 Plan Administrator
Except as to those functions reserved within the
Plan to the Board of Directors, there shall be an
individual administrator or an administrative
committee (hereafter referred to as the
Administrator) appointed by the Board of Directors
to control and manage the operation and
administration of the Plan. The Administrator
shall be considered the "named fiduciary" and the
"plan administrator" for purposes of ERISA and the
Code. The Board of Directors shall have the
authority to allocate or delegate among
themselves, to the Administrator, or to any other
person, any fiduciary responsibility with respect
to the Plan.
13.2 Selection of Committee
If the Board of Directors appoints a committee to
be the Administrator, then such committee shall
consist of not fewer than three nor more than
seven members to serve at its pleasure and without
compensation for service as such. The committee
shall select a secretary (who may, but need not,
be a member of the committee) to keep its records
or to assist it in the doing of any act or thing
to be done or performed by the committee.
A majority of the members of the committee at the
time in office shall constitute a quorum for the
transaction of the business at any meeting. Any
determination or action of the committee may be
made or taken by a majority of the members present
at any meeting thereof, or without a meeting by a
resolution or written memorandum concurred in by a
majority of the members then in office. No member
who is a Participant of this Plan, however, shall
vote on any question relating solely to himself.
13.3 Powers of the Administrator
The Administrator, subject to the limitations
herein contained and to such other restrictions as
the Board of Directors may make, shall have the
discretionary power and the duty to take all
action and to make all decisions necessary or
proper to carry out the provisions of Plan. The
determination of the Administrator as to any
question involving the general administration and
interpretation of the Plan shall be final,
conclusive and binding. Any discretionary actions
to be taken under the Plan by the Administrator
with respect to the classification of Employees,
Participants, beneficiaries, contributions, or
benefits shall be uniform in their nature and
applicable to all persons similarly situated.
Without limiting the generality of the foregoing,
the Administrator shall have the following powers
and duties:
(A) To require any person to furnish such
information as it may request for the purpose
of the proper administration of the Plan as a
condition of receiving any benefits under the
Plan;
(B) To make and enforce such rules and
regulations and prescribe the use of such
forms as it shall deem necessary for the
efficient administration of the Plan;
(C) To interpret the Plan, and to resolve
ambiguities, inconsistencies and omissions,
which findings shall be binding, final and
conclusive;
(D) To decide on questions concerning the Plan
and the eligibility of any Employee to
participate in the Plan, in accordance with
the provisions of the Plan;
(E) To determine the amount of benefits which
shall be payable to any person in accordance
with the provisions of the Plan. The
Administrator may require claims for benefits
to be filed in writing, on such forms and
containing such information as the Board may
deem necessary. Adequate notice shall be
provided in writing to any Participant or
beneficiary thereof whose claim for benefits
under the Plan has been wholly or partially
denied. The Plan claim review procedure is
more particularly described in Section 13.7
of the Plan. Notice of denial of a claim
shall be written in a manner calculated to be
understood by the Participant or his
Beneficiary and shall afford reasonable
opportunity to the Participant or his
Beneficiary whose claim for benefits has been
denied for a full and fair review of the
decision denying the claim;
(F) To allocate any such powers and duties to or
among individual members of any
administrative committee serving as the
Administrator;
(G) To designate persons other than Administrator
to carry out any duty or power which would
otherwise be a fiduciary responsibility of
the Administrator, under the terms of the
Plan; and
(H) To make such administrative or technical
amendments to the Plan as may be necessary or
appropriate to carry out the intent of the
Board of Directors, including such amendments
as may be required to satisfy the
requirements of Section 401(a) and Section
401(k) of the Code, and of ERISA and any
similar provisions or subsequent revenue or
other laws, or the rules and regulations from
time to time in effect under any of such laws
or to conform with governmental regulations
or other policies.
13.4 Selection and Replacement of Trustee
The Board of Directors shall appoint and they
shall retain the power to discharge or replace the
Trustee. However, the power to appoint, discharge
or replace the Trustee shall not confer any
responsibility or authority upon the Board of
Directors with respect to the management or
control of the assets of the Plan.
13.5 Selection of Other Professional Counselors
(A) The Administrator may employ a counsel, a
qualified public accountant, a qualified
actuary, consultant and such clerical,
medical and other accounting services as it
may require in carrying out the provisions of
the Plan or in complying with requirements
imposed by ERISA and the Code.
(B) The Administrator may appoint an investment
manager or managers and delegate investment
responsibilities to manage any assets of the
Plan, including the power to acquire and
dispose of fund assets and to perform such
other services as the Administrator shall
deem necessary or desirable in connection
with the management of Plan assets. Such
investment manager or managers shall (i) be
registered as an investment advisor under the
Investment Advisors Act of 1940; (ii) be a
bank, as defined in the Investment Advisors
Act of 1940; or (iii) be an insurance company
qualified to manage, acquire or dispose of
qualified plan assets under the laws of more
than one State; and shall acknowledge in
writing to the Administrator that he is (or
they are) a fiduciary with respect to the
Plan. Anything in this Article or elsewhere
in the Plan to the contrary notwithstanding,
the Trustee shall be relieved of the
authority and discretion to manage and solely
control the assets of the Plan to the extent
that authority to acquire, dispose of, or
otherwise manage the assets of the Plan is
delegated to one or more investment managers
in accordance with this Section.
13.6 Reliance on Professional Counselors
To the extent permitted by law, the Administrator
and any person to whom it may delegate any duty or
power in connection with administering the Plan,
the Employer, and the officers and directors
thereof, shall be entitled to rely conclusively
upon, and shall be fully protected in any action
taken or suffered by them in good faith in
reliance upon, any counsel, accountant, other
specialist, or other person selected by the
Administrator, or in reliance upon any tables,
valuations, certificates, opinions or reports
which shall be furnished by any of them or by the
Trustee. Further, to the extent permitted by law,
no member of the Administrator, nor the Employer,
nor the officers nor directors thereof, shall be
liable for any neglect, omission or wrongdoing of
the Trustee or any other member of the
Administrator.
13.7 Plan Claim Procedure
(A) Any claim for a Plan benefit hereunder shall
be filed by a Participant or Beneficiary
(claimant) of this Plan on the form
prescribed for such purpose with the
Administrator, or in lieu thereof, by written
communication which is made by the claimant
or the claimant's authorized representative
which is reasonably calculated to bring the
claim to the attention of the Administrator.
(B) If a claim for a Plan benefit is wholly or
partially denied, notice of the decision
shall be furnished to the claimant by the
Administrator within ninety (90) days after
receipt of the claim by the Administrator.
(C) Any claimant who is denied a claim for
benefit shall be furnished written notice
setting forth:
(1) The specific reason or reasons for the
denial;
(2) Specific reference to the pertinent Plan
provisions upon which the denial is
based;
(3) A description of any additional material
or information necessary for the
claimant to perfect the claim and an
explanation of why such material or
information is necessary; and
(4) An explanation of the Plan's claim
review procedure.
(D) In order that a claimant may appeal denial of
a claim, a claimant or his duly authorized
representative:
(1) May request a review by written
application to the Administrator not
later than sixty (60) days after receipt
by the claimant of written notification
of denial of a claim;
(2) May review pertinent documents; and
(3) May submit issues and comments in
writing.
(E) A decision on review of a denied claim shall
be made not later than sixty (60) days after
the Plan's receipt of a request for review,
unless special circumstances require an
extension of time for processing, in which
case a decision shall be rendered within a
reasonable period of time, but not later than
one hundred twenty (120) days after receipt
of a request for review.
The decision on review shall be in writing
and shall include the specific reason(s) for
the decision and the specific reference(s) to
the pertinent Plan provisions on which the
decision is based.
13.8 Source of Payment of Expenses
All expenses prior to the termination of the Plan
that shall arise in connection with the
administration of the Plan, including but not
limited to the compensation of the Trustee,
administrative expenses and proper charges and
disbursements of the Trustee and compensation and
other expenses and charges of any counsel,
accountant, specialist or other person who shall
be employed by the Administrator in connection
with the administration thereof, shall be paid
from the Trust Fund to the extent not paid by the
Employer.
13.9 Compensation of the Administrator
The Administrator shall serve without compensation
for services as such (other than any compensation
the Administrator may receive as an employee of
the Employer), but all reasonable expenses
incurred in the performance of their duties shall,
to the extent not paid by the Employer, be paid
from the Trust Fund. Unless otherwise determined
by the Company or unless required by any Federal
or State law, the Administrator shall not be
required to give any bond or other security in any
jurisdiction.
13.10 Fiduciary Liability Insurance
The Administrator may, to the extent permitted by
law, procure and pay (from assets of the Plan or
the Employer) insurance premiums for fiduciary
liability insurance covering the Board of
Directors, the Administrator and other such
Employees of the Employer as the Administrator
shall in their discretion determine. To the
extent such insurance is not obtained and to the
extent permitted by law, the Employer shall
indemnify any fiduciary described in the preceding
sentence for any loss arising out of any action in
connection with the performance (or omission) of
any duty imposed by the Plan.
ARTICLE 14
AMENDMENT OR TERMINATION
14.1 Right to Amend
(A) The Board of Directors, a delegate of the
Board of Directors or an authorized officer
of the Company reserves the right at any time
and from time to time and retroactively if
deemed necessary or appropriate, to modify or
amend, in whole or in part, any or all of the
provisions of the Plan.
(B) No such modification or amendment, however,
shall make it possible for any part of the
corpus or income of the Trust Fund to be used
for, or diverted to, purposes other than for
the exclusive benefit of Participants and
their beneficiaries under the Plan prior to
the satisfaction of all liabilities with
respect to Participants and their
Beneficiaries under the Plan, prior to the
satisfaction of all liabilities with respect
thereto. Moreover, no amendment or
modification shall make it possible to
deprive any Participant of a previously
accrued benefit (including an optional form
of benefit), except to the extent permitted
by Section 412(c)(8) of the Code.
(C) The Administrator may adopt amendments which
do not significantly affect the cost of the
Plan and which may be necessary or
appropriate to qualify or maintain the Plan,
any trust and any contract with an insurance
carrier which may form a part of the Plan as
a plan and trust meeting the requirements of
Sections 401(a) and 501(a) of the Code.
14.2 Right to Discontinue Plan
The Board of Directors reserves the power to
discontinue the Plan at any time with respect to
any or all Employers. Unless the Plan be sooner
terminated, a successor to the business or any
portion thereof of an Employer, by whatever form
or manner resulting, with the written consent of
the Company, may continue the Plan and become a
party to the Trust Agreement by executing
appropriate supplemental agreements and other
documents, and such successor shall, succeed to
all applicable rights, powers and duties of such
Employer with relation thereto. The employment of
any Participant who is continued in the employ of
such successor shall not be deemed to have been
terminated or severed for any purpose under the
Plan.
14.3 Obligations Upon Merger, Consolidation or Transfer
In the event of any merger or consolidation with,
or transfer of assets or liabilities to, any other
plan, each Participant shall be entitled to
receive a benefit if the Plan were to terminate
immediately after the merger, consolidation, or
transfer, which is not less than the benefit he
would have been entitled to receive if the Plan
had terminated immediately before the merger,
consolidation, or transfer.
14.4 Obligations Upon Termination, Partial Termination
or Discontinuance
(A) While each Employer intends to continue the
Plan indefinitely, nevertheless it assumes no
contractual obligation as to the Plan's
continuance, and the Board of Directors may
terminate the Plan as to any Employer. In
the case of any termination, partial
termination or complete discontinuance of
contributions, each Participant who is then
an Employee and who is affected by the
termination, partial termination or complete
discontinuance of contributions shall have a
one hundred percent (100%) non-forfeitable
interest in the Account Balance.
(B) At the direction of the Administrator after
any such discontinuance, and after payment
of, or appropriate reserve for, the expenses
of any such discontinuance each Participant's
Account Balance shall be paid in cash to each
Participant, or, if he is then deceased, to
his designated beneficiary, if living, or, if
such beneficiary is not living, to such
deceased Participant's estate.
(C) Notwithstanding the foregoing, a
Participant's Account Balance shall not be
distributed pursuant to a termination,
partial termination or complete
discontinuance of contributions if the
Employer or an affiliated Employer maintains
a successor plan with respect to the
Participant.
14.5 Continued Funding After Plan Termination
Anything in the Plan to the contrary
notwithstanding, no Employer, upon any termination
or partial termination of the Plan, shall have any
obligation or liability whatsoever to make any
further payments for the benefit of Participants
(including all or any part of any contributions
payable prior to any termination of the Plan), to
the Trustee for benefits under the Plan. Neither
the Trustee, the Board of Directors, the
Administrator, nor any Participant, Employee, nor
beneficiary, shall have any right to compel an
Employer to make any payment after the termination
or partial termination of the Plan.
14.6 Distribution Upon Sale of Assets
A Participant's Account Balance may be distributed
to the Participant as soon as administratively
feasible after the sale of substantially all of
the assets used by the Employer in the trade or
business in which the Participant is employed if
the Participant is no longer employed by the
Employer or an affiliated Employer who has adopted
the Plan and the assets were not sold to a related
employer.
ARTICLE 15
GENERAL PROVISIONS
15.1 No Implied Employment Contract
This Plan shall not be deemed to constitute a
contract between the Employer and any Employee or
other person whether or not in the employ of the
Employer, nor shall anything herein contained be
deemed to give any Employee or other person,
whether or not in the employ of the Employer, any
right to be retained in the employ of the
Employer, or to interfere with the right of the
Employer to discharge any Employee at any time and
to treat him without any regard to the effect
which such treatment might have upon him as a
Participant in the Plan.
15.2 Benefits Not Assignable
Except as may otherwise be provided by law, no
distribution or payment under the Plan to any
Participant or beneficiary shall be subject in any
manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or
charge, whether voluntary or involuntary, and any
attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the
same shall be void; nor shall any such
distribution or payment be in any way liable for
or subject to the debts, contracts, liabilities,
engagement or torts of any person entitled to such
distribution or payment.
Notwithstanding the foregoing, the right to a
benefit payable with respect to a Participant
pursuant to a "qualified domestic relations order"
(as defined in Section 414(p) of the Code) may be
created, assigned or recognized. The
Administrator shall establish reasonable
procedures to determine the qualified status of
domestic relations orders and to administer
distributions under such qualified orders in a
manner consistent with Section 414(p) of the Code.
15.3 Facility of Payment
If the Administrator determines that any person
entitled to payments under the Plan is an infant
or incompetent by reason of physical or mental
disability, the Administrator may cause all
payments thereafter becoming due to such person to
be made to any other person for his benefit,
without responsibility to follow application of
amounts so paid. Payments made pursuant to this
provision shall completely discharge the Plan,
Administrator and the Trustee.
15.4 Source of Benefits
The Trust Fund shall be the sole source of
benefits under this Plan, and each Employee,
Participant, Beneficiary, or any other person who
shall claim the right to any payment or benefit
under this Plan shall be entitled to look only to
the Trust Fund for payment of benefits. Except as
may be otherwise provided by ERISA or other
applicable law, the Employer shall have no
liability to make or continue from its own funds
the payment of any benefit under the Plan.
15.5 Lost Participants or Beneficiaries
If the Plan is unable to make payment to any
Participant or Beneficiary who is entitled to
receive a Plan Benefit, because it cannot
ascertain the identity or whereabouts of such
Participant or Beneficiary after reasonable
efforts have been made to identify or locate such
person (including a notice of the payment so due
mailed to the last known address of such
Participant or Beneficiary as shown on the records
of the Employer), such payment and all subsequent
payments otherwise due to such Participant or
other person shall be forfeited and used to reduce
Employer contributions to the Plan twenty-four
(24) months after the date such payment first
became due; provided, however, that such payment
and any subsequent payments shall be reinstated
retroactively, without interest, no later than
sixty (60) days after the date on which the
Participant or Beneficiary is identified or
located.
15.6 Service in Several Fiduciary Capacities
Any person, group of persons, or entity, may serve
in more than one fiduciary capacity with respect
to the Plan.
15.7 Construction of Plan
Headings to the articles, sections or subsections
of the Plan have been supplied for convenience
only and are not to be taken as limiting or
extending the meanings of any of the provisions of
the Plan.
15.8 Governing Law
The provisions of the Plan shall be construed,
administered and governed under ERISA and, to the
extent not preempted, the laws of the State of
California.
15.9 Intent to Comply With Legal Requirements
The Employer intends that the Plan shall be a
qualified plan of deferred compensation
established for the exclusive benefit of its
Employees and their Beneficiaries as provided for
in Section 401(a) of the Code or as provided for
in any similar provisions of subsequent revenue
laws and that the Plan assets held by the Trustee
shall be exempt from taxation under Section 501(a)
of the Code.
15.10 Annuity Contracts
Any annuity contract purchased by the Plan and
distributed to a Participant shall provide that
the benefits under the contract shall be provided
in accordance with the applicable consent, present
value and other requirements of Section 417(e) of
the Code.
15.11 Voting Rights
Before each annual or special meeting of the
Company's stockholders, the Company shall cause to
be sent to each Participant a copy of the proxy
statement being sent to the registered
stockholders of the Company. A Participant shall
have the right to instruct the Trustee
confidentially with respect to the voting of all
shares of FHC Stock, whether or not vested, that
were allocated to his or her Account on the
applicable record date for such meeting. The
Company shall conclusively determine the number of
the whole and fractional shares of FHC Stock that
are subject to each Participant's voting
instructions and shall advise the Trustee
accordingly. The voting instructions shall be on
a form prescribed by the Company and shall be
submitted to the Trustee not later than the date
specified by the Company. Once received by the
Trustee, the voting instructions shall be
irrevocable. Under no circumstances shall the
Trustee permit the Company or any representative
thereof to see any voting instructions given by
any Participant to the Trustee. The Trustee shall
vote any shares of FHC Stock with respect to which
it has not received (prior to the date specified
by the Company) voting instructions on the
prescribed form from the appropriate Participants,
in direct proportion to the shares with respect to
which it has received timely voting instructions
from Participants.
15.12 Other Instructions by Participants
In the event that any person or group of persons
makes a tender offer subject to Section 14(d) of
the Securities Exchange Act of 1934 to acquire all
or part of the outstanding shares of FHC Stock,
including the Stock held in the FHC Stock Fund
("Acquisition Offer"), each Participant shall be
entitled to direct the Trustee confidentially (on
a form to be prescribed by the Company) to tender
all or part of those shares of FHC Stock which
would then be subject to such Participant's voting
instructions under Section 15.11. If the Trustee
receives an instruction by the date communicated
by the Company to Participants, the Trustee shall
tender such shares in accordance with such
instruction. Any shares of FHC Stock with respect
to which the Trustee does not receive timely
instructions shall be tendered or withheld by the
Trustee in the same proportion as the shares with
respect to which the Trustee has received timely
instructions from Participants. The Company shall
distribute to each Participant all appropriate
materials pertaining to the Acquisition Offer,
including the statement of the position of the
Company with respect to such offer issued pursuant
to Rule 14e-2 under the Securities Exchange Act of
1934, as soon as practicable after such materials
are issued; provided, however, that if the Company
fails to issue such statement within five business
days after the commencement of such offer, the
Company shall distribute such materials to each
Participant without the statement by the Company
and shall separately distribute such statement as
soon as practicable after it is issued. The
Trustee shall follow the procedures regarding the
confidentiality of instructions described in
Section 15.11.
ARTICLE 16
ROLLOVER CONTRIBUTIONS AND TRANSFERS
16.1 Transfers From Other Plans
In the event that an individual
(A) Becomes an Employee eligible to participate
in the Plan, and
(B) Was a participant in a plan qualified under
Section 401(a) of the Code, the trust of
which is exempt from tax under Section 501(a)
of the Code, and
(C) Received from such trust a "qualified total
distribution" (within the meaning of
subsection 402(a)(5)(E) of the Code) which
qualifies for rollover treatment in
accordance with Section 402(a)(5), and
(D) such "qualified total distribution" consists
of money,
then, with the consent of the Company, the
eligible Employee may transfer any portion of the
distribution, to the extent it exceeds the amount
referred to in subsection 402(e)(4)(D)(i) of the
Code, to this Plan on or before the sixtieth
(60th) day after the day on which he received such
distribution, and upon receipt by the Plan, such
amount shall be credited to the Rollover Account
established under the Plan, pursuant to Article 6.
Notwithstanding the foregoing, there may be
transferred directly from the trustee of another
plan qualified under Section 401(a) of the Code,
the trust of which is exempt from tax under
Section 501(a) of the Code, to the Trustee,
subject to the approval of the Administrator and
the Trustee that such transfer will not adversely
affect the qualified status of the Plan, all or
any of the assets, including voluntary
contributions, if any (whether by Trustee,
Custodian or otherwise) on behalf of the other
plan which is maintained for the benefit of any
Employees who are about to become Participants in
this Plan.
The eligible Employee shall have a one hundred
percent (100%) vested and nonforfeitable right to
all amounts credited to his Rollover Account as a
result of any transfer pursuant to this Section.
16.2 Rollover of Funds From Conduit Individual
Retirement Account (IRA)
In the event that an individual
(A) Becomes an Employee eligible to participate
in the Plan, and
(B) Shall have established an Individual
Retirement Account or Individual Retirement
Annuity (hereinafter collectively referred to
as "IRA") described in Sections 408(a) and
408(b), respectively, of the Code, which IRA
is comprised solely of amounts constituting a
rollover contribution of a qualified total
distribution from an employer's trust
described in Section 401(a) of the Code,
which is exempt from tax under Section 501(a)
of the Code, or an annuity plan described in
Section 403(a) of the Code, and
(C) Received from such IRA the entire amount of
the account or the entire value of the
annuity, including any earnings on such sums,
pursuant to Section 408(d)(3)(A)(ii) of the
Code,
then, with the consent of the Company, the
eligible Employee may transfer the entire amount
received in such distribution to this Plan (for
the benefit of such individual) on or before the
sixtieth (60th) day after the day on which he
received such payment or distribution, and upon
receipt by the Plan, such amount shall be credited
to the Rollover Account established hereunder.
The Participant shall have a one hundred percent
(100%) vested and nonforfeitable right to all
amounts credited to his Rollover Account as a
result of such IRA rollover.
16.3 Mistaken Rollover
If it is determined that a Participant's rollover
contribution did not qualify under the Code for a
tax free rollover, then as soon as reasonably
possible the balance in the Participant's Rollover
Account shall be:
(A) Segregated from all other Plan assets;
(B) Treated as a non-qualified trust established
by and for the benefit of the Participant;
and
(C) Distributed to the Participant.
Such a mistaken rollover contribution shall be
deemed never to have been a part of the Plan and
shall not adversely affect the tax qualification
of the Plan under the Code.
ARTICLE 17
TOP-HEAVY PROVISIONS
17.1 Top-Heavy Plan Defined
This Article shall apply if the Plan is a "Top-
Heavy Plan" as hereinafter provided. The Plan
shall be a "Top-Heavy Plan" in a Plan Year if, as
of the Determination Date the present value of the
cumulative accrued benefits (as calculated below)
of all Key Employees exceeds sixty percent (60%)
of the present value of the accumulative accrued
benefits under the Plan of all Employees and Key
Employees, but excluding the value of the accrued
benefits of former Key Employees.
In determining whether this Plan is a Top-Heavy
Plan, all employers that are aggregated under
Sections 414(b), (c), (m) and (o) of the Code
shall be treated as a single employer. In
addition, all plans that are part of the Required
Aggregation Group shall be treated as a single
plan. The Plan shall apply the special rules of
Code Sections 416(g)(4)(A), (B) and (E) to
determine which Employees and which benefits are
taken into account to determine whether the Plan
(or any other plan included in a Required
Aggregation Group of which the Plan is a part) is
a Top-Heavy Plan.
Solely for the purpose of determining if the Plan,
or any other plan included in a Required
Aggregation Group of which this Plan is a part, is
Top-Heavy, the accrued benefit of an Employee
other than a Key Employee shall be determined
under (A) the method, if any, that uniformly
applies for accrual purposes under all plans
maintained by the affiliated employers, or (B) if
there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual
rate permitted under the fractional accrual rate
of Section 411(b)(1)(C) of the Code.
For this purpose, the present value of an
Employee's accrued benefit is equal to the sum of
(A) and (B) below:
(A) The sum of (i) the present value of an
Employee's accrued retirement income in each
defined benefit plan which is included in the
Required Aggregation Group determined as of
the most recent valuation date within the
twelve (12) month period ending on the
Determination Date and as if the Employee had
terminated service as of such valuation date
and (ii) the aggregate distribution made with
respect to such Employee during the five-year
period ending on the Determination Date from
all defined benefit plans included in the
Required Aggregation Group and not reflected
in the value of his accrued retirement income
as of the most recent valuation date. In
determining present value for all plans in
the Required Aggregation Group, the actuarial
assumptions set forth for this purpose in the
Employer's defined benefit plan shall be
utilized and the commencement date shall be
determined taking any nonproportional subsidy
into account; and
(B) The sum of (i) the aggregate balance of his
accounts in all defined contribution plans
which are part of the Required Aggregation
Group as of the most recent valuation date
within the twelve (12) month period ending on
the Determination Date, (ii) any
contributions allocated to such an account
after the valuation date and on or before the
Determination Date, and (iii) the aggregate
distributions made with respect to such
Employee during the five-year period ending
on the Determination Date from all defined
contribution plans which are part of the
Required Aggregation Group and not reflected
in the value of his account(s) as of the most
recent valuation date.
17.2 Other Definitions
For the purposes of this Article, the following
terms shall have the following meanings:
(A) "Determination Date" means the last day of
the preceding Plan Year except that in the
case of the first Plan Year, the term
"Determination Date" shall mean the last day
of the Plan Year.
(B) "Employee" means (i) a current employee or
(ii) a former employee who performed services
for the Employer during the Plan Year
containing the Determination Date or any of
the four (4) preceding Plan Years.
(C) "Key Employee" means an Employee, a former
Employee or the Beneficiary under the Plan of
a former Employee who, in the Plan Year
containing the Determination Date, or any of
the four preceding Plan Years, is:
(1) An officer of the Employer having an
annual Total Compensation greater than
fifty percent (50%) of the amount in
effect under Section 415(b)(1)(A) of the
Code for any such Plan Year. Not more
than fifty (50) Employees or, if lesser,
the greater of three (3) Employees or
ten percent (10%) of the Employees shall
be considered as officers for purposes
of this subparagraph.
(2) One of the ten (10) Employees owning (or
considered as owning within the meaning
of Section 318 of the Code) the largest
interest in the Employer, which is more
than one-half percent (.5%) ownership
interest in value, and whose Total
Compensation equals or exceeds the
maximum dollar limitation under Section
415(c)(1)(A) of the Code as in effect
for the calendar year in which the
Determination Date falls.
(3) A five-percent (5%) owner of the
Employer.
(4) A one percent (1%) owner of the Employer
having an annual Total Compensation from
the Employer of more than $150,000.
Whether an Employee is a five percent (5%)
owner or a one percent (1%) owner shall be
determined in accordance with Section 416(i)
of the Code.
(D) "Non-Key Employee" means an Employee who is
not a Key Employee.
(E) "Required Aggregation Group" means
(1) Each stock bonus, pension, or profit
sharing plan of the Employer in which a
Key Employee participates and which is
intended to qualify under Section 401(a)
of the Code; and
(2) Each other such stock bonus, pension or
profit sharing plan of an Employer which
enables any plan in which a Key Employee
participates to meet the requirements of
Section 401(a)(4) or Section 410 of the
Code.
17.3 Top-Heavy Vesting
(A) If the Plan is a Top-Heavy Plan in a Plan
Year, the nonforfeitable percentage of the
Account Balance of a Participant for such
Plan Year who is credited with an Hour of
Service in such Plan Year shall be determined
in accordance with the vesting provisions
described in Section 10.2 of the Plan.
(B) A Participant's nonforfeitable benefit shall
not be less than his vested Account Balance
determined as of the last day of the last
Plan Year in which the Plan was a Top-Heavy
Plan.
17.4 Top-Heavy Contributions
(A) Solely in the event that any Participant who
is a Non-Key Employee is not covered by a
defined benefit plan of the Employer which
provides the minimum benefit required by
Section 416(c)(1) of the Code during a Plan
Year in which this Plan is a Top-Heavy Plan,
the Employer contributions and forfeitures
allocated to each such Non-Key Employee who
has not separated from service by the end of
the Plan Year shall be equal to not less than
the lesser of:
(1) Three percent (3%) of such Participant's
Total Compensation in the Plan Year, or
(2) The greatest allocation, expressed as a
percentage of Compensation, made to any
Participant who is a Key Employee.
(B) The percentage referred to in
subparagraph (2) above shall be determined by
dividing the contributions and forfeitures
allocated to the Key Employee by such
Employee's Compensation. The Employer shall
make such additional contribution to the Plan
as shall be necessary to make the allocation
described above. The provisions of this
Section apply without regard to contributions
or benefits under Social Security or any
other Federal or State law. An adjustment
may be made to this Section, as permitted
under Treasury Regulations, in the event an
employee is also entitled to an increased
benefit in any other Top-Heavy plan while it
is in the Aggregation Group with this Plan.
(C) A Non-Key Employee who is otherwise entitled
to a minimum contribution under this Section
shall not fail to receive the required
minimum contribution because the Employee is
excluded from participation because the
Employee failed to make elective Deferred
Salary Contributions under the Plan.
17.5 Adjustment to Limitation on Annual Additions
(A) If the Employer also maintains a qualified
defined benefit plan (as defined in Section
3(35) ERISA and Section 414(j) of the Code)
and which is not part of a floor-offset
arrangement (as defined in Section 414(k) of
the Code) the denominator of both the Defined
Benefit Plan Fraction and Defined
Contribution Plan Fraction, as set forth in
Section 5.6, for the limitation year ending
in such Plan Year will be adjusted by
substituting one (1) for one and twenty-five
one hundredths (1.25) in each place the
figure occurs.
(B) The adjustments referred to in paragraph (A)
are not required if:
(1) the Plan would not be Top-Heavy if
ninety percent (90%) were substituted
for sixty percent (60%) in Section 17.1,
and
(2) Section 17.4(A) is adjusted by
substituting four percent (4%) for three
percent (3%) where the figure occurs.
(C) The adjustments referred to in paragraph (A)
above do not apply to any Participant as long
as no Employer contributions, forfeitures,
salary deferrals, or nondeductible voluntary
contributions are allocated to such
Participant's Accounts and the Participant
does not accrue any benefits under any
defined benefit plan maintained by the
Employer.
EXECUTION PAGE
The Company has caused this amended and restated Plan to be
adopted effective January 1, 1994, by having the Plan
executed by its duly authorized officer this 22nd day of
December, 1994.
FOUNDATION HEALTH CORPORATION
BY_________________________________
ITS_________________________________
Exhibit 4.5
1990 STOCK OPTION PLAN OF
FOUNDATION HEALTH CORPORATION
(AS AMENDED AND RESTATED EFFECTIVE APRIL 20, 1994)
SECTION I. ESTABLISHMENT AND PURPOSE.
The Plan was established in 1990, and it was most recently
amended and restated effective April 20, 1994. The Plan offers
selected employees, consultants and advisors and the nonemployee
directors of the Company an opportunity to acquire a proprietary
interest in the success of the Company, or to increase such
interest, by exercising Options to purchase Shares of the
Company's Common Stock. Options granted under the Plan may
include Nonstatutory Options as well as ISOs intended to qualify
under section 422 of the Code. The Plan also offers the
nonemployee directors of the Company an opportunity to receive
their directors' fees in the form of Shares of the Company's
Common Stock.
SECTION II. DEFINITIONS
A. "Board of Directors" shall mean the Board of Directors
of the Company, as constituted from time to time.
B. "Change in Control" means the occurrence of either of
the following events:
1. A change in the composition of the Board of
Directors, as a result of which fewer than one-half of the
incumbent directors are directors who either:
a. Had been directors of the Company 24 months
prior to such change; or
b. Were elected, or nominated for election, to
the Board of Directors with the affirmative votes of at least a
majority of the directors who had been directors of the Company
24 months prior to such change and who were still in office at
the time of the election or nomination; or
2. Any "person" (as such term is used in sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of
directors (the "Base Capital Stock"); except that any change in
the relative beneficial ownership of the Company's securities by
any person resulting solely from a reduction in the aggregate
number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities,
shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any
securities of the Company. For purposes of this Subsection
(B)(2), the term "person" shall not include an employee benefit
plan maintained by the Company.
C. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
D. "Committee" shall be the Compensation and Organization
Committee of the Board of Directors of the Company, as described
in Section III(A).
E. "Company" shall mean Foundation Health Corporation, a
Delaware corporation.
F. "Director" shall mean any individual who is not a
common-law employee of the Company or of a Subsidiary and who is
duly elected and serving the Company as a member of the Board of
Directors.
G. "Employee" shall mean
1. An individual who is a common-law employee of the
Company or of a Subsidiary; and
2. An independent contractor who performs services
for the Company or a Subsidiary as an advisor or consultant and
who is not a Director. Service as an independent contractor
shall be considered employment for all purposes of the Plan,
except as provided in Section IV(A).
H. "Exercise Price" shall mean the amount for which one
Share may be purchased upon exercise of an Option, as specified
in the applicable Stock Option Agreement.
I. "Fair Market Value" shall mean the market price of
Stock, determined by the Committee as follows:
1. If the Stock was traded over-the-counter on the
date in question but was not classified as a national market
issue, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices
quoted by the NASDAQ system for such date;
2. If the Stock was traded over-the-counter on the
date in question and was classified as a national market issue,
then the Fair Market Value shall be equal to the last transaction
price quoted by the NASDAQ system for such date;
3. If the Stock was traded on a stock exchange on the
date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable
composite-transactions report for such date; and
4. If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee
in good faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by
the Committee shall be conclusive and binding on all persons.
J. "ISO" shall mean an employee incentive stock option
described in section 422 of the Code.
K. "Nonstatutory Option" shall mean a stock option not
described in section 422 or 423(b) of the Code.
L. "Option" shall mean an ISO or Nonstatutory Option
granted under the Plan and entitling the holder to purchase
Shares.
M. "Optionee" shall mean an individual who holds an
Option.
N. "Plan" shall mean this 1990 Stock Option Plan of
Foundation Health Corporation, as amended from time to time.
O. "Service" shall mean service as an Employee or Director
including a Director of any Subsidiary of the Company.
P. "Share" shall mean one share of Stock, as adjusted in
accordance with Section IX (if applicable).
Q. "Stock" shall mean the Common Stock of the Company.
R. "Stock Option Agreement" shall mean the agreement
between the Company and an Optionee which contains the terms,
conditions and restrictions pertaining to his or her Option.
S. "Subsidiary" shall mean any corporation, if the Company
and/or one or more other Subsidiaries own not less than 50
percent of the total combined voting power of all classes of
outstanding stock of such corporation. A corporation that
attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of
such date.
T. "Total and Permanent Disability" shall mean that the
Optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has
lasted, or can be expected to last, for a continuous period of
not less than 12 months.
SECTION III. ADMINISTRATION.
A. Committee Membership. The Plan shall be administered
by the Committee, which shall consist of three or more members of
the Board of Directors. The members of the Committee shall be
appointed by the Board of Directors. If no Committee has been
appointed, the entire Board of Directors shall constitute the
Committee.
B. Disinterested Directors. Subsection (A) above
notwithstanding, if the Company is subject to section 16 of the
Securities Exchange Act of 1934, as amended, the Committee shall
consist only of disinterested directors. A member of the Board
of Directors shall be deemed to be "disinterested" only if he or
she satisfies such requirements as the Securities and Exchange
Commission may establish for disinterested administrators acting
under plans intended to qualify for exemption under Rule 16b-3
(or its successor) under such Act.
C. Committee Procedures. The Board of Directors shall
designate one of the members of the Committee as chairperson.
The Committee may hold meetings at such times and places as it
shall determine. The acts of a majority of the Committee members
present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Committee members, shall be valid
acts of the Committee.
D. Committee Responsibilities. Subject to the provisions
of the Plan, the Committee shall have full authority and
discretion to take the following actions:
1. To interpret the Plan and to apply its provisions;
2. To adopt, amend or rescind rules, procedures and
forms relating to the Plan;
3. To authorize any person to execute, on behalf of
the Company, any instrument required to carry out the purposes of
the Plan;
4. Except with respect to Optionees who are
Directors, to determine when Options are to be granted under the
Plan;
5. Except with respect to Optionees who are
Directors, to select the Optionees;
6. Except with respect to Optionees who are
Directors, to determine the number of Shares to be made subject
to each Option;
7. Except with respect to Optionees who are
Directors, to prescribe the terms and conditions of each Option,
to determine whether such Option is to be classified as an ISO or
as a Nonstatutory Option, and to specify the provisions of the
Stock Option Agreement relating to such Option;
8. To amend any outstanding Stock Option Agreement,
subject to applicable legal restrictions and to the consent of
the Optionee who entered into such agreement;
9. To prescribe the consideration for the grant of
each Option under the Plan and to determine the sufficiency of
such consideration; and
10. To take any other actions deemed necessary or
advisable for the administration of the Plan.
All decisions, interpretations and other actions of the Committee
shall be final and binding on all Optionees and all persons
deriving their rights from an Optionee. No member of the
Committee shall be liable for any action that he or she has taken
or has failed to take in good faith with respect to the Plan or
any Option.
SECTION IV. ELIGIBILITY.
A. Employees. Only Employees (including, without
limitation, independent contractors who are not Directors) shall
be eligible for designation as Optionees by the Committee. In
addition, only Employees who are common-law employees of the
Company or of a Subsidiary shall be eligible for the grant of
ISOs.
1. Ten-Percent Stockholders. An Employee who owns
more than 10 percent of the total combined voting power of all
classes of outstanding stock of the Company or any of its
Subsidiaries shall not be eligible for designation as an Optionee
for an ISO unless (i) the Exercise Price is at least 110 percent
of the Fair Market Value of a Share on the date of grant and (ii)
the ISO by its terms is not exercisable after the expiration of
five years from the date of grant.
2. Attribution Rules. For purposes of Subsection
(A)(1) above, in determining stock ownership, an Employee shall
be deemed to own the stock owned, directly or indirectly, by or
for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be
owned proportionately by or for its stockholders, partners or
beneficiaries. Stock with respect to which such Employee holds
an option shall not be counted.
3. Outstanding Stock. For purposes of Subsection
(A)(1) above, "outstanding stock" shall include all stock
actually issued and outstanding immediately after the grant.
"Outstanding stock" shall not include treasury shares or shares
authorized for issuance under outstanding options held by the
Employee or by any other person.
B. Directors. Directors of the Company shall be eligible
for participation in the Plan as set forth in Sections VI(B) and
VIII.
SECTION V. STOCK SUBJECT TO PLAN.
A. Basic Limitation. Shares offered under the Plan shall
be authorized but unissued Shares or treasury Shares. The
aggregate number of Shares which may be issued under the Plan
upon exercise of Options shall not exceed 5,525,000 Shares,
subject to adjustment pursuant to Section IX. Commencing with
July 1, 1994, the Committee shall not grant options to any one
individual covering a number of shares in excess of 1,000,000
(the "Allocation limit"), subject to adjustment pursuant to
Section IX. The number of Shares which are subject to Options
outstanding at any time under the Plan shall not exceed the
number of Shares which then remain available for issuance under
the Plan. The Company, during the term of the Plan, shall at all
times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
B. Additional Shares. In the event that any outstanding
Option for any reason expires or is canceled or otherwise
terminated, the Shares allocable to the unexercised portion of
such Option shall again be available for the purposes of the
Plan.
C. Adjustment of Allocation Limit. If, as a result of
subsequent regulations or other interpretive guidance, the
Committee determines that (i) the inclusion of the Allocation
Limit is not required in order for option grants to qualify as
performance-based compensation under the provisions of Section
162(m) of the Code, or (ii) option grants can qualify as
performance-based compensation even if the Allocation Limit was
made less restrictive, the Committee will be entitled to amend
the Plan accordingly (including amendments to adjust or eliminate
altogether the Allocation Limit).
SECTION VI. TERMS AND CONDITIONS OF OPTIONS.
A. Employees.
1. Stock Option Agreement. Each grant of an Option
under the Plan shall be evidenced by a Stock Option Agreement
between the Optionee and the Company. Such Option shall be
subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems
appropriate for inclusion in a Stock Option Agreement. The
provisions of the various Stock Option Agreements entered into
under the Plan need not be identical.
2. Number of Shares. Each Stock Option Agreement
shall specify the number of shares that are subject to the Option
and shall provide for the adjustment of such number in accordance
with Section IX. The Stock Option Agreement shall also specify
whether the Option is an ISO or a Nonstatutory Option.
3. Exercise Price. Each Stock Option Agreement shall
specify the Exercise Price. The Exercise Price shall not be less
than 100 percent of the Fair Market Value of a Share on the date
of grant, except as otherwise provided in Section IV (A)(1).
Subject to the preceding sentence, the Exercise Price under any
Option shall be determined by the Committee at its sole
discretion. The Exercise Price shall be payable in a form
described in Section VII.
4. Exercisability and Term. Each Stock Option
Agreement shall specify the date when all or any installment of
the Option is to become exercisable. The vesting of any Option
shall be determined by the Committee at its sole discretion. A
Stock Option Agreement may provide for accelerated exercisability
in the event of the Optionee's death, Total and Permanent
Disability or retirement or other events. The Stock Option
Agreement shall also specify the term of the Option. The term
shall not exceed 10 years from the date of grant, except as
otherwise provided in Section IV(A)(1). Subject to the preceding
sentence, the Committee at its sole discretion shall determine
when an Option is to expire.
5. Effect of Change in Control. The Committee may
determine, at the time of granting an Option or thereafter, that
such Option shall become fully exercisable as to all Shares
subject to such Option in the event that a Change in Control
occurs with respect to the Company. If the Committee finds that
there is a reasonable possibility that, within the succeeding six
months, a Change in Control will occur with respect to the
Company, then the Committee may determine that any or all
outstanding Options shall become fully exercisable as to all
Shares subject to such Options.
B. Directors.
1. Stock Option Agreements. A Nonstatutory Option to
purchase Shares shall be granted to each Director then in office
on April 22, 1993. In the case of a Director who is not a
Director on April 22, 1993, the grant of an option to such
Director under this Subsection (B)(1) shall occur on the date
such Director takes office. Each grant of an Option under the
Plan shall be evidenced by a Stock Option Agreement between the
Optionee and the Company. Such Option shall be subject to all
applicable terms and conditions of the Plan and to stockholder
approval of this provision. The provisions of the various Stock
Option Agreements entered into under the Plan need not be
identical.
2. Number of Shares. Each Stock Option Agreement
shall specify the number of Shares that are subject to the Option
and shall provide for the adjustment of such number in accordance
with Section IX. The number of Shares that are subject to each
Option under Subsection (B)(1) shall be 25,000.
3. Exercise Price. Each Stock Option Agreement shall
specify the Exercise Price. The Exercise Price shall be 100
percent of the Fair Market Value of a Share on the date of grant.
The Exercise Price shall be payable in cash or Common Stock.
4. Exercisability and Term. Each Stock Option
Agreement shall specify that the Option is to become exercisable
in accordance with the following schedule:
Anniversary of Percentage of
Date of Grant Shares Exercisable
First 20%
Second 40%
Third 60%
Fourth 80%
Fifth 100%
The Stock Option Agreement shall specify the term of the Option
which shall be 10 years from the date of grant, unless earlier
terminated as set forth herein.
5. Amendments. The foregoing provisions of this
Subsection (B) shall not be amended more than once every six
months, unless required by the Code or the regulations
thereunder.
C. Withholding Taxes. As a condition to the exercise of
an Option, the Optionee shall make such arrangements as the
Committee may require for the satisfaction of any federal, state,
local or foreign withholding tax obligations that may arise in
connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of
any federal, state, local or foreign withholding tax obligations
that may arise in connection with the disposition of Shares
acquired by exercising an Option. The Committee may permit the
Optionee to satisfy all or part of his or her withholding or
income tax obligations by having the Company withhold a portion
of any Shares that otherwise would be issued to him or her or by
surrendering a portion of any Shares that previously were issued
to him or her. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash.
Any payment of taxes by assigning Shares to the Company may be
subject to restrictions, including any restrictions required by
rules of the Securities and Exchange Commission.
D. Nontransferability. No Option shall be transferable by
the Optionee other than by will, by a beneficiary designation
executed by the Optionee and delivered to the Company or by the
laws of descent and distribution. An Option may be exercised
during the lifetime of the Optionee only by him or her or by his
or her guardian or legal representative. No Option or interest
therein may be transferred, assigned, pledged or hypothecated by
the Optionee during his or her lifetime, whether by operation of
law or otherwise, or be made subject to execution, attachment or
similar process.
E. Termination of Service (Except by Death). If an
Optionee's Service terminates for any reason other than his or
her death, then his or her Option(s) shall expire on the earliest
of the following occasions:
1. The expiration date determined pursuant to
Subsection (A)(4) or (B)(4) above;
2. The date 90 days after the termination of his or
her Service for any reason other than Total and Permanent
Disability; or
3. The date 12 months after the termination of his or
her Service by reason of Total and Permanent Disability.
The Optionee may exercise all or part of his or her Option(s) at
any time before the expiration of such Option(s) under the
preceding sentence, but only to the extent that such Option(s)
had become exercisable before his or her Service terminated or
became exercisable as a result of the termination. The balance
of such Option(s) shall lapse when the Optionee's Service
terminates unless otherwise specified in the applicable Stock
Option Agreement. In the event that the Optionee dies after the
termination of his or her Service but before the expiration of
his or her Option(s), all or part of such Option(s) may be
exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person who has
acquired such Option(s) directly from him or her by bequest,
beneficiary designation or inheritance, but only to the extent
that such Option(s) had become exercisable before his or her
Service terminated or became exercisable as a result of the
termination.
F. Leaves of Absence. For purposes of Subsection E above,
Service shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence
(as determined by the Committee). The foregoing notwithstanding,
in the case of an ISO granted to an Employee under the Plan,
Service shall not be deemed to continue beyond the first 90 days
of such leave, unless the Optionee's reemployment rights are
guaranteed by statute or by contract.
G. Death of Optionee. If an Optionee dies while he or she
is in Service, then his or her Option(s) shall expire on the
earlier of the following dates:
1. The expiration date determined pursuant to
Subsection (A)(4) or (B)(4) above; or
2. The date 12 months after his or her death.
All or part of the Optionee's Option(s) may be
exercised at any time before the expiration of such Option(s)
under the preceding sentence by the executors or administrators
of his or her estate or by any person who has acquired such
Option(s) directly from him or her by bequest, beneficiary
designation or inheritance, but only to the extent that such
Option(s) had become exercisable before his or her death or
became exercisable as a result of his or her death. The balance
of such Option(s) shall lapse when the Optionee dies.
H. No Rights as a Stockholder. An Optionee, or a
transferee of an Optionee, shall have no rights as a stockholder
with respect to any Shares covered by his or her Option until the
date of the issuance of a stock certificate for such Shares. No
adjustments shall be made, except as provided in Section IX.
I. Modification, Extension and Assumption of Options.
Within the limitations of the Plan, the Committee may modify,
extend or assume outstanding Options or may accept the
cancellation of outstanding Options (whether granted by the
Company or another issuer) in return for the grant of new Options
for the same or a different number of Shares and at the same or a
different price. The foregoing notwithstanding, no modification
of an Option shall, without the consent of the Optionee, impair
his or her rights or increase his or her obligations under such
Option.
J. Restrictions on Transfer of Shares. Any Shares issued
upon exercise of an Option shall be subject to such special
forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may
determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to
any general restrictions that may apply to all holders of Shares.
SECTION VII. PAYMENT FOR SHARES.
A. General Rule. The entire Exercise Price of Shares
issued under the Plan shall be payable in lawful money of the
United States of America at the time when such Shares are
purchased, except as follows:
1. In the case of an ISO granted under the Plan to an
Employee, payment shall be made only pursuant to the express
provisions of the applicable Stock Option Agreement. However,
the Committee (at its sole discretion) may specify in the Stock
Option Agreement that payment may be made in one or more of the
forms described in Subsections (B), (C), (D) and (E) below.
2. In the case of a Nonstatutory Option granted under
the Plan to an Employee, the Committee (at its sole discretion)
may accept payment in one or more of the forms described in
Subsections (B), (C), (D) and (E) below.
3. In the case of a Nonstatutory Option granted under
the Plan to a Director, payment may be made in one or both of the
forms described in Subsections (B) and (D) below.
B. Surrender of Stock. To the extent that this Subsection
(B) is applicable and to the extent that applicable law permits,
payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more
than six months and which are surrendered to the Company in good
form for transfer. Such Shares shall be valued at their Fair
Market Value on the date when the new Shares are purchased under
the Plan.
C. Promissory Note. To the extent that this Subsection
(C) is applicable, a portion of the Exercise Price of Shares
issued under the Plan may be payable by a full-recourse
promissory note; provided that (i) the par value of such Shares
must be paid in lawful money of the United States of America at
the time when such Shares are purchased, (ii) the Shares are
security for payment of the principal amount of the promissory
note and interest thereon and (iii) the interest rate payable
under the terms of the promissory note shall not be less than the
minimum rate (if any) required to avoid the imputation of
additional interest under the Code. Subject to the foregoing,
the Committee (at its sole discretion) shall specify the term,
interest rate, amortization requirements (if any) and other
provisions of such note.
D. Exercise/Sale. To the extent that this Subsection (D)
is applicable, payment may be made by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a
securities broker approved by the Company to sell Shares and to
deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding
taxes.
E. Exercise/Pledge. To the extent that this Subsection
(E) is applicable, payment may be made by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge
Shares to a securities broker or lender approved by the Company,
as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the Exercise
Price and any withholding taxes.
SECTION VIII. PAYMENT OF DIRECTOR'S FEES IN STOCK.
A. Election. A Director may elect to receive his or her
director's fees from the Company in the form of Shares to be
issued under the Plan. Such an election may be made with respect
to:
1. All director's fees, including (without
limitation) annual retainer fees, meeting fees and fees paid to
committee chairpersons, but not including expense reimbursements
and consulting fees; or
2. Annual retainer payments only.
An election under this Section VIII shall be filed with the
Company on the prescribed form. The election shall apply only to
fees payable at least six months after such form has been
received by the Company. The election may be amended or canceled
by filing a new form with the Company, but the new form shall
apply only to fees payable at least six months after it has been
received by the Company. The number of Shares to be issued shall
be determined by dividing the amount of the fee by the Fair
Market Value of one Share on the date when such fee otherwise
would be paid in cash.
B. Withholding Taxes. The Director shall satisfy all of
his or her federal, state or local withholding tax obligations
(if any) by having the Company withhold a portion of the Shares
that otherwise would be issued to him or her. Such Shares shall
be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash. The payment of taxes by
assigning Shares to the Company shall be subject to any
restrictions required by rules of the Securities and Exchange
Commission.
SECTION IX. ADJUSTMENT OF SHARES.
A. General. In the event of a subdivision of the
outstanding Stock, a declaration of a dividend payable in Shares,
a declaration of a dividend payable in a form other than Shares
in an amount that has a material effect on the value of Shares, a
combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall
make appropriate adjustments in one or more of (i) the number of
Shares available for future grants under Section V, (ii) the
number of Shares covered by each outstanding Option or (iii) the
Exercise Price under each outstanding Option.
B. Merger; Consolidation. In the event that the Company
is a party to a merger or consolidation, outstanding Options
shall be subject to the agreement of merger or consolidation.
Such agreement shall provide (i) for the assumption of
outstanding Options by the surviving corporation or its parent,
(ii) for their continuation by the Company, if the Company is a
surviving corporation, (iii) for payment of a cash settlement
equal to the difference between the amount to be paid for one
Share under such agreement and the Exercise Price or (iv) for the
acceleration of their exercisability followed by the cancellation
of Options not exercised, in all cases other than clause (iii)
without the Optionees' consent. (The Optionees' consent shall be
required for a cash settlement.) Any cancellation shall not
occur earlier than 30 days after such acceleration is effective
and Optionees have been notified of such acceleration. In the
case of Options that have been outstanding for less than 12
months, a cancellation need not be preceded by an acceleration.
C. Reservation of Rights. Except as provided in this
Section IX, an Optionee shall have no rights by reason of (i) any
subdivision or consolidation of shares of stock of any class,
(ii) the payment of any dividend or (iii) any other increase or
decrease in the number of shares of stock of any class. Any
issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made
with respect to, the number or Exercise Price of Shares subject
to an Option. The grant of an Option pursuant to the Plan shall
not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION X. SECURITIES LAWS.
Shares shall not be issued under the Plan unless the
issuance and delivery of such Shares complies with (or is exempt
from) all applicable requirements of law, including (without
limitation) the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which
the Company's securities may then be listed.
SECTION XI. NO RIGHTS TO SERVICE.
No provision of the Plan, nor any Option granted under the
Plan, shall be construed to give any person any right to become,
to be treated as, or to remain an Employee or Director of the
Company, as the case may be. The Company and its Subsidiaries
reserve the right to terminate any person's Service at any time
and for any reason.
SECTION XII. DURATION AND AMENDMENTS.
A. Term of the Plan. The Plan, as amended and restated,
is effective as of April 20, 1994, subject to stockholder
approval. The Plan shall terminate automatically on March 31,
2000 and may be terminated on any earlier date pursuant to
Subsection (B) below.
B. Right to Amend or Terminate the Plan. The Committee
may amend, suspend or terminate the Plan at any time and for any
reason; provided, however, that any amendment of the Plan which
increases the number of Shares available for issuance under the
Plan (except as provided in Section IX), or which materially
changes the class of persons who are eligible for the grant of
ISOs, shall be subject to the approval of the Company's
stockholders. Stockholder approval shall not be required for any
other amendment of the Plan, except to the extent required by
applicable law.
C. Effect of Amendment or Termination. No Shares shall be
issued under the Plan after the termination thereof, except upon
exercise of an Option granted prior to such termination. The
termination of the Plan, or any amendment thereof, shall not
affect any Share previously issued or any Option previously
granted under the Plan.
SECTION XIII. EXECUTION.
To record the amendment and restatement of the Plan by the
Board of Directors on April 20, 1994, the Company has caused its
authorized officer to execute the same.
FOUNDATION HEALTH CORPORATION
By: /s/Daniel D. Crowley
President and Chief Executive Officer
Exhibit 4.6
1992 NONSTATUTORY STOCK OPTION PLAN OF
FOUNDATION HEALTH CORPORATION
Effective May 19,1992
SECTION I. ESTABLISHMENT AND PURPOSE
The Plan is being established to offer selected
employees of the Company an opportunity to acquire a proprietary
interest in the success of FHC or to increase such interest, by
exercising Options to purchase Shares of Stock. Options granted
under the Plan are Nonstatutory Options.
SECTION II. DEFINITIONS
A. "Board of Directors" shall mean the Board of
Directors of the Company, as constituted from time to time.
B. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
C. "Committee" shall mean a committee of the Board of
Directors, as described in Section III(A).
D. "Company" shall mean Associated Claims Management,
Inc. of California, a California corporation.
E. "Employee" shall mean any individual who is an
employee of the Company or of designated Subsidiaries or
affiliates of the Company; provided the term Employee shall not
include any executive officer or director of FHC.
F. "Exercise Price" shall mean the amount for which one
Share may be purchased upon exercise of an Option, as specified
in the applicable Stock Option Agreement.
G. "Fair Market Value" shall mean the market price of
Stock, determined by the Committee as follows:
(i) If the Stock was traded over-the-counter on the
date in question but was not classified as a national market
issue, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices
quoted by the NASDAQ system for such date, or if such date is not
a trading day, on the last trading day immediately preceding such
date;
(ii) If the Stock was traded over-the-counter on the
date in question and was classified as a national market issue,
then the Fair Market Value shall be equal to the last-transaction
price quoted by the NASDAQ system for such date, or if such date
is not a trading day, on the last trading day immediately
preceding such date;
(iii) If the Stock was traded on a stock exchange on
the date in question, then the Fair Market Value shall be equal
to the closing price reported by the applicable composite-
transactions report for such date, or if such date is not a
trading day, on the last trading day immediately preceding such
date; and
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee
in good faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by
the Committee shall be conclusive and binding on all persons.
H. "FHC" shall mean Foundation Health Corporation, a
Delaware corporation, and parent corporation of the Company.
I. "Nonstatutory Option" shall mean a stock option not
described in section 422(b) or 423(b) of the Code.
J. "Option" shall mean a Nonstatutory Option granted
under the Plan and entitling the holder to purchase Shares.
K. "Optionee" shall mean an individual who holds an
Option.
L. "Plan" shall mean this 1992 Nonstatutory Stock
Option Plan of Foundation Health Corporation as amended from time
to time.
M. "Service" shall mean service as an Employee.
N. "Share" shall mean one share of Stock, as adjusted
in accordance with Section VIII (if applicable).
O. "Stock" shall mean the Common Stock, $.01 par value
per share, of FHC.
P. "Stock Option Agreement" shall mean the agreement
between the Company and an Optionee which contains the terms,
conditions and restrictions pertaining to his or her Option.
Q. "Subsidiary" shall mean any corporation, if the
Company and/or one or more other Subsidiaries own not less than
50 percent of the total combined voting power of all classes of
outstanding stock of such corporation. A corporation that
attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of
such date.
R. "Total and Permanent Disability" shall mean that the
Optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has
lasted, or can be expected to last, for a continuous period of
not less than 12 months.
SECTION III. ADMINISTRATION.
A. Committee Membership. The Plan shall be
administered by the Committee, which shall consist of two or more
members of the Board of Directors. The members of the Committee
shall be appointed by the Board of Directors. If no Committee
has been appointed, the entire Board of Directors shall
constitute the Committee.
B. Committee Procedures. The Board of Directors shall
designate one of the members of the Committee as chairperson.
The Committee may hold meetings at such times and places as it
shall determine. The acts of a majority of the Committee members
present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Committee members, shall be valid
acts of the Committee.
C. Committee Responsibilities. Subject to the
provisions of the Plan, the Committee shall have full authority
and discretion to take the following actions:
1. To interpret the Plan and to apply its provisions;
2. To adopt, amend or rescind rules, procedures and
forms relating to the Plan;
3. To authorize any person to execute, on behalf of
the Company, any instrument required to carry out
the purposes of the Plan;
4. To determine when Options are to be granted under
the Plan;
5. To select the Optionees;
6. To determine the number of Shares to be made
subject to each Option;
7. To prescribe the terms and conditions of each
Option, including (without limitation) the Exercise
Price, and to specify the provisions of the Stock
Option Agreement relating to such Option;
8. To amend any outstanding Stock Option Agreement,
subject to applicable legal restrictions and to the
consent of the Optionee who entered into such
agreement;
9. To prescribe the consideration for the grant of
each Option under the Plan and to determine the
sufficiency of such consideration; and
10. To take any other actions deemed necessary or
advisable for the administration of the Plan.
All decisions, interpretations and other actions of the Committee
shall be final and binding on all Optionees and all persons
deriving their rights from an Optionee. No member of the
Committee shall be liable for any action that he or she has taken
or has failed to take in good faith with respect to the Plan or
any Option.
SECTION IV. ELIGIBILITY.
Employees. Employees shall be eligible for designation
as Optionees by the Committee.
SECTION V. STOCK SUBJECT TO PLAN.
A. Basic Limitation. Shares offered under the Plan
shall be authorized but unissued Shares or treasury Shares. The
aggregate number of Shares which may be issued under the Plan
upon exercise of Options shall not exceed 238,000 Shares, subject
to adjustment pursuant to Section VIII. The number of Shares
which are subject to Options outstanding at any time under the
Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan. FHC, during the term of
the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.
B. Additional Shares. In the event that any
outstanding Option for any reason expires or is canceled or
otherwise terminated, the Shares allocable to the unexercised
portion of such Option shall again be available for the purposes
of the Plan. In the event that Shares issued under the Plan are
acquired by FHC pursuant to a forfeiture provision, a right of
repurchase or a right of first refusal, such Shares shall again
be available for the purposes of the Plan.
SECTION VI. TERMS AND CONDITIONS OF OPTIONS.
A. Terms.
1. Stock Option Agreement. Each grant of an Option
under the Plan shall be evidenced by a Stock Option Agreement
between the Optionee and the Company. Such Option shall be
subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which the
Committee deems appropriate for inclusion in a Stock Option
Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical.
2. Number of Shares. Each Stock Option Agreement shall
specify the number of shares that are subject to the Option
and,shall provide for the adjustment of such number in accordance
with Section VIII.
3. Exercise Price. Each Stock Option Agreement shall
specify the Exercise Price which shall be 100 percent of the Fair
Market Value of a Share on the date of grant. The Exercise Price
shall be payable in a form described in Section VII.
4. Exercisability and Term. Each Stock Option
Agreement shall specify the date when all or any installment of
the Option is to become exercisable. An Option shall become
exercisable at least as rapidly as set forth in the following
schedule:
Anniversary of Percentage of
Date of Grant Shares Exercisable
First 33-1/3%
Second 66-2/3%
Third 100%
Subject to the preceding sentence, the vesting of any Option
shall be determined by the Committee at its sole discretion. A
Stock Option Agreement may provide for accelerated exercisability
in the event of the Optionee's death, Total and Permanent
Disability or retirement, a change in control with respect to FHC
or other events. The Stock Option Agreement shall also specify
the term of the Option. The term shall not exceed 10 years from
the date of grant. Subject to the preceding sentence, the
Committee at its sole discretion shall determine when an Option
is to expire.
B. Withholding Taxes. As a condition to the exercise
of an Option, the Optionee shall make such arrangements as the
Committee may require for the satisfaction of any federal, state,
local or foreign withholding tax obligations that may arise in
connection with such exercise.
C. Nontransferability. No Option shall be transferable
by the Optionee other than by will, by a beneficiary designation
executed by the Optionee and delivered to the Company or by the
laws of descent and distribution. An Option may be exercised
during the lifetime of the Optionee only by him or her or by his
or her guardian or legal representative. No Option or interest
therein may be transferred, assigned, pledged or hypothecated by
the Optionee during his or her lifetime, whether by operation of
law or otherwise, or be made subject to execution, attachment or
similar process.
D. Termination of Service (Except by Death). If an
Optionee's Service terminates for any reason other than his or
her death, then his or her Option(s) shall expire on the earliest
of the following occasions:
1. The expiration date determined pursuant to
Subsection A(4) above;
2. The date 90 days after the termination of his or
her Service for any reason other than Total and
Permanent Disability; or
3. The date 12 months after the termination of his or
her Service by reason of Total and Permanent
Disability.
The Optionee may exercise all or part of his or her Option(s) at
any time before the expiration of such Option(s) under the
preceding sentence, but only to the extent that such Option(s)
had become exercisable before his or her Service terminated or
became exercisable as a result of the termination. The balance
of such Option(s) shall lapse when the Optionee's Service
terminates. In the event that the Optionee dies after the
termination of his or her Service but before the expiration of
his or her Option(s), all or part of such Option(s) may be
exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person who has
acquired such Option(s) directly from him or her by bequest,
beneficiary designation or inheritance, but only to the extent
that such Option(s) had become exercisable before his or her
Service terminated or became exercisable as a result of the
termination.
E. Leaves of Absence. For purposes of Subsection D
above, Service shall be deemed to continue while the Optionee is
on a military leave, sick leave or other bona fide leave of
absence (as determined by the Committee) which has been approved
by the Company in writing.
F. Death of Optionee. If an Optionee dies while he or
she is in Service, then his or her Option(s) shall expire on the
earlier of the following dates:
1. The expiration date determined pursuant to
Subsection A(4) above; or
2. The date 12 months after his or her death.
All or part of the Optionee's Option(s) may be exercised at any
time before the expiration of such Option(s) under the preceding
sentence by the executors or administrators of his or her estate
or by any person who has acquired such Option(s) directly from
him or her by bequest, beneficiary designation or inheritance,
but only to the extent that such Option(s) had become exercisable
before his or her death or became exercisable as a result of his
or her death. The balance of such Option(s) shall lapse when the
Optionee dies.
G. No Rights as a Stockholder. An Optionee, or a
transferee of an Optionee, shall have no rights as a stockholder
of FHC with respect to any Shares covered by his or her Option
until the date of the issuance of a stock certificate for such
Shares. No adjustments shall be made, except as provided in
Section VIII.
H. Modification, Extension and Assumption of Options.
Within the limitations of the Plan, the Committee may modify,
extend or assume outstanding Options or may accept the
cancellation of outstanding Options (whether granted by the
Company or another issuer) in return for the grant of new Options
for the same or a different number of Shares and at the same or a
different price. The foregoing notwithstanding, no modification
of an Option shall, without the consent of the Optionee, impair
his or her rights or increase his or her obligations under such
Option.
I. Restrictions on Transfer of Shares. Any Shares
issued upon exercise of an Option shall be subject to such
special forfeiture conditions, rights of repurchase, rights of
first refusal and other transfer restrictions as the Committee
may determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to
any general restrictions that may apply to all holders of Shares.
SECTION VII. PAYMENT FOR SHARES.
A. General Rule. The entire Exercise Price of Shares
issued under the Plan shall be payable in lawful money of the
United States of America at the time when such Shares are
purchased, except that the Committee (at its sole discretion) may
accept payment in one or more of the forms described below:
1. Surrender of Stock. To the extent that this
Subsection (1) is applicable, payment may be made all or in part
with Shares which have already been owned by the optionee or his
or her representative for more than twelve months and which are
surrendered to FHC in good form for transfer. Such Shares shall
be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
2. Exercise/Sale. To the extent that this Subsection
(2) is applicable, payment may be made by the delivery (on a form
prescribed by FHC) of an irrevocable direction to a securities
broker approved by FHC to sell Shares and to deliver all or part
of the sales proceeds to FHC in payment of all or part of the
Exercise Price and any withholding taxes.
3. Exercise/Pledge. To the extent that this Subsection
(3) is applicable, payment may be made by the delivery (on a form
prescribed by FHC) of an irrevocable direction to pledge Shares
to a securities broker or lender approved by FHC, as security for
loan and to deliver all or part of the loan proceeds to FHC in
payment of all or part of the Exercise Price and any withholding
taxes.
4. Promissory Note. To the extent that this Subsection
(4) is applicable, a portion of the Exercise Price of Shares
issued under the Plan may be payable by a full-recourse
promissory note, provided that (i) the par value of such Shares
must be paid in lawful money of the United States of America at
the time when such Shares are purchased, (ii) the Shares are
security for payment of the principal amount of the promissory
note and interest thereon, and (iii) the interest rate payable
under the terms of the promissory note shall be no less than the
minimum rate (if any) required to avoid the imputation of
additional interest under the Code. Subject to the foregoing,
the Committee (at its sole discretion) shall specify the term,
interest rate, amortization requirements (if any), and other
provisions of such note.
SECTION VIII. ADJUSTMENT OF SHARES.
A. General. In the event of a subdivision of the
outstanding Stock, a declaration of a dividend payable in Shares,
a declaration of a dividend payable in a form other than Shares
in an amount that has a material effect on the value of Shares, a
combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall
make appropriate adjustments in one or more of (i) the number of
Shares available for future grants under Section V, (ii) the
number of Shares covered by each outstanding Option or (iii) the
Exercise Price under each outstanding Option.
B. Merger; Consolidation. In the event that FHC is a
party to a merger or consolidation, outstanding Options shall be
subject to the agreement of merger or consolidation. Such
agreement may provide, without limitation, (i) for the assumption
of outstanding Options by the surviving corporation or its
parent, (ii) for their continuation by FHC, if FHC is a surviving
corporation, (iii) for payment of a cash settlement equal to the
difference between the amount to be paid for one Share under such
agreement and the Exercise Price or (iv) for the acceleration of
their exercisability followed by the cancellation of Options not
exercised. In the case of Options that have been outstanding for
less than 12 months, a cancellation need not be preceded by an
acceleration.
C. Reservation of Rights. Except as provided in this
Section VIII, an Optionee shall have no rights by reason of (i)
any subdivision or consolidation of shares of stock of any class,
(ii) the payment of any dividend or (iii) any other increase or
decrease in the number of shares of stock of any class. Any
issue by FHC of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in
any way the right or power of FHC or the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION IX. SECURITIES LAWS.
Shares shall not be issued under the Plan unless the
issuance and delivery of such Shares complies with (or is exempt
from) all applicable requirements of law, including (without
limitation) the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which
FHC's securities may then be listed.
SECTION X. NO RIGHTS TO SERVICE.
No provision of the Plan, nor any Option granted under
the Plan, shall be construed to give any person any right to
become, to be treated as or to remain an Employee. FHC, the
Company and subsidiaries and affiliates of the Company reserve
the right to terminate any person's Service at any time and for
any reason.
SECTION XI. DURATION AND AMENDMENTS.
A. Term of the Plan. The Plan is effective as of
__________, 1992. The Plan shall terminate automatically on
__________, 2002 and may be terminated on any earlier date
pursuant to Subsection B below.
B. Right to Amend or Terminate the Plan. The Committee
may amend, suspend or terminate the Plan at any time and for any
reason except the consent of FHC shall be required to add shares
available for the grant of options.
C. Effect of Amendment or Termination. No Shares shall
be issued under the Plan after the termination thereof, except
upon exercise of an Option granted prior to such termination.
The termination of the Plan, or any amendment thereof, shall not
affect any Share previously issued or any Option previously
granted under the Plan.
SECTION XII. EXECUTION.
FHC has caused its authorized officer to execute this
Plan as of May 19, 1992.
FOUNDATION HEALTH CORPORATION
By: /s/ Daniel D. Crowley
1992 NONSTATUTORY STOCK OPTION PLAN OF FOUNDATION HEALTH CORPORATION:
NONSTATUTORY STOCK OPTION AGREEMENT
Foundation Health Corporation, a Delaware corporation ("FHC"),
hereby grants an option to purchase shares of its common stock to
the optionee named below. The terms and conditions of the option
are set forth in this cover sheet, in the attachment and in the
1992 Nonstatutory Stock Option Plan of Foundation Health
Corporation (the "Plan").
Date of Option Grant: _______________, 199_
Name of Optionee: ________________________________________
Optionee's Social Security Number: ____ - ___ - _____
Number of Shares of FHC Common Stock Covered by Option: _________
Exercise Price per Share: $________._____
Vesting Start Date: _______________, 199__
By signing this cover sheet, you agree to all of the terms and
conditions described in the attachment and in the Plan.
Optionee: __________________________________________________________
Signature
FHC: _______________________________________________________________
Signature
Title:______________________________________
Attachment
1992 NONSTATUTORY STOCK OPTION PLAN OF FOUNDATION HEALTH CORPORATION:
NONSTATUTORY STOCK OPTION AGREEMENT
Nonstatutory Stock Option. This option is not intended
to be an incentive stock option under section 422 of the Internal
Revenue Code.
Vesting. Your right to exercise this option shall
accrue in installments as follows:
Anniversary of Percentage of
Date of Grant Shares Exercisable
First 33-1/3%
Second 66-2/3%
Third 100%
No additional shares become exercisable after your
service has terminated for any reason.
Term. Your option will expire in any event at the close
of business on the day before the 10th anniversary of the Date of
Grant, as shown on the cover sheet. (It will expire earlier if
your service terminates, as described below.)
Regular Termination. If your service as an employee of
Associated Claims Management, Inc. of California (the "Company")
(or any subsidiary or affiliate) terminates for any reason except
death or total and permanent disability, then your option will
expire at the close of business on the 90th day after your
termination date. During such period you may exercise the vested
portion of your option.
The Company determines when your service terminates for
this purpose.
Death. If you die while an employee of the Company (or
any subsidiary or affiliate), then your option vill expire at the
close of business on the date twelve months after the date of
death. During that twelve-month period, your estate or heirs may
exercise the vested portion of your option.
Disability. If your service as an employee of the
Company (or any subsidiary or affiliate) terminates because of
your total and permanent disability, then your option will expire
at the close of business on the date twelve months after your
termination date.
"Total and permanent disability" means that you are
unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which
can be expected to result in death or which has lasted, or can be
expected to last, for a continuous period of not less than one
year.
Leaves of Absence. For purposes of this option, your
service does not terminate when you go on a military leave, a
sick leave or another bona fide leave of absence, if the leave
was approved by the Company in writing. But your service
terminates when the approved leave ends, unless you immediately
return to active work.
The Company determines which leaves count for this
purpose.
Restrictions on Exercise. The Company will not permit
you to exercise this option if the issuance of shares at that
time would violate any law or regulation.
Notice of Exercise. When you wish to exercise this
option, you must notify FHC by filing the proper "Notice of
Exercise" form at the address given on the form. Your notice
must specify how many shares you wish to purchase. Your notice
must also specify how your shares should be registered (in your
name only or in your and your spouse's names as community
property or as joint tenants with right of survivorship). The
notice will be effective when it is received by FHC.
If someone else wants to exercise this option after your
death, that person must prove to FHC's satisfaction that he or
she is entitled to do so.
Form of Payment. When you submit your notice of
exercise, you must include payment of the exercise price for the
shares you are purchasing. Payment may be made in one or a
combination of two or more) of the following forms:
1. Your personal check, a cashier's check or a money
order.
2. Irrevocable directions to a securities broker
approved by FHC to sell your option shares and to
deliver all or a portion of the sale proceeds to
FHC in payment of the option price. (The balance
of the sale proceeds, if any, will be delivered to
you.) The directions must be given by signing a
"Notice of Exercise" form provided by FHC.
3. Certificates for FHC stock that you have owned for
at least twelve months, along with any forms needed
to effect a transfer of the shares to FHC. The
value of the shares, determined as of the effective
date of the option exercise, will be applied to the
option price.
Withholding Taxes. You will not be allowed to exercise
this option unless you make acceptable arrangements to pay any
withholding taxes that may be due as a result of the option
exercise.
Restrictions on Resale. By signing this Agreement, you
agree not to sell any option shares at a time when applicable
laws or FHC policies prohibit a sale. This restriction will
apply as long as you are an employee of the Company (or any
subsidiary or affiliate).
Transfer of Option. Prior to your death, only you may
exercise this option. You cannot transfer or assign this option.
For instance, you may not sell this option or use it as security
for a loan. If you attempt to do any of these things, this
option will immediately become invalid. You may, however,
dispose of this option in your will.
Regardless of any marital property settlement agreement,
FHC is not obligated to honor a notice of exercise from your
former spouse, nor is FHC obligated to recognize your former
spouse's interest in your option in any other way.
Retention Rights. Your option or this Agreement do not
give you the right to be retained by FHC, the Company (or any
subsidiary or affiliate) in any capacity. FHC, the Company (and
any subsidiary or affiliate) reserve the right to terminate your
service at any time, with or without cause.
Stockholder Rights. You, or your estate or heirs, have
no rights as a stockholder of FHC until a certificate for your
option shares has been issued. No adjustments are made for
dividends or other rights if the applicable record date occurs
before your stock certificate is issued, except as described in
the Plan.
Adjustments. In the event of a stock split, a stock
dividend or a similar change in FHC stock, the number of shares
covered by this option and the exercise price per share may be
adjusted pursuant to the Plan.
Applicable Law. This Agreement will be interpreted and
enforced under the laws of the State of California.
The Plan and Other Agreements. The text of the Plan is
incorporated in this Agreement by reference.
This Agreement and the Plan constitute the entire
understanding between you and FHC regarding this option. Any
prior agreements, commitments or negotiations concerning this
option are superseded.
By signing the cover sheet of this Agreement, you agree
to all of the terms and conditions described above and in the
Plan.
Exhibit 4.7
1989 STOCK PLAN OF
BUSINESS INSURANCE CORPORATION
As Amended and Restated, September 22, 1992
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was established in 1989 to offer
selected employees, directors, advisers and consultants
an opportunity to acquire a proprietary interest in the
success of the Company, or to increase such interest, by
purchasing Shares of the Company's Common Stock. The Plan
provides both for the direct award or sale of Shares and
for the grant of Options to purchase Shares. Options
granted under the Plan may include Nonstatutory Options
as well as ISOs intended to qualify under section 422 of
the Code.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the
Board of Directors of the Company, as constituted from
time to time.
(b) "Code" shall mean the Internal
Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee of
the Board of Directors, as described in Section 3(a).
(d) "Company" shall mean Business
Insurance Corporation, a Delaware corporation.
(e) "Employee" shall mean (i) any
individual who is a common-law employee of the Company or
of a Subsidiary, (ii) a member of the Board of Directors
and (iii) an independent contractor or advisor who
performs services for the Company or a Subsidiary.
Service as a member of the Board of Directors or as an
independent contractor or advisor shall be considered
employment for all purposes of the Plan except the second
sentence of Section 4(a).
(f) "Exercise Price" shall mean the
amount for which one Share may be purchased upon exercise
of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(g) "Fair Market Value" shall mean the
fair market value of a Share, as determined by the
Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(h) "ISO" shall mean an employee
incentive stock option described in section 422 of the
Code.
(i) "Nonstatutory Option" shall mean an
employee stock option not described in section 422 of the
Code.
(j) "Offeree" shall mean an individual to
whom the Committee has offered the right to acquire
Shares under the Plan (other than upon exercise of an
Option).
(k) "Option" shall mean an ISO or
Nonstatutory Option granted under the Plan and entitling
the holder to purchase Shares.
(l) "Optionee" shall mean an individual
who holds an Option.
(m) "Plan" shall mean this 1989 Stock
Plan of Business Insurance Corporation, as amended.
(n) "Purchase Price" shall mean the
consideration for which one Share may be acquired under
the Plan (other than upon exercise of an Option), as
specified by the Committee.
(o) "Service" shall mean service as an
Employee.
(p) "Share" shall mean one share of
Stock, as adjusted in accordance with Section 9 (if
applicable).
(q) "Stock" shall mean the Common Stock
of the Company.
(r) "Stock Option Agreement" shall mean
the agreement between the Company and an Optionee which
contains the terms, conditions and restrictions
pertaining to his Option.
(s) "Stock Purchase Agreement" shall mean
the agreement between the Company and an Offeree who
acquires Shares under the Plan which contains the terms,
conditions and restrictions pertaining to the acquisition
of such Shares.
(t) "Subsidiary" shall mean any
corporation, if the Company and/or more other
Subsidiaries own not less than 50 percent of the total
combined voting power of all classes of outstanding stock
of such corporation. A corporation that attains the
status of a Subsidiary on a date after the adoption of
the Plan shall be considered a Subsidiary commencing as
of such date.
(u) "Total and Permanent Disability"
shall mean that the Optionee is unable to perform his
customary duties as an Employee by reason of any
medically determinable physical or mental impairment
which can be expected to result in death or which has
lasted, or can be expected to last, for a continuous
period of not less than six months.
SECTION 3. ADMINISTRATION.
(a) Committee Membership. The Plan shall
be administered by the Board of Directors unless and
until the Board of Directors delegates administration to
a committee, as provided in this Section 3. The Board of
Directors may delegate administration of the Plan to a
committee composed of not fewer than two (2) directors
(the "Committee"), all of the members of which Committee
shall be disinterested persons, if required and as
defined by the provisions of subparagraph 3(b). If
administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board of
Directors, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. Additionally,
prior to the date of the first registration of an equity
security of the Company under Section 12 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and notwithstanding anything to the
contrary contained herein, the Board of Directors may
delegate administration of the Plan to any person or
persons and the term "Committee" shall apply to any
person or persons to whom such authority has been
delegated.
(b) The term "disinterested person," as
used in this Plan, shall mean a director: (i) who was not
during the one (1) year prior to service as an
administrator of the Plan granted or awarded equity
securities pursuant to the Plan or any other plan of the
Company or any of its affiliates entitling the
participants therein to acquire equity securities of the
Company or any of its affiliates except as permitted by
Rule 16b-3(c)(2)(i) ("Rule 16b-3(c)(2)(i)") promulgated
under the Exchange Act; or (ii) who is otherwise
considered to be a "disinterested person" in accordance
with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and
Exchange Commission. Any such person shall otherwise
comply with the requirements of Rule 16b-3 promulgated
under the Exchange Act.
(c) Any requirement that an administrator
of the Plan be a "disinterested person" shall not apply
(i) prior to the date of the first registration of an
equity security of the Company under Section 12 of the
Exchange Act, or (ii) if the Board of Directors or the
Committee expressly declares that such requirement shall
not apply.
(d) Committee Procedures. The Board of
Directors shall designate one of the members of the
Committee as chairman. The Committee may hold meetings at
such times and place as it shall determine. The acts of a
majority of the Committee members present at meetings at
which a quorum exists, or acts reduced to or approved in
writing by all Committee members, shall be valid acts of
the Committee.
(e) Committee Responsibilities. Subject
to the provisions of the Plan, the Board of Directors, or
if one be appointed, the Committee, shall have full
authority and discretion to take the following actions:
(i) To interpret the Plan and
to apply its provisions;
(ii) To adopt, amend or rescind
rules, procedures and forms relating to the
Plan;
(iii) To authorize any person to
execute, on behalf of the Company, any
instrument required to carry out the purposes
of the Plan;
(iv) To determine when Shares
are to be awarded or offered for sale and when
Options are to be granted under the Plan;
(v) To select the Offerees and
Optionees;
(vi) To determine the number of
Shares to be offered to each Offeree or to be
made subject to each Option;
(vii) To prescribe the terms and
conditions of each award or sale of Shares,
including (without limitation) the Purchase
Price, and to specify the provisions of the
Stock Purchase Agreement relating to such award
or sale;
(viii) To prescribe the terms and
conditions of each Option, including (without
limitation) the Exercise Price, to determine
whether such Option is to be classified as an
ISO or as a Nonstatutory Option, and to specify
the provisions of the Stock Option Agreement
relating to such Option;
(ix) To amend any outstanding
Stock Purchase Agreement or Stock Option
Agreement, subject to applicable legal
restrictions and to the consent of the Offeree
or Optionee who entered into such agreement;
(x) To prescribe the
consideration for the grant of each Option or
other right under the Plan and to determine the
sufficiency of such consideration; and
(xi) To take any other actions
deemed necessary or advisable for the
administration of the Plan.
All decisions, interpretations and other actions of the
Board of Directors or Committee shall be final and
binding on all Offerees, all Optionees, and all persons
deriving their rights from an Offeree or Optionee. No
member of the Board of Directors or Committee shall be
liable for any action that he has taken or has failed to
take in good faith with respect to the Plan, any Option,
or any right to acquire Shares under the Plan.
(f) Financial Reports. Not less often
than annually, the Company shall furnish to Optionees and
Offerees reports of its financial condition, unless such
optionees and Offerees have access to equivalent
information through their employment. Such reports need
not be audited.
SECTION 4. ELIGIBILITY.
(a) General Rule. Only Employees shall be
eligible for designation as Optionees or Offerees by the
Committee. In addition, only individuals who are employed
as common-law employees by the Company or a Subsidiary
shall be eligible for the grant of ISOs.
(b) Directors. A director shall in no
event be eligible for the benefits of the Plan unless at
the time discretion is exercised in the selection of the
director as a person to whom options may be granted, or
in the determination of the number of shares which may be
covered by options granted to the director: (i) the Board
of Directors has delegated its discretionary authority
over the Plan to a committee which consists solely of
"disinterested persons" as defined in subparagraph 3(b);
(ii) the Plan otherwise complies with the requirements of
Rule 16b-3 promulgated under the Exchange Act, as from
time to time in effect; or (iii) the Board of Directors
or the Committee expressly declares that such requirement
will not apply. The Board of Directors shall otherwise
comply with the requirements of Rule 16b-3 promulgated
under the Exchange Act, as from time to time in effect,
unless the Board or the committee expressly declares that
such requirement will not apply. This subparagraph 4(b)
shall not apply prior to the date of the first
registration of an equity security of the Company under
Section 12 of the Exchange Act.
(c) Ten-Percent Shareholders. An Employee
who owns more than 10 percent of the total combined
voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible
for designation as an Optionee or Offeree unless (i) the
Exercise Price or Purchase Price (if any) is at least 110
percent of the Fair Market Value of a Share on the date
of grant and (ii) in the case of an ISO, such ISO by its
terms is not exercisable after the expiration of five
years from the date of grant.
(d) Attribution Rules. For purposes of
Subsection (c) above, in determining stock ownership, an
Employee shall be deemed to own the stock owned, directly
or indirectly, by or for his brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly
or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or
beneficiaries. Stock with respect to which such Employee
holds an option shall not be counted.
(e) Outstanding Stock. For purposes of
Subsection (c) above, "outstanding stock" shall include
all stock actually issued and outstanding immediately
after the grant. "Outstanding stock" shall not include
shares authorized for issuance under outstanding options
held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered
under the Plan shall be authorized but unissued Shares or
treasury Shares. The aggregate number of Shares which may
be issued under the Plan (upon exercise of Options or
other rights to acquire Shares) shall not exceed 514,000
Shares, subject to adjustment pursuant to Section 9,
provided, however, that the number of Shares which may be
issued from time to time under the Plan (upon exercise of
Options or other rights to purchase Shares) shall not in
the aggregate (inclusive of prior outstanding issuances
under the Plan) exceed 30% of the then (upon the date of
such issuance) outstanding stock of the Company (treating
for purposes of this computation, all shares of Preferred
Stock of the Company as having been converted into Stock
on the date of such issuance). The number of Shares which
are subject to Options or other rights outstanding at any
time under the Plan shall not exceed the number of Shares
which then remain available for issuance under the Plan.
The Company, during the term of the Plan, shall at all
times reserve and keep available sufficient Shares to
satisfy the requirements of the Plan.
(b) Additional Shares. In the event that
any outstanding Option or other right for any reason
expires or is cancelled or otherwise terminated, the
Shares allocable to the unexercised portion of such
Option or other right shall again be available for the
purposes of the Plan. In the event that Shares issued
under the Plan are reacquired by the Company pursuant to
a forfeiture provision, a right of repurchase or a right
of first refusal, such Shares shall again be available
for the purposes of the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) Stock Purchase Agreement. Each award
or sale of Shares under the Plan (other than upon
exercise of an option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company.
Such award or sale shall be subject to all applicable
terms and conditions of the Plan and may be subject to
any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate
for inclusion in a Stock Purchase Agreement. The
provisions of the various Stock Purchase Agreements
entered into under the Plan need not be identical.
(b) Duration of Offers and
Nontransferability of Rights. Any right to acquire Shares
under the Plan (other than an Option) shall automatically
expire if not exercised by the Offeree within 30 days
after the grant of such right was communicated to him by
the Committee. Such right shall not be transferable and
shall be exercisable only by the Offeree to whom such
right was granted.
(c) Purchase Price. The Purchase Price of
Shares to be offered under the Plan shall not be less
than 85 percent of the Fair Market Value of such Shares,
except as otherwise provided in Section 4(c). Subject to
the preceding sentence, the Purchase Price shall be
determined by the Committee as its sole discretion. The
Purchase Price shall be payable in a form described in
Section 8.
(d) Withholding Taxes. As a condition to
the purchase of Shares, the Offeree shall make such
arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding
tax obligations that may arise in connection with such
purchase.
(e) Restrictions on Transfer of Shares.
Any Shares awarded or sold under the Plan shall be
subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock
Purchase Agreement and shall apply in addition to any
general restrictions that may apply to all holders of
Shares. Any service-based vesting conditions shall not be
less rapid than the schedule set forth in Section 7(e).
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of
an Option under the Plan shall be evidenced by a Stock
Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other
terms and conditions which are not inconsistent with the
Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of
the various Stock Option Agreements entered into under
the Plan need not be identical.
(b) Number of Shares. Each Stock Option
Agreement shall specify the number of Shares that are
subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9.
The Stock Option Agreement shall also specify whether the
Option is an ISO or a Nonstatutory Option.
(c) Exercise Price. Each Stock Option
Agreement shall specify the Exercise Price. The Exercise
Price of an ISO shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(c). The Exercise Price
of a Nonstatutory Option shall not be less than 85
percent of the Fair Market Value of a Share on the date
of grant, except as otherwise provided in Section 4(c).
Subject to the preceding two sentences, the Exercise
Price under any Option shall be determined by the
Committee at its sole discretion. The Exercise Price
shall be payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to
the exercise of an Option, the Optionee shall make such
arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding
tax obligations that may arise in connection with such
exercise. The Optionee shall also make such arrangements
as the Committee may require for the satisfaction of any
federal, state or local withholding tax obligations that
may arise in connection with the disposition of Shares
acquired by exercising an Option.
(e) Exercisability and Term. Each Stock
Option Agreement shall specify the date when all or any
installment of the Option is to become exercisable. An
Option shall become exercisable at least as rapidly as
set forth in the following schedule:
Anniversary of Percentage of Shares
Date of Grant Exercisable
First . . . . . . . . . . . 20%
Second . . . . . . . . . 40%
Third . . . . . . . . . . 60%
Fourth . . . . . . . . . 80%
Fifth . . . . . . . . . . 100%
Subject to the preceding sentence, the vesting of any
option shall be determined by the Committee at its sole
discretion. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's
death, Total and Permanent Disability, retirement or
other events. The Stock Option Agreement shall also
specify the term of the Option. The term shall not exceed
10 years from the date of grant, except as otherwise
provided in Section 4(c). Subject to the preceding
sentence, the Committee at its sole discretion shall
determine when an Option is to expire.
(f) Nontransferability. During an
Optionee's lifetime, his Option(s) shall be exercisable
only by him and shall not be transferable. In the event
of an Optionee's death, his Option(s) shall not be
transferable other than by will or by the laws of descent
and distribution.
(g) Termination of Service (Except by
Death). If an Optionee's Service terminates for any
reason other than his death, then his Option(s) shall
expire on the earliest of the following occasions:
(i) The expiration date
determined pursuant to Subsection (e) above;
(ii) The date 90 days after the
termination of his Service for any reason other
than Total and Permanent Disability; or
(iii) The date six months after
the termination of his Service by reason of
Total and Permanent Disability.
The Optionee may exercise all or part of his Option(s) at
any time before the expiration of such Option(s) under
the preceding sentence, but only to the extent that such
Option(s) had become exercisable before his Service
terminated or became exercisable as a result of the
termination. The balance of such Option(s) shall lapse
when the Optionee's Service terminates. In the event that
the Optionee dies after the termination of his Service
but before the expiration of his Option(s), all or part
of such Option(s) may be exercised (prior to expiration)
by the executors or administrators of the Optionee's
estate or by any person who has acquired such Option(s)
directly from him by bequest or inheritance, but only to
the extent that such Option(s) had become exercisable
before his Service terminated or became exercisable as a
result of the termination.
(h) Leaves of Absence. For purposes of
Subsection (g) above, Service shall be deemed to continue
while the Optionee is on military leave, sick leave or
other bona fide leave of absence (as determined by the
Committee). The foregoing notwithstanding, in the case of
an ISO granted under the Plan, Service shall not be
deemed to continue beyond the first 90 days of such
leave, unless the Optionee's reemployment rights are
guaranteed by statute or by contract.
(i) Death of Optionee. If an Optionee
dies while he is in Service, then his Option(s) shall
expire on the earlier of the following dates:
(i) The expiration date
determined pursuant to Subsection (e) above; or
(ii) The date six months after
his death. All or part of the Optionee's
Option(s) may be exercised at any time before
the expiration of such Option(s) under the
preceding sentence by the executors or
administrators of his estate or by any person
who has acquired such Option(s) directly from
him by bequest or inheritance, but only to the
extent that such Option(s) had become
exercisable before his death or became
exercisable as a result of his death. The
balance of such Option(s) shall lapse when the
Optionee dies.
(j) No Rights as a Stockholder. An
Optionee, or a transferee of an Optionee, shall have no
rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a
stock certificate for such Shares. No adjustments shall
be made, except as provided in Section 9.
(k) Modification, Extension and Renewal
of Options. Within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options
or may accept the cancellation of outstanding Options (to
the extent not previously exercised) in return for the
grant of new Options at the same or a different price.
The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair
his rights or increase his obligations under such Option.
(l) Restrictions on Transfer of Shares.
Any Shares issued upon exercise of an Option shall be
subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock
Option Agreement and shall apply in addition to any
general restrictions that may apply to all holders of
Shares. Any service-based vesting conditions shall not be
less rapid than the schedule set forth in Subsection (e)
above.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Purchase
Price or Exercise Price of Shares issued under the Plan
shall be payable in lawful money of the United States of
America at the time when such Shares are purchased,
except as provided in Subsections (b) and (c) below.
(b) Surrender of Stock. To the extent
that a Stock Option Agreement so provides, payment may be
made all or in part with Shares which have already been
owned by the Optionee or his representative for more than
12 months and which are surrendered to the Company in
good form for transfer. Such Shares shall be valued at
their Fair Market Value on the date when the new Shares
are purchased under the Plan.
(c) Services Rendered. At the discretion
of the Committee, Shares may be awarded under the Plan in
consideration of services rendered to the Company or a
Subsidiary prior to the award. If Shares are awarded
without the payment of a Purchase Price in cash, the
Committee shall make a determination (at the time of the
award) of the value of the services rendered by the
Offeree and the sufficiency of the consideration to meet
the requirements of Section 6(c).
SECTION 9. ADJUSTMENT OF SHARES.
(a) General. In the event of a
subdivision of the outstanding Stock, a declaration of a
dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has
a material effect on the value of Shares, a combination
or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of
Shares, a recapitalization or a similar occurrence, the
Committee shall make appropriate adjustments in one or
more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares covered
by each outstanding Option or (iii) the Exercise Price
under each outstanding Option.
(b) Reorganizations. In the event that
the Company is a party to a merger or other
reorganization, outstanding Options shall be subject to
the agreement of merger or reorganization. Such agreement
shall provide for the assumption of outstanding Options
by the surviving corporation or its parent or for their
continuation by the Company (if the Company is a
surviving corporation), provided, however, that if
assumption or continuation of the outstanding Options is
not provided by such agreement then the Committee shall
have the option of offering (i) the payment of a cash
settlement equal to the difference between the amount to
be paid for one Share under such agreement and the
Exercise Price, or (ii) the acceleration of their
exercisability followed by the cancellation of Options
not exercised, in all cases without the Optionees'
consent. Any cancellation shall not occur earlier than 30
days after such acceleration is effective and Optionees
have been notified of such acceleration. In the case of
Options that have been outstanding for less than 12
months, a cancellation need not be preceded by an
acceleration.
(c) Reservation of Rights. Except as
provided in this Section 9, an Optionee or Offeree shall
have no rights by reason of any class, the payment of any
dividend or any other increase or decrease in the number
of shares of stock of any class. Any issue by the Company
of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made
with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to
the Plan shall not affect in any way the right or power
of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its
business or assets.
SECTION 10. SECURITIES LAWS.
Shares shall not be issued under the Plan
unless the issuance and delivery of such Shares complies
with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of
1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations, and
the regulations of any stock exchange on which the
Company's securities may then be listed.
SECTION 11. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or
Option granted under the Plan, shall be construed to give
any person any right to become, to be treated as, or to
remain an Employee. The Company and its Subsidiaries
reserve the right to terminate any person's Service at
any time and for any reason.
SECTION 12. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set
forth herein, shall become effective on the date of its
adoption by the Board of Directors, subject to the
approval of the Company's stockholders. In the event that
the stockholders fail to approve the Plan within 12
months after its adoption by the Board of Directors, any
Option grants or Stock awards already made shall be null
and void, and no additional Option grants or Stock awards
shall be made after such date. The Plan shall terminate
automatically 10 years after its adoption by the Board of
Directors and may be terminated on any earlier date
pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan.
The Board of Directors may amend, suspend or terminate
the Plan at any time and for any reason; provided,
however, that any amendment of the Plan which (i)
materially increases the benefits accruing to
participants under the Plan; (ii) materially increases
the number of Shares available for issuance under the
Plan (except as provided in Section 9); (iii) materially
changes the class of persons who are eligible for the
grant of ISOs, or (iv) modifies the Plan in any other way
if such modification requires stockholder approval in
order for the Plan to satisfy the requirements of Section
422(b) of the Code or to comply with the requirements of
Rule 16b-3 promulgated under the Exchange Act, shall be
subject to the approval of the Company's stockholders.
Stockholder approval shall not be required for any other
amendment of the Plan.
(c) Effect of Amendment or Termination.
No Shares shall be issued or sold under the Plan after
the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination
of the Plan, or any amendment thereof, shall not affect
any Share previously issued or any Option previously
granted under the Plan.
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board
of Directors and the Stockholders as amended and restated
on September 22, 1992, the Company has caused its
authorized officer to execute the same.
BUSINESS INSURANCE CORPORATION
By
Exhibit 4.8
MANAGED HEALTH NETWORK, INC.
A DELAWARE CORPORATION
INCENTIVE STOCK OPTION PLAN
**This Plan is not a qualified plan under
the Internal Revenue Code**
1. Purposes of the Plan. The purposes of the
Managed Health Network, Inc., Incentive Stock Option Plan
are to attract and retain the best available people for
positions of substantial responsibility, to provide
additional incentive to the Employees of the Company and
its Subsidiaries, to promote the success of the Company's
business, and to enable the Employees to share in the
growth and prosperity of the Company by providing them
with an opportunity to purchase stock in the Company.
2. Definitions. As used herein, the following
definitions shall apply:
(a) "Board" shall mean the Board of
Directors of the Company.
(b) "Common Stock" shall mean the Capital
Stock of the Company.
(c) "Company" shall mean Managed Health
Network, Inc., a Delaware corporation.
(d) "Committee" shall mean the Committee
appointed by the Board in accordance with Paragraph 4(a)
of the Plan, if, if one is appointed.
(e) "Continuous Employment" or
"Continuous Status As An Employee" shall mean the absence
of any interruption or termination of employment or
service as an Employee by the Company or any Parent or
Subsidiary of the Company which now exists or is
hereafter organized or acquired by or acquires the
Company. Continuous Employment shall not be considered
interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Board or in
the case of transfers between locations of the Company or
between the Company, its Parent, or any of its
Subsidiaries or its successors.
Amended: August 8, 1989
(f) "Employee" shall mean any person,
including officers and directors, employed by the Company
or any of its Subsidiaries or its successors.
(g) "Option" shall mean a stock option
granted pursuant to the Plan.
(h) "Option Agreement" shall mean an
agreement substantially in the form attached hereto as
Exhibit "A," or such other form or forms as the Board
(subject to the terms and conditions of this Plan) may
from time to time approve, evidencing an Option.
(i) "Optioned Stock. shall mean the
Common Stock subject to an Option granted pursuant to the
Plan.
(j) "Optionee" shall mean any Employee
who is granted an Option.
(k) "Outstanding Option" shall mean any
Incentive Stock Option which is issued, valid, and
unexercised.
(l) "Plan" shall mean the Managed Health
Network, Inc., a Delaware corporation, Incentive Stock
Option Plan.
(m) "Share" shall mean shares of the
Common Stock as adjusted in accordance with section 11 of
the Plan.
(n) "Stock Purchase Agreement" shall mean
an agreement substantially in the form attached hereto as
Exhibit "B," or such other form or forms as the Board
(subject to the terms and conditions of this Plan) may
from time to time approve, which is to be executed as a
condition of purchasing Optioned Stock upon exercise of
an Option as provided in the Plan.
(o) "Subsidiary" shall mean a subsidiary
of the Company.
3. Stock Subject to the Plan. Subject to the
provisions of section 11 of the Plan, the maximum
aggregate number of Shares which may be optioned and sold
under the Plan is One Million Nine Hundred Ninety
Thousand (1,990,000) Shares. The Shares may be
authorized, but unissued, or reacquired Shares.
If an Option should expire or become
unexerecisable for any reason without having been
exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been
terminated, return to the Plan and become available for
other option(s) under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be
administered by the Board.
The Board may appoint a Committee
consisting of not less than two (2) members of the Board
to administer the Plan on behalf of the Board, subject to
such terms and conditions as the Board may prescribe.
Once appointed, the Committee shall continue to serve
until otherwise directed by the Board. From time to time,
the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution
therefor, fill vacancies however caused and remove all
members of the Committee, and thereafter, directly
administer the Plan.
Members of the Board who are eligible for
Options or have been granted Options may vote on any
matter affecting the administration of the Plan or the
grant of any Options pursuant to the Plan, except that no
such member may be counted in determining the existence
of a quorum at any meeting of the Board or Committee
during which action is taken with respect to the granting
of Options to him or her.
As used in the Plan and with respect to
any Option, the term "Committee" shall refer to either
the Committee or the Board if no Committee is then
designated.
(b) Powers of the Board. Subject to the
provisions of the Plan, the Board, upon a majority vote,
shall have the authority, in its sole discretion,
consistent with the provisions of the Plan: (i) to
determine the exercise price of the Options to be
granted, (ii) to determine the Employees to whom, and the
time or times at which, Options shall be granted, and the
number of Shares of Optioned Stock to be represented by
each Option; (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan; (iv) to determine
the terms and provisions of each Option granted under
the Plan and of each Stock Purchase Agreement (which need
not be identical with the terms of other Options and
Stock Purchase Agreements) and, with the consent of the
Optionee, to modify or amend each Option and/or Stock
Purchase Agreement; (v) to accelerate the exercise date
of any Option; (vi) to determine whether a stock
repurchase agreement or other agreement will be required
to be executed by the Optionee as a condition of the
exercise of an Option, and to determine the terms and
provisions of any such agreement (which need not be
identical with the terms of any other such agreement)
and, with the consent of the Optionee, to modify or amend
any such agreement; (vii) to construe and interpret the
Plan, the Option Agreements, the Stock Purchase
Agreements and any other agreement approved hereunder;
(viii) to authorize any person to execute on behalf of
the Company any instrument required to effectuate the
grant of an Option previously granted by the Board or to
take such other actions as may be necessary or advisable
with respect to the Company's rights pursuant to the
Option, Stock Purchase Agreement or other agreement
approved hereunder; and (ix) to make such other
determinations and establish such other procedures as it
deems necessary or appropriate for the administration of
the Plan.
(c) Effect of the Board's or Committee's
Decision. All the decisions, determinations and
interpretations of the Board or the Committee shall be
final and binding on all Optionees and any other proper
holders of any Options granted under the Plan.
5. Eligibility. Options under the Plan may be
granted only to Employees as designated by the Board in
its discretion. An Employee who has been granted an
Option may, if he/she is otherwise eligible, be granted
an additional Option or Options. Options may be granted
to one or more Employees without being granted to other
eligible Employees, as the Board may determine in its
sole discretion.
6. Term of Plan. The Plan shall become
effective immediately upon the earlier to occur of its
adoption by the Board or its approval by vote on the
adoption of the Plan. It shall continue in effect for a
term of ten (10) years unless sooner terminated under
sections 13 or 17 of the Plan.
7. Provisions and Term of Options.
(a) As provided in Paragraph 4 of this
Plan and subject to any limitations specified herein, the
Board shall have the authority to determine the terms and
provisions of any Option granted under the Plan, the
Stock Purchase Agreement or of any other agreement
required to be executed in connection with the exercise
of any Option. Each Option granted pursuant to this Plan
shall be evidenced by an Option Agreement.
(b) The term of each Option shall be ten
(10) years from the date of grant thereof, except that
the term of any Option may be less than ten (10) years if
specified by the Board upon grant of the Option and set
forth in the Option Agreement.
8. Option Price and Consideration.
(a) The exercise price per Share for the
Shares to be issued pursuant to an Option granted under
the Plan shall be such price as is determined by the
Board.
(b) The consideration to be paid for the
Shares to be issued upon exercise of an Option, including
the method of payment, shall be determined by the Board
and may consist entirely of cash, promissory notes, or by
surrender of shares having a fair market value on the
date of surrender equal to the purchase price of the
Shares as to which said option shall be exercised, a
combination thereof, or such other consideration and
method of payment for the issuance of Shares to the
extent permitted by the Delaware General Corporation Law.
The determination of consideration shall be deemed to be
such as may be reasonably expected to benefit the
Company.
If the consideration for the exercise of
an Option is a promissory note, it shall be a full
recourse promissory note executed to the Optionee,
bearing interest at the rate of ten percent (10%) per
annum, but in no event shall the rate of interest exceed
the highest rate permitted by law. In such an instance,
the Company may retain the Shares purchased upon exercise
of the Option in escrow as security for payment of the
promissory note.
If the consideration for the exercise of
an Option is the surrender of previously acquired and
owned Shares, the Optionee shall be required to make
representations and warranties satisfactory to the
Company regarding his or her title to the Shares used to
effect the purchase, including, without limitation,
representations and warranties that the Optionee has good
and marketable title to such Shares free and clear of any
and all liens, encumbrances, charges, equities, claims,
security interests, options or restrictions and has full
power to deliver such Shares without obtaining the
consent or approval of any person or governmental
authority other than those which have already given
consent or approval in a form satisfactory to the
Company. The value of the Shares used to effect the
purchase shall be the fair market value of those Shares
as determined by the Board in its sole discretion,
exercised in good faith.
9. Exercise of Option.
(a) Procedure for Exercise. Any Option
granted hereunder shall be exercisable at such times and
under such conditions as may be determined by the Board,
including performance criteria with respect to the
Company and/or the Optionee and as shall be permissible
under the terms of the Plan.
An Option may be exercised in accordance
with the provisions of this Plan as to all or any portion
of the shares then exercisable under an Option, from time
to time during the term of the Option. An Option may not
be exercised for a fraction of a Share.
An Option shall be deemed to be exercised
when written notice of such exercise has been given to
the Company at its principal business office in
accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised, has
been received by the Company, accompanied by the executed
Stock Purchase Agreement, if required, and/or any other
representations or agreements required by the terms of
this Plan or the Option granted hereunder. Full payment
may consist of such consideration as is authorized by the
Board as provided hereunder. Until the Option is properly
exercised hereunder and the Company receives full payment
for the Shares with respect to which the Option is
exercised, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to
the Optioned Stock. No adjustment shall be made for a
dividend or other rights for which the record date is
prior to the date the Option is properly exercised and
payment in full is received, except as provided in
section 11 of the Plan.
As soon as practicable after any proper
exercise of an Option in accordance with the provisions
of this Plan and payment in full for the exercised
Shares, the Company shall, without transfer or issue tax
to the Optionee, deliver to the Optionee at the principal
business office of the Company, or such other place as
shall be mutually acceptable, a certificate or
certificates representing the Shares as to which the
Option has been exercised. The time of issuance and
delivery of the certificate(s) representing the Shares
may be postponed by the Company for such period as may be
required for it, with reasonable diligence, to comply
with any applicable listing requirements of any national
or regional securities exchange and any law or regulation
applicable to the issuance and delivery of such Shares.
Exercise of an Option shall result in a
decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee.
If an Optionee ceases to serve as an Employee of the
Company for any reason other than death or permanent and
total disability and thereby terminates his or her
Continuous Status as an Employee, the Option shall
immediately terminate. If an Optionee serves as an
Employee pursuant to an employment agreement or other
contract, termination of status as an Employee shall
include termination of such agreement or contract, with
or without cause, or pursuant to a settlement agreement
reached between the Optionee and the Company or
otherwise. The termination of the Option shall be
concurrent with the termination of Optionee as an
Employee regularly performing services for Company, and
the option shall not continue regardless of any
continuation of Optionee's salary or benefits from the
Company.
(c) Death or Disability of Optionee. If
an Optionee ceases to serve as an Employee of the Company
due to death or permanent and total disability and
thereby terminates his or her Continuous Status as an
Employee, the Option may be exercised but only within
ninety (90) days following the date of death or
termination of employment due to disability (subject to
any earlier termination of the Option as provided
hereunder), by the Optionee in the case of disability, or
in the case of death by the Optionee's estate or by a
person who acquired the right to exercise the Option by
bequest or inheritance, but in any case only to the
extent the Optionee was entitled to exercise the option
at the date of his or her termination of employment by
death or disability.
10. Non-Transferability of Options. Options
granted under this Plan may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed
of in any manner, either voluntarily or involuntarily by
operation of law other than by will or by the laws of
descent or distribution, and may be exercised during the
lifetime of the Optionee only by such Optionee.
11. Adjustments upon Changes in Capitalization.
(a) Subject to any required action by the
shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which
have been returned to the Plan upon cancellation of an
Option as well as the exercise price per Share covered by
each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split or combination
or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the
number of such Shares effected without receipt of
consideration by the Company (other than stock bonuses to
Employees or Directors); provided, however, that the
conversion of any convertible securities of the Company
shall not be deemed to have been "effected without the
receipt of consideration". Such adjustment shall be made
by the Board, and its determination in that respect shall
be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of
stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number
or price of Shares subject to the Plan or an Option.
(b) In the event of the proposed
dissolution or liquidation of the Company, or in the
event of a proposed sale of substantially all of the
assets of the Company, or the merger or consolidation of
the Company with or into another corporation, the Board
may, if it so determines in the exercise of its sole
discretion, (i) make provision for adjusting the number
or class of Optioned Stock covered by any Option, as well
as the price to be paid therefor, or (ii) declare that
any Option shall terminate as of a date to be fixed by
the Board and give each Optionee the right to exercise
his/her Option as to all or any part of such Optioned
Stock, including Shares, in the Board's discretion, as to
which the Option would not otherwise be exercisable.
(c) No fractional Shares of the Common
Stock shall be issuable on account of any action
aforesaid, and the aggregate number of Shares into Which
Shares then covered by the Option, when changed as the
result of such action, shall be reduced to the largest
number of whole Shares resulting from such action, unless
the Board, in its sole discretion, shall determine to
issue scrip certificates, in respect to any fractional
Shares, which scrip certificates, in such event, shall be
in a form and have such terms and conditions as the Board
in its discretion shall prescribe.
12. Time of Granting Options. The date of
grant of an Option under the Plan shall, for all
purposes, be the date on which the Board makes the
determination granting such Option. Notice of the
determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the
date of such qrant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. Provided
that a majority of the Directors consent, the Board may
amend or terminate the Plan from time to time in such
respects as the Board may deem advisable.
(b) Effect of Termination. Except as
otherwise provided under the Plan without the written
consent of the Optionee, any such termination of the Plan
shall not affect Options already granted and such Options
shall remain ln full force and effect as if this Plan had
not been terminated.
14. Conditions Upon Issuance of Shares.
Options granted under the Plan are conditioned upon
compliance with all applicable state and federal
securities laws and the requirements of any stock
exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for
the Company with respect to such compliance.
As a condition to the exercise of an Option,
the Board may require the person exercising such Option
to execute an agreement adopted by the Board, and/or may
require the person exercising such Option to make any
representation and/or warranty to the Company as may in
the judgment of counsel to the Company be required under
applicable law or regulation, including but not limited
to a representatiOn and warranty that the Shares are
being purchased only for investment and without any
present intention to sell or distribute such Shares if,
in the opinion of counsel for the Company, such a
representation is appropriate under any of the
aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during
the term of this Plan, shall at all times reserve and
keep available, the number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The Company, during the term of this Plan,
shall use its best efforts to seek to obtain from
appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of
Shares as shall be sufficient to satisfy the requirements
of the Plan. The inability of the Company to obtain from
any such regulatory agency having Jurisdiction the
requisite authorization(s) deemed by the Company's
counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, or the inability of the Company
to confirm to its satisfaction that any issuance and sale
of any Shares hereunder will meet applicable legal
requirements, shall relieve the Company of any liability
in respect to the non-issuance or sale of such Shares as
to which such requisite authority shall not have been
obtained.
16. Taxes, Fees, Expenses and Withholding of
Taxes.
(a) The Company shall pay all original
issue and transfer taxes (but not income taxes, if any)
with respect to the grant of Options and/or the issue and
transfer of Shares pursuant to the exercise of such
Options, and all other fees and expenses necessarily
incurred by the Company in connection therewith, and will
from time to time use its best efforts to comply with all
laws and regulations which, in the opinion of counsel for
the Company, shall be applicable thereto.
(b) The grant of Options hereunder and
the issuance of Shares pursuant to the exercise of such
Options is conditioned upon the Company's reservation of
the right to withhold, in accordance with any applicable
law, from any compensation payable to the Optionee any
taxes required to be withheld by federal, state or local
law as a result of the grant or exercise of such Option
or the sale of the Shares issued upon exercise of the
Option.
17. Notices. Any notice to be given to the
Company pursuant to the provisions of this Plan shall be
addressed to the Company in care of its Secretary at its
principal office, and any notice to be given to an
Employee to whom an Option is granted hereunder shall be
delivered personally or addressed to him or her at the
address given beneath his or her signature on his or her
Stock Option Agreement, or at such other address as such
Employee or his or her transferee (upon the transfer of
the Optioned Stock) may hereafter designate in writing to
the Company. Any such notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee
prepaid, in a post office or branch post office regularly
maintained by the United States Postal Service. It shall
be the obligation of each Optionee and each transferee
holding Shares purchased upon exercise of an Option to
provide the Secretary of the Company, by letter mailed as
provided hereinabove, with written notice of his or her
direct mailing address.
18. No Enlargement of Employee Rights. This
Plan is purely voluntary on the part of the Company, and
the continuance of the Plan shall not be deemed to
constitute a contract between the Company and any
Employee, or to be consideration for or a condition of
the employment of any Employee. Nothing contained in this
Plan shall be deemed to give any Employee the right to be
retained in the employ of the Company, its Parent,
Subsidiary or a successor corporation, or to interfere
with the right of the Company or any such corporations to
discharge or retire any Employee thereof at any time. No
Employee shall have any right to or interest in Options
authorized hereunder prior to the grant of such Option to
such Employee, and upon such grant he/she shall have only
such rights and interests as are expressly provided
herein, subject, however, to all applicable provisions of
the Company's Articles of Incorporation, as the same may
be amended from time to time.
19. Legends on Certificates.
(a) Federal Law. Unless an appropriate
registration statement is filed pursuant to the Federal
Securities Act of 1933, as amended, with respect to the
Options and Shares issuable under this Plan, each
certificate representing such Options and Shares shall be
endorsed on its face with legends substantially as
follows:
THE SHARES OF COMMON STOCK EVIDENCED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH, OR
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORY AGENCY OR AUTHORITY.
THESE INTERESTS HAVE BEEN OFFERED IN RELIANCE UPON THE
SECTION 4(2) PRIVATE OFFERING EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933,
AS AMENDED, AND APPLICABLE STATE EXEMPTIONS FROM
REGISTRATION AND QUALIFICATION. THE SALE, TRANSFER,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF ANY SHARE
OF COMMON STOCK IS RESTRICTED AND MAY NOT BE ACCOMPLISHED
EXCEPT IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND
STATE FEDERAL AND STATE SECURITIES LAWS.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO
RECEIvE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF
THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED BY THE
COMMISSIONER'S RULES.
(b) Additional Legends. Each certificate
representing the Options and Shares issuable under the
Plan shall also contain such legends as required by the
applicable state law, and as are set forth in any Stock
Purchase Agreement or other agreement the execution of
which is a condition to the exercise of an Option under
this Plan. ln addition, each Option Agreement shall be
endorsed with legends substantially as follows:
"THE SHARES WHICH MAY BE PURCHASED UPON
EXERCISE OF THIS OPTION MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF A STOCK PURCHASE AGREEMENT,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY, TO BE ENTERED INTO BETWEEN THE HOLDER OF THIS
OPTION AND THE COMPANY AS A CONDITION TO EXERCISE OF THIS
OPTION AND UPON COMPLIANCE WITH ALL APPLICABLE STATE AND
FEDERAL SECURITIES LAWS."
20. Other Terms. Any Option granted hereunder
shall contain such other and additional terms, not
inconsistent with the terms of this Plan, which are
deemed necessary or desirable by the Board, or by legal
counsel to the Company.
21. No Obligation to Exercise Option. The
granting of an Option under the Plan shall impose no
obligation upon the optionee/employee to exercise such
Option.
22. Availability of Plan. A copy of this Plan
shall be delivered to the Secretary of the Company and
shall be shown by him or her to any eligible person
making reasonable inquiry concerning it.
23. Invalid Provisions. In the event that any
provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as
rendering any other provisions contained herein as
invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent
as though the invalid or unenforceable provision was not
contained herein.
24. Applicable Law. This Plan shall be
governed by and construed in accordance with the laws of
the State of California.
IN WITNESS WHEREOF, pursuant to the due
authorization and adoption of this Plan by the Board on
February 16, 1988, the Company has caused this Plan to be
duly executed by its duly authorized officers, effective
as of February 16, 1988.
MANAGED HEALTH NETWORK, INC.,
a Delaware corporation
By: ___________________________
Title:_________________________
By:____________________________
Title: ________________________
Exhibit 4.9
MANAGED HEALTH NETWORK, INC.
AMENDED AND RESTATED
1991 STOCK OPTION PLAN
1. Purpose; Administration. The Managed
Health Network, Inc. Amended and Restated 1991 Stock
Option Plan (the "Plan") is intended to provide
incentives which will attract and retain highly competent
persons as officers, key employees, directors and
independent contractors of Managed Health Network, Inc.,
a Delaware corporation (the "Company"), and its
subsidiaries by providing them opportunities to acquire
shares of Common Stock of the Company ("Common Stock")
pursuant to the Incentive Stock Options and Nonstatutory
Options (collectively, "Options") described herein. The
Plan will be administered by the Board of Directors, or
through such directors, officers or committees as it may
designate as the Stock Option Committee (the
"Committee"). Notwithstanding the foregoing, in the
event that the Company becomes subject to the Securities
Exchange Act of 1934 (the "1934 Act"), all grants under
this Plan to persons subject to Section 16 of the 1934
Act shall be by a specially designated committee (the
"Special Committee") of the Board of Directors of the
Company, consisting of such two or more nonemployee
directors as the Board may designate from time to time,
all of whom shall be and remain Directors not eligible to
receive Options under the Plan, or any other similar plan
of the Company, both at the time of their appointment to
the Special Committee and at any time within one year
prior thereto. The Special Committee and Committee are
together referred to as the "Committees".
2. Participation. Participants eligible to
receive grants of Nonstatutory options will consist of
all employees of the Company or its subsidiaries
(including officers), and independent contractors of the
Company or its subsidiaries. The term "independent
contractors of the Company or its subsidiaries" includes,
for this purpose, entities such as corporations or
partnerships that perform services for or otherwise
contract (for example, as vendors) with the Company or
its subsidiaries. Participants eligible to receive
grants of Incentive Stock Options will consist solely of
all employees (including officers) of the Company or its
subsidiaries. With respect to both Nonstatutory Options
and Incentive Stock Options, grantees will be limited to
those persons that the Committees in their sole
discretion determine to be significantly responsible for
the success and future growth and profitability of the
Company and whom the Committees designate from time to
time to receive Options under the Plan. Designation of a
participant in any year shall not require the Committees
to designate such person to receive an Option in any
other year. The Committees shall consider such factors
as they deem pertinent in selecting participants and in
determining the amount and terms of their respective
Options. A determination by the Committees of the amount
and terms of a participant's Options shall in all cases
be subject to the approval of the Board of Directors.
3. Shares Reserved under the Plan. There is
hereby reserved for issuance under the Plan an aggregate
of 4,350,000 shares of Common Stock, which may be either
authorized but unissued shares or treasury shares. Any
shares subject to Options may thereafter be subject to
new Options under this Plan if there is a lapse,
expiration or termination of the previously outstanding
Options prior to issuance of the shares, or if shares are
issued pursuant to the exercise of such Options and
thereafter are reacquired by the Company pursuant to
rights reserved by the Company upon issuance thereof.
4. Incentive Stock Options. This Plan is
intended to authorize the Board to grant, in its
discretion, options that qualify as incentive stock
options pursuant to Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), (such qualifying
options being referred to herein as "Incentive Stock
Options"). Incentive Stock Options will consist of
awards from the Company, evidenced by written option
agreements, which enable the holder to purchase a
specific number of shares of Common Stock, under set
terms and at a set price which shall not be less than the
Fair Market Value of the Common Stock (as determined
under Section 11 hereof) on the date of grant.
Notwithstanding the foregoing, if an employee, at the
time an Incentive Stock Option is granted to him or her,
owns stock representing more than ten percent (10%) of
the total combined voting power of all classes of stock
of the Company, or any of its subsidiaries (or, under
Section 424(d) of the Code, is deemed to own stock
representing more than 10% of the total combined voting
power of all such classes of stock, by reason of the
ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse,
ancestor or lineal decedent of such employee, or by or
for any corporation, partnership, estate or trust of
which such employees are shareholder, partner or
beneficiary), then the Incentive Stock Option price of
each share of Common Stock subject to such Incentive
Stock Option shall be a stated price which is not less
than 110% of the Fair Market Value of such share of
Common Stock on the date of grant. Said purchase price
may be paid by check or, in the discretion of Committees,
by the delivery of shares of Common Stock of the Company
then owned by the participants. Incentive Stock Options
shall be exercisable not later than ten (10) years after
the date they are granted; provided, however, that an
Incentive Stock Option granted to any employee as to whom
the Incentive Stock Option price of each share of Common
Stock subject thereto is required to be 110% of the Fair
Market Value of such share of Common Stock pursuant to
this Section 4, shall not be exercisable after the
expiration of five (5) years from the date of grant.
Incentive Stock Options shall terminate not later than
three (3) months after termination of employment for any
reason other than "disability" (within the meaning of
Section 22(e)(3) of the Code) or death. In the event of
termination of employment due to disability, the right of
the participant to exercise an Incentive Stock Option
shall terminate not later than twelve (12) months after
such termination. In the event of termination of
employment due to death, the option may be exercised by
the optionee's estate at any time during the remaining
stated duration of the Option in accordance with Section
7 hereof. Leaves of absence for military service,
illness, and transfer of employment between the Company
and any subsidiary thereof shall not constitute
termination of employment.
5. Nonstatutory Options. Nonstatutory Options
will consist of awards from the Company, evidenced by
written option agreements, which enable the holder to
purchase a specific number of shares of Common Stock,
under set terms and at a set price which shall not be
less than 85% of the Fair Market Value of the Common
Stock on the date of grant. Said purchase price may be
paid by check or, in the discretion of the Committees, by
the delivery of shares of Common Stock of the Company
then owned by the participant. Nonstatutory Options
shall be exercisable not later than ten (10) years after
the date they are granted. Notwithstanding the
foregoing, Nonstatutory Options granted to employees of
the Company or its subsidiaries shall terminate not later
than three (3) months after termination of employment for
any reason other than disability or death. In the event
of termination of employment due to disability, the right
of the participant to exercise a Nonstatutory Option
shall terminate not later than twelve (12) months after
such termination. In the event of termination of
employment due to death, the Option nay be exercised by
the optionee's estate at any time during the remaining
stated duration of the option in accordance with Section
7 hereof. Leaves of absence for military service,
illness, and transfers of employment between the Company
and any subsidiary thereof shall not constitute
termination of employment. Nonstatutory options granted
to independent contractors of the Company or its
subsidiaries may provide, in the discretion of the
Committees, that such Option shall terminate in the event
of, or within a fixed period following, the termination
of tho contractual or other business relationship between
the Company or its subsidiaries and the independent
contractor.
6. Adjustment Provisions.
(a) If the Company shall at any time
change the number of issued shares of Common Stock
without new consideration to the Company (such as by
stock dividends or stock splits), the total number of
shares reserved for issuance under this Plan and the
number of shares covered by each outstanding Option shall
be adjusted so that the aggregate consideration payable
to the Company and the value of each such Option shall
not be changed. The Board may also provide for the
continuation of Options or for other equitable
adjustments after changes in the Common Stock resulting
from reorganization, sale, merger, consolidation or
similar occurrence.
(b) Notwithstanding any other provision
of this Plan, and without affecting the number of shares
of Common Stock otherwise reserved or available
hereunder, the Board may authorize the issuance or
assumption of Options in connection with any merger,
consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may
deem appropriate.
(c) In the case of any merger,
consolidation or combination of the Company with or into
another corporation, other than a merger, consolidation
or combination in which the Company is the continuing
corporation and which does not result in the outstanding
Common Stock being converted into or exchanged for
different securities, cash or other property, or any
combination thereof (an "Acquisition) any participant to
whom an Option has been granted under the Plan shall have
the right (subject to the provisions of the Plan and any
limitation applicable to such Option) thereafter and
during the term of such Option, to receive upon exercise
thereof the Acquisition Consideration (as defined below)
receivable upon such Acquisition by a holder of the
number of shares of Common Stock which might have been
obtained upon exercise of such option or portion thereof,
as the case may be, immediately prior to such
Acquisition. The term "Acquisition Consideration" shall
mean the kind and amount of shares of the surviving or
new corporation, cash, securities, evidence of
indebtedness, other property or any combination thereof
receivable in respect to one share of Common Stock of the
Company upon consummation of an Acquisition.
7. Nontransferability. Options granted under
the Plan to participants that are not individuals shall
not be transferable other than with the consent of the
Company, which consent may be withheld in the Company's
sole discretion. Options granted under the Plan to
individual participants shall not be transferable by him
or her otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during his
lifetime, only by him or her. In the event of the death
of an individual participant, each Option theretofore
granted to him or her shall be exercisable only:
(a) By the executor or administrator of
the estate of the deceased participant or the person or
persons to whom the deceased participant's rights under
the Option shall pass by will or the laws of descent and
distribution; and
(b) To the extent that the deceased
participant was entitled to do so at the date of his
death.
8. Other Provisions. The grant of any Option
under the Plan may also be subject to such other
provisions (whether or not applicable to the Option
granted to any other participant) as the Committees
determine appropriate, including without limitation,
provisions for the installment purchase of Common Stock
under Options, provisions for the acceleration of
exercisability of Options in the event of a change of
control of the Company, provisions for the payment of the
value of Options to participants, in the event of a
change of control of the Company, provisions to comply
with Federal and State securities laws, or understandings
or conditions as to the participant's employment or other
business relationship with the Company and its
subsidiaries in addition to those specifically provided
for under the Plan.
9. Rules. The Committees may establish such
rules and regulations as they consider desirable for the
administration of the Plan.
10. Determination of Fair Market Value. For
purposes of this Plan, the Board shall determine the fair
market value ("Fair Market Value") of a share of Common
Stock of the Company on the basis of such factors as it
shall deem appropriate, provided that (i) if on the date
such determination is made the class of stock being
valued is regularly listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ")
or another comparable system, the fair market value of a
share of such stock shall be deemed to be equal to the
mean of the average of the closing bid and asked prices
for such stock quoted on such system on each of the five
trading days immediately preceding the date such
determination is made, and (ii) if on the date such
determination is made the class of stock being valued is
admitted to trading on a national securities exchange or
exchanges for which actual sale prices are regularly
reported, or actual sales prices are otherwise regularly
published for such stock, the Fair Market Value of the
shares of Common Stock shall be deemed equal to the mean
of the closing sale prices reported for such stock on
each of the five (5) trading days immediately preceding
the date the determination is made.
11. Withholding. All payments or
distributions made pursuant to the Plan shall be net of
any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding
requirements. If the Company is required to distribute
Common Stock pursuant to the Plan, it may require the
recipient to remit to it an amount sufficient to satisfy
such tax withholding requirements prior to the delivery
of any certificates for such Common Stock. The Committee
may, in their discretion and subject to such rules as
they may adopt, permit a participant to pay all or a
portion of the federal, state and local withholding taxes
arising in connection with the exercise of an Option by
electing to have the Company withhold shares of Common
Stock having a Fair Market Value equal to the amount to
be withheld.
12. Tenure. A participant's right, if any, to
continue to serve the Company or its subsidiaries as an
officer, employee, independent contractor or otherwise,
shall not be enlarged or otherwise affected by his or her
designation as a participant under the Plan.
13. Duration, Amendment and Termination. No
Option shall be granted more than ten years after the
date of adoption of this Plan; provided, however, that
the terms and conditions applicable to any Option granted
within such period may thereafter be amended or modified
by mutual agreement between the Company and the
participant or such other persons as may then have an
interest therein. The Board of Directors may amend the
Plan from time to time or terminate the Plan at any time.
However, no action authorized by this paragraph shall
reduce the amount of any existing Option or change the
terms and conditions thereof without the participant's
consent.
14. Stockholders' Agreement. Any participant,
who on the date of exercise of his/her option, will own
in excess of 150,000 shares of Common Stock shall execute
and deliver to the Company the necessary documents to
become a party to that certain Stockholders' Agreement
dated December 30, 1987 between the Company and certain
persons named therein, so long as such action is required
by the Stockholders' Agreement. A copy of the
Stockholders' Agreement is attached to this Plan as
Exhibit A.
15. Stockholder Approval. The Plan was
originally adopted by the Board of Directors of the
Company on December 31, 1991. The Plan was amended and
restated in its current form by the Board of Directors of
the Company on __________, 1993. The Plan and all
Options granted hereunder shall be null and void if
stockholder approval is not obtained within twelve (12)
months after the March, 1993 adoption of the Plan by the
Board of Directors.
16. Vesting. Options granted hereunder shall
vest and be exercisable at a rate of at least 20% per
year over 5 years from the date the option is granted.
Exhibit 4.10
AMENDED AND RESTATED
1993 NONSTATUTORY STOCK OPTION PLAN OF
FOUNDATION HEALTH CORPORATION
(As amended and restated effective September 7, 1995)
SECTION I. ESTABLISHMENT AND PURPOSE
The Plan is being established to offer
selected employees of the Company an opportunity to
acquire a proprietary interest in the success of FHC, or
to increase such interest, by exercising Options to
purchase Shares of Stock. Options granted under the Plan
are Nonstatutory Options.
SECTION II. DEFINITIONS
A. "BOARD OF DIRECTORS" shall mean the Board of
Directors of FHC, as constituted from time to time.
B. "CODE" shall mean the Internal Revenue Code
of 1986, as amended.
C. "COMMITTEE" shall mean a committee of the
Board of Directors, as described in Section III(A).
D. "COMPANY" shall mean Foundation Health
Medical Group, Inc., a California professional medical
corporation, and Thomas-Davis Medical Centers, P.C., an
Arizona professional medical corporation, and such
affiliated professional medical corporations as may be
established from time to time by FHC.
E. "EMPLOYEE" shall mean any individual who is
an employee of the Company or any professional medical
corporation of which the Company owns at least 25
percent, and who is considered a full-time equivalent
employee for purposes of employee benefits provided by
the Company or such professional medical corporation of
which the Company owns at least 25 percent.
F. "EXERCISE PRICE" shall mean the amount for
which one Share may be purchased upon exercise of an
Option, as specified in the applicable Stock Option
Agreement.
G. "FAIR MARKET VALUE" shall mean the market
price of Stock, determined by the Committee as follows:
(i) If the Stock was traded over-the-counter
on the date in question but was not classified as a
national market issue, then the Fair Market Value shall
be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ
system for such date, or if such date is not a trading
day, on the last trading day immediately preceding such
date;
(ii) If the Stock was traded over-the-counter
on the date in question and was classified as a national
market issue, then the Fair Market Value shall be equal
to the last-transaction price quoted by the NASDAQ system
for such date, or if such date is not a trading day, on
the last trading day immediately preceding such date;
(iii) If the Stock was traded on a stock
exchange on the date in question, then the Fair Market
Value shall be equal to the closing price reported by the
applicable composite-transactions report for such date,
or if such date is not a trading day, on the last trading
day immediately preceding such date; and
(iv) If none of the foregoing provisions is
applicable, then the Fair Market Value shall be
determined by the Committee in good faith on such basis
as it deems appropriate.
In all cases, the determination of Fair Market
Value by the Committee shall be conclusive and binding on
all persons.
H. "FHC" shall mean Foundation Health
Corporation, a Delaware corporation.
I. "NONSTATUTORY OPTION" shall mean a stock
option not described in section 422(b) or 423(b) of the
Code.
J. "OPTION" shall mean a Nonstatutory Option
granted under the Plan and entitling the holder to
purchase Shares.
K. "OPTIONEE" shall mean an individual who holds
an Option.
L. "PLAN" shall mean this 1993 Nonstatutory
Stock Option Plan of Foundation Health Corporation, as
amended from time to time.
M. "SERVICE" shall mean service as an Employee.
N. "SHARE" shall mean one share of Stock, as
adjusted in accordance with Section VIII (if applicable).
O. "STOCK" shall mean the Common Stock, $.01 par
value per share, of FHC.
P. "STOCK OPTION AGREEMENT" shall mean the
agreement between FHC and an Optionee which contains the
terms, conditions and restrictions pertaining to his or
her Option.
Q. "SUBSIDIARY" shall mean any corporation, if
the Company and/or one or more other Subsidiaries own not
less than 50 percent of the total combined voting power
of all classes of outstanding stock of such corporation.
A corporation that attains the status of a Subsidiary on
a date after the adoption of the Plan shall be considered
a Subsidiary commencing as of such date.
R. "TOTAL AND PERMANENT DISABILITY" shall mean
that the Optionee is unable to engage in any substantial
gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to
result in death or which has lasted, or can be expected
to last, for a continuous period of not less than 12
months.
SECTION III. ADMINISTRATION
A. COMMITTEE MEMBERSHIP. The Plan shall be
administered by the Committee, which shall consist of two
or more members of the Board of Directors. The members
of Committee shall be appointed by the Board of
Directors. If no Committee has been appointed, the
entire Board of Directors shall constitute the Committee.
B. COMMITTEE PROCEDURES. The Board of Directors
shall designate one of the members of the Committee as
chairperson. The Committee may hold meetings at such
times and places as it shall determine. The acts of a
majority of the Committee members present at meetings at
which a quorum exists, or acts reduced to or approved in
writing by all Committee members, shall be valid acts of
the Committee.
C. COMMITTEE RESPONSIBILITIES. Subject to the
provisions of the Plan, the Committee shall have full
authority and discretion to take the following actions:
1. To interpret the Plan and to apply its
provisions;
2. To adopt, amend or rescind rules,
procedures and forms relating to the Plan;
3. To authorize any person to execute, on
behalf of FHC, any instrument required to carry out the
purposes of the Plan;
4. To determine when Options are to be
granted under the Plan;
5. To select the Optionees;
6. To determine the number of Shares to be
made subject to each Option;
7. To prescribe the terms and conditions of
each Option, including (without limitation) the Exercise
Price, and to specify the provisions of the Stock Option
Agreement relating to such Option;
8. To amend any outstanding Stock Option
Agreement, subject to applicable legal restrictions and
to the consent of the Optionee who entered into such
agreement;
9. To prescribe the consideration for the
grant of each Option under the Plan and to determine the
sufficiency of such consideration; and
10. To take any other actions deemed
necessary or advisable for the administration of the
Plan.
All decisions, interpretations and other actions of the
Committee shall be final and binding on all Optionees and
all persons deriving their rights from an Optionee. No
member of the Committee shall be liable for any action
that he or she has taken or has failed to take in good
faith with respect to the Plan or any Option.
SECTION IV. ELIGIBILITY
EMPLOYEES. Employees shall be eligible for
designation as Optionees by the Committee.
SECTION V. STOCK SUBJECT TO PLAN
A. BASIC LIMITATION. Shares offered under the
Plan shall be authorized but unissued Shares or treasury
Shares. The aggregate number of Shares which may be
issued under the Plan upon exercise of Options shall not
exceed 1,600,000 Shares, subject to adjustment pursuant
to Section VIII. The number of Shares which are subject
to Options outstanding at any time under the Plan shall
not exceed the number of Shares which then remain
available for issuance under the Plan. FHC, during the
term of the Plan, shall at all times reserve and keep
available sufficient Shares to satisfy the requirements
of the Plan.
B. ADDITIONAL SHARES. In the event that any
outstanding Option for any reason expires or is canceled
or otherwise terminated, the Shares allocable to the
unexercised portion of such Option shall again be
available for the purposes of Plan. In the event that
Shares issued under the Plan are acquired by FHC pursuant
to a forfeiture provision, a right of repurchase or a
right of first refusal, such Shares shall again be
available for the purposes of the Plan.
SECTION VI. TERMS AND CONDITIONS OF OPTIONS
A. TERMS.
1. STOCK OPTION AGREEMENT. Each grant of
an Option under the Plan shall be evidenced by a Stock
Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other
terms and conditions which the Committee deems
appropriate for inclusion in a Stock Option Agreement.
The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical.
2. NUMBER OF SHARES. Each Stock Option
Agreement shall specify the number of Shares that are
subject to the Option and shall provide for the
adjustment of such number in accordance with Section
VIII.
3. EXERCISE PRICE. Each Stock Option
Agreement shall specify the Exercise Price which shall be
100 percent of the Fair Market Value of a Share on the
date of grant. The Exercise Price shall be payable in a
form described in Section VII.
4. EXERCISABILITY AND TERM. Each Stock
Option Agreement shall specify the date when all or any
installment of the Option is to become exercisable. The
vesting of any Option shall be determined by the
Committee at its sole discretion. A Stock Option
Agreement may provide for accelerated exercisability in
the event of the Optionee's death, Total and Permanent
Disability or retirement, a change in control with
respect to FHC or other events. The Stock Option
Agreement shall also specify the term of the Option. The
term shall not exceed 10 years from the date of grant.
Subject to the preceding sentence, the Committee at its
sole discretion shall determine when an Option is to
expire.
B. WITHHOLDING TAXES. As a condition to the
exercise of an Option, the Optionee shall make such
arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign
withholding tax obligations that may arise in connection
with such exercise.
C. NONTRANSFERABILITY. No Option shall be
transferable by the Optionee other than by will, by a
beneficiary designation executed by the Optionee and
delivered to FHC or by the laws of descent and
distribution. An Option may be exercised during the
lifetime of the Optionee only by him or her or by his or
her guardian or legal representative. No Option or
interest therein may be transferred, assigned, pledged or
hypothecated by the Optionee during his or her lifetime,
whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
D. TERMINATION OF SERVICE (EXCEPT BY DEATH). If
an Optionee's Service terminates for any reason other
than his or her death, then his or her Option(s) shall
expire on the earliest of the following occasions:
1. The expiration date determined pursuant
to Subsection A(4) above;
2. The date 90 days after the termination
of his or her Service for any reason other than Total and
Permanent Disability; or
3. The date 12 months after the termination
of his or her Service by reason of Total and Permanent
Disability.
The Optionee may exercise all or part of his or her
Option(s) at any time before the expiration of such
Option(s) under the preceding sentence, but only to the
extent that such Option(s) had become exercisable before
his or her Service terminated or became exercisable as a
result of the termination. The balance of such Option(s)
shall lapse when the Optionee's Service terminates. In
the event that the Optionee dies after the termination of
his or her Service but before the expiration of his or
her Option(s), all or part of such Option(s) may be
exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person
who has acquired such Option(s) directly from him or her
by bequest, beneficiary designation or inheritance, but
only to the extent that such Option(s) had become
exercisable before his or her Service terminated or
became exercisable as a result of the termination.
E. LEAVES OF ABSENCE. For purposes of
Subsection D above, Service shall be deemed to continue
while the Optionee is on a military leave, sick leave or
other bona fide leave of absence (as determined by the
Committee) which has been approved by the Company in
writing.
F. DEATH OF OPTIONEE. If an Optionee dies while
he or she is in Service, then his or her Option(s) shall
expire on the earlier of the following dates:
1. The expiration date determined pursuant
to Subsection A(4) above; or
2. The date 12 months after his or her
death.
All or part of the Optionee's Option(s) may be exercised
at any time before the expiration of such Option(s) under
the preceding sentence by the executors or administrators
of his or her estate or by any person who has acquired
such Option(s) directly from him or her by bequest,
beneficiary designation or inheritance, but only to the
extent that such Option(s) had become exercisable before
his or her death or became exercisable as a result of his
or her death. The balance of such Option(s) shall lapse
when the Optionee dies.
G. NO RIGHTS AS A STOCKHOLDER. An Optionee, or
a transferee of an Optionee, shall have no rights as a
stockholder of FHC with respect to any Shares covered by
his or her Option until the date of the issuance of a
stock certificate for such Shares. No adjustments shall
be made, except as provided in Section VIII.
H. MODIFICATION, EXTENSION AND ASSUMPTION OF
OPTIONS. Within the limitations of the Plan, the
Committee may modify, extend or arrange for the
assumption of outstanding Options or may accept the
cancellation of outstanding Options (whether granted by
FHC or another issuer) in return for the grant of new
Options for the same or a different number of Shares and
at the same or a different price. The foregoing
notwithstanding, no modification of an Option shall,
without the consent of the Optionee, impair his or her
rights or increase his or her obligations under such
Option.
I. RESTRICTIONS ON TRANSFER OF SHARES. Any
Shares issued upon exercise of an Option shall be subject
to such special forfeiture conditions, rights or
repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock
Option Agreement and shall apply in addition to any
general restrictions that may apply to all holders of
Shares.
SECTION VII. PAYMENT FOR SHARES
A. GENERAL RULE. The entire Exercise Price of
Shares issued under the Plan shall be payable in lawful
money of the United States of America at the time when
such Shares are purchased, except that FHC (at its sole
discretion) may accept payment in one or more of the
forms described below:
1. SURRENDER OF STOCK. To the extent that
this Subsection (1) is applicable, payment may be made
all or in part with Shares which have already been owned
by the Optionee or his or her representative for more
than 12 months and which are surrendered to FHC in good
form for transfer. Such Shares shall be valued at their
Fair Market Value on the date when the new Shares are
purchased under the Plan.
2. EXERCISE/SALE. To the extent that this
Subsection (2) is applicable, payment may be made by the
delivery (on a form prescribed by FHC) of an irrevocable
direction to a securities broker approved by FHC to sell
Shares and to deliver all or part of the sales proceeds
to FHC in payment of all or part of the Exercise Price
and any withholding taxes.
3. EXERCISE/PLEDGE. To the extent that
this Subsection (3) is applicable, payment may be made by
the delivery (on a form prescribed by FHC) of an
irrevocable direction to pledge Shares to a securities
broker or lender approved by FHC, as security for a loan
and to deliver all or part of the loan proceeds to FHC in
payment of all or part of the Exercise Price and any
withholding taxes.
4. PROMISSORY NOTE. To the extent that
this Subsection (4) is applicable, a portion of the
Exercise Price of Shares issued under the Plan may be
payable by a full-recourse promissory note, provided that
(i) the par value of such Shares must be paid in lawful
money of the United States of America at the time when
such Shares are purchased, (ii) the Shares are security
for payment of the principal amount of the promissory
note and interest thereon, and (iii) the interest rate
payable under the terms of the promissory note shall be
no less than the minimum rate (if any) required to avoid
the imputation of additional interest under the Code.
Subject to the foregoing, the Committee (in its sole
discretion) shall specify the term, interest rate,
amortization requirements (if any), and other provisions
of such note.
SECTION VIII. ADJUSTMENT OF SHARES
A. GENERAL. In the event of a subdivision of
the outstanding Stock, a declaration of a dividend
payable in Shares, a declaration of a dividend payable in
a form other than Shares in an amount that has a material
effect on the value of Shares, a combination or
consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of
Shares, a recapitulation or a similar occurrence, the
Committee shall make appropriate adjustments in one or
more of (i) the number of Shares available for future
grants under Section V, (ii) the number of Shares covered
by each outstanding Option, or (iii) the Exercise Price
under each outstanding Option.
B. MERGER; CONSOLIDATION. In the event that FHC
is a party to a merger or consolidation, outstanding
Options shall be subject to the agreement or merger or
consolidation. Such agreement may provide, without
limitation, (i) for the assumption of outstanding Options
by the surviving corporation or its parent, (ii) for
their continuation by FHC, if FHC is a surviving
corporation, (iii) for payment of a cash settlement equal
to the difference between the amount to be paid for one
Share under such agreement and the Exercise Price, or
(iv) for the acceleration of their exercisability
followed by the cancellation of Options not exercised.
In the case of Options that have been outstanding for
less than 12 months, a cancellation need not be preceded
by an acceleration.
C. RESERVATION OF RIGHTS. Except as provided in
this Section VIII, an Optionee shall have no rights by
reason of (i) any subdivision or consolidation of shares
of Stock of any class, (ii) the payment of any dividend,
or (iii) any other increase or decrease in the number of
shares of stock of any class. Any issue by FHC of shares
of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of Shares subject to an
Option. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of FHC of
the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its
business or assets.
SECTION IX. SECURITIES LAWS
Shares shall not be issued under the Plan
unless the issuance and delivery of such Shares complies
with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of
1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations of any
stock exchange on which FHC's securities may then be
listed.
SECTION X. NO RIGHTS TO SERVICE
No provision of the Plan, nor any Option
granted under the Plan, shall be construed to give any
person any right to become, to be treated as, or to
remain an Employee. FHC, the Company and Subsidiaries
and affiliates of the Company and FHC reserve the right
to terminate any person's Service at any time and for any
reason, subject to rights under employment agreement, if
any.
SECTION XI. DURATION AND AMENDMENTS
A. TERM OF THE PLAN. The plan is effective as
of October 1, 1993. The Plan shall terminate
automatically on October 1, 2003 and may be terminated on
any earlier date pursuant to Subsection B below.
B. RIGHT TO AMEND OR TERMINATE THE PLAN. The
Committee may amend, suspend or terminate the Plan at any
time and for any reason except the consent of FHC shall
be required to add shares available for the grant of
options.
C. EFFECT OF AMENDMENT OR TERMINATION. No
Shares shall be issued under the Plan after the
termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of
the Plan, or any amendment thereof, shall not affect any
Share previously issued or any Option previously granted
under the Plan.
SECTION XII. EXECUTION
FHC has caused its authorized officer to execute
this amended and restated Plan as September 7, 1995.
FOUNDATION HEALTH CORPORATION
By________________________________________
Daniel D. Crowley
President and Chief Executive Officer
Exhibit 5.1
[Skadden, Arps, Slate, Meagher & Flom (Illinois)
letterhead]
April 4, 1997
Foundation Health Systems, Inc.
225 North Main Street
Pueblo, Colorado 81003
Re: Foundation Health Systems, Inc.
Registration on Form S-8
Dear Ladies and Gentlemen:
We have acted as special counsel to Foundation
Health Systems, Inc., formerly known as Health Systems
International, Inc., a Delaware corporation (the
"Company"), in connection with the preparation of the
Registration Statement on form S-8 (the "Registration
Statement") for the registration under the Securities Act
of 1933, as amended (the "Act"), of 4,762,006 shares (the
"Shares") of Class A Common Stock, $.001 par value (the
"Common Stock"), of the Company, together with 4,762,006
Series A Participating Preferred Stock Purchase Rights (the
"Rights") associated therewith, which may be issued
pursuant to the Foundation Health Corporation Employee
Stock Purchase Plan, the Foundation Health Corporation
Profit Sharing and 401(k) Plan (Amended and Restated
effective January 1, 1994), the 1990 Stock Option Plan of
Foundation Health Corporation, the 1992 Nonstatutory Stock
Option Plan of Foundation Health Corporation, the 1989
Stock Plan of Business Insurance Corporation (as Amended
and Restated Effective September 22, 1992), the Managed
Health Network, Inc. Incentive Stock option Plan, the
Managed Health Network, Inc. Amended and Restated 1991
Stock Option Plan and the 1993 Nonstatutory Stock Option
Plan of Foundation Health Corporation (collectively, the
"Plans").
Pursuant to the terms of the Agreement and Plan of
Merger dated as of October 1, 1996 (the "Merger Agreement")
among the Company, FH Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company
("Merger Sub"), and Foundation Health Corporation, a
Delaware corporation ("FHC"), which provides for the merger
of FH Acquisition Corp. with and into FHC, with FHC
surviving as a wholly-owned subsidiary of the Company, the
Company agreed to assume the Plans at the Effective Time
(as defined in the Merger Agreement).
This opinion is being delivered in accordance
with the requirements of Item 601(b)(5) of Regulation S-K
under the Act. Capitalized terms used but not otherwise
defined herein have the meanings ascribed to them in the
Registration Statement.
In connection with this opinion, we have examined
originals or copies, certified or otherwise identified to
our satisfaction, of (i) the Registration Statement; (ii) a
specimen certificate representing the Common Stock; (iii)
the Merger Agreement; (iv) the Certificate of Merger of FHC
and Merger Sub, dated April 1, 1997; (v) the Certificate of
Incorporation of the Company, as presently in effect; (vi)
the By-Laws of the Company, as presently in effect; (vii)
certain resolutions of the Board of Directors of the
Company approving the Merger Agreement and agreeing to the
assumption of the Plans by the Company as of the Effective
Time; and (viii) the Plans as amended to date. We have
also examined originals or copies, certified or otherwise
identified to our satisfaction, of such other documents,
certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal
capacity of all natural persons, the genuiness of all
signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such
copies. In making our examination of documents executed by
the parties other than the Company, we have assumed that
such parties had the power, corporate or other, to enter
into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such
parties of such documents and that such documents
constitute the valid and binding obligations of such
parties. As to any facts material to the opinions
expressed herein which were not independently established
or verified, we have relied upon oral or written statements
and representatives of officers, trustees and other
representatives of the Company and others.
Members of our firm are admitted to the practice
of law in the State of Illinois, and we do not express any
opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware and the
federal laws of the United States.
Based on and subject to the foregoing and to the
other qualifications and limitations set forth herein, we
are of the opinion that:
1. Upon issuance pursuant to the terms of the
Plans, the Shares will be validly issued, fully paid and
nonassessable.
2. Each Right associated with the Shares will
be validly issued when the associated Shares have been duly
issued as set forth in paragraph 1.
We hereby consent to all references to our Firm
in the Registration Statement. We also hereby consent to
the filing of this opinion with the Commission as an
exhibit to the Registration Statement. In giving this
consent, we do not thereby admit that we are within the
category of persons whose consent is required under the
Section 7 of the Act or the rules and regulations of the
Commission promulgated thereunder. This opinion is
expressed as of the date hereof unless otherwise expressly
stated and we disclaim any undertaking to advise you of the
facts stated or assumed herein or any subsequent changes in
applicable law.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher &
Flom
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Foundation Health Systems, Inc. (formerly Health
Systems International, Inc.) on Form S-8 of our report dated
March 21, 1997, appearing in the Annual Report on Form 10-K of
Foundation Health Systems, Inc. (formerly Health Systems
International, Inc.) for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Los Angeles, California
April 1, 1997
