<PAGE>
As filed with the Securities and Exchange Commission on December 18, 1997
Registration No. 333-
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
PAULA FINANCIAL
(Exact name of registrant as specified in its charter)
----------------
DELAWARE 95-4640368
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
----------------
300 North Lake Avenue, Suite 300
Pasadena, California 91101
(626) 304-0401
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
1997 STOCK INCENTIVE PLAN
1994 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENTS
(Full title of the plan)
----------------
Bradley K. Serwin
Senior Vice President and General Counsel
PAULA FINANCIAL
300 North Lake Avenue, Suite 300
Pasadena, California 91101
(626) 304-0401
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
WITH A COPY TO:
RICHARD A. STRONG, ESQ.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
(213) 229-7000
----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to Offering Price per Aggregate Registration
to be Registered be Registered(1) Share (2) Offering Price (2) Fee (2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,046,200 shares $11.99 $12,543,939 $3,700
- ---------------------------------------------------------------------------------------------------
</TABLE>
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1
<PAGE>
(1) The 1997 Stock Incentive Plan (the "1997 Plan") of PAULA Financial (the
"Company") authorizes the issuance of 200,000 shares of the Company's
Common Stock. Of the 200,000 shares being registered hereunder for
issuance pursuant to the 1997 Plan, none are subject to presently
outstanding options. The 1994 Stock Incentive Plan (the "1994 Plan") of
the Company authorizes the issuance of 550,000 shares of the Company's
Common Stock. Of the 470,200 shares being registered hereunder for
issuance pursuant to the 1994 Plan, 404,650 are subject to presently
outstanding options and 39,150 have been issued as restricted stock.
The stock option agreement between the Company and Jeffrey A. Snider,
dated as of October 26, 1996 (the "1996 Snider Stock Option Agreement"),
authorizes the issuance of 250,000 shares of Common Stock. All of the
250,000 shares of Common Stock being registered hereunder for issuance
pursuant to the 1996 Snider Stock Option Agreement are subject to
presently outstanding options. The stock option agreement between the
Company and John Clinton, dated as of October 26, 1996 (the "Clinton
Stock Option Agreement"), authorizes the issuance of 4,000 shares of
Common Stock. All of the 4,000 shares of Common Stock being registered
hereunder for issuance pursuant to the Clinton Stock Option Agreement are
subject to presently outstanding options. The stock option agreement
between the Company and Saugatuck Associates II, Inc., dated as of October
26, 1996 (the "Saugatuck Stock Option Agreement"), authorizes the issuance
of 4,000 shares of Common Stock. All of the 4,000 shares of Common Stock
being registered hereunder for issuance pursuant to the Saugatuck Stock
Option Agreement are subject to presently outstanding options. The stock
option agreement between the Company and RFE Investment Partners IV, L.P.,
dated as of October 26, 1996 (the "RFE Stock Option Agreement"),
authorizes the issuance of 4,000 shares of Common Stock. All of the 4,000
shares of Common Stock being registered hereunder for issuance pursuant to
the RFE Stock Option Agreement are subject to presently outstanding
options. The stock option agreement between the Company and Jerry M.
Miller, dated as of October 26, 1996 (the "Miller Stock Option Agreement"),
authorizes the issuance of 4,000 shares of Common Stock. All of the 4,000
shares of Common Stock being registered hereunder for issuance pursuant to
the Miller Stock Option Agreement are subject to presently outstanding
options. The stock option agreement between the Company and Gerard
Vecchio, dated as of October 26, 1996 (the "Vecchio Stock Option
Agreement"), authorizes the issuance of 4,000 shares of Common Stock. All
of the 4,000 shares of Common Stock being registered hereunder for
issuance pursuant to the Vecchio Stock Option Agreement are subject to
presently outstanding options. The stock option agreement between the
Company and Ronald W. Waisner, dated as of October 26, 1996 (the "Waisner
Stock Option Agreement"), authorizes the issuance of 4,000 shares of
Common Stock. All of the 4,000 shares of Common Stock being registered
hereunder for issuance pursuant to the Waisner Stock Option Agreement are
subject to presently outstanding options. The stock option agreement
between the Company and Bradley K. Serwin, dated as of October 26, 1996
(the "Serwin Stock Option Agreement"), authorizes the issuance of 42,000
shares of Common Stock. All of the 42,000 shares of Common Stock being
registered hereunder for issuance pursuant to the Serwin Stock Option
Agreement are subject to presently outstanding options. The stock option
agreement between the Company and Jeffrey A. Snider, dated as of July 26,
1994 (the "1994 Snider Stock Option Agreement"), authorizes the issuance
of 60,000 shares of Common Stock. All of the 60,000 shares of Common
Stock being registered hereunder for issuance pursuant to the 1996 Snider
Stock Option Agreement are subject to presently outstanding options. The
1996 Snider Stock Option Agreement, the Clinton Stock Option Agreement,
the Saugatuck Stock Option Agreement, the RFE Stock Option Agreement, the
Miller Stock Option Agreement, the Vecchio Stock Option Agreement, the
Waisner Stock Option Agreement, the Serwin Stock Option Agreement and the
1994 Snider Stock Option Agreement collectively are referred to herein as
the "Stock Option Agreements."
(2) For purposes of computing the registration fee only. Pursuant to
Rule 457(h), the Proposed Maximum Offering Price per Share is based upon:
(1) the average exercise price per share ($8.78) of outstanding options
for 404,650 shares granted under the 1994 Plan; (2) the average price per
share ($8.39) of 39,150 shares of restricted stock issued under the 1994
Plan; (3) the average of the high and low prices ($22.75) on December 15,
1997 for the Company's Common Stock listed on the Nasdaq National Market
for 26,400 shares remaining to be awarded under the 1994 Plan and 200,000
shares remaining to be awarded under the 1997 Plan; and (4) the average
exercise price per share ($9.34) of outstanding options for 376,000 shares
under the Stock Option Agreements.
2
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents heretofore filed by PAULA Financial (the
"Company" or the "Registrant") with the Securities and Exchange Commission (the
"Commission") are by this reference incorporated in and made a part of this
Registration Statement:
(a) The Registrant's Prospectus filed pursuant to Rule 424(b) on
October 27, 1997;
(b) The Registrant's quarterly report on Form 10-Q filed with the
Commission on November 14, 1997; and
(c) The description of the Registrant's Common Stock contained in
the Registrant's Registration Statement on Form S-1 filed on
August 8, 1997, as amended.
All reports and other documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") after the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold shall be deemed to be incorporated by reference
in this Registration Statement and to be a part hereof from the date of filing
of such reports and documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law (the "DGCL")
authorizes a Delaware corporation to include a provision in its certificate of
incorporation limiting or eliminating the personal liability of its directors to
the corporation and its stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors exercise an informed business judgment
based on all material information reasonably available to them. Absent the
limitations authorized by such provision, directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Although
Section 102 of the DGCL does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. The Company's Certificate of Incorporation and Bylaws include
provisions which limit or eliminate the personal liability of its directors to
the fullest extent permitted by Section 102 of the DGCL. Consequently, a
director or officer will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for (i) any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases, redemptions or other distributions and
(iv) any transaction from which the director derived an improper personal
benefit.
3
<PAGE>
The Company's Certificate of Incorporation and Bylaws also provide, in
effect, that, to the fullest extent and under the circumstances permitted by
Section 145 of the DGCL, the Company will 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 a director or officer of
the Company, or is or was serving at the request of the Company as a director or
officer of another corporation or enterprise. The inclusion of these
indemnification provisions in the Company's Certificate of Incorporation and
Bylaws is intended to enable the Company to attract qualified persons to serve
as directors and officers who might otherwise be reluctant to do so. The Company
may, in its discretion, similarly indemnify its employees and agents.
Depending upon the character of the proceeding, the Company may
indemnify its directors and officers against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding if the person
indemnified acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no cause to believe his or her conduct
was unlawful. To the extent that a director or officer of the Company has been
successful in the defense of any action, suit or proceeding referred to above,
under the DGCL, the Company would have the obligation to indemnify him or her
against expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith.
In addition, the limited liability provisions in the Certificate of
Incorporation and the indemnification provisions in the Certificate of
Incorporation and Bylaws may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duty (including breaches
resulting from grossly negligent conduct) and may have the effect of reducing
the likelihood of derivative litigation against directors and officers, even
though such an action, if successful, might otherwise have benefited the Company
and its stockholders. Furthermore, a stockholder's investment in the Company
may be adversely affected to the extent the Company pays the costs of settlement
and damage awards against directors and officers of the Company pursuant to the
indemnification provisions in the Company's Bylaws. The limited liability
provisions in the Certificate of Incorporation will not limit the liability of
directors under federal securities laws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 PAULA Financial and Subsidiaries 1997 Stock Incentive Plan
(Exhibit 10.7 to the Company's Registration Statement on Form
S-1 (File No. 333-33159)). (1)
4.2 PAULA Financial and Subsidiaries 1994 Stock Incentive Plan
(Exhibit 10.6 to the Company's Registration Statement on Form
S-1 (File No. 333-33159)). (1)
4.3 Form of Stock Option Agreement (Immediate Vesting) issued under
the 1994 Plan (Exhibit 10.10 to the Company's Registration
Statement on Form S-1 (File No. 333-33159)). (1)
4.4 Form of Stock Option Agreement (Executive) issued under the 1994
Plan (Exhibit 10.11 to the Company's Registration Statement on
Form S-1 (File No. 333-33159)). (1)
4.5 Form of Stock Option Agreement (Stepped Vesting) issued under
the 1994 Plan (Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (File No. 333-33159)). (1)
4.6 Stock Option Agreement between the Company and Jeffrey A. Snider.
4
<PAGE>
4.7 Form of Stock Option Agreement (Immediate Vesting - Non-Plan)
issued in connection with the grant of stock options other than
under the 1994 Plan or the 1997 Plan (Exhibit 10.8 to the
Company's Registration Statement on Form S-1 (File No.
333-33159)). (1)
4.8 Schedule of Details of Stock Option Agreements (Immediate Vesting
- Non-Plan).
4.9 Form of Stock Option Agreement (Executive - Non-Plan) issued in
connection with the grant of stock options other than under the
1994 Plan or the 1997 Plan (Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (File No. 333-33159)). (1)
4.10 Schedule of Details of Stock Option Agreements (Executive -
Non-Plan).
5 Opinion of Gibson, Dunn & Crutcher LLP.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on Signature Page).
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Registration Statement on Form S-1 as filed on August 8,
1997 and incorporated herein by reference.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the 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.
5
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference 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 the time shall be deemed to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question 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.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies 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 Pasadena, State of California, on the 17th day of
December, 1997.
By:/s/ Jeffrey A. Snider
------------------------------------------------
Jeffrey A. Snider
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James A. Nicholson and Bradley K. Serwin as his
true and lawful attorneys-in-fact and agents, with full powers 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 all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full powers and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might, or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey A. Snider Chairman of the Board, President December 17, 1997
- -----------------------
Jeffrey A. Snider and Chief Executive Officer (Principal
Executive Officer)
/s/ James A. Nicholson Executive Vice President, Chief December 17, 1997
- -----------------------
James A. Nicholson Financial Officer, Treasurer,
Secretary and Director (Principal
Financial Officer)
/s/ Andrew M. Slavitt Director December 17, 1997
- -----------------------
Andrew M. Slavitt
/s/ Bradley K. Serwin Director December 17, 1997
- -----------------------
Bradley K. Serwin
/s/ Jerry M. Miller Director December 17, 1997
- -----------------------
Jerry M. Miller
/s/ Ronald W. Waisner Director December 17, 1997
- -----------------------
Ronald W. Waisner
/s/ John B. Clinton Director December 17, 1997
- -----------------------
John B. Clinton
7
<PAGE>
/s/ Gerard Vecchio Director December 17, 1997
- -----------------------
Gerard Vecchio
/s/ Owen S. Crihfield Director December 17, 1997
- -----------------------
Owen S. Crihfield
</TABLE>
8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
4.1 PAULA Financial and Subsidiaries 1997 Stock Incentive Plan
(Exhibit 10.7 to the Company's Registration Statement on Form S-1
(File No. 333-33159)). (1)
4.2 PAULA Financial and Subsidiaries 1994 Stock Incentive Plan
(Exhibit 10.6 to the Company's Registration Statement on Form S-1
(File No. 333-33159)). (1)
4.3 Form of Stock Option Agreement (Immediate Vesting) issued under
the 1994 Plan (Exhibit 10.10 to the Company's Registration
Statement on Form S-1 (File No. 333-33159)). (1)
4.4 Form of Stock Option Agreement (Executive) issued under the 1994
Plan (Exhibit 10.11 to the Company's Registration Statement on
Form S-1 (File No. 333-33159)). (1)
4.5 Form of Stock Option Agreement (Stepped Vesting) issued under the
1994 Plan (Exhibit 10.12 to the Company's Registration Statement
on Form S-1 (File No. 333-33159)). (1)
4.6 Stock Option Agreement between the Company and Jeffrey A. Snider.
4.7 Form of Stock Option Agreement (Immediate Vesting - Non-Plan)
issued in connection with the grant of stock options other than
under the 1994 Plan or the 1997 Plan (Exhibit 10.8 to the
Company's Registration Statement on Form S-1 (File
No. 333-33159)). (1)
4.8 Schedule of Details of Stock Option Agreements (Immediate Vesting
- Non-Plan).
4.9 Form of Stock Option Agreement (Executive - Non-Plan) issued in
connection with the grant of stock options other than under the
1994 Plan or the 1997 Plan (Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (File No. 333-33159)). (1)
4.10 Schedule of Details of Stock Option Agreements (Executive -
Non-Plan).
5 Opinion of Gibson, Dunn & Crutcher LLP.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney (included on Signature Page).
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Registration Statement on Form S-1 as filed on August 8,
1997 and incorporated herein by reference.
9
<PAGE>
STOCK OPTION AGREEMENT
JEFFREY A. SNIDER (INVESTMENT INDUCEMENT)
This Stock Option Agreement ("Agreement") is made and entered into as of
the Date of Grant indicated below by and between PAULA FINANCIAL, a California
corporation (the "Company"), and the person named below as Employee.
WHEREAS, Employee is an employee of the Company, and
WHEREAS, the compensation committee of the Board of Directors of the
Company (the "Committee") has approved the grant to Employee of an option to
purchase shares of the common stock, no par value, of the Company (the "Common
Stock"), conditioned on the purchase by Employee of an aggregate of 30,000
shares of Common Stock either from the Company or one or more of its
shareholders (the "Condition") and on the other terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS. The Company hereby
grants to Employee, and Employee hereby accepts, as of the Date of Grant, an
option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which option
shall expire at 5:00 o'clock p.m., Pacific Time, on the Expiration Date
indicated below and shall be subject to all of the terms and conditions set
forth in this Agreement (the "Option"). The Option shall become exercisable to
purchase ("vest with respect to") that all of the Option Shares on the later of
the Date of Grant or the date the Condition is satisfied.
Employee: Jeffrey A. Snider
Date of Grant: July 26, 1994
Number of share purchasable: 30,000
Exercise Price per share: 17.00
Expiration Date: July 26, 2004
The Option is not intended to qualify as an incentive stock option under Section
422 of the Internal Revenue Code (an "Incentive Stock Option").
2. TERMINATION OF OPTION.
(a) Termination of Employment.
<PAGE>
(i) TERMINATION WITHIN ONE YEAR AFTER CHANGE OF CONTROL. In the
event that Employee shall cease to be an employee of the Company or any of its
subsidiaries (such event shall be referred to herein as the "Termination" of
Employee's "Employment") for any reason, or for no reason, within one year after
a Change of Control (as hereinafter defined), then the Option shall terminate
upon the earlier of the Expiration Date or the first anniversary of the date of
such Termination of Employment. "Change of Control" shall mean the first to
occur of the following events:
(X) any date upon which the directors of the Company who
were nominated by the Board of Directors (the "Board") for election as
directors cease to constitute a majority of the directors of the
Company;
(Y) the date of the first public announcement that any
person or entity, together with all Affiliates and Associates (as such
capitalized terms are defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
such person or entity, shall have become the Beneficial Owner (as
defined in Rule 13d-3 promulgated under the Exchange Act) of voting
securities of the Company representing 50% or more of the voting power
of the Company (a "50% Stockholder"), provided, however, that the
terms "person" and "entity," as used in this clause (Y), shall not
include (1) the Company or any of its subsidiaries, (2) any employee
benefit plan of the Company or any of its subsidiaries including the
Company's Employee Stock Ownership Plan, (3) any entity holding voting
securities of the Company for or pursuant to the terms of any such
plan or (4) any person or entity if the transaction that resulted in
such person or entity becoming a 50% Stockholder was approved in
advance by the Board; or
(Z) a reorganization, merger or consolidation of the
Company (other than an reorganization, merger or consolidation the
sole purpose of which is to change the Company's domicile solely
within the United States) the consummation of which results in the
outstanding securities of any class then subject to the Option being
exchanged for or converted into cash, property and/or a different kind
of securities.
(ii) RETIREMENT. If Employee's Employment is Terminated by reason
of Employee's retirement in accordance with the Company's then-current
retirement policy ("Retirement"), and a Change of Control shall not have
occurred within one year prior thereto, then Option shall terminate upon the
earlier of the Expiration Date or the first anniversary of the date of such
Retirement.
2
<PAGE>
(iii) DEATH OR PERMANENT DISABILITY. If Employee's Employment is
Terminated by reason of the death or Permanent Disability (as hereinafter
defined) of Employee, and a Change of Control shall not have occurred within one
year prior thereto, then the Option shall terminate upon the earlier of the
Expiration Date or the first anniversary of the date of such Termination of
Employment. "Permanent Disability" shall mean the inability 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.
Employee shall not be deemed to have a Permanent Disability until proof of the
existence thereof shall have been furnished to the Board in such form and
manner, and at such times, as the Board may require. Any determination by the
Board that Employee does not have a Permanent Disability shall be final and
binding upon the Company and Employee.
(iv) OTHER TERMINATION. If Employee's Employment is Terminated for
no reason, or for any reason other than Retirement, death or Permanent
Disability, and a Change of Control shall not have occurred within one year
prior thereto, then the Option shall terminate 30 days after the date of such
Termination of Employment.
(b) DEATH FOLLOWING TERMINATION OF EMPLOYMENT. Notwithstanding anything
to the contrary in this Agreement, if Employee shall die at any time after the
Termination of his or her Employment and prior to the Expiration Date, then the
Option shall terminate on the earlier of the Expiration Date or the first
anniversary of the date of such death.
(c) OTHER EVENTS CAUSING TERMINATION OF OPTION. Notwithstanding anything
to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if later, the thirtieth day
following the first date upon which such event shall have been approved by both
the Board and the shareholders of the Company:
(i) the dissolution of the Company; or
(ii) a sale of substantially all of the property and assets of the
Company, unless the terms of such sale shall provide otherwise.
3. ADJUSTMENTS. In the event that the outstanding securities of the
class then subject to the Option are increased, decreased or exchanged for or
converted into cash, property and/or a different number or kind of securities,
or cash, property and/or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or in the event that substantially all of the property
and assets of the Company are sold, then, unless such event shall cause the
Option to terminate pursuant to Section 2(c) hereof, the Committee shall make
appropriate and proportionate adjustments in the number and type of shares or
other securities or cash or other property that may
3
<PAGE>
thereafter be acquired upon the exercise of the Option; provided, however, that
any such adjustments in the Option shall be made without changing the aggregate
Exercise Price of the then unexercised portion of the Option.
4. EXERCISE. The Option shall be exercisable during Employee's lifetime
only by Employee or by his or her guardian or legal representative, and after
Employee's death only by the person or entity entitled to do so under Employee's
last will and testament or applicable intestate law. The Option may only be
exercised by the delivery to the Company of a written notice of such exercise,
which notice shall specify the number of Option Shares to be purchased (the
"Purchased Shares") and the aggregate Exercise Price for such shares (the
"Exercise Notice"), together with payment in full of such aggregate Exercise
Price in cash or by check payable to the Company; provided, however, that
payment of such aggregate Exercise Price may instead be made, in whole or in
part:
(a) by the delivery to the Company of a promissory note in a form
and amount satisfactory to the Committee; or
(b) by the delivery to the Company of a certificate or certificates
representing shares of Common Stock, duly endorsed or accompanied by a duly
executed stock powers, which delivery effectively transfers to the Company good
and valid title to such shares, free and clear of any pledge, commitment, lien,
claim or other encumbrance (such shares to be valued on the basis of the
aggregate fair market value (as determined by the Board of Directors in their
good faith and reasonable judgment) thereof on the date of such exercise),
provided that the Company is not then prohibited from purchasing or acquiring
such shares of Common Stock.
5. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated to
withhold an amount on account of any tax imposed as a result of the exercise of
the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Employee shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay such
amount to the Company in cash or by check payable to the Company.
6. NOTICES. All notices and other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
given if delivered personally or five days after mailing by certified or
registered mail, postage prepaid, return receipt requested to the Company at 300
North Lake Avenue, Suite 300, Pasadena, California, 91101, Attention: Chief
Financial Officer, or to Employee at the address set forth beneath his or her
signature on the signature page hereto, or at such other addresses as they may
designate by written notice in the manner aforesaid.
7. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or
4
<PAGE>
delivered if (a) such shares have not been admitted to listing upon official
notice of issuance on each stock exchange upon which shares of that class are
then listed or (b) in the opinion of counsel to the Company, such issuance or
delivery would cause the Company to be in violation of or to incur liability
under any federal, state or other securities law, or any requirement of any
stock exchange listing agreement to which the Company is a party, or any other
requirement or law or of any administrative or regulatory body having
jurisdiction over the Company.
8. NONTRANSFERABILITY. Neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.
9. INTERPRETATION. The Option is not granted pursuant to the Company's
1994 Stock Incentive Plan. The interpretation and construction by the Committee
of this Agreement and the Option such shall be final and binding upon Employee.
10. SHAREHOLDER RIGHTS. No person or entity shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of any Option Shares
until the Option shall have been duly exercised to purchase such Option Shares
in accordance with the provisions of this Agreement.
11. EMPLOYMENT RIGHTS. No provision of this Agreement or of the Option
granted hereunder shall (a) confer upon Employee any right to continue in the
employ of the Company or any of its subsidiaries, (b) affect the right of the
Company and each of its subsidiaries to terminate the employment of Employee,
with or without cause, or (c) confer upon Employee any right to participate in
any employee welfare or benefit plan or other program of the Company or any of
its subsidiaries other than the Plan. Employee hereby acknowledges and agrees
that the Company and each of its subsidiaries may terminate the employment of
Employee at any time and for any reason, or for no reason, unless Employee and
the Company or such subsidiary are parties to a written employment agreement
that expressly provides otherwise.
12. GOVERNING LAW. This Agreement and the Option granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
State of California.
5
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the Date of Grant.
PAULA FINANCIAL
By: /s/ ROGER G. TEIG
---------------------------
Title: President/CEO
EMPLOYEE
/s/ JEFFREY A. SNIDER
----------------------------
Signature
1475 Rutherford Drive
----------------------------
Street Address
Pasadena CA 91103
----------------------------
City, State and Zip Code
561 88 1078
----------------------------
Social Security Number
6
<PAGE>
EXHIBIT 4.8
SCHEDULE OF DETAILS OF STOCK OPTION AGREEMENTS (IMMEDIATE VESTING - NON-PLAN)
<TABLE>
<CAPTION>
Date of Number Exercise Vesting Expiration
Employee Grant of Shares Price Schedule Date
- ------------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
John Clinton 10/26/96 4,000 $9.50 Immediate 10/25/06
Saugatuck 10/26/96 4,000 $9.50 Immediate 10/25/06
Associates II, Inc.
RFE Investment 10/26/96 4,000 $9.50 Immediate 10/25/06
Partners IV, Inc.
Jerry M. Miller 10/26/96 4,000 $9.50 Immediate 10/25/06
Gerard Vecchio 10/26/96 4,000 $9.50 Immediate 10/25/06
Ronald W. Waisner 10/26/96 4,000 $9.50 Immediate 10/25/06
</TABLE>
<PAGE>
EXHIBIT 4.10
SCHEDULE OF DETAILS OF STOCK OPTION AGREEMENTS (EXECUTIVE - NON-PLAN)
<TABLE>
<CAPTION>
Date of Number Exercise Vesting Expiration
Employee Grant of Shares Price Schedule Date
- -------------------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jeffrey A. Snider 10/26/96 250,000 $9.50 20% on Date 10/25/06
of Grant and
20% on each
anniversary
thereof
Bradley K. Serwin 10/26/96 42,000 $9.50 20% on Date 10/25/06
of Grant and
20% on each
anniversary
thereof
</TABLE>
<PAGE>
[LETTERHEAD]
December 17, 1997
(213) 229-7000 C 70231-00001
PAULA Financial
300 North Lake Avenue, Suite 300
Pasadena, CA 91101
Re: PAULA FINANCIAL - FORM S-8 REGISTRATION STATEMENT
Gentlemen:
We have acted as counsel for PAULA Financial, a Delaware corporation (the
"Company"), in connection with the preparation of a Registration Statement on
Form S-8 to be filed with the Securities and Exchange Commission (the
"Registration Statement") with respect to the registration under the Securities
Act of 1933 of 1,046,200 shares of Common Stock, $.01 par value (the "Shares"),
of the Company which have been reserved for issuance from time-to-time pursuant
to awards granted and to be granted pursuant to the Company's 1997 Stock
Incentive Plan (the "1997 Plan"), the Company's 1994 Stock Incentive Plan (the
"1994 Plan" and together with the 1997 Plan, the "Plans") and certain stock
option agreements not covered by the Plans (the "Agreements").
We are familiar with the corporate actions taken and to be taken by the
Company in connection with the authorization, issuance and sale of the Shares
and have made such other legal and factual inquiries as we deem necessary for
the purpose of rendering this opinion.
We have examined, among other things, the Company's Amended and Restated
Certificate of Incorporation and Bylaws, the Plans and related agreements, the
Agreements, and records of corporate proceedings and other actions taken and
proposed to be taken by the Company in connection with the authorization,
issuance and sale of the Shares pursuant to awards granted under the Plans and
under the Agreements. Based on the foregoing and in reliance thereon, it is our
opinion that the
<PAGE>
PAULA Financial
December 17, 1997
Page 2
Shares, when issued pursuant to awards granted and exercised in accordance with
the provisions of the Plans, related agreements and the Agreements, will be
legally issued, fully paid and non-assessable.
The Company is incorporated under the laws of the State of Delaware. We
are not admitted to practice in Delaware. However, we are generally familiar
with the Delaware General Corporation Law and have made such review thereof as
we consider necessary for the purpose of rendering this opinion. Subject to the
foregoing, this opinion is limited to Delaware, California and federal law.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Act or the General Rules and Regulations of the Commission.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
GIBSON, DUNN & CRUTCHER LLP
RAS/RAN
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
PAULA Financial:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
- -------------------------
Los Angeles, California
December 15, 1997
