-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WCVfiPnlneOP+3MWhWFlomTqLw7drJI0QeqtSGmHYtR6uov+tSxfTrYbDL6yTG3u YjkFwNg115mdMXe8PDDQOg== 0000912057-97-000560.txt : 19970110 0000912057-97-000560.hdr.sgml : 19970110 ACCESSION NUMBER: 0000912057-97-000560 CONFORMED SUBMISSION TYPE: 8-B12G PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19970109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: N T HOLDINGS INC CENTRAL INDEX KEY: 0001027974 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954591529 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-B12G SEC ACT: 1934 Act SEC FILE NUMBER: 000-21949 FILM NUMBER: 97503410 BUSINESS ADDRESS: STREET 1: 5995 PLAZA DRIVE CITY: CYPRESS STATE: CA ZIP: 90630 BUSINESS PHONE: 7149521121 MAIL ADDRESS: STREET 1: 5995 PLAZA DRIVE CITY: CYPRESS STATE: CA ZIP: 90630 8-B12G 1 8-B12G UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-B FOR REGISTRATION OF SECURITIES OF CERTAIN SUCCESSOR ISSUERS Filed Pursuant to Section 12(b) or (g) of the Securities and Exchange Act of 1934 N-T Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware (State of incorporation or organization) 95-4591529 (I.R.S. Employer Identification No.) 5995 Plaza Drive, Cypress, CA 90630-5028 (Address of principal executive offices) (Zip Code) Securities to be registered pursuant to Section 12(b) of the Act: Title of each class to Name of each exchange on which be so registered each class is to be registered None - ------------------------- ------------------------- Securities to be registered pursuant to Section 12(g) of the Act: Class A Common Stock, $.01 par value (Title of class) Class B Common Stock, $.01 par value (Title of class) Series A Cumulative Convertible Preferred Stock, $.01 par value (Title of class) ITEM 1. GENERAL INFORMATION. (a) Date, Form and State of Organization Reference is made to the section entitled "The Companies -- PacifiCare Holding" of the Registrant's Prospectus filed on November 26, 1996 pursuant to Rule 424(b)(3) promulgated under the Securities Act of 1933, as amended (the "Prospectus"), which is incorporated herein by reference, in respect of the Registration Statement on Form S-4 (File No. 333-16271) filed on November 18, 1996 under the Securities Act of 1933, as amended ("Registrant's S-4"). (b) Date on Which Registrant's Fiscal Year Ends The Registrant's Fiscal Year will end on September 30. ITEM 2. TRANSACTION OF SUCCESSION. (a) Predecessors with Securities Registered Pursuant to Section 12(b) or (g) of the Act at the Time of Succession Reference is made to the section entitled "The Companies" of the Prospectus, which is incorporated herein by reference. (b) Transaction of Succession, Basis of Exchange of Securities Reference is made to the sections entitled "The Mergers and Related Transactions" and "The Reorganization Agreement" of the Prospectus, which are incorporated herein by reference. ITEM 3. SECURITIES TO BE REGISTERED. The Registrant presently has authorized 1,000 shares of Common Stock, of which 200 shares are currently issued and outstanding. Such shares of currently issued and outstanding Common Stock will be cancelled upon consummation of the Mergers contemplated by the Reorganization Agreement referred to in the Prospectus. Shortly before consummation of the Mergers, the Registrant will file an Amended and Restated Certificate of Incorporation which will authorize 100,000,000 shares of Class A Common Stock, 100,000,000 shares of Class B Common Stock, and 40,000,000 shares of Series A Cumulative Convertible Preferred Stock. The number of shares of each such class to be issued and outstanding after the Mergers will be determined as described in the section entitled "The Mergers and Related Transactions" of the Prospectus, which is incorporated herein by reference. 2 ITEM 4. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED. Reference is made to the section entitled "Description of PacifiCare Holding Capital Stock" of the Prospectus, which is hereby incorporated herein by reference. ITEM 5. FINANCIAL STATEMENTS AND EXHIBITS. (a) Reference is made to pages F-1 through F-3 of the Prospectus, which are hereby incorporated herein by reference. (b) Exhibits. EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.01+ Amended and Restated Agreement and Plan of Merger and Reorganization ("Reorganization Agreement"), dated as of November 11, 1996, among PacifiCare Health Systems, Inc. ("PacifiCare"), Registrant, Neptune Merger Corp., Tree Acquisition Corp. and FHP International Corporation ("FHP"). See Appendix A to the Registrant's S-4. 3.01 Certificate of Incorporation of Registrant. 3.02+ Form of Certificate of Incorporation of Registrant to be filed pursuant to the Reorganization Agreement. See Exhibit 1.4 to Appendix A of the Registrant's S-4. 3.03+ Bylaws of Registrant. 4.01+ Form of Specimen Certificate for Registrant's Class A Common Stock. 4.02+ Form of Specimen Certificate for Registrant's Class B Common Stock. 4.03+ Form of Specimen Certificate for Registrant's Series A Cumulative Convertible Preferred Stock. 4.04* Indenture, dated as of September 22, 1993, between FHP and the Chase Manhattan Bank, N.A. in regard to $100,000,000 7% Senior Notes due 2003. - -------------------- + Incorporated herein by reference from Registrant's S-4. * Incorporated herein by reference from FHP's Form 10-K for the Fiscal Year Ended June 30, 1993. 3 10.01+ Credit Agreement, dated as of October 31, 1996, among the Registrant, the several financial institutions from time to time party to the Credit Agreement, The Bank of New York, The Bank of Nova Scotia, Banque Nationale de Paris, Dai-Ichi Kangyo Bank, Ltd., The Industrial Bank of Japan Limited, Rabobank Nederland, Sanwa Bank California, The Sumitomo Bank, Limited, and Wells Fargo Bank, N.A., as co-agents, The Chase Manhattan Bank and Citicorp. USA, Inc., as managing agents, and Bank of America National Trust and Savings Association, as agent for the Banks. 10.02++ Form of contract for the period January 1, 1993, through December 31, 1993 between PacifiCare of California and the Department of Health and Human Services. 10.03** Health Insurance Benefits for the Aged and Disabled Contracts dated January 1, 1992 between FHP, Inc. and the Secretary of Health and Human Services. 10.04*** Group Health Benefits Contract dated January 1, 1986 between FHP, Inc. and the Federal Office of Personnel Management. 10.05 1996 Stock Option Plan for Officers and Key Employees of the Registrant. 10.06 1996 Non-Officer Directors Stock Option Plan of the Registrant. 10.07 1996 Management Incentive Compensation Plan of the Registrant. 10.08 1996 Long-Term Performance Incentive Plan of the Registrant. 11.01+++ Statement re: Computation of Earnings Per Share. 12.01**** Statement re: Computation of Ratios. 21.01+ Subsidiaries of the Registrant. - -------------------- ** Incorporated herein by reference from FHP's Form 10-K for the Fiscal Year Ended June 30, 1992. *** Incorporated herein by reference from FHP's Registration Statement on Form S-1 (No. 33-5596). **** Incorporated herein by reference from FHP's Form 10-K for the Fiscal Year Ended June 30, 1996 ("FHP 1996 10-K") and the Registrant's S-4. ++ Incorporated herein by reference from PacifiCare's Registration Statement on Form S-3 (No. 33-72012). +++ Incorporated herein by reference from FHP 1996 10-K and PacifiCare's Form 10-K for the Fiscal Year Ended September 30, 1996. 4 27.01 Financial Data Schedule of Registrant. 99.01++++ Joint Proxy Statement of PacifiCare and FHP and Prospectus of Registrant dated November 21, 1996. - -------------------- ++++ Incorporated herein by reference from the Prospectus. 5 SIGNATURE Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. N-T HOLDINGS, INC. Date: January 9, 1997 By: /s/ Joseph S. Konowiecki ---------------------------------- Joseph S. Konowiecki Secretary 6 INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBITS - ------- -------- 2.01+ Amended and Restated Agreement and Plan of Merger and Reorganization ("Reorganization Agreement"), dated as of November 11, 1996, among PacifiCare Health Systems, Inc. ("PacifiCare"), Registrant, Neptune Merger Corp., Tree Acquisition Corp. and FHP International Corporation ("FHP"). See Appendix A to the Registrant's S-4. 3.01 Certificate of Incorporation of Registrant. 3.02+ Form of Certificate of Incorporation of Registrant to be filed pursuant to the Reorganization Agreement. See Exhibit 1.4 to Appendix A of the Registrant's S-4. 3.03+ Bylaws of Registrant. 4.01+ Form of Specimen Certificate for Registrant's Class A Common Stock. 4.02+ Form of Specimen Certificate for Registrant's Class B Common Stock. 4.03+ Form of Specimen Certificate for Registrant's Series A Cumulative Convertible Preferred Stock. 4.04* Indenture, dated as of September 22, 1993, between FHP and the Chase Manhattan Bank, N.A. in regard to $100,000,000 7% Senior Notes due 2003. - -------------------- + Incorporated herein by reference from Registrant's Registration Statement on Form S-4 (File No. 333-16271) filed on November 18, 1996 ("Registrant's S-4".) * Incorporated herein by reference from FHP's Form 10-K for the Fiscal Year Ended June 30, 1993. 7 10.01+ Credit Agreement, dated as of October 31, 1996, among the Registrant, the several financial institutions from time to time party to the Credit Agreement, The Bank of New York, The Bank of Nova Scotia, Banque Nationale de Paris, Dai-Ichi Kangyo Bank, Ltd., The Industrial Bank of Japan Limited, Rabobank Nederland, Sanwa Bank California, The Sumitomo Bank, Limited, and Wells Fargo Bank, N.A., as co-agents, The Chase Manhattan Bank and Citicorp. USA, Inc., as managing agents, and Bank of America National Trust and Savings Association, as agent for the Banks. 10.02++ Form of contract for the period January 1, 1993, through December 31, 1993 between PacifiCare of California and the Department of Health and Human Services. 10.03** Health Insurance Benefits for the Aged and Disabled Contracts dated January 1, 1992 between FHP, Inc. and the Secretary of Health and Human Services. 10.04*** Group Health Benefits Contract dated January 1, 1986 between FHP, Inc. and the Federal Office of Personnel Management. 10.05 1996 Stock Option Plan for Officers and Key Employees of the Registrant. 10.06 1996 Non-Officer Directors Stock Option Plan of the Registrant. 10.07 1996 Management Incentive Compensation Plan of the Registrant. 10.08 1996 Long-Term Performance Incentive Plan of the Registrant. 11.01+++ Statement re: Computation of Earnings Per Share. 12.01**** Statement re: Computation of Ratios. 21.01+ Subsidiaries of the Registrant. 27.01 Financial Data Schedule of Registrant. 99.01++++ Joint Proxy Statement of PacifiCare and FHP and Prospectus of Registrant dated November 21, 1996. - -------------------- ** Incorporated herein by reference from FHP's Form 10-K for the Fiscal Year Ended June 30, 1992. *** Incorporated herein by reference from FHP's Registration Statement on Form S-1 (No. 33-5596). **** Incorporated herein by reference from FHP's Form 10-K for the Fiscal Year Ended June 30, 1996 ("FHP 1996 10-K") and the Registrant's S-4. ++ Incorporated herein by reference from PacifiCare's Registration Statement on Form S-3 (No. 33-72012). +++ Incorporated herein by reference from FHP 1996 10-K and PacifiCare's Form 10-K for the Fiscal Year Ended September 30, 1996. ++++ Incorporated herein by reference from Registrant's Prospectus filed pursuant to Rule 424(b)(3) promulgated under the Securities Act of 1933, as amended, filed on November 26, 1996 ("Prospectus"). 8 EX-3.01 2 EXHIBIT 3.01 CERTIFICATE OF INCORPORATION OF N-T HOLDINGS, INC. I. The name of this corporation is N-T HOLDINGS, INC. II. The address, including street, number, city, and county, of the registered office of the corporation in the State of Delaware is 1013 Centre Road, City of Wilmington, 19805, County of New Castle; and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. III. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law. IV. This corporation is authorized to issue one class of stock to be designated "Common Stock." The total number of shares which the corporation is authorized to issue is one thousand (1,000) shares of Common Stock, each having a par value of one tenth of one cent ($0.001). 1 V. For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of the corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that: 1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by the Board of Directors in the manner provided in the Bylaws. 2. The Board of Directors may from time to time make, amend, supplement or repeal the Bylaws; provided, however, that the stockholders may change or repeal any Bylaw adopted by the Board of Directors by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the corporation (considered for this purpose as one class); and, provided further, that no amendment or supplement to the Bylaws adopted by the Board of Directors shall vary or conflict with any amendment or supplement thus adopted by the stockholders. 3. The directors of the corporation need not be elected by written ballot unless the Bylaws so provide. VI. A director of the corporation shall, to the full extent not prohibited by the Delaware General Corporation Law, as the same exists or may hereafter be amended, not be liable to the 2 corporation or its stockholders for monetary damages for breach of his fiduciary duty as a director. VII. The name and mailing address of the incorporator is as follows: Laurie A. Webb Cooley Godward Castro Huddleson & Tatum Five Palo Alto Square 300 El Camino Real Palo Alto, CA 94306-0663 VIII. The corporation is to have perpetual existence. IX. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the Delaware General Corporation Law, do make this Certificate, hereby declaring and certifying that this is my act and deed and that the facts herein stated are true and accordingly have hereunto set my hand this 1st day of August, 1996. --------------------------------------- LAURIE A. WEBB SOLE INCORPORATOR EX-10.05 3 EXHIBIT 10.05 Exhibit 10.05 1996 STOCK OPTION PLAN FOR OFFICERS AND KEY EMPLOYEES The Company hereby adopts this 1996 Stock Option Plan for Officers and Key Employees of N-T Holdings, Inc. (the "Plan"), subject to shareholder approval. The purposes of this Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to certain of its officers and other key employees who have been or will be given responsibility for the management or administration of the Company's business affairs. (2) To enable the Company to obtain and retain the services of the type of professional, technical and managerial personnel considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of capital stock. ARTICLE I DEFINITIONS Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. Section 1.1 - Act "Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.2 - Award "Award" shall mean an Incentive Stock Option, Non-Qualified Stock Option, a Stock Appreciation Right, a Stock Payment, or any combination thereof, granted under the Plan. Section 1.3 - Board "Board" shall mean the Board of Directors of the Company. Section 1.4 - Chief Financial Officer "Chief Financial Officer" shall mean the Chief Financial Officer of the Company. Section 1.5 - Class A Common Stock "Class A Common Stock" shall mean the Class A Common Stock of the Company, par value - 1 - $.01 per share. Section 1.6 - Class B Common Stock "Class B Common Stock" shall mean the Class B Common Stock of the Company, par value $.01 per share. Section 1.7 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. Section 1.8 - Committee "Committee" shall mean the Committee of the Board of Directors of the Company as defined in Section 7.1 hereof. Section 1.9 - Common Stock "Common Stock" shall mean either or both, as the context requires, the Class A Common Stock and the Class B Common Stock. Section 1.10 - Company "Company" shall mean N-T Holdings, Inc. or such other name which N-T Holdings, Inc. may adopt. Section 1.11 - Director "Director" shall mean a member of the Board. Section 1.12 - Employee "Employee" shall mean any employee (as defined in accordance with the Treasury Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company, or of any corporation which is then a Subsidiary or a consultant who is providing bona fide services to the Company, whether such employee is so employed, or such consultant is retained, at the time this Plan is adopted or becomes so employed or retained subsequent to the adoption of this Plan. Section 1.13 - Fair Market Value The "Fair Market Value" of a share of the Company's Common Stock on the date such determination is made shall mean: (i) the closing price of such share on the principal exchange on which the shares of Common Stock are then trading, if any, on such date, or, if shares of such stock were not traded on such date, then on the next preceding trading day during which a sale occurred; or (ii) if such stock is not traded on an exchange but is quoted on Nasdaq or a successor quotation system, (1) the last sales price (if the stock is then listed as a National Market Issue under the NASD National Market System), or (2) the mean between the closing representative bid and asked prices - 2 - (in all other cases) for the stock on such date as reported by Nasdaq or such successor quotation system; or (iii) if such stock is not publicly traded on an exchange and not quoted on Nasdaq or a successor quotation system, the mean between the closing bid and asked prices for the stock on such date as determined in good faith by the Committee; or (iv) if the Company's Common Stock is not publicly traded, the fair market value established by the Committee acting in good faith. Section 1.14 - Incentive Stock Option "Incentive Stock Option" shall mean an Option which qualifies under Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. Section 1.15 - Nasdaq "Nasdaq" shall mean the National Association of Securities Dealers Inc. Automated Quotation System. Section 1.16 - Non-Qualified Stock Option "Non-Qualified Stock Option" shall mean an Option which is not an Incentive Stock Option and which is designated as a Non-Qualified Stock Option by the Committee. Section 1.17 - Officer "Officer" shall mean an officer of the Company (including, without limitation, the Chairman and Vice Chairman of the Board) or any corporation which is then a Subsidiary, whether such Officer becomes an Officer at the time this Plan is adopted or subsequent to the adoption of the Plan. Section 1.18 - Option "Option" shall mean an option to purchase shares of the Class A Common Stock or Class B Common Stock of the Company, granted under the Plan. "Options" includes both Incentive Stock Options and Non-Qualified Stock Options. Section 1.19 - Parent Corporation "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.20 - Participant "Participant" shall mean an Officer or Employee who is selected by the Committee to receive an award. - 3 - Section 1.21 - Plan "Plan" shall mean this 1996 Stock Option Plan for Officers and Key Employees of the Company. Section 1.22 - Pronouns The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. Section 1.23 - Regulations "Regulations" shall mean final, temporary or proposed regulations promulgated under the Code. Section 1.24 - Secretary "Secretary" shall mean the Secretary of the Company. Section 1.25 - Stock Appreciation Right "Stock Appreciation Right" or "Right" shall mean a right granted pursuant to Article VI of the Plan to receive an amount of cash or, in the discretion of the Committee, a number of shares of Class A Common Stock or Class B Common Stock of the Company or a combination of shares of Class A Common Stock or Class B Common Stock and cash, based on the increase in the Fair Market Value of the shares of Class A Common Stock or Class B Common Stock subject to the right. Section 1.26 - Stock Payment "Stock Payment" shall mean a payment in shares of Class B Common Stock valued at the Fair Market Value at the time of the payment: (i) to replace all or any portion of the compensation, other than base salary, that would otherwise become payable to a Participant in cash; or (ii) to encourage employment with the Company for employees. Section 1.27 - Subsidiary "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.28 - Termination of Employment "Termination of Employment" shall mean: (i) the time when the Participant ceases to be an Employee or Officer of the Company or a Subsidiary for any reason, including, but not limited to, a termination by resignation, discharge, death or retirement, and with respect to a Participant who is - 4 - a consultant, the time when such consultant is no longer retained by the Company or any Subsidiary of the Company, but excluding terminations where there is a simultaneous reemployment or reappointment of the Participant as an Employee or Officer by the Company or a Subsidiary; or (ii) with respect to a Participant who is an Employee or Officer of a Subsidiary, the time when such Subsidiary ceases to be a Subsidiary of the Company. The Committee, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not limited to, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code. ARTICLE II SHARES SUBJECT TO PLAN Section 2.1 - Shares Subject to Plan The shares of stock subject to Awards shall be shares of the Company's Class A Common Stock and shares of the Company's Class B Common Stock. The aggregate number of such shares which may be subject to Options and Rights granted under the Plan, shall be 4,300,000 shares of Common Stock, subject to adjustment as provided herein including, but not limited to, adjustments for dividends consisting of one share of Class B Common Stock for one share of Class A Common Stock. With respect to each fiscal year, on and after October 1, 1997, the aggregate number of shares of Common Stock which may be subject to Awards granted during such year shall not exceed two percent (2%) of the aggregate outstanding shares of Class A and Class B Common Stock of the Company as of the last day of the previous fiscal year, subject to adjustment as provided herein. To the extent permissible under Rule 16b-3 of the Act, any shares of Common Stock available to be subject to Awards granted during a fiscal year and not made subject to Awards shall be added to the aggregate number of shares of Common Stock available for Awards in succeeding fiscal years. The maximum number of Incentive Stock Options available for grant under the Plan shall be 1,800,000, subject to adjustment as provided herein. The maximum number of Incentive Stock Options, Non-Qualified Stock Options and Stock Appreciation Rights available for grant to any Participant during any fiscal year shall not exceed 200,000, subject to adjustment as provided herein. If any Award, expires or is terminated or cancelled without having been fully exercised, the number of shares subject to such Award but as to which such Award was not exercised prior to its expiration or cancellation may again be granted hereunder, subject to the limitations contained herein, provided, however, that, in the case of the cancellation or termination of an Incentive Stock Option, a Non-Qualified Stock Option or Stock Appreciation Right in the same fiscal year that such Incentive Stock Option, Non-Qualified Stock Option or Stock Appreciation Right was granted, both the cancelled or terminated Incentive Stock Option, Non-Qualified Stock Option or Stock Appreciation Right and the newly granted Incentive Stock Option, Non-Qualified Stock Option or Stock Appreciation Right shall be counted in - 5 - determining whether the recipient has received the maximum number of such Awards permitted under the Plan. Section 2.2 - Limitation on Incentive Stock Option Exercise The aggregate Fair Market Value (determined as of the time the Option is granted) of the shares subject to Incentive Stock Options which may first become exercisable by any Officer or key Employee in any calendar year (under the Plan and all other incentive stock option plans of the Company, any Subsidiary and any Parent Corporation) shall not exceed $100,000. Section 2.3 - Changes in Company's Shares In the event that the outstanding shares of Class A Common Stock or Class B Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or (subject to Section 8.2 hereof) of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, or in the event of extraordinary cash or non-cash dividends being declared with respect to outstanding shares of Class A Common Stock or Class B Common Stock or similar transactions, proportionate adjustments shall be made by the Committee in the number and kind of shares which are subject to Awards, including adjustments of the limitations contained herein on the maximum number and kind of shares which may be subject to Awards under the Plan. ARTICLE III GRANTING OF AWARDS Section 3.1 - Eligibility Any Officer or key Employee of the Company or of any corporation which is then a Subsidiary shall be eligible to be granted Awards, except as otherwise provided herein. Section 3.2 - Qualifications of Incentive Stock Options No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. Section 3.3 - Stock Payments The Committee may approve Stock Payments of Class B Common Stock valued at the Fair Market Value at the time of payment to an Employee or Officer: (i) for all or any portion of the compensation, other than base salary, that would otherwise become payable to an Employee or Officer in cash; or (ii) as an incentive to employment with the Company. Each Stock Payment will be evidenced by a written instrument signed by the Participant or granted pursuant to a written performance plan adopted by the Committee and may include any other terms and conditions consistent with the Plan as the Committee may in its discretion determine. - 6 - Section 3.4 - Granting of Awards (a) The Committee shall from time to time, in its absolute discretion: (i) Determine which Employees are key Employees and select from among the Officers or key Employees (including those to whom Awards have been previously granted under the Plan) such of them as in its opinion should be granted Awards; (ii) Determine the number of shares to be subject to such Awards granted to such selected Officer or key Employees, and determine whether such Awards are to be Incentive Stock Options, Non-Qualified Stock Options, Stock Payments, Stock Appreciation Rights or any combination thereof; and (iii) Determine the terms and conditions of such Awards, consistent with the Plan. (b) Upon the selection of an Officer or key Employee to be granted an Award, the Committee shall, by resolution, set forth the terms and conditions of the Award, instruct the Secretary or Chief Financial Officer to issue such Award and, in the case of a grant of an Option, specify in the resolution whether such Option is intended to be an Incentive Stock Option or a Non-Qualified Stock Option; provided, however, that in the event no such specification is made in such resolutions, the Committee will be deemed to have specified that such Option is intended to be a Non-Qualified Stock Option; provided further, however, that in the event such specification, whether explicit or implicit, is inconsistent with terms set forth in such resolutions for such Option, then such specification shall be deemed of no force or effect, and the Committee will be deemed to have made a specification which is consistent with such terms. The Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of a Non-Qualified Stock Option to a Participant that the Participant surrender for cancellation some or all of the unexercised Non-Qualified Stock Options which have been previously granted to him. A Non-Qualified Stock Option, the grant of which is conditioned upon such surrender, may have an option price lower (or higher) than the option price of the surrendered Non-Qualified Stock Option, may cover the same (or a lesser or greater) number of shares as the surrendered Non-Qualified Stock Option, may contain such other terms as the Committee deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, option period or any other term or condition of the surrendered Non-Qualified Stock Option. (c) Awards may not be granted by the Committee to Directors who are not Officers or key Employees of the Company. ARTICLE IV TERMS OF OPTIONS Section 4.1 - Option Price The exercise price per share of the shares subject to each Option shall be set by the Committee; provided, however, that the exercise price per share shall be not less than 100 percent - 7 - of the Fair Market Value of such shares on the date such Option is granted; provided further, that, in the case of an Incentive Stock Option, the exercise price per share shall be not less than 110 percent of the Fair Market Value of such shares on the date such Option is granted in the case of an individual then owning (within the meaning of Section 425(d) of the Code) more than 10 percent of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation. Section 4.2 - Commencement of Exercisability (a) Except as the Committee may otherwise provide, no Option may be exercised in whole or in part during the first year after such Award is granted. (b) Subject to the provisions of Section 2.2, 4.2(a) , 4.2(c) and 8.2, Options shall become exercisable at such times and in such installments (which may be cumulative) as the Committee shall provide in the terms of each individual Option; provided, however, that by a resolution adopted after an Option is granted the Committee may in its absolute discretion, on such terms and conditions as it may determine to be appropriate and subject to Sections 4.2(a) and 4.2(c) accelerate the time at which such Option or any portion thereof may be exercised (c) No portion of an Option which is unexercisable at Termination of Employment shall thereafter become exercisable. Section 4.3 - Expiration of Options (a) No Incentive Stock Option may be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of ten years from the date the Incentive Stock Option was granted; or (ii) In the case of a Participant owning (within the meaning of Section 425(d) of the Code), at the time the Incentive Stock Option was granted, more than 10 percent of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation, the expiration of five years from the date the Incentive Stock Option was granted; or (iii) Except in the case of any Participant who is disabled, the expiration of three months from the date of the Participant's Termination of Employment for any reason other than such participant's death, unless the Participant dies within said three-month period; or (iv) In the case of a Participant who is disabled, the expiration of one year from the date of the Participant's Termination of Employment for any reason other than such Participant's death, unless the Participant dies within said one-year period; or (v) The expiration of one year from the date of the Participant's death. For purposes of this Section 4.3, "disabled" shall mean a medically determinable physical or - 8 - mental impairment which has lasted or can be expected to last for a continuous period of not less than 12 months (and in the case of an Incentive Stock Option, or which can be expected to result in death) and which renders the Participant substantially unable to function as an Officer or Employee of the Company or a Subsidiary. (b) Subject to the provisions of Section 4.3(a), the Committee shall provide, in the terms of each individual Option, when such Option expires and becomes unexercisable; and (without limiting the generality of the foregoing) the Committee may provide in the terms of individual Options that said Options expire immediately upon a Termination of Employment for any reason. Section 4.4 - Employment of Participant Nothing in this Plan or in any Stock Option Agreement, Stock Appreciation Right Agreement or in any written instrument or written performance plan related to Stock Payments hereunder shall confer upon any Participant any right to continue in the employ of, or be retained by the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and Subsidiaries, which are hereby expressly reserved, to discharge any Participant, or to terminate the services of any consultant, at any time for any reason whatsoever, with or without good cause. ARTICLE V EXERCISE OF AWARDS Section 5.1 - Person Eligible to Exercise During the lifetime of the Participant, only he, his guardian, legal representative or other person approved by the Committee in its sole discretion and described in the terms of the agreements documenting such Award may exercise an Award granted to him, or any portion thereof (unless, in the case of an Award which is an Incentive Stock Option, such exercise would disqualify such Option as an Incentive Stock Option). After the death of the Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under Article IV or Section 8.2, be exercised by his personal representative or by any person empowered to do so under the deceased Participant's will or under the then applicable laws of descent and distribution. Section 5.2 - Partial Exercise At any time and from time to time prior to the time when any exercisable Award or exercisable portion thereof becomes unexercisable under Article IV or Section 8.2, such Award or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Committee may, by the terms of the Award, require any partial exercise to be with respect to a specified minimum number of shares. Section 5.3 - Manner of Exercise An exercisable Award, or any exercisable portion thereof, may be exercised solely by delivery - 9 - to the Secretary or Chief Financial Officer or their respective offices of all of the following prior to the time when such Award or such portion becomes unexercisable under Section 4.3 or Section 8.2: (a) Notice in writing by the Participant or other person then entitled to exercise such Award or portion, stating that such Award or portion is exercised, such notice complying with all applicable rules established by the Committee; (b) (i) With respect to the exercise of Options, full payment (in cash or by check) for the shares with respect to which such Option or portion is thereby exercised; (ii) With the consent of the Committee, shares of any Class of the Company's Common Stock owned by the Participant either duly endorsed for transfer to the Company or duly attested as to ownership with a Fair Market Value (as determinable under Section 1.13) on the date of delivery equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised (which shares shall be owned by the Participant for more than six months at the time they are delivered); (iii) With the consent of the Committee (and provided the use of the following procedure by a Participant would not violate Rule 16(b) under the Act), delivery to the Company of (x) irrevocable instructions to deliver the stock certificates representing the shares for which the Option is being exercised directly to a broker, and (y) instructions to the broker to sell such shares and promptly deliver to the Company the portion of the sole proceeds equal to the aggregate Option exercise price; (iv) With the consent of the Committee, any other form of cashless exercise permitted under Section 5.4 hereof; or (v) Any combination of the consideration provided in the foregoing subsections (i), (ii), (iii) and (iv). (c) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (d) In the event that the Award or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Award or portion thereof. Section 5.4 - Cashless Exercise Procedures The Company, in its sole discretion, may establish procedures whereby a Participant, subject to the requirements of Rule 16b-3 under the Act, Regulation T issued by the Board of Governors of the Federal Reserve System pursuant to the Act, federal income tax laws, and other federal, state and local tax and securities laws, can exercise an Option or a portion thereof without making a direct payment of the Option price to the Company. If the Company so elects to establish a cashless - 10 - exercise program, the Company shall determine, in its sole discretion and from time to time, such administrative procedures and policies as its deems appropriate and such procedures and policies shall be binding on any participant wishing to utilize the cashless exercise program. Section 5.5 - Conditions to Issuance of Stock Certificates The shares of stock issuable and deliverable upon the exercise of an Award, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Award or portion thereof or upon a Stock Payment prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such Class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary and advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; (d) The payment to the Company of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Award or grant of a Stock Payment; and (e) The lapse of such reasonable period of time following the exercise of the Award as the Committee may establish from time to time for reasons of administrative convenience. Section 5.6 - Rights as Stockholders The holders of Awards shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares receivable upon the exercise of any part of an Award unless and until certificates representing such shares have been issued by the Company to such holders. Section 5.7 - Transfer Restrictions The Committee, in its absolute discretion, may impose such restrictions on the transferability of the shares receivable upon the exercise of an Award or upon the grant of a Stock Payment, as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement or Stock Appreciation Right Agreement and may be, and in the case of a Stock Payment will be, referred to on the certificates evidencing such shares. The Committee may require the Participant to give the Company prompt notice of any disposition of shares of stock, acquired by exercise of an Incentive Stock Option, within two years from the date of granting such Option or one year after the transfer of such shares to such Participant. The Committee may direct that the certificates evidencing - 11 - shares acquired by exercise of an Award refer to such requirement to give prompt notice of disposition. ARTICLE VI STOCK APPRECIATION RIGHTS Section 6.1 - Conditions to Grant of Rights The Committee may approve the grant of Rights related or unrelated to Options to Participants, subject to the following terms and conditions: A Stock Appreciation Right may be granted: (i) at any time if unrelated to an Option; (ii) either at the time of grant, or at any time thereafter during the option term if related to a Non-Qualified Stock Option; or (iii) only at the time of grant if related to an Incentive Stock Option. Section 6.2 - Rights Granted in Connection with Options (a) A Stock Appreciation Right granted in connection with an Option will require the holder of the related Option, upon exercise of the Stock Appreciation Right, to surrender such Option, or any portion thereof to the extent unexercised, with respect to the number of shares as to which such Stock Appreciation Right is exercised, and will entitle the holder to receive payment of an amount computed pursuant to Section 6.2(c). Upon the exercise of a Stock Appreciation Right, the number of shares subject to exercise under the related Option shall be automatically reduced by the number of shares represented by the Option or portion thereof surrendered. Upon the exercise of an Option, the number of shares subject to the related Stock Appreciation Right shall be automatically reduced by the number of shares with respect to which the Option was exercised. (b) Subject to Section 6.4(b) and (c), a Stock Appreciation Right granted in connection with an Option hereunder will be exercisable at such time or times, and only to the extent that a related Option is exercisable, and will not be transferable except to the extent that such related Option may be transferable. A Stock Appreciation Right granted in connection with an Incentive Stock Option shall be exercisable only if the Fair Market Value of a share of Common Stock of the Company on the date of exercise exceeds the purchase price per share of Common Stock specified in the related Option. (c) Upon the exercise of a Stock Appreciation Right related to an Option, the Option holder will be entitled to receive payment of an amount determined by multiplying: (i) The difference obtained by subtracting the purchase price of a share of the Class A Common Stock or a share of the Class B Common Stock specified in the related Option from the Fair Market Value of a share of the Class A Common Stock or Class B Common Stock, as the case may be, on the date of exercise of such Stock Appreciation Right, - 12 - by (ii) The number of shares of Class A Common Stock or the number of shares of Class B Common Stock as to which such Stock Appreciation Right has been exercised. Section 6.3 - Rights Granted Unrelated to Options The Committee may grant Stock Appreciation Rights unrelated to Options to Participants. The amount payable upon exercise of such a Stock Appreciation Right shall be determined in accordance with Section 6.2(c), except that "Fair Market Value of a share of Class A Common Stock or a share of the Class B Common Stock, as the case may be on the date of the grant of the Stock Appreciation Right" shall be substituted for "purchase price of a share of the Class A Common Stock or a share of Class B Common Stock specified in the related Option." Section 6.4 - Form of Payment; Conditions (a) Payment of the amount determined under Sections 6.2(c) or 6.3 shall be made solely in cash or alternatively, at the sole discretion of the Committee, may be made solely in whole shares of Class A Common Stock or Class B Common Stock in a number determined at their Fair Market Value on the date of exercise of the Stock Appreciation Right, or in a combination of cash and shares as the Committee deems advisable. If the Committee decides to make full payment in shares of Class A Common Stock or Class B Common Stock, and the amount payable results in a fractional share, payment for the fractional share will be made in cash. (b) The Committee may, at the time a Stock Appreciation Right is granted, impose such conditions on the exercise of the Stock Appreciation Right as may be required to satisfy the requirements of Rule 16b-3 under the Act (or any other comparable provisions in effect at the time or times in question). ARTICLE VII ADMINISTRATION Section 7.1 - Duties and Powers of Committee (a) The Plan shall be administered by a committee of the Board consisting of two or more members of the Board, selected by the Board, all of which members may be both a "Non-Employee Director" as defined in Rule 16b-3(b)(3) (or any successor provision) promulgated under the Act, and an "Outside Director" as defined for purposes of Section 162(m) (or any successor provision) of the Code and the Regulations promulgated thereunder. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Awards and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. The Committee shall in its absolute discretion determine whether to grant Non-Qualified Stock Options, Incentive Stock Options, Stock Payments and/or Stock Appreciation Rights; provided that in the case of the granting of Incentive Stock Options, any such interpretations - 13 - and rules in regard to Incentive Stock Options shall be consistent with the purposes of the Plan to grant "incentive stock options" within the meaning of Section 422 of the Code. (b) No Award granted hereunder shall be exercisable unless and until evidenced by a written Stock Option Agreement, Stock Appreciation Right Agreement or a written instrument related to a Stock Payment, if applicable, which shall be executed by the participant and an authorized Officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with the Plan. Each such agreement shall expressly incorporate by reference the provisions of this Plan (a copy of which shall be made available for inspection by the Participant during normal business hours at the principal office of the Company) and shall state that in the event of any inconsistency between the provisions hereof and the provisions of such agreement, the provisions of this Plan shall govern. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as "incentive stock options" under Section 422 of the Code. Section 7.2 - Majority Rule The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instruments signed by a majority of the Committee. Section 7.3 - Compensation; Professional Assistance; Good Faith Actions Members of the Committee shall not receive compensation for their services as members but all expenses and liabilities they incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1 - Adjustments in Outstanding Awards In the event that the outstanding shares of the stock subject to Rights or Options are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company or (subject to Section 8.2 hereof) of another corporation by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, or in the event of extraordinary cash or non-cash dividends being declared with respect to - 14 - outstanding shares of Common Stock or similar transactions, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Rights or Options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Participant's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in an outstanding Right or Option or the unexercised portion of the Right or Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the exercise price per share (or, with respect to Rights granted without Options, the Fair Market Value per share on the date the Right was granted); provided, however, that, in the case of Incentive Stock Options, each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code; provided, further, that each such adjustment shall be made in such manner as not to constitute: (i) a "material modification" to any Award intended to qualify for treatment as an "existing binding contract" in each case within the meaning of Section 162(m)(4)(D) of the Code; or (ii) a cancellation and reissuance of an Incentive Stock Option, Non-Qualified Stock Option or Stock Appreciation Right for purposes of 162(m) of the Code, or the Regulations promulgated thereunder to the extent that such reissuance would result in the grant of such Awards in excess of the maximum permitted to be granted to any Participant in any fiscal year. Any such adjustment made by the Committee shall be final and binding upon all Participants, the Company and all other interested persons. Section 8.2 - Merger, Consolidation, Acquisition, Liquidation or Dissolution a. Notwithstanding anything to the contrary in Section 4.2(a), Section 4.2(b) or any vesting provisions of any Award, any Award outstanding under the Plan which has been held for at least six months shall become exercisable immediately upon the effective date of a "Change of Control." As used in this Section 8.2, the term "Change of Control" shall mean the occurrence of any of the following: (i) a business combination effectuated through the merger or consolidation of the Company with or into another entity where the Company is not the Surviving Organization; (ii) any business combination effectuated through the merger or consolidation of the Company with or into another entity where the Company is the Surviving Organization and such business combination occurred with an entity whose market capitalization prior to the transaction was greater than 50 percent of the Company's market capitalization prior to the transaction; (iii) the sale in a transaction or series of transactions of all or substantially all of the Company's assets; (iv) any "person" or "group" (within the meaning of Sections 13(d)and 14(d) of the Act) other than UniHealth, a California non-profit public benefit corporation ("UniHealth"), acquires beneficial ownership (within the meaning of Rule 13d-3 of the Act), directly or indirectly, of 20 percent or more of the voting common stock of the Company and the beneficial ownership of the voting common stock of the Company owned by UniHealth at that date is less than or equal to the beneficial ownership interest of voting securities attributable to such other person or group; (v) a dissolution or liquidation of the Company; or (vi) the Company ceases to be subject to the reporting requirements of the Act as a result of a "going private transaction" (within the meaning of the Act). For purposes hereof, "Surviving Organization" shall mean any entity where the majority of the members of such entity's board of directors are persons who were members of the Company's board of directors prior to the merger, consolidation or other business combination - 15 - and the senior management of the surviving entity includes all of the individuals who were the Company's executive management (the Company's chief executive officer and those individuals who report directly to the Company's chief executive officer) prior to the merger, consolidation or other business combination and such individuals are in at least comparable positions with such entity b. The Committee may make such determinations and interpretations and adopt such rules and conditions as it, in its absolute discretion, deems appropriate in connection with a Change in Control and acceleration of exercisability. All such determinations and interpretations by the Committee shall be conclusive. c. Each Participant shall receive at least 10 days' notice prior to the effective date of the Change of Control that their Awards will be exercisable upon the effective date of the Change of Control and the officers of the Company shall make adequate provisions to permit all Participants to exercise their Awards as of the effective date of the Change of Control. Section 8.3 - Awards Not Transferable No Award or interest or right therein or part thereof, excluding Stock Payments, shall be liable for the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 8.3 shall prevent transfers by will or by the applicable laws of descent and distribution or by other methods to any approved person pursuant to Section 5.1. Section 8.4 - Withholding Tax Liability (a) A holder of an Award granted hereunder may elect to deliver shares to the Company or have the Company withhold shares otherwise issuable upon the exercise of an Award in order to satisfy federal and state withholding tax liability (a "share withholding election"), provided: (i) the Board or, if so designated, the Committee, shall not have revoked its advance approval of the holder's share withholding election; and (ii) the share withholding election is made on or prior to the date on which the amount of withholding tax liability is determined (the "Tax Date"). Notwithstanding the foregoing, a holder whose transactions in Common Stock are subject to Section 16(b) of the Act may make a share withholding election only if the following additional conditions are met: (i) the withholding is made at least six months after the date of the grant of the Award; and (ii) either (x) the share withholding election is irrevocably made at least six months in advance of the withholding, or (y) the share withholding election and the share withholding take place during the period beginning on the third business day following the date of release of the Company's quarterly or annual financial results and ending on the twelfth business day following such date. (b) A share withholding election shall be deemed made when written notice of such election, signed by the holder of the Award, has been delivered or transmitted by registered or - 16 - certified mail to the Secretary or Chief Financial Officer of the Company at its then principal office. Delivery of said notice shall constitute an irrevocable election to have shares withheld. (c) Upon exercise of an Award by a holder, the Company shall transfer the total number of shares of Class A Common Stock or Class B Common Stock of the Company subject to the Award to the holder on the date of exercise, less any shares the holder elects to withhold. (d) If a Participant disposes of shares acquired pursuant to an Incentive Stock Option in any transaction considered to be a disqualifying transaction under Sections 421 and 422 of the Code, the Participant must give the Company written notice of such transfer and the Company shall have the right to deduct any taxes required by law to be withheld from any amounts otherwise payable to the Participant. Section 8.5 - Amendment, Suspension or Termination of the Plan The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board, but no amendment may be awarded that is not subject to the approval of the stockholders of the Company if stockholder approval would be required under Section 162(m) of the Code, Section 422 of the Code or any other law or rule of any governmental authority, stock exchange or other self-regulatory organization to which the Company is subject. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Award, impair any rights or obligations under any Award heretofore granted. No Award may be granted during any period of suspension nor after termination of the Plan, and in no event may any Award be granted under this Plan after the expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 8.6. The Committee may amend or otherwise modify any Award (either individually or as a group) from time to time, but no amendment or modification shall, without the consent of the holder of such Award, impair any rights or obligations of such award. Section 8.6 - Approval of Plan by Stockholders The Plan will be submitted for the approval of the Company's stockholders within 12 months after the date of the Board's initial adoption of the Plan and as determined necessary or desirable for actions taken pursuant to Section 8.5. Awards may be granted prior to such stockholder approval; provided, however, that such Awards shall not be exercisable prior to the time when the Plan is approved by the stockholders; provided further, that if such approval has not been obtained at the end of said 12 month period, all Awards previously granted under the Plan shall thereupon be cancelled and become null and void. Section 8.7 - Effect of Plan Upon Other Incentive and Compensation Plans The adoption of this Plan shall not affect any other compensation or incentive plan in effect for the Company or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company or any Subsidiary: (i) to establish any other forms of incentives or compensation for Officers or - 17 - Employees of the Company or any Subsidiary; or (ii) to grant or assume Awards otherwise than under this Plan in connection with any proper corporate purpose, including, but not limited to, the grant or assumption of options or stock appreciation rights in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 8.8 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. - 18 - EX-10.06 4 EXHIBIT 10.06 Exhibit 10.06 1996 NON-OFFICER DIRECTORS STOCK OPTION PLAN 1. PURPOSE. This 1996 Non-Officer Directors Stock Option Plan (the "Plan") of N-T Holdings, Inc. or such other name as N-T Holdings, Inc. may adopt, a Delaware corporation (the "Company"), is intended to promote the best interests of the Company and its stockholders by strengthening the Company's ability to attract and retain the services of experienced and knowledgeable non-officer directors and to provide additional incentive for such directors to continue to work for the best interests of the Company and its stockholders. The options granted hereunder are not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as incentive stock options. 2. AMOUNT AND SOURCE OF STOCK. The shares of stock subject to options shall be shares of the Company's Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"). The total number of shares of Class B Common Stock which may be the subject of options granted pursuant to this Plan shall be limited so that the total number of shares of Class B Common Stock issued upon the exercise of options granted under this Plan shall not exceed 390,000, subject to adjustment as provided in Section 10 of this Plan. In the event that any option granted hereunder expires or is terminated or canceled prior to its exercise in full for any reason, the shares subject to such option shall be added to the shares of Class B Common Stock otherwise available for issuance pursuant to the exercise of options under this Plan. 3. ADMINISTRATION OF THE PLAN. (a) DUTIES AND POWERS OF THE COMMITTEE. This Plan shall be administered by a committee of the Board of Directors of the Company (the "Board") comprised of two or more members of the Board, selected by the Board (the "Committee"). Such members of the Committee may, but need not be, "Non-Employee Directors" as defined in Rule 16b-3(b)(3) (or any successor provision) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the respective option agreements and to adopt such rules for the administration, interpretation and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. The Committee shall have no authority with respect to the selection from among the eligible individuals to whom options are to be granted (any such individual being hereinafter referred to as the "optionee" or the "holder") or the number or maximum number of shares of Class B Common Stock subject to any option that is - 1 - granted to an eligible individual. The selection of optionees and the number of shares subject to each option shall be determined in accordance with Section 4 of this Plan. (b) MAJORITY RULE. The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee. (c) COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Members of the Committee shall not receive compensation for their services as members but all expenses and liabilities they incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all optionees, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or the options and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. 4. GRANT OF STOCK OPTIONS. (a) ELIGIBILITY. All non-officer directors of the Company, who are not eligible to receive options under the 1996 Stock Option Plan for Officers and Key Employees of the Company, (the "1996 Plan"), shall be eligible to receive options hereunder (the "Eligible Directors"). (b) STOCK OPTION GRANTS. (i) The Committee shall, subject to the applicable limits of this Plan, automatically grant each Eligible Director, upon being elected to the Board, options to purchase 10,000 shares of Class B Common Stock. (ii) The Committee shall, subject to the applicable limits of this Plan, automatically grant each Eligible Director annually options to purchase 5,000 shares of Class B Common Stock on the 31st day of December in each calendar year commencing December 31, 1996; provided that the optionee shall not have been eligible to receive options under the 1996 Plan for all or any part of the preceding 12-month period and shall have served on the Board the entire preceding 12-month period. If additional Eligible Directors are hereafter appointed to the Board, the Committee shall, subject to the applicable limits of this Plan, automatically grant annually each such person options to purchase 5,000 shares of Class B Common Stock on the 31st day of December in each calendar year commencing with the first - 2 - December 31st following the date on which such director was appointed; so long as the director is then eligible for the granting of options pursuant to this Plan and has not been eligible to receive options under the 1996 Plan for all of the preceding 12-month period, and, such director shall have served on the Board the entire preceding 12-month period. If the number of shares of Class B Common Stock which may be the subject of options under this Plan is not sufficient to make all automatic grants required to be made pursuant to this Plan on the applicable date, the number of shares of Class B Common Stock subject to the options granted to each director shall be reduced on a pro rata basis. (c) OPTION PRICE. The exercise price for the shares of Class B Common Stock purchasable under any option granted hereunder shall be an amount equal to 100 percent of the Fair Market Value of the Class B Common Stock on the date of grant. For purposes of this Plan, the "Fair Market Value" of the Class B Common Stock on a given date shall be based upon: (i) the closing price per share of the Class B Common Stock on the principal exchange on which the Class B Common Stock is then trading, if any, on such date, or, if the Class B Common Stock was not traded on such date, then on the next preceding trading day during which a sale occurred; or (ii) if the Class B Common Stock was not traded on an exchange but is quoted on the National Association of Securities Dealers Automatic Quotation System ("Nasdaq") or a successor quotation system, (1) the last sales price (if the Class B Common Stock is then listed as a National Market Issue under the NASD National Market System), or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Class B Common Stock on such date as reported by Nasdaq or such successor quotation system; or (iii) if the Class B Common Stock is not publicly traded on an exchange and not quoted on Nasdaq or a successor quotation system, the mean between the closing bid and asked prices for the Class B Common Stock on such date as determined in good faith by the Committee; or (iv) if the Class B Common Stock is not publicly traded, the fair market value established by the Committee acting in good faith. 5. TERMS AND CONDITIONS OF OPTIONS; VESTING. (a) COMMENCEMENT OF EXERCISABILITY. Subject to Sections 5(b) and (c), and Sections 7, 8 and 14, each option granted under this Plan shall become exercisable in four cumulative installments as follows: (i) The first installment shall consist of 25 percent of the shares of Class B Common Stock covered by the option and shall become exercisable on the first anniversary of the date of grant; (ii) The second installment shall consist of 25 percent of the shares of Class B Common Stock covered by the option and shall become exercisable on the second anniversary of the date of grant; - 3 - (iii) The third installment shall consist of 25 percent of the shares of Class B Common Stock covered by the option and shall become exercisable on the third anniversary of the date of grant; and (iv) The fourth installment shall consist of all remaining shares of Class B Common Stock covered by the option and shall become exercisable on the fourth anniversary of the date of grant. (b) VESTING CUMULATIVE. The installments provided for in this Section 5 are cumulative. Each such installment which becomes exercisable pursuant to Section 5(a) shall remain exercisable until such installment becomes unexercisable under Section 7. No portion of an option which is unexercisable at Termination of Directorship (as defined in Section 7) shall thereafter be exercisable. (c) STOCK OPTION AGREEMENT. Subject to Section 14, the grant of options by the Committee shall be effective as of the date of grant; provided, however, that no option granted hereunder shall be exercisable unless and until the holder shall enter into an individual option agreement with the Company that shall set forth the terms and conditions of such option. Each such agreement shall expressly incorporate by reference the provisions of this Plan (a copy of which shall be made available for inspection by the optionee during normal business hours at the principal office of the Company) and shall state that in the event of any inconsistency between the provisions hereof and the provisions of such agreement, the provisions of this Plan shall govern. 6. EXERCISE OF OPTIONS. (a) PERSON ELIGIBLE TO EXERCISE. During the lifetime of the optionee, only he, his guardian, legal representative or other person approved by the Committee in its sole discretion and described in the terms of the agreement documenting the option may exercise an option granted to him, or any portion thereof. After the death of the optionee, any exercisable portion of an option may, prior to the time when such option becomes unexercisable under Section 7, be exercised by his personal representative or by any person empowered to do so under the deceased optionee's will or under the applicable laws of descent and distribution. (b) PARTIAL EXERCISE. At any time and from time to time prior to when any exercisable option or exercisable portion thereof becomes unexercisable under Section 7, such option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the number of shares for which an option may be partially exercised shall be not less than 100 shares. (c) MANNER OF EXERCISE. An exercisable option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or Chief Financial Officer of the - 4 - Company or their respective offices of all of the following prior to the time when such option or such portion becomes unexercisable under this Plan: (i) Notice in writing signed by the optionee or other person then entitled to exercise such option or portion, stating that such option or portion is exercised, such notice complying with all applicable rules established by the Committee; (ii) (A) Full payment (in cash or by check) for the shares with respect to which such option or portion is hereby exercised; (B) With the consent of the Committee, shares of any class of the Company's stock owned by the optionee either duly endorsed for transfer to the Company or duly attested as to ownership with a Fair Market Value (as determinable under Section 4(c)) on the date of delivery equal to the aggregate option price of the shares of Class B Common Stock with respect to which such option or portion is thereby exercised (which shares shall be owned by the optionee for more than six months at the time they are delivered); (C) With the consent of the Committee, any other form of cashless exercise permitted under Section 6(d) hereof; or (D) Any combination of the consideration provided in the foregoing subsections (A), (B) and (C); (iii) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop transfer orders to transfer agents and registrars; and (iv) In the event that the option, or portion thereof, shall be exercised by any person or persons other than the optionee, appropriate proof of the right of such person or persons to exercise the option or portion thereof. (d) CASHLESS EXERCISE. The Company, in its sole discretion, may establish procedures whereby an optionee, to the extent permitted by and subject to the requirements of Rule 16b-3 under the Exchange Act, Regulation T issued by the Board of Governors of the Federal Reserve System pursuant to the Exchange Act, federal income tax laws, and other federal, state and local tax and securities laws, can exercise an option or a portion thereof without making a direct payment of the option price to the Company. If the Company so elects to establish a cashless exercise program, the Company shall determine, in its sole - 5 - discretion and from time to time, such administrative procedures and policies as it deems appropriate provided such procedures and policies are consistent with those of any cashless exercise program established pursuant to the 1996 Plan. Such procedures and policies shall be binding on any optionee wishing to utilize the cashless exercise program. 7. EXPIRATION OF OPTIONS. No option may be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of 10 years and one day from the date the option was granted; or (ii) The expiration of eight months from the time the optionee shall voluntarily or involuntarily cease to continue to serve as a director of the Company (a "Termination of Directorship"), unless such Termination of Directorship results from his death or disability; or (iii) The expiration of one year from the date of the optionee's Termination of Directorship by reason of his disability; or (iv) The expiration of one year from the date of optionee's death. For purposes of this Section 7, "disability" shall mean a medically determinable physical or mental impairment which has lasted or can be expected to last for a continuous period of not less than 12 months and which renders a director substantially unable to function as a director of the Company. Nothing contained herein or in any option agreement shall be construed to confer on any optionee any right to continue as a director of the Company. 8. ACCELERATION OF VESTING UPON A CHANGE OF CONTROL. Notwithstanding anything to the contrary in Section 7 and/or any vesting provisions of any option, any option which has been held for at least six months shall become exercisable immediately upon the effective date of a "Change of Control." As used in this Section 8, the term "Change of Control" shall mean the occurrence of any of the following: (i) a business combination effectuated through the merger or consolidation of the Company with or into another entity where the Company is not the Surviving Organization; (ii) any business combination effectuated through the merger or consolidation of the Company with or into another entity where the Company is the Surviving Organization and such business combination occurred with an entity whose market capitalization prior to the transaction was greater than 50 percent of the Company's market capitalization prior to the transaction; (iii) the sale in a transaction or series of transactions of all or substantially all of the Company's assets; (iv) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the - 6 - Exchange Act) other than UniHealth, a California nonprofit public benefit corporation ("UniHealth"), acquires beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of 20 percent or more of the voting common stock of the Company and the beneficial ownership of the voting common stock of the Company owned by UniHealth at that date is less than or equal to the beneficial ownership interest of voting securities attributable to such other person or group; (v) a dissolution or liquidation of the Company; or (vi) the Company ceases to be subject to the reporting requirements of the Exchange Act as a result of a "going private transaction" (within the meaning of the Exchange Act). For purposes hereof, "Surviving Organization" shall mean any entity where the majority of the members of such entity's board of directors are persons who were members of the Company's board of directors prior to the merger, consolidation or other business combination and the senior management of the surviving entity includes all of the individuals who were the Company's executive management (the Company's chief executive officer and those individuals who report directly to the Company's chief executive officer) prior to the merger, consolidation or other business combination and such individuals are in at least comparable positions with such entity. The Committee may make such determinations and interpretations and adopt such rules and conditions as it, in its absolute discretion, deems appropriate in connection with a Change in Control and acceleration of exercisability. All such determinations and interpretations by the Committee shall be conclusive. Each optionee shall receive at least 10 days' notice prior to the effective date of the Change of Control that their options will be exercisable upon the effective date of the Change of Control and the officers of the Company shall make adequate provisions to permit all optionees to exercise their options as of the effective date of the Change of Control. 9. NON-TRANSFERABILITY OF OPTIONS. No option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law or judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 9 shall prevent transfers by will or by the applicable laws of descent and distribution or by other methods to any approved person pursuant to Section 6(a). 10. ADJUSTMENTS UPON CERTAIN EVENTS. (a) CHANGES IN COMPANY'S SHARES. In the event that the outstanding shares of Class B Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, or in the event of extraordinary cash or non-cash - 7 - dividends being declared with respect to the outstanding shares of Class B Common Stock or other similar transactions, proportionate adjustments shall be made by the Committee in the number and kind of shares for the purchase of which options may be granted (including adjustments of the limitation on the maximum number and kind of shares which may be issued on exercise of options), which adjustments shall be consistent with comparable adjustments made pursuant to the corresponding provision in the 1996 Plan. (b) ADJUSTMENTS IN OUTSTANDING AWARDS. In the event that the outstanding shares of Class B Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, stock dividend or combination of shares, or in the event of extraordinary cash or non-cash dividends being declared with respect to the outstanding shares of Class B Common Stock or other similar transactions, the Committee shall make proportionate adjustments in the number and kind of shares as to which all outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustments shall be consistent with comparable adjustments made pursuant to the corresponding provision in the 1996 Plan. Such adjustment in an outstanding option shall be made without change in the total price applicable to the option or the unexercised portion of the option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in option price per share. Any such adjustment made by the Committee shall be final and binding upon all optionees, the Company and all other interested persons. 11. GENERAL RESTRICTIONS. (a) CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The shares of Class B Common Stock issuable and deliverable upon the exercise of any option, or any portion thereof, may be either previously authorized but unissued shares of Class B Common Stock or issued shares of Class B Common Stock which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of Class B Common Stock purchased upon the exercise of any option or portion thereof prior to fulfillment of all of the following conditions: (i) The admission of such shares of Class B Common Stock to listing on all stock exchanges on which such class of stock is then listed; (ii) The completion of any registration or other qualification of such shares of Class B Common Stock under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; - 8 - (iii) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; (iv) The payment to the Company of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the option; and (v) The lapse of such reasonable period of time following the exercise of the option as the Committee may establish from time to time for reasons of administrative convenience. (b) RIGHTS AS STOCKHOLDERS. The holders of options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares of Class B Common Stock receivable upon the exercise of any part of an option unless and until certificates representing the shares of Class B Common Stock have been issued by the Company to such holders. 12. WITHHOLDING TAX LIABILITY. (a) A holder of an option granted hereunder may elect to deliver shares of Class B Common Stock to the Company or have the Company withhold shares otherwise issuable upon the exercise of an option in order to satisfy federal, state and local withholding tax liability (a "share withholding election"), provided: (i) the Board or, if so designated, the Committee, shall not have revoked its advance approval of the holder's share withholding election; and (ii) the share withholding election is made on or prior to the date on which the amount of withholding tax liability is determined (the "Tax Date"). Notwithstanding the foregoing, a holder whose transactions in the Company's equity securities are subject to Section 16(b) of the Exchange Act may make a share withholding election only if the following additional conditions are met: (i) the withholding is made at least six months after the date of the grant of the option; and (ii) either (x) the share withholding election is irrevocably made at least six months in advance of the withholding, or (y) the share withholding election and the share withholding take place during the period beginning on the third business day following the date of release of the Company's quarterly or annual financial results and ending on the twelfth business day following such date. (b) A share withholding election shall be deemed made when written notice of such election, signed by the holder, has been delivered or transmitted by registered or certified mail to the Secretary or Chief Financial Officer of the Company at its then principal office. Delivery of said notice shall constitute an irrevocable election to have shares withheld. - 9 - (c) Upon exercise of an option by a holder, the Company shall transfer the total number of shares of Class B Common Stock subject to the option to the holder on the date of exercise, less any shares of Class B Common Stock the holder elects to withhold. 13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. This Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board; provided that the Board may not amend or modify this Plan without the approval of the stockholders of the Company if stockholder approval would be required under Section 422 of the Code or any law or rule of any governmental authority, stock exchange or other self-regulatory organization to which the Company is subject. Neither the amendment, suspension nor termination of this Plan shall, without the consent of the holder of the option, impair any rights or obligations under any option theretofore granted. The Committee may amend or otherwise modify the terms of an option granted hereunder, from time to time, but no amendment or modification shall, without the consent of the holder of such option impair any rights or obligations of such option. No option may be granted during any period of suspension nor after termination of this Plan, and in no event may any option be granted under this Plan after exhaustion of the shares reserved for shares subject to options granted pursuant to this Plan. 14. APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted for the approval of the Company's stockholders within 12 months after the date of the Board's initial adoption of this Plan and as determined necessary or desirable for actions taken pursuant to Section 13. Options may be granted prior to such stockholder approval; provided, however, that such options shall not be exercisable prior to the time when this Plan is approved by the stockholders; provided, further, that if such approval has not been obtained at the end of said 12-month period, all options previously granted under this Plan shall thereupon be canceled and become null and void. 15. EFFECTIVE DATE OF PLAN. Subject to Section 14, the effective date of this Plan shall be December 1, 1996. - 10 - EX-10.07 5 EXHIBIT 10.07 Exhibit 10.07 1996 MANAGEMENT INCENTIVE COMPENSATION PLAN Section 1. PURPOSE The purpose of the Management Incentive Compensation Plan is to promote the interests of the Company by attracting and retaining an outstanding management and key employee staff Under the Plan, incumbents in stipulated key positions may receive Awards that vary with the success of the Company, the Subsidiary Operating Units as appropriate, and individual performance. Section 2. DEFINITIONS (a) "Award" refers to a contingent right to receive cash at the end of a Plan Year. (b) "Base Salary" refers to a Participant's September monthly salary times twelve. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" means a committee of the Board of Directors consisting of two or more members of the Board of Directors, selected by the Board, each of which members shall be an "Outside Director" for purposes of Section 162(m) (or any successor provision) of the Code and the Regulations promulgated thereunder. (e) "Company" refers to N-T Holdings, Inc. or such other name which N-T Holdings, Inc. may adopt. (f) "Key Manager" means any Executive Officer, as defined under Rule 3b-7 of the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended, of the Company or any subsidiary of the Company. "Key Manager" also means any Officer or full-time employee of the Company or any subsidiary of the Company as are determined by the Committee to have a direct, significant, and measurable impact on the attainment of the Company's or subsidiary's long term growth and profitability objectives. - 1 - (g) "Officer" refers to an officer of the Company (including, without limitation, the Chairman and Vice Chairman of the Board of Directors) or any corporation which is then a subsidiary, whether such Officer becomes an Officer at the time this Plan is adopted or subsequent to the adoption of this Plan. (h) "Participant" refers to a Key Manager. (i) "Plan" refers to this 1996 Management Incentive Compensation Plan of the Company. (j) "Plan Year" refers to each annual fiscal year of the Company. (k) "Regulations" means final, temporary or proposed regulations promulgated under the Code. (l) "Section 162 (m)" means Section 162 (m) or any successor provision promulgated under the Code. (m) "Subsidiary Operating Units" refers to any profit center so designated by the Committee. Section 3. ADMINISTRATION The Plan will be administered by the Committee. The Committee will: (i) approve the Participants eligible to receive Awards under the Plan with respect to each Plan Year; (ii) determine the performance measures; and (iii) determine the amount of Awards subject to the terms and conditions set forth in the Plan and to other terms and conditions consistent with the purpose and provisions of the Plan. The Committee may prescribe, amend, or rescind such rules, regulations, policies, interpretations, and guides as deemed appropriate for proper and effective Plan administration. In addition, only the Board of Directors may suspend or terminate the Plan. Any of the foregoing actions will affect future Plan Years only. No member of the Committee or employee of the Company will be personally liable for any action, failure to act, determination, or interpretation made in good faith with respect to the Plan or any transaction under the Plan. - 2 - All decisions, determinations, and interpretations of the Committee will be final and binding. Section 4. ELIGIBILITY AND PARTICIPATION The persons eligible to participate in the Plan shall be Key Managers. The Committee will designate Participants who are to be granted Awards for an Award year and, in its discretion, may designate additional Participants during any Award year as deemed appropriate; provided, however, that adjustments shall be made to the minimum performance measures applicable to new Participants to ensure that any Award payable to such new Participant is based solely on the attainment of future performance objectives. The Committee, through its designee, will notify Participants of their eligibility in writing. The Committee will not be bound by selections made for prior Award years. Section 5. DETERMINATION AND ALLOCATION OF AWARDS (a) ESTABLISHMENT OF ANNUAL OBJECTIVES AND FORMULAS. No later than 90 days after the commencement of each Plan Year (or no later than such earlier or later date as may be the applicable deadline for compensation payable hereunder for such Plan Year to qualify as "performance-based" compensation under Section 162(m)), the Committee will establish, in writing, specific financial and/or strategic performance objectives for such Plan Year. At such time, the Committee will establish minimum performance objectives below which no Awards will be earned, maximum performance objectives above which Awards will not be affected, and the formula for computing each Participant's Award. Notwithstanding anything to the contrary herein, the performance objectives for any portion of this Plan that is intended by the Committee to satisfy the requirements for "performance based" compensation under Section 162(m) shall be a measure based on one or more Qualifying Performance Criteria (as defined in Section 10(b)). Upon establishment of the performance objective(s) for a specific Plan Year, the - 3 - appointed designee of the Committee will notify each participant in writing of the established objective(s). If the Committee determines the established performance measures are no longer suitable due to a change in the Company's business, operations, corporate structure, capital structure, or other conditions deemed by the Committee to be material, the Committee will have sole discretion during the Plan Year to modify the performance objectives as considered appropriate and equitable; provided, however, that no such adjustment will decrease the minimum performance goal applicable to an Executive Officer, or otherwise have the potential effect of increasing the amount of compensation that would be payable to an Executive Officer upon the attainment of the original performance goals; provided further that no adjustment will be inconsistent with Section 10. (b) STOCKHOLDER APPROVAL. Establishment of Awards for Executive Officers shall be subject to, and contingent upon, the disclosure to the stockholders of the Company of the material terms of the Qualifying Performance Criteria and stockholder approval of such terms. Such stockholder approval shall be required each time the Committee changes the material terms of the Qualifying Performance Criteria (a change in the minimum performance objectives applicable to a new Plan Year shall not be considered a change of a material term of the Qualifying Performance Criteria). Absent a change in the material terms of the Qualifying Performance Criteria, such terms need not be reapproved by the stockholders until the fifth year following the year in which stockholders previously approved the Qualifying Performance Criteria. Section 6. PAYMENT OF AWARDS EARNED The basis of Awards for a given Plan Year will be the achievement of the performance objectives and, except in the case of Executive Officers, individual contributions as determined by the Committee. If minimum financial performance is not attained for a Plan Year, no payment will be made and all contingent rights will cease. - 4 - Further, no additional payments will be made for financial performance above he maximum objective. If performance measures are achieved, the Committee shall certify in writing, prior to the payment of any Award, that such performance goals (and any other material terms) were satisfied. The Award, if any, earned by each Participant will be paid as soon as administratively possible following the close of the applicable Plan year and the certification by the Committee, described in the preceding sentence. A Participant may elect in writing one year in advance of a Plan Year, upon approval by the Committee, to defer receipt of all or a portion of an Award earned for a specified time as approved by the Committee. Payment of deferred amounts may be in a lump sum on the designated payment date or in installments as approved by the Committee. A Participant's right to any deferred Award will be that of a general creditor of the Company; no trust will be deemed to be created by virtue of such deferral. Section 7. TERMINATION OF EMPLOYMENT In the event of a Participant's death, disability, or retirement during a Plan Year, payment of the Award earned will be prorated unless otherwise determined by the Committee. Such Awards will then be paid to the Participant, the Participant's estate or legal representative as determined by the Committee. In the event of a Participant's death, disability, or retirement, after the end of the Plan Year but before payment of an Award to which the Participant is entitled, such Award will be paid to the Participant, the Participant's estate or legal representative. In the event of termination of employment of a Participant or a Participant ceases to be an Officer, voluntarily or by the actions of the Company, with or without cause, for reasons other than those specified above, at any time before payment of the incentive award, the Participant will forfeit all rights to any Award subject to the sole discretion of the Committee. - 5 - Section 8. DISCRETIONARY INCENTIVE AWARD. The Committee may, in its sole discretion, make an additional award to any Participant determined by the Committee to have positively impacted directly on the attainment of the performance objectives established by the Committee. Section 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event of a reorganization, merger, or consolidation of which the Company is not the surviving corporation, or upon the sale of substantially all the assets of the Company to another corporation, or upon the dissolution or liquidation of the Company, the Plan will terminate on the effective date of such transaction. Provision will be made for determining the amount of cash payable for all Awards for a Plan Year which will end after such event unless provisions are made for the continuance of the Plan and the assumption or substitution for such Awards of an equivalent value by the successor corporation. Adjustments under this section will be made by the Committee whose determination as to what adjustments will be made and the extent will be final, binding, and conclusive. Section 10. GENERAL PROVISIONS (a) No right to Participate: Nothing in the Plan will be deemed to give a Participant or a Participant's legal representative or any other person or entity claiming under or through a Participant any contract or right to participate in the benefits of the Plan. (b) Qualifying Performance Criteria: For purposes of this Plan, "Qualifying Performance Criteria" shall mean any of the following criteria, either alone or in any combination, and on either a consolidated or Subsidiary Operating Unit level, and measured either on an absolute basis, relative basis against a pre-established target, and/or peer group, or prior year's performance as the Committee determine: (i) revenue(sales); (ii) cash flow; (iii) earnings per share (including earnings before interest, taxes - 6 - and amortization); (iv) return on equity; (v) total shareholder return, (vi) return on capital; (vii) return on assets or net assets; (viii) income or net income; (ix) operating income or net operating income; (x) operating profit or net operating profit; (xi) operating margin; (xii) market share; (xiii) member satisfaction; or (xiv) employee satisfaction. The foregoing criteria shall have any reasonable definitions that the Committee may specify, which may include or exclude any or all of the following items as the Committee may specify: extraordinary, unusual or non- recurring items; effects of accounting changes; effects of financing activities; expenses for restructuring or productivity initiatives; other non-operating items; spending for acquisitions; and effects of divestitures. Any such Qualifying Performance Criteria or combination of such criteria may apply to a Participant's Award opportunity in its entirety or to any designated portion or portions of the Award opportunity, as the Committee may specify. (c) No Employment Right: Participation in the Plan will not be construed as constituting a commitment, guarantee, agreement, or understanding of any kind that the Company will continue to employ any individual. (d) Nontransferability: A Participant or any designed beneficiary has no right to assign, transfer, attach, or hypothecate any benefits or payments of the Plan. (e) Withholding: The Company has the right to deduct any sums federal, state, or local tax requires to be withheld with respect to the payment of any Award. (f) Restricted Liability: Payments held by the Company before distribution will not be liable for the debts, contracts, or obligations of any Participant or beneficiary, or be taken in execution by attachment or garnishment, or by any other legal or equitable proceeding. - 7 - Section 11. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN The Company may amend, suspend, or terminate the Plan at any time. Such amendment, suspension, or termination will not adversely alter or affect any right or obligation to any Award made before this action. The Committee will determine the effect on Performance Awards that may be effected by such event and make adjustments and/or payments as it, in its sole discretion, determines appropriate. Section 12. EFFECTIVE DATE This Plan will be effective upon its adoption by the Company and may be applied retroactively to the beginning of the Company's fiscal year at the sole discretion of the Committee. - 8 - EX-10.08 6 EXHIBIT 10.08 Exhibit 10.08 1996 LONG-TERM PERFORMANCE INCENTIVE PLAN Section 1. PURPOSE The Long-Term Performance Incentive Plan is designed to encourage the successful growth and profitability of the Company by strengthening the ability of the Company to: (i) stimulate and reinforce outstanding performance of key managers who contribute substantially to the achievement of long-term financial and strategic objectives; (ii) reinforce a "team" orientation; (iii) attract and retain personnel of superior capability; and (iv) provide competitive management compensation. Section 2. DEFINITIONS (a) "Committee" means a committee of the Board of Directors consisting of two or more members of the Board of Directors, selected by the Board, each of which members shall be an "Outside Director" for purposes of Section 162(m) and the Regulations promulgated thereunder. (b) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (c) "Company" means N-T Holdings, Inc. or such other name which N-T Holdings, Inc. may adopt. (d) "Key Manager" means any Executive Officer, as defined under Rule 3b-7 of the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended, of the Company or any subsidiary of the Company. "Key Manager" also means any Officer or full-time employee of the Company or any subsidiary of the Company as are determined by the Committee to have a direct, significant, and measurable impact on the attainment of the Company's or a subsidiary's long-term growth and profitability objectives. (e) "Officer" means an officer of the Company (including, without limitation, the Chairman and Vice Chairman of the Board of Directors) or any corporation which is then a subsidiary, whether such Officer becomes an - 1 - Officer at the time this Plan is adopted or subsequent to the adoption of this Plan. (f) "Participant" means a Key Manager determined by the Committee as eligible to receive an Award. (g) "Performance Award" or "Award" means a contingent right to receive cash or stock at the end of a Performance Period. (h) "Performance Period" or "Cycle" means a period of three consecutive fiscal years of the Company, beginning with the fiscal year in which a Performance Award is granted and over which the performance of the Company is measured for the purpose of determining the Award earned, if any. (i) "Plan" means this 1996 Long-Term Performance Incentive Plan of the Company. (j) "Regulations" means final, temporary or proposed regulations promulgated under the Code. (k) "Section 162 (m)" means Section 162 (m) or any successor provision promulgated under the Code. (l) "Subsidiary Operating Unit" means any profit center so designated by the Committee. Section 3. ADMINISTRATION The Plan will be administered by the Committee. The Committee will: (i) approve the Participants eligible to receive Awards under the Plan with respect to each Performance Period; (ii) determine the performance measures; and (iii) determine the amount of Awards subject to the terms and conditions set forth in this Plan and to other terms and conditions consistent with the purpose and provision of this Plan. Such Awards may be made so that more than one Performance Period is in progress simultaneously. The Committee may prescribe, amend, or rescind such rules, regulations, policies, interpretations, and guides as deemed appropriate for proper and effective administration of this Plan. - 2 - No member of the Committee or employee of the Company will be personally liable for any action, failure to act, determination, or interpretation made in good faith with respect to the Plan or any transaction under the Plan. All decisions, determinations, and interpretations of the Committee will be final and binding. Section 4. ELIGIBILITY AND PARTICIPATION The persons eligible to participate in the Plan shall be Key Managers. The Committee approves Participants who are to be granted Performance Awards before the beginning of each Performance Period and, at its discretion, may designate additional Participants during any Performance Period as deemed appropriate; provided, however, that adjustments shall be made to the minimum performance measures applicable to new Participants to ensure that any Award payable to such new Participant is based solely on the attainment of future performance objectives. The Committee, through its designee, will notify Participants in writing of their eligibility. The Committee will not be bound by selections made for prior Performance Periods. Section 5. PERFORMANCE OBJECTIVES (a) ESTABLISHMENT OF PERFORMANCE OBJECTIVES AND FORMULAS. No later than 90 days after the commencement of each Performance Period (or no later than such earlier or later date as may be the applicable deadline for compensation payable hereunder for such performance period to qualify as "performance-based" compensation under Section 162(m)), the Committee will establish, in writing, specific financial and/or strategic performance objectives for such Performance Period. At such time, the Committee will establish minimum performance objectives below which no Awards will be earned, maximum performance objectives above which Awards will not be affected and the formula for computing each Participant's Award. Notwithstanding anything to the contrary herein, the performance objectives for any portion of this Plan that is intended by the Committee to satisfy the requirements - 3 - for "performance based" compensation under Section 162(m) shall be a measure based on one or more Qualifying Performance Criteria (as defined in Section 10(b)). Upon establishment of the performance objective(s) for a specific Performance Period, the appointed designee of the Committee will notify each participant in writing of the established objective(s). If the Committee determines the established performance measures are no longer suitable due to a change in the Company's business, operations, corporate structure, capital structure, or other conditions deemed by the Committee to be material, the Committee will have sole discretion during the Performance Period to modify the performance objectives as considered appropriate and equitable; provided, however, that no such adjustment will decrease the minimum performance goal applicable to an Executive Officer, or otherwise have the potential effect of increasing the amount of compensation that would be payable to an Executive Officer upon the attainment of the original performance goals; provided further that no adjustment will be inconsistent with Section 10. (b) STOCKHOLDER APPROVAL. Establishment of Awards for Executive Officers shall be subject to, and contingent upon, the disclosure to the stockholders of the Company of the material terms of the Qualifying Performance Criteria and stockholder approval of such terms. Such stockholder approval shall be required each time the Committee changes the material terms of the Qualifying Performance Criteria (a change in the minimum performance objectives applicable to a new Performance Period shall not be considered a change of a material term of the performance goal). Absent a change in the material terms of the Qualifying Performance Criteria, such terms need not be reprieved by the stockholders until the fifth year following the year in which stockholders previously approved the performance goal. - 4 - Section 6. PAYMENTS OF AWARDS EARNED The basis of Awards for a given Performance Period will be the achievement of the financial and/or strategic performance objectives and, except in the case of Executive Officers, overall assessment of individual contributions as determined by the Committee. If minimum performance is not attained for a Performance Period, no payment will be made and all contingent rights will cease. Further, no additional payments will be made above the maximum objective. If performance measures are achieved, the Committee shall certify in writing, prior to the payment of any Performance Award, that such performance goals (and any other material terms) were satisfied. The Performance Award, if any, earned by each Participant will be paid in cash and/or stock as soon as administratively possible following the close of the applicable Performance Period and the certification by the Committee, described in the preceding sentence. One year in advance of the end of the Performance Period, a Participant may elect in writing, upon approval of the Committee, to defer receipt of all or a portion of an Award earned for a specified time as approved by the Committee. Payment of deferred amounts may be in a lump sum on the designated payment date or in installments as approved by the Committee. A Participant's right to any deferred Award will be that of a general creditor of the Company; no trust will be deemed to be created by virtue of such deferral. The Committee will set a reasonable interest rate, to be paid on deferred funds, and the applicable terms and conditions of such rate. Section 7. TERMINATION OF EMPLOYMENT In the event of a Participant's death, disability, or retirement during a Performance Period, payment of the Award earned will be prorated unless otherwise determined by the Committee. Such Awards will then be paid to the Participant, the Participant's estate, or legal representative as determined by the Committee. In the event of a Participant's death, disability or retirement after the end of a Performance - 5 - Period, such Award will be paid to the Participant, the Participant's estate, or legal representative as determined by the Committee. In the event of termination of employment of a Participant or a Participant ceases to be an Officer, voluntarily or by the actions of the Company with or without cause, for reasons other than specified above, at any time before the end of the Performance Period, the Participant will forfeit all rights to any Award for such Performance period, subject to the provisions of Section 8 or at the sole discretion of the Committee. Section 8. DISCRETIONARY INCENTIVE AWARD. The Committee may, in its sole discretion, make an additional award to any participant otherwise eligible to participate in the Plan who are determined by the Committee to have positively impacted directly on the attainment of the performance objectives established by the Committee. Section 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event of a reorganization, merger, or consolidation of which the Company is not the surviving corporation, or upon the sale of substantially all the assets of the Company to another corporation, or upon the dissolution or liquidation of the Company, the Plan will terminate on the effective date of such transaction. Provision will be made for determining the amount of cash payable for all Performance Awards for all Performance Periods that will end after such event unless provisions are made for the continuance of the Plan and the assumption or substitution for such Awards of an equivalent value by the successor corporation. Deferred funds will become due within 60 days of such event unless provisions are made for the continuance of the Plan and the assumption of deferred funds liability. Adjustments under this section will be made by the Committee whose determination as to what adjustments will be made and the extent will be final, binding, and conclusive. - 6 - Section 10. GENERAL PROVISIONS (a) No Right to Participate: Nothing in the Plan will be deemed to give a Participant or a Participant's legal representative or any other person or entity claiming under or through a Participant any contract or right to participate in the benefits of the Plan. (b) No Employment Right: Participation in the Plan does not constitute a commitment, guarantee, contract, or understanding of any kind that the Company will continue to employ any individual. (c) Qualifying Performance Criteria: For purposes of this Plan, "Qualifying Performance Criteria" shall mean earnings per share. The foregoing criteria shall have any reasonable definitions that the Committee may specify, which may include or exclude any or all of the following items as the Committee may specify: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of financing activities; expenses for restructuring or productivity initiatives; other non-operating items; spending for acquisitions; and effects of divestitures. (d) Nontransferability: A Participant or any designed beneficiary has no right to assign, transfer, attach, or hypothecate any benefits or payments of the Plan. (e) Withholding: The Company has the right to deduct any sums federal, state or local tax law requires to be withheld with respect to the payment of a Performance Award. (f) Restricted Liability: Payments held by the Company before distribution are not liable for the debts, contracts, or obligations of any Participant or beneficiary, and are not to be taken in execution by attachment or garnishment, or by any other legal or equitable proceeding. Section 11. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN The Company may amend, suspend, or terminate the Plan at any time. Such amendment, suspension, or - 7 - termination will not adversely alter or affect any right or obligation to any award made before this action. The Committee will determine the effect on Performance Awards that may be effected by such event and make adjustments and/or payments as it, in its sole discretion, determines appropriate. Section 12. EFFECTIVE DATE This Plan will be effective upon its adoption by the Company and may be applied retroactively to the beginning of the Company's fiscal year at the sole discretion of the Committee. - 8 - EX-27.01 7 EXHIBIT 27.01
5 1,000 12-MOS SEP-30-1996 OCT-31-1995 AUG-31-1996 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.00 0.00
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