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MAGELLAN HEALTH SERVICES, INC.
1996 STOCK OPTION PLAN
1. Purpose. The purpose of the Magellan Health Services, Inc.
1996 Stock Option Plan is to motivate and retain officers and other key
employees of Magellan Health Services, Inc. and its Subsidiaries who have major
responsibility for the attainment of the primary long-term performance goals of
Magellan Health Services, Inc.
2. Definitions. The following terms shall have the following
meanings:
"Board" means the Board of Directors of the Corporation.
"Change in Control" means the effective date of the occurrence, at any
time after November 30, 1995, of one or more of the following events: (i) the
sale, lease, transfer or other disposition, in one or more related transactions,
of all or substantially all of the Corporation's assets to any person or related
group of persons, including a "group" as such term is used in Section 13(d)(3)
of the Exchange Act, (ii) the merger or consolidation of the Corporation with or
into another corporation, the merger of another corporation into the Corporation
or any other transaction, to the extent that the stockholders of the Corporation
immediately prior to any such transaction hold less than 50 percent of the total
voting power or of the voting stock of the surviving corporation resulting from
any such transaction, (iii) any person or related group of persons, including a
"group" as such term is used in Section 13(d)(3) of the Exchange Act, whether
such person or group of persons is a stockholder of the Corporation as of
November 30, 1995, holds 30 percent or more of the voting power or of the voting
stock of the Corporation, or (iv) the liquidation or dissolution of the
Corporation.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules promulgated thereunder.
"Committee" means a committee of two or more members of the Board
constituted and empowered by the Board to administer the Plan in accordance with
its terms.
"Corporation" means Magellan Health Services, Inc., a Delaware
corporation.
"Director" means a member of the Board.
"Disability" means a physical or mental condition under which the
Participant qualifies for (or will qualify for after expiration of a waiting
period) disability benefits under the long-term disability plan of the
Corporation or a Subsidiary that employs such Participant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Fair Market Value" means: (1) if the Stock is listed on a national
securities exchange (as such term is defined by the Exchange Act) or is traded
on the Nasdaq National Market System on the date of award or other
determination, the price equal to the mean between the high and low sales prices
of a share of Stock on said national securities exchange or on said Nasdaq
National Market System on that date (or if no shares of the Stock are traded on
that date but there were shares traded on dates within a reasonable period both
before and after such date, the Fair Market Value shall be the weighted average
of the means between the high and low sales prices of the Stock on the nearest
date before and the nearest date after that date on which shares of the Stock
are traded); (2) if the Stock is traded both on a national securities exchange
and in the over-the-counter market, the Fair Market Value shall be determined by
the prices on the national securities exchange; and (3) if the Stock is not
listed for trading on a national securities exchange and is not traded on the
Nasdaq National Market System or otherwise in the over-the-counter market, then
the Committee shall determine the Fair Market Value of the Stock from time to
time in its sole discretion.
"Option" means an Option granted pursuant to Section 6.
"Participant" means an employee of the Corporation or any of its
Subsidiaries who is selected to participate in the Plan in accordance with
Section 4.
"Plan" means the Magellan Health Services, Inc. 1996 Stock Option Plan.
"Stock" means the common stock, par value $0.25 per share, of the
Corporation.
"Stock Option Agreement" means the written agreement or instrument
which sets forth the terms of an Option granted to a Participant under this
Plan.
"Subsidiary" means any corporation, as defined in Section 7701 of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder, of which the Corporation, at the time, directly or indirectly, owns
50% or more of the outstanding securities having ordinary voting power to elect
directors (other than securities having voting power only by reason of a
contingency).
3. Administration. The Plan shall be administered by the Committee.
Subject to the provisions of the Plan, the Committee, acting in its absolute
discretion, shall exercise such powers and take such action as expressly called
for under this Plan and, further, shall have the power to interpret the Plan, to
determine the terms of each Stock Option Agreement (subject to the provisions of
the Plan) and (subject to Section 18 and Rule 16b-3 under the Exchange Act, if
applicable) to take such other action in the administration and operation of
this Plan as the Committee deems equitable under the circumstances. All actions
of the Committee shall be binding on the Corporation, on each affected
Participant and on each other person directly or indirectly affected by such
action. No member of the Board shall serve as a member of the
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Committee unless such member is a "disinterested person" within the meaning of
Rule 16b-3 under the Exchange Act. The Committee shall have the right to
delegate to the chief executive officer of the Corporation the authority to
select Participants and to grant Options (except to any person subject to
Section 16 of the Exchange Act), subject to any review, approval or notification
required by the Committee or as otherwise may be required by law.
4. Participation. Participants in the Plan shall be limited to
those officers and employees of the Corporation or any of its Subsidiaries who
have been selected to participate in the Plan by the Committee acting in its
absolute discretion.
5. Maximum Number of Shares Subject to Options. Subject to the
provisions of Section 9, there shall be 1,750,000 shares of Stock reserved for
use under this Plan, and such shares of Stock shall be reserved to the extent
that the Committee and the Board deems appropriate from authorized but unissued
shares of Stock or from shares of Stock which have been reacquired by the
Corporation. Any shares of Stock subject to any Option which remain unpurchased
after the cancellation, expiration, exchange or forfeiture of such Option shall
again become available for use under this Plan. All authorized and unissued
shares issued upon exercise of Options under the Plan shall be fully paid and
nonassessable shares.
6. Grant of Options. The Committee, acting in its absolute discretion,
shall have the right to grant Options to Participants under this Plan from time
to time; provided, that the maximum number of shares of Stock issuable upon
exercise of Options shall not exceed 1,750,000, subject to adjustment as
provided in Section 9. No Option shall be granted after December 31, 1999. The
maximum number of Options that are granted to any Participant shall not exceed
500,000, subject to adjustment as provided in Section 9.
7. Terms and Conditions of Options. Options granted pursuant to the
Plan shall be evidenced by Stock Option Agreements in such form as the Committee
from time to time shall approve, including any such terms and conditions not
inconsistent with the provisions set forth in the Plan as the Committee may
determine; provided, that such Stock Option Agreements and the Options granted
shall comply with and be subject to the following terms and conditions:
(a) Employment. Each Participant shall agree to remain in the
employ of and to render services to the Corporation or a Subsidiary thereof for
such period as the Committee may require in the Stock Option Agreement;
provided, that such agreement shall not impose upon the Corporation or any
Subsidiary thereof any obligation to retain the Participant in its employ for
any period.
(b) Number of Shares. Each Stock Option Agreement shall
state the total number of shares of Stock to which it pertains.
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(c) Exercise Price. The exercise price per share for
Options shall be Fair Market Value of the Stock on the date of grant, subject
to adjustment as contemplated by Section 9.
(d) Medium and Time of Payment. The exercise price shall be
payable upon the exercise of the Option, or as provided in Section 7(e) if the
Corporation adopts a broker-directed cashless exercise/resale procedure, in each
case in an amount equal to the number of shares then being purchased times the
per share exercise price. Payment shall be in cash, except that the Corporation,
in its sole discretion, may permit payment by delivery to the Corporation of a
certificate or certificates for shares of Stock duly endorsed for transfer to
the Corporation with signature guaranteed by a member firm of the New York Stock
Exchange or by a national banking association. In the event of any payment by
delivery of shares of Stock, such shares shall be valued on the basis of their
Fair Market Value determined as of the day prior to the date of delivery. If
payment is made by delivery of shares of Stock, the value of such Stock may not
exceed the total exercise price payment; provided, that the preceding clause
shall not prevent delivery of a stock certificate for a number of shares having
a greater value, if the number of shares to be applied to payment of the
exercise price is designated by the Participant and the Participant requests
that a certificate for the remainder shares be delivered to the Participant.
In addition to the payment of the purchase price of the shares of Stock
then being purchased, a Participant shall also, pursuant to Section 16, pay to
the Corporation or otherwise provide for payment of an amount equal to the
amount, if any, which the Corporation at the time of exercise is required to
withhold under the income tax withholding provisions of the Code and other
applicable income tax laws.
(e) Method of Exercise. All Options shall be exercised (i) by
written notice directed to the Secretary of the Corporation at its principal
place of business, accompanied by payment of the option exercise price, in
accordance with the foregoing subsection (d), for the number of shares specified
in the notice of exercise and by any documents required by Section 14, or (ii)
by complying with the exercise and other provisions of any broker-directed
cashless exercise/resale procedure adopted by the Corporation and approved by
the Committee, and by delivery of any documents required by Section 14. The
Corporation shall make delivery of such shares within a reasonable period of
time or in accordance with applicable provisions of any such broker-directed
cashless exercise/resale procedure; provided, that if any law or regulation
requires the Corporation to take any action (including but not limited to the
filing of a registration statement under the Securities Act of 1933 and causing
such registration statement to become effective) with respect to the shares
specified in such notice before their issuance, then the date of delivery of
such shares shall be extended for the period necessary to take such action.
(f) Term of Options. Except as otherwise specifically provided
in the Plan, the terms of all Options shall commence on the date of grant and
shall expire not later than November 30, 2005.
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(g) Exercise of Options. Options are exercisable only to the
extent they are vested as provided in Section 8. After Options have vested in
accordance with Section 8, such Options are exercisable at any time, in whole or
in part during their terms if the Participant is at the time of exercise
employed by the Company or a Subsidiary. If a Participant's employment with the
Corporation or any Subsidiary is terminated for any reason other than death or
disability, the vested portion of each Option held by such Participant on the
date of such termination may be exercised for six (6) months following the date
of termination of employment (but not after expiration of the term of the
Option). In the event of the death or Disability of a Participant, the vested
portion of each Option held by such Participant on the date of such event may be
exercised within twelve months of the date of such event (but not after the
expiration of the term of the Option).
In the event of the death of a Participant, the vested portion of each
Option previously held by such Participant may be exercised within the time set
forth above by the executor, other legal representative or, if none, by the heir
or legatee of such Participant.
(h) Adjustments Upon Changes in Capitalization. Upon a change
in capitalization pursuant to Section 9, the number of shares covered by an
Option and the per share option exercise price shall be adjusted in accordance
with the provisions of Section 9.
(i) Transferability. No Option shall be assignable or
transferable by the Participant except by will or by the laws of descent and
distribution. The designation of a beneficiary shall not constitute a transfer;
and, during the lifetime of a Participant, all Options held by such Participant
shall be exercisable only by him or by his lawful representative in the event of
his incapacity.
(j) Rights as a Stockholder. A Participant shall have no
rights as a stockholder with respect to shares covered by his Option until the
date of the issuance of the shares to him and only after such shares are fully
paid. Unless specified in Section 9, no adjustment will be made for dividends or
other rights for which the record date is prior to the date of such issuance.
(k) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan may contain such other provisions not
inconsistent with the terms of this Plan as the Committee shall deem advisable.
8. Vesting. Options granted under this Plan shall be exercisable only
to the extent such Options have become vested pursuant to this Section 8. An
Option shall vest at the rate of 25 percent of the shares covered by the Option
on each of the first four anniversary dates of the grant of the Option if the
Participant is an employee of the Company or a Subsidiary on such dates.
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9. Change in Capitalization. If the Stock should, as a result of a
stock split or stock dividend, combination of shares, recapitalization or other
change in the capital structure of the Corporation or exchange of Stock for
other securities by reclassification or otherwise, be increased or decreased or
changed into, or exchanged for, a different number or kind of shares or other
securities of the Corporation, or any other corporation, then the number of
shares covered by Options, the number and kind of shares which thereafter may be
distributed or issued under the Plan and the per share option price of Options
shall be appropriately adjusted consistent with such change in such manner as
the Committee may deem equitable to prevent dilution of or increase in the
rights granted to, or available for, Participants.
10. Fractional Shares. In the event that any provision of this
Plan or a Stock Option Agreement would create a right to acquire a fractional
share of Stock, such fractional share shall be disregarded.
11. Successor Corporation. If the Corporation is merged or consolidated
with another corporation or other legal entity and the Corporation is not the
surviving corporation or legal entity, or in the event all or substantially all
of the assets or common stock of the Corporation is acquired by another
corporation or legal entity, or in the case of a dissolution, reorganization or
liquidation of the Corporation, the Board, or the board of directors or
governing body of any corporation or other legal entity assuming the obligations
of the Corporation hereunder, shall either: (i) make appropriate provision for
the preservation of Participants' rights under the Plan in any agreement or plan
it may enter into or adopt to effect any of the foregoing transactions; or (ii)
upon written notice to each Participant, provide that all Options, whether or
not vested, may be exercised within thirty days of the date of such notice and
if not so exercised, shall be terminated.
12. Change in Control. Notwithstanding any provisions in the Plan to
the contrary, in the event of a Change in Control, any unvested and outstanding
Options awarded to Participants under the Plan automatically shall become fully
vested and exercisable in accordance with the terms thereof.
13. Non-Alienation of Benefits. Except insofar as applicable law
otherwise may require, (i) no Options, rights or interest of Participants or
Stock deliverable to any Participant at any time under the Plan shall be subject
in any manner to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any
attempt to so alienate, sell, transfer, assign, pledge, attach, charge or
otherwise encumber any such amount, whether presently or thereafter payable,
shall be void; and (ii) to the fullest extent permitted by law, the Plan shall
in no manner be liable for, or subject to, claims, liens, attachments or other
like proceedings or the debts, liabilities, contracts, engagements or torts of
any Participant or beneficiary. Nothing in this Section 13 shall prevent a
Participant's rights and interests under the Plan from being transferred by will
or by the laws of descent and distribution; provided, that no transfer by will
or by the laws of descent and distribution shall be effective to
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bind the Corporation unless the Committee or its designee shall have been
furnished before or after the death of such Participant with a copy of such will
or such other evidence as the Committee may deem necessary to establish the
validity of the transfer.
14. Listing and Qualification of Shares. The Corporation, in its
discretion, may postpone the issuance or delivery of shares of Stock until
completion of any stock exchange listing, or other qualification or registration
of such shares under any state or federal law, rule or regulation, as the
Corporation may consider appropriate, and may require any Participant to make
such representations, including, but not limited to, a written representation
that the shares are to be acquired for investment and not for resale or with a
view to the distribution thereof, and to furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
in compliance with applicable law, rules and regulations. The Corporation may
cause a legend or legends to be placed on such certificates to make appropriate
reference to such representation and to restrict transfer in the absence of
compliance with applicable federal or state securities laws.
15. No Claim or Right Under the Plan. No employee of the Corporation or
any Subsidiary shall at any time have the right to be selected as a Participant
in the Plan nor, having been selected as a Participant and granted an Option, to
be granted any additional Option. Neither the action of the Corporation in
establishing the Plan, nor any action taken by it or by the Board or the
Committee thereunder, nor any provision of the Plan, nor participation in the
Plan, shall be construed to give, and does not give, to any person the right to
be retained in the employ of the Corporation or any Subsidiary, or interfere in
any way with the right of the Corporation or any Subsidiary to discharge or
terminate any person at any time without regard to the effect such discharge or
termination may have upon such person's rights, if any, under the Plan.
16. Taxes. The Corporation may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all federal,
state, local and other taxes required by law to be withheld with respect to
Options under the Plan, including, but not limited to, (i) deducting the amount
required to be withheld from salary or any other amount then or thereafter
payable to a Participant, beneficiary or legal representative, (ii) requiring a
Participant, beneficiary or legal representative to pay to the Corporation the
amount required to be withheld as a condition of releasing the Stock, or (iii)
complying with applicable provisions of any broker-directed cashless
exercise/resale procedure adopted by the Corporation pursuant to Section 7(e).
17. No Liability of Directors. No member of the Board or the Committee
shall be personally liable by reason of any contract or other instrument
executed by such member on his behalf in his capacity as a member of the Board
or Committee, nor for any mistake of judgment made in good faith, and the
Corporation shall indemnify and hold harmless each employee, officer and
Director, to whom any duty or power relating to the administration or
interpretation of the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or
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liability (including any sum paid in settlement of a claim with the approval of
the Board) arising out of any act or omission to act in connection with the Plan
to the fullest extent permitted or required by the Corporation's governing
instruments and, in addition, to the fullest extent of any applicable insurance
policy purchased by the Corporation.
18. Other Plans. Nothing contained in the Plan is intended to amend,
modify or rescind any previously approved compensation plans or programs entered
into by the Corporation or its Subsidiaries. The Plan shall be construed to be
in addition to any and all such plans or programs. No award of Options under the
Plan shall be construed as compensation under any other executive compensation
or employee benefit plan of the Corporation or any of its Subsidiaries, except
as specifically provided in any such plan or as otherwise provided by the
Committee. The adoption of the Plan by the Board shall not be construed as
creating any limitations on the power or authority of the Board to adopt such
additional compensation or incentive arrangements as the Board may deem
necessary or desirable.
19. Amendment or Termination. This Plan may be amended by the Board
from time to time to the extent that the Board deems necessary or appropriate;
provided, no such amendment shall be made absent the approval of the
stockholders of the Corporation: (1) if stockholder approval of such amendment
is required for continued compliance with Rule 16b-3 of the Exchange Act, or (2)
if stockholder approval of such amendment is required by any other applicable
laws or regulations or by the rules of any stock exchange as long as the Stock
is listed for trading on such exchange. The Committee also may suspend the
granting of Options under this Plan at any time and may terminate this Plan at
any time; provided, the Corporation shall not have the right to modify, amend or
cancel any Option granted before such suspension or termination unless (1) the
Participant consents in writing to such modification, amendment or cancellation
or (2) there is a dissolution or liquidation of the Corporation or a transaction
described in Section 11 of this Plan.
20. Captions. The captions preceding the sections of the Plan
have been inserted solely as a matter of convenience and shall not, in any
manner, define or limit the scope or intent of any provisions of the Plan.
21. Governing Law. The Plan and all rights thereunder shall be
governed by, and construed in accordance with, the laws of the State of Georgia,
without reference to the principles of conflicts of law thereof.
22. Expenses. All expenses of administering the Plan shall be
borne by the Corporation.
23. Effective Date. The Plan shall be effective as of the date
of its adoption by the Board, subject to approval of this Plan by the
stockholders of the Corporation after the date of its adoption in accordance
with the requirements of Rule 16b-3 under the Exchange Act.
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