MUTUAL HEALTH SYSTEMS, INC.
1993 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this 1993 Stock Incentive Plan (the "Plan")
is to enable Mutual Health Systems, Inc. (the "Company") to attract and
retain experienced and able directors, officers, employees and other key
contributors and to provide an additional incentive to these individuals to
exert their best efforts for the Company and its shareholders.
2. Administration.
2.1 Board of Directors. The Plan shall be administered by the
board of directors of the Company (the "Board of Directors"), which shall
determine and designate from time to time the persons to whom grants and
awards shall be made and the amounts, terms and conditions of those grants
and awards. Subject to the provisions of the Plan, the Board of Directors
may from time to time adopt or amend rules and regulations relating to
administration of the Plan, and the interpretation and construction of the
provisions of the Plan by the Board of Directors shall be final and
conclusive. Whenever the operation of the Plan requires that the fair
market value of the Company's Common Stock be determined, the fair market
value shall be determined by, or in a manner approved by, the Board of
Directors.
2.2 Committee. The Board of Directors may delegate to a committee
of the Board of Directors or a senior executive officer of the Company, or
both (the "Committee") any or all authority for administration of the Plan.
If authority is delegated to a Committee, all references to the Board of
Directors in the Plan shall mean and relate to the Committee except (i) as
otherwise provided by the Board of Directors, and (ii) that only the Board
of Directors may amend or terminate the Plan as provided in paragraphs 5
and 11.
3. Eligibility. Grants and awards may be made under the Plan to
directors, officers, and key employees of the Company or any parent or
subsidiary of the Company, and other key individuals such as consultants to
the Company who the Board of Directors believes have made or will make an
essential contribution to the Company; provided, however, that only
employees of the Company shall be eligible to receive Incentive Stock
Options under the Plan.
4. Shares Subject to the Plan. Subject to paragraph 9, an aggregate of
1,000,000 shares of Common Stock of the Company may be issued under the
Plan (i) upon exercise of options and stock appreciation rights granted
under the Plan, (ii) as bonuses under the Plan and (iii) pursuant to sales
under the Plan. If any option under the Plan or stock appreciation right
granted without a related option expires or is cancelled or terminated and
is unexercised in whole or in part, the shares allocable to the unexercised
portion shall again become available for awards under the Plan, except that
shares that are issued on exercise of a stock appreciation right that were
allocable to an option, or portion thereof, surrendered in connection with
the exercise of the stock appreciation right shall not again become
available for awards under the Plan. If Common Stock sold or awarded as a
bonus under the Plan is forfeited to the Company or repurchased by the
Company pursuant to applicable restrictions, the number of shares forfeited
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or repurchased shall again be available under the Plan. Common Stock issued
under the Plan may be subject to such restrictions on transfer, repurchase
rights or other restrictions as are determined by the Board of Directors.
The certificates representing such Common Stock shall bear such legends as
are determined by the Board of Directors.
5. Effective Date and Duration of Plan.
5.1 Effective Date. The Plan shall become effective when adopted
by the Board of Directors (the "Effective Date"), but no option shall
become exercisable until the Plan is approved by a vote of the shareholders
of the Company entitled to vote thereon. Subject to this limitation,
options and stock appreciation rights may be granted and Common Stock may
be awarded as bonuses or sold under the Plan at any time after the
Effective Date and before termination of the Plan.
5.2 Duration of the Plan. The Plan shall continue until, in the
aggregate, options and stock appreciation rights have been granted and
exercised and Common Stock has been awarded as bonuses or sold and the
restrictions on any such Common Stock have lapsed with respect to all
shares subject to the Plan under paragraph 4 (subject to any adjustments
under paragraph 9), provided, however, that unless sooner terminated by the
Board of Directors, the Plan shall terminate on, and no option or stock
appreciation right or bonus right shall be granted and no Common Stock
shall be awarded as a bonus or sold under the Plan on or after, the tenth
anniversary of the Effective Date. The Board of Directors may suspend or
terminate the Plan at any time except with respect to options, stock
appreciation rights and bonus rights, and Common Stock subject to
restrictions then outstanding under the Plan. Termination shall not affect
any right of the Company to repurchase shares or the forfeitability of
shares issued under the Plan.
6. Grants, Awards and Sales.
6.1 Type of Security. The Board of Directors may, from time to
time, take the following actions, separately or in combination, under the
Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"); (ii) grant options
other than Incentive Stock Options (hereinafter "Non-Statutory Stock
Options"); (iii) grant stock appreciation rights or bonus rights; (iv)
award bonuses of Common Stock; and (v) sell Common Stock subject to
restrictions. The Board of Directors shall specify the action taken with
respect to each person granted, awarded or sold any option or Common Stock
under the Plan and shall specifically designate each option granted under
the Plan as an Incentive Stock Option or a Non-Statutory Stock Option. At
the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award. No
employee may be granted options or stock appreciation rights under the Plan
for more than an aggregate of 150,000 shares of Common Stock in connection
with the hiring of the employee or 50,000 shares of Common Stock in any
calendar year otherwise.
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6.2 General Rules Relating to Options.
6.2.1 Time of Exercise. Except as provided in paragraph 8,
options granted under the Plan may be exercised over the period stated in
each option in amounts and at times prescribed by the Board of Directors
and stated in the option, provided that (i) no option granted under the
Plan may become exercisable at a rate of less than 20 percent per year over
the first five years of the option, and (ii) options shall not be exercised
for fractional shares. If the optionee does not exercise an option in any
period with respect to the full number of shares to which the optionee is
entitled in that period, the optionee's rights shall be cumulative and the
optionee may purchase those shares in any subsequent period during the term
of the option.
6.2.2 Option Price. The option price per share of each
option granted under the Plan shall be determined by the Board of
Directors, but shall not be less than 85 percent of the fair market value
of the shares covered by the option on the date the option is granted. With
respect to options granted to optionees possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary of the Company (a "Ten Percent
Owner"), the option price per share shall not be less than one hundred ten
percent (110%) of the fair market value on the date the option is granted.
6.2.3 Duration of Options. Subject to paragraph 8, each
option granted under the Plan shall continue in effect for the period fixed
by the Board of Directors, except that no option granted under the Plan
shall be exercisable after the expiration of 10 years from the date it is
granted. No option granted to a Ten Percent Owner shall be exercisable
after the expiration of five (5) years from the date such option is
granted.
6.2.4 Purchase of Shares. Shares may be purchased or
acquired pursuant to an option granted under the Plan only on receipt by
the Company of notice in writing from the optionee of the optionee's
intention to exercise, specifying the number of shares the optionee desires
to purchase and the date on which the optionee desires to complete the
transaction, which may not be more than 30 days after receipt of the
notice, and, unless in the opinion of counsel for the Company such a
representation is not required to comply with the Securities Act of 1933,
as amended, containing a representation that it is the optionee's intention
to acquire the shares for investment and not with a view to distribution.
Unless otherwise determined by the Board of Directors, on or before the
date specified for completion of the purchase, the optionee must have paid
the Company the full purchase price in cash, including cash that may be the
proceeds of a loan from the Company, in shares of Common Stock previously
acquired by the optionee valued at fair market value, or in any combination
of cash and shares of Common Stock. No shares shall be issued until full
payment therefor has been made. Each optionee who has exercised an option
shall, on notification of the amount due, if any, and prior to or
concurrently with delivery of the certificates representing the shares for
which the option was exercised, pay to the Company amounts necessary to
satisfy any applicable federal, state and local withholding tax
requirements. If additional withholding becomes required beyond any amount
deposited before delivery of the certificates, the optionee shall pay such
amount to the Company on
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demand. If the employee fails to pay the amount demanded, the Company shall
have the right to withhold that amount from other amounts payable by the
Company to the optionee, including salary, subject to applicable law.
6.3 Incentive Stock Options. Incentive Stock Options shall be
subject to the following additional terms and conditions:
6.3.1 Limitation on Amount of Grants. No employee may be
granted Incentive Stock Options under the Plan such that the aggregate fair
market value, on the date of grant, of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by that
employee during any calendar year, under the Plan and under any other
incentive stock option plan (within the meaning of section 422 of the Code)
of the Company or any parent or subsidiary of the Company, exceeds
$100,000.
6.3.2 Option Price. The option price per share under each
option granted under the Plan shall be determined by the Board of Directors
in accordance with paragraph 6.2.2, but the option price with respect to an
Incentive Stock Option shall be not less than 100 percent of the fair
market value of the shares covered by the option on the date the option is
granted.
6.4 Stock Bonuses. Common Stock awarded as a bonus shall be
subject to the terms, conditions and restrictions determined by the Board
of Directors at the time the Common Stock is awarded as a bonus. The Board
of Directors may require the recipient to sign an agreement as a condition
of the award, but may not require the recipient to pay any money
consideration except as provided in the last sentence of this paragraph.
The agreement may contain such terms, conditions, representations and
warranties as the Board of Directors may require. The Company may require
any recipient of a Common Stock bonus to pay to the Company amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements prior to delivery of certificates. If the recipient fails to
pay the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the recipient, including salary or fees
for services, subject to applicable law. With the consent of the Board of
Directors, a recipient may deliver Common Stock to the Company to satisfy
this withholding obligation.
6.5 Restricted Stock. The Board of Directors may issue shares of
Common Stock under the Plan for such consideration (including promissory
notes and services) as determined by the Board of Directors in accordance
with the law and with such restrictions concerning transferability,
repurchase by the Company, or forfeiture as determined by the Board of
Directors. If shares of Common Stock are subject to repurchase by the
Company at the original purchase price upon termination of employment of
the recipient, such right of repurchase shall lapse at a rate of no less
than twenty percent (20%) per year over five years from the date the shares
are granted. All shares of Common Stock issued pursuant to this paragraph
6.5 shall be subject to a purchase agreement, which shall be executed by
the Company and the prospective recipient of the Common Stock prior to the
delivery of certificates
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representing such shares to the recipient. Subject to the terms of the
Plan, the purchase agreement shall contain such terms and conditions and
representations and warranties as the Board of Directors shall require. The
Company may require any purchaser of restricted stock to pay to the Company
in cash upon demand amounts necessary to satisfy any applicable federal,
state or local tax withholding requirements. If the purchaser fails to pay
the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the purchaser, including salary, subject
to applicable law. With the consent of the Board of Directors, a purchaser
may deliver Common Stock to the Company to satisfy this withholding
obligation.
6.6 Stock Appreciation Rights.
6.6.1 Description. Each stock appreciation right shall
entitle the holder, on exercise, to receive from the Company in exchange
therefor an amount equal in value to the excess of the fair market value on
the date of exercise of one share of Common Stock over its fair market
value on the date of grant (or, in the case of a stock appreciation right
granted in connection with an option, the option price per share under the
option to which the stock appreciation right relates), multiplied by the
number of shares covered by the stock appreciation right or the option, or
portion thereof, that is surrendered.
6.6.2 Exercise. A stock appreciation right shall be
exercisable only at the time or times established by the Board of
Directors. If a stock appreciation right is granted in connection with an
option, then it shall be exercisable only to the extent and on the same
conditions that the related option is exercisable. Upon exercise of a stock
appreciation right, any option or portion thereof to which the stock
appreciation right relates must be surrendered unexercised.
6.6.3 Payment. Payment by the Company upon exercise of a
stock appreciation right may be made in shares of Common Stock valued at
fair market value, or in cash, or partly in Common Stock and partly in
cash, as determined by the Board of Directors. No fractional shares shall
be issued upon exercise of a stock appreciation right. In lieu thereof,
cash may be paid in an amount equal to the value of the fraction or, in the
discretion of the Board of Directors, the number of shares may be rounded
to the next whole share.
6.6.4 Adjustment. In the event of any adjustment pursuant to
paragraph 9 in the number of shares of Common Stock subject to an option
granted under the Plan, any stock appreciation right granted hereunder in
connection with such option shall be proportionately adjusted.
6.6.5 Withholding. Each participant who has exercised a
stock appreciation right shall, upon notification of the amount due, pay to
the Company in cash amounts necessary to satisfy any applicable federal,
state and local tax withholding requirements. If the participant fails to
pay the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the participant including salary, subject
to
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applicable law. With the consent of the Board of Directors a participant
may satisfy this obligation, in whole or in part, by having the Company
withhold from any shares to be issued upon the exercise that number of
shares that would satisfy the withholding amount due or by delivering
Common Stock to the Company to satisfy the withholding amount.
6.7 Cash Bonus Rights.
6.7.1 Grant. The Board of Directors may grant bonus rights
under the Plan in connection with (i) an option or stock appreciation right
granted or previously granted, (ii) Common Stock awarded, or previously
awarded, as a bonus and (iii) Common Stock sold, or previously sold, under
the Plan. Bonus rights will be subject to rules, terms and conditions as
the Board of Directors may prescribe.
6.7.2 Bonus Rights in Connection with Options and Stock
Appreciation Rights. A bonus right granted in connection with an option
will entitle an optionee to a cash bonus when the related option is
exercised (or is surrendered in connection with the exercise of a stock
appreciation right related to the option) in whole or in part. A bonus
right granted in connection with a stock appreciation right will entitle
the holder to a cash bonus when the stock appreciation right is exercised.
Upon exercise of an option, the amount of the bonus shall be determined by
multiplying the excess of the total fair market value of the shares to be
acquired upon the exercise over the total option price for the shares by
the applicable bonus percentage. Upon exercise of a stock appreciation
right, the bonus shall be determined by multiplying the total fair market
value of the shares or cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right shall be determined from time to time by the
Board of Directors but shall in no event exceed 100 percent.
6.7.3 Bonus Rights in Connection with Stock Bonus. A bonus
right granted in connection with Common Stock awarded as a bonus will
entitle the person awarded such Common Stock to a cash bonus either at the
time the Common Stock is awarded or at such time as restrictions, if any,
to which the Common Stock is subject lapse. If Common Stock awarded is
subject to restrictions and is repurchased by the Company or forfeited by
the holder, the bonus right granted in connection with such Common Stock
shall terminate and may not be exercised. The amount of cash bonus to be
awarded and the time such cash bonus is to be paid shall be determined from
time to time by the Board of Directors.
6.7.4 Bonus Rights in Connection with Stock Purchase. A
bonus right granted in connection with Common Stock purchased hereunder
(excluding Common Stock purchased pursuant to an option) shall terminate
and may not be exercised in the event the Common Stock is repurchased by
the Company or forfeited by the holder pursuant to restrictions applicable
to the Common Stock. The amount of cash bonus to be awarded and the time
such cash bonus is to be paid shall be determined from time to time by the
Board of Directors.
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7. Nontransferability. Each option, stock appreciation right, or cash
bonus right granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the time
of death, and each option, stock appreciation right or cash bonus right by
its terms shall be exercisable during the holder's lifetime only by the
holder.
8. Termination of Employment.
8.1 Retirement or General Termination. Unless otherwise
determined by the Board of Directors, if an employee's employment by the
Company or any parent or subsidiary of the Company is terminated by
retirement or for any reason other than in the circumstances specified in
8.2 below, any option, stock appreciation right or cash bonus right held by
the employee may be exercised at any time prior to its expiration date or
the expiration of three months after the date of the termination, whichever
is the shorter period, but only if and to the extent the employee was
entitled to exercise the option, stock appreciation right or cash bonus
right on the date of termination. Transfer of an employee by the Company or
any parent or subsidiary of the Company to the Company or any parent or
subsidiary of the Company shall not be considered a termination for
purposes of the Plan.
8.2 Death or Disability. Unless otherwise determined by the Board
of Directors, if an employee's employment by the Company or any parent or
subsidiary of the Company is terminated because of death or physical
disability (within the meaning of section 22(e)(3) of the Code), any
option, stock appreciation right or cash bonus right held by the employee
may be exercised at any time prior to its expiration date or the expiration
of one year after the date of termination, whichever is the shorter period,
for the greater of (a) the number of remaining shares for which the
employee was entitled to exercise the option, stock appreciation right or
cash bonus right on the date of termination or (b) the number of remaining
shares for which the employee would have been entitled to exercise the
option, stock appreciation right or cash bonus right if such option or
right had been 50 percent exercisable on the date of termination. If an
employee's employment is terminated by death, any option, stock
appreciation right or cash bonus right held by the employee shall be
exercisable only by the person or persons to whom the employee's rights
under the option, stock appreciation right or cash bonus right pass by the
employee's will or by the laws of descent and distribution of the state or
country of the employee's domicile at the time of death.
8.3 Termination of Unexercised Rights. To the extent an option,
stock appreciation right or cash bonus right held by any deceased employee
or by any employee whose employment is terminated is not exercised within
the limited periods provided above or otherwise provided by the Board of
Directors, all further rights to exercise the option, stock appreciation
right or cash bonus right shall terminate at the expiration of such
periods.
8.4 Termination of Non-Employees. With respect to options, stock
appreciation rights and cash bonus rights granted to persons who are not
employees of the
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Company, the Board of Directors may establish provisions relating to the
termination of those persons' status with the Company.
9. Changes in Capital Structure. If the outstanding shares of Common
Stock are increased or decreased or 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 any reorganization, merger,
consolidation, plan of exchange, recapitalization, reclassification, stock
split-up, combination of shares, or dividend payable in shares, appropriate
adjustment shall be made by the Board of Directors in the number and kind
of shares for the purchase of which options or stock appreciation rights
may be granted and for which Common Stock may be awarded as bonuses or sold
subject to restrictions under the Plan. In addition, the Board of Directors
shall make appropriate adjustments in the number and kind of shares as to
which outstanding options, or portions thereof then unexercised, shall be
exercisable, and the number and kind of shares covered by outstanding stock
appreciation rights to the end that each optionee's proportionate interest
shall be maintained as before the occurrence of such event. Adjustments in
outstanding options shall be made without change in the total price
applicable to the unexercised portion of any option and with a
corresponding adjustment in the option price per share. Adjustments in
outstanding stock appreciation rights shall be made without change in their
total value. Any such adjustment made by the Board of Directors shall be
conclusive. In the event of dissolution or liquidation of the Company or a
merger, consolidation, or plan of exchange affecting the Company, in lieu
of making adjustments as provided for above in this paragraph 9, the Board
of Directors may, in its sole discretion, provide a 30-day period
immediately preceding the event during which optionees shall have the right
to exercise options or stock appreciation rights to the extent options are
exercisable at such time. Upon the expiration of such 30-day period all
unexercised options shall be terminated and optionees shall have no further
rights to acquire shares.
10. Corporate Mergers, Acquisitions, Etc. The Board of Directors may
also grant options and stock appreciation rights having terms and
provisions which vary from those specified in this Plan, provided that any
options and stock appreciation rights granted pursuant to this section are
granted in substitution for, or in connection with the assumption of,
existing options and stock appreciation rights granted by another
corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a transaction involving a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a
party.
11. Amendment of Plan. The Board of Directors may at any time and from
time to time modify or amend the Plan in such respects as it deems
advisable because of changes in the law while the Plan is in effect or for
any other reason. After the Plan has been approved by the shareholders and
except as provided in paragraph 9, however, no change in an option or stock
appreciation right already granted to any person shall be made without the
written consent of such person. Furthermore, unless approved by the
shareholders of the Company entitled to vote thereon, no amendment or
change shall be made in the Plan (a) increasing the total number of
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shares that may be issued under the Plan, or (b) changing the class of
persons eligible to receive options under the Plan.
12. Approvals. The obligations of the Company under the Plan are
subject to the approval of state and federal authorities or agencies with
jurisdiction in the matter. The Company will use its best efforts to take
steps required by state or federal law or applicable regulations, including
rules and regulations of the Securities and Exchange Commission in
connection with the granting of any option or the issuance or sale of any
shares under the Plan. The foregoing notwithstanding, the Company shall not
be obligated to issue or deliver shares of Common Stock under the Plan if
the Company is advised by its legal counsel that such issuance or delivery
would violate applicable state or federal laws.
13. Employment Rights. Nothing in the Plan or any grant pursuant to
the Plan shall confer on any employee any right to be continued in the
employment of the Company or any parent or subsidiary of the Company or
shall interfere in any way with the right of the Company or any parent or
subsidiary of the Company by whom such employee is employed to terminate
such employee's employment at any time, with or without cause.
14. Rights as a Shareholder. A holder of an option or a stock
appreciation right, a recipient of Common Stock awarded as a bonus, or a
purchaser of Common Stock shall have no rights as a shareholder with
respect to any shares covered by any option, stock appreciation right,
bonus award, or stock purchase agreement until the date of issue of a stock
certificate to him or her for such shares. Except as otherwise provided in
the Plan, no adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is
issued.
15. Information. The Company will provide all recipients of grants or
awards under Plan with financial statements of the Company on at least an
annual basis.
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