EXHIBIT 10(i)
MAGELLAN HEALTH SERVICES, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of the Magellan Health Services, Inc. 1997 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 March 18, 1997, 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 March 18, 1997, 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. Notwithstanding any provisions hereof to the
contrary, the term Change in Control shall not be construed to apply to the
transactions contemplated by the Real Estate Purchase and Sale Agreement, dated
as of January 29, 1997, by and between the Corporation and Crescent Real Estate
Equities Limited Partnership, as amended, modified, supplemented or restated.
"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.
-2-
"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.
"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. 1997 Stock Option Plan, as
amended.
"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
-3-
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 Committee unless such member is a "non-employee director" 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 with respect to
any person who, with respect to the last completed fiscal year of the
Corporation, has been designated by the Corporation as a named executive officer
of the Corporation, as that term is defined in Item 402(a)(3) of Regulation S-K,
issued by the Securities and Exchange Commission), 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 1,500,000 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 are not purchased
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 1,500,000, subject to adjustment as
provided in Section 9. No Option shall be granted after December 31, 2000. The
maximum number of shares of Stock that may be covered by Options granted to any
Participant under the Plan shall not exceed 1,000,000, 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:
-4-
(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.
(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.
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 February 28, 2007.
-5-
(g) Exercise of Options. Options are exercisable only to the extent
they are vested as provided in the Stock Option Agreement. After Options have
vested in accordance with the terms of the Stock Option Agreement, 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 (12) 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 331/3 percent of the shares covered by the
Option on each of the first three anniversary dates of the grant of the Option
if the Participant is an employee of the Company or a Subsidiary on such dates.
-6-
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 bind the
Corporation unless the Committee or its designee shall have been furnished
before or
-7-
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 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
-8-
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.