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MID ATLANTIC MEDICAL SERVICES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT FOR XXXXXX X. XXXXXX
AGREEMENT ("Agreement") dated this ---- day of ---------, 199- by
and between Mid Atlantic Medical Services, Inc., a Delaware corporation
("Corporation"), and Xxxxxx X. Xxxxxx, the Chairman of the Board,
President and Chief Executive Officer of the Corporation ("Optionee").
WHEREAS, the Corporation desires to have Optionee continue in its
employ and to provide Optionee with an incentive by sharing in the
success of the Corporation;
WHEREAS, in order to provide such an incentive to its officers and
key employees, the Corporation has adopted the Mid Atlantic Medical
Services, Inc. 1996 Non-Qualified Stock Option Plan ("Plan");
WHEREAS, the Corporation desires to grant to Optionee under the
Plan options not intended to qualify as "incentive stock options" within
the meaning of Section 422 or any successor provision of the Internal
Revenue Code of 1986, as amended ("Code"); and
WHEREAS, unless otherwise provided herein, capitalized terms used
in this Agreement shall have the meaning given them in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants and
representations herein contained and intending to be legally bound, the
parties hereto agree as follows:
1. NUMBER OF SHARES AND PRICE. The Corporation hereby grants to
the Optionee an option ("Option") to purchase the number of shares of
Common Stock set forth on the attached Face Sheet of this Agreement.
The exercise price per share of Common Stock of the Option shall be as
is set forth on the attached Face Sheet of this Agreement, such price
being the Fair Market Value per share of Common Stock on the Date of
Grant of the Option. The Option is not intended to qualify as an
"incentive stock option" under Section 422 of the Code.
2. TERM AND EXERCISE. The Option shall expire five (5) years from
the date hereof, subject to earlier termination as set forth in Section
3. Subject to the provisions of Section 3, the Option shall become
exercisable in installments as set forth on the attached Face Sheet of
this Agreement.
3. EXERCISE OF OPTION UPON TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF VESTED OPTION UPON TERMINATION OF
EMPLOYMENT.
(i) TERMINATION. Upon the Optionee's Termination of
Employment for any reason other than for Cause (as hereinafter defined),
the Optionee may exercise all or any part of the Option (whether or not
it was exercisable at the date of Termination of Employment), but only
to the extent not previously exercised, until the Option terminates in
accordance with Section 2.
(ii) CAUSE. In the event the Optionee's Termination of
Employment for Cause, the Optionee may exercise all or a part of the
Option, but only to the extent the Option was exercisable on the date of
Termination of Employment. In no event, however, may the Option be
exercised later than the expiration date described in Section 2.
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(iii) DEFINITION OF CAUSE. "Cause" means (A) failure or
refusal by the Optionee to perform his duties in accordance with his
Employment Agreement with the Corporation, including without limitation,
the duty to keep the Board or the Board of Directors of MD-Individual
Practice Association, Inc. adequately informed and to submit to each of
such Boards such written reports as it may reasonably require; (B) any
material act of self-dealing between the Optionee and the Corporation's
business that is not disclosed in full to, and approved by, the Board;
(C) misrepresentation of the performance and affairs of the Corporation
and other matters affecting the Corporation; (D) deliberate
falsification by the Optionee of any records or reports; (E) fraud on
the part of the Optionee; (F) theft, embezzlement or misappropriation by
the Optionee of any funds of the Corporation, or conviction of the
Optionee for any felony; (G) execution by the Optionee of any document
transferring or creating any material lien or encumbrance on any
property of the Corporation without authorization of the Board; or (H)
refusal to submit to such reasonable periodic examinations by a
physician or medical group as may be mutually acceptable to the
Corporation and the Optionee (or his legal representative) upon the
reasonable request of the Corporation and at its expense, or refusal to
make available to the Corporation the results of such examinations.
(b) TERMINATION OF UNVESTED OPTION UPON TERMINATION OF
EMPLOYMENT. Except as provided in Section 3(a)(i), to the extent all or
any part of the Option was not exercisable as of the date of Termination
of Employment, the unexercisable portion of the Option shall expire at
the date of such Termination of Employment.
(c) CHANGE OF CONTROL. Notwithstanding anything to the
contrary in Section 2 or this Section 3, in the event one of the events
specified in Section 8.05(d)(i), (ii), (iii) or (iv) of the Plan occurs,
the provisions of such Section 8.05(d) shall determine when the Option
becomes exercisable, when it may be exercised and when it expires.
4. EXERCISE PROCEDURES. The Option shall be exercisable by
written notice to the Corporation, which must be received by the
Secretary of the Corporation not later than 5:00 P.M. local time at the
principal executive office of the Corporation on the expiration date of
the Option. Such written notice shall set forth (a) the number of
shares of Common Stock being purchased, (b) the total exercise price for
the shares of Common Stock being purchased, (c) the exact name as it
should appear on the stock certificate(s) to be issued for the shares of
Common Stock being purchased, and (d) the address to which the stock
certificate(s) should be sent. The exercise price of shares of Common
Stock purchased upon exercise of the Option shall be paid in full (a) in
cash, (b) by delivery to the Corporation of shares of Common Stock
(which shares of Common Stock must have been held for at least six
months), (c) in any combination of cash and shares of Common Stock, or
(d) by delivery of such other consideration as the Committee deems
appropriate and in compliance with applicable law (including payment in
accordance with a cashless exercise program under which, if so
instructed by the Optionee, shares of Common Stock may be issued
directly to the Optionee's broker or dealer upon receipt of the exercise
price in cash from the broker or dealer). In the event that any shares
of Common Stock shall be transferred to the Corporation to satisfy all
or any part of the exercise price, the part of the exercise price deemed
to have been satisfied by such transfer of shares of Common Stock shall
be equal to the product derived by multiplying the Fair Market Value as
of the date of exercise times the number of shares of Common Stock
transferred to the Corporation. Any shares of Common Stock tendered in
payment shall be duly endorsed in blank or accompanied by stock powers
duly endorsed in blank. The Optionee may not transfer to the
Corporation in satisfaction of the exercise price any fraction of a
share of Common Stock, and any portion of the exercise price that would
represent less than a full share of Common Stock must be paid in cash by
the Optionee. Subject to Section 8 hereof, certificates for the
purchased shares of Common Stock will be issued and delivered to the
Optionee as soon as practicable after the receipt of such payment of the
exercise price; PROVIDED, HOWEVER, that delivery of any such shares of
Common Stock shall be deemed effected for all purposes when a stock
transfer agent of the Corporation shall have deposited such certificates
in the United States mail, addressed to Optionee, at the address set
forth on the last page of this Agreement or to such other address as
Optionee may from time to time designate in a written notice to the
Corporation. The Optionee shall not be deemed for any purpose to be a
shareholder of the Corporation in respect of any shares of Common Stock
as to which the Option shall not have been exercised, as herein
provided, until such shares of Common Stock have been issued to Optionee
by the Corporation hereunder.
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5. PLAN PROVISIONS CONTROL OPTION TERMS; MODIFICATIONS. The Option
is granted pursuant and subject to the terms and conditions of the Plan,
the provisions of which are incorporated herein by reference. In the
event any provision of this Agreement shall conflict with any of the
terms in the Plan as constituted on the Date of Grant, the terms of the
Plan as constituted on the Date of Grant shall control. Except as
provided in Section 8.05 of the Plan, the Option shall not be modified
after the Date of Grant except by express written agreement between the
Corporation and the Optionee; PROVIDED, HOWEVER, that any such
modification (a) shall not be inconsistent with the terms of the Plan,
and (b) shall be approved by the Committee. No modifications may be
made to the Option while the Optionee is subject to Section 16(b) of the
Exchange Act except in compliance with Rule 16b-3.
6. LIMITATIONS ON TRANSFER. The Option may not be assigned or
transferred other than by will, by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the
Code, Title I of ERISA or the rules thereunder.
7. TAXES. The Corporation shall be entitled to withhold (or
secure payment from the Optionee in lieu of withholding) the amount of
any withholding or other tax required by law to be withheld or paid by
the Corporation with respect to any shares of Common Stock issuable
under this Agreement, and the Corporation may defer issuance of shares
of Common Stock upon the exercise of the Option unless the Corporation
is indemnified to its satisfaction against any liability for any such
tax. The amount of such withholding or tax payment shall be determined
by the Committee or its delegate and shall be payable by the Optionee at
such time as the Committee determines. The Optionee may satisfy his or
her tax withholding obligation by the payment of cash to the Corporation
and/or by the withholding from the Option, at the appropriate time, of a
number of shares of Common Stock sufficient, based upon the Fair Market
Value of such shares of Common Stock, to satisfy such tax withholding
requirements. The Committee shall be authorized, in its sole
discretion, to establish such rules and procedures relating to any such
withholding methods as it deems necessary or appropriate, including,
without limitation, rules and procedures relating to elections to have
shares of Common Stock withheld upon exercise of the Option to meet such
withholding obligations.
8. NO EXERCISE IN VIOLATION OF LAW. Notwithstanding any of the
provisions of this Agreement, the Optionee hereby agrees that he or she
will not exercise the Option granted hereby, and that the Corporation
will not be obligated to issue any shares of Common Stock to the
Optionee hereunder, if the exercise thereof or the issuance of such
shares of Common Stock shall constitute a violation by the Optionee or
the Corporation of any provision of any law or regulation of any
governmental authority. Any determination in this connection by the
Committee shall be final, binding and conclusive.
9. SECURITIES LAW COMPLIANCE. The Optionee agrees, for the
Optionee and his or her Beneficiaries, with respect to all shares of
Common Stock acquired pursuant to the terms and conditions of the Plan
and the Option (or any other shares of Common Stock issued pursuant to a
stock dividend or stock split thereon or any securities issued in lieu
thereof or in substitution or exchange therefor), that the Optionee and
his or her Beneficiaries will not sell or otherwise dispose of these
shares except pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), or except in a
transaction that, in the opinion of counsel for the Corporation, is
exempt from registration under the Act. Further, the Corporation shall
not be required to sell or issue any shares under the Option if, in the
opinion of the Corporation, (a) the issuance of such shares would
constitute a violation by the Optionee or the Corporation of any
applicable law or regulation of any government authority or (b) the
consent or approval of any governmental body is necessary or desirable
as condition of, or in connection with, the issuance of such shares.
10. ADJUSTMENTS. The existence of the Option shall not affect in
any way the right or power of the Corporation or its directors or
shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the
Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or any issuance of bonds, debentures,
preferred stock or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or dissolution or liquidation of the
Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
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11. DISPUTE RESOLUTION. As a condition of granting the Option,
the Optionee agrees, for the Optionee and his or her Beneficiaries, that
any dispute or disagreement that may arise under or as a result of or
pursuant to the Plan and the Option shall be determined by the Committee
in its sole discretion, and any interpretation by the Committee of the
terms of the Plan and Option shall be final, binding and conclusive.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
ATTEST: MID ATLANTIC MEDICAL SERVICES, INC.
-------------------------- By:-------------------------------
Xxxxxx X. Xxxxxxxxxx,
Executive Vice President,
General Counsel and
Secretary
By:-------------------------------
Member of the Compensation
Committee
WITNESS: OPTIONEE
-------------------------- ----------------------------------
Xxxxxx X. Xxxxxx
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FACE SHEET
Notice Addresses:
Optionee:
Xxxxxx X. Xxxxxx
0 Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Corporation:
Mid Atlantic Medical Services, Inc.
0 Xxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Secretary
Grant Date: --------------------
Total Options Granted: --------------
Exercise Price per share of Common Stock: $-----------
Vesting Schedule:
Number of Shares
Date (Non-Cumulative)
---- ----------------
06/01/1997 ----------
06/01/1998 ----------
06/01/1999 ----------
Expiration Date:
Optioned shares must be purchased within five (5) years from the
date of grant, which is -----------. That is, all options must be
exercised by --------------.
