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.
1998 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.
(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 adequately informed and to it 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) such other act as should cause material harm to the business
or property of the Corporation unless action was taken in good faith such as
with a reasonable belief that such act was in the best interest of the
Corporation. (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 approved by the Committee). 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.
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 (a) having cash withheld from the Optionee's
salary or other compensation payable by the Corporation or a Subsidiary, (b) the
payment of cash to the Corporation, (c) the payment in shares of Common Stock
already owned by the Optionee valued at Fair Market Value, and/or (d) 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 and absolute 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.
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.
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 Stock Option Committee
WITNESS: OPTIONEE
-------------------------- _________________________________________
Xxxxxx X. Xxxxxx
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)
06/01/1999 ________________
06/01/2000 ________________
06/01/2001 ________________
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
__________.
