1
MID ATLANTIC MEDICAL SERVICES, INC.
STOCK OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS
AGREEMENT ("Agreement") dated this 1st day of May, 1996 by and
between Mid Atlantic Medical Services, Inc., a Delaware corporation
("Corporation"), and the person indicated on the attached Face Sheet, a
non-employee director of the Corporation and/or one of its subsidiaries
("Optionee").
WHEREAS, the Corporation desires to have Optionee continue to serve
on its Board of Directors 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 key employees
and non-employee directors, the Corporation has adopted the Mid Atlantic
Medical Services, Inc. 1996 Non-Qualified Stock Option Plan ("Plan");
WHEREAS, the option granted hereby is not intended to qualify as an
"incentive stock option" within the meaning of Section 422 or any
successor provision of the Internal Revenue Code of 1986, as amended;
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. The Option shall become exercisable in installments as
set forth on the attached Face Sheet of this Agreement; PROVIDED,
HOWEVER, that, if the Optionee is removed for Cause, the Option shall
cease to continue to become exercisable on or after the date of such
removal. If the Optionee's service with the Corporation terminates for
any reason or if the Optionee ceases to be a Non-Employee Director, the
Option shall continue to become exercisable in accordance with the
preceding sentence and may be exercised until the Option expires in
accordance with the first sentence of this Section 2. Accordingly, if
the Optionee is removed for Cause, he or she may continue to exercise
the Option until the Option expires in accordance with the first
sentence of this Section 2, but only to the extent that (a) the Option
became exercisable prior to the date of such removal and (b) it was not
previously exercised.
Notwithstanding anything to the contrary in this Section 2, 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.
2
3. 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 7 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.
4. 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.
5. 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.
3
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
4
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. Xxxxxx, Chairman,
President and Chief
Executive Officer
By:-------------------------------
Member of the Compensation
Committee
WITNESS: OPTIONEE
-------------------------- -------------------------------
5
FACE SHEET
Notice Addresses:
Optionee:
-------------------------
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 years from the date
of grant, which is May 1, 1996. That is, all options must be exercised
by April 30, 2001.
