MID ATLANTIC MEDICAL SERVICES, INC.
STOCK OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS
AGREEMENT ("Agreement") dated this 3rd day of May, 1999 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 Physicians Health Plan of Maryland, Inc. ("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. 1999 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.
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
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 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.
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.
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 (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.
7. 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.
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 and absolute
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. Xxxxxxx, Interim
President and Chief Executive Officer
By:
Member of the Stock Option Committee
WITNESS: OPTIONEE
__________________________
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)
05/03/2000 ___
05/03/2001 ___
05/03/2002 ___
Expiration Date:
Optioned shares must be purchased within five years from the date of
grant, which is May 3, 1999. That is, all options must be exercised by May 3,
2004.
