EXHIBIT 4.8
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MAGELLAN HEALTH SERVICES, INC.
STOCK OPTION AGREEMENT
Optionee - R. Xxxxxx XxXxxxx
Dated January 31, 2006
(Reference No. 2006-1-001)
SECTION 1. GRANT OF OPTION.
(a) OPTION. On the terms and conditions set forth in this Agreement and the
Notice of Stock Option Award dated as of January 31, 2006 delivered to Optionee
simultaneously herewith and each other Notice of Stock Option Award referencing
this Agreement (an "OPTION AWARD NOTICE"), Magellan Health Services Inc. (the
"COMPANY" as further defined below) grants to the Optionee, as referred to on
the signature page hereof, as of the Date of Grant (as defined below) an option
to purchase at the Exercise Price (as defined below) a number of shares of
Ordinary Common Stock, $ 0.01 par value, of the Company set forth in the Option
Award Notice, subject to Section 7 below (the "OPTION SHARES"). Each such Option
Award Notice, together with this referenced Agreement, shall be a separate
option governed by the terms of this Agreement and any such separate option may
be referred to herein as "the option" and any of multiple Option Award Notices
may be referred to herein as "the Option Award Notice." This option is intended
to be an Incentive Stock Option or a Nonqualified Stock Option, as provided in
the Option Award Notice.
(b) 2003 MANAGEMENT INCENTIVE PLAN AND DEFINED TERMS. Each option referred
in an Option Award Notice is granted on the same terms and conditions as
provided for the grant of options pursuant to the Company's 2003 Management
Incentive Plan, as amended and supplemented from time to time (the "PLAN"), a
copy of which is incorporated herein by this reference, and shall be subject to
such terms and conditions; it being understood, however, that the option granted
pursuant to the Option Award Notice dated as of January 31, 2006 referred to
above has been separately authorized by the Company and is not among the options
authorized by and granted under the Plan and that the Option Shares that may be
issued pursuant to such Option Award Notice are not among the shares of Ordinary
Common Stock of the Company, and shall not be counted against, the maximum
number of such shares, that may be issued pursuant to the Plan. Certain
capitalized terms used herein are defined in Section 9 below but terms used
herein, if not defined herein, shall have the same meaning for purposes hereof
as provided by the Plan.
(c) SCOPE OF THIS AGREEMENT. This Agreement shall apply both to the option
and to the Option Shares acquired upon the exercise of the option.
(d) RESTORATION STOCK OPTION. If the Option Award Notice so provides, upon
the exercise of all or a portion of the option in accordance with paragraph (i)
of subsection 5(b) below, the Company shall grant an additional option to
purchase an equivalent number of Shares so purchased pursuant to the option, on
the terms and conditions set forth in such Option Award Notice and this
Agreement (the "RESTORATION STOCK OPTION"). In such event, references to the
option in this Agreement shall include references to the Restoration Stock
Option. The Company shall in such event issue an appropriate Option Award Notice
in respect of such Restoration Stock Option.
SECTION 2. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to the conditions set forth in this Agreement,
all or part of an option may be exercised to purchase Option Shares prior to its
expiration at the time or times set forth in the vesting and exercise provisions
of the Option Award Notice.
(b) $100,000 LIMITATION. If the option is designated as an Incentive Stock
Option in the Option Award Notice, then the Optionee's right to exercise the
option shall be deferred to the extent (and only to the extent) that the option
would not be treated as an Incentive Stock Option solely by reason of the
$100,000 annual limitation under Section 422(d) of the Code, except that the
Optionee need not defer his or her right to exercise the option if (i) the
Company is subject to an Extraordinary Business Combination Event before the
Optionee's Service terminates, (ii) the Company, or any surviving corporation of
any business combination involving the Company or its parent (a "SURVIVING
COMPANY") does not continue the option, and (iii) any Surviving Company does not
assume the option or does not substitute an option with substantially the same
terms for the option. The failure to defer exercise of the option in order to
comply with this $100,000 limitation as permitted by the foregoing provisions
may, however, result in the option no longer being considered an Incentive Stock
Option. Additional limitations with regard to Incentive Stock Options are set
forth in the Plan.
(c) INJURIOUS CONDUCT. Except as otherwise specifically provided by an
Option Award Notice or by an agreement executed by the Company with the approval
of the Committee, in the event the Optionee has engaged in Injurious Conduct as
defined in, and as determined to have occurred in accordance with, Section 12 of
the Plan (i) the option may not be exercised (even if fully vested), nor shall
any other Benefits accrue to the Optionee under the Agreement or the Plan
(including the lapse of any restrictions on transfer or other restrictions
applicable to Option Shares once issued), prior to settlement in full of all
obligations of the Optionee and the Company related to the option (including
completion of the issuance and delivery to the Optionee of Option Shares upon
exercise of the option and compliance by the Optionee with any restrictions that
are applicable to Optionee under the Plan or this Agreement or the Option Award
Notice before the lapse of any restrictions on transfer or other restrictions
applicable to Option Shares once issued), and (ii) any such unsettled option
shall be forfeited and shall terminate and any such Option Shares subject to any
such restrictions shall be forfeited.
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SECTION 3. TRANSFER OF OPTION.
(a) TRANSFERS GENERALLY PROHIBITED. Except as otherwise provided by the
Option Award Notice, this option shall be exercisable only during the Optionee's
lifetime and only by the Optionee. Except as otherwise provided in subsection
3(b) below, this option and the rights and privileges conferred hereby shall not
be sold or otherwise Transferred.
(b) CERTAIN TRANSFERS PERMITTED. Notwithstanding the foregoing provisions
of this Section 3, this option may be Transferred (i) in the event of the
Grantee's death, by the laws of descent or distribution, (ii) by operation of
law in connection with a merger, consolidation, recapitalization,
reclassification or exchange of shares, reorganization or similar transaction
involving the Company affecting the Shares generally or (iii) with the approval
of the Committee, to a member of Grantee's family, or a trust primarily for the
benefit thereof, or to a corporation, partnership or other entity primarily for
the benefit of such a family member or trust or in another estate planning
transaction; provided, however, that the option so Transferred shall remain
subject in the hands of the Transferee to the restrictions on Transfer provided
hereby.
(c) FIDUCIARY AND SECURITIES LAW RESTRICTIONS. As a employee, officer
and/or director of the Company or a subsidiary thereof, Optionee may be subject
to restrictions on his or her ability to sell or otherwise Transfer Option
Shares by reason of being a fiduciary for the Company or by reason of federal or
state securities laws and/or the policies regarding transactions in the
securities of the Company from time to time adopted by the Company in connection
therewith. Nothing contained herein shall relieve Optionee of any restriction on
sale or other Transfer of Option Shares provided thereby and the restrictions
provided herein shall be in addition to and not in lieu of any such other
restrictions.
(d) LAPSE OF TRANSFER RESTRICTIONS. Subject to subsection 3(c) above and
unless otherwise provided by the Option Award Notice, upon the acquisition of
Option Shares pursuant to the option Optionee shall be free to dispose of Option
Shares so acquired in any manner and at any time after expiration of the vesting
period provided by the Option Award Notice.
SECTION 4. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee (or the Optionee's personal
representative or permitted Transferee) may exercise the option by giving
written notice to the Company specifying the election to exercise the option,
the number of Shares for which it is being exercised and the form of payment.
Exhibit A is an example of a "Notice of Exercise". The Notice of Exercise shall
be signed by the person exercising the option. In the event that the option is
being exercised by the Optionee's personal representative or permitted
Transferee, the notice shall be accompanied by proof (satisfactory to the
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Company) of the representative's right to exercise the option. The Optionee or
the Optionee's representative or permitted Transferee shall deliver to the
Company, at the time of giving the notice, payment in a form permissible under
Section 5 below for the full amount of the Purchase Price.
(b) ISSUANCE OF COMMON STOCK. Subject to subsection 2(c) above, after
receiving a proper notice of exercise and payment for the Option Shares for
which the option was exercised, the Company shall cause to be issued a
certificate or certificates for the Option Shares as to which this option has
been exercised, registered in the name of the person exercising the option (or,
at the direction of the Optionee, in the names of such person and his or her
spouse as community property or as joint tenants with right of survivorship or
as tenants in the entirety).
(c) WITHHOLDING REQUIREMENTS. The Company may withhold any tax (or other
governmental obligation) arising as a result of the exercise of the option, as a
condition to the exercise of the option, and the Optionee shall make
arrangements satisfactory to the Company to enable it to satisfy all such
withholding requirements. The Optionee shall also make arrangements satisfactory
to the Company to enable it to satisfy any withholding requirements that may
arise in connection with the vesting or disposition of Option Shares purchased
by exercising of the option.
SECTION 5. PAYMENT FOR SHARES.
(a) CASH OR CHECK. All or part of the Purchase Price may be paid in cash or
by good check.
(b) ALTERNATIVE METHODS OF PAYMENT. Subject to any provision of the Option
Award Agreement otherwise providing, at the sole discretion of the Committee,
all or any part of the Purchase Price and any applicable withholding
requirements may be paid by one or more of the following alternative methods:
(i) Surrender of Stock. By surrendering ownership of Shares that
are already owned by the Optionee free and clear of any restriction
or limitation, unless the Company specifically agrees to accept such
Shares subject to a restriction or limitation. In such cases, the
Shares shall be surrendered to the Company in good form for transfer
and shall be valued at their Fair Market Value on the date of the
applicable exercise of the option. Without the specific approval of
the Committee, the Optionee shall not be permitted to surrender
ownership of Shares in payment of the Purchase Price (or
withholding) if such action would cause the Company to recognize
compensation expense (or additional compensation expense) with
repect to the option for financial reporting purposes that otherwise
would not have occurred.
(ii) Net Exercise. By reducing the number of Shares otherwise
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deliverable upon the exercise of the option by the number of Shares
of having a Fair Market Value equal to the amount of the Purchase
Price and withholding required to be made by the Company in
connection with such exercise of the option.
(iii) Exercise/Sale. By the delivery (on a form prescribed by the
Company) of an irrevocable direction (A) to a securities broker
approved by the Company to sell Shares and to deliver all or a part
of the sales proceeds to the Company or (B) to pledge Shares to a
securities broker or lender approved by the Company as security for
a loan, and to deliver all or part of the loan proceeds to the
Company.
Should the Committee exercise its discretion to permit the Optionee to exercise
the option in whole or in part in accordance with subsection 5(b) above, it
shall have no obligation to permit such alternative exercise with respect to the
remainder of the option or with respect to any other option to purchase Shares
held by the Optionee.
SECTION 6. TERM AND EXPIRATION.
(a) BASIC TERM. Subject to earlier termination in accordance with
subsection 6(b) below, the exercise period of this option shall expire ten (10)
years after its Date of Grant.
(b) TERMINATION OF SERVICE. If the Optionee's Service terminates, then the
exercise period for this option shall expire (except as otherwise set forth in
the Option Award Notice) on the earliest of the following occasions (or such
later date as the Committee in a specific instance may determine), but in no
event after the expiration of the ten year period referred to in subsection 6(a)
above:
(i) the date six (6) months after the termination of the
Optionee's Service for any reason other than death, normal
retirement or Disability;
(ii) the date twelve (12) months after the termination of the
Optionee's Service by reason of Disability or retirement pursuant to
any then current formal retirement policy of the Company; or
(iii) the date twelve (12) months after the Optionee's death.
The Optionee (or in the case of the Optionee's death or disability, the
Optionee's personal representative) may exercise all or part of the option at
any time before its expiration under the preceding provisions of this Section 6,
but only to the extent that the option had become exercisable for Shares on or
before the date the Optionee's Service terminates. When the Optionee's Service
terminates, this option shall expire immediately with respect to the number of
Shares for which this option has not yet become exercisable.
(c) NOTICE CONCERNING INCENTIVE STOCK OPTION TREATMENT. If this option is
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designated as an Incentive Stock Option in the Option Award Notice, it ceases to
qualify for favorable tax treatment as an Incentive Stock Option to the extent
it is exercised (i) more than three (3) months after the date the Optionee
ceases to be an Employee for any reason other than death or permanent and total
disability (as defined in Section 22(e)(3) of the Code), (ii) more than twelve
(12) months after the date the Optionee ceases to be an Employee by reason of
such permanent and total disability or (iii) after the Optionee has been on a
leave of absence for more than ninety (90) days, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
SECTION 7. ADJUSTMENT OF SHARES.
(a) ADJUSTMENT GENERALLY. If while the option remains in effect there shall
be any change in the Ordinary Common Stock of the Company, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse stock split, split up, spin-off, combination of shares, exchange of
shares for other securities, dividend in kind or other like change in capital
structure or distribution (other than normal cash dividends) to stockholders of
the Company, an adjustment shall be made to the option as determined by the
Committee so that the option shall thereafter be exercisable for such
securities, cash and/or other property as would have been received in respect of
the Common Stock subject to the option had such option been exercised in full
immediately prior to such change or distribution or, if to the extent the
Committee determines that such adjustment in the consideration to be received
upon exercise of the option is not practicable, the Committee shall equitably
modify the option as provided by subsection 7(b) below, and such an adjustment
shall be made successively each time any such change shall occur.
(b) MODIFICATION OF OPTION. In the event of any change or distribution
described in subsection 7(a) above, in order to prevent dilution or enlargement
of theOptionee's rights hereunder, the Committee may, in an equitable manner,
otherwise adjust the number and kind of Shares that may be issued under this
Agreement and/or adjust the Exercise Price applicable to the option and/or the
Fair Market Value of the Shares and other value determinations applicable to the
option. Appropriate adjustments may also be made by the Committee in other terms
of the option to reflect such changes or distributions and/or to modify any
other terms of the option, on an equitable basis, including modifications of
performance targets and changes in the length of performance periods relating to
the vesting of the option or any restrictions on Option Shares. Notwithstanding
the foregoing, (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code, and (ii) in no
event shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an "incentive stock option" for purposes of Section
422 of the Code.
SECTION 8. MISCELLANEOUS PROVISIONS.
(a) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
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personal representative or permitted Transferee shall have any rights as a
shareholder with respect to any Shares subject to the option until the Optionee
or his or her personal representative or permitted Transferee becomes entitled
to receive such Shares by (i) filing a notice of exercise and (ii) paying the
Purchase Price as provided by this Agreement, and any such right shall be
subject to subsection 2(c) above of this Agreement.
(b) TENURE. Nothing in the Option Award Notice, this Agreement or the Plan
shall confer upon the Optionee any right to continue in the Company's Service
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Company (or any Parent or Subsidiary employing or
retaining the Optionee) or of the Optionee, which rights are hereby expressly
reserved by each, to terminate his or her Service at any time and for any
reason, with or without cause.
(c) NOTIFICATION. Any notification required by the terms of this Agreement
shall be given in writing and shall be deemed effective upon personal delivery
to the President, Treasurer, General Counsel, Secretary or any Assistant
Secretary of the Company or five Business Days upon deposit with the United
States Postal Service, by registered or certified mail, with postage and fees
prepaid addressed to the Company. A notice shall be addressed to the Company at
its principal executive office, marked to the attention of the Corporate
Secretary, and to the Optionee at the address that he or she most recently
provided to the Company.
(d) ENTIRE AGREEMENT. This Agreement, any related Option Award Notice and
the Plan constitute the entire contract between the parties hereto with regard
to the subject matter hereof and supersede any other agreements, representations
or understandings (whether oral or written and whether express or implied) which
relate to the subject matter hereof; it being understood, however, that, if this
Agreement is being entered into by the Company in the performance of obligations
under an employment agreement between the Company and Optionee, the Company and
Optionee shall also have those separate obligations, if any, relating to the
granting of options provided thereby.
(e) WAIVER. No waiver of any breach or condition of this Agreement shall be
deemed to be a waiver of any other or subsequent breach or condition whether of
like or different nature.
(f) SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Company and its successors and assigns
and upon the Optionee, the Optionee's personal representatives, heirs, legatees
and other permitted Transferees, whether or not any such person shall have
become a party to this Agreement and have agreed in writing to be join herein
and be bound by the terms hereof.
(g) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, as such laws are applied to
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contracts entered into and performed in such State.
SECTION 9. DEFINITIONS.
(a) "AGREEMENT" shall mean this Stock Option Agreement.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company,
as constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
(d) "COMMITTEE" shall mean the committee of the Board of Directors
described in Section 2 of the Plan.
(e) "COMPANY" shall mean Magellan Health Services, Inc, a Delaware
corporation, and any successor thereto.
(f) "DATE OF GRANT" in respect of an option shall mean the date specified
in the Option Award Notice, which date shall be no later than the date the
employment agreement between the Optionee and the Company, dated as of January
29, 2006, is effective.
(g) "DISABILITY" shall mean that the Optionee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment as determined by the Committee in its sole discretion.
(h) "EMPLOYEE" shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "EXERCISE PRICE" shall mean the amount for which one Option Share may
be purchased upon exercise of the option, as specified in the Option Award
Notice.
(k) "EXTRAORDINARY BUSINESS COMBINATION EVENT" shall be deemed to have
occurred upon any of the following events:
(i) any person (as such term is used in Section 13(d) of the
Exchange Act) becomes the "beneficial owner" (as determined pursuant
to Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty percent (50%)
of the combined voting power in the election of directors of the
Company's then outstanding securities, except that, in the case of a
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person who beneficially owned 50% of such combined voting power on
the date of the Option Award Notice, such person become the
beneficial owner (as so defined) of securities of the Company
representing sixty percent (60%) of more of such combined voting
power; or
(ii) during any period of two (2) consecutive years (not including
any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the members of the
Board of Directors and any new director, whose election to the Board
of Directors or nomination for election to the Board of Directors by
the Company's stockholders was approved by a vote of at least a
majority of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board of Directors; or
(iii) the Company shall merge with or consolidate into any other
corporation, other than a merger or consolidation which would result
in the holders of the voting securities of the Company outstanding
immediately prior thereto holding immediately thereafter securities
representing more than fifty percent (50%) of the combined voting
power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation;
or
(iv) the stockholders of the Company approve and effect a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(l) "FAIR MARKET VALUE" of a Share as of any day shall mean the closing
price of the Shares on such day (or on the last preceding trading date if the
Shares were not traded on such day) if the Shares are readily tradeable on a
national securities exchange or the Nasdaq Stock Market (or other established
market system involving current interdealer quotations), and, if the Shares are
not readily tradeable, Fair Market Value shall mean the amount determined in
good faith by the Committee as the fair market value of the Shares, which
determination shall be final and binding on all persons.
(m) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
described in Section 422(b) of the Code.
(n) "NONQUALIFIED STOCK OPTION" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.
(o) "OPTION AWARD NOTICE" shall have the meaning provided by Section 1 of
this Agreement.
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(p) "OPTIONEE" shall mean the person signing this Agreement as such.
(q) "PARENT" shall mean a "parent corporation" as defined in Section 424(e)
of the Code.
(r) "PLAN" shall mean the Magellan Health Services, Inc. 2003 Management
Incentive Plan.
(s) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the number
of Option Shares with respect to which this option is being exercised.
(t) "SERVICE" shall mean service as an Employee. For any purpose under this
Agreement, Service shall be deemed to continue while the Optionee is on a bona
fide leave of absence, if such leave was approved by the Company in writing or
if continued crediting of Service for such purpose is expressly permitted by the
terms of such leave or required by applicable law (as determined by the
Company).
(u) "SHARE" shall mean a share of Ordinary Common Stock of the Company, as
the same may generally be exchanged for or changed into any other share of
capital stock or other security of the Company or any other company in
connection with a transaction referred to in subsection 7(a) above (and in the
event of any such exchange or change, any security resulting from any such
successive exchange or change) and in respect of the option or the related
Option Shares with such adjustment thereto as provided in respect of adjustments
in Benefits granted under the Plan in accordance with subsection 7(b) above and
Section 13 of the Plan (if applicable).
(v) "TRANSFER" shall mean, with respect to the option or Option Share, any
sale, assignment, transfer, alienation, conveyance, gift, bequest by will or
under intestacy laws, pledge, lien encumbrance or other disposition, with or
without consideration, of all or part of such Share, or of any beneficial
interest therein, now or hereafter owned by the Optionee, including by
execution, attachment, levy or similar process.
(w) "SUBSIDIARY" shall mean a "subsidiary corporation" as defined in
Section 424(f) of the Code.
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In consideration of the foregoing and intending to be legally bound
hereby, the Company and the Optionee named below have executed this Agreement as
of the date first above written.
MAGELLAN HEALTH SERVICES, INC.
By:____________________________________
Name:
Title:
OPTIONEE:
---------------------------------
Name: R. Xxxxxx XxXxxxx
Address for Notice:
Social Security Number:
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EXHIBIT A
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SAMPLE NOTICE OF EXERCISE
Magellan Health Services, Inc.
[ADDRESS]
Attn: Corporate Secretary
Re: Exercise of Option, Option Award Notice Reference No. ____.
I hereby exercise my stock option identified above and notify you of my
desire to purchase the Option Shares that may be purchased pursuant to such
option as and to the extent described below.
Except as otherwise agreed with the Company as provided by the Option
Agreement, I shall pay for the Shares by delivery of a check payable to Magellan
Health Services, Inc. (the "Company") in the amount described below in full
payment for such Shares plus all amounts required to be withheld by the Company
under state, federal or local law as a result of such exercise or shall provide
such documentation as is satisfactory to the Company demonstrating that I am
exempt from any withholding requirement.
This notice of exercise is delivered this ___ day of ___________, 20__.
------------------------------ -------------------------------------------------
NUMBER OF SHARES TO BE ACQUIRED UPON
THIS EXERCISE OF THE OPTION: ______________
EXERCISE PRICE PER SHARE: $____; TOTAL EXERCISE PRICE: $____________
TYPE OF OPTION: ___ Nonqualified Stock Option OR ___ Incentive Stock Option
ESTIMATED WITHHOLDING TAX: $__________________
AMOUNT TENDERED HEREWITH: $__________________
--------------------------------------------------------------------------------
Very truly yours,
----------------------------
[Signature of Optionee]
Optionee's Name, Mailing Address and Social Security Number:
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MAGELLAN HEALTH SERVICES, INC.
NOTICE OF STOCK OPTION GRANT
(R. XXXXXX XXXXXXX)
[REFERNCE NO. 2006 -1-001]
NAME OF OPTIONEE: R. Xxxxxx XxXxxxx
SHARES SUBJECT TO OPTION: 30,000 shares of Ordinary Common Stock of
Magellan Health Services, Inc. ("Shares")
TYPE OF OPTION: ___X___ Nonqualified ________ Incentive
-
EXERCISE PRICE PER SHARE: o $36.29
DATE OF GRANT: o January 31, 2006
DATE EXERCISABLE: o This option shall be exercisable only to the
extent it is vested and, except as otherwise
provided in this notice of grant, to the
extent vested, only when otherwise
exercisable in accordance with the terms of
the 2003 Management Incentive Plan and the
Option Agreement to which this notice of
grant relates.
o The options granted hereby, to the
extent vested on the date of termination of
the Optionee's Service with the Company,
shall be exercisable for a period of six
months after the termination of the
Optionee's Service with the Company
(notwithstanding anything that may be to the
contrary in the Option Agreement to which
this notice of grant relates).
VESTING: o This option shall vest with respect to 7,500
of the Shares subject thereto on each of the
first four anniversaries of the Date of
Grant, provided that in each case the
Optionee's Service with the Company has not
terminated prior to such date.
o Notwithstanding the preceding paragraph,
this Option shall earlier vest immediately
with respect to 100% of the Shares subject
hereto in the event, after the date hereof,
a Change in Control of the Company (as
defined below) shall have occurred and
within the eighteen months (or such other
period as is provided by Optionee's
employment agreement, if any, in effect at
the time of the Change of Control) following
occurrence of the Change in Control,
Optionee's Service with the Company shall be
terminated by the Company without Cause (as
defined below) or by the Optionee with Good
Reason (as defined below), provided that the
Optionee's Service with the Company has not
previously terminated after the date hereof
for any other reason, and upon such
accelerated vesting this Option shall
continue to be exercisable for a period of
six months after such termination of
Optionee's Service, consistent with the
provisions regarding exercise set forth
above. For purposes of this Option, the
terms "Change in Control," "Cause" and "Good
Reason" shall have the same meanings
ascribed thereto below, unless any
employment agreement between the Company and
Optionee in effect at the time of the Change
in Control (including any terms of
substantially comparable significance in any
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such employment agreement even if not of
identical wording, including for purposes of
"Good Reason" any event contemplated under
Section 7(c) of the employment agreement
between the Optionee and the Company dated
as of January 29, 2006) provides different
meanings (in which event, such meanings,
including whether or not the Optionee's
employment has been so terminated, shall
apply but only if such meanings are more
favorable to Optionee).
o A "Change in Control" of the Company shall
mean the first to occur after the date
hereof of any of the following events:
o
a. any "person," as such term is used
in Sections 3(a)(9) and 13(d) of the
Securities Exchange Act of 1934, as
amended (the "Exchange Act"), becomes
a "beneficial owner," as such term is
used in Rule 13d-3 promulgated under
the Exchange Act, of 30% or more of
the Voting Stock (as defined below) of
the Company;
b. the majority of the Board of
Directors of the Company consists of
individuals other than "Continuing
Directors," which shall mean the
members of the Board on the date
hereof, provided that any person
becoming a director subsequent to the
date hereof whose election or
nomination for election was supported
by two-thirds of the directors who
then comprised the Continuing
Directors shall be considered to be a
Continuing Director;
c. the Board of Directors of the
Company adopts and, if required by law
or the certificate of incorporation of
the Corporation, the shareholders
approve the dissolution of the Company
or a plan of liquidation or comparable
plan providing for the disposition of
all or substantially all of the
Company's assets;
d. all or substantially all of the
assets of the Company are disposed of
pursuant to a merger, consolidation,
share exchange, reorganization or
other transaction unless the
shareholders of the Company
immediately prior to such merger,
consolidation, share exchange,
reorganization or other transaction
beneficially own, directly or
indirectly, in substantially the same
proportion as they previously owned
the Voting Stock or other ownership
interests of the Company, a majority
of the Voting Stock or other ownership
interests of the entity or entities,
if any, that succeed to the business
of the Company; or
e. the Company merges or combines with
another company and, immediately after
the merger or combination, the
shareholders of the Company
immediately prior to the merger or
combination own, directly or
indirectly, 50% or less of the Voting
Stock of the successor company,
provided that in making such
determination there shall being
excluded from the number of shares of
Voting Stock
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held by such shareholders, but not
from the Voting Stock of the successor
company, any shares owned by
Affiliates of such other company who
were not also Affiliates of the
Company prior to such merger or
combination.
(2) "Cause" shall mean:
a. Optionee is convicted of (or pleads
guilty or nolo contendere to) a felony
or a crime involving moral turpitude;
b. Optionee's commission of an act of
fraud or dishonesty involving his or
her duties on behalf of the Company;
c. Optionee's willful failure or
refusal to faithfully and diligently
perform duties lawfully assigned to
Optionee as an officer or employee of
the Company or other willful breach of
any material term of any employment
agreement at the time in effect
between the Company and Optionee; or
d. Optionee's willful failure or
refusal to abide by the Company's
policies, rules, procedures or
directives, including any material
violation of the Company's Code of
Ethics.
(3) "Good Reason" shall mean:
a. a reduction in Optionee's salary in
effect at the time of a Change in
Control, unless such reduction is
comparable in degree to the reduction
that takes place for all other
employees of the Company of comparable
rank (for which purpose any person who
is an executive officer of the Company
(as determined for purposes of the
Exchange Act shall be considered of
comparable rank) or a reduction in
Optionee's bonus for the year in which
or any year after the year in which
the Change in Control occurs from
Optionee's maximum bonus opportunity
for the year in which the Change in
Control occurs (if any) as established
under any employment agreement
Optionee has with the Company or any
bonus plan of the Company applicable
to Optionee (or, if no such maximum
bonus opportunity has yet been
established for Optionee under a bonus
plan applicable to Opitonee for the
year in which the Change in Control
has occurred, the maximum bonus
opportunity so established for
Optionee for the immediately preceding
year (if any);
b. a material diminution in Optionee's
position, duties or authority as in
effect at the time of a Change in
Control or the assignment to Optionee
of duties which are materially
inconsistent with such position,
duties and authority, unless in either
case such change is made with the
consent of the Optionee; or
c. the relocation by more than 30
15
miles of the offices of the Company
which constitute at the time of the
Change in Control Optionee's principal
location for the performance of his or
her services to the Company;
provided that, in each such case, such
event or condition continues uncured
for a period of more than 15 days
after Optionee gives notice thereof to
the Company.
For purposes of the foregoing definitions, (A)
"the Company" shall include any entity that
succeeds to all or substantially all of the
business of the Company, (B) "Affiliate" of a
person or other entity shall mean a person or
other entity that directly or indirectly
controls, is controlled by, or is under common
control with the person or other entity
specified, and (C) "Voting Stock" shall mean any
capital stock of any class or classes having
general voting power under ordinary
circumstances, in the absence of contingencies,
to elect the directors of a corporation and
reference to a percentage of Voting Stock shall
refer to such percentage of the votes that all
such Voting Stock is entitled to cast.
OTHER TERMS (IF ANY): o Notwithstanding Section 8(d) of the Stock Option
Agreement, this Notice, the Stock Option
Agreement and the 2003 Management Incentive
Plan, together with the employment agreement
dated January 29, 2006, between Optionee and the
Company, constitute the full agreement and
understanding of the parties with respect to the
options granted hereby.
EXPIRATION DATE: o January 31, 2016
By signing your name below, you accept this award and acknowledge and agree that
this award is granted under and governed by the terms and conditions of the
Stock Option Agreement, dated as of January 31, 2006, between Magellan Health
Services, Inc. and the undersigned Optionee, reference number 0000-0-000, which
is hereby made a part of this document.
OPTIONEE: MAGELLAN HEALTH SERVICES, INC.
By:
---------------------------- ---------------------------------
R. Xxxxxx XxXxxxx Name:
---------------------------------
Title:
---------------------------------
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