EXHIBIT 4.12
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EXECUTION COPY
MAGELLAN HEALTH SERVICES, INC.
STOCK OPTION AGREEMENT
Reference No. 200_ - ____ ( )
As of July 31, 2006
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 July 31, 2006 (the
"OPTION AWARD NOTICE") delivered to Optionee simultaneously herewith (the form
of which is attached hereto as Exhibit B), Magellan Health Services Inc. (the
"COMPANY" as further defined below) grants to the Optionee referred to on the
signature page hereof, as of the Date of Grant (as defined below), an option
(the "OPTION") to purchase at the Exercise Price (as defined below) the number
of shares of Ordinary Common Stock, $ 0.01 par value per share, of the Company
set forth in such Notice of Stock Option Award, subject to adjustment thereto on
account of any change in respect of the shares of Ordinary Common Stock that may
be made as provided by Section 7 below (the "OPTION SHARES"). The option is
intended to be an Incentive Stock Option (as defined below) or a Nonqualified
Stock Option (as defined below), as provided in the Option Award Notice.
(b) 2006 MANAGEMENT INCENTIVE PLAN AND DEFINED TERMS. The
option referred to in the Option Award Notice is granted on the same terms and
conditions as provided for the grant of options pursuant to the Company's 2006
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 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.
SECTION 2. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to the conditions set forth in
this Agreement and the Plan, all or part of the option may be exercised to
purchase Option Shares prior to expiration of the option at the time or times,
and subject to satisfaction of the conditions, 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 the 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 during Optionee's Service or during the
year following termination of Optionee's Service, then (i) no option issued to
Optionee under the Option Award Notice may be exercised after such determination
(even if fully vested) nor shall any other benefit of any Award thereafter
accrue to the Optionee under the Agreement or the Plan (including by reason of
the lapse of any restriction on transfer or other restriction applicable to
Option Shares that have been issued), and the Company shall not complete the
settlement of any such option (including completion of the issuance and delivery
to the Optionee of Option Shares upon a previous exercise of the option) or the
settlement of any other Award (including the removal of any restriction on
transfer or other restriction applicable to any Option Shares that have been
issued, even upon lapse of or compliance by the Optionee with any other
restrictions thereon that are otherwise applicable to Optionee), 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. A forfeiture of
benefits as provided hereby upon the Committee determining that Optionee has
engaged in Injurious Conduct during Optionee's Service or during the year
following termination of Optionee's Service, shall not relieve Optionee of any
other liability he or she may have to the Company, any Subsidiary or any Parent
as a result of engaging in the Injurious Conduct.
(d) TRANSFER RESTRICTIONS ON OPTION SHARES. Subject to
subsection 2(c) above and subsection 3(c) below, unless otherwise provided by
the Option Award Notice, upon the acquisition of Option Shares pursuant to the
exercise of an option after expiration of the vesting period and satisfaction of
any vesting and exercise conditions provided by the Option Award Notice,
Optionee shall be free to dispose of Option Shares so acquired in any manner and
at any time.
SECTION 3. TRANSFER OF OPTION.
(a) TRANSFERS GENERALLY PROHIBITED. Except as otherwise
provided by the Option Award Notice or otherwise permitted by the terms of the
Plan or in the case of a transfer permitted by subsection 3(b) below, the option
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shall be exercisable only during the Optionee's lifetime and only by the
Optionee. Except as otherwise provided in subsection 3(b) below, the option and
the rights and privileges conferred by the option 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 Optionee's death, by will or the laws of descent and distribution or by a
written beneficiary designation accepted by the Company, (ii) by operation of
law in connection with a merger, consolidation, recapitalization,
reclassification or exchange of Shares, reorganization or similar transaction
involving the Company and affecting the Shares generally or (iii) with the
approval of the Committee, to a member of Optionee's family, or a trust
primarily for the benefit of Optionee and/or one or more members of Optionee's
family, or to a corporation, partnership or other entity primarily for the
benefit of Optionee and/or one or more such family members and/or trusts or (iv)
with the approval of the Committee, in another estate or personal financial
planning transaction; provided, however, that in any such case the option so
Transferred shall remain subject in the hands of the Transferee to the
restrictions on Transfer provided hereby and all other terms hereof, including
the terms of subsection 2(c) above.
(c) FIDUCIARY AND SECURITIES LAW RESTRICTIONS. As a employee,
officer and/or director of the Company, 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 securities of the Company
from time to time adopted by the Company and applicable to Optionee in
connection therewith. Nothing contained herein shall relieve Optionee of any
restriction on sale or other Transfer of Option Shares provided thereby and any
other restrictions of sale or other Transfer of Option Shares provided herein
(including in the terms of the Plan) shall be in addition to and not in lieu of
any other restrictions provided thereby.
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 Option 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 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
and subsection 4(d) below, 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
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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) 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.
(d) SECURITIES LAW RESTRICTIONS ON EXERCISE. Unless a
registration statement under the Securities Act permitting the sale and delivery
of Option Shares upon exercise of the option is in effect at the date of
exercise, the Company shall not be required to issue Option Shares upon such
exercise, except as otherwise provided in this subsection. The Company shall use
its commercially reasonable efforts to register under the Securities Act
sufficient Option Shares to permit the sale and delivery to Optionee of all
Option Shares that may be acquired by Optionee upon the exercise of the option;
provided, however, that the Company shall only be so required to register the
Option Shares on Form S-8 under the Securities Act (or any successor form).
Notwithstanding the foregoing, the Company shall, if Optionee has given the
Company at least 90 days' notice requesting the Company to register the Option
Shares that may then be acquired by Optionee upon exercise of the option in
accordance with the foregoing provisions of this subsection and the Company has
failed to do so, issue Option Shares to Optionee upon exercise of the option
without registration thereof under the Securities Act if (i) Optionee
represents, effective on the date of such issuance, in writing in a form
acceptable to the Company (A) that such Option Shares are being acquired for
investment and not with a present view to distribution, (B) Optionee understands
that the Option Shares have not been registered under the Securities Act and
cannot be sold or otherwise Transferred unless a registration statement under
the Securities Act is in effect with respect thereto or the Company has received
an opinion of counsel, satisfactory to it, to the effect that such registration
is not required, (C) that Optionee has, alone or together with any qualified
advisor, such knowledge and experience in financial and business matters as is
necessary to evaluate the risks of an investment in the Option Shares, is
purchasing the Option Shares based on an independent evaluation of the long-term
prospects of an investment in the Option Shares and has been furnished with such
financial and other information regarding the Company as the Optionee has
requested for purposes of making such evaluation, and (D) Optionee is able to
bear the economic risk of an investment in the Option Shares subject to such
restrictions on Transfer and (ii) if the Company determines that under the
circumstances issuing the Option Shares pursuant to such exercise of the option
is lawful; provided, however, that the Company may require, as a condition of
such issuance of Option Shares, that Optionee execute and deliver to it such
other certificates, agreements and other instruments as in the judgment of the
Company, upon advice of counsel, are necessary or appropriate to assure that the
Option Shares are issued to Optionee in accordance with the Securities Act and
any other applicable securities law and may require that any certificates
representing Option Shares so issued bear any restrictive legend appropriate for
such purpose. In addition, even if a registration statement under the Securities
Act permitting the sale and delivery of Option Shares upon exercise of the
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option is in effect at the date of exercise, the Company may suspend the
issuance of Option Shares pursuant to the exercise of all options issued under
the Option Award Notice for such period of time as in the judgment of the
Company, upon advice of counsel, is necessary in order for the Company to come
into compliance with all the reporting requirements applicable to the Company
pursuant to Section 13(a) of the Exchange Act or to otherwise avoid in
connection with the issuance of the Option Shares under such registration
statement a violation of Sections 10, 11 or 12 of the Securities Act. If the
Company suspends the issuance of Option Shares pursuant to the exercise of
options issued under the Option Award Notice, the Company shall give prompt
written notice thereof to the Optionee (but the failure of the Company to give
such notice shall not prevent the Company from suspending the issuance of Option
Shares as permitted hereby) and, at such time as such period of suspension ends,
shall give prompt written notice thereof to Optionee.
SECTION 5. PAYMENT FOR OPTION 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
pertaining thereto in the Option Award Agreement, 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. Payment may be made 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, such
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 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 respect to the option for financial reporting
purposes that otherwise would not have occurred.
(ii) Net Exercise. Payment may be made in the case of
Nonqualified Stock Options by reducing the number of Option
Shares otherwise deliverable upon the exercise of the option
by the number of Shares having a Fair Market Value equal to
the amount of the Purchase Price and the withholding required
to be made by the Company in connection with such exercise of
the option.
(iii) Exercise/Sale. Payment may be made 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 Option Shares (or other Shares owned by
Optionee) and to deliver all or part of the sales proceeds to
the Company or (B) to pledge Option Shares (and/or other
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Shares owned by Optionee) 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 the date it is granted.
(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 at or after the normal date for retirement under
any retirement plan of the Company in which Optionee
participates or as otherwise determined 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 Option 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 Option Shares for which this option has not yet become exercisable.
(c) NOTICE CONCERNING INCENTIVE STOCK OPTION TREATMENT. If
this option is 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
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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 outstanding Shares of the class which
may be purchased upon exercise of the option, through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, combination of shares, exchange of shares for other securities or other
like change in the outstanding Shares, or any spin-off, split-off, dividend in
kind or other extraordinary dividend or other distribution in respect of such
outstanding Shares or other extraordinary change in the capital structure of the
Company, an adjustment shall be made to the terms of the option so that the
option shall thereafter be exercisable, otherwise on the same terms and
conditions as provided by the Option Award Notice, this Agreement and the Plan,
for such securities, cash and/or other property as would have been received in
respect of the Shares that would have been issued upon exercise of the option
had the option been exercised in full immediately prior to such change or
distribution (whether or not the option was then exercisable in full) or, if and
to the extent the Committee determines that so adjusting the consideration to be
received upon exercise of the option, in whole or in part, is not practicable,
the Committee shall equitably modify the consideration to be received in respect
of the exercise of the option or the Exercise Price or other pertinent terms and
conditions of the option as provided by subsection 7(b) below. Such an
adjustment shall be made successively each time any such change in the
outstanding Shares of the class which may be purchased upon exercise of the
option or extraordinary distribution in respect of such outstanding Shares or
extraordinary change in the capital structure of the Company shall occur.
(b) MODIFICATION OF OPTION. In the event any change in the
outstanding Shares of the class which may be purchased upon exercise of the
option or extraordinary distribution in respect of such outstanding Shares or
extraordinary change in the capital structure of the Company described in
subsection 7(a) above occurs, or in the event of any change in applicable laws
or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Optionee in connection with the terms of the Plan or which otherwise warrants
equitable adjustment to the terms and conditions of the option because such
event or circumstances interferes with the intended operation of the terms of
the Plan (including the intended tax consequences of Awards) occurs, then the
Committee may, and shall where required by subsection 7(a) above, adjust the
number and kind of Shares and/or other securities and/or cash or other property
that may be issued or delivered upon the exercise of the option and/or adjust
the Exercise Price and/or other terms and conditions of the option as the
Committee in its discretion determines to be equitable in order to prevent
dilution or enlargement of the Optionee's rights in respect of the option as
such existed before such event. Appropriate adjustments may likewise be made by
the Committee in other terms and conditions of the option to reflect equitably
such changes in circumstances, 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, (ii) in no event shall any adjustment
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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 without
the consent of the Optionee and (iii) no adjustment shall be made which is
prohibited by Section 13 of the Plan.
(c) MODIFICATIONS TO COMPLY WITH SECTION 409A. To the extent
applicable, this Agreement shall be interpreted in accordance with Section 409A
of Code and Department of Treasury regulations and other interpretive guidance
issued thereunder, including without limitation any such regulations or guidance
that may be issued after the Date of Grant. Without limiting the authority of
the Committee under subsection 7(b) above to make modifications to the option by
reason of changes in law or circumstances that would result in any substantial
dilution or enlargement of the rights granted to, or available for, Optionee in
connection with the terms of the Plan or which otherwise warrants equitable
adjustment to the terms and conditions of the option because such event
interferes with the operation of the terms of the Plan, and notwithstanding any
provision of the Agreement to the contrary, in the event that the Committee or
an authorized officer of the Company determines that any amounts will be
immediately taxable to the Participant under Section 409A of the Code and
related Department of Treasury guidance (or subject the Optionee to a penalty
tax) in connection with the grant or vesting of the option or any other
provision of the Option Award Notice or this Agreement or the Plan, the Company
may (a) adopt such amendments to the option, including amendments to this
Agreement (having prospective or retroactive effect), that the Committee or
authorized officer determines to be necessary or appropriate to preserve the
intended tax treatment of the option and/or (b) take such other actions as the
Committee or authorized officer determines to be necessary or appropriate to
comply with the requirements of Section 409A of the Code and related Department
of Treasury guidance, including such Department of Treasury guidance and other
interpretive materials as may be issued after the Date of Grant.
SECTION 8. MISCELLANEOUS PROVISIONS.
(a) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the
Optionee's personal representative or permitted Transferee shall have any rights
as a shareholder with respect to any Option Shares until the Optionee or his or
her personal representative or permitted Transferee becomes entitled to receive
such Option Shares by (i) filing a notice of exercise and (ii) paying the
Purchase Price as provided by this Agreement, and any such right shall also be
subject to subsections 2(c) and 4(d) above.
(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
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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, the 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 joined 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 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 and as the same may be 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 and (without limitation of the
Committee's authority to otherwise delegate any of its powers or
responsibilities as permitted by law) shall include any officer of the Company
to whom such committee has specifically delegated by resolution adopted by the
Committee authority to approve payment for Option Shares by an alternative
method of payment referred to in subsection 5(b) above.
(e) "COMPANY" shall mean Magellan Health Services, Inc, a
Delaware corporation, and any successor thereto.
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(f) "DATE OF GRANT" in respect of the option shall mean the
date specified in the Option Award Notice.
(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 and as the same may be amended from time to time, and any
successor statute, and the rules and regulations promulgated thereunder.
(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
person who beneficially owned 50% of such combined voting
power on the date of the Option Award Notice, such person
becomes 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
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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 average of the opening price and 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
(or in accordance with procedures approved 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.
(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. 2006
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) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended and as the same may be amended from time to time, and any successor
statute, and the rules and regulations promulgated thereunder.
(u) "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).
11
(v) "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).
(w) "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.
(x) "SUBSIDIARY" shall mean a "subsidiary corporation" as
defined in Section 424(f) of the Code.
12
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: ▇▇▇▇ ▇▇▇▇▇▇▇
Address for Notice:
▇▇▇▇ ▇.▇.▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Social Security Number:
13
EXHIBIT A
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 Option Shares by delivery of a check
payable to Magellan Health Services, Inc. (the "Company") in the amount
described below in full payment for such Option 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__.
---------------------------- -------------------------- -------------------- -------------------
No. of Option Shares to be Type of Option Exercise Price Total
Acquired
---------------------------- -------------------------- -------------------- -------------------
Nonqualified Stock Option
---------------------------- -------------------------- -------------------- -------------------
Incentive Stock Option
---------------------------- -------------------------- -------------------- -------------------
Estimated Withholding Nonqualified only
---------------------------- -------------------------- -------------------- -------------------
AMOUNT PAID
---------------------------- -------------------------- -------------------- -------------------
Very truly yours,
-----------------------------------
Signature of Optionee
Optionee's Name and Mailing Address:
Optionee's Social Security Number:
-----------------------------------
EXHIBIT B
MAGELLAN HEALTH SERVICES INC.
-----------------------------
NOTICE OF STOCK OPTION GRANT
(REFERENCE NO. 20 ___ - ___ - __)
------------------------------- ------------------------------------------------
NAME OF OPTIONEE:
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
SHARES SUBJECT TO OPTION: __________ shares of Ordinary Common Stock of
Magellan Health Services, Inc. (the "Shares")
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
TYPE OF OPTION: _X_ Nonqualified ___ Incentive
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
EXERCISE PRICE PER SHARE: $
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
DATE OF GRANT: , 20
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
DATE EXERCISABLE AND
OTHER CONDITIONS OF
EXERCISE: This option shall be exercisable, in whole or in
part, until its Expiration Date only to the
extent it is vested and while the Optionee's
Service with the Company, a Subsidiary or, a
Parent company continues. In addition, this
option, to the extent vested on the date of
termination of the Optionee's Service, shall be
exercisable for the period after the termination
of the Optionee's Service provided by Optionee's
Option Agreement, unless a different period is
specified in Optionee's employment agreement
with the Company, a Subsidiary or a parent
company, in which case this option shall be
exercisable for such different period after
termination of Optionee's Service (but in no
event on or after the Expiration Date).
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
In addition, this option may be exercised, to
the extent vested, only when exercise is
otherwise permitted in accordance with the terms
of the 2006 Management Incentive Plan and the
Option Agreement to which this notice of grant
relates (including the provisions thereof
applicable in the event of Injurious Conduct).
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
VESTING: This option shall vest with respect to the
Shares subject hereto as to one-third of such
Shares on each of the first, second and third
anniversaries of the Date of Grant, provided
that in each case the Optionee's Service has not
terminated prior to such date.
------------------------------- ------------------------------------------------
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 period of 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 the same period after such
termination of Optionee's Service as provided
above. For purposes of this Option, the terms
"Change in Control," "Cause" and "Good Reason"
shall have the same meanings as provided in 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 such employment
agreement even if not of identical wording) or,
if no such employment agreement is in effect at
such time or no such meanings are provided in
such employment agreement, shall have the
meanings ascribed thereto below:
------------------------------- ------------------------------------------------
(1) A "Change in Control" of the Company
shall mean the first to occur after the
date hereof of any of the following
events:
------------------------------- ------------------------------------------------
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;
------------------------------- ------------------------------------------------
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 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 of 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 Optionee for the year
in which the Change of 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 responsibilities 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 50 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):
------------------------------- ------------------------------------------------
EXPIRATION DATE: , 20
------------------------------- ------------------------------------------------
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, reference number 2006-___, dated as of _______________,
between Magellan Health Services, Inc. and the undersigned Optionee, which is
hereby made a part of this document.
-------------------------------------- -----------------------------------------
OPTIONEE: MAGELLAN HEALTH SERVICES, INC.
-------------------------------------- -----------------------------------------
By:
---------------------------------- -------------------------------------
Name: Name:
-----------------------------------
Title:
----------------------------------
-------------------------------------- -----------------------------------------
MAGELLAN HEALTH SERVICES INC.
NOTICE OF STOCK OPTION GRANT
------------------------------- ------------------------------------------------
NAME OF OPTIONEE: ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
SHARES SUBJECT TO OPTION: 20,000 shares of Ordinary Common Stock of
Magellan Health Services, Inc. (the "Shares")
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
TYPE OF OPTION: _X_ Nonqualified ___ Incentive
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
EXERCISE PRICE PER SHARE: $ 46.94
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
DATE OF GRANT: July 31, 2006
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
DATE EXERCISABLE AND
OTHER CONDITIONS OF
EXERCISE: This option shall be exercisable, in whole or in
part, until its Expiration Date only to the
extent it is vested and while the Optionee's
Service with the Company, a Subsidiary or, a
Parent company continues. In addition, this
option, to the extent vested on the date of
termination of the Optionee's Service, shall be
exercisable for the period after the termination
of the Optionee's Service provided by Optionee's
Option Agreement, unless a different period is
specified in Optionee's employment agreement
with the Company, a Subsidiary or a parent
company, in which case this option shall be
exercisable for such different period after
termination of Optionee's Service (but in no
event on or after the Expiration Date).
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
In addition, this option may be exercised, to
the extent vested, only when exercise is
otherwise permitted in accordance with the terms
of the 2006 Management Incentive Plan and the
Option Agreement to which this notice of grant
relates (including the provisions thereof
applicable in the event of Injurious Conduct).
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
VESTING: This option shall vest with respect to the
Shares subject hereto as to one-third of such
Shares on each of the first, second and third
anniversaries of the Date of Grant, provided
that in each case the Optionee's Service has not
terminated prior to such date.
------------------------------- ------------------------------------------------
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 period of 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 the same period after such
termination of Optionee's Service as provided
above. For purposes of this Option, the terms
"Change in Control," "Cause" and "Good Reason"
------------------------------- ------------------------------------------------
------------------------------- ------------------------------------------------
shall have the same meanings as provided in 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 such employment
agreement even if not of identical wording) or,
if no such employment agreement is in effect at
such time or no such meanings are provided in
such employment agreement, shall have the
meanings ascribed thereto below:
------------------------------- ------------------------------------------------
(1) A "Change in Control" of the Company
shall mean the first to occur after the
date hereof of any of the following
events:
------------------------------- ------------------------------------------------
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;
------------------------------- ------------------------------------------------
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 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 of 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 Optionee for the year
in which the Change of 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 responsibilities 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 50 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):
------------------------------- ------------------------------------------------
EXPIRATION DATE: July 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, reference number 2006- ___ - __, dated as of July 31,
2006, between Magellan Health Services, Inc. and the undersigned Optionee, which
is hereby made a part of this document.
-------------------------------------- -----------------------------------------
OPTIONEE: MAGELLAN HEALTH SERVICES, INC.
-------------------------------------- -----------------------------------------
By:
---------------------------------- -------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name:
-----------------------------------
Title:
----------------------------------
-------------------------------------- -----------------------------------------