<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1998
REGISTRATION NO. 333-____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
MARINER HEALTH GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 04-2272148
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
125 EUGENE O'NEILL DRIVE
NEW LONDON, CONNECTICUT 06320
(Address of Principal Executive Offices)
--------------------
PRISM HEALTH GROUP, INC. 1992 EMPLOYEE,
DIRECTOR AND CONSULTANT STOCK PLAN; AND
OTHER EMPLOYEE BENEFIT PLANS
(Full Title of the Plan)
--------------------
DAVID N. HANSEN
CHIEF FINANCIAL OFFICER
MARINER HEALTH GROUP, INC.
125 EUGENE O'NEILL DRIVE
NEW LONDON, CONNECTICUT 06320
(Name and Address of Agent For Service)
(860) 701-2000
(Telephone Number, Including Area Code, of Agent For Service)
--------------------
Copies to:
MARK H. BURNETT, ESQ.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
(617) 248-7000
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
---------------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
PRISM HEALTH GROUP, INC. 1992 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK PLAN
Mariner Health 20,281 shares $ 4.37 $ 88,627.97 $ 26.15
Group, Inc. 34,385 shares $ 7.71 $ 265,108.35 $ 78.21
Common Stock, 21,319 shares $ 6.79 $ 144,756.01 $ 42.70
$.01 par value(1) 11,689 shares $ 5.34 $ 62,419.26 $ 18.41
859 shares $ 3.39 $ 2,912.01 $ 0.86
OTHER MARINER HEALTH GROUP, INC. EMPLOYEE BENEFIT PLANS
Mariner Health 400,000 shares $16.25 $6,500,000.00 $1,917.50
Group, Inc.
Common Stock,
$.01 par value(2)
TOTAL: 488,533 shares $7,063,823.60 $2,083.83
</TABLE>
(1) Based on options to purchase 88,533 shares of Mariner Health Group,
Inc.'s Common Stock granted as of October 3, 1997 under the Prism Health Group,
Inc. 1992 Employee, Director and Consultant Stock Plan (the "Plan"). All of such
shares are issuable upon the exercise of outstanding options to purchase the
number of shares at the exercise price listed above. Pursuant to Rule 457(h)(1),
the aggregate offering price and the fee have been computed upon the basis of
the price at which the options may be exercised.
(2) Based on options to purchase 400,000 shares of Mariner Health Group,
Inc.'s Common Stock granted as of October 3, 1997 under other Mariner Health
Group, Inc. employee benefit plans. All of such shares are issuable upon the
exercise of outstanding options to purchase the number of shares at the exercise
price listed above. Pursuant to Rule 457(h)(1), the aggregate offering price and
the fee have been computed upon the basis of the price at which the options may
be exercised.
This Registration Statement covers an aggregate of 488,533 shares of
Common Stock, $.01 par value per share, of Mariner Health Group, Inc.
("Mariner") issuable upon exercise of options granted pursuant to certain
employee benefit plans of Prism Health Group, Inc. ("PHG"), which were assumed
by
<PAGE> 3
Mariner in connection with transactions between Mariner and PHG, and certain
other Mariner benefit plans. PHG was acquired by Mariner on October 3, 1997
pursuant to an Agreement and Plan of Merger dated as of September 12, 1997 (the
"Merger Agreement"). Pursuant to the terms of the Merger Agreement, Mariner
assumed all of the then outstanding but unexerciseable options granted under the
Plan, which consisted of options to purchase an aggregate of 128,750 shares of
PHG Common Stock. As a result of the merger, these options are now exercisable
for an aggregate of 88,533 shares of Mariner Common Stock, assuming the exercise
of all such outstanding options. No additional options or other rights will be
granted by Mariner under the Plan. Also, under the terms of the employment
agreements contemplated under the Merger Agreement, Mariner granted
non-qualified stock options to purchase an aggregate of 400,000 shares of
Mariner Common Stock, assuming the exercise of all such options, to certain
executive officers of PHG who will be continuing their employment with Mariner.
<PAGE> 4
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.
The documents containing the information specified in this Item 1 will
be sent or given to employees, directors or others as specified by Rule
428(b)(1). In accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission") and the instructions to Form S-8, such
documents are not being filed with the Commission either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
The documents containing the information specified in this Item 2 will
be sent or given to employees, directors or others as specified by Rule
428(b)(1). In accordance with the rules and regulations of the Commission and
the instructions to Form S-8, such documents are not being filed with the
Commission either as part of this Registration Statement or as prospectuses or
prospectus supplements pursuant to Rule 424.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by Mariner Health Group, Inc. (the
"Company" or the "Registrant") with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") are incorporated in this
Registration Statement by reference as of their respective dates (File No.
0-21512):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, as amended, filed pursuant to the Exchange Act
which contains audited financial statements for the fiscal year ended
December 31, 1996.
(b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997
filed pursuant to the Exchange Act.
(c) The section entitled "Description of Registrant's Securities to be
Registered" contained in the Registrant's Registration Statements on
Form 8-A filed pursuant to Section 12(g) of the Exchange Act on April
9, 1993 and November 2, 1995.
All documents subsequently filed with the Commission by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicates that all securities offered
herein have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference in this Registration Statement
and to be a part hereof from the date of filing of such documents.
<PAGE> 5
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Company's Restated
Certificate of Incorporation and Amended and Restated By-laws provide for
indemnification of the Company's directors and officers for liabilities and
expenses that they may incur in such capacities. In general, directors and
officers are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interest of the
Company, and with respect to any criminal action or proceeding, actions that the
indemnified party had no reasonable cause to believe were unlawful. Reference is
made to the Registrant's Restated Certificate of Incorporation filed as Exhibit
3.2, 4.2 to the Company's Registration Statement on Form S-1 (File No. 33-60736)
and Certificate of Amendment to the Company's Restated Certificate of
Incorporation filed as exhibit 4.2 to the Company's Form 10-Q for the quarter
ended March 31, 1994, as amended, and to the Registrant's By-Laws, as amended
and restated, filed as Exhibits 3.2, 4.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein
by reference.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
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<CAPTION>
Exhibit No. Description of Exhibit
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<S> <C>
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1)
24.1 Power of Attorney (found on Page 8 of this Registration Statement)
99.1 Prism Health Group, Inc. 1992 Employee, Director and Consultant Stock Plan
99.2 Non-Qualified Option Agreement dated as of October 3, 1997 between Mariner and Steven
Garfinkle.
99.3 Non-Qualified Option Agreement dated as of October 3, 1997 between Mariner and Thomas
Dixon.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
99.4 Non-Qualified Option Agreement dated as of October 3, 1997 between Mariner and
Russell Fichera.
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
<PAGE> 7
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New London, Connecticut, on the 29th day of January, 1998.
MARINER HEALTH GROUP, INC.
By: /s/ David N. Hansen
------------------------------
David N. Hansen
Chief Financial Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Mariner Health Group, Inc.,
hereby severally constitute and appoint Arthur W. Stratton, Jr. and David N.
Hansen, and each of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement filed herewith and any
and all amendments thereto (including post-effective amendments), and generally
to do all such things in our names and on our behalf in our capacities as
officers and directors to enable Mariner Health Group, Inc. to comply with the
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to said
Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
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Signature Title(s) Date
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<S> <C> <C>
/s/ Arthur W. Stratton President, Chairman, January 29, 1998
------------------------------- Chief Executive Officer
Arthur W. Stratton, Jr. and Director
(principal executive officer)
/s/ David N. Hansen Treasurer, Chief January 29, 1998
------------------------------- Financial Officer and Director
David N. Hansen (principal financial officer)
/s/ David C. Fries Director January 29, 1998
-------------------------------
David C. Fries
/s/ Christopher Grant, Jr. Director January 29, 1998
-------------------------------
Christopher Grant, Jr.
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
/s/ Samuel B. Kellett Director January 29, 1998
--------------------------------
Samuel B. Kellett
/s/ Stiles A. Kellett, Jr. Director January 29, 1998
--------------------------------
Stiles A. Kellett, Jr.
/s/ John F. Robenalt Director January 29, 1998
--------------------------------
John F. Robenalt
</TABLE>
<PAGE> 10
EXHIBIT INDEX
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<CAPTION>
Exhibit No. Description of Exhibit
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<S> <C>
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1)
24.1 Power of Attorney (found on Page 8 of this Registration Statement)
99.1 Prism Health Group, Inc. 1992 Employee, Director and Consultant Stock Plan
99.2 Non-Qualified Option Agreement dated as of October 3, 1997 between Mariner and Steven
Garfinkle.
99.3 Non-Qualified Option Agreement dated as of October 3, 1997 between Mariner and Thomas
Dixon.
99.4 Non-Qualified Option Agreement dated as of October 3, 1997 between Mariner and
Russell Fichera.
</TABLE>
<PAGE> 1
Exhibit 5.1
January 20, 1998
Mariner Health Group, Inc.
125 Eugene O'Neill Drive
New London, CT 06320
Re: Mariner Health Group, Inc.
Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
We are acting as counsel for Mariner Health Group, Inc., a Delaware
corporation (the "Company"), in connection with the registration on a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933 for the offer and sale of up to 488,533 shares of Common
Stock, par value $.01 per share, of the Company (the "Shares") to be issued upon
exercise of options assumed by the Company under the Prism Health Group, Inc.
1992 Employee, Director and Consultant Stock Plan (as described in the
Registration Statement) or granted by the Company under certain other employee
benefit plans (as described in the Registration Statement) (collectively the
"Options").
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion. In rendering this opinion, as to
all matters of fact relevant to this opinion, we have assumed the completeness
and accuracy of, and are relying solely upon, the statements set forth in the
Certificate of the Secretary of the Company dated January 7, 1998, without
making any independent investigation or inquiry with respect to the
completeness or accuracy of such statements.
We are members only of the bar of the Commonwealth of Massachusetts and
are not experts in, and express no opinion regarding, the laws of any
jurisdiction other than the Commonwealth of Massachusetts and the United States
of America, and the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that the
Shares are duly authorized and, when issued and delivered pursuant to the terms
of the Options against receipt by the Company of the consideration therefor as
provided therein, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-8 of Mariner Health Group, Inc. of our reports dated February 7, 1997,
on our audits of the financial statements and financial statement schedule of
Mariner Health Group, Inc. and Subsidiaries.
/s/ Coopers & Lybrand L.L.P.
----------------------------
Boston, Massachusetts
January 23, 1998
<PAGE> 1
EXHIBIT 99.1
-1-
THE PRISM HEALTH GROUP, INC.
1992 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires,
the following terms, as used in this The Prism Health Group, Inc. 1992
Employee, Director and Consultant Stock Plan, have the following
meanings:
Administrator means the Board of Directors, unless it has
delegated power to act on its behalf to a committee. (See
Article 4)
Affiliate means a corporation which, for purposes of Section
424 of the Code, is a parent or subsidiary of the Company,
direct or indirect.
Board of Directors means the Board of Directors of the
Company.
Class A Common Stock means shares of the Company's Class A
Common Stock, $.01 par value.
Class B Common Stock means shares of the Company's Class B
Common Stock, $.01 par value.
Code means the United States Internal Revenue Code of 1986, as
amended.
Committee means the Committee to which the Board of Directors
has delegated power to act under or pursuant to the provisions
of the Plan.
Common Stock means shares of the Company's Class A Common
Stock or the Company's Class B Common Stock, as the case may
be.
Company means The Prism Health Group, Inc., a Massachusetts
corporation.
Disability or Disabled means permanent and total disability as
defined in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national securities
exchange or traded in the over-the-counter market and sales
prices are regularly reported for the Common Stock, the
average of-the closing or last prices of the Common Stock on
the Composite Tape or other comparable reporting system for
the ten (10) consecutive trading days immediately preceding
the applicable date;
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<PAGE> 2
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if
sales prices are not regularly reported for the Common Stock
for the ten (10) days referred to in clause (1), and if bid
and asked prices for the Common Stock are regularly reported,
the average of the mean between the bid and the asked price
for the Common Stock at the close of trading in the
over-the-counter market for the ten (10) days on which Common
Stock was traded immediately preceding the applicable date;
and
(3) If the Common Stock is neither listed on a national
securities exchange nor traded in the over-the-counter market,
such value as the Administrator, in good faith, shall
determine.
ISO means an option meant to qualify as an incentive stock
option under Code Section 422.
Key Employee means an employee of the Company or of an
Affiliate (including, without limitation, an employee who is
also serving as an officer or director of the Company or of an
Affiliate), designated by the Administrator to be eligible to
be granted one or more Stock Rights under the Plan.
Non-Qualified Option means an option which is not intended to
qualify as an ISO.
Option means an ISO or Non-Qualified Option granted under the
Plan.
Option Agreement means an agreement between the Company and a
Participant pertaining to an Option and executed and delivered
pursuant to the Plan.
Participant means a Key Employee, director or consultant to
whom one or more Stock Rights are granted under the Plan. As
used herein, "Participant" shall include "Participant's
Survivors" where the context requires.
Participant's Survivors means a deceased Participant's legal
representatives and/or any person or persons who acquired the
Participant's rights to a Stock Right by will or by the laws
of descent and distribution.
Plan means this The Prism Health Group, Inc. 1992 Employee,
Director and Consultant Stock Plan.
Purchase Opportunity means an opportunity to make a direct
purchase of Shares of the Company granted under the Plan.
Shares means shares of Class A Common Stock or Class B Common
Stock, as the case may be, as to which Options have been or
may be granted under the Plan or any shares of capital stock
into which such Shares are changed or for which they are
exchanged within the provisions of Paragraph 3 of the Plan.
The Shares
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<PAGE> 3
issued upon exercise of Stock Rights granted under the Plan
may be authorized and unissued shares or shares held by the
Company in its treasury, or both.
Stock Agreement means an agreement between the Company and a
Participant executed and delivered pursuant to the Plan.
Stock Right means a right to Shares of the Company granted
pursuant to the Plan -- an Option or a Purchase Opportunity.
2. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees,
directors and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the issuance of ISOs and
Non-Qualified Options and the granting of Purchase opportunities to Employees of
the Company.
3. SHARES SUBJECT TO THE PLAN.
The number of Shares of Class A Common Stock subject to this Plan as to
which Purchase Opportunities may be granted from time to time shall be One
Million Six Hundred and Thirty-Nine Thousand (1,639,000) or the equivalent of
such number of Shares after the Administrator, in its sole discretion, has
interpreted the effect of any stock split, stock dividend, combination,
recapitalization or similar transaction in accordance with Paragraph 16 of the
Plan.
The number of Shares of Class B Common Stock subject to this Plan as to
which Options may be granted from time to time shall be Three Hundred and Twenty
Thousand (320,000) or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Paragraph 16 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, the
Shares which were subject to such Option shall be available for the granting of
other Options under the Plan. Any Option shall be treated as "outstanding" until
such Option is exercised in full, or terminates or expires under the provisions
of the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
The Administrator of the Plan will be the Board of Directors, except to
the extent the Board of Directors delegates its authority to a Committee of the
Board of Directors. Following the date on which the Class A Common Stock is
registered under the Securities and Exchange Act of 1934, as amended (the "1934
Act"), the Plan is intended to comply in all respects with Rule 16b-3 or its
successors, promulgated pursuant to Section 16 of the 1934 Act with respect to
Participants who are subject to Section 16 of the 1934 Act, and any provision in
this Plan with
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<PAGE> 4
respect to such persons contrary to Rule 16b-3 shall be deemed null and void to
the extent permissible by law and deemed appropriate by the Administrator.
Subject to the provisions of the Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan, any Option, any Purchase
Opportunity or any Stock Agreement and to make all rules and
determinations which it deems necessary or advisable for the
administration of the Plan;
b. Determine which employees of the Company or of an Affiliate
shall be designated as Key Employees and which of the Key
Employees, directors and consultants shall be granted Options;
c. Determine the number of Shares for which a Stock Right or
Rights shall be granted; and
d. Specify the terms and conditions upon which a Stock Right or
Rights may be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Code Section 422 of those Options which are designated as ISOs.
Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Stock Rights granted under
it shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is other than the Board of Directors.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the Participants
in the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time a Stock
Right is granted. Notwithstanding any of the foregoing provisions, the
Administrator may authorize the grant of a Stock Right to a person not then an
employee, director or consultant of the Company or of an Affiliate. The actual
grant of such Stock Right, however, shall be conditioned upon such person
becoming eligible to become a Participant at or prior to the time of the
execution of the Stock Agreement evidencing such Stock Right. ISOs and Purchase
Opportunities may be granted only to Key Employees. Non-Qualified Options may be
granted to any Key Employee, director or consultant of the Company or an
Affiliate. The granting of any Stock Right to any individual shall neither
entitle that individual to, nor disqualify him or her from, participation in any
other grant of Stock Rights.
6. TERMS AND CONDITIONS OF STOCK RIGHTS.
Each Stock Right shall be set forth in writing in a Stock Agreement,
duly executed by the Company and by the Participant. The Administrator may
provide the Stock Rights granted subject to such conditions as the Administrator
may deem appropriate including, without limitation, subsequent approval by the
stockholders of the Company of this Plan or any
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<PAGE> 5
amendments thereto. The Stock Agreements shall be subject to at least the
following terms and conditions:
A. Non-Qualified Options: Each Option intended to be a
Non-Qualified Option shall be subject to the terms and
conditions which the Administrator determines to be
appropriate and in the best interest of the Company, subject
to the following minimum standards for any such Non-Qualified
Option:
a. Option Price: The Option price (per share) of the
Shares covered by each Option shall be determined by
the Administrator but shall not be less than the par
value per share-of Common Stock.
b. Each Option Agreement shall state the number of
Shares to which it pertains;
c. Each Option Agreement shall state the date or dates
on which it first is exercisable and the date after
which it may no longer be exercised, and may provide
that the Option rights accrue or become exercisable
in installments over a period of months or years, or
upon the attainment of stated goals; and
d. Exercise of any Option may be conditioned upon the
Participant's execution of a Share purchase agreement
in form satisfactory to the Administrator providing
for certain protections for the Company and its other
shareholders including requirements that:
i. The Participant's or the Participant's
Survivors' right to sell the Shares may be
restricted; and
ii. The Participant or the Participant's
Survivors may be required to execute letters
of investment intent and must also
acknowledge that the Shares will bear
legends noting any applicable restrictions.
B. ISOs: Each Option intended to be an ISO shall be issued only
to a Key Employee and be subject to at least the following
terms and conditions, with such additional restrictions or
changes as the Administrator determines are appropriate but
not in conflict with Code Section 422 and relevant regulations
and rulings of the Internal Revenue Service:
a. Minimum standards: The ISO shall meet the minimum
standards required of Participants who are granted
Non-Qualified Options, as described above, except
clause (a) thereunder.
b. Option Price: Immediately before the Option is
granted, if the Participant owns, directly or by
reason of the applicable attribution rules in Code
Section 424(d):
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<PAGE> 6
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price (per share) of
the Shares covered by each Option shall not
be less than one hundred percent (100%) of
the Fair Market Value (per share) of the
Shares on the date of the grant of the
Option.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price (per share) of
the Shares covered by each Option shall not
be less than one hundred ten percent (110%)
of the said Fair Market Value on the date of
grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, each Option shall terminate not
more than ten (10) years from the date of
the grant or at such earlier time as the
Option Agreement may provide;
ii. More than 10% of the total combined voting
power of all classes of share capital of the
company or an Affiliate, each Option shall
terminate not more than five (5) years from
the date of the grant or at such earlier
time as the Option Agreement may provide.
d. Medium of Payment: The Option price shall be payable
upon the exercise of the Option and only in such form
as the Administrator determines and as is permitted
by Section 422 of the Code.
e. Limitation on Yearly Exercise: The Option Agreements
shall restrict the amount of Options which may be
exercisable in any calendar year (under this or any
other ISO plan of the Company or an Affiliate) so
that the aggregate Fair Market Value (determined at
the time each ISO is granted) of the stock with
respect to which ISOs are exercisable for the first
time by the Participant in any calendar year does not
exceed one hundred thousand dollars ($100,000),
provided that this subparagraph (e) shall have no
force or effect if its inclusion in the Plan is not
necessary for Options issued as ISOs to qualify as
ISOs pursuant to Section 422(d) of the Code.
f. Limitation on Grant of ISOs: No ISOs shall be granted
after the date which is the earlier of ten (10) years
from the date of the adoption of the Plan by the
Company and the date of the approval of the Plan by
the shareholders of the Company.
C. Purchase Opportunities: Each Purchase Opportunity shall be
subject to such terms and conditions as the Administrator may
determine.
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<PAGE> 7
7. EXERCISE OF STOCK RIGHT AND ISSUE OF SHARES.
An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal office address, together
with the tender of the full purchase price for the Shares as to which such
Option is being exercised, and upon compliance with any other conditions) set
forth in the Option Agreement. Such written notice shall be signed by the person
exercising the Option, shall state the number of Shares with respect to which
the Option is being exercised and shall contain any representation required by
the Plan or the Option Agreement. Full payment of the purchase price for the
Shares as to which such Option is being exercised shall be made (a) in United
States dollars in cash or by check, or (b) at the discretion of the
Administrator, through delivery of Shares of Common Stock having a fair market
value equal as of the date of the exercise to the cash exercise price of the
Option, determined in good faith by the Administrator, or (c) at the discretion
of the Administrator in such other manners as constitutes valid consideration in
accordance with applicable law, or (d) at the discretion of the Administrator,
by any combination of (a), (b) and (c) above. Notwithstanding the foregoing, the
Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to
which such Option was exercised to the Participant (or to the Participant's
Survivors, as the case may be). In determining what constitutes "reasonably
promptly", it is expressly understood that the delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation which
requires the Company to take any action with respect to the Shares prior to
their issuance. The Shares shall, upon delivery, be evidenced by an appropriate
certificate or certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Administrator shall
not accelerate the exercise date of any installment of any Option granted to any
Key Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in paragraph
6(e).
A Purchase Opportunity shall be exercised in accordance with the terms
of the Stock Agreement pursuant to which it is granted.
8. RIGHTS AS A SHAREHOLDER.
No Participant to whom a Stock Right has been granted shall have rights
as a shareholder with respect to any Shares covered by such Stock Right, except
after due exercise of the Stock Right and tender of the full purchase price for
the Shares being purchased pursuant to such exercise and registration of the
Shares in the Company's share register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.
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<PAGE> 8
By its terms, A Stock Right granted to a Participant shall not be
transferable by the Participant other than by will or by the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime, only
by such Participant (or by his or her legal representative). Such Stock Right
shall not be assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted transfer, assignment, pledge, hypothecation or
other disposition of any Stock Right or of any rights granted thereunder
contrary to the provisions of this Plan, or the levy of any attachment or
similar process upon a Stock Right, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate (for any reason
other than termination "for cause", Disability, or death for
which events there are special rules in Paragraphs 11, 12, and
13, respectively), may exercise any Option granted to him or
her to the extent that the right to purchase Shares has
accrued on the date of such termination of service, but only
within such term as the Administrator has designated in the
pertinent Option Agreement.
b. In no event may an Option Agreement provide, if the Option is
intended to be an ISO, that the time for exercise be later
than three (3) months after the Participant's termination of
employment.
c. The provisions of this paragraph, and not the provisions of
Paragraph 12 or 13, shall apply to a Participant who
subsequently becomes disabled or dies after the termination of
employment, director status or consultancy, provided, however,
in the case of a Participant's death during the exercise
period otherwise permitted after the termination of
employment, director status or consulting, the Participant's
Survivors may exercise the Option within a period of up to one
(1) year after the date of the Participant's death, but in no
event after the date of expiration of the term of the Option.
d. Notwithstanding anything herein to the contrary, but only if
so provided in the Option Agreement, if subsequent to a
Participant's termination of employment, termination of
director status or termination of consultancy, but prior to
the exercise of an Option, the Board of Directors determines
that, either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which would
constitute "cause", then such Participant shall forthwith
cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the
Plan who is absent from work with the Company or with an
Affiliate because of temporary disability
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<PAGE> 9
(any disability other than a permanent and total Disability as
defined in Paragraph 1 hereof), or who is on leave of absence
for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have
terminated such Participant's employment, director status or
consultancy with the Company or with an Affiliate, except as
the Administrator may otherwise expressly provide.
f. Options granted under the Plan shall not be affected by any
change of employment or other service within or among the
Company and any Affiliates, so long as the Participant
continues to be an employee, director or consultant of the
Company or any Affiliate, provided, however, if a
Participant's employment by either the Company or an Affiliate
should cease (other than to become an employee of an Affiliate
or the Company), such termination shall affect the
Participant's rights under any Option granted to such
Participant in accordance with the terms of the Plan and the
pertinent Option Agreement.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
If and only if so provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all of his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the date the
Participant is notified his or her service is terminated "for
cause" will immediately be forfeited, unless the Option
Agreement provides otherwise.
b. For purposes of this Article, "cause" shall include (and is
not limited to) dishonesty with respect to the employer,
insubordination, substantial malfeasance or nonfeasance of
duty, unauthorized disclosure of confidential information, and
conduct substantially prejudicial to the business of the
Company or any Affiliate. The determination of the
Administrator as to the existence of cause will be conclusive
on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to
a Participant's termination of service, nor is it necessary
that the Administrator's finding of "cause" occur prior to
termination. If and only if so provided in the pertinent
Option Agreement, the Administrator determines, subsequent to
a Participant's termination of service but prior to the
exercise of an Option, that either prior or subsequent to the
Participant's termination the Participant engaged in conduct
which would constitute "cause", then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the
Company or an Affiliate, which contains a conflicting
definition of "cause" for termination and which is in effect
at the time of such termination, shall supersede the
definition in this Plan with respect to such Participant.
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<PAGE> 10
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent that the right to purchase Shares has accrued on
the date of his or her Disability; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights as would have accrued had the Participant
not become Disabled prior to the end of the accrual period
which next ends following the date of Disability. The
proration shall be based upon the number of days of such
accrual period prior to the date of Disability.
A Disabled Participant may exercise such rights only within a period of
not more than one (1) year after the date that the Participant became Disabled,
notwithstanding that the Participant might have been able to exercise the Option
as to some or all of the Shares on a later date if he or she had not become
disabled and had continued to be an employee, director or consultant or, if
earlier, within the originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant to whom an Option has been granted while the
Participant is an employee, director or consultant of the Company or of an
Affiliate, such Option may be exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of
death; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights which would have accrued had the Participant
not died prior to the end of the accrual period which next
ends following the date of death. The proration shall be based
upon the number of days of such accrual period prior to the
Participant's death.
If the Participant's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within one (1) year after the
date of death of such Participant, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of
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<PAGE> 11
the Shares on a later date if he or she had not died and had continued to be an
employee, director or consultant or, if earlier, within the originally
prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the
particular exercise of an Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the "1933
Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise such Option shall warrant to the
Company, at the time of such exercise or receipt, as the case
may be, that such person(s) are acquiring such Shares for
their own respective accounts, for investment, and not with a
view to, or for sale in connection with, the distribution of
any such Shares, in which event the person(s) acquiring such
Shares shall be bound by the provisions of the following
legend which shall be endorsed upon the certificates)
evidencing their Shares issued pursuant to such exercise or
such grant:
"The shares represented by this certificate have been
taken for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration
statement with respect to such shares shall be
effective under the Securities Act of 1933, as
amended, or (b) the Company shall have received an
opinion of counsel satisfactory to it that an
exemption from registration under such Act is then
available, and (2) there shall have been compliance
with all applicable state securities laws.
b. If the Company so requires, the Company shall have received an
opinion of its counsel that the Shares may be issued upon such
particular exercise in compliance with the 1933 Act without
registration thereunder.
The Company may delay issuance of the Shares until completion of any
action or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws).
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the right to purchase Shares has accrued under the Plan as of
the date immediately prior to such dissolution or liquidation.
16. ADJUSTMENTS.
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<PAGE> 12
Upon the occurrence of any of the following events, a Participant's
rights with respect to any Option granted to him or her hereunder which have not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the written agreement between the
Participant and the Company relating to such Option:
A. Stock Dividends and Stock Splits. If the Shares of Common Stock
shall be subdivided or combined into a greater or smaller number of Shares or if
the Company shall issue any Shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of Shares of Common Stock deliverable upon
the exercise of such Option shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated with
or acquired by another entity in a merger, sale of all or substantially all of
the Company's assets or otherwise (an "Acquisition"), the Administrator or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding Shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised, to the extent then exercisable, within a specified
number of days of the date of such notice, at the end of which period the
Options shall terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the Fair Market Value of the Shares subject to
such Options (to the extent then exercisable) over the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding Shares of
Common Stock, a Participant upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or she
would have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only
after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.
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<PAGE> 13
17. ISSUANCES OF SECURITIES.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to Options. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
No fractional share shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional share equal to the fair market value thereof determined in good faith
by the Board of Directors of the Company.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS: TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in
its discretion take such actions as may be necessary to convert such
Participant's ISOs (or any portions thereof) that have not been exercised on the
date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the Participant is an employee of
the Company or an Affiliate at the time of such conversion. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Administrator (with the consent of the Participant) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISO's converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such termination.
20. WITHHOLDING.
Upon the exercise of a Non-Qualified Option for less than the then Fair
Market Value or the making of a Disqualifying Disposition (as defined in
paragraph 21), the Company may withhold from the Participant's wages, if any, or
other remuneration, or may require the Participant to pay additional federal,
state, and local income tax withholding and employee contributions to employment
taxes in respect of the amount that is considered compensation includable in
such person's gross income. The Administrator in its discretion may condition
the exercise of an Option for less than the then Fair Market Value on the
Participant's payment of such additional income tax withholding and employee
contributions to employment taxes.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
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<PAGE> 14
Each Key Employee who receives an ISO must agree to notify the Company
in writing immediately after the Key Employee makes a Disqualifying Disposition
of any Shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such Shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
22. TERMINATION OF THE PLAN.
The Plan will terminate on the date which is ten (10) years from the
earlier of the date of its adoption and the date of its approval by the
stockholders of the Company. The Plan may be terminated at an earlier date by
vote of the stockholders of the Company; provided, however, that any such
earlier termination will not affect any Options granted or Option Agreements
executed prior to the effective date of such termination.
23. AMENDMENT OF THE PLAN.
The Plan may be amended by the stockholders of the Company. The Plan
may also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock Options under Section 422 of the Code, to the extent necessary
to ensure the qualification of the Plan under Rule 16b-3, and to the extent
necessary to qualify the Shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers. Any amendment approved by the Administrator which
is of a scope that requires stockholder approval in order to ensure favorable
federal income tax treatment for any incentive stock Options or requires
stockholder approval in order to ensure the compliance of the Plan with Rule
16b-3 shall be subject to obtaining such stockholder approval. Any modification
or amendment of the Plan shall not, without the consent of a Participant, affect
his or her rights under an Option previously granted to him or her. With the
consent of the Participant affected, the Administrator may amend outstanding
Option Agreements in a manner not inconsistent with the Plan.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement shall be deemed to prevent
the Company or an Affiliate from terminating the employment, consultancy or
director status of a Participant, nor to prevent a Participant from terminating
his or her own employment, consultancy or director status or to give any
Participant a right to be retained in employment or other service by the Company
or any Affiliate for any period of time.
25. GOVERNING LAW.
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<PAGE> 15
This Plan shall be construed and enforced in accordance with the law of
the Commonwealth of Massachusetts.
<PAGE> 1
EXHIBIT 99.2
MARINER HEALTH GROUP, INC.
Non-Qualified Stock Option Agreement
This Non-Qualified Stock Option Agreement dated as of October 3, 1997
(the "Agreement") by and between Mariner Health Group, Inc., a Delaware
corporation (the "Company") with a principal place of business in New London,
Connecticut, and Steven W. Garfinkle (the "Optionee"):
WITNESSETH:
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors (the "Board") has authorized the grant of stock options upon certain
terms and conditions set forth below;
WHEREAS, the grant of stock options pursuant to this Agreement, is
contemplated by Section 4(g) of the Optionee's Employment Agreement dated as of
September 12, 1997 (the "Employment Agreement") by and among the Company, Prism
Health Group, Inc. and the Optionee (capitalized terms used in this Agreement,
unless otherwise defined in this Agreement, shall have the respective meaning
ascribed to them in the Employment Agreement).
NOW, THEREFORE, in consideration of these premises and the mutual
covenants and agreements herein contained, the Company and the parties hereto
agree as follows:
1. Grant. The Company does hereby grant to the Optionee an option (the
"Option") to purchase from the Company 100,000 shares of its Common Stock
("Stock") upon the terms and conditions set forth herein.
2. Option Exercise Prices. This Option may be exercised at the option
price of $16.25 per share of Stock, subject to adjustment as provided herein.
3. Term and Exercisability of Option. This Option shall become
exercisable on the fifth (5th) anniversary of the date of this Agreement, unless
the following conditions are satisfied (in which case the specified portion of
this Option shall become exercisable on the date specified for the specified
portion of this Option):
(a) (i) the Company's EPS for the year ending December 31,
1998 is at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time) and (ii) the Optionee and/or
the Company meet such other objectives for such fiscal year as are
agreed to by the Optionee and the CEO, in which case 20,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly.
(b) (i) the Company's EPS for the year ending December 31,
1999 is at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time) and (ii) the Optionee and/or
the Company meet such other objectives for such fiscal year as are
agreed to by the Optionee and the CEO, in which case 20,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly.
(c) (i) the Company's EPS for the year ending December 31,
2000 is at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and
<PAGE> 2
Garfinkle Non-Qualified Stock Option Agreement--Page 2
revised from time to time) and (ii) the Optionee and/or the Company
meet such other objectives for such fiscal year as are agreed to by the
Optionee and the CEO, in which case 20,000 shares of Stock subject to
the Option shall become exercisable at the time the Company's earnings
for such year are announced publicly.
(d) (i) the Company's EPS for the year ending December 31,
2001 is at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time) and (ii) the Optionee and/or
the Company meet such other objectives for such fiscal year as are
agreed to by the Optionee and the CEO, in which case 20,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly.
(e) (i) the Company's EPS for the year ending December 31,
2002 is at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time) and (ii) the Optionee and/or
the Company meet such other objectives for such fiscal year as are
agreed to by the Optionee and the CEO, in which case 20,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly.
Not later than thirty (30) days after the beginning of each fiscal year
during the period beginning January 1, 1998 and ending December 31, 2002, the
Company shall provide the Executive with the aforementioned EPS target of the
Company with respect to such fiscal year.
If either (x) the Company terminates the Executive's employment at any
time during a period commencing with a Change in Control (as defined in the
Employment Agreement) and ending one year from such Change in Control pursuant
to the provisions of Section 5(b) (without Cause) of the Employment Agreement,
or (y) the Executive terminates his employment at any time during a period
commencing with a Change in Control and ending one year from such Change in
Control pursuant to the provisions of Section 5(c) of the Employment Agreement
because of a Material Breach or Section 5(d) (for Good Reason) of the Employment
Agreement, all outstanding shares of Stock subject to this Option at the time of
such termination which have not yet vested at the time of such termination shall
immediately be fully vested and shall immediately become exercisable in full.
Such right to exercise the Option is subject to Sections 5 and 6 hereof, as
appropriate, if the Optionee ceases to be employed by the Company and any
present or future parent or subsidiary of the Company ("Related Corporations").
4. Method of Exercise. To the extent that the right to purchase shares
of Stock has accrued hereunder, this Option may be exercised from time to time
by written notice to the Company in the form attached hereto, stating the number
of shares with respect to which this Option is being exercised, accompanied by
payment in full of the option price for the number of shares to be delivered. As
soon as practicable after its receipt of such notice, the Company shall, without
transfer or issue tax to the Optionee (or other person entitled to exercise
these options), deliver to the Optionee (or other person entitled to exercise
this Option), at the principal executive offices of the Company or such other
place as shall be mutually acceptable, a certificate or certificates for such
shares out of theretofore authorized but unissued shares or reacquired shares of
its Stock as the Company may elect; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any applicable requirements of law.
The option price shall be paid, at the election of the Optionee, (i) in cash or
by check; (ii) by delivery of shares of the Stock having a fair market value (as
determined by the Committee) equal as of the date of exercise to the option
price; (iii) by delivery of an assignment satisfactory in form and substance to
the Company of a sufficient
<PAGE> 3
Garfinkle Non-Qualified Stock Option Agreement--Page 3
amount of the proceeds from the sale of the Stock and an instruction to the
broker or selling agent to pay that amount to the Company; or (iv) by any
combination of the foregoing. If the Optionee (or other person entitled to
exercise this Option) fails to pay for and accept delivery of all of the shares
specified in such notice upon tender of delivery thereof, his right to exercise
this Option with respect to such shares not paid for may be terminated by the
Company.
5. Termination of Employment. Unless otherwise provided herein, if the
Optionee ceases to be employed by the Company and all Related Corporations for
any reason (including death or disability or termination for Cause as defined in
Section 5(a) of the Employment Agreement), no further installments of this
Option shall become exercisable after the date of termination of his employment
by the Company, and this Option shall terminate no later than the earlier of (a)
one year after the date of termination of his employment and (b) the Option's
specified expiration date. In such a case, the Optionee's only rights hereunder
shall be those which are properly exercised by the Optionee or the Optionee's
legal representative before the termination of this option.
6. Effect of Termination. At the expiration of the period provided in
Section 5 or the scheduled expiration date, whichever is the earlier, this
Option shall terminate and the only rights hereunder shall be those as to which
this Option were properly exercised before such termination.
7. Non-assignability. This Option shall not be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the life of the Optionee, this Option shall be exercisable
only by the Optionee.
8. Compliance with Securities Act. The Company shall not be obligated
to sell or issue any shares of Stock or other securities pursuant to the
exercise of this Option unless the shares of Stock or other securities with
respect to which this Option are being exercised are at that time effectively
registered or exempt from registration under the Securities Act of 1933, and
applicable state securities laws. In the event shares of Stock or other
securities shall be issued which shall not be so registered, the Optionee hereby
represents, warrants and agrees that he will receive such shares or other
securities for investment and not with a view to their resale or distribution,
and will execute an appropriate investment letter satisfactory to the Company
and its counsel.
9. Legends. The Optionee hereby acknowledges that, if required by law,
the stock certificate representing the Stock will bear a legend setting forth
certain restrictions on its transferability.
10. No Rights as Stockholder until Exercise. The Optionee shall have no
rights as a stockholder with respect to this Option until such time as the
Optionee has exercised this Option by delivering a notice of exercise and has
paid in full the purchase price for the shares so exercised in accordance with
Section 4. Except as is expressly provided herein with respect to certain
changes in the capitalization of the Company, no adjustment shall be made for
dividends or similar rights for which the record date is prior to such date of
exercise.
11. Equitable Adjustment. In the event of any stock dividend,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, then the Company shall make such
equitable changes or adjustments as are necessary or appropriate to (a) the
number and kind of shares of Stock issued or issuable in respect of outstanding
Options or (b) the exercise price.
12. Effect Upon Employment. Nothing in this Option shall be construed
to impose any obligation upon the Company to retain the Optionee in its employ.
<PAGE> 4
Garfinkle Non-Qualified Stock Option Agreement--Page 4
13. Time for Acceptance. Unless the Optionee shall evidence his
acceptance of this Option by execution of this Agreement within ten (10) days of
the Effective Time, this Option and this Agreement shall be null and void.
14. Withholding Taxes. If the Company or any Related Corporation in its
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this Option, or in connection with the transfer of, or the
lapse of restrictions on, any Stock or other property acquired pursuant to this
Option, the Optionee hereby agrees that the Company or any Related Corporation
may withhold from the Optionee's wages or other remuneration the appropriate
amount of tax. At the discretion of the Company or Related Corporation, the
amount required to be withheld may be withheld in cash from such wages or other
remuneration or in kind from the Stock or other property otherwise deliverable
to the Optionee on exercise of this Option. The Optionee further agrees that, if
the Company or any Related Corporation does not withhold an amount from the
Optionee's wages or other remuneration sufficient to satisfy the withholding
obligation of the Company or Related Corporation, the Optionee will make
reimbursement on demand, in cash, for the amount withheld.
15. Provision of Documentation to Optionee. By signing this Agreement
the Optionee acknowledges receipt of a copy of this Agreement.
16. General Provisions.
(a) Amendment; Waivers. This Agreement contains the full and complete
understanding and agreement of the parties hereto as to the subject matter
hereof and may not be modified or amended, nor may any provision hereof be
waived, except by a further written agreement duly signed by each of the
parties. The waiver by either of the parties hereto of any provision hereof in
any instance shall not operate as a waiver of any other provision hereof or in
any other instance.
(b) Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of laws thereof.
(d) Construction. The titles of the sections of this Agreement are
included for convenience only and shall not be construed as modifying or
affecting their provisions; the masculine gender shall include both sexes; the
singular shall include the plural and the plural the singular unless the context
otherwise requires. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Employment Agreement.
(e) Notices. Any notice in connection with this Agreement shall be
deemed to have been properly delivered if it is in writing and is delivered in
hand or sent by mail to the party addressed as follows, unless another address
has been substituted by notice so given:
To the Optionee: To his address as set forth in the Employment Agreement.
To the Company: Mariner Health Group, Inc.
125 Eugene O'Neill Drive
New London, CT 06320
[Remainder of Page Intentionally Left Blank]
<PAGE> 5
Garfinkle Non-Qualified Stock Option Agreement--Page 5
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officer thereunto duly authorized, and its corporate seal to be
affixed as of the date set forth below.
MARINER HEALTH GROUP, INC.
By: /s/ Jennifer B. Gallagher
-------------------------
Title: Vice President
<PAGE> 6
Garfinkle Non-Qualified Stock Option Agreement--Page 6
ACCEPTANCE
I hereby accept the foregoing Options in accordance with its terms and
conditions set forth in this Agreement.
October 3, 1997 /s/ Steven W. Garfinkle
- --------------- -----------------------
Date Signature of Optionee
Steven W. Garfinkle
<PAGE> 1
EXHIBIT 99.3
MARINER HEALTH GROUP, INC.
Non-Qualified Stock Option Agreement
This Non-Qualified Stock Option Agreement dated as of October 3, 1997
(the "Agreement") by and between Mariner Health Group, Inc., a Delaware
corporation (the "Company") with a principal place of business in New London,
Connecticut, and Thomas P. Dixon (the "Optionee"):
WITNESSETH:
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors (the "Board") has authorized the grant of stock options upon certain
terms and conditions set forth below; and
WHEREAS, the grant of stock options pursuant to this Agreement, is
contemplated by Section 4(g) of the Optionee's Employment Agreement dated as of
September 12, 1997 (the "Employment Agreement") by and among the Company, Prism
Rehabilitation Systems, Inc. and the Optionee (capitalized terms used in this
Agreement, unless otherwise defined in this Agreement, shall have the respective
meaning ascribed to them in the Employment Agreement).
NOW, THEREFORE, in consideration of these premises and the mutual
covenants and agreements herein contained, the Company and the parties hereto
agree as follows:
1. Grant. The Company does hereby grant to the Optionee an option (the
"Option") to purchase from the Company 150,000 shares of its Common Stock
("Stock") upon the terms and conditions set forth herein.
2. Option Exercise Prices. This Option may be exercised at the option
price of $16.25 per share of Stock, subject to adjustment as provided herein.
3. Term and Exercisability of Option. This Option shall expire on the
day prior to the tenth (10th) anniversary of the date of this Agreement. This
Option shall become exercisable on the third (3rd) anniversary of the date of
this Agreement, unless the following conditions are satisfied (in which case the
specified portion of this Option shall become exercisable on the date specified
for the specified portion of this Option):
(a) Contract Therapy EBIT (as defined in Exhibit A to the
Employment Agreement to which this Option Agreement is also an Exhibit
("Exhibit A")) with respect to the quarterly period ending December 31,
1997 equals or exceeds the Contract Therapy EBIT Target for such period
as set forth in Exhibit A, in which case 25,000 shares of Stock subject
to the Option shall become exercisable at the time the Company's
earnings for such quarters are announced publicly;
(b) Contract Therapy EBIT with respect to the fiscal year
ending December 31, 1998 equals or exceeds the Contract Therapy EBIT
Target for such period as set forth in Exhibit A, in which case 50,000
shares of Stock subject to the Option shall become exercisable at the
time the Company's earnings for such year is announced publicly;
(c) the Company's EPS for the year ending December 31, 1999 is
at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised
<PAGE> 2
Dixon Non-Qualified Stock Option Agreement -- Page 2
from time to time), in which case 25,000 shares of Stock subject to the
Option shall become exercisable at the time the Company's earnings for
such year are announced publicly;
(d) the Company's EPS for the year ending December 31, 2000 is
at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time), in which case 25,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly; and
(e) the Company's EPS for the year ending December 31, 2001 is
at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time), in which case 25,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly.
If either (x) the Company terminates the Executive's employment at any time
during a period commencing with a Change in Control (as defined in the
Employment Agreement) and ending one year from such Change in Control pursuant
to the provisions of Section 5(b) (without Cause) of the Employment Agreement,
or (y) the Executive terminates his employment at any time during a period
commencing with a Change in Control and ending one year from such Change in
Control pursuant to the provisions of Section 5(c) of the Employment Agreement
because of a Material Breach or Section 5(d) (for Good Reason) of the Employment
Agreement, all outstanding shares of Stock subject to this Option at the time of
such termination which have not yet vested at the time of such termination shall
immediately be fully vested and shall immediately become exercisable in full.
Such right to exercise the Option is subject to Sections 5 and 6 hereof, as
appropriate, if the Optionee ceases to be employed by the Company and any
present or future parent or subsidiary of the Company ("Related Corporation").
4. Method of Exercise. To the extent that the right to purchase shares
of Stock has accrued hereunder, this Option may be exercised from time to time
by written notice to the Company in the form attached hereto, stating the number
of shares with respect to which this Option is being exercised, accompanied by
payment in full of the option price for the number of shares to be delivered. As
soon as practicable after its receipt of such notice, the Company shall, without
transfer or issue tax to the Optionee (or other person entitled to exercise
these options), deliver to the Optionee (or other person entitled to exercise
this Option), at the principal executive offices of the Company or such other
place as shall be mutually acceptable, a certificate or certificates for such
shares out of theretofore authorized but unissued shares or reacquired shares of
its Stock as the Company may elect; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any applicable requirements of law.
The option price shall be paid, at the election of the Optionee, (i) in cash or
by check; (ii) by delivery of shares of the Stock having a fair market value (as
determined by the Committee) equal as of the date of exercise to the option
price; (iii) by delivery of an assignment satisfactory in form and substance to
the Company of a sufficient amount of the proceeds from the sale of the Stock
and an instruction to the broker or selling agent to pay that amount to the
Company; or (iv) by any combination of the foregoing. If the Optionee (or other
person entitled to exercise this Option) fails to pay for and accept delivery of
all of the shares specified in such notice upon tender of delivery thereof, his
right to exercise this Option with respect to such shares not paid for may be
terminated by the Company.
5. Termination of Employment. If the Optionee ceases to be employed by
the Company and all Related Corporations for any reason (including death or
disability or termination for Cause as defined in Section 5(a) of the Employment
Agreement), no further installments of this Option shall
<PAGE> 3
Dixon Non-Qualified Stock Option Agreement -- Page 3
become exercisable after the date of termination of his employment by the
Company, and this Option shall terminate no later than the earlier of (a) one
year after the date of termination of his employment and (b) the Option's
specified expiration date. In such a case, the Optionee's only rights hereunder
shall be those which are properly exercised by the Optionee or the Optionee's
legal representative before the termination of this Option.
6. Effect of Termination. At the expiration of the period provided in
Section 5 or the scheduled expiration date, whichever is the earlier, this
Option shall terminate and the only rights hereunder shall be those as to which
this Option were properly exercised before such termination.
7. Non-assignability. This Option shall not be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the life of the Optionee, this Option shall be exercisable
only by the Optionee.
8. Compliance with Securities Act. The Company shall not be obligated
to sell or issue any shares of Stock or other securities pursuant to the
exercise of this Option unless the shares of Stock or other securities with
respect to which this Option are being exercised are at that time effectively
registered or exempt from registration under the Securities Act of 1933, and
applicable state securities laws. In the event shares of Stock or other
securities shall be issued which shall not be so registered, the Optionee hereby
represents, warrants and agrees that he will receive such shares or other
securities for investment and not with a view to their resale or distribution,
and will execute an appropriate investment letter satisfactory to the Company
and its counsel.
9. Legends. The Optionee hereby acknowledges that, if required by law,
the stock certificate representing the Stock will bear a legend setting forth
certain restrictions on its transferability.
10. No Rights as Stockholder until Exercise. The Optionee shall have no
rights as a stockholder with respect to this Option until such time as the
Optionee has exercised this Option by delivering a notice of exercise and has
paid in full the purchase price for the shares so exercised in accordance with
Section 4.
11. Equitable Adjustment. In the event of any stock dividend,
recapitalization, Stock split, reverse Stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporation transaction or event, then the Company shall make such
equitable changes or adjustments as are necessary or appropriate to (a) the
number and kind of shares of Stock issued or issuable in respect of outstanding
Options or (b) the exercise price.
12. Effect Upon Employment. Nothing in this Option shall be construed
to impose any obligation upon the Company to retain the Optionee in its employ.
13. Time for Acceptance. Unless the Optionee shall evidence his
acceptance of this Option by execution of this Agreement within ten (10) days of
the Effective Time this Option and this Agreement shall be null and void.
14. Withholding Taxes. If the Company or any Related Corporation in its
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this Option, or in connection with the transfer of, or the
lapse of restrictions on, any Stock or other property acquired pursuant to this
Option, the Optionee hereby agrees that the Company or any Related Corporation
may withhold from the Optionee's wages or other remuneration the appropriate
amount of tax. At the discretion of the Company or Related Corporation, the
amount required to be withheld may be withheld in cash from such wages or other
remuneration or in kind from the Stock or other property otherwise deliverable
to the Optionee on exercise of this Option. The Optionee further agrees that, if
the Company or any Related Corporation does not withhold an amount from the
Optionee's wages or other remuneration sufficient to
<PAGE> 4
Dixon Non-Qualified Stock Option Agreement -- Page 4
satisfy the withholding obligation of the Company or Related Corporation, the
Optionee will make reimbursement on demand, in cash, for the amount withheld.
15. Provision of Documentation to Optionee. By signing this Agreement
the Optionee acknowledges receipt of a copy of this Agreement.
16. General Provisions.
(a) Amendment; Waivers. This Agreement contains the full and complete
understanding and agreement of the parties hereto as to the subject matter
hereof and may not be modified or amended, nor may any provision hereof be
waived, except by a further written agreement duly signed by each of the
parties. The waiver by either of the parties hereto of any provision hereof in
any instance shall not operate as a waiver of any other provision hereof or in
any other instance.
(b) Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of laws thereof.
(d) Construction. The titles of the sections of this Agreement are
included for convenience only and shall not be construed as modifying or
affecting their provisions; the masculine gender shall include both sexes; the
singular shall include the plural and the plural the singular unless the context
otherwise requires. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Employment Agreement.
(e) Notices. Any notice in connection with this Agreement shall be
deemed to have been properly delivered if it is in writing and is delivered in
hand or sent by mail to the party addressed as follows, unless another address
has been substituted by notice so given:
To the Optionee: To his address as set forth in the Employment Agreement.
To the Company: Mariner Health Group, Inc.
125 Eugene O'Neill Drive
New London, CT 06320
[Remainder of Page Intentionally Left Blank]
<PAGE> 5
Dixon Non-Qualified Stock Option Agreement -- Page 5
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officer thereunto duly authorized, and its corporate seal to be
affixed as of the date set forth below.
MARINER HEALTH GROUP, INC.
By: /s/ Jennifer B. Gallagher
------------------------------
Title: Vice President
<PAGE> 6
Dixon Non-Qualified Stock Option Agreement -- Page 6
ACCEPTANCE
I hereby accept the foregoing Options in accordance with its terms and
conditions.
October 3, 1997 /s/ Thomas P. Dixon
- ------------------------------ --------------------------------
Date Signature of Optionee
Thomas P. Dixon
<PAGE> 1
EXHIBIT 99.4
MARINER HEALTH GROUP, INC.
Non-Qualified Stock Option Agreement
This Non-Qualified Stock Option Agreement dated as of October 3, 1997
(the "Agreement") by and between Mariner Health Group, Inc., a Delaware
corporation (the "Company") with a principal place of business in New London,
Connecticut, and Russell J. Fichera (the "Optionee"):
WITNESSETH:
WHEREAS, the Compensation Committee (the "Committee") of the Board of
Directors (the "Board") has authorized the grant of stock options upon certain
terms and conditions set forth below; and
WHEREAS, the grant of stock options pursuant to this Agreement, is
contemplated by Section 4(g) of the Optionee's Employment Agreement dated as of
September 12, 1997 (the "Employment Agreement") by and among the Company, Prism
Rehabilitation Systems, Inc. and the Optionee (capitalized terms used in this
Agreement, unless otherwise defined in this Agreement, shall have the respective
meaning ascribed to them in the Employment Agreement).
NOW, THEREFORE, in consideration of these premises and the mutual
covenants and agreements herein contained, the Company and the parties hereto
agree as follows:
1. Grant. The Company does hereby grant to the Optionee an option (the
"Option") to purchase from the Company 150,000 shares of its Common Stock
("Stock") upon the terms and conditions set forth herein.
2. Option Exercise Prices. This Option may be exercised at the option
price of $16.25 per share of Stock, subject to adjustment as provided herein.
3. Term and Exercisability of Option. This Option shall expire on the
day prior to the tenth (10th) anniversary of the date of this Agreement. This
Option shall become exercisable on the third (3rd) anniversary of the date of
this Agreement, unless the following conditions are satisfied (in which case the
specified portion of this Option shall become exercisable on the date specified
for the specified portion of this Option):
(a) Contract Therapy EBIT (as defined in Exhibit A to the
Employment Agreement to which this Option Agreement is also an Exhibit
("Exhibit A")) with respect to the quarterly period ending December 31,
1997 equals or exceeds the Contract Therapy EBIT Target for such period
as set forth in Exhibit A, in which case 25,000 shares of Stock subject
to the Option shall become exercisable at the time the Company's
earnings for such quarters are announced publicly;
(b) Contract Therapy EBIT with respect to the fiscal year
ending December 31, 1998 equals or exceeds the Contract Therapy EBIT
Target for such period as set forth in Exhibit A, in which case 50,000
shares of Stock subject to the Option shall become exercisable at the
time the Company's earnings for such year is announced publicly;
(c) the Company's EPS for the year ending December 31, 1999 is
at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised
<PAGE> 2
Fichera Non-Qualified Stock Option Agreement -- Page 2
from time to time), in which case 25,000 shares of Stock subject to the
Option shall become exercisable at the time the Company's earnings for
such year are announced publicly;
(d) the Company's EPS for the year ending December 31, 2000 is
at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time), in which case 25,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly; and
(e) the Company's EPS for the year ending December 31, 2001 is
at least equal to such per share amount set forth either in the
Company's budget for such period as set by the Board and/or in
consensus analysts expectations for such period (in each case as
reviewed and revised from time to time), in which case 25,000 shares of
Stock subject to the Option shall become exercisable at the time the
Company's earnings for such year are announced publicly.
If either (x) the Company terminates the Executive's employment at any time
during a period commencing with a Change in Control (as defined in the
Employment Agreement) and ending one year from such Change in Control pursuant
to the provisions of Section 5(b) (without Cause) of the Employment Agreement,
or (y) the Executive terminates his employment at any time during a period
commencing with a Change in Control and ending one year from such Change in
Control pursuant to the provisions of Section 5(c) of the Employment Agreement
because of a Material Breach or Section 5(d) (for Good Reason) of the Employment
Agreement, all outstanding shares of Stock subject to this Option at the time of
such termination which have not yet vested at the time of such termination shall
immediately be fully vested and shall immediately become exercisable in full.
Such right to exercise the Option is subject to Sections 5 and 6 hereof, as
appropriate, if the Optionee ceases to be employed by the Company and any
present or future parent or subsidiary of the Company ("Related Corporation").
4. Method of Exercise. To the extent that the right to purchase shares
of Stock has accrued hereunder, this Option may be exercised from time to time
by written notice to the Company in the form attached hereto, stating the number
of shares with respect to which this Option is being exercised, accompanied by
payment in full of the option price for the number of shares to be delivered. As
soon as practicable after its receipt of such notice, the Company shall, without
transfer or issue tax to the Optionee (or other person entitled to exercise
these options), deliver to the Optionee (or other person entitled to exercise
this Option), at the principal executive offices of the Company or such other
place as shall be mutually acceptable, a certificate or certificates for such
shares out of theretofore authorized but unissued shares or reacquired shares of
its Stock as the Company may elect; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any applicable requirements of law.
The option price shall be paid, at the election of the Optionee, (i) in cash or
by check; (ii) by delivery of shares of the Stock having a fair market value (as
determined by the Committee) equal as of the date of exercise to the option
price; (iii) by delivery of an assignment satisfactory in form and substance to
the Company of a sufficient amount of the proceeds from the sale of the Stock
and an instruction to the broker or selling agent to pay that amount to the
Company; or (iv) by any combination of the foregoing. If the Optionee (or other
person entitled to exercise this Option) fails to pay for and accept delivery of
all of the shares specified in such notice upon tender of delivery thereof, his
right to exercise this Option with respect to such shares not paid for may be
terminated by the Company.
5. Termination of Employment. If the Optionee ceases to be employed by
the Company and all Related Corporations for any reason (including death or
disability or termination for Cause as defined in Section 5(a) of the Employment
Agreement), no further installments of this Option shall become exercisable
after the date of termination of his employment by the Company, and this Option
shall
<PAGE> 3
Fichera Non-Qualified Stock Option Agreement -- Page 3
terminate no later than the earlier of (a) one year after the date of
termination of his employment and (b) the Option's specified expiration date. In
such a case, the Optionee's only rights hereunder shall be those which are
properly exercised by the Optionee or the Optionee's legal representative before
the termination of this Option.
6. Effect of Termination. At the expiration of the period provided in
Section 5 or the scheduled expiration date, whichever is the earlier, this
Option shall terminate and the only rights hereunder shall be those as to which
this Option were properly exercised before such termination.
7. Non-assignability. This Option shall not be assignable or
transferable by the Optionee except by will or by the laws of descent and
distribution. During the life of the Optionee, this Option shall be exercisable
only by the Optionee.
8. Compliance with Securities Act. The Company shall not be obligated
to sell or issue any shares of Stock or other securities pursuant to the
exercise of this Option unless the shares of Stock or other securities with
respect to which this Option are being exercised are at that time effectively
registered or exempt from registration under the Securities Act of 1933, and
applicable state securities laws. In the event shares of Stock or other
securities shall be issued which shall not be so registered, the Optionee hereby
represents, warrants and agrees that he will receive such shares or other
securities for investment and not with a view to their resale or distribution,
and will execute an appropriate investment letter satisfactory to the Company
and its counsel.
9. Legends. The Optionee hereby acknowledges that, if required by law,
the stock certificate representing the Stock will bear a legend setting forth
certain restrictions on its transferability.
10. No Rights as Stockholder until Exercise. The Optionee shall have no
rights as a stockholder with respect to this Option until such time as the
Optionee has exercised this Option by delivering a notice of exercise and has
paid in full the purchase price for the shares so exercised in accordance with
Section 4.
11. Equitable Adjustment. In the event of any stock dividend,
recapitalization, Stock split, reverse Stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporation transaction or event, then the Company shall make such
equitable changes or adjustments as are necessary or appropriate to (a) the
number and kind of shares of Stock issued or issuable in respect of outstanding
Options or (b) the exercise price.
12. Effect Upon Employment. Nothing in this Option shall be construed
to impose any obligation upon the Company to retain the Optionee in its employ.
13. Time for Acceptance. Unless the Optionee shall evidence his
acceptance of this Option by execution of this Agreement within ten (10) days of
the Effective Time this Option and this Agreement shall be null and void.
14. Withholding Taxes. If the Company or any Related Corporation in its
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this Option, or in connection with the transfer of, or the
lapse of restrictions on, any Stock or other property acquired pursuant to this
Option, the Optionee hereby agrees that the Company or any Related Corporation
may withhold from the Optionee's wages or other remuneration the appropriate
amount of tax. At the discretion of the Company or Related Corporation, the
amount required to be withheld may be withheld in cash from such wages or other
remuneration or in kind from the Stock or other property otherwise deliverable
to the Optionee on exercise of this Option. The Optionee further agrees that, if
the Company or any Related Corporation does not withhold an amount from the
Optionee's wages or other remuneration sufficient to
<PAGE> 4
Fichera Non-Qualified Stock Option Agreement -- Page 4
satisfy the withholding obligation of the Company or Related Corporation, the
Optionee will make reimbursement on demand, in cash, for the amount withheld.
15. Provision of Documentation to Optionee. By signing this Agreement
the Optionee acknowledges receipt of a copy of this Agreement.
16. General Provisions.
(a) Amendment; Waivers. This Agreement contains the full and complete
understanding and agreement of the parties hereto as to the subject matter
hereof and may not be modified or amended, nor may any provision hereof be
waived, except by a further written agreement duly signed by each of the
parties. The waiver by either of the parties hereto of any provision hereof in
any instance shall not operate as a waiver of any other provision hereof or in
any other instance.
(b) Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of laws thereof.
(d) Construction. The titles of the sections of this Agreement are
included for convenience only and shall not be construed as modifying or
affecting their provisions; the masculine gender shall include both sexes; the
singular shall include the plural and the plural the singular unless the context
otherwise requires. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Employment Agreement.
(e) Notices. Any notice in connection with this Agreement shall be
deemed to have been properly delivered if it is in writing and is delivered in
hand or sent by mail to the party addressed as follows, unless another address
has been substituted by notice so given:
To the Optionee: To his address as set forth in the Employment Agreement.
To the Company: Mariner Health Group, Inc.
125 Eugene O'Neill Drive
New London, CT 06320
[Remainder of Page Intentionally Left Blank]
<PAGE> 5
Fichera Non-Qualified Stock Option Agreement -- Page 5
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officer thereunto duly authorized, and its corporate seal to be
affixed as of the date set forth below.
MARINER HEALTH GROUP, INC.
By: /s/ Jennifer B. Gallagher
--------------------------------
Title: Vice President
<PAGE> 6
Fichera Non-Qualified Stock Option Agreement -- Page 6
ACCEPTANCE
I hereby accept the foregoing Options in accordance with its terms and
conditions.
October 3, 1997 /s/ Russell J. Fichera
- ------------------------------ --------------------------------
Date Signature of Optionee
Russell J. Fichera
