EX-4.4 3 g78683exv4w4.txt 1997 INCENTIVE & NONQUALIFIED STOCK OPTION PLAN Exhibit 4.4 PSYCHIATRIC SOLUTIONS, INC. 1997 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN FOR KEY PERSONNEL 1. The Purpose of the Plan. This Plan is intended to provide an opportunity for Key Persons performing services to the Corporation and its Subsidiaries to acquire shares of the Corporation's Common Stock, providing an equity interest in the Corporation and additional compensation based on appreciation of the value of such stock. The Plan provides for the grant of stock options intended to constitute (a) incentive stock options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and (b) nonqualified stock options, as an incentive to service or continued service to the Corporation in order to aid the Corporation in obtaining and retaining key personnel of outstanding ability and/or in substitution for stock options of entities which may be acquired by the Corporation. 2. Definitions. For purposes of this Plan, the following terms will be defined as indicated: (a) "Board" means the Board of Directors of the Corporation. (b) "Cause" means habitual drug use or drunkenness, embezzlement of Corporation funds, conduct which is injurious to the Corporation, or conviction of a felony, all as determined in good faith by the Board or Committee. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" has the meaning prescribed in paragraph 4. (e) "Common Stock" means the common stock of the Corporation, $.01 par value. (f) "Corporation" means Psychiatric Solutions, Inc., a Delaware corporation. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" means the closing price of the Common Stock, as reported by the New York Stock Exchange or by any other national securities market upon which the Common Stock is traded, including Nasdaq. In the event the Common Stock is not listed on an exchange or traded in the over-the-counter market, then the Board or Committee will determine Fair Market Value, which determination will be made in good faith and will be binding. (i) "ISO" means an incentive stock Option as defined in Section 422 of the Code. (j) "Key Person" means a consultant, advisor, director or full-time salaried employee of either the Corporation or any present or future subsidiary who, in the judgment of the Board or Committee, is instrumental to the success of the Corporation or one of its Subsidiaries; including officers. (k) "NQSO" means a non-qualified stock option. (l) "Option" means an option granted pursuant to the Plan, whether an ISO or an NQSO. (m) "Plan" means the Corporation's 1997 Incentive and Nonqualified Stock Option Plan for Key Personnel described herein. (n) "Rule 16b-3" means Rule 16b-3 as promulgated under the Exchange Act, as the rule may be amended from time to time, or any successor rule or other comparable regulatory requirements. (o) "Subsidiary" means any person or entity which is controlled by the Corporation. (p) "Substitute Option" means an Option granted in substitution for options to purchase equity securities of an equity acquired by the Corporation. 3. Stock Subject to the Plan. There will be reserved for issuance under the Plan an aggregate of 331,712 shares of Common Stock, which will be authorized and unissued Common Stock. If an Option expires or terminates for any reason without being exercised in full, the shares subject thereto which have not been purchased will again be available for purposes of the Plan. The number of shares as to which Options may be granted under the Plan will be proportionately adjusted, to the nearest whole share, in the event of any stock dividend, stock split, reorganization, merger, consolidation, share combination or similar recapitalization involving the Common Stock or any spin-off, spin-out or other significant distribution of assets of stockholders for which the Corporation receives no consideration. In the event that there is an insufficient number of authorized shares of Common Stock available to allow exercise of the Options on the date of any grant hereunder, such Options will not be exercisable until there are sufficient shares of Common Stock authorized for issuance. 4. Administration of the Plan. The Board may administer this Plan itself or may appoint a Committee of the Board to administer the Plan. Subject to the provisions of the Plan, the Committee will have full authority and discretion to determine the Key Persons of the Corporation and its Subsidiaries to whom Options will be granted, the number of shares to be subject to each Option, the Option prices, and the exercise period for the Options. In making such determinations, the Committee may take into account the nature of the services rendered or to be rendered by such persons, their past, present or potential contributions to the Corporation, and any other factors which the Committee deems relevant. Subject to the provisions of the Plan, the Committee will have full and conclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Option agreements (which need not be identical); and to make all other determinations necessary or advisable for the proper administration of the Plan. The Board may at any time remove members from or add members to the Committee, or may abolish the Committee and revest in the Board the administration of the Plan. Vacancies on the Committee, howsoever caused, will be filled by the Board in accordance with the bylaws of the Corporation. 5. Option Agreement. Each grant of an Option will be evidenced by an Option agreement, executed by the holder of the Option and the Corporation, and such other instruments in such form as the Board or Committee approves from time to time, which instruments will (i) comply with and include expressly or by reference the terms and conditions set forth in this Plan, and (ii) may include such other provisions not inconsistent with the provisions of this Plan as the Board or Committee deems advisable, including provisions granting the holder the right to receive property at the time of exercise of the Option (provided that Section 83 of the Code applies to any such property other than cash). The terms and conditions of the Option agreements need not contain similar provisions. The granting of any Option under the Plan will not be deemed either to entitle the holder of the Option to, or to disqualify such holder from, participation in any other grant of Options under the Plan. 6. Eligibility. Options may be granted to Key Persons of the Corporation and its present or future Subsidiaries, provided, however, that Options granted to directors and certain officers of the Corporation will 2 comply with the applicable provisions of paragraph 4(b) of this Plan. Substitute Options may be granted to Key Persons of any entity acquired by the Corporation (or any subsidiary of such acquired entity). 7. Terms and Conditions of Options. All Options will be in such form and upon such terms and conditions as the Board or Committee, in its discretion, may from time to time determine. To the extent not included in a specific Option agreement or other document (such as an employment agreement), the following terms and provisions shall apply to each Option granted hereunder. (a) Option Price. Except in the case of Substitute Options, the Option price per share will be an amount determined by the Committee or the Board at the time the Option is granted, taking into account the market price of the Common Stock on such date, the value of services provided or to be provided by the recipient of the Options, and the overall value of the compensation of the recipient by the Corporation and its Subsidiaries. The Option price per share for all ISOs will in no event be less than the Fair Market Value of the Common Stock on the trading day next preceding the date the Option is granted. Further, in the case of ISOs granted to a Key Person who beneficially owns more than ten percent (10%) of the then outstanding Common Stock, the Option price per share will in no event be less than 110% of the Fair Market Value of the Common Stock on the trading day next preceding the date of grant. In the case of Substitute Options, the Option price per share will be determined by multiplying the market price of the Common Stock immediately prior to acquisition by the exchange ratio applicable to the class of equity securities of the acquired entity subject to the acquired entity's options immediately prior to acquisition, if any, or, if no such exchange ratio is applicable, by a factor determined by the Board. The Corporation will not be required to issue Options or Substitute Options for fractional shares, but may, in the discretion of the Board or Committee, round to the nearest whole share. (b) Option Term. No Option will be exercisable after the expiration of ten (10) years from the date the Option is granted. Further, in the case of ISOs granted to a Key Person who beneficially owns more than ten percent (10%) of the then outstanding Common Stock, the term of the Option will not exceed five (5) years from the date of grant. The date of grant will be the date on which the Board or Committee has approved the terms and conditions of the Option agreement evidencing the Option, has determined the recipient of the Option, the number of shares covered by the Option and the Option price per share, and has taken all other action necessary to complete the grant of the Option. (c) Option Type. Each Option granted hereunder will be clearly identified as either an ISO or an NQSO. (d) Maximum Grants. Any Key Person will be entitled to receive, at any time over the life of this Plan, Options with respect to such number of shares of Common Stock as set by the Board or Committee, up to the total number of shares reserved for issuance upon exercise of Options as set forth in paragraph 3; provided, however, that ISOs granted in any calendar year to a Key Person and exercisable for the first time by such Key Person during any calendar year may not exceed the limits prescribed by the Code. (e) Payment and Withholding. Payment for all shares purchased pursuant to exercise of an Option will be made in cash, by delivery of unrestricted shares of Common Stock at Fair Market Value on the date of exercise, or a combination thereof. The payment will be made at the time the Option or any part thereof is exercised, and no shares will be issued until full payment therefor has been made. Payment in currency or by check, bank draft, cashier's check, postal money order or wire transfer will be considered payment in cash. In addition to the Option price, the Corporation will have the right, if applicable, to require the holder of an Option to remit to the Corporation an amount sufficient to satisfy any federal, state or local withholding tax liability prior to the delivery of any certificate or certificates for shares issuable upon exercise of the Option. 3 (f) Conditions to Exercise of an Option. Except in the case of a Substitute Option, no Option may be exercised to any extent until the holder will have been employed by the Corporation or one of its Subsidiaries continuously for at least three (3) months from the date of grant. Except as provided in subparagraph (h) below, an Option may not be exercised by the holder unless he is then a Key Person of the Corporation or one of its Subsidiaries. No Option may be exercised by a holder with respect to fractional shares unless approved by the Board or Committee. (g) Nontransferability of Options. An Option will not be transferable or assignable except by will, by the laws of descent and distribution, or, in the case of NQSOs, pursuant to a qualified domestic relations order as defined by the Code, Title I of the Employee Retirement Income Security Act or the rules thereunder, and an Option will be exercisable, during the holder's lifetime, only by him. Notwithstanding the limitations of this subparagraph (g), the Board or Committee may, in its sole discretion, allow transfer of an Option to an immediate member of the Optionholder's family or to a family partnership or trust. (h) Termination of Employment or Death. In the event that a holder ceases to be employed or retained by the Corporation or any of its Subsidiaries for any reason other than his death, disability or termination for Cause and will no longer be employed by any of them, such holder will have the right to exercise the Option at any time within three (3) months after his termination of employment or retention to the extent his right to exercise the Option has vested and has not previously been exercised at the date of termination. In the event of termination of employment or retention of the holder by reason of disability, the holder may exercise his Option at any time within twelve (12) months after the date of such termination. If the holder of an Option dies while he is employed by the Corporation or one of its Subsidiaries, his Option may be exercised (to the extent that the holder would have been entitled to do so at the date of his death) by a legatee or legatees of the holder under his last will, or by his personal representatives or distributees, at any time within twelve (12) months following his death. In the event of termination of employment of the holder for Cause, any and all Options of the holder shall automatically expire upon such termination. In all of the cases cited above, the Corporation's Board of Directors or the Committee may, in its discretion, extend the exercise period of the Option in question; provided, however, that notwithstanding this subparagraph (h), no Option may be exercised more than ten (10) years after the date on which such Option was granted. For purposes of this subparagraph (h), employment of a holder will not be deemed terminated so long as the holder is employed by the Corporation, a Subsidiary or another entity (or an affiliate of another entity) which has assumed this Option in a transaction to which Section 424(a) of the Code is applicable. (i) Changes in Capitalization; Merger; Liquidation. The number of shares of Common Stock covered by each outstanding Option will be proportionately adjusted, to the nearest whole share (i) for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or combination of shares or stock split or the payment of a stock dividend (but only on the Common Stock) or any other merger, reorganization, combination, consolidation or similar recapitalization or increase or decrease in the number of such shares effected without receipt of consideration by the Corporation, or (ii) for any spin-off or spin-out of assets to the Corporation's stockholders or any other significant distribution of assets by the Corporation to its stockholders without receipt of consideration by the Corporation. Any such adjustment to an outstanding Option will be made without changing the total price applicable to the unexercised portion of the Option, but with a corresponding adjustment in the price for each share covered by the Option. If the Corporation is the surviving corporation in any merger or consolidation, each outstanding Option will pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to the Option would have been entitled to receive in such merger or consolidation. A dissolution or liquidation of the Corporation or a merger or consolidation in which the Corporation is not the surviving corporation will cause each outstanding Option to terminate, except for Options as to which another entity assumes or substitutes another option in a transaction to which Section 424(a) of the Code is applicable; provided, however, that, as to any Options which are to so terminate, each holder will have the right immediately prior to such dissolution, liquidation, merger or consolidation, to exercise his Option in whole or in part, including with respect to shares as to which the right to exercise had not yet vested and without regard to any provisions deferring exercise contained herein. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, the adjustments will be made by the Board or 4 Committee, whose determination will be conclusive. Except as expressly provided in this subparagraph (i), the holder of an Option will have no rights by reason of any subdivision or combination of shares of stock of any class, or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, or by reason of any spin-off, spin-out or comparable distribution of assets to the Corporation's stockholders, or by reason of any dissolution, liquidation, merger or consolidation or distribution to the Corporation's stockholders of assets or securities of another entity; and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, will not affect, and no adjustment by reason thereof will be made with respect to, the number or price of shares of Common Stock subject to the Option. The existence of the Plan and the Options granted pursuant to the Plan will not affect in any way the right or power of the Corporation to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Corporation, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Corporation, any sale or transfer of all or any part of the Corporation's business or assets, or any other corporate act or proceeding. (j) If at any time the Board or Committee determines that the listing or approval for quotation, registration or qualification of the shares subject to the Options upon any securities exchange or interdealer quotation system or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of the Option or the issue or purchase of Common Stock thereunder, the Option may not be exercised, in whole or in part, unless such listing, approval for quotation, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Board or Committee. The holder of the Option will supply the Corporation with such certificates, representations, opinions of counsel and information as the Corporation may request, including, without limitation, an investment letter certifying that all shares being purchased under an Option are being acquired for investment and not for the purpose of resale or distribution, and will otherwise cooperate with the Corporation in obtaining such listing, approval for quotation, registration, qualification, consent or approval. (k) No Option granted pursuant to the Plan will terminate when an employee is on military, maternity, sick leave or other bona fide leave of absence so long as his right to reemployment is guaranteed either by statute or contract. 8. Termination and Amendment of the Plan. The Plan shall terminate at midnight on April 9, 2007, ten (10) years after the date of its initial adoption by the Board. No Option will be granted under the Plan after that date, but Options granted before termination of the Plan will remain exercisable thereafter until they expire or lapse according to their terms. The Plan may be terminated, modified or amended by the Corporation's stockholders or Board. 9. Rule 16b-3 Compliance. In taking any action under the Plan involving a person who files reports under Section 16 of the Exchange Act, the Corporation will use its best efforts to ensure that such action is taken in compliance with Rule 16b-3. 10. No Rights as Stockholder. A holder of an Option will have no rights as a stockholder with respect to any Common Stock covered by his Option until the date of issuance of a stock certificate to him by the Corporation following exercise, in whole or in part, of the Option. 11. Indemnification and exculpation of Board or Committee. In addition to other rights of indemnification as they may have as members of the Board, each member of the Board or Committee will be indemnified by the Corporation against all costs and expenses reasonably incurred by him in connection with any action, suit or proceeding to which he may be party by reason of any action taken or failure to act under or in connection with the Plan, or any Option granted thereunder, and against all amounts paid by him in settlement thereof (provided the settlement is approved by legal counsel selected by the Corporation) or paid by him in satisfaction of a judgment in any such action, suit or proceeding, except a judgment based upon a finding of a breach of the duty of loyalty or acts or omissions either not in good faith or which involve intentional misconduct or a knowing violation of law. Upon the institution of any such action, suit or proceeding, each Board or Committee member affected will notify the Corporation in writing of the same, giving the Corporation an opportunity, at its own expense, to defend the same before the member undertakes to defend it on his own behalf. The members of the Board or Committee shall, to the fullest extent permitted by law, not be liable to the Corporation, its stockholders, option holders, employees, consultants or others, in connection with any action taken or failure to act under or in connection with the Plan, or any Option granted thereunder. 5