WELLCARE HEALTH PLANS, INC. NON-QUALIFIED STOCK OPTION AGREEMENT FOR THOMAS F. O’NEIL III Agreement
Exhibit
10.3
FOR
XXXXXX
X. X’XXXX III
Agreement
1. Grant of
Option. WellCare Health Plans, Inc. (the “Company”) hereby
grants, as of April 1, 2008, to Xxxxxx X. X’Xxxx III (the “Optionee”) an
option (the “Option”) to purchase up to 100,000 shares of the Company’s Common
Stock, $0.01 par value per share (the “Shares”), at an exercise price per share
equal to $39.70 (the “Option Price”). The Option is being granted as
an “employee inducement award” within the meaning of Section 303A(8) of the New
York Stock Exchange Listed Company Manual. The Option shall be
subject to the terms and conditions set forth herein. The Option is a
non-qualified stock option, and not an incentive stock option conforming to the
requirements of Section 422 of the Code. The Optionee agrees to be
bound by all of the terms and conditions hereof and all applicable laws and
regulations.
i. “Board”
means the Board of Directors of the Company.
ii. “Cause”
shall have such meaning as otherwise set forth in the Employment
Agreement.
iii. “Change
in Control” shall have such meaning as otherwise set forth in the
Employment Agreement.
iv. “Code”
means the Internal Revenue Code of 1986, as amended.
v. “Committee”
means the Compensation Committee of the Board.
vi. “Common
Stock” means the Common Stock, par value $.01 per share, of the Company, and any
other shares into which such stock may be changed by reason of a
recapitalization, reorganization, merger, consolidation or any other change in
the corporate structure or capital stock of the Company.
vii. “Competition” is
deemed to occur if a person whose employment with the Company or its
Subsidiaries has terminated engages as an officer, director, shareholder, owner,
partner, joint venturer, or in any managerial capacity, whether as an employee,
independent contractor, consultant or advisor (paid or unpaid), or as a sales
representative, or otherwise participates, in each case, in any business that
sells, markets, or provides any benefits or services within any state in which
the Company, Comprehensive Health Management, Inc. or their respective
subsidiaries (each, a “WellCare Company”) is doing business at the time the
Optionee ceases to be employed by the Company that are in direct competition
with the benefits or services provided by such WellCare Company in such
state.
viii. “Disability”
means a disability that would entitle an eligible participant to
payment
of
monthly disability payments under any Company disability plan or any agreement
between the eligible participant and the Company as otherwise determined by the
Committee.
ix. “Employment
Agreement” means the employment agreement dated April 1, 2008 between
the Optionee, the Company and Comprehensive Health Management, Inc., a Florida
corporation (“CHMI”).
x. “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
xi. “Fair
Market Value” of a share of Common Stock of the Company means, as of the
date in question, the officially-quoted closing selling price of the stock (or
if no selling price is quoted, the bid price) on the principal securities
exchange on which the Common Stock is then listed for trading (including for
this purpose the Nasdaq National Market) (the “Market”) for the applicable
trading day or, if the Common Stock is not then listed or quoted in the Market,
the Fair Market Value shall be the fair value of the Common Stock determined in
good faith by the Board; provided, however, that when shares received upon
exercise of an option are immediately sold in the open market, the net sale
price received may be used to determine the Fair Market Value of any shares used
to pay the exercise price or applicable withholding taxes and to compute the
withholding taxes.
xii. “Good
Reason” shall have such meaning as otherwise set forth in the Employment
Agreement.
xiii. “Subsidiary”
means a corporation or other entity of which outstanding shares or ownership
interests representing 50% or more of the combined voting power of such
corporation or other entity entitled to elect the management thereof, or such
lesser percentage as may be approved by the Committee, are owned directly or
indirectly by the Company.
3. Exercise
Schedule. Except as otherwise provided in Sections 6 and 7 of
this Agreement, the Option is exercisable in installments as provided below,
which shall be cumulative. To the extent that the Option has become exercisable
with respect to a percentage of Shares as provided below, the Option may
thereafter be exercised by the Optionee, in whole or in part, at any time or
from time to time prior to the expiration of the Option as provided herein. The
Option shall vest in equal annual installments on each of April, 2009, 2010,
2011 and 2012 (each, a “Vesting Date”) provided that the Optionee’s employment
or service with the Company and its Subsidiaries during the period beginning on
April 1, 2008 continues through and on the applicable Vesting Date.
Notwithstanding
anything contained herein to the contrary, once the Option has vested and become
exercisable with respect to 100% of the Shares, then the Option shall be fully
vested and the provisions of the preceding sentence shall cease to
apply.
Except as
otherwise specifically provided herein, there shall be no proportionate or
partial vesting in the periods prior to each Vesting Date, and all vesting shall
occur only on the appropriate Vesting Date. Upon the termination of the
Optionee’s employment or service with the Company and its Subsidiaries, any
unvested portion of the Option shall terminate and be null and
void.
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4. Method of
Exercise. The vested portion of this Option shall be
exercisable in whole or in part in accordance with the exercise schedule set
forth in Section 3 hereof by delivery of written notice by the Optionee which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised (which number must be a whole number),
and such other representations and agreements as to the holder’s investment
intent with respect to such Shares as may be required by the Company pursuant to
the provisions of the Plan. Such written notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Optionee shall deliver, together with
the written notice, payment of the Option Price. This Option shall be
deemed to be exercised after both (a) receipt by the Company of such written
notice accompanied by the Option Price and (b) arrangements that are
satisfactory to the Committee in its sole discretion have been made for
Optionee’s payment to the Company of the amount, if any, that is necessary to be
withheld in accordance with applicable Federal or state withholding
requirements. No Shares will be issued pursuant to the Option unless
and until such issuance and such exercise shall comply with all relevant
provisions of applicable law, including the requirements of any stock exchange
(including the New York Stock Exchange) or interdealer quotation system upon
which the Shares then may be traded.
5. Method of
Payment. Payment of the Option Price shall be by
any of the following, or a combination thereof, at the election of the
Optionee: (a) in cash (including check, bank draft, money order or
wire transfer of immediately available funds), (b) by delivery of outstanding
shares of Common Stock with a Fair Market Value on the date of exercise equal to
the aggregate exercise price payable with respect to the Options’ exercise, (c)
to the extent permissible, by simultaneous sale through a broker reasonably
acceptable to the Committee of Shares acquired on exercise, as permitted under
Regulation T of the Federal Reserve Board, (d) by authorizing the
Company to withhold from issuance a number of Shares issuable upon exercise of
the Option which, when multiplied by the Fair Market Value of a share of Common
Stock on the date of exercise, is equal to the Option Price payable with respect
to the portion of the Option being exercised or (e) by any combination of the
foregoing.
In
the event the Optionee elects to pay the Option Price pursuant to clause (b)
above, (i) only a whole number of share(s) of Common Stock (and not fractional
shares of Common Stock) may be tendered in payment, (ii) the Optionee must
present evidence acceptable to the Company that the Optionee has owned any such
shares of Common Stock tendered in payment of the Option Price (and that such
tendered shares of Common Stock have not been subject to any substantial risk of
forfeiture) for at least six months prior to the date of exercise, and (iii)
Common Stock must be delivered to the Company. Delivery for this
purpose may, at the election of the Optionee, be made either by (A) physical
delivery of the certificate(s) for all such shares of Common Stock tendered in
payment of the Option Price, accompanied by duly executed instruments of
transfer in a form acceptable to the Company, or (B) direction to the Optionee’s
broker to transfer, by book entry, such shares of Common Stock from a brokerage
account of the Optionee to a brokerage account specified by the
Company. When payment of the Option Price is made by delivery of
Common Stock, the difference, if any, between the Option Price payable with
respect to the portion of the Option being exercised and the Fair Market Value
of the shares of Common Stock tendered in payment (plus any applicable taxes)
shall be paid in cash. The Optionee may not tender shares of Common
Stock having a Fair Market Value exceeding the Option Price payable with respect
to the portion of the Option being exercised (plus any applicable
taxes).
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In
the event the Optionee elects to pay the Option Price pursuant to clause (d)
above, (i) only a whole number of Share(s) (and not fractional Shares) may be
withheld in payment and (ii) the Optionee must present evidence acceptable to
the Company that the Optionee has owned a number of shares of Common Stock at
least equal to the number of Shares to be withheld in payment of the Option
Price (and that such owned shares of Common Stock have not been subject to any
substantial risk of forfeiture) for at least six months prior to the date of
exercise. When payment of the Option Price is made by withholding of
Shares, the difference, if any, between the Option Price payable with respect to
the portion of the Option being exercised and the Fair Market Value of the
Shares withheld in payment (plus any applicable taxes) shall be paid in
cash. The Optionee may not authorize the withholding of Shares having
a Fair Market Value exceeding the Option Price payable with respect to the
portion of the Option being exercised (plus any applicable
taxes). Any withheld Shares shall no longer be issuable under the
Option.
(a) Death or
Disability. If the Optionee ceases to be a director, officer
or employee of, or to perform other services for, the Company, CHMI or any
Subsidiary due to the Optionee’s death or Disability, the Option shall become
fully vested on the date of such cessation and shall remain exercisable for a
period of one year from the date of such cessation, but in no event after the
expiration date provided in Section 7(a) below; provided that the Option shall
immediately terminate and become null and void in the event that the Optionee
engages in Competition during such one year period, unless the Optionee has
received written consent to do so from the Company.
(b) Termination for
Cause. If the Optionee’s employment or service as a director,
officer or employee of, or other performance of services for, the Company, CHMI
or any Subsidiary is terminated for Cause, the Option shall expire and be
forfeited immediately upon such termination, whether or not then
exercisable.
(c) Other Termination of
Service. If the Optionee ceases to be an officer or employee of, or to
perform other services for, the Company, CHMI or any Subsidiary for any reason
other than death, Disability, or Cause, the portion of the Option that was
exercisable on the date of such cessation shall remain so for a period of 90
days after the date of such cessation, but in no event after the expiration date
provided in Section 7(a) below; provided that the Option shall immediately
terminate in the event that the Optionee engages in Competition during such 90
day period, unless the Optionee has received written consent to do so from the
Company.
(d) Termination of Service
Following a Change in Control. Notwithstanding the foregoing,
if the Optionee ceases to be an officer or employee of, or to perform other
services for, the Company, CHMI or any Subsidiary, and the Optionee’s service
was terminated (i) by the Company or CHMI without Cause, (ii) by reason of the
Optionee’s death, Disability, or retirement (as defined under any Company or
CHMI pension plan or retirement program or termination of Optionee’s employment
on retirement with the approval of the Committee), or (iii) by the Optionee for
Good Reason, in any case, within twelve months after there is a Change in
Control of the Company, then the Option shall be immediately fully exercisable
and shall remain so for the applicable period following the Optionee’s
termination of service, as described in this Section 6.
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(f) Extension of
Post-Termination of Service Exercise Period. The period during which the Option can be exercised
after a termination of service subject
to Sections 6(a), (c), or (d)
above will be extended for any period
during which the Optionee cannot exercise the Option because such an exercise
would violate an applicable Federal, state, local, or foreign law, until 30 days
after the exercise of the Option first would no
longer violate an applicable Federal, state, local, and foreign laws but in no event beyond the expiration of the Option in
accordance with Section 7(a).
7. Other Termination of
Option.
(a) Expiration of
Option. Notwithstanding anything to the contrary, any
unexercised portion of the Option shall automatically and without notice
terminate and become null and void on the tenth anniversary of the date as of
which the Option is granted.
(b) Cancellation by the
Committee. Notwithstanding anything to the contrary, in
connection with any transaction of the type specified by clause (c) of the
definition of a Change in Control in the Employment Agreement, the Committee
may, in its discretion, (i) cancel the Option in consideration for payment to
the Optionee of an amount equal to the portion of the consideration that would
have been payable to the Optionee pursuant to such transaction if the
Option had been fully exercised immediately prior to such transaction, less the
aggregate Option Price that would have been payable therefor, or (ii) if the
amount that would have been payable to the Optionee pursuant to such transaction
if the Option had been fully exercised immediately prior thereto would be equal
to or less than the aggregate Option Price that would have been payable
therefor, cancel the Option for no consideration or payment of any
kind. Payment of any amount payable pursuant to the preceding
sentence may be made in cash or, in the event that the consideration to be
received in such transaction includes securities or other property, in cash
and/or securities or other property in the Committee’s discretion.
(c) Corporate
Transactions. Notwithstanding anything to the contrary, to the
extent not previously exercised, the Option shall terminate immediately in the
event of the liquidation or dissolution of the Company.
8. Transferability. Unless
otherwise determined by the Committee, the Option granted hereby is not
transferable otherwise than by will or under the applicable laws of descent and
distribution, and during the lifetime of the Optionee the Option shall be
exercisable only by the Optionee, or the Optionee’s guardian or legal
representative. In addition, the Option shall not be assigned, negotiated,
pledged or hypothecated in any way (whether by operation of law or otherwise),
and the Option shall not be subject to execution, attachment or similar process.
Upon any attempt to transfer, assign, negotiate, pledge or hypothecate the
Option, or in the event of any levy upon the Option by reason of any execution,
attachment or similar process contrary to the provisions hereof, the Option
shall immediately become null and void. The terms of this Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee. The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
9. No Rights of
Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the
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Company
with respect to any shares of Common Stock purchasable or issuable upon the
exercise of the Option, in whole or in part, prior to the date of exercise of
the Option.
10. No Right to Continued
Employment or
Service. Neither the Option nor this Agreement shall confer
upon the Optionee any right to continued employment or service with the
Company.
11. Law
Governing. This Agreement shall be governed in accordance with
and governed by the internal laws of the State of Delaware.
12. Interpretation. The
undersigned Optionee hereby accepts as binding, conclusive and final all
decisions or interpretations of the Committee upon any questions arising
under this Agreement.
13. Notices. Any
notice under this Agreement shall be in writing and shall be deemed to have been
duly given when delivered personally or when deposited in the United States
mail, registered, postage prepaid, and addressed, in the case of the Company, to
the Company’s Secretary at:
0000
Xxxxxxxxx Xxxx
Xxxxxxxxxxx
Xxx
Xxxxx, XX
00000
or if the
Company should move its principal office, to such principal office, and, in the
case of the Optionee, to the Optionee’s last permanent address as shown on the
Company’s records, subject to the right of either party to designate some other
address at any time hereafter in a notice satisfying the requirements of this
Section.
14. Adjustments. In
the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, distribution of assets, or any
other change in the corporate structure or shares of the Company, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
shares subject to your Option and in the Option Price. Any such
adjustment shall be final, conclusive and binding for all purposes of the
Plan.
15. Requirements of
Law.
(a) The
Company shall not be required to sell or issue any securities under the Option
if the sale or issuance of such securities would constitute a violation by you,
the individual exercising the Option, or the Company of any provisions of any
law or regulation of any governmental authority, including without limitation
any federal or state securities laws or regulations. If at any time
the Company shall determine, in its discretion, that the listing, registration
or qualification of any securities subject to the Option upon any securities
exchange or under any governmental regulatory body is necessary or desirable as
a condition of, or in connection with, the issuance or purchase of securities
hereunder, the Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Option. Specifically in connection with the Securities Act of 1933,
as amended (the “1933 Act”), upon the exercise of the Option, unless a
registration statement under the 1933 Act is in effect with respect to the
securities covered by the Option, the Company
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shall not
be required to sell or issue such securities unless the Committee has received
evidence satisfactory to it that the holder of such Option may acquire such
securities pursuant to an exemption from registration under the 1933 Act and
applicable state securities laws or regulations. Any determination in
this connection by the Committee shall be final, binding, and
conclusive. The Company hereby agrees that, as soon as reasonably
practicable following the date (after the date of this Agreement) on which the
Company becomes eligible to use Form S-8 for the registration under the 1933 Act
of the securities covered by the Option, the Company will file a registration
statement on Form S-8 to register all of the securities covered by the
Option. Other than as set forth in the preceding sentence, the
Company shall not be obligated to take any affirmative action in order to cause
the exercise of the Option or the issuance of securities pursuant thereto to
comply with any law or regulation of any governmental authority. As
to any jurisdiction that expressly imposes the requirement that the Option shall
not be exercisable until the securities covered by such Option are registered or
are exempt from registration, the exercise of such Option (under circumstances
in which the laws of such jurisdiction apply) shall be deemed conditioned upon
the effectiveness of such registration or the availability of such an
exemption.
(b) Optionee
Representations. The Optionee hereby represents and warrants
to the Company that: (i) the Optionee understands and accepts that
the grant of the Option by the Company to the Optionee is intended to be exempt
from registration under the 1933 Act by virtue of Section 4(2) of the 1933 Act;
(ii) the Optionee understands and accepts that the grant of the Option by the
Company to the Optionee is intended to be exempt from registration under the
securities laws of the state or states in which the grant of such Option is
deemed to be made, by virtue of transactional exemptions set forth therein;
(iii) the Option acquired by the Optionee hereunder, and the Shares to be
received as a result of the exercise of the Option, are being acquired solely
for his own account, for investment purposes only and not with a view to, or for
sale in connection with, any distribution (as such term is used in Section 2(11)
of the 0000 Xxx) of such Option or such Shares nor with the present intention of
distributing or selling such Option or such Shares; (iv) the Optionee has made a
detailed inquiry concerning the Company and its business and services, officers
and personnel; (v) the Company has made available to the Optionee, or such
Optionee has had access to, any and all information, financial or otherwise,
concerning the Company and its businesses and services, officers and personnel
which the Optionee has requested or deems relevant (including information
regarding the ongoing investigations of the Company by certain federal and state
agencies and other regulatory bodies, as well as related private party
proceedings, and the Company’s ongoing response thereto); (vi) the Optionee has
such knowledge and experience in financial and business matters in order to
evaluate the merits and risks of investment in the Option and the Shares to be
received as a result of the exercise of the Option and to make an informed
investment decision with respect to both the Option and the Shares; (vii) the
Optionee is an “accredited investor” as defined in Regulation D promulgated
under the 1933 Act; and (viii) the Optionee can bear a complete loss of the
value of the Option (or the Shares to be received as a result of the exercise of
the Option) and is able to bear the economic risks of holding the Option or the
Shares for an indefinite period. The Optionee also understands that
neither the Option nor the Shares to be received as a result of the exercise of
the Option have been registered under the 1933 Act or any applicable state
securities laws and regulations and that neither the Option nor any of such
Shares can be transferred or sold unless subsequently registered under the 1933
Act and any applicable state securities laws and regulations or unless an
exemption from such registration is available. The Optionee further
acknowledges that if an exemption from registration is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Shares, and on requirements relating
to the Company which are outside of the Optionee’s control.
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16. Tax
Consequences. Set forth below is a brief summary as of the
date of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) The
Optionee will not recognize any income on receipt of the Option.
(b) The
Optionee will recognize ordinary income at the time he exercises the Option
equal to the amount by which the Fair Market Value of the Shares on the date of
exercise exceeds the Option Price paid for the Shares. The amount so
recognized is subject to federal withholding and employment taxes if the
Optionee is an employee.
(c) The
Optionee’s tax basis for the Shares received as a result of the exercise of the
Option will be equal to the Fair Market Value of those Shares on the date of the
exercise.
(d) Upon
the sale of the Shares, the Optionee will recognize a capital gain or loss on
the difference between the amount realized from the sale of the Shares and the
Fair Market Value on the date of exercise. The gain or loss would be
short- or long-term depending upon whether the Shares were held for at least one
year after the date of exercise of the Option.
* * * * *
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of
the first day
of April, 2008.
| COMPANY:
|
|
| By: /s/ Xxxxx Xxxxxxxxx
Name:
Xxxxx Xxxxxxxxx
Title:
President & CEO
|
Optionee
hereby accepts this Option subject to all of the terms and provisions
hereof. Optionee has reviewed this Option in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option, and
fully understands all provisions of the Option.
| Dated: April 1, 2008 | |
| OPTIONEE: /s/ Xxxxxx X. X'Xxxx III |
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