NONQUALIFIED STOCK OPTION AGREEMENT
EXHIBIT 10.2
This AGREEMENT (this “Agreement”) is made as of June 9, 2006 (the “Grant Date”) by and between
HealthMarkets, Inc., a Delaware corporation (the “Company”), and Xxxxxx X. Xxxxxxx (“Optionee”).
As a condition precedent to the Company’s grant of the Option (as defined in Section 2 of this
Agreement) to Optionee, Optionee is executing and delivering a counterpart of the Stockholders’
Agreement and thereby agrees to be bound by the terms thereof.
(a) “Call Right” has the meaning specified in Section 8 of this Agreement.
(b) “Company” has the meaning specified in the introductory paragraph of this
Agreement.
(c) “Compensation Committee” means the Executive Compensation Committee of the
Board.
(d) “Disability” shall mean the Optionee’s incapacity due to physical or mental
illness to substantially perform his duties on a full-time basis for at least 26 consecutive weeks
or an aggregate period in excess of 26 weeks in any one fiscal year, and within 30 days after a
notice of termination is thereafter given by the Company, the Optionee shall not have returned to
the full-time performance of the Optionee’s duties; provided, however, if the Optionee shall not
agree with a determination to terminate his employment because of Disability, the question of the
Optionee’s Disability shall be subject to the certification of a qualified medical doctor selected
by the Company or its insurers and acceptable to the Optionee or, in the event of the Optionee’s
incapacity to accept a doctor, the Optionee’s legal representative.
(e) “Fair Market Value” shall have the meaning specified in the Stockholders
Agreement.
(f) “Grant Date” has the meaning specified in the introductory paragraph of this
Agreement.
(g) “Option” has the meaning specified in Section 2 of this Agreement.
(h) “Optionee” has the meaning specified in the introductory paragraph of this
Agreement.
(i) “Option Price” has the meaning specified in Section 2 of this Agreement.
(j) “Option Shares” has the meaning specified in Section 2 of this Agreement.
(k) “Plan” has the meaning specified in Section 1 of this Agreement.
(l) “Term Sheet” means the Stock Option Plan/Grant Term Sheet marked as “Exhibit B”
to the Term Sheet by and between the Company and Optionee dated as of June 2, 2006.
(m) “Termination for Cause” means the termination by the Company or any Subsidiary
of Optionee’s service with the Company or any Subsidiary as a result of (i) the commission by
Optionee of an act of gross negligence, willful misconduct, fraud, embezzlement, misappropriation
or breach of fiduciary duty against the Company or any of its affiliates or Subsidiaries, or the
conviction of Optionee by a court of competent jurisdiction of, or a plea of guilty or nolo
contendere to, any felony or any crime involving moral turpitude or any crime which reasonably
could affect the reputation of the Company or the Optionee’s ability to perform the duties with the
Company or any Subsidiary, (ii) the commission by Optionee of a material breach of any of his
duties to the Company or any Subsidiary or his covenants in the Stockholders Agreement, which
breach has not been remedied within 30 days of the delivery to the Optionee by the Board of written
notice of the facts constituting the breach, and which breach if not cured, would have a material
adverse effect on the Company, or (iii) the habitual and willful neglect by Optionee of his
obligations or duties as a Director of the Company or any Subsidiary.
(a) The Option shall become exercisable with respect to 20% of the Option Shares on
each of the first five anniversaries of the Grant Date if Optionee remains in the continuous
service as a Director of the Company or any Subsidiary as of each such date.
(b) Notwithstanding the foregoing, (i) the Option granted hereby shall become
immediately exercisable with respect to all of the Option Shares upon the occurrence of a Change of
Control if Optionee remains in the continuous service as a Director of the Company or any
Subsidiary until the date of the consummation of such Change of Control.
(c) Optionee shall be entitled to the privileges of ownership with respect to Option
Shares purchased and delivered to Optionee upon the exercise of all or part of this Option.
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(a) To the extent then exercisable, the Option may be exercised in whole or in part
by written notice to the Company stating the number of Option Shares for which the Option is being
exercised and the intended manner of payment. The date of such notice shall be the exercise date.
Payment equal to the aggregate Option Price of the Option Shares being purchased pursuant to an
exercise of the Option must be tendered in full with the notice of exercise to the Company in one
or a combination of the following methods as specified by Optionee in the notice of exercise: (i)
cash in the form of currency or check or by wire transfer as directed by the Company, (ii) solely
following an IPO or shares of the Company’s Class A-1 Common Stock otherwise being traded on an
established securities market, through the surrender to the Company of shares of Class A-1 Common
Stock owned by Optionee for at least six months as valued at their Fair Market Value on the date of
exercise or (iii) through such other form of consideration as is deemed acceptable by the Board.
(b) As soon as practicable upon the Company’s receipt of Optionee’s notice of
exercise and payment, the Company shall direct the due issuance of the Option Shares so purchased.
(c) As a further condition precedent to the exercise of this Option in whole or in
part, Optionee shall comply with all regulations and the requirements of any regulatory authority
having control of, or supervision over, the issuance of the shares of Class A-1 Common Stock and in
connection therewith shall execute any documents which the Board shall in its sole discretion deem
necessary or advisable.
(a) after Optionee’s termination of service as a Director of the Company and its
Subsidiaries, the lesser of (i) ninety (90) calendar days following the Optionee’s date of
termination or (ii) the remaining term of the Option;
(b) The date of Optionee’s termination of service as a Director of the Company and
its subsidiaries for Cause; or
(c) Ten (10) years from the Grant Date.
In the event that Optionee’s employment is terminated in the circumstances described in
Section 7(b) hereof, this Agreement shall terminate at the time of such termination notwithstanding
any other provision of this Agreement and Optionee’s option will cease to be exercisable to the
extent exercisable as of such termination and will not be or become exercisable after such
termination. Upon the Optionee’s termination of service as Director of the Company, and, if
applicable, its Subsidiaries, all Options which are not then exercisable shall immediately
terminate.
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received pursuant to the terms and conditions set forth in Article VI Call Rights of the
Stockholders Agreement.
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18. Governing Law. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof and all parties, including their successors and assigns,
consent to the jurisdiction of the state and federal courts of Delaware.
HealthMarkets, Inc. |
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By: | ||||
Name: | ||||
Title: | ||||
Xxxxxx X. Xxxxxxx | ||||
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