Form of Non-Qualified Stock Option Agreement between Thomas L. Tran and WellCare Health Plans, Inc

 

 

1.                        Grant of Option.  WellCare Health Plans, Inc. (the “Company”) hereby grants, as of __________  ___, 2008, to Thomas Tran (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 $_______ (the “Option Price”).  The Option shall be subject to the terms and conditions set forth herein.  The Option was issued pursuant to the Company’s 2004 Equity Incentive Plan (the “Plan”), which is incorporated herein for all purposes.  The Option is a Non-Qualified Stock Option, and not an Incentive Stock Option.  The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all of the terms and conditions hereof and thereof and all applicable laws and regulations.

 

2.                        Definitions.  Unless otherwise provided herein, terms used herein that are defined in the Plan and not defined herein shall have the meanings attributed thereto in the Plan.

 

3.                        Exercise Schedule.  Except as otherwise provided in Sections 6 and 7 of this Agreement, or in the Plan, 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 following table indicates each date (the “Vesting Date”) upon which the Optionee shall be entitled to exercise the Option with respect to the percentage of Shares granted as indicated beside the date, provided that the Optionee’s employment or service with the Company and its Subsidiaries during the period beginning on __________  ___, 2008 (the “Vesting Commencement Date”) continues through and on the applicable Vesting Date:

 

Percentage of Shares                                                                Vesting Date

 

25%                                           First anniversary of the VestingCommencement Date

 

50%                                           Second anniversary of the VestingCommencement Date

 

75%                                           Third anniversary of the VestingCommencement Date

 

100%                                         Fourth anniversary of the VestingCommencement 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.  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE OPTION CANNOT BE EXERCISED UNTIL THE COMPANY IS AGAIN CURRENT IN ITS PERIODIC REPORT FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) AND HAS FILED ALL PERIODIC REPORTS REQUIRED TO BE FILED BY THE COMPANY WITH THE SEC WITHIN THE PRECEDING TWELVE MONTHS.

 

                          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. Except as otherwise specifically provided herein, 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.

 

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 written notice 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 written notice shall be accompanied by 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) receipt by the Company of the Optionee’s cash payment 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 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 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, (c) 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 (d) by any combination of the foregoing.  

 

                       In the event the Optionee elects to pay the Option Price pursuant to clause (c) 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.

 

6.                       Termination of Optionee’s Service.

 

           (a)           Death or Disability.  If the Optionee ceases to be an officer or employee of, or to perform other services for, the Company, Comprehensive Health Management, Inc. (“CHMI”) or any other Subsidiary due to the Optionee’s death or Disability, as defined in the Employment Agreement dated as of July 21, 2008 among the Optionee, the Company and CHMI (the “Employment Agreement”), 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 any such post-termination exercise period, unless the Optionee has received written consent to do so from the Company.

 

           (b)           Termination for Cause.  If the Optionee’s employment by, or other performance of services for, the Company, CHMI or any other Subsidiary is terminated for Cause, as defined in the Employment Agreement, 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 and any other Subsidiary for any reason other than death, Disability, as defined in the Employment Agreement, or Cause, as defined in the Employment Agreement, 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 any such post-termination exercise 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 other Subsidiary, and the Optionee’s service was terminated (i) by the Company, CHMI or any other Subsidiary without Cause, as defined in the Employment Agreement, or (ii) by the Optionee for Good Reason, as defined in the Employment Agreement, in either case, within twelve months after there is a Change in Control of the Company, as defined in Section 2(c) of the Plan, 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.

 

           (e)           Extension of Post-Termination of Service Exercise Period.  Notwithstanding the foregoing, 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 after the expiration date of the Option provided in Section 7(a) below.

 

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 seventh 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 (iii) of the definition of a Change in Control in Section 2(c) of the Plan, 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.

 

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 Company with respect to any shares of 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/Provisions of Plan Control. This Agreement is subject to all the terms, conditions and provisions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan adopted by the Committee as may be in effect from time to time. If and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly. The Optionee accepts the Option subject to all the terms and provisions of the Plan and this Agreement.  The undersigned Optionee hereby accepts as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan and 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:

 

                                           8735 Henderson Road

                                           Renaissance Two

                                          Tampa, FL 33634

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.                      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 the Optionee 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 Form S-8 registration statement under the 1933 Act is in effect with respect to the securities covered by the Option, the Company shall not be required to sell or issue such securities.  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 is 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 1933 Act) of such Option nor with the present intention of distributing or selling such Option; (iv) the Optionee has made a detailed inquiry concerning the Company and its business and services, officers and personnel, including the ongoing governmental investigations and the investigation by special committee of the Board (“Special Committee”); (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, the Special Committee investigation 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 to make an informed investment decision with respect to the Option; (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 and is able to bear the economic risks of holding the Option 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 the Option cannot be exercised until the Company is again current in its periodic report filings with the SEC and has filed all periodic reports required to be filed by the Company within the preceding twelve months.

 

15.                      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.

 

16.                      Company Right to Recover Option Stock or Option Gains. If it is ever determined by the Board of Directors, in its sole and absolute discretion, that actions by the Optionee have constituted: (i) wrongdoing that contributed to (A) any material misstatement or omission from any report or statement filed by the Company with the SEC or (B) any statement, certification, cost report, claim for payment, or other filing made under Medicare or Medicaid that was false, fraudulent, or for an item or service not provided as claimed; (ii) gross misconduct; (iii) breach of fiduciary duty to the Company or any Subsidiary; or (iv) fraud, then the Option shall be immediately forfeited and thereupon the Option shall be cancelled; provided, further, that if the Option has been exercised prior to the Board of Director’s determination, the Optionee shall be required to pay to the Company an amount equal to the difference between the aggregate value of the Shares acquired upon such exercise of the Option at the date of the Board determination and the aggregate exercise price paid by Optionee.  In addition, the Option and gains resulting from the exercise of the Option, shall be subject to forfeiture in accordance with the Company’s standard policies relating to such forfeitures and clawbacks, as such policies are in effect at the time of grant of the Option.

 

*  *  *  *  *

 

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the date first written above.

 

 

 

                                                                           By: ______________________________                                                           & #160;   

                                                                           Name: Heath G. Schiesser

                                                                           Title: President and Chief Executive Officer

           Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof.  Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option, and fully understands all provisions of the Option.

 

OPTIONEE:

 

_________________                                                                           

Thomas Tran