Exhibit 10.82a
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), dated as of April
1, 1996, is made by and between Peter J. Ratican ("Executive") and
Maxicare Health Plans, Inc., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, Executive presently serves as Chief Executive Officer
and President of the Company pursuant to an Employment and
Indemnification Agreement dated as of January 1, 1992 exerting
particularly diligent efforts in such capacity on behalf of the
Company;
WHEREAS, the Company and the Executive have agreed that
Executive should continue to serve in the aforementioned capacities
on behalf of the Company pursuant to the terms and conditions
contained in the Amended and Restated Employment and
Indemnification Agreement dated as of April 1, 1996 between the
Company and the Executive (the "Restated Employment Agreement");
WHEREAS, as a material part of Executive's compensation under
the New Employment Agreement, the Company has agreed to grant
Executive options to purchase 350,000 shares of the Company's, no
par value, common stock (the "Common Stock"); and
WHEREAS, the Company and the Executive desire to set forth in
this Agreement the specific terms and conditions regarding the
aforementioned options.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, Executive and the
Company hereby agree as follows:
1. Grant of Options. Subject to Section 14 below
and upon the terms and subject to the conditions hereinafter set
forth, the Company hereby agrees to grant to Executive options (the
"Options") to purchase up to 350,000 authorized but unissued shares
of Common Stock (the "Option Shares"). As a pre-condition to the
grant of each of the Options set forth below and all Options to be
granted hereunder following such Option, Executive must be employed
by the Company on the grant date of any such Option. Subject to
the preceding sentence, the Options shall be granted on the
following dates:
(a) an Option to purchase 70,000 Option Shares on
the date on which resolutions are adopted by the Shareholders
approving this Agreement;
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(b) an Option to purchase 70,000 Option Shares on
January 1, 1997;
(c) an Option to purchase 70,000 Option Shares on
January 1, 1998;
(d) an Option to purchase 70,000 Option Shares on
January 1, 1999; and
(e) an Option to purchase 70,000 Option Shares on
January 1, 2000.
2. Option Prices.
(a) The Option Price with respect to the Option
Shares for each of the Options set forth in 1(a) through 1(e) above
shall be the closing price of the Common Stock on the last trading
date immediately preceding the grant dates of the Options set forth
in Sections 1(a) through 1(e) above.
(b) For the purposes of calculating the Option
Price, the closing price shall be (in the following order or
priority), if the Common Stock is listed or admitted for trading
(i) on any national securities exchange (or in case the Common
Stock shall be listed on more than one, the exchange with the
greatest trading volume in the Common Stock), the last sale price,
or, in case no reported sale takes place on such day, the average
of the last reported bid and asked prices; (b) on the National
Association of Securities Dealers, Inc. Automated Quotation System-
National Market System ("NASDAQ-NMS"), the average of the last
reported bid and asked prices; or (iii) in the daily stock price
publication of the National Quotation Bureau (also known as the
"Pink Sheets"), the average of the last reported bid and asked
prices.
3. Vesting of Options. Executive's rights in and to
the Options set forth in Sections 1(a) through 1(e) above shall
vest, and Executive may exercise each such Option immediately as of
the date of the grant of each Option.
4. Term of Options. Subject to and so long as
Executive is employed by the Company, whether pursuant to the
Restated Employment Agreement or otherwise each Option granted
pursuant to Sections 1(a) through 1(e) above, may be exercised in
whole or in part at any time or from time to time by Executive on
or before 12:00 midnight, California time on the expiration of 10
years from the date of grant of each such Option (the "Expiration
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Date"); provided, however, that in the event that Executive's
employment with the Company terminates prior to the Expiration Date
the Options which have been granted prior to such termination of
employment shall expire as follows:
(a) in the event termination is as a result of
death of Executive or Incapacity, any outstanding Options granted
pursuant to this Agreement shall expire 180 days after such
termination;
(b) in the event termination is as a result of:
(i) Cause pursuant to Section 7(d) of the Restated Employment
Agreement or (ii) pursuant to Section 7(b) of the Restated
Employment Agreement other than for Good Reason, thirty (30) days
after such termination; and
(c) in the event termination is as a result of
Section 7(b) for Good Reason, 7(e) or 7(f) of the Restated
Employment Agreement on the Expiration Date.
The terms "Incapacity", "Cause" and "Good Reason" when utilized
herein shall be as defined in the Restated Employment Agreement.
5. Exercise of Option.
(a) In the event Executive elects to exercise any
Option granted hereunder, he shall give at least three, but no more
than ten business days' prior written notice to the Company, at the
principal executive office of the Company, or to such transfer
agent as the Company shall designate. Such notice shall state
which Option the employee wishes to exercise, the election to
exercise such Option and the number of Option Shares with respect
to which it is being exercised. The notice shall be accompanied by
a cashier's or certified check payable in United States Dollars to
the order of the Company in an aggregate amount equal to the
product of the Option Price times the number of Option Shares to be
purchased.
Upon receipt of Executive's notice to exercise the Option,
conforming to the conditions of this Section 5, the Company shall,
as soon as practicable thereafter, deliver to Executive a
certificate or certificates representing the Option Shares
purchased, registered in the name of the Executive (or, if so
request in the notice to exercise, registered in the name of the
Executive and another person jointly, with right of survivorship).
In the event the Option shall be exercised, pursuant to Section 10
hereof, by any person or persons other than Executive, such notice
shall be accompanied by appropriate proof of the right of such
person or persons to exercise the Option.
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All Option Shares purchased upon the exercise of the Option as
provided herein shall be fully paid and non-assessable.
(b) Notwithstanding the foregoing, the Option may
be exercised only on the condition that no injunction, judgment,
order or decree of a court or governmental agency with competent
jurisdiction prohibits such exercise.
6. Adjustment Upon Restructuring or Dissolution.
(a) In the event of any change, after the date of
grant but prior to the exercise of any Option granted hereunder, in
the number or nature of Option Shares by reason of any stock
dividend, split-up, stock split, reverse stock split, merger,
recapitalization, combination, exchange of common stock, or similar
transaction (the "Restructuring"), the number and kind of Option
Shares subject to acquisition hereunder and the Option Price per
Option Share shall be appropriately adjusted, effective upon the
consummation of the Restructuring, either by way of an amendment to
the Options or by way of a grant of new stock options in
substitution of, or in addition to, the Options, to provide that:
(i) the number of shares subject to the Options shall be adjusted
to reflect such Restructuring so that the percentage of the
outstanding equity of the Company represented by shares subject to
the Options remains constant both before and after the
Restructuring; and (ii) the per share exercise price of the Options
shall be adjusted so that the total exercise price which would be
paid by Executive, were he to purchase all of the shares available
to him under the Options after the adjustment described in the
preceding clause (i), equals the total exercise price he would have
paid had he purchased all Option Shares available to him before the
Restructuring at the Option Price. In the event any Restructuring
occurs prior to the grant of any Option hereunder, (i) above shall
apply; however the Option Price shall be as determined by Section 2
above.
(b) In addition, in the event of any dissolution
or liquidation of the Company or a Restructuring as a result of
which the Company is not the surviving corporation, or a sale of
substantially all the property of the Company to another entity,
then either (i) provision shall be made for the assumption of all
Options or the substitution for the Options of new options covering
the stock of a successor employer corporation (or a parent or
subsidiary thereof) with appropriate adjustments as to number and
kind of shares and prices; or (ii) provision shall be made for the
payment of substantially equivalent economic benefit to Executive
in exchange for such Options which have been granted prior to the
consummation of such event or transaction, upon the consummation of
such event or transaction; notwithstanding the foregoing, Executive
shall have the right, prior to the consummation of such event or
transaction, to exercise all Options granted prior to the
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consummation thereof. In the event that the contemplated event or
transaction is not consummated, any Option that had been exercised
solely by reason of such event or transaction shall again become
unexercised and shall revert to its former status as issued but
unexercised as of the termination of the transaction subject,
however, to such other provisions of this Agreement as may apply.
For the purposes hereof, the aforementioned economic benefit to
Executive shall be calculated (without regard to the illiquidity of
the Common Stock issuable to the Executive upon exercise of the
Option) based upon the actual difference between the Option Price
and the closing price of the Common Stock on the day prior to the
consummation of the aforementioned transaction.
(c) Adjustments under this Section 6 shall be
made by the Board of Directors of the Company, whose determination
as to what adjustments shall be made shall be final and conclusive.
The Board of Directors of the Company may obtain and may rely upon
the advice of independent counsel and accountants of the Company.
No fractional shares of stock shall be issued under the option on
account of any such adjustment. If for any reason Option Shares
shall include a fractional share interest, upon the exercise of the
option with respect to such fractional interest, a cash payment
shall be made of an equivalent value for such fractional interest.
7. Investment Representations; Restrictions on
Transfer.
(a) Executive represents, warrants and covenants
to the Company that:
(i) Any Option Shares or other securities
acquired by Executive upon exercise of the Option will be acquired
for Executive's own account and not with a view to resale or
distribution in violation of the Securities Act of 1933, as amended
(the "1933 Act").
(ii) Executive has such knowledge and
experience in business and financial matters as to be capable of
utilizing the information which is available to him to evaluate the
merits and risks of an investment in Option Shares and is able to
bear the economic risks of any Option Shares or other securities
which Executive may acquire upon exercise of the Option.
(iii) Executive understands that the Option
Shares have not been registered under the 1933 Act, in reliance
upon certain exemptions contained therein, and that the Company's
reliance on such exemption is predicated on Executive's
representations set forth herein. Executive further understands
that because the Option Shares have not been registered under the
1933 Act, he may not, and Executive covenants and agrees that he
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will not, sell, offer to sell or otherwise dispose of any such
securities in violation of the 1933 Act or any applicable "blue
sky" or securities law of any state. Executive acknowledges and
understands that he has no independent right to require the Company
to register the Option Shares.
(b) Executive consents to the placing of
restrictive legends in substantially the following form on any
stock certificate(s) representing Option Shares:
"The Shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or the
blue sky law of any state. These shares have been acquired for
investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise
transferred without an effective registration statement for such
shares under the Securities Act of 1933, as amended, or until the
issuer has been furnished with an opinion of counsel for the
registered owner of these shares, reasonably satisfactory to
counsel for the issuer, that such sale, transfer or disposition is
exempt from the registration or qualification provisions of the
Securities Act of 1933, as amended, or the blue sky laws of any
state having jurisdiction."
(c) Executive also hereby consents and agrees to
the placing of stop transfer instructions against any subsequent
transfer(s) of the Option Shares. The Company hereby agrees to
remove the legend and stop transfer instructions upon receipt of an
opinion of counsel from the registered owner of the Option Shares,
in form and substance reasonably acceptable to counsel for the
Company, to the effect that such shares may be transferred without
violation of the 1933 Act or the blue sky laws of any state having
jurisdiction.
8. Additional Documents. The Company and Executive
hereby covenant and agree to execute and deliver any additional
documents necessary or desirable, in the opinion of Executive or
the Company, as the case may be, to complete the sale and transfer
of all of the Option Shares with respect to which the Option is
exercised.
9. Options Not Transferable. Executive may not
transfer or assign the Option or his rights under this
Agreement,except by will or by the laws of descent and distribution
and subject to the provisions of Section 10 hereof. The Option and
Executive's rights under this Agreement shall not otherwise be
transferred, assigned, pledged or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during
Executive's lifetime only by Executive or his guardian or legal
representative.
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10. Death or Termination of Executive. Subject to
Section 5(a) above if the Executive dies during the term of any
Options granted hereunder, the Option may be exercised, to the
extent of the number of shares with respect to which the Executive
could have exercised such Options on the date of his death, by his
estate, personal representative or beneficiary, or the person or
persons entitled to do so under the Executive's last will and
testament or under applicable intestate laws.
11. No Obligation to Exercise Options. The grant and
acceptance of the Options imposes no obligation on Executive to
exercise them.
12. No Obligation to Continue Employment. The
Company is not by virtue of the grant of the Options obligated to
continue Executive in employment.
13. No Rights as Stockholder Until Exercise. The
Executive shall have no rights as a stockholder with respect to
Option Shares until a stock certificate with respect to the Option
Shares has been issued to Executive and the Option Shares have been
fully paid for pursuant to the terms hereof.
14. Shareholder Approval. The grant of the Options
pursuant to the terms of this Agreement shall be subject to and
conditioned upon the approval of the Company's shareholders. The
Company agrees to seek such approval at the 1996 Annual Meeting of
Stockholders.
15. Registration Undertaking. Subsequent to
shareholder approval of the Options, the Company agrees to file a
Form S-8 Registration Statement at such time as may be determined
by its Board of Directors. Said Form S-8 Registration Statement,
and the Form S-3 Prospectus related thereto, shall include, to the
extent permissible, the Option Shares.
16. Miscellaneous.
16.1 Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
16.2 Binding Effect and Assignment. This Agreement
and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and permitted assigns. Executive's rights to the Option with
respect to the percentage of the Option Shares in which his
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interest has vested as of the termination date hereof shall survive
the termination of this Agreement, regardless of cause. This
Agreement may not be assigned by the Company without the prior
written consent of Executive.
16.3 Amendments and Modification. This Agreement may
not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
16.4 Specific Performance; Injunctive Relief. The
parties hereto acknowledge that Executive will be irreparably
harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of the Company set
forth herein. Therefore, it is agreed that, in addition to any
other remedies which may be available to Executive upon any such
violation, Executive shall have the right to enforce such covenants
and agreements by specific performance, injunctive relief or by any
other means available to Executive at law or inequity.
16.5 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if delivered by messenger, transmitted by telex or telecopier
(with receipt confirmed), or mailed by registered or certified
mail, postage prepaid, as follows:
(a) If to Executive:
Peter J. Ratican
1440 Greenbriar Road
Glendale, California 91207
(b) If to the Company:
Maxicare Health Plans, Inc.
1149 South Broadway Street
Los Angeles, California 90015
Attention: Alan D. Bloom, Esq.
General Counsel
or such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall only be effective upon receipt.
16.6 Counterparts. This Agreement may be executed in
any number of counterparts, and by separate parties on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
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16.7 Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State
of California. The Options will not be treated as an "incentive
stock option" under the Internal Revenue Code.
16.8 Jurisdiction, Attorneys' Fees. The parties
hereto agree that any and all disputes hereunder shall be submitted
to a court located in Los Angeles, California and in this regard,
the parties agree that they shall consent to personal jurisdiction
to any state and/or the United States District Court for the
Central District of California sitting in Los Angeles, California
and agree to venue in the State of California. All costs and
expenses (including attorneys' fees) incurred by the parties in
connection with any dispute arising under this Agreement, shall be
apportioned between the parties by a court based upon such court's
determination of the merits of their respective positions.
16.9 Entire Understanding. This Agreement constitutes
the entire understanding between the parties hereto regarding the
subject matter hereof and supersedes all other prior agreements,
understandings, negotiations and discussions of the parties whether
written or oral.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
MAXICARE HEALTH PLANS, INC.,
a Delaware corporation
By:
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Its:
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EXECUTIVE:
/s/ PETER J. RATICAN
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Peter J. Ratican
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