EXHIBIT 10.7
INCENTIVE STOCK OPTION AGREEMENT
under the
ACCREDO HEALTH, INCORPORATED
2002 LONG-TERM INCENTIVE PLAN
Optionee: Steven R. Fitzpatrick
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Number Shares Subject to Option: 37,500
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Exercise Price per Share: $27.91
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Date of Grant: September 5, 2003
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1. Grant of Option. Accredo Health, Incorporated (the "Company")
hereby grants to the Optionee named above (the "Optionee"), under the Accredo
Health, Incorporated 2002 Long-Term Incentive Plan (the "Plan"), an Incentive
Stock Option to purchase, on the terms and conditions set forth in this
agreement (this "Option Agreement"), the number of shares indicated above of the
Company's $0.01 par value common stock (the "Stock"), at the exercise price per
share set forth above (the "Option"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Article 9 of the Plan, the Option shall vest
(become exercisable) in accordance with the following schedule:
Cumulative No. of
No. of Option Shares Option Shares Vested on
Vesting Date Vested on Vesting Date Vesting Date
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1st anniversary of grant date 25% 25%
2nd anniversary of grant date 25% 50%
3rd anniversary of grant date 25% 75%
4th anniversary of grant date 25% 100%
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b) and
(c) below, provide in writing that the Option will extend until a later date,
but if the Option is exercised after the dates specified in paragraphs (b) and
(c) below, it will automatically become a Non-Qualified Stock Option:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time, on the
tenth anniversary of the date of grant (the "Expiration Date").
(b) The Option shall lapse three months after the Optionee's
termination of employment for any reason other than the Optionee's death or
Disability; provided, however, that if the Optionee's employment is terminated
by the Company for cause (as defined below) or by the Optionee without the
consent of the Company, the Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the Optionee's
termination of employment.
(d) If the Optionee dies while employed, or during the three-month
period described in subsection (b) above or during the one-year period described
in subsection (c) above and before the Option otherwise lapses, the Option shall
lapse one year after the date of the Optionee's death. Upon the Optionee's
death, the Option may be exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
(including vesting by acceleration in accordance with Article 9 of the Plan).
The term "cause" as used herein shall mean cause as defined in your
employment agreement, if any. If no agreement exists where cause is defined,
cause shall mean (i) gross neglect of duty, (ii) prolonged absence from duty
without the consent of the Company, (iii) intentionally engaging in any activity
which is in conflict with or adverse to the business or other interests of the
Company, (iv) willful misconduct, misfeasance or malfeasance of duty which is
reasonably determined to be detrimental to the Company.
4. Exercise of Option. The Option shall be exercised by written
notice on such forms as the Committee may approve, such as the forms provided by
the Company's stock plan administrator AST Stockplan, Inc. Unless the exercise
is a broker-assisted "cashless exercise" as described below, such written notice
shall be accompanied by full payment in cash, shares of Stock previously
acquired by the Optionee, or any combination thereof, for the number of shares
specified in such written notice; provided, however, that if shares of Stock are
used to pay the exercise price, such shares must have been held by the Optionee
for at least six months. The Fair Market Value of the surrendered Stock as of
the last trading day immediately prior to the exercise date shall be used in
valuing Stock used in payment of the exercise price. To the extent permitted
under Regulation T of the Federal Reserve Board, and subject to applicable
securities laws, the Option may be exercised through a broker in a so-called
"cashless exercise" whereby the broker sells the Option shares and delivers cash
sales proceeds to the Company in payment of the exercise price. In such case,
the date of exercise shall be
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deemed to be the date on which notice of exercise is received by the Company and
the exercise price shall be delivered to the Company on the settlement date.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Company.
5. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Company unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Company or any
Subsidiary.
6. Stock Reserve. The Company shall at all times during the term
of this Option Agreement reserve and keep available such number of shares of
Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
7. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Company or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any other party other than the Company or a Parent
or Subsidiary. The Option is not assignable or transferable by the Optionee
other than by will or the laws of descent and distribution. The Option may be
exercised during the lifetime of the Optionee only by the Optionee.
8. Restrictions on Issuance of Shares. If at any time the Board
shall determine in its discretion, that listing, registration or qualification
of the shares of Stock covered by the Option upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to the exercise of the
Option, the Option may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
9. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative.
10. Successors. This Option Agreement shall be binding upon any
successor of the Company, in accordance with the terms of this Option Agreement
and the Plan.
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11. Severability. If any one or more of the provisions contained
in this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
12. Notice. Notices and communications under this Option Agreement
must be in writing and either personally delivered or sent by registered or
certified United States mail, return receipt requested, postage prepaid. Notices
to the Company must be addressed to:
Accredo Health, Incorporated
1640 Century Center Pkwy, Suite 101
Memphis, TN 38134
Attn: Secretary
or any other address designated by the Company in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Company, or at any other address given
by the Optionee in a written notice to the Company.
13. Interpretation. It is the intent of the parties hereto that
the Option qualify for incentive stock option treatment pursuant to, and to the
extent permitted by, Section 422 of the Code. All provisions hereof are intended
to have, and shall be construed to have, such meanings as are set forth in
applicable provisions of the Code and Treasury Regulations to allow the Option
to so qualify.
14. Restrictive Covenant and Confidentiality Agreement. You
acknowledge and agree that as a condition to the grant of any options pursuant
to the Plan that you are bound by and have executed a Restrictive Covenant and
Confidentiality Agreement with Accredo Health, Inc. or one of its Subsidiaries;
receipt of a copy of which you hereby acknowledge.
15. Binding Effect. The grant of the Options referenced herein is
subject to Optionee being bound by all of the terms set out in this Agreement.
The acceptance of the Options and the exercise of any right hereunder, including
but not being limited to the giving of written notice to exercise any Option,
shall constitute conclusive evidence of acceptance by the Optionee of all of the
terms and conditions set out herein, and Optionee by such actions shall be bound
by, and shall be deemed to have agreed to these terms and conditions, the same
as if Optionee had affixed his or her signature to this Incentive Stock Option
Agreement.
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IN WITNESS WHEREOF, Accredo Health, Incorporated, acting by and through
its duly authorized officer, has caused this Option Agreement to be executed as
of the day and year first above written.
ACCREDO HEALTH, INCORPORATED
By:
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Name: Thomas W. Bell, Jr.
Title: Sr. Vice President and
General Counsel
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