EXHIBIT 10.7
ACCREDO HEALTH, INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
___________________
Employee/Optionee: __________________
Number of shares of
Common Stock subject
to this Agreement: _____________
Pursuant to the Accredo Health, Inc. and its Subsidiaries Stock Option and
Restricted Stock Purchase Plan (the "Plan"), the Board of Directors of Accredo
Health, Inc. (the "Company") has granted to you on the Date of Grant indicated
below an option (the "Option") to purchase the number of shares of the Company's
Common Stock, $.01 par value ("Common Stock"), set forth above. Such shares (as
the same may be adjusted as described in Section 12 below) are herein referred
to as the "Option Shares." The Option shall constitute and be treated at all
times by you and the Company for Federal income tax purposes as an "incentive
stock option" as defined under Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code") except to the extent that Section 422(d) of the
Code may be applicable; provided that nothing herein shall be deemed to obligate
you to adhere to any holding periods set forth in Section 422(a)(1) of the Code.
The terms and conditions of the Option are set out below.
1. Date of Grant. The Option is granted to you on ____________________.
2. Termination of Option. Your right to exercise the Option (and to
purchase the Option Shares) shall expire and terminate in all events on the
earlier of (i) ten years from date of grant or (ii) the date provided in Section
10 below in the event you cease to be employed by the Company or any subsidiary
or parent thereof.
3. Option Price. The purchase price to be paid upon the exercise of the
Option is $_________ per share (subject to adjustment as provided in Section 13
below).
4. Tranche A Vesting Provisions. With respect to an aggregate
____________ Option Shares (the "Tranche A Option Shares"), except as provided
in Section 6 below, you will not be entitled to exercise the Option (and
purchase any such Option Shares) prior to ________________. Commencing on
______________, and on each of the three succeeding anniversaries of that date
on which you shall continue to be employed on a full-time basis by the Company
or any subsidiary or parent thereof, you shall become entitled to exercise the
Option with respect to 25% of such Tranche A Option Shares (as the same may be
adjusted from time to time pursuant to Section 13 below, and rounded to the
nearest whole share) until the Option expires and terminates pursuant to Section
2 hereof.
5. RESERVED.
6. Accelerated Vesting for Change of Control.
(a) Upon the occurrence of a "Change in Control," (as defined
below) all outstanding Options shall become fully exercisable;
provided, however that such acceleration will not occur if, in
the opinion of the Corporation's accountants, such
acceleration would preclude the use of "pooling of interest"
accounting treatment for a Change in Control transaction that
(a) would otherwise qualify for such accounting treatment, and
(b) is contingent upon qualifying for such accounting
treatment. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in
Section 4.3 of the Plan, the excess Options shall be deemed to
be Non-Qualified Stock Options.
(b) "Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Date of Grant the beneficial owner
of 25% or more of the Outstanding Corporation Voting
Securities, (ii) any acquisition directly from the
Corporation, (iii) any acquisition by the Corporation, (iv)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation, or (v) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (3) of
this definition; or
(2) Individuals who, as of the Date of Grant, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Date of Grant whose election, or nomination for election
by the Corporation's stockholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of
the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Corporation Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination; or
(4) Approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
7. Additional Provisions Relating to Exercise.
(a) Once you become entitled to exercise the Option (and purchase
Option Shares) as provided in Sections 4, 5 and 6 hereof, such
right will continue until the date on which the Option expires
and terminates pursuant to Section 2 hereof.
(b) The Board of Directors of the Company, in its sole discretion,
may at any time accelerate the time set forth in Section 4, 5
or 6 hereof at which the Option may be exercised by you with
respect to any Option Shares.
8. Exercise of Option. The Option shall be exercised by written notice
directed to the Secretary of the Company at the principal executive offices of
the Company, in substantially the form attached hereto as Exhibit A, or such
other form as the Committee may approve, such as the forms provided by the
Company's stock plan administrator. 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 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.
9. Transferability of Option. The Option may not be transferred by you
(other than by will or the laws of descent and distribution) and may be
exercised during your lifetime only by you.
10. Termination of Employment.
(a) In the event that (i) the Company or any subsidiary or parent
thereof terminates your employment by such entity "for cause"
or (ii) you terminate your employment by such entity for any
reason whatsoever (other than as a result of your death or
"disability" (within the meaning of Section 22(e)(3) of the
Code), then the Option may only be exercised within three
months after such termination, and only to the same extent
that you were entitled to exercise the Option on the date your
employment was so terminated and had not previously done so.
(b) In the event that you cease to be employed on a full-time
basis by the Company or any subsidiary or parent thereof as a
result of the termination of your employment by the Company or
any subsidiary or parent thereof at any time other than "for
cause" or as a result of your death or "disability" (within
the meaning of Section 22(e)(3) of the Code) the Option may
only be exercised within three months after the date you cease
to be so employed, and only to the same extent that you were
entitled to exercise the Option on the date you ceased to be
so employed by reason of such termination and had not
previously done so.
(c) In the event that you cease to be employed on a full-time
basis by the Company or any subsidiary or parent thereof by
reason of a "disability" (within the meaning of Section
22(e)(3) of the Code), the Option may only be exercised within
one year after the date you cease to be so employed, and only
to the same extent that you were entitled to exercise the
Option on the date you ceased to be so employed by reason of
such disability and had not previously done so.
(d) In the event that you die while employed by the Company or any
subsidiary or parent thereof (or (i) within a period of one
month after ceasing to be employed by the Company or any
subsidiary or parent thereof for any reason described in
Section 10(a) above, (ii) within a period of ninety (90) days
after ceasing to be employed by the Company or any subsidiary
or parent thereof for any reason described in Section 10(b)
above or (iii) within a period of one year after ceasing
to be employed by the Company for any reason described in
Section 10(c) hereof), the Option may only be exercised within
one year after your death. In such event, the Option may be
exercised during such one-year period by the executor or
administrator of your estate or by any person who shall have
acquired the Option through bequest or inheritance, but only
to the same extent that you were entitled to exercise the
Option immediately prior to the time of your death and you had
not previously done so.
(e) Notwithstanding any provision contained in this Section 10 to
the contrary, in no event may the Option be exercised to any
extent by anyone after the tenth anniversary of the date of
grant.
11. Representations. You represent and warrant that you understand the
Federal, state and local income tax consequences of the granting of the Option
to you, the acquisition of rights to exercise the Option with respect to any
Option Shares, the exercise of the Option and purchase of Option Shares, and the
subsequent sale or other disposition of any Option Shares. In addition, you
understand that the Company may be required to withhold Federal, state or local
taxes in respect of any compensation income realized by you as a result of any
"disqualifying disposition" of any Option Shares acquired upon exercise of the
Option granted hereunder. To the extent that the Company is required to withhold
any such taxes as a result of any such "disqualifying disposition", you hereby
agree that the Company may deduct from any payments of any kind otherwise due to
you an amount equal to the total Federal, state and local taxes required to be
so withheld, or if such payments are inadequate to satisfy such Federal, state
and local taxes, or if no such payments are due or to become due to you, then
you agree to provide the Company with cash funds or make other arrangements
satisfactory to the Company regarding such payment. It is understood that all
matters with respect to the total amount of taxes to be withheld in respect of
any such compensation income shall be determined by the Board of Directors in
its sole discretion.
12. Notice of Sale. You agree to give the Company prompt notice of any
sale or other disposition of any Option Shares that occurs (i) within two years
from the date of the granting of the Option to you, or (ii) within one year
after the transfer of such Option Shares to you upon the exercise of the Option.
13. Reorganization, Reclassification, Consolidation, Merger or Sale.
(a) In the event that, after the date hereof, the outstanding
shares of the Company's Common Stock shall be increased or
decreased or changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company
or of another corporation through reorganization, merger or
consolidation, recapitalization, reclassification, stock
split, split-up, combination or exchange of shares or
declaration of any dividends payable in Common Stock, the
Board of Directors of the Company shall appropriately adjust
the number of shares of Common Stock (and the option price per
share) subject to the unexercised portion of the Option (to
the nearest possible full share), and such adjustment shall be
effective and binding for all purposes of this Agreement and
the Plan.
(b) If any capital reorganization or reclassification of the
capital stock of the Company or any consolidation or merger of
the Company with another corporation, or the sale of all or
substantially all its assets to another corporation, shall be
effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then
you shall thereafter have the right to receive upon the basis
and upon the terms and conditions specified in the Option and
in lieu of the shares of Common Stock of the Company
immediately theretofore receivable upon the exercise of the
Option, such shares of stock, securities or assets (including
cash) as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately
theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken
place.
(c) In the event that, after the date hereof, Fully Diluted Common
Stock Outstanding shall be increased or decreased or changed
into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another
corporation through reorganization, merger or consolidation,
recapitalization, reclassification, stock split, split-up,
combination or exchange of shares or declaration of any
dividends payable in Common Stock, the Board of Directors of
the Company shall appropriately adjust the Target FDEPS for
each fiscal year ending after said event to reflect the
increase or decrease in Fully Diluted Common Stock Outstanding
such that Target FDEPS for that fiscal year will not be
materially affected by the increase or decrease.
14. Continuation of Employment. Neither the Plan nor the Option shall
confer upon you any right to continue in the employ of the Company or any
subsidiary or parent thereof, or limit in any respect the right of the Company
or any subsidiary or parent thereof to terminate your employment or other
relationship with the Company or any subsidiary or parent thereof, as the case
may be, at any time.
15. Plan Documents. This Agreement is qualified in its entirety by
reference to the provisions of the Plan, which are incorporated herein by
reference.
16. Restrictive Covenant & Confidentiality Agreement. You acknowledge
and agree that as a condition to the grant of any options pursuant to the Plan
that you either be bound by or execute and become bound by a Restrictive
Covenant and Confidentiality Agreement with Accredo Health, Inc. or one of its
Subsidiaries; receipt of a copy of which you hereby acknowledge.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee. If any one or more
provisions of this Agreement shall be found to be illegal or unenforceable in
any respect, the validity and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
Please acknowledge receipt of this Agreement by signing the enclosed copy
of this Agreement in the space provided below and returning it promptly to the
Secretary of the Company.
Accredo Health, Incorporated
By_______________________________
Name: David D. Stevens
Title: Chief Executive Officer
Accepted and Agreed to
as of __________________:
___________________________________
Employee/Optionee
EXHIBIT A
ACCREDO HEALTH, INC. AND ITS SUBSIDIARIES
STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN
OPTION EXERCISE FORM
I,__________________________, a Participant under the Accredo
Health, Inc. and its Subsidiaries Stock Option and Restricted Stock Purchase
Plan (the "Plan"), do hereby exercise the right to purchase __________ shares of
Common Stock, $.01 par value, of Accredo Health, Inc. pursuant to the Option
granted to me on ___________________ under the Plan.
Enclosed herewith is (indicate one):
[ ] Cash or a check in the amount of $____, an amount equal to the total
exercise price for the shares of Common Stock being purchased
pursuant to this Option Exercise Form.
OR
[ ] A certificate or certificates representing shares of Common Stock of
the Company, together with stock powers and other documentation
requested by the Company, for a number of shares of Common Stock
which the undersigned has owned for not less than six months having
a fair value as of the date hereof equal to the total exercise price
for the shares of Common Stock being purchased pursuant to this
Option Exercise Form.
Date:________________ ____________________________
Signature
Send a completed copy of this Option Exercise Form to:
Accredo Health, Inc.
1640 Century Center Parkway
Memphis, Tennessee 38134
Attention: Secretary