Exhibit 10.2
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
This AGREEMENT (this
“Agreement”) is made as of August 2, 2007 by and
between HealthMarkets, Inc., a Delaware corporation (the
“Company”), and Philip Rydzewski
(“Optionee”). As a condition precedent to the
Company’s grant of the Options (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 Stockholders’ Agreement as a
“Management Stockholder” thereunder.
1. Certain
Definitions . Capitalized terms used, but not otherwise
defined, in this Agreement will have the meanings given to such
terms in the Company’s 2006 Management Option Plan (the
“Plan”). As used in this Agreement:
(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 , that 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) “Effective
Time” has the meaning specified in Section 9
hereof.
(f) “Fair
Market Value” shall have the meaning specified in the
Stockholders Agreement.
(g) “Options”
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) “Performance-Based
Tranche” has the meaning specified in Section 2 of this
Agreement.
(l) “Plan”
has the meaning specified in Section 1 of this
Agreement.
(m) “Termination
for Cause” means the termination by the Company or any
Subsidiary of Optionee’s employment 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 required of him, if
any, with the Company or any Subsidiary, (ii) the commission
by Optionee of a material breach of any of the covenants required
of his position, if any, with the Company or any Subsidiary or 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 under his job duties, if any, with the Company
or any Subsidiary or the Optionee’s duties as an employee of
the Company or any Subsidiary.
(n) “Termination
for Good Reason” means the termination by the Optionee of
Optionee’s employment with the Company or any Subsidiary with
written notice to the Company within 90 days following the
occurrence, without Optionee’s consent, of any of the
following events (after failure of the Company or any Subsidiary to
cure in thirty (30) days): (i) the reduction of
Optionee’s position from that of a senior executive level
position with the Company or any Subsidiary, (ii) a decrease
in Optionee’s base salary or target annual bonus, other than
in the case of a decrease for a majority of similarly situated
executives of the Company or any Subsidiary, (iii) a reduction
in Optionee’s participation in the Company’s or any
Subsidiary’s benefit plans and policies to a level materially
less favorable to Optionee, unless such reduction applies to a
majority of the senior level executives of the Company or any
Subsidiary, or (iv) the announcement of the relocation of
Optionee’s primary place of employment to a location 50 or
more miles from the current headquarters.
(o) “Termination
Without Cause” means the termination by the Company or any
Subsidiary of Optionee’s employment with the Company or any
Subsidiary for any reason other than a Termination for Cause (other
than by reason of Optionee’s death or Disability).
(p) “Time-Based
Tranche” has the meaning specified in Section 2 of this
Agreement.
(q) “Tranche
C Option Shares” has the meaning specified in Section 2
of this Agreement.
(r) “Voluntary
Termination” means Optionee’s termination of
Optionee’s employment with the Company or any Subsidiary for
any reason, other than a Termination for Good Reason.
2. Grant of Stock
Option . Subject to and upon the terms, conditions, and
restrictions set forth in this Agreement and in the Plan and the
Company’s obtaining shareholder approval of the Plan, the
Company hereby grants to Optionee options (the
“Options”) to purchase 12,500 shares of the
Company’s Class A-1 Common Stock (the “Option
Shares”). The Options may be exercised from time to time in
accordance with the terms of this Agreement. Subject to adjustment
as hereinafter provided,
(a) one-third of the Option Shares
(4,167 shares) may be purchased pursuant to the Options at a price
(the “Option Price”) of $40.97 per share (the
“Time-Based Tranche”);
(b) one-third of the Option Shares(
4,167 shares) may be purchased pursuant to the Options at an Option
Price of $40.97 per share (the “Performance-Based
Tranche”); and
(c) one-third of the Option Shares
(4,166 shares) (the “Tranche C Option Shares”) may be
purchased pursuant to this Option at an Option Price of (i) $40.97
per share, if Optionee exercises the option to purchase any Tranche
C Option Shares prior to the second anniversary of the Effective
Time; (ii) $45.07 per share, if Optionee exercises the option to
purchase any Tranche C Option Shares on or after the second
anniversary of the Effective Time but prior to the third
anniversary of the Effective Time; (iii) $49.58 per share, if
Optionee exercises the option to purchase any Tranche C Option
Shares on or after the third anniversary of the Effective Time but
prior to the fourth anniversary of the Effective Time; (iv) $54.54
per share, if Optionee exercises the option to purchase any Tranche
C Option Shares on or after the fourth anniversary of the Effective
Time but prior to the fifth anniversary of the Effective Time; and
(v) $59.99 per share, if Optionee exercises the option to purchase
any Tranche C Option Shares on or after the fifth anniversary of
the Effective Time.
The
Options are intended to be nonqualified stock options and shall not
be treated as an “incentive stock option” within the
meaning of that term under Section 422 of the Code, or any
successor provision thereto. In the event that shareholder approval
of the Plan is not obtained, this Option shall be void ab
initio and of no force and effect.
3. Term of
Options . The term of the Options shall commence at the
Effective Time and, unless earlier terminated in accordance with
Section 7 hereof, shall expire ten (10) years from the
Effective Time.
4. Right to
Exercise . Unless terminated as hereinafter provided, the
Options shall become exercisable only as follows:
(a) The
Options shall become exercisable with respect to 20% of the
Time-Based Tranche(4,167 shares) on each of the first five
anniversaries of the Effective Time if Optionee remains in the
continuous employ of the Company or any Subsidiary as of each such
date.
(b) The
Optionee may earn the right to exercise the option to purchase
(i) 25% of the Performance-Based Tranche (1,041 shares) on the
first anniversary of the Effective Time, (ii) 25% of the
Performance-Based Tranche (1,042 shares) on the second anniversary
of the Effective Time, (iii) 17% of the Performance-Based
Tranche (708 shares) on the third anniversary of the Effective
Time, (iv) 17% of the Performance-Based Tranche (709 shares)
on the fourth anniversary of the Effective Time and (v) the
remaining 16% of the Performance-Based Tranche (667 shares) on the
fifth anniversary of the Effective Time, provided, however ,
that (A) as of each such date Optionee shall have remained in
the continuous employ of the Company or any Subsidiary and
(B) the Company shall have achieved certain specified
performance targets (including, without limitation, EBIT, net
income and revenue growth) set by the Compensation Committee after
consultation in good faith with the Chief Executive Officer of the
Company for such year. Any shares included in the Performance-Based
Tranche as to which Optionee does not earn the right to exercise
the related Option Shares shall thereupon expire and
terminate.
(c) The
Options shall become exercisable with respect to (i)&nb
| 
