Stock Option Agreement - Medical Manager Corp. and Martin J. Wygod
AMENDED AND RESTATED STOCK OPTION AGREEMENT dated as of August
21, 2000 (the "Agreement") between MEDICAL MANAGER CORPORATION, a Delaware
corporation (the "Company"), and MARTIN J. WYGOD (the "Participant").
WHEREAS, in light of the extraordinary services that will be
required of the Participant in integrating the businesses of the companies
following the merger of the Company and CareInsite, Inc., a Delaware
corporation, with Healtheon/WebMD Corporation, a Delaware corporation
("Healtheon"), the Company has granted to the Participant nonqualified stock
options to purchase 1,200,000 shares of common stock, $.01 par value, of the
Company (the "Common Shares") upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Confirmation of Grant of Options; Effectiveness.
Pursuant to a determination by the Stock Option Committee (the "Committee") of
the Board of Directors of the Company (the "Board"), the Company hereby confirms
that the Participant has been granted, effective as of the date hereof (the
"Date of Grant"), and subject to the terms and conditions of this Agreement, the
number of nonqualified stock options (the "Options") specified at the foot of
the signature page hereof. Each such Option shall entitle the Participant to
purchase, upon payment of the option price specified at the foot of the
signature page hereof (the "Option Price"), one Common Share. The Options shall
be exercisable as hereinafter provided.
2. Certain Restrictions. None of the Options may be
sold, transferred, assigned, pledged, or otherwise encumbered or disposed of,
except by will or the laws of descent and distribution; provided, however, that
the Committee shall permit the transfer of an Option to the Participant's family
members, to one or more trusts established in whole or in part for the benefit
of one or more of such family members or to any other entity that is owned by
such family members. During the Participant's lifetime, an Option shall be
exercisable only by the Participant or by the Participant's guardian, legal
representative or permitted transferee. Each transferee of an Option by will or
the laws of descent and distribution or other permitted transferee shall, as a
condition to the transfer thereof, execute an agreement pursuant to which it
shall become a party to this Agreement. Any attempt to sell, transfer, assign,
pledge or otherwise encumber or dispose of any Option contrary to the provisions
of this Agreement, and any levy, attachment or similar process upon any Option
shall be null and void and without effect.
3. Terms and Conditions of Options. The Options
evidenced hereby are subject to the following terms and conditions:
(a) Vesting. Subject to Section 3(b), the Options shall
vest and become exercisable ("Vested Options") as follows: 2.0833% of the
Options shall vest and become exercisable on the first day of each month
following the Date of Grant, commencing September 1, 2000, with 100% of the
Options being vested and exercisable on August 1, 2004.
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(b) Option Period. (i) The Options shall not be
exercisable following the tenth anniversary of the Date of Grant, and shall be
subject to earlier termination as provided in Section 3(b)(iii).
(ii) In the event that the Participant's employment with the
Company and its subsidiaries is terminated (A) as a result of the Participant's
death or the Participant becoming Disabled (as defined below), (B) by the
Company without Cause (as defined below) or (C) by the Participant for Good
Reason (as defined below), the Options shall be fully vested and exercisable as
of the date on which such employment terminates.
(iii) In the event that the Participant's employment with the
Company and its subsidiaries is terminated by the Company for Cause or by the
Participant without Good Reason, any Options which have not become Vested
Options as of the date of termination shall terminate and be cancelled without
any consideration being paid therefor; provided, however, that a change in the
Participant's status with the Surviving Corporation (as defined in the Agreement
and Plan of Merger dated February 13, 2000 between Healtheon and the Company, as
amended by Amendment No. 1 thereto dated as of June 18, 2000 (the "Merger
Agreement")) from Co-Chief Executive Officer or Chief Executive Officer to any
other position (including Chairman) with the consent of the Surviving
Corporation and the Participant shall not be treated as a termination of the
Participant's employment for purposes of this Agreement.
(iv) In the event that the Participant's employment with the
Company and its subsidiaries terminates for any reason, the Participant (or the
Participant's estate) shall be entitled to exercise any Options which have
become Vested Options as of the date of termination until the tenth anniversary
of the Date of Grant.
(v) In the event of a Change in Control (as defined below),
the Options shall be fully vested and exercisable as of the date on which such
Change in Control occurs. For purposes of this Agreement, a "Change in Control"
means a transaction (other than the transactions contemplated by the Merger
Agreement) that occurs after the Effective Time (as defined in the Merger
Agreement), if:
1. Any person, entity or group shall have acquired, in
one or more transactions, the beneficial ownership of at least 50
percent of the voting power of the outstanding voting securities of the
Surviving Corporation; or
2. The sale of all or substantially all of the assets of
the Surviving Corporation to a person, entity or group occurs in a
transaction (except for a sale-leaseback transaction) where the
Surviving Corporation or the holders of the common stock of the
Surviving Corporation do not receive (i) voting securities representing
a majority of the voting power entitled to vote on a regular basis for
the board of directors of the acquiring entity or of an affiliate which
controls the acquiring entity, or (ii) securities representing a
majority of the equity interest in the acquiring entity or of an
affiliate that controls the acquiring entity, if other than a
corporation; or
3. A complete liquidation or dissolution of the
Surviving Corporation shall have occurred;
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provided, however, that the provisions of this clause (v) shall be
subject to any necessary approvals by the Committee.
(c) Certain Definitions. (i) For purposes of this
Agreement, "Cause" means a final, non-appealable court adjudication in a civil
or criminal proceeding that the Participant has during his employment committed
a fraud or felony directed against the Company relating to or adversely
affecting his employment.
(ii) For purposes of this Agreement, the Participant shall be
"Disabled" if the Participant becomes incapacitated by bodily injury or disease
(including as a result of mental illness) so as to be unable to regularly
perform the duties of his position for a period in excess of 180 days in any
consecutive twelve-month period.
(iii) For purposes of this Agreement, "Good Reason" means any
of the following conditions or events:
1. a reduction in the Participant's title or
responsibilities with the Company or the Surviving Corporation, or if
he is required to report to any person other than the full Board
(following the Effective Time, the full Board of Directors of the
Surviving Corporation);
2. any reduction in any compensation or fringe benefits
provided by the Company;
3. any breach by the Company of this Agreement or any
other material agreement between the Company and the Participant;
4. the failure of the Surviving Corporation to assume
the obligations of the Company hereunder and agree to be bound by the
terms hereof; or
5. a change in the location from which the Participant
performs his services for the Company or the Surviving Corporation from
his residence in the San Diego, California area.
(d) Notice of Exercise. Subject to Sections 3(e) and 5(a)
hereof, the Participant may exercise any or all of the Vested Options by giving
written notice to the Chief Financial Officer of the Company at its principal
business office. The date of exercise of a Vested Option shall be the later of
(i) the date on which the Chief Financial Officer of the Company receives such
written notice or (ii) the date on which the conditions provided in Sections
3(e) and 5(a) hereof are satisfied.
(e) Payment. Prior to the issuance of a certificate
pursuant to Section 3(h) hereof evidencing Common Shares, the Participant shall
have paid to the Company the Option Price of all Common Shares purchased
pursuant to exercise of such Options, in cash or by certified or official bank
check, and all applicable tax withholding obligations as provided in Section
5(a) of this Agreement. The Option Price may also be payable by a customary
"cashless" exercise procedure through a broker or in such other form as the
Committee may approve.
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(f) Shareholder Rights. The Participant shall have no
rights as a shareholder with respect to any Common Shares issuable upon the
exercise of an Option until a certificate or certificates evidencing such shares
shall have been issued to the Participant, and, except as provided in Section 6,
no adjustment shall be made for dividends or distributions or other rights in
respect of any share for which the record date is prior to the date upon which
the Participant shall become the holder of record thereof.
(g) Compliance with Securities Laws. The Company shall,
on or prior to the date on which an Option becomes exercisable, use its best
efforts to (A) file a registration statement with the Securities and Exchange
Commission on Form S-8 with respect to the Common Shares subject to such Option
and cause such registration statement to be declared effective and remain
effective for so long as any Option remains outstanding and (B) qualify such
Common Shares under applicable state "blue sky" laws (or determine that an
exemption under such blue sky laws is available) and cause such Common Shares to
remain so qualified (or exempt) for so long as any Option remains outstanding.
(h) Issuance of Certificate. As soon as practicable
following the exercise of any Options, a certificate evidencing the number of
Common Shares issued in connection with such exercise shall be issued in the
name of the Participant.
4. Representations and Warranties. The Company and the
Participant represent that this Agreement has been duly executed and delivered
by such party and constitutes a legal, valid and binding agreement of such
party, enforceable against such party in accordance with its terms, except as
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally and by general principles of
equity.
5. Miscellaneous.
(a) Tax Withholding. The Company and its subsidiaries
shall have the right to require the Participant to remit to the Company, prior
to the delivery of any certificates evidencing Common Shares pursuant to the
exercise of an Option, any amount sufficient to satisfy any minimum federal,
state or local tax withholding requirements. Prior to the Company's
determination of such withholding liability, the Participant shall have the
right to make an irrevocable election to satisfy, in whole or in part, such
obligation to remit taxes by directing the Company to withhold Common Shares
that would otherwise be received by the Participant.
(b) No Restriction on Right of Company to Effect
Corporate Changes. Subject to Section 6, this Agreement shall not affect in any
way the right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
the capital structure or business of the Company, or any merger or consolidation
of the Company, or any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior preference stocks
whose rights are superior to or affect the Common Shares or the rights thereof
or which are convertible into or exchangeable for Common Shares, or the
dissolution or liquidation of the Company, or any sale
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or transfer of all or any part of the assets or business of the Company, or any
other corporate act or proceeding, whether of a similar character or otherwise.
6. Adjustment.
The number and price per Common Share covered by any Option,
and any other rights under any Option, shall be appropriately adjusted by the
Board or the Committee, as the case may be, to reflect any subdivision (stock
split) or consolidation (reverse split) of the issued Common Shares, or any
other recapitalization of the Company, or any business combination or other
transaction involving the Company (including, without limitation, rights
offerings and issuances of securities for consideration that is less than the
fair market value thereof), which shall affect the rights of holders of Common
Shares. The Committee or the Board, as the case may be, shall provide for
appropriate adjustment of the Options in the event of stock dividends or
distributions of assets or securities owned by the Company to its stockholders.
Without limiting the foregoing, any adjustment pursuant to this Section 6 shall
(i) be on terms that are no less favorable to the Participant than those
applicable to any other holder of stock options or convertible securities issued
by the Company and (ii) entitle the Participant to receive, upon exercise of the
Options, in addition to the Common Shares that remain subject to such Options,
such stock, securities, other property and rights that the Participant, as a
holder of Common Shares, would have received if such Options had been exercised
prior to the date of the applicable event or transaction described in this
Section 6.
7. Survival; Assignment.
All agreements, representations and warranties made herein and
in any certificates delivered pursuant hereto shall survive the issuance to the
Participant of the Options and the Common Shares and, notwithstanding any
investigation heretofore or hereafter made by the Participant or the Company or
on the Participant's or the Company's behalf, shall continue in full force and
effect. Without the prior written consent of the Company, the Participant may
not assign any of his rights hereunder except as permitted by Section 2.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the heirs and permitted successors and
assigns of such party; and all agreements herein by or on behalf of the Company,
or by or on behalf of the Participant, shall bind and inure to the benefit of
the heirs and permitted successors and assigns of such parties hereto.
8. Gross-Up Payment. (i) Anything in this Agreement to
the contrary or any termination of the Options notwithstanding, in the event it
shall be determined that any payment or distribution or benefit received or to
be received by the Participant pursuant to the terms of this Agreement or any
other payment or distribution or benefit made or provided by the Company, or any
of its subsidiaries and affiliates, to or for the benefit of the Participant
(whether pursuant to this Agreement or otherwise and determined without regard
to any additional payments required under this Section 8) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") or any interest or penalties are incurred by
the Participant with respect to such excise tax (such excise tax, together with
any such interest and penalties, is hereinafter collectively referred to as the
"Excise Tax"), then the Participant shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Participant of all taxes
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(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income and employment taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
product of any deductions actually disallowed under Section 68 of the Code
solely as a direct result of the inclusion of the Gross-Up Payment in the
Participant's adjusted gross income and the highest applicable marginal rate of
federal income taxation for the calendar year in which the Gross-Up Payment is
to be made. For purposes of determining the amount of the Gross-Up Payment, the
Participant shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made and (ii) pay applicable state and local income
taxes at the highest marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(ii) Subject to the provisions of Sections 8(i) and 8(iii),
all determinations required to be made under this Section 8, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the Company's certified public accounting firm (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Participant within 15 business days of the receipt of notice from the
Participant or the Company that there has been a Payment, or such earlier time
as is requested by the Company. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 8, shall be paid by the Company to the Participant
within five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Participant. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 8(iii) and the Participant thereafter
is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Participant.
(iii) The Participant shall notify the Company in writing of
any claim by the U.S. Internal Revenue Service (the "IRS") that, if successful,
would require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten
business days after the Participant is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Participant shall not pay such claim prior to
the expiration of the 30-day period following the date on which the Participant
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Participant in writing prior to the expiration of such period that it
desires to contest such claim, the Participant shall:
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(a) give the Company any information reasonably requested
by the Company relating to such claim;
(b) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company; and
(c) cooperate with the Company in good faith in order
effectively to contest such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Participant harmless, on an
after-tax basis, for any Excise Tax or income and employment tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 8(iii), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Participant to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Participant shall
agree to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Participant to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Participant, on an interest-free
basis and shall indemnify and hold the Participant harmless, on an after-tax
basis, from any Excise Tax or income and employment tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and provided
further, that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Participant with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Participant shall be entitled to settle or contest, as the case may be, any
other issue (an "Other Issue") raised by the IRS or any other taxing authority;
provided, however, that if, solely as a result of any contest by the Company
pursuant to this Section 8(iii), the Participant's ability to settle or
otherwise resolve any such Other Issue is delayed, then the Company will
reimburse the Participant, on an after-tax basis, for any additional interest
incurred by the Participant as a result of such delay.
(iv) If, after the receipt by the Participant of an amount
advanced by the Company pursuant to Section 8(iii), the Participant becomes
entitled to receive any refund with respect to such claim, the Participant shall
(subject to the Company's complying with the requirements of Section 8(iii))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Participant of an amount advanced by the Company pursuant to
Section 8(iii), a determination is made that the Participant shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Participant in writing of its intent to contest such
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denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
9. Consulting Engagement. In the event that the
Participant terminates his employment with the Company and its subsidiaries
without Good Reason after the six-month anniversary of the Effective Time but
prior to the third anniversary of the Effective Time, the Participant shall, at
the request of the Company, make himself available to provide consulting and
advisory services (the "Consulting Services") to the Company during the period
beginning on the date of termination and ending on the third anniversary of the
Effective Time; provided, however, that such Consulting Services shall be
performed at such times and places as are acceptable to the Participant in his
sole discretion. The Participant shall not be entitled to receive any additional
compensation for the Consulting Services.
10. Notices. All notices and other communications
provided for herein shall be in writing and shall be delivered by hand or sent
by certified or registered mail, return receipt requested, postage prepaid,
addressed, if to the Participant, to his attention at the most recent mailing
address that the Company has on record and, if to the Company, to it at River
Drive Center 2, 669 River Drive, Elmwood Park, New Jersey 07407-1361, Telecopier
No.: (201) 703-3401, Attention: Chief Financial Officer. All such notices shall
be conclusively deemed to be received and shall be effective, if sent by hand
delivery, upon receipt, or if sent by registered or certified mail, on the fifth
day after the day on which such notice is mailed.
11. Waiver. The waiver by either party of compliance with
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any other provision of this Agreement, or of any
subsequent breach by such party of a provision of this Agreement.
12. Source of Rights. This Agreement shall be the sole
and exclusive source of any and all rights which the Participant, and the
Participant's personal representatives or heirs at law, may have in respect of
the Options as granted hereunder.
13. Captions. The captions contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
14. Entire Agreement; Governing Law; Jurisdiction. This
Agreement sets forth the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings relating to the
subject matter hereof (including, without limitation, the Stock Option Agreement
dated as of August 21, 2000 between the Company and the Participant). The
Participant and the Company acknowledge and agree that the terms and conditions
of the letter agreement dated June 18, 2000 between Healtheon and the
Participant shall not apply to the Options granted pursuant to this Agreement.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together constitute
one and the same agreement. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning of
any of the provisions of this Agreement. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New Jersey (without
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reference to the choice of law provisions of New Jersey law) applicable to
contracts executed and to be wholly performed within such State, and the State
or Federal court sitting in San Diego County, California shall have exclusive
jurisdiction of the Company and the Participant for purposes of adjudicating any
disputes under this Agreement. The Participant and the Company hereby consent to
personal jurisdiction and venue in the State or Federal court sitting in San
Diego County, California and hereby waive any claim or defense that the party
lacks minimum contacts with the forum, that such State or Federal court lacks
personal jurisdiction of the parties, or that such State or Federal court is an
improper or inconvenient venue.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer and the Participant has executed this
Agreement, both as of the day and year first above written.
MEDICAL MANAGER CORPORATION
By: /s/ CHARLES A. MELE
--------------------------------------------------
Name: Charles A. Mele
Title: Executive Vice President - General Counsel
PARTICIPANT
/s/ MARTIN J. WYGOD
-----------------------------------------------------
Martin J. Wygod
Number of Options: 1,200,000
Option Price: $31.875
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