Form of Stock Option Agreement



 






Exhibit 10.4




NationsHealth,
Inc.

2005 Long-Term Incentive
Plan




Stock
Option Agreement




     NATIONSHEALTH, INC., a Delaware corporation (the “Company”), hereby grants an Option to
purchase shares of its common stock (the “Shares”) to the Participant named below. The terms and
conditions of the Option are set forth in this Stock Option Agreement (the “Agreement”), and in the
NationsHealth, Inc. 2005 Long-Term Incentive Plan (the “Plan”).



	 	 	 	 	 
	Date of Option Grant

	 	 	 	Expiration Date
	 
	 	 	 	 
	Participant’s Name

	 	 	 	SSN _____________________
	 
	 	 	 	 
	Type of Option
	 	 	 	 
	(Check applicable

box(es))

	 	The Option is


an Incentive Stock Option


a Nonstatutory Stock Option
	 	The Option is granted with respect to Restricted Stock

(If this box is checked, ask the Company for a description of
the restrictions that apply to the Option Shares)






 





	 	 	 
	Number of Shares

	 	____________
Shares, with an Exercise Price of $______ per Share.
	 
	 	 
	Vesting
	 	 
	(Check applicable

box(es))

	 	The Option to purchase
______ Shares will vest upon achievement of the
          Performance Objectives listed below.


The Option to purchase ___ Shares will vest according to the Vesting Schedule below.
	 
	 	 
	Performance

Objectives

(Subject to Section 4.3

4.3 of the Plan)

	 	_________________________________________________________________________________

_________________________________________________________________________________

_________________________________________________________________________________






	 	 	 	 	 	 	 	 	 
	Vesting Schedule

	 	Date
	 	Percent

Vested*
	 	Date
	 	Percent

Vested*
	 

	 	 
	 	 
	 	 
	 	 
	 

	 	__________________
	 	 	 	__________________	 	 
	 

	 	__________________
	 	 	 	__________________	 	 
	 

	 	__________________
	 	 	 	__________________	 	 
	 

	 	__________________
	 	 	 	__________________	 	 






          * “Percent Vested” refers to the percentage of Shares with respect to which the Option may be exercised.




 





	 	 	 
	Termination of

Service Prior to

Expiration Date

(Subject to

Section 5.5(b)

of the Plan)

	 	If the Participant has a Termination of Service (not for Cause) prior to the Expiration Date, the time to exercise the Option
shall be limited, as follows:


• Unless the Termination of Service is the result of the Participant’s death or Disability, the Participant may exercise the
Option up to three (3) months after the Termination of Service.

• If the Termination of Service is the result of the Participant’s Disability, the Participant may exercise the Option up to
twelve (12) months after the Termination of Service.

• If the Termination of Service is the result of the Participant’s death, the Participant’s Beneficiary may exercise the Option
up to twelve (12) months after the Termination of Service.






 





          My signature at the end of this Agreement indicates that I understand and agree to the terms
and conditions set forth in this Agreement and the Plan.
Initials: ______ Date: ____________




 









 








NationsHealth, Inc.

2005 Long-Term Incentive Plan

Stock Option Agreement




Stock Option Agreement




          This Agreement evidences the grant of an Option under the NationsHealth, Inc. 2005
Long-Term Incentive Plan. The name of the recipient, the number of Shares covered by the Option,
and other variable terms are set forth in the cover page, which is part of this Agreement. The
words “you,” “your,” and similar terms refer to the Participant to whom this Option is granted.




          The Option is subject to the following terms and conditions:




 





	 	 	 
	Definitions and the

Plan

	 	All capitalized terms that are not otherwise defined in this Agreement have
the meanings set forth in the Plan, the text of which is incorporated into
this Agreement by reference. In case of any conflict between this
Agreement and the Plan, the terms of the Plan shall control.
	 
	 	 
	 

	 	 
	 
	 	 
	Term

	 	Subject to the Termination of Service provisions set forth in the cover
page and the provisions that apply in case of Termination of Service for
Cause (and, for an Incentive Stock Option, Section 5.3(a) of the Plan),
this Option shall expire at 5:00 p.m. Eastern Time on the Expiration Date
set forth in the cover page.
	 
	 	 
	 

	 	 
	 
	 	 
	Number of Shares

and Exercise Price

	 	To the extent vested (and prior to the end of the Term described above),
this Option gives you the right to purchase the number of Shares set forth
in the cover page, at the Exercise Price set forth in the cover page.
	 
	 	 
	 

	 	• The Exercise Price is subject to Section 5.3(b) of the Plan, which
provides that the Exercise Price may not be less than the Fair Market Value
(or, if this Option is an Incentive Stock Option and you are a 10%
Stockholder, 110% of the Fair Market Value) of the Shares on the Date of
Option Grant.
	 
	 	 
	 

	 	• The number of Shares and/or Exercise Price may be adjusted to
reflect a stock split or other corporate transaction or event, in the sole
discretion of the Committee.
	 
	 	 
	 

	 	 
	 
	 	 
	Vesting

	 	The cover page indicates whether the criteria for vesting are (i)
achievement of the Performance Objectives set forth in the cover page
and/or (ii) continued service in accordance with the Vesting Schedule set
forth in the cover page.
	 
	 	 
	 

	 	• With respect to any portion of this Option that vests according to
the Vesting Schedule set forth in the cover page, a leave of absence shall
not count as service, except as required by law.
	 
	 	 
	 

	 	• Any portion of this Option that vests upon achievement of
Performance Objectives shall not be deemed to have vested until the
Committee certifies in writing that the applicable Performance Objectives
and other material terms of the Agreement have been satisfied.


In addition, this Option shall vest upon the occurrence of any vesting
event (for example, onset of disability or a change in control) set forth
in a separate written agreement between you and the Company.
	 
	 	 
	 

	 	 
	 
	 	 
	Special Provisions

for Incentive Stock

Options

	 	If this Option is an Incentive Stock Option, the following provisions apply:


• Although the Option is intended to be an Incentive Stock Option,
the Company does not warrant that the Option will be treated as an
Incentive Stock Option for tax purposes. To the extent that the Option
fails for any reason to satisfy the requirements applicable to Incentive
Stock Options, the Option shall be a Nonqualified Stock Option.






 





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NationsHealth, Inc.

2005 Long-Term Incentive Plan

Stock Option Agreement




 





	 	 	 
	 

	 	• The Option will not be treated as an Incentive Stock Option for tax
purposes if you sell or otherwise dispose of Shares issued upon exercise
before the later of: (i) the first anniversary of the date the Shares are
delivered to you, or (ii) the second anniversary of the Date of Option
Grant. Any earlier sale or disposition of the Shares will be a
“disqualifying disposition.” You must notify the Company of any
disqualifying disposition within 30 days after a disqualifying disposition
occurs.

	 
	 	 
	 

	 	• Any portion of the Option that is exercised more than three months
after your Termination of Service for any reason other than Disability or
death (to the extent the Option has not expired) shall be treated as a
Nonstatutory Stock Option. In case of Termination of Service due to
Disability, the three-month period shall be extended to 12 months. If you
die before exercising the Option, it may be treated as an Incentive Stock
Option only to the extent that the Option would have been treated as an
Incentive Stock Option if you had exercised it on the date of your death.
	 
	 	 
	 

	 	 
	 
	 	 
	Exercise

	 	To exercise this Option, you (or your Beneficiary, in the case of exercise
after your death) must complete a Notice of Exercise, which may be written
or electronic, and file it at the address shown on the form. Your Notice
of Exercise must indicate the number of Shares you wish to purchase and
will not be accepted if it is incomplete. You may not purchase fractional
Shares: any request for fractional Shares will be rounded down to the next
lowest whole number of Shares.
	 
	 	 
	 

	 	A sample Notice of Exercise appears as Appendix A to this Agreement.
	 
	 	 
	 

	 	You will not have any of the rights of a stockholder until (1) you exercise
the Option, (2) the Company receives full payment for the Shares, and (3)
the Shares are transferred to you.
	 
	 	 
	 

	 	 
	 
	 	 
	Payment Upon

Exercise

	 	When you (or your Beneficiary) submit your Notice of Exercise, you must
include payment of the Exercise Price for the Shares you are purchasing.
(You might also have to include payment for tax withholding, as described
below.) Unless approved by the Committee, payment for the Shares must be
made by cash or check. With approval from the Committee, however, payment
may be made in either of the following forms:
	 
	 	 
	 

	 	• Tender or Attestation of Shares: You may tender whole Shares to the
Company with a Fair Market Value equal to the Exercise Price. Instead of
actually tendering Shares to the Company, you may attest that you own
Shares with a Fair Market Value equal to the Exercise Price, and the
Company will reduce the number of Shares issuable upon exercise by the
number of Shares required to cover the Exercise Price. Shares attested to
or tendered in order to pay the Exercise Price may not be Restricted Stock,
and you must have owned the Shares for at least six months.
	 
	 	 
	 

	 	• Broker-Assisted Cashless Exercise: You may instruct the Company to
deliver the Shares issuable upon exercise to a broker (acceptable to the
Company); you must give the broker irrevocable instructions to sell enough
Shares to pay the Exercise Price and to deliver the Exercise Price to the
Company. For purposes of a broker-assisted cashless exercise, the Shares
are deemed to have a Fair Market Value on the Option exercise date equal to
the price at which the broker sold the Shares to pay the Exercise Price.
(Because of the rules prohibiting them from receiving loans or other
extensions of credit from the Company, directors and executive officers of
the Company are not eligible to use the cashless exercise method.)
	 
	 	 
	 

	 	All or part of the Option is deemed exercised when the Committee receives
(i) your (or your Beneficiary’s) Notice of Exercise and (ii) full payment
for the Shares with respect to which the Option is exercised.






 





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NationsHealth, Inc.

2005 Long-Term Incentive Plan

Stock Option Agreement




 





	 	 	 
	

	 	The Committee or the Company may for any reason decline to accept payment
by exchange of Shares, or may impose such limitations or restrictions on
the form of payment as it deems advisable.
	 
	 	 
	 

	 	 
	 
	 	 
	Withholding

	 	If you received the Option as an employee, the Company must withhold income
and employment taxes when you (or your Beneficiary) exercise the Option.
The Company may either (i) require you (or your Beneficiary) to remit to
the Company cash and/or Shares in an amount sufficient to satisfy all
federal, state, and local withholding obligations, or (ii) upon your
request and with approval from the Committee, withhold Shares that would
otherwise be delivered.
	 
	 	 
	 

	 	As set forth in Section 10.7(a) of the Plan, you remain responsible at all
times for paying any federal, state, and local income and employment taxes
with respect to this Award. NationsHealth is not responsible for any
liability or penalty that you incur by failing to make timely payments of
tax.
	 
	 	 
	 

	 	 
	 
	 	 
	Nontransferability

	 	Unless the Committee determines otherwise, you may not transfer the Option,
except will or the laws of descent or distribution. (The person(s) to whom
the Option is passed by will or the laws of descent or distribution is your
Beneficiary.) However, if approved by the Committee (subject to terms and
conditions that the Committee may establish), and provided that this Option
is a Nonstatutory Stock Option, you may transfer all or part of the Option
to a member of your immediate family (i.e., spouse, child, stepchild,
grandchild, parent, grandparent, or sibling).
	 
	 	 
	 

	 	 
	 
	 	 
	Restrictions on

Exercise, Delivery,

and Resale

	 	• You may not exercise this Option or sell any Shares acquired under
this Option at a time when the exercise or sale would be prohibited under
Applicable Laws.
	 
	 	 
	 

	 	• You may not exercise this Option after an event constituting
“Cause” (as defined in the following section) occurs, unless you are
notified by the Committee your right to exercise has been reinstated.
	 
	 	 
	 

	 	• As set forth in Section 10.5 of the Plan, Shares shall not be
delivered until (i) all conditions of the Award have been met to the
satisfaction of the Committee, (ii) all other legal matters in connection
with the issuance and delivery of the Shares have been satisfied, and (iii)
you have executed and delivered all representations and agreements as are
necessary and appropriate to satisfy the requirements of any Applicable
Laws.
	 
	 	 
	 

	 	• As set forth in Section 10.6 of the Plan, the Company shall not be
liable for any delay in obtaining regulatory authority that it deems
necessary to issue Shares.
	 
	 	 
	 

	 	• If the cover page indicates that this Option is granted with
respect to Restricted Stock, the Shares you acquire by exercising the
Option might be subject to additional restrictions, and you might forfeit
the Shares if you fail to meet the vesting conditions specified in the
Restricted Stock Agreement. Consult the Company concerning the nature of
any restrictions before you exercise an Option to acquire Restricted Stock.
	 
	 	 
	 

	 	 
	 
	 	 
	Forfeiture Upon

Termination of

Service for Cause

	 	If you experience a Termination of Service that is initiated by the Company
for “Cause” (as defined below), this Option (whether vested or not vested)
shall immediately expire and shall be null and void.
	 
	 	 
	 

	 	If you are covered by an employment agreement or consulting agreement at
the time of your Termination of Service, and if the employment agreement or
consulting agreement includes provisions relating to termination for cause,
your termination for cause within the meaning of the employment agreement
or consulting agreement shall constitute a Termination of Service for
“Cause” within the meaning of this Agreement.






 





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NationsHealth, Inc.

2005 Long-Term Incentive Plan

Stock Option Agreement




 





	 	 	 
	 

	 	If you are not covered by an employment agreement or consulting agreement
that includes provisions relating to termination for cause, “Cause” shall
mean (i) any breach or violation by you of any agreement between you and
the Company or an Affiliate; (ii) any act or omission to act by you that
would be reasonably likely to have the effect of injuring the reputation,
business, or business relationships of the Company, or of impairing your
ability to perform services for the Company or an Affiliate; (iii) your
conviction (including without limitation a plea of guilty or nolo
contendere) of any crime other than an ordinary traffic violation; (iv) any
material misconduct or willful and deliberate non-performance of duties by
you in connection with the Company’s or an Affiliate’s business or affairs;
(v) your theft, dishonesty, misrepresentation, or falsification of the
Company’s or an Affiliate’s documents or records; (vi) your improper use or
disclosure of the Company’s or an Affiliate’s confidential or proprietary
information; or (vii) your use of the Company’s or an Affiliate’s
facilities, premises, or property to conduct unlawful or unauthorized
activities or transactions.
	 
	 	 
	 

	 	 
	 
	 	 
	Lock-up Provision

	 	If the Company proposes to make a public offering of Shares, the Company or
an underwriter might request that you not sell or otherwise dispose
(directly or indirectly) of Shares delivered under this Agreement for a
reasonable period (not to exceed 180 days) after the offering. Your right
to any Shares received under this Agreement is contingent on your agreeing
to comply with such a request.
	 
	 	 
	 

	 	 
	 
	 	 
	Notices

	 	• Any notice from you to the Company must be in writing and shall be
deemed effective when it is received by the Secretary of the Company at the
Company’s principal office.
	 
	 

	 	• Any notice from the Company to you must be in writing and shall be
deemed effective when it is personally delivered to you or when it is
deposited in the U.S. Mail, with postage and fees prepaid.
	 
	 	 
	 

	 	 
	 
	 	 
	Not an Employment

Contract

	 	This Agreement is not an employment agreement and does not give you any
right to continued employment (or other service relationship) with the
Company or an Affiliate. Unless provided otherwise in a written agreement
between you and the Company or an Affiliate, your employment (or other
service relationship) is “at-will” and may be terminated at any time and
for any reason.
	 
	 	 
	 

	 	 
	 
	 	 
	Amendment and

Termination

	 	This Agreement may be amended or terminated by mutual agreement, in
writing, signed by you and the Company. To the extent required to comply
with an Applicable Law or accounting principle, this Agreement may be
amended by the Company without your consent. In addition, as set forth in
Section 11.5 of the Plan, the Committee reserves the right to adjust the
terms of this Agreement in connection with any unusual or nonrecurring
events affecting the Company or an Affiliate. By way of example, the
Company may respond to an unusual or nonrecurring event by temporarily
suspending your right to exercise this Option.
	 
	 	 
	 

	 	 
	 
	 	 
	Governing Law

	 	As set forth in Section 12.2 of the Plan, this Agreement shall be governed
by and interpreted in accordance with Delaware law (without regard to any
principles of Delaware law that might direct resolution to the laws of a
different jurisdiction).






 





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NationsHealth, Inc.

2005 Long-Term Incentive Plan

Stock Option Agreement


 





	 	 	 
	Severability

	 	As set forth in Section 12.5 of the
Plan, any provision in this
Agreement that is determined to be
unenforceable shall be construed or
deemed to be amended to resolve the
applicable infirmity, unless the
Committee determines that the
infirmity cannot be resolved without
materially changing the Agreement,
in which case the provision shall be
stricken (as it applies in the
jurisdiction where it is invalid)
and the remainder of Agreement shall
remain in effect.
	 
	 	 
	 

	 	 
	Waiver

	 	The waiver by you or the Company of
any provision of this Agreement at
any time or for any purpose shall
not operate as or be construed to be
a waiver of the same or any other
provision of this Agreement at any
subsequent time or for any other
purpose.
	 
	 	 
	 

	 	 
	Interpretation and Construction

	 	This Agreement shall be construed
and interpreted by the Committee, in
its sole discretion. Any
interpretation or other
determination by the Committee
(including without limitation
correction of any defect or omission
and reconciliation of any
inconsistency in the Agreement or
the Plan) shall be binding and
conclusive.
	 
	 	 
	 

	 	 
	Headings

	 	The headings in this Agreement are
provided solely as a convenience to
facilitate reference. The headings
shall not be relevant for purposes
of construing or interpreting any
part of this Agreement.
	 
	 	 
	 

	 	 
	Entire Understanding

	 	This Agreement and the Plan
constitute the entire understanding
between you and the Company
regarding this Option. Any prior
agreements, commitments, or
negotiations concerning this Option
are superseded.






 





	 	 	 	 	 
	 	NationsHealth, Inc.

 	 
	 	By: ________________________________	
 	 
	 
	 	Title: ________________________________ 		 
	 	 	 	 
	 




     I have read this Agreement and the Plan, and I understand and agree to their terms and conditions.



	 	 	 	 	 
	 	______________________________

Participant’s Signature





______________________________

Participant’s Name (please print)

 	 
	 	 	 
	 	 	 
	 	 	 



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NationsHealth, Inc.

2005 Long-Term Incentive Plan




Appendix A:

Sample Notice of Exercise




	 	 	 	 	 
	 	Name _________________________________





Address: _________________________________



_________________________________


_________________________________

 	 



Date: ______________________, 20____




NationsHealth, Inc.

13650 NW 8th Street

Sunrise, FL 33325

Attention: Corporate Secretary





     By
a Stock Option Agreement dated
_________ , 20 ___ (the “Option Agreement”), I am
the holder of an Option granted under the NationsHealth, Inc. 2005 Long-Term Incentive Plan (the
“Plan”) to purchase up to
____________ shares of NationsHealth common stock (the “Shares”) at an
exercise price of
$____________ per Share. My Option is (circle one) [an Incentive] [a Nonstatutory]
Stock Option.



     I
hereby exercise my Option to purchase ____________ Shares, for which the total exercise price
is $_________. I have arranged to pay the exercise price as follows:



	 	 	 
	___

	 	I am enclosing with this notice a check for $____________.
	 
	 	 
	___

	 	With approval from the Compensation Committee of NationsHealth’s
Board of Directors (the “Committee”), I have arranged to tender
____________ Shares, with a Fair Market Value of $_________. I
certify that I have owned the Shares that I am tendering for more
than six months and that the Shares are not restricted.
	 
	 	 
	___

	 	With approval from the Committee, I hereby attest that I have owned
_________ Shares, with a current Fair Market Value of $_________,
for more than six months, and that I continue to own such Shares. I
acquired these Shares on
_________ [ insert date] for a purchase
price of $_________. I authorize NationsHealth to reduce the
number of Shares deliverable upon exercise by the number of Shares
whose ownership I have attested.
	 
	 	 
	___

	 	With approval from the Committee, I hereby instruct NationsHealth to
deliver the Option Shares to
__________________ (the “Broker”)
to be credited to my account number _________. The Broker’s
address and telephone number are: ___________________________
	 
	 	 
	 

	 	____________________________________________________________________________________________________________.

I certify that I have instructed the Broker to sell Shares with a
Fair Market Value of at least
$_________ (after any commissions or other expenses of the sale), and to deliver
$____________ to NationsHealth from the proceeds of the sale.






 









 






NationsHealth, Inc.

Page 2



I understand that my Option may be exercised only to the extent that it is vested, and that it will
not be deemed exercised with respect to any Shares until the exercise price has been received by
the Corporate Secretary of NationsHealth (or by a person designated by the Corporate Secretary).




     I understand that if I received my Option as an employee of NationsHealth, exercise of my
Option might trigger certain federal, state, and local tax withholding obligations (although
withholding will not be required with respect to exercise of an Incentive Stock Option). I have
arranged to satisfy the withholding obligations in the following manner:



	 	 	 
	___

	 	I am enclosing with this notice a check for $____________, which
NationsHealth has determined to be sufficient to satisfy all
withholding obligations.
	 
	 	 
	___

	 	With approval from the Committee, I authorize NationsHealth to
withhold Shares with a Fair Market Value equal to the amount that
must be withheld. I understand that only whole Shares will be
withheld and that any fractional Shares required to be withheld will
be rounded up to the next whole Share.





Notwithstanding the provisions for withholding, I understand that I remain responsible at all times
for paying any federal, state, and local income and employment taxes with respect to my Option and
that NationsHealth is not responsible for any liability or penalty that I incur by failing to make
timely payments of tax.




     Please register my stock certificate as follows:



	 	 	 
	Name:

	 	_________________________________
	Address:

	 	_________________________________
	 

	 	_________________________________
	Tax I.D. #:

	 	_________________________________






     If my Option is an Incentive Stock Option, I will notify NationsHealth’s Chief Financial
Officer within 30 days after any transfer of Shares acquired pursuant to my exercise of the Option
that occurs within one (1) year after the date of exercise or within two (2) years after the date
the Option was granted.



 









 





NationsHealth, Inc.

Page 3




     I further understand and acknowledge that my exercise of this Option and receipt of the Shares
are subject to the terms and conditions of the Plan and the Option Agreement, which I have received
and carefully reviewed. I understand the terms and conditions and agree to be bound by them.



	 	 	 	 	 
	 	Sincerely,





________________________________

Signature

 	 
	 	 	 
	 	 	 
	 	 	 
	 



	 	 	 	 	 
	 	Received by NationsHealth, Inc.:
__________________ , 20___



Approved

 	 
	 	By: ___________________________	
 	 
	 
	 	Title: ___________________________