1
EXHIBIT 10.5
UNIVERSAL STANDARD HEALTHCARE, INC.
DIRECTORS STOCK OPTION PLAN
(AS AMENDED AND RESTATED AUGUST 25, 1997)
I. GENERAL PROVISIONS
1.1 PURPOSE. The purpose of the Universal Standard Healthcare, Inc.
Directors Stock Option Plan is to promote the best interests of the Company and
its shareholders by attracting and motivating highly qualified individuals to
serve as Directors.
1.2 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "AGREEMENT" means the written agreement that sets forth the
terms of a Participant's Option.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CHANGE OF CONTROL" means (i) the sale of all or substantially
all of the assets of the Company to an unaffiliated third-party, (ii) the
merger or consolidation of the Company with an unaffiliated third-party in
which the Company is not the surviving corporation or (iii) any person or group
of persons (as defined in Section 13(d) of the Exchange Act) (other than
WestSphere Capital Associates, L.P. and its affiliates) shall acquire or
control in excess of 66-2/3% of the Common Stock on a fully-diluted basis.
(d) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "COMMITTEE" means a committee of the Board, which shall be
comprised of two or more "non-employee directors", as defined in Rule 16b-3.
(f) "COMMON STOCK" means shares of the Company's authorized Common
Stock.
(g) "COMPANY" means Universal Standard Healthcare, Inc.
(h) "DIRECTOR" means a member of the Company's Board of Directors.
(i) "DISABILITY" means total and permanent disability, as defined
in Code Section 22(e).
(j) "EFFECTIVE DATE" means March 27, 1995.
2
(k) "ELIGIBLE DIRECTOR" means a Director who is not an Employee and
who is not a beneficial owner (as such term is used in Section 13(d) of the
Exchange Act and the rules promulgated thereunder) of 5% or more of the
outstanding Common Stock or an employee, officer or affiliate of, or partner
in, such a beneficial owner.
(l) "EMPLOYEE" means an employee of the Company or its Subsidiaries,
who has an "employment relationship" with the Company or its Subsidiaries, as
defined in Treasury Regulation 1.421-7(h), and the term "employment" means
employment with the Company or its subsidiaries.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time and any successor thereto.
(n) "EXPIRATION DATE" means the tenth anniversary of an Option's Grant
Date.
(o) "FAIR MARKET VALUE" means, for purposes of determining the value
of Common Stock, the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which the Common Stock may at the time be
listed or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day or, if on any day the Common Stock is not so listed, the sales
prices of the Common Stock as of 4:00 p.m., New York time, on such day as
reported on the National Market or the SmallCap Market or, if the Common Stock
is not reported on the National Market or the SmallCap Market on such day, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which Fair Market Value is
being determined and the 20 consecutive trading days prior to such day or, if
the Common Stock is not so listed or quoted, as determined in good faith by the
Committee.
(p) "GRANT DATE" means the date on which the Option was automatically
awarded pursuant to Section 2.1.
(q) "INVOLUNTARY REMOVAL" means (i) the removal of the Participant
from the Board, (ii) the Participant not being nominated to stand for
reelection to the Board, or (iii) the failure of the Participant to be elected
to the Board, if nominated therefor by the Board or a committee thereof.
(r) "NONQUALIFIED STOCK OPTION" means an Option that is not intended
to meet the requirements of Section 422 of the Code.
2
3
(s) "NATIONAL MARKET" means the Nasdaq Stock Market's National
Market.
(t) "OPTION" means a Nonqualified Stock Option to purchase Common
Stock granted under this Plan.
(u) "PARTICIPANT" means each of the Directors of the Company
participating in the Plan from time to time.
(v) "PLAN" means the Universal Standard Medical Laboratories, Inc.
Directors Stock Option Plan, the terms of which are set forth herein, and any
amendments hereto.
(w) "RULE 16B-3" means Rule 16b-3 under the Exchange Act, as in
effect from time to time.
(x) "SMALLCAP MARKET" means the Nasdaq Stock Market's SmallCap
Market.
1.3 ADMINISTRATION. To the extent permitted by Rule 16b-3 without
disqualifying the Eligible Directors from status as "disinterested directors"
as that term is used in Rule 16b-3, the Plan shall be administered by the
Committee. The Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or its
administration with respect to any Option granted under the Plan shall be final
and binding upon all Participants.
1.4 STOCK. The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed 300,000 shares of
Common Stock, as adjusted from time to time in accordance with Section 4.5.
Shares subject to any unexercised portion of a terminated, forfeited, canceled
or expired Option granted hereunder shall be available for subsequent grants
under the Plan. In the event that an Option granted under the Plan is
exercised and the exercise price is paid by delivering shares of Common Stock
or through the withholding or retention by the Company of shares subject to the
Option, the shares of Common Stock so delivered to or retained by the Company
shall be available for subsequent grants under this Plan.
II. STOCK OPTIONS FOR ELIGIBLE DIRECTORS
2.1 AUTOMATIC GRANTS OF OPTIONS.
(a) INITIAL GRANT. Each Eligible Director who is serving on the
Board on the Effective Date of the Plan shall be granted an Option to purchase
30,000 shares of the Common Stock on the Effective Date. Any Eligible Director
who is first elected or appointed to such position
3
4
after the Effective Date shall receive an Option to purchase 15,000 shares of
Common Stock on the date of his or her election or appointment. A person who
first becomes an Eligible Director following service as an Employee or Director
of the Company (other than Directors who become Eligible Directors as of the
Effective Date) shall not be entitled to receive a grant under this Section
2.1(a) upon becoming an Eligible Director.
(b) SUBSEQUENT GRANTS. During the term of the Plan, an
▇▇▇▇▇▇▇▇ Director who has been a Director for at least six months before the
date of an annual meeting of shareholders (not including the annual meeting
held in calendar year 1995), automatically shall be granted, as of the date of
such annual meeting, an additional Option to purchase 10,000 shares of Common
Stock. A Participant may hold more than one Option under the Plan.
2.2 OPTION AGREEMENT. Each Option granted pursuant to this
Article II shall be evidenced by an Agreement that shall specify the exercise
price, the term of the Option, the date or dates on which the Option becomes
exercisable, the number of shares to which the Option relates, and other such
provisions as the Committee shall determine which are consistent with the terms
of the Plan. The terms of the Plan shall govern in the event any provision of
any Agreement conflicts with any term in this Plan as constituted on the Grant
Date.
2.3 OPTION PRICE. The purchase price per share of Common Stock
for an Option granted pursuant to this Article II shall be equal to the Fair
Market Value per share of Common Stock on the Grant Date.
2.4 EXERCISE OF SHARES SUBJECT TO OPTION. Options granted
pursuant to this Article II shall become exercisable (i) according to the
following schedule: one-fourth of the Option shall become exercisable on the
first, second, third and fourth anniversaries of the Grant Date of each Option
and (ii) immediately in full upon a Change of Control or an Involuntary
Removal. Once exercisable, such Options may be exercised at any time and from
time to time until the Expiration Date of such Options, unless earlier
terminated pursuant to Article III.
2.5 DURATION OF OPTIONS. Options granted pursuant to this
Article II shall expire on the Expiration Date, except as otherwise provided in
Article III.
2.6 PAYMENT FOR OPTION SHARES. The purchase price for shares of
Common Stock to be acquired upon exercise of an Option granted hereunder shall
be paid in full at the time of exercise in any of the following ways: (a) in
cash or by check, (b) by delivery to the Company of outstanding shares of the
Common Stock with a Fair Market Value (determined as of the date of exercise of
the Option) equal to the exercise price; (c) through the retention by the
Company of shares with a Fair Market Value (determined as of the date of
exercise of the Option) equal to the exercise price which would otherwise be
transferred to the option holder upon exercise of the Option; or (d) by any
combination of the foregoing.
4
5
2.7 NO DISCRETION. Notwithstanding any provision in the Plan to the
contrary, the Committee shall have no discretion with respect to the terms of
grants made pursuant to this Article II, except to the extent such discretion
would not result in the grant or the Plan failing to satisfy the conditions of
paragraph (c)(2)(ii) of Rule 16b-3.
III. TERMINATION
3.1. PRIOR TO EXERCISABILITY. Except as provided in Section 2.4(ii), if a
Participant's term of office as a Director ceases or is terminated for any
reason, prior to the date that an Option or a portion thereof first becomes
exercisable, such Option or portion thereof which is not then exercisable shall
terminate and all rights thereunder shall cease.
3.2 AFTER EXERCISABILITY. To the extent an Option or any portion thereof
is exercisable and unexercised on the date a Participant's term of office as a
Director ceases or is terminated for any reason, the Option shall terminate on
the earlier of (i) the Expiration Date of the Option, and (ii) three months
after such cessation or termination; provided, however, that the exercise
period in clause (ii) shall be extended to one year after cessation or
termination if the cessation or termination is due to the Participant's death
or Disability;
3.3 POST-TERMINATION EXERCISE. During the period from the Participant's
cessation or termination until the termination or expiration of the Option, the
Participant, or the person or persons to whom the Option shall have been
transferred by will or by the laws of descent and distribution, may exercise
the Option only to the extent that such Option was exercisable on the date of
the Participant's cessation or termination.
IV. MISCELLANEOUS
4.1 PARTIAL EXERCISE. The Committee shall permit, and shall establish
procedures for, the partial exercise of Options under the Plan.
4.2 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option as
may be required to satisfy the requirements of Rule 16b-3.
4.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option until and
only to the extent that the Option is exercised.
4.4 NON-ASSIGNABILITY. No Option shall be transferable by a Participant
except by will or the laws of descent and distribution. During the lifetime of
a Participant, an Option shall be
5
6
exercised only by the Participant. No transfer of an Option by will or the
laws of descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and a copy of
the will or such evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions of the Option.
4.5 ADJUSTMENTS. In the event of changes in the outstanding
Common Stock by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in the capital structure of the Company, an appropriate
adjustment shall be made by the Committee in the number of shares and kind of
stock or other securities for which Options may be or may have been granted
under the Plan, and the exercise price related thereto, to the end that the
proportionate interests shall be maintained as before the occurrence of such an
event. Any of the foregoing adjustments may provide for the elimination of any
fractional share which might otherwise become subject to any Option.
4.6. SECURITIES LAWS.
(a) Anything to the contrary herein notwithstanding, the
Company's obligation to sell and deliver Common Stock pursuant to the exercise
of an Option is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities
as the Company deems necessary or advisable. The Company shall not be required
to sell and deliver Common Stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares shall not violate any of
the provisions of the Securities Act of 1933 or the Exchange Act, or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder or those of the Nasdaq Stock Market or any stock exchange on which
the Common Stock may be listed, the provisions of any state laws governing the
sale of securities, or that there has been compliance with the provisions of
such acts, rules, regulations and laws.
(b) The Committee may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of an Option as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) required by the Nasdaq Stock Market (including,
without limitation, with respect to securities traded on the National Market or
the SmallCap Market) or any stock exchange or other recognized trading market
upon which such shares of Common Stock are then listed or traded, and (iii)
under any blue sky or state securities laws applicable to such shares. No
shares shall be issued until counsel for the Company has determined that the
Company has complied with all requirements under appropriate securities laws.
4.7 TERMINATION AND AMENDMENT.
6
7
(a) The Board may terminate the Plan, or the granting of Options
under the Plan, at any time. No new grants shall be made under the Plan after
June 30, 2000.
(b) The Board may amend or modify the Plan at any time and from
time to time.
(c) No amendment, modification or termination of the Plan shall
adversely affect any Option granted under the Plan without the consent of the
Participant holding the Option.
4.8 EFFECT ON SERVICES. Neither the adoption of the Plan nor the
granting of any Option pursuant to the Plan shall be deemed to create any right
in any individual to be retained as a Director.
4.9 USE OF PROCEEDS. The proceeds received from the sale of Common
Stock pursuant to the Plan shall be used for general corporate purposes of the
Company.
4.10 APPROVAL OF PLAN. The Plan shall be subject to the approval of
the holders of at least a majority of the shares of Common Stock present and
entitled to vote at a meeting of shareholders of the Company held within 12
months after adoption of the Plan by the Board. Any Option granted under the
Plan prior to such shareholder approval, shall be conditioned upon receipt of
such approval, and may not be exercised in whole or in part unless the Plan has
been approved by the shareholders as provided herein. If not approved by
shareholders within 12 months after approval by the Board, the Plan shall be
rescinded, and any Options granted under the Plan shall be void retroactive to
the Grant Date.
BOARD APPROVAL: March 27, 1995; October 24, 1996; June 17, 1997
SHAREHOLDER APPROVAL: June 14, 1995
7