EXHIBIT 99.1
2002 INCENTIVE STOCK OPTION PLAN
2,500,000 SHARES
FONAR CORPORATION
1. Purposes of the Plan.
The purpose of this Plan (the "Plan"), which is designed to qualify as an
"incentive stock option plan" under section 422A of the Internal Revenue Code of
1954, as amended (the "Code"), is to assist Fonar Corporation, a Delaware
corporation (the "Corporation"), and its subsidiaries (as hereinafter defined)
in attracting and retaining key employees and to secure for the Corporation and
its subsidiaries the benefits of the incentive inherent in ownership of the
Corporation's equity securities by employees who are responsible for the
continuing growth and success of the Corporation and its subsidiaries. The Plan
provides a means by which such employees may be given an opportunity, as an
incentive to service or continued service with the Corporation or a subsidiary,
to purchase shares of the Common Stock of the Corporation upon the exercise of
options designed to qualify as "incentive stock options" under Section 422A of
the Code.
For the purposes of this Plan, the term "subsidiary" and/or "subsidiaries"
shall have the same meaning as the term "subsidiary corporation" defined in
section 425 (f) of the Code, as from time to time amended, and shall include
specifically Health Management Corporation of America.
2. Shares Subject to the Plan.
Subject to the provisions of Section 13 of the Plan, an aggregate of
2,500,000 shares of Common Stock, par value $.0001 per share, of the Corporation
("Common Stock"), are available for the issuance upon the exercise of options
under the Plan.
The shares to be issued upon the exercise of options under the Plan may be
authorized but unissued shares of Common Stock or issued shares of Common Stock
which are held in the treasury of the Corporation. If an option shall expire or
terminate for any reason without having been exercised in full, the
unpurchasable shares which were subject thereto shall, unless the Plan shall
have been terminated, be added to the shares otherwise available for options
under the Plan.
3. Term of the Plan.
Subject to the provisions of Section 14 and 15, the Plan shall commence
effective as of July 1, 2002, and options granted under the Plan must be granted
no later than June 30, 2012.
4. Administration of the Plan.
The Plan shall be administered by a committee which shall consist of one or
more members, as the Board of Directors shall from time to time determine, who
shall be appointed by the Board of Directors of the Corporation (the
"Committee") or, in the absence of such a Committee, by the Board of Directors
of the Corporation. Directors of the Corporation who are either eligible to
receive options, or to whom options have been granted, may vote on any matters
affecting the administration of the Plan or the granting of options under the
Plan; provided, however, that no Director shall vote upon the granting of an
option to himself, but any such Director may be counted in determining the
existence of a quorum at any meeting of the Board of Directors at which the Plan
is administered or action is taken with respect to the granting of an option.
Any action of the Committee or the Board of Directors may be taken by a written
instrument signed by all of the members of the Committee or the Board of
Directors, as the case may be, and any action so taken by written consent shall
be as fully effective as if it had been taken by a majority of the members at a
meeting duly held and called.
Subject to the express provisions of the Plan, the Committee or the Board
or Directors, as the case may be, shall have the authority, in its discretion:
(i) to determine the individuals to receive options, the times when they shall
receive them, the number of shares to be subject to each option, the exercise
price for shares of Common Stock subject to each option, the term of each
option, the date each option shall become exercisable in whole, in part or in
installments, and, if in installments, the number of shares to be subject to
each installment, the date each installment shall become exercisable and the
term of each installment: to accelerate the date of exercise of any installment;
to determine whether shares may be issued upon exercise of an option as partly
paid and, if so, the date when future installments of the exercise price shall
become due and the amounts of such installments, and to determine the other
terms and provisions of each option granted under the Plan; (ii) to construe and
interpret the terms of the respective option certificates and the Plan; (iii) to
establish, amend and rescind rules and regulations for the administration of the
Plan; and (iv) to make all other determinations deemed necessary or advisable
for administering the Plan. The determinations of the Committee or the Board of
Directors, as the case may be, on the matters referred to in this Section 4
shall be final and conclusive.
5. Eligibility and Selection.
Only key employees (including employees who are officers and directors) of
the Corporation or of any of its subsidiaries are eligible to receive options
under the Plan. For the purposes of the Plan, the term "key employees" shall
mean and include all employees of the Corporation or any of its subsidiaries who
render substantial services to the Corporation in the management, administration
or supervision of the business or affairs of the Corporation or any of its
subsidiaries or are engaged in the research, development, production, sale,
marketing, or promotion of the products or services of the Corporation or any of
its subsidiaries. Directors of the Corporation who are not employees of the
Corporation or a subsidiary are not eligible to receive options under the Plan.
In determining the employees to whom options shall be granted under the Plan and
the number of shares of Common Stock as to which options may be granted to such
an employee, the Committee or the Board of Directors, as the case may be, shall
consider the duties of the employees, their present and potential contributions
to the success of the business of the Corporation, and such other factors as the
Committee or the Board of Directors deems relevant in furthering the purposes of
the granting of such options and the interests of the Corporation. An employee
may receive more than one option under the Plan.
6. Incentive Stock Options.
(a) Each option ("Option") may be evidenced by a written Incentive Stock
Option Certificate (the "Certificate"); provided that to the extent permitted by
law and consistent with the terms and conditions of the Plan and the Option, the
Board of Directors may make such modifications in the terms and conditions of
the Option as the Board shall deem necessary or advisable, or as may be required
in order that the Option evidenced by the Certificate be an "incentive stock
option".
(b) Each Option under the Plan (i) shall specify the exercise price per
share of Common Stock, which shall not be less than the fair market value of the
Common Stock of the Company on the date on which such Option is granted,
provided that the exercise price per share of any Option granted to an
individual who, at the time such option is granted, is the owner of stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Corporation shall not be less than 110% of the fair
market value of a share of the Common Stock of the Corporation on the date on
which such Option is granted; (ii) shall be exercisable during a period no later
than ten (10) years after the date on which it is granted, as determined by the
Committee or the Board of Directors at the time of grant; provided that any
Option granted to any person who, at the time such Option is granted, is the
owner of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation, must expire no later
than five (5) years after the date of grant of the Option; (iii) shall be
exercisable at such time or times as may be determined by the Committee or the
Board of Directors at the time of grant, provided that an Option shall become
immediately exercisable as to all shares subject to the Option upon the death or
"disability" (as defined in Section 13) of the holder of the Option; (iv) shall
not be transferable by the holder of the Option (other than by will or the laws
of descent and distribution), and shall be exercisable during the lifetime of
the holder of the Option only by such holder; and (v) shall contain such other
terms and conditions or be in such other form as may be determined by the
Committee or the Board of Directors at the time of grant, provided that such
other terms and conditions shall be permitted by law, shall not be inconsistent
with the Plan and shall not prevent the Option from qualifying as an "incentive
stock option" under Section 422A of the Code. To the extent permitted by law,
and without limitation to the foregoing, the Board of Directors may make such
modifications in the provisions of any particular Option under the Plan as it
shall deem advisable or as may be required in order that the Option may qualify
as an "incentive stock option" under section 422A of the Code.
7. Exercise Price.
The exercise price for each share of Common Stock issuable upon the
exercise of an Option granted under the Plan shall not be less than the fair
market value (or, in the case of an Option granted to any person who, at the
time of the grant of such Option, is the owner of more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation or
any of its subsidiaries, not less than 110% of the fair market value) of a share
of Common Stock at the time of granting of the Option, as determined by the
Committee or the Board of Directors, provided that the method of determination
shall not be inconsistent with any regulations applicable to "incentive stock
options" which may be promulgated by the Internal Revenue Service or the
Secretary of the Treasury.
8. Term of Options.
Options under the Plan shall be exercisable as shall be determined by the
Committee or the Board of Directors, as the case may be, at the time of grant;
provided that Options granted hereunder shall be exercisable for a period not
exceeding ten (10) years from the date such Option is granted, and provided that
any Option granted to any person who, at the time such Option is granted, is the
owner of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation or any of its
subsidiaries shall be exercisable for a period not exceeding five (5) years from
the date such Option is granted. Options shall be subject to earlier termination
as hereinafter provided.
9. Exercise of Options.
Each Option shall be exercised, in whole or in part, as to such number of
shares of Common Stock and at such time or times as the Committee or the Board
of Directors shall have determined at the time of grant. Except as provided in
Sections 10 and 11 hereof, an Option may only be exercised if the holder is at
the time of exercise in the employ of the Corporation or a subsidiary of the
Corporation. Options shall be exercised only by the holder at the Corporation's
principal office, or at such other office as may be designated by the
Corporation, specifying the number of shares purchased and accompanied by
payment in full by certified or bank cashier's check, shares of Common Stock of
the Corporation owned by the holder of the Option (or by any other property, or
in any other form, acceptable to the Committee or the Board of Directors, as the
case may be.) Certificates representing the shares of stock purchased upon
exercise shall be issued as promptly as practicable thereafter. The holder of an
Option shall not have any of the rights of a stockholder of the Corporation with
respect to the shares of Common Stock issuable upon exercise of the Option until
one or more certificates evidencing such shares of Common Stock shall have been
issued to the holder of the Option. In no event may a fraction of a share be
purchased or issued under the Plan.
Options issued under the Plan (and any other plans of the Corporation) to
any individual will not be treated as "incentive stock options" under Section
422A of the Code to the extent that the aggregate fair market value of the stock
underlying any such options (determined as at the time the options are granted),
which become exercisable for the first time in any calendar year, exceeds
$100,000.
10. Termination of Employment.
Except as provided in Section 11, any Option granted under the Plan to an
employee who voluntarily terminates his employment with the Corporation without
the written consent of the Corporation shall expire immediately upon such
termination of employment. Any Option granted under the Plan to an employee who
voluntarily terminates his employment with written consent of the Corporation or
whose employment is involuntarily terminated, shall be exercisable for a period
which shall expire on the day 3 months after the cessation of employment, but in
no event after expiration of the term of the Option and only to the extent such
Option is otherwise exercisable. Except as provided in Section 11, upon the
expiration of any such Options, all rights thereunder, to the extent that such
rights shall not have been exercised, shall terminate immediately. Options
granted under the Plan shall not be affected by any change of employment as long
as the holder continues to be an employee of the Corporation or of any
subsidiary of the Corporation.
11. Exercise Upon Death, Disability or Retirement of the Employee.
(a) If the holder of an Option dies while employed by the Corporation or
any of its subsidiaries, the Option may be exercised as to all shares subject to
the Option by the executor or administrator of such deceased employee or by such
other person at the time entitled by law to the rights of such deceased employee
under the Option, at any time within six (6) months after death, but in no event
after the expiration of the term of the Option.
(b) In the event that the employment of the holder of any Option by the
Corporation or a subsidiary of the Corporation is terminated by reason of the
"disability" of the holder of the Option, the Option may be exercised as to all
shares subject to the Option by the holder thereof at any time within one (1)
year after the date of such termination of employment, but in no event after the
expiration of the term of the Option. For purposes of the Plan the term
"disability" shall mean a physical or mental disability as defined in Section
105 of the Code.
(c) In the event that the employment of the holder of any Option by the
Corporation or a subsidiary of the Corporation is terminated by reason of the
retirement of the holder of the Option, the Option may be exercised (to the
extent otherwise exercisable on the date of the retirement of the holder of the
Option) by the holder thereof at any time within three (3) months after the date
of such retirement, but in no event after the expiration of the term of the
Option.
12. Non-Transferability of Options.
Options shall not be transferable otherwise than by the last will and
testament of the holder of the Option or the applicable laws of descent and
distribution, and during the lifetime of the holder, Options may be exercised
only by the holder thereof. Options may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) except to the extent expressly provided for in the Plan, and shall
not be subject to execution, attached or similar process.
Any assignment, transfer, pledge, hypothecation or other disposition of any
Option attempted contrary to the provisions of this Plan, or any levy or
execution, attachment or other process attempted upon an Option, will be null
and void and without effect. Any attempt to make any such assignment, transfer,
pledge, hypothecation or other disposition of an Option or any attempt to make
any such levy or execution, attachment or other process will cause the Option to
be terminated immediately upon the happening of any such event if the
Corporation, at any time, should, in the sole discretion of the Committee or the
Board of Directors, so elect, by written notice to the employee or to the person
then entitled to exercise the Option under the provisions of Section 11 hereof;
provided that any such termination of the Option under the foregoing provisions
of this Section 12 will not prejudice any rights or remedies which the
Corporation or any subsidiary may have under the Plan, any Incentive Stock
Option Certificate or otherwise.
13. Adjustments.
If (a) the Corporation shall at any time be involved in a transaction to
which subsection (a) of Section 425 of the Code is applicable, (b) the
Corporation shall declare a dividend payable in, or shall subdivide or combine
its Common Stock, or (c) any other event shall occur which, in the judgment of
the Committee or the Board of Directors, necessitates action by way of adjusting
the terms of the outstanding Options, the Committee or the Board of Directors,
as the case may be, shall take any such action as in its judgment shall be
necessary to preserve to the holders of Options rights substantially
proportionate to the rights existing prior to such event. To the extent that
such action shall include an increase or decrease in the number of shares of
Common Stock subject to Options outstanding under the Plan, the aggregate number
of shares of Common Stock available under Section 2 of the Plan for issuance
upon exercise of such outstanding Options and of additional Options which may be
granted shall be increased or decreased, as the case may be, proportionately. No
action shall be taken by the Committee or by the Board of Directors under the
provisions of this Section 13 which, in its judgment, would constitute a
modification, extension or renewal of the Option (within the meaning of Section
425(h) of the Code), or would prevent the Option from qualifying as an
"incentive stock option" (within the meaning of Section 422A of the Code). The
determination of the Committee or the Board of Directors, as the case may be,
with respect to any matter referred to in this Section 13 shall be conclusive
and binding upon each holder of an Option under the Plan.
14. Termination and Amendment of the Plan.
(a) Unless sooner terminated, as hereinafter provided, this Plan shall
terminate at 11:59 p.m. on June 30, 2012, and no options shall be granted
hereunder after that date. The Board of Directors may, without further approval
by the stockholders at any time terminate or amend this Plan without notice, or
make such modifications of this Plan as it shall deem advisable; provided that
the Board of Directors may not, without prior approval by the stockholders of
the Corporation, (i) increase the maximum number of shares of Common Stock as to
which Options may be granted under the Plan (except as contemplated by the
provisions of Section 13 hereof), (ii) extend the term during which options may
be granted under the Plan, (iii) permit the exercise of an Option after the date
on which such Option would otherwise terminate pursuant to the terms thereof; or
(iv) reduce the exercise price per share to less than the fair market value of a
share of Common Stock on the date the Option is granted, or, in the case of any
Option granted to an individual who, on the date of the grant of the Option, is
the owner of more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or any subsidiary, 110% of the fair
market value of a share of Common stock (except, in both cases, as contemplated
by the provisions of section 13 hereof). No termination, amendment or
modification of the Plan may, without the consent of the person to whom any
Option has been granted, adversely affect the rights of such person under such
Option or any unexercised portion thereof.
(b) Notwithstanding the limitation set forth in Paragraph (a) of this
Section 14, the Plan and any Option and the number of shares as to which any
Option under the Plan shall have been granted may be reduced, retroactively at
any time, to conform to the provisions of the Code and the regulations
promulgated thereunder, in order that Options under the Plan may qualify as
"incentive stock options" within the meaning of Section 422A of the Code, and no
such amendment shall be considered prejudicial to the rights of any holder of an
Option.
15. Substitutions and Assumptions of Options of Certain Constituent
Corporations.
Anything in this Plan to the contrary notwithstanding, the Board of
Directors may, without further approval by the stockholders, substitute new
Options for prior options of a constituent corporation (as hereinafter defined)
or assume the prior options of such constituent corporation. The term
"constituent corporation" shall mean any corporation which has been merged into
or consolidated with the Corporation, or whose assets or stock have been
purchased or acquired by or liquidated into the Corporation or by or into one or
more subsidiaries of the Corporation, or any parent or any subsidiary of any
such corporation.
16. Indemnification of Committee.
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee or the
Directors, as the case may be, shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by the Corporation) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudicated in
such action, suit or proceeding that such Committee member or Director is liable
for negligence or misconduct in the performance of his duties; provided that
within 10 days after institution of any such action, suit or proceeding a
Committee member shall in writing offer the Corporation the opportunity, at its
own expense, to handle and defend the same.
17. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of Directors of
the Corporation; provided that the Plan shall be submitted for approval by the
stockholders of the Corporation no later than twelve (12) months after the date
of adoption of the Plan by the Board of Directors.