Exhibit 10.1
INSIGHT HEALTH SERVICES CORP.
1998 EMPLOYEE STOCK OPTION PLAN
InSight Health Services Corp., a Delaware corporation
("Corporation") sets forth herein the terms of the InSight Health Services
Corp. 1998 Employee Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation by
providing the individuals listed in Attachment 1 hereto ("Optionees") an
inducement essential to enter into executive employment agreements with the
Corporation and with an opportunity to develop a proprietary interest in the
Corporation, which will thereby create strong performance incentives for such
individuals to maximize the growth and success of the Corporation and its
subsidiaries, and will encourage such individuals to remain in the employ of
the Corporation, or any of its subsidiaries. Options granted under the Plan
("Options") shall not constitute "incentive stock options" within the meaning
of section 422 of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
2. ADMINISTRATION
Except as otherwise specifically provided herein, the Plan shall be
administered by the Compensation Committee ("Committee") of the Board of
Directors ("Board") of the Corporation, which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any Option granted or Option Agreement (as
defined in Section 5 below) entered into hereunder, and all such other
actions and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Committee to be necessary or appropriate
to the administration of the Plan or any Option granted or Option Agreement
entered into hereunder; provided however, that the Committee may not alter,
amend or modify the express provisions of the Plan. The interpretation and
construction by the Committee of any provision of the Plan or of any Option
granted or Option Agreement entered into hereunder shall be final, binding
and conclusive.
The Board may remove members, add members, and fill vacancies on the
Committee from time to time, all in accordance with the Corporation's
Certificate of Incorporation and Amended and Restated Bylaws, and with
applicable law. No member of the Board or of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Option granted or Option Agreement entered into hereunder.
3. COMMON STOCK
The stock that may be issued pursuant to Options granted under the
Plan shall be shares of common stock, par value $0.001 per share, of the
Corporation ("Common Stock"), which shares may be treasury shares or
authorized but unissued shares. The number of shares of Common Stock that may
be issued pursuant to Options granted under the Plan shall not exceed in the
aggregate 250,000 shares, which number of shares is subject to adjustment as
hereinafter provided in Section 12 below.
1998 EMPLOYEE STOCK OPTION PLAN PAGE 1
4. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall be effective as of the date on which the merger
described in that certain Agreement and Plan of Merger dated as of April 15,
1998, by and among the Corporation, SMSI Acquisition Company, Signal Medical
Services, Inc.. and its stockholders becomes effective ("Effective Date") and
shall continue in effect for a term of ten (10) years. Any Options outstanding
under the Plan on such date shall continue to be exercisable pursuant to their
terms, except as otherwise provided herein.
5. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, each Optionee is
hereby granted as of the Effective Date, Options to purchase such number of
shares of the Common Stock listed on Attachment 1 hereto at a purchase price of
$ _____ per share, on the terms and conditions set forth in the written
agreements ("Option Agreements"), to be executed by the Corporation and by the
Optionee, in the form of Attachment 2 hereto.
6. TERM AND EXERCISE OF OPTIONS
(a) Method of Exercise and Payment. An Option that is exercisable
hereunder may be exercised by delivery to the Corporation on any business
day, at its principal office, addressed to the attention of the Corporate
Secretary, of written notice of exercise in the form attached to the Option
Agreement as Exhibit A, which notice shall specify the number of shares with
respect to which the Option is being exercised, and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is
being exercised. The minimum number of shares of Common Stock with respect to
which an Option may be exercised, in whole or in part, at any time shall be
the lesser of 100 shares or the maximum number of shares available for
purchase under the Option at the time of exercise. Payment of the Option
Price for the shares of Common Stock purchased pursuant to the exercise of an
Option shall be made (i) in cash or in cash equivalents; (ii) with the
consent of the Committee, through the tender to the Corporation of shares of
Common Stock, which shares shall be valued, for purposes of determining the
extent to which the Option Price has been paid thereby, at their Fair Market
Value (as defined below) on the date of exercise; or (iii) by a combination
of the methods described in (i) and (ii). If shares of Common Stock are
surrendered by an officer of the Corporation (as the term "officer" is
defined in Section 10(c) below) for payment and the Common Stock surrendered
was acquired pursuant to an Option of the Corporation, then six (6) months
must have elapsed since the date of grant of such Option. The payment in full
of the Option Price need not accompany the written notice of exercise
provided the notice of exercise directs that the Common Stock certificate or
certificates for the shares for which the Option is exercised be delivered to
a licensed broker acceptable to the Corporation as the agent for the
individual exercising the Option and, at the time such Common Stock
certificate or certificates are delivered, the broker shall tender to the
Corporation cash (or cash equivalents acceptable to the Corporation) equal to
the Option Price for the shares of Common Stock purchased pursuant to the
exercise of the Option plus the amount (if any) of federal and/or other taxes
which the Corporation, may, in its judgment, be required to withhold with
respect to the exercise of the Option. Any attempt to exercise any Option
granted hereunder other than as set forth above shall be invalid and of no
force and effect. Promptly after the exercise of an Option and the payment in
full of the Option Price of the shares of Common Stock covered thereby, the
individual exercising the Option shall be entitled to the issuance of a
Common Stock certificate or certificates evidencing his ownership of such
shares. An individual holding or exercising an Option shall have none of the
rights of a stockholder until the shares of Common Stock covered thereby are
fully paid and issued to him, and except as provided in Section 12 below, no
adjustment shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.
(b) Fair Market Value. "Fair Market Value" means the value of each
share of Common Stock subject to the Plan determined as follows: If on the
date of exercise the Common Stock is listed on an
1998 EMPLOYEE STOCK OPTION PLAN PAGE 2
established national or regional stock exchange, is admitted to quotation on
The Nasdaq Stock Market, or is publicly traded on an established securities
market, the Fair Market Value of the Common Stock shall be the closing price
of the Common Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the date
of exercise or on the trading day immediately preceding the date of exercise
if the date of exercise is not a trading day (or, if there is no such
reported closing price, the Fair Market Value shall be the mean between the
highest bid and lowest asked prices or between the high and low sale prices
on such trading day), or, if no sale of the Common Stock is reported for such
trading day, on the next preceding day on which any sale shall have been
reported. If the Common Stock is not listed on such an exchange, quoted on
such Stock Market or traded on such a market, Fair Market Value shall be
determined by the Committee in good faith.
(c) Withholding. The Corporation shall have the right to withhold,
or require an Optionee to remit to the Corporation, an amount sufficient to
satisfy any applicable federal, state, local or foreign withholding tax
requirements imposed with respect to the exercise of Options. Subject to the
consent of the Committee which may be withheld in its sole and absolute
discretion, and to the extent permissible under applicable tax, securities,
and other laws, an Optionee may (a) have shares of Common Stock otherwise
issuable to the Optionee hereunder withheld, or (b) tender to the Corporation
previously acquired shares of Common Stock, having a Fair Market Value
sufficient to satisfy all or part of the Optionee's federal, state and local
tax obligations associated with the exercise of Options.
7. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Option is granted,
only such Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise the Option. No
Option shall be assignable or transferable by the Optionee to whom it is
granted, other than by will, the laws of descent and distribution, or
pursuant to a qualified domestic relations order as defined in section 414 of
the Code, or such other transfers as may be permitted by the Committee and no
Option shall be pledged or hypothecated (by operation of law or otherwise),
or subject to execution, attachment or similar process.
8. TERMINATION OF EMPLOYMENT
Upon the termination of the employment of an Optionee with the
Corporation or a subsidiary of the Corporation, other than by reason of the
death or "permanent and total disability" (within the meaning of section
22(e)(3) of the Code) of such Optionee, any Option granted to an Optionee
pursuant to the Plan shall terminate thirty (30) days after the date of such
termination of employment, unless otherwise provided pursuant to the Option
Agreement. A leave of absence or leave on military or government service
approved by the Committee shall not constitute a termination of employment
for purposes of the Plan. For purposes of the Plan, a termination of
employment with the Corporation or a subsidiary of the Corporation shall not
be deemed to occur if the Optionee is immediately thereafter employed with
the Corporation or any subsidiary of the Corporation.
9. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Common
Stock pursuant to Options granted under the Plan shall constitute general
funds of the Corporation.
10. REQUIREMENTS OF LAW
(a) Violations of Law. The Corporation shall not be required to sell
or issue any shares of Common Stock under any Option if the sale or issuance
of such shares would constitute a violation by the individual exercising the
Option or the Corporation of any provisions of any law or regulation of any
1998 EMPLOYEE STOCK OPTION PLAN PAGE 3
governmental authority, including without limitation any federal or state
securities laws or regulations. Specifically in connection with the
Securities Act of 1933, as amended ("1933 Act"), upon exercise of any Option,
unless a registration statement under the 1933 Act is in effect with respect
to the shares of Common Stock covered by such Option, the Corporation shall
not be required to sell or issue such shares unless the Committee has
received evidence satisfactory to it that the holder of such Option may
acquire such shares pursuant to an exemption from registration under the 1933
Act. Any determination in this connection by the Committee shall be final,
binding and conclusive. The Corporation may, but shall in no event be
obligated to, register any securities covered hereby pursuant to the 1933
Act. The Corporation shall not be obligated to take any affirmative action in
order to cause the exercise of an Option or the issuance of shares of Common
Stock pursuant thereto to comply with any law or regulation of any
governmental authority, except the Corporation shall timely file for
registration, on Form S-8 under the 1933 Act, of the shares of Common Stock
to be issued upon exercise of the Options granted under the Plan. As to any
jurisdiction that expressly imposes the requirement that an Option shall not
be exercisable unless and until the shares of Common Stock covered by such
Option are registered or are subject to an available exemption from
registration, the exercise of such Option (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
(b) Compliance with Rule 16b-3. The Plan is intended to comply with
Rule 16b-3 or its successor rule., promulgated under the Securities Exchange
Act of 1934 ("1934 Act"). With respect to persons subject to Section 16 of
the 1934 Act, any provision of the Plan or action of the Committee that is
inconsistent with such Rule shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee.
(c) Holding Period for Officers. With respect to Options granted to
officers of the Corporation (as the term "officer" is defined in the rules
promulgated under Section 16 of the 1934 Act) and except as may be approved
by the Committee, at least six (6) months must elapse from the date of grant
of the Option and (i) any disposition of the Option (not including its
exercise), or (ii) any disposition of the underlying Common Stock.
11. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan; provided however, that no amendment, suspension or
termination of the Plan by the Board may, without the consent of the holder
of the Option, adversely affect any rights or obligations under any Option
theretofore granted under the Plan.
1998 EMPLOYEE STOCK OPTION PLAN PAGE 4
12. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Common Stock. If the outstanding shares of Common
Stock are increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Corporation by reason of
any recapitalization, reclassification, stock split-up, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease affecting such outstanding
shares generally that is effected without receipt of consideration by the
Corporation, occurring after the Effective Date, the number and kinds of
shares for the purchase of which Options may be granted under the Plan shall
be adjusted proportionately and accordingly by the Committee. In addition,
the number and kind of shares for which Options are outstanding shall be
adjusted proportionately and accordingly so that the proportionate ownership
interest of the holder of the Option immediately following such event shall,
to the extent practicable, be the same as immediately prior to such event.
Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised
portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share. If there is a
distribution payable in the capital stock of a subsidiary corporation of the
Corporation ("Spin-off Shares"), to the extent consistent with Treasury
Regulation section 1.425-1(a)(6) or the corresponding provision of any
subsequent regulation, each outstanding Option shall thereafter additionally
pertain to the number of Spin-off Shares that would have been received in
such distribution by a stockholder of the Corporation who owned a number of
shares of Common Stock equal to the number of shares that are subject to the
Option at the time of such distribution, and the aggregate Option Price of
the Option shall be allocated between the Spin-off Shares and the Common
Stock in proportion to the relative Fair Market Values of a Spin-off Share
and a share of Common Stock immediately after the distribution of Spin-off
Shares.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. If the Corporation shall be the surviving corporation in any
reorganization, merger, or consolidation of the Corporation with one or more
other corporations, any Option theretofore granted pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of
shares of Common Stock subject to such Option would have been entitled
immediately following such reorganization, merger, or consolidation, with a
corresponding proportionate adjustment of the Option Price per share so that
the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior
to such reorganization, merger, or consolidation.
(c) Reorganization in Which the Corporation Is Not the Surviving
Corporation; Sale of Assets or Stock. Upon the dissolution or liquidation of
the Corporation, or upon a merger, consolidation or reorganization of the
Corporation with one or more other corporations in which the Corporation is
not the surviving corporation, or upon a sale of substantially all of the
assets of the Corporation to another corporation, or upon any transaction
(including, without limitation, a merger or reorganization in which the
Corporation is the surviving corporation) approved by the Board which results
in any person or entity owning eighty percent or more of the combined voting
power of all classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent provision is made
in writing in connection with such transaction for the continuation of the
Plan and/or the assumption of the Options theretofore granted, or for the
substitution for such Options of new options covering the stock of a
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise prices, to
preserve the then excess, if any, of the aggregate Fair Market Value of the
shares subject to Options over the purchase price for the shares under the
Options, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. In the event of any
such termination of the Plan, each individual holding an Option shall have
the right, immediately prior to the occurrence of such termination and during
such period occurring prior to such termination as the Board in its sole
discretion shall determine and designate, to exercise such Option in whole or
in part, whether or not such Option was otherwise exercisable at the time
such termination occurs
1998 EMPLOYEE STOCK OPTION PLAN PAGE 5
and without regard to any installment limitation on exercise imposed pursuant
to the Option Agreement. The Board shall send written notice of an event that
will result in such a termination to all individuals who hold Options not
later than the time at which the Corporation gives notice thereof to its
stockholders. Notwithstanding the foregoing, the occurrence of any event
described in this Section 12(c) which also constitutes a Change of Control
(as defined below) shall cause the exercisability in full of all Options
whether or not (i) all conditions to exercise have been satisfied and (ii)
the Plan is terminated pursuant to this Section 12(c).
(d) Adjustments. Adjustments under this Section 12 related to stock
or securities of the Corporation shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares of Common Stock or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share or unit.
(e) No Limitations on the Corporation. The grant of an Option
pursuant to the Plan shall not affect or limit in any way the right or power
of the Corporation to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, consolidate,
dissolve or liquidate, or to sell or transfer all or any part of its business
or assets.
13. CHANGE OF CONTROL
"Change of Control" means the Corporation or its stockholders enter
into an agreement or agreements, in one or a series of related transactions,
to dispose of, whether by sale, exchange, merger, consolidation,
reorganization, recapitalization, dissolution or liquidation (a) not less
than 80% of the assets of the Corporation or (b) a portion of the outstanding
Common Stock such that after the transaction or transactions one person or
"group" (as defined by the Securities and Exchange Commission) owns, of
record or beneficially, 50% or more of the outstanding capital stock of the
Corporation, or the right (by whatever means) or the voting power to elect
50% or more of the directors of the Corporation.
14. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ of the Corporation or any
subsidiary of the Corporation, or to interfere in any way with the right and
authority of the Corporation or any subsidiary of the Corporation either to
increase or decrease the compensation of any individual at any time, or to
terminate any employment or other relationship between any individual and the
Corporation or any subsidiary of the Corporation.
15. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or individuals) as the Board in its discretion
determines desirable, including, without limitation, the granting of stock
options otherwise than under the Plan.
16. GOVERNING LAW
THE VALIDITY, INTERPRETATION AND EFFECT OF THE PLAN, AND THE RIGHTS
OF ALL PERSONS HEREUNDER, SHALL BE GOVERNED BY AND DETERMINED IN ACCORDANCE
WITH THE LAWS OF DELAWARE, OTHER THAN THE CHOICE OF LAW RULES THEREOF.
1998 EMPLOYEE STOCK OPTION PLAN PAGE 6
17. HEADINGS
The headings herein are for convenience only and shall not be used
in interpreting the Plan.
1998 EMPLOYEE STOCK OPTION PLAN PAGE 7
ATTACHMENT 1
Optionee Name Number of Option Shares
- ------------- -----------------------
Brian P. Stone 107,160
Thomas W. Crucitti 74,600
David M. Karchner 68,240
1998 EMPLOYEE STOCK OPTION PLAN PAGE 8