Exhibit 10.2
INSIGHT HEALTH SERVICES CORP.
1997 MANAGEMENT STOCK OPTION PLAN
InSight Health Services Corp., a Delaware corporation ("Corporation")
sets forth herein the terms of the InSight Health Services Corp. 1997 Management
Stock Option Plan ("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") 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 500,000 shares,
which number of shares is subject to adjustment as hereinafter provided in
Section 12 below.
4. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan became effective upon its adoption by the Board on November 7,
1997 ("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.
1997 MANAGEMENT STOCK OPTION PLAN PAGE 1
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
("Option Price") of $8.375 per share, on the terms and conditions set forth in
the written agreements ("Option Agreements"), executed by the Corporation and by
the Optionee, in the form of Attachment 2 hereto. The Option Price is greater
than the Fair Market Value (as defined in Section 6(b)) as of the Effective
Date.
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 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
1997 MANAGEMENT STOCK OPTION PLAN PAGE 2
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 three (3) months 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
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
1997 MANAGEMENT STOCK OPTION PLAN PAGE 3
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, 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.
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
1997 MANAGEMENT STOCK OPTION PLAN PAGE 4
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 (80%) 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 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.
1997 MANAGEMENT STOCK OPTION PLAN PAGE 5
13. CHANGE OF CONTROL
If a Change of Control (as defined below) occurs, all Options shall be
exercisable in full regardless of whether all conditions of exercise have been
satisfied. A "Change of Control" shall be deemed to occur (i) at such time as
any person (as defined in the Section 13(d)(3) of the 1934 Act, but excluding
General Electric Company ("GE") and the entities to whom shares of the
Corporation's Convertible Preferred Stock, Series B ("Series B Preferred Stock")
were initially issued ("Carlyle"), and successors and permitted assigns of GE
and Carlyle, individually and collectively) at any time shall directly or
indirectly acquire more than forty percent (40%) of the voting power of the
Common Stock, (ii) at such time as during any one (1) year period, individuals
who at the beginning of such period constitute the Board (together with any new
directors (i) whose election by such Board or whose nomination for election by
the stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved or (ii) elected or appointed by Carlyle, GE or their successors and
permitted assigns) cease to constitute at least a majority of such Board
(provided, however, that a change in directors upon a Type B Event Date (as
defined in the Corporation's Certificate of Designation, Preferences and Rights
of Convertible Preferred Stock, Series B ("Series B Certificate of
Designation")) shall not be deemed to cause a Change of Control pursuant to this
clause (ii), (iii) upon consummation of a merger or consolidation of the
Corporation into or with another Person (as defined below) in which the
stockholders of the Corporation immediately prior to the consummation of such
transaction shall own fifty percent (50%) or less of the voting securities of
the surviving corporation (or the parent corporation of the surviving
corporation where the surviving corporation is wholly owned by the parent
corporation) immediately following the consummation of such transaction, or (iv)
the sale, transfer or lease of all or substantially all of the assets of the
Corporation, in any of cases (i), (ii), (iii) or (iv) in a single transaction or
series of related transactions; provided, that no Change of Control hereunder
with respect to the Corporation shall be deemed to occur solely by reason of (x)
the ownership of the Corporation's capital stock by any of Carlyle, TC Group,
L.L.C., any investor in any entity comprising Carlyle or TC Group, L.L.C. as of
October 14, 1997, GE or its Affiliates (as defined in the Series B Certificate
of Designation), (y) the conversion of shares of Series B Preferred Stock into
either the Corporation's Convertible Preferred Stock, Series D ("Series D
Preferred Stock") (and any change in the Board incident thereto) or Common
Stock, or (z) the conversion of shares of Series D Preferred Stock into Common
Stock. "Person" means any corporation, partnership, limited partnership, limited
liability partnership, joint venture, association, limited liability company,
joint-stock company, trust or unincorporated organization.
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.
1997 MANAGEMENT STOCK OPTION PLAN PAGE 6
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.
17. HEADINGS
The headings herein are for convenience only and shall not be used in
interpreting the Plan.
1997 MANAGEMENT STOCK OPTION PLAN PAGE 7
ATTACHMENT 1
Optionee Name Number of Option Shares
- ------------- -----------------------
E. Larry Atkins 150,000
Thomas V. Croal 140,000
Glenn P. Cato 80,000
Michael A. Boylan 50,000
Robert N. LaDouceur 50,000
Michael D. Cragin 30,000
1997 MANAGEMENT STOCK OPTION PLAN PAGE 8