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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
Laboratory Corporation
of America Holdings
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
13-3757370
(I.R.S. Employer Identification No.)
358 South Main Street
Burlington, North Carolina 27215
(336) 229-1127
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
________________________
DIANON Systems, Inc. 1996 Stock Incentive Plan
DIANON Systems, Inc. 1999 Stock Incentive Plan
DIANON Systems, Inc. 2000 Stock Incentive Plan
DIANON Systems, Inc. 2001 Stock Incentive Plan
UroCor, Inc. Second Amended and Restated 1992 Stock Option Plan
(Full title of the Plan)
________________________
Bradford T. Smith
Executive Vice President, Chief Legal Officer and Secretary
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, North Carolina 27215
(336) 229-1127
(Name, address and telephone number, including area code, of agent for service)
Copy to:
Michael J. Silver
Hogan & Hartson L.L.P.
111 South Calvert Street
Baltimore, Maryland 21202
(410) 659-2700
________________________
CALCULATION OF REGISTRATION FEE
Exhibit 10.2
DIANON SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1. Purposes
The purposes of the Dianon Systems, Inc. 1996 Stock Incentive Plan
(the "Plan") are (i) to enable Dianon Systems, Inc. (the "Company") and its
Related Companies (as defined below) to attract, retain and reward employees
and strengthen the existing mutuality of interests between such employees and
the Company's stockholders by offering such employees an equity interest in
the Company, and (ii) to enable the Company to pay part of the compensation of
its Outside Directors (as defined in Section 5.2) in the form of equity of the
Company, thereby increasing such directors' proprietary interests in the
Company. For purposes of the Plan, a "Related Company" means any corporation,
partnership, joint venture or other entity in which the Company owns, directly
or indirectly, at least a 20% beneficial ownership interest.
SECTION 2. Types of Awards
2.1 Awards under the Plan may be in the form of (i) Stock Options;
(ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred
Stock; (v) Bonus Stock; (vi) Loans; and/or (vii) Tax Offset Payments. One or
more types of awards may be granted, which may be independent or granted
in tandem. If two awards are granted in tandem, the award holder may exercise
(or otherwise receive the benefit of) one award only to the extent he or she
relinquishes the tandem award.
2.2 Outside Directors shall receive Stock Options, Limited Stock
Appreciation Rights and Stock Grants as provided in Section 15. In addition,
Outside Directors may be granted awards in one or more of the forms set forth
in Section 2.1.
SECTION 3. Administration
3.1 The Plan shall be administered (i) by the Compensation Committee
of the Company's Board of Directors (the "Board") or such other committee of
directors as the Board shall designate (the "Committee"), with respect to
awards to persons other than Outside Directors, and (ii) by the Board with
respect to awards to Outside Directors (except as provided in Section 4.4).
The Committee shall consist of not less than two directors each of whom is an
Outside Director. The members of the Committee shall serve at the pleasure of
the Board.
3.2 For purposes of this Plan the term "Granting Authority" shall mean
(i) the Board of Directors with respect to awards to Outside Directors (except
as provided in Section 4.4), and (ii) the Committee with respect to all other
awards. The Granting Authority shall have the following authority with respect
to awards under the Plan within its jurisdiction: to grant such awards to
persons eligible to receive them under the Plan; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall deem advisable; to interpret the terms and provisions of the Plan and
any award granted by it under the Plan; and to otherwise supervise the
administration of the Plan. In particular, and without limiting its authority
and powers, the Granting Authority shall have the authority with respect to
the awards within its jurisdiction:
(a) to determine whether and to what extent any award or combination
of awards will be granted hereunder, including whether any awards
will be granted in tandem with each other;
(b) to select the eligible persons to whom awards will be granted;
(c) to determine the number of shares of the common stock of the
Company (the "Stock") to be covered by each award granted
hereunder subject to the limitations contained herein;
(d) to determine the terms and conditions of any award granted
hereunder, including, but not limited to, any vesting or other
restrictions based on such performance objectives (the
"Performance Objectives") and such other factors as the Granting
Authority may establish, and to determine whether the Performance
Objectives and other terms and conditions of the award are
satisfied;
(e) to determine the treatment of awards upon an award holder's
retirement, disability, death, termination for cause or other
termination of employment or service with the Company or Related
Company;
(f) to determine pursuant to a formula or otherwise the fair market
value of the Stock on a given date; provided, however, that if the
Granting Authority fails to make such a determination, fair market
value of the Stock on a given date shall be the closing sale price
on a given date, or if no such sale of Stock occurs on such date,
the weighted average of the closing sale prices on the nearest
trading dates before and after such date;
(g) to determine that amounts equal to the amount of any dividends
declared with respect to the number of shares covered by an award
(i) will be paid to the award holder currently or (ii) will be
deferred and deemed to be reinvested or (iii) will otherwise be
credited to the award holder, or that the award holder has no
rights with respect to such dividends;
(h) to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an award will be
deferred either automatically or at the election of an award
holder, including providing for and determining the amount (if any)
of deemed earnings on any deferred amount during any deferral
period;
(i) to provide that the shares of Stock received as a result of an
award shall be subject to a right of first refusal, pursuant to
which the award holder shall be required to offer to the Company
any shares that the award holder wishes to sell, subject to such
terms and conditions as the Granting Authority may specify;
(j) to amend the terms of any award (including those granted under
Section 15), prospectively or retroactively; provided, however,
that no amendment shall impair the rights of the award holder
without his or her written consent; and
(k) to substitute new Stock Options for previously granted Stock
Options, or for options granted under other plans or agreements,
in each case including previously granted options having higher
option prices.
3.3 The Committee shall have the right to designate awards as
"Performance Awards." Awards so designated shall be granted and administered
in a manner designed to preserve the deductibility of the compensation
resulting from such awards in accordance with Section 162(m) of the Internal
Revenue Code (the "Code"). The grant or vesting of a Performance Award shall
be subject to the achievement of Performance Objectives established by the
Committee based on one or more of the following criteria, in each case applied
to the Company on a consolidated basis and/or to a business unit and which the
Committee may use as an absolute measure, as a measure of improvement relative
to prior performance, or as a measure of comparable performance relative to a
peer group of companies: sales, operating profits, operating profits before
interest expense and taxes, net earnings, earnings per share, return on
equity, return on assets, return on invested capital, total shareholder
return, cash flow, debt to equity ratio, market share, stock price, economic
value added, and market value added.
The Performance Objectives for a particular Performance Award relative
to a particular fiscal year shall be established by the Committee in writing
no later than 90 days after the beginning of such year. The Committee's
determination as to the achievement of Performance Objectives relating to a
Performance Award shall be made in writing. The Committee shall have
discretion to modify the Performance Objectives or vesting conditions of a
Performance Award only to the extent that the exercise of such discretion
would not cause the Performance Award to fail to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Granting Authority pursuant to the
provisions of the Plan shall be final and binding on all persons, including
the Company and Plan participants.
3.5 The Committee may from time to time delegate to one or more
officers of the Company any or all of its authorities granted hereunder
except with respect to awards granted to persons subject to Section 16 of
the Securities Exchange Act of 1934 or Performance Awards. The Committee
shall specify the maximum number of shares that the officer or officers to
whom such authority is delegated may award.
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock which may be issued under the
Plan shall be 700,000, of which 630,000 shall be used for awards to employees
and 70,000 shall be used for awards to Outside Directors (all subject to
adjustment as provided below). Such shares may consist of authorized but
unissued shares or treasury shares. The exercise of a Stock Appreciation Right
for cash or the payment of any other award in cash shall not count against
this share limit.
4.2 To the extent a Stock Option terminates without having been
exercised, or an award terminates without the award holder having received
payment of the award, or shares awarded are forfeited, the shares subject to
such award shall again be available for distribution in connection with future
awards under the Plan. Shares of Stock equal in number to the shares
surrendered in payment of the option price, and shares of Stock which are
withheld in order to satisfy federal, state or local tax liability, shall not
count against the above limit, and shall again be available for grants under
the Plan.
4.3 No employee shall be granted Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, and/or Bonus Stock, or any
combination of the foregoing with respect to more than 300,000 shares of
Stock in any fiscal year (subject to adjustment as provided in Section 4.4).
No employee shall be granted a Tax Offset Payment in any fiscal year with
respect to more than the number of shares of Stock covered by awards granted
to such employee in such fiscal year.
4.4 In the event of any merger, reorganization, consolidation, sale
of substantially all assets, recapitalization, Stock dividend, Stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may
be determined to be appropriate by the Committee in its sole discretion, shall
be made in the aggregate number of shares reserved for issuance under the
Plan, the number of shares as to which awards may be granted to any individual
in any calendar year, the number and type of shares subject to outstanding
awards and the amounts to be paid by award holders or the Company, as the case
may be, with respect to outstanding awards; provided, however, that no such
adjustment shall increase the aggregate value of any outstanding award. In the
event any change described in this Section 4.4 occurs, the Committee shall
make appropriate adjustment in the awards previously granted and to be granted
to Outside Directors under the Plan; provided that no such adjustment shall
increase the aggregate value of any outstanding award.
SECTION 5. Eligibility
5.1 Employees of the Company or a Related Company, including employees
who are officers and/or directors of the Company, are eligible to be granted
awards under the Plan, other than under Section 15. Employees shall be
selected for participation in the Plan from time to time by the Committee, in
its sole discretion, from among those eligible.
5.2 Awards under Section 15 of the Plan shall be made solely to
Outside Directors, which term shall mean any director of the Company other
than one who is an employee of the Company or a Related Company. The Board, in
its discretion, may also grant other awards under the Plan in one or more of
the forms set forth in Section 2.1 to one or more Outside Directors.
SECTION 6. Stock Options
6.1 The Stock Options awarded under the Plan may be of two types:
(i) Incentive Stock Options within the meaning of Section 422 of the Code or
any successor provision thereto (which may only be granted to employees); and
(ii) Non-Qualified Stock Options. To the extent that any Stock Option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
6.2 Subject to the following provisions, Stock Options awarded under
the Plan shall be in such form and shall have such terms and conditions as the
Granting Authority may determine:
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Granting Authority, and
may be less than the fair market value of the Stock on the date of
the award of the Stock Option.
(b) Option Term. The term of each Stock Option shall be fixed by the
Granting Authority.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be
determined by the Granting Authority. The Granting Authority may
waive such exercise provisions or accelerate the exercisability of
the Stock Option at any time in whole or in part.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice
of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment
of the purchase price shall be made in such manner as the Granting
Authority may provide in the award, which may include cash
(including cash equivalents), delivery of shares of Stock already
owned by the optionee or subject to awards hereunder, "cashless
exercise", any other manner permitted by law determined by the
Granting Authority, or any combination of the foregoing. If the
Granting Authority determines that a Stock Option may be exercised
using shares of Restricted Stock, then unless the Granting
Authority provides otherwise, the shares received upon the
exercise of a Stock Option which are paid for using Restricted
Stock shall be restricted in accordance with the original terms of
the Restricted Stock award.
(e) No Stockholder Rights. An optionee shall have neither rights to
dividends or other rights of a stockholder with respect to shares
subject to a Stock Option until the optionee has given written
notice of exercise and has paid for such shares.
(f) Surrender Rights. The Granting Authority may provide that options
may be surrendered for cash upon any terms and conditions set by
the Granting Authority.
(g) Non-transferability. Unless otherwise provided by the Granting
Authority, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and
distribution, and (ii) during the optionee's lifetime, all Stock
Options shall be exercisable only by the optionee or by his or her
guardian or legal representative.
(h) Termination of Service. Following the termination of an optionee's
service with the Company or a Related Company, the Stock Option
shall be exercisable to the extent determined by the Granting
Authority. The Granting Authority may provide different
post-termination exercise provisions with respect to termination
of service for different reasons. The Granting Authority may
provide that, notwithstanding the option term fixed pursuant to
Section 6.2(b), a Stock Option which is outstanding on the date of
an optionee's death shall remain outstanding for an additional
period after the date of such death.
6.3 Notwithstanding the provisions of Section 6.2, no Incentive Stock
Option shall (i) have an option price which is less than 100% of the fair
market value of the Stock on the date of the award of the Incentive Stock
Option, (ii) be exercisable more than ten years after the date such Incentive
Stock Option is awarded, or (iii) be awarded more than ten years after the
effective date of the Plan specified in Section 19. No Incentive Stock Option
granted to an employee who owns more than 10% of the total combined voting
power of all classes of stock of the Company or any of its parent or
subsidiary corporations, as defined in Section 424 of the Code, shall (A) have
an option price which is less than 110% of the fair market value of the Stock
on the date of award of the Incentive Stock Option or (B) be exercisable more
than five years after the date such Incentive Stock Option is awarded.
SECTION 7. Stock Appreciation Rights
7.1 A Stock Appreciation Right shall entitle the holder thereof to
receive payment of an amount, in cash, shares of Stock or a combination
thereof, as determined by the Granting Authority, equal in value to the
excess of the fair market value of the number of shares of Stock as to which
the award is granted on the date of exercise over an amount specified by the
Granting Authority. Any such award shall be in such form and shall have such
terms and conditions as the Granting Authority may determine. The grant shall
specify the number of shares of Stock as to which the Stock Appreciation Right
is granted.
7.2 The Granting Authority may provide that a Stock Appreciation
Right may be exercised only within the 60-day period following occurrence of a
Change of Control (as defined in Section 17.2) (such Stock Appreciation Right
being referred to herein as a Limited Stock Appreciation Right). The Granting
Authority may also provide that in the event of a Change of Control the amount
to be paid upon exercise of a Stock Appreciation Right shall be based on the
Change of Control Price (as defined in Section 17.3).
SECTION 8. Restricted Stock
Subject to the following provisions, all awards of Restricted Stock shall
be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by
the recipient of the Restricted Stock and the date or dates on
which, or the conditions upon the satisfaction of which, the
Restricted Stock will vest. The grant and/or the vesting of
Restricted Stock may be conditioned upon the completion of a
specified period of service with the Company or a Related Company,
upon the attainment of specified Performance Objectives or upon
such other criteria as the Granting Authority may determine.
(b) Stock certificates representing the Restricted Stock awarded under
the Plan shall be registered in the award holder's name, but the
Granting Authority may direct that such certificates be held by
the Company on behalf of the award holder. Except as may be
permitted by the Granting Authority, no share of Restricted Stock
may be sold, transferred, assigned, pledged or otherwise encumbered
by the award holder until such share has vested in accordance with
the terms of the Restricted Stock award. At the time Restricted
Stock vests, a certificate for such vested shares shall be
delivered to the award holder (or his or her designated
beneficiary in the event of death), free of all restrictions.
(c) The Granting Authority may provide that the award holder shall
have the right to vote or receive dividends on Restricted Stock.
Unless the Granting Authority provides otherwise, Stock received
as a dividend on, or in connection with a stock split of,
Restricted Stock shall be subject to the same restrictions as the
Restricted Stock.
(d) Except as may be provided by the Granting Authority, in the event
of an award holder's termination of service before all of his or
her Restricted Stock has vested, or in the event any conditions to
the vesting of Restricted Stock have not been satisfied prior to
any deadline for the satisfaction of such conditions set forth in
the award, the shares of Restricted Stock which have not vested
shall be forfeited, and the Granting Authority may provide that
(i) any purchase price paid by the award holder shall be returned
to the award holder or (ii) a cash payment equal to the Restricted
Stock's fair market value on the date of forfeiture, if lower,
shall be paid to the award holder.
(e) The Granting Authority may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to,
any or all of the award holder's Restricted Stock, other than
Performance Awards whose vesting was made subject to satisfaction
of one or more Performance Objectives (except that the Committee
may waive conditions or restrictions with respect to Performance
Awards if such waiver would not cause the Performance Award to
fail to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code).
SECTION 9. Deferred Stock Awards
Subject to the following provisions, all awards of Deferred Stock shall
be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Deferred Stock award shall specify the number of shares of
Deferred Stock to be awarded and the duration of the period (the
"Deferral Period") during which, and the conditions under which,
receipt of the Stock will be deferred. The Granting Authority may
condition the grant or vesting of Deferred Stock, or receipt of
Stock or cash at the end of the Deferral Period, upon the
attainment of specified Performance Objectives or such other
criteria as the Granting Authority may determine.
(b) Except as may be provided by the Granting Authority, Deferred
Stock awards may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Deferral Period.
(c) At the expiration of the Deferral Period, the award holder (or his
or her designated beneficiary in the event of death) shall receive
(i) certificates for the number of shares of Stock equal to the
number of shares covered by the Deferred Stock award, (ii) cash
equal to the fair market value of such Stock, or (iii) a
combination of shares and cash, as the Granting Authority may
determine.
(d) Except as may be provided by the Granting Authority, in the event
of an award holder's termination of service before the Deferred
Stock has vested, his or her Deferred Stock award shall be
forfeited.
(e) The Granting Authority may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to,
Stock or cash under a Deferred Stock award, other than with
respect to Performance Awards (except that the Committee may waive
conditions or restrictions with respect to Performance Awards if
such waiver would not cause the Performance Award to fail to
qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code).
SECTION 10. Bonus Stock
The Granting Authority may award Bonus Stock subject to such terms and
conditions as the Granting Authority shall determine. The grant of Bonus Stock
may be conditioned upon the attainment of specified Performance Objectives or
upon such other criteria as the Granting Authority may determine. The Granting
Authority may waive such conditions in whole or in part other than with
respect to Performance Awards (except that the Committee may waive conditions
or restrictions with respect to Performance Awards if such waiver would not
cause the Performance Award to fail to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code). The Granting
Authority shall also have the right to eliminate or reduce the amount of Bonus
Stock otherwise payable under an award. Unless otherwise specified by the
Granting Authority, no money shall be paid by the recipient for the Bonus
Stock. Alternatively, the Granting Authority may offer the award holder the
opportunity to purchase Bonus Stock at a discount from its fair market value.
The Bonus Stock award shall be satisfied by the delivery of the designated
number of shares of Stock which are not subject to restriction.
SECTION 11. Loans
The Granting Authority may provide that the Company shall make, or
arrange for, a loan or loans with respect to the exercise of any Stock Option
awarded under the Plan, with respect to the payment of the purchase price, if
any, of any Restricted Stock awarded hereunder or with respect to any taxes
arising from an award hereunder; provided, however, that the Company shall not
loan more than the sum of (i) the excess of the purchase or exercise price of
an award over the par value of any shares of Stock awarded plus (ii) the
amount of any taxes arising from such award. The Granting Authority shall have
full authority to decide whether a loan will be made hereunder and to
determine the amount, term and provisions of any such loan, including the
interest rate to be charged, whether the loan will be with or without recourse
against the borrower, any security for the loan, the terms on which the loan
is to be repaid and the conditions, if any, under which the loan may be
forgiven.
SECTION 12. Tax Offset Payments
The Granting Authority may provide for a Tax Offset Payment by the
Company with respect to one or more awards granted under the Plan. The Tax
Offset Payment shall be in an amount specified by the Granting Authority,
which shall not exceed the amount necessary to pay the federal, state, local
and other taxes payable with respect to the applicable award and the receipt
of the Tax Offset Payment, assuming that the award holder is taxed at the
maximum tax rate applicable to such income. The Tax Offset Payment shall be
paid solely in cash.
SECTION 13. Election to Defer Awards
The Granting Authority may permit an employee or Outside Director to
elect to defer receipt of an award (other than an award pursuant to Section
15) for a specified period or until a specified event, upon such terms as
are determined by the Granting Authority.
SECTION 14. Tax Withholding
14.1 Each employee shall, no later than the date as of which the value
of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements satisfactory
to the Committee regarding payment of, any federal, state, local or other
taxes of any kind required by law to be withheld with respect to the award.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company (and, where applicable, any Related
Company), shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the employee.
14.2 To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any awards hereunder, satisfied by (i) having the Company withhold
shares of Stock otherwise deliverable to such person with respect to the award
or (ii) delivering to the Company shares of unrestricted Stock. Alternatively,
the Committee may require that a portion of the shares of Stock otherwise
deliverable be applied to satisfy the withholding tax obligations with respect
to the award.
SECTION 15. Automatic Stock Options, Limited Stock Appreciation Rights and
Stock Grants for Outside Directors
15.1 Outside Directors shall be granted Stock Options as follows:
(a) Initial Grant. Each person who is an Outside Director on the date
of adoption of the Plan by the Board shall be granted on such date
a Stock Option to purchase the number of whole shares of Stock
obtained by dividing $5,000 by the closing sales price of the
Stock on the date of grant. Each person who becomes an Outside
Director after such date shall be granted, on the first trading
day coincident with or immediately following the effective date of
his or her election as an Outside Director, a Stock Option to
purchase the number of whole shares of Stock obtained by dividing
$5,000 by the closing sales price of the Stock on the date of
grant.
(b) Quarterly Grants. On the first trading day of each calendar
quarter beginning with October 1, 1995, each Outside Director then
serving on the Board and who has served for all or a portion of
the previous calendar quarter shall be granted a Stock Option to
purchase the number of whole shares of Stock obtained by dividing
$5,000 by the closing sales price of the Stock on the date of
grant.
(c) For purposes of this Section 15.1, the term trading day shall mean
a day on which the Stock is traded on a national securities
exchange, on the Nasdaq National Market, or in the over-the-
counter market.
(d) Notwithstanding the foregoing, if on any date on which Stock
Options are to be granted under this Section 15.1 the remaining
shares available for issuance to Outside Directors under the Plan
are insufficient to enable each Outside Director to receive a
Stock Option to purchase the applicable number of shares of Stock
set forth above, each Outside Director who is entitled to be
granted a Stock Option pursuant to this Section 15.1 on such date
shall be granted a Stock Option to purchase his or her pro rata
portion of such remaining shares.
15.2 Stock Options granted under this Section 15 shall be Non-Qualified
Stock Options, and shall have the following terms and conditions:
(a) Option Price. The option price per share of Stock purchasable under
the Stock Option shall be equal to the closing sales price of the
Stock on the date the Stock Option is granted.
(b) Term of Option. The term of the Stock Option shall be ten years
from the date of grant, subject to earlier termination in the
event of termination of service as a director, as set forth in
paragraphs (e) and (f) below.
(c) Exercisability. Subject to paragraphs (e) and (f) below, each
Stock Option shall vest with respect to 10% of the underlying
shares on the date which is three months after the date of grant,
and an additional 10% at the end of each three-month period
thereafter, provided that the optionee is a director of the
Company on such date. The minimum number of shares with respect to
which a Stock Option may be exercised is the lesser of 100 shares
or the number of shares then subject to the Stock Option.
(d) Method of Exercise. The Stock Options may be exercised in whole or
in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares
to be purchased, accompanied by payment of the purchase price.
Payment of the purchase price shall be made in cash (including
cash equivalents) or by delivery of shares of Stock already owned
by the optionee for at least six months, or by any combination of
the foregoing. Shares delivered upon payment of the exercise price
shall be valued at the average of the high and low sale price of
the Stock on the date of exercise (or, if the Stock is not traded
on such date, at the weighted average of the high and low prices
on the nearest trading dates before and after such date).
(e) Termination of Service as Director. If an optionee's service as a
director is terminated for any reason, such director's Stock
Options may be exercised for five years following such termination
of service (but not beyond the Option term), but only to the
extent such Options were vested on the date of termination of
service.
(f) Change of Control. Notwithstanding any other provision of the
Plan, upon the occurrence of a Change of Control (as defined in
Section 17.2), all Stock Options outstanding at the time of such
Change of Control shall become immediately vested and exercisable
and shall remain exercisable for five years after the director's
termination of service (but not beyond the option term).
(g) Non-transferability. No Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and
distribution. During an optionee's lifetime, all Stock Options
shall be exercisable only by the optionee or by his or her
guardian or legal representative.
(h) Shareholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a shareholder.
15.3 Limited Stock Appreciation Rights in Tandem with Options. Each
Stock Option granted to an Outside Director under this Section 15 shall be
granted in tandem with a Limited Stock Appreciation Right which may be
exercised only within the 60-day period following a Change of Control. Upon
exercise of the Limited Stock Appreciation Right, the holder shall receive,
for each share with respect to which the Limited Stock Appreciation Right is
exercised, an amount equal in value to the excess of the Change of Control
Price (as defined in Section 17.3) over the exercise price of the related
Stock Option. The Limited Stock Appreciation Right shall be payable solely in
cash, and shall be paid within 30 days of the exercise of the Limited Stock
Appreciation Right.
15.4 Quarterly Stock Grants. On the first trading day of each calendar
quarter beginning with the first calendar quarter after the date of
shareholder approval of the Plan, each Outside Director then serving on the
Board and who has served for all or a portion of the previous calendar quarter
shall be granted the number of whole shares of Stock obtained by dividing
$2,000 by the closing sales price of the Stock on the date of grant.
Notwithstanding the foregoing, if on any date on which shares are to be
granted pursuant to this Section 15.4 the remaining shares reserved for
issuance to Outside Directors under the Plan are insufficient to enable each
Outside Director to receive the applicable number of shares of Stock set forth
above, each Outside Director who is entitled to be granted shares pursuant to
this Section 15.4 shall be granted his or her pro rata portion of such
remaining shares. All shares granted under this Section 15.4 shall be fully
vested and non-forfeitable at the time of grant.
SECTION 16. Amendments and Termination
The Board may discontinue the Plan at any time and may amend it from time
to time. No amendment or discontinuation of the Plan shall adversely affect
any award previously granted without the award holder's written consent. To
the extent required in order to satisfy Rule 16b-3 under the Securities
Exchange Act of 1934 ("Rule 16b-3") (or any successor rule), the provisions
of Section 15 shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder. Amendments may be made without stockholder
approval except as required to satisfy Rule 16b-3, Section 162(m) of the Code,
or other NASDAQ, stock exchange, or regulatory requirements.
SECTION 17. Change of Control
17.1 In the event of a Change of Control, unless otherwise determined
by the Granting Authority at the time of grant or by amendment (with the award
holder's consent) of such grant:
(a) all outstanding Stock Options and all outstanding Stock
Appreciation Rights (including Limited Stock Appreciation Rights)
awarded under the Plan shall become fully exercisable and vested;
(b) the restrictions and deferral limitations applicable to any
outstanding Restricted Stock and Deferred Stock awards under the
Plan shall lapse and such shares and awards shall be deemed fully
vested; and
(c) to the extent the cash payment of any award is based on the fair
market value of Stock, such fair market value shall be the Change
of Control Price.
17.2 A "Change of Control" shall be deemed to occur on:
(a) the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (other
than the Company and its subsidiaries as determined immediately
prior to that date) has become the beneficial owner, directly or
indirectly (with beneficial ownership determined as provided in
rule 13d-3, or any successor rule, under the Securities Exchange
Act of 1934) of securities of the Company representing 25% or more
of the total combined voting power of all classes of stock of the
Company having the right under ordinary circumstances to vote at
an election of the Board, unless such person has acquired 80% or
more of such securities directly from the Company;
(b) the date on which one-third or more of the members of the Board
shall consist of persons other than Current Directors (for these
purposes a "Current Director" shall mean any member of the Board
on July 27, 1995 and any member of the Board whose nomination or
election has been approved by a majority of the Current Directors
then on the Board);
(c) the date of approval by the stockholders of the Company of an
agreement providing for the merger or consolidation of the Company
with another corporation where (i) the stockholders of the
Company, immediately prior to the merger or consolidation, would
not beneficially own, immediately after the merger or
consolidation, shares entitling such stockholders to 50% or more
of all votes (without consideration of the rights of any class of
stock to elect directors by a separate class vote) to which all
stockholders of the corporation issuing cash or securities in the
merger or consolidation would be entitled in the election of
directors, or (ii) where the members of the Board, immediately
prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of
directors of the corporation issuing cash or securities in the
merger; or
(d) the date of approval by the stockholders of the Company of an
agreement providing for the sale or other disposition of all or
substantially all of the assets of the Company.
17.3 "Change of Control Price" means the highest price per share paid
in any transaction reported in the Nasdaq National Market or on any national
securities exchange where the Stock is traded, or paid or offered in any
transaction related to a Change of Control at any time during the 90-day
period ending with the Change of Control. Notwithstanding the foregoing
sentence, in the case of Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Change of Control Price shall be the highest
price paid on the date on which the Stock Appreciation Right is exercised.
SECTION 18. General Provisions
18.1 Each award under the Plan shall be subject to the requirement
that, if at any time the Granting Authority shall determine that (i) the
listing, registration or qualification of the Stock subject or related thereto
upon any securities exchange or under any state or federal law, or (ii) the
consent or approval of any government regulatory body or (iii) an agreement by
the recipient of an award with respect to the disposition of Stock is
necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of Stock thereunder, such award shall not be granted or exercised, in
whole or in part, unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Granting Authority.
18.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements. Neither the adoption
of the Plan nor any award hereunder shall confer upon any employee of the
Company, or of a Related Company, any right to continued employment, and no
award shall confer upon any Outside Director any right to continued service as
a director.
18.3 Determinations by the Granting Authority under the Plan relating
to the form, amount, and terms and conditions of awards need not be uniform,
and may be made selectively among persons who receive or are eligible to
receive awards under the Plan, whether or not such persons are similarly
situated.
18.4 No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee
and all officers or employees of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.
SECTION 19. Effective Date of Plan
The provisions of the Plan with respect to formula grants to Outside
Directors (as currently set forth in Section 15) were adopted and shall be
effective on July 27, 1995, and the provisions of the Plan with respect to
grants to employees were adopted and shall be effective on April 10, 1996, in
each case subject to approval by the Company's stockholders at the 1996 Annual
Meeting of Stockholders. The provisions of the Plan with respect to
discretionary grants to Outside Directors were adopted on September 6, 1996
and shall become effective on the date of approval by the Company's
stockholders at the 1996 Annual Meeting of Stockholders.
EXHIBIT 10.3
DIANON SYSTEMS, INC.
1999 STOCK INCENTIVE PLAN
SECTION 1. PURPOSES
The purposes of the Dianon Systems, Inc. 1999 Stock Incentive
Plan (the "Plan") are (i) to enable Dianon Systems, Inc. (the "Company") and
its Related Companies (as defined below) to attract, retain and reward
employees and strengthen the existing mutuality of interests between such
employees and the Company's stockholders by offering such employees an equity
interest in the Company, and (ii) to enable the Company to pay part of the
compensation of its Outside Directors (as defined in Section 5.2) in the form
of equity of the Company, thereby increasing such directors' proprietary
interests in the Company. For purposes of the Plan, a "Related Company" means
any corporation, partnership, joint venture or other entity in which the
Company owns, directly or indirectly, at least a 20% beneficial ownership
interest. In addition, for purposes of this Plan, the term "Stock" shall refer
to the common stock of the Company, par value $.01 per share.
SECTION 2. TYPES OF AWARDS
2.1 Awards under the Plan may be in the form of (i) Stock Options;
(ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred Stock;
(v) Bonus Stock; (vi) Loans; and/or (vii) Tax Offset Payments. One or more
types of awards may be granted, which may be independent or granted in tandem.
If two awards are granted in tandem, the award holder may exercise (or
otherwise receive the benefit of) one award only to the extent he or she
relinquishes the tandem award.
2.2 Outside Directors shall receive Stock Options, Limited Stock
Appreciation Rights and Stock Grants as provided in Section 15. In addition,
Outside Directors may be granted discretionary awards in one or more of the
forms set forth in Section 2.1.
SECTION 3. ADMINISTRATION
3.1 The Plan shall be administered (i) by the Compensation
Committee of the Company's Board of Directors (the "Board") or such other
committee of directors as the Board shall designate (the "Committee"), with
respect to awards to persons other than Outside Directors, and (ii) by the
Board with respect to awards to Outside Directors (except as provided in
Section 4.5). The Committee shall consist of not less than two directors each
of whom is an Outside Director. The members of the Committee shall serve at
the pleasure of the Board.
3.2 For purposes of this Plan the term "Granting Authority" shall
mean (i) the Board of Directors with respect to awards to Outside Directors
(except as provided in Section 4.5), and (ii) the Committee with respect to
all other awards. The Granting Authority shall have the following authority
with respect to awards under the Plan within its jurisdiction: to grant such
awards to persons eligible to receive them under the Plan; to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall deem advisable; to interpret the terms and provisions of the Plan
and any award granted by it under the Plan; and to otherwise supervise the
administration of the Plan. In particular, and without limiting its authority
and powers, the Granting Authority shall have the authority with respect to
the awards within its jurisdiction:
(a) to determine whether and to what extent any award or
combination of awards will be granted hereunder, including whether any
awards will be granted in tandem with each other;
(b) to select the eligible persons to whom awards will be
granted;
(c) to determine the number of shares of the Stock of the
Company to be covered by each award granted hereunder subject to the
limitations contained herein;
(d) to determine the terms and conditions of any award
granted hereunder, including, but not limited to, any vesting or other
restrictions based on such performance objectives (the "Performance
Objectives") and such other factors as the Granting Authority may
establish, and to determine whether the Performance Objectives and other
terms and conditions of the award are satisfied;
(e) to determine the treatment of awards upon an award
holder's retirement, disability, death, termination for cause or other
termination of employment or service with the Company or Related
Company;
(f) to determine pursuant to a formula or otherwise the fair
market value of the Stock on a given date; provided, however, that if
the Granting Authority fails to make such a determination, fair market
value of the Stock on a given date shall be the closing sale price on a
given date, or if no such sale of Stock occurs on such date, the
weighted average of the closing sale prices on the nearest trading dates
before and after such date;
(g) to determine that equal to the amount of any dividends
declared with respect to the number of shares covered by an award
(i) will be paid to the award holder currently or (ii) will be deferred
and deemed to be reinvested or (iii) will otherwise be credited to the
award holder, or that the award holder has no rights with respect to
such dividends;
(h) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an award
will be deferred either automatically or at the election of an award
holder, including providing for and determining the amount (if any) of
deemed earnings on any deferred amount during any deferral period;
(i) to provide that the shares of Stock received as a result
of an award shall be subject to a right of first refusal, pursuant to
which the award holder shall be required to offer to the Company any
shares that the award holder wishes to sell, subject to such terms and
conditions as the Granting Authority may specify;
(j) to amend the terms of any award (including those granted
under Section 15), prospectively or retroactively; provided, however,
that no amendment shall impair the rights of the award holder without
his or her written consent; and
(k) to substitute new Stock Options for previously granted
Stock Options, or for options granted under other plans or agreements,
in each case including previously granted options having higher option
prices.
3.3 The Committee shall have the right to designate awards as
"Performance Awards." Awards so designated shall be granted and administered
in a manner designed to preserve the deductibility of the compensation
resulting from such awards in accordance with Section 162(m) of the Internal
Revenue Code (the "Code"). The grant or vesting of a Performance Award shall
be subject to the achievement of Performance Objectives established by the
Committee based on one or more of the following criteria, in each case applied
to the Company on a consolidated basis and/or to a business unit and which the
Committee may use as an absolute measure, as a measure of improvement relative
to prior performance, or as a measure of comparable performance relative to a
peer group of companies: sales, operating profits, operating profits before
interest expense and taxes, net earnings, earnings per share, return on
equity, return on assets, return on invested capital, total shareholder
return, cash flow, debt to equity ratio, market share, stock price, economic
value added, and market value added.
The Performance Objectives for a particular Performance Award
relative to a particular fiscal year shall be established by the Committee in
writing no later than 90 days after the beginning of such year. The
Committee's determination as to the achievement of Performance Objectives
relating to a Performance Award shall be made in writing. The Committee shall
have discretion to modify the Performance Objectives or vesting conditions of
a Performance Award only to the extent that the exercise of such discretion
would not cause the Performance Award to fail to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Granting Authority pursuant to
the provisions of the Plan shall be final and binding on all persons,
including the Company and Plan participants.
3.5 The Committee may from time to time delegate to one or more
officers of the Company any or all of its authorities granted hereunder except
with respect to awards granted to persons subject to Section 16 of the
Securities Exchange Act of 1934 or Performance Awards. The Committee shall
specify the maximum number of shares that the officer or officers to whom such
authority is delegated may award.
3.6 All awards granted under this Plan shall be evidenced by a
grant certificate and the terms and conditions of the award shall be set forth
in a written agreement between the Company and the award recipient.
SECTION 4. STOCK SUBJECT TO PLAN
4.1 The total number of shares of Stock which may be awarded or
issued pursuant to the exercise of an award granted under this Plan shall be
300,000, of which 270,000 shall be used for awards to employees and 30,000
shall be used for awards to Outside Directors (all subject to adjustment as
provided below). Such shares may consist of authorized but unissued shares or
treasury shares. The exercise of a Stock Appreciation Right for cash or the
payment of any other award in cash shall not count against this share limit.
4.2 To the extent a Stock Option terminates without having been
exercised, or an award terminates without the award holder having received
payment of the award, or shares awarded are forfeited, the shares subject to
such award shall again be available for distribution in connection with future
awards under the Plan. Shares of Stock equal in number to the shares
surrendered in payment of the option price, and shares of Stock which are
withheld in order to satisfy federal, state or local tax liabilities, shall
not count against the above limit, and shall again be available for grants
under the Plan.
4.3 (a) No employee shall be granted Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, and/or Bonus Stock, or
any combination of the foregoing with respect to more than 40,000 shares of
Stock in any fiscal year (subject to adjustment as provided in Section 4.5).
No employee shall be granted a Tax Offset Payment in any fiscal year with
respect to more than the number of shares of Stock covered by awards granted
to such employee in such fiscal year.
(b) For purposes of Section 162(m) of the Code, no key
employee shall be granted Stock Options or Stock Appreciation Rights with
respect to more than 40,000 shares of Stock in any fiscal year (subject to
adjustment as provided in Section 4.5).
4.4 The maximum number of shares of Stock that may be issued under
this Plan pursuant to the exercise of Options intended to be Incentive Stock
Options shall be 270,000 shares.
4.5 In the event of any merger, reorganization, consolidation,
sale of substantially all assets, recapitalization, stock dividend, stock
split, spin-oft split-up, split-off distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may
be determined to be appropriate by the Committee in its sole discretion, shall
be made in the aggregate number of shares reserved for issuance under the
Plan, the number of shares as to which awards may be granted to any individual
in any calendar year, the number and type of shares subject to outstanding
awards and the amounts to be paid by award holders or the Company, as the case
may be, with respect to outstanding awards; provided, however, that no such
adjustment shall increase the aggregate value of any outstanding award. In the
event any change described in this Section 4.5 occurs, the Committee shall
make appropriate adjustment in the awards previously granted and to be granted
to Outside Directors under the Plan; provided that no such adjustment shall
increase the aggregate value of any outstanding award.
SECTION 5. ELIGIBILITY
5.1 Key employees of the Company or a Related Company, including
key employees who are officers and/or directors of the Company, are eligible
to be granted awards under the Plan, other than under Section 15. Employees
shall be selected for participation in the Plan from time to time by the
Committee, in its sole discretion, from among those key employees eligible to
participate in this Plan.
5.2 Awards under Section 15 of the Plan shall be made solely to
Outside Directors, which term shall mean any director of the Company other
than one who is an employee of the Company or a Related Company. The Board, in
its discretion, may also grant other awards under the Plan in one or more of
the forms set forth in Section 2.1 to one or more Outside Directors.
SECTION 6. STOCK OPTIONS
The Stock Options awarded under the Plan may be of two types:
(i) Incentive Stock Options within the meaning of Section 422 of the Code or
any successor provision thereto (which may be granted only to employees); and
(ii) Non-Qualified Stock Options. To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
Subject to the following provisions, Stock Options awarded under
the Plan shall be in such form and shall have such terms and conditions as the
Granting Authority may determine:
(a) OPTION PRICE. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Granting
Authority, and may be less than the fair market value of the Stock on
the date of the award of the Stock Option.
(b) OPTION TERM. The term of each Stock Option shall be
fixed by the Granting Authority.
(c) EXERCISABILITY. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Granting Authority. The Granting Authority may waive
such exercise provisions or accelerate the exercisability of the Stock
Option at any time in whole or in part.
(d) METHOD OF EXERCISE. Stock Options may be exercised in
whole or in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the
purchase price shall be made in such manner as the Granting Authority
may provide in the award, which may include cash (including cash
equivalents), delivery of shares of Stock already owned by the optionee
for at least six months, "cashless exercise" (which may be either (i) a
broker-assisted cash exercise effected in accordance with rules adopted
by the Granting Authority or (ii) a direction to the Company to withhold
shares of Stock, otherwise deliverable to the option holder with respect
to the Option, having a fair market value on the date of exercise equal
to the option price), or in any other manner permitted by law determined
by the Granting Authority, or any combination of the foregoing. If the
Granting Authority determines that a Stock Option may be exercised using
shares of Restricted Stock, then unless the Granting Authority provides
otherwise, the shares received upon the exercise of a Stock Option which
are paid for using Restricted Stock shall be restricted in accordance
with the original terms of the Restricted Stock award.
(e) NO STOCKHOLDER RIGHTS. An optionee shall have neither
rights to dividends or other rights of a stockholder with respect to
shares subject to a Stock Option until the optionee has given written
notice of exercise and has paid for such shares.
(f) SURRENDER RIGHTS. The Granting Authority may provide
that options may be surrendered for cash upon any terms and conditions
set by the Granting Authority.
(g) NON-TRANSFERABILITY. Unless otherwise provided by the
Granting Authority, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and distribution,
and (ii) during the optionee's lifetime, all Stock Options shall be
exercisable only by the optionee or, in the event of the optionee's
disability, by his or her guardian or legal representative.
(h) TERMINATION OF SERVICE. Following the termination of an
optionee's service with the Company or a Related Company, the Stock
Option shall be exercisable to the extent determined by the Granting
Authority. The Granting Authority may provide different post-termination
exercise provisions with respect to termination of service for different
reasons. The Granting Authority may provide that, notwithstanding the
option term fixed pursuant to Section 6.2(b), a Stock Option which is
outstanding on the date of an optionee's death shall remain outstanding
for an additional period after the date of such death.
6.3 Notwithstanding the provisions of Section 6.2, no Incentive
Stock Option shall (i) have an option price which is less than 100% of the
fair market value of the Stock on the date of the award of the Incentive Stock
Option, (ii) be exercisable more than ten years after the date such Incentive
Stock Option is awarded, or (iii) be awarded more than ten years after the
effective date of the Plan specified in Section 19. No Incentive Stock Option
granted to an employee who owns more than 10% of the total combined voting
power of all classes of stock of the Company or any of its parent or
subsidiary corporations, as defined in Section 424 of the Code, shall (A) have
an option price which is less than 110% of the fair market value of the Stock
on the date of award of the Incentive Stock Option or (B) be exercisable more
than five years after the date such Incentive Stock Option is awarded.
6.4 A Stock Option granted to a key employee under this Plan will
not be considered an Incentive Stock Option to the extent that such Stock
Option, together with any earlier Stock Option granted to such employee under
this or any other plan of the Company that is intended to be an Incentive
Stock Option, permits the exercise for the first time in any calendar year of
shares of Stock having a fair market value in excess of $100,000 (determined
at the time of grant).
SECTION 7. STOCK APPRECIATION RIGHTS
7.1 A Stock Appreciation Right shall entitle the holder thereof to
receive payment of an amount, in cash, shares of Stock or a combination
thereof, as determined by the Granting Authority, equal in value to the excess
of the fair market value of the number of shares of Stock as to which the
award is granted on the date of exercise over an amount specified by the
Granting Authority. Any such award shall be in such form and shall have such
terms and conditions as the Granting Authority may determine. The grant shall
specify the number of shares of Stock as to which the Stock Appreciation Right
is granted.
7.2 The Granting Authority may provide that a Stock Appreciation
Right may be exercised only within the 60-day period following occurrence of a
Change of Control (as defined in Section 17.2) (such Stock Appreciation Right
being referred to herein as a Limited Stock Appreciation Right). The Granting
Authority may also provide that in the event of a Change of Control the amount
to be paid upon exercise of a Stock Appreciation Right shall be based on the
Change of Control Price (as defined in Section 17.3).
SECTION 8. RESTRICTED STOCK
Subject to the following provisions, all awards of Restricted Stock
shall be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Restricted Stock award shall specify the number of
shares of Restricted Stock to be awarded, the price, if any, to be paid
by the recipient of the Restricted Stock and the date or dates on
which, or the conditions upon the satisfaction of which, the
restrictions shall lapse and the Restricted Stock will vest. The grant
and/or the vesting of Restricted Stock may be conditioned upon the
completion of a specified period of service with the Company or a
Related Company, upon the attainment of specified Performance Objectives
or upon such other criteria as the Granting Authority may determine.
(b) Stock certificates representing the Restricted Stock
awarded under the Plan shall be registered in the award holder's name,
but the Granting Authority may direct that such certificates be held by
the Company on behalf of the award holder. Except as may be permitted by
the Granting Authority, no share of Restricted Stock may be sold,
transferred, assigned, pledged or otherwise encumbered by the award
holder until such share has vested in accordance with the terms of the
Restricted Stock award. At the time Restricted Stock vests, a
certificate for such vested shares shall be delivered to the award
holder (or his or her designated beneficiary in the event of death),
free of all restrictions.
(c) The Granting Authority may provide that the award holder
shall have the right to vote or receive dividends on Restricted Stock.
Unless the Granting Authority provides otherwise, Stock received as a
dividend on, or in connection with a stock split of, Restricted Stock
shall be subject to the same restrictions as the Restricted Stock.
(d) Except as may be provided by the Granting Authority, in
the event of an award holder's termination of service before all of his
or her Restricted Stock has vested, or in the event any conditions to
the vesting of Restricted Stock have not been satisfied prior to any
deadline for the satisfaction of such conditions set forth in the award,
the shares of Restricted Stock which have not vested shall be forfeited,
and the Granting Authority may provide that (i) any purchase price paid
by the award holder shall be returned to the award holder or (ii) a cash
payment equal to the Restricted Stock's fair market value on the date of
forfeiture, if lower, shall be paid to the award holder.
(f) The Granting Authority may waive, in whole or in part,
any or all of the conditions to receipt of, or restrictions with respect
to, any or all of the award holder's Restricted Stock, other than
Performance Awards whose vesting was made subject to satisfaction of one
or more Performance Objectives (except that the Committee may waive
conditions or restrictions with respect to Performance Awards if such
waiver would not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of
the Code).
SECTION 9. DEFERRED STOCK AWARDS
Subject to the following provisions, all awards of Deferred Stock
shall be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Deferred Stock award shall specify the number of
shares of Deferred Stock to be awarded and the duration of the period
(the "Deferral Period") during which, and the conditions under which,
receipt of the Stock will be deferred. The Granting Authority may
condition the grant or vesting of Deferred Stock, or receipt of Stock or
cash at the end of the Deferral Period, upon the attainment of specified
Performance Objectives or such other criteria as the Granting Authority
may determine.
(b) Except as may be provided by the Granting Authority,
Deferred Stock awards may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Deferral Period.
(c) At the expiration of the Deferral Period, the award
holder (or his or her designated beneficiary in the event of death)
shall receive (i) certificates for the number of shares of Stock equal
to the number of shares covered by the Deferred Stock award, (ii) cash
equal to the fair market value of such Stock, or (iii) a combination of
shares and cash, as the Granting Authority may determine.
(d) Except as may be provided by the Granting Authority, in
the event of an award holder's termination of service before the
Deferred Stock has vested, his or her Deferred Stock award shall be
forfeited.
(e) The Granting Authority may waive, in whole or in part,
any or all of the conditions to receipt of, or restrictions with respect
to, Stock or cash under a Deferred Stock award, other than with respect
to Performance Awards (except that the Committee may waive conditions
or restrictions with respect to Performance Awards if such waiver would
not cause the Performance Award to fail to qualify as "performance based
compensation" within the meaning of Section 162(m) of the Code).
SECTION 10. BONUS STOCK
The Granting Authority may award Bonus Stock subject to such terms
and conditions as the Granting Authority shall determine. The grant of Bonus
Stock may be conditioned upon the attainment of specified Performance
Objectives or upon such other criteria as the Granting Authority may
determine. The Granting Authority may waive such conditions in whole or in
part other than with respect to Performance Awards (except that the Committee
may waive conditions or restrictions with respect to Performance Awards if
such waiver would not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code). In making a determination with respect to the terms and conditions of a
Bonus Stock award, the Granting Authority shall also have the right to
eliminate or reduce the amount of Bonus Stock otherwise payable under an
award. Unless otherwise specified by the Granting Authority, no money shall be
paid by the recipient for the Bonus Stock. Alternatively, the Granting
Authority may offer the award holder the opportunity to purchase Bonus Stock
at a discount from its fair market value. The Bonus Stock award shall be
satisfied by the delivery of the designated number of shares of Stock which
are not subject to restriction.
SECTION 11. LOANS
The Granting Authority may provide that the Company shall make, or
arrange for, a loan or loans with respect to the exercise of any Stock Option
awarded under the Plan, with respect to the payment of the purchase price, if
any, of any Restricted Stock awarded hereunder or with respect to any taxes
arising from an award hereunder; provided, however, that the Company shall not
loan more than the sum of (i) the excess of the purchase or exercise price of
an award over the par value of any shares of Stock awarded plus (ii) the
amount of any taxes arising from such award. The Granting Authority shall have
full authority to decide whether a loan will be made hereunder and to
determine the amount, term and provisions of any such loan, including the
interest rate to be charged, whether the loan will be with or without recourse
against the borrower, any security for the loan, the terms on which the loan
is to be repaid and the conditions, if any, under which the loan may be
forgiven.
SECTION 12. TAX OFFSET PAYMENTS
The Granting Authority may provide for a Tax Offset Payment by
the Company with respect to one or more awards granted under the Plan. The Tax
Offset Payment shall be in an amount specified by the Granting Authority,
which shall not exceed the amount necessary to pay the federal, state, local
and other taxes payable with respect to the applicable award and the receipt
of the Tax Offset Payment, assuming that the award holder is taxed at the
maximum tax rate applicable to such income. The Tax Offset Payment shall be
paid solely in cash.
SECTION 13. ELECTION TO DEFER AWARDS
The Granting Authority may permit an employee or Outside Director
to elect to defer receipt of an award (other than an award pursuant to Section
15) for a specified period or until a specified event, upon such terms as are
determined by the Granting Authority.
SECTION 14. TAX WITHHOLDING
14.1 Each employee shall, no later than the date as of which the
value of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state,
local or other taxes of any kind required by law to be withheld with respect
to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company (and, where
applicable, any Related Company), shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the employee.
14.2 To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any awards hereunder, satisfied by (i) having the Company withhold
shares of Stock otherwise deliverable to such person with respect to the award
or (ii) delivering to the Company shares of unrestricted Stock previously
owned by the person for at least six months.
SECTION 15. AUTOMATIC STOCK OPTIONS, LIMITED STOCK APPRECIATION RIGHTS AND
STOCK GRANTS FOR OUTSIDE DIRECTORS
15.1 Outside Directors shall be granted Stock Options as follows:
(a) INITIAL GRANT. Each person who is an Outside Director
on the date of adoption of the Plan by the Board shall be granted on
such date a Stock Option to purchase the number of whole shares of Stock
obtained by dividing $5,000 by the closing sales price of the Stock on
the date of grant. Each person who becomes an Outside Director after
such date shall be granted, on the first trading day coincident with or
immediately following the effective date of his or her election as an
Outside Director, a Stock Option to purchase the number of whole shares
of Stock obtained by dividing $5,000 by the closing sales price of the
Stock on the date of grant.
(b) QUARTERLY GRANTS. On the first trading day of each
calendar quarter beginning with October 1, 1999, each Outside Director
then serving on the Board and who has served for all or a portion of the
previous calendar quarter shall be granted a Stock Option to purchase
the number of whole shares of Stock obtained by dividing $5,000 by the
closing sales price of the Stock on the date of grant.
(c) For purposes of this Section 15.1, the term trading day
shall mean a day on which the Stock is traded on a national securities
exchange, on the Nasdaq National Market, or in the over-the-counter
market.
(d) Notwithstanding the foregoing, if on any date on which
Stock Options are to be granted under this Section 15.1 the remaining
shares available for issuance to Outside Directors under the Plan are
insufficient to enable each Outside Director to receive a Stock Option
to purchase the applicable number of shares of Stock set forth above,
each Outside Director who is entitled to be granted a Stock Option
pursuant to this Section 15.1 on such date shall be granted a Stock
Option to purchase his or her pro-rata portion of such remaining shares.
Stock Options granted under this Section 15 shall be Non-Qualified
Stock Options, and shall have the following terms and conditions:
(a) OPTION PRICE. The option price per share of Stock
purchasable under the Stock Option shall be equal to the closing sales
price of the Stock on the date the Stock Option is granted.
(b) TERM OF OPTION. The term of the Stock Option shall be
ten years from the date of grant, subject to earlier termination in the
event of termination of service as a director, as set forth in
paragraphs (e) and (f) below.
(c) EXERCISABILITY. Subject to paragraph (f) below, each
Stock Option shall become exercisable with respect to 10% of the
underlying shares on the date which is three months after the date of
grant, and an additional 10% at the end of each three-month period
thereafter, less any shares that have been exercised prior to each such
date, provided that the optionee is a director of the Company on such
date. The minimum number of shares with respect to which a Stock Option
may be exercised is the lesser of 100 shares or the number of shares then
subject to the Stock Option.
(d) METHOD OF EXERCISE. The Stock Options may be exercised
in whole or in part at any time during the option period by giving
written notice of exercise to the Company specifying the number of
shares to be purchased, accompanied by payment of the purchase price.
Payment of the purchase price shall be made in cash (including cash
equivalents) or by delivery of shares of Stock already owned by the
optionee for at least six months, or by any combination of the
foregoing. Shares delivered upon payment of the exercise price shall be
valued at the average of the high and low sale prices of the Stock on
the date of exercise (or, if the Stock is not traded on such date, at
the weighted average of the high and low prices on the nearest trading
dates before and after such date).
(e) TERMINATION OF SERVICE AS DIRECTOR. If an optionee's
service as a director is terminated for any reason, such director's
Stock Options may be exercised for five years following such termination
of service (but not beyond the Option term), but only to the extent such
Options were vested on the date of termination of service.
(f) Change of Control. Notwithstanding any other provision
of the Plan, upon the occurrence of a Change of Control (as defined in
Section 17.2), all Stock Options outstanding at the time of such Change
of Control shall become immediately vested and exercisable and shall
remain exercisable for five years after the director's termination of
service (but not beyond the option term).
(g) Non-transferability. No Stock Option shall be
transferable by the optionee other than by will or by the laws of
descent and distribution. During an optionee's lifetime, all Stock
Options shall be exercisable only by the optionee or, in the event of
the optionee's disability, by his or her guardian or legal
representative.
(h) Shareholder Rights. The holder of a Stock Option shall,
as such, have none of the rights of a shareholder.
15.3 Limited Stock Appreciation Rights in Tandem with Options.
Each Stock Option granted to an Outside Director under this Section 15 shall
be granted in tandem with a Limited Stock Appreciation Right which may be
exercised only within the 60-day period following a Change of Control. Upon
exercise of the Limited Stock Appreciation Right, the holder shall receive,
for each share with respect to which the Limited Stock Appreciation Right is
exercised, an amount equal in value to the excess of the Change of Control
Price (as defined in Section 17.3) over the exercise price of the related
Stock Option. The Limited Stock Appreciation Right shall be payable solely in
cash, and shall be paid within 30 days of the exercise of the Limited Stock
Appreciation Right. Upon the exercise of the Limited Stock Appreciation
Right, the Stock Option granted in tandem with such Right shall expire.
15.4 Quarterly Stock Grants. On the first trading day of each
calendar quarter beginning with the first calendar quarter after the date of
shareholder approval of the Plan, each Outside Director then serving on the
Board and who has served for all or a portion of the previous calendar quarter
shall be granted the number of whole shares of Stock obtained by dividing
$2,000 by the closing sales price of the Stock on the date of grant.
Notwithstanding the foregoing, if on any date on which shares are to be
granted pursuant to this Section 15.4 the remaining shares reserved for
issuance to Outside Directors under the Plan are insufficient to enable each
Outside Director to receive the applicable number of shares of Stock set forth
above, each Outside Director who is entitled to be granted shares pursuant to
this Section 15.4 shall be granted his or her pro rata portion of such
remaining shares. All shares granted under this Section 15.4 shall be fully
vested and non-forfeitable at the time of grant.
SECTION 16. AMENDMENTS AND TERMINATION
The Board may discontinue the Plan at any time and may amend it
from time to time. No amendment or discontinuation of the Plan shall adversely
affect any award previously granted without the award holder's written
consent. Amendments may be made without stockholder approval except as
required to satisfy Section 422 of the Code, Section 162(m) of the Code, or
other NASDAQ, stock exchange, or regulatory requirements.
SECTION 17. CHANGE OF CONTROL
17.1 In the event of a Change of Control, unless otherwise
determined by the Granting Authority at the time of grant or by amendment
(with the award holder's consent) of such grant:
(a) all outstanding Stock Options and all outstanding Stock
Appreciation Rights (including Limited Stock Appreciation Rights)
awarded under the Plan shall become fully exercisable and vested;
(b) the restrictions and deferral limitations applicable to
any outstanding Restricted Stock and Deferred Stock awards under the
Plan shall lapse and such shares and awards shall be deemed fully
vested; and
(c) to the extent the cash payment of any award is based on
the fair market value of Stock, such fair market value shall be the
Change of Control Price.
17.2 A "Change of Control" shall be deemed to occur on:
(a) the date that any person or group deemed a person under
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934
(other than the Company and its subsidiaries as determined immediately
prior to that date) has become the beneficial owner, directly or
indirectly (with beneficial ownership determined as provided in rule
13d-3, or any successor rule, under the Securities Exchange Act of 1934)
of securities of the Company representing 25% or more of the total
combined voting power of all classes of stock of the Company having the
right under ordinary circumstances to vote at an election of the Board,
unless such person has acquired 80% or more of such securities directly
from the Company;
(b) the date on which one-third or more of the members of
the Board shall consist of persons other than Current Directors (for
these purposes a "Current Director" shall mean any member of the Board on
August 31, 1999 and any member of the Board whose nomination or election
has been approved by a majority of the Current Directors then on the
Board);
(c) the date of approval by the stockholders of the Company
of an agreement providing for the merger or consolidation of the Company
with another corporation where (i) the stockholders of the Company,
immediately prior to the merger or consolidation, would not beneficially
own, immediately after the merger or consolidation, shares entitling such
stockholders to 50% or more of all votes (without consideration of the
rights of any class of stock to elect directors by a separate class
vote) to which all stockholders of the corporation issuing cash or
securities in the merger or consolidation would be entitled in the
election of directors, or (ii) where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately
after the merger or consolidation, constitute a majority of the board of
directors of the corporation issuing cash or securities in the merger;
or
(d) the date of approval by the stockholders of the Company
of an agreement providing for the sale or other disposition of all or
substantially all of the assets of the Company.
17.3 "Change of Control Price" means the highest price per share
paid in any transaction reported in the Nasdaq National Market or on any
national securities exchange where the Stock is traded, or paid or offered in
any transaction related to a Change of Control at any time during the 90-day
period ending with the Change of Control. Notwithstanding the foregoing
sentence, in the case of Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Change of Control Price shall be the highest
price paid on the date on which the Stock Appreciation Right is exercised.
SECTION 18. GENERAL PROVISIONS
18.1 Each award under the Plan shall be subject to the requirement
that, if at any time the Granting Authority shall determine that (i) the
listing, registration or qualification of the Stock subject or related thereto
upon any securities exchange or under any state or federal law, or (ii) the
consent or approval of any government regulatory body or (iii) an agreement by
the recipient of an award with respect to the disposition of Stock is
necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of Stock thereunder, such award shall not be granted or exercised, in
whole or in part, unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Granting Authority.
18.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements. Neither the adoption
of the Plan nor any award hereunder shall confer upon any employee of the
Company, or of a Related Company, any right to continued employment, and no
award shall confer upon any Outside Director any right to continued service as
a director.
18.3 Determinations by the Granting Authority under the Plan
relating to the form, amount, and terms and conditions of awards need not be
uniform, and may be made selectively among persons who receive or are eligible
to receive awards under the Plan, whether or not such persons are similarly
situated.
18.4 No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee
and all officers or employees of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.
SECTION 19. EFFECTIVE DATE OF PLAN
The Plan was adopted by the Company's Board of Directors on August
31, 1999, and shall be effective as of such date, subject to the approval of
the Plan by the Company's stockholders at the 1999 Annual Meeting of
Stockholders.
EXHIBIT 10.4
DIANON SYSTEMS, INC.
2000 STOCK INCENTIVE PLAN
SECTION 1. PURPOSES
The purposes of the Dianon Systems, Inc. 2000 Stock Incentive Plan
(the "Plan") are (i) to enable Dianon Systems, Inc. (the "Company") and its
Related Companies (as defined below) to attract, retain and reward employees
and strengthen the existing mutuality of interests between such employees and
the Company's stockholders by offering such employees an equity interest in
the Company, and (ii) to enable the Company to pay part of the compensation
of its Outside Directors (as defined in Section 5.2) in the form of equity of
the Company, thereby increasing such directors' proprietary interests in the
Company. For purposes of the Plan, a "Related Company" means any corporation,
partnership, joint venture or other entity in which the Company owns,
directly or indirectly, at least a 20% beneficial ownership interest. In
addition, for purposes of this Plan, the term "Stock" shall refer to the
common stock of the Company, par value $.01 per share.
SECTION 2. TYPES OF AWARDS
2.1 Awards under the Plan may be in the form of (i) Stock Options;
(ii) Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred Stock;
(v) Bonus Stock; (vi) Loans; and/or (vii) Tax Offset Payments. One or more
types of awards may be granted, which may be independent or granted in
tandem. If two awards are granted in tandem, the award holder may exercise
(or otherwise receive the benefit of) one award only to the extent he or she
relinquishes the tandem award.
2.2 Outside Directors shall receive Stock Options, Limited Stock
Appreciation Rights and Stock Grants as provided in Section 15. In addition,
Outside Directors may be granted discretionary awards in one or more of the
forms set forth in Section 2.1.
SECTION 3. ADMINISTRATION
3.1 The Plan shall be administered (i) by the Compensation
Committee of the Company's Board of Directors (the "Board") or such other
committee of directors as the Board shall designate (the "Committee"), with
respect to awards to persons other than Outside Directors, and (ii) by the
Board with respect to awards to Outside Directors (except as provided in
Section 4.5). The Committee shall consist of not less than two directors each
of whom is an Outside Director. The members of the Committee shall serve at
the pleasure of the Board.
3.2 For purposes of this Plan the term "Granting Authority" shall
mean (i) the Board of Directors with respect to awards to Outside Directors
(except as provided in Section 4.5), and (ii) the Committee with respect to
all other awards. The Granting Authority shall have the following authority
with respect to awards under the Plan within its jurisdiction: to grant such
awards to persons eligible to receive them under the Plan; to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall deem advisable; to interpret the terms and provisions of the
Plan and any award granted by it under the Plan; and to otherwise supervise
the administration of the Plan. In particular, and without limiting its
authority and powers, the Granting Authority shall have the authority with
respect to the awards within its jurisdiction:
(a) to determine whether and to what extent any award or
combination of awards will be granted hereunder, including whether any
awards will be granted in tandem with each other;
(b) to select the eligible persons to whom awards will be
granted;
(c) to determine the number of shares of the Stock of the
Company to be covered by each award granted hereunder subject to the
limitations contained herein;
(d) to determine the terms and conditions of any award
granted hereunder, including, but not limited to, any vesting or other
restrictions based on such performance objectives (the "Performance
Objectives") and such other factors as the Granting Authority may
establish, and to determine whether the Performance Objectives and
other terms and conditions of the award are satisfied;
(e) to determine the treatment of awards upon an award
holder's retirement, disability, death, termination for cause or other
termination of employment or service with the Company or Related
Company;
(f) to determine pursuant to a formula or otherwise the fair
market value of the Stock on a given date; provided, however, that if
the Granting Authority fails to make such a determination, fair market
value of the Stock on a given date shall be the closing sale price on a
given date, or if no such sale of Stock occurs on such date, the
weighted average of the closing sale prices on the nearest trading dates
before and after such date;
(g) to determine that amounts equal to the amount of any
dividends declared with respect to the number of shares covered by an
award (i) will be paid to the award holder currently or (ii) will be
deferred and deemed to be reinvested or (iii) will otherwise be credited
to the award holder, or that the award holder has no rights with respect
to such dividends;
(h) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an award
will be deferred either automatically or at the election of an award
holder, including providing for and determining the amount (if any) of
deemed earnings on any deferred amount during any deferral period;
(i) to provide that the shares of Stock received as a result
of an award shall be subject to a right of first refusal, pursuant to
which the award holder shall be required to offer to the Company any
shares that the award holder wishes to sell, subject to such terms and
conditions as the Granting Authority may specify;
(j) to amend the terms of any award (including those granted
under Section 15), prospectively or retroactively; provided, however,
that no amendment shall impair the rights of the award holder without
his or her written consent; and
(k) to substitute new Stock Options for previously granted
Stock Options, or for options granted under other plans or agreements,
in each case including previously granted options having higher option
prices.
3.3 The Committee shall have the right to designate awards as
"Performance Awards." Awards so designated shall be granted and administered
in a manner designed to preserve the deductibility of the compensation
resulting from such awards in accordance with Section 162(m) of the Internal
Revenue Code (the "Code"). The grant or vesting of a Performance Award shall
be subject to the achievement of Performance Objectives established by the
Committee based on one or more of the following criteria, in each case
applied to the Company on a consolidated basis and/or to a business unit and
which the Committee may use as an absolute measure, as a measure of
improvement relative to prior performance, or as a measure of comparable
performance relative to a peer group of companies: sales, operating profits,
operating profits before interest expense and taxes, net earnings, earnings
per share, return on equity, return on assets, return on invested capital,
total shareholder return, cash flow, debt to equity ratio, market share,
stock price, economic value added, and market value added.
The Performance Objectives for a particular Performance Award
relative to a particular fiscal year shall be established by the Committee in
writing no later than 90 days after the beginning of such year. The
Committee's determination as to the achievement of Performance Objectives
relating to a Performance Award shall be made in writing. The Committee shall
have discretion to modify the Performance Objectives or vesting conditions of
a Performance Award only to the extent that the exercise of such discretion
would not cause the Performance Award to fail to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Granting Authority pursuant to
the provisions of the Plan shall be final and binding on all persons,
including the Company and Plan participants.
3.5 The Committee may from time to time delegate to one or more
officers of the Company any or all of its authorities granted hereunder
except with respect to awards granted to persons subject to Section 16 of the
Securities Exchange Act of 1934 or Performance Awards. The Committee shall
specify the maximum number of shares that the officer or officers to whom
such authority is delegated may award.
3.6 All awards granted under this Plan shall be evidenced by a
grant certificate and the terms and conditions of the award shall be set
forth in a written agreement between the Company and the award recipient.
SECTION 4. STOCK SUBJECT TO PLAN
4.1 The total number of shares of Stock which may be awarded or
issued pursuant to the exercise of an award granted under this Plan shall be
400,000, of which 350,000 shall be used for awards to employees and 50,000
shall be used for awards to Outside Directors (all subject to adjustment as
provided below). Such shares may consist of authorized but unissued shares or
treasury shares. The exercise of a Stock Appreciation Right for cash or the
payment of any other award in cash shall not count against this share limit.
4.2 To the extent a Stock Option terminates without having been
exercised, or an award terminates without the award holder having received
payment of the award, or shares awarded are forfeited, the shares subject to
such award shall again be available for distribution in connection with
future awards under the Plan. Shares of Stock equal in number to the shares
surrendered in payment of the option price, and shares of Stock which are
withheld in order to satisfy federal, state or local tax liabilities, shall
not count against the above limit, and shall again be available for grants
under the Plan.
4.3 (a) No employee shall be granted Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, and/or Bonus Stock, or
any combination of the foregoing with respect to more than 40,000 shares of
Stock in any fiscal year (subject to adjustment as provided in Section 4.5).
No employee shall be granted a Tax Offset Payment in any fiscal year with
respect to more than the number of shares of Stock covered by awards granted
to such employee in such fiscal year.
(b) For purposes of Section 162(m) of the Code, no key
employee shall be granted Stock Options or Stock Appreciation Rights
with respect to more than 40,000 shares of Stock in any fiscal year
(subject to adjustment as provided in Section 4.5).
4.4 The maximum number of shares of Stock that may be issued under
this Plan pursuant to the exercise of Options intended to be Incentive Stock
Options shall be 350,000 shares.
4.5 In the event of any merger, reorganization, consolidation,
sale of substantially all assets, recapitalization, stock dividend, stock
split, spin-oft split-up, split-off distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may
be determined to be appropriate by the Committee in its sole discretion,
shall be made in the aggregate number of shares reserved for issuance under
the Plan, the number of shares as to which awards may be granted to any
individual in any calendar year, the number and type of shares subject to
outstanding awards and the amounts to be paid by award holders or the
Company, as the case may be, with respect to outstanding awards; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding award. In the event any change described in this Section 4.5
occurs, the Committee shall make appropriate adjustment in the awards
previously granted and to be granted to Outside Directors under the Plan;
provided that no such adjustment shall increase the aggregate value of any
outstanding award.
SECTION 5. ELIGIBILITY
5.1 Key employees of the Company or a Related Company, including
key employees who are officers and/or directors of the Company, are eligible
to be granted awards under the Plan, other than under Section 15. Employees
shall be selected for participation in the Plan from time to time by the
Committee, in its sole discretion, from among those key employees eligible to
participate in this Plan.
5.2 Awards under Section 15 of the Plan shall be made solely to
Outside Directors, which term shall mean any director of the Company other
than one who is an employee of the Company or a Related Company. The Board,
in its discretion, may also grant other awards under the Plan in one or more
of the forms set forth in Section 2.1 to one or more Outside Directors.
SECTION 6. STOCK OPTIONS
6.1 The Stock Options awarded under the Plan may be of two types:
(i) Incentive Stock Options within the meaning of Section 422 of the Code or
any successor provision thereto (which may be granted only to employees); and
(ii) Non-Qualified Stock Options. To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
6.2 Subject to the following provisions, Stock Options awarded
under the Plan shall be in such form and shall have such terms and conditions
as the Granting Authority may determine:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Granting
Authority, and may be less than the fair market value of the Stock on
the date of the award of the Stock Option.
(b) Option Term. The term of each Stock Option shall be
fixed by the Granting Authority.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Granting Authority. The Granting Authority may waive
such exercise provisions or accelerate the exercisability of the Stock
Option at any time in whole or in part.
(d) Method of Exercise. Stock Options may be exercised in
whole or in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the
purchase price shall be made in such manner as the Granting Authority
may provide in the award, which may include cash (including cash
equivalents), delivery of shares of Stock already owned by the optionee
for at least six months, "cashless exercise" (which may be either (i) a
broker-assisted cash exercise effected in accordance with rules adopted
by Granting Authority or (ii) a direction to the Company to withhold
shares of Stock, otherwise deliverable to the option holder with respect
to the Option, having a fair market value on the date of exercise equal
to the option price), or in any other manner permitted by law determined
by the Granting Authority, or any combination of the foregoing. If the
Granting Authority determines that a Stock Option may be exercised using
shares of Restricted Stock, then unless the Granting Authority provides
otherwise, the shares received upon the exercise of a Stock Option which
are paid for using Restricted Stock shall be restricted in accordance
with the original terms of the Restricted Stock award.
(e) No Stockholder Rights. An optionee shall have neither
rights to dividends or other rights of a stockholder with respect to
shares subject to a Stock Option until the optionee has given written
notice of exercise and has paid for such shares.
(f) Surrender Rights. The Granting Authority may provide
that options may be surrendered for cash upon any terms and conditions
set by the Granting Authority.
(g) Non-transferability. Unless otherwise provided by the
Granting Authority, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and distribution,
and (ii) during the optionee's lifetime, all Stock Options shall be
exercisable only by the optionee or, in the event of the optionee's
disability, by his or her guardian or legal representative.
(h) Termination of Service. Following the termination of an
optionee's service with the Company or a Related Company, the Stock
Option shall be exercisable to the extent determined by the Granting
Authority.The Granting Authority may provide different post-termination
exercise provisions with respect to termination of service for different
reasons.The Granting Authority may provide that, notwithstanding the
option term fixed pursuant to Section 6.2(b), a Stock Option which is
outstanding on the date of an optionee's death shall remain outstanding
for an additional period after the date of such death.
6.3 Notwithstanding the provisions of Section 6.2, no Incentive
Stock Option shall (i) have an option price which is less than 100% of the
fair market value of the Stock on the date of the award of the Incentive
Stock Option, (ii) be exercisable more than ten years after the date such
Incentive Stock Option is awarded, or (iii) be awarded more than ten years
after the effective date of the Plan specified in Section 19. No Incentive
Stock Option granted to an employee who owns more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
parent or subsidiary corporations, as defined in Section 424 of the Code,
shall (A) have an option price which is less than 110% of the fair market
value of the Stock on the date of award of the Incentive Stock Option or (B)
be exercisable more than five years after the date such Incentive Stock
Option is awarded.
6.4 A Stock Option granted to a key employee under this Plan will
not be considered an Incentive Stock Option to the extent that such Stock
Option, together with any earlier Stock Option granted to such employee under
this or any other plan of the Company that is intended to be an Incentive
Stock Option, permits the exercise for the first time in any calendar year of
shares of Stock having a fair market value in excess of $100,000 (determined
at the time of grant).
SECTION 7. STOCK APPRECIATION RIGHTS
7.1 A Stock Appreciation Right shall entitle the holder thereof to
receive payment of an amount, in cash, shares of Stock or a combination
thereof, as determined by the Granting Authority, equal in value to the
excess of the fair market value of the number of shares of Stock as to which
the award is granted on the date of exercise over an amount specified by the
Granting Authority. Any such award shall be in such form and shall have such
terms and conditions as the Granting Authority may determine. The grant shall
specify the number of shares of Stock as to which the Stock Appreciation
Right is granted.
7.2 The Granting Authority may provide that a Stock Appreciation
Right may be exercised only within the 60-day period following occurrence of
a Change of Control (as defined in Section 17.2) (such Stock Appreciation
Right being referred to herein as a Limited Stock Appreciation Right). The
Granting Authority may also provide that in the event of a Change of Control
the amount to be paid upon exercise of a Stock Appreciation Right shall be
based on the Change of Control Price (as defined in Section 17.3).
SECTION 8. RESTRICTED STOCK
Subject to the following provisions, all awards of Restricted
Stock shall be in such form and shall have such terms and conditions as the
Granting Authority may determine:
(a) The Restricted Stock award shall specify the number of
shares of Restricted Stock to be awarded, the price, if any, to be paid
by the recipient of the Restricted Stock and the date or dates on which,
or the conditions upon the satisfaction of which, the restrictions shall
lapse and the Restricted Stock will vest. The grant and/or the vesting
of Restricted Stock may be conditioned upon the completion of a specified
period of service with the Company or a Related Company, upon the
attainment of specified Performance Objectives or upon such other
criteria as the Granting Authority may determine.
(b) Stock certificates representing the Restricted Stock
awarded under the Plan shall be registered in the award holder's name,
but the Granting Authority may direct that such certificates be held by
Company on behalf of the award holder. Except as may be permitted by
the Granting Authority, no share of Restricted Stock may be sold,
transferred, assigned, pledged or otherwise encumbered by the award
holder until such share has vested in accordance with the terms of the
Restricted Stock award. At the time Restricted Stock vests, a
certificate for such vested shares shall be delivered to the award
holder (or his or her designated beneficiary in the event of death),
free of all restrictions.
(c) The Granting Authority may provide that the award
holder shall have the right to vote or receive dividends on Restricted
Stock. Unless the Granting Authority provides otherwise, Stock received
as a dividend on, or in connection with a stock split of, Restricted
Stock shall be subject to the same restrictions as the Restricted Stock.
(d) Except as may be provided by the Granting Authority, in
the event of an award holder's termination of service before all of his
or her Restricted Stock has vested, or in the event any conditions to the
vesting of Restricted Stock have not been satisfied prior to any
deadline for the satisfaction of such conditions set forth in the award,
the shares of Restricted Stock which have not vested shall be forfeited,
and the Granting Authority may provide that (i) any purchase price paid
by the award holder shall be returned to the award holder or (ii) a cash
payment equal to the Restricted Stock's fair market value on the date of
forfeiture, if lower, shall be paid to the award holder.
(e) The Granting Authority may waive, in whole or in part,
any or all of the conditions to receipt of, or restrictions with respect
to, any or all of the award holder's Restricted Stock, other than
Performance Awards whose vesting was made subject to satisfaction of one
or more Performance Objectives (except that the Committee may waive
conditions or restrictions with respect to Performance Awards if such
waiver would not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of
the Code).
SECTION 9. DEFERRED STOCK AWARDS
Subject to the following provisions, all awards of Deferred Stock
shall be in such form and shall have such terms and conditions as the
Granting Authority may determine:
(a) The Deferred Stock award shall specify the number of
shares of Deferred Stock to be awarded and the duration of the period
(the "Deferral Period") during which, and the conditions under which,
receipt of the Stock will be deferred. The Granting Authority may
condition the grant or vesting of Deferred Stock, or receipt of Stock
or cash at the end of the Deferral Period, upon the attainment of
specified Performance Objectives or such other criteria as the Granting
Authority may determine.
(b) Except as may be provided by the Granting Authority,
Deferred Stock awards may not be sold, assigned, transferred, pledged
or otherwise encumbered during the Deferral Period.
(c) At the expiration of the Deferral Period, the award
holder (or his or her designated beneficiary in the event of death)
shall receive (i) certificates for the number of shares of Stock equal
to the number of shares covered by the Deferred Stock award, (ii) cash
equal to the fair market value of such Stock, or (iii) a combination
of shares and cash, as the Granting Authority may determine.
(d) Except as may be provided by the Granting Authority, in
the event of an award holder's termination of service before the
Deferred Stock has vested, his or her Deferred Stock award shall be
forfeited.
(e) The Granting Authority may waive, in whole or in part,
any or all of the conditions to receipt of, or restrictions with respect
to, Stock or cash under a Deferred Stock award, other than with respect
to Performance Awards (except that the Committee may waive conditions or
restrictions with respect to Performance Awards if such waiver would
not cause the Performance Award to fail to qualify as "performance
based compensation" within the meaning of Section 162(m) of the Code).
SECTION 10. BONUS STOCK
The Granting Authority may award Bonus Stock subject to such terms
and conditions as the Granting Authority shall determine. The grant of Bonus
Stock may be conditioned upon the attainment of specified Performance
Objectives or upon such other criteria as the Granting Authority may
determine. The Granting Authority may waive such conditions in whole or in
part other than with respect to Performance Awards (except that the Committee
may waive conditions or restrictions with respect to Performance Awards if
such waiver would not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code). In making a determination with respect to the terms and conditions of
a Bonus Stock award, the Granting Authority shall also have the right to
eliminate or reduce the amount of Bonus Stock otherwise payable under an
award. Unless otherwise specified by the Granting Authority, no money shall
be paid by the recipient for the Bonus Stock. Alternatively, the Granting
Authority may offer the award holder the opportunity to purchase Bonus Stock
at a discount from its fair market value. The Bonus Stock award shall be
satisfied by the delivery of the designated number of shares of Stock which
are not subject to restriction.
SECTION 11. LOANS
The Granting Authority may provide that the Company shall make, or
arrange for, a loan or loans with respect to the exercise of any Stock Option
awarded under the Plan, with respect to the payment of the purchase price, if
any, of any Restricted Stock awarded hereunder or with respect to any taxes
arising from an award hereunder; provided, however, that the Company shall
not loan more than the sum of (i) the excess of the purchase or exercise
price of an award over the par value of any shares of Stock awarded plus (ii)
the amount of any taxes arising from such award. The Granting Authority shall
have full authority to decide whether a loan will be made hereunder and to
determine the amount, term and provisions of any such loan, including the
interest rate to be charged, whether the loan will be with or without
recourse against the borrower, any security for the loan, the terms on which
the loan is to be repaid and the conditions, if any, under which the loan may
be forgiven.
SECTION 12. TAX OFFSET PAYMENTS
The Granting Authority may provide for a Tax Offset Payment by the
Company with respect to one or more awards granted under the Plan. The Tax
Offset Payment shall be in an amount specified by the Granting Authority,
which shall not exceed the amount necessary to pay the federal, state, local
and other taxes payable with respect to the applicable award and the receipt
of the Tax Offset Payment, assuming that the award holder is taxed at the
maximum tax rate applicable to such income. The Tax Offset Payment shall be
paid solely in cash.
SECTION 13. ELECTION TO DEFER AWARDS
The Granting Authority may permit an employee or Outside Director
to elect to defer receipt of an award (other than an award pursuant to
Section 15) for a specified period or until a specified event, upon such
terms as are determined by the Granting Authority.
SECTION 14. TAX WITHHOLDING
14.1 Each employee shall, no later than the date as of which the
value of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, local
or other taxes of any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements, and the Company (and, where applicable, any
Related Company), shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
employee.
14.2 To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any awards hereunder, satisfied by (i) having the Company withhold
shares of Stock otherwise deliverable to such person with respect to the
award or (ii) delivering to the Company shares of unrestricted Stock
previously owned by the person for at least six months.
SECTION 15. AUTOMATIC STOCK OPTIONS, LIMITED STOCK APPRECIATION RIGHTS AND
STOCK GRANTS FOR OUTSIDE DIRECTORS
15.1 Outside Directors shall be granted Stock Options as follows:
(a) Initial Grant. Each person who is an Outside Director
on the date of adoption of the Plan by the Board shall be granted on
such date a Stock Option to purchase the number of whole shares of Stock
obtained by dividing $5,000 by the closing sales price of the Stock on
the date of grant. Each person who becomes an Outside Director after
such date shall be granted, on the first trading day coincident with or
immediately following the effective date of his or her election as an
Outside Director, a Stock Option to purchase the number of whole shares
of Stock obtained by dividing $5,000 by the closing sales price of the
Stock on the date of grant.
(b) Quarterly Grants. On the first trading day of each
calendar quarter beginning with October 1, 2000, each Outside Director
then serving on the Board and who has served for all or a portion of
the previous calendar quarter shall be granted a Stock Option to
purchase the number of whole shares of Stock obtained by dividing
$5,000 by the closing sales price of the Stock on the date of grant.
(c) For purposes of this Section 15.1, the term trading day
shall mean a day on which the Stock is traded on a national securities
exchange, on the Nasdaq National Market, or in the over-the-counter
market.
(d) Notwithstanding the foregoing, if on any date on which
Stock Options are to be granted under this Section 15.1 the remaining
shares available for issuance to Outside Directors under the Plan are
insufficient to enable each Outside Director to receive a Stock Option
to purchase the applicable number of shares of Stock set forth above,
each Outside Director who is entitled to be granted a Stock Option
pursuant to this Section 15.1 on such date shall be granted a Stock
Option to purchase his or her pro-rata portion of such remaining shares.
15.2 Stock Options granted under this Section 15 shall be Non-
Qualified Stock Options, and shall have the following terms and conditions:
(a) Option Price. The option price per share of Stock
purchasable under the Stock Option shall be equal to the closing sales
price of the Stock on the date the Stock Option is granted.
(b) Term of Option. The term of the Stock Option shall be
ten years from the date of grant, subject to earlier termination in the
event of termination of service as a director, as set forth in
paragraphs (e) and (f) below.
(c) Exercisability. Subject to paragraph (f) below, each
Stock Option shall become exercisable with respect to 10% of the
underlying shares on the date which is three months after the date of
grant, and an additional 10% at the end of each three-month period
thereafter, less any shares that have been exercised prior to each such
date, provided that the optionee is a director of the Company on such
date. The minimum number of shares with respect to which a Stock Option
may be exercised is the lesser of 100 shares or the number of shares
then subject to the Stock Option.
(d) Method of Exercise. The Stock Options may be exercised
in whole or in part at any time during the option period by giving
written notice of exercise to the Company specifying the number of
shares to be purchased, accompanied by payment of the purchase price.
Payment of the purchase price shall be made in cash (including cash
equivalents) or by delivery of shares of Stock already owned by the
optionee for at least six months, or by any combination of the
foregoing. Shares delivered upon payment of the exercise price shall be
valued at the average of the high and low sale prices of the Stock on
the date of exercise (or, if the Stock is not traded on such date, at
the weighted average of the high and low prices on the nearest trading
dates before and after such date).
(e) Termination of Service as Director. If an optionee's
service as a director is terminated for any reason, such director's
Stock Options may be exercised for five years following such termination
of service (but not beyond the Option term), but only to the extent such
Options were vested on the date of termination of service.
(f) Change of Control. Notwithstanding any other provision
of the Plan, upon the occurrence of a Change of Control (as defined in
Section 17.2), all Stock Options outstanding at the time of such Change
of Control shall become immediately vested and exercisable and shall
remain exercisable for five years after the director's termination of
service (but not beyond the option term).
(g) Non-transferability. No Stock Option shall be
transferable by the optionee other than by will or by the laws of
descent and distribution. During an optionee's lifetime, all Stock
Options shall be exercisable only by the optionee or, in the event of
the optionee's disability, by his or her guardian or legal
representative.
(h) Shareholder Rights. The holder of a Stock Option shall,
as such, have none of the rights of a shareholder.
15.3 Limited Stock Appreciation Rights in Tandem with Options.
Each Stock Option granted to an Outside Director under this Section 15 shall
be granted in tandem with a Limited Stock Appreciation Right which may be
exercised only within the 60-day period following a Change of Control. Upon
exercise of the Limited Stock Appreciation Right, the holder shall receive,
for each share with respect to which the Limited Stock Appreciation Right is
exercised, an amount equal in value to the excess of the Change of Control
Price (as defined in Section 17.3) over the exercise price of the related
Stock Option. The Limited Stock Appreciation Right shall be payable solely in
cash, and shall be paid within 30 days of the exercise of the Limited Stock
Appreciation Right. Upon the exercise of the Limited Stock Appreciation
Right, the Stock Option granted in tandem with such Right shall expire.
15.4 Quarterly Stock Grants. On the first trading day of each
calendar quarter beginning with the first calendar quarter after the date of
shareholder approval of the Plan, each Outside Director then serving on the
Board and who has served for all or a portion of the previous calendar
quarter shall be granted the number of whole shares of Stock obtained by
dividing $2,000 by the closing sales price of the Stock on the date of grant.
Notwithstanding the foregoing, if on any date on which shares are to be
granted pursuant to this Section 15.4 the remaining shares reserved for
issuance to Outside Directors under the Plan are insufficient to enable each
Outside Director to receive the applicable number of shares of Stock set
forth above, each Outside Director who is entitled to be granted shares
pursuant to this Section 15.4 shall be granted his or her pro rata portion of
such remaining shares. All shares granted under this Section 15.4 shall be
fully vested and non-forfeitable at the time of grant.
SECTION 16. AMENDMENTS AND TERMINATION
The Board may discontinue the Plan at any time and may amend it
from time to time. No amendment or discontinuation of the Plan shall
adversely affect any award previously granted without the award holder's
written consent. Amendments may be made without stockholder approval except
as required to satisfy Section 422 of the Code, Section 162(m) of the Code,
or other NASDAQ, stock exchange, or regulatory requirements.
SECTION 17. CHANGE OF CONTROL
17.1 In the event of a Change of Control, unless otherwise
determined by the Granting Authority at the time of grant or by amendment
(with the award holder's consent) of such grant:
(a) all outstanding Stock Options and all outstanding Stock
Appreciation Rights (including Limited Stock Appreciation Rights)
awarded under the Plan shall become fully exercisable and vested;
(b) the restrictions and deferral limitations applicable to
any outstanding Restricted Stock and Deferred Stock awards under the
Plan shall lapse and such shares and awards shall be deemed fully
vested; and
(c) to the extent the cash payment of any award is based on
the fair market value of Stock, such fair market value shall be the
Change of Control Price.
17.2 A "Change of Control" shall be deemed to occur on:
(a) the date that any person or group deemed a person under
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934
(other than the Company and its subsidiaries as determined immediately
prior to that date) has become the beneficial owner, directly or
indirectly (with beneficial ownership determined as provided in rule
13d-3, or any successor rule, under the Securities Exchange Act of
1934) of securities of the Company representing 25% or more of the total
combined voting power of all classes of stock of the Company having the
right under ordinary circumstances to vote at an election of the Board,
unless such person has acquired 80% or more of such securities directly
from the Company;
(b) the date on which one-third or more of the members of
the Board shall consist of persons other than Current Directors (for
these purposes a "Current Director" shall mean any member of the Board
on August 31, 2000 and any member of the Board whose nomination or
election has been approved by a majority of the Current Directors then
on the Board);
(c) the date of approval by the stockholders of the Company
of an agreement providing for the merger or consolidation of the Company
with another corporation where (i) the stockholders of the Company,
immediately prior to the merger or consolidation, would not beneficially
own, immediately after the merger or consolidation, shares entitling
such stockholders to 50% or more of all votes (without consideration of
the rights of any class of stock to elect directors by a separate class
vote) to which all stockholders of the corporation issuing cash or
securities in the merger or consolidation would be entitled in the
election of directors, or (ii) where the members of the Board,
immediately prior to the merger or consolidation, would not,
immediately after the merger or consolidation, constitute a majority
of the board of directors of the corporation issuing cash or securities
in the merger; or
(d) the date of approval by the stockholders of the Company
of an agreement providing for the sale or other disposition of all or
substantially all of the assets of the Company.
17.3 "Change of Control Price" means the highest price per share
paid in any transaction reported in the Nasdaq National Market or on any
national securities exchange where the Stock is traded, or paid or offered in
any transaction related to a Change of Control at any time during the 90-day
period ending with the Change of Control. Notwithstanding the foregoing
sentence, in the case of Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Change of Control Price shall be the highest
price paid on the date on which the Stock Appreciation Right is exercised.
SECTION 18. GENERAL PROVISIONS
18.1 Each award under the Plan shall be subject to the requirement
that, if at any time the Granting Authority shall determine that (i) the
listing, registration or qualification of the Stock subject or related
thereto upon any securities exchange or under any state or federal law, or
(ii) the consent or approval of any government regulatory body or (iii) an
agreement by the recipient of an award with respect to the disposition of
Stock is necessary or desirable (in connection with any requirement or
interpretation of any federal or state securities law, rule or regulation) as
a condition of, or in connection with, the granting of such award or the
issuance, purchase or delivery of Stock thereunder, such award shall not be
granted or exercised, in whole or in part, unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Granting Authority.
18.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements. Neither the adoption
of the Plan nor any award hereunder shall confer upon any employee of the
Company, or of a Related Company, any right to continued employment, and no
award shall confer upon any Outside Director any right to continued service
as a director.
18.3 Determinations by the Granting Authority under the Plan
relating to the form, amount, and terms and conditions of awards need not be
uniform, and may be made selectively among persons who receive or are
eligible to receive awards under the Plan, whether or not such persons are
similarly situated.
18.4 No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee
and all officers or employees of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.
SECTION 19. EFFECTIVE DATE OF PLAN
The Plan was adopted by the Company's Board of Directors on July
20, 2000, and shall be effective as of such date, subject to the approval of
the Plan by the Company's stockholders at the 2000 Annual Meeting of
Stockholders.
Exhibit 10.5
DIANON SYSTEMS, INC.
2001 STOCK INCENTIVE PLAN
SECTION 1. Purposes
The purposes of the Dianon Systems, Inc. 2001 Stock Incentive Plan (the
"Plan") are (i) to enable Dianon Systems, Inc. (the "Company") and its
Related Companies (as defined below) to attract, retain and reward employees
and strengthen the existing mutuality of interests between such employees and
the Company's stockholders by offering such employees an equity interest in
the Company, and (ii) to enable the Company to pay part of the compensation
of its Outside Directors (as defined in Section 5.2) in the form of equity of
the Company, thereby increasing such directors' proprietary interests in the
Company. For purposes of the Plan, a "Related Company" means any corporation,
partnership, joint venture or other entity in which the Company owns, directly
or indirectly, at least a 20% beneficial ownership interest. In addition, for
purposes of this Plan, the term "Stock" shall refer to the common stock of the
Company, par value $.01 per share.
SECTION 2. Types of Awards
2.1 Awards under the Plan may be in the form of (i) Stock Options; (ii)
Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred Stock; (v)
Bonus Stock; (vi) Loans; and/or (vii) Tax Offset Payments. One or more types
of awards may be granted, which may be independent or granted in tandem. If
two awards are granted in tandem, the award holder may exercise (or otherwise
receive the benefit of) one award only to the extent he or she relinquishes
the tandem award.
2.2 Outside Directors shall receive Stock Options, Limited Stock
Appreciation Rights and Stock Grants as provided in Section 15. In addition,
Outside Directors may be granted discretionary awards in one or more of the
forms set forth in Section 2.1.
SECTION 3. Administration
3.1 The Plan shall be administered (i) by the Compensation Committee of
the Company's Board of Directors (the "Board") or such other committee of
directors as the Board shall designate (the "Committee"), with respect to
awards to persons other than Outside Directors, and (ii) by the Board with
respect to awards to Outside Directors (except as provided in Section 4.5).
The Committee shall consist of not less than two directors each of whom is an
Outside Director. The members of the Committee shall serve at the pleasure of
the Board.
3.2 For purposes of this Plan the term "Granting Authority" shall mean (i)
the Board of Directors with respect to awards to Outside Directors (except as
provided in Section 4.5), and (ii) the Committee with respect to all other
awards. The Granting Authority shall have the following authority with
respect to awards under the Plan within its jurisdiction: to grant such
awards to persons eligible to receive them under the Plan; to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall deem advisable; to interpret the terms and provisions of the
Plan and any award granted by it under the Plan; and to otherwise supervise
the administration of the Plan. In particular, and without limiting its
authority and powers, the Granting Authority shall have the authority with
respect to the awards within its jurisdiction:
(a) to determine whether and to what extent any award or combination of
awards will be granted hereunder, including whether any awards will be
granted in tandem with each other;
(b) to select the eligible persons to whom awards will be granted;
(c) to determine the number of shares of the Stock of the Company to be
covered by each award granted hereunder subject to the limitations
contained herein;
(d) to determine the terms and conditions of any award granted
hereunder, including, but not limited to, any vesting or other restrictions
based on such performance objectives (the "Performance Objectives") and
such other factors as the Granting Authority may establish, and to
determine whetherthe Performance Objectives and other terms and conditions
of the award are satisfied;
(e) to determine the treatment of awards upon an award holder's
retirement, disability, death, termination for cause or other termination
of employment or service with the Company or Related Company;
(f) to determine pursuant to a formula or otherwise the fair market
value of the Stock on a given date; provided, however, that if the Granting
Authority fails to make such a determination, fair market value of the
Stock on a given date shall be the closing sale price on a given date, or
if no such sale of Stock occurs on such date, the weighted average of the
closing sale prices on the nearest trading dates before and after such
date;
(g) to determine that amounts equal to the amount of any dividends
declared with respect to the number of shares covered by an award (i) will
be paid to the award holder currently or (ii) will be deferred and deemed
to be reinvested or (iii) will otherwise be credited to the award holder,
or that the award holder has no rights with respect to such dividends;
(h) to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an award will be deferred
either automatically or at the election of an award holder, including
providing for and determining the amount (if any) of deemed earnings on
any deferred amount during any deferral period;
(i) to provide that the shares of Stock received as a result of an
award shall be subject to a right of first refusal, pursuant to which the
award holder shall be required to offer to the Company any shares that the
award holder wishes to sell, subject to such terms and conditions as the
Granting Authority may specify;
(j) to amend the terms of any award (including those granted under
Section 15), prospectively or retroactively; provided, however, that no
amendment shall impair the rights of the award holder without his or her
written consent; and
(k) to substitute new Stock Options for previously granted Stock
Options, or for options granted under other plans or agreements, in each
case including previously granted options having higher option prices.
3.3 The Committee shall have the right to designate awards as "Performance
Awards." Awards so designated shall be granted and administered in a manner
designed to preserve the deductibility of the compensation resulting from
such awards in accordance with Section 162(m) of the Internal Revenue Code
(the "Code"). The grant or vesting of a Performance Award shall be subject to
the achievement of Performance Objectives established by the Committee based
on one or more of the following criteria, in each case applied to the Company
on a consolidated basis and/or to a business unit and which the Committee may
use as an absolute measure, as a measure of improvement relative to prior
performance, or as a measure of comparable performance relative to a peer
group of companies: sales, operating profits, operating profits before
interest expense and taxes, net earnings, earnings per share, return on
equity, return on assets, return on invested capital, total stockholder
return, cash flow, debt to equity ratio, market share, stock price, economic
value added, and market value added.
The Performance Objectives for a particular Performance Award relative to
a particular fiscal year shall be established by the Committee in writing no
later than 90 days after the beginning of such year. The Committee's
determination as to the achievement of Performance Objectives relating to a
Performance Award shall be made in writing. The Committee shall have
discretion to modify the Performance Objectives or vesting conditions of a
Performance Award only to the extent that the exercise of such discretion
would not cause the Performance Award to fail to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Granting Authority pursuant to the
provisions of the Plan shall be final and binding on all persons, including
the Company and Plan participants.
3.5 The Committee may from time to time delegate to one or more officers
of the Company any or all of its authorities granted hereunder except with
respect to awards granted to persons subject to Section 16 of the Securities
Exchange Act of 1934 or Performance Awards. The Committee shall specify the
maximum number of shares that the officer or officers to whom such authority
is delegated may award.
3.6 All awards granted under this Plan shall be evidenced by a grant
certificate and the terms and conditions of the award shall be set forth in a
written agreement between the Company and the award recipient.
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock which may be awarded or issued
pursuant to the exercise of an award granted under this Plan shall be
640,000, of which 500,000 shall be used for awards to employees and 140,000
shall be used for awards to Outside Directors (all subject to adjustment as
provided below). Such shares may consist of authorized but unissued shares or
treasury shares. The exercise of a Stock Appreciation Right for cash or the
payment of any other award in cash shall not count against this share limit.
4.2 To the extent a Stock Option terminates without having been exercised,
or an award terminates without the award holder having received payment of
the award, or shares awarded are forfeited, the shares subject to such award
shall again be available for distribution in connection with future awards
under the Plan. Shares of Stock equal in number to the shares surrendered in
payment of the option price, and shares of Stock which are withheld in order
to satisfy federal, state or local tax liabilities, shall not count against
the above limit, and shall again be available for grants under the Plan.
4.3 (a) No employee shall be granted Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, and/or Bonus Stock, or any
combination of the foregoing with respect to more than 50,000 shares of Stock
in any fiscal year (subject to adjustment as provided in Section 4.5). No
employee shall be granted a Tax Offset Payment in any fiscal year with
respect to more than the number of shares of Stock covered by awards granted
to such employee in such fiscal year.
(b) For purposes of Section 162(m) of the Code, no key employee shall be
granted Stock Options or Stock Appreciation Rights with respect to more than
50,000 shares of Stock in any fiscal year (subject to adjustment as provided
in Section 4.5).
4.4 The maximum number of shares of Stock that may be issued under this
Plan pursuant to the exercise of Options intended to be Incentive Stock
Options shall be 500,000 shares.
4.5 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, stock dividend, stock split,
spin-oft split-up, split-off distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment shall
be made by the Granting Authority in the aggregate number of shares reserved
for issuance under the Plan, the number of shares as to which awards may be
granted to any individual in any calendar year, the number and type of shares
subject to outstanding awards and the amounts to be paid by award holders or
the Company, as the case may be, with respect to outstanding awards;
provided, however, that no such adjustment shall increase the aggregate value
of any outstanding award. In the event any change described in this Section
4.5 occurs, the Granting Authority shall make appropriate adjustment in the
awards previously granted and to be granted to Outside Directors under the
Plan; provided that no such adjustment shall increase the aggregate value of
any outstanding award.
SECTION 5. Eligibility
5.1 Key employees of the Company or a Related Company, including key
employees who are officers and/or directors of the Company, are eligible to
be granted awards under the Plan, other than under Section 15. Employees
shall be selected for participation in the Plan from time to time by the
Committee, in its sole discretion, from among those key employees eligible to
participate in this Plan.
5.2 Awards under Section 15 of the Plan shall be made solely to Outside
Directors, which term shall mean any director of the Company other than one
who is an employee of the Company or a Related Company. The Board, in its
discretion, may also grant other awards under the Plan in one or more of the
forms set forth in Section 2.1 to one or more Outside Directors.
SECTION 6. Stock Options
6.1 The Stock Options awarded under the Plan may be of two types: (i)
Incentive Stock Options within the meaning of Section 422 of the Code or any
successor provision thereto (which may be granted only to employees); and
(ii) Non-Qualified Stock Options. To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
6.2 Subject to the following provisions, Stock Options awarded under the
Plan shall be in such form and shall have such terms and conditions as the
Granting Authority may determine:
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Granting Authority, and may be
less than the fair market value of the Stock on the date of the award of
the Stock Option.
(b) Option Term. The term of each Stock Option shall be fixed by the
Granting Authority.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Granting Authority. The Granting Authority may waive such exercise
provisions or accelerate the exercisability of the Stock Option at any
time in whole or in part.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of
exercise to the Company specifying the number of shares to be purchased,
accompanied by payment of the purchase price. Payment of the purchase
price shall be made in such manner as the Granting Authority may provide
in the award, which may include cash (including cash equivalents), delivery
of shares of Stock already owned by the optionee for at least six months,
"cashless exercise" (which may be either (i) a broker-assisted cash
exercise effected in accordance with rules adopted by the Granting
Authority or (ii) a direction to the Company to withhold shares of Stock,
otherwise deliverable to the option holder with respect to the Option,
having a fair market value on the date of exercise equal to the option
price), or in any other manner permitted by law determined by the Granting
Authority, or any combination of the foregoing. If the Granting Authority
determines that a Stock Option may be exercised using shares of Restricted
Stock, then unless the Granting Authority provides otherwise, the shares
received upon the exercise of a Stock Option which are paid for using
Restricted Stock shall be restricted in accordance with the original terms
of the Restricted Stock award.
(e) No Stockholder Rights. An optionee shall have neither rights to
dividends or other rights of a stockholder with respect to shares subject
to a Stock Option until the optionee has given written notice of exercise
and has paid for such shares.
(f) Surrender Rights. The Granting Authority may provide that options
may be surrendered for cash upon any terms and conditions set by the
Granting Authority.
(g) Non-transferability. Unless otherwise provided by the Granting
Authority, (i) Stock Options shall not be transferable by the optionee
other than by will or by the laws of descent and distribution, and (ii)
during the optionee's lifetime, all Stock Options shall be exercisable only
by the optionee or, in the event of the optionee's disability, by his or
her guardian or legal representative.
(h) Termination of Service. Following the termination of an optionee's
service with the Company or a Related Company, the Stock Option shall be
exercisable to the extent determined by the Granting Authority. The
Granting Authority may provide different post-termination exercise
provisions with respect to termination of service for different reasons.
The Granting Authority may provide that, notwithstanding the option term
fixed pursuant to Section 6.2(b), a Stock Option which is outstanding on
the date of an optionee's death shall remain outstanding for an additional
period after the date of such death.
6.3 Notwithstanding the provisions of Section 6.2, no Incentive Stock
Option shall (i) have an option price which is less than 100% of the fair
market value of the Stock on the date of the award of the Incentive Stock
Option, (ii) be exercisable more than ten years after the date such Incentive
Stock Option is awarded, or (iii) be awarded more than ten years after the
Effective Date (as defined below) of the Plan specified in Section 19. No
Incentive Stock Option granted to an employee who owns more than 10% of the
total combined voting power of all classes of stock of the Company or any of
its parent or subsidiary corporations, as defined in Section 424 of the Code,
shall (A) have an option price which is less than 110% of the fair market
value of the Stock on the date of award of the Incentive Stock Option or (B)
be exercisable more than five years after the date such Incentive Stock
Option is awarded.
6.4 A Stock Option granted to a key employee under this Plan will not be
considered an Incentive Stock Option to the extent that such Stock Option,
together with any earlier Stock Option granted to such employee under this or
any other plan of the Company that is intended to be an Incentive Stock
Option, permits the exercise for the first time in any calendar year of
shares of Stock having a fair market value in excess of $100,000 (determined
at the time of grant).
SECTION 7. Stock Appreciation Rights
7.1 A Stock Appreciation Right shall entitle the holder thereof to receive
payment of an amount, in cash, shares of Stock or a combination thereof, as
determined by the Granting Authority, equal in value to the excess of the
fair market value of the number of shares of Stock as to which the award is
granted on the date of exercise over an amount specified by the Granting
Authority. Any such award shall be in such form and shall have such terms and
conditions as the Granting Authority may determine. The grant shall specify
the number of shares of Stock as to which the Stock Appreciation Right is
granted.
7.2 The Granting Authority may provide that a Stock Appreciation Right may
be exercised only within the 60-day period following occurrence of a Change
of Control (as defined in Section 17.2) (such Stock Appreciation Right being
referred to herein as a Limited Stock Appreciation Right). The Granting
Authority may also provide that in the event of a Change of Control the
amount to be paid upon exercise of a Stock Appreciation Right shall be based
on the Change of Control Price (as defined in Section 17.3).
SECTION 8. Restricted Stock
Subject to the following provisions, all awards of Restricted Stock shall
be in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by the
recipient of the Restricted Stock and the date or dates on which, or the
conditions upon the satisfaction of which, the restrictions shall lapse
and the Restricted Stock will vest. The grant and/or the vesting of
Restricted Stock may be conditioned upon the completion of a specified
period of service with the Company or a Related Company, upon the
attainment of specified Performance Objectives or upon such other
criteria as the Granting Authority may determine.
(b) Stock certificates representing the Restricted Stock awarded under
the Plan shall be registered in the award holder's name, but the Granting
Authority may direct that such certificates be held by the Company on
behalf of the award holder. Except as may be permitted by the Granting
Authority, no share of Restricted Stock may be sold, transferred, assigned,
pledged or otherwise encumbered by the award holder until such share has
vested in accordance with the terms of the Restricted Stock award. At the
time Restricted Stock vests, a certificate for such vested shares shall be
delivered to the award holder (or his or her designated beneficiary in the
event of death), free of all restrictions.
(c) The Granting Authority may provide that the award holder shall have
the right to vote or receive dividends on Restricted Stock. Unless the
Granting Authority provides otherwise, Stock received as a dividend on, or
in connection with a stock split of, Restricted Stock shall be subject to
the same restrictions as the Restricted Stock.
(d) Except as may be provided by the Granting Authority, in the event
of an award holder's termination of service before all of his or her
Restricted Stock has vested, or in the event any conditions to the vesting
of Restricted Stock have not been satisfied prior to any deadline for the
satisfaction of such conditions set forth in the award, the shares of
Restricted Stock which have not vested shall be forfeited, and the
Granting Authority may provide that (i) any purchase price paid by the
award holder shall be returned to the award holder or (ii) a cash payment
equal to the Restricted Stock's fair market value on the date of
forfeiture, if lower, shall be paid to the award holder.
(e) The Granting Authority may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to, any or
all of the award holder's Restricted Stock, other than Performance Awards
whose vesting was made subject to satisfaction of one or more Performance
Objectives (except that the Committee may waive conditions or restrictions
with respect to Performance Awards if such waiver would not cause the
Performance Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code).
SECTION 9. Deferred Stock Awards
Subject to the following provisions, all awards of Deferred Stock shall be
in such form and shall have such terms and conditions as the Granting
Authority may determine:
(a) The Deferred Stock award shall specify the number of shares of
Deferred Stock to be awarded and the duration of the period (the "Deferral
Period") during which, and the conditions under which, receipt of the
Stock will be deferred. The Granting Authority may condition the grant or
vesting of Deferred Stock, or receipt of Stock or cash at the end of the
Deferral Period, upon the attainment of specified Performance Objectives or
such other criteria as the Granting Authority may determine.
(b) Except as may be provided by the Granting Authority, Deferred Stock
awards may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Deferral Period.
(c) At the expiration of the Deferral Period, the award holder (or his
or her designated beneficiary in the event of death) shall receive (i)
certificates for the number of shares of Stock equal to the number of
shares covered by the Deferred Stock award, (ii) cash equal to the fair
market value of such Stock, or (iii) a combination of shares and cash, as
the Granting Authority may determine.
(d) Except as may be provided by the Granting Authority, in the event
of an award holder's termination of service before the Deferred Stock has
vested, his or her Deferred Stock award shall be forfeited.
(e) The Granting Authority may waive, in whole or in part, any or all
of the conditions to receipt of, or restrictions with respect to, Stock or
cash under a Deferred Stock award, other than with respect to Performance
Awards (except that the Committee may waive conditions or restrictions with
respect to Performance Awards if such waiver would not cause the
Performance Award to fail to qualify as "performance based compensation"
within the meaning of Section 162(m) of the Code).
SECTION 10. Bonus Stock
The Granting Authority may award Bonus Stock subject to such terms and
conditions as the Granting Authority shall determine. The grant of Bonus
Stock may be conditioned upon the attainment of specified Performance
Objectives or upon such other criteria as the Granting Authority may
determine. The Granting Authority may waive such conditions in whole or in
part other than with respect to Performance Awards (except that the Committee
may waive conditions or restrictions with respect to Performance Awards if
such waiver would not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code). In making a determination with respect to the terms and conditions of
a Bonus Stock award, the Granting Authority shall also have the right to
eliminate or reduce the amount of Bonus Stock otherwise payable under an
award. Unless otherwise specified by the Granting Authority, no money shall
be paid by the recipient for the Bonus Stock. Alternatively, the Granting
Authority may offer the award holder the opportunity to purchase Bonus Stock
at a discount from its fair market value. The Bonus Stock award shall be
satisfied by the delivery of the designated number of shares of Stock which
are not subject to restriction.
SECTION 11. Loans
The Granting Authority may provide that the Company shall make, or arrange
for, a loan or loans with respect to the exercise of any Stock Option awarded
under the Plan, with respect to the payment of the purchase price, if any, of
any Restricted Stock awarded hereunder or with respect to any taxes arising
from an award hereunder; provided, however, that the Company shall not loan
more than the sum of (i) the excess of the purchase or exercise price of an
award over the par value of any shares of Stock awarded plus (ii) the amount
of any taxes arising from such award. The Granting Authority shall have full
authority to decide whether a loan will be made hereunder and to determine
the amount, term and provisions of any such loan, including the interest rate
to be charged, whether the loan will be with or without recourse against the
borrower, any security for the loan, the terms on which the loan is to be
repaid and the conditions, if any, under which the loan may be forgiven.
SECTION 12. Tax Offset Payments
The Granting Authority may provide for a Tax Offset Payment by the Company
with respect to one or more awards granted under the Plan. The Tax Offset
Payment shall be in an amount specified by the Granting Authority, which
shall not exceed the amount necessary to pay the federal, state, local and
other taxes payable with respect to the applicable award and the receipt of
the Tax Offset Payment, assuming that the award holder is taxed at the
maximum tax rate applicable to such income. The Tax Offset Payment shall be
paid solely in cash.
SECTION 13. Election to Defer Awards
The Granting Authority may permit an employee or Outside Director to elect
to defer receipt of an award (other than an award pursuant to Section 15) for
a specified period or until a specified event, upon such terms as are
determined by the Granting Authority.
SECTION 14. Tax Withholding
14.1 Each employee shall, no later than the date as of which the value of
an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, local
or other taxes of any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements, and the Company (and, where applicable, any
Related Company), shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
employee.
14.2 To the extent permitted by the Committee, and subject to such terms
and conditions as the Committee may provide, an employee may elect to have
the withholding tax obligation, or any additional tax obligation with respect
to any awards hereunder, satisfied by (i) having the Company withhold shares
of Stock otherwise deliverable to such person with respect to the award or
(ii) delivering to the Company shares of unrestricted Stock previously owned
by the person for at least six months.
SECTION 15. Automatic Stock Options and Limited Stock Appreciation Rights.
15.1 Outside Directors shall be granted Stock Options as follows:
(a) Existing Directors. On the first trading day following the approval
of this Plan by the Company's stockholders, a Stock Option to purchase
20,000 shares of Stock, subject to adjustment as provided in Section 4.5,
shall be granted automatically to each Outside Director who is then a
member of the Board.
(b) Triennial Option Grants. On each three-year anniversary of the date
of grant of the Stock Options granted pursuant to Section 15.1(a), a Stock
Option to purchase 20,000 shares of Stock, subject to adjustment as
provided in Section 4.5, shall be granted automatically to each Outside
Director who is then a member of the Board.
(c) Initial Grants for New Outside Directors. Each new Outside Director
who has not been granted a Stock Option pursuant to Section 15.1(a) or
Section 15.1(b), upon the first trading day coincident with or immediately
following the effective date of his or her election as an Outside
Director, shall be granted a Stock Option to purchase a pro-rated number
of shares of Stock. The pro-rated number of shares of Stock with respect
to which a Stock Option shall be granted shall be equal to 20,000, subject
to adjustment as provided in Section 4.5, times a fraction, the numerator
of which is the number of whole months remaining (if any) until the next
triennial Stock Option grant under Section 15.1(b) and the denominator of
which is 36. A "whole" month will include the month in which the Outside
Director is elected or appointed where the date of election or appointment
is on or before the tenth of the month.
(d) For purposes of this Section 15.1, the term trading day shall mean
a day on which the Stock is traded on a national securities exchange, on
the Nasdaq National Market, or in the over-the-counter market.
(e) Notwithstanding the foregoing, if on any date on which Stock
Options are to be granted under this Section 15.1 the remaining shares
available for issuance to Outside Directors under the Plan are insufficient
to enable each Outside Director to receive a Stock Option to purchase the
applicable number of shares of Stock set forth above, each Outside Director
who is entitled to be granted a Stock Option pursuant to this Section 15.1
on such date shall be granted a Stock Option to purchase his or her pro-
rata portion of such remaining shares.
15.2 Stock Options granted under this Section 15 shall be Non-Qualified
Stock Options, and shall have the following terms and conditions:
(a) Option Price. The option price per share of Stock purchasable under
the Stock Option shall be equal to the closing sales price of the Stock on
the date the Stock Option is granted.
(b) Term of Option. The term of the Stock Option shall be ten years
from the date of grant, subject to earlier termination in the event of
termination of service as a director, as set forth in paragraphs (f) and
(g) below.
(c) Exercisability. Each Stock Option pursuant to Section 15.1 shall
become exercisable as to one-third of the total number of shares of Stock
covered by the Stock Option, on a cumulative basis, on each of the first,
second and third anniversaries of the date of grant if the holder thereof
has been an Outside Director at all times since such date of grant. The
minimum number of shares with respect to which a Stock Option may be
exercised is the lesser of 100 shares or the number of shares then subject
to the Stock Option.
(d) Method of Exercise. The Stock Options may be exercised in whole or
in part at any time during the option period by giving written notice of
exercise to the Company specifying the number of shares to be purchased,
accompanied by payment of the purchase price. Payment of the purchase
price shall be made in cash (including cash equivalents) or by delivery of
shares of Stock already owned by the optionee for at least six months, or
by any combination of the foregoing. Shares delivered upon payment of the
exercise price shall be valued at the average of the high and low sale
prices of the Stock on the date of exercise (or, if the Stock is not traded
on such date, at the weighted average of the high and low prices on the
nearest trading dates before and after such date).
(e) Termination of Service as Director. If an optionee's service as a
director is terminated for any reason, such director's Stock Options may
be exercised for five years following such termination of service (but not
beyond the Option term), but only to the extent such Options were vested
on the date of termination of service.
(f) Change of Control. Notwithstanding any other provision of the Plan,
upon the occurrence of a Change of Control (as defined in Section 17.2),
all Stock Options outstanding at the time of such Change of Control shall
become immediately vested and exercisable and shall remain exercisable for
five years after the director's termination of service (but not beyond the
option term).
(g) Non-transferability. No Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and distribution.
During an optionee's lifetime, all Stock Options shall be exercisable only
by the optionee or, in the event of the optionee's disability, by his or
her guardian or legal representative.
(h) Stockholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a stockholder.
15.3 Limited Stock Appreciation Rights in Tandem with Options. Each Stock
Option granted to an Outside Director under this Section 15 shall be granted
in tandem with a Limited Stock Appreciation Right which may be exercised only
within the 60-day period following a Change of Control. Upon exercise of the
Limited Stock Appreciation Right, the holder shall receive, for each share
with respect to which the Limited Stock Appreciation Right is exercised, an
amount equal in value to the excess of the Change of Control Price (as
defined in Section 17.3) over the exercise price of the related Stock Option.
The Limited Stock Appreciation Right shall be payable solely in cash, and
shall be paid within 30 days of the exercise of the Limited Stock
Appreciation Right. Upon the exercise of the Limited Stock Appreciation
Right, the Stock Option granted in tandem with such Right shall expire.
SECTION 16. Amendments and Termination
The Board may discontinue the Plan at any time and may amend it from time
to time. No amendment or discontinuation of the Plan shall adversely affect
any award previously granted without the award holder's written consent.
Amendments may be made without stockholder approval except as required to
satisfy Section 422 of the Code, Section 162(m) of the Code, or other NASDAQ,
stock exchange, or regulatory requirements.
SECTION 17. Change of Control
17.1 In the event of a Change of Control, unless otherwise determined by
the Granting Authority at the time of grant or by amendment (with the award
holder's consent) of such grant:
(a) all outstanding Stock Options and all outstanding Stock
Appreciation Rights (including Limited Stock Appreciation Rights) awarded
under the Plan shall become fully exercisable and vested;
(b) the restrictions and deferral limitations applicable to any
outstanding Restricted Stock and Deferred Stock awards under the Plan
shall lapse and such shares and awards shall be deemed fully vested; and
(c) to the extent the cash payment of any award is based on the fair
market value of Stock, such fair market value shall be the Change of
Control Price.
17.2 A "Change of Control" shall be deemed to occur on:
(a) the date that any person or group deemed a person under Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (other than
the Company and its subsidiaries as determined immediately prior to that
date) has become the beneficial owner, directly or indirectly (with
beneficial ownership determined as provided in rule 13d-3, or any successor
rule, under the Securities Exchange Act of 1934) of securities of the
Company representing 25% or more of the total combined voting power of all
classes of stock of the Company having the right under ordinary
circumstances to vote at an election of the Board, unless such person has
acquired 80% or more of such securities directly from the Company;
(b) the date on which one-third or more of the members of the Board
shall consist of persons other than Current Directors (for these purposes a
"Current Director" shall mean any member of the Board on the Effective
Date and any member of the Board whose nomination or election has been
approved by a majority of the Current Directors then on the Board);
(c) the date of approval by the stockholders of the Company of an
agreement providing for the merger or consolidation of the Company with
another corporation where (i) the stockholders of the Company, immediately
prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares entitling such
stockholders to 50% or more of all votes (without consideration of the
rights of any class of stock to elect directors by a separate class vote)
to which all stockholders of the corporation issuing cash or securities in
the merger or consolidation would be entitled in the election of directors,
or (ii) where the members of the Board, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the corporation issuing
cash or securities in the merger; or
(d) the date of approval by the stockholders of the Company of an
agreement providing for the sale or other disposition of all or
substantially all of the assets of the Company.
17.3 "Change of Control Price" means the highest price per share paid in
any transaction reported in the Nasdaq National Market or on any national
securities exchange where the Stock is traded, or paid or offered in any
transaction related to a Change of Control at any time during the 90-day
period ending with the Change of Control. Notwithstanding the foregoing
sentence, in the case of Stock Appreciation Rights granted in tandem with
Incentive Stock Options, the Change of Control Price shall be the highest
price paid on the date on which the Stock Appreciation Right is exercised.
SECTION 18. General Provisions
18.1 Each award under the Plan shall be subject to the requirement that,
if at any time the Granting Authority shall determine that (i) the listing,
registration or qualification of the Stock subject or related thereto upon
any securities exchange or under any state or federal law, or (ii) the
consent or approval of any government regulatory body or (iii) an agreement
by the recipient of an award with respect to the disposition of Stock is
necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition
of, or in connection with, the granting of such award or the issuance,
purchase or delivery of Stock thereunder, such award shall not be granted or
exercised, in whole or in part, unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Granting Authority.
18.2 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the
Plan nor any award hereunder shall confer upon any employee of the Company,
or of a Related Company, any right to continued employment, and no award
shall confer upon any Outside Director any right to continued service as a
director.
18.3 Determinations by the Granting Authority under the Plan relating to
the form, amount, and terms and conditions of awards need not be uniform, and
may be made selectively among persons who receive or are eligible to receive
awards under the Plan, whether or not such persons are similarly situated.
18.4 No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee
and all officers or employees of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.
SECTION 19. Effective Date of Plan
The Plan was adopted by the Company's Board of Directors on August 1,
2001, and shall be effective as of such date (the "Effective Date"), subject
to the approval of the Plan by the Company's stockholders at the 2001 Annual
Meeting of Stockholders.
Exhibit 10.7
UROCOR, INC.
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
MAY 5, 1997
1. PURPOSE. This Second Amended and Restated 1992 Stock Option Plan
(the "Plan") of UroCor, Inc. (the "Company"), for certain employees,
officers, directors and independent contractors performing services for the
Company is intended to advance the best interest of the Company by providing
those persons who have substantial responsibility for its management and
growth with additional incentive and by increasing their proprietary interest
in the success of the Company -- thereby encouraging them to continue their
employment or affiliation.
2. ADMINISTRATION. The Plan shall be administered by a committee to be
appointed by the Board of Directors of the Company (the "Committee"), which
Committee shall consist of not less than two members of the Board of
Directors and shall be comprised solely of members of the Board of Directors
who qualify as both non-employee directors as defined in Rule 16b-3(b)(3) of
the Securities Exchange Act of 1934, as amended (the "Securities Exchange
Act") and outside directors within the meaning of Department of Treasury
Regulations issued under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Board of Directors of the Company shall have the
power to add or remove members of the Committee, from time to time, and to
fill vacancies arising for any reason. The Committee shall designate a
chairman from among its members, who shall preside at all of its meetings,
and shall designate a secretary, without regard to whether that person is a
member of the Committee, who shall keep the minutes of the proceedings and
all records, documents, and data pertaining to its administration of the
Plan. Meetings shall be held at any time and place as it shall choose. A
majority of the members of the Committee shall constitute a quorum for the
transaction of business. The vote of a majority of those members present at
any meeting shall decide any question brought before that meeting. In
addition, the Committee may take any action otherwise proper under the Plan
by the affirmative vote, taken without a meeting, of a majority of its
members. No member of the Committee shall be liable for any act or omission
of any other member of the Committee or for any act or omission on his own
part, including but not limited to the exercise of any power or discretion
given to him under the Plan, except those resulting from his own gross
negligence or willful misconduct. All questions of interpretation and
application of the Plan, or as to options granted under it (the "Options"),
shall be subject to the determination of a majority of the Committee. In
carrying out its authority under this Plan, the Committee shall have full and
final authority and discretion, including but not limited to the rights,
powers and authorities, to: (a) determine the persons to whom and the time or
times at which Options will be made, (b) determine the number of shares and
the purchase price of stock covered in each Option, subject to the terms of
this Plan, (c) determine the terms, provisions and conditions of each Option,
which need not be identical, (d) accelerate the time at which any outstanding
Option may be exercised, (e) define the effect, if any, on an Option of the
death, disability, retirement, or other termination of employment of the
Optionee, (f) prescribe, amend and rescind rules and regulations relating to
administration of this Plan, and (g) make all other determinations and take
all other actions deemed necessary, appropriate, or advisable for the proper
administration of this Plan. The actions of the Committee in exercising all
of the rights, powers, and authorities set out in this Article and all other
Articles of this Plan, when performed in good faith and in its sole judgment,
shall be final, conclusive and binding on all parties. When appropriate the
Plan shall be administered in order to qualify certain of the Options granted
under it as "incentive stock options" described in Section 422 of the Code
("Incentive Stock Options").
3. DEDICATED SHARES. The stock subject to the Options and other
provisions of the Plan shall be shares of the Company's Common Stock, $.01
par value (the "Stock"). The total number of shares of Stock with respect to
which Incentive Stock Options may be granted shall be 1,700,000 shares. The
maximum number of shares subject to Options which may be issued to any
Optionee under this Plan during any period of three consecutive years is
500,000 shares. The class and aggregate number of shares which may be subject
to the Options granted hereunder shall be subject to adjustment in accordance
with the provisions of Paragraph 17 hereof.
In the event that an outstanding Option expires or is surrendered for
any reason or terminates by reason of the death or other severance of
employment of the Optionee, the shares of Stock allocable to the unexercised
portion of that Option may again be subject to an Option under the Plan.
4. AUTHORITY TO GRANT OPTIONS. The Committee may grant the following
Options at any time during the term of this Plan to any eligible individual
that it chooses:
(a) "Incentive Stock Options". The Committee may grant to an eligible
employee an Option, or Options, to buy a stated number of shares of
Stock under the terms and conditions of the Plan, which Option or
Options would be an "incentive stock option" within the meaning of
Section 422 of the Code.
(b) "Nonqualified Stock Options". The Committee may grant to an
eligible individual an Option, or Options, to buy a stated number of
shares of Stock under the terms and conditions of the Plan, which Option
or Options would not constitute an "incentive stock option" within the
meaning of Section 422 of the Code.
Each Option granted shall be approved by the Committee. Subject only to
any applicable limitations set forth in this Plan, the number of shares of
Stock to be covered by an Option shall be as determined by the Committee.
5. ELIGIBILITY. The individuals who shall be eligible to receive
Incentive Stock Options shall be those full-time key employees, including
officers and directors if they are employees, of the Company, or of any
parent or subsidiary corporation, as the Committee shall determine during the
term of this Plan. However, no employee who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
corporation employing the employee or of its parent or subsidiary corporation
shall be eligible to receive an Incentive Stock Option unless at the time
that the Option is granted the option price is at least 110% of the fair
market value (as defined in this Section 5) of the Stock at the time the
Option is granted and the Option by its own terms is not exercisable after
the expiration of five years from the date the Option is granted.
An employee will be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants. Stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust will be
considered as being owned proportionately by or for its shareholders,
partners or beneficiaries. For all purposes of this Plan, a parent
corporation is any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company if, on the date of grant of the
Option in question, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in that chain; and a
subsidiary corporation is any corporation in an unbroken chain of
corporations beginning with the Company if, on the date of grant of the
Option in question, each of the corporations, other than the last corporation
in the chain, owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in that chain.
The individuals who shall be eligible to receive Nonqualified Stock
Options shall be such individuals as the Committee shall determine during the
term of this Plan.
No individual shall be eligible to receive an Option under the Plan
while that individual is a member of the Committee.
As used in this Plan, "fair market value" of the Stock as of any date
means (a) the closing price on that date on the principal securities exchange
on which the Stock is listed; or (b) if the Stock is not listed on a
securities exchange, the closing price of the Stock on that date as reported
on The National Association of Securities Dealers (the "NASD") Automated
Quotation System ("Nasdaq") Stock Market's National Market; or (c) if the
Stock is not listed on The Nasdaq Stock Market's National Market, the average
of the high and low bid quotations for the Stock on that date as reported by
the National Quotation Bureau Incorporated; or (d) if none of the foregoing
is applicable, an amount, at the election of the Committee equal to (x) the
average between the closing bid and ask prices per share of Stock on the last
preceding date on which those prices were reported or (y) the value of the
Stock as determined in good faith by the Committee in its sole discretion.
6. OPTION PRICE. The price at which shares may be purchased pursuant to
an Incentive Stock Option shall be not less than the fair market value of the
shares of Stock on the date the Option is granted. The price at which shares
may be purchased pursuant to a Nonqualified Stock Option shall be not less
than the fair market value of the shares of Stock on the date the Option is
granted. The Committee in its discretion may provide that the price at which
shares may be purchased shall be more than the minimum price required. If an
employee owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the corporation employing the employee or of
its parent or subsidiary corporation, the option price at which shares may be
purchased under an Incentive Stock Option shall be not less than 110% of the
fair market value of the Stock on the date the Option is granted.
7. DURATION OF OPTIONS. No Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such Option is granted. The
Committee in its discretion may provide that the Option shall be exercisable
throughout the ten-year period or during any lesser period of time commencing
on or after the date of grant of the Option and ending upon or before the
expiration of the ten-year period. If an employee owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
corporation employing the employee or of its parent or subsidiary
corporation, no Incentive Stock Option shall be exercisable after the
expiration of five years from the date such Option is granted. No
Nonqualified Stock Option shall be exercisable after the expiration of ten
years from the date such Option is granted. The Committee in its discretion
may provide that the Option shall be exercisable throughout the ten-year
period or during any lesser period of time commencing on or after the date of
grant of the Option and ending upon or before the expiration of the ten-year
period.
8. $100,000 LIMITATION ON INCENTIVE STOCK OPTIONS. To the extent that
the aggregate fair market value (determined as of the time an Incentive
Option is granted) of the Stock with respect to which Incentive Options first
become exercisable by the Optionee during any calendar year (under this Plan
and any other incentive stock option plan(s) of the Company or any parent
corporation or subsidiary corporation) exceeds $100,000, the Incentive
Options shall be treated as Nonqualified Options. In making this
determination, Incentive Options shall be taken into account in the order in
which they were granted.
9. AMOUNT EXERCISABLE. Each Option may be exercised, so long as it is
valid and outstanding, from time to time in part or as a whole, in the manner
and subject to the conditions that the Committee in its discretion may
provide in the Option agreement. However, the Committee in its absolute
discretion may accelerate the time at which any outstanding Option may be
exercised. Notwithstanding any provision of this Plan or an Option agreement
to the contrary, no Option awarded under this Plan after May 5, 1997, may be
exercised before this amendment and restatement of this Plan is approved by
the stockholders of the Company.
10. EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery
of written notice to the Company setting forth the number of shares of Stock
with respect to which the Option is to be exercised, together with cash,
certified check, bank draft or postal or express money order payable to the
order of the Company for an amount equal to the exercise price of such
shares, and specifying the address to which the certificates for such shares
are to be mailed. As promptly as practicable after receipt of written
notification and payment, the Company shall deliver to the Optionee
certificates for the number of shares with respect to which the Option has
been exercised, issued in the Optionee's name. Delivery of the shares shall
be deemed effected for all purposes when a stock transfer agent of the
Company shall have deposited the certificates in the United States mail,
addressed to the Optionee, at the address specified by the Optionee in his
notice of exercise.
11. TRANSFERABILITY OF OPTIONS. Options shall not be transferable by
the Optionee except by will or under the laws of descent and distribution,
and shall be exercisable, during his lifetime, only by him.
12. TERMINATION OF EMPLOYMENT OR AFFILIATION OF OPTIONEE. Except as
otherwise expressly provided herein or in the Option agreement, Incentive
Stock Options shall terminate at 5:00 p.m., Oklahoma City time, on the 60th
day immediately following the date of severance of employment of the Optionee
from the Company for any reason, with or without cause, other than death or
retirement for age or disability under the then established rules of the
Company, and Nonqualified Stock Options shall terminate at 5:00 p.m.,
Oklahoma City time, on the 60th day immediately following the date of the
severance of the employment or affiliation relationship between the Company
and the Optionee for any reason with or without cause other than death or
retirement for age or disability under the then established rules of the
Company. Whether authorized leave of absence or absence on military or
government service shall constitute severance of the employment or
affiliation relationship between the Company and the Optionee shall be
determined by the Committee at that time. After such severance of an Optionee
holding either an Incentive Stock Option or Nonqualified Stock Option, such
Optionee shall have the right, at any time prior to such termination, to
exercise the Option to the extent to which he was entitled to exercise it
immediately prior to his severance.
If, before the expiration of an Incentive Stock Option or a
Nonqualified Stock Option held by an employee of the Company, the Optionee
shall be retired from the employ of the Company because of his age or
disability under the then established rules of the Company, such Incentive
Stock Option or Non-incentive Stock Option, as the case may be, shall
terminate on the earlier of such date of expiration or one day less than
three months after his retirement. If, before the expiration of a
Nonqualified Stock Option held by an Optionee who is not an employee of the
Company, the Optionee's affiliation with the Company shall be severed for age
or disability under the then established rules of the Company, such
Nonqualified Stock Option shall terminate on the earlier of such date of
expiration or one day less than three months after his severance of
affiliation. In the event of retirement for age or disability, or severance
of affiliation for age or disability, as the case may be, the Optionee shall
have the right prior to the termination of the Option to exercise the Option
to the extent to which he was entitled to exercise it immediately prior to
such retirement or severance of affiliation for age or disability, as the
case may be.
In the event of the death of a holder of an Incentive Stock Option
while in the employ of the Company or during the period after the retirement
of the employee for age or disability and before the date of expiration of
the Option, such Option will terminate on the earlier of such date of
expiration or one year following the date of his death. In the event of the
death of a holder of a Nonqualified Stock Option while in the employ of, or
affiliated with, the Company or during the period after the retirement of the
holder for age or disability or after the severance of his affiliation with
the Company for age or disability, as the case may be, and before the date of
expiration of the Option, the Option will terminate on the earlier of such
date of expiration or one year following the date of his death. After the
death of an Optionee holding either an Incentive Stock Option or a
Nonqualified Stock Option, his executors, administrators or any persons to
whom his Option may be transferred by will or by the laws of descent and
distribution shall have the right, at any time prior to such termination, to
exercise the Option to the extent to which he was entitled to exercise it
immediately prior to his death.
An employment relationship between the Company and the Optionee shall
be deemed to exist during any period in which the Optionee is employed by the
Company, by any parent or subsidiary corporation, by a corporation issuing or
assuming a stock option in a transaction to which Section 424(a) of the Code
applies, or by a parent or subsidiary corporation of the corporation issuing
or assuming a stock option. For this purpose, the phrase "corporation issuing
or assuming a stock option" shall be substituted for the word "Company" in
the definitions of parent and subsidiary corporations in Section 5 and the
parent-subsidiary relationship shall be determined at the time of the
corporate action described in Section 424(a) of the Code.
13. FORFEITURES. Notwithstanding any other provision of this Plan, if
the Committee finds by a majority vote, that the Optionee, before or after
termination of his employment or affiliation with the Company or any parent
or subsidiary corporation (as used in this Section, the "Employer"),
committed fraud, embezzlement, theft, commission of felony, or proven
dishonesty in the course of his employment by or affiliation with the
Employer which conduct damaged the Employer, or for disclosing trade secrets
of the Employer, then any outstanding options which have not been exercised
by the Optionee will be forfeited. The decision of the Committee as to the
cause of an Optionee's discharge, the damage done to the Employer and the
extent of the Optionee's competitive activity will be final. No decision of
the Committee, however, will affect the finality of the discharge of the
Optionee by the Employer.
14. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any shares under any Option if issuing the shares shall constitute a
violation by the Optionee or the Company of any provisions of any law or
regulation of any governmental authority. Each Option granted under this Plan
shall be subject to the requirements that, if at any time the Board of
Directors of the Company or the Committee shall determine that the listing,
registration or qualification of the shares upon any securities exchange or
under any state or federal law of the United states or of any other country
or governmental subdivision, or the consent or approval of any governmental
regulatory body, or investment or other representations, are necessary or
desirable in connection with the issue or purchase of shares subject to an
Option, that Option shall not be exercised in whole or in part unless the
listing, registration, qualification, consent, approval or representations
shall have been effected or obtained free of any conditions not acceptable to
the Committee. In connection with any applicable statute or regulation
relating to the registration of securities, upon exercise of any Option, the
Company shall not be required to issue any Stock unless the Committee has
received evidence satisfactory to it to the effect that the holder of that
Option will not transfer the Stock except in accordance with applicable law,
including receipt of an opinion of counsel satisfactory to the Company to the
effect that any proposed transfer complies with applicable law. Any
determination by the Committee on these matters shall be final, binding and
conclusive. In the event the shares issuable on exercise of an Option are not
registered under applicable securities laws of any country or any political
subdivision the Company may imprint on the certificate for such shares the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with applicable law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any state and may not be sold or transferred except upon
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company, in form and substance satisfactory to the
Company, that registration is not required for a sale or transfer."
The Company may, but shall in no event be obligated to, register any
securities covered by this Plan under applicable securities laws of any
country or political subdivision (as now in effect or as later amended) and,
in the event any shares are registered, the Company may remove any legend on
certificates representing those shares. The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an Option
or the issuance of shares under the Option to comply with any law or
regulation or any governmental authority.
15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have rights as a
stockholder with respect to shares covered by his Option until the date a
stock certificate is issued for the shares. Except as provided in Section 17,
no adjustment for dividends, or other matters shall be made if the record
date is prior to the date the certificate is issued.
16. EMPLOYMENT OR AFFILIATION OBLIGATION. The granting of any Option
shall not impose upon the Company any obligation to employ or become
affiliated with or continue to employ or be affiliated with any Optionee. The
right of the Company to terminate the employment or affiliation of any person
shall not be diminished or affected by reason of the fact that an Option has
been granted to him.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of
or affecting the Stock or the rights of the Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding,
without receiving compensation for it in money, services or property, then
(a) the number, class and per share price of shares of stock subject to
outstanding Options under this Plan shall be appropriately adjusted in a
manner as to entitle an Optionee to receive upon exercise of an Option, for
the same aggregate cash consideration, the same total number and class or
classes of shares as he would have received had he exercised his Option in
full immediately prior to the event requiring the adjustment; and (b) the
number and class of shares then reserved for issuance under the Plan shall be
adjusted by substituting for the total number and class of shares of stock
then reserved for the number and class or classes of shares of stock that
would have been received by the owner of an equal number of outstanding
shares of Stock as the result of the event requiring the adjustment.
If the Company merges or consolidates with another corporation, whether
or not the Company is a surviving corporation, or if the Company is
liquidated or sells or otherwise disposes of substantially all its assets
while unexercised Options remain outstanding under the Plan, or if any
"person" (as that term is used in Section 13(d) and 14(d)(2) of the
Securities Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing greater than 50% of the
combined voting power of the Company's then outstanding securities, after the
effective date of the merger, consolidation, liquidation, sale or other
disposition, or change in beneficial ownership, as the case may be, each
holder of an outstanding Option shall be entitled, upon exercise of an
Option, to receive, in lieu of shares of Stock, the number and class or
classes of shares of stock or other securities or property to which the
holder would have been entitled if, immediately prior to the merger,
consolidation, liquidation, sale or other disposition, or change in
beneficial ownership, the holder had been the holder of record of the number
of shares of Stock equal to the entire number of shares as to which the
Option may be exercised regardless of and without giving effect to any
limitations set out in or imposed pursuant to this Plan or any Option granted
hereunder.
Except as expressly provided before in this Plan, the issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to
subscribe for shares, or upon conversion of shares or obligations of the
Company convertible into shares or other securities, shall not affect, and no
adjustment by reason of it shall be made with respect to, the number or price
of shares of Stock then subject to outstanding Options.
18. SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company, or whose
employer is about to become a parent or subsidiary corporation, conditioned
in the case of an Incentive Stock Option upon the employee becoming an
employee as the result of a merger or consolidation of the Company with
another corporation, or the acquisition by the Company of substantially all
the assets of another corporation, or the acquisition by the Company of at
least 50% of the issued and outstanding stock of another corporation as the
result of which it becomes a subsidiary of the Company. The terms and
conditions of the substitute Options granted may vary from the terms and
conditions of this Plan to the extent the Board of Directors of the Company
at the time of grant may deem appropriate to conform, in whole or in part, to
the provisions of the stock options in substitution for which they are
granted. But with respect to Incentive Stock Options, no variation shall be
made which will affect the status of any substitute option as an "incentive
stock option" under Section 422 of the Code.
19. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors may
modify, revise or terminate this Plan at any time and from time to time.
However, without the further approval of the holders of at least a majority
of the outstanding shares of voting stock, or if the provisions of the
corporate charter, by-laws or applicable state law prescribe a greater degree
of stockholder approval for this action, without the degree of stockholder
approval thus required, the Board of Directors may not (a) change the
aggregate number of shares which may be issued under Options pursuant to the
provisions of this Plan; (b) reduce the Option price permitted for Incentive
Stock Options; (c) extend the term during which an Incentive Stock Option may
be exercised or the termination date of this Plan; (d) change the class of
employees eligible to receive Incentive Stock Options; or (e) (i) materially
increase the benefits accruing to participants under the Plan, (ii)
materially increase the number of securities which may be issued under the
Plan or (iii) materially modify the requirements as to eligibility for
participation in the Plan. The Board of Directors, however, shall have the
power to make all changes in the Plan and in the regulations and
administrative provisions under the Plan or in any outstanding Option as in
the opinion of counsel for the Company may be necessary or appropriate from
time to time to enable any Option granted pursuant to the Plan to qualify as
an incentive stock option under Section 422 of the Code and the regulations
which may be issued under that Section as in existence from time to time. All
Options granted under this Plan shall be subject to the terms and provisions
of this Plan and any amendment, modification or revision of this Plan shall
be deemed to amend, modify or revise all Options outstanding under this Plan
at the time of the amendment, modification or revision. In the event this
Plan is terminated by action of the Board of Directors, all Options
outstanding under this Plan may be terminated.
20. WRITTEN AGREEMENT. Each Option granted under this Plan shall be
embodied in a written agreement, which shall be subject to the terms and
conditions prescribed above, and shall be signed by the Optionee and by an
officer of the Company on behalf of the Committee and the Company. Each
Option agreement shall contain any other provisions that the Committee in its
discretion shall deem advisable which are not inconsistent with the terms of
this Plan.
21. INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. The
Company will, to the fullest extent permitted by law, indemnify, defend and
hold harmless any person who at any time is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) in any
way relating to or arising out of this Plan or any Option or Options granted
under it by reason of the fact that that person is or was at any time a
director of the Company or a member of the Committee against judgments,
fines, penalties, settlements and reasonable expenses (including attorneys'
fees) actually incurred by that person in connection with the action, suit or
proceeding. This right of indemnification will inure to the benefit of the
heirs, executors and administrators of each person to be protected and is in
addition to all other rights to which that person may be entitled by virtue
of the by-laws of the Company or as a matter of law, contract or otherwise.
22. TAX WITHHOLDING. The Company shall be entitled to deduct from other
compensation payable to each employee any sums required by federal, state or
local tax law to be withheld with respect to the grant or exercise of an
Option. In the alternative, the Company may require the employee (or other
individual exercising the Option) to pay the sum directly to the Company. If
the employee (or other individual exercising the Option) is required to pay
the sum directly, payment in cash or by check of such sums for taxes shall be
delivered within ten days after the date of exercise. The Company shall have
no obligation upon exercise of any Option until payment has been received,
unless withholding (or offset against a cash payment) as of or prior to the
date of exercise is sufficient to cover all sums due with respect to that
exercise. The Company shall not be obligated to advise an employee of the
existence of the tax or the amount which the employer corporation will be
required to withhold.
23. GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.
24. HEADINGS. Headings of Sections are included for convenience of
reference only and do not constitute part of this Plan and shall not be used
in construing the terms of this Plan.
25. OTHER OPTIONS. The grant of an Option shall not confer upon an
Optionee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Optionees, or the
right to receive future Options upon the same terms or conditions as
previously granted.
26. ARBITRATION OF DISPUTES. Any controversy arising out of or relating
to this Plan or an Option Agreement shall be resolved by arbitration
conducted pursuant to the arbitration rules of the American Arbitration
Association. The arbitration shall be final and binding on the parties.
27. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Delaware.
28. EFFECTIVE DATE OF PLAN. This Plan restates and integrates, and also
amends, the UroCor, Inc. 1992 Amended and Restated Stock Option Plan adopted
effective March 15, 1996.
The Plan shall become effective and shall be deemed to have been
adopted on May 5, 1997, if within one year of that date it has been approved
by the holders of at least a majority of the outstanding shares of voting
stock of the Company voting in person or by proxy at a duly held
stockholders' meeting, or if the provisions of the corporate charter, by-laws
or applicable state law prescribe a greater degree of stockholder approval
for this action, the approval by the holders of that percentage, at a duly
held meeting of stockholders.
No Options shall be granted pursuant to the Plan after September 24,
2002.
FIRST AMENDMENT
TO
UROCOR, INC.
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
1. Paragraph 3 of the UroCor, Inc. Second Amended and Restated 1992
Stock Option Plan is hereby deleted in its entirety and replaced by the
following:
3. DEDICATED SHARES. The stock subject to the Options and other
provisions of the Plan shall be shares of the Company's Common Stock,
$.01 par value (the "Stock"). The total number of shares of Stock with
respect to which Incentive Stock Options may be granted shall be
2,000,000 shares. The maximum number of shares subject to Options which
may be issued to any Optionee under this Plan during any period of three
consecutive years is 500,000 shares. The class and aggregate number of
shares which may be subject to the Options granted hereunder shall be
subject to adjustment in accordance with the provisions of Paragraph 17
hereof.
In the event that an outstanding Option expires or is surrendered
for any reason or terminates by reason of the death or other severance
of employment of the Optionee, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option
under the Plan.
2. Except as expressly amended by this First Amendment, the UroCor,
Inc. Second Amended and Restated 1992 Stock Option Plan shall continue in
full force and effect in accordance with its terms.
AMENDMENT
TO
UROCOR, INC.
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN, AS AMENDED
ADOPTED BY THE BOARD OF DIRECTORS APRIL 14, 1999
AND
BY THE STOCKHOLDERS JUNE 14, 1999
1. Paragraph 3 of the UroCor, Inc. Second Amended and Restated 1992
Stock Option Plan, as amended, is hereby deleted in its entirety and replaced
by the following:
3. DEDICATED SHARES. The stock subject to the Options and other
provisions of the Plan shall be shares of the Company's Common Stock,
$.01 par value (the "Stock"). The total number of shares of Stock with
respect to which Incentive Stock Options may be granted shall be
2,300,000 shares. The maximum number of shares subject to Options which
may be issued to any Optionee under this Plan during any period of three
consecutive years is 500,000 shares. The class and aggregate number of
shares which may be subject to the Options granted hereunder shall be
subject to adjustment in accordance with the provisions of Paragraph 17
hereof.
In the event that an outstanding Option expires or is surrendered
for any reason or terminates by reason of the death or other severance
of employment of the Optionee, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option
under the Plan.
2. Except as expressly amended by this Amendment, the UroCor, Inc.
Second Amended and Restated 1992 Stock Option Plan, as amended, shall
continue in full force and effect in accordance with its terms.
AMENDMENT
TO
UROCOR, INC.
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN, AS AMENDED
ADOPTED BY THE BOARD OF DIRECTORS APRIL 18, 2000
AND
BY THE STOCKHOLDERS JUNE 20, 2000
1. Paragraph 3 of the UroCor, Inc. Second Amended and Restated 1992
Stock Option Plan, as amended, is hereby deleted in its entirety and replaced
by the following:
3. DEDICATED SHARES. The stock subject to the Options and other
provisions of the Plan shall be shares of the Company's Common Stock,
$.01 par value (the "Stock"). The total number of shares of Stock with
respect to which Incentive Stock Options may be granted shall be
2,700,000 shares. The maximum number of shares subject to Options which
may be issued to any Optionee under this Plan during any period of three
consecutive years is 500,000 shares. The class and aggregate number of
shares which may be subject to the Options granted hereunder shall be
subject to adjustment in accordance with the provisions of Paragraph 17
hereof.
In the event that an outstanding Option expires or is surrendered
for any reason or terminates by reason of the death or other severance
of employment of the Optionee, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option
under the Plan.
2. Except as expressly amended by this Amendment, the UroCor, Inc.
Second Amended and Restated 1992 Stock Option Plan, as amended, shall
continue in full force and effect in accordance with its terms.
EXHIBIT 5.1
January 17, 2003
Board of Directors
Laboratory Corporation of America Holdings
358 South Main Street
Burlington, North Carolina 27215
Ladies and Gentlemen:
As the Chief Legal Officer of Laboratory Corporation of America Holdings,
a Delaware corporation (the "Company"), I have been requested to furnish this
opinion letter to you in connection with the Company's registration statement
on Form S-8, (the "Registration Statement"), filed with the Securities and
Exchange Commission relating to the registration of up to 690,116 shares of
the Company's common stock, par value $.10 per share (the "Shares"), in
connection with the merger between the Company, DIANON Systems, Inc.
("DIANON") and DaVinci Development, Inc. ("DaVinci"), a wholly-owned
subsidiary of the Company, where DIANON merged with and into DaVinci, with
DIANON surviving the merger and becoming a wholly-owned subsidiary of the
Company and pursuant to the terms of that Agreement and Plan of Merger, dated
as of November 10, 2002, between the Company, DIANON and DaVinci (the "Merger
Agreement"), pursuant to which the Company is required to assume DIANON's 1996
Stock Incentive Plan, 1999 Stock Incentive Plan, 2000 Stock Incentive Plan,
2001 Stock Incentive Plan, and the UroCor, Inc. Second Amended and Restated
1992 Stock Option Plan (collectively, the "Plans"). This opinion letter is
furnished to you at your request to enable you to fulfill the requirements of
Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in
connection with the Registration Statement.
For purposes of this opinion letter, I have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. Copies of the Plans.
3. The Merger Agreement.
4. The Amended and Restated Certificate of Incorporation of the Company.
5. The Bylaws of the Company.
6. Resolutions of the Board of Directors of the Company relating to the
adoption and approval of the Merger Agreement, approval of the Merger
and the authorization and issuance of the Shares and arrangements in
connection therewith.
In my examination of the aforesaid documents, I have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to me, the authenticity of
all original documents, and the conformity to authentic original documents of
all documents submitted to me as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on the Delaware
General Corporation Law, as amended. I express no opinion herein as to any
other laws, statutes, ordinances, rules, or regulations. As used herein, the
term "Delaware General Corporation Law, as amended" includes the statutory
provisions contained therein, all applicable provisions of the Delaware
Constitution and reported judicial decisions interpreting these laws.
Based upon, subject to and limited by the foregoing, I am of the opinion
that the Shares, when issued and delivered in the manner and on the terms
contemplated in the Registration Statement and the Plans, will be validly
issued, fully paid, and non-assessable.
This opinion letter has been prepared for your use in connection with
the Registration Statement and speaks as of the date hereof. I assume no
obligation to advise you of any changes in the foregoing subsequent to the
delivery of this opinion letter.
I hereby consent to the filing of this opinion letter as Exhibit 5.1 to
the Registration Statement. In giving this consent, I do not thereby admit
that I am an "expert" within the meaning of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ BRADFORD T. SMITH
Bradford T. Smith
Executive Vice President,
Chief Legal Officer and Secretary
EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 of our report dated February 8, 2002 except for Note 10, as to which date is February 20, 2002 relating to the financial statements and financial statement schedule, which appears in Laboratory Corporation of America Holdings Annual Report on Form 10-K for the year ended December 31, 2001. /s/ PricewaterhouseCoopers LLP Charlotte, North Carolina January 17, 2002