Exhibit 10.7
U.S. LABORATORIES, INC.
FORM OF INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT made and entered into as of the ____day of______,
______ (the "Grant Date"), by and between U.S. LABORATORIES INC., a Delaware
corporation (the "Company"), and ________________________________, an
employee of the Company ("Participant").
R E C I T A L S
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WHEREAS, the Company has in effect the U.S. Laboratories Inc. 1998
Stock Option Plan (the "Plan"), which permits options to purchase shares of
the Company's common stock, $.01 par value ("Stock"), to be granted to
certain employees of the Company.
WHEREAS, the Company believes it to be in the best interests of the
Company and its shareholders for employees to obtain or increase their stock
ownership interest in the Company in order that they will have a greater
incentive to work for and manage the Company's affairs.
WHEREAS, the Participant is an employee of the Company and has been
selected by the Board of Directors and the Compensation Committee of the
Board of Directors of the Company (the "Committee") to receive an option
under the Plan.
A G R E E M E N T
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NOW, THEREFORE, in consideration of the covenants and agreements
herein set forth, the parties hereby mutually covenant and agree as follows:
1. GRANT. Subject to the terms and conditions of the Plan, a
copy of which is attached hereto and made a part hereof, and this Agreement,
the Company hereby grants to Participant an option to purchase from the
Company all or any part of an aggregate number of ____________ shares of
Stock (hereinafter such shares of Stock are referred to as the "Optioned
Shares", and the option to purchase the Optioned Shares is referred to as the
"Option"). The Option is intended to qualify as an "Incentive Stock Option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. VESTING. The Option shall vest and become exercisable by the
Participant during the period of his or her continuous employment by the
Company or its subsidiaries with respect to _________________ Optioned Shares
on ______________, as to an additional _________________ Optioned Shares on
______________, as to an additional ______________ Optioned Shares on
_____________, as to an additional ________________ Optioned
Shares on June 1, 2001, as to an additional ___________ Optioned Shares on
_____________, and as to the remaining _____________ Optioned Shares on
___________. If the Participant's employment with the Company or its
subsidiaries changes from full-time to part-time status or is interrupted by
a leave of absence, the Board of Directors or the Committee, in its
discretion, may delay the vesting of the Option pursuant to this paragraph 2
for such period as it reasonably deems appropriate.
3. PRICE. The price to be paid for the Optioned Shares shall be
_____ dollars ($_____) per share, which represents not less than
[one hundred percent (100%)][one hundred ten percent (110%)] of the Fair
Market Value of the Optioned Shares on the Grant Date. The term Fair Market
Value shall have the meaning assigned to such term in the Plan.
4. TERM; EXERCISE. Subject to the terms and conditions of the
Plan and this Agreement, the Option may be exercised by the Participant while
in the employ of the Company or its subsidiaries, in whole or in part, from
time to time with respect to any shares for which the right to exercise shall
have accrued pursuant to paragraph 2 hereof, but only during the period
beginning on the date of this Agreement and ending on _____________ (the
"Expiration Date").
5. LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate fair market value, as determined by the Committee, of the Stock
with respect to which Incentive Stock Options are first exercisable by the
Participant during any calendar year (under the Plan and all other plans of
the Company and its Subsidiaries) exceeds One Hundred Thousand Dollars
($100,000), such Option as to the excess shall be treated as a Non-Qualified
Stock Option.
6. METHOD OF EXERCISE.
(a) The Option may be exercised only by written notice, delivered or
mailed by postpaid registered or certified mail, addressed to the treasurer
of the Company at the Company's principal executive offices specifying the
number of Optioned Shares being purchased. Such notice shall be
accompanied by payment of the entire Option price of the Optioned Shares
being purchased: (i) in cash or its equivalent; (ii) with the consent of
the Committee, by tendering previously acquired shares of Stock valued at
their Fair Market Value at the time of exercise; or (iii) with the consent
of the Committee, by any combination of (i) and (ii). On and after the
effective date of an IPO (as defined below) of the Stock, the Option may be
exercised in the manner previously described or by delivery to the Company
or its designated agent of an executed irrevocable exercise form together
with instructions to a broker-dealer to sell or margin a sufficient portion
of the shares being exercised and deliver the sale or margin proceeds
directly to the Company to pay for the Option price. As used herein, "IPO"
means the event that occurs when shares of Stock are sold to the public
pursuant to an effective registration statement, other than a registration
statement on Form S-4 or Form S-8 or any other forms primarily used to
register securities to be issued pursuant to Company benefit plans, filed
by the Company under the Securities Act of 1933 (the "Securities Act").
For purposes of this paragraph, Fair Market Value shall
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be determined in the same manner as the Fair Market Value of the Stock on
the Grant Date was determined pursuant to paragraph 2 hereof.
(b) Shares of Stock tendered shall be duly endorsed in blank or
accompanied by stock powers duly endorsed in blank. Upon receipt of the
payment of the entire purchase price of the Optioned Shares so purchased,
certificates for such Optioned Shares shall be issued to the Participant.
The Optioned Shares so purchased shall be fully paid and nonassessable.
(c) The requirements for incentive stock options under Section 422 of
the Code include minimum holding period requirements that require the Stock
acquired upon exercise of the Option to be held for at least two years from
the date of grant and one year from the date of exercise.
7. TERMINATION OF EMPLOYMENT.
(a) Except as otherwise provided by the Committee, if the Participant
ceases to be an employee of the Company or its subsidiaries for any reason
other than death, disability or cause (as defined below), then the
Participant may exercise the Option for a period of thirty (30) days after
such termination of employment, but in no event beyond the Expiration Date.
(b) If the Participant ceases to be an employee of the Company or its
subsidiaries by reason of death or disability (as defined in Section
22(e)(3) of the Code), then the Participant (or the Participant's
beneficiary or estate in the event of the Participant's death) may exercise
the Option for a period of ninety (90) days following the date of death or
disability, but in no event beyond the Expiration Date.
(c) If the Participant's employment with the Company or its
subsidiaries is terminated for cause (as defined below), the Option shall
be immediately forfeited and automatically cancelled. As used herein,
"cause" shall mean (i) conviction of a felony, (ii) commission by the
Participant of an act of fraud, misappropriation or embezzlement or (iii)
any other act or omission to act by the Participant if, in the judgment of
the Committee (A) the Participant knew or should have known that such an
act or omission would cause material injury to the financial condition or
reputation of the Company or its subsidiaries, and (B) such material injury
has occurred or is likely to occur, all as determined by the Committee.
8. NO RIGHTS AS A SHAREHOLDER. The Participant shall not be
deemed for any purposes to be a shareholder of the Company with respect to
any shares which may be acquired hereunder except to the extent that the
Option shall have been exercised with respect thereto and a stock certificate
issued therefor.
9. NONTRANSFERABILITY; COLLATERAL. The Option shall not be
transferable by the Participant otherwise than by will or the laws of descent
and distribution, and may be exercised during the life of the Participant
only by the Participant. The Option may not be assigned, mortgaged or
pledged as any type of security or collateral.
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10. RESTRICTIONS ON TRANSFERS OF STOCK. It shall be a condition
of the obligation of the Company to issue or transfer shares of Stock upon
exercise of the Option, that the Participant (or his representatives or
legatees) (a) execute and deliver to the Company such investment
representations and warranties, and to take such other actions, as counsel
for the Company determines may be necessary or appropriate for compliance
with the Securities Act and any applicable securities laws; and (b) execute a
restrictive stock transfer agreement in the form provided by the Company if
so demanded by the Committee and agree that the shares received upon exercise
of the Option will be subject to certain restrictions on sale or transfer as
necessary to comply with applicable state and federal securities laws, as
determined by the Committee. The Participant agrees that any certificate
representing shares acquired upon exercise of the Option may bear a legend to
such effect. If the Participant (or his representatives or legatees) fails
to comply with this paragraph 9, the Company may refuse to issue or transfer
shares of Stock upon exercise of the Option.
11. ADJUSTMENTS. If the Company shall at any time change the
number of shares of its Stock without new consideration to the Company (such
as by stock dividend, stock split or similar transaction), the total number
of shares then remaining subject to purchase hereunder shall be changed in
proportion to the change in issued shares, and the Option price per share
shall be adjusted so that the total consideration payable to the Company upon
the purchase of all shares not theretofore purchased shall not be changed.
In the event there shall be any change, other than as specified above, in the
number or kind of outstanding shares of Stock or of any stock or other
securities into which such Stock shall have been changed or for which it
shall have been exchanged, then if the Committee shall in its sole discretion
determine that such change equitably requires an adjustment in the number or
kind of shares subject to the Option, such adjustment shall be made by the
Committee. The Option price for each share of Stock or other securities
substituted or adjusted as provided in this paragraph shall be determined by
dividing the Option price for each share prior to such substitution or
adjustment by the number of shares or the fraction of a share substituted for
such share or to which such share shall have been adjusted. No adjustment or
substitution provided for in this paragraph shall require the Company to sell
a fractional share.
12. POWERS OF COMPANY NOT AFFECTED. The existence of the Option
herein granted shall not affect in any way the right or power of the Company
or its shareholders 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 issuance of bonds, debentures, preferred, or prior preference stock ahead
of or affecting the Stock or the rights thereof, or 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.
13. INTERPRETATION. As a condition of the granting of the Option,
the Participant agrees for himself and his legal representatives, that any
dispute or disagreement which may arise under or as a result of or pursuant
to this Agreement shall be determined by the Committee in its sole
discretion, and any interpretation by the Committee of the terms of this
Agreement shall be final, binding and conclusive.
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14. AMENDMENT OR MODIFICATION. No term or provision of this
Agreement may be amended, modified or supplemented orally, but only by an
instrument in writing signed by the party against whom or which the
enforcement of the amendment, modification or supplement is sought.
15. GOVERNING LAW. This Agreement shall be governed by the
internal laws of the State of Delaware as to all matters, including, but not
limited to, matters of validity, construction, effect, performance and
remedies.
16. TERMS OF PLAN GOVERN. All parties acknowledge that this
Option is granted under and pursuant to the Plan, which shall govern all
rights, interests, obligations and undertakings of both the Company and the
Participant. All capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Plan.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer and the Participant has executed this
Agreement as of the day and year first above written.
U.S. LABORATORIES INC.
(the "Company")
By:
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PARTICIPANT:
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