Exhibit 10.5

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement (this “Agreement”) is entered into as of February
16, 2006 by and between StarMed Group, Inc., a Nevada corporation (the
“Company”), and Herman Rappaport (the “Option Holder”).

 

Recitals

 

A. The Company has adopted the 2004 Equity Compensation Plan (the “Plan”). The
Option Holder has had an opportunity to review the Plan.

 

B. The Option Holder is a director and the President of the Company and is
eligible to receive option grants under the Plan. This Agreement is intended by
the parties to evidence the Company’s grant to the Option Holder of an option to
purchase shares of its common stock.

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the
Company and the Option Holder hereby agree as follows:

 

Agreement

 

1. Option Grant and Exercise Price.

 

(a) Effective as of February 16, 2006, the Company hereby grants to the Option
Holder the right and option (the “Option”) to purchase, on the terms and
conditions set forth in this Agreement and in the Plan, One Million (1,000,000)
shares of its common stock, par value $0.01 per share (“Common Stock”), at an
exercise price of $0.35 per share. The Option exercise price was determined in
accordance with Section 2(p) of the Plan.

 

(b) The Option is a non-qualified stock option, and is not intended by the
Company and the Option Holder to be an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended.

 

2. Vesting and Term of the Option.

 

(a) Option Vesting. The Option is fully vested and is exercisable on February
16, 2006.

 

(b) Option Term. The Option shall be exercisable in whole or in part prior to
February 16, 2016. The Option shall terminate on February 16, 2016, and no
portion of the Option may be exercised on or after that date. The exercisability
of the Option is not contingent on the termination of the Option Holder’s
employment or directorship with the Company, it being understood that the Option
Holder shall retain the right to exercise the Option until February 16, 2016
even after the termination of his employment or directorship with the Company.

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3. Manner of Exercising the Option. The Option Holder may exercise the vested
portion of the Option in whole or in part prior to the Option’s termination,
provided that a partial exercise of the Option may not be for fewer than one
hundred (100) shares of Common Stock unless fewer than one hundred (100) shares
subject to the vested portion of the Option remain unexercised, in which event
the entire remaining vested portion of the Option must be exercised at one time.
The Option shall not be exercisable with respect to a fraction of a share of
Common Stock. The Option Holder may exercise the vested portion of the Option,
in whole or in part, by delivering to the Company’s General Counsel written
notice of exercise in the form of the notice attached to this Agreement as
Exhibit A. Such notice shall specify the number of shares of Common Stock to be
purchased and shall be accompanied by payment of the purchase price of the
shares. No shares shall be issued by the Company until full payment of the
purchase price has been made.

 

4. Payment of the Option Exercise Price. Payment of the exercise price of the
shares of Common Stock subject to the exercised portion of the Option shall be
made in accordance with Section 6(c) of the Plan.

 

5. Transferability of the Option.

 

(a) Except as provided in this Section 5, the Option Holder may not assign or
otherwise transfer the Option, either voluntarily or by operation of law, other
than by will or the laws of descent and distribution, and the Option shall be
exercisable during the Option Holder’s lifetime only by the Option Holder or by
the Option Holder’s legal representative. Following the death of the Option
Holder, the Option shall be exercisable by the Option Holder’s legal
representative, executor and beneficiaries.

 

(b) The Option Holder may assign and transfer part or all of the Option to a
family member or family trust during the Option Holder’s lifetime but only if:
(i) the transfer is made by a gift and not for consideration; (ii) the
transferee is a “family member” (including, without limitation, a family trust)
as defined in General Instruction A.1(a)(5) of Form S-8 under the Securities Act
of 1933, as amended (the “Securities Act”); (iii) the Option Holder gives the
Company at least ten days’ prior written notice of the proposed transfer; and
(iv) the transferee executes and delivers to the Company any documents requested
by the Company (including, without limitation, a counterpart of this Agreement)
in order to document the transfer. Any such transferee of all or part of the
Option shall be bound by all of the terms and conditions of the Plan and this
Agreement, and the Option Holder shall be personally liable to the Company for
any breach by the transferee of any of the terms of the Plan or this Agreement.

 

6. Securities Law Compliance. No shares of Common Stock shall be issued or
delivered upon exercise of the Option unless and until the Board determines that
the exercise of the Option and the issuance and delivery of such shares pursuant
thereto will comply with all relevant provisions of law, including, without
limitation, the Securities Act, applicable state and foreign securities laws and
the requirements of any stock exchange or over-the-counter trading system upon
which the Common Stock may be listed.

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7. Incorporation by Reference of the Plan. The Plan and all of its terms and
conditions, as amended from time to time, are incorporated by reference into
this Agreement. The Option Holder acknowledges that he has received and reviewed
a copy of the Plan. This Agreement is not a complete restatement of all of the
terms and conditions of the Plan. The Company and the Option Holder agree to be
bound by the Plan, as amended from time to time, and agree that the terms and
conditions of the Plan shall govern if and to the extent that there are any
inconsistencies between the Plan and this Agreement. If the Plan is administered
by a committee as permitted by Section 4 of the Plan, references in this
Agreement to the Board shall, as appropriate, apply instead to such committee.

 

8. Option Holder’s Representations and Warranties. In connection with the
receipt of the Option pursuant to this Agreement and in contemplation of the
Option Holder’s purchase of shares of Common Stock upon exercise of the Option,
the Option Holder hereby agrees, represents and warrants as follows, which
agreements, representations and warranties shall be deemed to have been given
again by the Option Holder as of the date that he exercises the Option:

 

(a) Access to Information. The Option Holder has had a sufficient opportunity to
review (i) the Plan, (ii) the Prospectus that the Company has distributed
regarding the Plan, and (iii) all registration statements, annual and periodic
reports and proxy and information statements that the Company has filed with the
Securities and Exchange Commission (the “SEC”) during the preceding twelve
months. Neither the Company nor any of its officers, directors, employees or
other agents has made any representation or recommendation to the Option Holder
about the advisability of the Option Holder’s purchase of the shares of Common
Stock that are subject to the Option.

 

(b) Ability to Bear Investment Risk. The Option Holder is aware that any
purchase of stock involves an element of risk. The Option Holder can afford to
bear the risks of an investment in the Company. The Option Holder has sufficient
knowledge and experience in financial and investment matters to enable him or
her to evaluate the merits and risks of the proposed purchase of the shares of
Common Stock subject to the Option and to make an informed investment decision.
The Option Holder has had a sufficient opportunity to consult with his or her
advisers about the merits and legal implications of the proposed transaction.

 

(c) Resale Restrictions. The Option Holder understands that: (i) neither the SEC
nor any state or other regulatory authority has made any recommendation or
finding concerning the value of the shares of Common Stock subject to the
Option; and (ii) the shares may be offered, sold or otherwise transferred by the
Option Holder only if the transaction is registered and qualified under the
applicable provisions of federal and state securities laws or if exemptions from
such registration and qualification are available. The Option Holder agrees not
to sell, pledge or otherwise transfer any of the shares of Common Stock acquired
upon exercise of the Option except in full compliance with all applicable
federal and state securities laws, rules and regulations.

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(d) Applicability to Transferees. If the Option Holder transfers part or all of
the Option to a family member or family trust pursuant to Section 5(b), the
transferee shall be deemed to have made all of the representations, warranties
and agreements that are set forth in this Section 8, and the Option Holder shall
be personally liable to the Company for any and all losses, damages, expenses
and liabilities (including, but not limited to, court costs and reasonable
attorneys’ fees) that the Company may incur as a result of any breach of such
representations, warranties and agreements by the transferee.

 

(e) No Continuing Employment Right. The Option Holder understands that nothing
in the Plan or this Agreement gives the Option Holder a right to continue in the
employment of the Company or a subsidiary and that, if the Option Holder is a
director, nothing in the Plan or this Agreement gives the Option Holder a right
to continue to serve as a director of the Company.

 

9. Miscellaneous Provisions.

 

(a) Further Instruments. The Company and the Option Holder agree to execute such
further instruments and to take such further actions as may be reasonably
necessary to carry out the intent of this Agreement.

 

(b) Provisions Subject to Applicable Law. If any provision of this Agreement is
held by an arbitrator or a court of competent jurisdiction to be invalid, void
or unenforceable, the remaining provisions shall nevertheless continue in full
force and effect without being impaired or invalidated in any way and shall be
construed in accordance with the purposes and intent of this Agreement.

 

(c) Complete Agreement. This Agreement and the Plan constitute the complete and
exclusive agreement between the Company and the Option Holder with respect to
the subject matter herein and replace and supersede any and all other prior
written and oral agreements or statements by the parties relating to such
subject matter.

 

(d) Successors and Assigns. Subject to the provisions of this Agreement and the
Plan relating to the transferability of the Option and the shares of Common
Stock acquired upon exercise of the Option, this Agreement shall be binding upon
and inure to the benefit of the Company and the Option Holder and their
respective successors and assigns. Whenever appropriate in this Agreement,
references to the Company or the Option Holder shall be deemed to refer to such
person’s legal representative, estate or other transferees, successors or
assigns, as applicable.

 

(e) Notices. Any notice required or permitted to be given to the Company or the
Option Holder must be in writing and personally delivered or sent by registered
or certified United States mail (postage prepaid and return receipt requested),
by overnight delivery service or by facsimile transmission, addressed to the
address hereinafter shown below such party’s signature or to such other address
as the party may designate in the foregoing manner to the other party. Any such
notice that is sent by the Company or the Option Holder in the foregoing manner
shall be deemed to have been delivered upon (i) personal delivery, (ii) actual
receipt by facsimile

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transmission, (iii) three days after deposit in the United States mail, or (iv)
one day after delivery to an overnight delivery service.

 

 

(f )

Amendment and Termination. This Agreement may be amended or terminated

only by a writing executed by both the Company and the Option Holder.

 

(g) Counterparts. This Agreement may be executed by facsimile and in two
counterparts, each of which shall be deemed an original, but both of which shall
constitute one and the same instrument.

 

(h) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of California
without giving effect to such state’s conflict-of-law principles.

 

IN WITNESS WHEREOF, the Company and the Option Holder have executed and
delivered this Agreement as of the day and year first written above.

 

STARMED GROUP, INC.

 

 

 

By:

/s/ Steven L. Rosenblatt

 

 

Steven L. Rosenblatt, M.D.

 

Executive Vice President

 

 

 

Address:

2029 Century Park East

 

 

Suite 1112

 

 

Los Angeles, CA 90067

 

Fax: 310-551-2724

 

 

 

HERMAN RAPPAPPORT

 

/s/ Herman Rappaport

 

 

Address:

2029 Century Park East

 

 

Suite 1112

 

 

Los Angeles, CA 90067

 

Fax: 310-551-2724

 

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Exhibit A

 

OPTION EXERCISE NOTICE

 

StarMed Group

2029 Century Park East

Suite 1112

Los Angeles, CA 90067

Attention: General Counsel

 

I hereby notify StarMed Group, Inc. (the “Company”) of my election to purchase
_____ shares of the Company’s common stock at a purchase price of $______ per
share pursuant to an option that was granted under the Stock Option Agreement
dated as of _________________ (the “Agreement”) between the Company and
_____________________.

 

If the Option Holder named above assigned part or all of the option to a family
member or family trust pursuant to Section 5(b) of the Agreement, this Option
Exercise Notice is being executed by the transferee instead of the Option
Holder.

 

Concurrently with the delivery to the Company of this notice, I have delivered
to the Company the purchase price of the shares in the manner provided in the
Agreement.

 

I agree to execute whatever additional documents are requested by the Company in
order to complete the exercise of my option. All of the representations and
warranties that I made in Section 8 of the Agreement remain accurate as of the
date of this notice.

 

 

 

Dated:

__________________

____________________________

 

 

 

Name:

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