Document:

2005 Equity Incentive Plan

 Exhibit 10.4 
  
 NIGHTHAWK RADIOLOLGY HOLDINGS, INC. 
  
 2005 EQUITY INCENTIVE PLAN 
  
 1. Purposes of the Plan. The purposes of this Plan are: 
  

	 	•	 	to attract and retain the best available personnel for positions of substantial responsibility, 

  

	 	•	 	to provide additional incentive to Employees, Directors and Consultants, and 

  

	 	•	 	to promote the success of the Company’s business. 

  
 The Plan permits the grant of Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and
Performance Shares. 
  
 2. Definitions. As used herein, the
following definitions will apply: 
  
 (a)
“Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan. 
  
 (b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

  
 (c) “Award” means, individually or
collectively, a grant under the Plan of Options, SARs, Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares. 
  
 (d) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted
under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. 
  
 (e) “Board” means the Board of Directors of the Company. 
  
 (f) “Change in Control” means the occurrence of any of the following events: 
  
 (i) Any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented
by the Company’s then outstanding voting securities; or 
  
 (ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; 

 (iii) A change in the composition of the Board occurring within a two-year period, as a result of which
fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to
the election of directors to the Company); or 
  
 (iv) The
consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity
or its parent outstanding immediately after such merger or consolidation. 
  
 (g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code. 
  
 (h) “Committee” means a committee of Directors or of other
individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof. 
  
 (i) “Common Stock” means the common stock of the Company. 
  
 (j) “Company” means NightHawk Radiology Holdings, Inc., a Delaware corporation, or any successor thereto.

  
 (k) “Consultant” means any person, including
an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. 
  
 (l) “Director” means a member of the Board. 
  
 (m) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that the Administrator in its
discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time. 
  
 (n) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or
Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company. 
  
 (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 (p) “Exchange Program” means a program under which (i)
outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, and/or (ii) the exercise price of an outstanding Award is
reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion. 
  

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 (q) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows: 
  
 (i) If the Common Stock is listed on any
established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
  
 (ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; 
  
 (iii) For
purposes of any Awards granted on the Registration Date, the Fair Market Value will be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company’s Common Stock; or 
  
 (iv) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator. 
  
 (r) “Fiscal Year” means the fiscal year of the Company. 
  
 (s) “Incentive Stock Option” means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 
  
 (t) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock
Option. 
  
 (u) “Officer” means a person who is
an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
  
 (v) “Option” means a stock option granted pursuant to the Plan. 
  
 (w) “Optioned Stock” means the Common Stock subject to an Award. 
  
 (x) “Parent” means a “parent corporation,” whether
now or hereafter existing, as defined in Section 424(e) of the Code. 
  
 (y) “Participant” means the holder of an outstanding Award. 
  

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 (z) “Performance Share” means an Award denominated in Shares which may be earned in
whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 10. 
  
 (aa) “Performance Unit” means an Award which may be earned in whole or in part upon attainment of performance goals or other vesting
criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10. 
  
 (bb) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are
subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as
determined by the Administrator. 
  
 (cc) “Plan”
means this 2005 Equity Incentive Plan. 
  
 (dd)
“Registration Date” means the effective date of the first registration statement that is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s
securities. 
  
 (ee) “Restricted Stock” means
Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued pursuant to the early exercise of an Option. 
  
 (ff) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted
pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company. 
  
 (gg) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan. 
  
 (hh) “Section
16(b)” means Section 16(b) of the Exchange Act. 
  
 (ii)
“Service Provider” means an Employee, Director or Consultant. 
  
 (jj) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan. 
  
 (kk) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant to
Section 9 is designated as a SAR. 
  
 (ll)
“Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code. 
  
 3. Stock Subject to the Plan. 
  
 (a) Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 2,000,000, plus (i) the number of Shares which have been reserved but not issued under the 
  

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 Company’s 2004 Stock Plan (the “2004 Plan”) as of the Registration Date, (ii) any Shares returned to the
2004 Plan as a result of termination of options or repurchase of Shares issued under such plan, and (iii) an annual increase to be added on the first day of the Company’s fiscal year beginning in 2007, equal to the lesser of (A) 3% of
the outstanding Shares on such date or (B) an amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. 
  
 (b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange
Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and SARs, the forfeited or
repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to SARs, only Shares actually issued pursuant to an SAR will cease to be available under the
Plan; all remaining Shares under SARs will remain available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and
will not become available for future distribution under the Plan; provided, however, that if Shares of Restricted Stock, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become
available for future grant under the Plan. Shares used to pay the tax and exercise price of an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such
cash payment will not result in reducing the number of Shares available for issuance under the Plan. 
  
 (c) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of the Plan. 
  
 4.
Administration of the Plan. 
  
 (a) Procedure.

  
 (i) Multiple Administrative Bodies. Different
Committees with respect to different groups of Service Providers may administer the Plan. 
  
 (ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of
the Code, the Plan will be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code. 
  
 (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
will be structured to satisfy the requirements for exemption under Rule 16b-3. 
  
 (iv) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws. 
  

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 (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a
Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion: 
  
 (i) to determine the Fair Market Value; 
  
 (ii) to select the Service Providers to whom Awards may be granted hereunder; 
  
 (iii) to determine the number of Shares to be covered by each Award granted hereunder; 
  
 (iv) to approve forms of agreement for use under the Plan; 
  
 (v) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine; 
  
 (vi) to institute an Exchange Program; 
  
 (vii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan; 
  
 (viii) to prescribe, amend and rescind
rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws; 
  
 (ix) to modify or amend each Award (subject to Section 18(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Awards longer than is otherwise provided for in the Plan; 
  
 (x) to allow Participants to satisfy withholding tax obligations in such manner as prescribed in Section 14; 
  
 (xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by the Administrator; 
  
 (xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award 
  
 (xiii) to make all other determinations deemed necessary or advisable for
administering the Plan. 
  

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 (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations will be final and binding on all Participants and any other holders of Awards. 
  
 5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and Performance
Shares may be granted to Service Providers. 
  
 6. Stock
Options. 
  
 (a) Limitations. 
  
 (i) Each Option granted pursuant to the Plan will be a Nonstatutory Stock
Option. 
  
 (ii) The following limitations will apply to grants
of Options: 
  
 (1) No Service Provider will be granted, in any
Fiscal Year, Options to purchase more than 1,000,000 Shares. 
  
 (2) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 2,000,000 Shares, which will not count against the limit set forth in Section 6(a)(2)(ii)(1) above. 
  
 (3) The foregoing limitations will be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 13. 
  
 (4) If an Option is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 13), the cancelled Option will be counted against the limits set forth in
subsections (1) and (2) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 
  
 (b) Term of Option. The term of each Option will be stated in the
Award Agreement. 
  
 (c) Option Exercise Price and
Consideration. 
  
 (1) Exercise Price. The per share
exercise price for the Shares to be issued pursuant to exercise of a Nonstatutory Stock Option will be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation”
within the meaning of Section 162(m) of the Code, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on the date of grant. 
  
 (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period
within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised. 
  

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 (iii) Form of Consideration. The Administrator will determine the acceptable form of
consideration for exercising an Option, including the method of payment. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note; (4) other Shares, provided Shares acquired directly or indirectly from the Company, (A)
have been owned by the Participant and not subject to substantial risk of forfeiture for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option will be exercised; (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (6) a reduction in the amount of any Company liability to the Participant,
including any liability attributable to the Participant’s participation in any Company-sponsored deferred compensation program or arrangement; (7) any combination of the foregoing methods of payment; or (8) such other consideration and method
of payment for the issuance of Shares to the extent permitted by Applicable Laws. 
  
 (d) Exercise of Option. 
  
 (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in
the Award Agreement. An Option may not be exercised for a fraction of a Share. 
  
 An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specify from time to time) from the person entitled to exercise the Option, and (ii) full payment
for the Shares with respect to which the Option is exercised (together with an applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement
and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued,
except as provided in Section 13 of the Plan. 
  
 Exercising an
Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (ii) Termination of Relationship as a Service Provider. If a
Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option
is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three
(3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by 
  

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 the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or
her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  
 (iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the
Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on
the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within
the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  
 (iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death
within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the
Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the
Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent
and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death
Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate,
and the Shares covered by such Option will revert to the Plan. 
  
 7. Restricted Stock. 
  
 (a) Grant of
Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will
determine. 
  
 (b) Restricted Stock Agreement. Each Award
of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the
Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed. 
  
 (c) Transferability. Except as provided in this Section 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction. 
  

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 (d) Other Restrictions. The Administrator, in its sole discretion, may impose such other
restrictions on Shares of Restricted Stock as it may deem advisable or appropriate. 
  
 (e) Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as
practicable after the last day of the Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed. 
  
 (f) Voting Rights. During the Period of Restriction, Service Providers
holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise. 
  
 (g) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of
Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be
subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. 
  
 (h) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not
lapsed will revert to the Company and again will become available for grant under the Plan. 
  
 8. Restricted Stock Units. 
  
 (a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it shall advise the
Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units and the form of payout, which, subject to Section 8(d), may be left to the discretion of the
Administrator. 
  
 (b) Vesting Criteria and Other Terms.
The Administrator shall set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set
vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion. 
  
 (c) Earning Restricted Stock Units. Upon meeting the applicable
vesting criteria, the Participant shall be entitled to receive a payout as specified in the Restricted Stock Unit Award Agreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole
discretion, may reduce or waive any vesting criteria that must be met to receive a payout. 
  
 (d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made as soon as practicable after the date(s) set forth in the Restricted Stock Unit Award 
  

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 Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a
combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again shall be available for grant under the Plan. 
  
 (e) Cancellation. On the date set forth in the Restricted Stock Unit Award Agreement, all unearned Restricted Stock Units shall be forfeited to the
Company. 
  
 9. Stock Appreciation Rights. 
  
 (a) Grant of SARs. Subject to the terms and conditions of the Plan, a
SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. 
  
 (b) Number of Shares. The Administrator will have complete discretion to determine the number of SARs granted to any Service Provider. 

 
 (c) Exercise Price and Other Terms. The Administrator, subject to
the provisions of the Plan, will have complete discretion to determine the terms and conditions of SARs granted under the Plan. 
  
 (d) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions
of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine. 
  
 (e) Expiration of SARs. An SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set
forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will apply to SARs. 
  
 (f) Payment of SAR Amount. Upon exercise of an SAR, a Participant will be entitled to receive payment from the Company in an amount determined by
multiplying: 
  
 (i) The difference between the Fair Market Value
of a Share on the date of exercise over the exercise price; times 
  
 (ii) The number of Shares with respect to which the SAR is exercised. 
  
 At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 
  
 10. Performance Units and Performance Shares. 
  
 (a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers
at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant.

  
 (b) Value of Performance Units/Shares. Each Performance
Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. 
  

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 (c) Performance Objectives and Other Terms. The Administrator will set performance objectives or
other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid
out to the Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award
Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide,
divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion. 
  
 (d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled
to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been
achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share. 
  
 (e) Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which
have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof. 
  
 (f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested
Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan. 
  
 11. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. 
  
 12. Transferability of Awards. Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by
the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 
  

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 13. Adjustments; Dissolution or Liquidation; Merger or Change in Control. 
  
 (a) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other
securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available
under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award and the numerical Share limits in Sections 3 and
6 of the Plan. 
  
 (b) Dissolution or Liquidation. In the
event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an
Award will terminate immediately prior to the consummation of such proposed action. 
  
 (c) Change in Control. In the event of a merger or Change in Control, each outstanding Award will be treated as the Administrator determines, including, without limitation, that each Award be assumed or an
equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. The Administrator shall not be required to treat all Awards similarly in the transaction. 
  
 In the event that the successor corporation does not assume or substitute for
the Award, unless the Administrator provides otherwise, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at
target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically
that the Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period. 
  
 For the purposes of this subsection (c), an Award will be considered assumed
if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in
the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration
received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of an Option or Stock Appreciation 
  

 -13- 

 Right or upon the payout of a Restricted Stock Unit, Performance Share or Performance Unit, for each Share subject to
such Award (or in the case of Restricted Stock Units and Performance Units, the number of implied shares determined by dividing the value of the Restricted Stock Units and Performance Units, as applicable, by the per share consideration received by
holders of Common Stock in the Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

  
 Notwithstanding anything in this Section 13(c) to the
contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent;
provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. 
  
 14. Tax Withholding. 
  
 (a) Withholding Requirements. Prior to the delivery of any Shares or
cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes
(including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof). 
  
 (b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may
permit a Participant to satisfy such tax withholding obligation, in whole or in part by (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required
to be withheld, or (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the
Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld. 
  
 15. No Effect on Employment or Service. Neither the Plan nor any Award
will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to
terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws. 
  
 16. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant. 
  

 -14- 

 17. Term of Plan. Subject to Section 21 of the Plan, the Plan will become effective upon its
adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 18 of the Plan. 
  
 18. Amendment and Termination of the Plan. 
  
 (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. 
  
 (b) Stockholder Approval. The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. 
  
 (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and
the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination. 
  
 19. Conditions Upon Issuance of Shares. 
  
 (a)
Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of
counsel for the Company with respect to such compliance. 
  
 (b)
Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 
  
 20. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority
will not have been obtained. 
  

 -15-Form of Stock Option Agreement

 Exhibit 10.5 
  
 NIGHTHAWK RADIOLOGY HOLDINGS, INC. 
  
 2005 EQUITY INCENTIVE PLAN 
  
 STOCK OPTION AGREEMENT 
  
 Unless otherwise defined herein, the terms defined in the Nighthawk Radiology Holdings, Inc. 2005 Equity Incentive Plan (the “Plan”)
will have the same defined meanings in this Stock Option Agreement (the “Option Agreement”). 
  
 I.        NOTICE OF STOCK OPTION GRANT 
  
 Name: 
  
 Address: 
  
 You have been granted a Nonstatutory Stock Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows: 
  

			
		
	 Grant Number
	 	  _________________________________________
		
	 Date of Grant
	 	  _________________________________________
		
	 Vesting Commencement Date
	 	  _________________________________________
		
	 Exercise Price per Share
	 	$_________________________________________
		
	 Total Number of Shares Granted
	 	  _________________________________________
		
	 Total Exercise Price
	 	$_________________________________________
		
	 Term/Expiration Date:
	 	  _________________________________________

  
 Vesting
Schedule: 
  
 Subject to accelerated vesting as set forth in
the Plan, this Option may be exercised, in whole or in part, in accordance with the following schedule: 
  
 [1/3 of the Shares subject to the Option will vest twelve months after the Vesting Commencement Date, and 1/36 of the Shares subject to the Option will
vest each month thereafter on the same day of the month as the Vesting Commencement Date (or if there is no corresponding day in an applicable month, the last day of such month), subject to Participant continuing to be a Service Provider through
each such date.] 

 Termination Period: 
  
 This Option shall be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such
termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for one (1) year after Participant ceases to be Service Provider. Notwithstanding the foregoing, in no event may this Option be
exercised after the Term/Expiration Date as provided above and may be subject to earlier termination as provided in Section 14(c) of the Plan. 
  
 II.        AGREEMENT 
  
 1. Grant of Option. 
  
 The Administrator hereby grants to individual named in the Notice of Grant attached as Part I of this Agreement (the “Participant”) an
option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to Section 19(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms
and conditions of the Plan will prevail. 
  
 2. Exercise of
Option. 
  
 (a) Right to Exercise. This Option is
exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement. 
  
 (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as
Exhibit A (the “Exercise Notice”) or in such other form and manner as determined by the Administrator, which will state the election to exercise the Option, the number of Shares in respect of which the Option is being
exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be completed by Participant and delivered to the
Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together with any applicable withholding taxes. This Option will be deemed to be exercised upon receipt by the Company of such
fully executed Exercise Notice accompanied by such aggregate Exercise Price. 
  
 No Shares will be issued pursuant to the exercise of this Option unless such issuance and exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares will be considered
transferred to Participant on the date the Option is exercised with respect to such Exercised Shares. 
  

 -2- 

 3. Method of Payment. 
  
 Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of
Participant: 
  
 (a) cash; 
  
 (b) check; 
  
 (c) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or
indirectly, have been owned by the Participant and not subject to a substantial risk of forfeiture for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate
Exercise Price of the Exercised Shares; or 
  
 (d) consideration
received by the Company under a cashless exercise program implemented by the Company in connection with the Plan. 
  
 4. Non-Transferability of Option. 
  
 This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Participant only by Participant. 
  
 5. Term of
Option. 
  
 This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement. 
  
 6. Tax Obligations. Participant agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining
Participant) for the satisfaction of all Federal, state, and local income and employment tax withholding requirements applicable to the Option exercise. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of exercise. 
  
 7. Entire Agreement; Governing Law. 
  
 The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant. This Option
Agreement is governed by the internal substantive laws, but not the choice of law rules, of Idaho. 
  

 -3- 

 8. NO GUARANTEE OF CONTINUED SERVICE. 
  
 PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL,
AND WILL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. 
  
 [Remainder of Page Intentionally Left Blank] 
  

 -4- 

 By Participant’s signature and the signature of the Company’s representative below, Participant
and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below. 
  

			
	 PARTICIPANT:
	 	NIGHTHAWK RADIOLOGY HOLDINGS, INC.
		
	
	 	

	Signature	 	By
		
	
	 	

	Print Name	 	Title
		
	
	 	 
		
	
	 	 
	Residence Address	 	 

  

 -5- 

 EXHIBIT A 
 NIGHTHAWK RADIOLOGY HOLDINGS, INC. 
 2005 EQUITY INCENTIVE PLAN 
  
 EXERCISE NOTICE 
  
 Nighthawk Radiology Holdings, Inc. 
 [ADDRESS] 
  
 Attention:              
  
 1. Exercise of Option. Effective as of today,
                    ,         , the undersigned (“Purchaser”) hereby elects to
purchase                     shares (the “Shares”) of the Common Stock of Nighthawk Radiology Holdings, Inc. (the
“Company”) under and pursuant to the 2005 Equity Incentive Plan (the “Plan”) and the Option Agreement dated
                    (the “Option Agreement”). The purchase price for the Shares will be
$                    , as required by the Option Agreement. 
  
 2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares and any
required withholding taxes to be paid in connection with the exercise of the Option. 
  
 3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

  
 4. Rights as Stockholder. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired will be issued to Participant as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior
to the date of issuance, except as provided in Section 14 of the Plan. 
  
 5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice. 
  
 6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all 

 prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be
modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of Idaho. 
  

			
	Submitted by:	 	Accepted by:
		
	PURCHASER:	 	NIGHTHAWK RADIOLOGY HOLDINGS, INC.
		
	
	 	

	Print Name	 	Its
		
	Address:	 	Address:
		
	
	 	

		
	
	 	

	 	 	Date Received

  

 -2-

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