Document:

Exhibit 10.17

 

UHS HOLDCO, INC.

STOCK OPTION PLAN

 

ARTICLE I

 

Purpose of Plan

 

The Stock Option Plan (the “Plan”) of UHS
Holdco, Inc. (the “Company”), adopted by the Board (as defined below)
and shareholders of the Company effective May 31, 2007 is intended to advance
the best interests of the Company by providing executives and other employees
of the Company or any Subsidiary (as defined below) and certain directors and
consultants of the Company, in each case, who have substantial responsibility
for the management and growth of the Company or any Subsidiary with additional
incentives by allowing such employees, directors and/or consultants to acquire
an ownership interest in the Company. The Plan is a compensatory benefit plan
within the meaning of Rule 701 under the Securities Act of 1933, as amended
(the “Securities Act”) and, unless and until the Common Stock (as
defined below) is publicly traded, the issuance of stock purchase options (“Options”)
for shares of Common Stock pursuant to the Plan and the issuance of shares of
Common Stock pursuant to such Options is intended to qualify for the exemption
from registration under the Securities Act provided by Rule 701.

 

ARTICLE II

 

Definitions

 

For purposes of the Plan the following terms have the
indicated meanings:

 

“Affiliate” means, when used with reference to
a specified Person, any Person that directly or indirectly controls or is
controlled by or is under common control with the specified Person. As used in
this definition, “control” (including, with its correlative meanings, “controlled
by” and “under common control with”) shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). With respect to any Person who is an
individual, “Affiliates” shall also include, without limitation, any member of
such individual’s Family Group.

 

“Aggregate Repurchase Price” shall have the
meaning set forth in Section 5.7(c).

 

“Approved Sale” shall have the meaning set
forth in Section 5.10(a).

 

“Board” means the Company’s Board of Directors.

 

“BSMB” means Bear Stearns Merchant Banking
Partners III, L.P. or its Affiliates.

 

“Cause” means, with respect to any Participant,
such Participant’s (i) continued failure, whether willful, intentional or
grossly negligent, after written notice, to perform substantially such
Participant’s duties to the Company and its Subsidiaries (the “Duties”)
as 

 

 

determined by such
Participant’s immediate supervisor, the Chief Executive Officer or a Senior
Vice President of the Company, or the Board (other than as a result of a
disability); (ii) dishonesty or fraud in the performance of such Participant’s
Duties or a material breach of such Participant’s duty of loyalty to the
Company or its Subsidiaries; (iii) conviction or confession of an act or acts
on such Participant’s part constituting a felony under the laws of the United
States or any state thereof or a misdemeanor which materially impairs such
Participant’s ability to perform such Participant’s Duties; (iv) willful act or
omission on such Participant’s part which is materially injurious to the
financial condition or business reputation of the Company or any of its
Subsidiaries; or (v) breach of any non-competition, non-competition, non-solicitation,
non-disclosure or confidentiality agreement applicable to such Participant; provided,
that if any Participant is a party to an employment agreement with the Company
or its Subsidiaries, the definition of “cause” (or term of like import)
contained therein, if any, shall control.

 

“Code” means the Internal Revenue Code of 1986,
as amended.

 

“Committee” means the Compensation Committee or
such other committee of the Board as the Board may designate to administer the
Plan or, if for any reason the Board has not designated such a committee, the
Board. The Committee, if other than the Board, shall be composed of two or more
directors as appointed from time to time by the Board.

 

“Common Stock” means the Company’s Common,
Stock, par value $.01 per share.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Fair Market Value” of any Common Stock as of
any given date shall be determined in good faith by the Board based on such
factors as the Board, in the exercise of its reasonable business judgment,
considers relevant; provided, that in making such determination, the
Board shall assume that the Company and its Subsidiaries are sold as a going
concern and then liquidated and shall not provide for any discounts based on
the fact that the Common Stock being valued represent a minority interest in
the Company; provided, further, that notwithstanding anything
herein to the contrary, any determination of Fair Market Value shall be made in
accordance with the requirements of Section 409A of the Code.

 

“Family Group” means, when used with reference
to a specified individual Person, (i) such Person’s spouse, former spouse,
ancestors and descendants (whether natural or adopted), parents and their
descendants and any spouse of the foregoing persons (collectively, “relatives”),
(ii) the trustee, fiduciary or personal representative of such Person and any
trust solely for the benefit of such Person and/or such Person’s relatives
(other than any remainder interests) or (iii) any limited partnership or
limited liability company the governing instruments of which provide that such
Person shall have the exclusive, nontransferable power to direct the management
and policies of such entity and of which the sole owners of partnership
interests, membership interests or any other equity interests are, and will
remain, limited to such Person and such Person’s relatives.

 

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“Good Reason” means, with respect to any
Participant, (i) the Company or its Subsidiaries has reduced or reassigned a
material portion of such Participant’s duties (per such Participant’s job
description); (ii) such Participant’s base salary has been reduced other than
in connection with an across-the-board reduction (of approximately the same
percentage) in executive compensation to employees imposed by the Board in
response to negative financial results or other adverse circumstances affecting
the Company or its Subsidiaries; or (iii) the Company or its Subsidiaries has
required such Participant to relocate in excess of fifty (50) miles from the
location where such Participant is currently employed; provided, that if
any Participant is a party to an employment agreement with the Company or its
Subsidiaries, the definition of “good reason” (or term of like import)
contained therein, if any, shall control.

 

“Independent Third Party” means any Person who,
immediately prior to the contemplated transaction, does not own in excess of 5%
of the Common Stock on a fully diluted basis, who is not controlling,
controlled by or under common control with any such 5% owner of the Common
Stock and who is not the spouse or descendant (by birth or adoption) of any
such 5% owner of the Common Stock.

 

“IPO” means an initial Public Offering of
Common Stock or the Company otherwise becoming a “reporting company” under
Section 13 of the Exchange Act with regard to a registration of Common Stock
under Section 12 of the Exchange Act.

 

“Issued Shares” means (i) all shares of Common
Stock issued upon the proper exercise of an Option and (ii) all equity
securities issued with respect to the Common Stock referred to in clause (i)
above by way of stock dividend or stock split or in connection with any
conversion, merger, consolidation or recapitalization or other reorganization
affecting the Common Stock. Unless otherwise provided herein or in a
Participant’s Option Agreement (as defined herein), Issued Shares will continue
to be Issued Shares in the hands of any holder other than the Participant
(except for the Company), and each such transferee thereof will succeed to the
rights and obligations of a holder of Issued Shares hereunder.

 

“Option Agreement” shall have the meaning set
forth in Section 6.1.

 

“Options” shall have the meaning set forth in
the preamble to this Plan.

 

“Option Shares” means (i) all shares of Common
Stock issuable upon the exercise of an Option and (ii) all shares of any other
class of Common Stock issuable upon the exercise of an Option as a result of an
adjustment to such Option pursuant to any provision hereof.

 

“Participant” means any (a) executive or other
employee of the Company or any of its Subsidiaries, (b) member of the Board
(but excluding any employee or Affiliate of (i) the Company or any Subsidiary
or (ii) BSMB), or (c) consultant to the Company, in each case, who has been
selected to participate in the Plan by the Committee.

 

“Permitted Transferee” shall have the meaning
set forth in Section 5.8(a).

 

“Person” means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated 

 

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organization, a
governmental entity or any department, agency or political subdivision thereof
or any other entity or organization.

 

“Public Company” means any Person that is
required to file periodic reports with the Securities and Exchange Commission
pursuant to the requirements of Sections 13 or 15 of the Securities and
Exchange Act.

 

“Public Offering” means an underwritten public
offering and sale of Common Stock pursuant to an effective registration
statement under the Securities Act; provided, that a Public Offering
shall not include an offering made in connection with a business acquisition or
combination pursuant to a registration statement on Form S-4 or any form for
similar registration purposes, or an employee benefit plan pursuant to a
registration statement on Form S-8 or any form for similar registration
purposes.

 

“Public Sale” means the sale of Issued Shares
to the public pursuant to an offering registered under the Securities Act or,
after the consummation of an initial Public Offering, to the public pursuant to
the provisions of Rule 144 (or any similar rule or rules then in effect) under
the Securities Act.

 

“Qualified Public Offering” means a Public
Offering which results in proceeds (net of underwriting discounts and selling
commissions) of an aggregate (together with proceeds from all previous Public
Offerings) of at least $100,000,000 and after which the Company’s equity
securities are listed on a national securities exchange or the NASDAQ Stock
Market; provided, that a Qualified Public Offering shall not include any
issuance of equity securities in any merger or other business combination.

 

“Repurchase Notice” shall have the meaning set
forth in Section 5.7(b).

 

“Repurchase Option” shall have the meaning set
forth in Section 5.7(a).

 

“Repurchase Window” shall have the meaning set
forth in Section 5.7(d).

 

“Sale of the Company” means any transaction
(other than pursuant to a Public Offering) involving the Company or UHS and an
Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company or UHS (whether by merger,
consolidation, sale of the capital stock or otherwise) or (ii) all or
substantially all of the assets of the Company or UHS, as determined on a
consolidated basis.

 

“Stockholders Agreement” means the Stockholders
Agreement, dated as of May 31, 2007, by and among the Company and certain
of the Company’s stockholders, as amended or modified from time to time.

 

“Subsidiary” means, with respect to any Person,
any corporation, partnership, limited liability company, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a 

 

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combination thereof, or
(ii) if a partnership, limited liability company, association or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association or
other business entity if such Person or Persons shall be allocated a majority
of partnership, limited liability company, association or other business entity
gains or losses or shall be or control the managing director, managing member,
manager or a general partner of such partnership, limited liability company,
association or other business entity. Where not otherwise indicated, the term “Subsidiary”
refers to a Subsidiary of the Company.

 

“Termination Date” means, with respect to any
Participant, the date that a Termination Event has occurred.

 

“Termination Event” means (i) with respect to
any Participant that is an executive or other employee of the Company or any
Subsidiary, that such Participant has ceased to be employed by the Company or
any of its Subsidiaries for any reason (including as a result of such
Participant’s disability, death or, to the extent that such Participant entered
into an employment agreement with the Company, the non-renewal of such
employment agreement), (ii) with respect to any Participant that is a member of
the Board, that such Participant had ceased to be a member of the Board for any
reason or (iii) with respect to any Participant that is a consultant of
the Company or any Subsidiary, that such Participant had ceased to provide consulting
services to the Company or any of its Subsidiaries for any reason.

 

“Transfer” shall have the meaning set forth in Section
5.8(a).

 

“Transfer Notice” shall have the meaning set
forth in Section 5.8(a).

 

“UHS” means Universal Hospital Services, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company.

 

“Valuation Date” means, with respect to any
Repurchase Option, the date, if any, that the Company delivers a Repurchase
Notice to a holder of Issued Shares.

 

ARTICLE III

 

Administration

 

The Plan shall be administered by the Committee. Subject
to the limitations of the Plan, the Committee shall have the sole and complete
authority to:  (i) select Participants,
(ii) grant Options to Participants in such forms and amounts and with such
exercise price as it shall determine, (iii) impose such limitations,
restrictions and conditions upon such Options as it shall deem appropriate in
accordance with the terms of the applicable Option Agreement (as defined
below), (iv) interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules, procedures and regulations relating to the Plan,
(v) correct any defect or omission or reconcile any inconsistency in the Plan
or in any Options granted under the Plan in accordance with the terms of the
applicable Option Agreement and (vi) make all other determinations and take all
other actions necessary or advisable for the implementation and administration
of the 

 

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Plan. The Committee’s
determinations on matters within its authority shall be conclusive and binding
upon the Participants, the Company and all other Persons, except, with respect
to any Options held by any Participant, as otherwise provided in the Option
Agreement for such Options or in such Participant’s employment agreement. All
expenses associated with the administration of the Plan shall be borne by the
Company. The Committee may, as approved by the Board and to the extent
permissible by law, delegate any of its authority hereunder to such Persons as
it deems appropriate.

 

ARTICLE IV

 

Limitation on Aggregate
Shares

 

The number of shares of Common Stock with respect to
which Options may be granted under the Plan shall not exceed, in the aggregate,
43,904,773 shares of Common Stock, subject to adjustment in accordance with Section
6.4 and 6.5. To the extent any Options expire unexercised or are
canceled, terminated or forfeited in any manner without the issuance of Common
Stock thereunder, the shares with respect to which such Options were granted
shall again be available under the Plan. Similarly, if any shares of Common
Stock issued hereunder upon exercise of the Options are repurchased hereunder,
such shares shall again be available under the Plan for reissuance as Options. The
shares of Common Stock available under the Plan may be either authorized and
unissued shares, treasury shares or a combination thereof, as the Committee
shall determine.

 

ARTICLE V

 

Awards

 

5.1           Grant
of Options. The Committee may grant Options to Participants from time to
time in accordance with this Article V. Options granted under the Plan
shall be nonqualified stock options. The exercise price per share of Common
Stock under each Option shall be determined by the Committee at the time of
grant, but shall be no less than the “fair market value” of the Common Stock on
the date such Options are granted. For purposes of this Section 5.1 only, “fair
market value” of Common Stock means (a) if the stock is not readily tradable on
an established securities market, the amount determined by the Board by the
reasonable application of a reasonable valuation method within the meaning of
Treas. Reg. §1.409A-1(b)(5)(iv)(B) or (b) if the stock is readily tradable on
an established securities market, the fair market value of the stock based upon
the last sale before or the first sale after the grant of such stock. Subject
to Section 5.6, Options shall be exercisable at such time or times as
the Committee shall determine. The term of each Option shall be ten years from
the date of grant of such Option.

 

5.2           Exercise
Procedure.

 

(a)           Options
shall be exercisable, to the extent they are vested, by written notice to the
Company (to the attention of the Company’s Secretary or any other designee set
forth in the Option Agreement) accompanied by payment in full of the applicable
exercise price. Payment of such exercise price shall be made, at the election
of the Participant, (i) in cash 

 

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(including check, bank draft, money order or wire transfer
of immediately available funds), (ii) by delivery of outstanding shares of
Common Stock with a Fair Market Value on the date of exercise equal to the
aggregate exercise price payable with respect to the Option’s exercise, (iii)
by authorizing the Company to withhold from issuance a number of Issued Shares
issuable upon exercise of the Options which, when multiplied by the Fair Market
Value of a share of Common Stock on the date of exercise, is equal to the
aggregate exercise price payable with respect to the Options so exercised or
(iv) by any combination of the foregoing.

 

(b)           In
the event a Participant elects to pay the exercise price payable with respect
to an Option pursuant to Section 5.2(a)(ii), (A) only a whole number of
share(s) of Common Stock (and not fractional shares of Common Stock) may be
tendered in payment, (B) such Participant must present evidence acceptable to
the Company that such Participant has owned any such shares of Common Stock
tendered in payment of the exercise price (and that such tendered shares of
Common Stock have not been subject to any substantial risk of forfeiture) for
at least six months prior to the date of exercise, and (C) such shares of
Common Stock must be delivered to the Company. Delivery for this purpose may,
at the election of such Participant, be made either by (1) physical delivery of
the certificate(s) for all such shares of Common Stock tendered in payment of
the price, accompanied by duly executed instruments of transfer in a form
acceptable to the Company, or (2) direction to such Participant’s broker to
transfer, by book entry, such shares of Common Stock from a brokerage account
of such Participant to a brokerage account specified by the Company. When
payment of the exercise price is made by delivery of Common Stock, the
difference, if any, between (x) the aggregate exercise price payable with
respect to the Option being exercised and (y) the Fair Market Value of the
shares of Common Stock tendered in payment (plus any applicable taxes) shall be
paid in cash. No Participant may tender shares of Common Stock having a Fair
Market Value exceeding the aggregate exercise price payable with respect to the
Option being exercised (plus any applicable taxes).

 

(c)           In
the event a Participant elects to pay the exercise price payable with respect
to an Option pursuant to Section 5.2(a)(iii), only a whole number of
Issued Shares (and not fractional Issued Shares) may be withheld in payment. When
payment of the exercise price is made by withholding of Issued Shares, the
difference, if any, between (x) the aggregate exercise price payable with
respect to the Option being exercised and (y) the Fair Market Value of the
Issued Shares withheld in payment shall be paid in cash. No Participant may
authorize the withholding of Issued Shares having a Fair Market Value exceeding
the aggregate exercise price payable with respect to the Option being exercised
(plus any applicable taxes). Any withheld Issued Shares shall no longer be
issuable under such Option.

 

(d)           If,
with respect to any Participant a Termination Event occurs, then, subject to Section 
6.3, such Participant shall have a period of 90 days after the
Termination Date to exercise any Options that were vested as of the Termination
Date; provided, that in the event of Participant’s death or disability,
such Participant (or such Participant’s legal representatives) shall have a
period of 180 days after the Termination Date to exercise any Options that were
vested as of the Termination Date.

 

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5.3           Withholding
Tax Requirements.

 

(a)           Amount
of Withholding. It shall be a condition of the exercise of any Option that
the Participant exercising the Option make appropriate payment or other
provision acceptable to the Company with respect to any withholding tax
requirement arising from such exercise, in accordance with the Plan or the
Option Agreement, as applicable. The amount of withholding tax required, if
any, with respect to any Option exercise (the “Withholding Amount”)
shall be determined by the Company’s Treasurer or other appropriate officer of
the Company, and the Participant shall furnish such information and make such
representations as such officer requires to make such determination.

 

(b)           Withholding
Procedure. If the Company determines that withholding tax is required with
respect to any Option exercise, the Company shall notify the Participant of the
Withholding Amount, and the Participant shall pay to the Company an amount
equal to the Withholding Amount in cash (including check, bank draft, money
order or wire transfer of immediately available funds), except to the extent
otherwise provided in the Option Agreement.(1) All amounts paid to the Company
pursuant to this Section 5.3 shall be deposited in accordance with applicable
law by the Company as withholding tax for the Participant’s account. If the
Treasurer or other appropriate officer of the Company determines that no
withholding tax is required with respect to the exercise of any Option, but
subsequently it is determined that the exercise resulted in taxable income as
to which withholding is required (as a result of a disposition of shares or
otherwise), the Participant shall promptly, upon being notified of the
withholding requirement, pay to the Company, by means acceptable to the Company
or as provided in an Option Agreement, the amount required to be withheld.

 

5.4           Notification
of Inquiries and Agreements. Each Participant and each Permitted Transferee
(as defined herein) shall notify the Company in writing within ten (10) days
after the date such Participant or Permitted Transferee (i) first obtains
knowledge of any Internal Revenue Service inquiry, audit, assertion,
determination, investigation, or question relating in any manner to the value
of Options granted hereunder; (ii) includes or agrees (including, without
limitation, in any settlement, closing or other similar agreement) to include
in gross income with respect to any Option granted under this Plan (A) any
amount in excess of the amount reported on Form 1099 or Form W-2 to such
Participant by the Company, or (B) if no such Form was received, any amount;
and/or (iii) exercises, sells, disposes of, or otherwise transfers an Option
acquired pursuant to this Plan. Upon request, a Participant or Permitted Transferee
shall provide to the Company any information or document that is reasonably
available to them relating to any event described in the preceding sentence
which the Company (in its sole discretion) requires in order to calculate and
substantiate any change in the Company’s tax liability as a result of such
event.

 

5.5           Conditions
and Limitations on Exercise. At the discretion of the Committee, exercised
at the time of grant, Options may vest, in one or more installments, upon (i)
the fulfillment of certain conditions, (ii) the passage of a specified period
of time, and/or (iii) the achievement by the Company or any Subsidiary of
certain performance goals. In the event of 

 

(1)   Gary Blackford will have the
right in his Option Agreement to net amounts owed by him for any withholding
taxes resulting from the exercise of any Options.

 

 

8

 

a proposed Sale of the Company, the Committee may
provide, in its discretion, by written notice to each applicable Participant,
that any or all Options shall become immediately vested, and that any or all
Options shall terminate if not exercised as of the date of such Sale of the
Company or any other designated date, or that any such Options shall thereafter
represent only the right to receive such consideration as the Committee shall
reasonably deem equitable in good faith in the circumstances.

 

5.6           Expiration
of Options. In no event shall any part of any Option be exercisable after
the stated date of expiration thereof.

 

5.7           Right
to Purchase Issued Shares Upon Termination of Employment. Except to the
extent otherwise provided in the Option Agreement (as determined by the
Committee in its sole discretion at the time of grant), the provisions of this Section 5.7
shall apply to all Options.(2)

 

(a)           Repurchase
Right. If, with respect to any Participant, a Termination Event occurs,
then such Participant’s Issued Shares (whether held by such Participant or one
or more transferees and including any Issued Shares acquired subsequent to the
Termination Date) will, at the Company’s election, be subject to repurchase, in
whole or in part, by the Company pursuant to the terms and conditions set forth
in this Section 5.7 (the “Repurchase Option”) at a price per
Issued Share equal to the Fair Market Value per Issued Share determined as of
the Valuation Date, less the amount of any cash or property distributed by the
Company with respect to such Issued Share between the applicable Valuation Date
and the closing of the applicable repurchase; provided, that
notwithstanding the foregoing, if the Termination Event occurred due to a
termination by the Company of such Participant’s employment for Cause, then the
applicable Issued Shares will be subject to the Repurchase Option at a price
per Issued Share equal to the lesser of (x) a price per Issued Share equal to
the Fair Market Value per Issued Share determined as of the Valuation Date,
less the amount of any cash distributed by the Company with respect to such
Issued Share between the applicable Valuation Date and the closing of the
applicable repurchase and (y) the price paid to the Company for such Issued
Share by such Participant. Upon the occurrence of a Termination Event with
respect to any Participant, such Participant’s unvested Options as of the
Termination Date shall terminate.

 

(b)           Repurchase
Procedures. The Repurchase Option is exercisable by the Company delivering
written notice (the “Repurchase Notice”) to the holder or holders of the
applicable Issued Shares at any time within 240 days after the later of (x) the
applicable Termination Date or (y) the date that such Issued Shares were first
issued. The Repurchase Notice will set forth the number of Issued Shares to be
acquired from such holder(s), an estimate of the aggregate consideration to be
paid for such holder’s Issued Shares and the time and place for the closing of
the transaction. If any Issued Shares are held by any transferees of the
applicable Participant, the Company will purchase such Issued Shares elected to
be purchased from such holder(s), pro rata according to the number of Issued
Shares held by such holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share).

 

(2)   Gary Blackford's Option
Agreement will provide that his Issued Shares are not subject to repurchase.

 

9

 

(c)           Closing
of Repurchase. The closing of the transactions contemplated by this Section
5.7 will take place on the date designated by the Company in the Repurchase
Notice, which date will not be more than 45 days after the delivery of such
notice. The amount of the repurchase price to be paid for any Issued Shares to
be purchased by the Company pursuant to a Repurchase Option shall be determined
pursuant to Section 5.7(a) hereof and the aggregate amount of such
repurchase price shall be referred to herein as the “Aggregate Repurchase
Price”. The Company will pay the applicable Aggregate Repurchase Price for
any Issued Shares to be purchased by the Company pursuant to a Repurchase
Option by delivery of a check payable to or by wire transfer to an account or
account(s) designated by the holder(s) of such Issued Shares in an aggregate
amount equal to the applicable Aggregate Repurchase Price for such Issued Shares.

 

(d)           Restrictions
on Repurchase. Notwithstanding anything to the contrary contained in this
Plan, all repurchases of Issued Shares by the Company pursuant to a Repurchase
Option will be subject to applicable restrictions contained under applicable
law (including Delaware law) and in the Company’s and its Subsidiaries’ debt
and equity financing agreements that are in effect on the date designated by
the Company for the closing of such repurchase in accordance with Section
5.7(c). If any such restrictions prohibit the repurchase of Issued Shares
which the Company is otherwise entitled to make pursuant to this Section 5.7
or if such repurchase would cause a default under any of the Company’s and/or
its Subsidiaries’ debt and/or equity financing agreements and, in either case,
a Repurchase Notice has been timely delivered pursuant to Section 5.7(b),
the Company may, subject to provisions of this Section 5.7(d), make such
repurchases as soon as (i) it is permitted to do so under such
restrictions and (ii) such repurchase would not cause such a default. The
Company will receive from each seller customary representations and warranties
regarding the ownership of the Issued Shares, including, but not limited to,
the representation that such seller has good and marketable title to such
Issued Shares to be transferred free and clear of all liens, claims,
encumbrances or other restrictions, but no seller will be required to provide
any representations and warranties regarding the status of the Company.

 

(e)           Termination
of Repurchase Option. The Repurchase Option set forth in this Section
5.7 shall terminate with respect to each Participant upon the consummation
of an IPO.

 

5.8           Restrictions
on Transfer of Issued Shares.

 

(a)           Neither
any Participant nor any Permitted Transferee may directly or indirectly, sell,
pledge, assign, transfer or otherwise dispose of (a “Transfer”) any
interest in any Issued Shares, except (i) pursuant to the provisions of Sections
5.7 or 5.10 hereof, (ii) in Public Sales, (iii) pursuant to applicable
laws of descent and distribution, or (iv) among such Participant’s Family
Group; provided, that the restrictions contained in this Section 5.8
will continue to be applicable to Issued Shares after any Transfer of the type
referred to in clause (iii) or (iv) above and, as a condition to any such
Transfer, the transferees of such Issued Shares must agree in writing (which
writing must be delivered to the Company) to be bound by the provisions of this
Plan (unless such Transfer is pursuant to applicable laws of descent and
distribution, in which case, such writing shall be entered into and delivered
to the Company as soon as reasonably possible after such Transfer). Any
transferee of Issued Shares pursuant to a Transfer in accordance with clause
(iii) or (iv) above is herein referred to as a “Permitted Transferee.”  

 

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Upon the proposed Transfer of any Issued Shares
pursuant to clause (iii) or (iv) above, such Participant or such Permitted
Transferee transferring such Issued Shares will deliver a written notice (a “Transfer
Notice”) to the Company, which discloses in reasonable detail the identity
of the Permitted Transferee(s).

 

(b)           The
provisions of this Section 5.8 shall terminate upon the consummation of
a  Qualified Public Offering.

 

(c)           Notwithstanding
anything to the contrary in this Section 5.8, any holder of Issued
Shares who is a party to the Stockholders Agreement (including as a result of
having executed a joinder to the Stockholders Agreement in accordance with the
terms of the Stockholders Agreement) shall be subject to the restrictions on
Transfers with respect to the Issued Shares that are set forth in the
Stockholders Agreement (rather than the restrictions on Transfers that are set
forth in this Section 5.8).

 

5.9           Additional
Restrictions on Transfer.

 

(a)           The
certificates representing shares of Issued Shares will bear the following
legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH
IN THE ISSUER’S STOCK OPTION PLAN, A COPY OF WHICH MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE ISSUER’S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.”

 

The legend set forth above regarding the Plan shall be
removed from the certificates evidencing any securities which cease to be
Issued Shares.

 

(b)           No
holder of Issued Shares may Transfer any Issued Shares (except pursuant to an
effective registration statement under the Securities Act or in a Public Sale)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the Securities
Act is not required in connection with such Transfer. If such opinion of
counsel, reasonably acceptable in form and substance to the Company, further
states that no subsequent Transfer of such Issued Shares will require
registration under the Securities Act, the Company will promptly upon such
Transfer, deliver new certificates for such securities which do not bear the
Securities Act legend set forth in this Section 5.9(a).

 

5.10         Approved
Sale of the Company.

 

(a)           If
the Board or the holders of a majority of the shares of voting Common Stock
then outstanding approve a sale of all or substantially all of the assets of
the Company or 

 

11

 

UHS (as determined on a consolidated basis) or a sale
of all (or, for accounting, tax or other reasons, substantially all) of
(x) the outstanding shares of Common Stock or (y) the shares of
voting capital stock of UHS (in either case, whether by merger,
recapitalization, consolidation, reorganization, combination or otherwise) to
an Independent Third Party or group of Independent Third Parties (each such
sale, an “Approved Sale”), then each holder of Issued Shares will vote
for, consent to and raise no objections against such Approved Sale. If the
Approved Sale is structured as (i) a merger or consolidation, each holder of
Issued Shares will waive any dissenters’ rights, appraisal rights or similar
rights in connection with such merger or consolidation or (ii) a sale of stock,
each holder of Issued Shares will agree to sell all of his or her Issued Shares
on the terms and conditions approved by the holders of a majority of the shares
of voting Common Stock then outstanding. Each holder of Issued Shares or
Options, as applicable, will take all necessary or desirable actions in connection
with the consummation of the Approved Sale as reasonably requested by the
Company including, without limitation, executing any applicable purchase
agreement and, if necessary, exercising any Options. Each holder of Issued
Shares, upon execution of the applicable Option Agreement, irrevocably
constitutes and appoints the Company the true and lawful attorney of such
holder, with full power of substitution, in the name of such holder or the
Company to give effect to this Section 5.10, including the execution of
any documentation necessary to transfer ownership of Issued Shares pursuant to
an Approved Sale. Each holder of Issued Shares, upon execution of the
applicable Option Agreement, agrees that the powers granted to the Company in
the immediately preceding sentence are coupled with an interest and are
irrevocable by any holder of Issued Shares.

 

(b)           If
the Company or the holders of the Company’s securities enter into any
negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities and Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Issued Shares will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Issued Shares appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Issued Shares declines to appoint the purchaser representative
reasonably designated by the Company, such holder will appoint another
purchaser representative, and such holder will be responsible for the fees of
the purchaser representative so appointed.

 

(c)           Each
holder of Issued Shares will bear their pro-rata share (based upon the amount
of consideration received) of the costs of any sale of Issued Shares pursuant
to an Approved Sale to the extent such costs are incurred for the benefit of
all holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by any holder of Issued Shares on his or her
own behalf will not be considered costs of the transaction hereunder.

 

5.11         Holdback
Agreement. No holder of Issued Shares will effect any sale or distribution
of Common Stock during the seven days prior to or the 180-day period beginning
on the effective date of any underwritten Public Offering (except as part of
such underwritten registration), unless the underwriters managing such
underwritten Public Offering otherwise agree.

 

12

 

ARTICLE VI

 

General Provisions

 

6.1           Written
Agreement. Each Option granted hereunder shall be embodied in a written  agreement (the “Option Agreement”)
which shall be signed by the Participant to whom the Option is granted and
shall be subject to the terms and conditions set forth herein.

 

6.2           Listing,
Registration and Legal Compliance. If at any time the Committee determines,
in its discretion, that the listing, registration or qualification of the
shares subject to Options upon any securities exchange or under any state or
federal securities or other law or regulation, or the consent or approval of
any governmental regulatory body, is necessary as a condition to or in
connection with the granting of Options or the purchase or issuance of shares
thereunder, no Options may be granted or exercised, in whole or in part, unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee. The
holders of such Options will supply the Company with such certificates,
representations and information as the Company shall reasonably request and
shall otherwise cooperate with the Company in obtaining such listing,
registration, qualification, consent or approval. In the case of officers and
other Persons subject to Section 16(b) of the Securities Exchange Act, the
Committee may at any time impose any limitations upon the exercise of Options
that, in the Committee’s discretion, are necessary in order to comply with such
Section 16(b) and the rules and regulations thereunder. If the Company, as part
of an offering of securities or otherwise, finds it necessary because of
federal or state regulatory requirements to reduce the period during which any
Options may be exercised, the Committee may, in its discretion and without the
consent of the holder of any such Option, so reduce such period on not less
than 15 days’ written notice to the holders thereof.

 

6.3           Options
Not Transferrable. Options (including the right to receive Option Shares)
may not be Transferred or assigned by the Participant to whom they were
granted, other than by will or the laws of descent and distribution and, during
the lifetime of such Participant, Options may be exercised only by such
Participant (or, if such Participant is incapacitated, by such Participant’s
legal guardian or legal representative). In the event of the death of a
Participant, Options which are not vested on the date of death shall terminate,
and the exercise of Options granted hereunder to such Participant which are
vested as of the date of death may be made only by the executor or
administrator of such Participant’s estate or the Person or Persons to whom
such Participant’s rights under the Options pass by will or the laws of descent
and distribution no later than 180 days after the date of such Participant’s
death.

 

6.4           Corporate
Transaction. Upon the occurrence of any “corporate transaction” as such
term is defined in Treas. Reg. § 1.424-1(a)(3) (including, but not limited
to a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation) in which holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock
with respect to their Common Stock, new stock rights may be substituted for the
Options, but only to the extent that the requirements of Treas. Reg.
§ 1.424-1 (without regard to the requirement described in § 1.424-1(a)(2)
that an eligible corporation be the employer of the optionee) would be met if
the Option were a statutory option, and that the requirements of Section 409A
of the Code are met. Notwithstanding the foregoing, in the event 

 

13

 

of any proposed transaction which would represent a
Sale of the Company, the Board may, in its discretion, terminate any or all of
the Options by written notice to the then holders of the Options (whether
vested or unvested), subject to the payment, upon the consummation of such Sale
of the Company, by the Company to the then holders of Options of the
difference, if any, between the consideration which the holders of such Options
would receive in such transaction for the applicable Issued Shares if such
holders exercised such Options (whether vested or unvested) immediately prior
to such transaction and the exercise price of such Options.

 

6.5           Adjustment
for Change in Common Stock. In the event of a recapitalization,
reorganization, stock split, stock dividend, combination of shares,
consolidation, merger or other change in any class of Common Stock, the Board
or the Committee shall, in order to prevent the dilution or enlargement of
rights under the Plan or outstanding Options, adjust (1) the number and type of
shares or other consideration as to which options may be granted under the
Plan, (2) the number and type of shares covered by outstanding Options,
(3) the exercise prices specified therein and (4) other provisions of this
Plan which specify a number of shares, all as such Board or Committee
determines to be appropriate and equitable; provided, that such
adjustments shall be made in a manner that does not subject Participants to any
additional tax, penalties or interest pursuant to Section 409A of the Code. In
the event that the Company declares and pays an extraordinary dividend, the
Board or Committee shall make appropriate provisions for supplemental
distributions of cash, securities and/or other property to holders of any
Options outstanding at the time of such extraordinary dividend in order to
preserve the value represented by such Options; provided, that such
supplemental distributions shall be made in a manner that does not subject
Participants to any additional tax, penalties or interest pursuant to Section
409A of the Code.

 

6.6           Rights
of Participants. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Subsidiary to terminate any Participant’s
employment at any time (with or without cause), or confer upon any Participant
any right to continue in the employ of the Company or any Subsidiary for any
period of time or to continue to receive such Participant’s current (or other)
rate of compensation, the terms of which shall be governed by such Participant’s
employment agreement, if any, with the Company or any of its Subsidiaries. No
employee of the Company or any of its Subsidiaries shall have a right to be
selected as a Participant or, having been so selected, to be selected again as
a Participant, except as expressly provided in such employee’s employment
agreement, if any, with the Company or any of its Subsidiaries.

 

6.7           Amendment,
Suspension and Termination of Plan. The Board or the Committee may suspend
or terminate the Plan or any portion thereof at any time and may amend it from
time to time in such respects as the Board or the Committee may deem advisable;
provided, however, that no such amendment shall be made without shareholder
approval to the extent such approval is required by law, agreement or the rules
of any exchange upon which the Common Stock is listed, and no such amendment,
suspension or termination shall impair the rights of Participants under
outstanding Options without the consent of the Participants affected thereby,
except as provided below. No Options shall be granted hereunder after the tenth
anniversary of the adoption of the Plan.

 

14

 

6.8           Amendment
of Outstanding Options. The Committee may amend or modify any Option in any
manner; provided, that no amendment shall be made with respect to any
outstanding Option to extend the exercise period beyond the stated date of
expiration with respect to such Option; provided, further, that,
except as expressly contemplated elsewhere herein or in any agreement
evidencing such Option, no such amendment or modification shall impair the
rights of any Participant under any outstanding Option without the consent of
such Participant.

 

6.9           Indemnification.
In addition to such other rights of indemnification as they may have as members
of the Board or the Committee, the members of the Board and Committee shall be
indemnified by the Company against (i) all costs and expenses reasonably
incurred by them in connection with any action, suit or proceeding to which
they or any of them may be party by reason of any action taken or failure to
act under or in connection with the Plan or any Option granted under the Plan,
and (ii) all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding; provided, however, that any such Board or Committee member
shall be entitled to the indemnification rights set forth in this Section
6.9 only if such member (1) acted in good faith and in a manner that such
member reasonably believed to be in, and not opposed to, the best interests of
the Company, and (2) with respect to any criminal action or proceeding, (A) had
no reasonable cause to believe that such conduct was unlawful, and (B) upon the
institution of any such action, suit or proceeding, a Board or Committee member
shall give the Company written notice thereof and an opportunity to handle and
defend the same before such Board or Committee member undertakes to handle and
defend it on his own behalf.

 

6.10         Restricted
Securities. All Common Stock issued upon the exercise of any Options issued
pursuant to the terms of this Plan shall constitute “restricted securities,” as
that term is defined in Rule 144 promulgated by the Securities and Exchange
Commission pursuant to the Securities Act, and may not be Transferred except in
compliance with the registration requirements of the Securities Act or an
exemption therefrom.

 

6.11         Amendment
to Comply with Section 409A of the Code. To the extent that this Plan or
any part thereof is deemed to be a nonqualified deferred compensation plan
subject to Section 409A of the Code and the Treasury Regulations (including
proposed regulations) and guidance promulgated thereunder, (a) the provisions
of this Plan shall be interpreted in a manner to the maximum extent possible to
comply with Section 409A of the Code in accordance with Section 409A of the
Code and (b) the parties hereto agree to amend this Plan for purposes of
complying with Section 409A of the Code promptly upon issuance of any Treasury
regulations or guidance thereunder; provided, that any such amendment
shall not enlarge or diminish the number of shares of Common Stock with respect
to which Options may be granted under the Plan, or otherwise materially
adversely affect the Participant, the Company, or any affiliate of the Company,
without the consent of such party.

 

6.12         Governing
Law; Jurisdiction. All issues and questions concerning the construction,
validity, interpretation and enforceability of this Plan shall be governed by,
and construed in accordance with, the laws of the State of Delaware, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Delaware or any

 

15

 

 other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware. The
parties hereto hereby irrevocably and unconditionally submit to the exclusive
jurisdiction of any Federal court sitting in the State of Minnesota over any
suit, action or proceeding arising out of or relating to this Plan. The parties
hereby agree that service of any process, summons, notice or document by U.S.
registered mail addressed to any such party shall be effective service of
process for any action, suit or proceeding brought against a party in any such
court. The parties hereto hereby irrevocably and unconditionally waive any
objection to the laying of venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. The
parties hereto agree that a final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon any
party and may be enforced in any other courts to whose jurisdiction any party
is or may be subject, by suit upon such judgment.

 

*    *    *   
*    *

 

16Exhibit
10.18

 

UHS HOLDCO, INC.

 

FORM OF OPTION AGREEMENT 

EVIDENCING A GRANT OF AN OPTION UNDER

THE EMPLOYEE OPTION PLAN

 

This Option
Agreement (this “Agreement”) is made [                      ],
20  , between UHS Holdco, Inc., a Delaware corporation (the “Company”),
and [                      ]
(“Grantee”). Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Plan (as defined below).

 

1.             Grant of
Option. Pursuant to the UHS Holdco, Inc. Stock Option Plan (the “Plan”),
the Company hereby grants to Grantee, as of the date hereof, a stock option
(the “Option”) to purchase from the Company [        ] shares (the
“Shares”) of the Company’s common stock, $0.01 par value per share (the “Common
Stock”), at the exercise price per share of $[         ] (the “Exercise
Price”), subject to the terms and conditions set forth herein and in the
Plan. Upon certain events, the number of Shares and/or the Exercise Price may
be adjusted as provided in the Plan.

 

2.             Grantee Bound by Plan. The Plan is incorporated herein by
reference and made a part hereof. Grantee hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by all the terms and provisions thereof. The
Plan should be carefully examined before any decision is made to exercise the
Option.

 

3.             Exercise of
Option. Subject to the terms and conditions contained herein,
including Section 7 hereof, and in the Plan, the Option may be
exercised, in whole or in part, to the extent it has become vested, by written
notice to the Company at any time and from time to time after the date of grant.
The Option may not be exercised for a fraction of a share of Common Stock. Options
are subject to cancellation as provided in the Plan.

 

4.             Expiration of Option.

 

(a)           The Option shall not be
exercisable in any event ten years after the date hereof. Any part of the
Option that is not vested on the Termination Date shall expire and be forfeited
on such date, and any part of the Option that is vested on the Termination Date
shall also expire and be forfeited to the extent not exercised on or before
ninety (90) days following the Termination Date or such shorter period if such
ninety (90)-day period would exceed the original term of the Option; provided,
that in the event of the death or disability of the Grantee, any part of the
Option that is vested on the date of the Termination Date shall expire and be
forfeited to the extent not exercised on or before 180 days following the
Termination Date or such shorter period if such 180-day period would exceed the
original term of the Option.

 

(b)           Subject to Section 5(d), all unvested Performance Vesting
Options shall terminate in their entirety, without any action on the part of
the Company, upon the occurrence of a Sale of the Company.

 

 

5.             Vesting of
Performance Vesting Options.

 

(a)           A portion of the Option
granted under this Agreement representing the right to purchase [                      ]
Shares (the “Performance Vesting Options”) shall vest in whole or in
part and become exercisable with respect to the Shares prior to the tenth
anniversary of the date hereof upon the attainment of certain goals and upon
certain events as described in this Section 5.

 

(b)           The Performance Vesting
Option shall vest and become exercisable with respect to 16.66% of the Shares
(rounded to the nearest whole share) on each December 31 after the date hereof
(a “Performance Vesting Date”) during the period beginning on the date
hereof and ending on December 31, 2012 (such period of time is referred to as
the “Performance Vesting Period”), if and only if, (i) the Grantee
remains continuously employed with the Company and/or any of its Subsidiaries
during the period beginning on the date hereof and ending on the applicable
Performance Vesting Date and (ii) the Company’s Adjusted EBITDA (as
defined below) for such fiscal year equals or exceeds the Adjusted Target
EBITDA (as defined below) for such fiscal year; provided, however,
at the end of each fiscal year of the Company during the Performance Vesting
Period, if the sum of the Company’s Adjusted EBITDA for the fiscal year ending
on such Performance Vesting Date and the Company’s Adjusted EBITDA for each of
the previous fiscal years during the Performance Vesting Period equals at least
100% of the sum of the Adjusted Target EBITDA for the fiscal year ending on
such Performance Vesting Date and the Adjusted Target EBITDA for each of the
previous fiscal years during the Performance Vesting Period (such determination
is referred to herein as the “Aggregate Test”), then the Performance
Vesting Options shall vest and become exercisable for the number of Shares
which will result in the aggregate number of Shares which are vested as of the
end of such fiscal year being equal to the greater of (A) the number of
Shares that would have otherwise vested and become exercisable as determined
without regard to the Aggregate Test and (B) the number of Shares which
would have vested if 16.66% of the Shares vested on each Performance Vesting
Date ending on or prior to the Performance Vesting Date which is the last day
of such fiscal year.

 

(c)           Notwithstanding
anything contained herein to the contrary, (i) if the Company or any of it
Subsidiaries consummates an acquisition of another Person, a disposition of the
Company or any of its Subsidiaries to another Person or any similar transaction
during any fiscal year of the Company or (ii) if the accounting policies,
procedures or rules to which the Company is subject change, in either case
during the Performance Vesting Period, then the Adjusted Target EBITDA for the
remainder of such fiscal year after such transaction or the effective date of
such change and all subsequent fiscal years during the Performance Vesting
Period will be adjusted in good faith by the Committee, and each such adjusted
and approved Adjusted Target EBITDA shall be deemed the applicable Adjusted
Target EBITDA for such fiscal year and each such subsequent fiscal years for
all purposes hereunder during the Performance Vesting Period. Any such
adjustment to the Adjusted Target EBITDA will not affect the Adjusted Target
EBITDA or the Aggregate Test with respect to any fiscal years (or a portion of
any fiscal year) prior to the consummation of such transaction.

 

(d)           In the event of a Sale
of the Company, so long as the Grantee remains continuously employed by the
Company and/or any of its Subsidiaries during the period 

 

2

 

beginning on the date
hereof and ending on the date that such Sale of the Company is consummated [(or if the Grantee is terminated without Cause or the
Grantee resigns for Good Reason in the thirty (30) days period prior to the
consummation of such Sale of the Company, the Grantee shall be deemed to have
been continuously employed by the Company and/or any of its Subsidiaries during
the period beginning on the date hereof and ending on the date that such Sale
of the Company is consummated for purposes of this Section 5(d) only)](1) the Performance Vesting Options
shall vest and become immediately exercisable with respect to 100% of the
Shares to the extent BSMB realizes an IRR equal to or greater than 20%, and,
subject to Sections 5.10 and 6.4 of the Plan, shall remain exercisable for a
period of 90 days following such Sale of the Company.

 

(e)           For purposes of this Section 5,
the following terms have the following meanings:

 

(i)            “Adjusted
EBITDA” means, with respect to the Company and its Subsidiaries, on a
consolidated basis, for any fiscal year, the sum of: (A) the net income
for such fiscal year (before the payment of any dividends and excluding the
effect of any extraordinary gains or losses during such period and the effect
of any purchase accounting adjustments as a result of the acquisition of UHS by
the Company), plus (B)  interest expense, federal, state, foreign
and local income, franchise, and other similar taxes, depreciation and
amortization for such fiscal year, plus (C) any management fees paid to
Bear Stearns Merchant Manager III (Cayman), L.P. or its Affiliates pursuant to
the Professional Services Agreement, dated as of May 31, 2007, by and
between UHS and Bear Stearns Merchant Manager III (Cayman), L.P., as amended,
modified or restated from time to time (the “Services Agreement”), any
management fees paid to any other institutional investor that owns shares of
Common Stock (including for fiscal year 2007 only, any management fees paid by
the Company or its Subsidiaries during the period from January 1, 2007 to May
31, 2007 pursuant to (x) that certain Management Agreement, dated as of October
17, 2003, between Halifax GenPar, L.P. and Universal Hospital Services, Inc.
and (y) that certain Management Agreement, dated as of February 28, 1998,
between J.W. Childs Associates, L.P. and Universal Hospital Services, Inc., as
amended by that certain Amendment to Management Agreement, dated as of October
17, 2003, between J.W. Childs Associates, L.P. and Universal Hospital
Services, Inc.) and any director fees paid to members of the Board, in each
case, during such fiscal year, plus (D) for fiscal year 2007 only, any
consulting fees paid by Universal Hospital Services, Inc. to L.E.K. Consulting
during the period from January 1, 2007 to May 31, 2007, plus (E) any non-cash
charges to the extent that such charges will not result in a cash charge in any
future period (including any non-cash expenses relating to the options under
FAS 123(R)) during such fiscal year, plus (F) non-capitalized
transaction fees and expenses incurred in connection with the acquisition of
UHS by the Company during such fiscal year, plus (G) any fees paid by
the Company or UHS to David Dovenberg, but not to exceed $250,000 in any fiscal
year, plus (or minus) (H) any unusual and non-recurring losses (or
gains) for such fiscal year, minus (I) any non-cash gains during such
fiscal 

 

(1)                                  This
provision will be included only for those Grantees who are at the level of Vice
President and above (including the Controller).

 

3

 

year, in each
case, as determined in accordance with United States generally accepted
accounting principles and as set forth on the Company’s financial statements
for such fiscal year which have been approved by the Board.

 

(ii)           “Adjusted
Target EBITDA” means, for any fiscal year of the Company during the
Performance Vesting Period, the Base Target EBITDA (as set forth in Annex I
attached hereto) for such year; provided, that the Committee shall make
appropriate adjustments to any Adjusted Target EBITDA (i) to the extent that
there are material deviations in the amount of capital expenditures actually
incurred by the Company during any fiscal year from the Capital Expenditures
Target (as set forth in Annex I attached hereto) for such fiscal
year and (ii) in accordance with Section 5(c) above.

 

(iii)          “IRR” means, as of any date of a Sale
of the Company, after giving effect to such Sale of the Company, BSMB’s
compounded annual rate of return (as determined in good faith by BSMB using the
“XIRR” function in Microsoft Excel®, upgrades to such program, or if
such software is not available at such time, an equivalent function in another
software package) on its entire investment in the Company.

 

For purposes of calculating BSMB’s compound annual
rate of return as contemplated in the preceding paragraph:

 

(A)                              there
shall be taken into account all cash payments received by BSMB from time to
time prior to the consummation of such Sale of the Company (excluding, for the
avoidance of doubt, any fees paid to BSMB pursuant to the Services Agreement,
but including the portion of any Advisory Fee (as defined in the Services
Agreement) paid to BSMB in excess of $500,000 in any fiscal year of the
Company);

 

(B)                                there
shall be taken into account all cash payments to be received by BSMB upon
consummation of such Sale of the Company but only if received by BSMB on the
date of consummation of such Sale of the Company, or to be received thereafter
in connection with such Sale of the Company pursuant to an installment sale
(excluding, for the avoidance of doubt, any fees paid to BSMB pursuant to the
Services Agreement, but including the portion of any Advisory Fee (as defined
in the Services Agreement) paid to BSMB in excess of $500,000 in any fiscal
year of the Company); and

 

(C)                                there
shall be taken into account the effect of any dilution resulting from any
vesting of the Option pursuant to this Agreement.

 

6.             Vesting of Time Vesting Options.

 

(a)           A portion of the Option
granted under this Agreement representing the right to purchase [              ]
Shares shall be subject to vesting (the “Time Vesting Options”) in the
manner described in this Section 6.

 

4

 

(b)           The Time Vesting
Options shall fully vest and become exercisable with respect to the applicable
number of Shares set forth below if and only if the Termination Date does not
occur during the period beginning on the date hereof and ending on the
applicable vesting date determined below. The Time Vesting Options shall
cumulatively vest and become exercisable with respect to 16.66% of the Shares
(rounded to the nearest one-thousandth (0.001) of a share of Common Stock) on
each December 31 after the date hereof during the period beginning on the date
hereof and ending on December 31, 2012.

 

(c)           Upon a Change in
Control (as defined below), 100% of any portion of the Time Vesting Options
that is not vested as of the date of such Change in Control shall become vested
and immediately exercisable and, subject to Sections 5.10 and 6.4 of the Plan,
shall remain exercisable for a period of 90 days following such Change in
Control. For the purposes  hereof, “Change
in Control” means any (i) sale or issuance (or series of sales or
issuances) of Common Stock or the right to acquire Common Stock by the Company
or any holders thereof which results in any Person or group of Affiliated
Persons (other than the owners of Common Stock or the right to acquire Common
Stock as of the date hereof and Affiliates of such Persons) owning and/or
having the right to acquire more than 50% of the Common Stock on a fully
diluted basis at the time of such sale or issuance (or series of sales or
issuances), other than in connection with a Public Offering or (ii) merger,
share exchange, reorganization, recapitalization or consolidation to which the
Company is a party (other than a merger in which the Company is the surviving
entity, or a share exchange in which capital stock of the Company is issued,
that does not result in more than 49% of the Company’s outstanding capital
stock possessing the voting power (under ordinary circumstances) to elect a
majority of the Board being owned of record or beneficially by persons or
entities other than the holders of such capital stock immediately prior to such
merger or share exchange).

 

7.             Conditions
to Exercise. The Option may not be exercised by Grantee unless the
following conditions are met:

 

(a)           The Option has become
vested with respect to the Shares to be acquired pursuant to such exercise;

 

(b)           Legal counsel for the
Company must be satisfied at the time of exercise that the issuance of shares
of Common Stock upon exercise will be in compliance with the Securities Act and
applicable United States federal, state, local and foreign laws; and

 

(c)           Grantee must pay at the
time of exercise the full Exercise Price for the Shares being acquired
hereunder in the form elected by Grantee, plus any withholding tax (which shall
be paid only in cash) required in connection with such exercise, in each case,
in accordance with the terms of the Plan[; provided,
that the Withholding Amount relating to the Options, at the Grantee’s election,
shall reduce the number of Shares (based on the Fair Market Value of such
Shares) that are issuable upon exercise of such portion of the Option; provided,
however, that the number of Shares used to satisfy the Withholding
Amount 

 

5

 

shall
not exceed the minimum withholding tax obligation under applicable federal and
state law in effect at such time].(2)

 

8.             Transferability.
The Option (including the right to receive the Shares) may not be
Transferred or assigned by Grantee, other than by will or the laws of descent
and distribution and, during the lifetime of Grantee, the Option may be
exercised only by Grantee (or, if Grantee is incapacitated, by Grantee’s legal
guardian or legal representative). In the event of the death of Grantee, the
Option, to the extent it has not vested on the date of death, shall terminate;
and the exercise of the Option, to the extent it has vested as of the date of
death, may be made only by the executor or administrator of Grantee’s estate or
the Person or Persons to whom Grantee’s rights under the Option pass by will or
the laws of descent and distribution. If Grantee or anyone claiming under or
through Grantee attempts to violate this Section 8, such attempted
violation shall be null and void and without effect, and the Company’s
obligation hereunder shall terminate. Any Issued Stock received upon exercise
of the Option is subject to the [repurchase
right],(3) restrictions on Transfer and other rights and obligations
set forth in the Plan[; provided,
that, notwithstanding anything contained in the Plan, any Shares received by
Grantee upon exercise of the Option shall not be subject to the repurchase
rights set forth in Section 5.7 of the Plan].

 

9.             Administration.
Any action taken or decision made by the Company, the Board, or the
Committee or its delegates arising out of or in connection with the
construction, administration, interpretation or effect of the Plan or this
Agreement shall lie within its sole and absolute discretion, as the case may
be, and shall be final, conclusive and binding on Grantee and all persons
claiming under or through Grantee, except as expressly provided in Grantee’s
employment agreement, if any, with the Company or any of its Subsidiaries. By
accepting this grant or other benefit under the Plan, Grantee and each person
claiming under or through Grantee shall be conclusively deemed to have
indicated acceptance and ratification of, and consent to, any action taken
under the Plan by the Company, the Board or the Committee or its delegates.

 

10.           No Rights as
Stockholder. Unless and until a certificate or certificates
representing such shares of Common Stock shall have been issued to Grantee (or
any person acting under Section 7 above), Grantee shall not be or
have any of the rights or privileges of a stockholder of the Company with
respect to shares of Common Stock acquirable upon exercise of the Option.

 

11.           Investment
Representation. Grantee hereby acknowledges that the shares of
Common Stock which Grantee may acquire by exercising the Option shall not be
Transferred in the absence of an effective registration statement for the
shares of Common Stock under the Securities Act and applicable state securities
laws or an applicable exemption from the registration requirements of the
Securities Act and any applicable state securities laws. Grantee also agrees
that the shares of Common Stock which Grantee may acquire by exercising the 

 

(2)           This provision will
be contained only in the Option Agreement for Gary Blackford.

(3)           The Issued Shares
owned by Gary Blackford will not be subject to the repurchase right provided
for in the Plan.  

 

6

 

Option will not be sold
or otherwise disposed of in any manner which would constitute a violation of
any applicable federal or state securities laws.

 

12.           Rights of
Grantee. Neither this Agreement nor the Plan creates any employment
rights in Grantee and neither the Company nor any of its Subsidiaries shall
have any liability arising out of the Plan or this Agreement for terminating
Grantee’s employment or reducing Grantee’s responsibilities.

 

13.           Notices. Any
notice hereunder to the Company shall be addressed to the Company’s principal
executive office, Attention: General Counsel, and any notice hereunder to
Grantee shall be addressed to Grantee at Grantee’s last address on the records
of the Company, subject to the right of either party to designate at any time
hereafter in writing some other address. Any notice shall be deemed to have
been duly given when delivered personally, one day following dispatch if sent
by reputable overnight courier, fees prepaid, or three days following mailing
if sent by registered mail, return receipt requested, postage prepaid and addressed
as set forth above.

 

14.           Binding
Effect. This Agreement shall be binding upon and inure to the
benefit of any successors and assigns to the Company and all persons lawfully
claiming under Grantee.

 

15.           Non-Competition
and Non-Solicitation.(4)

 

(a)           In consideration of the
Company’s grant of the Option hereunder, the Grantee acknowledges that, during
the course of the Grantee’s employment with the Company and its Subsidiaries
(the “Term”), the Grantee shall become familiar with the trade secrets
of the Company and its Subsidiaries and other Confidential Information (as
defined below) concerning the Company and its Subsidiaries (and their
respective predecessor companies) and that the Grantee’s services have been and
shall be of special, unique and extraordinary value to the Company and its
Subsidiaries. Accordingly, the Grantee agrees that during the Term and
thereafter until the end of the first anniversary of the Grantee’s Termination
Date, the Grantee shall not directly or indirectly own any interest in, manage,
control, participate in, consult with, render services for, or in any manner
engage in any Competing Business (as defined below) in the United States; provided,
that the foregoing shall not prohibit Grantee from owning stock as a passive
investor in any publicly traded corporation so long as Grantee’s ownership in
such corporation, directly or indirectly, is less than 2% of the voting stock
of such corporation. For purposes of this paragraph, “Competing Business”
means any business activity involving the outsourcing or rental of movable
medical equipment and related services to the health care industry.

 

(b)           During the Term and
thereafter until the end of the second anniversary of the Date of Termination,
the Grantee shall not directly or indirectly through another Person (i) induce
or attempt to induce any employee of the Company or any Subsidiary to leave the
employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the 

 

(4)           This provision will
not be included in Gary Blackford's Option Agreement.

 

7

 

Company or any Subsidiary
and any employee thereof, (ii) hire any person who was an employee of the
Company or any Subsidiary at any time within the one (1) year period before the
Grantee’s Termination Date, or (iii) induce or attempt to induce any customer,
supplier, licensee, licensor, franchisee or other business relation of the
Company or any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any
Subsidiary, except with the prior written consent of the Board, which consent
will be given at the sole discretion of the Board.

 

16.           Non-Disclosure.(5) The Grantee agrees that
during and at all times after the Term, the Grantee will keep secret all
confidential matters and materials of the Company (including its Subsidiaries
and Affiliates), including, without limitation, know-how, trade secrets, real
estate plans and practices, individual office results, customer lists, pricing
policies, operational methods, any information relating to the Company
(including any of its Subsidiaries and Affiliates) products, processes,
customers and services and other business and financial affairs of the Company
(collectively, “Confidential Information”), to which the Grantee had or
may have access and will not disclose such Confidential Information to any
Person other than (i) the Company, its respective authorized employees and such
other Persons to whom the Grantee has been instructed to make disclosure by the
Board, (ii) as appropriate (as determined by the Grantee in good faith) to
perform the Grantee’s duties to the Company or its Subsidiaries, or (iii) in
compliance with legal process or regulatory requirements. “Confidential
Information” will not include any information which is in the public domain
during or after the Term to the extent that such information is not in the
public domain as a consequence of disclosure by the Grantee in violation of
this Option Agreement.

 

17.           Intellectual Property, Inventions and Patents.(6) 
The Grantee acknowledges that all discoveries, concepts, ideas,
inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports, patent applications, copyrightable work and mask
work (whether or not including any Confidential Information) and all
registrations or applications related thereto, all other proprietary information
and all similar or related information (whether or not patentable) which relate
to the actual or anticipated business, research and development or existing or
future products or services of the Company or its Subsidiaries and which are
conceived, developed or made by the Grantee (whether individually or jointly
with others) while employed by the Company or its Subsidiaries (or their
respective predecessors) (“Work Product”), belong to the Company or its
Subsidiaries. The Grantee shall promptly disclose such Work Product to the
Board and, at the Company’s expense, perform all actions reasonably requested
by the Board (whether during or after the Term) to establish and confirm such
ownership (including, without limitation, assignments, consents, powers of attorney
and other instruments).

 

(5)           This provision
will not be included in Gary Blackford's Option Agreement. 

(6)           This
provision will not be included in Gary Blackford's Option Agreement. 

 

8

 

18.           Modification.(7)  The Grantee agrees and acknowledges that the
duration and scope of the covenants described in Section 15, 16
or 17 are fair, reasonable and necessary in order to protect the
goodwill and other legitimate interests of the Company and its Subsidiaries,
that adequate consideration has been received by the Grantee for such
obligations, and that these obligations do not prevent the Grantee from earning
a livelihood. If, however, for any reason any court of competent jurisdiction
determines that any restriction contained in Section 15, 16 or 17
are not reasonable, that consideration is inadequate, such restriction will be
interpreted, modified or rewritten to include as much of the duration, scope
and geographic area identified in Section 15, 16 or 17 as
will render such restrictions valid and enforceable.

 

19.           Remedies.(8) The Grantee acknowledges that the Company will suffer
irreparable harm as a result of a breach of this Option Agreement by the
Grantee for which an adequate monetary remedy does not exist and a remedy at
law may prove to be inadequate. Accordingly, in the event of any actual or
threatened breach by the Grantee of any provision of this Option Agreement, the
Company will, in addition to any other remedies permitted by law, be entitled
to obtain remedies in equity, including without limitation specific
performance, injunctive relief, a temporary restraining order and/or a
permanent injunction in any court of competent jurisdiction, to prevent or
otherwise restrain any such breach without the necessity of proving damages,
posting a bond or other security. Such relief will be in addition to and not in
substitution of any other remedies available to the Company. The existence of
any claim or cause of action by the Grantee against the Company or any of its
Subsidiaries, whether predicated on this Option Agreement or otherwise, will
not constitute a defense to the enforcement by the Company of this Option
Agreement. The Grantee agrees not to defend on the basis that there is an
adequate remedy at law.

 

20.          Governing Law.  The validity, construction, interpretation,
administration and effect of the Plan, and of its rules and regulations, and
rights relating to the Plan and to this Agreement, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Delaware. The
parties hereto hereby irrevocably and unconditionally submit to the exclusive
jurisdiction of any Federal court sitting in the State of Minnesota over any
suit, action or proceeding arising out of or relating to this Agreement. The
parties hereby agree that service of any process, summons, notice or document
by U.S. registered mail addressed to any such party shall be effective service
of process for any action, suit or proceeding brought against a party in any such
court. The parties hereto hereby irrevocably and unconditionally waive any
objection to the laying of venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. The
parties hereto agree that a final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon any
party and may be enforced in any other courts to whose jurisdiction any party
is or may be subject, by suit upon such judgment.

 

(7)           This
provision will not be included in Gary Blackford's Option Agreement. 

(8)                                  This
provision will not be included in Gary Blackford's Option Agreement. 

 

9

 

21.           WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY
HERETO HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY
IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING
OUT OF THIS AGREEMENT OR THE PLAN, OR THE ENFORCEMENT HEREOF OR THEREOF. THE
GRANTEE AGREES THAT THIS SECTION 21 IS A SPECIFIC AND MATERIAL ASPECT OF
THIS AGREEMENT AND ACKNOWLEDGES THAT THE COMPANY WOULD NOT HAVE ENTERED INTO
THIS AGREEMENT IF THIS SECTION 21 WERE NOT PART OF THIS AGREEMENT.

 

*     *    
*     *     *

 

10

 

IN WITNESS
WHEREOF, the Company and Grantee have executed this Option Agreement as of the
date first above written.

 

	
   

  	
  UHS HOLDCO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  GRANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [                                      ]

  

 

 

ANNEX
I

 

	
  Fiscal Year

  	
   

  	
  Base Target EBITDA

  	
   

  	
  Capital Expenditures Target

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2007

  	
   

  	
  $

  	
  91,805,000

  	
   

  	
  $

  	
  58,100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008

  	
   

  	
  $

  	
  102,743,000

  	
   

  	
  $

  	
  52,700,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2009

  	
   

  	
  $

  	
  113,158,000

  	
   

  	
  $

  	
  59,700,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2010

  	
   

  	
  $

  	
  126,845,000

  	
   

  	
  $

  	
  70,400,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  $

  	
  143,833,000

  	
   

  	
  $

  	
  83,200,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2012(9)

  	
   

  	
  To be determined by the
  Board or Committee prior to date of grant

  	
   

  	
  To be determined by the
  Board or Committee prior to date of grant

  	
   

  

 

(9)           Please
propose target for FY 2012.

 

12

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