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EXHIBIT 10.4
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE COMPDENT CORPORATION 1997 STOCK OPTION PLAN
NAME OF OPTIONEE:
NO. OF OPTION SHARES:
GRANT DATE:
OPTION EXERCISE PRICE:
EXPIRATION DATE:
Pursuant to the CompDent Corporation 1997 Stock Option Plan (the
"Plan"), CompDent Corporation, a Delaware corporation (the "Company"), hereby
grants to the person named above (together with his or her successors or assigns
as contemplated hereby, the "Optionee"), an option (the "Stock Option") to
purchase on or prior to the expiration date specified herein, all or any part of
the number of shares of Common Stock, par value $0.01 per share ("Common
Stock"), of the Company indicated above (the "Option Shares"), at the per share
option exercise price specified above, subject to the terms and conditions set
forth herein and in the Plan. All capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Plan.
1. VESTING AND EXERCISABILITY.
(a) No portion of this Stock Option may be exercised until such portion
shall have vested.
(b) Except as set forth below and in Section 6, and subject to the
determination of the Compensation Committee of the Board of Directors of the
Company or the Board of Directors of the Company, as applicable (the
"Committee"), in its sole discretion to accelerate the vesting schedule
hereunder, this Stock Option shall be vested and exercisable with respect to the
following number of Option Shares on the dates indicated:
Incremental (Aggregate) Number
of Option Shares Exercisable* Vesting Date
----------------------------- ------------
1.
2.
3.
4.
Further, and notwithstanding anything herein to the contrary and
without limitation of Section 6, this Stock Option shall be deemed vested and
exercisable in full upon the date on which the Optionee's employment with the
Company and its Subsidiaries terminates if such termination occurs in the year
following a Change of Control (as hereinafter defined) of the Company or any
entity controlling the Company (a "Parent") and either (i) such termination
occurs pursuant to or under the circumstances contemplated by Section 6(e) or
Section 6(f) of the Employment Agreement dated_____________, between the Company
and the Optionee (the "Employment Agreement") (i.e., without cause termination
by the Company or termination by the Optionee following a material and uncured
default by the Company) or (ii) without limitation of clause (i), such
termination is preceded during such year by any material elimination or adverse
modification in the duties, title, principal employment location or compensation
of the Optionee without his or her written consent, subject, however to the
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* Subject to Section 5
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following sentence. Notwithstanding the foregoing, in the event that the
Company receives written advice from its independent public accountants in
connection with any transaction constituting a Change of Control (as
hereinafter defined) to the effect that vesting of this Stock Option under the
circumstances contemplated by the preceding sentence would preclude or
otherwise adversely affect the ability of the Company or any other party to
such transaction to account for the same as a "pooling of interests" within the
meaning of XXX Xx. 00 (or any successor provision), which transaction would
otherwise qualify for such accounting treatment, then vesting of this Stock
Option shall not accelerate on a subsequent termination of employment within
the year following a Change of Control as contemplated by the preceding
sentence, and in such circumstance this Stock Option shall continue to vest in
accordance with the annual schedule set forth above.
For purposes hereof, a "Change of Control" shall mean any of the
following events occurring after the date hereof: (i) the direct or indirect
beneficial ownership (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 13D-G
thereunder) of a majority of the outstanding Common Stock of the Company or
Parent is acquired or becomes held by any person or group of persons (within the
meaning of Section 13(d)(3) of the Exchange Act) (a "Group"), (ii) the sale,
mortgage, lease or other transfer to any person or Group in one or more
transactions not in the ordinary course of business of all or substantially all
of the assets on a consolidated basis of Parent, the Company and the Company's
Subsidiaries (taken as a whole), (iii) a change of stock ownership of the
Company of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Exchange Act and any successor Item
of a similar nature; or (iv) the acquisition of beneficial ownership,
directly or indirectly, by any person (as such term is used in Section 13(d) and
14(d)(2) of the Exchange Act) of securities of the Company or Parent
representing 25% or more of the combined voting power of the Company or Parent's
then outstanding securities; or (v) a change during any period of two
consecutive years of a majority of the members of the Board of Directors of the
Company or Parent for any reason.
(c) In the event that the Optionee's Service Relationship (as
hereinafter defined) with the Company and its Subsidiaries terminates for any
reason or under any circumstances other than those described in Section 1(b)
above, including the Optionee's resignation, retirement or termination by the
Company, upon the Optionee's death or disability, or for any other reason,
regardless of the circumstances thereof, this Stock Option shall no longer vest
or become exercisable with respect to any Option Shares not vested as of the
date of such termination from and after the date of such termination, and this
Stock Option may thereafter be exercised, to the extent it was vested and
exercisable on such date of such termination, until the Expiration Date
contemplated by Section 1(d), except as the Committee may otherwise determine.
Upon a termination of employment following a Change of Control under the
circumstances contemplated by Section 1(b), vesting shall occur or continue, as
applicable, as contemplated by such Section. For purposes hereof, a "Service
Relationship" shall mean any relationship as an employee, part-time employee or
consultant of the Company or any Subsidiary of the Company such that, for
example, a Service Relationship shall be deemed to continue without interruption
in the event the Optionee's status changes from full-time employee to part-time
employee or consultant.
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(d) Once any portion of this Stock Option becomes vested and
exercisable, it shall continue to be exercisable by the Optionee or his or her
transferees or successors as contemplated herein at any time or times prior to
the earlier of (i) the date which is 12 months following the date on which the
Optionee's Service Relationship with the Company terminates for any reason or
(ii) ____________, _____, subject to the provisions hereof, including, without
limitation, Section 6 hereof which provides for the termination of unexercised
options upon completion of certain transactions as described therein (the
"Expiration Date").
2. EXERCISE OF STOCK OPTION.
(a) The Optionee may exercise only vested portions of this
Stock Option and only in the following manner: Prior to the Expiration Date
(subject to Section 6), the Optionee may deliver a Stock Option Exercise Notice
(an "Exercise Notice") in the form of Appendix A hereto indicating his or her
election to purchase some or all of the Option Shares with respect to which this
Stock Option has vested at the time of such notice. Such notice shall specify
the number of shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one
or more (if applicable) of the following methods: (a) in cash, by certified or
bank check or other instrument acceptable to the Committee; (b) in the form of
shares of Common Stock that are not then subject to restrictions under any
Company plan and that have been held by the Optionee for at least six months;
(c) by the Optionee delivering to the Company a properly executed Exercise
Notice together with irrevocable instructions to a broker to promptly deliver to
the Company cash or a check payable and acceptable to the Company to pay the
option purchase price, provided that in the event the Optionee chooses to pay
the option purchase price as so provided, the Optionee and the broker shall
comply with such procedures and enter into such agreements of indemnity and
other agreements as the Committee shall prescribe as a condition of such payment
procedure; or (d) a combination of (a), (b) and (c) above. Payment instruments
will be received subject to collection.
(b) Certificates for the Option Shares so purchased will be
issued and delivered to the Optionee upon compliance to the satisfaction of the
Committee with all requirements under applicable laws or regulations in
connection with such issuance. Until the Optionee shall have complied with the
requirements hereof and of the Plan, the Company shall be under no obligation to
issue the Option Shares subject to this Stock Option, and the determination of
the Committee as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares of stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to
the terms hereof, the Company shall have issued and delivered the Option Shares
to the Optionee, and the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee shall
have full dividend and other ownership rights with respect to such Option
Shares, subject to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan,
no portion of this Stock Option shall be exercisable by the Optionee or his or
her transferees and successors after the Expiration Date hereof or such earlier
expiration date as is specified in Section 1 hereof.
3. INCORPORATION OF PLAN. Notwithstanding anything herein to the
contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan.
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4. TRANSFERABILITY. Any portion of this Stock Option which is vested
may be transferred, without consideration for such transfer, to members of the
Optionee's immediate family, to trusts for the benefit of such family members,
to partnerships in which such family members are the only partners, or to
charitable organizations, provided that the transferee agrees in writing with
the Company to be bound by all of the terms and conditions of this Agreement
including without limitation termination of the Stock Option on the date which
is twelve months following termination of the Optionee's Service Relationship
as provided in Section 1(d). Further, this Stock Option shall be transferable
by the laws of descent and distribution. This Agreement is personal to the
Optionee and is not otherwise transferable by the Optionee in any manner and
may be exercised during the Optionee's lifetime only by the Optionee. The
Optionee may elect to designate a beneficiary by providing written notice of
the name of such beneficiary to the Company, and may revoke or change such
designation at any time by filing written notice of revocation or change with
the Company; such beneficiary may exercise the Optionee's Stock Option in the
event of the Optionee's death to the extent provided herein. If the Optionee
does not designate a beneficiary, or if the designated beneficiary predeceases
the Optionee, the Optionee's personal representative, heirs or legatees to whom
ownership has passed may exercise this Stock Option to the extent provided
herein in the event of the Optionee's death.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Subject to Section 6
hereof, if the shares of Common Stock as a whole are increased, decreased,
changed or converted into or exchanged for a different number or kind of shares
or securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend,
stock split, combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment shall be made
in the number and kind of shares and in the per share exercise price of shares
subject to any unexercised portion of this Stock Option. Subject to Section 6
hereof, in the event of any such adjustment in this Stock Option, the Optionee
thereafter shall have the right to purchase the number of shares under this
Stock Option at the per share price, as so adjusted, which the Optionee could
purchase at the total purchase price applicable to this Stock Option immediately
prior to such adjustment. Adjustments under this Section 5 shall be determined
by the Committee of the Company and such determination shall be final, binding
and conclusive.
6. EFFECT OF CERTAIN TRANSACTIONS. In the case of (a) the dissolution
or liquidation of the Company, (b) a merger, reorganization or consolidation in
which a majority of the outstanding voting power of the Company is acquired by
another person or entity (other than a holding company formed by the Company),
(c) the sale of all or substantially all of the assets of the Company to another
person or entity, or (d) the sale of all of the stock of the Company to an
unrelated person or entity, other than a merger transaction to be accounted for
as a Apooling of interests' under XXX Xx. 00 in which the surviving entity
assumes this Stock Option (a "Pooling Transaction"), this Stock Option shall be
deemed fully vested and exercisable as of the closing or consummation of such
transaction, provided that such acceleration and any notice of exercise of
options that become vested as of such closing or consummation shall in all cases
be subject to and contingent upon such closing or consummation. From and after
the closing or consummation of any such transaction, other than a Pooling
Transaction, this Stock Option shall terminate and no longer be exercisable as
to any Option Shares unexercised on or prior to the closing or
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consummation date of such transaction or event, unless provision is made in such
transaction in the sole discretion of the parties thereto for the assumption of
this Stock Option or the substitution for this Stock Option of a new stock
option of the successor person or entity or a parent or subsidiary thereof, if
any, with such adjustment as to the number and kind of shares and the per share
exercise price as such parties shall agree to. In the event of a Pooling
Transaction, this Stock Option shall remain in effect in accordance with its
terms as provided herein and shall become an obligation of the surviving entity,
with appropriate adjustments to the number and kind of shares an the per share
exercise price as contemplated by Section 5. In the event of any transaction
subject to this Section 6, the Company shall give to the Optionee written notice
thereof at least thirty (30) days prior to the closing or anticipated
consummation date, or the record date for such transaction, if earlier.
7. WITHHOLDING TAXES.
The Optionee shall, not later than the date as of which the
exercise of this Stock Option becomes a taxable event for federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Committee
for payment of any federal, state, and local taxes required by law to be
withheld on account of such taxable event. Subject to approval by the Committee,
the Optionee may elect to have such tax withholding obligation satisfied, in
whole or in part, by authorizing the Company to withhold from shares of Common
Stock to be issued or transferring to the Company, a number of shares of Common
Stock with an aggregate Fair Market Value that would satisfy the withholding
amount due. For purposes of this Section 7 "Fair Market Value" on any given date
means the last reported sale price at which Common Stock is traded on such date
or, if no Common Stock is traded on such date, the next preceding
date on which Common Stock was traded, as reflected on the principal stock
exchange or, if applicable, any other national stock exchange on which the
Common Stock is traded or admitted to trading. The Optionee acknowledges and
agrees that the Company or any subsidiary of the Company has the right to deduct
from payments of any kind otherwise due to the Optionee, or from the Option
Shares to be issued in respect of an exercise of this Stock Option, any federal,
state or local taxes of any kind required by law to be withheld with respect to
the issuance of Option Shares to the Optionee.
8. RESTRICTIVE AGREEMENTS.
In consideration of the relationship established by the
employment of Optionee by the Company and the benefits being provided pursuant
said employment including, but not by way of limitation, the grant of the Stock
Option to the Optionee pursuant to this Agreement, the Optionee hereby agrees
with that:
(a) Covenant Not to Solicit/Hire.
1. For a period of twenty four (24) consecutive
calendar months following the Termination of Relationship, Optionee shall not,
for himself/herself or on behalf of any other person, persons, firm,
partnership, corporation, or company call upon any Customer(s), and/or Agents of
the Company for the purpose of soliciting, selling, renting, or other business
promotion to any of said Customer(s) and/or Agents, products and/or services
similar to products and/or services sold and/or delivered by the Company; nor
will he/she in any way, directly or indirectly, for himself/herself or on behalf
of, or in conjunction with any other person, persons, firm, partnership,
corporation or company divert, or take away any Customer(s) and/or Agents of the
Company during the twenty four (24) month term following
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Termination of Relationship; nor will he/she, directly or indirectly, for
himself/herself or on behalf of, or in conjunction with any other person,
persons, firm, partnership, corporation, or company, induce or attempt to induce
any Customer, Agent, Provider, employee, and/or representative of the Company to
sever or otherwise alter their relationship with the Company for twenty four
(24) consecutive calendar months following Termination of Relationship.
(2) For a period of twenty four (24) consecutive
calendar months following the Termination of Relationship, Executive shall not,
for himself/herself or on behalf of any other person, persons, firm,
partnership, corporation, or company, whether or not Executive has any part or
involvement with the foregoing, hire or retain the services of any Employee of
the Company for any purpose.
(b) Non-Disclosure of Trade Secrets and Other Proprietary
Information.
(1) Optionee acknowledges and understands that,
during his/her association with the Company, he/she may have access to and
become familiar with the various trade secrets, technological expertise and
know-how which are owned by and are the property of the Company, including but
not limited to the Confidential Information (as defined herein).
(2) In perpetuity hereafter, Optionee expressly
agrees that until such time as said Confidential Information lawfully becomes
part of the public domain (including generally known information with the
industry), other than as a result of Optionee's acts or omissions to act, not to
disclose any of the aforesaid trade secrets, technological expertise, know-how
or Confidential Information, directly or indirectly, nor to use same in any way,
except in connection with his/her employment duties hereunder or as expressly
authorized by the Company in writing.
(3) Optionee shall deliver to the Company at the
Termination of the Relationship, or at any other time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes and software and
other documents and data (and all copies thereof) relating to the Confidential
Information, work product or the business of the Company which he/she may then
possess or have under his/her control.
(c) No Adverse Action. Executive further agrees not to
knowingly participate in, directly or indirectly, the dissemination, verbal or
otherwise, advertisement or publication of any statement which unfavorably
comments on, unfavorably compares the services or products of the Company to
that of another, or generally holds out in an unfavorable manner the personnel
or management of the Company or the services or products designed, manufactured,
handled, managed or provided by the Company, either along or in cooperation with
others, during the Term of Employment and for a period of twenty four (24)
consecutive calendar months following the Termination of Relationship.
(d) The parties acknowledge that the time, scope and other
provisions of this Section 8 are reasonable under the circumstances. In the
event that any covenant contained in this Section 8 shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its extending
for too great a period of time or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the maximum period of
time for which it may be enforceable and/or to the maximum extent in all other
respects as to which it may be enforceable, all as determined by such court in
such action. The existence of any claim or cause of action which the Optionee
may have against the Company shall not constitute a
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defense or bar to the enforcement of any of the provisions of this Agreement and
shall be pursued through separate court action by the Optionee.
(e) Definitions. For purposes of this paragraph 8 the
following terms shall have the meanings as indicated.
(1) "Affiliates" shall mean all persons or entities
who, at any time during the period of twenty four (24) months beginning on the
date of the Termination of Relationship, are (i) entities or persons
controlling, controlled by or under common control with the party in question,
directly or indirectly, (ii) executive officers or directors of that party,
(iii) 50% beneficial owners of that party's stock, or (iv) entities or persons
for which that party manages or oversees business operations pursuant to a
contract, Agreement or arrangement of any nature.
(2) "Agent" shall mean a person or entity authorized
to act on behalf of the Company or its Affiliates in matters concerning the
business of the Company and its Affiliates, including, but not limited to,
individuals or entities which have contracted with the Company or its Affiliates
as an "Agent", "General Agent", "Regional General Agent", or "Master General
Agreement" as those terms are defined by the custom and usage within the
industry.
(3) "Company" shall mean the American Prepaid
Professional Services, Inc., its subsidiaries, whether wholly or partially
owned, and its affiliates, and CompDent Corporation, parent company of American
Prepaid.
(4) "Confidential Information" shall mean, to the
extent not in the public domain or known generally within the industry; names,
addresses, telephone numbers, contact persons and other identifying information
relating to the Company's operation, Providers, Agents, employees and/or
Customers; information with respect to the needs and requirements
of various Customers of the Company for services, including the dates on which
any contracts held by the Company with such Customers will terminate or be
subject to renewal; all business records and personnel data relating to the
Company's employees, independent contractors, advisors, and consultants,
including compensation arrangements of such persons or entities with the
Company.
(5) "Customer" shall mean a natural person or
business entity with which the Company has solicited or established an
advantageous business relationship, either through oral or written contract or
other recognized commitment, to obtain or receive the products or services
(including, but not limited to, the delivery of prepaid dental plans) of the
Company.
(6) "Provider" shall mean any dental facility,
dental/medical facility, dentist, professional association, partnership,
corporation or other entity or professional with which the Company has
established a contractual or other business relationship for the rendering of
service.
(7) "Termination of Relationship" shall mean the
cessation of the provision of services to the Company by Optionee, for any
reason, with or without cause, voluntary or involuntary, and whether in the
capacity as employee, independent contractor, advisor, consultant or other such
similar paid position.
Optionee recognizes that the foregoing provisions in this Section 8 are
reasonable and necessary for the protection of the Company, and that the Company
will be irrevocably harmed if same are not specifically enforced, and that the
remedy at law alone would be an inadequate remedy for such breach. Accordingly,
the parties agree that the foregoing restrictive covenants may be enforced by
the Company by means of a preliminary or permanent injunction, without
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the necessity of proving actual damages and without prejudice to such damage
rights as may exist. Therefore, if the Company should institute an action or
proceeding to specifically enforce the provisions hereof, Optionee hereby waives
the claim or defense therein that the Company has an adequate remedy at law, and
shall not urge in such action or proceeding the claim or defense that such
remedy at law exists. If the Company is required to post a bond in connection
with obtaining any temporary or permanent injunctive relief, the parties hereto
agree that such bond shall be limited in amount to $10,000 and that such amount
is reasonable and adequate for such bond.
9. CONSENT TO JURISDICTION. The Optionee hereby irrevocably submits to
the non-exclusive jurisdiction to enforce the covenants contained in Sections 8
and 9 of this Agreement of the courts of any state within the geographic scope
of such covenants. In the event that the courts of one or more of such states
shall hold such covenants unenforceable (in whole or in part) by reason of the
breadth of such scope or otherwise, it is the intention of the parties hereto
that such determination shall not bar or in any way affect the right of the
Company to the relief provided for herein in the courts of any other states
within the geographic scope of such covenants, as to breaches of such covenants
in such other respective states, the above covenants as they relate to each
state being, for this purpose, severable into diverse and independent covenants.
10. MISCELLANEOUS PROVISIONS.
(a) Equitable Relief. The parties hereto agree and declare
that legal remedies may be inadequate to enforce the provisions of this
Agreement and that equitable relief, including specific performance and
injunctive relief, may be used to enforce the provisions of this Agreement.
(b) Change and Modifications. This Agreement may not be
orally changed, modified or terminated, nor shall any oral waiver of any of its
terms be effective. This Agreement may be changed, modified or terminated only
by an agreement in writing signed by the Company and the Optionee.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
(d) Headings. The headings are intended only for
convenience in finding the subject matter and do not constitute part of the
text of this Agreement and shall not be considered in the interpretation of
this Agreement.
(e) Saving Clause. If any provision(s) of this Agreement
shall be determined to be illegal or unenforceable, such determination shall in
no manner affect the legality or enforceability of any other provision hereof.
(f) Notices. All notices, requests, consents and other
communications shall be in writing and be deemed given when delivered
personally, by telex or facsimile transmission or when received if mailed by
first class registered or certified mail, postage prepaid. Notices to the
Company or the Optionee shall be addressed as set forth underneath their
signatures below, or to such other address or addresses as may have been
furnished by such party in writing to the other.
(g) Benefit and Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective successors, permitted assigns, and legal representatives. The
Company has the right to assign this Agreement, and such assignee shall become
entitled to all the rights of the Company hereunder to the extent of such
assignment.
(h) Counterparts. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
COMPDENT CORPORATION
By:
---------------------------------------
Xxxxx X. Xxxxx
Chairman of the Board of Directors and
Title: Chief Executive Officer
---------------------------------
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The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
Dated as of ______________ OPTIONEE:
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Optionee's Address:
-----------------------
-----------------------
Designated Beneficiary:
-----------------------
Beneficiary's Address:
-----------------------
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APPENDIX A
STOCK OPTION EXERCISE NOTICE
CompDent Corporation
Attention: Chief Financial Officer
---------------------------
---------------------------
Dear Sirs:
Pursuant to the terms of my stock option agreement dated
____________ (the "Agreement") [under the CompDent Corporation 1997 Stock Option
Plan], I, [INSERT NAME] ___________________, hereby [CIRCLE ONE] partially/fully
exercise such option by including herein payment in the amount of $_______
representing the purchase price for [FILL IN NUMBER OF OPTION SHARES] __________
option shares. I have chosen the following form(s) of payment:
[ ] 1. Cash
[ ] 2. [CERTIFIED OR BANK] Check payable to CompDent Corporation
[ ] 3. Other (as described in the Agreement (please describe)___.
Sincerely yours,
Please Print Name:
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