Exhibit 10.20
U.S. LABORATORIES INC.
FORM OF STOCK WARRANT AGREEMENT
THIS AGREEMENT made and entered into as of the ___ day of _______.
_____ (the "Grant Date"), by and between U.S. LABORATORIES INC., a Delaware
corporation (the "Company"), and ________________________________ (the
"Holder").
R E C I T A L S
WHEREAS, the Board of Directors of the Company (the "Board") approved
the grant of a warrant to purchase shares of the Company's common stock, par
value $.01 per share ("Stock"), to the Holder; and
WHEREAS, this Agreement is intended to memorialize the terms and
conditions of such grant.
A G R E E M E N T
NOW, THEREFORE, in consideration of the covenants and agreements
herein set forth, the parties hereby mutually covenant and agree as follows:
1. GRANT. The Company hereby grants to Holder a warrant to purchase
from the Company all or any part of an aggregate number of ____________ shares
of Stock (hereinafter such shares of Stock are referred to as the "Warrant
Shares" and the warrant to purchase the Warrant Shares is referred to as the
"Warrant").
2. PRICE. The price to be paid for the Warrant Shares shall be
___________ ($______) per share.
3. TERM; EXERCISE.
(a) This Warrant may be exercised by the Holder hereof in whole or in
part, from time to time, beginning on the earlier to occur of:
i. the date on which the closing price of a share of Stock as
reported on the Nasdaq Small-Cap Market is greater than $_______, or
ii. the date on which the audited financial statements of the
Company for its fiscal year ending December 31, 1998 (including on a
consolidated basis the earnings on Xxxxx Testing Laboratories, Inc.
("Xxxxx")), or any fiscal year thereafter during the term of the
Warrant, reflect that the Company's earnings per share of Stock for
the fiscal year are at least twice the award of the "base period
earnings." The "base period earnings" shall mean $__________, which
represents the combined earnings of
the Company and Xxxxx as reported in the audited financial statements
of the Company for the fiscal year ending December 31, 1997.
(b) This Warrant will expire and will not be exercisable after the
earlier to occur of:
i. thirty (30) days after the Holder's termination of
employment for any reason other than death, disability or cause (as
defined below);
ii. ninety (90) days after the Holder's termination of
employment as a result of death or disability (as defined in Section
22(e)(3) of the Code);
iii. the Holder's termination of employment for cause (as defined
below); or
iv. November 9, 2003;
PROVIDED, HOWEVER, that if the Warrant is not exercisable pursuant to paragraph
3(a) hereof as of the date of the Participant's termination of employment with
the Company or its subsidiaries for any reason, the Warrant shall be immediately
terminated and automatically cancelled as of such date of termination.
As used herein, "cause" shall mean (i) conviction of a felony, (ii) commission
by the Participant of an act of fraud, misappropriation or embezzlement or (iii)
any other act or omission to act by the Participant if, in the judgment of the
Committee (A) the Participant knew or should have known that such an act or
omission would cause material injury to the financial condition or reputation of
the Company or its subsidiaries, and (B) such material injury has occurred or is
likely to occur, all as determined by the Committee.
4. METHOD OF EXERCISE. The Warrant may be exercised only by
written notice, delivered or mailed by postpaid registered or certified mail,
addressed to the treasurer of the Company at the Company's principal
executive offices specifying the number of Warranted Shares being purchased.
Such notice shall be accompanied by payment of the entire price of the
Warrant Shares being purchased (i) in cash or its equivalent, (ii) with the
consent of the Board, by tendering previously acquired shares of Stock having
a fair market value (as determined by the Board) equal to the price of the
Warrant Shares being purchased, or (iii) with the consent of the Board, by a
combination of (i) and (ii). On and after the effective date of an IPO (as
defined below) of the Stock, the Warrant may be exercised in the manner
previously described or by delivery to the Company or its designated agent of
an executed irrevocable exercise form together with instructions to a
broker-dealer to sell or margin a sufficient portion of the shares being
exercised and deliver the sale or margin proceeds directly to the Company to
pay for price for the Warrant Shares. As used herein, "IPO" means the event
that occurs when shares of Stock are sold to the public pursuant to an
effective registration statement, other than a registration statement on Form
S-4 or Form S-8 or any other forms primarily used to register securities to
be issued pursuant to Company benefit plans, filed by the Company under the
Securities Act of 1933 (the "Securities Act"). Upon receipt of the payment
of the entire price of the Warrant
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Shares so purchased, certificates for such Warrant Shares shall be issued to
the Holder. The Warrant Shares so purchased shall be fully paid and
nonassessable.
5. NO RIGHTS AS A SHAREHOLDER. The Holder shall not be deemed for
any purposes to be a shareholder of the Company with respect to any shares which
may be acquired hereunder except to the extent that the Warrant shall have been
exercised with respect thereto and a stock certificate issued therefor.
6. NONTRANSFERABILITY; COLLATERAL. Unless permitted by the Board,
the Warrant shall not be transferable by the Holder otherwise than by will or
the laws of descent and distribution, and may be exercised during the life of
the Holder only by the Holder. The Warrant may not be assigned, mortgaged or
pledged as any type of security or collateral.
7. RESTRICTIONS ON TRANSFERS OF STOCK. The shares to be acquired
upon exercise of the Warrant may not be sold or offered for sale except (i)
pursuant to an effective registration statement under the Securities Act of 1933
(the "Act") or any applicable state securities laws, (ii) in a transaction
satisfying the requirements of Rule 144 promulgated under the Act, or (iii) in a
transaction which, in the opinion of counsel for the Company, is exempt from the
registration provisions of the Act or applicable state securities laws. The
Holder agrees that any certificate representing shares acquired upon exercise of
the Warrant may bear the following legend:
The shares of Common Stock represented by this certificate
are restricted securities as that term is defined under Rule
144 promulgated under the Securities Act of 1933, as amended
(the "Act"). These shares may not be sold, transferred or
disposed of unless they are registered under the Act, sold
in a transaction satisfying the requirements of Rule 144 or
unless the request to transfer is accompanied by an opinion
of counsel acceptable to the issuer, that the transfer will
not result in a violation of the Act or any applicable state
securities laws.
8. SPECIFIC RESTRICTIONS UPON WARRANT SHARES. The Holder hereby
agrees with the Company that the Holder shall acquire the Warrant Shares for
investment purposes only and not with a view to resale or other distribution
thereof to the public in violation of the Act, and shall not dispose of the
Warrant Shares in any transaction which, in the opinion of counsel to the
Company, would violate the Act, or the rules and regulations thereunder, or any
applicable state securities or blue sky laws.
9. ADJUSTMENTS. If the Company shall at any time change the number
of shares of its Stock without new consideration to the Company (such as by
stock dividend, stock split or similar transaction), the total number of shares
then remaining subject to purchase hereunder shall be changed in proportion to
the change in issued shares, and the Warrant price per share shall be adjusted
so that the total consideration payable to the Company upon the purchase of all
shares not theretofore purchased shall not be changed. In the event there shall
be any change, other than as specified above, in the number or kind of
outstanding shares of Stock or of any stock or other securities into which such
Stock shall have been changed or for which it
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shall have been exchanged, then if the Board shall in its sole discretion
determine that such change equitably requires an adjustment in the number or
kind of shares subject to the Warrant, such adjustment shall be made by the
Board. The Warrant price for each share of Stock or other securities
substituted or adjusted as provided in this paragraph shall be determined by
dividing the Warrant price for each share prior to such substitution or
adjustment by the number of shares or the fraction of a share substituted for
such share or to which such share shall have been adjusted. No adjustment or
substitution provided for in this paragraph shall require the Company to sell
a fractional share.
10. TAX WITHHOLDING. It shall be a condition of the obligation of
the Company to issue or transfer shares of Stock upon exercise of the Warrant,
that the Holder shall pay to the Company upon its demand, or agree that the
Company may withhold from compensation due the Holder, such amount as may be
requested by the Company for the purpose of satisfying its liability to withhold
federal, state or local income or other taxes incurred by reason of the exercise
of the Warrant. If the Holder fails to comply with this Paragraph 10, the
Company may refuse to issue or transfer shares of Stock upon exercise of the
Warrant.
11. POWERS OF COMPANY NOT AFFECTED. The existence of the Warrant
herein granted shall not affect in any way the right or power of the Company or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred, or prior preference stock ahead of or affecting
the Stock or the rights thereof, or dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
12. INTERPRETATION. As a condition of the granting of the Warrant,
the Holder agrees for himself and his legal representatives, that any dispute or
disagreement which may arise under or as a result of or pursuant to this
Agreement shall be determined by the Board in its sole discretion, and any
interpretation by the Board of the terms of this Agreement shall be final,
binding and conclusive.
13. AMENDMENT OR MODIFICATION. No term or provision of this
Agreement may be amended, modified or supplemented orally, but only by an
instrument in writing signed by the party against whom or which the enforcement
of the amendment, modification or supplement is sought.
14. GOVERNING LAW. This Agreement shall be governed by the internal
laws of the State of Delaware as to all matters, including, but not limited to,
matters of validity, construction, effect, performance and remedies.
15. ENTIRE AGREEMENT. This Agreement entered into between the Holder
and the Company sets forth the entire agreement of the parties hereto in respect
of the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto; and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and canceled.
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16. DELEGATION BY BOARD. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange or market, the Board
may delegate all or any portion of its responsibilities and powers to any one or
more of its members. Any such delegation may be revoked by the Board at any
time.
17. HEIRS AND SUCCESSORS. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring all or substantially all of the Company's assets and
business. In the event of the Holder's death prior to exercise of the warrant,
the Warrant may be exercised by the estate of the Holder to the extent such
exercise is otherwise permitted by this Agreement.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer and the Holder has executed this
Agreement as of the day and year first above written.
U.S. LABORATORIES INC.
(the "Company")
By:
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HOLDER:
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