Exhibit 10.18
STOCK OPTION AGREEMENT
AGREEMENT entered into as of the ___ day of October, 2001 by and
between InSight Health Services Holdings Corp. a Delaware corporation (the
"Company"), and the undersigned employee (the "Employee") of the Company or one
of its subsidiaries.
WHEREAS, the Company desires to grant the Employee a nonqualified stock
option to acquire shares of the Company's common stock, $0.001 par value per
share ("Common Stock"); and
WHEREAS, the Employee desires to accept such option subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Employee,
intending to be legally bound, hereby agree as follows:
1. Grant of Option. As of the Effective Time (as defined in the
Agreement and Plan of Merger, dated as of June 29, 2001, as amended, by and
among the Company, InSight Health Services Acquisition Corp. (formerly known as
JWCH Merger Corp.) and InSight Health Services Corp.) (the "Grant Date"), the
Company grants to the Employee a nonqualified stock option (the "Option") to
purchase all (or any part) of _____________ shares of Common Stock (the
"Shares") on the terms and conditions hereinafter set forth. This Option is not
intended to be treated as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Exercise Price. The exercise price ("Exercise Price") for the
Shares covered by the Option shall be $____(*) per share.
3. Vesting and Exercisability. Twenty percent (20%) of the total
Option set forth in Section 1 shall be available for vesting in the respective
fiscal years set forth in clauses (A) and (B) below as follows: (A) twenty-five
percent (25%) of the number of available Options shall vest and become
exercisable upon the anniversary of the Grant Date in the fiscal years ending on
June 30 in the years 2003-2007 and (B) seventy-five percent (75%) of the number
of available Options shall vest and become exercisable for each fiscal year
ending on June 30 in the years 2002-2006 upon the Company's attainment of the
performance goals set forth on Schedule I attached hereto and incorporated
herein. In the event the Employee is employed by the Company or one of its
subsidiaries at the time a Change in Control (as defined below) occurs, all of
the Options (to the extent not already vested) which are to vest over time
pursuant to clause (A) above shall vest immediately prior to the Change in
Control. Notwithstanding the foregoing, to the extent any of the
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(*) Intended to be the subscription price for all stockholders who
subscribe as of the Effective Time. Currently anticipated to be $18.00
per share.
Options which may vest pursuant to clause (B) above do not vest in accordance
with Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be
deemed to vest on such date.
4. Term of Options.
(a) Each Option shall expire on the tenth anniversary of
the Grant Date, but shall be subject to earlier termination as provided in
subsections (b) and (c) below.
(b) If the Employee is terminated for Cause (as defined
in Schedule II hereto) or voluntarily terminates his employment with the Company
at any time without Good Reason (as defined in Schedule II), the Option shall
terminate on the date of such termination of employment, whether or not then
fully vested and exercisable.
(c) If the Employee is terminated by the Company without
Cause, resigns for Good Reason, dies, or becomes Disabled (as defined in
Schedule II) at any time during the term of his employment by the Company, any
portion of the Option that is not then fully vested and exercisable shall
terminate immediately, provided, however, that the board of directors of the
Company (the "Board") shall have the discretion to vest any portion of such
Employee's Options that have not yet become eligible to vest, and any such
accelerated Options shall be subject to the same terms and conditions as other
Options that have vested pursuant to Section 3. Any portion of the Option that
is vested and exercisable shall terminate on the 120th day following such
termination of employment.
5. Manner of Exercise of Option.
(a) The Employee may exercise any Option that is fully
vested and exercisable by giving written notice to the Company stating the
number of Shares (which shall not be less than 100, unless the total Shares
which are vested and exercisable at such time is less than 100) to be purchased
and accompanied by payment in full of the Exercise Price for such Shares.
Payment shall be either in cash or by a certified or bank cashier's check or
checks payable to the Company.
At any time when Common Stock is registered under Section 12
of the Securities Exchange Act of 1934, as amended, the Option may also be
exercised by means of a "broker cashless exercise" procedure approved in all
respects in advance by the Board, in which a broker: (i) transmits the Exercise
Price for any Shares to the Company in cash or acceptable cash equivalents,
either (1) against the Employee's notice of exercise and the Company's
confirmation that it will deliver to the broker stock certificates issued in the
name of the broker for at least that number of Shares having a fair market value
equal to the Exercise Price therefor, or (2) as the proceeds of a margin loan to
the Employee; or (ii) agrees to pay the Exercise Price therefor to the Company
in cash or acceptable cash equivalents upon the broker's receipt from the
Company of stock certificates issued in the name of the broker for at least that
number of Shares having a fair market value equal to the Exercise Price
therefor. The Employee's written notice of exercise of the Option pursuant to a
"cashless exercise" procedure must include the name and address of the broker
involved, a clear description of the procedure, and such other information or
undertaking by the broker as the Board shall reasonably require. If payment is
to be made in whole or in part in Shares
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underlying the Option, the Employee shall direct the Company to subtract from
the number of Shares underlying the Option, that number of Shares having a fair
market value (as determined in good faith by the Board) equal to the purchase
price (or portion thereof) to be paid with such underlying Shares.
Upon such purchase, delivery of a certificate for paid-up,
non-assessable Shares shall be made at the principal office of the Company to
the Employee (or the person entitled to exercise the Option pursuant to Section
7), not more than 10 days from the date of receipt of the notice by the Company.
(b) The Company shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
(c) Notwithstanding Section 5(a) of this Agreement, the
Company may delay the issuance of Shares covered by the Option and the delivery
of a certificate for such Shares until one of the following conditions is
satisfied: (i) the Shares purchased pursuant to the Option are at the time of
the issuance of such Shares effectively registered or qualified under applicable
federal and state securities laws or (ii) such Shares are exempt from
registration and qualification under applicable federal and state securities
laws.
6. Administration. This Agreement shall be administered by the
Board. The Board shall be authorized to interpret this Agreement and to make all
other determinations necessary or advisable for the administration of this
Agreement. The determinations of the Board in the administration of this
Agreement, as described herein, shall be final and conclusive. The Secretary
shall be authorized to implement this Agreement in accordance with its terms and
to take such actions of a ministerial nature as shall be necessary to effectuate
the intent and purposes thereof.
7. Non-Transferability. The right of the Employee to exercise the
Option (as and when vested) shall not be assignable or transferable by the
Employee otherwise than by will or the laws of descent and distribution, and
such Shares may be purchased during the lifetime of the Employee only by him (or
his legal representative in the event that he is Disabled). Any other such
transfer shall be null and void and without effect upon any attempted assignment
or transfer, except as hereinabove provided, including without limitation any
purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof, or levy of
execution, attachment, trustee process or similar process, whether legal or
equitable, upon the Option.
8. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be
issued upon exercise of a vested Option shall not be effectively registered
under the Securities Act of 1933, as amended (the "1933 Act"), upon any date on
which the Option is exercised, the Employee (or the person exercising the Option
pursuant to Section 7) shall give a written representation to the Company in the
form attached hereto as Exhibit A, and the Company shall place the legend
described on Exhibit A, upon any certificate for the Shares issued by reason of
such exercise.
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(b) The Company shall be under no obligation to qualify
Shares or to cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purposes of covering the issue of
Shares; provided, that the Company will use its reasonable best efforts to
comply with any available exemption from registration and qualification of the
Shares under applicable federal and state securities laws.
9. Adjustments upon Changes in Capitalization.
(a) In the event that the outstanding shares of the
Common Stock of the Company are changed into or exchanged for a different number
or kind of shares or other securities of the Company or of another corporation
by reason of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
Shares, and the Exercise Price therefor, as to which the Option, to the extent
not theretofore exercised, shall be exercisable.
In addition, unless otherwise determined by the Board in its
sole discretion, in the case of a Change in Control (as hereinafter defined) of
the Company, the purchaser(s) of the Company's assets or stock may, in his, her
or its discretion, deliver to the Employee, to the extent that the right to
purchase Shares under the Option has vested, the same kind of consideration (net
of the Exercise Price for such Shares) that is delivered to the stockholders of
the Company as a result of the Change in Control, or the Board may, in its sole
determination, cancel the Option, to the extent not theretofore exercised, in
exchange for consideration in cash or in kind, which consideration in either
case shall be equal in value to the value of those shares of stock or other
consideration the Employee would have received had the Option been exercised (to
the extent it has vested and not been exercised) and no disposition of the
shares acquired upon such exercise been made prior to the Change in Control,
less the Exercise Price therefor. Upon receipt of such consideration by the
Employee, the Option shall immediately terminate and be of no further force and
effect, with respect to both vested and nonvested portions thereof. The value of
the stock or other securities the Employee would have received if the Option had
been exercised shall be determined in good faith by the Board. In addition, in
the case of a Change in Control, the Board may, in its sole discretion,
accelerate the vesting of all or any portion of the Option that would remain
unvested after the application of the accelerated vesting on Schedule I and
Section 3 hereto. A "Change in Control" shall be deemed to have occurred if (i)
any person, or any two or more persons acting as a group, and all affiliates of
such person or persons (a "Group") who prior to such time beneficially owned
less than 50% of the then outstanding capital stock of the Company shall acquire
shares of the Company's capital stock in one or more transactions or series of
transactions, including by merger, and after such transaction or transactions
such person or Group and affiliates beneficially own 50% or more of the
Company's outstanding capital stock, or (ii) the Company shall sell all or
substantially all of its assets to any Group which, immediately prior to the
time of such transaction, beneficially owned less than 50% of the then
outstanding capital stock of the Company.
(b) Upon dissolution or liquidation of the Company, the
Option shall terminate, but the Employee shall have the right, immediately prior
to such dissolution or liquidation, to exercise any then vested Options.
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(c) No fraction of a share of Common Stock shall be
purchasable or deliverable upon the exercise of the Option, but in the event any
adjustment hereunder of the number of shares covered by the Option shall cause
such number to include a fraction of a share, such fraction shall be adjusted to
the nearest smaller whole number of shares.
10. No Special Employment Rights. Nothing contained in this
Agreement shall be construed or deemed by any person under any circumstances to
bind the Company or any of its subsidiaries to continue the employment of the
Employee for the period within which this Option may vest or for any other
period. However, during the period of the Employee's employment, the Employee
shall render diligently and faithfully the services which are assigned to the
Employee from time to time by the Board and shall at no time take any action
which directly or indirectly would be inconsistent with the best interests of
the Company.**
11. Rights as a Stockholder. The Employee shall have no rights as
a stockholder with respect to any Shares which may be purchased upon the vesting
of this Option unless and until a certificate or certificates representing such
Shares are duly issued and delivered to the Employee. Except as otherwise
expressly provided herein, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the stock certificate is
issued.
12. Withholding Taxes. The Employee hereby agrees, as a condition
to any exercise of the Option, to provide to the Company an amount sufficient to
satisfy its obligation to withhold certain federal, state and local taxes
arising by reason of such exercise (the "Withholding Amount"), if any, by (a)
authorizing the Company to withhold the Withholding Amount from his cash
compensation, or (b) remitting the Withholding Amount to the Company in cash;
provided that, to the extent that the Withholding Amount is not provided by one
or a combination of such methods, the Company may at its election withhold from
the Shares delivered upon exercise of the Option that number of Shares having a
fair market value (in the good faith judgment of the Board) equal to the
Withholding Amount.
13. Execution of Stockholders' Agreement. The Employee
acknowledges that he has previously executed and delivered the stockholders
agreement by and among the Company and the stockholders of the Company named
therein (the "Stockholders Agreement"). The Employee further agrees that this
Agreement, the Option and all Shares acquired by him upon exercise of the Option
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** This sentence shall be included in Stock Option Agreements entered into
by employees of the Company who will not have employment agreements.
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will be subject to the terms and conditions of the Stockholders Agreement, as
the same may have been amended or modified in accordance with its terms.
14. Governing Law. This Agreement shall be governed by the laws of
the State of Delaware, without regard to any conflicts of law principles thereof
that would call for the application of the laws of any other jurisdiction. Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against either of the parties in
the courts of the State of Delaware, or if it has or can acquire jurisdiction,
in the United States District Court for the District of Delaware, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world,
whether within or without the State of Delaware.
* * * * * * * * *
[Signatures on Following Page]
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STOCK OPTION AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed, by its officer thereunto duly authorized, and the Employee has
executed this Agreement, all as of the day and year first above written.
INSIGHT HEALTH SERVICES EMPLOYEE
HOLDINGS CORP.
_________________________________
By: _________________________________
Name: Address:
Title:
_________________________________
_________________________________
_________________________________
Telecopier Number:
_________________________________
Social Security Number
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SCHEDULE I
OPTION PERFORMANCE VESTING SCHEDULE
(a) For each of the Company's fiscal years ending on June 30 in the
years 2002 through 2006, the portion of the total Option described in clause (B)
of Section 3 of the Agreement shall vest and become exercisable if the Company
achieves a return on equity ("XXX") for such year that equals or exceeds the
following Base Targets:
Base Target 90% of Base Target
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2002 1.11 1.00
2003 2.40 2.16
2004 3.50 3.15
2005 5.00 4.50
2006 6.50 5.85
If the Company achieves more than 90% but less than 100% of the Base Target XXX
in any fiscal year, the Options available to vest in that year shall vest in the
ratio by which XXX achieved exceeds 90% of Base Target XXX for such fiscal year
(i.e., for XXX of 90.5% of Base Target XXX, one- twentieth of the available
Options would vest; for XXX of 96%, six-tenths of the available Options would
vest).
For purposes hereof, XXX for any fiscal year shall be calculated by the
following formula: [(5.25 x EBITDA) - D+C]/TE where
D = the Company's Consolidated Indebtedness at fiscal year-end
(or at time of sale of the Company)
C = the Company's Excess Cash at fiscal year-end (or at time of
sale of the Company)
TE= total equity invested as of the Effective Time (including
the net pre-tax value of any options rolled over as of the
Effective Time)
EBITDA = EBITDA for such fiscal year
If TE is increased at any time after the Effective Time and during the
Company's fiscal years ending on June 30 in the years 2002 through 2006, the
Board, in good faith, shall adjust the Base Targets. The Options available for
vesting shall vest, if the Targets are met, upon completion of the audit for the
Company and its subsidiaries' consolidated financial statements for such fiscal
year.
(b) Notwithstanding the foregoing, if in the fiscal year ending on June
30, 2006, (1) the percentage of Options available to vest that do vest exceeds
(2) the cumulative percentage of Options available to vest in the fiscal years
ending on June 30 in the years 2002-2005 that did vest in those years, the
vesting percentage achieved in fiscal year ending on June 30, 2006 shall be
carried back to the fiscal years ending on June 30 in the years 2002-2005 and
applied to the Options available to
vest in those fiscal years. The number of vested Options for the fiscal years
ending on June 30 in the years 2002 through 2005 shall be adjusted to reflect
such higher percentage.
(c) (1) In the event a Change in Control of the Company occurs before
the end of the fiscal year ending on June 30, 2006, the Base Target for the year
in which the Change in Control occurs and the above formula will be modified as
follows:
- the Base Target for such year will be adjusted to be an
amount determined by adding to the Base Target for the fiscal year immediately
prior to the fiscal year in which the Change in Control occurs an amount equal
to the product of (i) a fraction the numerator of which is the number of days
that elapsed since the first day of the fiscal year in which the Change in
Control occurs until the date of the consummation of the Change in Control and
the denominator of which is 365 and (ii) the difference between the Base Target
for the year in which the Change in Control occurs and the Base Target for the
immediately preceding fiscal year.
- the formula for determining XXX at the time of the Change in
Control will be adjusted by using EBITDA for the 12 full calendar months
immediately preceding the date of the Change in Control so that the multiple of
EBITDA used will be the greater of 5.25 and the multiple used in determining the
Company's enterprise value in the Change in Control.
(2) The percentage of Options that vest in accordance with the formula
as so modified will then be applied to fiscal years preceding and following the
year in which the Change in Control occurs and the number of vested Options
shall be adjusted to reflect such percentage; provided that, if the cumulative
percentage of Options that vested in the fiscal years preceding the Change in
Control exceeds the percentage that vest in the fiscal year of the Change in
Control pursuant to the modified formula, the cumulative percentage of Options
that vested prior to the Change in Control will instead be applied to the fiscal
years that follow the Change in Control.
(d) Notwithstanding the foregoing, in the event X.X. Childs Equity
Partners II, L.P., Halifax Capital Partners, L.P. and their respective
affiliates each receive a net cash return on their total investment in the
Company resulting (i) in an internal rate of return of at least 35% on their
total investment in the Company and (ii) in an amount of cash equal to at least
three times their respective total investment in the Company, then one-third of
the total Options described in clause (B) of Section 3 of the Agreement (i.e.,
25% of the total Option set forth in Section 1 of the Agreement) shall vest and
become exercisable. This vesting provision is not intended to be additive to the
preceding provisions, but is intended to be in the alternative.
For purposes of this Schedule I, the following terms have the following
meanings:
"Consolidated Indebtedness" shall mean, as of any date, the aggregate
amount outstanding, on a consolidated basis, of (a) all obligations of the
Company or its subsidiaries for borrowed money, (b) all obligations of the
Company or its subsidiaries evidenced by bonds, debentures, notes or other
similar instruments or upon which interest charges are customarily paid, (c) all
obligations of the Company or its subsidiaries for the deferred purchase price
of property or services, except current accounts payable arising in the ordinary
course of business and not overdue beyond such period as
SCHEDULE I - 2
is commercially reasonable for the Company or its subsidiaries' business, (d)
all obligations of the Company or its subsidiaries under conditional sale or
other title retention agreements relating to property purchased by such Person
and all capitalized lease obligations, (e) all payment obligations of the
Company or its subsidiaries on or for currency protection agreements, (f) all
obligations of the Company or its subsidiaries as an account party under any
letter of credit (excluding those supporting trade payables), (g) all
obligations of any third party secured by property or assets of the Company or
its subsidiaries (regardless of whether or not such Person is liable for
repayment of such obligations) and (h) all guarantees of the Company or its
subsidiaries.
"EBITDA" shall mean consolidated earnings of the Company and its
subsidiaries, including equity in the earnings from non-consolidated
subsidiaries, before interest, taxes, depreciation, amortization and the
management fees paid to X.X. Childs Associates, L.P. and The Halifax Group,
L.L.C. or any of their respective affiliates and after deduction of all
operating expenses, minority interest expenses and incentive compensation, all
as calculated in accordance with generally accepted accounting principles
consistently applied, as reflected in the Company's consolidated financial
statements. For purposes of calculating EBITDA, upon the Company making an
acquisition or disposition of any assets or business, the Board, in good faith,
shall adjust EBITDA for any fiscal year to include or exclude on a pro forma
basis, as applicable, the EBITDA for such assets or business for the period of
time the assets or business are not owned by the Company for the fiscal year in
which the assets or business are acquired or sold.
"Excess Cash" shall mean cash in excess of the Company and its
subsidiaries' operating needs, in the good faith judgment of the Board.
SCHEDULE I - 3
SCHEDULE II
Definitions Applicable to
Stock Option Agreement
1. "Cause," with respect to the Employee, shall have the meaning
attributed to it under the executed written employment agreement between the
Employee and the Company (or a subsidiary thereof) or, in the absence of such
employment agreement, "Cause" shall mean the occurrence of any of the following
during the term of the Employee's employment with the Company (or a subsidiary
thereof):
(a) the Employee has performed his/her duties
negligently;
(b) the Employee is guilty of misconduct in connection
with the performance of the Employee's duties;
(c) the Employee has committed any serious crime or
offense;
(d) the Employee has failed or refused to comply with the
oral or written policies or directives of the Board of Directors; or
(e) the Employee has breached any provision or covenant
contained in this Agreement.
2. "Disabled," with respect to the Employee, shall have the
meaning attributed to it under the executed written employment agreement between
the Employee and the Company (or a subsidiary thereof) or, in the absence of
such employment agreement, the Employee shall be deemed to have become
"Disabled" if, during the term of the Employee's employment with the Company (or
a subsidiary thereof), the Employee shall become physically or mentally
disabled, whether totally or partially, either permanently or so that the
Employee, in the good faith judgment of the Board, is unable substantially and
competently to perform his duties on behalf of the Company (or a subsidiary
thereof) for a period of 90 consecutive days or for 90 days during any six month
period during the said term of employment. In order to assist the Board in
making that determination, the Employee shall, as reasonably requested by the
Board, (i) make himself available for medical examinations by one or more
physicians chosen by the Board and (ii) grant to the Board and any such
physicians access to all relevant medical information concerning him, arrange to
furnish copies of his medical records to the Board and use his best efforts to
cause his own physicians to be available to discuss his health with the Board.
3. "Good Reason," with respect to the Employee, shall have the
meaning attributed to it under the executed written employment agreement between
the Employee and the Company (or a subsidiary thereof) or, in the absence of
such employment agreement, "Good Reason" shall be deemed to have occurred if,
other than for Cause, any of the following has occurred during the term of the
Employee's employment with the Company (or a subsidiary thereof):
SCHEDULE I - 4
(a) the Employee's base salary has been reduced, other
than in connection with a reduction of executive compensation imposed by the
Board in response to negative financial results or other adverse circumstances
affecting the Company or its subsidiaries; or
(b) the Company has reduced or reassigned, in any
material respect, the duties of the Employee as an employee of the Company (or a
subsidiary thereof) and such event has not been rescinded within 10 business
days after the Employee notifies the Company (or a subsidiary thereof) in
writing that he objects thereto.
4. "Person" shall mean an individual, corporation, partnership,
limited liability company, trust, unincorporated association, government or any
agency or political subdivision thereof, or any other entity.
SCHEDULE II - 2
EXHIBIT A
TO STOCK OPTION AGREEMENT
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Gentlemen:
In connection with the purchase by me of ___________________ shares of
common stock, $0.001 par value per share, of InSight Health Services Holdings
Corp., a Delaware corporation (the "Company") under the nonqualified stock
option granted to me pursuant to that certain Stock Option Agreement dated as of
June ____, 2001 (the "Option Agreement"), I hereby acknowledge that I have been
informed as follows:
1. The shares of common stock of the Company to be issued to me
upon exercise of said option have not been registered under the Securities Act
of 1933, as amended (the "Act"), and accordingly, must be held indefinitely
unless such shares are subsequently registered under the Act, or an exemption
from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144
under the Act can be made only after the holding period and in limited amounts
in accordance with the terms and conditions provided by that Rule, and with
respect to which that Rule is not applicable, registration or compliance with
some other exemption under the Act will be required.
3. The Company is under no obligation to me to register the
shares or to comply with any such exemptions under the Act, other than as set
forth in the Stockholders' Agreement referenced and defined in paragraph 13 of
the Option Agreement (the "Stockholders Agreement").
4. The availability of Rule 144 is dependent upon adequate
current public information with respect to the Company being available and, at
the time that I may desire to make a sale pursuant to the Rule, the Company may
neither wish nor be able to comply with such requirement.
5. The shares of common stock of the Company to be issued to me
upon the exercise of said option are subject to the terms and conditions,
including restrictions on transfer, of the Stockholders Agreement.
In consideration of the issuance of certificates for the shares to me,
I hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge, hypothecate or
otherwise transfer such shares in the absence of an effective registration
statement covering the same, except as permitted by an applicable exemption
under the Act. In view of this representation and warranty, I agree that there
may be affixed to the certificates for the shares to be issued to me, and to all
certificates issued hereafter representing such shares (until in the opinion of
counsel, which opinion must be reasonably satisfactory in form and substance to
counsel for the Company, it is no longer necessary or required) a legend as
follows:
"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, transferred, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as
to the
EXHIBIT A - 1
securities under the Act or an opinion of counsel satisfactory to the
Company and its counsel that such registration is not required." "The
securities represented by this certificate are subject to the terms and
conditions, including restrictions on transfer, of a Stockholders'
Agreement among the Company and its stockholders dated as of
____________, as amended from time to time, a copy of which is on file
at the principal office of the Company."
I further agree that the Company may place a stop order with its
transfer agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
I hereby represent and warrant that:
(a) My financial situation is such that I can afford to
bear the economic risk of holding the shares issued to me upon exercise of said
option for an indefinite period of time, I have no need for liquidity with
respect to my investment and have adequate means to provide for my current needs
and personal contingencies, and can afford to suffer the complete loss of my
investment in such shares.
(b) I am an "accredited investor" within the meaning of
Rule 501 under the Act and I, either alone or with my purchaser representative
(as such term is defined in Rule 501 under the Act) have such knowledge and
experience in financial and business matters that I am capable of evaluating the
merits and risks of my investment in the shares issued to me upon exercise of
said option.
(c) I have been afforded the opportunity to ask questions
of, and to receive answers from, the Company and its representatives concerning
the shares issued to me upon exercise of said option and to obtain any
additional information I have deemed necessary.
(d) I have a high degree of familiarity with the
business, operations, financial condition and prospects of the Company.
Very truly yours,
___________________________
[Employee]
EXHIBIT A - 2
