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EXHIBIT 99.6
STOCK OPTION AGREEMENT
PRO INTERMED, INC. (the "Company"), desiring to afford an opportunity to
the Grantee named below to purchase certain shares of the Company's common
stock, to provide the Grantee, as an added incentive pursuant to his
responsibilities as the Chairman of the Advisory Committee to the Company's
Board of Directors, hereby grants to Grantee, and the Grantee hereby accepts, an
option to purchase the number of such shares optioned as specified below, during
the term ending at midnight (prevailing local time at the Company's principal
offices) on the expiration date of this Option specified below, at the option
exercise price specified below, subject to and upon the following terms and
conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following respective meanings:
(A) Grantee: DAVID EPSTEIN
(B) Date of grant: September 1, 1998
(C) Number of shares optioned: Sixteen Thousand Seven Hundred Sixty Five
(16,765), of which (i) Five Thousand (5,000) shall be deemed to be
"Phase I Option Shares" and (ii) Eleven Thousand Seven Hundred Sixty
Five (11,765) shall be deemed to be "Phase II Option Shares".
(D) Option Exercise Price: For Phase I Option Shares, $0.001 per share;
For Phase II Option Shares, $17.00 per share;
This Option is not intended to be and shall not be treated as an
incentive stock option under Section 422 of the Internal Revenue Code unless
this sentence has been manually lined out and its deletion is followed by the
signature of the corporate officer who signed this Option on behalf of the
Company:
This Option is granted pursuant to the Nonqualified Stock Option Plan
adopted by the Company's Board of Directors on _______________, 1998, at a
meeting duly called and validly held pursuant to the Company's By Laws, and
ratified by the shareholders on ___________, 1998 at a meeting duly called and
validly held pursuant to the Company's By Laws. In the event that there is any
conflict between the Plan and this Agreement, the terms of this Agreement shall
control the rights and obligations of the parties hereto.
2. Vesting of Option; Conditions Precedent; Reduction of Option Shares.
(A) Phase I Option Shares: The Option with respect to the Phase I Option
Shares shall vest on June 30, 1999 subject to the condition
precedent (the "Phase I Condition Precedent") that by June 30, 1999
the Company has attained, for each month commencing and including
September 1998 and ending and including June 1999 (the "Base
Period"), Monthly Gross Operating Revenues ("MGOR"), (as
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hereinafter defined) of $400,000; provided, however, that if, during
the Base Period MGOR for each month have not been $400,000 (or
more), but during said Base Period the sum of all MGOR for all ten
(10) months have been $3.2 Million (or more), then the number of
Phase I Option Shares shall be decreased, pro-rata.
By way of example, if the total of all MGOR for the entire Base
Period are $3.2 Million, then the number of Phase I Option Shares
shall be 80% of 5,000, or 4,000 shares; if the total of all MGOR for
the entire Base Period are $3.65 Million, then the number of shares
subject to this Option shall be 91.25% of 5,000, or 4,562.50,
shares.
For purposes of this Agreement, the term "Monthly Gross Operating
Revenues" or "MGOR", shall mean the adjusted revenues of the
Company, determined on the accrual basis of accounting.
(B) Phase II Option Shares: The Option with respect to the Phase II
Option Shares shall vest (i) only after the Option with respect to
the Phase I Option Shares have vested (including any vesting of a
reduced number of such Phase II Option Shares, as described in
subsection (A), above), and (ii)(a) with respect to one-half of the
Phase II Option Shares (5,882.50 shares), on July 1, 2000 (22 months
from the date of grant hereof), and (b) with respect to the
remaining Phase II Option Shares (5,882.50 shares), on July 1, 2001
(34 months from the date of grant hereof).
(C) Termination of Option Rights; Compensation. Notwithstanding anything
herein to the contrary (including, but not limited to this Section
2, Section 4, Section 7 or 8 herein):
(1) In the event that, prior to February 28, 1999, either (a) the
Company, by requisite vote of its shareholders, as required pursuant to its
Bylaws, elects to liquidate or (b) a majority of the shareholders of the company
elect to sell the Company, or there is a "Change In Ownership" (as defined
hereinbelow), then Grantee shall have no right, whatsoever, to exercise any of
the Options hereinabove granted provided, however that;
(x) in the event of a sale of the Company, or a Change In
Ownership, if Grantee makes a material contribution of his time and
expertise to assist in such sale, then (i) Grantee shall receive a
commission pursuant to the Wallingford Schedule Rate, which is
incorporated herein by reference as though set forth below; (ii) Grantee
shall have no right to the Bonus described in Section 3, below; and
(iii) all of the rights and obligations of Grantee and Grantee under the
"Advisory Committee Appointment, Scope of Services and Expense
Reimbursement Agreement and Loan Agreement" (the "Advisory Services and
Loan Agreement") entered into of even date herewith shall cease, as of
the date of such sale, and Grantee shall have no obligation to repay the
loan to Company, which loan is described in the Advisory Services and
Loan Agreement;
(y) in the event of a liquidation of the Company, then (i)
Grantee shall receive a
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Bonus, described in Section 3, below, computed and paid as of the date
of liquidation and (ii) all of the rights and obligations of Grantee and
Grantor under the "Advisory Services and Loan Agreement" entered into of
even date herewith shall cease, as of the date of such sale, and Grantee
shall have no obligation to repay the loan to Company, which loan is
described in the Advisory Services and Loan Agreement.
(2) In the event that, at any time after February 28, 1999 and
prior to July 1, 1999, either (a) the Company, by requisite vote of its
shareholders, as required pursuant to its Bylaws, elects to liquidate or (b) a
majority of the shareholders of the Company elect to sell the Company, or (c)
there is a Change In Ownership, and during the period from September 1, 1998 to
and including the date of consummation of such sale or liquidation or June 30,
1999 (whichever shall first occur), the MGOR of the Company have been at least
$400,000.00 for each calendar month (pro-rated in the event that the date of
consummation of such sale or liquidation occurs on other than the end of a
calendar month), then Grantee hereunder shall have the rights described in
Section, below, as if the Options granted herein had vested.
For purposes of this Agreement, the term "Change In Ownership" shall
mean any transfer of voting stock which results in the Harrar family owning and
controlling less than 51% of the voting stock of the Company.
3. Other Issues Related to Vesting of Options.
(A) Bonus in the Event of Failure to Meet Phase I Condition Precedent.
In the event that the Phase I Condition Precedent is not met, or is
waived by Company (which waiver shall be at its sole and absolute
discretion, it being expressly understood that Company shall have no
obligation to waive the satisfaction of the Phase I Condition
Precedent, under any circumstances whatsoever), then Grantee shall
have the right to receive a bonus (the "Bonus"), in cash, equal to
the Bonus Schedule, as set forth below. Bonus payments shall be made
payments in cash, as follows: With respect to receipts, by the
Company, of MGOR which is subject to the Bonus pursuant to the Bonus
Schedule, for any such MGOR received by the Company on or before
June 30, 1999, the Bonus shall be paid on or before July 31, 1999;
with respect to all subsequent MGOR received by the Company which is
subject to the Bonus pursuant to the Bonus Schedule, from and
including July 1, 1999 and to and including June 30, 2001, the
Company shall pay to Grantee the amounts due as a Bonus on the last
day of the month following the month of receipt of any MGOR for
which Grantee is entitled to a Bonus.
For purposes of this Agreement, the Bonus Schedule is the
following: (i) with respect to clients whose first introduction to
the Company is made by Grantee, 2.5% of all MGOR received by the
Company; (ii) with respect to revenues from business with Unihealth
Hospitals and/or the UCLA Hospital System, 2.5%of all MGOR received
by the Company, subject to the condition precedent that the
Company's appointment of Grantee as Chairman of the Advisory
Committee, pursuant to the Advisory Services and Loan Agreement,
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shall not have been terminated ((i) by Grantee, or (ii) by Grantor
under a "for cause" termination, as such term is defined in the
Advisory Services and Loan Agreement which is incorporated herein by
reference), prior to March 1, 1999; and (iii) with respect to MGOR
from any business or person which is not, as of the date of this
Agreement, a client of the Company, 2.5% of all MGOR received by the
Company, subject to reduction, on a dollar-for-dollar basis, by the
amount of any commissions or finders' fees paid to any other person
not an employee or officer of the Company to the extent that such
other commission is in excess of 2.5%, so that the Company will be
paying not more than 5% bonus, commission and/or finders' fees, in
the aggregate, and so that the Company will pay, first, such other
person's commission and/or finders' fees, and Grantee hereunder will
receive any remaining percentage (if any), up to a total obligation,
on the part of Company, of 5%.
(B) No Termination of Advisory Committee Appointment. The failure to
meet the Phase I Condition Precedent shall not operate to terminate
any rights or obligations of either party under the Advisory
Services and Loan Agreement being entered into concurrently herewith
by Grantee and the Company.
4. Time and Manner of Exercise.
(A) Time of Exercise
(i) Phase I Option Shares: The Option with respect to the Phase I
Option Shares is not exercisable, in whole or in part, until the
Option for the Phase I Option Shares has vested; provided,
however, that the right to exercise the Phase I Option Shares, in
whole or in part, shall expire at midnight on August 31, 2003.
After August 31, 2003, the Option with respect to the Phase I
Option Shares shall expire and the rights of Grantee hereunder to
exercise the Option with respect to the Phase I Option Shares
which remain, at that time, subject to said Option shall lapse.
(ii) Phase II Shares: The Option with respect to the Phase II
Option Shares is not exercisable, in whole or in part, until the
Option for the Phase II Option Shares has vested; provided,
however, that the right to exercise the Phase II Option Shares,
in whole or in part, shall expire on August 31, 2003. After
August 31, 2003, the Option with respect to the Phase II Option
Shares shall expire and the right of Grantee hereunder to
exercise the Option with respect to the Phase II Option Shares
which remain, at that time, subject to said Option shall lapse.
(B) Manner of Exercise. Grantee shall exercise this Option, with
respect to the any Option Shares, by giving written notice to
Company of his election to exercise said Option, in whole or in
part, (and identifying whether the Option is being exercised as
to the Phase I Option Shares, and the number of such Shares,
and/or the Phase II Option Share, and the number of such Shares),
and such notice shall
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be accompanied by a cashier's or certified check in the amount of
the Option Price multiplied by the number of Option Shares being
purchased pursuant to said exercise. Promptly upon receipt of
such notice and payment, the Company shall deliver to Grantee a
stock certificate representing the number of shares purchased in
accordance with the foregoing, duly registered in the name of
Grantee.
(C) Subject to "Tag Along/Drag Along" Provisions of Shareholders'
Agreement Prior to Complete Exercise. Notwithstanding anything to
the contrary, if (i) the other owners of stock in the Company
enter into one or more agreements to sell all, or any part of,
their stock to a third-party buyer, and (ii) at that time,
Grantee has already exercised this Option with respect to any or
all of the Phase I or Phase II Option Shares, Grantee, and by
such ownership of stock in the Company shall be subject to the
provisions of Section ____ of the Shareholders' Agreement
referred to in Section 11, below, (the "Tag Along/Drag Along
Provisions"), then:
(i) Tag Along. Upon thirty (30) days written notice from the
other owners of the Company stating that (a) they have entered
into an agreement to sell all, or a part of their stock to a
third-party buyer, which notice shall state the percentage of
their stock that they have agreed to sell (the "Selling
Percentage"), and (b) that they give to Grantee to right to "tag
along" by selling the same Selling Percentage of Shares (the "Tag
Along Shares") to the third-party buyer, Grantee shall have the
right to exercise his Option rights so that he has exercised and
owns, in the aggregate, the Tag Along Shares, and Grantee shall
give the other owners, within fifteen (15) days after receiving
the "Tag Along Notice", his written notice of his election to
either (x) decline from participating in the sale of the Tag
Along Shares or (y) accept the right to participate in the sale
of the Tag Along Shares. If Grantee accepts the right to
participate, and does not at that time own any or all of the Tag
Along Shares, then unless Grantee exercises the Option, in the
manner described in subsection (C), above, and at the same time
as he accepts the right to participate, so that he owns the Tag
Along Shares, Grantee shall be deemed to have exercised the
Option to purchase Option Shares, first with respect to the Phase
I Option Shares and thereafter with respect to the Phase II
Option Shares, in number so that he owns, in the aggregate, the
Tag Along Shares and shall thereafter make payment therefor, and
Grantee shall be bound to sell the Tag Along Shares in the manner
described in the Shareholders' Agreement.
(ii) Drag Along. Upon thirty (30) days written notice from the
other owners of the Company stating (a) that they have entered
into an agreement to sell all, or a part of their stock to a
third-party buyer, which notice shall state the percentage of
their stock that they have agreed to sell (the "Selling
Percentage"), and (b) that they require Grantee to exercise his
Option rights so that he has exercised and owns, in the
aggregate, the same Selling Percentage of all shares subject to
the Phase I and Phase II Options (the "Drag Along Shares"), then
Grantee shall exercise the Option, as to either the Phase I or
Phase II shares, as he shall elect, so as to, after such
exercise, and payment therefor, own, in the aggregate, the
Selling Percentage
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number of shares, and Grantee shall pay for them in the time and
manner referred to in subsection (C), above and shall thereafter
be bound to sell the Drag Along Shares in the manner described in
the Shareholders Agreement.
5. Rights Personal to Grantee; Effect of Death of Grantee Prior to
Complete Exercise. This grant of Option is, except as specifically provided for
hereinbelow, exercisable only by Grantee during his lifetime. If Grantee should
die during the term of this Option, the Grantee's legal representative or
representatives, or the person or persons entitled to do so under the Grantee's
last will and testament or under applicable intestate laws, shall have the right
to exercise this Option, but only for the number of shares as to which the
Grantee was entitled to exercise Option in accordance with subsection (i),
above, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
6. Non-Transferable: Except as provided for in Section 5, above, this
Option may not be sold, transferred, assigned, pledged, hypothecated or disposed
of in any way, whether by operation of law or otherwise, and shall be
exercisable during the Grantee's life-time only by the Grantee or his guardian
or legal representative.
7. Adjustments and Corporate Reorganizations: Subject to the provisions
of the Company's Stock Option Plan under which this Option is granted, if the
outstanding shares of the class then subject to this Option are increased or
decreased, or are changed into or exchanged for a different number or kind of
shares or securities, as a result of one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or the
like, appropriate adjustments shall be made in the number and/or kind of shares
or securities for which the unexercised portions of this Option may thereafter
be exercised, all without any change in the aggregate exercise price applicable
to the unexercised portions of this Option, but with a corresponding adjustment
in the exercise price per share or other unit. No fractional share of stock
shall be issued under this Option or in connection with any such adjustment.
Such adjustments shall be made by or under authority of the Company's board of
directors whose determinations as to what adjustment shall be made, and the
extent thereof, shall be final, binding and conclusive.
Upon (i) the dissolution or liquidation of the Company, or (ii) a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to this Option are changed into
or exchanged for cash or property or securities not of the Company's issue, or
any combination thereof, or (iii) a sale or substantially all the property of
the Company to another corporation or person, or a Change In Ownership, then
this Option shall terminate, unless provision be made in writing in connection
with such transaction for the assumption of options theretofore granted under
the Stock Option Plan under which this Option was granted, or the substitution
for such options of any options covering the stock of a successor employer
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices, in which event this Option shall
continue in the manner and under the terms so provided. If this Option shall
terminate pursuant to the foregoing
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sentence, then the Option shall be deemed to have vested, and Grantee shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of this Option, including the portions thereof which would, but for
this Section entitled "Adjustments and Corporate Reorganization," not yet be
exercisable.
8. Changes in Control: Notwithstanding any other provisions hereof, this
Option shall accelerate so that the Grantee shall have the right, at all times
until the expiration or earlier termination of the Option, to exercise the
unexercised portions of this Option, including the portions thereof which would,
but for this Section entitled "Changes in Control," not yet be exercisable,
within twenty-four (24) months after a Change in Control that occurs while there
remain unexercised any portion of this Option. For purposes of this paragraph a
"Change in Control" means any of the following events if they occur after the
date of grant of this Option and after the class of stock then subject to this
Option becomes Publicly Traded: the direct or indirect beneficial ownership
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and
Regulation 13D-G thereunder) forty percent (40%) or more of the class of
securities then subject to this Option is acquired or becomes held by any person
or group of persons (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934), or the sale, mortgage, lease or other transfer in one or
more transactions not in the ordinary course of the Company's business of assets
or earning power constituting more than 50% of the assets or earning power of
the Company and its subsidiaries (taken as a whole) to any such person or group
of persons; and (b) "Publicly Traded" stock is a class which is listed or
admitted to unlisted trading privileges on a national securities exchange or as
to which sales or bind and offer quotations are reported in the automated
quotation system ("NASDAQ") operated by the National Association of Securities
Dealers, Inc.
9. Rights in Shares Before Issuance and Delivery: No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option, unless and until such shares have been issued to
such person as fully paid shares.
10. Requirements of Law and of Stock Exchanges: Grantee hereunder
represents and warrants that he is a resident of the State of California. By
accepting this Option, the Grantee represents and agrees for himself and his
transferees by will or the laws of descent and distribution that, unless a
registration statement under the Securities Act of 1933 is in effect as to share
purchased upon any exercise of this Option, (i) any and all shares so purchased
shall be acquired for his personal account and not with a view to or for sale in
connection with any distribution, and (ii) each notice of the exercise of any
portion of this Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares are
being so acquired in good faith for his personal account and not with view to or
for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing
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the Company to be in violation of or incur any liability under any federal,
state or other securities law, any requirement of any securities exchange
listing agreement to which the Company may be a party, or any other requirement
of law or of any regulatory body having jurisdiction over the Company.
11. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be subject to the terms and conditions set forth
in that certain "Shareholders Agreement" attached hereto as Exhibit "A-1" and
incorporated herein by reference. Any certificates evidencing shares of
restricted stock may contain such legends as the Company may deem necessary or
advisable to reflect and give effect to the restrictions imposed thereon
hereunder.
12. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address given beneath
his signature hereto or at such other address as the Grantee may hereafter
designate in writing to the company. Any such notice shall be deemed duly given
no later than two business days after sending, when sent (i) first class mail,
postage prepaid and deposited in a post office, or branch post office, regularly
maintained by the United States Postal Service, or (ii) by reputable overnight
courier, delivery charges prepaid.
13. Laws Applicable to Construction: This Agreement has been executed
and delivered by the Company in the State of California, and this Agreement
shall be construed and enforced in accordance with the laws of said State.
((NO FURTHER TEXT ON THIS PAGE))
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IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
PRO INTERMED, INC., a California corporation
By: /s/ Mike Harrar
----------------------------------
Mike Harrar, President
ACCEPTED:
/s/ D.A. Epstein Address: 2528 Ouan Ft.
---------------------------------- Del Mar CA
DAVID EPSTEIN, Grantee FAX: 619/755-5017
