Exhibit 10.11
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated August 1, 1995, is made by and between Red Lion
Hotels, Inc., a Delaware corporation hereinafter referred to as "Company," and
David J. Johnson, an employee of the Company or Subsidiary of the Company,
hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock; and
WHEREAS, the Company wishes to carry out the Plan (the terms of which are
hereby incorporated by reference and made a part of this Agreement); and
WHEREAS, the Committee, appointed to administer the Plan, has determined
that it would be to the advantage and best interest of the Company and its
shareholders to grant the Non-Qualified Option provided for herein to the
Optionee as an inducement to enter into or remain in the service of the Company
or its Subsidiaries and as an incentive for increased efforts during such
service, and has advised the Company thereof and instructed the undersigned
officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
Section 1.1 - Board
- - - ----------- -----
"Board" shall mean the Board of Directors of the Company.
Section 1.2 - Code
- - - ----------- ----
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
- - - ----------- ---------
"Committee" shall mean the Compensation Committee of the Board, or a
subcommittee of the Board, appointed as provided in Section 9.1 of the Plan.
Section 1.4 - Common Stock
- - - ----------- ------------
"Common Stock" shall mean the common stock of the Company, par value $.01
per share, and any equity security of the Company issued or authorized to be
issued in the future, but excluding any warrants, options or other rights to
purchase Common Stock. Debt securities of the Company convertible into Common
Stock shall be deemed equity securities of the Company.
Section 1.5 - Company
- - - ----------- -------
"Company" shall mean Red Lion Hotels, Inc., a Delaware corporation.
Section 1.6 - Director
- - - ----------- --------
"Director" shall mean a member of the Board.
Section 1.7 - Employee
- - - ----------- --------
"Employee" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.
Section 1.8 - Exchange Act
- - - ----------- ------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
Section 1.9 - Fair Market Value
- - - ----------- -----------------
"Fair Market Value" of a share of Common Stock as of a given date shall be
(i) the mean between the highest and lowest selling price of a share of Common
Stock on the principal exchange on which shares of Common Stock are then
trading, if any, on such date, or if shares were not traded on such date, then
on the closest preceding date on which a trade occurred, or (ii) if Common Stock
is not traded on an exchange, the mean between the closing representative bid
and asked prices for the Common Stock on such date as reported by NASDAQ or, if
NASDAQ is not then in existence, by its successor quotation system; or (iii) if
Common Stock is not publicly traded, the Fair Market Value of a share of Common
Stock as established by the Committee acting in good faith.
Section 1.10 - Option
- - - ------------ ------
"Option" shall mean a non-qualified stock option granted under this
Agreement and Article III of the Plan.
Section 1.11 - Optionee
- - - ------------ --------
"Optionee" shall mean an Employee granted an Option under this Agreement
and the Plan.
Section 1.12 - Plan
- - - ------------ ----
"Plan" shall mean The 1995 Equity Participation Plan of Red Lion Hotels,
Inc.
Section 1.13 - QDRO
- - - ------------ ----
"QDRO" shall mean any qualified domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder.
Section 1.14 - Rule 16b-3
- - - ------------ ----------
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time.
Section 1.15 - Secretary
- - - ------------ ---------
"Secretary" shall mean the Secretary of the Company.
Section 1.16 - Securities Act
- - - ------------ --------------
"Securities Act" shall mean the Securities Act of 1933, as amended.
Section 1.17 - Subsidiary
- - - ------------ ----------
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
Section 1.18 - Termination of Employment
- - - ------------ -------------------------
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company or any Subsidiary is
terminated for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment,
continuing employment of an Optionee by the Company or any Subsidiary, (ii) at
the discretion of the Committee, terminations which result in a temporary
severance of the employee-employer relationship, and (iii) at the discretion of
the Committee, terminations which are followed by the simultaneous establishment
of a consulting relationship by the Company or a Subsidiary with the former
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employee. The Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to Termination of Employment, including,
but not by way of limitation, the question of whether a Termination of
Employment resulted from a discharge for cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate an Employee's employment at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
ARTICLE II
GRANT OF OPTION
---------------
Section 2.1 - Grant of Option
- - - ----------- ---------------
For good and valuable consideration, the sufficiency of which is hereby
acknowledged, on the date hereof the Company irrevocably grants to the Optionee
the option to purchase any part or all of an aggregate of 870,833 shares of its
$.01 par value Common Stock upon the terms and conditions set forth in this
Agreement.
Section 2.2 - Purchase Price
- - - ----------- --------------
The purchase price of the shares of stock covered by the Option shall be
$19.00 per share without commission or other charge.
Section 2.3 - Consideration to Company
- - - ----------- ------------------------
In consideration of the granting of this Option by the Company, the
Optionee agrees to render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company shall from time
to time prescribe, for a period of at least one (1) year from the date this
Option is granted. Nothing in the Plan or this Agreement shall confer upon any
Optionee any right to continue in the employ of the Company or any Subsidiary,
or as a director of the Company, or shall interfere with or restrict in any way
the rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge the Optionee at any time for any reason whatsoever, with
or without cause.
Section 2.4 - Adjustments in Option
- - - ----------- ---------------------
(a) In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of shares of
the Company or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock splitup, stock dividend or combination of shares, the
Committee shall make an appropriate and equitable adjustment in the number and
kind of shares as to which the Option, or portions thereof then
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unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in the Option may include any necessary
corresponding adjustment in the Option price per share, but shall be made
without change in the total price applicable to the unexercised portion of the
Option (except for any change in the aggregate price resulting from rounding-off
of share quantities or prices). Any such adjustment made by the Committee shall
be final and binding upon the Optionee, the Company and all other interested
persons.
(b) Notwithstanding the foregoing, in the event of such a reorganization,
merger, consolidation, recapitalization, reclassification, stock splitup, stock
dividend or combination, or other adjustment or event which results in shares of
Common Stock being exchanged for or converted into cash, securities or other
property, the Company will have the right to terminate the Plan as of the date
of the exchange or conversion, in which case all options, rights and other
awards under this Option shall become the right to receive such cash, securities
or other property, net of any applicable exercise price.
(c) In the event of a "spin-off" or other substantial distribution of
assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Company's Common Stock, the Board may in its discretion make
an appropriate and equitable adjustment to the Option to reflect such
diminution.
ARTICLE III
PERIOD OF EXERCISABILITY
------------------------
Section 3.1 - Commencement of Exercisability
- - - ----------- ------------------------------
(a) Subject to Section 5.6, the Option shall become exercisable in three
(3) cumulative installments as follows:
(i) The first installment shall consist of sixty percent (60%)
of the shares covered by the Option and shall become exercisable on the
date of this Agreement.
(ii) The second installment shall consist of twenty percent (20%)
of the shares covered by the Option and shall become exercisable on
September 30, 1995.
(iii) The third installment shall consist of twenty percent (20%)
of the shares covered by the Option and shall become exercisable on
September 30, 1996.
(b) Notwithstanding Section 3.1(a), one hundred percent (100%) of the
shares covered by the Option shall become immediately exercisable upon (i) the
death of the Optionee while he is an employee of the Company, (ii) the
Optionee's Termination of
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Employment by reason of the Optionee's total and permanent disability or (iii)
the sale by Red Lion, a California limited partnership, or the distribution to
its partners, of all of the Common Stock held by Red Lion, a California limited
partnership.
(c) No portion of the Option which is unexercisable at Termination of
Employment shall thereafter become exercisable, except as may be otherwise
provided by the Committee.
Section 3.2 - Duration of Exercisability
- - - ----------- --------------------------
The installments provided for in Section 3.1 are cumulative. Each
such installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
Section 3.3 - Expiration of Option
- - - ----------- --------------------
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of ten (10) years from the date the Option was
granted; or
(b) One hundred twenty (120) days after the Optionee's Termination of
Employment, unless such Termination of Employment results from the Optionee's
death, total and permanent disability or retirement in accordance with the
Company's retirement policies or after age fifty five (55) if the Optionee has
completed five (5) years of employment with the Company, provided, however, that
the Committee, in its sole discretion and not subject to the consent of the
Optionee, may elect to waive the foregoing provision at any time prior to the
Optionee's exercise of the Option by advising the Optionee that this subsection
(b) shall be deleted in its entirety from this Agreement; or
(c) The expiration of one (1) year from the date of the Optionee's
Termination of Employment by reason of the Optionee's total and permanent
disability or the Optionee's retirement in accordance with the Company's
retirement policies or after age fifty five (55) if the Optionee has completed
five (5) years of employment with the Company; or
(d) The expiration of one (1) year from the date of the Optionee's
death; or
(e) The effective date of either the merger or consolidation of the
Company with or into another corporation, the exchange of all or substantially
all of the assets of the Company for the securities of another corporation, the
acquisition by another corporation or person of all or substantially all of the
Company's assets or eighty percent (80%) or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company,
unless the Committee waives this provision in connection with such transaction.
At least twenty (20) days prior to the effective date of such merger,
consolidation, exchange, acquisition, liquidation or dissolution, the Committee
shall give the Optionee notice of such
6
event if the Option has then neither been fully exercised nor become
unexercisable under this Section 3.3.
Section 3.4 - Acceleration of Exercisability
- - - ----------- ------------------------------
In the event of the merger or consolidation of the Company with or
into another corporation, the exchange of all or substantially all of the assets
of the Company for the securities of another corporation, the acquisition by
another corporation or person of all or substantially all of the Company's
assets or eighty percent (80%) or more of the Company's then outstanding voting
stock, or the liquidation or dissolution of the Company, the Committee may, in
its absolute discretion and upon such terms and conditions as it deems
appropriate, provide by resolution, adopted prior to such event and incorporated
in the notice referred to in Section 3.3(f), that at some time prior to the
effective date of such event this Option shall be exercisable as to all the
shares covered hereby, notwithstanding that this Option may not yet have become
fully exercisable under Section 3.1(a); provided, however, that this
acceleration of exercisability shall not take place if:
(a) This Option becomes unexercisable under Section 3.3 prior to said
effective date; or
(b) In connection with such an event, provision is made for an
assumption of this Option or a substitution therefor of a new option by an
employer corporation or a parent or subsidiary of such corporation; and
provided, further, that nothing in this Section 3.4 shall make this Option
exercisable if it is otherwise unexercisable by reason of Section 5.6.
The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction.
None of the foregoing discretionary terms of this Section shall be
permitted to the extent that such discretion would be inconsistent with the
requirements of Rule 16b-3.
ARTICLE IV
EXERCISE OF OPTION
------------------
Section 4.1 - Person Eligible to Exercise
- - - ----------- ---------------------------
During the lifetime of the Optionee, only the Optionee, or an
alternate payee under a QDRO, may exercise the Option or any portion thereof.
After the death of the Optionee, any exercisable portion of the Option may,
prior to the time when the Option
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becomes unexercisable under Section 3.3, be exercised by a beneficiary
designated by the Optionee, the Optionee's personal representative or by any
person empowered to do so under the Optionee's will or under the then applicable
laws of descent and distribution.
Section 4.2 - Partial Exercise
- - - ----------- ----------------
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
3.3; provided, however, that each partial exercise shall be for not less than
one hundred (100) shares (or the minimum installment set forth in Section 3.1,
if a smaller number of shares) and shall be for whole shares only.
Section 4.3 - Manner of Exercise
- - - ----------- ------------------
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or the Secretary's office of all of the
following prior to the time when the Option or such portion becomes
unexercisable under Section 3.3:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or portion
is thereby exercised, such notice complying with all applicable rules
established by the Committee or the Board; and
(b) (i) Full payment (in cash) for the shares with respect to which
such Option or portion is exercised;
(ii) With the consent of the Committee, payment may be delayed for
up to thirty (30) days from the date the Option, or portion thereof, is
exercised; or
(iii) With the consent of the Committee, (A) shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfer to
the Company or (B) shares of the Company's Common Stock issuable to the
Optionee upon exercise of the Option, with a Fair Market Value on the date
of Option exercise equal to the aggregate purchase price of the shares with
respect to which such Option or portion is exercised; or
(iv) With the consent of the Committee, property of any kind which
constitutes good and valuable consideration; or
(v) With the consent of the Committee, a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code or successor provision)
and payable upon such terms as may be prescribed by the Committee or the
Board. The Committee may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised,
however, by delivery of a promissory note or by a loan from the Company
when or where such loan or other extension of credit is prohibited by law;
or
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(vi) With the consent of the Committee, any combination of the
consideration provided in the foregoing subparagraphs (iii), (iv) and (v);
and
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee or the Board, signed by the Optionee or other
person then entitled to exercise such Option or portion, stating that the shares
of stock are being acquired for the Optionee's own account, for investment and
without any present intention of distributing or reselling said shares or any of
them except as may be permitted under the Securities Act and then applicable
rules and regulations thereunder, and that the Optionee or other person then
entitled to exercise such Option or portion will indemnify the Company against
and hold it free and harmless from any loss, damage, expense or liability
resulting to the Company if any sale or distribution of the shares by such
person is contrary to the representation and agreement referred to above. The
Committee may, in its absolute discretion, take whatever additional actions it
deems appropriate to insure the observance and performance of such
representation and agreement and to effect compliance with the Securities Act
and any other federal or state securities laws or regulations. Without limiting
the generality of the foregoing, the Committee may require an opinion of counsel
acceptable to it to the effect that any subsequent transfer of shares acquired
on an Option exercise does not violate the Securities Act, and may issue stop-
transfer orders covering such shares. Share certificates evidencing stock
issued on exercise of this Option shall bear an appropriate legend referring to
the provisions of this subsection (c) and the agreements herein. The written
representation and agreement referred to in the first sentence of this
subsection (c) shall, however, not be required if the shares to be issued
pursuant to such exercise have been registered under the Securities Act, and
such registration is then effective in respect of such shares; and
(d) Full payment to the Company (or other employer corporation) of
all amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; with the consent of the Committee, (i)
shares of the Company's Common Stock owned by the Optionee duly endorsed for
transfer, or (ii) shares of the Company's Common Stock issuable to the Optionee
upon exercise of the Option, having a Fair Market Value at the date of Option
exercise equal to the sums required to be withheld, may be used to make all or
part of such payment; and
(e) In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.
Section 4.4 - Conditions to Issuance of Stock Certificates
- - - ----------- --------------------------------------------
The shares of stock deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:
9
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Committee or Board shall, in its absolute discretion, deem necessary
or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee or Board shall, in its
absolute discretion, determine to be necessary or advisable; and
(d) The receipt by the Company of full payment for such shares,
including payment of all amounts which, under federal, state or local tax law,
it is required to withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or Board may from time to time establish
for reasons of administrative convenience.
Section 4.5 - Rights as Shareholder
- - - ----------- ---------------------
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
ARTICLE V
OTHER PROVISIONS
----------------
Section 5.1 - Administration
- - - ----------- --------------
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In
its absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under this Plan except
with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or
any regulations or rules issued thereunder, are required to be determined in the
sole discretion of the Committee.
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Section 5.2 - Option Not Transferable
- - - ----------- -----------------------
Neither the Option nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Optionee or the
Optionee's successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent (i) transfers by will or by the applicable laws of descent and
distribution, (ii) the designation by the Optionee of a beneficiary to exercise
the Optionee's Option or other rights under this Agreement after the Optionee's
death, or (iii) transfers pursuant to a QDRO.
Section 5.3 - Shares to Be Reserved
- - - ----------- ---------------------
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.4 - Notices
- - - ----------- -------
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to the Optionee at the
address given beneath the Optionee's signature hereto. By a notice given
pursuant to this Section 5.4, either party may hereafter designate a different
address for notices to be given to that party. Any notice which is required to
be given to the Optionee shall, if the Optionee is then deceased, be given to
the Optionee's personal representative if such representative has previously
informed the Company of such representative's status and address by written
notice under this Section 5.4. Any notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
Section 5.5 - Titles
- - - ----------- ------
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
Section 5.6 - Shareholder Approval
- - - ----------- --------------------
The Plan will be submitted for approval by the Company's shareholders
within twelve (12) months after the date the Plan was initially adopted by the
Board. This Option may not be exercised to any extent by anyone prior to the
time when the Plan is approved by the shareholders, and if such approval has not
been obtained by the end of said twelve-month period, this Option shall
thereupon be cancelled and become null and void.
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Section 5.7 - Construction
- - - ----------- ------------
This Agreement shall be administered, interpreted and enforced under
the laws of the State of Delaware.
Section 5.8 - Conformity to Securities Laws
- - - ----------- -----------------------------
The Optionee acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3. Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the
Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
Section 5.9 - Amendments, etc.
- - - ----------- ----------------
Except as provided by Section 3.3(b), this Agreement may not be
modified, amended, or terminated except by an instrument in writing, signed by
the Optionee or such other person as may be permitted to exercise the Option
pursuant to Section 4.1 and by a duly authorized representative of the Company.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
RED LION HOTELS, INC.
By /s/ Anupam Narayan
-------------------
Vice President
By /s/ Beth A. Ugoretz
-------------------
Secretary
/s/ David J. Johnson
- - - ----------------------------
Optionee
- - - ----------------------------
- - - ----------------------------
Address
Optionee's Taxpayer
Identification Number:
- - - ----------------------------
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