Puts and Calls. BAD TERMINATIONS GOOD TERMINATIONS --------------------------------------------------------------------------------------------------------------------------------- FIRED FOR QUIT W/O FIRED W/O "CAUSE"/ QUIT DEATH/DISABILITY "CAUSE" "
Puts and Calls. Somewhat more rare is a provision giving a shareholder the ability to require the company or another shareholder to buy that shareholder’s stock, or allowing the company and certain shareholders the ability Continued on next page to cause another shareholder to involuntarily sell its stock to the company or shareholder. A typical example would be a call right by the company to buy out an employee shareholder’s stock if the employee ceases to be employed by the company, or the corollary put right by the employee to cause the company to buy. There are several issues to consider when drafting these types of provisions. First, who has the right to trigger the provision? A majority shareholder may have the leverage in negotiating the shareholders agreement to cause the other shareholders to be subject to a ROFR or drag right, but the minority shareholders don’t have a ROFR if the majority shareholder sells and cannot drag the majority shareholder. The minority shareholder may have only tag-along rights. Second, how do these rights interplay with each other? A tag-along right should not apply if all equity has been purchased under the ROFR. Similarly, a shareholder who exercises its ROFR should not then be able to exercise tag-along rights. Also, shareholders should not have a ROFR where the selling shareholder has drag-along rights. It is important to carefully coordinate these provisions. Third, what value is paid for the equity? In a right triggered by an offer to a third party, the price offered by the third party usually controls. The price to be paid is often an issue in the put/call scenarios. Some agreements provide that the board has the right to determine the fair market value of the equity. Of course, a board determination would be problematic in a situation where the company is exercising a call right. Some provisions allow for the parties to hire an appraisal firm to determine the fair market value. Other issues in calculating value include whether the appraisal firm can or should apply a minority or a liquidity discount in arriving at the market value. Many of these issues will come down to who has the leverage at the time of negotiations.
Puts and Calls. To ensure the availability of continued ownership participation to future key employees, the Company has options to repurchase ("Calls") certain equity interests in Affiliates owned by partners or members. The options were exercisable beginning in 1998. In addition, Affiliate management owners have options ("Puts"), exercisable beginning in the year 2000, which require the Company to purchase certain portions of their equity interests at staged intervals. The Company is also obligated to purchase ("Purchase") such equity interests in Affiliates upon death, disability or termination of employment. All of the Puts and Purchases would take place based on a multiple of the respective Affiliate's Owners' Allocation but using reduced multiples for terminations for cause or for voluntary terminations occurring prior to agreed upon dates, all as defined in the general partnership, limited partnership or limited liability company agreements of the Affiliates. Resulting payments made to former owners of acquired Affiliates are accounted for as adjustments to the purchase price for such Affiliates. Payments made to equity holders who have been awarded equity interests in connection with their employment are accrued, net of estimated forfeitures, over the service period as equity-based compensation. The Company's contingent obligations under the Put and Purchase arrangements at December 31, 1998 ranged from $11.0 million on the one hand, assuming all such obligations occur due to early resignations or terminations for cause, and $227.5 million on the other hand, assuming all such obligations occur due to death, disability or terminations without cause. The Put and Purchase amounts above were calculated based upon $32.0 million of average annual historical Owners' Allocation. Assuming the closing of all such Put and Purchase transactions, AMG would own all the prospective Owners' Allocations.
Puts and Calls. 1. The Borrower owns a 78.2% interest in Telcel, its Venezuelan operation. Telcel's other major shareholder holds an indirect 21% interest in Telcel. Under a Stock Purchase Agreement, that shareholder has the right to initiate a process that could require the Borrower to purchase (the puts), and the Borrower has the right to initiate a process that could require that shareholder to sell (the calls) to the Borrower, the shareholder's interest in Telcel. Notice of the initiation of the process with respect to approximately half of that shareholder's interest was to be given in 2000 and notice with respect to the remaining balance was to be given in 2002. If the Borrower exercises its call right, it would purchase that shareholder's interest at between 100% and 120% of its appraised fair value. If the Borrower is required to purchase the interest, it would do so at between 80% and 100% of its appraised fair value. In 2000, the shareholder initiated a process for appraising the value of approximately half of its interest in Telcel, but the process was not completed. The shareholder also has sent a letter purporting to exercise the balance of the puts under the Stock Purchase Agreement. The Borrower is currently in arbitration with the shareholder over alleged breaches by the Borrower and the shareholder of the Stock Purchase Agreement, including the timing of the valuation and whether the process was properly initiated in 2000. The arbitration does not directly involve the valuation of the balance of the puts. The shareholder is seeking damages and specific performance, and the Borrower is seeking, among other things, unspecified damages and a ruling that it has not breached the Stock Purchase Agreement in any respect. The arbitration also related to an alleged oral agreement to buy out the shareholder's entire interest in Telcel, which the Borrower argues does not exist. Hearings on these matters occurred in January and April 2004. If the arbitration panel rules against the Borrower, it is possible that the appraised fair value of the shareholder's interest in Telcel could be substantially in excess of current value. At this time, the likely outcome of this arbitration cannot be predicted, nor can a reasonable estimate of the amount of loss, if any, be made.
Puts and Calls. Section 5.1
Puts and Calls. Section 5.2 Willx........................................
Puts and Calls. The Company and each Management Investor (which term, for purpose of this Section 5.2, shall include all Permitted Transferees thereof as the context may require) shall be subject to the following purchase and sale obligations and rights:
Puts and Calls. The Executive and Company hereby agree to the terms and conditions of certain “put” and “call” rights set forth on Attachment C hereto.
Puts and Calls. Within fifteen days after the date hereof, TeleNova -------------- and ITXC shall enter into an amendment to this Agreement that shall provide for a series of puts and calls to apply in the event that (i) ITXC effects an initial public offering, (ii) ITXC is acquired, (iii) either TeleNova or ITXC effects a Territory Non-Exclusive Arrangement pursuant to Section 14 hereof or (iv) an impasse develops. Such amendment shall be consistent with each of the provisions of the Exit Clause Outline annexed hereto as Exhibit H and shall acknowledge that to the extent that TeleNova acquires stock pursuant to such puts and calls, such stock generally will not be registered under any applicable securities law. In the event that TeleNova and ITXC are unable to agree upon the text of such amendment within such fifteen day period, then either such Party shall have the right to terminate this Agreement and the License Agreement without liability upon notice to each of the Parties.
Puts and Calls. (a) In the event this Agreement is terminated by Empire, SYN shall have a call right to purchase Empire's shares of common stock of SYN at a price equal to 100% of fair market value, determined by appraisal, and Empire shall have a put right to sell to SYN Empire's shares of common stock of SYN at a price equal to 90% of fair market value, determined by appraisal, provided that, in case of a put by Empire, SYN has adequate liquidity, as reasonably determined by its Board, to make such purchase.
