EXECUTIVE SHARE AGREEMENT
This Executive Share Agreement (the "Agreement") is dated as
of March 28, 1997 among Xxxxxxx X. XxXxx (the "Executive
Shareholder"), INROADS Capital Partners, L.P. ("INROADS"),
Mesirow Capital Partners VII, an Illinois Limited Partnership
("Mesirow") and Edgewater Private Equity Fund II, L.P.
("Edgewater"; together with INROADS and Mesirow, the
Purchasers") and Meridian Financial Corporation (the
"Company").
WHEREAS, the Executive Shareholder is currently a shareholder
of the Company and serves as an executive officer of the
Company;
WHEREAS, pursuant to that certain Securities Purchase
Agreement, dated as of March 28, 1997 (the "Purchase
Agreement" ), the Purchasers are, concurrently with the
execution of this Agreement, purchasing shares of Series C
Convertible Preferred Stock of the Company ("Preferred
Shares") and 10.0% Subordinated Notes of the Company
("Notes");
WHEREAS, the Purchasers desire, upon the fulfillment of
certain conditions, to deliver Executive Shares (as defined
in Section l(f)) to the Executive Shareholder or to other
officers or employees of the Company, all as specified herein
and subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the
parties hereto agree as follows:
Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
()"Board of Directors" shall mean the Board of Directors of
the Company
() "Cause" shall mean any of the following with respect to
the Executive Shareholder: (i) the conviction, admission or
plea of no contest by the Executive Shareholder with respect
to any crime, whether or not involving the Company, which
constitutes a felony in the jurisiction involved; (ii) the
embezzlement or misappropriation of property of the Company
or any of its subsidiaries or affiliates, or any other act
involving fraud with respect to the Company or any of its
subsidiaries or affiliates; (iii) any substance abuse by the
Executive Shareholder that interferes with the Executive
Shareholder's ability to discharge his duties to the Company;
(iv) a breach by the Executive Shareholder of any of the
provisions of Section 7.02 of the Purchase Agreement; or (v)
the failure by the Executive Shareholder (following
reasonable notice and an opportunity to cure) to perform such
duties as may he delegated to him by the Board of Directors.
() "Common Stock" shall mean Common Shares, without par
value, of the Company.
() "Cumulative Lease Origination Amount", for any period,
shall mean (i) the original equipment cost of all restaurant
equipment leased by the Company pursuant to leases for
restaurant equipment and (ii) the original equipment cost of
all equipment other than restaurant equipment, up to $5
million in the aggregate, leased by the Company pursuant to
leases approved by the Board of Directors, in each case
originated by the Company (whether such leases are ultimately
retained in the Company's portfolio or brokered for others)
in the ordinary course of its business during such period, as
determined by the Board of Directors.
() "Cumulative Pre-Tax Net Income", for any period, shall
mean the sum of (i) the net income before state and federal
income tax expense of the Company, as reflected on the
audited statement of operations of the Company for each
fiscal year wholly contained in such period and (ii) the net
income before state and federal income tax expense of the
Company, as determined by the Board of Directors in
accordance with generally accepted accounting principles,
applied consistently with the Company's past practice, for
each period contained in such period that is not a part of
any such fiscal year.
() "Executive Shares" shall mean, with respect to any
Purchaser, (i) 8% of the Preferred Shares purchased by such
Purchaser pursuant to the Purchase Agreement (which, together
with resect to all Purchasers, equals 6% of the Common Stock
on a fully diluted basis as of the date of this Agreement)
and any shares of Common Stock issued upon conversion of such
Preferred Shares and (ii) any other securities of the Company
issued with respect to any of such securities (or other
Executive Shares by virtue of this clause (ii)) by way of a
dividend, distribution, stock split, recapitalization,
reorganization, merger or any ransaction or series of related
transactions in which Executive Shares are changed into,
converted into or exchanged for other securities.
() "Liquidity Event" shall mean any of the following: (i)
the closing of a firm commitment underwritten public offering
of shares of Common Stock which triggers the mandatory
conversion provisions applicable to the Preferred Share; (ii)
the consummation of a transaction pursuant to which the
Company shall sell all or substantially all of its assets
(except in connection with a sale effected in the form of a
securitization); (iii) the consummation of a transaction
pursuant to which the Purchasers shall sell all or
substantially all of their aggregate equity interest in the
Company; or (iv) the consummation by the Company of a merger,
consolidation or other combination in which the Company is
not the surviving party or in which the Company survives as a
wholly-owned subsidiary of another entity.
() "Retained Asset Amount", as of any date, shall mean the
Cumulative Lease Origination Amount from the date hereof
through such date (excluding leases brokered for the accounts
of others or sold to others, but including any securitized
lease), as determined by the Board of Directors on a basis
consistent with that utilized in the preparation of the
Business Plan (as defined in the Purchase Agreement).
() The "Vested Percentage" of the Executive Shares shall be
determined as follows:
If the Executive Shareholder's The
Vested
employment is terminated between:
Percentage is:
The date hereof and March 31, 1998
0%
April 1, 1998 and March 31, 1999
25%
April 1, 1999 and March 31, 2000
50%
April 1, 2000 and March 31, 2001
75%
April l, 2001 and following
100%
. Agreement to Deliver.
()Upon the fulfillment of the conditions set forth in
Section 3, and subject to Section 2(b), on the earlier of (i)
immediately prior to a Liquidity Event or (ii) the tenth
anniversary of the date hereof, each of the Purchasers
severally, but not jointly, hereby agrees to transfer and
deliver promptly, for no additional consideration other than
the fulfillment of such conditions, all Executive Shares of
such Purchaser to the Executive Shareholder and/or such other
officers, directors, employees or consultants of the Company
as he designates in writing (and in such proportions as he
designates in writing).
()If the Executive Shareholder's employment with the Company
has been terminated for any reason prior to March 31, 2001,
no Purchaser shall have any obligation to deliver any
Executive Shares pursuant to this Agreement and this
Agreement shall terminate upon any such termination of the
Executive Shareholder's employment with the Company, except
that if (i) the Executive Shareholder's employment with the
Company is terminated prior to March 31, 2001 by the
Executive Shareholder's death or total permanent disability,
determined in accordance with the Company's practices for
employees generally and, as of the most recent period set
forth on Schedule A hereto (each such period being a
"Measuring Period") ended prior to the date of such death or
disability, the Company has met each of the projections set
forth on Schedule A hereto with respect to such Measuring
Period, or (ii) the Executive Shareholder's employment with
the Company is terminated prior to March 31, 2001 by the
Company without Cause, and, as of the end of each Measuring
Period ended prior to the date of such termination, the
Company has met each of the projections set forth on Schedule
A hereto with respect to such Measuring Periods, then, in
full satisfaction of the Purchasers' obligations under this
Agreement: (1) each Purchaser shall deliver to the Executive
Shareholder or his designees, on the earlier of (x)
immediately prior to a Liquidity Event or (y) the tenth
anniversary of the date hereof, the Vested Percentage of the
Executive Shares of such Purchaser as of the date of such
termination and (2) each Purchaser shall deliver, on the
earlier of (x) immediately prior to a Liquidity Event or (y)
the tenth anniversary of the date hereof, to senior managers
of the Company designated from time to time by the Purchasers
("Other Executives"), subject to fulfillment of the
conditions set forth in Section 3, any Executive Shares of
such Purchaser which are not deliverable by such Purchaser to
the Executive Shareholder (or his designees) as a result of
the provisions of this Section 2(b) ("Available Shares")
(provided that, in the event of the termination of this
Agreement as a result of the death of the Executive
Shareholder, the Available Shares, after any allocation of
Executive Shares to Xxxxxxxxx X. Xxxxx, shall be allocated
60% to Xxxxxxx X. Xxxxxxx and 40% to Xxxxxx X. Xxxxxxx (who
shall thereupon be the Other Executives for purposes of this
Agreement)); provided that the Purchasers shall not be
required to deliver any Available Shares to any Other
Executive who is not employed by the Company in a management
capacity on the earlier of the occurrence of a Liquidity
Event or April 1, 2001. If the Executive Shareholder's
employment is terminated for any reason on or after March 31,
2001 and the conditions set forth in Section 3 have been met,
the Purchasers shall be obligated to deliver the Executive
Shares as provided in Section 2(a). If the employment with
the Company of any Other Executive to whom Available Shares
have been allocated is terminated, such Available Shares
shall upon such termination be free of the terms of this
Agreement.
Conditions. The obligation of the Purchasers to deliver
Executive Shares pursuant to Section 2 is subject to the
fulfillment of the following conditions:
() if a Liquidity Event occurs on or after April 1, 2001:
() Cumulative Pre-Tax Net Income of the Company from the
date hereof through March 31, 2001, shall be equal to or
greater than $12.5 million;
()the Cumulative Lease Origination Amount from the date
hereof through March 31, 2001 shall be equal to or greater
than $123 million; and
()the Company's Retained Asset Amount as of March 31,
2001 shall be at least $95 million;
()if a Liquidity Event occurs prior to April 1, 2000: the
Company shall have met each of the projections set forth on
Schedule A hereto with respect to the
most recent Measuring Period ended prior to the date of such
Liquidity Event; and
()if a Liquidity Event occurs on or after April 1, 2000 and
prior to April 1, 2001: (i) the Company shall have met each
of the projections set forth on Schedule A hereto with
respect to the Measuring Period ended March 31, 2000 and (ii)
the total valuation of the Company in such Liquidity Event
shall exceed the product of (x) 4.5 and (y) the aggregate
total amount of capital invested by the Purchasers in the
Company through the date of such Liquidity Event plus the
aggregate amount of capital invested in the Company by
parties other than the Purchasers after the date of this
Agreement, in each case whether such capital is evidenced by
equity securities or subordinated debt of the Company.
Determination of Financial Conditions. As soon as
practicable after determination of the Company's results of
operations as of March 3 l, 2001, but in no event later than
15 days thereafter, the Board of Directors shall determine,
based on such statements and on the Company's internal books
and records, whether it believes that the conditions set
forth in paragraph (a) of Section 3 have been met, and shall
deliver a written notice of its determination to each of the
Purchasers and the Executive Shareholder. If either the
Executive Shareholder or a Purchaser disputes the Company's
determination with respect to such conditions, the parties,
with the assistance of the Company's independent public
accountants, shall attempt to resolve such dispute within 30
days following the date on which the determination of the
Board of Directors was delivered to the Purchasers and the
Executive Shareholder. If such dispute is not resolved
within such 30-day period, the Purchasers and the Executive
Shareholder shall jointly select a national firm of
independent public accountants familiar with the business in
which the Company is engaged (the "Arbitrating Accountant")
to determine whether any such disputed conditions have been
met. The Arbitrating Accountant shall conduct such
independent procedures and investigation as the Arbitrating
Accountant shall deem necessary in order to form an opinion
as to the fulfillment of such conditions. The Arbitrating
Accountant shall give written notice to the Purchasers, the
Executive Shareholder and the Company of its determination
within 45 days of its appointment, and such determination
shall be final and binding on the parties hereto. The fees
of the Arbitrating Accountant shall be borne by the Company.
Participation in Liquidity Event. The Company and each of
the Purchasers agree to use reasonable efforts to ensure that
upon delivery of Executive Shares to the Executive
Shareholder (or other recipient of Executive Shares) (the
"Recipient") upon a Liquidity Event, such Recipient shall
have the right to participate in such Liquidity Event with
respect to such Executive Shares in the same manner as each
other holder of shares of the same class of capital stock of
the Company and solely for such purpose, the Company shall
use its best efforts to ensure that holdback or similar
agreements with respect to securities of the Company are
ratably allocated among any Recipients and all other holders
of such securities, if the Liquidity Event is a public
offering (and the Executive Shareholder and any such other
Recipients shall not unreasonably withhold their consent to
any such ratable holdback or similar agreement). If for any
reason the Company and the Purchasers fail or are unable to
take such action as may be necessary to enable a Recipient to
participate in such a Liquidity Event, to the extent
necessary to provide the Recipient with proceeds from such
participation sufficient to cover the Recipient's federal,
state and local income tax liability attributable to his or
her receipt of Executive Shares, and the Recipient is unable,
after using his or her reasonable efforts (which shall not
require the pledge of any collateral other than the Executive
Shares of such Recipient), to secure a loan in an amount
sufficient to cover such tax liability, then the Company
agrees to use its reasonable efforts to provide such a loan
to the Recipient, on commercially reasonable terms to be
determined by the Company, in an amount sufficient to pay
such tax liability (or the balance of such tax liability, as
the case may be) which loan, with respect to any Recipient,
shall be secured by the Executive Shares of such Recipient.
Termination. The obligation of the Purchasers to deliver
Executive Shares pursuant hereto shall terminate upon the
earlier of (i) the determination under Section 4 that the
conditions set forth in paragraph (a) of Section 3 have not
been met and (ii) the tenth anniversary of the date of this
Agreement.
Restrictions on Transfer. Subject to the provisions of
Section 2 hereof, the Executive Shareholder may not transfer
or assign any rights hereunder to any person. The Purchasers
may transfer Executive Shares (subject to the restrictions
set forth in the Purchase Agreement), provided that the
transferee agrees in writing to be bound by the provisions
hereof.
Miscellaneous.
()Legend. All certificates evidencing Executive Shares
which are subject to this Agreement shall bear the following
legend:
"THE SHARES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
AGREEMENTS SET FORTH IN AN EXECUTIVE SHARE AGREEMENT AMONG
MERIDIAN FINANCIAL CORPORATION (THE "COMPANY") AND CERTAIN
HOLDERS OF SHARES OF THE COMPANY DATED AS OF MARCH 28, 1997.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
Upon termination of this Agreement, certificates for
Executive Shares may be surrendered to the Company in
exchange for new certificates without the foregoing legend.
()Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the
parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties
hereto whether so expressed or not. Any person who is an
Other Executive or a Recipient for purposes of this Agreement
shall be a third party beneficiary of this Agreement and
shall be entitled to enforce the provisions hereof applicable
to such person.
()Notices. All notices and other communications which are
required or permitted to be given under this Agreement shall
be in writing and shall be delivered personally, mailed by
certified or registered mail, return receipt requested. sent
by reputable overnight courier or sent by confirmed
telecopier, addressed as follows:
() if to the Company, at 0000 Xxxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxxxx, Xxxxxxx 00000-0000, Attention: President;
()if to the Executive Shareholder, at the address of the
Executive Shareholder as shown by the records of the Company;
and
()if to any Purchaser, at the address of such Purchaser
shown by the records of the Company; or to such other address
and/or such other addressee as any of the above shall have
specified by notice hereunder. Each notice or other
communication which shall be delivered personally, mailed on
telecopied in the manner described above shall be deemed
sufficiently given, served, sent, received or delivered for
all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt or the
affidavit of messenger being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
()Remedies. If any party to this Agreement obtains a
judgment against any party hereto by reason of any breach of
this Agreement or the failure of such other party to comply
with the provisions hereof, a reasonable attorneys' fee as
fixed by the court shall be included in such judgment. No
remedy conferred upon any party to this Agreement is intended
to be exclusive of any other remedy herein or by law provided
or permitted, but each such remedy shall be cumulative or
shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
Each party hereto agrees that, in the event of any violation
of this Agreement by such party, the remedies available at
law would be inadequate and that such party's obligations
under this Agreement may be specifically enforced.
Notwithstanding the foregoing sentence, nothing herein shall
be construed as prohibiting any party hereto from also
pursuing any other rights, remedies or defenses, in
connection with any breach of this Agreement.
()Waiver. None of the terms of this Agreement shall be
deemed to have been waived by any party hereto, unless such
waiver is in writing and signed by that party. The waiver by
any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of
any other provision of this Agreement or of any further
breach of the provision so waived or of any other provision
of this Agreement. No extension of time for the performance
of any obligation or act hereunder shall be deemed an
extension of time for the performance of any other obligation
or act.
() Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Illinois, without giving effect to its conflicts of law
rules.
()Entire Agreement. This Agreement constitutes the sole and
entire agreement of the parties with respect to the subject
matter hereof.
()Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed to be an
original, and all of which shall be taken to be one and the
same instrument with the same effect as if each of the
parties hereto had signed the same signature page. Any
signature page of this Agreement may be detached from any
counterpart of this Agreement without impairing the legal
effect of any signature thereon and may be attached to
another counterpart of this Agreement identical in form
hereto and having attached to it one or more additional
signature pages.
() Amendments. This Agreement may not be amended, modified
or changed in any respect without the written consent of the
party against whom enforcement of each amendment,
modification or change is sought.
() Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement shall be unenforceable or invalid
under applicable law, such provision shall be ineffective
only to the extent of such unenforceability or invalidity,
and the remaining provisions of this Agreement shall continue
to be binding and in full force and effect.
()Headings. The section and other headings contained in
this Agreement are for convenience only and shall not be
deemed to limit, characterize or interpret any provision of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Executive Share Agreement as of the date first above written.
INROADS CAPITAL
PARTNERS,
L.P.
Xxxxxxx X. XxXxx
By: INROADS
GENERAL
PARTNERS,
L.P., its
general partner
By:
MERIDIAN FINANCIAL CORPORATION Its:
By: MESIROW CAPITAL
PARTNERS VII,
Its: an Illinois
Limited Partnership
By: MESIROW
FINANCIAL
SERVICES,
INC., its
general partner
By:
Its:
EDGEWATER
PRIVATE EQUITY FUND
II,
L.P.
By:
XXXXXX MANAGEMENT, INC. its
general
partner
By:
Its:
SCHEDULE A
Period from the date Cumulative
Cumulative Lease
Retained
of this Agreement through: Net Income
Origination Amount
Asset Amount
March 31, 1998 842,850
24,600,000
18,600,000
March 31, 1999 2,819,261
51,600,000
36,600,000
March 31, 2000 6,321,343
83,400,000
65,400,000
March 31, 2001 12,500,000 123,000,000
95,000,000
