EXHIBIT 99(C)(5)
INCENTIVE OPTION AGREEMENT
THIS AGREEMENT made as of the 16th day of June, 0000
X X X X X X X:
XXXXXXXX XXXXXXXX,
an individual resident in Los Angeles, California
(hereinafter called "Xxxxx")
- and -
CCL INDUSTRIES INC.
a corporation continued under the laws of Canada
(hereinafter called "CCL")
WHEREAS:
1. Seda Specialty Packaging Corp. ("Seda"), Xxxxx and CCL have entered into an
agreement made as of the 16th day of June, 1997 pursuant to which Seda has
agreed to continue to employ Xxxxx on and subject to the terms specified therein
(the "Employment Agreement").
2. CCL is a party to the Employment Agreement for the purpose of granting stock
options to Xxxxx pursuant to section 3.5 thereof.
3. Xxxxx and CCL have agreed to enter into this agreement to provide for the
grant of the Incentive Options (as defined in the Employment Agreement) to
Xxxxx, and the terms and conditions to which the Incentive Options shall be
subject.
THIS AGREEMENT WITNESSES that in consideration of the covenants,
agreements and warranties herein set out and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto respectively covenant and agree as follows:
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1. Subject to the terms hereof, CCL hereby grants to Xxxxx (effective upon the
commencement of employment of Xxxxx pursuant to the Employment Agreement)
an irrevocable option (the "Incentive Option") to purchase from CCL within
the time period hereinafter provided and subject to compliance with all
requirements of all stock exchanges and securities regulatory authorities
having jurisdiction, all or any part of 500,000 authorized and unissued
Class B non-voting shares ("Class B Shares") in the capital of CCL (the
"Option Shares") at a price per share equal to the simple average of the
daily high and low board lot trading prices for Class B Shares on The
Toronto Stock Exchange for the ten trading days commenced June 10, 1997 and
ending June 23, 1997 (the "Option Price"). Notwithstanding any of the
provisions hereof, any issuance of Option Shares will occur only upon (a)
compliance by CCL with the terms of section 1.1, and by Xxxxx of
section 1.3, of the Qualification and Listing of Shares Agreement dated
June 16, 1997 between CCL and Xxxxx, but only insofar as such terms
relate to the isssuance of Class B Shares issuable upon exercise of the
Incentive Options, or (b) the waiver by Xxxxx of compliance by CCL with
such terms.
2. The Incentive Option shall vest and be exercisable as to 100,000 Option
Shares with respect to each of the next five consecutive fiscal years
commencing with the fiscal year ending December 31, 1997, if and only if
EBITDA (as defined in the Employment Agreement) for a particular fiscal
year is 20% greater than EBITDA for the prior fiscal year. Xxxxx and CCL
acknowledge that the EBITDA target for the vesting of the first 100,000
Incentive Options (for the fiscal year ending December 31, 1997) is US$20
million. For greater certainty (i) the vesting of the Incentive Options
shall be based on EBITDA growth in a fiscal year over EBITDA for the prior
fiscal year, and EBITDA for any other fiscal years shall not be relevant
for such purpose; (ii) if in respect of any fiscal year EBITDA is less that
20% of EBITDA of the prior fiscal year, the 100,000 Incentive Options in
respect of such year shall not vest and shall be cancelled; (iii) the
Incentive Options shall not vest or be exercisable but shall be cancelled
if Xxxxx is in breach of his obligations pursuant to sections 5.3, 5.4 or
5.6 of the Employment Agreement; (iv) Incentive Options which vest and
become exercisable in accordance with this section 2 shall expire at 4:30
p.m. (Toronto time) on the 16th day of June, 2003. Notwithstanding anything
else in this section 2, but provided that Xxxxx is not in breach of his
obligations pursuant to section 5.3, 5.4 and 5.6 of the Employment
Agreement, if Shawn's employment is terminated pursuant to subsection
2.2(b), subsection 2.2(c) or subsection 2.2(d) of the Employment Agreement
or Xxxxx dies, only those Incentive Options scheduled to vest in the fiscal
year in which Shawn's employment is terminated shall
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vest, and the remaining balance of the unvested Incentive Options shall not
vest or be exercisable and shall be cancelled. If CCL adopts a policy
generally of extending the term of outstanding options held by senior
executives of CCL, provided all regulatory approvals and consents are
obtained and the terms thereof are complied with, the Incentive Option
shall be similarly extended.
3. In the event Xxxxx elects to exercise all or any portion of the Incentive
Option, Xxxxx shall duly complete, execute and deliver to CCL at its
address hereinafter provided, a signed notice specifying the number of
Option Shares with respect to which the Incentive Option is being exercised
together with a certified cheque, bank draft or money order payable to or
to the order of CCL in an amount equal to the product of the Option Price
multiplied by the number of Option Shares in respect of which the Incentive
Option is to be exercised. Upon each exercise of the Incentive Option in
the manner herein provided, CCL shall cause the registrar and transfer
agent of CCL to deliver to Xxxxx, within a reasonable time of such exercise
and at the address specified in section 17 or such other address as Xxxxx
shall direct in writing, certificates representing the Option Shares being
purchased registered in the name of Xxxxx, or subject to section 17A, in
such other name as Xxxxx shall direct in writing at the time of such
exercise. If Xxxxx exercises the Incentive Option in the manner herein
provided, certificates for the Option Shares registered in the name of
Xxxxx in respect of which the Incentive Option has been exercised shall be
delivered to Xxxxx within a reasonable time thereafter. Xxxxx shall use
reasonable commercial efforts to conduct dispositions of Option Shares in
an orderly manner such that the market price of the Class B non-voting
shares of CCL shall not be unduly affected by any such disposition, and
Xxxxx shall provide reasonable advance notice to CCL of any proposed
disposition whereupon CCL shall have the right (which right CCL shall have
the right to assign to an institution, pension fund, mutual fund or similar
purchaser, provided that any such assignment shall not relieve CCL from its
obligations with respect to the exercise of such right) but not the
obligation, upon notice in writing to Xxxxx within one business day of
receipt by CCL of Shawn's notice, to purchase all or part of such shares at
a price per share equal to the closing price of the Class B Shares on The
Toronto Stock Exchange on the trading day immediately preceding the date of
notice by Xxxxx. Such purchase and sale shall be completed on the third
business day following the date of CCL's (or its assigns) notice to Xxxxx.
It shall be a condition, which Xxxxx may waive, to the right of CCL (or its
assigns) to purchase all or part of the Option Shares that Xxxxx receive a
legal opinion that the sale of such shares to CCL (or its assigns) shall
not result in tax consequences to Xxxxx which are materially less
favourable than if Xxxxx were to sell such Option Shares in the open
market. If such condition is not waived by Xxxxx, the opinion shall be
obtained at the expense of Xxxxx (and a copy delivered to CCL (or its
assigns)) not more than ten (10) business days following the giving of
notice by Xxxxx, in which case the time periods in which CCL (or its
assigns) is required to give notice of its intention to purchase such
shares, and to complete the purchase of such shares, shall not commence
until receipt of such opinion by CCL (or its assigns).
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4. CCL represents and warrants to Xxxxx that:
(a) all corporate action has been taken by or on behalf of CCL to
authorize and permit CCL to enter into and perform this Agreement and
to validly allot and reserve for issuance the Option Shares to and in
favour of Xxxxx, his heirs, executors, legal representatives and
permitted assigns; this Agreement constitutes a legal, valid and
binding obligation of CCL enforceable against it in accordance with
its terms except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law and
upon the due exercise of the Incentive Option or any part thereof and
upon the payment of the Option Price, each Option Share issued to
Xxxxx or his nominee shall be outstanding as a fully paid and non-
assessable Class B Share in the capital of CCL;
(b) CCL is a reporting issuer pursuant to the Securities Act (Ontario)
(the "Act") and is not in default of any provision of the Act or the
regulation or rules promulgated thereunder;
(c) the Class B Shares of CCL are presently listed and posted for trading
on The Toronto Stock Exchange and The Montreal Exchange and CCL is not
in default of the by-laws, policies or rules of such stock exchanges;
(d) neither the execution and delivery of this Agreement by CCL nor the
performance by CCL of its obligations hereunder will constitute a
violation of, conflict with, or result in a default (or give rise to
any right of termination, cancellation or acceleration) under any
note, bond, mortgage indenture, licence, contract, commitment,
agreement, understanding, arrangement or restriction of any kind to
which CCL is a party or by which CCL or its properties or assets is
bound or any judgement, decree, order, injunction, statute, rule or
regulation of any court, agency, securities commission or regulatory
authority of any kind applicable to CCL or any of its assets or
properties, except for violations, conflicts, defaults (or rights of
termination, cancellation or acceleration) which would not impair
CCL's ability to issue the Option Shares to Xxxxx on the terms and
conditions hereof; and
(e) all consents, approvals and authorizations required to be obtained in
connection with the grant of the Incentive Option and the issuance of
the Option Shares have been obtained, other than the approval of the
Montreal Exchange, which approval CCL shall use its reasonable best
efforts to obtain.
5. CCL hereby covenants with Xxxxx that it will, at all times (subject to
section 6 hereof):
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(a) cause the Option Shares from time to time acquired by Xxxxx pursuant
to the terms hereof to be issued as fully paid and non-assessable
Class B Shares in the capital of CCL and to cause the certificate(s)
representing such Option Shares to be delivered in accordance with the
terms hereof;
(b) comply at its expense with all legal, regulatory, stock exchange and
administrative requirements applicable to the Class B Shares
(including, without limitation, any such requirements relating to the
Incentive Option); and
(c) cause the Class B Shares of CCL to be listed on either The Montreal
Exchange or The Toronto Stock Exchange and cause either of the said
Stock Exchanges to list and reserve for issuance a sufficient number
of Class B Shares of CCL for issuance to Xxxxx pursuant to this
Agreement, in each case, at its own expense.
6. Each of the representations, warranties and covenants contained in sections
4 and 5 hereof shall survive for a period of twelve months following the
last purchase by Xxxxx of the Option Shares pursuant to this Agreement
provided that if Xxxxx does not exercise the Incentive Option herein
granted in respect of any of the Option Shares prior to the expiry of the
Incentive Option or if the Incentive Option does not vest and become
exercisable in whole or in part, CCL shall thereupon be thereafter released
from any and all representations, warranties and covenants herein contained
with respect to the unexercised portion of the Incentive Option.
7. Nothing herein contained or done pursuant hereto shall obligate Xxxxx to
purchase and/or pay for any Option Shares except upon the exercise of the
Incentive Option in the manner hereinbefore provided.
8. Xxxxx covenants and agrees:
(a) to execute and deliver to CCL upon request, all such filings as may be
required in respect of the exercise by Xxxxx of the Incentive Option
from time to time by all stock exchanges and securities regulatory
authorities having jurisdiction; provided that Xxxxx shall not be
responsible for more than nominal expense for doing so; and
(b) not to sell, transfer, or distribute any of the Option Shares in the
United States except pursuant to: (i) an effective registration
statement under the Securities Act of 1933, as amended (the "Act"); or
(ii) if there is no registration statement in effect, pursuant to a
specific exemption from registration under the Act.
9. If CCL shall amalgamate, consolidate with, or merge with or into another
company or the Class B Shares of CCL are reclassified, the Incentive
Option, to the extent it has not been exercised, shall entitle Xxxxx, upon
the future exercise of the Incentive Option, to such number and kind of
securities or other property, subject to the terms of the Incentive
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Option, which Xxxxx would have received upon such amalgamation,
consolidation, merger or reclassification if Xxxxx had fully exercised the
Incentive Option immediately prior to the amalgamation, consolidation,
merger or reclassification.
10. The number of Option Shares issuable upon the exercise of the Incentive
Option shall be subject to adjustment from time to time as follows:
(a) If and whenever at any time prior to the expiry of the Incentive
Option (the "Option Term"), CCL shall:
(i) subdivide, redivide, reclassify or otherwise change the
outstanding Class B Shares or securities convertible or
exchangeable into Class B Shares into a greater number of Class
B Shares; or
(ii) reduce, combine, or consolidate the outstanding Class B Shares
or securities convertible or exchangeable into Class B Shares
into a lesser number of Class B Shares; or
(iii) issue any Class B Shares, or securities convertible to or
exchangeable for or with respect to Class B Shares, to the
holders of all or substantially all of the outstanding Class B
Shares by way of a stock dividend; or
(iv) issue rights, options or warrants (collectively, "Rights") to
all or substantially all of the holders of its outstanding
Class B Shares entitling them for a period expiring not later
than 60 days after such record date to subscribe for, acquire
or purchase Class B Shares or securities convertible or
exchangeable for Class B Shares;
(any of such events in (i), (ii), (iii) and (iv) being herein called a
"Share Reorganization")
the number of Option Shares issuable upon the exercise of the
Incentive Option shall (subject to subsection 10(b) below) be adjusted
effective immediately after the record date of which the holders of
common shares are determined for the purposes of the Share
Reorganization, by multiplying the number of Option Shares which would
have been determined pursuant to section 1 without regard to the Share
Reorganization by a fraction, the numerator of which shall be the
number of Class B Shares outstanding after giving effect to such Share
Reorganization, and the denominator of which shall be the number of
Class B Shares outstanding on such record date before giving effect to
such Share Reorganization. To the extent that any of the Rights are
not so issued or if issued, are not exercised prior to the expiry
thereof, the number of Option Shares issuable upon exercise of the
Incentive Option shall be readjusted to that number of Option
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Shares issuable upon exercise of the Incentive Option without regard
to those of the Rights not so issued or exercised, as the case may be;
(b) No adjustments to the number of Option Shares shall be made pursuant
to paragraphs (iii) and (iv) of subsection 10(a) if Xxxxx is permitted
to participate in such stock dividend or in the issue of such Rights,
as the case may be, as though and to the same extent as if Xxxxx had
exercised the Incentive Option prior to the applicable record date or
effective date for such stock dividend or the issue of such Rights, as
the case may be;
(c) The adjustment to the number of Option Shares provided for in this
section 10 shall be cumulative and shall apply to successive
subdivisions, reclassifications, reductions, combinations,
consolidations, issuances or other events that result in the
requirement for adjustment pursuant to the terms hereof;
(d) When any action is taken which would, if implemented, require an
adjustment to the number of Class B Shares issuable upon the exercise
of the Incentive Option as herein provided, CCL shall forthwith
prepare and deliver to Xxxxx a certificate signed by a senior officer
of CCL setting forth the details of the proposed Share Reorganization
or other event, the number of Class B Shares before adjustment to
which Xxxxx would be entitled upon exercise of the Incentive Option
and details of the computation of the adjustments required to be made
to the number of Option Shares in accordance with the terms of this
section 10. If any dispute shall at any time arise with respect to
such adjustments, such disputes shall be conclusively determined by
the auditors of CCL and any such determination shall be binding upon
CCL and Xxxxx; and
(e) No fractional shares shall be issued upon the exercise of this
Incentive Option. If as a result of any adjustment pursuant to this
section 10, Xxxxx would become entitled to a fractional share, Xxxxx
will have the right to purchase only the next lower whole number of
shares and no payment or other adjustment will be made with respect to
the fractional interest so disregarded.
11. Upon the occurrence of a Share Reorganization resulting in an adjustment to
the number of Option Shares issuable upon the exercise of the Incentive
Option, the Option Price shall be adjusted by multiplying the Option Price
in effect immediately prior to such time by a fraction which shall be the
reciprocal of the fraction employed in the adjustment of the number of
Option Shares.
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12. The adjustments provided for in sections 9, 10 and 11 hereof shall be made
successively and cumulatively and in the case of adjustments to the Option
Price shall be computed to the nearest cent. After any such adjustment, the
term "Class B Shares" as used herein shall mean the shares or property, as
a result of such adjustments, which Xxxxx is entitled to receive upon
exercise of the Incentive Option.
13. No modification or waiver of any provision of this Agreement and no consent
by either party to any departure therefrom shall be effective unless in
writing signed by a duly authorized officer of the party so modifying or
waiving, and the same will only then be effective for the period and on the
conditions and for the specific instance and purposes specified in such
writing.
14. All dollar amounts referred to herein are in lawful currency of Canada
unless otherwise expressed.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO CHOICE OF LAW
PRINCIPLES THEREOF. ANY JUDICIAL PROCEEDING BROUGHT AGAINST ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTION CONTEMPLATED
HEREBY, MAY BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO (I)
ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
SUCH COURT AND ANY RELATED APPELLATE COURT, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT,
SUBJECT, IN EACH CASE, TO ALL RIGHTS TO APPEAL SUCH DECISIONS TO THE EXTENT
AVAILABLE TO THE PARTIES AND (II) IRREVOCABLY WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH
PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT
SERVICE OF PROCESS UPON SUCH PARTY MAY BE MADE BY DELIVERY AT SUCH PARTY'S
ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED ON THE DATE OF
DELIVERY. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
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16. Subject to the terms and conditions herein provided, CCL and Xxxxx use
their reasonable best efforts to promptly take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations or otherwise to
consummate and make effective the transactions contemplated by this
Agreement as soon as practicable.
17. Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and shall be sufficiently given if
personally delivered by courier, charges prepaid, to CCL and to Xxxxx, as
the case may be, at the applicable address set out below, or transmitted to
it by telecopy:
(a) If to Xxxxx, addressed to him as follows:
Xx. Xxxxxxxx Xxxxxxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx
00000-0000
Telecopier No. (000) 000-0000
(b) If to CCL, addressed to it as follows:
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: President
Telecopier No. (000) 000-0000
or such other address as the party to whom such writing is to be given
shall have notified the party giving the same in the manner provided in
this section. Any notice delivered to the party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on
the date it is so delivered at such address, provided that if such day is
not a business day, then a notice shall be deemed to have been given and
received on the next business day following such day. Any notice
transmitted by telecopy shall be deemed given and received on the first
business day after its transmission.
17A. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their successors and assigns, but shall not be
assignable by either party without the written consent of the other party
other than by will or by the applicable laws of descent and distribution. A
beneficial interest in the Incentive Option shall not be assigned nor shall
any agreement, undertaking or commitment to do so be entered into, other
than by
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will or by the applicable laws of descent and distribution, without prior
receipt of all regulatory approvals.
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18. This Agreement, the Employment Agreement and the option agreement between
Xxxxx and CCL dated June 16, 1997 supersede all prior agreements,
understandings and representations (oral, written, implied or expressed)
between Xxxxx and CCL relating to the Option Shares.
IN WITNESS WHEREOF this Agreement has been executed and delivered by the
parties hereto on the date first above written.
/s/ XXXXXXXX XXXXXXXX
------------------------ ------------------------------------
Witness XXXXXXXX XXXXXXXX
CCL INDUSTRIES INC.
By: /s/ CCL INDUSTRIES INC.
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