STOCK OPTION ASSUMPTION AND ROLLOVER AGREEMENT
Exhibit
E
EXECUTION VERSION
EXECUTION VERSION
This
Stock Option Assumption and Rollover Agreement (this “Agreement”) is made
and entered this 15th day of March, 2010 by and among Sage Parent Company, Inc.,
a Delaware corporation (“Parent”), Sport
Supply Group, Inc., a Delaware corporation (the “Company”), and
Xxxxxxxx Xxxxxxx (the “Optionee”).
RECITALS
A. The
Company maintains the Amended and Restated 2007 Long-Term Incentive Plan, as
amended from time to time (the “Plan”). The
Company granted the Optionee certain stock options under the Plan to acquire
shares of the Company’s common stock (“Company Common
Stock”), on such dates, in such amounts and at an exercise price per
share as set forth on Exhibit A (each, an
“Option” and
collectively, the “Options”). Each
Option is evidenced by, and subject to, the terms and conditions of a written
Stock Option Agreement between the Company and the Optionee (each, an “Option Agreement”)
attached hereto as Exhibit
B.
B. Parent,
the Company and Sage Merger Company, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent (“Merger Sub”) entered
into an Agreement and Plan of Merger dated as of the date hereof (the “Merger Agreement”),
pursuant to which Merger Sub will merge with and into the Company (the “Merger”), as a result
of which the Company will be the surviving corporation and a wholly owned
subsidiary of Parent.
C. The
Company and the Optionee are parties to that certain Employment Agreement dated
as of the date hereof (the “Employment
Agreement”), whereby the parties thereto contemplate the entry into this
Agreement.
D. The
Company, the Optionee and Parent desire, effective as of (or, as may be
necessary to effect the provisions of this Agreement, effective as of
immediately prior to) the Effective Time (as such term is defined in the Merger
Agreement) and subject to the substantially simultaneously consummation of the
Merger, to: (1) amend each Option to provide that the Option shall be assumed by
Parent as to that certain number of shares of Company Common Stock subject
thereto set forth on Exhibit A and (2) provide that each Option, as to the
balance of shares of Company Common Stock subject thereto set forth on Exhibit
A, shall, upon the Effective Time, be cancelled (and converted into the right to
receive a portion of the Option Consideration (as such term is defined in the
Merger Agreement)) upon the terms set forth in the Merger
Agreement.
E. This
Agreement and the representations, warranties, obligations and other agreements
of the Optionee and the Company set forth herein are a material inducement to
the willingness of Parent to enter into the Merger Agreement and consummate the
transactions contemplated thereby and each of the Optionee and the Company
expressly acknowledge and agree that Parent is relying on the representations,
warranties, obligations and other agreements of the Optionee and the Company set
forth herein in entering into the Merger Agreement.
NOW, THEREFORE, in
consideration of the mutual promises and covenants made herein and the mutual
benefits to be derived herefrom and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. Assumption of the
Options.
(a) Effective
upon (or, as may be necessary to effect the provisions of this Agreement,
effective as of immediately prior to) the Effective Time, the outstanding
portion of each Option immediately prior to the Effective Time shall become
fully vested and exercisable and be assumed by the Parent as to the number of
shares of Company Common Stock subject thereto as set forth on Exhibit A (such
assumed portion of each Option is hereby referred to as a “Rollover Option” and
collectively, the “Rollover
Options”). Each Rollover Option shall be converted into a
fully vested stock option to acquire a new number of shares of common stock of
Parent (“Parent Common
Stock”) at a new per share exercise price (“New Exercise Price”)
which shall be determined by Parent prior to the Effective Time in a manner that
does not result in the grant of a new stock right constituting a deferral of
compensation within the meaning of Treasury Regulations Section
1.409A-1(b)(5)(v); provided that, with
respect to each Rollover Option, the excess of the aggregate fair market value
of the shares of Parent Common Stock (which fair market value shall be equal to
the Original Issue Price) subject to the Rollover Option over the aggregate New
Exercise Price of such shares of Parent Common Stock immediately after the
Effective Time is equal to the excess of the aggregate per share Merger
Consideration (as such term is defined in the Merger Agreement) of the shares of
Company Common Stock subject to the corresponding Rollover Option over the
aggregate exercise price for the shares of Company Common Stock subject such
Rollover Option immediately before the Effective Time. The number of
shares of Parent Common Stock covered by each Rollover Option and the New
Exercise Price for those shares shall be communicated to the Optionee in writing
at or immediately following the Effective Time. The number of shares
set forth in Exhibit A assumes that no portion of any Rollover Option is
exercised or otherwise terminates for any reason prior to the Effective Time,
and in the event that any portion of any Rollover Option is exercised or
terminates prior to the Effective Time, corresponding adjustments shall be made
to the numbers set forth in Exhibit A to reflect such exercise or termination so
that the total number of Rollover Options and shares of common stock into which
such Rollover Options are convertible remains the same and the Optionee agrees
that he shall not exercise any such Rollover Options to the extent the terms of
this Agreement are not satisfied as a result, and any such attempted exercise
shall be deemed null and void. For purposes of this Agreement, “Original Issue Price”
shall mean the price per share at which the ONCAP Investors purchase shares of
Parent Common Stock at the Closing, and “ONCAP Investors”
shall mean ONCAP Investment Partners II L.P. and/or one or more of its
affiliated funds, successors or assigns.
(b) Each
Rollover Option, as expressly modified by this Agreement, shall remain in full
force and effect after the Effective Time and shall be subject to the other
terms and conditions of the applicable Option Agreement and the Plan; provided, however, that:
(i) references
in the Plan and the applicable Option Agreement to (x) the “Company” shall be
references to Parent and (y) “Common Stock” shall be references to Parent Common
Stock; and
(ii) the
New Exercise Price per share of each Rollover Option shall be increased
immediately prior to the time such Rollover Option is exercised by the
applicable percentage, if any, by which the then-fair market value of a share of
Parent Common Stock (as defined in the Stockholders’ Agreement (defined below)),
has increased in value over the Original Issue Price (for example, if the fair
market value of a share of Parent Common Stock has increased by 20% from the
Original Issue Price, the New Exercise Price per share of the portion of the
Rollover Option that is being exercised shall be increased by 20% immediately
prior to the time the option is exercised), and the Optionee agrees to provide
the Parent with at least five days prior written notice of his intent to
exercise any portion of a Rollover Option in order to effect the foregoing
adjustment, if any, to the New Exercise Price per share; and
(iii) Section
3(c) of the applicable Option Agreement shall no longer apply, such that each
Rollover Option shall no longer be subject to the early termination provisions
in Section 3(c) upon the termination of the Optionee’s employment with the
Company; provided, however, that if the
Optionee’s employment with the Company terminates prior to the stated expiration
date of such Rollover Option, then the Parent shall have the right, but not the
obligation, to cancel each Rollover Option (to the extent it is
then-outstanding) in exchange for a cash payment equal to the Repurchase Price
of such cancelled Rollover Option (the “Option Repurchase
Right”). For purposes of this Agreement, the “Repurchase Price”
shall mean an amount equal to the positive difference, if any, of (w) the fair
market value of a share of Parent Common Stock (as determined under the
Stockholders’ Agreement) on the Repurchase Date (defined below), minus the per
share New Exercise Price of such Rollover Option as adjusted for any increase
pursuant to Section 1(b)(ii) above as if such Rollover Option was being
exercised on such date, multiplied by (x) the number of shares of Parent Common
Stock then subject to such Rollover Option; provided that if the
Optionee’s employment is terminated by the Company for Cause or by the Optionee
without Good Reason (as such terms are defined in the Stockholders’ Agreement),
then the Repurchase Price shall mean an amount equal to the positive difference,
if any, of (y) the lesser of (A) the
fair market value of a share of Parent Common Stock (as determined under the
Stockholders’ Agreement) on the Repurchase Date (defined below) or (B) the
Original Issue Price (as adjusted to reflect the effects of any share
sub-division, stock split, recapitalization or similar adjustment to the
applicable shares of Parent Common Stock following the Effective Time), minus
the per share New Exercise Price of such Rollover Option as adjusted for any
increase pursuant to Section 1(b)(ii) above as if such Rollover Option was being
exercised on such date, multiplied by (z) the number of shares of Parent Common
Stock then subject to such Rollover Option. The Parent may exercise
the Option Repurchase Right by delivering written notice (an “Option Repurchase
Notice”) to the Optionee within 60 days after the date the Optionee’s
employment terminates (such date which any such repurchase is closed with
respect to a Rollover Option, the “Repurchase Date”).
The Repurchase Date shall take place on the later of (i) the date specified by
the Parent, which shall in no event be later than thirty (30) days following the
date of the Option Repurchase Notice and (ii) within ten (10) days following the
receipt by the Parent of all necessary government approvals provided that in no
event shall the Repurchase Date occur later than the original stated expiration
date of the Rollover Option. The Parent shall pay the Repurchase
Price (subject to any required tax withholding) on the Repurchase Date;
and
(iv) If
the Optionee elects to exercise any Rollover Option within 30 days prior to such
Rollover Option’s stated expiration date, then the Optionee may elect to pay the
aggregate New Exercise Price, as adjusted pursuant to Section 1(b)(ii), of such
Rollover Option (but not any related tax withholding) by a reduction in the
number of shares of Parent Common Stock otherwise deliverable upon the exercise
of such Rollover Option. Shares of Parent Common Stock used to
satisfy the exercise price of any Rollover Option shall be valued at their fair
market value (as determined under the Stockholders’ Agreement) on the date of
exercise.
For
purposes of clarity and without limiting the generality of this Section 1(b)
after the Effective Time: (1) the stated expiration date of each Rollover Option
shall continue to be the date set forth on Exhibit A, (2) each Rollover Option
shall continue to be subject to adjustment in accordance with Section
3(b) of the applicable Option Agreement, and (3) each Rollover Option shall
continue to be subject to earlier termination and adjustment (including, for
purposes of clarity, the New Exercise Price thereof) pursuant to Section X of
the Plan with respect to transactions and events occurring after the Effective
Time.
2. Unaffected Portion of the
Option. The outstanding portion of each Option that shall not
be assumed by Parent and shall not constitute a Rollover Option pursuant to
Section 1 above shall not be affected by this Agreement, but rather shall, upon
the Effective Time, be canceled (and converted into the right to receive a
portion of the Option Consideration upon the terms set forth in the Merger
Agreement.
3. Conditions of
Exercise. As a condition precedent to the exercise of any
Rollover Option, the Optionee shall be required to execute (or have executed) a
joinder to that certain Stockholders’ Agreement dated as of the date hereof, by
and among Parent and the other parties thereto, as may be amended from time to
time (the “Stockholders’
Agreement”), in the form attached thereto as Exhibit A, and agree
to be bound by the terms thereof as a “Management Equityholder” (as such term is
defined in the Stockholders’ Agreement).
4. Conditions to Assumptions of
Options. The assumption and conversion of the Rollover Options
contemplated by Section 1 hereof shall be subject to the satisfaction of the
following conditions unless waived in writing by Parent (in the case of clause
(a) and (b)) or by the Optionee or the Company (in the case of clause
(c)):
(a) Representations, Warranties
and Covenants of the Optionee. All representations and
warranties made in this Agreement by the Optionee shall be true and correct in
all respects on the date when made and on and as of the date of the Effective
Time (the “Closing
Date”) with the same effect as if made on and as of the Closing Date, and
the Optionee shall have performed or complied in all respects with all covenants
and agreements to be performed by the Optionee under this Agreement at or prior
to the Closing Date.
(b) Representations, Warranties
and Covenants of the Company. All representations and
warranties made in this Agreement by the Company shall be true and correct in
all respects on the date when made and on and as of the Closing Date with the
same effect as if made on and as of the Closing Date, and the Company shall have
performed or complied in all respects with all covenants and agreements to be
performed by the Optionee under this Agreement at or prior to the Closing
Date.
(c) Representations, Warranties
and Covenants of Parent. All representations and warranties
made in this Agreement by Parent shall be true and correct in all respects on
the date when made and on and as of the Closing Date with the same effect as if
made on and as of the Closing Date, and Parent shall have performed or complied
in all respects with all covenants and agreements to be performed by Parent
under this Agreement at or prior to the Closing Date.
5. Representations and Warranties of
Optionee. The Optionee hereby represents and warrants to
Parent as follows:
(a) The
Optionee is the beneficial owner of the Rollover Options, free and clear of all
pledges, liens, proxies, claims, charges, security interests and any other
encumbrances or arrangements whatsoever with respect to the ownership or
transfer of the Rollover Options;
(b) The
Optionee is not a party to, or bound by, any contract, arrangement, agreement,
instrument or order (other than this Agreement, the applicable Option Agreements
and the Plan) relating to the sale, assignment or other transfer of the Rollover
Options.
(c) The
execution and delivery of this Agreement by the Optionee, the performance by the
Optionee of his obligations hereunder and the consummation by the Optionee of
the transactions contemplated hereby do not and will not violate or conflict
with in any material respect, result in any material breach of, or constitute a
material default (or event which with the giving of notice or lapse of time, or
both, would become a default) under, any agreement to which the Optionee is a
party.
(d) The
Optionee acknowledges and agrees that upon the Effective Time, the Optionee
shall have no further right to receive Company Common Stock with respect to the
Options.
(e) The
Optionee has been given the opportunity to ask questions of and receive answers
from Parent and its representatives concerning (i) the terms and conditions of
the issuance of the Parent Common Stock upon exercise of the Rollover Options
and the other transactions contemplated in connection with the Merger Agreement
and (ii) the financial condition, operation and prospects of Parent after giving
effect to the Merger.
6. Representations and Warranties of the
Company. The Company hereby represents and warrants to Parent
as follows:
(a) The
Company has the requisite corporate power and authority to enter into and
deliver this Agreement, perform its obligations herein, and consummate the
transactions contemplated hereby. The Company has duly executed and
delivered this Agreement and, assuming the due authorization, execution and
delivery by the Optionee and Parent, this Agreement is a valid, legal and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally and subject to general principles of equity
(regardless of whether such enforcement is considered in a proceeding at Law or
at equity).
(b) The
execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder, and the consummation by the Company of the
transactions contemplated hereby, do not and will not (i) conflict with the
Company’s certificate of incorporation or bylaws, (ii) materially violate or
materially conflict with any constitution, law, ordinance, regulation, statute
or treaty of any Governmental Entity (as defined in the Merger Agreement)
(“Law”)
applicable to the Company or any of the Company’s assets or properties or (iii)
violate or conflict with in any material respect, result in any material breach
of, or constitute a material default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, any material agreement
to which the Company is a party or by which any of its assets or properties is
bound. No consent, approval, authorization, license, order or permit
of, or declaration, filing or registration with, or notification to, any
Governmental Entity, or any other Person (as defined in the
Merger Agreement), on the part of the Company is required to be made or obtained
in connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
7. Representations and Warranties of
Parent. Parent hereby represents and warrants to the Optionee
and the Company as follows:
(a) Parent
has the requisite corporate power and authority to enter into and deliver this
Agreement, perform its obligations herein, and consummate the transactions
contemplated hereby. Parent has duly executed and delivered this
Agreement and, assuming the due authorization, execution and delivery by the
Optionee and the Company, this Agreement is a valid, legal and binding
obligation of Parent, enforceable against Parent in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and subject to general principles of equity (regardless of
whether such enforcement is considered in a proceeding at Law or at
equity).
(b) The
execution and delivery of this Agreement by Parent, the performance by Parent of
its obligations hereunder, and the consummation by Parent of the transactions
contemplated hereby, do not and will not (i) conflict with Parent’s certificate
of incorporation or bylaws, (ii) materially violate or materially conflict with
any constitution, Law applicable to Parent or any of Parent’s assets or
properties or (iii) violate or conflict with in any material respect, result in
any material breach of, or constitute a material default (or event which with
the giving of notice or lapse of time, or both, would become a default) under,
any material agreement to which Parent is a party or by which any of its assets
or properties is bound. No consent, approval, authorization, license,
order or permit of, or declaration, filing or registration with, or notification
to, any Governmental Entity, or any other Person, on the part of Parent is
required to be made or obtained in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, other than any filings as may be required under applicable
state “Blue Sky” Laws.
8. Covenant of the
Company. The Company, the board of directors of the Company,
and the compensation committee of the Company, as applicable, shall adopt any
resolutions and shall take any actions necessary or appropriate to effectuate
the amendments to the Options contemplated by this Agreement.
9. Internal Revenue
Code. This Agreement is intended to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), and the
published guidance thereunder. To the extent any party hereto reasonably
determines that any provision of this Agreement would subject Optionee to the
excise tax under Section 409A of the Code, the parties agree in good faith to
cooperate to reform this Agreement in a manner that would avoid the imposition
of such tax on Optionee while preserving any affected benefit or payment to the
extent reasonably practicable without increasing the cost to the Company, Parent
or Merger Sub. Nothing contained in this Agreement is intended to
constitute a guarantee of Optionee’s personal tax treatment. No
adjustment shall be made under this Section 8 without the written consent of the
Optionee.
10. Acknowledgement and Consent to
Amendments. The Optionee hereby consents to the amendments to
be made to each applicable Option Agreement and the Plan effective upon the
Effective Time accordance with Section 26 of the Option Agreement and Section XI
of the Plan, respectively. The Optionee and the Company each hereby
acknowledge that the Parent is relying on the representations, warranties,
obligations and other agreements of the Optionee and the Company set forth
herein in entering into the Merger Agreement and that such representations,
warranties, obligations and other agreements of the Optionee and the Company set
forth herein are a material inducement to the willingness of Parent to enter
into the Merger Agreement and consummate the transactions contemplated
thereby.
11. Termination of
Agreement. This Agreement shall terminate, and shall be of no
further force or effect, on the earlier of (i) the mutual written consent of
Parent, the Optionee and the Company and (ii) the termination of the Merger
Agreement without the Closing having occurred.
12. Remedies. The
Optionee and the Company each agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise
breached. Accordingly, the Optionee and the Company each agree that,
in the event of any breach or threatened breach by the Optionee or the Company,
respectively, of any covenant or obligation in this Agreement, Parent shall be
entitled (in addition to any other remedy that may be available to Parent
whether in law or in equity) to seek and obtain: (i) a decree or order of
specific performance to enforce the observance and performance of such covenant
or obligation, and (ii) an injunction restraining such breach or threatened
breach. The Optionee and the Company each agree that Parent shall not
be required to obtain, furnish or post any bond or similar instrument in
connection with or as a condition to Parent obtaining any remedy referred to in
this Section 12, and each of the Optionee and the Company irrevocably waive any
right the Optionee or the Company, respectively, may have to require the
obtaining, furnishing or posting of any such bond or similar instrument.
Notwithstanding anything to the contrary contained in this Agreement, no former,
current or future directors, officers employees, Affiliates (as defined in the
Merger Agreement), general or limited partners, stockholders, managers, members,
financing sources, assignees, agents or other representatives of Parent, or any
direct or indirect holder of any equity interests or securities of Parent
(collectively, the “Party Affiliates”),
shall have any liability or obligation of any nature whatsoever in connection
with or under this Agreement or the transactions contemplated hereby, and each
of the Optionee and the Company hereby waives and releases all claims against
such Party Affiliates for any such liability or obligation.
13. Section
Headings. Section headings are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.
14. No Assignment. The
rights, if any, of the Optionee or any other person under this Agreement may not
be assigned, transferred, pledged, or encumbered except by will or the laws of
descent or distribution. Except as provided in the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties’ respective successors, assigns, executors and
administrators.
15. Attorneys’ Fees. In
the event of any litigation or other legal proceeding involving the
interpretation of this Agreement or enforcement of the rights or obligations of
the parties hereto, the prevailing party or parties shall be entitled to recover
reasonable attorneys’ fees and costs determined by a court or other
adjudicator.
16. Governing Law, Severability, Consent to
Jurisdiction, Waiver of Jury Trial. This Agreement is governed
by and shall be construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed entirely in such state, without
giving effect to conflicts of law principles thereunder that would give effect
to the laws of another jurisdiction. Each of the parties hereto, on
behalf of itself and its respective affiliates, (i) consents to submit to the
personal jurisdiction of the Delaware Court of Chancery or the other courts of
the State of Delaware, in each case in connection with any action arising out
of, in connection with, in respect of, or in any way relating to the
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby and waives any right to trial by jury with respect to any
such matters. Each party hereto, on behalf of itself and its
respective affiliates, irrevocably and unconditionally waives any objection to
the laying of venue of any Action arising out of, in connection with, or in
respect of this letter. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other persons or circumstances shall not be affected
thereby, and that provision shall be enforced to the greatest extent permitted
by law.
17. Entire
Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only in a writing executed by the party to be bound
thereby. This Agreement supersedes all prior and contemporaneous
agreements of the parties hereto, whether written, oral or otherwise, that
directly or indirectly bear on the subject matter hereof.
18. Legal Counsel; Mutual
Drafting. Each party recognizes that this is a legally binding
contract and acknowledges and agrees that they have had the opportunity to
consult with legal counsel of their choice. Each party has cooperated
in the drafting, negotiation and preparation of this
Agreement. Hence, in any construction to be made of this Agreement,
the same shall not be construed against either party on the basis of that party
being the drafter of such language. Each party agrees and
acknowledges that he or it, as applicable, has read and understands this
Agreement, is entering into it freely and voluntarily, and has been advised to
seek counsel prior to entering into this Agreement and has had ample opportunity
to do so.
19. Counterparts. This
Agreement may be executed in counterparts, including via facsimile, each of
which shall be deemed an original and all of which taken together, shall
constitute one and the same document.
20. No Third Party
Beneficiaries. This Agreement shall be binding on the
undersigned solely for the benefit of the undersigned parties to this Agreement,
and nothing set forth herein shall be construed to confer upon or give to any
person other than the parties to this Agreement any benefits, rights, or
remedies under or by reason of, or any rights to enforce or cause such parties
to enforce, the transactions contemplated hereby or any provision of this
Agreement.
21. Further
Assurances. Subject to the terms and conditions provided
herein, each party hereto agrees to use all commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement.
[Signature
Page Follows]
IN WITNESS WHEREOF, the
parties have duly executed this Agreement as of the date first written
above.
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SPORT
SUPPLY GROUP, INC.,
a
Delaware corporation
By:
/s/Xxxx
Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Its:
Chairman & CEO
|
|
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a
Delaware corporation
By:
/s/Xxxxxxx
Xxx
Name:
Xxxxxxx Xxx
Its:
President
|
|
|
“OPTIONEE”
/s/ Xxxxxxxx
Xxxxxxx
Xxxxxxxx
Xxxxxxx
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Exhibit
A
[Intentionally Omitted]
Exhibit
B
Stock
Option Agreement(s)
[Intentionally
Omitted]
