EXHIBIT 7
EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement") is made and entered into as
of September 30, 2002, between BCO Holding Company, a Delaware corporation
("Holding"), and Xxxx Xxx Xxxxxxx (the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and
BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date
herewith (the "Merger Agreement"), which provides, among other things, for the
merger of Acquisition Sub with and into the Company, with the Company continuing
as the surviving corporation (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is the beneficial owner
of, and has the sole right to vote and dispose of 1,821,273 shares of common
stock, par value $0.01 per share, of the Company (the "Company Common Stock");
and
WHEREAS, subject to the conditions set forth herein, immediately prior
to the Effective Time, (i) the Stockholder desires to exchange 596,596 shares of
Company Common Stock (the "Shares"), and (ii) Holding desires to issue to the
Stockholder, in exchange (the "Share Exchange") for the Shares, 1,193,192 shares
of common stock, par value $0.01 per share, of Holding (the "Holding Common
Stock").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings attributed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties contained herein, Holding and the Stockholder
hereby agree as follows:
1. Share Exchange.
(a) Immediately prior to the Effective Time, the Stockholder shall
assign, transfer, convey and deliver the Shares to Holding and, in
exchange for each such Share, Holding shall issue and deliver to the
Stockholder 1,193,192 shares of Holding Common Stock. If any Shares are
held in "street name" by the Stockholder, such Stockholder agrees to
arrange for appropriate transfer to Holding hereunder.
(b) In the event that the Share Exchange is consummated but the
Merger Agreement is terminated in accordance with its terms, then
promptly following such termination, the Stockholder shall assign,
transfer, convey and deliver to Holding the number of shares of Holding
Common Stock received by
the Stockholder pursuant to clause (a) above and, in exchange therefor,
Holding shall assign, transfer, convey and deliver to the Stockholder
the Shares exchanged by the Stockholder for such shares of Holding
Common Stock pursuant to clause (a) above.
2. Closing.
(a) The closing of the transactions contemplated by this Agreement
shall take place at the offices of Debevoise & Xxxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately prior to the Closing
under the Merger Agreement.
(b) At the Closing, Stockholder will deliver to Holding stock
certificates duly endorsed for transfer to Holding, or accompanied by
stock powers duly endorsed in blank, and representing the number of
Shares subject to the Share Exchange.
3. Covenants. Attached hereto as Schedule A are the terms of the
Stockholders Agreement and the Registration Rights Agreement to be entered into
among Holding, Xxxxx Investment Associates VI, L.P., KEP VI, LLC and the parties
to the Exchange Agreements immediately prior to the closing of the Merger. The
parties hereto agree to negotiate in good faith definitive forms of such
agreements as promptly as practicable after the date hereof. Attached hereto as
Schedule B are the terms of the Option Plan and a form of Option Agreement to be
adopted by Holding in the case of the Option Plan and to be entered into by
Holding and each of the managers identified on Schedule B, in each case,
immediately prior to the closing of the Merger. Holding and each such manager
agree to negotiate in good faith definitive forms of such Option Plan and Option
Agreement as promptly as practicable after the date hereof.
4. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants as follows:
(a) Binding Agreement. The Stockholder has the capacity to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The Stockholder has duly and validly executed and
delivered this Agreement and this Agreement constitutes a legal, valid
and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
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(b) Ownership of Shares. The Stockholder is the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, which meaning will apply for all purposes of this Agreement)
of, and has the sole power to vote and dispose of the number of Shares
set forth in the recitals hereto, free and clear of any security
interests, liens, charges, encumbrances, equities, claims, options or
limitations of whatever nature and free of any other limitation or
restriction (including any restriction on the right to vote, sell or
otherwise dispose of the Shares), except as may exist by reason of this
Agreement, the Voting Agreement between the Stockholder and Holding or
pursuant to applicable law. Except as provided for in this Agreement,
the Voting Agreement between the Stockholder and Holding, the Merger
Agreement and the other agreements contemplated hereby and thereby,
there are no outstanding options or other rights to acquire from the
Stockholder, or obligations of the Stockholder to sell or to dispose
of, any Shares.
(c) No Agreements. Except for this Agreement, the Voting Agreement,
the Stockholders Agreement and the Registration Rights Agreement
referred to above and any other agreements contemplated hereby and
thereby, the Stockholder has not entered into or agreed to be bound by
any other arrangements or agreements of any kind with any other party
with respect to the Shares, including, but not limited to, arrangements
or agreements with respect to the acquisition or disposition thereof or
any interest therein or the voting of any such shares.
(d) No Conflict. Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby,
nor the performance of the Stockholder's obligations hereunder will (a)
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation, or acceleration) under any contract,
agreement, instrument, commitment, arrangement or understanding to
which the Stockholder is a party, or result in the creation of a
security interest, lien, charge, encumbrance, equity or claim with
respect to the Stockholder's Shares, or (b) require any material
consent, authorization or approval of any person, entity or government
entity, or (c) violate or conflict with any writ, injunction or decree
applicable to the Stockholder or the Stockholder's Shares, or the
shares of Holding Common Stock.
(e) Securities Laws Matters. The Stockholder acknowledges receipt of
advice from Holding that (i) the shares of Holding Common Stock have
not been registered under the Securities Act of 1933 (the "Act") or
qualified under any state securities or "blue sky" or non U.S.
securities laws, (ii) it is not anticipated that there will be any
public market for the shares of Holding Common Stock, (iii) the shares
of Holding Common Stock must be held
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indefinitely and the Stockholder must continue to bear the economic
risk of the investment in the shares of Holding Common Stock unless
such shares of Holding Common Stock are subsequently registered under
the Act and such state or non U.S. securities laws or an exemption from
such registration is available, (iv) Rule 144 promulgated under the Act
("Rule 144") is not presently available with respect to sales of any
shares of Holding Common Stock and Holding has made no covenant to make
Rule 144 available and Rule 144 is not anticipated to be available in
the foreseeable future, (v) when and if the shares of Holding Common
Stock may be disposed of without registration in reliance upon Rule
144, such disposition can be made only in limited amounts and in
accordance with the terms and conditions of such Rule, (vi) if the
exemption afforded by Rule 144 is not available, public sale of the
shares of Holding Common Stock without registration will require the
availability of an exemption under the Act, (vii) restrictive legends
in the form set forth in the Stockholders Agreement shall be placed on
the certificate representing the shares of Holding Common Stock and
(viii) a notation shall be made in the appropriate records of the
Holding indicating that the shares of Holding Common Stock are subject
to restrictions on transfer and, if Holding should in the future engage
the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to the
shares of Holding Common Stock.
(f) Accredited Investor. The Stockholder is an "accredited investor"
as such term is defined in Rule 501(a) promulgated under the Securities
Act.
(g) Stockholder's Experience. (A) The Stockholder's financial
situation is such that the Stockholder can afford to bear the economic
risk of holding the shares of Holding Common Stock for an indefinite
period of time, (B) the Stockholder can afford to suffer complete loss
of his investment in the shares of Holding Common Stock, and (C) the
Stockholder's knowledge and experience in financial and business
matters are such that the Stockholder is capable of evaluating the
merits and risks of the Stockholder's investment in the shares of
Holding Common Stock.
(h) Access to Information. The Stockholder represents and warrants
that the Stockholder has been granted the opportunity to ask questions
of, and receive answers from, representatives of Holding concerning the
terms and conditions of the Share Exchange and to obtain any additional
information that the Stockholder deems necessary to verify the accuracy
of the information so provided.
(i) Investment Intent. The Stockholder is acquiring the shares of
Holding Common Stock solely for the Stockholder's own account for
investment and not with a view to or for sale in connection with any
distribution thereof. The
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Stockholder agrees that the Stockholder will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any of the shares of Holding Common Stock (or solicit any
offers to buy, purchase or otherwise acquire or take a pledge of any
shares of Holding Common Stock), except in compliance with (i) the
Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, (ii) applicable state and non-U.S.
securities or "blue sky" laws and (iii) the provisions of this
Agreement and the Stockholders Agreement.
5. Representations and Warranties of Holding. Holding represents and
warrants as follows:
(a) Corporate Form. Holding is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has (and, immediately following the Effective Time, will have) all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted.
(b) Corporate Authority, etc. Holding has (and, immediately prior to
the Effective Time, will have) all requisite corporate power and
authority to enter into this Agreement and to perform all of its
obligations hereunder and to carry out the transactions contemplated
hereby and Holding has (and, immediately prior to the Effective Time,
will have) all requisite corporate power and authority to issue the
shares of Holding Common Stock. The shares of Holding Common Stock,
when issued, delivered and paid for in accordance with the terms
hereof, will be duly and validly issued, fully paid and nonassessable.
(c) Actions Authorized. Holding has taken all corporate actions
necessary to authorize it to enter into this Agreement and, prior to
the Effective Time, will have taken all corporate actions necessary to
authorize it to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Holding and, assuming due authorization, execution and
delivery of this Agreement by the Stockholder constitutes a legal,
valid and binding obligation of Holding enforceable in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(d) Required Filings and Approvals. Other than as provided for in
the Merger Agreement and the disclosure schedules thereto, the
execution and delivery of this Agreement by Holding, and the
consummation of the transactions contemplated hereby by Holding, do not
require a consent, approval or
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authorization of, or filing, registration or qualification with, any
governmental authority on the part of Holding, other than the filings,
registrations or qualifications (i) that may be required under
Regulation D under the Securities Act, (ii) that may be required under
the state securities laws or "blue sky" laws of any state of the United
States of America that may be required to be made or obtained, all of
which Holding will comply with prior to the date of the Closing, or
(iii) the failure of which to make or obtain, in the aggregate, would
not reasonably be expected to have an Acquiror Entity Material Adverse
Effect.
(e) No Conflicts. Other than as provided for in the Merger Agreement
and the disclosure schedules thereto, none of the execution, delivery
or performance of this Agreement or the consummation of the
transactions contemplated hereby, by Holding will conflict with the
certificate of incorporation or the by-laws of Holding or result in any
breach of, or constitute a default under any contract, agreement or
instrument to which Holding is a party or by which it or any of its
respective assets is bound.
(f) Post-Closing Capitalization. Assuming the consummation of the
transactions contemplated hereby, by the Merger Agreement and by each
other similar Exchange Agreement entered or to be entered into between
Holding and any other stockholder, director, officer or employee of the
Company (the "Other Exchange Agreements") and assuming, further,
Holding's total equity account is $101.5 million (i.e., the sum of (A)
Xxxxx'x funded equity, (B) the aggregate value of the Exchange Shares
and (C) the aggregate spread value of the Exchange Options (as defined
in the Other Exchange Agreements)), immediately following the
consummation of the transactions contemplated hereby, by the Merger
Agreement and by the Other Exchange Agreements, (1) the authorized
capital stock of Holding will consist solely of 13,115,576 shares of
Holding Common Stock, 9,303,827 of which will have been issued at a per
share price of $10.00 and will be outstanding and (2) no options,
rights, instruments or securities exercisable for (or exchangeable or
convertible into) any shares of Holding Common Stock will be
outstanding (other than options to acquire up to an aggregate of
1,625,820 shares of Holding Common Stock held by directors, officers
and employees of the Company). All outstanding shares of Holding Common
Stock shall have been issued for the same per share purchase price.
(g) Holding Fees. Other than as permitted by the Stockholders
Agreement, the aggregate fees (but not including any expense
reimbursements) payable to Xxxxx and its affiliates (1) in connection
with the consummation of the transactions contemplated by this
Agreement, the Merger Agreement and the other agreements contemplated
hereby and thereby and (2) in connection with any agreements (including
financial advisory agreements) to be entered into between
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the Company and Xxxxx and its affiliates in connection with the Closing
will not exceed the amounts set forth in Section 5.16 of the Merger
Agreement.
6. Conditions Precedent.
(a) The obligations of the Stockholder to consummate the
transactions contemplated hereby are subject to (1) the conditions set
forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied
or waived by the Company and (2) Holding having entered into the
Stockholders Agreement and Registration Rights Agreement and having
adopted the Option Plan and entered into the Option Agreement, in each
case as referred to in Section 3.
(b) The obligations of Holding to consummate the transactions
contemplated hereby are subject to (i) the conditions set forth in
Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or
waived by Holding and (ii) the Stockholder having entered into the
Stockholders Agreement and the Registration Rights Agreement referred
to in Section 3.
7. Miscellaneous.
(a) Binding Effect; Benefits. This Agreement shall be binding upon
the successors, heirs, executors and administrators of the parties
hereto. Nothing in this Agreement, express or implied, is intended or
shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any
legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein, except as provided in
Section 7(j) below. No party shall have liability for any breach of any
representation or warranty contained herein, except for any knowing or
intentional breach thereof.
(b) Amendments. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written
agreement executed by the Stockholder and Holding.
(c) Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Stockholder without the prior written consent of
Holding; it being understood that Holding may assign its rights
hereunder to any affiliate of Holding, provided that the post-closing
capitalization of such assignee shall be the same as the proposed
post-closing capitalization of Holding.
(d) Specific Performance. The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable
harm for which money damages would not be an adequate remedy and
accordingly the
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parties hereto agree that, in addition to any other remedies, each
party shall be entitled to enforce the terms of this Agreement by a
decree of specific performance without the necessity of proving the
inadequacy of money damages as a remedy.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof).
(f) Counterparts. This Agreement may be executed by facsimile and in
two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
(g) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are
not affected in any manner materially adverse to any party hereto. Upon
such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible in a mutually acceptable manner.
(h) Waiver. Any party to this Agreement may waive any condition to
their obligations contained herein.
(i) Termination. This Agreement shall terminate on the earliest to
occur of (i) the termination of the Merger Agreement in accordance with
its terms and (ii) an agreement of Holding and the Stockholder to
terminate this Agreement. Termination shall not relieve any party from
liability for any intentional breach of its obligations hereunder
committed prior to such termination.
(j) Third Party Beneficiary. The Company is a third party
beneficiary of this Agreement with the right to enforce the provisions
hereof.
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IN WITNESS WHEREOF, Holding and the Stockholder have executed this
Agreement as of the date first above written.
BCO Holding Company
By: /s/ Xxxxx X. Xxxxxxx XX
-----------------------------
Name: Xxxxx X. Xxxxxxx XX
Title: Vice President
/s/ Xxxx Xxx Xxxxxxx
----------------------------------
Xxxx Xxx Xxxxxxx
Schedule A
Summary of Materials Terms of
Stockholders and Registration Rights Agreements
Parties Xxxxx Investment Associates VI, L.P. and KEP VI, LLC
(collectively, "Xxxxx") and WH, MH, J-PE and other
managers who exchange options pursuant to an Exchange
Agreement with the Company.
Tag-Along and
Drag-Along Rights The non-Xxxxx stockholders will have pro rata tag-
along rights on sales of shares of Xxxxx to a third
party which, together with all other shares
previously sold by Xxxxx, represent more than 15% of
the shares held by Xxxxx on the closing date.
If Xxxxx proposes to sell shares to a third party for
cash, and such shares, together with all other shares
previously sold by Xxxxx, represent more than 85% of
the shares held by Xxxxx on the closing date, Xxxxx
will have the right to drag along, on a pro rata
basis, each of the non-Xxxxx stockholders. Xxxxx
would have the right to receive non-cash
consideration so long as the per share consideration
received by Xxxxx is no greater than the per share
cash consideration received by the non-Xxxxx
stockholders.
The tag-along and drag-along rights would expire on a
Company IPO.
Registration Rights
Xxxxx would have unlimited demand rights. After the
first year anniversary of an IPO, WH/MH would jointly
have two demand rights. Both Xxxxx'x and WH/MH's
demand rights would be subject to customary
suspension provisions.
If Xxxxx exercises its demand rights, the non-Xxxxx
stockholders will have piggyback rights, subject to a
pro rata cutback (and no priority for Xxxxx) and the
additional cutback for the management stockholders
described below.
If WH/MH exercise their demand rights, Xxxxx and the
other non-Xxxxx stockholders will have piggyback
rights, subject to a pro rata cutback (and no
priority for
WH/MH) and the additional cutback for management
stockholders described below. If WH/MH are cut back
by more than 65% in any given offering, then that
offering would not constitute one of their demand
rights.
If the Company files a registration statement for an
IPO, Xxxxx and the non-Xxxxx stockholders will have
pro rata rights to sell their shares in the IPO,
subject only to right of the Company to sell shares
first.
Stockholders who are also management employees may be
subject to an additional cutback if the IPO's
underwriter determines in good faith that the
participation of such management stockholders would
adversely affect the marketability or offering price
of the other securities to be sold.
All parties to the Registration Rights Agreement will
agree to a lockup following the IPO of up to 180
days, depending on the managing underwriter's
requirements.
Pre-emptive Rights WH/MH and the other non-Xxxxx stockholders (but only
if such non-Xxxxx stockholder is an employee of the
Company at that time) would have pre-emptive rights
on issuances of securities by the Company, subject to
customary agreed upon exemptions.
Transfer Restrictions All non-Xxxxx stockholders except WH/MH would be
restricted from transferring their shares until an
IPO or Xxxxx'x exit, subject to customary estate
planning exceptions.
WH/MH would be permitted to sell to a third party who
agrees to be bound by the Stockholders Agreement,
subject to Xxxxx'x consent, such consent not to be
unreasonably withheld.
The Company will have the right to purchase the
shares of any non-Xxxxx stockholder whose shares
become subject to foreclosure, bankruptcy, etc. prior
to a Company IPO, at the lesser of: (a) fair market
value and (b) the amount of the liability giving rise
to such involuntary transfer plus any excess of the
carrying value of the transferred shares over such
liability.
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Puts and Calls The options (and the underlying shares) acquired
pursuant to an Exchange Agreement would be subject to
puts and calls upon termination of employment, the
specifics of which will be discussed by the parties.
Board Seats WH would have one board seat unless the board has 11
or more directors in which case WH would have an
additional board seat. WH/MH would have the right to
designate a member of their family to serve on the
board in WH's place. The family may designate
non-family member(s) to represent them on the board,
the identity of whom would be subject to Xxxxx'x
consent, such consent not to be unreasonably
withheld. Any such non-family board member would
receive the same director's fee being paid to other
outside directors. The board seat would not be
transferable outside of the WH/MH family, subject to
the right of designation described above. J-PE would
have one board seat, so long as he is CEO. Xxxxx
would have the right to designate the remaining
directors which would constitute a majority of the
board of directors.
Veto Right WH would have a veto on affiliate transactions,
except for (1) Xxxxx fees as described below and (2)
payments pursuant to the financial advisory agreement
described below. This veto right would only be
exercisable by WH, or in the event that WH is no
longer a director, a family member, if any, who is
serving on the board. If there are no family members
on the board, then affiliate transactions would be
reviewed by the disinterested board.
Xxxxx Fees Xxxxx will receive an up front fee of $4,950,000 and
annual fee of $495,000 pursuant to a financial
advisory agreement between Xxxxx and the Company.
Xxxxx will also receive a customary exit fee,
consistent with their past practices that will be
negotiated with the Company at that time. WH would
participate pro rata in the exit fee based on stock
ownership at the time of exit, but capped at 15% for
WH.
WH's Rights WH to receive an annual director's fee of $100,000.
The fee would be payable to WH or a designated family
member serving on the board. WH to continue benefits
under SERP ($157,500 per year with acceleration as a
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result of the transaction so that payments would
commence beginning the month in which the closing
occurs).
Employment Agreements Existing employment agreements, except as otherwise
mutually agreed upon.
Minority Shareholder No charter amendments that would disproportionately
Protections affect roll-over shareholders. Others, if any, to be
discussed.
Management Offering Proposed $2 mm equity offering to managers pursuant
to Rule 701 post-closing.
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Schedule B
Summary of Material Terms of
Equity Incentive Plan
-------------------------------
Participants Officers and key employees of the Can Holding
Company, and its subsidiaries (the "Company"), as
selected by Xxxx-Xxxxxx Xxxxx, subject to the
reasonable approval of the Compensation Committee of
the Board of Directors. It is expected that the
Committee shall be comprised of two Kelso directors
and Xxxx-Xxxxxx Xxxxx.
Shares The common stock of the Company, par value $.01 per
share (i.e., voting common stock).
Type of Option Grant It is anticipated that all options will be
non-qualified stock options.
Option Price; Payment The Committee shall have the ability to determine
the per share exercise price of the options,
provided that such price cannot be less than the
fair market value of the common stock on the grant
date. Options granted in connection with the closing
of the merger will be granted with an exercise price
equal to the equivalent of the per share merger
consideration. The Plan provides for payment by cash
(or equivalents) or, following an IPO by "stock
swap" (i.e., paying the exercise price with shares
already owned for 6 months or more).
Exercise; Expiration The Committee shall have the ability to set the
exercise terms at the time of granting the options,
provided that no options will be exercisable after
the 10th anniversary of the grant date. The Plan
requires, as a condition to exercise, that
optionholders execute the Management Stockholders
Agreement and the Registration Rights Agreement.
Treatment of Options Upon In the event employment is terminated for cause,/1/
Termination of Employment all options held by the employee, whether or not
then exercisable, will terminate and be canceled
--------------------
/1/ To be mutually agreed upon by the parties following the closing of the
merger.
immediately. In all other cases, the employee may
exercise any options that are or become exercisable
at the time of the termination of his or her
employment within a period of time following such
termination (one year in case of termination by
reason of death, disability or retirement; 60 days
in all other cases), but in any case prior to the
normal expiration date of the options, and all
unvested options will be cancelled.
Service Options Service Options become exercisable in up to three
equal annual installments, commencing on the first
anniversary of the grant date.
Performance Options Performance Options become exercisable in five equal
annual installments only if the Company achieves the
EBITDA objectives established by the Committee (in
consultation with the Company) for such fiscal year
or the cumulative EBITDA objective for the period
ending with the end of the subsequent fiscal year.
Notwithstanding the foregoing, Annex A lists the
EBITDA objectives for the Company's 2003-07 fiscal
years. The Plan provides for a "catch up"
opportunity in the event the EBITDA objectives for a
year are not achieved.
Exit Options Exit Options are exercisable only if (i) Xxxxx
Investment Associates VI, L.P. and KEP VI, LLC
(together, the "Xxxxx Entities") sell all or
substantially all of their Company common stock or
the Company sells all or substantially all of its
assets to a non-affiliated third party (an "Exit
Event"), (ii) at least a minimum aggregate share
value with respect to the shares of Company common
stock held by the Xxxxx Entities (the "Xxxxx Stock")
of two times the equivalent of the per share merger
consideration (the "Floor Value") is achieved by the
Xxxxx Entities in the Exit Event taking into account
all options (the "Exit Value") and (iii) the Xxxxx
Entities shall have achieved at least a 15% internal
rate of return, compounded annually, on their
investment in the Xxxxx Stock. Where the Exit Value
is greater than the Floor Value, but less than four
times the equivalent of the per share merger
consideration, Exit Options become exercisable
ratably. All Exit Options are exercisable if the
Exit Value is at least four times the equivalent of
the per
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share merger consideration. Exit Options that have
not vested upon the first occurrence of an event
described in clause (i) of this paragraph will be
cancelled.
Percentage of Fully-Diluted Assuming the Company's total equity account is
Shares Available for $101.5 million (i.e., the sum of (a) Xxxxx'x funded
Different Types of Options equity, (b) the aggregate - - value of the Exchange
Shares and (c) the aggregate spread value of
Exchange Options (as each such term is defined in
the Exchange Agreements to which this term sheet is
attached)) as of the closing of the merger,
2,185,929 shares of common stock of the Company will
be available for option grants under the Plan,
representing approximately 20% of the outstanding
shares of common stock of the Company at closing,
including, for this purpose, the aggregate number of
shares reserved for issuance in connection with the
New Options (as defined in the Exchange Agreements
to which this term sheet is attached) (the "Option
Pool").
40% of the Option Pool will be Service Options, 10%
of the Option Pool will be Performance Options and
50% of the Option Pool will be Exit Options. In
connection with the closing of the merger, 40% of
the Option Pool shall be granted to Xxxx-Xxxxxx
Xxxxx, 20% of the Option Pool shall be granted to
Xxxxxxx X. Xxxxxxxx, and the remaining 40% of the
Option Pool shall be granted in accordance with the
terms of the Plan to employees selected by
Xxxx-Xxxxxx Xxxxx, subject to the reasonable
approval of the Committee.
Any shares subject to an option that expires, or is
canceled, terminated or forfeited without the
issuance of shares shall again be available for
grant.
Transferability Options are not transferable other than by will or
by the laws of descent and distribution, or, if
allowed by the Committee, in connection with certain
pledges and estate-planning transfers.
Change in Control In the event of a sale of more than 50% of the
Company's common stock or assets to any person or
group that is unaffiliated with Xxxxx (a "Change in
Control"), unless the Committee determines that the
Options will be honored, assumed or substituted,
each
3
Service Option, whether or not then exercisable, and
each Performance Option and Exit Option that vests
in accordance with its terms on or before the date
of such Change in Control will be canceled for a
payment by the Company to the Option holder of the
price per share paid for the Company's common stock
in the Change of Control transaction less the
exercise price for the Option. If in connection with
the Change of Control all of the Exit Options have
vested in accordance with their terms (after giving
to effect all options vesting in connection with the
transaction), all of the Performance Options that
would otherwise have covered the period following
the Change of Control shall vest.
Requirements of Law The purchase of shares and the grant (and terms)
of options shall be subject to all applicable
securities laws (including U.S. and non-U.S. laws
and state "blue-sky" laws).
Adjustments in The plan provides for the Committee to make
Capitalization proportionate adjustments to the number of
shares subject to the plan, and outstanding options
for any stock dividend, stock split,
recapitalization, reorganization, merger or
consolidation or other similar event.
Cap on Benefits The plan provides that, notwithstanding anything
herein to the contrary, to the extent that any of
the payments and benefits provided for under the
Plan or under any other agreement or arrangement
between the Company and a Participant (collectively,
the "Payments") would constitute a "parachute
payment" within the meaning of Section 280G
of the Code, the amount of such Payments shall be
reduced to the amount that would result in no
portion of the Payments being subject to the excise
tax imposed pursuant to Section 4999 of the Code. If
Payments that would otherwise be limited as a result
of the foregoing would not be limited if the
shareholder approval requirements of Section
280G(b)(5) of the Code are capable of being
satisfied, the Company shall use its reasonable best
efforts to cause such payments to be submitted for
such
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approval prior to a Change in Control./2/
Administration The Plan (including the determination of terms and
conditions of options) will generally be
administered by the Committee.
-----------------------
/2/ This provision is intended to address the IRS's view on how it's recently
proposed regulations under Section 280G will operate. Xxxxx'x intent is to
take such steps (i.e., shareholder approval prior to a Change of Control)
to avoid the imposition of the cap.
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Annex A
EBITDA Objectives
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Fiscal Year EBITDA Objective
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2003 $64.0 million
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2004 $68.0 million
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2005 $72.0 million
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2006 $76.0 million
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2007 $80.0 million
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Cummulative Total $360.0 million
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