EXHIBIT 10.35
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement"), dated as of
July 7, 1999 (the "Grant Date"), is made by and between ST. XXXX KNITS
INTERNATIONAL, INCORPORATED (the "Company"), a Delaware corporation, and the
employee of the Company or its subsidiary whose name appears on the signature
page hereof, hereinafter referred to as the "Optionee".
WHEREAS, the Company wishes, pursuant to the St. Xxxx Knits
International, Incorporated 1999 Stock Option Plan (the "Plan") (a copy of which
is attached hereto and the terms of which are hereby incorporated by reference),
to grant to Optionee an Option to purchase the number of shares of Common Stock
set forth on Schedule 1 in accordance with the terms of this Agreement; and
WHEREAS, the Board of Directors of the Company has determined
that it would be to the advantage and best interest of the Company and its
stockholders to sell the shares and grant the Option provided for herein.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever capitalized terms are used in this Agreement as
defined terms, they shall have the meaning set forth in the Plan or the meaning
specified below unless the context clearly indicates to the contrary.
SECTION 1.1 - CAUSE. "Cause" used in connection with the
Termination of Employment of the Optionee shall mean either (a) the definition
of "Cause" as set forth in any employment agreement executed between the
Optionee and the Company or any of its affiliates or, if no such agreement or
definition therein exists, (b) a Termination of Employment of the Optionee by
the Company or any affiliate thereof due to (i) willful malfeasance or willful
misconduct by Optionee in connection with his employment, (ii) continuing
refusal by Optionee to perform his duties, after notice of any such refusal to
perform such duties or direction was given to Optionee, (iii) any breach by the
Optionee of a confidentiality or noncompete covenant made in favor of the
Company or an affiliate or any material breach by the Optionee of an employment
agreement between the Company or an affiliate and the Optionee or (iv) the
commission by Optionee of (a) any felony or (b) a misdemeanor involving moral
turpitude.
2
SECTION 1.2 - CHANGE OF CONTROL. "Change of Control" shall
mean (i) prior to an initial Public Offering of Common Stock, the date Vestar:
(A) ceases to be the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, which shall in any event
include having the power to vote (or cause to be voted at
Vestar's direction) pursuant to contract, irrevocable proxy or
otherwise)), directly or indirectly, of a majority in the
aggregate of the total voting power of the Company, whether as
a result of the issuance of securities of the Company, any
merger, consolidation, liquidation or dissolution of the
Company, any direct or indirect transfer of securities by the
Company or otherwise, and
(B) does not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of
the Board;
(ii) coincident with or subsequent to an initial Public
Offering of Common Stock, the date that:
(A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than Vestar, is or becomes the
beneficial owner (as defined in clause (i)(A) above, except
that such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more
than 35% of the total voting power of the Company; and
(B) Vestar "beneficially owns" (as defined in clause (i)(A)
above), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Company than such
other person and does not have the right or ability by voting
power, contract or otherwise to elect or designate for
election a majority of the Board; or
(iii) the date, following the expiration of any period of two
consecutive years, that individuals, who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors, or whose nomination for
election by the shareholders of the Company, was approved by a vote of 66-2/3%
of the directors of the Company then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
For purposes of clauses (i) and (ii), Vestar shall be deemed
to beneficially own voting power of a corporation held by any other corporation
(the "parent corporation") so long as Vestar beneficially owns (as so defined),
directly or indirectly, in the aggregate, a majority of the voting power of the
parent corporation. For purposes hereof, Vestar shall be deemed to have voting
power over each share of Common Stock owned by any Employee.
3
SECTION 1.3 - CLOSING DATE. "Closing Date" shall mean July 7,
1999.
SECTION 1.4 - COMMON STOCK EQUIVALENTS. "Common Stock
Equivalents" shall mean any stock, warrants, rights, calls, options or other
securities exchangeable or exercisable for or convertible into Common Stock.
SECTION 1.5 - DISABILITY. "Disability" of the Optionee shall
mean the inability of the Optionee to perform the essential functions of his
job, with or without reasonable accommodation, by reason of a physical or mental
infirmity, (i) for a continuous period of six (6) months or (ii) at such earlier
time as the Company receives satisfactory medical evidence that the Optionee has
a physical or mental disability or infirmity which is reasonably likely to
prevent him from returning to the performance of his work duties for six (6)
months or longer. The date of such Disability shall be on the last day of such
six-month period or the fifteenth day following the day on which the Company
receives such satisfactory medical evidence, as the case may be.
SECTION 1.6 - EBITDA - "EBITDA" shall have the same meaning as
"Consolidated EBITDA", as such term is defined in the Credit Agreement dated as
of July 7, 1999, among the Company, the Lenders party thereto, and The Chase
Manhattan Bank, as Administrative Agent, as such Agreement shall from time to
time be amended.
SECTION 1.7 - LLC AGREEMENT. "LLC Agreement" shall mean the
Amended and Restated Limited Liability Company Agreement of Vestar/Xxxx
Investors LLC by and among Vestar Capital Partners III, L.P., Xxxxxx Xxxx, Xxxxx
Xxxx, Xxxxx X. Xxxx, Xxxxx Xxx Xxxx Trust, Xxxx Family Trust and St. Xxxx Knits
International, Incorporated, dated as of July 7, 1999, as such Agreement shall
from time to time be amended.
SECTION 1.8 - OPTION. "Option" shall mean the Option described
in Section 3.1 hereof.
SECTION 1.9 - OPTION SHARES. "Option Shares" shall mean the
shares of Common Stock subject to an unexercised Option.
SECTION 1.10 - OPTION STOCK. "Option Stock" shall mean the
shares of Common Stock received upon the exercise of the Option.
SECTION 1.11 - OPTION TERMINATION EVENT. "Option Termination
Event" shall mean either (i) a Public Offering wherein the price of the shares
of Common Stock in the Public Offering would, if Vestar sold shares of Vestar
Stock in the Public Offering, result in Vestar failing to achieve the Vestar
Return on any such sale or (ii) a Change of Control wherein the consideration
for the shares of Vestar Stock sold or otherwise disposed of in the Change of
Control results in Vestar failing to achieve the Vestar Return upon such sale or
other disposition.
SECTION 1.12 - PUBLIC OFFERING. "Public Offering" shall mean
the sale of Securities to the public after the Closing Date (i) pursuant to an
effective registration statement filed under the Securities
4
Act (excluding any registration of Securities on a Form S-4 or Form S-8) and
(ii) which results in an active trading market in such Securities (it being
understood that such an active trading market shall be deemed to exist if, among
other things, such Securities are listed on a national securities exchange or on
NASDAQ).
SECTION 1.13 - SECURITIES. "Securities" shall mean shares of
Common Stock or Common Stock Equivalents or other voting securities of the
Company, whether owned on the date hereof or hereafter acquired.
SECTION 1.14 - SECURITIES ACT. "Securities Act" shall mean the
Securities Act of 1933, as amended, and all rules and regulations promulgated
thereunder, as the same may be amended from time to time.
SECTION 1.15 - SECURITYHOLDER AGREEMENTS. "Securityholder
Agreements" shall mean any securityholder agreements to which any holder of
Common Stock, Common Stock Equivalents, or Securities is a party, including, but
not limited to, all voting agreements, stock transfer rights agreements and
registration rights agreements, which shall include the LLC Agreement.
SECTION 1.16 - VESTAR. "Vestar" shall mean Vestar Capital
Partners III, L.P., any investor therein or any affiliate thereof.
SECTION 1.17 - VESTAR CHANGE OF CONTROL. "Vestar Change of
Control" shall mean a Change of Control wherein the consideration for the shares
of Vestar Stock sold or otherwise disposed of in the Change of Control results
in Vestar achieving at least the Vestar Return upon such sale or other
disposition.
SECTION 1.18 - VESTAR EQUITY VALUE. "Vestar Equity Value"
shall mean the sum of:
(i) all amounts actually received by Vestar from time to time
(or, in the event of a Vestar IPO, all amounts which would be received if Vestar
sold shares of Vestar Stock in the Vestar IPO) on a cumulative basis through the
date of determination of (A) cash (x) through any cash dividend or other
distribution on account of the Vestar Stock or (y) in connection with either (1)
a disposition (including by way of redemption, repurchase or repayment) of all
or part of the Vestar Stock or of Securities or other non-cash property
previously received by way of a dividend or other distribution on account of the
Vestar Stock, but only to the extent Vestar Stock or other securities or
non-cash property is so disposed, (2) a disposition of any or all of the assets
of the Company or any of its subsidiaries, or (3) a recapitalization of the
Company or its subsidiaries, or (B) securities or other non-cash property
(valued at their fair market value) in connection with either (x) a disposition
of all or part of the Vestar Stock to a third party, but only to the extent
Vestar Stock is so disposed, or (y) a disposition of any or all of the assets of
the Company or any of its subsidiaries (it being understood that for purposes of
this clause (i), the terms "disposition," "dispose," and "disposed" shall not
include the creation of a pledge, lien or other similar encumbrance); PLUS
5
(ii) an amount with respect to all shares of preferred stock
of the Company held by Vestar as of the determination date (including preferred
stock issued in payment of dividends and all accrued and unpaid dividends
thereon to the date of determination) equal to the aggregate liquidation
preference in respect thereof, determined as of such date in accordance with the
terms of such preferred stock (whether or not funds would be legally available
for the payment of such liquidation preference).
SECTION 1.19 - VESTAR IPO. "Vestar IPO" shall mean a Public
Offering wherein the price of the shares of Common Stock sold in the Public
Offering would, if Vestar sold shares of Vestar Stock in the Public Offering,
result in Vestar achieving at least the Vestar Return on any such sale.
SECTION 1.20 - VESTAR RETURN. "Vestar Return" shall mean the
"internal rate of return" for Vestar, which shall be deemed to have occurred on
the earliest date when the Vestar Equity Value with respect to Vestar Stock is
equal to or greater than, as of the date of determination, the amount determined
by increasing the amount of Vestar's initial investment in the Company (the
"INITIAL INVESTMENT") plus the amount of additional cash invested by Vestar in
Vestar Stock after the Closing Date at a compounded annual rate of 20%
commencing on the Closing Date (with respect to the Initial Investment made by
Vestar in Vestar Stock on the Closing Date) and the date of any subsequent cash
investment by Vestar (with respect to Vestar Stock acquired by Vestar after the
Closing Date) through and including such date of determination.
SECTION 1.21 - VESTAR STOCK. "Vestar Stock" shall mean issued
and outstanding shares of capital stock of any class or series of the Company,
so long as such shares were originally acquired by Vestar from the Company.
ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION. For good and valuable
consideration, receipt of which is hereby acknowledged, on and as of the date
hereof, the Company irrevocably grants to the Optionee the Options to purchase
any part or all of an aggregate of the number of shares set forth on Schedule 1
hereof of its Common Stock upon the terms and conditions set forth in this
Agreement.
SECTION 2.2 - OPTION PRICE. The initial Option Price per share
of Common Stock subject to Options on the Grant Date and for the term of the
Options is set forth on Schedule 1.
SECTION 2.3 - ADJUSTMENTS TO OPTIONS. Subject to Section 4.5
of the Plan, in the event that the outstanding shares of the Common Stock
subject to the Options are changed into or exchanged for a different number or
kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares or otherwise, the Committee shall
6
make an appropriate adjustment in the number and kind of shares as to which the
Options, or portions thereof then exercised, shall be exercisable. Such
adjustment in the Options shall be made without change in the total price
applicable to the unexercised portion of the Options (except for any change in
the aggregate price resulting from rounding-off of shares, quantities or prices)
and with any necessary corresponding adjustment in the Option Price. Any such
adjustment made by the Committee shall be final and binding upon the Optionee,
the Company and all other interested persons.
ARTICLE III
EXERCISABILITY OF OPTION
SECTION 3.1 - EXERCISABILITY.
(a) VESTING AND EXERCISABILITY. The Option shall become vested with
respect to one-third of the Option Shares on each of the first three
anniversaries of the Grant Date; PROVIDED, HOWEVER, that the Option shall only
become exercisable if and to the extent that the Option is vested and either of
the following occurs:
(i) the Company achieves certain EBITDA Targets for certain fiscal
years of the Company (each, a "FISCAL YEAR"), as set forth below:
Fiscal Year 1999 - $70.4 million
Fiscal Year 2000 - $76.2 million
Fiscal Year 2001 - $82.4 million
or, (ii) in the event that all such EBITDA Targets have not been achieved and
the Optionee continues to be employed with the Company through the end of Fiscal
Year 2001, upon the occurrence of a Vestar IPO or a Vestar Change of Control.
(b) DEATH AND DISABILITY. In the event that the Optionee dies or
becomes disabled prior to the end of Fiscal Year 2001, the Optionee's Option
will remain outstanding and be treated in the same manner as the Option would
have been treated if the Optionee had continued to be employed with the Company
though the end of the Fiscal Year 2001.
(c) OTHER TERMINATIONS OF EMPLOYMENT. In the event that the Optionee's
employment terminates for any reason (other than for Cause, death or Disability)
prior to Fiscal Year 2001, upon the occurrence of either of the events set forth
in (a)(i) and (ii), above, the Option will only be exercisable in respect of the
portion of the Option in which the Optionee had vested prior to such
terminations of employment.
SECTION 3.2 - EXPIRATION OF OPTION. The Option shall expire
and may not be exercised to any extent by anyone on the earliest to occur of the
following events:
7
(a) the tenth anniversary of the Grant Date;
(b) in the event of either a Public Offering or a Change of Control,
with respect to any exercisable portion of the Option (or with respect to any
portion of an Option that becomes exercisable upon a Vestar IPO or a Vestar
Change of Control), thirty (30) days after the occurrence of either of such
events;
(c) immediately after a Termination of Employment for Cause;
(d) with respect to the then exercisable portion of the Option only,
three months after a Termination of Employment by the Company other than for
Cause, death or Disability;
(e) with respect to the unvested portion of the Option only, any
Termination of Employment other than for death or Disability;
(f) immediately after an Option Termination Event (unless the Option
has become exercisable pursuant to Section 3.1(a)(i)); or
(g) if the Committee so determines pursuant to Section 4.6 of the Plan,
upon the occurrence of any event described in that Section.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSONS ELIGIBLE TO EXERCISE. During the
lifetime of the Optionee, only the Optionee may exercise the Option or any
portion thereof. After the death of the Optionee, any portion of the Option may,
prior to the time when the Option becomes unexercisable under Section 3.2, be
exercised by the Optionee's personal representative or by any person empowered
to do so under the Optionee's will or under the then applicable laws of descent
and distribution.
SECTION 4.2 - PARTIAL EXERCISE. Any exercisable portion of the
Option or the entire Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.2; PROVIDED, HOWEVER, that any
partial exercise shall be for whole shares only.
SECTION 4.3 - MANNER OF EXERCISE. The Option, or any
exercisable portion thereof, may be exercised solely by delivery to the
Secretary or his office all of the following prior to the time when the Option
or such portion becomes unexercisable under Section 4.2:
8
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that the Option or
portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Committee; and
(b) Full payment (in cash, by certified check or by a combination
thereof) for the shares with respect to which such Option or portion thereof is
exercised; and
(c) Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Option; and
(d) Execution of all necessary Securityholder Agreements, which
Agreements shall include a Stockholder's Agreement containing terms regarding
transfer restrictions, put rights, piggyback registration rights, and other
rights relating to the Option and Option Stock, by the Optionee; and
(e) If the Option or portion thereof shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.
SECTION 4.4 - RIGHTS AND OBLIGATIONS UPON EXERCISE. Upon
exercise of the Option, the rights and obligations set forth in the
Securityholder Agreements shall be applicable to all shares of Option Stock
(including, but not limited to, the legend requirements and transfer
restrictions set forth therein).
SECTION 4.5 - RIGHTS AS STOCKHOLDER. The holder of the Option
shall not be, nor have any of the rights or privileges of, a stockholder of the
Company in respect of any shares purchasable upon the exercise of the Option or
any portion thereof unless and until certificates representing such shares shall
have been issued by the Company to such holder and the Company agrees to issue
any such certificates on a timely basis.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 - OPTIONS NOT TRANSFERABLE. Neither the Options
nor any interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.1 shall not prevent transfers by will or by the
applicable laws of descent and distribution.
9
SECTION 5.2 - NOTICES. Any notice to be given under the terms
of this Agreement to the Company shall be addressed to the Company in care of
its Secretary, and any notice to be given to the Optionee shall be addressed to
him at the address given beneath his signature hereto. By a notice given
pursuant to this Section 5.2, either party may hereafter designate a different
address for notices to be given to him. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 5.2. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by
the United States Postal Service.
SECTION 5.3 - TITLES. Titles are provided herein for
convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.
SECTION 5.4 - AMENDMENT. This Agreement may be amended only by
a writing executed by the parties hereto which specifically states that it is
amending this Agreement.
SECTION 5.5 - NO RIGHT TO EMPLOYMENT. Nothing in this
Agreement or in the Plan shall confer upon the Employee any right to continue in
the employ or service of the Company or shall interfere with or restrict in any
way the rights of the Company, which are hereby expressly reserved, to discharge
the Employee at any time for any reason whatsoever.
SECTION 5.6 - GOVERNING LAW. This Agreement shall be construed
under and governed by the laws of the State of Delaware applicable to contracts
made and to be performed therein. Any action to enforce, which arises out of or
in any way relates to, any of the provisions of this Agreement may be brought
and prosecuted in such court or courts located within the State of Delaware as
provided by law; and the parties consent to the jurisdiction of such court or
courts located within the State of Delaware and to service of process by
registered mail, return receipt requested, or by any other manner provided by
Delaware law.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
ST. XXXX KNITS INTERNATIONAL,
INCORPORATED:
By:____________________________
Name:
Title:
OPTIONEE:
__________________________
Xxxxx St. Xxxx Xxxx
Address:
Optionee's Taxpayer
Identification Number:
__________________________
11
SCHEDULE 1
XXXXX ST. XXXX XXXX
NUMBER OF SHARES SUBJECT TO OPTION: 109,104
OPTION PRICE PER SHARE: $30.00
GRANT DATE: 7/7/99
