Exhibit 10.12
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UNITED INDUSTRIES CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered
into as of January 20, 1999, by and between UNITED INDUSTRIES CORPORATION, a
Delaware corporation (the "Company"), and Xxxxx Xxxxx ("Optionee") pursuant to
the United Industries Corporation 1999 Stock Option Plan (the "Plan"). The
Company and Optionee are referred to collectively herein as the "Parties."
Capitalized terms used but not defined herein shall have the meaning set forth
in the Plan.
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Options and Effective Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to the
Plan an option (the "Option") to purchase all or any part of
an aggregate of 150,000 shares (the "Class A Shares") of the
Company's Class A Voting Common Stock, par value $0.01 per
share and 150,000 shares (the "Class B Shares" and, together
with the Class A Shares (the "Shares")) of the Company's
Class B Non-Voting Common Stock, par value $0.01 per share
(collectively, "Common Stock"), on the terms and conditions
set forth herein and in the Plan as in effect on the Grant
Date (as defined below), the terms of which are incorporated
herein by reference.
1.2 Grant Date. The Grant Date of this Option is January 20,
1999 (the "Grant Date").
2. Exercise Price. The exercise price for the Shares of Common Stock
covered by this Option shall be $5.00 per share (the "Exercise
Price").
3. Adjustment and Termination of Options. Subject to the restrictions,
and under the circumstances described, in the Plan and this Agreement,
the Company shall adjust the number and kind of Shares and the
Exercise Price thereof, and this Option shall be terminated in certain
circumstances, in accordance with the provisions of the Plan.
4. Exercise of Options.
4.1 When Exercisable.
(a) Rate of Exercise for 5-Year Options. Optionee's
right to exercise this Option as to 100,000 of the
Shares (50,000 Class A Shares and 50,000 Class B
Shares) subject thereto (the "5 Year Options")
shall vest ratably over the five (5) year period
commencing on the Grant Date in accordance with
the following schedule if (but only if) Optionee
is a director of the Company or any of its
Subsidiaries as of each such date:
Cumulative Shares of
Date 5 Year Option Vested
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1st Anniversary of Grant Date 20,000
2nd Anniversary of Grant Date 40,000
3rd Anniversary of Grant Date 60,000
4th Anniversary of Grant Date 80,000
5th Anniversary of Grant Date 100,000
Notwithstanding any provision to the contrary in this Section 4.1(a), but
subject to the other restrictions in the Plan and this Agreement, in the event
of a Sale (as defined below) prior to December 31, 2003, the 5 Year Options
shall become vested and immediately exercisable.
(b) Rate of Exercise on TARSAP Options.
(i) Optionee shall not be vested with the right to
exercise this Option with respect to 200,000 of the Shares
(100,000 Class A Shares and 100,000 Class B Shares) (the
"TARSAP Shares") subject thereto (the "TARSAP Options")
until ten (10) years after the Grant Date, at which time
Optionee shall acquire the vested right to exercise the
TARSAP Options and purchase one hundred percent (100%) of
the TARSAP Shares if (but only if) Optionee is a director of
the Company or any of its Subsidiaries as of such date.
(ii) Acceleration of TARSAP Options.
Notwithstanding the foregoing, if on and after the
publication of each written determination by the Board of
Directors of the Company (the "Board") or a committee
thereof which is authorized to do so that the Company has
met at least ninety percent (90%) of its objective for
EBITDA (as defined below) (100% of the Company's objective
referred to herein as the "Performance Goals") with respect
to any fiscal year commencing with the fiscal year ending
December 31, 1999 and continuing for each of the four fiscal
years thereafter (which Performance Goals are set forth on
Annex I attached hereto), then (subject to the other
restrictions in the Plan and this Agreement), Optionee shall
acquire the vested right to exercise the TARSAP Options to
purchase ten percent (10%) of the TARSAP Shares, and for
each additional one percent (1%) achievement over ninety
percent (90%) of the Performance Goals for any such fiscal
year, as so determined, Optionee shall acquire the vested
right to exercise the TARSAP Options to purchase an
additional one percent (1%) of the TARSAP Shares, but no
more than twenty percent (20%) of the TARSAP Shares in
respect of each full fiscal year. Additionally, on and after
publication of a written determination by the Board or a
committee thereof which is authorized to do so that the
Company has met at least eighty seven and one-half percent
(87.5 %) of its Performance Goals for the fiscal year ending
December 31, 2003 and at least ninety percent (90%) of its
cumulative Performance Goals for the five fiscal years
ending December 31, 2003 ("Five Year Performance Goals"),
then subject to the other restrictions in the Plan and this
Agreement, (i) Optionee shall acquire the vested right to
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exercise the TARSAP Options to purchase fifty percent (50%)
of the TARSAP Shares as to which Optionee had not otherwise
acquired the vested right to exercise, and (ii) for each
additional one percent (1%) achievement over ninety percent
(90%) of the Five Year Performance Goals, as so determined,
Optionee shall acquire the vested right to exercise this
TARSAP Option to purchase an additional five percent (5%) of
the TARSAP Shares as to which Optionee has not otherwise
acquired the vested right to exercise (such additional
exercise rights pursuant to clauses (i) and (ii) above are
referred to herein as the "Additional Exercise Rights").
Such determinations shall be made by the Board or such
committee within ten (10) days after receipt of audited
financial statements for each fiscal year. The Board's or
committee's determination as to whether the Company has met
such objectives shall be final and not subject to dispute.
In addition, the Board or a committee thereof shall have
complete discretion to modify such objectives from time to
time for any year or years to reflect business combinations
or dispositions, fiscal year changes, purchases or sales of
assets or any other circumstances the Board or committee
thereof deems relevant. For purposes hereof, "EBITDA" shall
mean earnings before interest, taxes, depreciation and
amortization, excluding any non-recurring or extraordinary
items, as determined in accordance with generally accepted
accounting principles, consistently applied.
(iii) Acceleration Upon Sale. Notwithstanding any
provision to the contrary in this Section 4.1(b), but
subject to the other restrictions in the Plan and this
Agreement, in the event of a Sale (as defined below) prior
to December 31, 2003, the TARSAP Options shall become vested
and immediately exercisable to the extent set forth below.
On and after publication of a written determination by the
Board or a committee thereof which is authorized to do so
that the Company has met at least eighty seven and one-half
percent (87.5 %) of its Performance Goals for the last
twelve (12) full months and at least ninety percent (90%) of
its cumulative Performance Goals for the completed fiscal
years (if any) and the Interim Period (as defined below)
(based on months elapsed), the Board or such committee shall
treat the percentage of cumulative Performance Goals
achieved through the completed fiscal years (if any) and
Interim Period as the percentage of Five Year Performance
Goals achieved and on that basis shall determine the
Additional Exercise Rights with respect to all 200,000
TARSAP Options as to which Optionee had not otherwise
acquired the vested right to exercise consistent with the
method set forth in the second sentence of Section
4.1(b)(ii) above. The percentage of Five Year Performance
Goals for such period shall be computed by dividing (i) the
sum of EBITDA achieved for the completed fiscal years (if
any) and the Interim Period by (ii) the annual Performance
Goals for the completed fiscal years (if any) and the
monthly Performance Goals for the Interim Period. For
purposes hereof, the term "Interim Period" shall mean the
period beginning on the first day of the then current fiscal
year and ending on the last full month of that uncompleted
fiscal year.
For purposes hereof, the term "Sale" shall mean:
(w) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated
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under the Exchange Act) of voting securities of (a) the
Company or (b) the surviving entity in any reorganization,
merger or consolidation (each an "Acquisition") involving
the Company (any such entity referred to herein as the
"Corporation") where such Acquisition causes such Person to
own more than fifty percent (50%) of the combined voting
power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors, other than acquisitions by the Xxxxxx X. Xxx
Company or its affiliates;
(x) approval by the shareholders of the Company of
a complete liquidation or dissolution of the Company;
(y) the acquisition by a third party not
affiliated with the Company of all or substantially all of
the Company's assets; or
(z) individuals who constitute the Board on the
date of the Company's initial public sale of equity
securities registered under the Securities Act (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board thereafter. Any person
becoming a director subsequent to such date whose, election,
or nomination for election, is, at any time, approved by a
vote of at least a majority of the directors comprising the
Incumbent Board shall be considered a member of the
Incumbent Board.
The accelerated vesting provided in this Section 4.1(b)(iii) shall
take effect immediately prior to but contingent upon the Sale giving rise to
such accelerated vesting. The phrase "immediately prior to the Sale" shall be
understood to mean sufficiently in advance of a Sale to permit the Optionee to
take all steps reasonably necessary to permit the Optionee to become a
shareholder of the Company as of the consummation of such Sale with respect to
the TARSAP Shares subject to the accelerated vesting provided in this Section
4.1(b)(iii). The Board or committee thereof may in good faith shorten the
Interim Period or make approximations of EBITDA during the Interim Period in
order to comply with the preceding sentence.
(c) Partial Exercise. Subject to the other
restrictions in the Plan and this Agreement, the
Options may be exercised for all or a part of the
Shares with respect to which each Option is
exercisable under Section 4.1(a) and (b) above.
4.2 Method of Exercise; Stockholders Agreement. Subject to
Section 4.1 and the other restrictions in the Plan and this
Agreement, Options are exercisable from time to time by
Optionee, who shall complete, execute and deliver to the
Company a Form of Exercise and Stock Transfer Power
substantially in the form attached hereto or in such other
form as the Company may require. Except as otherwise
permitted by Section 6(d) of the Plan, such notice shall be
accompanied by payment in full for the Shares to be
purchased. Payment of the Exercise Price may be made: (i) in
cash, (ii) in shares of Common Stock which either (A) were
purchased by Optionee in other than a compensatory
transaction, (B) have been held by Optionee free and clear
for
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at least six (6) months prior to the use thereof to pay part
or all of the Exercise Price or (C) otherwise are considered
"mature" shares for purposes of generally accepted
accounting principles, as determined by the Company's
outside auditors, or (iii) so long as the Common Stock is
publicly traded, by delivery to the Committee of irrevocable
instructions to a stockbroker to deliver promptly to the
Company an amount of sale or loan proceeds sufficient to pay
a portion of the Exercise Price subject to this clause
(iii), or a combination of the methods specified in clauses
(i), (ii) and (iii), or in the sole discretion of the
Committee, through a cashless exercise procedure. Optionee
shall also execute and deliver to the Company a copy of the
Company's Stockholders Agreement, dated as of January 20,
1999, in the form in effect at the time of exercise (as
amended and modified from time to time, the "Stockholders
Agreement"), if Optionee has not previously done so. Upon
due exercise of any Option and (if required) execution and
delivery of the Stockholders Agreement, subject to the terms
and conditions in this Agreement, the Company shall issue in
the name of Optionee and deliver to Optionee a certificate
for the Shares in respect of which such Option shall have
been exercised, but no Shares will be issued until
arrangements satisfactory to Company have been made for
appropriate income tax withholding, if any, pursuant to
Section 12 hereof.
4.3 Exercise After Termination of Directorship; Termination of
Options.
(a) Termination of Vesting. Upon any termination of
Optionee as a director of the Company or any of
its Subsidiaries for any reason, the Options may,
to the extent exercisable as of the date of
termination and not terminated pursuant to
Section 4.3(b), be exercised by Optionee until
termination pursuant to Section 4.3(b).
(b) Termination of Options. The Options shall not be
exercisable after the earliest of (i) a Sale
(provided that Optionee has at least five (5)
business days prior to the Sale to exercise the
Options or the Options are treated as exercised
in connection with such Sale) or (ii) January 20,
2009.
5. Non-transferability of Options. The Options shall not be transferable
or assignable except upon Optionee's death by will or the laws of
descent and distribution and shall be exercisable, during Optionee's
lifetime, only by Optionee.
6. Purchase for Investment; Other Representations of Optionee; Legends.
6.1 Investment Intent. As provided in the Plan, in the event
that the offering of Shares with respect to which the
Options are being exercised is not registered under the
Securities Act, but an exemption is available that requires
an investment representation or other representation,
Optionee, if electing to purchase Shares, will be required
to represent that such Shares are being acquired for
investment and not with a view to distribution thereof, and
to make such other reasonable and customary representations
regarding matters relevant to compliance with applicable
securities
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laws as are deemed necessary by counsel to the Company.
Stock certificates evidencing such unregistered Shares that
are acquired upon exercise of the Options shall bear
restrictive legends in substantially the following form and
such other restrictive legends as are required or advisable
under the provisions of any applicable laws or are provided
for in the Stockholders Agreement or any other agreement to
which Optionee is a party:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT
BE TRANSFERRED AT ANY TIME IN THE ABSENCE OF (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES AT SUCH TIME, OR (II) AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL, TO THE
EFFECT THAT SUCH TRANSFER AT SUCH TIME WILL NOT VIOLATE THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
6.2 Other Representations. Optionee hereby represents and
warrants to the Company as follows:
(a) Access to Information. Because of Optionee's
business relationship with the Company and with
the management of the Company, Optionee has had
access to all material and relevant information
concerning the Company, thereby enabling Optionee
to make an informed investment decision with
respect to his investment in the Company, and all
pertinent data and information requested by
Optionee from the Company or its representatives
concerning the business and financial condition of
the Company and the terms and conditions of this
Agreement have been furnished. Optionee
acknowledges that Optionee has had the opportunity
to ask questions of and receive answers from and
to obtain additional information from the Company
and its representatives concerning the present and
proposed business and financial condition of the
Company.
(b) Financial Sophistication. Optionee has such
knowledge and experience in financial and business
matters that Optionee is capable of evaluating the
merits and risks of investing in the Shares.
(c) Understanding the Investment Risks. Optionee
understands that:
(i) An investment in the Shares represents a
highly speculative investment, and there
can be no assurance as to the success of
the Company in its business; and
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(ii) There is at present no market for the
Shares and there can be no assurance
that a market will develop in the
future.
(d) Understanding of the Nature of the Shares.
Optionee understands and agrees that:
(i) There can be no assurance that the
Shares will be registered under the
Securities Act or any state securities
laws and if they are not so registered,
they will only be issued and sold in
reliance upon certain exemptions
contained in the Securities Act and
applicable state securities laws, and
the representations and warranties of
Optionee contained herein, which will
have to be renewed as to the Shares at
the times of exercise of the Options,
are essential to any claim of exemption
by the Company under the Securities Act
and such state laws;
(ii) If the Shares are not so registered, the
Shares will be "restricted securities"
as that term is defined in Rule 144
promulgated under the Securities Act;
(iii) The Option cannot be exercised and the
Shares will not be sold to Optionee and
Optionee cannot resell or transfer the
Shares without registration under the
Securities Act and applicable state
securities laws unless the Company
receives an opinion of counsel
acceptable to it (as to both counsel and
the opinion) that such registration is
not necessary, the cost of such opinion
to be borne by the Company;
(iv) Only the Company can register the Shares
under the Securities Act and applicable
state securities laws;
(v) The Company has not made any
representations to Optionee that the
Company will register the Shares under
the Securities Act or any applicable
state securities laws, or with respect
to compliance with any exemption
therefrom;
(vi) Optionee is aware of the conditions for
Optionee's obtaining an exemption for
the resale of the Shares under the
Securities Act and any applicable state
securities laws; and
(vii) The Company may, from time to time, make
stop transfer notations in its transfer
records to ensure compliance with the
Securities Act and any applicable state
securities laws, and any additional
restrictions imposed by state securities
administrators.
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(e) Investment Intent. Optionee acknowledges that:
(i) Optionee is acquiring the Option for
Optionee's own account and not on behalf
of any other person;
(ii) Optionee is acquiring the option for
investment and not with a view to
distribution or with the intent to
divide Optionee's participation with
others or resell or otherwise distribute
the Options or the Shares;
(iii) Neither Optionee nor anyone acting on
Optionee's behalf has paid or will pay a
commission or other remuneration to any
person in connection with the
acquisition of the Options or the
Shares; and
(iv) At the time of exercise of any Option,
Optionee will have to make all the
representations and warranties contained
in this Section 6 with respect to the
Shares to be issued and other
representations concerning investment
intent as a condition of the issuance of
the Shares by the Company.
7. Restriction on Issuance of Shares. The Company shall not be obligated
to sell or issue any Shares pursuant to this Agreement if such
issuance would result in the violation of any laws, including the
Securities Act or any applicable state securities laws. The Company
agrees to use its reasonable best efforts to qualify for available
exemptions under the Securities Act or any applicable state securities
laws which will enable it to issue Shares hereunder in compliance with
applicable law.
8. Rights as a Shareholder. Optionee shall have no rights as a
shareholder with respect to any Shares covered by the Options until
the date of exercise and payment of the Exercise Price in accordance
with the terms of this Agreement. Subject to Section 3 hereof, no
adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
9. No Directorship Rights. This Agreement shall not confer upon Optionee
any right with respect to the continuance as a director of the Company
or any Subsidiary, nor shall it interfere in any way with the right of
the Company or any Subsidiary to terminate such directorship at any
time.
10. Governing Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by, and construed in accordance with, the laws of the State
of Delaware, without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
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11. Notices. All notices and other communications under this Agreement
shall be in writing, and shall be deemed to have been duly given on
the date of delivery if delivered personally or when received if
mailed to the party to whom notice is to be given, by certified mail,
return receipt requested, postage prepaid, or by reputable overnight
courier service (charges prepaid), or transmitted by facsimile with
answer-back confirmation to the following address, or any other
address specified, by notice duly given:
To Optionee at: Xxxxx Xxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopy (000) 000-0000
To the Company at: United Industries Corporation
0000 Xxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
12. Withholdings. Except to the extent prohibited by applicable law,
Optionee may satisfy any required withholding obligation upon the
exercise of an Option hereunder by either of the following methods, or
by a combination of such methods: (a) tendering a cash payment or (b)
delivering to the Company previously acquired Shares, or having the
Company withhold Shares otherwise deliverable upon the exercise of an
Option, in either case having an aggregate Fair Market Value,
determined as of the date the withholding obligation arises, less than
or equal to the amount of the total withholding obligation.
13. Pro Rata Exercise. The Shares of Common Stock covered by this Option
shall only be exercised, if at all, ratably among the Class A Shares
and Class B Shares, based on the aggregate number of Class A Shares
and Class B Shares subject to the Options granted hereunder.
14. Registration of Shares. At any time after UIC Holdings, L.L.C.,
together with its affiliates, holds less than 25% of the Common Stock
held by such entities as of the date hereof, Optionee shall have the
right to cause the Company to register all of the Shares on a Form
S-8, along with a Form S-3 reoffer prospectus, under the Securities
Act of 1933, as amended from time to time, or any successor form
thereto, and the Company shall use its reasonable best efforts to
comply with such request in a timely manner.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
UNITED INDUSTRIES CORPORATION
By
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Name:
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Title:
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OPTIONEE:
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Xxxxx Xxxxx
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