1 MANAGEMENT SUBSCRIPTION AGREEMENT TERM SHEET Terms not otherwise defined herein have the meaning given to them in that certain Stockholders Agreement dated as of November 29, 1999 among Gleason Corporation and certain of its Stockholders.
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MANAGEMENT SUBSCRIPTION AGREEMENT TERM SHEET
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Terms not otherwise defined herein have the meaning given to them in that
certain Stockholders Agreement dated as of November 29, 1999 among Xxxxxxx
Corporation and certain of its Stockholders.
Parties Members of management named on
Schedule A hereto (each such member,
an "Executive," and collectively,
"Management") and the Company.
Management Stock At the time of the Closing,
Management will own the Existing
Options and the shares of Common
Stock (the "Retained Stock"), in
each case, as set forth on Schedule
A. For purposes of this term sheet
only, all references to Common Stock
shall only mean such Common Stock
held by Management at the time of
the Closing or purchased upon
exercise of the Existing Options;
provided that, with respect to the
Existing Options only, all
references to Fair Market Value
shall mean the Fair Market Value of
the Common Stock underlying such
Existing Options minus the exercise
price of such Existing Options.
Put and Call Option Upon the termination of Executive's
employment with the Company or any
of its subsidiaries for any reason,
the Company shall have the right to
repurchase the Common Stock held by
Executive and Executive's
transferees in certain circumstances
(the "Call Option"), and Executive
and Executive's transferees shall
have the right to cause the Company
to repurchase the Common Stock held
by Executive and Executive's
transferees in certain circumstances
(the "Put Option"), in each case to
the extent and on the terms set
forth below:
Death: If Executive's termination
results from the Executive's death,
the Company may repurchase all (but
not less than all) of the Common
Stock held by Executive and
Executive's transferees at a price
equal to the Fair Market Value. Upon
the Executive's death, the
Executive's heirs shall have the
right to cause the Company to
purchase that
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portion of the Common Stock held by
Executive and Executive's
transferees for Fair Market Value to
the extent of (x) the life insurance
proceeds available to the Company
from Executive's life insurance
policy for the benefit of the
Company plus (y) an annual basket
equal to $250,000; provided,
however, in the case of JG, such
repurchase right shall be limited
with respect to the amounts set
forth in clauses (x) and (y) to the
amount necessary to pay estate taxes
solely in respect of JG's Common
Stock and Existing Options to the
extent then due and payable (i.e.,
second-to-die taxes).
Retirement: If Executive's
employment with the Company is
terminated as a result of
Executive's Retirement, the Company
may repurchase all but not less than
all of the Common Stock of Executive
for Fair Market Value. Upon
Executive's Retirement, the
Executive (other than JG) may
require the Company to repurchase
all but not less than all of the
Common Stock of Executive and
Executive's transferees for the
lesser of Fair Market Value and
Original Cost.
Cause: If Executive's termination
results from the Company's
termination of Executive for Cause,
the Company may repurchase all but
not less than all of Executive's
Common Stock for the lesser of
Original Cost and Fair Market Value.
Resignation by Executive Prior to
Third Anniversary without Good
Reason: If Executive's active
employment is terminated by
Executive without Good Reason prior
to the third anniversary of the
Closing, the Company may repurchase
all but not less than all of
Executive's Common Stock for the
lesser of Fair Market Value and
Original Cost.
Resignation by Executive without
Good Reason After Third but Prior to
Fourth Anniversary: If Executive's
active employment is terminated by
Executive without Good Reason after
the third anniversary but prior to
the fourth anniversary of the
Closing, the Company may repurchase
all but not less than all of the
Executive's Common Stock as follows:
(i) 30% percent of Executive's
Common Stock for Fair Market Value
and (ii) all other Common Stock of
Executive for the lesser of Fair
Market Value and Original
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Cost.
Resignation by Executive without
Good Reason After Fourth but Prior
to Fifth Anniversary: If Executive's
active employment is terminated by
Executive without Good Reason after
the fourth anniversary but prior to
the fifth anniversary of the
Closing, the Company may repurchase
all but not less than all of the
Executive's Common Stock as follows:
(i) 40% percent of Executive's
Common Stock for Fair Market Value
and (ii) all other Common Stock of
Executive for the lesser of Fair
Market Value and Original Cost.
Resignation by Executive with Good
Reason or Termination by Company
without Cause Prior to First
Anniversary: If Executive's active
employment is terminated by
Executive with Good Reason or by
Company without Cause prior to the
first anniversary of the Closing,
the Company may repurchase all but
not less than all of the Common
Stock of Executive for the lesser of
(x) Fair Market Value and (y)
Original Cost plus interest thereon
calculated from the Closing (or, in
the case of Common Stock purchased
upon exercise of Existing Options,
the date of such exercise) at the
10-year federal rate which is
applicable from time to time during
such period (the "Applicable Federal
Rate").
Resignation by Executive with Good
Reason or Termination by Company
without Cause After First
Anniversary but Prior to Second
Anniversary: If Executive's active
employment is terminated by
Executive with Good
Reason or by the Company without
Cause after the first anniversary
but prior to the second anniversary
of the Closing, the Company may
repurchase all but not less than all
of the Executive's Common Stock as
follows: (i) 20% of the Executive's
Common Stock for Fair Market Value
and (ii) all other Common Stock of
Executive for the lesser of (x) Fair
Market Value and (y) Original Cost
plus interest thereon at the
Applicable Federal Rate.
Resignation by Executive with Good
Reason or Termination by Company
without Cause After Second
Anniversary but Prior to Third
Anniversary: If Executive's active
employment is terminated by
Executive with Good
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Reason or by the Company without
Cause after the second anniversary
but prior to the third anniversary
of the Closing, the Company may
repurchase all but not less than all
of the Executive's Common Stock as
follows: (i) 40% of the Executive's
Common Stock for Fair Market Value
and (ii) all other Common Stock of
Executive for the lesser of (x) Fair
Market Value and (y) Original Cost
plus interest thereon at the
Applicable Federal Rate.
Resignation by Executive with Good
Reason by Executive or Termination
without Cause by Company After Third
but Prior to Fourth Anniversary: If
Executive's active employment is
terminated by Executive with Good
Reason or by the Company without
Cause after the third anniversary
but prior to the fourth anniversary
of the Closing, the Company may
repurchase all but not less than all
of the Executive's Common Stock as
follows: (i) 60% percent of
Executive's Common Stock for Fair
Market Value and (ii) all other
Common Stock of Executive for the
lesser of (x) Fair Market Value and
(y) Original Cost plus interest
thereon at the Applicable Federal
Rate.
Resignation by Executive with Good
Reason by Executive or Termination
without Cause by Company After
Fourth but Prior to Fifth
Anniversary: If Executive's active
employment is terminated by
Executive with Good Reason or by
Company without Cause after the
fourth anniversary but prior to the
fifth anniversary of the Closing,
the Company may repurchase all but
not less than all of the Executive's
Common Stock as follows: (i) 80%
percent of Executive's Common Stock
for Fair Market Value and (ii) all
other Common Stock of Executive for
the lesser of (x) Fair Market Value
and (y) Original Cost plus interest
thereon at the Applicable Federal
Rate.
Termination or Resignation After
Fifth Anniversary: If Executive
resigns with or without Good Reason
or his employment is terminated by
Company without Cause on or after
the fifth anniversary of the
Closing, the Company may repurchase
all but not less than all of the
Common Stock of Executive for Fair
Market Value.
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Disability. Other than with respect
to JG, if Executive's employment is
terminated because of a Disability,
(x) Executive shall have a Put
Option for all but not less than all
of his Common Stock at the lesser of
Fair Market Value and Original Cost
plus interest thereon at the
Applicable Federal Rate and (y) the
Company shall have the right to
repurchase from such Executive all
but not less than all of Executive's
Common Stock at Fair Market Value.
Notwithstanding the foregoing, the
Board of Directors of the Company
may, in its sole discretion,
increase the repurchase price
provided above with the affirmative
vote of at least one Acquisition
Company Director so long as
Acquisition Company does not own
less than the Preferred Minimum
Threshold and less than a number of
shares of Common Stock (including
shares of Common Stock underlying
the Warrants) in an amount equal to
or greater than 50% of the number of
shares of Common Stock (including
shares of Common Stock underlying
the Warrants) that the Acquisition
Company held immediately after the
Closing.
Any and all repurchase rights of the
Company set forth above shall
include any and all Common Stock
held by the transferees of
Executive.
The Company's election to repurchase
pursuant to this section all of the
Common Stock held by any Executive
other than a Top Executive shall
require the approval of a majority
of the Board of Directors. Election
for the repurchase by the Company of
Common Stock held by any Top
Executive shall be made by a special
committee of the Board of Directors,
a majority of which consist of
Acquisition Company Directors (the
"Committee").
Option Mechanics The Put Options and Call Options
must be exercised within 90 days of
the date of Executive's termination,
and the closing of such transaction
shall occur within 60 days after the
date of the exercise of such option.
The purchase price for Common Stock
to be repurchased by the Company, at
the option of the Company, shall be
paid first by offsetting any amounts
owing from Executive to the Company.
Subject to the terms below, the
balance, if any, shall be paid by
the Company by delivery of a check
or wire transfer of
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funds unless the Executive resigned
without Good Reason or was
terminated by the Company with
Cause. The Company may make any
repurchase of Common Stock pursuant
to the Call Option or Put Option in
the form of the unsecured
subordinated notes payable in five
equal annual installments (the
"Repurchase Notes") only (i) if the
Company is prohibited by law or its
financing arrangements from
repurchasing the Common Stock for
cash, (ii) if such Executive was
terminated for Cause or (iii) if
such Executive resigned without Good
Reason. Such Repurchase Notes shall
bear interest at 7% per annum,
compounding annually, unless
Executive was terminated by the
Company with Cause, in which case,
such Repurchase Notes shall not bear
interest. Notwithstanding anything
to the contrary herein, the
repurchase of Common Stock by the
Company and payments to Executive
under the Repurchase Notes are
subject to restrictions imposed
under law and the Company's
financing arrangements, and in the
event the Company is prohibited from
making a repurchase within any time
period required above or a payment
pursuant to the Repurchase Notes,
such time period or payment, as the
case may be, shall be suspended
until the Company is permitted to
make such purchase or payment. The
Company agrees to use commercially
reasonably efforts to retain under
any financing arrangement the right
to repurchase Common Stock held by
Executives.
Certain Defined Terms "Cause" means a termination of
employment of Executive by the
Company or any of its subsidiaries
due to (i) the willful failure by
the Executive to perform the
Executive's duties to the extent
such failure or breach has not been
cured within 10 days after a written
demand for performance is delivered
to the Executive by the Board of
Directors, which demand specifically
identifies the manner in which the
Board of Directors believes that the
Executive has not performed the
Executive's duties, (ii) the
Executive's willful failure to
comply in any material respect with
the lawful directive of the Board of
Directors or such Executive's
superior officer(s), (iii) the
engaging by Executive in gross
negligence or the willful engaging
by the Executive in any other
conduct, in each case, which is
demonstrably and materially
injurious to the Company or its
subsidiaries, monetarily or
otherwise, or (iv) the conviction
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of the Executive of (A) a felony or
crime involving dishonesty or fraud
or (B) a crime involving moral
turpitude which would materially
injure relationships with customers,
suppliers or employees of the
Company or otherwise cause a
material injury to the Company.
"Disability" means the inability of
Executive to perform the essential
functions of Executive's job, with
or without reasonable accommodation,
by reason of a physical or mental
infirmity, for a continuous period
of six months. The six-month period
shall be deemed to be continuous
unless Executive returns to work for
at least 30 consecutive business
days during such period and performs
services at the level and competence
that services were performed prior
to the start of the six-month
period. The reference date to
determine Fair Market Value in the
event of Disability shall be the
first day of such six-month period.
"Fair Market Value" of each share of
Common Stock means the average of
the closing prices of the sales of
the Company's Common Stock on all
securities exchanges on which the
Common Stock may at the time be
listed, or, if there have been no
sales on any such exchange on any
day, the average of the highest bid
and lowest asked prices on all such
exchanges at the end of such day,
or, if on any day the Common Stock
are not so listed, the average of
the representative bid and asked
prices quoted in the NASDAQ System
as of 4:00 PM, Eastern Time, or, if
on any day the Common Stock are not
quoted in the NASDAQ System, the
average of the highest bid and
lowest asked prices on such day in
the domestic over-the-counter market
as reported by the National
Quotation Bureau Incorporated, or
any similar successor organization,
in each such case averaged over a
period of 21 days consisting of the
day as of which the Fair Market
Value is being determined and the 20
consecutive trading days prior to
such day. If at any time the Common
Stock is not listed on any
securities exchange or quoted in the
NASDAQ System or the
over-the-counter market, the Fair
Market Value shall be (i) with
respect to Common Stock held by an
Executive other than a Top
Executive, the fair value of the
Common Stock determined in good
faith by a majority of the Board of
Directors, and (ii) with respect to
Common Stock held by a
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Top Executive, subject to the next
sentence, the fair value of the
Common Stock determined in good
faith by the Committee (in each
case, without taking into account
the lack of liquidity and minority
position of the Common Stock subject
to repurchase). In the event the Top
Executive objects to the Committee's
determination of fair value within
10 days of written notice thereof,
there shall be an appraisal process
to determine fair value.
"Good Reason" means (x) for any
Executive who has entered into a
Severance Agreement with the
Company, the definition of "Good
Reason" as set forth in such
Severance Agreement and (y) with
respect to all other Executives, (a)
without the consent of such
Executive, a reduction by the
Company in the Executive's annual
base salary except for
across-the-board salary reductions
similarly affecting all members of
Management; or (b) without the
consent of Executive, the relocation
of the Executive's principal place
of employment to a location outside
of the metropolitan area which the
Executive currently is employed or
the Company's requiring the
Executive to be based anywhere other
than such principal place of
employment (or permitted relocation
thereof) except for required travel
on the Company's business, or (c)
the failure by the Company to
continue to provide the Executive
with benefits substantially similar
to those enjoyed by the Executive
under any of the Company's pension,
savings, life insurance, medical,
health and accident, disability or
other plans in which the Executive
was participating (except for
across-the-board changes similarly
affecting all Management).
"Non-Management Directors" means the
members of the Board of Directors
who are not employees of the
Company.
"Original Cost" with respect to each
share of the Retained Stock shall be
equal to the price offered for such
Common Stock in the tender
offer/merger, and with respect to
Common Stock purchased upon exercise
of Existing Options, the exercise
price thereof, in each case, as
proportionately adjusted for all
subsequent stock splits, stock
dividends and other
recapitalizations.
"Retirement" means Executive's
retirement as an employee of the
Company or any of its Subsidiaries
on or after
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reaching an age consistent with the
Company's or its Subsidiaries'
current retirement plan or policies,
if any, or such earlier age as may
be otherwise determined by a
majority vote of the members of the
Board of Directors after at least
four years' employment with the
Company after the Closing, such
majority vote including the
affirmative vote of at least one
Acquisition Company Director so long
as Acquisition Company owns at least
the Preferred Minimum Threshold or
shares of Common Stock (including
shares of Common Stock underlying
the Warrants) in an amount equal to
or greater than 50% of the number of
shares of Common Stock (including
shares of Common Stock underlying
the Warrants) that Acquisition
Company held immediately after the
Closing.
