Exhibit 10.31
RESTRICTED STOCK AGREEMENT
This Agreement is made this 28th day of November, 2001, (the "Award Date")
by and between MCG Capital Corporation, a Delaware corporation (the "Company"),
and the undersigned employee of the Company ("Employee").
WHEREAS, the Employee is the holder of certain options (the "Options") to
purchase shares of the Company's Class A common stock, par value $0.01 per share
(the "Class A Common Stock"), granted pursuant to the MCG Credit 1998 Stock
Option Plan (the "Plan"),
WHEREAS, the Employee and the Company desire to cancel such Options and
the Company desires to terminate the Plan,
WHEREAS, in consideration therefor, the Company desires to award (the
"Award") Employee shares of common stock, par value $0.01 per share of the
Company (the "Common Stock") in three tiers ("Tier 1," "Tier 2" and "Tier 3";
the awarded shares with respect to the Tier 1 Award, the "Tier 1 Awarded
Shares," the awarded shares with respect to the Tier 2 Award, the "Tier 2
Awarded Shares," the awarded shares with respect to the Tier 3 Award, the "Tier
3 Awarded Shares," and, together, the "Awarded Shares") subject to the
restrictions and other terms and conditions set forth herein;
WHEREAS, the Employee has previously advised the Company of its intention
to make an election under Section 83(b) of the Code with respect to all or a
portion of his/her Tier 1 Shares, Tier 2 Shares, and/or Tier 3 Shares (as
defined herein);
WHEREAS, in connection with the Employee's election under Section 83(b) of
the Code, the Company will make cash payments to the Employee (the "Tier 1 Cash
Payment," the "Tier 2 Cash Payment," and "Tier 3 Cash Payment;" and together,
the "Cash Payments");
WHEREAS, in connection with the Employee's election under Section 83(b) of
the Code, the Company desires to sell to Employee, and Employee desires to
purchase (the "Purchase"), from the Company shares of Common Stock (the "Tier 1
Purchased Shares," "Tier 2 Purchased Shares" and the "Tier 3 Purchased Shares,"
and together, the "Purchased Shares;" and together, with the Awarded Shares, the
"Shares;" and the Tier 1 Awarded Shares and Tier 1 Purchased Shares, together,
the "Tier 1 Shares;" and the Tier 2 Awarded Shares and Tier 2 Purchased Shares,
together, the "Tier 2 Shares;" and the Tier 3 Awarded Shares and Tier 3
Purchased Shares, together, the "Tier 3 Shares"); and
1
WHEREAS, it is a condition precedent to the Company's making of such Award
and Cash Payments and making available such Purchase that the Employee enter
into this Agreement with the Company concerning the rights and restrictions of
the shares of Common Stock subject to the Award and the Purchases and any
additional agreements described herein that the Company may require.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
I. CANCELLATION OF OPTIONS AND OWNERSHIP OF SHARES
1.1 Options. The Company hereby cancels the Options to purchase the Class
A Common Stock granted pursuant to the Plan. The Employee hereby agrees that the
Options are cancelled and are null and void.
1.2 Shares and Cash Payments.
(a) Awarded Shares. The Company hereby awards to the Employee the
Awarded Shares set forth on Annex 1.
(b) Cash Payments. Within 30 days of the date hereof, the Company
will make Cash Payments to the Employee in the amounts set forth on Annex 1. The
amount of the Cash Payments is intended to equal the estimated taxes
attributable to the Employee's receipt of the Shares with respect to which
Employee will make an election under Section 83(b) of the Code and the Cash
Payments.
(c) Purchased Shares. The Company hereby sells to the Employee and
Employee hereby purchases from the Company, the Purchased Shares set forth on
Annex 1 for the price per Share set forth in Annex 1, subject to adjustment as
set forth in paragraph 7 of the Note (as defined below). In consideration for
the Purchased Shares, the Employee agrees concurrently as a condition to such
purchase (i) to execute and deliver a promissory note (the "Note") for the
principal amount set forth on Annex 1, in the form attached hereto as Exhibit B,
the payment of which is being secured by a pledge of the Shares and additional
shares of Common Stock as set forth in the Pledge Agreement (as defined herein),
(ii) to deliver a check payable to the Company in the amount of the par value of
the Purchased Shares, and (iii) to execute and deliver a Stock Pledge Agreement
(the "Pledge Agreement") in the form attached hereto as Exhibit C. The Shares
shall be subject to the restrictions and other terms and conditions set forth
herein, including without limitation, the forfeiture restrictions set forth in
Article IV hereof. The certificates representing the Shares subject to the
forfeiture restrictions under Article IV shall be held in escrow by the
Secretary of the Company as provided in, and in accordance with, Article V.
Employee hereby agrees to deliver to the Secretary of the
Company ten (10) originals of a duly executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit A).
1.3 Lapse of Restrictions. Subject to Sections 4.1, 4.2 and 4.3 hereof,
the forfeiture restrictions set forth herein shall lapse with respect to the
Tier 1, Tier 2 and Tier 3 Shares in accordance with the Tier 1 Schedule, Tier 2
Schedule and Tier 3 Schedule, as appropriate, set forth on Annex 1 (any portion
of the Tier 1, Tier 2 and Tier 3 Shares with respect to which the restrictions
have not lapsed in accordance with the appropriate Schedule, the "Forfeitable
Shares").
1.4 Restricted Securities. Employee hereby confirms that (i) Employee is
acquiring the Shares for its own account, for investment and not with a view to
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "1933 Act") and (ii) Employee has been informed that the Shares are
restricted securities under the 1933 Act, and as such have not been and will not
be registered under the 1933 Act or any state securities laws by reason of their
issuance by the Company in a transaction exempt from the registration
requirements thereof and the Shares may not be resold or transferred unless the
Shares are first registered under the federal securities laws and applicable
state securities laws or unless an exemption from such registration is
available. Accordingly, Employee hereby acknowledges that Employee is prepared
to hold the Shares for an indefinite period. Employee agrees that Employee has
been given access to information about the Company, the Company's financial
condition and the Shares. Employee has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
Shares, the business of the Company and the merits and risks of investing in the
Shares and to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense. Prior to Employee's
acquisition of the Shares, Employee acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Shares.
Employee has such knowledge and experience in financial and business matters so
as to make him capable of utilizing said information to evaluate the risks of
the prospective investment and to make an informed investment decision. Employee
is able to bear the economic risk of his investment in the Shares.
1.5 Restrictive Legends. In order to reflect the restrictions on
disposition of the Shares and the forfeiture restrictions, the stock
certificates representing the Shares will be endorsed with the following
restrictive legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF (A "TRANSFER")
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF A RESTRICTED STOCK AGREEMENT DATED
AS OF NOVEMBER 28, 2001, AS IT MAY BE AMENDED FROM TIME TO TIME. PURSUANT TO
SUCH AGREEMENT, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS AND FORFEITURE RESTRICTIONS, AND ANY TRANSFEREE OF
THESE SECURITIES TAKES SUBJECT TO SUCH TRANSFER RESTRICTIONS AND
FORFEITURE RESTRICTIONS. COPIES OF THE RESTRICTED STOCK AGREEMENT ARE ON FILE
WITH THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO
TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM
WITH RESPECT TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE
REQUIREMENTS OF THE ACT."
1.6 Definitions. Whenever the following terms are used in this Agreement,
they shall have the meaning specified below unless the context clearly indicates
to the contrary.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
"Beneficial Ownership" or "Beneficially Owned" means ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
"Board" means the Board of Directors of the Company.
"Cause" in the case of an Employee whose employment with the Company
or a Subsidiary is, as of the date of this Agreement, subject to the terms of an
employment or other agreement between such Employee and the Company or
Subsidiary, which employment or other agreement includes a definition of
"Cause," the term "Cause" as used in this Agreement shall have the meaning set
forth in such employment or other agreement in effect as of the date of this
Agreement (without regard to the term of such employment or other agreement).
"Change in Capitalization" means any increase or reduction in the
number of shares of Common Stock, or any change in the shares of Common Stock or
exchange of shares of Common Stock for a different number or kind of shares or
other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, cash dividend, property dividend, combination or exchange
of shares, change in corporate structure or substantially similar event.
"Change in Control" means the occurrence of any of the following
events:
(a) An acquisition in one or more transactions (other than directly
from the Company) of any voting securities of the Company by any Person
immediately after which such Person has Beneficial Ownership of fifty percent
(50%) or more of the combined voting power of the Company's then outstanding
voting securities; provided, however, in determining whether a Change in Control
has occurred, voting securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person of which a
majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (ii) the Company or its Subsidiaries, or (iii) any
Person in connection with a "Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date hereof are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the members of the Board or, following a Merger, the board of
directors of the ultimate Parent Corporation; provided, however, that if the
election, or nomination for election by the Company's common stockholders, of
any new director was approved by a vote of at least a majority of the Incumbent
Board (or, with respect to the directors who are not "interested persons" as
defined in the Investment Company Act of 1940, by a majority of the directors
who are not "interested persons" serving on the Incumbent Board), such new
director shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of an actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any Proxy
Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganization involving the
Company (a "Merger") or an indirect or direct subsidiary of the Company, or to
which securities of the Company are issued, unless:
(A) the stockholders of the Company, immediately before
a Merger, own, directly or indirectly immediately following the Merger, more
than fifty percent (50%) of the combined voting power of the outstanding voting
securities of (x) the corporation resulting from the Merger (the "Surviving
Corporation") if fifty percent (50%) or more of the combined voting power of the
then outstanding voting securities of the Surviving Corporation is not
Beneficially Owned, directly or indirectly,
by another Person or group of Persons (a "Parent Corporation"), or (y)if there
is one or more Parent Corporations, the ultimate Parent Corporation,
(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for a Merger
constitute at least a majority of the members of the board of directors of (x)
the Surviving Corporation or (y) the ultimate Parent Corporation, if the
ultimate Parent Corporation, directly or indirectly, owns fifty percent (50%) or
more of the combined voting power of the then outstanding voting securities of
the Surviving Corporation, and
(C) no Person other than (1) the Company, (2) any
Subsidiary, (3) any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any Subsidiary, or the
ultimate Parent Corporation, or (4) any Person who, together with its
Affiliates, immediately prior to a Merger had Beneficial Ownership of fifty
percent (50%) or more of the then outstanding voting securities, owns, together
with its Affiliates, Beneficial Ownership of fifty percent (50%) or more of the
combined voting power of the then outstanding voting securities of (x) the
Surviving Corporation or (y) the ultimate Parent Corporation.
Each transaction described in clauses (A) through
(C) above shall herein be referred to as a "Non-Control Transaction".
(ii) A complete liquidation or dissolution of the Company
(other than where assets of the Company are transferred to or remain with a
Subsidiary or Subsidiaries of the Company).
(iii) The direct or indirect sale or other disposition of all
or substantially all of the assets of the Company to any Person (other than (A)
a transfer to a Subsidiary, (B) under conditions that would constitute a
Non-Control Transaction with the disposition of assets being regarded as a
Merger for this purpose, or (C) the distribution to the Company's stockholders
of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding voting
securities as a result of the acquisition of voting securities by the Company
which, by reducing the number of voting securities then outstanding, increases
the proportional number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional voting securities which increases the
percentage of the then outstanding voting securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board, or
another committee of the Board appointed by the Board to administer the
Agreement.
"Dividends" means all cash dividends (including Shares of Common
Stock acquired through any dividend reinvestment program with respect to regular
cash dividends), except for liquidating dividends.
"Fair Market Value" on any date means the closing price per share of
Common Stock on such date and, when used with reference to shares of Common
Stock for any period shall mean the average of the daily closing prices per
share of Common Stock for such period. If the shares of Common Stock are listed
or admitted to trading on a national securities exchange, the closing price
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not so
listed on any national securities exchange, as reported in the transaction
reporting system applicable to securities designated as a "national market
system security" or NASDAQ. If the shares of Common Stock are not so listed,
admitted to trading or designated, Fair Market Value shall be as determined in
good faith by the Board based on an opinion of an independent investment banking
firm with an established national reputation with respect to the valuation of
securities.
"Initial Public Offering" means the consummation of the first public
offering of Shares pursuant to a registration statement (other than on Form X-0,
Xxxx X-0, or Form N-14 or a successor form thereto) filed with, and declared
effective by, the Securities and Exchange Commission.
"Measurement Date" shall mean the date of the completion of the
Initial Public Offering and such date shall be set forth on Annex 1.
"Non-Forfeitable Shares" means any Shares with respect to which the
restrictions have lapsed in accordance with the Schedules set forth in Annex 1.
"Owner" includes the Employee and all subsequent holders of the
Shares who own such Shares pursuant to a Transfer from the Employee in
accordance with Section 3.1, Section 3.2 and Section 3.3 hereof.
"Person" means "person" as such term is used for purposes of Section
13(d) or 14(d) of the Exchange Act, including without limitation, any
individual, corporation, limited liability company, partnership, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity or any group of Persons.
"Plan" means the MCG Credit Corporation 1998 Stock Option Plan.
"Schedule" shall refer to the Schedules set forth on Annex 1.
"Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company,
except that for the purposes of the definition of a "Change in Control,"
Subsidiary is defined in such definition.
"Termination of Employment" in the case of an Employee whose
employment with the Company or a Subsidiary is, as of the date of this
Agreement, subject to the terms of an employment or other agreement between such
Employee and the Company or Subsidiary, which employment or other agreement
includes a definition of "Termination of Employment," the term "Termination of
Employment" as used this Agreement shall have the meaning set forth in such
employment or other agreement in effect as of the date of this Agreement
(without regard to the term of such employment or other agreement).
"Transfer" means a transfer, sale, assignment, pledge, hypothecation
or other disposition of any Shares.
II. SPECIAL PROVISIONS
2.1 Stockholder Rights. Subject to the forfeiture restrictions under this
Agreement, Employee (or any successor in interest) shall have all the rights of
a stockholder (including voting and dividend rights) with respect to the Shares,
including the Shares held in escrow under Article V, but subject, however, to
the transfer restrictions of Article III.
2.2 Section 83(b) Election and Withholding of Taxes. Employee understands
that all the Shares are considered subject to a substantial risk of forfeiture
under Section 83 of the Code and that under Section 83(a) of the Code, upon the
lapse of any forfeiture restrictions applicable to the Shares, Employee is
required to include as compensation income the difference, if any, between the
price paid for the Shares and their Fair Market Value on the date on which any
such forfeiture restrictions applicable to such Shares lapse. Employee
understands that he or she may, at the time of the execution and delivery of
this Agreement, elect to include as compensation income an amount equal to the
difference, if any, between the price paid for the Shares, and the Fair Market
Value of the Shares at the time the Shares are acquired hereunder rather than
when and as such
Shares cease to be subject to such forfeiture restrictions, by filing an
election under Section 83(b) of the Code, substantially in the form of Exhibit D
(with respect to the Tier 1 Shares), Exhibit E (with respect to the Tier 2
Shares) and Exhibit F (with respect to the Tier 3 Shares) hereto, with the
Company and with the Internal Revenue Service within thirty (30) days of the
Award Date hereunder. If Employee makes an election under Section 83(b) of the
Code with respect to all or a portion of its Tier 1 Shares, Tier 2 Shares and/or
Tier 3 Shares, Employee shall make a cash payment to the Company equal to the
estimated taxes attributable to the Employee's receipt of the Cash Payments and
such Shares within thirty (30) days after the Award Date. The Employee agrees
that the Company is authorized to use (and will use) all or a portion of the
Cash Payments to satisfy the Employee's obligation to pay the estimated taxes
under this Section 2.2 attributable to the Employee's receipt of the Cash
Payments and the Shares to which Employee will make an election under Section
83(b) of the Code. If the Employee does not make an election under Section 83(b)
of the Code with respect to all or a portion of its Tier 1 Shares, Tier 2 Shares
and/or Tier 3 Shares and is entitled to receive Shares under this Agreement, the
Employee acknowledges that it shall not receive a Cash Payment and shall pay the
estimated taxes attributable to such Shares for which an election under Section
83(b) of the Code is not made to the Company prior to the issuance of such
Shares.
2.3 Market Stand-Off.
(a) The Employee agrees to deliver a lock-up letter in the form
previously distributed to the Employee by the Company in connection with the
Initial Public Offering concurrently with the execution of this Agreement. After
the Initial Public Offering, to the extent requested in writing by the Company
in connection with, or the managing underwriter, if any, of, any registration
statement filed under the 1933 Act (other than an S-8 or X-0, X-00 or successor
or applicable, equivalent forms) or in connection with any subsequent exchange
offer or conversion relating to the securities registered under such
registration statement, each Employee agrees not to sell, transfer or otherwise
dispose of, including any sale pursuant to Rule 144 under the 1933 Act, any
Shares during the time period reasonably requested by the Company or the
managing underwriter, not to exceed 180 days (such period, the "Employee
Lockup"); provided that such agreement shall include the exceptions set forth in
Section 2.7(a) of the Second Amended and Restated Registration Rights Agreement
(the "Registration Rights Agreement") among the Company and certain of its
stockholders to be entered into prior to the Initial Public Offering, as amended
from time to time, which includes a provision allowing the Employee to dispose
of Shares in order to apply the proceeds thereof to repay interest or principal
related to indebtedness due to the Company. This Section 2.3 shall only remain
in effect for the one (1) year period immediately following the effective date
of the Company's Initial Public Offering and shall thereafter terminate and
cease to be in force or effect and, in any event, no Employee Lockup shall
extend beyond such one year period; provided, however, that this shall not
affect the Employee's obligations
under Section 2.7(a) of the Registration Rights Agreement if the Employee is a
signatory under that Agreement.
(b) In the event of any stock dividend, stock split,
recapitalization, or other change affecting the Company's outstanding Common
Stock effected without receipt of consideration, then any new, substituted, or
additional securities distributed with respect to the Shares shall be
immediately subject to the provisions of this Section 2.3 to the same extent the
Shares are at such time covered by such provisions.
2.4 Stop Transfer. In order to enforce the provisions of Section 2.3, the
Company may impose stop-transfer instructions with respect to the Shares until
the end of the applicable stand-off period.
III. TRANSFER RESTRICTIONS
3.1 Restrictions on Transfer of Forfeitable Shares. The Employee shall not
transfer, assign, encumber, or otherwise dispose of all or any part of the
Forfeitable Shares, other than to the Company. Subject to Section 3.3 below,
such restrictions on transfer of the Forfeitable Shares shall not apply with
respect to Transfers of the type described in Section 3.2(a) below (whether or
not an Initial Public Offering by the Company has occurred) provided the
Employee receives the Company's written consent prior to such Transfer; provided
that if the Forfeitable Shares are subject to the Pledge Agreement, such Shares
may not be transferred under any circumstances without the consent of the
Company or as otherwise permitted under the Pledge Agreement.
3.2 Restrictions on Transfer of Non-Forfeitable Shares. The Employee shall
not transfer, assign, encumber, or otherwise dispose of all or any part of the
Non-Forfeitable Shares, except in compliance with the provisions of Sections
3.2(a) through (c) and Section 3.3 below; provided that if the Non-Forfeitable
Shares are subject to the Pledge Agreement, such Shares may not be transferred
under any circumstances without the consent of the Company or as permitted under
the Pledge Agreement.
(a) The following Transfers of Non-Forfeitable Shares shall be
permitted:
(i) a Transfer made by the Employee to the Company; and
(ii) a Transfer made to any of the following "Permitted
Transferees":
(A) upon the death of the Employee to his executors,
administrators, testamentary trustees, legatees or beneficiaries (the
"Employee's Estate") or a Transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has become a
holder of Shares in accordance with the terms of this Agreement;
(B) a Transfer made to a trust or custodianship the
beneficiaries of which include only the Employee, his spouse, his life partner,
his descendants, including adopted children, his ancestors, his siblings, and
spouses and life partners of his descendants, ancestors and siblings (an
"Employee's Trust"); or
(C) a Transfer made to a partnership, limited liability
company, corporation or other entity all of the owners of which are included in
subparagraph B above (an "Employee's Entity"); or
(D) a Transfer to an organization which is exempt from
federal income taxation under Section 501(c)(3) of the Code;
(b) Immediately prior to any Transfer of Shares to an Employee's
Trust or an Employee's Entity, the Employee shall provide the Company with a
copy of the instruments creating the Employee's Trust or Employee's Entity and
with the identity of the beneficiaries, partners, members or shareholders of the
Employee's Trust or Employee's Entity, as the case may be. The Employee shall
notify the Company prior to any change in the identity of any beneficiary,
partner, member or shareholder of the Employee's Trust or Employee's Entity, as
the case may be.
(c) The restrictions on Transfer set forth in this Section 3.2 shall
terminate upon an Initial Public Offering by the Company.
3.3 Restrictions on Transfer of Shares; Transferee Obligations.
(a) No Transfer of Shares, whether or not permitted by Sections 3.1
or 3.2 hereof, shall be made or recorded on the books of the Company, and any
such Transfer shall be void and of no effect, unless:
(i) Such Transfer of the Shares is made pursuant to an
effective registration statement under the 1933 Act and applicable state
securities laws or pursuant to an exemption therefrom with respect to which the
Company may, upon request, require a satisfactory opinion of counsel retained by
the Employee (which counsel shall be acceptable to the Company) to the effect
that such Transfer is exempt from the provisions of Section 5 of the 1933 Act
and applicable state securities laws; and
(ii) Each person (other than the Company) to whom the Shares
(whether Forfeitable Shares or Non-Forfeitable Shares) are transferred by means
of one of the Transfers specified in Sections 3.1 and 3.2 above shall, as a
condition precedent to the validity of such Transfer, agree in writing to the
Company to be bound by the terms and provisions of this Agreement and
acknowledge that any such transferred Shares shall be subject to the terms and
provisions of this Agreement, including without limitation (1) the restrictions
on transfer contained in Sections 3.1, 3.2, and 3.3 as applicable, (2) the
forfeiture restrictions contained in Section 4, (3) the market stand-off
provisions of
Section 2.3 above, and (4) the escrow provisions pursuant to Article V, to the
same extent as if such Shares continued to be owned by the Employee.
(b) No Transfer of Shares in violation of this Agreement shall be
made or recorded on the books of the Company and any such Transfer shall be void
and of no effect.
IV. FORFEITURE OF FORFEITABLE SHARES
4.1 Forfeiture of Forfeitable Shares. Subject to Section 4.2, and unless
the Committee provides otherwise in its sole discretion, the following provision
shall apply in the event of the Employee's Termination of Employment: With
respect to the Tier 1 Shares, Tier 2 Shares and Tier 3 Shares, if the Employee's
employment with the Company or a Subsidiary is subject to the terms of an
employment or other agreement between such Employee and the Company or
Subsidiary, such agreement shall govern the forfeiture of Forfeitable Shares if
such agreement contains such provisions.
4.2 Change in Control. Upon a Change in Control, the forfeiture
restrictions shall immediately lapse with respect to (A) the Tier 1 and Tier 2
Forfeitable Shares, (B) the Tier 3 Shares as to which a Performance Based
Criteria Test (as defined on the Tier 3 Schedule on Annex 1) has been met prior
to the date of the Change in Control transaction (such Shares in this clause B
hereinafter called the "CIC Shares" and any Tier 3 Shares which are not CIC
Shares are hereinafter referred to as the "Non-CIC Shares"), and (C)(x) if the
Change in Control is described in clauses (a) or (c) of the definition of Change
in Control, the greater of (i) one-third of the Non-CIC Shares so long as the
consideration (in whatever form) paid (in whatever manner) to the Company's
shareholders in the Change of Control transaction is at least $22 per share of
Common Stock or (ii) the Non-CIC Shares for which a Performance Based Criteria
Test would be deemed to be satisfied after taking into account the consideration
paid to the Company's shareholders in the Change in Control transaction; or (y)
if the Change in Control is described in clause (b) of the definition of Change
in Control, (i) one-third of the Non-CIC Shares if none of the individuals who
are members of the Incumbent Board and are affiliated with Institutional
Investors vote for the Change in Control described in clause (b) of the
definition of Change in Control or (ii) all of the Non-CIC Shares if any of the
individuals who are members of the Incumbent Board and are affiliated with
Institutional Investors vote for the Change in Control described in clause (b)
of the definition of Change in Control in Control. "Institutional Investors"
means GS Capital Partners II, L.P., Vestar Capital Partners IV, L.P., or Xxxxx
Private Equity Partners LLC. The Company shall assign this Agreement and its
rights, together with its obligations, hereunder in connection with a Change in
Control.
4.3 Additional Shares or Substituted Securities. In the event of a Change
in Capitalization, any new, substituted or additional securities or other
property (excluding Dividends) which is by reason of any such Change in
Capitalization distributed with
respect to the Shares shall be immediately subject to the restrictions set forth
herein, but only to the extent the Shares are at the time covered by such
restrictions. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number of Shares hereunder in order
to reflect the effect of any such transaction upon the Company's capital
structure.
V. ESCROW
5.1 Deposit. Upon issuance, the certificates for the Shares shall be
deposited in escrow with the Secretary of the Company to be held in accordance
with the provisions of this Article V. Each deposited certificate shall be
accompanied by ten original duly executed Assignment Separate from Certificates
in the form of Exhibit A. The deposited certificates, together with any other
assets or securities from time to time deposited with the Company pursuant to
the requirements of this Agreement, shall remain in escrow until such time or
times as the certificates (or other assets and securities) are to be released or
otherwise surrendered for cancellation in accordance with Section 5.3 below.
Upon delivery of the certificates (or other assets and securities) to the
Company, the Owner shall be issued an instrument of deposit acknowledging the
number of Shares (or other assets and securities) delivered in escrow to the
Secretary of the Company.
5.2 Recapitalization. All Dividends shall be paid directly to the Owner
and shall not be held in escrow. However, in the event of a Change in
Capitalization, any new, substituted or additional securities or other property
(excluding Dividends) which is by reason of such transaction distributed with
respect to the Shares shall be immediately delivered to the Secretary of the
Company to be held in escrow under this Article V, but only to the extent the
Shares are at the time subject to the escrow requirements of Section 5.1 above.
5.3 Release/Surrender. The Shares, together with any other assets or
securities held in escrow hereunder, shall be subject to the following terms and
conditions relating to their release from escrow or their surrender to the
Company for cancellation:
(a) The certificates for Shares (excluding Dividends) shall be
released from escrow and delivered to the Owner as the restrictions on the
Forfeitable Shares lapse in accordance with the Schedule or as otherwise set
forth herein, upon the request of the Owner.
(b) In the event Forfeitable Shares are forfeited hereunder, the
certificates representing such forfeited Shares shall be surrendered to the
Company.
(c) Notwithstanding anything to the contrary contained in this
Section 5.3, all Shares (or other assets or securities) released from escrow in
accordance with the provisions of Section 5.3(a) hereof shall nevertheless
remain subject to the market stand-
off provisions of Section 2.3 above, and the transfer restrictions set forth in
Sections 3.2 and 3.3 until such provisions terminate in accordance with their
terms.
VI. GENERAL PROVISIONS
6.1 No Employment or Service Contract. Nothing in this Agreement shall
confer upon the Employee any right to continue in the service of the Company (or
any subsidiary corporation of the Company employing or retaining Employee) for
any period of time or interfere with or restrict in any way the rights of the
Company (or any subsidiary corporation of the Company employing or retaining
Employee) or the Employee, which rights are hereby expressly reserved by each,
to terminate the employee status of Employee at any time for any reason
whatsoever, with or without Cause, subject to the provisions of any employment
agreement between the Company and the Employee.
6.2 Notices. Any notice required in connection with this Agreement shall
be given in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or telecopied to the recipient at the address
indicated on Annex 1 or at such other address as such party may designate by ten
(10) days' advance written notice under this Section 6.2 to all other parties to
this Agreement.
6.3 No Waiver. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
6.4 Amendment. This Agreement may be modified, amended, suspended or
terminated, and terms or conditions may be waived, but only by a written
instrument executed by the parties hereto.
6.5 Employee Undertaking. Employee hereby agrees to take whatever
additional action and execute whatever additional documents the Company may, in
its judgment, deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Employee or the
Shares pursuant to the express provisions of this Agreement.
6.6 Agreement Is Entire Contract. This Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter hereof.
6.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, as such laws are applied to
contracts entered into and performed in such State, without regard to conflict
of laws principles thereof.
6.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, when taken together,
shall constitute one and the same instrument.
6.9 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Employee and the Employee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
6.10 Rescission. This Agreement, the Note and the Pledge Agreement shall
be rescinded and shall be null and void if the Company's Initial Public Offering
does not occur within twenty (20) days of the Award Date. Upon the rescission of
this Agreement, the Shares shall be automatically cancelled and surrendered to
the Company.
6.11 Consistent Tax Reporting. Employee agrees that by making the election
under Section 83(b) of the Code with respect to some or all of the Shares,
Employee will be treated as the owner of such Shares as of the Award Date.
Employee further agrees that it will report the Cash Payments as taxable
compensation income in the year of the Award and that it will treat the
Purchased Shares as if those Shares were purchased for the Note.
6.12 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
* * *
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day
and year first indicated above.
THE COMPANY:
MCG CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxxx
Title: Executive Vice President and General
Counsel
THE EMPLOYEE:
/s/ X. Xxxxx Xxxxxxx
--------------------
Name: X. Xxxxx Xxxxxxx
Annex 1
MCG CAPITAL CORPORATION
RESTRICTED STOCK AGREEMENT
Name: X. Xxxxx Xxxxxxx
Address: 0000 X. Xx., XX, Xxxxxxxxxx, XX 00000
Principal Amount of Note: $801,214
Par Value of Purchased Shares: $472
Tier 1 Shares
(a) Number of Tier 1 Awarded Shares: 20,438
(b) Number of Tier 1 Purchased Shares: 18,865
Tier 1 Shares: 39,303
(c) Tier 1 Cash Payment: $320,719
Tier 2 Shares
(a) Number of Tier 2 Awarded Shares: 30,651
(b) Number of Tier 2 Purchased Shares: 28,293
Tier 2 Shares: 58,944
(c) Tier 2 Cash Payment: $480,985
Tier 3 Shares:
(a) Number of Tier 3 Awarded Shares: 138,704
(b) Number of Tier 3 Purchased Shares: 0
Tier 3 Shares: 138,704
(c) Tier 3 Cash Payment: $0
Measurement Date: 12/4/01
Purchase Price per Purchased Share: $17
Tier 1 Schedule:
All Tier 1 Shares covered hereby shall remain subject to the restrictions
and other terms and conditions set forth in this Agreement during the period
measured from the Award Date and ending on the Measurement Date. From and after
the Measurement Date, subject to the restrictions and other terms and conditions
set forth in this Agreement, the restrictions set forth in Sections 3.1, 3.3 and
4.1 shall lapse with respect to one-twelfth (1/12) of the Tier 1 Shares (i) on
the Measurement Date (if on such date the Employee is then employed by the
Company), and (ii) on the last day of each of the eleven (11) calendar year
quarters beginning Xxxxx 00, 0000, (xx on each such date the Employee is then
employed by the Company). Thus, such restrictions with respect to all Tier 1
Shares will lapse on September 30, 2004.
Notwithstanding anything herein to the contrary, the lapsing of forfeiture
restrictions with respect to the Tier 1 Shares shall occur first with respect to
the Tier 1 Awarded Shares and thereafter with respect to the Tier 1 Purchased
Shares.
Tier 2 Schedule:
All Tier 2 Shares covered hereby shall remain subject to the restrictions
and other terms and conditions set forth in this Agreement during the period
measured from the Award Date and ending on the Measurement Date. From and after
the Measurement Date, subject to the restrictions and other terms and conditions
set forth in this Agreement, the restrictions set forth in Sections 3.1, 3.3.
and 4.1 shall lapse with respect to one-sixteenth (1/16) of the Tier 2 Shares
(i) on the Measurement Date (if on such date the Employee is then employed by
the Company), and (ii) on the last day of each of the fifteen (15) calendar year
quarters beginning Xxxxx 00, 0000, (xx on each such date the Employee is then
employed by the Company). Thus, such restrictions with respect to all Tier 2
Shares will lapse on September 30, 2005.
Notwithstanding anything herein to the contrary, the lapsing of forfeiture
restrictions with respect to the Tier 2 Shares shall occur first with respect to
the Tier 2 Awarded Shares and thereafter with respect to the Tier 2 Purchased
Shares.
Tier 3 Schedule:
Subject to the terms and conditions of this Agreement, the restrictions
set forth in Sections 3.1, 3.3 and 4.1 of this Agreement will lapse with respect
to the Tier 3 Shares on September 30, 2005 with respect to the number of Tier 3
Shares set forth below, provided that the Employee continues to be employed by
the Company on September 30, 2005 and provided, further, that such restrictions
will lapse with respect to one-quarter (1/4) of the Tier 3 Shares for each of
four (4) performance periods starting with the period from the date of the
completion of the Initial Public Offering to December 31, 2002, and continuing
thereafter with each of the three (3) consecutive twelve (12) month periods
beginning October 1, 2002, (each a "Performance Period") if (i) the specified
"Total Return" set forth below for each such Performance Period has been
achieved and (ii) the average Total Return for the then-current Performance
Period and all historical Performance Periods is equal to or greater than 10%
(the "Minimum Average Total Return"). If the Total Return and Minimum Average
Total Return are not met in a particular Performance Period, the restrictions
set forth in Sections 3.1, 3.3 and 4.1 shall lapse with respect to the Tier 3
Shares allocated to that Performance Period if the average Total Return for the
then-current Performance Period and all historical Performance Periods is
greater than 20% (the "True-Up Average Total Return"; for purposes of this
Agreement, a "Performance Based Criteria Test" shall be defined as (A) the Total
Return and the Minimum Average Total Return or (B) the True-Up Average Total
Return). Moreover, if at the end of any of the four Performance Periods the
Minimum Average Total Return is at least 10% and also results in the Minimum
Average Total Return for each of the prior Performance Periods to be 10%, the
restrictions set forth in Sections 3.1, 3.3 and 4.1 shall lapse with respect to
the total Tier 3 Shares allocated to all prior Performance Periods for which the
Total Return is satisfied but for which the Minimum Average Total Return is not
satisfied. Notwithstanding the foregoing, the restrictions set forth in Sections
3.1, 3.3 and 4.1 in all restricted stock agreements entered into by the Company
shall lapse with respect to all Tier 3 Shares outstanding under all such
restricted stock agreements on September 30, 2005, unless the Committee
determines in its sole discretion based on factors it deems relevant that all
Company employees are required to forfeit a specified number or all of the Tier
3 Shares outstanding under all such restricted stock agreements allocated to a
Performance Period in which the Total Return, the Minimum Average Total Return
and the True-Up Average Total Return, as applicable, were not met.
Performance Minimum Average True-Up Average
Period Tier 3 Shares Total Return Total Return Total Return
------ ------------- ------------ ------------ ------------
1 (IPO closing date - 25% of Tier 3
12/31/02) Shares 20% -- --
2 (10/1/02 - 9/30/03) 25% of Tier 3
Shares 15% 10% 20%
3 (10/1/03 - 9/30/04) 25% of Tier 3
Shares 15% 10% 20%
4 (10/1/04 - 9/30/05) 25% of Tier 3
Shares 15% 10% 20%
The Total Return in respect of one share of Common Stock is calculated
assuming that an investor owns one share of Common Stock on the first day of
each Performance Period, receives dividends in cash through the Performance
Period in respect of one share of Common Stock (assuming no re-investment for
purposes of this calculation), and sells that share of Common Stock on the last
day of the Performance Period at a price that is the average of the Fair Market
Value on the last ten (10) trading days of the applicable Performance Period,
including the last trading day of the applicable Performance Period. The Total
Return in respect of one share of Common Stock will be calculated with an
assumed starting point on the first day of each Performance Period equal to the
higher of $22 or the average of the Fair Market Value on the last ten (10)
trading days of the prior Performance Period.
