Exhibit 4.7
FORM OF DIRECTOR'S NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ________________, 1999 is made by and
between Xxxxxxx'x Food Markets, Inc., a Texas corporation (hereinafter
referred to as the "Company"), and __________________, a member of the board
of directors of the Company (the "Board"), hereinafter referred to as
"Optionee".
WHEREAS, the Company wishes to afford the Optionee the opportunity
to purchase shares of its common stock, par value $.25 per share (the "Common
Stock");
WHEREAS, the Company wishes to carry out the Plan (as hereinafter
defined), the terms of which are hereby incorporated by reference and made a
part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and
best interest of the Company and its shareholders to grant the Non-Qualified
Options provided for herein to the Optionee as an incentive for increased
efforts during his tenure as a Director (as hereinafter defined), and has
advised the Company thereof and instructed the undersigned officers to issue
said Option;
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 the following terms are used in this Agreement, they shall
have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.
Section 1.1 - Affiliate
"Affiliate" shall mean, with respect to the Company, any
corporation directly or indirectly controlling, controlled by, or under
common control with, the Company or any other entity designated by the Board
of Directors of the Company in which the Company or an Affiliate has an
interest.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the Compensation Committee of the Company.
Section 1.4 - Director
"Director" shall mean any member of the Board.
Section 1.5 - Outside Director's Stockholder Agreement
"Outside Director's Stockholder Agreement" shall mean that certain
Outside Director's Stockholder Agreement dated as of __________ between the
Optionee and the Company.
Section 1.6 - Grant Date
"Grant Date" shall mean the date on which the Option provided for
in this Agreement is granted.
Section 1.7 - Management Group
"Management Group" shall mean the group consisting of all or
certain Officers of the Company on the date hereof, whether or not such
person remains in that capacity.
Section 1.8 - Officer
"Officer" shall mean the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer or the Secretary of the Company.
Section 1.9 - Option
"Option" shall mean the non-qualified Option to purchase Common
Stock granted under this Agreement.
Section 1.10 - Performance Option
"Performance Option" shall mean an Option with respect to which
the commencement of exercisability is governed by Section 3.1(a) hereof.
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Section 1.11 - Permanent Disability
The Optionee shall be deemed to have a "Permanent Disability" if
the Optionee is unable to engage in the activities required by the Optionee's
position on the Board of Directors of the Company by reason of any medically
determined physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period
of not less than 12 months.
Section 1.12 - Plan
"Plan" shall mean the Amended and Restated 1997 Stock Purchase and
Option Plan for Xxxxxxx'x Food Markets, Inc. and Subsidiaries, as amended
from time to time.
Section 1.13 - Pronouns
The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
Section 1.14 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.15 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group
of commonly controlled corporations, (other than the last corporation in the
unbroken chain), then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
For good and valuable consideration, on and as of the date hereof
the Company irrevocably grants to the Optionee a Performance Option to
purchase any part or all of an aggregate of the number of shares set forth
with respect to each such Option on the signature page hereof of its Common
Stock upon the terms and conditions set forth in this Agreement.
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Section 2.2 - Exercise Price
Subject to Section 2.4, the exercise price of the shares of stock
covered by the Option shall be $12.96 per share without commission or other
charge.
Section 2.3 - Consideration to the Company
In consideration of the granting of this Option by the Company, the
Optionee agrees to render service as a member of the Board, with such duties
and responsibilities as the Company shall from time to time require the
Optionee to perform. Nothing in this Agreement or in the Plan shall confer
upon the Optionee any right to remain a Director for any specific period of
time or shall limit the Company's ability to remove the Optionee, in his
capacity as a Director, in accordance with applicable law and the governing
corporate documents of the Company.
Section 2.4 - Adjustments in Option Pursuant to Merger, Consolidation, etc.
Subject to Section 9 of the Plan, in the event that the outstanding
shares of the stock subject to an Option are, from time to time, changed into
or exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination
of shares, or otherwise, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares and/or the amount of
consideration as to which or for which, as the case may be, such Option, or
portions thereof then unexercised, shall be exercisable. Any such adjustment
made by the Committee shall be final and binding upon the Optionee, the
Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) The Performance Option shall become exercisable with respect to
33 1/3% of the shares of Common Stock subject to such Option on each Vesting
Date following a Determination Date that the Company's Cumulative EBITDA
equals or exceeds the Cumulative EBITDA Target as of such Determination Date
and the actual EBITDA for that year equals or exceeds the EBITDA Target for
that year. If the Company's EBITDA for a Plan Year is less than 100% of the
EBITDA Target for such Plan Year (a "Missed Year"), no such Performance
Option shall become exercisable with respect to any additional shares of
Common Stock on the Vesting Date for such Plan Year. If, for any Plan Year
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subsequent to a Missed Year, EBITDA exceeds the EBITDA Target and Cumulative
EBITDA exceeds the Cumulative EBITDA Target, then any prior percentage of
Performance Option in respect of prior Missed Years shall become exercisable
(but only to the extent such Option has not otherwise terminated or become
exercisable).
(b) Notwithstanding the foregoing, the Performance Option shall
become immediately exercisable as to 100% of the shares of Common Stock
subject to such Option on the earlier of (i) seven years and 11 months after
the Grant Date (but only to the extent such Option has not otherwise
terminated or become exercisable) and (ii) immediately prior to a Change of
Control (but only to the extent such Option has not otherwise terminated or
become exercisable). A "Change of Control" means (i) a sale of all or
substantially all of the assets of the Company to a Person who is not an
Affiliate of Kohlberg Kravis Xxxxxxx & Co., L.P. ("KKR"), (ii) a sale by KKR
or any of its Affiliates resulting in more than 50% of the voting stock of
the Company (on a fully diluted basis, including, without limitation, after
giving effect to the exercise of the option to purchase 3,606,881 shares of
Common Stock granted to RFM Acquisition LLC by the Company) being held by a
Person or Group that does not include KKR or any of its Affiliates or the
Management Group or (iii) a merger or consolidation of the Company into
another Person which is not an Affiliate of KKR. "Person" means an
individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature. "Group" means two or more Persons acting
together as a partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of securities of the Company.
(c) For purposes of Section 3.1(a):
(i) "Cumulative EBITDA" means with respect to any Performance
Option, the sum of the EBITDA for the Company and its consolidated
subsidiaries during the period commencing on June 28, 1998 and ending on
the last day of the Plan Year preceding the Determination Date.
(ii) "Cumulative EBITDA Targets" means with respect to any
Performance Option, the sum of the EBITDA Targets for the period
commencing June 28, 1998 and ending on the last day of the Plan Year
preceding the Determination Date.
(iii) "Determination Date" with respect to each Plan Year means
the September 30 following such Plan Year.
(iv) "EBITDA" shall mean, with respect to the Company and its
consolidated subsidiaries, net income before net interest expense,
income taxes, depreciation and amortization, writedown of property and
securities, extraordinary loss on extinguishment of debt, loss on
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disposal of discontinued operations and loss from operation of
discontinued operations.
(v) "EBITDA Target" shall have the meaning ascribed to such term
in Schedule I hereto for Plan Years 1999 through 2001 and such other
targets as are established by the Committee with respect to subsequent
Plan Years; provided, that to the extent that the Company or any of its
subsidiaries disposes or acquires assets out of the ordinary course of
business the Committee will decrease or increase, as the case may be,
the EBITDA Target for such dispositions or acquisitions.
(vi) "Plan Year" means (i) the period from June 28, 1998 to June
26, 1999 with respect to Plan Year 1999 and (ii) thereafter, the period
commencing on the day immediately succeeding the close of the prior Plan
Year until the Saturday closest to each June 30.
(vi) "Vesting Date" means three calendar days after the relevant
Determination Date.
(d) In the event the Company elects to change its fiscal year, the
definitions of EBITDA Target and Plan Year shall be amended by the Committee
in good faith and in a manner consistent with such definitions included in
this Agreement on the date hereof.
Section 3.2 - Expiration of Option
The Option may not be exercised to any extent by the Optionee after
the first to occur of the following events:
(a) The first anniversary of the date of the Optionee's ceasing to
be a Director by reason of death or Permanent Disability; or
(b) The first business day which is thirty calendar days after
removal of the Optionee from the Board for cause pursuant to applicable
state law and the governing corporate documents of the Company; or
(c) In any other event, the tenth anniversary of the Grant Date;
or
(d) If the Committee so determines pursuant to Section 9 of the
Plan, the effective date of either the merger or consolidation of the
Company into another Person, or the exchange or acquisition by another
Person of all or substantially all of the Company's assets or 80% or
more of its then outstanding voting stock, or the recapitalization,
reclassification, liquidation or dissolution of the Company. At least
ten (10) days prior to the effective date of such merger, consolidation,
exchange, acquisition, recapitalization, reclassification, liquidation
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or dissolution, the Committee shall give the Optionee notice of such
event if the Option has then neither been fully exercised nor become
unexercisable under this Section 3.2.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
Except as otherwise provided in the Outside Director's Stockholder
Agreement, during the lifetime of the Optionee, only he may exercise an
Option or any portion thereof. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when an Option
becomes unexercisable under Section 3.2, be exercised by his 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 an 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 of Common Stock only.
Section 4.3 - Manner of Exercise
An Option, or any exercisable portion thereof, may be exercised
solely by delivering to the Secretary or his office all of the following
prior to the time when the Option or such portion becomes unexercisable under
Section 3.2:
(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;
(b) Full payment (in cash, by check or by a combination thereof)
for the shares with respect to which such Option or portion thereof is
exercised;
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person
then entitled to exercise such Option or portion thereof, stating that
the shares of stock are being acquired for his own account, for
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investment and without any present intention of distributing or
reselling said shares or any of them except as may be permitted under
the Securities Act of 1933, as amended (the "Act"), and then applicable
rules and regulations thereunder, and that the Optionee or other person
then entitled to exercise such Option or portion thereof will indemnify
the Company against and hold it free and harmless from any loss, damage,
expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the
representation and agreement referred to above; provided, however, that
the Committee may, in its absolute discretion, take whatever additional
actions it deems appropriate to ensure the observance and performance of
such representation and agreement and to effect compliance with the Act
and any other federal or state securities laws or regulations;
(d) 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
(e) In the event 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.
Without limiting the generality of the foregoing, the Committee may require
an opinion of counsel acceptable to it to the effect that any subsequent
transfer of shares acquired on exercise of an Option does not violate the
Act, and may issue stop-transfer orders covering such shares. Share
certificates evidencing stock issued on exercise of this Option shall bear an
appropriate legend referring to the provisions of subsection (c) above and
the agreements herein. The written representation and agreement referred to
in subsection (c) above shall, however, not be required if the shares to be
issued pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of an Option, or
any portion thereof, may be either previously authorized but unissued shares
or issued shares which have then been reacquired by the Company. Such shares
shall be fully paid and nonassessable. The Company shall not be required to
issue or deliver any certificate or certificates for shares of stock
purchased upon the exercise of an Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The obtaining of approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
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(b) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish
for reasons of administrative convenience.
Section 4.5 - Rights as Stockholder
The holder of an 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.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In
its absolute discretion, the Board of Directors may at any time and from time
to time exercise any and all rights and duties of the Committee under the
Plan and this Agreement.
Section 5.2 - Option Not Transferable
Except as provided in the Outside Director's Stockholder Agreement,
neither the Option 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
5.2 shall not prevent transfers by will or by the applicable laws of descent
and distribution.
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Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of stock as will be
sufficient to satisfy the requirements of this Agreement.
Section 5.4 - 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 5.4, 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 5.4.
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 5.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 5.6 - Applicability of Plan and Outside Director's Stockholder
Agreement
The Option and the shares of Common Stock issued to the Optionee
upon exercise of the Option shall be subject to all of the terms and
provisions of the Plan and the Outside Director's Stockholder Agreement, to
the extent applicable to the Option and such shares. In the event of any
conflict between this Agreement and the Plan, the terms of the Plan shall
control. In the event of any conflict between this Agreement or the Plan and
the Outside Director's Stockholder Agreement, the terms of the Outside
Director's Stockholder Agreement shall control.
Section 5.7 - Amendment
This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
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Section 5.8 - Governing Law
The laws of the State of Texas (or if the Company reincorporates in
another state, the laws of that state) shall govern the interpretation,
validity and performance of the terms of this Agreement regardless of the law
that might be applied under principles of conflicts of laws.
Section 5.9 - Jurisdiction
Any suit, action or proceeding against the Optionee with respect to
this Agreement, or any judgment entered by any court in respect of any
thereof, may be brought in any court of competent jurisdiction in the State
of Texas (or if the Company reincorporates in another state, in that state)
or New York, as the Company may elect in its sole discretion, and the
Optionee hereby submits to the non-exclusive jurisdiction of such courts for
the purpose of any such suit, action, proceeding or judgment. The Optionee
hereby irrevocably waives any objections which he may now or hereafter have
to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Agreement brought in any court of competent jurisdiction
in the State of Texas (or if the Company reincorporates in another state, in
that state) or New York, and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been
brought in any inconvenient forum. No suit, action or proceeding against the
Company with respect to this Agreement may be brought in any court, domestic
or foreign, or before any similar domestic or foreign authority other than in
a court of competent jurisdiction in the State of Texas (or if the Company
reincorporates in another state, in that state) or New York, and the Optionee
hereby irrevocably waives any right which he may otherwise have had to bring
such an action in any other court, domestic or foreign, or before any similar
domestic or foreign authority. The Company hereby submits to the
jurisdiction of such courts for the purpose of any such suit, action or
proceeding.
Section 5.10 - Counterparts
This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered
by the parties hereto as of the date first above written.
XXXXXXX'X FOOD MARKETS, INC.
By __________________________
Its:
___________________________
Optionee Aggregate number of shares
of Common Stock for which
___________________________ the Performance Option granted
hereunder is exercisable:
___________________________ __________________
Address
Optionee's Taxpayer
Identification Number:
___________________________
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Schedule I
Plan Year EBITDA Target
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1999 $155 million
2000 $210 million
2001 $240 million
