EXHIBIT 10.74
VP HOLDING CORPORATION
STOCK SUBSCRIPTION AGREEMENT
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THIS STOCK SUBSCRIPTION AGREEMENT (this "Agreement") is made and
entered into as of December 9, 1996 by and between VP Holding Corporation, a
Delaware corporation (the "Company"), and Xxxxx Xxxxxxxxx ("Purchaser").
R E C I T A L S:
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A. The Company indirectly holds a limited partnership interest in
Brylane, L.P. (the "Partnership") and a general partnership interest in the
Partnership pursuant to that certain Agreement of Limited Partnership dated as
August 30, 1993, as amended (the "Partnership Agreement"), among VLP Corporation
("VLP"), VGP Corporation ("VGP") and certain of subsidiaries of The Limited
(VLP, VGP and such subsidiaries are sometimes collectively referred to herein as
the "Partners").
B. The Company now desires to sell to Purchaser and Purchaser
desires to purchase from the Company shares of Series A Preferred Stock, $0.01
par value per share, of the Company (the "Series A Preferred Stock"), subject to
the terms and conditions set forth in this Agreement. The date on which such
sale and purchase occur shall be referred to herein as the "Closing Date."
C. The Partners and/or the Company may form a corporation that is a
successor to, or parent entity of, the Partnership and/or the Company or a
successor to the Partnership and/or the Company (collectively, "Newco"). Newco
may at some time complete an initial sale to the public (an "Initial Public
Offering") of equity securities pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Act").
D. In order to induce the Company to sell its shares of Series A
Preferred Stock to the Purchaser, Purchaser agrees to hold such shares and the
shares of common stock received upon conversion of such shares subject to the
restrictions and interests created by this Agreement.
A G R E E M E N T:
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NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties agree as follows:
1. Sales and Purchase of Stock. The Company hereby agrees to sell to
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Purchaser, subject to the conditions and restrictions contained in this
Agreement, and Purchaser hereby agrees to purchase from the Company, 37,500
shares (individually, a "Share," and collectively, the "Shares") of Series A
Preferred Stock of the Company, at a price of $20.00 per share, for an aggregate
purchase price of $750,000 (the "Purchase Price"). The Purchase Price shall be
payable by delivery of cash or Purchaser's check in the amount of the Purchase
Price. Purchaser shall deliver the cash or check to the Company prior to the
Closing Date. In connection with the purchase of Shares hereunder, Purchaser
acknowledges that he or she has reviewed the memorandum regarding Section 83(b)
of the Internal Revenue Code of 1986, as amended, attached hereto as Exhibit A.
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2. Restriction on Transfer of the Shares. Purchaser may not sell,
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transfer, assign, pledge, hypothecate or otherwise dispose of (collectively,
"Transfer") any of the Shares, or any right, title or interest therein, prior to
the third anniversary of the Closing Date and, thereafter, any Transfer must be
in compliance with Sections 3 and 5 hereof. Any purported Transfer or Transfers
(including involuntary Transfers initiated by operation of legal process) of any
of the Shares or any right, title or interest therein, except in strict
compliance with the terms and conditions of this Agreement, shall be null and
void.
3. Right of First Refusal.
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(a) Sales; Notice. At any time on or after the third anniversary
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of the Closing Date, Purchaser may Transfer for cash (and only for such form of
consideration) any or all of the Shares to any third party subject to the
provisions of this Section 3 and Section 4(c), 5(d) and 7(a) hereof. Prior to
any such intended Transfer, Purchaser shall first give at least 30 days' advance
written notice (the "Notice") to the Company specifying (i) Purchaser's bona
fide intention to sell such Shares; (ii) the name(s) and address(es) of the
proposed transferee(s); (iii) the number of Shares Purchaser proposes to
Transfer (individually, an "Offered Share," and collectively, the "Offered
Shares"); (iv) the price for which Purchaser proposes to Transfer each Offered
Share (the "Proposed Purchase Price"); and (v) all other material terms and
conditions of the proposed transfer.
(b) Election by the Company. Within 20 days after receipt of the
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Notice, the Company (or its designee) may elect to purchase all of the Offered
Shares at the price and on the terms and conditions set forth in the Notice by
delivery of written notice of such election to Purchaser, specifying a day,
which shall not be more than 20 days after such notice is delivered, on or
before which Purchaser shall surrender (if Purchaser has not already done so)
the certificate or certificates representing the Offered Shares (duly endorsed
in blank for transfer) at the principal office of the Company. Within 20 days
after delivery of such notice to Purchaser, the Company shall
2.
deliver to Purchaser a check, payable to Purchaser or to such person as
Purchaser shall request, in the amount equal to the product of the Proposed
Purchase Price multiplied by the number of Offered Shares (the "First Refusal
Price") in exchange for the Offered Shares. If Purchaser fails to so surrender
such certificate or certificates on or before such date, from and after such
date the Offered Shares shall be deemed to be no longer outstanding, and
Purchaser shall cease to be a stockholder with respect to such Shares and shall
have no rights with respect thereto except only the right to receive payment of
the First Refusal Price, without interest, upon surrender of the certificate or
certificates therefor duly endorsed in blank for Transfer. If the Company does
not elect to purchase all of the Offered Shares, Purchaser shall be entitled to
Transfer the Offered Shares, subject to Sections 5(d) and 7(a)of this Agreement,
to the transferee(s) named in the Notice at the Proposed Purchase Price or at a
higher price and on the terms and conditions set forth in the Notice; provided,
however, that such Transfer must be consummated within 90 days after the date of
the Notice and any proposed Transfer after such 90-day period may be made only
by again complying with the procedures set forth in this Section 3.
4. Investment Representations. Purchaser represents and warrants to
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the Company as follows:
(a) Purchaser's Own Account. Purchaser is acquiring the Shares
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for Purchaser's own account and not with a view to or for sale in connection
with any distribution of the Shares.
(b) Access to Information. Purchaser (i) is familiar with the
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business of the Company and its direct or indirect, majority or wholly-owned
entities including the Partnership (a "Subsidiary" and collectively
"Subsidiaries"); (ii) has had an opportunity to discuss with representatives of
the Company and its Subsidiaries the condition of and prospects for the
continued operation and financing of the Company and its Subsidiaries and such
other matters as Purchaser has deemed appropriate in considering whether to
invest in the Shares; and (iii) has been provided access to all available
information about the Company and its Subsidiaries requested by Purchaser.
(c) Shares Not Registered. Purchaser understands that the
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Shares have not been registered under the Act or registered or qualified under
the securities laws of any state and that Purchaser may not Transfer the Shares
unless they are subsequently registered under the Act and registered or
qualified under applicable state securities laws, or unless an exemption is
available which permits Transfers without such registration and qualification
and the Company receives an opinion from Purchaser's counsel to such effect, in
form and substance reasonably satisfactory to the Company. Purchaser is an
"accredited investor" as defined in Rule 501 of Regulation D of the Act.
3.
5. Obligation to Sell Securities; Other Obligations.
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(a) If FS Equity Partners II, L.P., a California limited
partnership, and FS Equity Partners III, L.P., a Delaware limited partnership
(collectively, "FSEP"), find a third-party buyer, for all of the shares of
Common Stock of the Company, VGP and/or VLP (the "Companies") held by FSEP or
for all of the Partnership units (the "Units") indirectly held by FSEP or if the
Company or FSEP are required to sell all shares of the Company pursuant to the
Partnership Agreement (whether such sale is by way of purchase, exchange, merger
or other form of transaction), upon the request of FSEP, the Purchaser shall
sell all of his or her Shares (on an as-converted basis if the Shares have not
yet been converted into common stock) on the same terms and conditions as apply
to the FSEP sale (except for differences based on the fact that Partnership
Units and not stock are being sold); provided that, prior to the third
anniversary of the date hereof, Purchaser shall not be required to receive less
than $20.00 per Share (as appropriately adjusted for stock dividends,
reclassifications or splits) under this provision. The Purchaser agrees to be
bound by the provisions of Section 9.05 of the Partnership Agreement in the same
manner and to the same extent as FSEP in the event FSEP is required to sell any
securities in accordance with such section.
(b) The Company may at any time by notice to the holder
repurchase any or all Unvested Shares (as defined in Section 8(a) of the
Certificate of Designation creating the Shares) of the Purchaser at a price of
$20.00 per share (as appropriately adjusted for stock dividends,
reclassifications or splits). If Purchaser fails to surrender certificates
evidencing repurchased shares on date set for repurchase in such notice, from
and after such date the Shares which the Company elected to repurchase shall be
deemed to be no longer outstanding, and Purchaser shall cease to be a
stockholder with respect to such Shares and shall have no rights with respect
thereto except only the right to receive payment of the repurchase price,
without interest, upon surrender of the certificate or certificates therefor
(duly endorsed in blank for transfer).
(c) In addition to the obligations of the Purchaser to sell the
Shares pursuant to Sections 5(a) and (b) above, the Purchaser hereby agrees to
exchange or otherwise transfer his or her Shares and Newco shall be obligated to
exchange such Shares (i) for preferred stock of Newco with terms and conditions
substantially similar to the Series A Preferred Stock if the Shares have not
been converted into common stock or (ii) for common stock of Newco if the Shares
have been converted into Common Stock, in connection with the Newco (whether or
not in connection with an initial public offering). The Purchaser shall be
entitled to receive the appropriate Newco securities at the time that FSEP
converts its Company shares into Newco securities. Purchaser agrees that any
conversion ratio with respect to such preferred stock will be equivalent to the
exchange ratio of Company common stock for Newco common stock. Purchaser agrees
to execute a new agreement with respect to Newco securities containing
substantially similar provisions to this Agreement. The form of the Certificate
of Designation of the Newco preferred stock is attached hereto as Exhibit B.
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4.
(d) The Purchaser agrees to consent to any sale, transfer,
reorganization, exchange, merger, combination or other form of transaction
described in this Section 5 or contemplated by Article X of the Partnership
Agreement and to execute such agreements, powers of attorney, voting proxies or
other documents and instruments as may be necessary or desirable to consummate
such sale, transfer, reorganization, exchange, merger, combination or other form
of transaction. Purchaser further agrees to timely take such other actions as
FSEP may reasonably request in connection with the approval of the consummation
of such sale, transfer, reorganization, exchange, merger, combination or other
form of transaction, including voting as a stockholder to approve any such sale,
transfer, reorganization, exchange, merger, combination or other form of
transaction and including the execution of a reasonable lock-up agreement in
connection with an Initial Public Offering.
(e) The obligations of Purchaser pursuant to Section 5 shall be
binding on any transferee of any of the Shares and Purchaser shall obtain and
deliver to the Company and FSEP a written commitment to be bound by such
provisions from such transferee prior to any transfer.
6. Termination.
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The provision of Sections 2, 3, 5(a) and 5(b) shall terminate with
respect to shares of Common Stock received upon conversion of Shares upon
completion of an Initial Public Offering satisfying the following requirements:
(i) the offering results in receipt by Newco of at least $30,000,000 of gross
proceeds from the sale of newly issued stock or (ii) the offering results in the
sale of newly issued common stock representing at least 20% of the outstanding
common stock of Newco (after giving effect to such offering).
7. Miscellaneous.
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(a) Legends on Certificates. Any and all certificates now or
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hereafter issued evidencing the Shares shall have endorsed upon them a legend
substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THAT CERTAIN STOCK SUBSCRIPTION
AGREEMENT DATED AS OF DECEMBER 9, 1996 BY AND BETWEEN VP HOLDING
CORPORATION, A DELAWARE CORPORATION, AND THE ORIGINAL PURCHASER
HEREOF, A COPY OF
5.
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF VP
HOLDING CORPORATION."
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
(b) Further Assurances. Each party hereto agrees to perform any
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further acts and execute and deliver any documents which may be reasonably
necessary to carry out the intent of this Agreement.
(c) Notices. Except as otherwise provided herein, all notices,
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requests, demands and other communications under this Agreement shall be in
writing, and if given by telegram, telecopy or telex, shall be deemed to have
been validly served, given or delivered when sent, if given by personal
delivery, shall be deemed to have been validly served, given or delivered upon
actual delivery and, if mailed, shall be deemed to have been validly served,
given or delivered three Business Days after deposit in the United States mails,
as registered or certified mail, with proper postage prepaid and addressed to
the party or parties to be notified, at the following addresses (or such other
address(es) a party may designate for itself by like notice):
If to the Company:
VP Holding Corporation
c/o Xxxxxxx Xxxxxx & Co. Incorporated
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Purchaser:
_________________________
_________________________
_________________________
(d) Amendments. This Agreement may be amended only by a written
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agreement executed by both of the parties hereto.
(e) Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of Delaware.
6.
(f) Disputes. In the event of any dispute among the parties
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arising out of this Agreement, the prevailing party shall be entitled to recover
from the nonprevailing party the reasonable expenses of the prevailing party
including, without limitation, reasonable attorneys' fees.
(g) Entire Agreement. This Agreement constitutes the entire
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agreement and understanding among the parties pertaining to the subject matter
hereof and supersedes any and all prior agreements, whether written or oral,
relating hereto.
(h) Conversion, Recapitalizations or Exchanges Affecting the
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Company's Capital Stock; Issuances of Capital Stock. The provisions of this
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Agreement shall apply to any and all shares of capital stock or other securities
of the Company or any successor or assign of the Company, or the Partnership,
including Newco, which may be issued in respect of, in exchange for or in
substitution of, the Shares by reason of any conversion, stock dividend, stock
split, reverse split, recapitalization, reclassification, combination, merger,
consolidation or otherwise, and such shares or other securities shall be
encompassed within the term "Shares" for purposes of this Agreement.
(i) No Rights as an Employee. Nothing in this Agreement shall
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affect in any manner whatsoever the rights of the Company or any of its
Subsidiaries to terminate Purchaser's employment for any reason, with or without
cause, subject to the terms and conditions of any employment agreement to which
Purchaser may be a party.
(j) Disclosure. The Company shall have no duty or obligation to
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affirmatively disclose to Purchaser, and Purchaser shall have no right to be
advised of, any material information regarding the Partnership, Company or any
of its Subsidiaries at any time prior to, upon or in connection with the
Company's repurchase of the Shares under this Agreement.
(k) Successors and Assigns. The Company may assign with absolute
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discretion any or all of its rights and/or obligations and/or delegate any of
its duties under this Agreement to any of its affiliates, successors and/or
assigns (including Newco), and this Agreement shall inure to the benefit of, and
be binding upon, such respective affiliates, successors and/or assigns of the
Company in the same manner and to the same extent as if such affiliates,
successors and/or assigns were original parties hereto. Without limiting the
foregoing, the Company may assign the right of first refusal provided for in
Section 3 of this Agreement or the repurchase right contained in Section 5(b) of
this Agreement, to any designee, including any of its affiliates, successors
and/or assigns. Unless specifically provided herein to the contrary, Purchaser
may not assign any or all of its rights and/or obligations and/or delegate any
or all its duties under this Agreement without the prior written consent of the
Company. Upon an assignment of any or all of Purchaser's rights and/or
obligations and/or a delegation of any or all of its duties under this Agreement
in accordance with the terms of this Agreement, this Agreement shall inure to
the benefit of, and be binding upon,
7.
Purchaser's respective affiliates, successors and/or assigns in the same manner
and to the same extent as if such affiliates, successors and/or assigns were
original parties hereto.
(l) Headings. Introductory headings at the beginning of each
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section and subsection of this Agreement are solely for the convenience of the
parties and shall not be deemed to be a limitation upon or description of the
contents of any such section and subsection of this Agreement.
(m) Counterparts. This Agreement may be executed in two
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counterparts, each of which shall be deemed an original and both of which, when
taken together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE COMPANY:
VP HOLDING CORPORATION,
a Delaware corporation
By: /s/ Xxxx X. Xxxx
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Its: President
PURCHASER:
/s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
8.
EXHIBIT A
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M E M O R A N D U M
TO: Ms. Xxxxx Xxxxxxxxx
Xx. Xxxxxxxxxx X. Xxx
FROM: Xxxxxxx & XxXxxxxx
DATE: December 2, 1996
RE: Income Tax Consequences of Restricted Stock
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This memorandum discusses certain federal income tax consequences to
you with respect to your purchase of shares of Series A Preferred Stock (the
"Shares") of VP Holding Corporation, a Delaware corporation (the "Company").
Because you are an employee of Brylane L.P., the limited partnership
in which subsidiaries of the Company hold both an interest as a general partner
and an interest as a limited partner, we believe that the Shares are subject to
Federal income taxation under the provisions of Section 83 of the Internal
Revenue Code of 1986 (the "Code"). We believe that the Shares are subject to a
"substantial risk of forfeiture" under Section 83 of the Code and thus, the
shares would be "restricted stock." The "substantial risk of forfeiture" arises
because of your right to convert the Shares into common stock of the Company is
dependent upon such shares being "vested" over the next three years and that the
Shares are subject to repurchase by the Company at a price of $20 per share if
you cease being an employee under certain circumstances over that three year
period. Thus, we believe such restrictions would be treated as a "substantial
risk of forfeiture" because your right to the "full enjoyment" of such shares
are conditioned upon the future performance of your services.
Section 83 of the Code generally will tax you upon the fair market
value of shares of restricted stock at the time when the substantial risk of
forfeiture lapses.
As a result, you would be taxed upon one-third of the Shares on each of the next
three anniversaries of their purchase by you if you remain an employee of
Brylane L.P. At such time, you would have income equal to the excess of the
then fair market value of one-third of the Shares over their purchase price. As
the Shares would then be convertible into common stock, it is possible that the
Shares could have substantial value in excess of your purchase price. If your
employment is terminated under certain limited circumstances, such restrictions
may never lapse.
You are obligated to recognize income in this amount regardless of
whether or not you dispose of the Shares at that time or have the ability to
sell the Shares. This recognition event could require the payment of a
significant amount of income tax at a time when cash is unavailable to pay the
tax, if the Shares have substantially appreciated in value from the time of your
purchase.
If you believe that the Shares will substantially appreciate in value
over the next three years, you can file an election with the Internal Revenue
Service to have your purchase of the Shares governed by Section 83(b) of the
Code. If you make this election, the fact that the Shares are subject to a
substantial risk of forfeiture is ignored for income tax purposes. In other
words, you will not recognize taxable income when the Company's right to
repurchase the Shares at less than their fair market value terminates.
If you make the Section 83(b) election, you will be required to report
as taxable income the amount by which the fair market value of the shares you
purchased exceeds the purchase price you paid for the Shares. At this time, the
Company believes that the purchase price of the Shares is equal to their fair
market value, so no taxable income need be reported.
Any amount included in your gross income as a result of the issuance
of the Shares or the termination of the Company's repurchase right will be
ordinary income. Such amount constitutes "wages" with respect to which the
Company is required to deduct and withhold federal income tax and Federal
Insurance Contribution Act tax. Such deductions will be made from the wages,
salary, bonus or other income to which the purchaser would otherwise be entitled
and, at the Company's election, you may be required to pay to the Company (for
withholding on your behalf) any amount not so deducted but required to be so
withheld.
When you sell the Shares, you will recognize capital gain or loss in
an amount equal to the difference between the sale proceeds and your basis in
the shares. The basis in the Shares is equal to the value of the Shares on the
date the risk of forfeiture terminates, or if you make the Section 83(b)
election, the value of the Shares on the date the Shares were purchased, which
should be $20.00 per share. Your gain will be short-term or long-term depending
upon whether your holding period in the shares exceeds one year at the time of
disposition.
THE PRECEDING DISCUSSION IS APPLICABLE TO FEDERAL TAX LAW ONLY WITH
RESPECT TO THE SHARES AS RESTRICTED STOCK. ALTHOUGH MANY STATES HAVE RULES
RELATING TO RESTRICTED STOCK THAT PARALLEL THOSE OF THE FEDERAL LAW, YOU SHOULD
CONSULT WITH YOUR TAX ADVISER CONCERNING THE STATE TAX CONSEQUENCES AND
REQUIREMENTS APPLICABLE TO YOUR PURCHASE OF THE SHARES.
If you wish to make the Section 83(b) election with respect to your
Restricted Stock:
2.
1. Review the attached Section 83(b) election form. Complete
(INCLUDING SOCIAL SECURITY NUMBER) and sign the form. Make 4 copies of the
completed form.
2. File one copy of the Section 83(b) election form with the
Internal Revenue Service office at which you file your federal income tax
return. NOTE: THE FORM MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
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30 DAYS AFTER THE DATE ON WHICH YOU PURCHASED THE SHARES IN ORDER TO MAKE A
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VALID ELECTION. For example, if the transaction closes on December 9, 1996, you
must file the election on or before January 7, 1997.
3. Deliver one copy to Xxxxxx Xxxxxxxx at Brylane, L.P.
4. Attach one copy to your federal income tax return and, if
appropriate, one copy to your state income tax return for 1996.
If you have any questions concerning the Section 83(b) election,
please contact your tax advisor. You may also wish to have your tax advisor
contact Xxxxxxx X. XxXxxxxx of Xxxxxxx & XxXxxxxx at (000) 000-0000.
3.
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER
1.
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(Name)
-----------------------------------
(Street Address)
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(City, State, Zip Code)
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(Social Security Number)
2. This election has been made under Internal Revenue Code 83(b) and is being
made with respect to the following property:
Shares of the Series A Preferred Stock of VP Holding Corporation
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3. The property was transferred on the following date: December 9, 1996
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The election is made for the following taxable year (e.g. December 31,
1996): December 31, 1996
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4. The property transferred is subject to the following restrictions:
The Preferred Stock is not vested and is subject to repurchase by the
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Company upon termination of the taxpayer's employment by the Company.*
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5. The property transferred, with respect to which the election has been made,
has the following fair market value at the time of transfer: $20.00 per
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share
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6. The amount, if any, paid for such property: $20.00 per share
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7. A copy of this statement was given to the following: Brylane L.P., 2300
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Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000
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(The entity for whom the services were performed).
If the transferee of the restricted property and the person performing the
services are not the same, then a copy of this statement has been given to
the following: (same)
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(The transferee of the restricted property).
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(Signature)
NOTE: This filing is being made for Alternative Minimum Tax (AMT) purposes
* This repurchase right expires with respect to one-third of these
shares per year over the next three years.
EXHIBIT B
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CERTIFICATE OF DESIGNATION
OF
THE SERIES A CONVERTIBLE REDEEMABLE
PREFERRED STOCK
OF
BRYLANE, INC.
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Brylane, Inc., a corporation organized and existing under the Delaware
General Corporation Law (the "Corporation"), hereby certifies that the following
resolutions were adopted as of __________________, 19__ by the Board of
Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board of Directors")
by the provisions of the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), there hereby is created, out of the
______________ shares of Preferred Stock of the Corporation authorized in
Article IV of the Certificate of Incorporation (the "Preferred Stock"), a series
of the Preferred Stock consisting of [75,000] shares, which series shall have
the following powers, designations, preferences and relative, participating,
optional or other rights, and the following qualifications, limitations and
restrictions (in addition to the powers, designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations and
restrictions, set forth in the Certificate of Incorporation which are applicable
to the Preferred Stock):
Section 1. Designation of Amount. The shares of such series shall be
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designated as "Series A Convertible Redeemable Preferred Stock" (the "Series A
Preferred Stock") and the authorized number of shares constituting such series
shall be [75,000] shares. The par value of the Series A Preferred Stock shall
be $.01 per share.
Section 2. Dividends.
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The holders of shares of the Series A Preferred Stock will not be
entitled to receive dividends payable in cash or property (other than such stock
dividends, reclassifications or splits with respect to the Series A Preferred
Stock as may be declared by the Board of Directors in its sole discretion).
Section 3. Redemption at Corporation's Option.
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(a) The shares of the Series A Preferred Stock will be redeemable at
the option of the Corporation by resolution of its Board of Directors, in whole
or from time to time in part, at any time with respect to shares of Series A
Preferred Stock that will always be Unvested Shares (as defined in Section
8(a)), subject to the limitations set forth below, at a redemption price of
[$20.00] per share (as appropriately adjusted for stock dividends,
reclassifications or splits), upon giving notice as provided below. It is the
intent of this provision that redemption
not be permitted with respect to shares of Series A Preferred Stock that may, in
the future, vest in accordance with Section 8.
(b) Subject to the foregoing, the number of shares to be redeemed
shall be determined by the Board of Directors in its sole discretion.
Redemption shall be on a pro rata basis among all holders of Series A Preferred
Stock. Once the Corporation has mailed a notice of redemption pursuant to this
Section 3 (as described below), such holder(s) may not exercise any rights under
Section 6.
(c) At least 10 days but not more than 30 days prior to the date fixed
for the redemption of shares of the Series A Preferred Stock, a written notice
shall be mailed to each holder of record of shares of the Series A Preferred
Stock to be redeemed in a postage prepaid envelope addressed to such holder at
his post office address as shown on the records of the Corporation, notifying
such holder of the election of the Corporation to redeem such shares, stating
the dated fixed for redemption thereof (an "Optional Redemption Date"), and
calling upon such holder to surrender to the Corporation on the Optional
Redemption Date at the place designated in such notice his certificate or
certificates representing the number of shares specified in such notice of
redemption. On or after the Optional Redemption Date each holder of shares of
the Series A Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In case less that all the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after the Optional Redemption Date,
all rights of the holders thereof as stockholders of the Corporation, except the
right to receive the redemption price of such shares, without interest, upon the
surrender of certificates representing the same, shall cease and terminate and
such shares shall not thereafter be transferred on the books of the Corporation,
and such shares shall not be deemed to be outstanding for any purpose
whatsoever.
(d) Shares of the Series A Preferred Stock redeemed pursuant to the
provisions of this Section 3 shall thereupon be retired and may not be reissued
as shares of the Series A Preferred Stock but shall thereafter have the status
of authorized but unissued shares of the Preferred Stock, without designation as
to series until such shares are once more designated as part of a particular
series of the Preferred Stock.
Section 4. Redemption at Holder's Option.
-----------------------------
(a) At the request of the holder thereof, subject to Section 4(b), the
Corporation shall, to the extent permitted by law and from funds legally
available therefor, redeem at the redemption price of [$20.00] per share (as
appropriately adjusted for stock dividends, reclassifications or splits) any
Vested Share (as defined in Section 8(a)) of Series A Preferred
2
Stock on the third anniversary of the closing of transactions contemplated by
that certain Asset Purchase Agreement dated October 18, 1996 among TJX
Companies, Inc., Xxxxxxxx'x, Inc. and Brylane, L.P. (the "Closing Date");
provided that no request for redemption under this Section 4 may be made after
4:30 p.m. New York City time on the date that is the third anniversary of the
Closing Date. Each holder of Vested Shares of the Series A Preferred Stock to
be redeemed shall present and surrender his certificate or certificates for such
shares to the Corporation at the time the request for redemption is made and,
subject to Section 4(b), promptly after the third anniversary of the Closing
Date the redemption price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled (the date of any
such payment being the "Mandatory Redemption Date"). From and after the
Mandatory Redemption Date, all rights of the holder of Series A Preferred Stock
requesting redemption as a stockholder of the Corporation, except the right to
receive the redemption price (without interest) of such shares upon the
surrender of certificates representing the same, shall cease and terminate and
such shares shall not thereafter be transferred on the books of the Corporation,
and such shares shall not be deemed to be outstanding for any purpose
whatsoever.
(b) If, on the Mandatory Redemption Date, the funds of the Corporation
legally available for such redemption shall be insufficient to redeem all Vested
Shares required to be redeemed, funds to the maximum extent legally available
for such purposes shall be utilized to redeem the maximum number of outstanding
Vested Shares on such date on a pro rata basis among the requesting holders of
Vested Shares and thereafter the Corporation shall continue to redeem such
shares (on a pro rata basis) as promptly as practicable after funds are legally
available therefor.
(c) Shares of the Series A Preferred Stock redeemed pursuant to the
provisions of this Section 4 shall thereupon be retired and may not be reissued
as shares of the Series A Preferred Stock but shall thereafter have the status
of authorized but unissued shares of the Preferred Stock, without designation as
to the series until such shares are once more designated as part of a particular
series of the Preferred Stock.
Section 5. Voting Rights.
-------------
Except as required by Delaware law, the holders of shares of the
Series A Preferred Stock shall not be entitled to vote on any matter.
Section 6. Liquidation Rights.
------------------
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Corporation and
any preferential distribution with respect to any other class or shares of the
Corporation ranking senior with respect to rights upon liquidation or
3
dissolution of the Corporation to the Series A Preferred Stock, the holders of
shares of the Series A Preferred Stock shall be entitled to receive out of the
remaining net assets of the Corporation, the amount of [$20.00] (as
appropriately adjusted for stock dividends, reclassifications or splits) for
each share of the Series A Preferred Stock, before any distribution shall be
made to the holders of the Common Stock with respect to payments upon
dissolution or liquidation of the Corporation. If upon any liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of the outstanding shares of
Series A Preferred Stock shall be insufficient to permit the payment to such
stockholders of the full preferential amounts aforesaid, then the entire assets
of the Corporation to be distributed shall be distributed ratably among the
holders of outstanding shares of Series A Preferred Stock based on the full
preferential amounts for the number of outstanding shares of Series A Preferred
Stock held by each holder.
(b) For purposes of this Section 6, a dissolution, winding up or
liquidation shall not include (i) any consolidation or merger of the Corporation
with or into any other corporation or entity or a plan of exchange between the
Corporation and any other corporation or entity or (ii) a sale or other
disposition of all or substantially all of the Corporation's assets to another
corporation or entity.
(c) After the payment of the full preferential amounts provided for
herein to the holders of shares of the Series A Preferred Stock or funds
necessary for such payment have been set aside in trust for the holders thereof,
such holders shall be entitled to no other or further participation in the
distribution of the assets of the Corporation.
Section 7. Redemption Upon Change of Control.
---------------------------------
(a) Subject to Section 7(d), in the event of a Change of Control (as
defined below) (the date of such occurrence, the "Change of Control Date"), each
Vested Share shall, at the option of the holder thereof, either (i) be redeemed
by the Corporation at a price of $20.00 per share (as appropriately adjusted for
stock dividends, reclassifications or splits) or (ii) be converted into Common
Stock of the Corporation at the Conversion Ratio (as defined below); provided,
however, that shares that are not Vested Shares will not be convertible at the
option of the holder thereof and shall be redeemed by the Corporation at a price
of [$20.00] per share (as appropriately adjusted for stock dividends,
reclassifications or splits). A "Change of Control" shall have occurred for
purposes of this Section 7(a) upon the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than
Permitted Holders (as defined below), is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have beneficial ownership of all shares that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total voting power of all classes of Voting Equity Interests (as defined below)
of the Corporation, Brylane, L.P. (the
4
"Partnership") or the Partnership's general partner; provided that the Permitted
--------
Holders do not have the right or ability by voting power, contract or otherwise
to elect or designate for election a majority of the Board of Representatives or
Directors provided, further, that unless the Compensation Committee of the
-------- -------
Partnership shall otherwise determine prior to the acquisition of such majority
ownership, such acquisition of ownership shall not constitute a Change of
Control if an Original Purchaser or an Executive Related Party is the person or
a member of a group constituting the person acquiring such ownership; or; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Representatives or Directors (together with
any new members of the Board of Representatives or Directors whose election to
such Board or whose nomination for election by the holders of Equity Interests
(as defined below) of the Partnership or the Corporation was approved by (a) a
Permitted Holder or (b) a vote of at least 66 2/3% of the members of the Board
of Representatives or Directors then still in office who were either members of
the Board of Representatives or Directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of such Board of Representatives or
Directors then in office; (iii) the Partnership or its general partner or the
Corporation consolidates with or merges with or into any person or entity or
conveys, transfers or leases all or substantially all of its assets to any
person or entity, or any corporation or partnership or entity consolidates with
or merges into or with the Partnership or its general partner or the
Corporation, in any such event pursuant to a transaction in which the
outstanding Voting Equity Interests of the Partnership or its general partner or
the Corporation are changed into or exchanged for cash, securities or other
property, other than any such transaction where the outstanding Voting Equity
Interests of the Partnership or its general partner or the Corporation are not
changed or exchanged at all (except to the extent necessary to reflect a change
in the jurisdiction of incorporation of the Partnership or its general partner
or the Corporation or where (A) the outstanding Voting Equity Interests of the
Partnership or its general partner or the Corporation are changed into or
exchanged for (x) Voting Equity Interests of the surviving corporation or
entity, or (y) cash, securities and other property (other than Equity Interests
of the surviving corporation or entity) and (B) no "person" or "group" other
than Permitted Holders owns immediately after such transaction, directly or
indirectly, more than the greater of (1) 50% of the total outstanding Voting
Equity Interests of the surviving corporation or entity, and (2) the percentage
of the outstanding Voting Equity Interests of the surviving corporation or
partnership or entity owned, directly or indirectly, by Permitted Holders
immediately after such transaction); or (iv) the sale or other disposition by
the Partnership, in one transaction or a series of related transactions (but not
including a disposition that is part of any sale-and-leaseback or similar
financing transactions), of assets aggregating more than thirty percent (30%) of
the assets of the Partnership's Xxxxxxxx'x of Boston business (taken at the
values as stated on the books of the Partnership determined in accordance with
generally accepted accounting principles consistently applied), or responsible
for generating more than thirty percent (30%) of the net sales of the
Partnership's Xxxxxxxx'x of Boston business; provided, that unless otherwise
--------
determined by the Compensation Committee of the Corporation, no transaction
described above shall constitute a Change of Control with respect to the shares
of Series A Preferred Stock issued to an Original Purchaser if, immediately
after such transaction, such
5
Original Purchaser (as defined in Section 8(a)) or any Executive Related Party
(as defined below) shall own Equity Interests of any surviving corporation or
entity ("Surviving Entity") having a fair value as a percentage of the fair
value of the Equity Interests of such Surviving Entity greater than 125% of the
fair value of the Equity Interests of the Partnership and/or the Corporation
owned by such Original Purchaser and any Executive Related Party immediately
prior to such transaction, expressed as a percentage of the fair value of all
Equity Interests of the Partnership and/or the Corporation immediately prior to
such transaction; provided, further, that for purposes of this definition, if a
-------- -------
transaction agreement requires as a condition precedent approval by the
equityholders of the Partnership and/or the Corporation of the transaction or
related agreement, a Change of Control shall not be deemed to have taken place
unless such approval is secured and the transaction is consummated.
Notwithstanding anything in this definition to the contrary, a "Change of
Control" shall not be deemed to have occurred as a result of any sale of Equity
Interests in a public offering.
"Equity Interest" in any person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents or
interest in (however designated) corporate stock or other equity participations,
including partnership interests, whether general or limited, in such person.
"Executive Related Party" shall mean any affiliate or associate of an
Original Purchaser other than the Corporation or the Partnership, or an
affiliate of the Partnership or the Corporation. The terms "affiliate" and
"associate" shall have the meanings ascribed thereto in Rule 12b-2 under the
Exchange Act (the term "registrant" in the definition of "associate" meaning, in
this case, the Partnership or the Corporation).
"Permitted Holders" means (i) The Limited, Inc., a Delaware
corporation, and any of its affiliates, (ii) Xxxxxxx Xxxxxx & Co., a California
general partnership, and any of its affiliates, (iii) WearGuard Corporation, a
Delaware corporation, and any of its affiliates, (iv) Chadwicks, Inc. (v) Leeway
& Co., as nominee for The AT&T Long-Term Investment Trust ("ATT") and the
affiliates and permitted assignees of ATT and (vi) NYNEX Master Trust and its
affiliates and permitted assignees and (vii) VP Holding Corporation (with
respect to the general partner of the Partnership); provided that Brylane, L.P.
--------
and it subsidiaries shall not be deemed affiliates of The Limited, Inc., Xxxxxxx
Xxxxxx & Co., WearGuard Corporation, Xxxxxxxx'x, Inc., Leeway & Co., as nominee
for The AT&T Long-Term Investment Trust and NYNEX Master Trust for purposes of
this definition.
"Voting Equity Interests" means Equity Interests of the class or
classes pursuant to which the holders thereof have (i) in respect of a
corporation, the general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time Equity Interests of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency)
6
or (ii) in respect of limited liability company or other entity the general
voting power under ordinary circumstances to elect the board of directors or
other governing board of such entity.
(b) The Corporation shall notify the holders of Series A Preferred
Stock in writing of the occurrence of a Change of Control (i) within 15 days
after a Change of Control caused by an event described in clauses (i) or (ii) of
the definition of Change of Control above or (ii) 15 days prior to Change of
Control caused by an event described in clauses (iii) or (iv) of the definition
of Change of Control above. The Corporation shall either (i) redeem, subject to
subsection (d) below, shares of Series A Preferred Stock at a redemption price
equal to $20.00 per share (as appropriately adjusted for stock dividends,
reclassifications or splits) or (ii) convert shares of Series A Preferred Stock
into shares of common stock at the Conversion Ratio. Subject to the proviso in
the first sentence of Section 7(a), holders of Series A Preferred Stock shall
have five days from receipt of such notice to elect to have shares redeemed or
converted. The Corporation shall have no obligations under this Section 7 to
redeem or convert shares of Series A Preferred Stock unless the event causing
the Change of Control is consummated. Shares to be redeemed or converted shall
be delivered with the holder's election together with any completed transfer
documents reasonably required by the Board of Directors of the Corporation.
(c) All shares of Series A Preferred Stock from and after the Change
of Control Date (unless default shall be made by the Corporation in redeeming
the shares of the Series A Preferred Stock so delivered), shall no longer be
deemed to be issued and outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price or the shares of Common Stock issued upon
conversion) shall cease and terminate.
(d) If, on the Change of Control Date, the funds of the Corporation
legally available for such redemption shall be insufficient to redeem all
outstanding shares of Series A Preferred Stock funds to the maximum extent
legally available for such purposes shall be utilized to redeem the maximum
number of outstanding shares of Series A Preferred Stock on such date on a pro
rata basis among the holders of all outstanding shares of Series A Preferred
Stock that have requested redemption or whose shares are required to be redeemed
hereunder and thereafter the Corporation shall continue to redeem such shares
(on a pro rata basis) as promptly as practicable after funds are available
therefor.
(e) Shares of the Series A Preferred Stock redeemed pursuant to the
provisions of this Section 7 shall thereupon be retired and may not be reissued
as shares of the Series A Preferred Stock but shall thereafter have the status
of authorized but unissued shares of the Preferred Stock, without designation as
to the series until such shares are once more designated as part of a particular
series of the Preferred Stock.
7
Section 8. Conversion. The shares of Series A Preferred Stock shall
----------
have the following conversion rights.
(a) Definitions.
(i) "Vested Shares" with respect to shares of Series A Preferred
Stock issued to an Original Purchaser shall mean:
12,500 shares of Series A Preferred Stock on and after the
first anniversary of the Closing Date; plus 12,500 shares of
----
Series A Preferred Stock on and after the second anniversary
of the Closing Date (for an aggregate of 25,000 Vested
Shares); plus 12,500 shares of Series A Preferred Stock on
----
the third anniversary of the Closing Date (for an aggregate
of 37,500 Vested Shares)(all such share amounts as
appropriately adjusted for stock dividends or splits).
Shares of Series A Preferred Stock shall not vest if an
Original Purchaser is not employed by the Partnership on a
vesting date, unless his or her employment (A) has been
terminated by the Partnership other than for Cause (in which
case all unvested shares will immediately vest), (B) has
terminated due to the Original Purchaser's death or
Disability or Incapacity (in which case all unvested shares
will immediately vest) or (C) has been terminated by the
Original Purchaser for Good Reason (in which case all
unvested shares will immediately vest). In the event an
Original Purchaser is then employed by the Partnership and
there is a Change of Control, all shares of Series A
Preferred Stock originally issued to such Original Purchaser
shall immediately become "Vested Shares" if not already
vested.
(ii) "Unvested Shares" shall mean any shares of Series A
Preferred Stock that are not Vested Shares and may not, with
the passage of time, become vested.
(iii) "Cause" shall mean dishonesty, conviction of a felony or
gross neglect by an Original Purchaser of his duties (other
than as a result of Disability, Incapacity or death), or
conflict of interest, which gross neglect or conflict shall
continue for 30 days after the Partnership gives written
notice to an Original Purchaser requesting the cessation of
such gross neglect or conflict.
8
(iv) "Disability" shall have the meaning given it in the long-
term disability plan previously operated by the
Partnership's Xxxxxxxx'x of Boston business (or any
successor plan operated by the Partnership or any of its
affiliates, so long as the definition of "Disability" in any
such successor plan is not more restrictive). An Original
Purchaser's employment shall be deemed to be terminated for
Disability on the date on which such Original Purchaser is
entitled to receive long-term disability compensation
pursuant to such long-term disability plan.
(v) "Good Reason" shall mean, with respect to any voluntary
termination of employment by an Original Purchaser, the
following:
1) the assignment to such Original Purchaser of any duties
materially inconsistent with his positions, duties,
responsibilities, reporting requirements, and status
with the Partnership (or a subsidiary) on the later of
December 9, 1996 or 120 days prior to the date of such
termination, or a substantive change in such Original
Purchaser's titled, reporting requirements or offices
as in effect on the later of December 9, 1996 or 120
days prior to the date of such termination, or any
removal of such Original Purchaser from or any failure
to reelect him to such positions, except in connection
with the termination of such Original Purchaser's
employment by the Partnership (or a subsidiary) for
Cause or by such Original Purchaser other than for Good
Reason; or any other action by the Partnership (or a
subsidiary) which results in a diminishment in such
position, authority, duties or responsibilities, other
than an insubstantial and inadvertent action which is
remedied by the Partnership or the subsidiary promptly
after receipt of notice thereof given by such Original
Purchaser; or
2) if such Original Purchaser's rate of base salary for
any fiscal year is less than 100% of the base salary
paid to such Original Purchaser in the completed fiscal
year immediately preceding the fiscal year in which
such Original Purchaser voluntarily terminates his
employment, or if such Original Purchaser's total cash
compensation opportunities, including salary and
incentive, for any fiscal year are less than 100% of
the total cash compensation opportunities made
available
9
to such Original Purchaser in the completed fiscal year
immediately preceding the fiscal year in which such
Original Purchaser voluntarily terminates his
employment; or
3) any relocation by the Partnership of such Original
Purchaser's principal place of employment of more than
50 miles from the place where such Original Purchaser's
principal residence was located on the date that such
Original Purchaser gives notice of such termination.
4) any breach by the Partnership of any term or provision
of its Employment Agreement with such Original
Purchaser, as such agreement may be amended from time
to time.
Notwithstanding the foregoing, a voluntary termination
by such Original Purchaser of his employment shall not be
deemed to be for "Good Reason" unless such termination
occurs within 120 days after the occurrence of any event
described in clauses 1), 2), 3) or 4) above without such
Original Purchaser's express written consent, such Original
Purchaser gives notice to the Partnership at least 30 days
in advance requesting that the situation described in such
clauses be remedied, and the situation remains unremedied
upon expiration of such 30-day period.
(vi) "Incapacity" shall mean a disability (other than Disability
within the meaning of that definition) or other impairment
of health that renders an Original Purchaser unable to
perform his duties to the satisfaction of the Compensation
Committee of the Board of Representatives of the
Partnership. If by reason of Incapacity such Original
Purchaser is unable to perform his duties for at least six
months in any consecutive 12-month period, upon written
notice by the Company the employment of an Original
Purchaser shall be deemed to have terminated by reason of
Incapacity.
(vii) "Original Purchaser" shall mean each of Xxxxx Xxxxxxxxx or
Xxxxxxxxxx Xxx.
(b) Any Vested Share may, at the option of the holder thereof, be
converted into one share of Common Stock of the Corporation (the "Conversion
Ratio")(subject to adjustment as set forth below).
10
(c) All outstanding Vested Shares shall be converted automatically
into Common Stock of the Corporation at the Conversion Ratio at 5:00 p.m. New
York City time on the third anniversary of the Closing Date if the rights
granted under Section 4 have not been properly exercised with respect to any
such shares.
(d) Each holder of Vested Shares who desires to convert the same into
Common Stock shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation and shall give written notice to the
Corporation at such office that such holder elects to convert the same and shall
state therein the number of Vested Shares being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series A Preferred Stock to be converted and the person entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such Common Stock on such date.
(e) The Conversion Ratio is subject to adjustment from time to time
upon the occurrence of the events enumerated in this subparagraph (e).
If the Corporation:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(ii) subdivides or reclassifies its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares;
(iv) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(v) issues by reclassification of its Common Stock any shares of
its capital stock;
then, in the case of paragraphs (i), (ii) and (iii) of this subsection (e), the
Conversation Ratio in effect immediately prior to such action shall be
proportionately adjusted, and in the case of paragraphs (iv) and (v) of this
subsection (e), appropriate provision shall be made so that the holder of any
Series A Preferred Stock converted after such action may receive the aggregate
number and kind of shares of capital stock of the Corporation which it would
have owned
11
immediately following such action if such Series A Preferred Stock had been
converted immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
12
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by ___________________, its _________________, this
____ day of ____________________________.
BRYLANE, INC.
By:_____________________________
Title:
13
