PUT AGREEMENT
THIS PUT AGREEMENT (this "Agreement") is made and entered into as of
January 22, 1997, by and among Cognitive Communications, LLC, a Delaware limited
liability company ("CCL"), International Post Limited, a Delaware corporation
and the indirect parent of CCL ("IPL"), Xxxxx Xxxxxx ("SW"), Xxxxxxx Xxxxxxx
("MR") and Xxxxx Xxxxxx ("DL" and together with SW and MR, the "Optionholders").
W I T N E S S E T H :
WHEREAS, as of the date hereof, CCL is purchasing the operating assets
of Cognitive Communications, Inc., a Connecticut corporation (the "Company"),
pursuant to an Asset Purchase Agreement among CCL, the Company, SW and MR (the
"Purchase Agreement");
WHEREAS, pursuant to the Purchase Agreement, CCL is issuing and selling
to SW and MR a 2% ownership interest in CCL (the "CCL-DL Interests");
WHEREAS, as of the date hereof, CCL also is issuing to the
Optionholders certain options to purchase ownership interests in CCL (the "Sale
Options") upon the disposition by Manhattan Transfer/Edit, Inc. ("MTE") of its
ownership interests in CCL, as more fully set forth therein;
WHEREAS, as of the date hereof, in connection with CCL's employment of
the Optionholders CCL is entering into an Incentive Compensation Agreement with
the Optionholders relating to, among other things, CCL's grant to the
Optionholders of certain options to purchase ownership interests in CCL (the
"Incentive Options") upon the attainment of certain EBITDA targets, as more
fully set forth therein; and
WHEREAS, CCL and IPL desires to grant the Optionholders certain put
rights with respect to the CCL-DL Interests, the Sale Options and the Incentive
Options, as more fully set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Put.
Each Optionholder shall have the right (the "Put") to sell, in
whole but not in part, to CCL or IPL such Optionholder's CCL-DL Interests, Sale
Options and Incentive Options, including any ownership interests in CCL issued
upon exercise of the Sale Options or Incentive Options (and any equity
securities of CCL issued as (or issuable upon the conversion or exercise of any
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities) (collectively, the "Put Securities"), in accordance with the
provisions set forth in this Agreement.
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2. Purchase Price.
The purchase price (the "Purchase Price") for the Put
Securities shall be their Fair Market Value (as hereinafter defined) as
determined by a firm of independent public accountants or an independent
investment bank mutually acceptable to CCL or IPL, as the case may be, and the
selling Optionholder; provided, however, that a "Big 6" accounting firm, other
than the accounting firms then used by CCL, IPL or any of the Optionholders,
shall be deemed to be mutually acceptable for these purposes. The Fair Market
Value of the Put Securities shall be based upon the average of a (i) comparable
company valuation of CCL and (ii) discounted cash flow valuation of CCL. The
parties shall be deemed to have accepted such valuation as final and binding
(the "First Valuation"), unless notice is given to the other party of a dispute
within thirty (30) days after receipt of such valuation. Such dispute shall be
referred to another firm of independent public accountants or an independent
investment bank mutually acceptable to CCL or IPL, as the case may be, and the
selling Optionholder (the "Second Valuation") (provided, however, that a "Big 6"
accounting firm, other than the accounting firms then used by CCL, IPL or any of
the Optionholders, shall be deemed to be mutually acceptable for these
purposes), which accountants or investment bank shall also determine the Fair
Market Value of the Put Securities based upon the average of a (i) comparable
company valuation of CCL and (ii) discounted cash flow valuation of CCL. The
final and binding Fair Market Value of the Put Securities shall then be the
average of the First Valuation and the Second Valuation. The fees and expenses
of any accountants or bankers retained pursuant to the provisions of this
Section 2 shall be borne equally by CCL or IPL, as the case may be, and the
selling Optionholder.
3. Exercise of Put.
(a) The Put may be exercised by any Optionholder at any time
on one (1) occasion upon written notice to CCL or IPL as follows:
(i) In the event an Optionholder's employment by CCL
is terminated (x) by CCL with or without cause or
(y) by CCL as a result of the Optionholder's death
or disability or (z) by the Optionholder as a
result of Constructive Termination, as defined in
the Optionholders' Employment Agreements with CCL
dated as of the date hereof, then the Put may be
exercised by such Optionholder after such
termination upon written notice to CCL or IPL. The
Put Securities so desired to be sold shall be
valued as of the ninetieth (90th) day after such
notice of exercise is received by CCL or IPL. As
promptly as practicable after the Purchase Price
is calculated pursuant to Section 2, but in any
event within fifteen (15) days thereafter, CCL or
IPL, as the case may be, shall notify the selling
Optionholder of the place, time and date for the
closing of the purchase and sale of the Put
Securities, which closing
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shall be as promptly as practicable
after such notice, but in any event
within five (5) days thereafter.
(ii) In the event that an Optionholder's employment
with CCL is terminated by the Optionholder other
than as a result of Constructive Termination, then
the Put may be exercised by such Optionholder
after such termination upon three hundred and
sixty (360) days prior written notice to CCL or
IPL. The Put Securities so desired to be sold
shall be valued as of the three hundred and
sixtieth (360th) day after such notice of exercise
is received by CCL or IPL. As promptly as
practicable after the Purchase Price is calculated
pursuant to Section 2, but in any event within
fifteen (15) days thereafter, CCL or IPL, as the
case may be, shall notify the selling Optionholder
of the place, time and date for the closing of the
purchase and sale of the Put Securities, which
closing shall be as promptly as practicable after
such notice, but in any event within five (5) days
thereafter. Notwithstanding the foregoing, in no
event shall the closing occur prior to July 31,
2001.
(iii)The Put may also be exercised by an Optionholder
after July 31, 2000 upon sixty (60) days prior
written notice to CCL or IPL and the Put
Securities so desired to be sold shall be valued
as of the sixtieth (60th) day after such notice of
exercise is received by CCL or IPL; provided that
in such event the Optionholder is then an employee
of CCL and agrees to continue to remain a
full-time employee of CCL for a one (1) year
period following the notice of exercise upon the
same terms and conditions as contained in such
Optionholder's most recent employment agreement
with CCL. The closing of the purchase and sale of
the Put Securities shall take place as promptly as
practicable after the expiration of such one (1)
year employment period (but in any event within
five (5) days thereafter) at such place, time and
date as CCL or IPL, as the case may be, shall
notify the selling Optionholder in writing.
CCL agrees that during the period commencing upon its receipt of
a notice of exercise of the Put from an Optionholder until the valuation of the
Put Securities so desired to be sold, it shall continue to operate its business
in the ordinary course, except as otherwise reasonably required.
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(b) Notwithstanding the foregoing, the Put shall become
immediately exercisable upon ten (10) days written notice to CCL or IPL upon a
Change in Control (as hereinafter defined) of CCL. The Put Securities so desired
to be sold shall be valued as of the tenth (10th) day after such notice of
exercise is received by CCL or IPL, as the case may be. A Change in Control
shall be deemed to occur upon any of the following (provided, however, that the
provisions of clause (iii) below shall no longer apply and be deemed a Change in
Control upon consummation of a public offering of securities of CCL):
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, (the "Exchange Act"), other than
International Post Limited ("IPL") or any of its
affiliates or subsidiaries, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of CCL representing fifty percent (50%)
or more of the combined voting power of CCL's then
outstanding securities;
(ii) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act, other than
IPL or any of its affiliates or subsidiaries,
acquires, directly or indirectly, substantially
all of the assets of CCL;
(iii)SW and MR (or their designees) cease to
constitute 40% of the Managers of CCL or designees
of IPL or any of its affiliates or subsidiaries
cease to constitute 60% of the current Managers of
CCL, in each case other than as specifically
provided in the Operating Agreement of CCL; or
(iv) the members of CCL or the shareholders of MTE
approve a merger or consolidation of CCL with any
other entity, other than a merger or consolidation
which would result in the voting securities of CCL
outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or
by being converted into voting securities of the
surviving entity) more than eighty percent (80%)
of the combined voting power of the voting
securities of CCL or such surviving entity
outstanding immediately after such merger or
consolidation.
(c) Notwithstanding anything contained herein to the contrary,
CCL shall have the right to restrict the Optionholders' exercise of the Put for
a one hundred and twenty (120) day period (the "Restricted Period") in any
consecutive three hundred and sixty five (365) day period upon prior written
notice by CCL for any reason. In the event that an Optionholder exercises the
Put
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within ten (10) days after the expiration of the Restricted Period, the date the
Optionholder specifies in such notice as the date during the Restricted Period
that CCL or IPL would have otherwise received a notice of exercise if not for
such exercise restriction will be deemed such date of receipt for valuation and
closing purposes in accordance with Sections 3(a) and (b).
4. Closing.
At the closing, (a) CCL or IPL, as the case may be, shall pay to
the selling Optionholder the Purchase Price by wire transfer of immediately
available funds to an account designated by the selling Optionholder or by check
payable to the selling Optionholder, and (b) the selling Optionholder shall
deliver to CCL or IPL, as the case may be, any certificates representing the Put
Securities so purchased and sold, duly endorsed or accompanied by applicable
instruments of transfer, free and clear of any liens, charges, pledges, security
interests, voting or stockholders agreements or encumbrances. In the event that
the Purchase Price to be paid to the selling Optionholder is equal to $1 million
or more, the Purchase Price shall be payable over five (5) years in five (5)
equal installments payable on the anniversary date of the closing, together with
interest thereon at the rate of 8% per annum (calculated on the basis of a
360-day year consisting of twelve 30-day months); provided, however, that each
minimum installment payment shall be equal to the lesser of $1 million or the
remaining unpaid purchase price, plus applicable interest.
5. Miscellaneous.
(a) Section headings contained in this Agreement are included for
convenience only and shall not affect the interpretation of any provisions of
this Agreement.
(b) Any notice, demand, request, waiver, or other communication
under this Agreement shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given (i) on the date of service
if personally served, (ii) on the third day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid or (iii) on the date sent if sent by facsimile, to
the parties at the following addresses or facsimile numbers (or at such other
address or facsimile number for a party as shall be specified by like notice):
If to the Optionholders, to:
Cognitive Communications, Inc.
0 Xxxxxxx Xxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxx 00000
Fax No.:
with a copy to:
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Xxxxxxx, Xxxxxxxx & Kotel
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
If to CCL or IPL, to:
Cognitive Communications, LLC
c/o International Post Limited
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Fax No.: (000) 000-0000
with a copy to:
Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Except as
otherwise expressly set forth in this Agreement, the rights of the Optionholders
shall not be assignable or transferable.
(d) This Agreement shall be construed in accordance with, and
governed by, the internal laws of the State of New York as applied to contracts
made and to be performed entirely within the State of New York. Any legal
action, suit or proceeding arising out of or relating to this Agreement may be
instituted in any state or federal court located within the County of New York,
State of New York, and each party hereto agrees not to assert, by way of motion,
as a defense, or otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such court, that the
action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such court. Each party hereto
further irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding.
(e) This Agreement, including the Exhibits and Schedules hereto,
sets forth the entire understanding and agreement of the parties with respect to
their subject matter and supersede any and all prior understandings,
negotiations or agreements among the parties hereto, both written and oral, with
respect to such subject matter.
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(f) This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which together shall constitute a single
agreement.
(g) In the event that any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, in whole or in part, the validity of the remaining
provisions shall not be affected and the remaining portion of any provision held
to be invalid, illegal or unenforceable shall in no way be affected, prejudiced
or disturbed thereby.
(h) This Agreement may be amended or modified only by written
agreement executed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
-----------------------------
Xxxxxxx X. Xxxxxx
Vice President and Chief Financial Officer
INTERNATIONAL POST LIMITED
By:
-----------------------------
Xxxxxxx X. Xxxxxx
Executive Vice President
and Chief Financial Officer
-----------------------------
Xxxxx Xxxxxx
-----------------------------
Xxxxxxx Xxxxxxx
-----------------------------
Xxxxx Xxxxxx
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