Exhibit 10.10
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UNITED INDUSTRIES CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered
into as of January 20, 1999, by and between UNITED INDUSTRIES CORPORATION, a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxx ("Optionee")
pursuant to the United Industries Corporation 1999 Stock Option Plan (the
"Plan"). The Company and Optionee are referred to collectively herein as the
"Parties." Capitalized terms used but not defined herein shall have the meaning
set forth in the Plan.
Simultaneously with the execution of this Agreement, the
parties hereto have executed a Management Agreement, dated as of the date hereof
(the "Management Agreement"), to which this Agreement is attached as Annex A.
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Options and Effective Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to
the Plan an option (the "Option") to purchase all or any
part of an aggregate of 300,000 shares (the "Class A
Shares") of the Company's Class A Voting Common Stock, par
value $0.01 per share, and 300,000 shares (the "Class B
Shares" and, together with the Class A Shares
(the "Shares")) of the Company's Class B Non-Voting Common
Stock, par value $0.01 per share (collectively, "Common
Stock"), on the terms and conditions set forth herein and
in the Plan as in effect on the Grant Date (as defined
below), the terms of which are incorporated herein by
reference.
1.2 Grant Date. The Grant Date of this Option is January 20,
1999 (the "Grant Date").
2. Exercise Price. The exercise price for the Shares of Common Stock
covered by this Option shall be $5.00 per share (the "Exercise
Price").
3. Adjustment and Termination of Options. Subject to the restrictions,
and under the circumstances described, in the Plan and this
Agreement, the Company shall adjust the number and kind of Shares and
the Exercise Price thereof, and this Option shall be terminated in
certain circumstances, in accordance with the provisions of the Plan.
4. Exercise of Options.
4.1 When Exercisable.
(a) Rate of Exercise for 5-Year Options. Optionee's
right to exercise this Option as to 200,000 of
the Shares (100,000 Class A Shares and 100,000
Class B Shares) subject thereto (the "5 Year
Options") shall vest ratably over
the five (5) year period commencing on the
Grant Date in accordance with the following
schedule if (but only if) Optionee is employed
by the Company or any of its Subsidiaries as of
each such date:
Cumulative Shares of
Date 5 Year Option Vested
---- --------------------
1st Anniversary of Grant Date 40,000
2nd Anniversary of Grant Date 80,000
3rd Anniversary of Grant Date 120,000
4th Anniversary of Grant Date 160,000
5th Anniversary of Grant Date 200,000;
provided that if Optionee's employment by the Company terminates by virtue of
the expiration of the "Term" (as defined in the Management Agreement) (i.e.,
Optionee's employment terminates due to the passage of the date referenced in
Section 2(a)(i) thereof (as extended pursuant to the provision in such Section
2(a)) as opposed to any termination by the Company or Optionee or by virtue of
Optionee's death or disability), then Optionee shall be credited with an
additional 21 days of vesting (for example, if Optionee's employment with the
Company terminates as described above on December 31, 2001, the 5 Year Options
will vest through January 20, 2002). Notwithstanding any provision to the
contrary in this Section 4.1(a), but subject to the other restrictions in the
Plan and this Agreement, in the event of a Sale (as defined below) prior to
December 31, 2003, the 5 Year Options shall become vested and immediately
exercisable.
(b) Rate of Exercise on TARSAP Options.
(i) Optionee shall not be vested with the right
to exercise this Option with respect to 400,000 of the
Shares (200,000 Class A Shares and 200,000 Class B Shares)
(the "TARSAP Shares") subject thereto (the "TARSAP
Options") until ten (10) years after the Grant Date, at
which time Optionee shall acquire the vested right to
exercise the TARSAP Options and purchase one hundred
percent (100%) of the TARSAP Shares if (but only if)
Optionee is an employee of the Company or any of its
Subsidiaries as of such date.
(ii) Acceleration of TARSAP Options.
Notwithstanding the foregoing, if on and after the
publication of each written determination by the Board of
Directors of the Company (the "Board") or a committee
thereof which is authorized to do so that the Company has
met at least ninety percent (90%) of its objective for
EBITDA (as defined below) (100% of the Company's objective
referred to herein as the "Performance Goals") with
respect to any fiscal year commencing with the fiscal year
ending December 31, 1999 and continuing for each of the
four fiscal years thereafter (which Performance Goals are
set forth on Annex I attached hereto), then (subject to
the other restrictions in the Plan
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and this Agreement), Optionee shall acquire the vested
right to exercise the TARSAP Options to purchase ten
percent (10%) of the TARSAP Shares, and for each
additional one percent (1%) achievement over ninety
percent (90%) of the Performance Goals for any such fiscal
year, as so determined, Optionee shall acquire the vested
right to exercise the TARSAP Options to purchase an
additional one percent (1%) of the TARSAP Shares, but no
more than twenty percent (20%) of the TARSAP Shares in
respect of each full fiscal year. Additionally, on and
after publication of a written determination by the Board
or a committee thereof which is authorized to do so that
the Company has met at least eighty seven and one-half
percent (87.5 %) of its Performance Goals for the fiscal
year ending December 31, 2003 and at least ninety percent
(90%) of its cumulative Performance Goals for the five
fiscal years ending December 31, 2003 ("Five Year
Performance Goals"), then subject to the other
restrictions in the Plan and this Agreement, (i) Optionee
shall acquire the vested right to exercise the TARSAP
Options to purchase fifty percent (50%) of the TARSAP
Shares as to which Optionee had not otherwise acquired the
vested right to exercise, and (ii) for each additional one
percent (1%) achievement over ninety percent (90%) of the
Five Year Performance Goals, as so determined, Optionee
shall acquire the vested right to exercise this TARSAP
Option to purchase an additional five percent (5%) of the
TARSAP Shares as to which Optionee has not otherwise
acquired the vested right to exercise (such additional
exercise rights pursuant to clauses (i) and (ii) above are
referred to herein as the "Additional Exercise Rights").
Such determinations shall be made by the Board or such
committee within ten (10) days after receipt of audited
financial statements for each fiscal year. The Board's or
committee's determination as to whether the Company has
met such objectives shall be final and not subject to
dispute. In addition, the Board or a committee thereof
shall have complete discretion to modify such objectives
from time to time for any year or years to reflect
business combinations or dispositions, fiscal year
changes, purchases or sales of assets or any other
circumstances the Board or committee thereof deems
relevant. For purposes hereof, "EBITDA" shall mean
earnings before interest, taxes, depreciation and
amortization, excluding any non-recurring or extraordinary
items, as determined in accordance with generally accepted
accounting principles, consistently applied.
(iii) Acceleration Upon Sale. Notwithstanding
any provision to the contrary in this Section 4.1(b), but
subject to the other restrictions in the Plan and this
Agreement, in the event of a Sale (as defined below) prior
to December 31, 2003, the TARSAP Options shall become
vested and immediately exercisable to the extent set forth
below. On and after publication of a written determination
by the Board or a committee thereof which is authorized to
do so that the Company has met at least eighty seven and
one-half percent (87.5 %) of its Performance Goals for the
last twelve (12) full months and at least ninety percent
(90%) of its cumulative Performance Goals for the
completed fiscal years (if any) and the Interim Period (as
defined below) (based on months elapsed), the Board or
such committee shall treat the percentage of cumulative
Performance Goals achieved through the completed fiscal
years (if any) and Interim Period as the percentage of
Five Year Performance Goals achieved and on that basis
shall determine the Additional Exercise Rights with
respect to all 400,000 TARSAP Options as to which Optionee
had not otherwise acquired the vested right to exercise
consistent with the method set forth in the second
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sentence of Section 4.1(b)(ii) above. The percentage of
Five Year Performance Goals for such period shall be
computed by dividing (i) the sum of EBITDA achieved for
the completed fiscal years (if any) and the Interim Period
by (ii) the annual Performance Goals for the completed
fiscal years (if any) and the monthly Performance Goals
for the Interim Period. For purposes hereof, the term
"Interim Period" shall mean the period beginning on the
first day of the then current fiscal year and ending on
the last full month of that uncompleted fiscal year.
For purposes hereof, the term "Sale" shall mean:
(w) the acquisition by any individual, entity
or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of (a) the
Company or (b) the surviving entity in any reorganization,
merger or consolidation (each an "Acquisition") involving
the Company (any such entity referred to herein as the
"Corporation") where such Acquisition causes such Person
to own more than fifty percent (50%) of the combined
voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election
of directors, other than acquisitions by the Xxxxxx X. Xxx
Company or its affiliates;
(x) approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company;
(y) the acquisition by a third party not
affiliated with the Company of all or substantially all of
the Company's assets; or
(z) individuals who constitute the Board on the
date of the Company's initial public sale of equity
securities registered under the Securities Act (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board thereafter. Any person
becoming a director subsequent to such date whose,
election, or nomination for election, is, at any time,
approved by a vote of at least a majority of the directors
comprising the Incumbent Board shall be considered a
member of the Incumbent Board.
The accelerated vesting provided in this Section
4.1(b)(iii) shall take effect immediately prior to but contingent upon the Sale
giving rise to such accelerated vesting. The phrase "immediately prior to the
Sale" shall be understood to mean sufficiently in advance of a Sale to permit
the Optionee to take all steps reasonably necessary to permit the Optionee to
become a shareholder of the Company as of the consummation of such Sale with
respect to the TARSAP Shares subject to the accelerated vesting provided in this
Section 4.1(b)(iii). The Board or committee thereof may in good faith shorten
the Interim Period or make approximations of EBITDA during the Interim Period in
order to comply with the preceding sentence.
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(c) Partial Exercise. Subject to the other
restrictions in the Plan and this Agreement, the
Options may be exercised for all or a part of the
Shares with respect to which each Option is
exercisable under Section 4.1(a) and (b) above.
4.2 Method of Exercise; Stockholders Agreement. Subject to
Section 4.1 and the other restrictions in the Plan and this
Agreement, Options are exercisable from time to time by
Optionee, who shall complete, execute and deliver to the
Company a Form of Exercise and Stock Transfer Power
substantially in the form attached hereto or in such other
form as the Company may require. Except as otherwise
permitted by Section 6(d) of the Plan, such notice shall be
accompanied by payment in full for the Shares to be
purchased. Payment of the Exercise Price may be made: (i)
in cash, (ii) in shares of Common Stock which either (A)
were purchased by Optionee in other than a compensatory
transaction, (B) have been held by Optionee free and clear
for at least six (6) months prior to the use thereof to pay
part or all of the Exercise Price or (C) otherwise are
considered "mature" shares for purposes of generally
accepted accounting principles, as determined by the
Company's outside auditors, or (iii) so long as the Common
Stock is publicly traded, by delivery to the Committee of
irrevocable instructions to a stockbroker to deliver
promptly to the Company an amount of sale or loan proceeds
sufficient to pay a portion of the Exercise Price subject
to this clause (iii), or a combination of the methods
specified in clauses (i), (ii) and (iii), or in the sole
discretion of the Committee, through a cashless exercise
procedure. Optionee shall also execute and deliver to the
Company a copy of the Company's Stockholders Agreement,
dated as of January 20, 1999, in the form in effect at the
time of exercise (as amended and modified from time to
time, the "Stockholders Agreement"), if Optionee has not
previously done so. Upon due exercise of any Option and (if
required) execution and delivery of the Stockholders
Agreement, subject to the terms and conditions in this
Agreement, the Company shall issue in the name of Optionee
and deliver to Optionee a certificate for the Shares in
respect of which such Option shall have been exercised, but
no Shares will be issued until arrangements satisfactory to
Company have been made for appropriate income tax
withholding, if any, pursuant to Section 12 hereof.
4.3 Exercise After Termination of Employment; Termination of
Options.
(a) Definitions. For purposes of this Section 4.3,
the capitalized terms Good Reason, Cause, and
Disability shall have the meanings set forth in
the Management Agreement.
(b) Termination Without Good Reason. Upon any
termination of employment by Optionee without
Good Reason, the Options may, to the extent
exercisable and not terminated pursuant to
Section 4.3(e), be exercised only within thirty
(30) days after the date of such employment
termination. This Section 4.3(b) shall not,
however, extend the term of the Options beyond
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that specified in Section 4.3(e). For purposes
of this Section 4.3(b), the extent to which the
Options are exercisable shall be determined as
of the date of termination of employment.
(c) Termination by Virtue of Death or Disability or
Without Cause or With Good Reason. Upon any
termination of employment of Optionee by virtue
of Optionee's death or Disability or upon any
termination of employment by Optionee with Good
Reason, or by the Company without Cause, the
Options may, to the extent exercisable and not
terminated pursuant to Section 4.3(e), be
exercised only within twelve (12) months after
the date of such termination. This Section 4.3
(c) shall not extend the term of the Options
beyond that specified in Section 4.3(e). For
purposes of this Section 4.3(c), the extent to
which the Options are exercisable shall be
determined as of the date of termination of
employment.
(d) Termination for Cause. The Option shall
terminate immediately upon termination of the
employment of Optionee for Cause.
(e) Other Termination. The Options shall not be
exercisable after the earliest of (i) a Sale
(provided that Optionee has at least five (5)
business days prior to the Sale to exercise the
Options or the Options are treated as exercised
in connection with such Sale) or (ii) January
20, 2009.
(f) Company Repurchase; Extension of Exercise Period.
If Optionee properly elects to exercise all or
any portion of the Option following a termination
of Optionee's employment as described in Section
4.3(c) (a "Post-Termination Exercise"), at the
written request of Optionee delivered to the
Company prior to or simultaneously with the
attempted exercise of such Option, the Company
shall either:
(i) offer to purchase from Optionee, within
fifteen (15) days following its receipt of such request,
at a purchase price equal to Fair Market Value, such
portion of the Shares obtained by Optionee through the
Post-Termination Exercise having an aggregate Fair Market
Value equal to the excess of (A) Optionee's aggregate
federal, state and local income tax obligations in respect
of the Post-Termination Exercise over (B) any amounts
related to income tax previously withheld by the Company
with respect to such Post-Termination Exercise; or
(ii) extend the period during which Optionee
may exercise the Options specified in Optionee's notice
until the earlier of (A) such time as the Company elects
to comply with Section 4.3(f)(i), above (disregarding the
fifteen (15) day period referenced therein), and (B) such
time as the Shares to be received by Optionee upon the
exercise of the Options specified in Optionee's notice are
registered under the Securities Act and freely tradable.
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5. Non-transferability of Options. The Options shall not be transferable
or assignable except upon Optionee's death by will or the laws of
descent and distribution and shall be exercisable, during Optionee's
lifetime, only by Optionee.
6. Purchase for Investment; Other Representations of Optionee; Legends.
6.1 Investment Intent. As provided in the Plan, in the event
that the offering of Shares with respect to which the
Options are being exercised is not registered under the
Securities Act, but an exemption is available that requires
an investment representation or other representation,
Optionee, if electing to purchase Shares, will be required
to represent that such Shares are being acquired for
investment and not with a view to distribution thereof, and
to make such other reasonable and customary representations
regarding matters relevant to compliance with applicable
securities laws as are deemed necessary by counsel to the
Company. Stock certificates evidencing such unregistered
Shares that are acquired upon exercise of the Options shall
bear restrictive legends in substantially the following
form and such other restrictive legends as are required or
advisable under the provisions of any applicable laws or
are provided for in the Stockholders Agreement or any other
agreement to which Optionee is a party:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL
NOT BE TRANSFERRED AT ANY TIME IN THE ABSENCE OF (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES AT SUCH TIME, OR (II) AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL, TO
THE EFFECT THAT SUCH TRANSFER AT SUCH TIME WILL NOT VIOLATE THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
6.2 Other Representations. Optionee hereby represents and
warrants to the Company as follows:
(a) Access to Information. Because of Optionee's
business relationship with the Company and with
the management of the Company, Optionee has had
access to all material and relevant information
concerning the Company, thereby enabling
Optionee to make an informed investment
decision with respect to his investment in the
Company, and all pertinent data and information
requested by Optionee from the Company or its
representatives concerning the business and
financial condition of the Company and the
terms and conditions of this Agreement have
been furnished. Optionee acknowledges that
Optionee has had the opportunity to ask
questions of and receive answers from and to
obtain additional information from the Company
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and its representatives concerning the present
and proposed business and financial condition
of the Company.
(b) Financial Sophistication. Optionee has such
knowledge and experience in financial and
business matters that Optionee is capable of
evaluating the merits and risks of investing in
the Shares.
(c) Understanding the Investment Risks. Optionee
understands that:
(i) An investment in the Shares
represents a highly speculative
investment, and there can be no
assurance as to the success of the
Company in its business; and
(ii) There is at present no market for
the Shares and there can be no
assurance that a market will develop
in the future.
(d) Understanding of the Nature of the Shares.
Optionee understands and agrees that:
(i) There can be no assurance that the
Shares will be registered under the
Securities Act or any state
securities laws and if they are not
so registered, they will only be
issued and sold in reliance upon
certain exemptions contained in the
Securities Act and applicable state
securities laws, and the
representations and warranties of
Optionee contained herein, which
will have to be renewed as to the
Shares at the times of exercise of
the Options, are essential to any
claim of exemption by the Company
under the Securities Act and such
state laws;
(ii) If the Shares are not so registered,
the Shares will be "restricted
securities" as that term is defined
in Rule 144 promulgated under the
Securities Act;
(iii) The Option cannot be exercised and
the Shares will not be sold to
Optionee and Optionee cannot resell
or transfer the Shares without
registration under the Securities
Act and applicable state securities
laws unless the Company receives an
opinion of counsel acceptable to it
(as to both counsel and the opinion)
that such registration is not
necessary, the cost of such opinion
to be borne by the Company;
(iv) Only the Company can register the
Shares under the Securities Act and
applicable state securities laws;
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(v) The Company has not made any
representations to Optionee that the
Company will register the Shares
under the Securities Act or any
applicable state securities laws, or
with respect to compliance with any
exemption therefrom;
(vi) Optionee is aware of the conditions
for Optionee's obtaining an
exemption for the resale of the
Shares under the Securities Act and
any applicable state securities
laws; and
(vii) The Company may, from time to time,
make stop transfer notations in its
transfer records to ensure
compliance with the Securities Act
and any applicable state securities
laws, and any additional
restrictions imposed by state
securities administrators.
(e) Investment Intent. Optionee acknowledges that:
(i) Optionee is acquiring the Option for
Optionee's own account and not on
behalf of any other person;
(ii) Optionee is acquiring the option for
investment and not with a view to
distribution or with the intent to
divide Optionee's participation with
others or resell or otherwise
distribute the Options or the
Shares;
(iii) Neither Optionee nor anyone acting
on Optionee's behalf has paid or
will pay a commission or other
remuneration to any person in
connection with the acquisition of
the Options or the Shares; and
(iv) At the time of exercise of any
Option, Optionee will have to make
all the representations and
warranties contained in this Section
6 with respect to the Shares to be
issued and other representations
concerning investment intent as a
condition of the issuance of the
Shares by the Company.
7. Restriction on Issuance of Shares. The Company shall not be obligated
to sell or issue any Shares pursuant to this Agreement if such
issuance would result in the violation of any laws, including the
Securities Act or any applicable state securities laws. The Company
agrees to use its reasonable best efforts to qualify for available
exemptions under the Securities Act or any applicable state
securities laws which will enable it to issue Shares hereunder in
compliance with applicable law.
8. Rights as a Shareholder. Optionee shall have no rights as a
shareholder with respect to any Shares covered by the Options until
the date of exercise and payment of the Exercise Price in accordance
with the terms of this Agreement. Subject to Section 3 hereof, no
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adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
9. No Employment Rights. This Agreement shall not confer upon Optionee
any right with respect to the continuance as an employee of the
Company or any Subsidiary, nor shall it interfere in any way with the
right of the Company or any Subsidiary to terminate such employment
at any time.
10. Governing Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by, and construed in accordance with, the laws of the State
of Delaware, without giving effect to any choice of law or conflict
of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Delaware.
11. Notices. All notices and other communications under this Agreement
shall be in writing, and shall be deemed to have been duly given on
the date of delivery if delivered personally or when received if
mailed to the party to whom notice is to be given, by certified mail,
return receipt requested, postage prepaid, or by reputable overnight
courier service (charges prepaid), or transmitted by facsimile with
answer-back confirmation to the following address, or any other
address specified, by notice duly given:
To Optionee at: Xxxxxxx X. Xxxxxxx
0000 Xxxxxxxx Xxxxxx Xx.
Xxxxxxxxxxxx, XX 00000
To the Company at: United Industries Corporation
0000 Xxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
Attention: President
Telecopy: (000) 000-0000
12. Withholdings. Except to the extent prohibited by applicable law,
Optionee may satisfy any required withholding obligation upon the
exercise of an Option hereunder by either of the following methods,
or by a combination of such methods: (a) tendering a cash payment or
(b) delivering to the Company previously acquired Shares, or having
the Company withhold Shares otherwise deliverable upon the exercise
of an Option, in either case having an aggregate Fair Market Value,
determined as of the date the withholding obligation arises, less
than or equal to the amount of the total withholding obligation.
13. Pro Rata Exercise. The Shares of Common Stock covered by this Option
shall only be exercised, if at all, ratably among the Class A Shares
and Class B Shares, based on the
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aggregate number of Class A Shares and Class B Shares subject to the
Options granted hereunder.
14. Registration of Shares. At any time after UIC Holdings, L.L.C.,
together with its affiliates, holds less than 25% of the Common Stock
held by such entities as of the date hereof, Optionee shall have the
right to cause the Company to register all of the Shares on a Form
S-8, along with a Form S-3 reoffer prospectus, under the Securities
Act of 1933, as amended from time to time, or any successor form
thereto, and the Company shall use its reasonable best efforts to
comply with such request in a timely manner.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
UNITED INDUSTRIES CORPORATION
By
--------------------------
Name:
--------------------
Title:
--------------------
OPTIONEE:
-----------------------------
Xxxxxxx X. Xxxxxxx
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