Exhibit 10.11
SENIOR MANAGEMENT
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UNIT SUBSCRIPTION AGREEMENT
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THIS SENIOR MANAGEMENT UNIT SUBSCRIPTION AGREEMENT (this "Agreement") is
made as of November 20, 2003, by and among THL-MF Investors, LLC, a Delaware
limited liability company ("Investors") and Xxxxx Xxxx (the "Executive").
WHEREAS, the Executive is an employee and shareholder of M-Foods
Holding, Inc., a Delaware corporation (the "Company"), and one of several
persons who are or will be key employees of Investors or one or more of its
subsidiaries and who will hold interests in Investors (collectively with the
Executive, the "Management Investors");
WHEREAS, the Company entered into an Agreement and Plan of Merger with
THL Food Products Co., a Delaware corporation, ("Merger Sub") and a wholly owned
subsidiary of THL Food Products Holding Co. ("Holdings"), dated as of October
10, 2003, as amended from time to time in accordance with its terms (the "Merger
Agreement"), pursuant to which Merger Sub shall be merged with and into the
Company (the "Acquisition"), in accordance with the terms and conditions of the
Merger Agreement, and the surviving corporation shall be the Company;
WHEREAS, prior to the consummation of the transactions contemplated by
this Agreement and the Merger Agreement, the Executive is the record and
beneficial owner of the number of shares of the Company's common stock, par
value $0.01 per share (the "Shares"), set forth on Schedule I attached hereto;
WHEREAS, on the terms and subject to the conditions hereof and
pursuant to Section 721(a) of the Internal Revenue Code, the Executive also
desires to contribute the Shares or other consideration in exchange for
Investors' Class A Units (the "Class A Units"), Class B Units (the "Class B
Units") and Class C Units (the "Class C Units"), in each case in the amounts and
as set forth on Schedule I attached hereto.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions.
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1.1 Acquisition. The term "Acquisition" shall have the meaning set forth
in the preface.
1.2 Agreement. The term "Agreement" shall have the meaning set forth in
the preface.
1.3 Applicable Percentage. Except as provided otherwise in the next
sentence, the term "Applicable Percentage" shall mean: (i) 0% during the
one-year period commencing on the
Closing Date (ii) 20% during the one-year period commencing on the first
anniversary of the Closing Date; (iii) 40% during the one-year period commencing
on the second anniversary of the Closing Date; (iv) 60% during the one-year
period commencing on the third anniversary of the Closing Date; (v) 80% during
the one-year period commencing on the fourth anniversary of the Closing Date;
and (vi) 100% on and after the fifth anniversary of the Closing Date.
Notwithstanding the foregoing, (A) immediately prior to and after the occurrence
of a Sale of the Company, such Applicable Percentage shall mean 100%, and (B) in
the case of a termination of employment described in Section 5.2(a)(iii)(B),
such Applicable Percentage in clauses (i), (ii) and (iii) shall be 0%, and in
clauses (iv) and (v) and (vi) shall be 40%, 75% and 100%, respectively.
1.4 Board. The "Board" shall mean Investors' Management Committee.
1.5 Cause. The term "Cause" used in connection with the termination of
employment of the Executive shall have the same meaning ascribed to such term in
any employment or severance agreement then in effect between Executive and
Investors or one of its subsidiaries or, if no such agreement containing a
definition of "Cause" is then in effect, shall mean (i) the continued failure of
the Executive to perform substantially the Executive's duties with Investors or
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board which specifically
identifies the manner in which the Board believes that the Executive has not
substantially performed the Executive's duties; (ii) the willful engaging by the
Executive in illegal conduct or gross misconduct which is materially and
demonstrably injurious to Investors or one of its subsidiaries; or (iii)
conviction of a felony or guilty or nolo contendere plea by the Executive with
respect thereto.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of Investors or one of
its subsidiaries. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the instructions of
the Chief Executive Officer (while the Executive does not serve as such) or
based upon the advice of counsel for Investors shall be conclusively presumed to
be done, or omitted to be done, by the Executive in good faith and in the best
interests of Investors and its subsidiaries. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than 75% of the entire membership of the Board
(excluding the Executive) at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in (i), (ii) or (iii) above, and specifying the
particulars thereof in detail.
1.6 Change in Control. The term "Change in Control" means the
consummation of a transaction, whether in a single transaction or in a series of
related transactions that are consummated contemporaneously (or consummated
pursuant to contemporaneous agreements), with any other party or parties on an
arm's-length basis, pursuant to which (a) such party or parties, directly or
indirectly, acquire (whether by merger, stock purchase, recapitalization,
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reorganization, redemption, issuance of capital stock or otherwise) more than
50% of the voting stock of the Company, (b) such party or parties, directly or
indirectly, acquire assets constituting all or substantially all of the assets
of the Company and its subsidiaries on a consolidated basis, or (c) prior to an
initial public offering of the Company Common Stock pursuant to an offering
registered under the 1933 Act, THL cease to have the ability to elect, directly
or by virtue of their interests in Investors, a majority of the Board of
Directors of the Company.
1.7 Class A Units. The term "Class A Units" shall have the meaning set
forth in the preface.
1.8 Class B Units. The term "Class B Units" shall have the meaning set
forth in the preface.
1.9 Class C Units. The term "Class C Units" shall have the meaning set
forth in the preface.
1.10 Closing. The "Closing" for the sale and purchase of the Shares and
the contribution of Shares and other consideration in exchange for Units
hereunder shall occur immediately prior to the consummation of the Acquisition.
1.11 Closing Date. The term "Closing Date" shall mean the date on which
the Closing occurs.
1.12 Company. The term "Company" shall have the meaning set forth in the
preface.
1.13 Cost. The term "Cost" shall mean, with respect to Units, the cash or
fair market value of property per unit contributed by the Executive (as
proportionately adjusted for all subsequent distributions of units and other
recapitalizations).
1.14 Disability. The term "Disability" used in connection with the
termination of employment of the Executive shall have the same meaning ascribed
to such term in any employment or severance agreement then in effect between
Executive and Investors or one of its subsidiaries or, if no such agreement
containing a definition of "Disability" is then in effect, shall mean a
determination by the Company in its sole discretion that Executive is unable to
perform his job responsibilities as a result of chronic illness, physical,
mental or any other disability for a period of six months or more.
1.15 Employee and Employment. The term "employee" shall mean any employee
(as defined in accordance with the regulations and revenue rulings then
applicable under Section 3401(c) of the Internal Revenue Code of 1986, as
amended) of Investors or any of its subsidiaries, and the term "employment"
shall include service as a part- or full-time employee to Investors or any of
its subsidiaries.
1.16 Executive. The term "Executive" shall have the meaning set forth in
the preface.
1.17 Executive Group. The term "Executive Group" shall have the meaning
set forth in Section 5.2(a).
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1.18 Fair Market Value. The term "Fair Market Value" used in connection
with the value of Units shall mean the fair value of the Units determined in
good faith by the Board (without taking into account the effect of any
contemporaneous repurchase of Units at less than Fair Market Value under Section
6); provided that, with respect to its calculation of the Fair Market Value of
any class of Units, the Board shall assume, as of such calculation date, the
sale of all of the assets of Investors at fair value and the distribution of the
proceeds resulting therefrom in accordance with the distribution provisions set
forth in the LLC Agreement; provided further that if the Executive disagrees in
good faith with the Board's determination, the Executive shall promptly notify
the Company in writing of such disagreement, in which event an independent
appraiser, accountant or investment banking firm (the "Arbiter") selected by
mutual agreement of the Executive and the Board shall make a determination of
the fair market value thereof (disregarding any discount for minority interest
or marketability of units and assuming the prior conversion, exercise or
exchange of all securities convertible into or exchangeable or exercisable for
Units) solely by (i) reviewing a single written presentation timely made by each
of the Company and the Executive setting forth their respective resolutions of
the dispute and the bases therefor and (ii) accepting either the Executive's or
the Company's proposed resolution of the dispute. Promptly following the
Company's receipt of Executive's written notice of disagreement, the Company
shall make available to Executive all data (including reports of employees and
outside advisors) relied upon by the Board in making its determination. The
Executive's and the Company's written presentations must be submitted to the
Arbiter within 30 days of the Arbiter's engagement. The Arbiter shall notify the
Executive and the Company of its decision within 40 days of its engagement. The
party whose proposed resolution is not accepted shall pay all of the Arbiter's
fees and expenses. If the Executive's proposed resolution is accepted, the
Company also shall pay all of the Executive's reasonable out-of-pocket fees and
expenses (including reasonable fees and expenses of counsel and one appraiser,
accountant or investment banking firm) incurred in connection with the
arbitration. Each of the Company and the Executive agrees to execute, if
requested by the Arbiter, a reasonable engagement letter with the Arbiter.
1.19 Financing Default. The term "Financing Default" shall mean any event
of default under (i) that certain Credit Agreement by and among Merger Sub,
Holdings and Bank of America, as administrative Agent, (ii) that certain Senior
Unsecured Term Loan Agreement by and among Merger Sub, Holdings and Bank of
America, as administrative agent and (iii) those certain 8.00% Senior
Subordinated Notes due 2013 in an aggregate principal amount of $150,000,000
issued on or about November 20, 2003, or any other similar notes or instruments
that Xxxxxxx Foods or its Subsidiaries may issue from time to time.
1.20 Good Reason. The term "Good Reason" shall have the same meaning
ascribed to such term in any employment or severance agreement then in effect
between Executive and Investors or one of its subsidiaries or, if no such
agreement containing a definition of "Good Reason" is then in effect, shall mean
(i) upon a Change in Control, the assignment to the Executive of any duties
inconsistent with the Executive's title and position (including status, offices
and reporting requirements), authority, duties or responsibilities, or any other
action by Investors or one of its subsidiaries (as applicable) which results in
a diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by Investors or one of its subsidiaries promptly
after receipt of notice thereof given by the Executive; provided that after a
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Change in Control, Investors or one of its subsidiaries (as applicable) shall
have the flexibility to appoint the Executive to a reporting relationship
different from that which existed prior to the Change in Control, to make an
immaterial change in Executive's duties, or to change the Executive's title;
(ii) any failure by Investors or one of its subsidiaries (as applicable) to
provide Executive with the annual base salary Executive had previously received
or the failure by Investors or one of its subsidiaries (as applicable) to
increase such annual base salary each year after a Change in Control by an
amount which at least equals on a percentage basis, the mean average percentage
increase in base salary for all employees similarly situated during the two full
calendar years immediately preceding a Change in Control, other than an
isolated, insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by Investors or one of its subsidiaries (as applicable)
promptly after receipt of notice thereof given by the Executive; (iii) the
failure of Investors or one of its subsidiaries (as applicable) upon a Change in
Control to (A) continue in effect any employee benefit plan, compensation plan,
welfare benefit plan or material fringe benefit plan in which Executive is
participating immediately prior to such Change in Control or the taking of any
action by Investors or one of its subsidiaries which would adversely affect
Executive's participation in or reduce Executive's benefits under any such plan,
unless Executive is permitted to participate in other plans providing Executive
with substantially equivalent benefits, or (B) provide Executive with paid
vacation in accordance with the most favorable past practice of Investors or one
of its subsidiaries as in effect for Executive immediately prior to such Change
in Control; (iv) after a Change in Control, any purported termination by
Investors or one of its subsidiaries of the Executive's employment otherwise
than for Cause, death or Disability; or (v) after a Change in Control, any
requirement that the Executive (A) be based anywhere more than 50 miles from the
office where the Executive is currently located or (B) travel on Investor or its
subsidiaries' business to an extent substantially greater than the Executive's
current travel obligations.
1.21 Investors. The term "Investors" shall have the meaning set forth in
the preface.
1.22 LLC Agreement. The term "LLC Agreement" shall mean the Amended and
Restated Limited Liability Company Agreement of Investors, dated as of November
20, 2003, entered into by and among the members of Investors, as amended from
time to time in accordance with its terms.
1.23 Management Investors. The term "Management Investors" shall have the
meaning set forth in the preface.
1.24 Merger Agreement. The term "Merger Agreement" shall have the meaning
set forth in the preface.
1.25 Merger Sub. The term "Merger Sub" shall have the meaning set forth in
the preface.
1.26 Permitted Transferee. The term "Permitted Transferee" means any
transferee of Units pursuant to clauses (e) or (f) of the definition of "Exempt
Transfer" as defined in the Securityholders Agreement.
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1.27 Person. The term "Person" shall mean any individual, corporation,
partnership, limited liability company, trust, joint stock company, business
trust, unincorporated association, joint venture, governmental authority or
other entity of any nature whatsoever.
1.28 Public Offering. The term "Public Offering" shall have the meaning
set forth in the Securityholders Agreement.
1.29 Retirement. The term "Retirement" shall mean, with respect to the
Executive, the Executive's retirement as an employee of Investors or any of its
subsidiaries on or after reaching age 65, or such earlier age as may be
otherwise determined by the Board, after at least three years employment with
Investors or any of its subsidiaries after the Closing Date.
1.30 Sale of the Company. The term "Sale of the Company" shall have the
meaning set forth in the Securityholders Agreement.
1.31 Securities Act. The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and all rules and regulations promulgated thereunder,
as the same may be amended from time to time.
1.32 Securityholders Agreement. The term "Securityholders Agreement" shall
mean the Securityholders Agreement dated as of the Closing Date, among
Investors, the Management Investors, and the other securityholders party
thereto, as it may be amended or supplemented thereafter from time to time.
1.33 Shares. The term "Shares" shall have the meaning set forth in the
preface.
1.34 THL. The term "THL" means, collectively Xxxxxx X. Xxx Equity Fund V,
L.P. and its affiliates.
1.35 Termination Date. The term "Termination Date" means the date upon
which Executive's employment with Investors and its subsidiaries is terminated.
1.36 Transaction Documents. The term "Transaction Documents" means,
collectively, (i) the LLC Agreement, (ii) the Securityholders Agreement, (iii)
the 2003 Xxxxxxx Foods Deferred Compensation Plan, (iv) each Unit Subscription
Agreement by and among Investors and each Management Investor, and (v) each of
the other agreements, documents and instruments executed in connection with the
Merger Agreement and the transactions contemplated thereby.
1.37 Units. The term "Units" shall mean the Class A Units, Class B Units,
Class C Units and any other class of equity securities issued by Investors,
whether pursuant to this Agreement or any other arrangement.
1.38 Unvested Percentage. The term "Unvested Percentage" shall mean the
result of one minus the Applicable Percentage.
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2. Contribution.
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2.1 Purchase and Sale. At closing, upon the terms and subject to the
conditions set forth in this Agreement, the Executive shall contribute the
Shares or other consideration as set forth on Schedule I attached hereto to
Investors in exchange for the Units set forth opposite the Executive's name on
Schedule I attached hereto. The Executive shall pay any purchase price payable
in cash with respect to the Units by check or wire transfer of immediately
available funds.
2.2 Section 83(b) Election. With respect to the Units received by
Executive, within 30 days after the Closing, Executive shall make a timely
election with the Internal Revenue Service under Section 83(b) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder in
the form of Exhibit A attached hereto.
3. Representations and Warranties of the Executive and Investors.
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3.1 Unit Purchase Representations of the Executive. The Executive
represents and warrants to Investors that the statements contained in this
Section 3.1 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date, with respect to himself:
(a) Power and Authority. The Executive has full power and authority
to execute and deliver this Agreement and perform his obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Executive, enforceable in accordance with its terms and
conditions. To the best of his knowledge, the Executive need not give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
(b) Noncontravention. To the best of his knowledge, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
the Executive is subject or conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Executive is a party or by which he is bound or to
which any of his assets is subject.
(c) Brokers' Fees. The Executive has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which Investors could
become liable or obligated.
(d) Capital Stock. The Executive holds of record and owns
beneficially the number of Shares set forth next to his name on Schedule I
attached hereto, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act, state securities laws, or other
Transaction Documents), taxes, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. In
the
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event the Executive owns the Shares in joint tenancy, the joint tenant of
the Executive has executed this Agreement on the signature page attached
hereto releasing any rights to the Shares and Executive has informed such
joint tenant of the transactions set forth in this Agreement. The Executive
is not a party to any option, warrant, purchase right, or other contract or
commitment that could require the Executive to sell, transfer, or otherwise
dispose of any capital stock of the Company (other than this Agreement).
Except as set forth in other Transaction Documents, the Executive is not a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Company. The Executive
acknowledges and represents that the Buyer (as defined in the Merger
Agreement) will not make any payment to Executive in connection with the
Shares subject to this Agreement and that such shares will be cancelled
upon consummation of the Acquisition.
3.2 Units Unregistered. The Executive acknowledges and represents that
Executive has been advised by Investors that:
(a) the offer and sale of the Units have not been registered under
the Securities Act;
(b) the Units must be held indefinitely and the Executive must
continue to bear the economic risk of the investment in the Units unless
the offer and sale of such Units are subsequently registered under the
Securities Act and all applicable state securities laws or an exemption
from such registration is available;
(c) there is no established market for the Units and it is not
anticipated that there will be any public market for the Units in the
foreseeable future;
(d) a restrictive legend in the form set forth below and the legends
set forth in Section 7.2(a) and (b) of the Securityholders Agreement shall
be placed on the certificates representing the Units:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN REPURCHASE OPTIONS AND OTHER PROVISIONS SET FORTH
IN A MANAGEMENT UNIT SUBSCRIPTION AGREEMENT BETWEEN THE
ISSUER AND THE EXECUTIVE DATED AS OF NOVEMBER 20, 2003, AS
AMENDED AND MODIFIED FROM TIME TO TIME, A COPY OF WHICH MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE"; and
(e) a notation shall be made in the appropriate records of Investors
indicating that the Units are subject to restrictions on transfer and, if
Investors should at some time in the future engage the services of a
securities transfer agent, appropriate stop-transfer instructions will be
issued to such transfer agent with respect to the Units.
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3.3 Representations of Investors. Investors represent to the Executive
that the statements contained in this Section 3.3 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date, with respect to itself:
(a) Organization and Power. Investors is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full power and authority to enter into this
Agreement and perform its obligations hereunder.
(b) Authorization. The execution, delivery and performance of this
Agreement by Investors and the consummation of the transactions
contemplated hereby by Investors have been duly and validly authorized by
all requisite limited liability company action on the part of Investors,
and no other proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement. This Agreement has
been duly executed and delivered by Investors, and this Agreement
constitutes a valid and binding obligation of Investors, enforceable in
accordance with its terms and conditions. Investors need not give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Investors is subject or
any provision of its charter or bylaws or conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which Investors is a party or by which it is bound or
to which any of its assets is subject.
(d) Investment. Investors are not acquiring the Shares with a view to
or for sale in connection with any distribution thereof within the meaning
of the Securities Act.
(e) Capitalization. All of the issued and outstanding Units have been
duly authorized and are validly issued. Except as set forth in the
Transaction Documents, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Investors to
issue, sell, or otherwise cause to become outstanding any of its Units.
Except as set forth in the Transaction Documents, there are no outstanding
or authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to Investors. Except as set forth in the
Transaction Documents, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital
stock of Investors.
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4. Covenants of the Executive and Investors.
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4.1 Covenants. The Executive and/or Investors each agree as follows with
respect to the period between the execution of this Agreement and the Closing:
(a) General. The Executive and Investors each will use his or its
commercially reasonable efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective
the transactions contemplated by this Agreement (including satisfaction,
but not waiver, of the closing conditions set forth in Section 5 below).
(b) Notification. Each of the parties hereto shall disclose to the
other parties hereto in writing any material breach by such party of the
representations and warranties of such party contained in Section 3 hereof
promptly upon discovery thereof.
5. Certain Sales Upon Termination of Employment.
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5.1 Put Option.
(a) If the Executive's employment with Investors and its subsidiaries
terminates due to the Disability, death or Retirement of the Executive
prior to the earlier of (i) a Public Offering or (ii) a Sale of the
Company, for any Units issued 181 days or more prior to the date of
termination of employment of the Executive, within 120 days after such date
of termination of employment (or in the case of any Unit issued 180 days or
less prior to such date of termination or at any time after such date of
termination of employment, no earlier than 181 days and no later than 271
days after the date of issuance of such Units), the Executive shall have
the right, subject to the provisions of Section 6 hereof, to sell to
Investors, and Investors shall be required to purchase (subject to the
provisions of Section 6 hereof), on one occasion from the Executive and his
Permitted Transferees, if applicable, all (but not less than all) of the
number of Units then held by the Executive and such other number of Units
held by the Executive's Permitted Transferees as the Executive may request
(x) if such termination occurs prior to the date which is 18 months from
the date of this Agreement the purchase price per Unit shall be the greater
of (1) the Fair Market Value (measured as of the Termination Date) and (2)
the Cost of such Units and (y) if such termination occurs after the date
which is 18 months from the date of this Agreement the purchase price per
Unit shall be the Fair Market Value (measured as of the Termination Date)
of such Units.
(b) If the Executive desires to exercise its option to require
Investors to repurchase Units pursuant to Section 5.1(a), the Executive
shall send one written notice to Investors setting forth the intention of
Executive and Permitted Transferees, if applicable, to collectively sell
all Units pursuant to Section 5.1(a) within the period described above,
which notice shall specify the number and class of Units to be sold and
shall include the signature of the Executive and each Permitted Transferee
desiring to sell Units. Subject to the provisions of Section 6.1, the
closing of the purchase shall take place at the principal office of
Investors on the later of the 30th day after the giving of such notice and
the date that is 10 business days after the final determination of Fair
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Market Value. Subject to the provisions of Section 6.1, the Executive shall
deliver to Investors duly executed instruments transferring title to the
Units to Investors, against payment of the appropriate purchase price by
cashier's or certified check payable to the Executive or by wire transfer
of immediately available funds to an account designated by the Executive.
5.2 Call Options.
(a) If the Executive's employment with Investors or any of its
subsidiaries terminates for any of the reasons set forth in clauses (i),
(ii) or (iii) below prior to a Sale of the Company, or if the Executive
engages in Competitive Activity (as defined in Section 7.1 of this
Agreement), for any Units issued 181 days or more prior to the date of
Executive's termination of employment or engagement in Competitive
Activity, within 120 days after such date (or in the case of Units issued
180 days or less prior to such date or at any time after such date, no
earlier than 181 days and no later than 271 days after the date of issuance
of such Units), Investors shall have the right and option to purchase, and
the Executive and the Executive's Permitted Transferees (hereinafter
referred to as the "Executive Group") shall be required to sell to
Investors, any or all of such Units then held by such member of the
Executive Group after taking into account Units put to Investors under
Section 5.1 of this agreement (it being understood that if Units of any
class subject to repurchase hereunder may be repurchased at different
prices, Investors may elect to repurchase only the portion of the Units of
such class subject to repurchase hereunder at the lower price), at a price
per unit equal to the applicable purchase price determined pursuant to
Section 5.2(c):
(i) if the Executive's active employment with Investors and its
subsidiaries is terminated due to the Disability, death or Retirement
of the Executive;
(ii) if the Executive's active employment with Investors and its
subsidiaries is terminated by Investors and its subsidiaries without
Cause or by the Executive for Good Reason;
(iii) if the Executive's active employment with Investors and its
subsidiaries is terminated (A) by Investors or any of its subsidiaries
for Cause or (B) by the Executive for any other reason not set forth
in Section 5.2(a)(i) or Section 5.2(a)(ii);
provided that Investors' rights under this Section 5.2(a) shall not be available
in the event of the termination of Executive's employment by Investors or its
subsidiaries without Cause or by Executive for Good Reason, in either case
following a sale by Investors or its subsidiaries of substantially all of the
line of business in which Executive primarily performs his services.
(b) If Investors desire to exercise one of its options to purchase
Units pursuant to this Section 5.2, Investors shall, not later than the
expiration of the applicable period described for such purchase in Section
5.2(a), send written notice to each member of the Executive Group of its
intention to purchase Units, specifying the number of Units
11
to be purchased (the "Call Notice"). Subject to the provisions of Section
6, the closing of the purchase shall take place at the principal office of
Investors on the later of the 60th day after the giving of the Call Notice
and the date that is 10 business days after the final determination of Fair
Market Value. Subject to the provisions of Section 6.1, the Executive shall
deliver to Investors duly executed instruments transferring title to units
to Investors, against payment of the appropriate purchase price by
cashier's or certified check payable to the Executive or by wire transfer
of immediately available funds to an account designated by the Executive.
(c) In the event of a purchase by Investors pursuant to Section
5.2(a), the purchase price shall be (in each case after taking account of
any prior purchases pursuant to Section 5.2(a)):
(i) if the Executive engages in any Competitive Activity (as
defined in Section 7.1 of this Agreement), a price per unit equal to
the lesser of (A) Fair Market Value (measured as of the Activity Date
(as defined in Section 7.2 of this Agreement)) and (B) Cost;
(ii) in the case of a termination of employment described in
Section 5.2(a)(i) or Section 5.2(a)(ii), (x) if such termination
occurs prior to the date 18 months from the date of this Agreement,
the purchase price for each Unit shall be the greater of (1) the Fair
Market Value (measured as of the date of the Call Notice) and (2) the
Cost of such Unit, and (y) if such termination occurs after the date
which is 18 months from the date of this Agreement, the purchase price
for each Unit shall be the Fair Market Value of such Unit (measured as
of the date of the Call Notice);
(iii) in the case of a termination of employment described in
Section 5.2(a)(iii)(B), (i) if the number of Units to be purchased
from the Executive Group by Investors is less than or equal to the
total number of Units of such Class held by the Executive Group
multiplied by the Unvested Percentage of such class, the purchase
price for each Unit shall be the lesser of (x) the Fair Market Value
(measured as of the date of the Call Notice) and (y) the Cost of such
Unit (the "Unvested Unit Purchase Price"), and (ii) if the number of
such Units exceeds the Unvested Percentage of such class, the purchase
price for each Unit shall be (A) for a number of Units of such class
equal to the product of (x) the Unvested Percentage and (y) the total
number of Units of such class held by the Executive Group, the
Unvested Unit Purchase Price, and (B) for the remainder of the Units
of such class being repurchased, the Fair Market Value of such Unit
(measured as of the date of the Call Notice); and
(iv) in the case of a termination of employment described in
Section 5.2(a)(iii)(A), a price per unit equal to the lesser of (A)
Fair Market Value (measured as of the date of the Call Notice) and (B)
Cost.
Notwithstanding anything to the contrary contained in this Agreement, if
the Fair Market Value of Units subject to a Call Notice is finally determined to
be an amount at least 10% greater
12
than the per Unit repurchase price for such Unit in the Call Notice, Investors
shall have the right to revoke the exercise of its option pursuant to this
Section 5.2 for all or any portion of the Units elected to be repurchased by it
by delivering notice of such revocation in writing to the Executive Group during
the ten-day period beginning on the date that Investors is given written notice
that the Fair Market Value of a Unit was finally determined to be an amount at
least 10% greater than the per Unit repurchase price set forth in the Call
Notice.
Notwithstanding anything in this Section 5.2 to the contrary, in the event
that Investors purchases Units at Fair Market Value pursuant to the terms of
this Section 5.2 and within six months of the date of the determination of such
Fair Market Value both (A) a Sale of the Company or a Public Offering occurs and
(B) in connection with such transaction, the per share value of the Units
exceeds the per share purchase price paid by Investors to Executive under this
Section 5.2, the Executive shall be entitled to receive from Investors the
benefit of such higher valuation for the Units purchased. The excess of (x) the
net proceeds which the Executive would have received in such Sale of the Company
or Public Offering from the sale in such transaction of all Units repurchased by
Investors under this Section 5.2, less (y) the amount which the Executive
received from the purchase of such Units by Investors, shall be paid by
certified or cashier's check or wire transfer of funds to Executive upon
consummation of such transaction; provided that, Executive shall have no rights
under this paragraph if, in connection with the determination of Fair Market
Value of the repurchased Units, the Arbiter was used.
5.3 Obligation to Sell Several. If there is more than one member of the
Executive Group, the failure of any one member thereof to perform its
obligations hereunder shall not excuse or affect the obligations of any other
member thereof, and the closing of the purchases from such other members by
Investors shall not excuse, or constitute a waiver of its rights against, the
defaulting member.
6. Certain Limitations on Investors' Obligations to Purchase Units.
---------------------------------------------------------------
6.1 Payment for Units. If at any time Investors elects or is required to
purchase any Units pursuant to Section 5, Investors shall pay the purchase price
for the Units it purchases (i) first, by offsetting indebtedness, if any, owing
from the Executive to Investors (which indebtedness shall be applied pro rata
against the proceeds receivable by each member of the Executive Group receiving
consideration in such repurchase) and (ii) then, by Investors' delivery of a
check or wire transfer of immediately available funds for the remainder of the
purchase price, if any, against delivery of the certificates or other
instruments representing the Units so purchased, duly endorsed; provided that if
such cash payment would result (A) in a violation of any law, statute, rule,
regulation, policy, order, writ, injunction, decree or judgment promulgated or
entered by any federal, state, local or foreign court or governmental authority
applicable to Investors or any of its subsidiaries or any of its or their
property or (B) after giving effect thereto, a Financing Default, or (C) if the
Board determines in good faith that immediately prior to such purchase there
shall exist a Financing Default which prohibits such purchase, dividend or
distribution ((A) through (C) collectively the "Cash Deferral Conditions"), the
portion of the cash payment so affected may be made by Investors' delivery of
preferred units of Investors with a liquidation preference equal to the balance
of the purchase price; which preferred units shall accrue yield annually at the
"prime rate" published in The Wall Street Journal on the date of issuance, which
yield shall be payable at maturity or upon payment of distributions by Investors
13
(other than tax distributions). Each such preferred unit shall as of its
issuance be deemed to have basic contributions made with respect to such unit
equal to (A) the portion of the cash payment paid by the issuance of such
preferred units divided by (B) the number of preferred units so issued in the
repurchase. Any such preferred units issued shall be promptly redeemed (i) when
the Cash Deferral Condition which prompted their issuance no longer exists, (ii)
upon consummation of an IPO of the Company or Holdings (or their successors) (to
the extent allowed by the underwriters of such IPO), or (iii) upon a Sale of the
Company from net cash proceeds, if any, payable to Investors or its unitholders;
to the extent that sufficient net cash proceeds are not so payable, the
preferred units shall be cancelled in exchange for such non-cash consideration
received by unitholders in the Sale of the Company having a fair market value
equal to the principal of and accrued yield on the preferred units. If a yield
is required to be paid on any preferred units prior to maturity and any Cash
Deferral Conditions exist, such yield may be cumulated and accrued until and to
the extent that such prohibition no longer exists.
7. Noncompetition.
--------------
7.1 Competitive Activity. Executive shall be deemed to have engaged in
"Competitive Activity" if, during the period commencing on the date hereof and
ending on the second anniversary of the date Executive's employment with
Investors or its subsidiaries terminates, (i) Executive, for himself or on
behalf of any other person, firm, partnership, corporation, or other entity,
engages, directly or indirectly, as an executive, agent, representative,
consultant, partner, shareholder or holder of any other financial interest, in
any business that competes with Investors or its subsidiaries in the line of
business Executive is employed in by Investors or its subsidiaries (as
applicable), as such business is described in any employment or severance
agreement then in effect between Executive and Investors or one of its
subsidiaries or, if no such agreement is then in effect, as described on
Schedule II attached hereto (a "Competing Business"), it being understood and
agreed that Executive's activities shall not satisfy this clause (i) where
Executive is employed by a person, firm, partnership, corporation, or other
entity engaged in a variety of activities, including the Competing Business, and
Executive is not engaged in or responsible for the Competing Business of such
entity. Executive may also, without satisfying clause, (i) be a passive owner of
not more than 2% of the outstanding publicly traded stock of any class of a
Competing Business so long as Executive has no active participation in the
business of such entity, except to the extent permitted above; or (ii) Executive
(A) directly or indirectly through another entity, induces or attempts to induce
any employee of the Company or its subsidiaries to leave the employ of the
Company or its subsidiaries, or in any way interfere with the relationship
between the Company or any of its subsidiaries and any employee thereof, (B)
knowingly hires any person who was an employee of the Company or any of its
subsidiaries within 180 days prior to the time such employee was hired by
Executive, (C) induces or attempts to induce any customer, supplier, licensee or
other business relation of the Company or any of its subsidiaries to cease doing
business with the Company or its subsidiaries or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any subsidiary or (D) directly or indirectly acquires or
attempts to acquire an interest in any business relating to the business of the
Company or any of its subsidiaries and with which the Company or any of its
subsidiaries has entertained discussions or has requested and received
information relating to the acquisition of such business by the Company or its
subsidiaries in the one-year period immediately preceding Executive's
termination of employment with the Company.
14
7.2 Activity Date. If Executive engages in Competitive Activity, the
"Activity Date" shall be the first date on which Executive engages in such
Competitive Activity.
7.3 Repayment of Proceeds. If Executive engages in Competitive Activity,
then Executive shall be required to pay to Investors, within ten business days
following the Activity Date, an amount equal to the excess, if any, of (A) the
aggregate proceeds Executive received upon the sale or other disposition of
Executive's Units, over (B) the aggregate Cost of such Units.
8. Miscellaneous.
-------------
8.1 Transfers to Permitted Transferees. Prior to the transfer of Units to
a Permitted Transferee (other than a transfer in connection with or subsequent
to a Sale of the Company), the Executive shall deliver to Investors a written
agreement of the proposed transferee (a) evidencing such Person's undertaking to
be bound by the terms of this Agreement and (b) acknowledging that the Units
transferred to such Person will continue to be Units for purposes of this
Agreement in the hands of such Person. Any transfer or attempted transfer of
Units in violation of any provision of this Agreement or the Securityholders
Agreement shall be void, and Investors shall not record such transfer on its
books or treat any purported transferee of such Units as the owner of such Units
for any purpose.
8.2 Deemed Transfer of Units. If Investors shall deliver, at the time and
place and in the amount and form provided in this Agreement, the consideration
for the Units to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the Person from whom such units are to
be repurchased shall no longer have any rights as a holder of such units (other
than the right to receive payment of such consideration in accordance with this
Agreement), and such Units shall be deemed purchased in accordance with the
applicable provisions hereof and Investors shall be deemed the owner and holder
of such Units, whether or not certificates therefor have been delivered as
required by this Agreement.
8.3 Recapitalizations, Exchanges, Etc., Affecting Units. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to Units, to any and all securities of Investors or any successor or assign of
Investors (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or in substitution of the Units,
by reason of any dividend payable in units, issuance of units, combination,
recapitalization, reclassification, merger, consolidation or otherwise.
8.4 Executive's Employment by Investors. Nothing contained in this
Agreement shall be deemed to obligate Investors or any subsidiary of Investors
to employ the Executive in any capacity whatsoever or to prohibit or restrict
Investors (or any such subsidiary) from terminating the employment of the
Executive at any time or for any reason whatsoever, with or without Cause.
8.5 Indemnification by Executive. Executive agrees to indemnify and hold
harmless Investors against any and all losses, liabilities, damages, judgments,
fines, fees or expenses, including, without limitation, attorneys' fees (for
purposes of this Section 8.5, hereinafter "Losses"), incurred in connection with
any failure to withhold amounts relating to the Units acquired herein by the
Management Investors. In the event there is a determination within the meaning
of Section 1313 of the Internal Revenue Code of 1986, as amended, that Investors
properly failed to withhold amounts relating to the Units
15
acquired herein by Executive, Executive shall provide Investors with a Form 4669
or other suitable evidence of payment of taxes (which will include a cancelled
check or a copy of the relevant signed tax return) with respect to the receipt
of any distributions relating to the Units acquired herein by Executive. To the
extent either Investors and/or any of its affiliates is entitled to any tax
deduction with respect to the issuance of Units, (i) Investors shall specially
allocate such deduction to the Executive and/or (ii) the Company shall pay, or
cause any affiliate to pay, as the case may be, Executive an amount equal to 40%
of such deduction, such amount to be grossed up to reflect any additional
deduction to the Company and/or any of its affiliates (as the case may be)
provided that if any Cash Deferral Condition exists at the time such payment is
required, such payment shall be deferred until no such Cash Deferral Condition
exists. Each of Executive and Investors shall notify the other (in a manner
described in Section 8.10 of this Agreement) within 20 days of first receiving
notice of an audit or other proceeding being conducted by the Internal Revenue
Service or any state or local taxing authority relating to the Units acquired
herein by the Management Investors, and both Executive and Investors shall
assist each other during the course of such audit or other proceeding to the
extent that such assistance is reasonably requested.
8.6 Binding Effect. The provisions of this Agreement shall be binding
upon and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns; provided, however, that no
Permitted Transferee shall derive any rights under this Agreement unless and
until such Permitted Transferee has executed and delivered to Investors a valid
undertaking and becomes bound by the terms of this Agreement.
8.7 Amendment; Waiver. This Agreement may be amended only by a written
instrument signed by the parties hereto. No waiver by any party hereto of any of
the provisions hereof shall be effective unless set forth in a writing executed
by the party so waiving.
8.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
8.9 Jurisdiction. Any suit, action or proceeding with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, shall
be brought in any court of competent jurisdiction in the State of Delaware, and
each of Investors and the members of the Executive Group hereby submits to the
exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Each of the members of the Executive Group and Investors
hereby irrevocably waives any objections which it may now or hereafter have to
the laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any court of competent jurisdiction in the
State of Delaware, and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum.
8.10 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
telecopied (with confirmation of receipt), one day after deposit with a
reputable overnight delivery service
16
(charges prepaid) and three days after deposit in the U.S. Mail (postage prepaid
and return receipt requested) to the address set forth below or such other
address as the recipient party has previously delivered notice to the sending
party.
(a) If to Investors
THL-MF Investors, LLC
c/o Xxxxxx X. Xxx Partners, L.P.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx XxXxxx
Xxxx Xxxxxx
Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
with copies to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
(b) If to the Executive, to the address as shown on the unit register
of Investors.
8.11 Rights Cumulative; Waiver. The rights and remedies of the Executive
and Investors under this Agreement shall be cumulative and not exclusive of any
rights or remedies which either would otherwise have hereunder or at law or in
equity or by statute, and no failure or delay by either party in exercising any
right or remedy shall impair any such right or remedy or operate as a waiver of
such right or remedy, nor shall any single or partial exercise of any power or
right preclude such party's other or further exercise or the exercise of any
other power or right. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by either party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
8.12 Counterparts. This Agreement may be executed in separate counterparts
(including by means of telecopied signature pages), and by different parties on
separate counterparts each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
8.13 Integration. This Agreement and the documents referred to herein or
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
17
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
* * * * *
18
IN WITNESS WHEREOF, the parties have executed this Management Stock
Purchase and Unit Subscription Agreement as of the date first above written.
THL-MF INVESTORS, LLC
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Its:
------------------------------------
EXECUTIVE
/s/ Xxxxx Xxxx
----------------------------------------
Xxxxx Xxxx
19
SCHEDULE I
--------------------------------------------------------------------------------
Other Class A Class B Class C
Name Shares Consideration Units Units Units
--------------------------------------------------------------------------------
Xxxxx Xxxx 533.30 - 0 - 5,728.70 11,271.30 17,000.00
--------------------------------------------------------------------------------
20
SCHEDULE II
Competing Business: Production, distribution or sales of eggs or egg products,
refrigerated potato products or branded cheese products
21
EXHIBIT A
ELECTION TO INCLUDE UNITS IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
---------------------------------------
The undersigned purchased units (the "Units") of THL-MF Investors, LLC
("Investors") on November 20, 2003. The undersigned desires to make an election
to have the Units taxed under the provision of Section 83(b) of the Internal
Revenue Code of 1986, as amended ("Code Section 83(b)"), at the time the
undersigned purchased the Units.
Therefore, pursuant to Code Section 83(b) and Treasury Regulation
Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Units (described below), to report as taxable income for
calendar year 2003 the excess, if any, of the Units' fair market value on
November 20, 2003 over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Section 1.83-2(e):
1. The name, address and social security number of the undersigned:
Xxxxx X. Xxxx
0000 Xxxxx Xxx Xxxxx
Xxxxxx, XX 00000
SSN: ###-##-####
2. A description of the property with respect to which the election
is being made: 5,728.70 Class A Units; 11,271.30 Class B Units and 17,000.00
Class C Units.
3. The date on which the property was transferred:
November 20, 2003. The taxable year for which such election is made: calendar
year 2003.
4. The restrictions to which the property is subject: The Units are
subject to a time-based vesting schedule. If the undersigned ceases to be
employed by Investors or any of its subsidiaries under certain circumstances,
all or a portion of the Units may be subject to repurchase by Investors at a
price per Unit equal to the lesser of (x) fair market value (measured as of the
date of such repurchase) and (y) cost (except for Class A Units, which are
subject to repurchase at a price per Unit equal to the fair market value
(measured as of the date of such repurchase)). The Units are also subject to
transfer restrictions.
5. The fair market value on November 20, 2003 of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions:
Class A Units $572,870.00
Class B Units $22,542.60
Class C Units $34,000.00
6. The amount paid for such property:
Class A Units $572,870.00
Class B Units $22,542.60
Class C Units $34,000.00
A copy of this election has been furnished to the Secretary of Investors
pursuant to Treasury Regulations Section 1.83-2(e)(7).
Dated: ________, 2003 ----------------------------------------
[Name]
23
