EXHIBIT 99.7
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SPECIAL INCENTIVE BONUS AGREEMENT
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THIS SPECIAL INCENTIVE BONUS AGREEMENT (this "Agreement"), dated as of
April 23, 1999, is made and entered by and between Stimsonite Corporation, a
Delaware corporation (the "Company"), and ___________________ (the "Executive").
WITNESSETH:
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WHEREAS, the Company is considering, among other things, a sale of control
of the Company;
WHEREAS, the Executive is a senior executive of the Company and has made
and is expected to continue to make major contributions in connection with the
potential sale of the Company;
WHEREAS, the Company wishes to provide additional inducement to the
Executive to cooperate in the sale process in an effort to maximize the price
for the stockholders in the event the Company is sold; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the employ of the Company in the event of a
change of control of the Company occurs.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means any of the following events which the Board of Directors
has determined, in good faith, has occurred and which has not been remedied (to
the fullest extent possible) by the Executive within ten (10) days after notice
thereof by the Company: (i) Executive's continual or deliberate neglect of the
performance of his material duties; (ii) Executive's failure to devote
substantially all of his working time to the business of the Company and its
subsidiaries; (iii) Executive's engaging willfully in misconduct in connection
with the performance of any of his duties, including, without limitation, the
misappropriation of funds or securing or attempting to secure personally any
profit in connection with any transaction entered into on behalf of the Company
or its subsidiaries; (iv) Executive's willful breach of any confidentiality or
nondisclosure agreements with the Company (including this Agreement) or
Executive's violation, in any material respect, of any code or standard of
behavior generally applicable to employees or executive employees of the
Company; (v) Executive's active disloyalty to the Company, including, without
limitation, willfully aiding a competitor or improperly disclosing confidential
information; or (vi) Executive's engaging in conduct which may reasonably result
in material injury to the reputation of
the Company, including commission of a felony, embezzlement, bankruptcy,
insolvency, or general assignment for the benefit of creditors.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for "Cause" hereunder 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 two-thirds of the Board then in office at a
meeting of the Board called and held for such purpose, after reasonable notice
to the Executive and an opportunity for the Executive, together with the
Executive's counsel (if the Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good faith opinion
of the Board, the Executive had committed an act constituting "Cause" as herein
defined and specifying the particulars thereof in detail. Nothing herein will
limit the right of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(c) "Change in Control" means the occurrence during the Term of any of the
following events:
(i) 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 50% or more of the combined voting power of the then
outstanding Voting Stock of the Company; provided, however, that for
purposes of this Section 1(c)(i), the following acquisitions shall not
constitute a Change in Control: (A) any issuance of Voting Stock of the
Company directly from the Company that is approved by the Incumbent Board
(as defined in Section 1(c)(ii), below), (B) any acquisition by the Company
of Voting Stock of the Company, (C) any acquisition of Voting Stock of the
Company by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (D) any acquisition of Voting
Stock of the Company by Quad-C, Inc. or any of its affiliates or any of the
limited partnerships managed by Quad-C, Inc. or (E) any acquisition of
Voting Stock of the Company by any Person pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of Section
1(c)(iii), below; or
(ii) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a Director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least two-thirds
of the Directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be deemed to have been a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest (within the meaning of Rule 14a-11 of the Exchange Act) with
respect to the election or removal of Directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) consummation of a reorganization, merger or consolidation, a
sale or other disposition of all or substantially all of the assets of the
Company, or other transaction (each, a "Business Combination"), unless, in
each case, immediately following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
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owners of Voting Stock of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the
combined voting power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
relative to each other as their ownership, immediately prior to such
Business Combination, of the Voting Stock of the Company, (B) no Person
(other than the Company, such entity resulting from such Business
Combination, any employee benefit plan (or related trust) sponsored or
maintained by the Company, any Subsidiary or such entity resulting from
such Business Combination or Quad-C, Inc. or any of its affiliates or any
of the limited partnerships managed by Quad-C, Inc.) beneficially owns,
directly or indirectly, 50% or more of the combined voting power of the
then outstanding shares of Voting Stock of the entity resulting from such
Business Combination and (C) at least a majority of the members of the
Board of Directors of the entity resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement or of the action of the Board providing for such Business
Combination.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(e) "Severance Period" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the earlier of
(i) six months after the occurrence of the Change in Control or (ii) the
Executive's death.
(f) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(g) "Term" means the period commencing as of the date hereof and expiring
as of the expiration of the Severance Period; subject to the last sentence of
Section 6, if (i) prior to a Change in Control, the Executive ceases for any
reason to be an employee of the Company or (ii) no Change of Control occurs
prior to the first anniversary hereof, thereupon without further action the Term
shall be deemed to have expired and this Agreement will immediately terminate
and be of no further effect. For purposes of this Section 1(g), the Executive
shall not be deemed to have ceased to be an employee of the Company by reason of
the transfer of Executive's employment between the Company and any Subsidiary,
or among any Subsidiaries.
(h) "Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which shall be the date of termination, or
such other date that may be specified by the Executive if the termination is
pursuant to Section 3(b)).
(i) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative, including without limitation, the last sentence of Section 6
notwithstanding that the Term may have theretofore expired.
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3. Termination Following a Change in Control. (a) If, during the
Severance Period, the Executive's employment is terminated by the Company or any
Subsidiary other than for cause, the Executive will be entitled to the benefits
provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during the
Severance Period with the right to severance compensation as provided in Section
4 upon the occurrence of one or more of the following events (regardless of
whether any other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other
employment):
(i) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company which the Executive held immediately prior to the
Change in Control, (B) a reduction in the Executive's Base Pay received
from the Company, (C) the termination or denial of the Executive's right to
participate in any incentive compensation plan generally available to other
officers of the Company or (D) the termination or denial of the Executive's
rights to Employee Benefits in the aggregate equivalent in type and scope
to those generally available to other officers of the Company, any of which
is not remedied by the Company within 30 calendar days after receipt by the
Company of written notice from the Executive of such change, reduction,
termination or denial, as the case may be;
(ii) The Company relocates its principal executive offices (if such
offices are the principal location of Executive's work), or requires the
Executive to have his principal location of work changed, to any location
that, in either case, is in excess of 30 miles from the location thereof
immediately prior to the Change in Control; or
(iii) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto
which is not remedied by the Company within 30 calendar days after receipt
by the Company of written notice from the Executive of such breach.
4. Severance Compensation. (a) If, following the occurrence of a Change
in Control, (i) the Company terminates the Executive's employment during the
Severance Period other than for Cause, (ii) the Executive dies, (iii) the
Executive becomes permanently disabled within the meaning of, and begins
actually to receive disability benefits pursuant to, the long-term disability
plan in effect for, or applicable to, Executive immediately prior to the Change
in Control, (iv) the Executive terminates his employment pursuant to Section
3(b) or (v) the Executive is employed by the Company or a Subsidiary of the
Company at the conclusion of the Severance Period, the Company will pay to the
Executive the amounts described in Annex A within ten business days of the
earliest to occur of any of the above-described events.
(b) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant period in
the Midwest Edition of The Wall Street Journal, plus 1%. Such interest will be
payable as it accrues on demand. Any change in such prime rate will be effective
on and as of the date of such change.
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(c) Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under this Section 4 and under
Section 5 and the last sentence of Section 6 will survive any termination or
expiration of this Agreement or the termination of the Executive's employment
following a Change in Control for any reason whatsoever.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company, any Person whose actions result in a Change of
Control or any affiliate of the Company or such Person, to or for the benefit of
the Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock options, stock appreciation right or similar right, or the
lapse or termination of any restriction on the vesting or exercisability of any
of the foregoing, but determined without regard to any additional payments
required under this Section 5) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or penalties that
are incurred by the Executive with respect to such tax or taxes (such tax or
taxes, together with any such interest and penalties, are hereinafter referred
collectively to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (collectively, "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
(b) Subject to the provisions of Section 5(c), all determinations required
to be made under this Section 5, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP or such other certified public accounting firm as may
be agreed to by the Company and the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive or
the Company that there has been a Payment, or such earlier time as is requested
by the Company and the Executive. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 5, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time for the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up
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Payment. Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the 30 day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax
including interest and penalties with respect thereto imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(c))
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promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 5(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
6. Employment Rights. Nothing expressed or implied in this Agreement
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any Subsidiary
prior to or following any Change in Control. Anything in this Agreement to the
contrary notwithstanding, if a Change in Control occurs and not more than 180
days prior to the date on which the Change in Control occurs, the Executive's
employment with the Company is terminated by the Company, such termination of
employment shall be deemed to be a termination of employment after a Change in
Control for purposes of this Agreement if the Executive shall have reasonably
demonstrated that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose directly in connection with or in anticipation
of a Change in Control.
7. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any applicable law, regulation or
ruling.
8. Successors and Binding Agreement. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance reasonably
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any successor to the
Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business or assets of the Company
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor shall thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or delegable by
the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 8(a) and 8(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, in the event of any
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attempted assignment or transfer contrary to this Section 8(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
9. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as FedEx, UPS or
DHL, addressed to the Company (to the attention of the Secretary of the Company)
at its principal executive office and to the Executive at his principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
10. Validity. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
11. Arbitration; Governing Law. Any dispute between the parties under
this Agreement shall be resolved (except as provided below) through informal
arbitration by an arbitrator selected under the rules of the American
Arbitration Association (located in Chicago, Illinois) and the arbitration shall
be conducted in that location under the rules of said Association. The
arbitrator shall have the right only to interpret and apply the provisions of
this Agreement and may not change its provisions. The arbitrator shall permit
reasonable pre-hearing discovery of facts, to the extent necessary to establish
a claim or a defense to a claim, subject to supervision by the arbitrator. The
determination of the arbitrator shall be conclusive and binding upon the parties
and judgment upon the same may be entered in any court having jurisdiction
thereof. The arbitrator shall give written notice to the parties stating his or
their determination and shall furnish to each party a signed copy of such
determination. The expense of arbitration shall be borne equally by the
Executive and the Company or as the arbitrator shall otherwise equitably
determine.
12. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
STIMSONITE CORPORATION
_______________________________________
By:____________________________________
Title:_________________________________
_______________________________________
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Annex A
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Payments made under this Agreement, if any, will be based on the value of all
consideration paid to holders of equity securities of the Company on account of
any transaction or series of related transactions resulting in a Change of
Control (the "Aggregate Equity Consideration") and no such amounts will be
payable under this Agreement unless the Aggregate Equity Consideration is at
least equal to $109,777,105. The Aggregate Equity Consideration shall be
computed by multiplying the total number of outstanding shares of common stock
of the Company as of the date of the definitive agreement relating to any such
Change of Control by the per share stock consideration to be paid to the holders
of the Company's common stock pursuant to such definitive agreement and adding
such amount the difference between such per share consideration and the average
exercise price of all then unexercised stock options (other than options granted
under the Stock Option Plan for Non-Employee Directors to the extent such
options would be cancelled by their terms without payment of any consideration)
multiplied by the total number of shares which could be acquired upon the
exercise of such stock options. The following matrix reflects the amount of any
payments to be made to the Executive pursuant to this Agreement.
Aggregate Equity Incentive Change in Control
Consideration Bonus Amount
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Equal to or greater than $109,777,105
but not greater than $137,569,882 $60,000 plus 0.60% of the portion of
the Aggregate Equity Consideration
which exceeds $109,777,105
Greater than $137,569,882 $60,000 plus 1.2% of the portion of
the Aggregate Equity Consideration
which exceeds $109,777,105
A-1
