EXHIBIT 11
EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement") is made and entered into as
of September 30, 2002, between BCO Holding Company, a Delaware corporation
("Holding"), and Xxxxxxx X. Xxxxxxxx (the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement, BWAY Corporation, a Delaware corporation (the "Company"), Holding and
BCO Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Holding ("Acquisition Sub"), are entering into a Merger Agreement, of even date
herewith (the "Merger Agreement"), which provides, among other things, for the
merger of Acquisition Sub with and into the Company, with the Company continuing
as the surviving corporation (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is the owner of options
(the "Options") to acquire 95,000 shares of common stock, par value $0.01 per
share, of the Company (the "Company Common Stock"); and
WHEREAS, subject to the terms and conditions set forth herein,
immediately prior to the Effective Time, the Stockholder desires to have the
Options identified in Schedule A (the "Exchange Options") cancelled in exchange
(the "Option Exchange") for substitute options (each, a "New Option") to acquire
shares of common stock, par value $0.01 per share, of Holding (the "Holding
Common Stock").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings attributed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties contained herein, Holding and the Stockholder
hereby agree as follows:
1. Option Exchange. Stockholder agrees that each Exchange Option held
by the Stockholder shall be cancelled and, in exchange therefor, converted into
New Options to purchase 75,424 shares of Holding Common Stock with exercise
prices as set forth on Schedule A. Holding shall, at the Effective Time, assume
the Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (after
such assumption, the "Holding 1995 Long-Term Incentive Plan") and each New
Option shall be subject to the same terms and conditions as in effect
immediately before the Option Exchange, it being understood and agreed that all
New Options shall be fully vested as of the Closing under the Merger Agreement.
Holding and Stockholder agree to take all corporate and other action as shall be
necessary to effectuate the foregoing.
2. Closing. The closing of the transactions contemplated by this
Agreement shall take place at the offices of Debevoise & Xxxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately prior to the Closing under the
Merger Agreement.
3. Covenants. Attached hereto as Schedule B are the terms of the
Stockholders Agreement and the Registration Rights Agreement to be entered into
among Holding, Xxxxx Investment Associates VI, L.P., KEP VI, LLC and the parties
to the Exchange Agreements immediately prior to the closing of the Merger. The
parties hereto agree to negotiate in good faith definitive forms of such
agreements as promptly as practicable after the date hereof. Attached hereto as
Schedule C are the terms of the Option Plan and a form of Option Agreement to be
adopted by Holding in the case of the Option Plan and to be entered into by
Holding and each of the managers identified on Schedule C, in each case,
immediately prior to the closing of the Merger. Holding and each such manager
agree to negotiate in good faith definitive forms of such Option Plan and Option
Agreement as promptly as practicable after the date hereof.
4. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants as follows:
(a) Binding Agreement. The Stockholder has the capacity to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The Stockholder has duly and validly executed and
delivered this Agreement and this Agreement constitutes a legal, valid
and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(b) Ownership of Options. The Stockholder is owner of the number of
Exchange Options set forth in the recitals hereto, free and clear of
any security interests, liens, charges, encumbrances, equities, claims,
options or limitations of whatever nature and free of any other
limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of the Exchange Options), except as may
exist by reason of this Agreement, the Voting Agreement between the
Stockholder and Holding or pursuant to applicable law, or pursuant to
the restrictions on transferability and on exercise provided for in the
Company's 1995 Long-Term Incentive Plan and any related option
agreement. Except as provided for in this Agreement, the Voting
Agreement between the Stockholder and Holding, the Merger Agreement and
the other agreements contemplated hereby and thereby, there are no
outstanding options or other rights to acquire from the Stockholder, or
obligations of the Stockholder to sell or to dispose of, any Exchange
Options.
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(c) No Agreements. Except for this Agreement, the Voting Agreement,
the Stockholders Agreement and the Registration Rights Agreement
referred to above and any other agreements contemplated hereby and
thereby, the Stockholder has not entered into or agreed to be bound by
any other arrangements or agreements of any kind with any other party
with respect to the Options, including, but not limited to,
arrangements or agreements with respect to the acquisition or
disposition thereof or any interest therein or the voting of any such
shares.
(d) No Conflict. Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby,
nor the performance of the Stockholder's obligations hereunder will (a)
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation, or acceleration) under any contract,
agreement, instrument, commitment, arrangement or understanding to
which the Stockholder is a party, or result in the creation of a
security interest, lien, charge, encumbrance, equity or claim with
respect to the Stockholder's Exchange Options, or (b) require any
material consent, authorization or approval of any person, entity or
government entity, or (c) violate or conflict with any writ, injunction
or decree applicable to the Stockholder or the Stockholder's Exchange
Options, or New Options to be received by Stockholder.
(e) Securities Laws Matters. The Stockholder acknowledges receipt of
advice from Holding that (i) the New Options and any shares of Holding
Common Stock acquired in exercise of the New Options ("Exercise
Shares") have not been registered under the Securities Act of 1933 (the
"Act") or qualified under any state securities or "blue sky" or non
U.S. securities laws, (ii) it is not anticipated that there will be any
public market for any Exercise Shares, (iii) any Exercise Shares must
be held indefinitely and the Stockholder must continue to bear the
economic risk of the investment in the shares of Holding Common Stock
unless such shares of Holding Common Stock are subsequently registered
under the Act and such state or non U.S. securities laws or an
exemption from such registration is available, (iv) Rule 144
promulgated under the Act ("Rule 144") is not presently available with
respect to sales of any Exercise Shares and Holding has made no
covenant to make Rule 144 available and Rule 144 is not anticipated to
be available in the foreseeable future, (v) when and if any Exercise
Shares may be disposed of without registration in reliance upon Rule
144, such disposition can be made only in limited amounts and in
accordance with the terms and conditions of such Rule, (vi) if the
exemption afforded by Rule 144 is not available, public sale of the
shares of any Exercise Shares without registration will require the
availability of an exemption under the Act, (vii) restrictive legends
in the form set forth in the Stockholders Agreement shall be placed on
the
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certificate representing the shares of any Exercise Shares and (viii) a
notation shall be made in the appropriate records of the Holding
indicating that the shares of any Exercise Shares are subject to
restrictions on transfer and, if Holding should in the future engage
the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to any
Exercise Shares.
(f) Accredited Investor. The Stockholder is an "accredited investor"
as such term is defined in Rule 501(a) promulgated under the Securities
Act.
(g) Stockholder's Experience. (A) The Stockholder's financial
situation is such that the Stockholder can afford to bear the economic
risk of holding the Exercise Shares for an indefinite period of time,
(B) the Stockholder can afford to suffer complete loss of his
investment in the New Options and any Exercise Shares and (C) the
Stockholder's knowledge and experience in financial and business
matters are such that the Stockholder is capable of evaluating the
merits and risks of the Stockholder's investment in the New Options and
any Exercise Shares.
(h) Access to Information. The Stockholder represents and warrants
that the Stockholder has been granted the opportunity to ask questions
of, and receive answers from, representatives of Holding concerning the
terms and conditions of the Option Exchange and to obtain any
additional information that the Stockholder deems necessary to verify
the accuracy of the information so provided.
(i) Investment Intent. The Stockholder is acquiring the New Options,
and such Stockholder will acquire any Exercise Shares solely for the
Stockholder's own account for investment and not with a view to or for
sale in connection with any distribution thereof. The Stockholder
agrees that the Stockholder will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any of the
New Options or any Exercise Shares (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of any shares of Holding
Common Stock), except in compliance with (i) the Securities Act and the
rules and regulations of the Securities and Exchange Commission
thereunder, (ii) applicable state and non-U.S. securities or "blue sky"
laws and (iii) the provisions of this Agreement and the Stockholders
Agreement.
5. Representations and Warranties of Holding. Holding represents and
warrants as follows:
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(a) Corporate Form. Holding is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has (and, immediately following the Effective Time, will have) all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted.
(b) Corporate Authority, etc. Holding has (and, immediately prior to
the Effective Time, will have) all requisite corporate power and
authority to enter into this Agreement and to perform all of its
obligations hereunder and to carry out the transactions contemplated
hereby and Holding has (and, immediately prior to the Effective Time,
will have) all requisite corporate power and authority to issue the New
Options. The Exercise Shares, when issued, delivered and paid for in
accordance with the terms hereof, will be duly and validly issued,
fully paid and nonassessable.
(c) Actions Authorized. Holding has taken all corporate actions
necessary to authorize it to enter into this Agreement and, prior to
the Effective Time, will have taken all corporate actions necessary to
authorize it to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Holding and, assuming due authorization, execution and
delivery of this Agreement by the Stockholder constitutes a legal,
valid and binding obligation of Holding enforceable in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(d) Required Filings and Approvals. Other than as provided for in
the Merger Agreement and the disclosure schedules thereto, the
execution and delivery of this Agreement by Holding, and the
consummation of the transactions contemplated hereby by Holding, do not
require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the
part of Holding, other than the filings, registrations or
qualifications (i) that may be required under Regulation D under the
Securities Act, (ii) that may be required under the state securities
laws or "blue sky" laws of any state of the United States of America
that may be required to be made or obtained, all of which Holding will
comply with prior to the date of the Closing, or (iii) the failure of
which to make or obtain, in the aggregate, would not reasonably be
expected to have an Acquiror Entity Material Adverse Effect.
(e) No Conflicts. Other than as provided for in the Merger Agreement
and the disclosure schedules thereto, none of the execution, delivery
or performance of this Agreement or the consummation of the
transactions
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contemplated hereby, by Holding will conflict with the certificate of
incorporation or the by-laws of Holding or result in any breach of, or
constitute a default under any contract, agreement or instrument to
which Holding is a party or by which it or any of its respective assets
is bound.
(f) Post-Closing Capitalization. Assuming the consummation of the
transactions contemplated hereby, by the Merger Agreement and by each
other similar Exchange Agreement entered or to be entered into between
Holding and any other stockholder, director, officer or employee of the
Company (the "Other Exchange Agreements") and assuming, further,
Holding's total equity account is $101.5 million (i.e., the sum of (A)
Xxxxx'x funded equity, (B) the aggregate value of the Exchange Shares
and (C) the aggregate spread value of the Exchange Options (as defined
in the Other Exchange Agreements)), immediately following the
consummation of the transactions contemplated hereby, by the Merger
Agreement and by the Other Exchange Agreements, (1) the authorized
capital stock of Holding will consist solely of 13,115,576 shares of
Holding Common Stock, 9,303,827 of which will have been issued at a per
share price of $10.00 and will be outstanding and (2) no options,
rights, instruments or securities exercisable for (or exchangeable or
convertible into) any shares of Holding Common Stock will be
outstanding (other than options to acquire up to an aggregate of
1,625,820 shares of Holding Common Stock held by directors, officers
and employees of the Company). All outstanding shares of Holding Common
Stock shall have been issued for the same per share purchase price.
(g) Holding Fees. Other than as permitted by the Stockholders
Agreement, the aggregate fees (but not including any expense
reimbursements) payable to Xxxxx and its affiliates (1) in connection
with the consummation of the transactions contemplated by this
Agreement, the Merger Agreement and the other agreements contemplated
hereby and thereby and (2) in connection with any agreements (including
financial advisory agreements) to be entered into between the Company
and Xxxxx and its affiliates in connection with the Closing will not
exceed the amounts set forth in Section 5.16 of the Merger Agreement.
6. Conditions Precedent.
(a) The obligations of the Stockholder to consummate the
transactions contemplated hereby are subject to (1) the conditions set
forth in Sections 6.1 and 6.2 of the Merger Agreement being satisfied
or waived by the Company and (2) Holding having entered into the
Stockholders Agreement and Registration Rights Agreement and having
adopted the Option Plan and entered into the Option Agreement, in each
case as referred to in Section 3.
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(b) The obligations of Holding to consummate the transactions
contemplated hereby are subject to (i) the conditions set forth in
Section 6.1 and Section 6.3 of the Merger Agreement being satisfied or
waived by Holding and (ii) the Stockholder having entered into the
Stockholders Agreement and the Registration Rights Agreement referred
to in Section 3.
7. Miscellaneous.
(a) Binding Effect; Benefits. This Agreement shall be binding upon
the successors, heirs, executors and administrators of the parties
hereto. Nothing in this Agreement, express or implied, is intended or
shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any
legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein, except as provided in
Section 7(j) below. No party shall have liability for any breach of any
representation or warranty contained herein, except for any knowing or
intentional breach thereof.
(b) Amendments. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written
agreement executed by the Stockholder and Holding.
(c) Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Stockholder without the prior written consent of
Holding; it being understood that Holding may assign its rights
hereunder to any affiliate of Holding, provided that the post-closing
capitalization of such assignee shall be the same as the proposed
post-closing capitalization of Holding.
(d) Specific Performance. The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable
harm for which money damages would not be an adequate remedy and
accordingly the parties hereto agree that, in addition to any other
remedies, each party shall be entitled to enforce the terms of this
Agreement by a decree of specific performance without the necessity of
proving the inadequacy of money damages as a remedy.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof).
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(f) Counterparts. This Agreement may be executed by facsimile and in
two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
(g) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are
not affected in any manner materially adverse to any party hereto. Upon
such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible in a mutually acceptable manner.
(h) Waiver. Any party to this Agreement may waive any condition to
their obligations contained herein.
(i) Termination. This Agreement shall terminate on the earliest to
occur of (i) the termination of the Merger Agreement in accordance with
its terms and (ii) an agreement of Holding and the Stockholder to
terminate this Agreement. Termination shall not relieve any party from
liability for any intentional breach of its obligations hereunder
committed prior to such termination.
(j) Third Party Beneficiary. The Company is a third party
beneficiary of this Agreement with the right to enforce the provisions
hereof.
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IN WITNESS WHEREOF, Holding and the Stockholder have executed this
Agreement as of the date first above written.
BCO Holding Company
By: /s/ Xxxxx X. Xxxxxxx XX
------------------------------
Name: Xxxxx X. Xxxxxxx XX
Title: Vice President
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
Schedule A
Exchange Options
Date of Grant of Number of Exchange Current Exercise Price of Number of New Exercise Price
Exchange Option Options Exchange Options Options of New Options
02/21/00 15,000 $6.88 30,000 $3.440
09/05/01 22,712 $6.65 45,424 $3.325
Schedule B
Summary of Materials Terms of
Stockholders and Registration Rights Agreements
-----------------------------------------------
Parties Xxxxx Investment Associates VI, L.P. and KEP VI,
LLC (collectively, "Xxxxx") and WH, MH, J-PE and
other managers who exchange options pursuant to an
Exchange Agreement with the Company.
Tag-Along and The non-Xxxxx stockholders will have pro rata
Drag-Along Rights tag-along rights on sales of shares of Xxxxx to a
third party which, together with all other shares
previously sold by Xxxxx, represent more than 15%
of the shares held by Xxxxx on the closing date.
If Xxxxx proposes to sell shares to a third party
for cash, and such shares, together with all other
shares previously sold by Xxxxx, represent more
than 85% of the shares held by Xxxxx on the
closing date, Xxxxx will have the right to drag
along, on a pro rata basis, each of the non-Xxxxx
stockholders. Xxxxx would have the right to
receive non-cash consideration so long as the per
share consideration received by Xxxxx is no
greater than the per share cash consideration
received by the non-Xxxxx stockholders.
The tag-along and drag-along rights would expire
on a Company IPO.
Registration Rights Xxxxx would have unlimited demand rights. After
the first year anniversary of an IPO, WH/MH would
jointly have two demand rights. Both Xxxxx'x and
WH/MH's demand rights would be subject to
customary suspension provisions.
If Xxxxx exercises its demand rights, the
non-Xxxxx stockholders will have piggyback rights,
subject to a pro rata cutback (and no priority for
Xxxxx) and the additional cutback for the
management stockholders described below.
If WH/MH exercise their demand rights, Xxxxx and
the other non-Xxxxx stockholders will have
piggyback rights, subject to a pro rata cutback
(and no priority for
WH/MH) and the additional cutback for management
stockholders described below. If WH/MH are cut
back by more than 65% in any given offering, then
that offering would not constitute one of their
demand rights.
If the Company files a registration statement for
an IPO, Xxxxx and the non-Xxxxx stockholders will
have pro rata rights to sell their shares in the
IPO, subject only to right of the Company to sell
shares first.
Stockholders who are also management employees may
be subject to an additional cutback if the IPO's
underwriter determines in good faith that the
participation of such management stockholders
would adversely affect the marketability or
offering price of the other securities to be sold.
All parties to the Registration Rights Agreement
will agree to a lockup following the IPO of up to
180 days, depending on the managing underwriter's
requirements.
Pre-emptive Rights WH/MH and the other non-Xxxxx stockholders
(but only if such non-Xxxxx stockholder is an
employee of the Company at that time) would have
pre-emptive rights on issuances of securities by
the Company, subject to customary agreed upon
exemptions.
Transfer Restrictions All non-Xxxxx stockholders except WH/MH would be
restricted from transferring their shares until an
IPO or Xxxxx'x exit, subject to customary estate
planning exceptions.
WH/MH would be permitted to sell to a third party
who agrees to be bound by the Stockholders
Agreement, subject to Xxxxx'x consent, such
consent not to be unreasonably withheld.
The Company will have the right to purchase the
shares of any non-Xxxxx stockholder whose shares
become subject to foreclosure, bankruptcy, etc.
prior to a Company IPO, at the lesser of: (a) fair
market value and (b) the amount of the liability
giving rise to such involuntary transfer plus any
excess of the carrying value of the transferred
shares over such liability.
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Puts and Calls The options (and the underlying shares) acquired
pursuant to an Exchange Agreement would be subject
to puts and calls upon termination of employment,
the specifics of which will be discussed by the
parties.
Board Seats WH would have one board seat unless the board has
11 or more directors in which case WH would have
an additional board seat. WH/MH would have the
right to designate a member of their family to
serve on the board in WH's place. The family may
designate non-family member(s) to represent them
on the board, the identity of whom would be
subject to Xxxxx'x consent, such consent not to be
unreasonably withheld. Any such non-family board
member would receive the same director's fee being
paid to other outside directors. The board seat
would not be transferable outside of the WH/MH
family, subject to the right of designation
described above. J-PE would have one board seat,
so long as he is CEO. Xxxxx would have the right
to designate the remaining directors which would
constitute a majority of the board of directors.
Veto Right WH would have a veto on affiliate transactions,
except for (1) Xxxxx fees as described below and
(2) payments pursuant to the financial advisory
agreement described below. This veto right would
only be exercisable by WH, or in the event that WH
is no longer a director, a family member, if any,
who is serving on the board. If there are no
family members on the board, then affiliate
transactions would be reviewed by the
disinterested board.
Xxxxx Fees Xxxxx will receive an up front fee of $4,950,000
and annual fee of $495,000 pursuant to a financial
advisory agreement between Xxxxx and the Company.
Xxxxx will also receive a customary exit fee,
consistent with their past practices that will be
negotiated with the Company at that time. WH would
participate pro rata in the exit fee based on
stock ownership at the time of exit, but capped at
15% for WH.
WH's Rights WH to receive an annual director's fee of
$100,000. The fee would be payable to WH or a
designated family member serving on the board. WH
to continue benefits under SERP ($157,500 per year
with acceleration as a
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result of the transaction so that payments would
commence beginning the month in which the closing
occurs).
Employment Agreements Existing employment agreements, except
as otherwise mutually agreed upon.
Minority Shareholder Protections No charter amendments that
would disproportionately affect roll-over
shareholders. Others, if any, to be discussed.
Management Offering Proposed $2 mm equity offering to managers
pursuant to Rule 701 post-closing.
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Schedule C
Summary of Material Terms of
Equity Incentive Plan
-----------------------------
Participants Officers and key employees of the Can Holding
Company, and its subsidiaries (the "Company"), as
selected by Xxxx-Xxxxxx Xxxxx, subject to the
reasonable approval of the Compensation Committee of
the Board of Directors. It is expected that the
Committee shall be comprised of two Kelso directors
and Xxxx-Xxxxxx Xxxxx.
Shares The common stock of the Company, par value $.01 per
share (i.e., voting common stock).
Type of Option It is anticipated that all options will be
Grant non-qualifed stock options.
Option Price; Payment The Committee shall have the ability to determine the
per share exercise price of the options, provided
that such price cannot be less than the fair market
value of the common stock on the grant date. Options
granted in connection with the closing of the merger
will be granted with an exercise price equal to the
equivalent of the per share merger consideration. The
Plan provides for payment by cash (or equivalents)
or, following an IPO by "stock swap" (i.e., paying
the exercise price with shares - - already owned for
6 months or more).
Exercise; Expiration The Committee shall have the ability to set the
exercise terms at the time of granting the options,
provided that no options will be exercisable after
the 10th anniversary of the grant date. The Plan
requires, as a condition to exercise, that
optionholders execute the Management Stockholders
Agreement and the Registration Rights Agreement.
Treatment of Options Upon In the event employment is terminated for cause,1 all
Termination of Employment options held by the employee, whether or not then
exercisable, will terminate and be canceled
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1 To be mutually agreed upon the parties following the closing of the merger.
immediately. In all other cases, the employee may
exercise any options that are or become exercisable
at the time of the termination of his or her
employment within a period of time following such
termination (one year in case of termination by
reason of death, disability or retirement; 60 days in
all other cases), but in any case prior to the normal
expiration date of the options, and all unvested
options will be cancelled.
Service Options Options Service Options become exercisable in up to
three equal annual installments, commencing on the
first anniversary of the grant date.
Performance Options Performance Options become exercisable in five equal
annual installments only if the Company achieves the
EBITDA objectives established by the Committee (in
consultation with the Company) for such fiscal year
or the cumulative EBITDA objective for the period
ending with the end of the subsequent fiscal year.
Notwithstanding the foregoing, Annex A lists the
EBITDA objectives for the Company's 2003-07 fiscal
years. The Plan provides for a "catch up" opportunity
in the event the EBITDA objectives for a year are not
achieved.
Exit Options Exit Options are exercisable only if (i) Xxxxx
Investment - Associates VI, L.P. and KEP VI, LLC
(together, the "Xxxxx Entities") sell all or
substantially all of their Company common stock or
the Company sells all or substantially all of its
assets to a non-affiliated third party (an "Exit
Event"), (ii) at least a minimum aggregate share
value with respect to the shares of Company common
stock held by the Xxxxx Entities (the "Xxxxx Stock")
of two times the equivalent of the per share merger
consideration (the "Floor Value") is achieved by the
Xxxxx Entities in the Exit Event taking into account
all options (the "Exit Value") and (iii) the Xxxxx
Entities shall have achieved at least a 15% internal
rate of return, compounded annually, on their
investment in the Xxxxx Stock. Where the Exit Value
is greater than the Floor Value, but less than four
times the equivalent of the per share merger
consideration, Exit Options become exercisable
ratably. All Exit Options are exercisable if the Exit
Value is at least four times the equivalent of the
per
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share merger consideration. Exit Options that have
not vested upon the first occurrence of an event
described in clause (i) of this paragraph will be
cancelled.
Percentage of Assuming the Company's total equity account is $101.5
Fully-Diluted Shares million Different Types of Options (i.e., the sum of
Available for Different (a) Xxxxx'x funded equity, (b) the aggregate value of
Types of Options the Exchange Shares and (c) the aggregate spread
value of Exchange Options (as each such term is
defined in the Exchange Agreements to which this term
sheet is attached)) as of the closing of the merger,
2,185,929 shares of common stock of the Company will
be available for option grants under the Plan,
representing approximately 20% of the outstanding
shares of common stock of the Company at closing,
including, for this purpose, the aggregate number of
shares reserved for issuance in connection with the
New Options (as defined in the Exchange Agreements to
which this term sheet is attached) (the "Option
Pool").
40% of the Option Pool will be Service Options, 10%
of the Option Pool will be Performance Options and
50% of the Option Pool will be Exit Options. In
connection with the closing of the merger, 40% of the
Option Pool shall be granted to Xxxx-Xxxxxx Xxxxx,
20% of the Option Pool shall be granted to Xxxxxxx X.
Xxxxxxx, and the remaining 40% of the Option Pool
shall be granted in accordance with the terms of the
Plan to employees selected by Xxxx-Xxxxxx Xxxxx,
subject to the reasonable approval of the Committee.
Any shares subject to an option that expires, or is
canceled, terminated or forfeited without the
issuance of shares shall again be available for
grant.
Transferability Options are not transferable other than by will or by
the laws of descent and distribution, or, if allowed
by the Committee, in connection with certain pledges
and estate-planning transfers.
Change in Control In the event of a sale of more than 50% of the
Company's common stock or assets to any person or
group that is unaffiliated with Xxxxx (a "Change in
Control"), unless the Committee determines that the
Options will be honored, assumed or substituted, each
3
Service Option, whether or not then exercisable, and
each Performance Option and Exit Option that vests in
accordance with its terms on or before the date of
such Change in Control will be canceled for a payment
by the Company to the Option holder of the price per
share paid for the Company's common stock in the
Change of Control transaction less the exercise price
for the Option. If in connection with the Change of
Control all of the Exit Options have vested in
accordance with their terms (after giving to effect
all options vesting in connection with the
transaction), all of the Performance Options that
would otherwise have covered the period following the
Change of Control shall vest.
Requirements of Law The purchase of shares and the grant (and terms) of
options shall be subject to all applicable securities
laws (including U.S. and non-U.S. laws and state
"blue-sky" laws).
Adjustments in The plan provides for the Committee to make
Capitalization proportionate adjustments to the number of shares
subject to the plan, and outstanding options for any
stock dividend, stock split, recapitalization,
reorganization, merger or consolidation or other
similar event.
Cap on Benefits The plan provides that, notwithstanding anything
herein to the contrary, to the extent that any of the
payments and benefits provided for under the Plan or
under any other agreement or arrangement between the
Company and a Participant (collectively, the
"Payments") would constitute a "parachute payment"
within the meaning of Section 280G of the Code, the
amount of such Payments shall be reduced to the
amount that would result in no portion of the
Payments being subject to the excise tax imposed
pursuant to Section 4999 of the Code. If Payments
that would otherwise be limited as a result of the
foregoing would not be limited if the shareholder
approval requirements of Section 280G(b)(5) of the
Code are capable of being satisfied, the Company
shall use its reasonable best efforts to cause such
payments to be submitted for such
4
approval prior to a Change in Control.2
Administration The Plan (including the determination
of terms and conditions of options) will generally be
administered by the Committee.
-------------------------------
2 This provision is intended to address the IRS's view on how it's recently
proposed regulations under Section 280G will operate. Xxxxx'x intent is to take
such steps (i.e., shareholder approval prior to a Change of Control) to avoid
the imposition of the cap.
5
Annex A
EBITDA Objectives
Fiscal Year EBITDA Objective
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2003 $64.0 million
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2004 $68.0 million
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2005 $72.0 million
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2006 $76.0 million
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2007 $80.0 million
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Cumulative Total $360.0 million
6
