Exhibit 4.11
OPTIONS
FORM OF MANAGEMENT STOCKHOLDER'S AGREEMENT
This Management Stockholder's Agreement (this "Agreement") is
entered into as of __________ __, 1999 between SPALDING HOLDINGS CORPORATION, a
Delaware corporation (the "Company"), and __________________ (the "Optionee")
(the Company and the Optionee being hereinafter collectively referred to as the
"Parties").
RECITALS
The Company proposes to grant to key employees of the Company and
certain other investors, options to purchase common stock par value $.01 per
share ("Common Stock) at an exercise price of $2.00 per share of Common Stock.
This Agreement is one of several other agreements ("Other
Purchasers' Agreements"), which Other Purchasers' Agreements shall include
Management Stockholder's Agreements that have been, or that in the future will
be, entered into between the Company and other individuals who are or will be
key employees of the Company or one of its subsidiaries (collectively, the
"Other Purchasers"). In addition, the Company has also entered into, and may in
the future enter into, agreements (the "Investors' Agreements") with other
purchasers (collectively, the "Investors") pursuant to which the Investors
purchased or will purchase shares of Common Stock.
The Company has agreed to grant to the Optionee an option or
options to purchase shares of Common Stock ("Options") at an exercise price
of $2.00 per share of Common Stock pursuant to the terms of the Amended and
Restated 1996 Stock Purchase and Option Plan for Key Employees of Spalding
Holdings Corporation and Subsidiaries (the "Option Plan") and the
"Non-Qualified Stock Option Agreement" attached hereto as Exhibit A.
This Agreement and the Exhibits hereto, and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the Parties with regard to the subjects
hereof and to the extent that any Optionee had previously executed an agreement
with regard to the subjects hereof, this Agreement shall supersede any such
previous agreement.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the Parties agree as follows:
1. Issuance of Options.
Subject to the terms and conditions hereinafter set forth, the
Company shall grant to the Optionee the Options as of the date hereof (the
"Grant Date") and the Parties shall execute and deliver to each other copies
of the Non-Qualified Stock Option Agreement concurrently with
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the grant of the Options. The Company shall have no obligation to grant any
Options to any person who (i) is a resident or citizen of a state or other
jurisdiction in which the granting of the Options to him or her would constitute
a violation of the securities or "blue sky" laws of such jurisdiction or (ii) is
not an employee of the Company or any of its subsidiaries on the date hereof.
2. Optionee's Representations, Warranties and Agreements.
(a) The Optionee agrees and acknowledges that he will not, directly
or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (any such act being herein referred to as a "transfer") at the time
of exercise, the Common Stock issuable upon exercise of the Options (together
with any other shares of Common Stock beneficially owned by the Optionee as of
the date hereof or hereafter acquired, the "Stock") unless such transfer
complies with Section 3 of this Agreement. Furthermore, if the Optionee is an
"affiliate" (as defined under Rule 405 of the rules and regulations promulgated
under the Act and as interpreted by the Board of Directors of the Company) of
the Company (an "Affiliate"), the Optionee agrees and acknowledges that he will
not transfer any shares of the Stock unless (i) the transfer is pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
and the rules and regulations in effect thereunder (the "Act"), and in
compliance with applicable provisions of state securities laws or (ii) (A)
counsel for the Optionee (which shall be such counsel acceptable to the Company)
shall have furnished the Company with an opinion, satisfactory in form and
substance to the Company, that no such registration is required because of the
availability of an exemption from registration under the Act and such transfer
is in compliance with the applicable provisions of state securities laws and (B)
if the Optionee is a citizen or resident of any country other than the United
States, or the Optionee desires to effect any transfer in any such country,
counsel for the Optionee (which counsel shall be acceptable to the Company)
shall have furnished the Company with an opinion or other advice satisfactory in
form and substance to the Company to the effect that such transfer will comply
with the securities laws of such jurisdiction. Notwithstanding the foregoing,
the Company acknowledges and agrees that any of the following transfers are
deemed to be in compliance with the Act and this Agreement and no opinion of
counsel is required in connection therewith: (x) a transfer made pursuant to
Section 4, 5 or 6 hereof, (y) a transfer upon the death of the Optionee to his
executors, administrators, testamentary trustees, legatees or beneficiaries (the
"Optionee's Estate") or a transfer to the executors, administrators,
testamentary trustees, legatees or beneficiaries of a person who has become a
holder of Stock in accordance with the terms of this Agreement, provided that it
is expressly understood that any such transferee shall be bound by the
provisions of this Agreement and (z) a transfer made after the Grant Date in
compliance with the federal securities laws to a trust or custodianship the
beneficiaries of which may include only the Optionee, his spouse or his lineal
descendants (a "Optionee's Trust") or a transfer made after the third
anniversary of the Grant Date to such a trust by a person, other than the
Optionee, who has become a holder of Stock in accordance with the terms of this
Agreement, provided that such transfer is made expressly subject to this
Agreement and that the transferee agrees in writing to be bound by the terms and
conditions hereof.
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(b) During the term of this Agreement, the certificate (or
certificates) representing the Stock shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT
STOCKHOLDER'S AGREEMENT DATED AS OF __________ ___, 1999 BETWEEN
SPALDING HOLDINGS CORPORATION ("THE COMPANY") AND THE OPTIONEE NAMED
ON THE FACE HEREOF (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY).
(c) The Optionee acknowledges that he has been advised that (i) the
Stock relating to the Options has been registered on Form S-8 under the Act,
(ii) a restrictive legend in the form heretofore set forth shall be placed on
the certificates representing the Stock and (iii) a notation shall be made in
the appropriate records of the Company indicating that the Stock relating to the
Options is subject to restrictions on transfer and appropriate transfer
restrictions will be issued to the Company's transfer agent with respect to the
Stock. If the Optionee is an Affiliate, the Optionee also acknowledges that (i)
the Stock must be held indefinitely and the Optionee must continue to bear the
economic risk of the investment in the Stock unless it is subsequently
registered under the Act or an exemption from such registration is available,
(ii) it is not anticipated that there will be any market on an exchange or a
quotation service for the Stock, (iii) when and if shares of the Stock may be
disposed of without registration in reliance on Rule 144 or the rules and
regulations promulgated under the Act, such disposition can be made only in
limited amounts in accordance with the terms and conditions of such Rule, and
(iv) if the Rule 144 exemption is not available, public sale without
registration will require compliance with Regulation A or some other exemption
under the Act.
(d) If any shares of the Stock are to be disposed of in accordance
with Rule 144 under the Act or otherwise, the Optionee shall promptly notify the
Company of such intended disposition and shall deliver to the Company at or
prior to the time of such disposition such documentation as the Company may
reasonably request in connection with such sale and, in the case of a
disposition pursuant to Rule 144, shall deliver to the Company an executed copy
of any notice on Form 144 required to be filed with the Securities and Exchange
Commission (the "SEC").
(e) The Optionee agrees that, if any shares of the capital stock of
the Company are offered to the public pursuant to an effective registration
statement under the Act (other than registration of securities issued under an
employee plan), the Optionee will not effect any public sale or distribution of
any shares of the Stock not covered by such registration statement within 7 days
prior to, or within 180 days after, the effective date of such registration
statement, unless otherwise agreed to in writing by the Company.
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(f) The Optionee represents and warrants that (i) he has received
and reviewed the documents comprising the Prospectus (the "Prospectus") relating
to the Stock and the documents referred to therein, certain of which documents
set forth the rights, preferences and restrictions relating to the Stock and
(ii) he has been given the opportunity to obtain any additional information or
documents and to ask questions and receive answers about such documents, the
Company and the business and prospects of the Company which he deems necessary
to evaluate the merits and risks related to his investment in the Stock and to
verify the information contained in the Prospectus and the information received
as indicated in this Section 2(f)(ii), and he has relied solely on such
information.
(g) The Optionee further represents and warrants that (i) his
financial condition is such that he can afford to bear the economic risk of
holding the Stock for an indefinite period of time and has adequate means for
providing for his current needs and personal contingencies, (ii) he can afford
to suffer a complete loss of his investment in the Stock, (iii) he understands
and has taken cognizance of all risk factors related to the purchase of the
Stock, including those set forth in the Prospectus referred to above, and (iv)
his knowledge and experience in financial and business matters are such that he
is capable of evaluating the merits and risks of his purchase of the Stock as
contemplated by this Agreement.
3. Restriction on Transfer.
Except for transfers permitted by clauses (x), (y) and (z) of
Section 2(a) or a sale of shares of Stock pursuant to an effective registration
statement under the Act filed by the Company (as described herein but excluding
the Form S-8 filed in connection with this agreement) or pursuant to the Sale
Participation Agreement (as defined below), the Optionee agrees that he will not
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any shares
of the Stock at any time prior to the fifth anniversary of the Grant Date. No
transfer of any such shares in violation hereof shall be made or recorded on the
books of the Company and any such transfer shall be void and of no effect.
4. Right of First Refusal.
If at any time after the fifth anniversary of the Grant Date and
prior to a Public Offering (as defined below), the Optionee receives a bona fide
offer to purchase any or all of his shares of Stock (the "Offer") from a third
party (the "Offeror") which the Optionee wishes to accept, the Optionee shall
cause the Offer to be reduced to writing and shall notify the Company in writing
of his wish to accept the Offer. The Optionee's notice shall contain an
irrevocable offer to sell such shares of Stock to the Company (in the manner set
forth below) at a purchase price equal to the price contained in, and on the
same terms and conditions of, the Offer, and shall be accompanied by a true copy
of the Offer (which shall identify the Offeror). At any time within 30 days
after the date of the receipt by the Company of the Optionee's notice, the
Company shall have the right and option to purchase, or to arrange for a third
party to purchase, all of the shares of Stock covered by the Offer either (i) at
the same price and on the same terms and conditions as the Offer or (ii) if the
Offer includes any consideration other than cash, then at
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the sole option of the Company, at the equivalent all cash price, determined in
good faith by the Company's Board of Directors, by delivering a certified bank
check or checks in the appropriate amount (and any such non-cash consideration
to be paid) to the Optionee at the principal office of the Company against
delivery of certificates or other instruments representing the shares of the
Stock so purchased, appropriately endorsed by the Optionee. If at the end of
such 30 day period, the Company has not tendered the purchase price for such
shares in the manner set forth above, the Optionee may during the succeeding 30
day period sell not less than all of the shares of Stock covered by the Offer to
the Offeror at a price and on terms no less favorable to the Optionee than those
contained in the Offer. Promptly after such sale, the Optionee shall notify the
Company of the consummation thereof and shall furnish such evidence of the
completion and time of completion of such sale and of the terms thereof as may
reasonably be requested by the Company. If, at the end of 30 days following the
expiration of the 30 day period for the Company to purchase the Stock, the
Optionee has not completed the sale of such shares of the Stock as aforesaid,
all the restrictions on sale, transfer or assignment contained in this Agreement
shall again be in effect with respect to such shares of the Stock.
5. Optionee's Resale of Stock and Options to the Company Upon The
Optionee's Death or Disability.
(a) Except as otherwise provided herein, if at any time prior to a
Public Offering, (i) the Optionee is still in the employ of the Company or any
subsidiary of the Company, or had retired from the Company and its subsidiaries
(A) at age 65 or over after having been employed by the Company or any
subsidiary for at least five years after the Grant Date or (B) at age 55 or over
if such Optionee has been employed with the Company or a Subsidiary for a
minimum of 15 years and after having been employed by the Company or any
subsidiary for at least five years after the Grant Date ("Retirement") and (ii)
the Optionee either dies or becomes Permanently Disabled, then the Optionee, the
Optionee's Estate or an Optionee's Trust, as the case may be, shall have the
right, for six months (or such longer time as determined by the Board of
Directors) following the date of death or Permanent Disability, to (I) sell to
the Company, and the Company shall be required to purchase, on one occasion, all
or any portion of the shares of Stock then held by the Optionee, the Optionee's
Trust and/or the Optionee's Estate, as the case may be, at the Section 5
Repurchase Price, as determined in accordance with Section 7, and (II) require
the Company to pay to the Optionee or the Optionee's Estate or the Optionee's
Trust, as the case may be, an additional amount equal to the Option Excess Price
determined on the basis of a Section 5 Repurchase Price as provided in Section 8
with respect to the termination of outstanding Options held by the Optionee. The
Optionee, the Optionee's Estate and/or the Optionee's Trust, as the case may be,
shall send written notice to the Company of its intention to sell shares of
Stock and to terminate such Options in exchange for the payment referred to in
the preceding sentence (the "Redemption Notice"). The completion of the purchase
shall take place at the principal office of the Company on the tenth business
day after the giving of the Redemption Notice. The Section 5 Repurchase Price
and any payment with respect to the Options as described above shall be paid by
delivery to the Optionee, the Optionee's Estate or the Optionee's Trust, as the
case may be, of a wire transfer of immediately available funds or a certified
bank check or checks in the appropriate amount payable to the order
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of the Optionee, the Optionee's Estate or the Optionee's Trust, as the case may
be, against delivery of certificates or other instruments representing the Stock
so purchased and appropriate documents canceling the Options so terminated
appropriately endorsed or executed by the Optionee, the Optionee's Estate or the
Optionee's Trust, or his or its duly authorized representative. For purposes of
this Agreement, Optionee shall be deemed to have a "Permanent Disability" if the
Optionee is unable to engage in the activities required by the Optionee's job by
reason of any medically determined physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months, or if the majority of the Board of
Directors of the Company shall, in good faith, determine the Optionee is
permanently disabled.
(b) Notwithstanding anything in Section 5(a) to the contrary and
subject to Section 11, if there exists and is continuing a default or an event
of default on the part of the Company or any subsidiary of the Company under any
loan, guarantee or other agreement under which the Company or any subsidiary of
the Company has borrowed money or if the repurchase referred to in Section 5(a)
would result in a default or an event of default on the part of the Company or
any subsidiary of the Company under any such agreement or if a repurchase would
not be permitted under Delaware General Corporation Law (the "DGCL") (or if the
Company reincorporates in another state, the business corporation law of such
state) (each such occurrence being an "Event"), the Company shall not be
obligated to repurchase any of the Stock or the Options from the Optionee, the
Optionee's Estate or the Optionee's Trust, as the case may be, until the first
business day which is 10 calendar days after all of the foregoing Events have
ceased to exist (the "Repurchase Eligibility Date"); provided, however, that (i)
the number of shares of Stock subject to repurchase under this Section 5(b)
shall be that number of shares of Stock, and (ii) the number of Exercisable
Option Shares (as defined in Section 8) for purposes of calculating the Option
Excess Price payable under this Section 5(b) shall be the number of Exercisable
Option Shares, held by the Optionee, the Optionee's Estate or a Optionee's
Trust, as the case may be, at the time of delivery of a Redemption Notice in
accordance with Section 5(a) hereof; provided, further, that the Repurchase
Calculation Date (as defined herein) shall be determined in accordance with
Section 7 as of the Repurchase Eligibility Date (unless the Section 5 Repurchase
Price would be greater if the Repurchase Calculation Date had been determined as
if no Event had occurred in which case, solely for purposes of this proviso, the
Repurchase Calculation Date shall be determined as if no Event had occurred).
All Options exercisable as of the date of a Redemption Notice shall continue to
be exercisable until the repurchase pursuant to such Redemption Notice.
(c) Notwithstanding any other provision of this Section 5 to the
contrary and subject to Section 11, the Optionee, the Optionee's Estate or the
Optionee's Trust, as the case may be, shall have the right to withdraw any
Redemption Notice which has been pending for 60 or more days and which has
remained unsatisfied because of the provisions of Section 5(b).
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6. The Company's Option to Repurchase Stock and Options of Optionee.
(a) If, on or prior to the fifth anniversary of the Grant Date, (i)
the Optionee's active employment with the Company (and/or, if applicable, its
subsidiaries) is voluntarily or involuntarily terminated for any reason
whatsoever, with or without Cause, (ii) the beneficiaries of a Optionee's Trust
shall include any person or entity other than the Optionee, his spouse or his
lineal descendants, or (iii) the Optionee shall effect a transfer of any of the
Stock other than as permitted in this Agreement (alternatively, a "Call Event"),
the Company shall have the right to purchase all, but not less than all, of the
shares of the Stock then held by the Optionee, the Optionee's Estate or a
Optionee's Trust at the Section 6 Repurchase Price determined in accordance with
Section 7 hereof; provided, however, that if the termination of employment
results from (A) the death or permanent disability of the Optionee or (B) the
Retirement (as defined in Section 5(a)) of the Optionee from the Company or any
of its subsidiaries, the Company shall have the right to purchase all, but not
less than all, of the shares of Stock then held by the Optionee or a Optionee's
Trust but the Repurchase Price shall be the Section 5 Repurchase Price. In the
event of Optionee's active employment with the Company is terminated by the
Company for Cause, all Options (whether or not then exercisable and whether such
Options are held by Optionee, Optionee's Trust or Optionee's Estate) shall
terminate without any payment. The Company shall have a period of 75 days from
the date of a Call Event in which to give notice in writing to the Optionee of
the exercise of such election ("Call Notice"). Except as set forth above, in the
event that the Company exercises its right to repurchase shares of Stock
pursuant to this Section 6, the Company shall also pay the Optionee an amount
equal to the Option Excess Price determined on the basis of the Section 6
Repurchase Price or the Section 5 Repurchase Price, as the case may be, as
provided in Section 7, with respect to the termination of outstanding Options
held by the Optionee.
(b) The completion of the purchases pursuant to the foregoing shall
take place at the principal office of the Company on the tenth business day
after the giving of notice of the exercise of the option to purchase. The
Section 5 Repurchase Price or the Section 6 Repurchase Price, as the case may
be, and any payment with respect to the Options as described above shall be paid
by delivery to the Optionee of a wire transfer of immediately available funds or
a certified bank check or checks in the appropriate amount payable to the order
of the Optionee against delivery of certificates or other instruments
representing the Stock so purchased and appropriate documents canceling the
Options so terminated, appropriately endorsed or executed by the Optionee, the
Optionee's Trust or his or its authorized representative.
(c) Notwithstanding any other provision of this Section 6 to the
contrary and subject to Section 11, if there exists and is continuing any Event,
the Company shall delay the repurchase of any of the Stock or the Options
(pursuant to a Call Notice given on a timely basis in accordance with Section
6(a) hereof) from the Optionee, the Optionee's Estate, or the Optionee's Trust,
as the case may be, until the Repurchase Eligibility Date; provided, however,
that (i) the number of shares of Stock subject to repurchase under this Section
6(c) shall be that number of shares of Stock and (ii) the number of Exercisable
Option Shares for purposes of
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calculating the Option Excess Price payable under this Section 6(c) shall be the
number of Exercisable Option Shares held by the Optionee, the Optionee's Estate
or a Optionee's Trust, as the case may be, at the time of delivery of a Call
Notice in accordance with Section 6(a) hereof; provided, further, that the
Repurchase Calculation Date shall be determined in accordance with Section 7
based on the Repurchase Eligibility Date (unless the applicable Repurchase Price
would be greater if the Repurchase Calculation Date had been determined as if no
Event had occurred, in which case, solely for purposes of this proviso, the
Repurchase Calculation Date shall be determined as if no Event had occurred).
All Options exercisable as of the date of a Call Notice shall continue to be
exercisable until the repurchase pursuant to such Call Notice.
7. Determination of Repurchase Price.
(a) The Section 5 Repurchase Price and the Section 6 Repurchase
Price are hereinafter collectively referred to as the "Repurchase Price." The
Repurchase Price shall be calculated on the basis of the audited financial
statements, if available, or the unaudited financial statements of the Company
or the Market Price Per Share (as defined in Section 7(f)) as of the last day of
the fiscal quarter preceding the later of (i) the fiscal quarter in which the
event giving rise to the repurchase occurs and (ii) the fiscal quarter in which
the Repurchase Eligibility Date occurs (hereinafter called the "Repurchase
Calculation Date"). The event giving rise to the repurchase shall be the death,
permanent disability, retirement or termination of employment, as the case may
be, of the Optionee, not the giving of any notice required pursuant to Section 5
or 6.
(b) Prior to a Public Offering (as hereinafter defined) the Section
5 Repurchase Price shall be a per share Repurchase Price equal to $____ plus the
amount, if any, by which the Book Value Per Share (as defined in Section 7(d))
as of the Repurchase Calculation Date exceeds $_____. After a Public Offering,
the Section 5 Repurchase Price shall be a per share Repurchase Price equal to
$_____ plus the amount, if any, by which the Market Price Per Share as of the
Repurchase Calculation Date exceeds $____.
(c) Prior to a Public Offering, the Section 6 Repurchase Price shall
be a per share Repurchase Price equal to the lesser of (i) the Book Value Per
Share (as defined in paragraph (d) below) or (ii) $_____ plus (x) the Percentage
(as defined below) multiplied by (y) the amount, if any, by which the Book Value
Per Share as of the Repurchase Calculation Date exceeds $____. After a Public
Offering, the Section 6 Repurchase Price shall be a per share Repurchase Price
equal to the lesser of (i) Market Price Per Share or (ii) $____ plus (a) the
Percentage multiplied by (b) the amount, if any, by which the Market Price Per
Share as of the Repurchase Calculation Date exceeds $____; provided, however,
that in the event of Optionee's termination without Cause by the Company
(and/or, if applicable, its subsidiaries) or with Good Reason by the Optionee,
the Section 6 Repurchase Price shall be the Book Value Per Share or Market Price
Per Share, as the case may be. For purposes of this Agreement the following
definitions shall apply: "Cause" shall mean (i) the Optionee's willful and
continued failure to perform Optionee's duties with respect to the Company or
its subsidiaries which continues beyond ten days after a written demand for
substantial performance is delivered to Optionee by the Company or (ii)
misconduct by Optionee involving (x) dishonesty or breach of trust in
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connection with Optionee's employment which is reasonably likely to be injurious
to the Company or (y) conduct which would be a reasonable basis for an
indictment of Optionee for a felony or for a misdemeanor involving moral
turpitude; and "Good Reason" shall mean (i) a material reduction in Optionee's
base salary or (ii) a substantial reduction in Optionee's duties and
responsibilities other than as approved by the Chief Executive Officer or
President of the Company.
The "Percentage" shall be determined as follows:
Repurchase Calculation Date Percentage
--------------------------- ----------
Grant Date through and including the first anniversary of the 0%
Grant Date
After the first anniversary of the Grant Date through and 20%
including the second anniversary of the Grant Date
After the second anniversary of the Grant Date through and 40%
including the third anniversary of the Grant Date
After the third anniversary of the Grant Date through and 60%
including the fourth anniversary of the Grant Date
After the fourth anniversary of the Grant Date through and 80%
including the fifth anniversary of the Grant Date
After the fifth anniversary of the Grant Date 100%
(d) For purposes of this Agreement, "Book Value Per Share" shall be
the quotient of (a) (i) $250 million plus (ii) the aggregate net income of the
Company from and after September 30, 1996 (the date of the Recapitalization) (as
decreased by any net losses from and after the date of the Recapitalization)
plus (iii) the aggregate dollar amount contributed to (or credited to Common
Stockholders' equity of) the Company after the date of the Recapitalization as
equity of the Company (including consideration to be received upon exercise of
the Options and other stock equivalents) plus (iv) to the extent reflected as
deductions to Book Value Per Share in clause (ii) above, or minus, to the extent
reflected as additions to Book Value Per Share in clause (ii) above, unusual or
other items recognized by the Company, if and to the extent determined in the
sole discretion of the Compensation Committee of the Board of Directors of the
Company, minus, (v) the aggregate dollar amount of any dividends paid by the
Company after the date of the Recapitalization divided by (b) the sum of the
number of shares of Common Stock then outstanding and the number of shares of
Common Stock issuable upon the exercise of all outstanding stock options and
other rights to acquire Common Stock and the conversion of all securities
convertible into shares of Common Stock. The calculations set forth in clauses
(a)(ii), (a)(iii), (a)(iv) and (a)(v) of the immediately preceding sentence
shall be determined in accordance with generally accepted accounting principles
applied on a basis consistent with any prior periods as reflected in the
consolidated financial statements of the Company.
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(e) As used herein the term "Public Offering" shall mean the sale of
shares of Common Stock to the public subsequent to the date hereof pursuant to a
registration statement under the Act which has been declared effective by the
SEC (other than a registration statement on Form S-4 or Form S-8 or any other
similar form) which results in an active trading market in the Common Stock if
such a market does not already exist. A "Qualified Public Offering" shall mean a
Public Offering pursuant to an effective registration statement relating to the
sale of shares of the Common Stock held by Strata Associates, L.P., a Delaware
limited partnership and its affiliates; provided, however, that a "Qualified
Public Offering" shall be deemed to have occurred if there has been a Public
Offering and there exists an active trading market in 40% or more of the Common
Stock.
(f) As used herein the term "Market Price Per Share" shall mean the
price per share equal to the average of the last sale price of the Common Stock
on the Repurchase Calculation Date on each exchange on which the Common Stock
may at the time be listed or, if there shall have been no sales on any of such
exchanges on the Repurchase Calculation Date, the average of the closing bid and
asked prices on each such exchange at the end of the Repurchase Calculation Date
or if there is no such bid and asked price on the Repurchase Calculation Date on
the next preceding date when such bid and asked price occurred or, if the Common
Stock shall not be so listed, the average of the closing sales prices as
reported by NASDAQ at the end of the Repurchase Calculation Date. If the Common
Stock is not so listed or reported by NASDAQ, then the Market Price Per Share
shall be the Book Value Per Share.
(g) In determining the Repurchase Price, appropriate and equitable
adjustments shall be made by the Compensation Committee or the Board of
Directors for any future issuances of rights to acquire and securities
convertible into Common Stock and any stock dividends, splits, combinations,
recapitalizations or any other adjustment in the number of outstanding shares of
Common Stock.
8. Stock Issued to Optionee Upon Exercise of Stock Options;
Termination of Options.
(a) The Company may from time to time grant to the Optionee, in
addition to the Options, additional options under the Option Plan to purchase
shares of Common Stock at $____ per share or at a different option exercise
price. The term "Stock" as used in this Agreement shall include all shares of
Common Stock of the Company issued to the Optionee by the Company upon exercise
of the Options and of any other stock options held by the Optionee or otherwise
beneficially owned by the Optionee.
(b) All outstanding Options granted to the Optionee under the Option
Plan or otherwise, whether or not then exercisable, will be automatically
terminated upon the payment by the Company to the Optionee (if not otherwise
terminated pursuant to Section 3.2 of the NonQualified Stock Option Agreement
relating to such Options), pursuant to the provisions of Sections 5 or 6 of this
Agreement, of an amount equal to the Option Excess Price. If the Option Excess
Price is zero or a negative number, all outstanding stock options granted to the
Optionee
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under the Option Plan or otherwise, whether or not then exercisable, shall be
automatically terminated upon the repurchase of Stock as provided in Sections 5
or 6. The Option Excess Price is the excess, if any, of the Section 5 Repurchase
Price or the Section 6 Repurchase Price, depending on which Repurchase Price is
being used to repurchase the remainder of the Stock, over the option exercise
price (as provided in the stock option agreement) multiplied by the number of
Exercisable Option Shares. For purposes hereof, "Exercisable Option Shares"
shall mean the shares of Common Stock which, at the time of determination of the
Option Excess Price, could be purchased by the Optionee upon exercise of his
outstanding options. Notwithstanding the foregoing, in the event of the
occurrence of a Call Event, all outstanding Options (whether or not then
exercisable) will be automatically terminated without payment therefor.
9. The Company's Representations and Warranties.
(a) The Company represents and warrants to the Optionee that (i)
this Agreement has been duly authorized, executed and delivered by the Company
and (ii) the Stock, when issued and delivered in accordance with the terms
hereof, will be duly and validly issued, fully paid and nonassessable.
(b) If the Company shall have engaged in a Public Offering, the
Company will file the reports required to be filed by it under the Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder, to the
extent required from time to time to enable the Optionee to sell shares of Stock
without registration under the Act within the limitations of the exemptions
provided by (A) Rule 144 or Rule 144A under the Act, as such Rules may be
amended from time to time, or (B) any similar rule or regulation hereafter
adopted by the SEC. Notwithstanding anything contained in this Section 9(b), the
Company may deregister under Section 12 or 15 of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and the rules and regulations
thereunder. Nothing in this Section 9(b) shall be deemed to limit in any manner
the restrictions on sales of Stock contained in this Agreement.
10. "Piggyback" Registration Rights.
(a) Effective upon the grant of Options pursuant to this Agreement,
until the later of (i) the first occurrence of a Qualified Public Offering (as
defined in Section 7(e) above) or (ii) the fifth anniversary of the Grant Date,
the Optionee hereby agrees to be bound by all of the terms, conditions and
obligations of the Registration Rights Agreement dated as of September 30, 1996,
among the Company, Strata Associates, L.P. and KKR Partners II L.P. (the
"Registration Rights Agreement") and, in the case of a Qualified Public Offering
and subject to the limitations set forth in this Section 10, shall have all of
the rights and privileges of the Registration Rights Agreement, in each case as
if the Optionee were an original party (other than the Company) thereto;
provided, however, that the Optionee shall not have any rights to request
registration under Section 3 of the Registration Rights Agreement; and provided
further, that the Optionee shall not be bound by any amendments to the
Registration Rights Agreement unless Optionee consents thereto. Notwithstanding
anything to the contrary contained in the
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Registration Rights Agreement, the Optionee's rights and obligations under the
Registration Rights Agreement shall be subject to the limitations and additional
obligations set forth in this Section 10. All shares of Stock purchased by the
Optionee upon the exercise of Options, and held by the Optionee, the Optionee's
Trust or the Optionee's Estate, shall be deemed to be Registrable Securities as
defined in the Registration Rights Agreement.
(b) The Company will promptly notify the Optionee in writing (a
"Notice") of any proposed registration (a "Proposed Registration"). If within 15
days of the receipt by the Optionee of such Notice, the Company receives from
the Optionee, the Optionee's Trust or the Optionee's Estate a written request (a
"Request") to register shares of Stock held by the Optionee, the Optionee's
Estate or the Optionee's Trust (which Request will be irrevocable unless
otherwise mutually agreed to in writing by the Optionee and the Company), shares
of Stock will be so registered as provided in this Section 10; provided,
however, that for each such registration statement only one Request, which shall
be executed by the Optionee, the Optionee's Trust or the Optionee's Estate, as
the case may be, may be submitted for all Registrable Securities held by the
Optionee, the Optionee's Estate and the Optionee's Trust.
(c) The maximum number of shares of Stock which will be registered
pursuant to a Request will be the lowest of (i) the number of shares of Stock
then held by the Optionee (which for purposes of this subparagraph (c) shall
include shares held by the Optionee, Optionee's Estate or a Optionee's Trust),
including all shares of Stock which the Optionee is then entitled to acquire
under an unexercised Option to the extent then exercisable or (ii) the maximum
number of shares of Stock which the Company can register in the Proposed
Registration without adverse effect on the offering in the view of the managing
underwriters (reduced pro rata with all Other Purchasers) as more
fully described in subsection (d) of this Section 10, (iii) the maximum number
of shares which the Optionee (pro rata based upon the aggregate number of shares
of Common Stock the Optionee and all Other Purchasers have requested
be registered) and all Other Purchasers are permitted to register
under the Registration Rights Agreement or (iv) the product of (A) the number of
shares of stock then held by the Optionee and (B) the quotient determined by
dividing (1) the total number of shares of Stock requested by KKR Affiliates (as
defined below) to be registered by the Company by (2) the aggregate number of
shares of Stock owned by the KKR Affiliates.
(d) If a Proposed Registration involves an underwritten offering and
the managing underwriter advises the Company in writing that, in its opinion,
the number of shares of Stock requested to be included in the Proposed
Registration exceeds the number which can be sold in such offering, so as to be
likely to have an adverse effect on the price, timing or distribution of the
shares of Stock offered in such Public Offering as contemplated by the Company,
then the Company will include in the Proposed Registration (i) first, 100% of
the shares of Stock the Company proposes to sell and (ii) second, to the extent
of the number of shares of Stock requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above, the number of shares of Stock which the
"Holders" (as defined in the Registration Rights
13
Agreement), including, without limitation, the Optionee and Other
Purchasers have requested to be included in the Proposed Registration,
such amount to be allocated pro rata among all requesting Holders on the basis
of the relative number of shares of Stock then held by each such Holder
(provided that any shares thereby allocated to any such Holder that exceed such
Holder's request will be reallocated among the remaining requesting Holders in
like manner).
(e) Upon delivering a Request the Optionee, the Optionee's Estate or
Optionee's Trust (or his or their authorized representative) will, if requested
by the Company, execute and deliver a custody agreement and power of attorney in
form and substance satisfactory to the Company with respect to the shares of
Stock to be registered pursuant to this Section 10 (a "Custody Agreement and
Power of Attorney"). The Custody Agreement and Power of Attorney will provide,
among other things, that the Optionee, the Optionee's Estate or Optionee's Trust
(or his or their authorized representative) will deliver to and deposit in
custody with the custodian and attorney-in-fact named therein a certificate or
certificates representing such shares of Stock (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock powers
in blank) and irrevocably appoint said custodian and attorney-in-fact as the
Optionee's, Optionee's Estate or Optionee's Trust's agent and attorney-in-fact
with full power and authority to act under the Custody Agreement and Power of
Attorney on the Optionee's behalf with respect to the matters specified therein.
(f) The Optionee agrees that he will execute such other agreements
as the Company may reasonably request to further evidence the provisions of this
Section 10.
11. Pro Rata Repurchases.
Notwithstanding anything to the contrary contained in Sections 5, 6
or 7, if at any time consummation of all purchases and payments to be made by
the Company pursuant to this Agreement and the Other Purchasers' Agreements
would result in an Event, then the Company shall make purchases from, and
payments to, the Optionee and the Other Purchasers pro rata (on the
basis of the proportion of the number of shares of Stock and the number of
Options each such Optionee and all Other Purchasers have elected or
are required to sell to the Company) for the maximum number of shares of Stock
and shall pay the Option Excess Price for the maximum number of Options
permitted without resulting in an Event (the "Maximum Repurchase Amount"). The
provisions of Section 5(b) and 6(c) shall apply in their entirety to payments
and repurchases with respect to Options and shares of Stock which may not be
made due to the limits imposed by the Maximum Repurchase Amount under this
Section 11. Until all of such Stock and Options are purchased and paid for by
the Company, the Optionee and the Other Purchasers whose Stock and
Options are not purchased in accordance with this Section 11 shall have
priority, on a pro rata basis, over other purchases of Common Stock and Options
by the Company pursuant to this Agreement and the Other Purchasers' Agreements.
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12. Rights to Negotiate Repurchase Price.
Nothing in this Agreement shall be deemed to restrict or prohibit
the Company from purchasing shares of Stock or Options from the Optionee, at any
time, upon such terms and conditions, and for such price, as may be mutually
agreed upon between the Parties, whether or not at the time of such purchase
circumstances exist which specifically grant the Company the right to purchase,
or the Optionee the right to sell, shares of Stock or the Company has the right
to pay, or the Optionee has the right to receive, the Option Excess Price under
the terms of this Agreement.
13. Covenant Regarding 83(b) Election.
Except as the Company may otherwise agree in writing, the Optionee
hereby covenants and agrees that he will make an election provided pursuant to
Treasury Regulation 1.83-2 with respect to the Stock, including without
limitation, the Stock to be acquired upon each exercise of the Optionee's
Options; and Optionee further covenants and agrees that he will furnish the
Company with copies of the forms of election the Optionee files within 30 days
after each exercise of Optionee's Non-Qualified Options and with evidence that
each such election has been filed in a timely manner.
14. Notice of Change of Beneficiary.
Immediately prior to any transfer of Stock to a Optionee's Trust,
the Optionee shall provide the Company with a copy of the instruments creating
the Optionee's Trust and with the identity of the beneficiaries of the
Optionee's Trust. The Optionee shall notify the Company immediately prior to any
change in the identity of any beneficiary of the Optionee's Trust.
15. Expiration of Certain Provisions.
The provisions contained in Sections 4, 5 and 6 of this Agreement
and the portion of any other provision of this Agreement which incorporates the
provisions of Sections 4, 5 and 6, shall terminate and be of no further force or
effect with respect to any shares of Stock sold by the Optionee (i) pursuant to
an effective registration statement filed by the Company pursuant to Section 10
hereof or (ii) pursuant to the terms of the Sale Participation Agreement of even
date herewith, among the Optionee and Strata Associates L.P.
The provisions contained in Sections 2(e), 3, 4, 5, 6 and 13 of this
Agreement, and the portion of any other provisions of this Agreement which
incorporate the provisions of such Sections, shall terminate and be of no
further force or effect upon (A) the consummation of a merger, reorganization,
business combination or liquidation of the Company, or a sale of Common Stock
owned by the Investors, but only if such merger, reorganization, business
combination, liquidation or sale of Common Stock results in Strata Associates,
L.P. (through its ownership of Spalding Holdings Corporation) or any affiliate
thereof (collectively, the "KKR Affiliates"), no longer having the power (i) to
elect a majority of the Board of Directors of the
15
Company or such other corporation which succeeds to the Company's rights and
obligations pursuant to such merger, reorganization, business combination,
liquidation or stock sale, or (ii) if the resulting entity of such merger,
reorganization, business combination, liquidation or stock sale is not a
corporation, to select the general partner(s) or other persons or entities
controlling the operations and business of the resulting entity or (B) a sale of
all or substantially all of the assets of the company (other than in connection
with financing transactions, sale and leaseback transactions and similar
transactions) to a person who is not a KKR Affiliate.
16. Recapitalizations, etc.
The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Stock or the Options, to any and all shares of
capital stock of the Company or any capital stock, partnership units or any
other security evidencing ownership interests in any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or substitution of the Stock or
the Options, by reason of any stock dividend, split, reverse split, combination,
recapitalization, liquidation, reclassification, merger, consolidation or
otherwise.
17. Optionee's Employment by the Company.
Nothing contained in this Agreement or in any other agreement
entered into by the Company and the Optionee contemporaneously with the
execution of this Agreement (i) obligates the Company or any subsidiary of the
Company to employ the Optionee in any capacity whatsoever or (ii) prohibits or
restricts the Company (or any such subsidiary) from terminating the employment,
if any, of the Optionee at any time or for any reason whatsoever, with or
without Cause, and the Optionee hereby acknowledges and agrees that neither the
Company nor any other person has made any representations or promises whatsoever
to the Optionee concerning the Optionee's employment or continued employment by
the Company or any subsidiary of the Company.
18. State Securities Laws.
The Company hereby agrees to use its best efforts to comply with all
state securities or "blue sky" laws which might be applicable to the issuance of
the Options to the Optionee.
19. 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. In the case of a transferee permitted
under Section 2(a) hereof, such transferee shall be deemed the Optionee
hereunder; provided, however, that no transferee (including without limitation,
transferees referred to in Section 2(a) hereof) shall derive any rights under
this Agreement unless
16
and until such transferee has delivered to the Company a valid undertaking and
becomes bound by the terms of this Agreement.
20. Amendment.
This Agreement may be amended only by a written instrument signed by
the Parties hereto.
21. Closing.
Except as otherwise provided herein, the payment of the Option
Excess Price, if any, pursuant to this Agreement shall take place at the
principal office of the Company on the tenth business day following delivery of
the notice by either Party to the other of its exercise of the right to cause
the payment of the Option Excess Price, if any.
22. Applicable Law.
The laws of the State of Delaware (or if the Company reincorporates
in another state, of that state) shall govern the interpretation, validity and
performance of the terms of this Agreement, regardless of the law that might be
applied under principles of conflicts of law. Any suit, action or proceeding
against the Optionee, with respect to this Agreement, or any judgment entered by
any court in respect of any thereof, may be brought in any court of competent
jurisdiction in the State of Delaware (or if the Company reincorporates in
another state, in that state) or the State of New York, as the Company may elect
in its sole discretion, and the Optionee hereby submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action, proceeding
or judgment. By the execution and delivery of this Agreement, the Optionee
appoints The Corporation Trust Company, at its office in New York, New York or
Wilmington, Delaware (or if the Company reincorporates in another state, an
office in that state), as the case may be, as his agent upon which process may
be served in any such suit, action or proceeding. Service of process upon such
agent, together with notice of such service given to the Optionee in the manner
provided in Section 25 hereof, shall be deemed in every respect effective
service of process upon him in any suit, action or proceeding. Nothing herein
shall in any way be deemed to limit the ability of the Company to serve any such
writs, process or summonses in any other manner permitted by applicable law or
to obtain jurisdiction over the Optionee, in such other jurisdictions and in
such manner, as may be permitted by applicable law. The Optionee hereby
irrevocably waives any objections which he 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 (or if the Company reincorporates in another state, in that state) or
the State of New York, 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. No suit, action or proceeding against the Company with
respect to this Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a court of
competent jurisdiction in the State of Delaware (or if the Company
reincorporates in another state, in that state) or the State of New York, and
the
17
Optionee hereby irrevocably waives any right which he may otherwise have had to
bring such an action in any other court, domestic or foreign, or before any
similar domestic or foreign authority. The Company hereby submits to the
jurisdiction of such courts for the purpose of any such suit, action or
proceeding. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
23. Assignability of Certain Rights by the Company.
The Company shall have the right to assign any or all of its rights
or obligations to purchase shares of Stock pursuant to Sections 4, 5 and 6
hereof; provided, however, that the Company shall remain obligated to perform
its obligations notwithstanding such assignment in the event that such assignee
fails to perform the obligations so assigned to it.
24. Miscellaneous.
In this Agreement (i) all references to "dollars" or "$" are to
United States dollars and (ii) the word "or" is not exclusive. If any provision
of this Agreement shall be declared illegal, void or unenforceable by any court
of competent jurisdiction, the other provisions shall not be affected, but shall
remain in full force and effect.
25. Notices.
All notices and other communications provided for herein shall be in
writing and shall be deemed to have been duly given if delivered by hand
(whether by overnight courier or otherwise) or sent by registered or certified
mail, return receipt requested, postage prepaid, to the Party to whom it is
directed:
(a) If to the Company, to it at the following address:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co.
0 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxxxx
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with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
(b) If to the Optionee, to him at the address set forth below
under his signature;
or at such other address as either party shall have specified
by notice in writing to the other.
26. Covenant Not to Compete; Confidential Information.
(a) In consideration of the Company entering into this Agreement
with the Optionee, the Optionee hereby agrees effective as of the Grant Date,
for so long as the Optionee is employed by the Company or one of its
subsidiaries and for a period of one year thereafter (the "Noncompete Period"),
the Optionee shall not, directly or indirectly, engage in the production, sale
or distribution of any product produced, sold or distributed by the Company or
its subsidiaries on the date hereof or during the Noncompete Period anywhere in
the world in which the Company or its subsidiaries is doing business other than
through the Optionee's employment with the Company or any of its subsidiaries.
At the Company's option, the Noncompete Period may be extended for an additional
one year period if (i) within nine months of the termination of the Optionee's
employment, the Company gives the Optionee notice of such extension and (ii)
beginning with the first anniversary of such termination, the Company pays the
Optionee an amount equal to the Optionee's base salary on the date of the
termination of his employment. Such amount shall be paid in installments in a
manner consistent with the then current salary payment policies of the Company.
For purposes of this Agreement, the phrase "directly or indirectly engage in"
shall include any direct or indirect ownership or profit participation interest
in such enterprise, whether as an owner, stockholder, partner, joint venturer of
otherwise, and shall include any direct or indirect participation in such
enterprise as a consultant, licensor of technology or otherwise.
(b) The Optionee will not disclose or use at any time any
Confidential Information (as defined below) of which the Optionee is or becomes
aware, whether or not such information is developed by him, except to the extent
that such disclosure or use is directly related to and required by the
Optionee's performance of duties, if any, assigned to the Optionee by the
Company. As used in this Agreement, the term "Confidential Information" means
information that is not generally known to the public and that is used,
developed or obtained by the Company or its subsidiaries in connection with its
business, including but not limited to (i) products or services, (ii) fees,
costs and pricing structures, (iii) designs, (iv) computer software, including
operating systems, applications and program listings, (v) flow charts, manuals
and
19
documentation, (vi) data bases, (vii) accounting and business methods, (viii)
inventions, devices, new developments, methods and processes, whether patentable
or unpatentable and whether or not reduced to practice, (ix) customers and
clients and customer or client lists, (x) other copyrightable works, (xi) all
technology and trade secrets, and (xii) all similar and related information in
whatever form. Confidential Information will not include any information that
has been published in a form generally available to the public prior to the date
the Optionee proposes to disclose or use such information. The Optionee
acknowledges and agrees that all copyrights, works, inventions, innovations,
improvements, developments, patents, trademarks and all similar or related
information which relate to the actual or anticipated business of the Company
and its subsidiaries (including its predecessors) and conceived, developed or
made by the Optionee while employed by the Company or its subsidiaries belong to
the Company. The Optionee will perform all actions reasonably requested by the
Company (whether during or after the Noncompete Period) to establish and confirm
such ownership at the Company's expense (including without limitation
assignments, consents, powers of attorney and other instruments).
(c) Notwithstanding clauses (a) and (b) above, if at any time a
court holds that the restrictions stated in such clauses (a) and (b) are
unreasonable or otherwise unenforceable under circumstances then existing, the
parties hereto agree that the maximum period, scope or geographic area
determined to be reasonable under such circumstances by such court will be
substituted for the stated period, scope or area. Because the Optionee's
services are unique and because the Optionee has had access to Confidential
Information, the parties hereto agree that money damages will be an inadequate
remedy for any breach of this Agreement. In the event a breach or threatened
breach of this Agreement, the Company or its successors or assigns may, in
addition to other rights and remedies existing in their favor, apply to any
court of competent jurisdiction for specific performance and/or injunctive
relief in order to enforce, or prevent any violations of, the provisions hereof
(without the posting of a bond or other security).
(d) Notwithstanding the foregoing paragraphs (a), (b) and (c), the
provisions of any employment agreement in effect on the date hereof between the
Company and Optionee which contains covenants relating to confidentiality and
competition shall supersede and replace the provisions of paragraphs (a), (b)
and (c) and shall be deemed incorporated by reference in this Agreement in their
entirety.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first above written.
SPALDING HOLDINGS CORPORATION
By________________________________
Name:
Title:
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Optionee (print)
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Optionee Signature
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Address of Optionee
EXHIBIT A
Form of Non-Qualified Stock Option Agreement
[See Exhibit B to the Prospectus.]
