MERRILL CORPORATION
DIRECT INVESTMENT PLAN
1. PURPOSE.
The purpose of the Merrill Corporation Direct Investment Plan (the
"PLAN") is to advance the interests of Merrill Corporation (the "COMPANY") and
its shareholders by facilitating the purchase of shares of the Company's voting
class B common stock, $0.01 par value per share ("COMMON STOCK") by Eligible
Employees (as defined below) of the Company. These purchases are intended to
(i) increase Common Stock ownership among Eligible Employees of the Company and
its Subsidiaries; (ii) more closely align such Eligible Employees' financial
rewards with the financial rewards realized by all other holders of capital
stock of the Company; and (iii) increase such Eligible Employees' motivation to
manage the Company as owners.
2. DEFINITIONS.
In addition to the capitalized terms otherwise defined herein, the
following additional capitalized terms will have the meanings set forth below,
unless the context clearly otherwise requires:
2.1 "ADVERSE ACTION" means any of the actions described in Section
8.7(b) of the Plan.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "CAUSE" means (i) dishonesty, fraud, misrepresentation,
embezzlement or deliberate injury or attempted injury, in each
case related to the Company or any Subsidiary, (ii) any unlawful
or criminal activity of a serious nature, (iii) any intentional
and deliberate breach of a duty or duties that, individually or in
the aggregate, are material in relation to the Participant's
overall duties, (iv) any material breach of any employment,
service, confidentiality or non-compete agreement entered into
with the Company or any Subsidiary, or (v) an Adverse Action.
2.4 "CLOSING DATE" means the date the Company closes on the sale of
Shares to Eligible Employees who are initially offered the right
to purchase Shares under the Plan, which the Company expects to be
on or before January 31, 2000.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended.
2.6 "COINVESTMENT SHARES" mean the shares of Common Stock offered to
the Participant pursuant to Section 5.2 of the Plan.
2.7 "COMMITTEE" means the group of individuals administering the Plan,
as provided in Section 3.1 of the Plan.
2.8 "COMMON STOCK" shall have the meaning given such term in Section
1, or the number and kind of shares of stock or other securities
into which such Common Stock may be changed in accordance with
Section 7.3 of the Plan.
2.9 "DISABILITY" means the disability of the Participant such as would
entitle the Participant to receive disability income benefits
pursuant to the long-term disability plan of the
Company or Subsidiary then covering the Participant or, if no such
plan exists or is applicable to the Participant, the permanent and
total disability of the Participant within the meaning of
Section 22(e)(3) of the Code.
2.10 "DLJMB" means DLJ Merchant Banking Partners II, L.P. and all its
affiliated entities as described in the Investors' Agreement.
2.11 "DLJMB LIQUIDATION EVENT" means, except for transfers to Permitted
Transferees (as defined in the Investors' Agreement), (i) a sale
or other transfer by DLJMB of 60% or more of its shares of common
equity in the Company (including all common equity originally
purchased by DLJMB and any additional common equity purchased by
DLJMB thereafter, whether voting, Class B or any other class of
common equity created by the Company) to one or more persons or
entities (in one transaction or in a series of related
transactions) other than in connection with a public offering of
the Company's common equity, (ii) the sale, lease, exchange or
other transfer, directly or indirectly, of substantially all of
the assets of the Company (in one transaction or in a series of
related transactions) to a person or entity that is not controlled
by the Company, or (iii) a merger or consolidation to which the
Company is a party if the shareholders of the Company immediately
prior to the effective date of such merger or consolidation do not
have "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) immediately following the effective date of such
merger or consolidation of more than 50% of the combined voting
power of the surviving corporation's outstanding securities
ordinarily having the right to vote at elections of directors.
2.12 "EFFECTIVE DATE" means the date set forth in Section 12.1 of the
Plan.
2.13 "ELIGIBLE EMPLOYEES" means any employee of the Company or any
Subsidiary, and any non-employee director, consultant and
independent contractor of the Company or any Subsidiary.
2.14 "ELIGIBILITY NOTICE" means the notice described in Section 4.1 of
the Plan.
2.15 "ENTERPRISE VALUE" means a value equal to six times the Pro-Forma
EBITDA as shown on the Company's consolidated statement of
operations for its most recent fiscal year end.
2.16 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.17 "FAIR MARKET VALUE" means, with respect to the Common Stock, as of
a Valuation Date (or, if no shares were traded or quoted on such
date, as of the next preceding date on which there was such a
trade or quote) (i) the mean between the reported high and low
sale prices of the Common Stock if the Common Stock is listed,
admitted to unlisted trading privileges or reported on any foreign
or national securities exchange or on the NASDAQ National Market
or an equivalent foreign market on which sale prices are reported;
(ii) if the Common Stock is not so listed, admitted to unlisted
trading privileges or reported, the closing bid price as reported
by the NASDAQ SmallCap Market, OTC Bulletin Board or the National
Quotation Bureau, Inc. or other comparable service; or (iii) if
the Common Stock is not so listed or reported, such price shall be
the Formula Value, or such other price as the Committee shall
determine is appropriate in its sole discretion. The Committee's
determination as to the Fair Market Value of the Common Stock
shall be final, conclusive and binding for all purposes and on all
persons, including, without limitation, the Company, shareholders
of the Company, the Participants and their
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respective successors-in-interest. No member of the Board or the
Committee shall be liable for any determination regarding current
values of the Common Stock that is made in good faith.
2.18 "FORMULA VALUE" means the price determined on a Valuation Date by
subtracting (i) Total Debt and (ii) Total Preferred Stock from the
Enterprise Value, adding Total Cash to this difference and
dividing such sum by the aggregate of the number of shares of
capital stock of the Company outstanding on such Valuation Date
(including all vested and unvested Shares) and all shares of
common equity of the Company which may be issuable upon the
exercise of options and warrants of the Company outstanding on
such Valuation Date (whether or not then exercisable); provided,
however, that any option which is not subject to a specific
vesting schedule and only becomes fully exercisable upon a DLJMB
Liquidation Event which realizes an internal rate of return in
excess of fifty percent shall not be included in the outstanding
option number on such Valuation Date.
2.19 "INTEREST RATE" means the rate of interest on the Purchase Loan as
set forth in Section 6.2 of the Plan.
2.20 "INVESTORS' AGREEMENT" means the Investors' Agreement, dated
November 23, 1999, by and among the Company and its shareholders,
as amended from time to time.
2.21 "NOTE" means the Nonrecourse Promissory Note in the form attached
hereto as EXHIBIT A to be entered into by each Participant in
connection with the purchase of Coinvestment Shares.
2.22 "PARTIAL TERMINATION" means a change in the Participant's
employment or other service with the Company and all its
Subsidiaries such that the number of hours worked by such
Participant is substantially reduced for any reason as the
Committee in its sole discretion may determine from the number of
hours such Participant is required to work for the Company or
Subsidiary and such reduction is expected to extend for an
indefinite period of time.
2.23 "PARTICIPANT" means an Eligible Employee of the Company or any
Subsidiary who is selected by the Committee to participate in the
Plan, and to the extent such Participant transfers any Shares
purchased under this Plan to a Permitted Transferee (as defined in
the Investors' Agreement) in accordance with the terms of the
Investors' Agreement such term shall mean the Participant and such
Permitted Transferee of such Participant.
2.24 "PLEDGE AGREEMENT" means the Pledge and Custody Agreement in the
form attached hereto as EXHIBIT B to be entered into by each
Participant and the Company in connection with the purchase of
Coinvestment Shares.
2.25 "PRO-FORMA EBITDA" means earnings before interest, taxes,
depreciation, amortization and non-cash compensation expense as
computed using generally accepted accounting principles on a
pro-forma basis as allowed by Regulation S-X of the Securities
Act.
2.26 "PRO RATA ADJUSTMENT" means a price per Share (which price
could be negative) determined by subtracting the Fair Market
Value of such Share as determined on the Valuation Date in the
fiscal year in which the Participant's employment or other
service is terminated from the Fair Market Value of such Share
as determined on the Valuation
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Date in the fiscal year immediately following the fiscal year
in which the Participant's employment or other service is
terminated, and then multiplying such difference by a fraction,
the numerator of which shall be the number of calendar days the
Participant was employed by the Company or any Subsidiary in
the fiscal year in which the Participant's employment or other
services is terminated, and the denominator of which shall be
the total number of calendar days in the fiscal year in which
the Participant's employment or other services is terminated.
2.27 "PURCHASE DATE" means the date, time and place the Company plans
to close the sale of Shares and collect the payment of the
purchase price for the Shares from the Participant as set forth in
Section 4.1 of the Plan.
2.28 "PURCHASE LOAN" means a nonrecourse interest bearing loan that may
be made by the Company to the Participant to enable the
Participant to purchase Coinvestment Shares pursuant to Section
5.2 of the Plan which shall be evidenced by a Note.
2.29 "REINVESTMENT SHARES" means the shares of Common Stock offered to
the Participant pursuant to Section 5.1 of the Plan.
2.30 "REPURCHASE DATE" means the date the Company will repurchase
Shares from the Participant as set forth in Section 8.2 of the
Plan.
2.31 "REPURCHASE RIGHT" means the irrevocable and exclusive right the
Company has to repurchase Shares as set forth in Section 8 of the
Plan.
2.32 "RETIREMENT" means termination of employment or service pursuant
to and in accordance with the regular (or, if approved by the
Committee for purposes of the Plan, early) retirement/pension plan
or practice of the Company or Subsidiary then covering the
Participant, provided that if the Participant is not covered by
any such plan or practice, the Participant will be deemed to be
covered by the Company's plan or practice for purposes of this
determination.
2.33 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.34 "SHARES" means the Reinvestment Shares and the Coinvestment Shares
offered to a Participant pursuant to Sections 5.1 and 5.2 of the
Plan.
2.35 "SUBSIDIARY" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a
significant equity interest, as determined by the Committee.
2.36 "TOTAL CASH" means the total amount of cash and cash equivalents
shown on the Company's consolidated balance sheet as of its most
recent fiscal year end.
2.37 "TOTAL DEBT" means any indebtedness of the Company in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof) or banker's acceptances, except any such balance
that constitutes an accrued expense, trade payable or customer
contract advance, if and to the extent that any of the foregoing
(other than letters of credit) would appear as a liability on the
Company's consolidated balance sheet as of its most recent fiscal
year end.
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2.38 "TOTAL PREFERRED STOCK" means the total amount of the liquidation
preference on all of the Company's issued and outstanding
preferred stock as of its most recent fiscal year end.
2.39 "VALUATION DATE" means a date on which the Committee shall
determine the Fair Market Value of the Common Stock, which date
shall be no more than ninety (90) days following the Company's
fiscal year end.
3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan will be administered by the Board or by a
committee of the Board. So long as the Company has a class of its
equity securities registered under Section 12 of the Exchange Act,
any committee administering the Plan will consist solely of two or
more members of the Board who are "non-employee directors" within
the meaning of Rule 16b-3 under the Exchange Act and, if the Board
determines in its sole discretion, who are "outside directors"
within the meaning of Section 162(m) of the Code. As used in the
Plan, "Committee" will refer to the Board or to such a committee,
if established. The Committee will act by majority approval of
the members (but may also take action with the written consent of
a majority of the members of the Committee), and a majority of the
members of the Committee will constitute a quorum. To the extent
consistent with corporate law, the Committee may delegate to any
officers of the Company the duties, power and authority of the
Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however,
that only the Committee may exercise such duties, power and
authority with respect to Eligible Employees who are subject to
Section 16 of the Exchange Act. The Committee may exercise its
duties, power and authority under the Plan in its sole and
absolute discretion without the consent of any Participant or
other party, unless the Plan specifically provides otherwise.
Each determination, interpretation or other action made or taken
by the Committee pursuant to the provisions of the Plan will be
final, conclusive and binding for all purposes and on all persons,
including, without limitation, the Company, the shareholders of
the Company, the Participants and their respective
successors-in-interest. No member of the Committee will be liable
for any action or determination made in good faith with respect to
the Plan.
3.2 AUTHORITY OF THE COMMITTEE.
(a) Notwithstanding any other provision to the contrary in the
Plan, the Committee will have the authority in its sole
discretion to (i) determine the Eligible Employees to be
selected as Participants in the Plan, (ii) determine the
number of Shares such Participant is allowed to purchase,
or the Company is allowed to repurchase, under the Plan,
(iii) determine the periods or dates when Shares may be
purchased by the Participant, or repurchased by the
Company, under the Plan, (iv) determine the amount of
Purchase Loans to be made to Participants in connection
with the purchase of Coinvestment Shares (which amount
shall not exceed sixty-five percent (65%) of the total
purchase price of the Coinvestment Shares), (v) determine
the terms and conditions of the Note and Pledge Agreement
as described in Section 6 hereof, (vi) adopt, alter, amend,
waive or repeal any administrative rules, guidelines,
practices and provisions governing the Plan or the
administration of the Plan as the Committee shall, from
time to time, deem advisable, (vii) interpret the terms and
provisions of the Plan (and any agreement or document
related hereto) and to supervise the administration of the
Plan, and (viii) determine the terms and conditions to
which the Shares may be
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subject upon a Participant's death, Disability, Retirement
or termination of employment or other service with the
Company or any Subsidiary, including, without limitation,
the right of the Company to accelerate the vesting of
unvested Coinvestment Shares and the right of the Company
to repurchase the Shares.
(b) The Committee will also have the authority under the Plan
to amend or modify the terms of any outstanding Shares in
any manner, including, without limitation, the terms and
conditions of any Shares or otherwise terminate any
restrictions relating to any Shares; provided, however,
that the amended or modified terms are permitted by the
Plan as then in effect and that any Participant adversely
affected by such amended or modified terms has consented to
such amendment or modification. The Committee shall also
have the authority to correct any defect, supply any
omission or reconcile any inconsistency in the Plan, any
Purchase Loan or any related document or agreement in the
manner and to the extent it shall deem desirable to carry
it into effect.
4. PARTICIPATION.
4.1 SELECTION OF PARTICIPANTS. The Committee will have the authority
to select from the Eligible Employees the Participants in the Plan
in accordance with Section 3 hereof. Eligible Employees will be
given written notice of their eligibility to participate in the
Plan (the "ELIGIBILITY NOTICE"). The Eligibility Notice shall
specify (i) the specific number of Reinvestment Shares and
Coinvestment Shares the Participant shall have the right to
purchase from the Company, (ii) the per share price the
Participant must pay for Reinvestment Shares and Coinvestment
Shares, (iii) the maximum amount the Participant may borrow from
the Company to assist with the purchase price of the Coinvestment
Shares (which in no event shall exceed sixty-five percent (65%) of
the total purchase price for the Coinvestment Shares), and (iv)
the date, time and place the Company plans to close the sale of
Shares and collect the payment of the purchase price for the
Shares from the Participant (the "PURCHASE DATE"). Eligible
Employees will have fifteen (15) days from the date of the
Eligibility Notice to elect to participate in the Plan, and if the
Eligible Employee elects to participate in the Plan, he or she
must satisfy all of the conditions set forth in Section 4.2 hereof
on or prior to the Purchase Date determined by the Committee;
provided, however, that the Eligible Employees initially selected
to participate in the Plan shall have until the Closing Date to
elect to participate in the Plan and to satisfy the conditions set
forth in Section 4.2 hereof. No Eligible Employee shall have at
any time the right (i) to be selected as a Participant, (ii) to be
entitled to purchase any Shares, or (iii) having been selected to
purchase Shares, to purchase any additional Shares.
4.2 ELECTION TO PARTICIPATE IN PLAN. Eligible Employees are not
required to participate in the Plan. Each Eligible Employee who
elects to participate in the Plan, however, shall satisfy the
following requirements on or prior to the Purchase Date or the
Closing Date, as applicable:
(a) Submit a completed, signed and irrevocable agreement to
purchase the Shares under the Plan, which agreement shall
specify the number of Coinvestment Shares and Reinvestment
Shares to be purchased by the Participant and the total
purchase price for such Shares;
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(b) Deliver to the Company in cash (including check, bank draft
or money order) the total purchase price for the
Reinvestment Shares purchased by the Participant pursuant
to Section 5.1 hereof, and that portion of the Coinvestment
Shares not covered by the Note pursuant to Section 5.2
hereof;
(c) Complete and sign all necessary agreements and other
documents relating to the Purchase Loan described in
Section 6 hereof in connection with the purchase of the
Coinvestment Shares;
(d) Execute and deliver to the Company an agreement to become a
party to the Investors' Agreement pursuant to Section 12.2
hereof;
(e) If required by the Committee, execute and deliver to the
Company an agreement acknowledging to be bound by a
confidentiality and non-compete agreement;
(f) If required by the Committee, execute an agreement to waive
or modify certain compensation provisions in any existing
employment agreement or arrangement between the Company and
the Participant; and
(g) Satisfy all other terms and conditions of participation
specified in the Plan, or as may be required from time to
time by the Committee after the Effective Date.
The agreements and other documents specified in this Section 4.2
shall be in such forms and shall be submitted at such times to
such Participants as specified by the Committee or its
designee(s).
5. PURCHASE OF SHARES.
5.1 REINVESTMENT SHARES. Each Participant selected by the Committee
to participate in the Plan shall be granted the right to purchase,
out of such Participant's own funds, that number of Reinvestment
Shares, at a price per share, as determined by the Committee. If a
Participant elects to participate in the Plan, such Participant
shall have the right to purchase any number of the Reinvestment
Shares up to the total amount awarded the Participant in the
Eligibility Notice. Each Participant electing to purchase such
Reinvestment Shares shall deliver to the Company on the Purchase
Date or the Closing Date, as applicable, the total purchase price
for the number of Reinvestment Shares such Participant is electing
to purchase. Each Participant electing to purchase Reinvestment
Shares shall be solely responsible for paying the entire amount of
the total purchase price of the Reinvestment Shares, and the
Company will not lend any funds to the Participant to assist with
the purchase of any Reinvestment Shares. On the Purchase Date or
the Closing Date, as applicable, the Participant will be recorded
on the books of the Company as the owner of the Reinvestment
Shares, and the Company will issue one or more duly issued and
executed stock certificates to the Participant evidencing such
Reinvestment Shares.
5.2 COINVESTMENT SHARES. Each Participant selected by the Committee
to participate in the Plan may also be granted the right to
purchase Coinvestment Shares as determined by the Committee. Such
Participant shall have the right to purchase any number of
Coinvestment Shares up to the total amount awarded the Participant
in the Eligibility Notice. On the Purchase Date or the Closing
Date, as applicable, the Company shall make a Purchase Loan to the
Participant in an amount determined by the Committee in its
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sole discretion (which amount shall not exceed sixty-five percent
(65%) of the total purchase price of the Coinvestment Shares) to
pay for a portion of the total purchase price for the number of
Coinvestment Shares the Participant is electing to purchase, and
the Participant shall be solely responsible for paying the
remaining balance of such purchase price. The proceeds of the
Purchase Loan shall be used solely to assist the Participant with
the purchase of the Coinvestment Shares. As a condition to the
Company making the Purchase Loan, all of the Coinvestment Shares
purchased by the Participant pursuant this Section 5.2 (whether
purchased with the Participant's own funds or with the Purchase
Loan) must be pledged as collateral for the Purchase Loan pursuant
to Section 6.4 hereof. The Coinvestment Shares purchased by the
Participant shall vest in accordance with the vesting schedule set
forth on an exhibit to the written agreement evidencing such
purchase. On the Purchase Date or the Closing Date, as
applicable, the Participant will be recorded on the books of the
Company as the owner of the Coinvestment Shares, and, subject to
Section 6.4 hereof, the Company will issue one or more duly issued
and executed stock certificates evidencing such Coinvestment
Shares.
5.3 RESTRICTIONS ON TRANSFERABILITY OF SHARES. In no event will a
Participant be entitled to sell or transfer any Shares purchased
by the Participant pursuant to the Plan during the six (6) months
following the Purchase Date or the Closing Date, as applicable.
In addition, all Shares purchased by Participants under the Plan
shall be subject to the transfer restrictions and other provisions
of the Plan and the Investors' Agreement, and until such time as
such restrictions on transfer expire, no right or interest of any
Participant under the Plan shall be subject in any manner to
alienation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind nor in any manner be
subject to the debts or liabilities of any person, and any attempt
to so alienate or subject any such amount, whether presently or
thereafter payable, or any such right shall be void, except as may
otherwise be provided for in the Plan or the Investors' Agreement.
Subject to Section 6.1 hereof, and in addition to the other
restrictions contained in the Plan and the Investors' Agreement, a
Participant may not sell, transfer, assign, pledge, attach, charge
or encumber in any way or in any manner any unvested Coinvestment
Shares. To enforce the transfer restrictions set forth in the
Plan and the Investors' Agreement, the Committee, in its sole
discretion, may place a legend on the stock certificates
evidencing that the Shares are subject to certain transfer
restrictions and may require the Company to hold any stock
certificates issued to the Participant for the Coinvestment
Shares, together with stock powers executed in blank, in the
custody of the Company or its transfer agent until the
restrictions on the Coinvestment Shares have terminated.
6. PURCHASE LOANS.
6.1 NOTE. All Purchase Loans shall be evidenced by the Participant's
execution of a Note. In the event that a Participant transfers
all or a portion of his or her Coinvestment Shares to a Permitted
Transferee (as defined in the Investors' Agreement), such
Permitted Transferee, as a condition to the transfer of the
Coinvestment Shares, shall agree to be bound by the terms and
conditions of the Plan, any agreement evidencing the sale of the
Shares to the Participant, and shall also agree to take such
Shares subject to the terms and conditions of the Note and Pledge
Agreement. The Participant, however, shall remain the primary
obligor of all obligations outstanding under the Note and the
Pledge Agreement regardless of such a transfer to a Permitted
Transferee.
6.2 INTEREST. Purchase Loans will accrue at a fixed rate of interest
equal to eight percent (8%) per annum beginning on the date the
Note is executed to evidence the Purchase Loan;
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provided, however, that such interest rate shall not exceed the
rate permitted by applicable law (the "INTEREST RATE"). While
interest on the Purchase Loan will accrue at the Interest Rate,
interest will not be paid by the Participant during the term of
the Note, but will be paid upon maturity of the Purchase Loan
pursuant to Section 6.3 hereof and the terms of the Note. Accrued
but unpaid interest on the Purchase Loan will be in addition to
the principal balance of the Purchase Loan.
6.3 REPAYMENT. The principal of the Purchase Loan and all accrued but
unpaid interest will be due and payable by the Participant in a
single payment, pursuant to the terms and conditions of the Plan
and the Note, as of the earlier of (i) the Participant's
termination of employment or other service with the Company and
all its Subsidiaries in accordance with Section 8 hereof, (ii) a
DLJMB Liquidation Event, (iii) a sale or transfer of the
Coinvestment Shares in accordance with the terms and conditions of
the Investors' Agreement (other than transfers to Permitted
Transferees under the Investors' Agreement or hardship repurchases
under Section 8.5 hereof), (iv) eight years from the Purchase Date
or Closing Date, as applicable, for the Coinvestment Shares or (v)
within 120 days following an initial public offering of the
Company's equity securities in which case the principal of the
Purchase Loan and all accrued interest thereon must be paid with
cash, or the Committee in its sole discretion may allow the
Company to repurchase the Participant's Reinvestment Shares and
vested Coinvestment Shares at Fair Market Value, and the
Participant's unvested Coinvestment Shares at a purchase price
determined by the Committee in its sole discretion, and apply the
proceeds the Company owes the Participant against the outstanding
balance of the Note and all accrued interest; provided, however,
that if the Participant elects to repay the Purchase Loan and all
accrued interest with the Participant's Shares, the Participant
will not be required to repay the Note and all accrued interest if
the total purchase price paid for such Shares does not exceed the
outstanding balance of the Note, all accrued interest and any tax
liability of the Participant associated with the sale of the
Shares. Notwithstanding anything to the contrary in this Section
6.3, however, the Committee may decide, in its sole discretion, to
extend the maturity of the Note. In the event that the
Participant sells or transfers (other than transfers to Permitted
Transferees under the Investors' Agreement or hardship repurchases
under Section 8.5 hereof) all or a portion of the Coinvestment
Shares in accordance with the Plan and the Investors' Agreement,
the Purchase Loan will become immediately due and payable by the
Participant to the extent of the lesser of (i) the total
outstanding balance of unpaid principal and all accrued interest
on the Purchase Loan or (ii) the net after tax proceeds realized
upon such sale. The Company shall have the right to apply any
amounts it owes the Participant for the purchase of Coinvestment
Shares pursuant to Section 8 hereof towards the outstanding
principal and accrued interest on the Note in accordance with
Section 8.7(c) hereof, and, in the event the Participant sells or
transfers the Coinvestment Shares in connection with a DLJMB
Liquidation Event or pursuant to the provisions of the Investors'
Agreement (other than to a Permitted Transferee, the Participant
shall be required to use all proceeds received from such sale or
transfer to repay the outstanding balance of the Note and all
accrued interest.
6.4 PLEDGE OF SHARES. As collateral for the Note, the Participant
shall grant to the Company a security interest in the Coinvestment
Shares by executing the Pledge Agreement. Any stock certificates
issued for Coinvestment Shares purchased pursuant to Section 5.2
hereof shall be held by the Company as collateral for the Purchase
Loan until such time as the Purchase Loan and all accrued interest
on the Purchase Loan are paid in full; provided, however, that the
Committee may in its sole discretion release, upon request of the
Participant, Shares if the collateral for the Note exceeds the
outstanding balance of
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the Purchase Loan and all accrued interest and the Committee
determines in its sole discretion that the remaining collateral is
sufficient to secure the outstanding balance of the Note and
accrued interest. If the Company repurchases the Coinvestment
Shares so pledged in accordance with Section 8 hereof, the Company
shall have the right to apply all proceeds it owes the Participant
against the outstanding balance of the Purchase Loan and all
accrued interest. Notwithstanding anything to the contrary in the
Plan or in the Investors' Agreement, so long as Coinvestment
Shares are pledged to the Company pursuant to this Section 6.4 in
no event can such Coinvestment Shares (whether vested or unvested)
be subject in any manner to alienation, sale, transfer,
assignment, bankruptcy, pledge, attachment, charge or encumbrance
of any kind nor in any manner be subject to the debts or
liabilities of any person, except that such Coinvestment Shares
may be transferred to Permitted Transferees (as defined in the
Investors' Agreement).
7. SHARES AVAILABLE FOR ISSUANCE.
7.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as
provided in Section 7.3 of the Plan, the maximum number of shares
of Common Stock that will be available for issuance under the Plan
will be 1,459,091 shares of Common Stock of which 227,272 shares
will be designated for Reinvestment Shares and 1,231,819 shares
will be designated for Coinvestment Shares.
7.2 ACCOUNTING FOR SHARES. Shares of Common Stock that are sold under
the Plan as Reinvestment Shares will be applied to reduce the
number of shares of Common Stock designated for Reinvestment
Shares remaining available for issuance under the Plan and shares
of Common Stock that are sold under the Plan as Coinvestment
Shares will be applied to reduce the number of shares of Common
Stock designated for Coinvestment Shares remaining available for
issuance under the Plan. In addition, in the event that any
Shares purchased under the Plan are reacquired by the Company
pursuant to any right of repurchase, right of first refusal or
forfeiture provisions, such Shares will automatically again become
available for issuance under the Plan and such shares of Common
Stock shall be divided by the Committee between Reinvestment
Shares and Coinvestment Shares in such amounts as the Committee
deems appropriate.
7.3 ADJUSTMENTS TO SHARES. In the event that the Committee determines
that any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other similar
change in the corporate structure or shares of the Company,
affects the Shares such that an adjustment is determined by the
Committee, in its sole discretion, to be appropriate in order to
prevent dilution or enlargement of the benefits or potential
benefits of a Participant's investment in the Shares under the
Plan, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the
surviving corporation) shall, in such manner as it deems
equitable, make such adjustments, if any, to the number and kind
of Shares (or number and kind of other securities or property)
with respect to the Shares purchased under the Plan, as it deems
appropriate and necessary.
8. REPURCHASE RIGHTS UPON PARTICIPANT'S TERMINATION OF SERVICES.
8.1 REPURCHASE RIGHT. Subject to the other provisions of this Section
8, in the event a Participant's employment or other service with
the Company and all its Subsidiaries is terminated for any reason
whatsoever, whether due to death, Disability, Retirement or
10
termination with or without Cause, prior to a DLJMB Liquidation
Event, the Company shall have the irrevocable and exclusive right
to repurchase (the "REPURCHASE RIGHT") at the price determined in
accordance with this Section 8.1 and in the manner set forth in
Section 8.2 hereof all or any portion of the Participant's Shares;
provided, however, that the Committee in its sole discretion may
determine to pay a price other than the price determined in
accordance with this Section 8.1 but in no event shall such price
be less than the price determined in accordance with this Section
8.1:
(a) If the Participant's employment or other service with the
Company and all its Subsidiaries is terminated during a
fiscal year by reason of voluntary resignation, death,
Disability, Retirement or termination by the Company
without Cause, the Company shall pay: (i) for each
Coinvestment Share that is vested at the time of
termination and each Reinvestment Share, an amount equal to
the Fair Market Value of each Share as determined on the
Valuation Date in the fiscal year in which the
Participant's employment or other service is terminated
plus any Pro Rata Adjustment; and (ii) for each
Coinvestment Share that is not vested at the time of
termination, an amount equal to the lesser of (x) the Fair
Market Value of each Coinvestment Share as determined on
the Valuation Date in the fiscal year in which the
Participant's employment or other service is terminated
plus any Pro Rata Adjustment, or (y) the purchase price
paid by the Participant for each unvested Coinvestment
Share, plus all accrued and unpaid interest on the Purchase
Loan relating to such unvested Coinvestment Shares.
(b) If the Participant's employment or other service with the
Company and all its Subsidiaries is terminated during a
fiscal year by the Company for Cause, the Company shall pay
for each Share owned by the Participant (whether vested or
unvested) the lesser of (i) the Fair Market Value for each
Share as determined on the Valuation Date in the fiscal
year in which the Participant's employment or other service
is terminated plus any Pro Rata Adjustment, or (ii) the
purchase price paid by the Participant for each Share,
without any accrued and unpaid interest on the Purchase
Loan relating to the Coinvestment Shares being paid.
(c) Unless the Committee otherwise determines in its sole
discretion, a Participant's employment or other service
will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other
records of the Company or the Subsidiary for which the
Participant provides employment or other service, as
determined by the Committee in its sole discretion based
upon such records.
8.2 EXERCISABILITY OF REPURCHASE RIGHT. Subject to Section 8.7
hereof, if the Company elects to exercise its Repurchase Right or
any other right or obligation the Company may have to repurchase
Shares pursuant to the Plan, the Company shall give the
Participant written notice of its intent to exercise its
Repurchase Right (the "NOTICE OF REPURCHASE") within sixty (60)
days of such Participants termination of employment or other
service. The Notice of Repurchase shall specify (i) the number of
Reinvestment Shares and Coinvestment Shares (including the number
of vested and unvested Coinvestment Shares) the Company intends to
repurchase and (ii) the date the Company expects to purchase the
Reinvestment Shares and Coinvestment Shares from the Participant
which date shall be no later than thirty (30) days following the
Valuation Date in the fiscal year immediately following the fiscal
year in which the Participant's employment or other service is
terminated (the "REPURCHASE DATE"). On or before the Repurchase
Date, the
11
Participant shall deliver to the Company the stock certificates
representing the Reinvestment Shares and Coinvestment Shares being
purchased by the Company, properly endorsed for transfer, unless
the Company is holding such Coinvestment Shares pursuant to
Section 6.4 hereof in which case such Coinvestment Shares shall be
deemed to have been delivered to the Company. By such delivery,
or deemed delivery, of such certificates, the Participant warrants
that (i) the Participant has good title to, the right to
possession of, and the right to sell, the Reinvestment Shares and
the Coinvestment Shares, (ii) such Reinvestment Shares and
Coinvestment Shares are free and clear of all pledges, liens,
encumbrances, charges, proxies, restrictions, options, transfers
and other adverse claims, except such as have been imposed by the
Plan or the Investors' Agreement, and except such restrictions on
transfer as may be imposed by federal or state securities laws,
and (iii) the Participant shall hold harmless the Company from all
costs, expenses and fees incurred in defending title and right to
possession. On the Repurchase Date, the Company shall pay to the
Participant the total purchase price for the Reinvestment Shares
and Coinvestment Shares purchased by the Company.
8.3 ASSIGNABILITY OF REPURCHASE RIGHT. The Company, in its sole
discretion, may assign its Repurchase Right to one or more
employees, officers, directors, shareholders or other persons or
organizations. In the event the Company does assign its
Repurchase Right to one or more employees, officers, directors,
shareholders or other persons or organizations, such persons or
organizations shall exercise such Repurchase Right in accordance
with Section 8.2 hereof.
8.4 PUT RIGHT. Subject to Section 8.7 hereof, in the event that
neither the Company nor any assignee of the Company exercises the
Repurchase Right and a Participant's employment or other service
with the Company and all Subsidiaries is terminated by reason of
voluntary resignation, death, Disability, Retirement or
termination by the Company without Cause, the Participant shall
have the right to require the Company to purchase, in the manner
set forth in Section 8.2 hereof, (i) all or any portion of the
Reinvestment Shares and vested Coinvestment Shares owned by the
Participant at the time of termination at a purchase price per
share equal to the Fair Market Value for each such Share as
determined on the Valuation Date in the fiscal year in which the
Participant's employment or other service is terminated plus any
Pro Rata Adjustment; and (ii) all or any portion of the unvested
Coinvestment Shares owned by the Participant at the time of
termination at a purchase price per share equal to the lesser of
(x) the Fair Market Value for each such unvested Coinvestment
Share as determined on the Valuation Date in the fiscal year in
which the Participant's employment or other service is terminated
plus any Pro Rata Adjustment, or (y) the purchase price paid by
the Participant for each such unvested Coinvestment Share, plus
all accrued and unpaid interest on the Purchase Loan relating to
such unvested Coinvestment Shares.
8.5 HARDSHIP REPURCHASES.
(a) Subject to the provisions of Section 8.5(e) and Section 8.7
hereof, a Participant may request that the Committee
repurchase his or her Reinvestment Shares and vested
Coinvestment Shares if the Participant is deemed to be in
immediate and heavy financial need as determined in
accordance with Section 8.5(b) and (c) hereof. A hardship
repurchase will be permitted only if the Committee
determines in its sole discretion that the repurchase is
being requested on account of an immediate and heavy
financial need of the Participant and is necessary to
satisfy such financial need. The fact that the Committee
grants a hardship
12
repurchase to a Participant, however, will not impact the
discretion of the Committee in the future to determine
whether to grant additional hardship repurchases to such
Participant or any other Participant, and each application
for a hardship repurchase will be considered by the
Committee on an individual basis independent of any facts
or circumstances surrounding any previous hardship
repurchase grants.
(b) A repurchase will be deemed to be made on account of an
immediate and heavy financial need only if it is determined
by the Committee in its sole discretion to be on account
of: (i) expenses for medical care (as described in Code
section 213(d)), incurred or to be incurred by the
Participant, the Participant's spouse or the Participant's
dependent (as described in Code section 152), (ii) payments
necessary to prevent the eviction of the Participant from
his or her principal residence or foreclosure on the
mortgage on the Participant's principal residence, or (iii)
any other situation in which the Committee in its sole
discretion determines such Participant is in immediate and
heavy financial need.
(c) A hardship repurchase will be deemed to be necessary to
satisfy the immediate and heavy financial need of the
Participant only if the Committee determines in its sole
discretion that the aggregate purchase price the Company
must pay is not more than the sum of the amount of the
immediate and heavy financial need of the Participant plus
the amount necessary to pay any federal, state or local
taxes or penalties that the Participant will incur in
connection with the repurchase, as estimated by the
Committee.
(d) The Committee's determination of the existence of a
Participant's financial hardship and the amount that may be
repurchased to satisfy the need created by such hardship
will be made in accordance with all applicable laws, and is
final and binding on the Participant. The Committee may
require the Participant to make representations and
certifications concerning his or her entitlement to a
repurchase pursuant to this Section 8.5 and is entitled to
rely on such representations and certifications unless the
Committee has actual knowledge to the contrary. The
Committee is not obligated to supervise or otherwise verify
that amounts repurchased are applied in the manner
specified in the Participant's repurchase application.
(e) In addition to the provisions of Section 8.7 hereof, all
repurchases of Shares under this Section 8.5 shall be
subject to the following rules:
(i) Applications for repurchases may be made at anytime
during the Company's fiscal year. The Company,
however, will not be required to make any payments
for such Shares repurchased within any specific time
period designated by the Participant in his or her
repurchase application. The Company will pay the
purchase price for such Shares being repurchased
pursuant to this Section 8.5 as soon as
administratively practicable after the Committee's
determination that the Participant is entitled to
have his or her Shares repurchased by the Company.
(ii) The price to be paid by the Company to the
Participant for each Share shall be the Fair Market
Value for such Share as determined on the most
recent Valuation Date prior to the hardship
repurchase.
13
(iii) No payment for Shares purchased by the Company under
this Section 8.5 will be made if the total purchase
price for such Shares is less than $1,000.
(iv) All payments for Shares purchased will be made by
the Company in the form of a lump sum payment by
check.
(v) The Company shall be permitted to repurchase Shares
pursuant to this Section 8.5 only to the extent that
the Fair Market Value of the Coinvestment Shares
held as collateral for the Note exceeds the
outstanding balance of the Purchase Loan and all
accrued interest, and at no time shall the Company
be permitted to repurchase Shares under this Section
8.5 if such repurchase would cause the collateral
securing the Note to be insufficient to repay the
Purchase Loan and all accrued interest in full.
8.6 PARTIAL TERMINATIONS. Subject to Section 8.7 hereof, in the event
that there is a Partial Termination of the Participant, the
Company shall have the irrevocable and exclusive right to
repurchase, in the manner set forth in Section 8.2 hereof, all or
any portion of the Participant's Coinvestment Shares (whether
vested or unvested) at the time of the Partial Termination as is
determined by the Committee in its sole discretion, and the
Company shall pay the Participant: (i) for each Coinvestment
Share that is vested at the time of the Partial Termination, an
amount equal to the Fair Market Value of each share as determined
on the Valuation Date in the fiscal year in which the Participant
has a Partial Termination plus any Pro Rata Adjustment; and (ii)
for each Coinvestment Share that is not vested at the time of the
Partial Termination, an amount equal to the lesser of (x) the Fair
Market Value of each Coinvestment Share as determined on the
Valuation Date in the fiscal year in which the Participant has a
Partial Termination plus any Pro Rata Adjustment, or (y) the
purchase price paid by the Participant for such unvested
Coinvestment Share, plus all accrued and unpaid interest on the
Purchase Loan relating to such unvested Coinvestment Shares.
8.7 OBLIGATIONS, LIMITATIONS AND RESTRICTIONS ON REPURCHASE SHARES.
(a) VIOLATION OF LAW AND CONTRACTUAL OBLIGATIONS.
Notwithstanding anything to the contrary in the Plan, the
Company shall only be required to repurchase any Shares
pursuant to this Section 8 as rapidly as permissible
without violating any loan covenants or other contractual
restrictions applicable to, and binding upon, the Company,
and any amounts not paid to the Participant on the
Repurchase Date in such case will bear interest at the
Interest Rate. The Company shall only be required to
repurchase any Shares pursuant to this Section 8 to the
extent that such repurchase does not violate any applicable
laws.
(b) ADVERSE ACTIONS.
(i) Notwithstanding anything in the Plan to the
contrary, in the event that a Participant takes
Adverse Actions with respect to the Company or any
Subsidiary (1) prior to such Participant's
termination of employment or other service with the
Company and all its Subsidiaries or (2) during the
period ending twelve (12) months following the date
of the Participant's termination of employment or
other service with the Company and all
14
Subsidiaries by reason of voluntary resignation,
death, Disability, Retirement or termination by the
Company without Cause, the Committee in its sole
discretion will have the authority to treat such
Participant's termination of employment or other
service as a termination for Cause and to repurchase
all Shares held by such Participant in the manner
set forth in Section 8.2 hereof for the lesser of
(x) the Fair Market Value for each Share as
determined on the Valuation Date in the fiscal year
in which the Participant's employment or other
service is terminated plus any Pro Rata Adjustment
or (y) the purchase price paid by the Participant
for each Share. In addition, to the extent a
Participant has received an amount in excess of such
purchase price in connection with a prior exercise
of the Company's Repurchase Right or the sale or
other transfer of such Shares either in the twelve
(12) months prior to, or the twelve (12) months
following, such Participant's termination of
employment or service, then the Participant shall be
required to pay to the Company any such excess. The
Company shall be entitled to require the Participant
to pay to the Company, within ten (10) days of
receipt of notice from the Company, the amount of
any excess. Such payment will be made in cash
(including check, bank draft or money order). The
Company will be entitled to off-set any amounts that
may be due and owing to the Participant from the
Company or any Subsidiary pursuant to Section 8.7(c)
or make other arrangements for the collection of all
amounts necessary to satisfy such payment
obligations.
(ii) For purposes of the Plan, an "ADVERSE ACTION" will
mean any action by a Participant that the Committee,
in its sole discretion, determines to be adverse to
the interests of the Company or any Subsidiary,
including, without limitation, (x) disclosing
confidential information of the Company or any
Subsidiary to any person not authorized by the
Company to receive it, (y) engaging, directly or
indirectly, in any commercial activity that in the
judgement of the Committee competes with the
business of the Company or any Subsidiary or (z)
interfering with the relationships of the Company or
any Subsidiary and their respective employees and
customers.
(c) RIGHT OF OFF-SET. The Company shall have the right to
set-off against any amounts owing by the Company to the
Participants, including, without limitation, any dividends
paid on the Shares, which amounts shall be applied first to
accrued interest on the Note and then to the outstanding
principal balance of the Note. Neither the exercise of,
nor the failure to exercise, such right of set-off will
constitute an election of remedies nor limit the Company in
any manner in the enforcement of any other remedies that
may be available to it.
(d) REPAYMENT OF INTEREST. In the event that the Company
repurchases Coinvestment Shares pursuant to Sections 8.1,
8.4, 8.6 or 8.7(b) hereof, the Committee, in its sole
discretion, shall on the Repurchase Date make an
appropriate adjustment to the purchase price paid on such
date to repay any interest that has accrued on the Purchase
Loan from the date of the Participant's termination of
employment or other services with the Company and all its
Subsidiaries until the date the Company repurchases the
Coinvestment Shares pursuant to this Section 8.
15
9. SHAREHOLDER RIGHTS. Subject to the provisions of Section 5 and Section
12.2 hereof, upon the Participant's purchase of the Shares (whether
vested or unvested) such Participant shall have all the rights of a
shareholder of the Company with respect to the Shares, including, without
limitation, all voting rights, liquidation rights and rights to receive
all dividends paid on the Shares at the same times and in the same
amounts as all other shares of Common Stock; provided, however, that all
dividends paid on the Coinvestment Shares shall be pledged as collateral
for the Note until such time as the Note and all accrued interest is paid
in full, and the Company shall be entitled to set-off against such
dividends in accordance with Section 8.7(c) hereof. Nothing in the Plan,
however, will interfere with or limit in any way the right of the Company
or any Subsidiary to terminate the employment or service of any Eligible
Employee or Participant at any time, nor confer upon any Eligible
Employee or Participant any right to continue in the employ or service of
the Company.
10. TAXES.
10.1 GENERAL RULES FOR WITHHOLDING. The Company is entitled to (i)
withhold and deduct from future wages of the Participant (or from
other amounts that may be due and owing to the Participant from
the Company or a Subsidiary), or make other arrangements for the
collection of, all legally required amounts necessary to satisfy
any and all foreign, federal, state and local withholding and
employment-related tax requirements attributable to the
acquisition of the Shares, the receipt of dividends or
distributions on the Shares or the termination of the security
interest or restrictions applicable to the Shares, or (ii) require
the Participant promptly to remit the amount of such withholding
to the Company before taking any action, including issuing any
Shares. In the event the Company is unable to withhold such
amounts, for whatever reasons, the Participant hereby agrees to
pay to the Company an amount equal to the amount the Company would
otherwise be required to withhold under foreign, federal, state or
local law.
10.2 SPECIAL RULES FOR WITHHOLDING. The Committee may, in its sole
discretion and upon terms and conditions established by the
Committee, permit or require a Participant to satisfy, in whole or
in part, any withholding or employment-related tax obligation
described in Section 10.1 hereof by electing to tender shares of
the Company previously acquired by the Participant or a promissory
note (on terms acceptable to the Committee in its sole
discretion), or by a combination of such methods.
10.3 SECTION 83(b) ELECTION. The Participant has reviewed with the
Participant's own tax advisors the federal, state, local and
foreign tax consequences of the purchase of the Shares and the
other transactions contemplated by the Plan. The Participant is
relying solely on such advisors and not on any statements or
representations of the Company or any of its agents. The
Participant understands that the Participant (and not the Company)
shall be responsible for the Participant's own tax liability that
may arise as a result of the purchase of the Shares or the other
transactions contemplated by this Agreement. The Company
recommends that each Participant consult with such Participant's
own tax advisor with respect to the making of an election pursuant
to Section 83(b) of the Code. Any such election, if made, must be
filed with the Internal Revenue Service within thirty (30) days of
the purchase of such Shares. THE PARTICIPANT ACKNOWLEDGES THAT IT
IS THE PARTICIPANT'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S
RESPONSIBILITY TO FILE SUCH ELECTION ON A TIMELY BASIS, EVEN IF
THE PARTICIPANT REQUESTS THAT THE COMPANY OR ITS REPRESENTATIVES
MAKE SUCH FILING ON BEHALF OF THE PARTICIPANT.
16
11. DLJMB LIQUIDATION EVENT.
11.1 ACCELERATION OF VESTING. Without limiting the authority of the
Committee under the Plan, if a DLJMB Liquidation Event occurs,
then, unless otherwise provided by the Committee in its sole
discretion in an agreement with the Participant, all unvested
Coinvestment Shares will become immediately vested in full.
11.2 LIMITATION ON PAYMENTS IN CONNECTION WITH A DLJMB LIQUIDATION
EVENT. Notwithstanding anything in Section 11.1 hereof to the
contrary, if, with respect to a Participant, the acceleration of
the vesting of Coinvestment Shares as provided in Section 11.1
(which acceleration or payment could be deemed a "payment" within
the meaning of Section 280G(b)(2) of the Code), together with any
other "payments" that such Participant has the right to receive
from the Company or any corporation that is a member of an
"affiliated group" (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a "parachute payment" (as
defined in Section 280G(b)(2) of the Code), then the "payments" to
such Participant pursuant to Section 11.1 hereof will be reduced
to the largest amount as will result in no portion of such
"payments" being subject to the excise tax imposed by Section 4999
of the Code; provided, however, that if a Participant is subject
to a separate agreement with the Company or a Subsidiary that
expressly addresses the potential application of Sections 280G or
4999 of the Code (including, without limitation, that "payments"
under such agreement or otherwise will be reduced, that the
Participant will have the discretion to determine which "payments"
will be reduced, that such "payments" will not be reduced or that
such "payments" will be "grossed up" for tax purposes), then this
Section 11.2 will not apply, and any "payments" to a Participant
pursuant to Section 11.1 hereof will be treated as "payments"
arising under such separate agreement.
12. MISCELLANEOUS.
12.1 EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan is effective
as of December 20, 1999, the date it was adopted by the Board.
The Plan will terminate at midnight on December 19, 2009, and may
be terminated prior to such time to by Board action, and no Shares
will be granted after such termination.
12.2 INVESTORS' AGREEMENT. Each Participant who purchases Shares under
the Plan shall become a party to the Investors' Agreement. Each
Participant who (i) is an employee of the Company or any
Subsidiary reporting directly to the Chief Executive Officer
("CEO") or Chief Operating Officer ("COO") of the Company or (ii)
acquires more than a certain percentage of Common Stock available
for sale under the Plan as determined by the Committee in its sole
discretion from time to time, shall be deemed a "Co-invest
Management Stockholder" for all purposes of the Investors'
Agreement, and all other Participants who acquire shares of Common
Stock under the Plan shall be deemed "Other Stockholders" for
purposes of the Investors' Agreement, including, without
limitation, all transfer restrictions and provisions thereof;
provided, however, if a Participant after the Purchase Date or
Closing Date, as applicable, is no longer required to report
directly to the CEO or COO such Participant shall thereafter be
deemed an "Other Stockholder," and any "Other Stockholder" who
acquires more than the percentage of Common Stock available for
sale under the Plan as determined by the Committee or reports
directly to the CEO or COO after the Purchase Date or Closing
Date, as applicable, shall thereafter be deemed a "Co-invest
Management Stockholder," for all purposes of the Investors'
17
Agreement. Notwithstanding anything to the contrary in the Plan,
if the Investors' Agreement has terminated by its terms, the
provisions of this Section 12.2 shall no longer apply.
12.3 NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation
plans or programs of the Company or create any limitations on the
power or authority of the Board to adopt such additional or other
compensation arrangements as the Board may deem necessary or
desirable.
12.4 SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other
provision of the Plan or any agreements entered into pursuant to
the Plan, the Company will not be required to issue any Shares
under the Plan, and a Participant may not sell, assign, transfer
or otherwise dispose of Shares issued under the Plan, unless
(i) there is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state or
foreign securities laws or an exemption from such registration
under the Securities Act and applicable state or foreign
securities laws, and (ii) there has been obtained any other
consent, approval or permit from any other regulatory body which
the Committee, in its sole discretion, deems necessary or
advisable. The Company may condition such issuance, sale or
transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on
certificates representing Shares, as may be deemed necessary or
advisable by the Company in order to comply with such securities
law or other restrictions.
12.5 PLAN AMENDMENT, MODIFICATION AND TERMINATION. The Board may
suspend or terminate the Plan or any portion thereof at any time,
and may amend the Plan from time to time in such respects as the
Board may deem advisable in order that Shares issued or to be
issued under the Plan will conform to any change in applicable
laws or regulations or in any other respect the Board may deem to
be in the best interests of the Company; provided, however, that
no amendments to the Plan will be effective without approval of
the shareholders of the Company if shareholder approval of the
amendment is then required pursuant to Section 422 of the Code or
the rules of any stock exchange or NASDAQ or similar regulatory
body. No termination, suspension or amendment of the Plan may
adversely affect any outstanding Shares without the consent of the
affected Participant; provided, however, that this sentence will
not impair the right of the Committee to take whatever action it
deems appropriate in accordance with the terms and conditions of
the Plan.
12.6 GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations
and actions relating to the Plan will be governed by and construed
exclusively in accordance with the laws of the State of Minnesota,
notwithstanding the conflicts of laws principles of any
jurisdictions.
12.7 SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure
to the benefit of the successors and permitted assigns of the
Company and the Participants.
18
EXHIBIT A
FORM OF SECURED DEMAND NOTE
EXHIBIT B
FORM OF PLEDGE AND CUSTODY AGREEMENT
EXHIBIT C
VESTING SCHEDULE FOR COINVESTMENT SHARES
(ONLY ATTACHED TO SUBSCRIPTION AGREEMENT)
On the Purchase Date or Closing Date, as applicable, thirty-five percent (35%)
of the Coinvestment Shares purchased by the Participant shall immediately vest,
and the vesting schedule for the Coinvestment shall be as follows:
- --------------------------------------------------------------------------------
PERCENTAGE OF COINVESTMENT SHARES
VESTING DATE VESTED AS OF THE VESTING DATE*
------------ ---------------------------------
- --------------------------------------------------------------------------------
One Year from Purchase Date or 35% of the Coinvestment Shares
Closing Date, as applicable purchased by the Participant
- --------------------------------------------------------------------------------
Two Years from Purchase Date or 35% of the Coinvestment Shares
Closing Date, as applicable purchased by the Participant
- --------------------------------------------------------------------------------
Three Years from Purchase Date or 57% of the Coinvestment Shares
Closing Date, as applicable purchased by the Participant
- --------------------------------------------------------------------------------
Four Years from Purchase Date or 79% of the Coinvestment Shares
Closing Date, as applicable purchased by the Participant
- --------------------------------------------------------------------------------
Five Years from Purchase Date or 100% of Coinvestment Shares
Closing Date, as applicable purchased by the Participant
- --------------------------------------------------------------------------------
* In the event that the vesting of any Coinvestment Shares results in a
fractional Coinvestment Share, such fractional Coinvestment Share shall be
rounded up to the nearest whole Coinvestment Share.