UNITED INDUSTRIES CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into
as of ________, 1999, by and between UNITED INDUSTRIES CORPORATION, a Delaware
corporation (the "Company"), and Robert L. Caulk ("Optionee") pursuant to the
United Industries Corporation 1999 Stock Option Plan (the "Plan"). The Company
and Optionee are referred to collectively herein as the "Parties." Capitalized
terms used but not defined herein shall have the meaning set forth in the Plan.
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Options and Effective Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to
the Plan an option (the "Option") to purchase all or any part
of an aggregate of 400,000 shares (the "Class A Shares") of
the Company's Class A Voting Common Stock, par value $0.01 per
share, and 400,000 shares (the "Class B Shares" and, together
with the Class A Shares (the"Shares") of the Company's Class B
Non-Voting Common Stock, par value $0.01 per share
(collectively, "Common Stock"), on the terms and conditions
set forth herein and in the Plan as in effect on the Grant
Date (as defined below), the terms of which are incorporated
herein by reference.
1.2 Grant Date. The Grant Date of this Option is _______,
1999 (the "Grant Date").
2. Exercise Price. The exercise price for the Shares of
Common Stock covered by this Option shall be $5.00 per share
(the "Exercise Price").
3. Adjustment and Termination of Options. Subject to the restrictions,
and under the circumstances described, in the Plan and this Agreement, the
Company shall adjust the number and kind of Shares and the Exercise Price
thereof, and this Option shall be terminated in certain circumstances, in
accordance with the provisions of the Plan.
4. Exercise of Options.
4.1 When Exercisable.
(a) Rate of Exercise for 5-Year Options. Optionee's
right to exercise this Option as to 266,666 of the Shares
(133,333 Class A Shares and 133,333 Class B Shares) subject
thereto (the "5 Year Options") shall vest ratably over the
five (5) year
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period commencing on the Grant Date in accordance with the
following schedule if (but only if) Optionee is employed by
the Company or any of its Subsidiaries as of each such date:
Cumulative Shares of
Date 5 Year Option Vested
---- --------------------
1st Anniversary of Grant Date 26,666
2nd Anniversary of Grant Date 53,333
3rd Anniversary of Grant Date 80,000
4th Anniversary of Grant Date 106,666
5th Anniversary of Grant Date 133,333
Notwithstanding any provision to the contrary in this Section 4.1(a), but
subject to the other restrictions in the Plan and this Agreement, in the event
of a Sale (as defined below) prior to the fifth anniversary of the Grant Date,
the 5 Year Options shall become vested and immediately exercisable.
(b) Rate of Exercise on TARSAP Options.
(i) Optionee shall not be vested with the right to
exercise this Option with respect to 533,334 of the Shares
(266,667 Class A Shares and 266,667 Class B Shares) (the
"TARSAP Shares") subject thereto (the "TARSAP Options") until
ten (10) years after the Grant Date, at which time Optionee
shall acquire the vested right to exercise the TARSAP Options
and purchase one hundred percent (100%) of the TARSAP Shares
if (but only if) Optionee is an employee of the Company or any
of its Subsidiaries as of such date.
(ii) Acceleration of TARSAP Options. Notwithstanding
the foregoing, if on and after the publication of each written
determination by the Board of Directors of the Company (the
"Board") or a committee thereof which is authorized to do so
that the Company has met at least ninety percent (90%) of its
objective for EBITDA (as defined below) (100% of the Company's
objective referred to herein as the "Performance Goals") with
respect to any fiscal year commencing with the fiscal year
ending December 31, 1999 and continuing for each of the four
fiscal years thereafter (which Performance Goals are set forth
on Annex I attached hereto), then (subject to the other
restrictions in the Plan and this Agreement), Optionee shall
acquire the vested right to exercise the TARSAP Options to
purchase ten percent (10%) of the TARSAP Shares, and for each
additional one percent (1%) achievement over ninety percent
(90%) of the Performance Goals for any such fiscal year, as so
determined, Optionee shall acquire the
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vested right to exercise the TARSAP Options to purchase an
additional one percent (1%) of the TARSAP Shares, but no more
than twenty percent (20%) of the TARSAP Shares in respect of
each full fiscal year. Additionally, on and after publication
of a written determination by the Board or a committee thereof
which is authorized to do so that the Company has met at least
eighty seven and one-half percent (87.5 %) of its Performance
Goals for the fiscal year ending December 31, 2003 and at
least ninety percent (90%) of its cumulative Performance Goals
for the five fiscal years ending December 31, 2003 ("Five Year
Performance Goals"), then subject to the other restrictions in
the Plan and this Agreement, (i) Optionee shall acquire the
vested right to exercise the TARSAP Options to purchase fifty
percent (50%) of the TARSAP Shares as to which Optionee had
not otherwise acquired the vested right to exercise, and (ii)
for each additional one percent (1%) achievement over ninety
percent (90%) of the Five Year Performance Goals, as so
determined, Optionee shall acquire the vested right to
exercise this TARSAP Option to purchase an additional five
percent (5%) of the TARSAP Shares as to which Optionee has not
otherwise acquired the vested right to exercise (such
additional exercise rights pursuant to clauses (i) and (ii)
above are referred to herein as the "Additional Exercise
Rights"). Such determinations shall be made by the Board or
such committee within ten (10) days after receipt of audited
financial statements for each fiscal year. The Board's or
committee's determination as to whether the Company has met
such objectives shall be final and not subject to dispute. In
addition, the Board or a committee thereof shall have complete
discretion to modify such objectives from time to time for any
year or years to reflect business combinations or
dispositions, fiscal year changes, purchases or sales of
assets or any other circumstances the Board or committee
thereof deems relevant. For purposes hereof, "EBITDA" shall
mean earnings before interest, taxes, depreciation and
amortization, excluding any non-recurring or extraordinary
items, as determined in accordance with generally accepted
accounting principles, consistently applied.
(iii) Acceleration Upon Sale. Notwithstanding any
provision to the contrary in this Section 4.1(b), but subject
to the other restrictions in the Plan and this Agreement, in
the event of a Sale (as defined below) prior to December 31,
2003, the TARSAP Options shall become vested and immediately
exercisable to the extent set forth below. On and after
publication of a written determination by the Board or a
committee thereof which is authorized to do so that the
Company has met at least eighty seven and one-half percent
(87.5 %) of its Performance Goals for the last twelve (12)
full months and at least ninety percent (90%) of its
cumulative Performance Goals for the completed fiscal years
(if any) and the Interim Period (as defined below) (based on
months elapsed), the Board or such committee shall treat the
percentage of cumulative Performance Goals achieved through
the completed fiscal years (if any) and Interim Period as the
percentage of Five Year Performance Goals achieved and on that
basis
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shall determine the Additional Exercise Rights with respect to
all TARSAP Options as to which Optionee had not otherwise
acquired the vested right to exercise consistent with the
method set forth in the second sentence of Section 4.1(b)(ii)
above. The percentage of Five Year Performance Goals for such
period shall be computed by dividing (i) the sum of EBITDA
achieved for the completed fiscal years (if any) and the
Interim Period by (ii) the annual Performance Goals for the
completed fiscal years (if any) and the monthly Performance
Goals for the Interim Period. For purposes hereof, the term
"Interim Period" shall mean the period beginning on the first
day of the then current fiscal year and ending on the last
full month of that uncompleted fiscal year.
For purposes hereof, the term "Sale" shall mean:
(w) the acquisition by any individual,
entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of (a) the Company or (b) the
surviving entity in any reorganization, merger or
consolidation (each an "Acquisition") involving the
Company (any such entity referred to herein as the
"Corporation") where such Acquisition causes such
Person to own more than fifty percent (50%) of the
combined voting power of the then outstanding voting
securities of the Corporation entitled to vote
generally in the election of directors, other than
acquisitions by the Thomas H. Lee Company or its
affiliates;
(x) approval by the shareholders of the
Company of a complete liquidation or dissolution of
the Company;
(y) the acquisition by a third party not
affiliated with the Company of all or substantially
all of the Company's assets; or
(z) individuals who constitute the Board on
the date of the Company's initial public sale of
equity securities registered under the Securities Act
(the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board
thereafter. Any person becoming a director subsequent
to such date whose, election, or nomination for
election, is, at any time, approved by a vote of at
least a majority of the directors comprising the
Incumbent Board shall be considered a member of the
Incumbent Board.
The accelerated vesting provided in this Section 4.1(b)(iii)
shall take effect immediately prior to but contingent upon the Sale giving rise
to such accelerated vesting. The phrase "immediately prior to the Sale" shall be
understood to mean sufficiently in advance of a Sale to permit the Optionee
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to take all steps reasonably necessary to permit the Optionee to become a
shareholder of the Company as of the consummation of such Sale with respect to
the TARSAP Shares subject to the accelerated vesting provided in this Section
4.1(b)(iii). The Board or committee thereof may in good faith shorten the
Interim Period or make approximations of EBITDA during the Interim Period in
order to comply with the preceding sentence.
(c) Partial Exercise. Subject to the other
restrictions in the Plan and this Agreement, the Options may
be exercised for all or a part of the Shares with respect to
which each Option is exercisable under Section 4.1(a) and (b)
above.
4.2 Method of Exercise; Stockholders Agreement. Subject to
Section 4.1 and the other restrictions in the Plan and this Agreement,
Options are exercisable from time to time by Optionee, who shall
complete, execute and deliver to the Company a Form of Exercise and
Stock Transfer Power substantially in the form attached hereto or in
such other form as the Company may require. Except as otherwise
permitted by Section 6(d) of the Plan, such notice shall be accompanied
by payment in full for the Shares to be purchased. Payment of the
Exercise Price may be made: (i) in cash, (ii) in shares of Common Stock
which either (A) were purchased by Optionee in other than a
compensatory transaction, (B) have been held by Optionee free and clear
for at least six (6) months prior to the use thereof to pay part or all
of the Exercise Price or (C) otherwise are considered "mature" shares
for purposes of generally accepted accounting principles, as determined
by the Company's outside auditors, or (iii) so long as the Common Stock
is publicly traded, by delivery to the Committee of irrevocable
instructions to a stockbroker to deliver promptly to the Company an
amount of sale or loan proceeds sufficient to pay a portion of the
Exercise Price subject to this clause (iii), or a combination of the
methods specified in clauses (i), (ii) and (iii), or in the sole
discretion of the Committee, through a cashless exercise procedure.
Optionee shall also execute and deliver to the Company a copy of the
Company's Stockholders Agreement, dated as of January 20, 1999, in the
form in effect at the time of exercise (as amended and modified from
time to time, the "Stockholders Agreement"), if Optionee has not
previously done so. Upon due exercise of any Option and (if required)
execution and delivery of the Stockholders Agreement, subject to the
terms and conditions in this Agreement, the Company shall issue in the
name of Optionee and deliver to Optionee a certificate for the Shares
in respect of which such Option shall have been exercised, but no
Shares will be issued until arrangements satisfactory to Company have
been made for appropriate income tax withholding, if any, pursuant to
Section 12 hereof.
4.3 Exercise After Termination of Employment; Termination
of Options.
(a) Definitions. The following definitions shall be
applied to the capitalized terms used in this Section 4.3 and
in Section 4.4 below for all purposes, unless otherwise
clearly indicated:
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(i) "Cause" for termination by the Company
of Optionee's employment with the Company means (a)
misappropriation of the Company's property, interests
or opportunities; (b) violation of reasonable
directions of the Company to Optionee which
directions are consistent with Optionee's duties and
responsibilities; (c) misconduct which causes damage
to the Company or its finances or to its business
relationships or reputation in the industry or the
community; (d) breach or nonperformance by Optionee
of his obligations provided for in this Agreement or
in other material agreement between Optionee and the
Company (including, without limitation, any
employment or noncompetition agreement) or reasonably
implied by his position; (e) the habitual drug
addiction or habitual intoxication of Optionee which
negatively impacts his job performance or Optionee's
failure of a Company-required drug test; or (f)
failure of Optionee to reasonably cooperate with an
examining physician as may be required by any
agreement between Optionee and the Company.
(ii) "Fair Market Value" of each Share means
the fair value of such share determined in good faith
by the Board, based on the assumption of an
arms-length transaction between a willing buyer and a
willing seller, taking into account all reasonable
and customary factors relevant to value including,
without limitation, the fact that there may be no
public market for the Company's securities, but not
including any minority discount; provided that the
"Fair Market Value" of each Share shall not be less
than the Original Cost of such Share.
(iii) "Original Cost" for each Share shall
be equal to $5.00 (as proportionately adjusted for
all subsequent stock splits, stock dividends and
other recapitalizations).
(iv) "Public Offering" means the sale in an
underwritten public offering registered under the
Securities Act of shares of any class of the
Company's Common Stock.
(v) "Termination Date" means the date on
which Optionee's employment with the Company
terminates, whether pursuant to an employment
agreement between Optionee and the Company or
otherwise.
(b) Termination by Optionee. Upon any termination of
employment by Optionee, the Options may, to the extent
exercisable and not terminated pursuant to
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Section 4.3(e), be exercised only within thirty (30) days
after the date of such employment termination. This Section
4.3(b) shall not, however, extend the term of the Options
beyond that specified in Section 4.3(e). For purposes of this
Section 4.3(b), the extent to which the Options are
exercisable shall be determined as of the date of termination
of employment.
(c) Termination by Virtue of Death or Disability or
Without Cause. Upon any termination of employment of Optionee
by virtue of Optionee's death or Disability or upon any
termination of employment by the Company without Cause, the
Options may, to the extent exercisable and not terminated
pursuant to Section 4.3(e), be exercised only within twelve
(12) months after the date of such termination. This Section
4.3 (c) shall not extend the term of the Options beyond that
specified in Section 4.3(e). For purposes of this Section
4.3(c), the extent to which the Options are exercisable shall
be determined as of the date of termination of employment.
(d) Termination for Cause. The Option shall
terminate immediately upon termination by the Company of
the employment of Optionee for Cause.
(e) Other Termination. The Options shall not be
exercisable after the earliest of (i) a Sale (provided that
Optionee has at least five (5) business days prior to the Sale
to exercise the Options or the Options are treated as
exercised in connection with such Sale) or (ii) October 25,
2009.
4.4 Repurchase Option.
(a) Right of Repurchase. In the event Optionee ceases
to be employed by the Company and its Subsidiaries for any
reason (the " Termination"), the Shares (whether held by
Optionee or one or more of Optionee's transferees) shall be
subject to repurchase by the Company pursuant to the terms and
conditions set forth in this Section 4.4 (the " Repurchase
Option").
(b) Purchase Price. Any repurchase of Shares pursuant
to the Repurchase Option shall be at the " Repurchase Price"
described in this Section 4.4(b) determined as of the
Termination Date. If Optionee's employment is terminated by
Optionee prior to the fifth anniversary hereof or by the
Company for Cause, the Repurchase Price for all of the Shares
shall be the lower of (i) the Fair Market Value therefor and
(ii) the Original Cost therefor. If Optionee's employment is
terminated for any other reason (including, without
limitation, as a result of Optionee's retirement in good
standing from the Company at or after age 65 in accordance
with the Company's retirement policies as in effect at that
time), the Repurchase Price for all Shares shall be the Fair
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Market Value therefor.
(c) Repurchase by the Company. The Company may elect
to purchase all or any portion of the Shares at the Repurchase
Price by delivering written notice (the " Repurchase Notice")
to Optionee (i) within 120 days after the Termination Date,
and (ii) for Shares acquired by Optionee after the Termination
Date pursuant to Section 4.3 above, then within 120 days after
the issuance of such Shares. The Repurchase Notice shall set
forth the number of Shares to be acquired from Optionee and/or
his or her transferees (if any), the aggregate consideration
to be paid for such securities, and the time and place for the
closing of the transaction (the " Repurchase Closing"). The
Company may, in its sole discretion, assign its rights
pursuant to this Section 4.4 to the holders of its capital
stock (other than Optionee and any other stockholder whose
Shares are being repurchased) pro rata on the basis of the
number of Shares owned (with subsequent re-offer in the event
of under subscription); provided that any such assignees shall
comply with the terms of this Section 4.4.
(d) Repurchase Closing. The closing of the purchase
of the Shares pursuant to the Repurchase Option shall take
place on the date designated by the Company in the Repurchase
Notice which date shall not be more than 60 days nor less than
10 days after the delivery of such notice. Subject to Section
4.4(e), the Company shall pay for the Shares to be purchased
pursuant to the Repurchase Option by delivery of a check or
wire transfer of funds. The Company shall be entitled to
receive customary representations and warranties regarding
good title to such securities, free and clear of any liens or
encumbrances, power and authority, due execution, and
enforceability.
(e) Certain Restrictions. Notwithstanding anything to
the contrary contained in this Agreement, all repurchases of
Shares by the Company shall be subject to applicable
restrictions contained in the Delaware General Corporation Law
and in the Company's and its Subsidiaries' debt and equity
financing agreements. If any such restrictions prohibit the
repurchase of Shares hereunder which the Company is otherwise
entitled or required to make, the time periods provided in
this Section 4.4 shall be suspended, and the Company shall
make such repurchases as soon as it is permitted to do so
under such restrictions with interest at an annual rate of 7%.
In addition, the Company may pay the Repurchase Price for such
Shares by offsetting any bona fide debts owed by Optionee to
the Company.
(f) Termination of Repurchase Option. The Repurchase
Option set forth in this Section 4.4 shall continue with
respect to all Shares following any Transfer thereof; provided
that such Repurchase Option shall terminate effective
immediately after the consummation of a Sale of the Company or
a Public Offering of the Company's equity
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securities in which the Company receives net proceeds of at
least $100 million; and provided further that, with respect to
each Share, the Repurchase Option with respect to such Share
shall terminate immediately upon the Transfer of such Share
pursuant to a Public Sale.
5. Non-transferability of Options. The Options shall not be
transferable or assignable except upon Optionee's death by will or the laws of
descent and distribution and shall be exercisable, during Optionee's lifetime,
only by Optionee.
6. Purchase for Investment; Other Representations of Optionee;
Legends.
6.1 Investment Intent. As provided in the Plan, in the event
that the offering of Shares with respect to which the Options are being
exercised is not registered under the Securities Act, but an exemption
is available that requires an investment representation or other
representation, Optionee, if electing to purchase Shares, will be
required to represent that such Shares are being acquired for
investment and not with a view to distribution thereof, and to make
such other reasonable and customary representations regarding matters
relevant to compliance with applicable securities laws as are deemed
necessary by counsel to the Company. Stock certificates evidencing such
unregistered Shares that are acquired upon exercise of the Options
shall bear restrictive legends in substantially the following form and
such other restrictive legends as are required or advisable under the
provisions of any applicable laws or are provided for in the
Stockholders Agreement or any other agreement to which Optionee is a
party:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT BE
TRANSFERRED AT ANY TIME IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
WITH RESPECT TO SUCH SHARES AT SUCH TIME, OR (II) AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, TO THE EFFECT THAT SUCH
TRANSFER AT SUCH TIME WILL NOT VIOLATE THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS.
6.2 Other Representations. Optionee hereby represents
and warrants to the Company as follows:
(a) Access to Information. Because of Optionee's
business relationship with the Company and with the management
of the Company, Optionee has had access to all
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material and relevant information concerning the Company,
thereby enabling Optionee to make an informed investment
decision with respect to his investment in the Company, and
all pertinent data and information requested by Optionee from
the Company or its representatives concerning the business and
financial condition of the Company and the terms and
conditions of this Agreement have been furnished. Optionee
acknowledges that Optionee has had the opportunity to ask
questions of and receive answers from and to obtain additional
information from the Company and its representatives
concerning the present and proposed business and financial
condition of the Company.
(b) Financial Sophistication. Optionee has
such knowledge and experience in financial and business
matters that Optionee is capable of evaluating the merits and
risks of investing in the Shares.
(c) Understanding the Investment Risks.
Optionee understands that:
(i) An investment in the Shares
represents a highly speculative investment, and
there can be no assurance as to the success of the
Company in its business; and
(ii) There is at present no market for the
Shares and there can be no assurance that a market
will develop in the future.
(d) Understanding of the Nature of the Shares.
Optionee understands and agrees that:
(i) There can be no assurance that the
Shares will be registered under the Securities Act or
any state securities laws and if they are not so
registered, they will only be issued and sold in
reliance upon certain exemptions contained in the
Securities Act and applicable state securities laws,
and the representations and warranties of Optionee
contained herein, which will have to be renewed as to
the Shares at the times of exercise of the Options,
are essential to any claim of exemption by the
Company under the Securities Act and such state laws;
(ii) If the Shares are not so registered,
the Shares will be "restricted securities" as that
term is defined in Rule 144 promulgated under the
Securities Act;
(iii) The Option cannot be exercised and the
Shares will not be sold to Optionee and Optionee
cannot resell or transfer the Shares without
registration
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under the Securities Act and applicable
state securities laws unless the Company receives an
opinion of counsel acceptable to it (as to both
counsel and the opinion) that such registration is
not necessary, the cost of such opinion to be borne
by the Company;
(iv) Only the Company can register the
Shares under the Securities Act and applicable
state securities laws;
(v) The Company has not made any
representations to Optionee that the Company will
register the Shares under the Securities Act or any
applicable state securities laws, or with respect to
compliance with any exemption therefrom;
(vi) Optionee is aware of the conditions
for Optionee's obtaining an exemption for the resale
of the Shares under the Securities Act and any
applicable state securities laws; and
(vii) The Company may, from time to time,
make stop transfer notations in its transfer records
to ensure compliance with the Securities Act and any
applicable state securities laws, and any additional
restrictions imposed by state securities
administrators.
(e) Investment Intent. Optionee acknowledges that:
(i) Optionee is acquiring the Option
for Optionee's own account and not on behalf of
any other person;
(ii) Optionee is acquiring the option for
investment and not with a view to distribution or
with the intent to divide Optionee's participation
with others or resell or otherwise distribute the
Options or the Shares;
(iii) Neither Optionee nor anyone acting on
Optionee's behalf has paid or will pay a commission
or other remuneration to any person in connection
with the acquisition of the Options or the Shares;
and
(iv) At the time of exercise of any Option,
Optionee will have to make all the representations
and warranties contained in this Section 6 with
respect to the Shares to be issued and other
representations concerning investment intent as a
condition of the issuance of the Shares by the
Company.
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7. Restriction on Issuance of Shares. The Company shall not be
obligated to sell or issue any Shares pursuant to this Agreement if such
issuance would result in the violation of any laws, including the Securities Act
or any applicable state securities laws. The Company agrees to use its
reasonable best efforts to qualify for available exemptions under the Securities
Act or any applicable state securities laws which will enable it to issue Shares
hereunder in compliance with applicable law.
8. Rights as a Shareholder. Optionee shall have no rights as a
shareholder with respect to any Shares covered by the Options until the date of
exercise and payment of the Exercise Price in accordance with the terms of this
Agreement. Subject to Section 3 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
9. No Employment Rights. This Agreement shall not confer upon
Optionee any right with respect to the continuance as an employee of the Company
or any Subsidiary, nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate such employment at any time.
10. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF DELAWARE.
11. Notices. All notices and other communications under this
Agreement shall be in writing, and shall be deemed to have been duly given on
the date of delivery if delivered personally or when received if mailed to the
party to whom notice is to be given, by certified mail, return receipt
requested, postage prepaid, or by reputable overnight courier service (charges
prepaid), or transmitted by facsimile with answer-back confirmation to the
following address, or any other address specified, by notice duly given:
To Optionee at: Robert L. Caulk
8825 Page Boulevard
St. Louis MO 63114
To the Company at: United Industries Corporation
8825 Page Boulevard
St. Louis, MO 63114
Attention: General Counsel
Telecopy: (314) 253-5947
12. Withholdings. Except to the extent prohibited by applicable
law, Optionee may satisfy
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any required withholding obligation upon the exercise of an Option hereunder by
either of the following methods, or by a combination of such methods: (a)
tendering a cash payment or (b) delivering to the Company previously acquired
Shares, or having the Company withhold Shares otherwise deliverable upon the
exercise of an Option, in either case having an aggregate Fair Market Value,
determined as of the date the withholding obligation arises, less than or equal
to the amount of the total withholding obligation.
13. Pro Rata Exercise. The Shares of Common Stock covered by this
Option shall only be exercised, if at all, ratably among the Class A Shares and
Class B Shares, based on the aggregate number of Class A Shares and Class B
Shares subject to the Options granted hereunder.
14. Registration of Shares. At any time after UIC Holdings,
L.L.C., together with its affiliates, holds less than 25% of the Common Stock
held by such entities as of the date hereof, Optionee shall have the right to
cause the Company to register all of the Shares on a Form S-8, along with a Form
S-3 reoffer prospectus, under the Securities Act of 1933, as amended from time
to time, or any successor form thereto, and the Company shall use its reasonable
best efforts to comply with such request in a timely manner.
15. Rule 701 Offering. THE GRANT OF THE OPTION HEREUNDER (AND THE
PURCHASE AND SALE OF SHARES UPON ANY EXERCISE OF THE OPTION PURSUANT TO THE
TERMS HEREOF) IS MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, PROVIDED BY RULE 701,
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
UNITED INDUSTRIES CORPORATION
By:
Name: Matthew M. McCarthy
Title: Vice President, General Counsel & Secretary
OPTIONEE:
Robert L. Caulk
14
ANNEX I
The Performance Goal with respect to each fiscal year from 1999 through 2003 are
as determined by the Board of Directors.
Fiscal Year Performance Goal
----------- ----------------
1999 $
2000
2001
2002
2003
Aggregate $
=
UNITED INDUSTRIES CORPORATION
FORM OF EXERCISE AND STOCK TRANSFER POWER
United Industries Corporation
8825 Page Boulevard
St. Louis, MO 63114
Ladies and Gentlemen:
Reference is made to the Stock Option Agreement between United
Industries Corporation (the "Company") and me (the "Option Agreement"), whereby
on ________________, 1999, I was granted an option to purchase all or any part
of an aggregate of 400,000 shares (the "Class A Shares") of the Company's Class
A Voting Common Stock, par value $0.01 per share and 400,000 shares (the "Class
B Shares" and, together with the Class A Shares (the "Shares") of the Company's
Class B Non-Voting Common Stock, par value $0.01 per share (collectively,
"Common Stock"), at $5.00 per share. I hereby exercise my right to purchase
Shares (on a pro rata basis among the Class A Shares and the Class B Shares)
(the "Exercised Shares") of Common Stock at said price and deliver to you
herewith the full purchase price of such Exercised Shares, as follows:
p Cash or check in the amount $ ;
p Previously owned shares of Common Stock having a Fair Market
Value (as defined in the Option Agreement) equal to $_______
as of the date hereof, and otherwise in accordance with
Section 4.2 of the Option Agreement; and/or
p If the Common Stock is publicly traded, by delivery to the
Company of the attached copy of irrevocable broker
instructions to deliver promptly to the Company $_______ of
loan proceeds, or $_________ of proceeds of the sale of
Exercised Shares of Common Stock deliverable upon exercise of
the option represented by the Option Agreement.
I understand that no Exercised Shares will be issued until
arrangements satisfactory to the Company have been made for appropriate income
tax withholding, if any, and I have executed the Company's Stockholders
Agreement (the "Stockholders Agreement").
PAGE 1A - STOCK EXERCISE FORM
In the event that the Exercised Shares have not been
registered under the Securities Act of 1933, as amended from time to time, upon
the date hereof, I hereby represent and warrant to the Company as follows:
1. Because of my business relationship with the Company and with the
management of the Company, I have had access to all material and
relevant information concerning the Company, thereby enabling me to
make an informed investment decision with respect to my investment in
the Company, and all pertinent data and information requested by me
from the Company or its representatives concerning the business and
financial condition of the Company and the terms and conditions of the
Option Agreement have been furnished. I acknowledge that I have had the
opportunity to ask questions of and receive answers from and to obtain
additional information from the Company and its representatives
concerning the present and proposed business and financial condition of
the Company.
2. I have such knowledge and experience in financial and business matters
that I am capable of evaluating the merits and risks of investing in
the Exercised Shares.
3. I understand that:
(a) An investment in the Exercised Shares represents a highly
speculative investment, and there can be no assurance as
to the success of the company in its business; and
(b) There is at present no market for the Exercised Shares and
there can be no assurance that a market will develop in
the future.
4. I understand and agree that:
(a) There can be no assurance that the Exercised Shares will be
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws and if they
are not so registered, they will only be issued and sold in
reliance upon certain exemptions contained in the Securities
Act and applicable state securities laws, and my
representations and warranties contained herein are essential
to any claim of exemption by the Company under the Securities
Act and such state laws;
(b) If the Exercised Shares are not so registered, the Exercised
Shares will be "restricted securities" as that term is defined
in Rule 144 promulgated under the Securities Act;
PAGE 2A - STOCK EXERCISE FORM
(c) I cannot resell or transfer the Exercised Shares without
registration under the Securities Act and applicable state
securities laws unless the Company receives an opinion of
counsel acceptable to it (as to both counsel and the opinion)
that such registration is not necessary, the cost of such
opinion to be borne by the Company;
(d) Only the Company can register the Exercised Shares under the
Securities Act and applicable state securities laws;
(e) The Company has not made any representations to me that the
Company will register the Exercised Shares under the
Securities Act or any applicable state securities laws, or
with respect to compliance with any exemption therefrom;
(f) I am aware of the conditions for obtaining an exemption for
the resale of the Exercised Shares under the Securities
Act and any applicable state securities laws;
(g) The Company may, from time to time, make stop transfer
notations in its transfer records to ensure compliance with
the Securities Act, and any applicable state securities laws,
and any additional restrictions imposed by state securities
administrators; and
(h) I understand that stock certificates evidencing the Exercised
Shares shall bear restrictive legends as more particularly
described in the Option Agreement and the Stockholders
Agreement.
5. I acknowledge that:
(a) I am acquiring the Exercised Shares for my own account and not
on behalf of any other person;
(b) I am acquiring the Exercised Shares for investment and not
with a view to distribution or with the intent to divide my
participation with others or resell or otherwise distribute
the Exercised Shares; and
(c) Neither I nor anyone acting on my behalf has paid or will pay
a commission or other remuneration to any person in connection
with the acquisition of the Exercised Shares.
PAGE 3A - STOCK EXERCISE FORM
6. I acknowledge and understand that an investment in the Shares involves
a high degree of risk and my entire investment could be lost, and that
these risks include, but are not limited to, the following:
(a) The manufacture and sale of the Company's products is highly
competitive, and the Company competes with a number of other
companies, some of which may be larger and better capitalized.
In response to such competition, the Company may be required
to lower selling prices to maintain or increase market share,
and such measures could adversely affect the Company's gross
margins and operating results.
(b) The Company may be a party to administrative actions and
lawsuits, including product liability claims involving its
products. An adverse final judgment in any such proceeding or
related actions could have a material adverse effect on the
Company's financial condition.
(c) UIC Holdings, L.L.C., owns in excess of 90% of the voting
shares of the Company. Accordingly, the UIC Holdings, L.L.C.
may elect the Company's directors and amend the Company's
certificate of incorporation, effect a merger, sale of assets
or other business acquisition or disposition, and otherwise
control the outcome of many actions requiring stockholder
approval.
(d) The Company is highly leveraged and is capitalized with a
significant amount of senior and subordinated debt. The rights
of the holders of the Common Stock are junior to the rights
held by the senior lenders and the holders of subordinated
debt
of the Company. Any proceeds on a sale of the Company or
on liquidation, dissolution or winding up of the Company would
first be used to pay outstanding debt incurred by the Company.
There is no guarantee that the Company can repay its
obligations to those with rights senior to the holders of
Common Stock or that any money will be available for
distribution to holders of Common Stock.
(e) Upon termination of employment, the Company has the right (but
not the obligation) to purchase all or a portion of the
Exercised Shares. As a result, I could be required to hold the
Exercised Shares for a period of time after the termination of
my employment with the Company.
(f) The financial performance of the Company is largely
dependent on the capabilities of its senior management. The
retention of the key members of
PAGE 4A - STOCK EXERCISE FORM
management is critical to the success of the Company. Loss of
key personnel could lead to poor execution of operating
strategies, lost sales and could adversely impact the
Company's operating results.
Signature
Robert L. Caulk
Address: 8825 Page Blvd.
St. Louis MO 63114
Social Security No.: xxx-xx-xxxx
PAGE 5A - STOCK EXERCISE FORM