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Exhibit 10.39
MCM GROUP, INC.
SPECIAL STOCK OPTION PLAN
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SECTION 1. PURPOSE
The purpose of this MCM Group, Inc. Special Stock Option Plan
is to provide for a one time grant of Options to certain current and former
executives and other key employees of the Company or its Affiliates immediately
prior to the Spin-off in order to provide them with an ownership interest in the
Company following the Spin-off.
SECTION 2. DEFINITIONS
2.1. DEFINITIONS. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(a) "Affiliate" means an entity controlling, controlled by or
under common control with the Company.
(b) "Alternative Option" has the meaning given in Section 7.2.
(c) "Board" means the Board of Directors of the Company.
(d) "C&D Fund" means The Clayton & Dubilier Private Equity
Fund IV Limited Partnership, a Connecticut limited partnership, and any
successor investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(e) "Change in Control" means the first to occur of the
following events after the Effective Date:
(i) the acquisition by any person, entity or
"group" (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended), other than the Company, its
subsidiaries, any employee benefit plan of the Company or its
subsidiaries, or the C&D Fund, of 50% or more of the combined
voting power of the Company's then outstanding voting
securities;
(ii) the merger or consolidation of the
Company, as a result of which persons who were
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stockholders of the Company immediately prior to such merger
or consolidation, do not, immediately thereafter, own,
directly or indirectly more than 50% of the combined voting
power entitled to vote generally in the election of directors
of the merged or consolidated company;
(iii) the liquidation or dissolution of the
Company; and
(iv) the sale of all or substantially all of the
assets of the Company to one or more persons or entities that
are not, immediately prior to such sale, Affiliates.
(f) "Common Stock" means the Class A Common Stock, par value
$.01 per share, of the Company.
(g) "Company" means MCM Group, Inc., a Delaware corporation,
and any successor thereto.
(h) "Effective Date" means the date of the Spin-off, currently
expected to be August 31, 1996.
(i) "Fair Market Value" means the fair market value per share
of Common Stock as of the Effective Date, as determined in good faith
by the VK/AC Board. In making a determination of Fair Market Value, the
VK/AC Board shall give due consideration for such factors as it deems
appropriate, including, without limitation, the earnings and certain
other financial and operating information of the Company in recent
periods, the potential value of the Company as a whole, the future
prospects of the Company and the industries in which it competes, the
history and management of the Company, the general condition of the
securities markets, the fair market value of securities of companies
engaged in businesses similar to those of the Company and a valuation
of the shares, which shall be performed prior to the Effective Date by
an independent valuation firm chosen by the VK/AC Board. The
determination of Fair Market Value will not give effect to any
restrictions on transfer of the shares or the fact that such shares
would represent a minority interest in the Company.
(j) "Option" means the right granted pursuant to the Plan to
purchase one share of Common Stock at a price equal to the Fair Market
Value.
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(k) "Option Agreement" means an agreement between the Company
and the Participant embodying the terms of any Options granted
hereunder, which agreement shall be substantially in the form attached
hereto as Exhibit A.
(l) "Participant" means any executive, officer or other key
employee of VK/AC Holding or any Subsidiary who is designated prior to
the Spin-off as a participant in the Plan and who, on the Effective
Date, holds options to purchase shares of common stock of VK/AC
Holding.
(m) "Plan" means this MCM Group, Inc. Special Stock Option
Plan, as the same may be amended from time to time.
(n) "Public Offering" means the first day as of which sales of
Common Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock led by one or more
underwriters, at least one of which is of nationally recognized
standing.
(o) "Spin-off" means the distribution by VK/AC Holding of 100%
of the outstanding Common Stock to the holders of record of the common
stock of VK/AC Holding, at the close of business on the Effective Date.
(p) "Subsidiary" means any corporation a majority of whose
outstanding voting securities is owned, directly or indirectly, by
VK/AC Holding.
(q) "VK/AC Board" shall mean the Board of Directors of VK/AC
Holding.
(r) "VK/AC Holding" means VK/AC Holding, Inc., a Delaware
corporation and indirect parent of the Company immediately prior to the
Spin-off.
2.2. GENDER AND NUMBER. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
SECTION 3. ELIGIBILITY AND PARTICIPATION
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Participation in the Plan shall be limited to those current or
former executives, officers and other key employees of VK/AC Holding or any
Subsidiary who, prior to the Spin-off, are designated by the Board as
participants in the Plan and, who, on the Effective Date, hold options to
purchase shares of common stock of VK/AC Holding. Selection as a Participant in
the Plan shall neither entitle any such Participant to nor disqualify such
Participant from participation in any other award or incentive plan.
SECTION 4. ADMINISTRATION OF THE PLAN
The Board shall be responsible for the administration of the
Plan. Any authority exercised by the Board under the Plan shall be exercised by
the Board in its sole discretion. Subject to the terms of the Plan, the Board,
by majority action thereof, is authorized to prescribe, amend and rescind rules
and regulations relating to the administration of the Plan, to provide for
conditions and assurances deemed necessary or advisable to protect the interests
of the Company, and to make all other determinations necessary or advisable for
the administration and interpretation of the Plan in order to carry out its
provisions and purposes. Determinations, interpretations or other actions made
or taken by the Board pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes and upon all persons. All of the powers,
duties and responsibilities of the Board specified in the Plan may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee of the Board, in any such case, to the extent authorized
by the Board to exercise and perform such powers, duties and responsibilities.
SECTION 5. OPTIONS SUBJECT TO PLAN
5.1. NUMBER. Subject to the provisions of Sections 5.2 and
5.3, the maximum number of Options (and the maximum number of shares of Common
Stock subject to Options) granted under the Plan may not exceed 48,359. The
shares of Common Stock to be delivered upon the exercise of Options granted
under the Plan may consist, in whole or in part, of treasury Common Stock or
authorized but unissued Common Stock, not reserved for any other purpose.
5.2. CANCELED, TERMINATED OR FORFEITED OPTIONS. Any Option
(and the share of Common Stock subject to such
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Option) which for any reason is canceled, terminated or otherwise forfeited, in
whole or in part, without having been exercised, shall no longer be available
for grant under the Plan.
5.3. ADJUSTMENT IN CAPITALIZATION. The number, class and
exercise price of any outstanding Options (and the number of shares of Common
Stock available for issuance upon exercise of such Options) granted under the
Plan, may be adjusted by the Board, in its sole discretion, if it shall deem
such an adjustment to be necessary or appropriate to reflect any Common Stock
dividend, stock split or share combination or any recapitalization, merger,
consolidation, exchange of shares, liquidation or dissolution of the Company.
SECTION 6. TERMS OF OPTIONS
6.1. GRANT OF OPTIONS. The Plan is intended to provide for a
one time grant of Options to Participants in connection with the Spin-off and,
accordingly, Options shall be granted to Participants only as of the Effective
Date. Each Option granted to a Participant shall be evidenced by an Option
Agreement that shall specify that the exercise price at which a share of Common
Stock may be purchased pursuant to such Option shall be equal to the Fair Market
Value, that such Option shall have a term of five years, commencing on the
Effective Date, and such other terms consistent with the Plan as the Board shall
determine, including customary representations, warranties and covenants with
respect to securities law matters. Such Option Agreement shall also state that
the holder thereof is entitled to the benefits of and bound by the obligations
set forth in the Registration and Participation Agreement, dated as of the
Effective Date, among the Company and certain stockholders of the Company (as
the same may be amended, waived, modified or supplemented from time to time), to
the extent set forth therein. Such Option Agreement shall be in substantially
the form attached hereto as Exhibit A.
6.2. EXERCISE PRICE. The exercise price per share of Common
Stock to be purchased upon exercise of an Option shall be equal to the Fair
Market Value.
6.3. EXERCISE OF OPTIONS. Options granted to a Participant
hereunder shall be fully vested at all times and, subject to Section 6.5, shall
be exercisable as of the date or dates during the period commencing on May 15
and
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ending on June 1 of each calendar year commencing during the term of such Option
(each such period, an "Exercise Window") established from time to time by the
Board. Notwithstanding the foregoing, upon or following a Public Offering, the
Board may, subject to compliance with all applicable securities laws, permit the
exercise of Options at any time prior to the expiration of the term of the
Options. On or before the date during an Exercise Window as of which a
Participant will exercise any Option, the Company and such Participant shall
enter into a Management Stock Subscription Agreement substantially in the form
attached hereto as Exhibit B. Notwithstanding any other provision of the Plan,
each Option shall terminate and shall not be exercisable on or after the fifth
anniversary of the Effective Date.
6.4. PAYMENT. The Board shall establish procedures governing
the exercise of Options, which procedures shall generally require that the
Participant submit written notice of his election to exercise any Options to the
Secretary of the Company at least 15 business days prior to the first day of the
Window Period for such proposed exercise (or, following a Public Offering, at
least five business days prior to any proposed exercise date), that the exercise
price thereof be paid in full in cash or cash equivalents, including by personal
check, at the time of exercise and that the exercise complies with Sections 6.3
and 6.5. If so determined by the Board in its sole discretion at or after the
Effective Date, the exercise price of any Options exercised after there has been
a Public Offering may be paid in full or in part in the form of shares of Common
Stock already owned by the Participant, based on the average of the high and low
trading prices for the Common Stock on the date of exercise or, if there are no
trades on such date, on the next preceding date on which there were trades in
the Common Stock. Subject to Section 6.5, prior to the end of the applicable
Window Period and as soon as practicable after receipt of payment in full of the
exercise price of any exercisable Options, the Company shall deliver to the
Participant a certificate or certificates representing the shares of Common
Stock acquired upon the exercise thereof.
6.5. LIMITATIONS ON EXERCISABILITY.
(a) SUSPENSION OF EXERCISABILITY. Notwithstanding any other
provision hereof or in any Option Agreement, the exercisability of
outstanding Options and the Company's obligation to honor an election
to exercise any such Options during a Window
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Period shall be suspended in the event that, during the twelve month
period preceding the effective date of such suspension, the sum of (i)
the aggregate exercise price for shares of Common Stock purchased upon
the exercise of Options granted hereunder and (ii) the aggregate
purchase price for shares of Common Stock purchased during such twelve
month period that, in the reasonable good faith judgement of the Board,
must be integrated with the offering and sale of Common Stock pursuant
to Options granted hereunder under Regulation D promulgated under the
Securities Act of 1993, as amended (such sum referred to as the
"Aggregate Price"), equals $1,000,000. Such period of suspension shall
continue until the first day during a Window Period as of which (x) the
Aggregate Price during the preceding twelve month period did not exceed
$750,000 or (y) sale of the shares of Common Stock subject to the
Options is registered under all applicable federal, state and foreign
securities laws. The exercisability of the Options shall be suspended
in accordance with the foregoing provisions of this Section 6.5(a) more
than one time, if and to the extent necessary to comply with all
applicable federal, state and foreign securities laws.
(b) PRIORITY OF EXERCISE. As soon as reasonably practicable
following the commencement of each Window Period, (x) the Board shall
determine if there is an excess of (i) the number of Options with
respect to which the Secretary has received elections to exercise as of
any date during such Window Period, over (ii) the number of Options
that may be exercised during such Window Period under the limitations
set forth in Section 6.5(a) and (y) in the event of any such excess,
the Board shall direct the Secretary of the Company to (i) reduce the
number of Options permitted to be exercised by all electing
Participants during such Window Period by each such Participant's pro
rata share of such excess, determined on the basis of the number of
Options that each such Participant has elected to exercise, and (ii)
notify each such Participant of such reduction, of the number of
Options that he will be permitted to exercise during such Window Period
and of the aggregate exercise price for such exercisable Options.
(c) DEFERRAL OF EXERCISE. In the event that (i) one or more
Participants shall have delivered to the Board a notice of election to
exercise, during the
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Window Period ending on June 1, 2001, all or a portion of any then
outstanding Options granted to such Participant and (ii) the
exercisability of all or any portion of such Options is suspended
pursuant to Section 6.5(a) (such Options, the "Suspended Options"),
then, notwithstanding the termination of such Suspended Options on the
fifth anniversary of the Effective Date pursuant to Section 6.1, the
Board shall cause all elections to exercise Suspended Options to be
honored as of the first date after the expiration of the Window Period
ending June 1, 2001 as of which the sum of (x) the Aggregate Price
during the preceding twelve months and (y) the aggregate exercise price
for the shares of Common Stock to be purchased upon exercise of 100% of
the Suspended Options does not exceed $1,000,000.
(d) PUBLIC OFFERING. Following a Public Offering and the
registration of the sale of the shares pursuant to exercise of the
Options under the Securities Act of 1933, as amended, the provisions of
Sections 6.5(a) and 6.5(b) shall terminate and cease to have further
effect.
SECTION 7. CHANGE IN CONTROL; TAKE-ALONG
7.1 EXERCISE OF OPTIONS. In the event of a Change in Control,
each Option that has not been exercised on or prior to the closing of the
transaction constituting the Change in Control shall be canceled and shall
terminate upon the consummation of such transaction and, thereupon, the Company
shall be relieved of any and all liabilities and obligations in respect of such
canceled and terminated Options and the holders thereof.
7.2 ALTERNATIVE OPTIONS. Notwithstanding Section 7.1, in the
event that the transaction constituting a Change in Control is intended to be
accounted for using the "pooling of interest" method of accounting, (i) no
cancellation or termination shall occur with respect to any Options and (ii) all
Options remaining outstanding as of the closing of such transaction shall be
honored or assumed, or new rights substituted therefor (such honored, assumed or
substituted Option being hereinafter referred to as an "Alternative Option") by
the surviving entity in the transaction constituting the Change in Control,
PROVIDED that any such Alternative Option must:
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(a) provide the Participant that held such Option with rights
and entitlements substantially equivalent to or better than the rights,
terms and conditions applicable under such Option, including, but not
limited to, identical or better timing and methods of payment; and
(b) have substantially equivalent economic value to such
Option (determined at the time of the Change in Control).
7.3 CERTAIN TAKE-ALONG RIGHTS PRIOR TO A PUBLIC OFFERING. The
Board shall provide in each Subscription Agreement evidencing Common Stock
purchased upon the exercise of Options granted hereunder that, upon certain
transactions described therein, the Participant will be required to sell such
shares of Common Stock then owned by him, for a cash payment per share of Common
Stock equal to the price per share of Common Stock paid in conjunction with such
transaction, and upon such additional terms and conditions as are set forth in
such Subscription Agreement.
SECTION 8. AMENDMENT, MODIFICATION AND
TERMINATION OF THE PLAN
The Board at any time may terminate or suspend the Plan, and
from time to time may amend or modify the Plan. No amendment, modification,
termination or suspension of the Plan shall in any manner adversely affect any
Option theretofore granted under the Plan, without the consent of the
Participant holding such Option. Shareholder approval of any such amendment,
modification, termination or suspension shall be obtained to the extent mandated
by applicable law, or if otherwise deemed appropriate by the Board.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1. NONTRANSFERABILITY OF AWARDS. No Options granted under
the Plan may be sold, transferred, pledged, assigned, encumbered or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution and provided that the deceased Participant's beneficiary or the
representative of his estate acknowledges and agrees in writing, in a form
reasonably acceptable to the Company, to be bound by the provisions of the Plan
(including the take-along rights described in Section 7.3)
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and the Option Agreement covering such Options as if such beneficiary or estate
were the Participant. All rights with respect to Options granted to a
Participant under the Plan shall be exercisable during his life-time by such
Participant only. Following a Participant's death, all rights with respect to
Options that were exercisable at the time of such Participant's death and have
not terminated shall be exercised by his designated beneficiary or by his
estate.
9.2. BENEFICIARY DESIGNATION. Each Participant under the Plan
may from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) by whom any right under the Plan is to be
exercised in case of his death. Each designation will revoke all prior
designations by the same Participant, shall be in a form reasonably prescribed
by the Board, and will be effective only when filed by the Participant in
writing with the Board during his lifetime.
9.3. TAX WITHHOLDING. With respect to those Participants who
are employees of the Company or one of its subsidiaries at the time of the
exercise of an option, the Company or such subsidiary shall have the power to
withhold, or to require such Participant to remit to the Company or such
subsidiary, subject to such other arrangements as the Board may set forth in the
Option Agreement to which such Participant is a party, an amount sufficient to
satisfy all federal, state, local and foreign withholding tax requirements in
respect of any Option granted under the Plan or any share of Common Stock
purchased upon the exercise of any such Option.
9.4. INDEMNIFICATION. Each person who is or shall have been a
member of the VK/AC Board, of the Board or any committee thereof shall be
indemnified and held harmless by the Company to the fullest extent permitted by
law from and against any and all losses, costs, liabilities and expenses
(including any related attorneys' fees and advances thereof) in connection with,
based upon or arising or resulting from any claim, action, suit or proceeding to
which he may be made a party or in which he may be involved by reason of any
action taken or failure to act under the Plan and from and against any and all
amounts paid by him in settlement thereof, with the Company's approval, or paid
by him in satisfaction of any judgment in any such action, suit or proceeding
against him, PROVIDED that he shall give the Company an opportunity, at its own
expense, to defend the same before he undertakes to defend it on his own behalf.
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The foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or By-laws, by
contract, as a matter of law, or otherwise.
9.5. NO LIMITATION ON COMPENSATION. Nothing in the Plan shall
be construed to limit the right of the Company or any of its subsidiaries to
establish other plans or to pay compensation to its employees, in cash or
property, in a manner that is not expressly authorized under the Plan.
9.6. REQUIREMENTS OF LAW. The granting of Options and the
issuance of shares of Common Stock pursuant to such Options shall be subject to
all applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. No
Options shall be granted under the Plan, and no shares of Common Stock shall be
issued upon exercise of any Options granted under the Plan, if such grant or
exercise would result in a violation of applicable law, including the federal
securities laws and any applicable state or foreign securities laws.
9.7. FREEDOM OF ACTION. Subject to Section 8, nothing in the
Plan or any Option Agreement shall be construed as limiting or preventing the
Company or any of its subsidiaries from taking any action that it deems
appropriate or in its best interest.
9.8. TERM OF PLAN. Subject to the consummation of the
Spin-off, the Plan shall be effective as of the Effective Date. The Plan shall
thereafter continue in effect, unless sooner terminated pursuant to Section 8,
until the fifth anniversary of the Effective Date.
9.9. NO VOTING RIGHTS. Except as otherwise required by law, no
Participant holding any Options granted under the Plan shall have any right, in
respect of such Options, to vote on any matter submitted to the Company's
stockholders until such time as the shares of Common Stock issuable upon
exercise of such Options have been so issued.
9.10. GOVERNING LAW. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
Delaware, regardless of the law that might be applied under principles of
conflict of laws.
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EXHIBIT A
[Form of Management Stock Option Agreement]
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MANAGEMENT STOCK OPTION AGREEMENT
MANAGEMENT STOCK OPTION AGREEMENT, dated as of October 8,
1996, between MCM Group, Inc., a Delaware corporation (the "Company"), and the
Grantee whose name appears on the signature page hereof (the "Grantee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on August 31, 1996, 100% of the outstanding Class A
common stock of the Company and 100% of the outstanding Class B common stock of
the Company was distributed to the stockholders of record of VK/AC Holding, Inc.
("VK/AC") on the record date for such distribution (such distribution, the
"Spin-off");
WHEREAS, immediately prior to the Spin-off, the Company
granted options to purchase an aggregate of approximately 48,359 shares of the
Class A common stock of the Company to those members of management of VK/AC and
its subsidiaries, including the Company and its subsidiaries, who, on the
effective date of the Spin-off, held options to purchase common stock of VK/AC;
WHEREAS, in connection with the Spin-off, the
Board of Directors of the Company has adopted the MCM Group,
Inc. Stock Purchase Plan (the "Stock Purchase Plan");
WHEREAS, on the date hereof, the Grantee and certain other
purchasers who are executives, senior officers or other key employees of the
Company or one of its direct or indirect subsidiaries have purchased an
aggregate of 18,200 shares of the Class C common stock of the Company, par value
$0.01 per share (the "Common Stock"), for a purchase price of $100.00 per
share, pursuant to the Stock Purchase Plan and separate management stock
subscription agreements between the Company and each such purchaser;
WHEREAS, in connection with the Spin-off, the Board of
Directors of the Company has adopted the MCM Group, Inc. Stock Option Plan (the
"Plan");
WHEREAS, pursuant to the terms of the Plan, the Board has
approved the grant to the Grantee of non-qualified stock options to purchase the
aggregate number of shares of Common Stock set forth under the heading "Initial
Value Options" on the signature page hereof, at an exercise price
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of $100 per share, and non-qualified options to purchase the aggregate number of
shares of Common Stock set forth under the heading "Premium Options" on the
signature page hereof, at an exercise price of $143.60 per share; and
WHEREAS, the Grantee and the Company desire to enter into an
agreement to evidence and confirm the grant of the options on the terms and
conditions set forth herein;
NOW, THEREFORE, to evidence the options so granted, and to set
forth its terms and conditions under the Plan, the Company and the Grantee
hereby agree as follows:
1. DEFINITIONS. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(a) "Affiliate" means an entity controlling, controlled by or
under common control with the Company.
(b) "Alternative Option" has the meaning given in
Section 9(c).
(c) "Applicable Portion" means, with respect to Performance
Options granted hereunder, the percentage obtained by dividing (i) the excess of
(x) the EBITDA actually achieved as of the Target Date (or other applicable date
of determination) over (y) the Minimum EBITDA Target by (ii) the excess of the
Maximum EBITDA Target over the Minimum EBITDA Target.
(d) "Board" means the Board of Directors of the Company.
(e) "C&D Fund" means The Clayton & Dubilier Private Equity
Fund IV Limited Partnership, a Connecticut limited partnership, and any
successor investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(f) "Cause" means (i) the willful failure by the Grantee to
perform substantially his duties as an employee of the Company or any Subsidiary
(other than any such failure due to physical or mental illness) after a demand
for substantial performance is delivered to the Grantee by the executive to
which the Grantee reports or by the Board, which notice identifies the manner in
which such executive or the Board, as the case may be, believes that the Grantee
has not substantially performed his duties, (ii) the
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Grantee's engaging in willful and serious misconduct that is or is expected to
be injurious to the Company or any Subsidiary, (iii) the Grantee's having been
convicted of, or entered a plea of guilty or NOLO CONTENDERE to, a crime that
constitutes a felony, (iv) the willful and material breach by the Grantee of any
written covenant or agreement with the Company or any Subsidiary not to disclose
any information pertaining to the Company, any Subsidiary or any Affiliate or
not to compete or interfere with the Company, any Subsidiary or any Affiliate or
with respect to any take-along or similar covenants applicable to any Common
Stock of the Grantee or (v) any violation by the Grantee of any federal, state
or foreign securities laws; PROVIDED that in the event that the Participant is
employed by the Company or a Subsidiary under an effective employment agreement
on the date of determination and such employment agreement shall contain a
different definition of Cause, the definition of Cause contained in such
employment agreement shall be substituted for the definition set forth above for
all purposes hereunder.
(g) "Change of Control" means the first to occur after
the Grant Date of the following events:
(i) the acquisition by any person, entity or "group"
(as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), other than the Company, the Subsidiaries,
any employee benefit plan of the Company or the Subsidiaries,
or the C&D Fund, of 50% or more of the combined voting power
of the Company's then outstanding voting securities;
(ii) the merger or consolidation of the Company, as a
result of which persons who were stockholders of the Company
immediately prior to such merger or consolidation, do not,
immediately thereafter, own, directly or indirectly more than
50% of the combined voting power entitled to vote generally in
the election of directors of the merged or consolidated
company;
(iii) the liquidation or dissolution of the Company;
and
(iv) the sale of all or substantially all of the
assets of the Company to one or more persons or entities that
are not, immediately prior to such sale, Affiliates.
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(h) "Change in Control Price" means the price per share of
Common Stock paid in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Board if any part of such price is
payable other than in cash).
(i) "Committee" means the Compensation Committee of the Board
(or such other committee of the Board which shall have jurisdiction over the
compensation of officers). If at any time no Committee shall be in office, the
Board shall perform the functions of the Committee.
(j) "Common Stock" means the Class C Common Stock, par value
$.01 per share, of the Company.
(k) "Company" means MCM Group, Inc., a Delaware corporation,
and any successor thereto.
(l) "EBITDA", for any period, shall mean the consolidated net
income of the Company and the Subsidiaries, determined prior to any reduction
for interest expense, taxes, depreciation or amortization.
(m) "Grant Date" means the date of this Agreement as of which
the Options are granted hereby.
(n) "Initial Value Options" means those Options granted
hereunder to purchase the number of Shares set forth under the heading "Initial
Value Options" on the signature page hereof, at an option exercise price equal
to $100.00 per share.
(o) "Involuntary Termination" means termination of the
Grantee's employment by the New Employer for any reason.
(p) "Maximum EBITDA Target" means, with respect to the
Performance Options granted hereunder, cumulative EBITDA of $25.8 million, which
shall be the cumulative EBITDA that the Company and the Subsidiaries must
achieve during the period commencing on the Grant Date and ending on the Target
Date for 100% of such Performance Options to become exercisable as of the Target
Date.
(q) "Minimum EBITDA Target" means, with respect to the
Performance Options granted hereunder, cumulative EBITDA of $22.2 million, which
shall be the minimum cumulative EBITDA that the Company and the Subsidiaries
must achieve during the period commencing on the Grant Date and
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ending on the Target Date for any portion of such Performance Options to become
exercisable as of the Target Date.
(r) "New Employer" means the Participant's employer, or the
parent or a subsidiary of such employer, immediately following a Change in
Control.
(s) "Option" means the right granted pursuant to Section 2
hereof to purchase one share of Common Stock at the price and on the terms and
conditions specified in this Agreement.
(t) "Permanent Disability" means a physical or mental
disability or infirmity that prevents the performance of the Grantee's
employment-related duties lasting (or likely to last, based on competent medical
evidence presented to the Board) for a period of six months or longer. The
Board's reasoned and good faith judgment as to Permanent Disability shall be
final and shall be based on such competent medical evidence as shall be
presented to it by the Grantee or by any physician or group of physicians or
other competent medical expert employed by the Grantee or the Company to advise
the Board.
(u) "Performance Option" means those Options granted hereunder
which become exercisable in accordance with the provisions of Section 3(b) based
upon the financial performance of the Company and the Subsidiaries.
(v) "Plan" means the MCM Group, Inc. Stock Option
Plan, as the same may be amended from time to time.
(w) "Premium Options" means Options granted hereunder to
purchase the number of Shares set forth under the heading "Premium Options" on
the signature page hereof, at an option exercise price of $143.60 per share.
(x) "Public Offering" means the first day as of which sales of
Class A common stock of the Company are made to the public in the United States
pursuant to an underwritten public offering of the Class A common stock of the
Company led by one or more underwriters, at least one of which is of nationally
recognized standing.
(y) "Retirement" means the Grantee's retirement at or after
age 60.
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(z) "Service Options" means those Options granted hereunder
which become exercisable in accordance with the provisions of Section 3(a) based
upon the Grantee's completion of service with the Company and the Subsidiaries.
(aa) "Shares" means the shares of Common Stock
covered by the Options.
(bb) "Spin-off" means the distribution by VK/AC of 100% of the
outstanding Class A common stock of the Company and 100% of the outstanding
Class B common stock of the Company to the holders of record of the common stock
of VK/AC at the close of business on the record date for the distribution.
(cc) "Special Termination" means a termination of the
Grantee's active employment with the Company and the Subsidiaries that employ
the Grantee by reason of a termination by such employer Without Cause or a
termination due to death, Permanent Disability or Retirement or, in the event
that the Grantee is, at the time of such termination, party to an effective
employment agreement with the Company or any Subsidiary, dated as of the date
hereof, by the Grantee for "good reason," as defined in such employment
agreement.
(dd) "Subsidiary" means any corporation a majority of whose
outstanding voting securities is owned, directly or indirectly, by the Company.
(ee) "Target Date" means, with respect to Performance Options
granted hereunder, the third anniversary of the Grant Date.
2. CONFIRMATION OF GRANT; OPTION PRICE. The Company hereby
evidences and confirms its grant to the Grantee, effective as of the date
hereof, of (a) the Initial Value Options, at an option exercise price of $100.00
per share, and (b) the Premium Options, at an option exercise price of $143.60
per share. The Options are not intended to be incentive stock options under the
U.S. Internal Revenue Code of 1986, as amended. This Agreement is subordinate
to, and the terms and conditions of the Options granted hereunder are subject
to, the terms and conditions of the Plan.
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3. EXERCISABILITY.
(a) SERVICE OPTIONS. Except as otherwise provided in this
Agreement, 50% of the Initial Value Options and 50% of the Premium Options (such
Initial Value Options and Premium Options, the "Service Options") shall become
available for exercise, subject to the provisions hereof, in 20% installments,
with the first installment becoming exercisable on the first anniversary of the
date of this Agreement and with an additional 20% becoming exercisable on each
of the second, third, fourth and fifth anniversaries of the date of this
Agreement, subject in each such case to the Grantee's continued employment with
the Company or a Subsidiary until such anniversary date.
(b) PERFORMANCE OPTIONS. Except as otherwise provided in this
Agreement, the remaining 50% of the Initial Value Options and the remaining 50%
of the Premium Options (such remaining Initial Value Options and Premium
Options, the "Performance Options") shall become exercisable based on the
financial performance of the Company and the Subsidiaries during the period from
the Grant Date to the Target Date as follows. Except as otherwise provided in
this Agreement, the Applicable Portion of the Performance Options shall become
exercisable as of the Target Date, if and only if (i) the Company shall have
achieved at least the Minimum EBITDA Target as of such Target Date and (ii) the
Grantee shall have been continuously employed by the Company or one of the
Subsidiaries from the Grant Date until the Target Date; PROVIDED that, if the
Grantee's employment is sooner terminated by reason of a Special Termination,
then a proportionate share of the Applicable Portion of the Performance Options
(such proportionate share to be determined by multiplying (x) the Applicable
Portion, if any, determined as of the last day of the calendar quarter ending
prior to the date of the Special Termination for which the applicable financial
information is available, on the basis of the cumulative EBITDA achieved as of
such date, by (y) the product of (a) the number of Performance Options
multiplied by (b) a fraction, the numerator of which is equal to the number of
days in the period commencing on the Grant Date and ending on the date of the
Special Termination and the denominator of which is equal to 1,095) shall become
exercisable as of the date of such Special Termination. In the event of the
acceleration of the exercisability of any Performance Options by reason of a
Special Termination of the Grantee's employment prior to the Target Date,
one-half of such accelerated Performance Options shall be Initial
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20
Value Options and the remaining one-half of such accelerated Performance Options
shall be Premium Options.
Notwithstanding the foregoing provisions of this paragraph
(b), subject to the continuous employment of the Grantee with the Company or one
of the Subsidiaries, Performance Options shall become exercisable nine years
following the Grant Date, regardless of whether the EBITDA Target has been
achieved.
(c) CONDITIONS. The Board may accelerate the exercisability of
any Option, all Options or any class of Options, at any time and from time to
time. Shares eligible for purchase may, subject to the provisions hereof,
thereafter be purchased, at any time and from time to time until the date one
day prior to the date on which the Options terminate, provided that any such
purchase shall be effected pursuant to and subject to the provisions contained
in the management stock subscription agreement related to such Shares. Any
Options held by the Grantee as of the date of the termination of his active
employment with the Company and the Subsidiaries that have not become
exercisable on or prior to the date of such termination in accordance with
Section 3(a) or 3(b) shall terminate and be cancelled immediately on such date.
4. TERMINATION OF OPTION.
(a) NORMAL TERMINATION DATE. Unless an earlier termination
date shall occur as specified in Section 4(b), the Options shall terminate on
the tenth anniversary of the date hereof (the "Normal Termination Date").
(b) EARLY TERMINATION. If the Grantee's active employment with
the Company and the Subsidiaries that employ the Grantee is voluntarily or
involuntarily terminated for any reason whatsoever prior to the Normal
Termination Date, any Options that have not become exercisable on or before the
effective date of such termination of employment shall terminate on such
effective date. Any Options that have become exercisable on or before the
effective date of such termination of the Grantee's active employment shall,
subject to the provisions of Section 5(c), remain exercisable for whichever of
the following periods is applicable, and if not exercised within such period,
shall terminate upon the expiration of such period: (i) if the Grantee's active
employment is terminated by reason of a Special Termination, any Options held by
the Grantee and then exercisable shall remain exercisable solely until the
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21
first anniversary of the Grantee's termination of employment and (ii) if the
Grantee's active employment is terminated for any reason other than a Special
Termination or for Cause, any then exercisable Options held by such Grantee
shall remain exercisable for a period of sixty days after the earlier of (x) the
expiration of the Second Purchase Period (as defined in Section 5(c)(i)) and (y)
receipt by the Grantee of written notice that the C&D Fund does not intend to
exercise its right to purchase pursuant to Section 5(c)(i), provided that in no
event shall any Options be or remain exercisable on or after the Normal
Termination Date. Notwithstanding anything else contained in this Agreement, if
the Grantee's active employment with the Company and Subsidiaries that employ
the Grantee is terminated by any such employer for Cause, then all Options
(whether or not then exercisable) shall terminate and be cancelled immediately
upon such termination. Nothing in this Agreement shall be deemed to confer on
the Grantee any right to continue in the employ of the Company or any of the
Subsidiaries, or to interfere with or limit in any way the right of the Company
or any of the Subsidiaries to terminate such employment at any time.
5. RESTRICTIONS ON EXERCISE; NON-TRANSFERABILITY OF OPTION;
REPURCHASE OF OPTION.
(a) RESTRICTIONS ON EXERCISE. The Options may be exercised
only with respect to full shares of Common Stock. No fractional shares of Common
Stock shall be issued. Notwithstanding any other provision of this Agreement,
the Options may not be exercised in whole or in part, and no certificates
representing Shares shall be delivered, (i) unless all requisite approvals and
consents of any governmental authority of any kind having jurisdiction over the
exercise of options shall have been secured, (ii) unless the purchase of the
Shares upon the exercise of the Options shall be exempt from registration under
applicable U.S. federal and state securities laws, and applicable non-U.S.
securities laws, or the Shares shall have been registered under such laws, (iii)
unless all applicable U.S. federal, state and local and non-U.S. tax withholding
requirements shall have been satisfied and (iv) if such exercise would result in
a violation of the terms or provisions of or a default or an event of default
under any of the Financing Agreements (as such term is defined in Section 10).
The Company shall use commercially reasonable efforts to obtain the consents and
approvals referred to in clause (i) of the preceding sentence, to satisfy the
withholding requirements referred to in clause (iii) of the preceding sentence
and,
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22
if applicable, to obtain the consent of the parties to the Financing Agreements
referred to in clause (iv) of the preceding sentence so as to permit the Options
to be exercised.
(b) NON-TRANSFERABILITY OF OPTIONS. The Options may be
exercised only by the Grantee or by his estate. The Options are not assignable
or transferable, in whole or in part, and may not, directly or indirectly, be
offered, transferred, sold, pledged, assigned, alienated, hypothecated or
otherwise disposed of or encumbered (including without limitation by gift,
operation of law or otherwise) other than by will or by the laws of descent and
distribution to the estate of the Grantee upon his death, PROVIDED that the
deceased Grantee's beneficiary or the representative of his estate shall
acknowledge and agree in writing, in a form reasonably acceptable to the
Company, to be bound by the provisions of this Agreement and the Plan as if such
beneficiary or the estate were the Grantee.
(c) REPURCHASE OF OPTION ON TERMINATION OF EMPLOYMENT.
(i) TERMINATION OF EMPLOYMENT. If the Grantee's active
employment with the Company and any direct and indirect subsidiaries of
the Company that employ the Grantee is terminated for any reason, the
Company shall have an option to purchase all of those Options that have
become exercisable on or prior to the effective date of termination of
employment (the "Covered Options"), and shall have 60 days from the
date of the Grantee's termination (the "First Purchase Period") during
which to give notice in writing to the Grantee (or if his employment
was terminated by his death, his estate) of its election to exercise or
not to exercise such right to purchase all or any of the Covered
Options. The Company hereby undertakes to use reasonable efforts to act
as promptly as practicable following such termination to make such
election. If the Company fails to give notice that it intends to
exercise its right to purchase the Covered Options within the First
Purchase Period or the Company has given notice of its exercise of its
right to purchase only a portion of the Covered Options, the C&D Fund
shall have the right to purchase all or a portion of the Covered
Options that will not be purchased by the Company and shall have until
the expiration of the earlier of (x) 60 days following the end of the
First Purchase Period, or (y) 60 days from the date of receipt by the
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23
C&D Fund of written notice that the Company does not intend to exercise
such right in full (the "Second Purchase Period"), to give notice in
writing to the Grantee (or his estate) of the C&D Fund's exercise of
its right to purchase all or any of the Covered Options. If the rights
to purchase the Covered Options of the Company and the C&D Fund granted
in this subsection are not exercised in full as provided herein, the
Grantee (or his estate) shall be entitled to retain the Covered Options
that will not be so repurchased, subject to all of the provisions of
this Agreement.
(ii) PURCHASE PRICE, ETC. All purchases pursuant to this
Section 5(c) by the Company or the C&D Fund shall be for a purchase
price and in the manner prescribed by Sections 5(f), (g), and (h).
(d) NOTICE OF TERMINATION. The Company shall give written
notice of any termination of the Grantee's active employment with each of the
Company and any direct or indirect subsidiaries of the Company that employ the
Grantee to the C&D Fund, except that if such termination (if other than as a
result of death) is by the Grantee, the Grantee shall give written notice of
such termination to the Company and the Company shall give written notice of
such termination to the C&D Fund.
(e) PUBLIC OFFERING. In the event of a Public Offering, none
of the Company or the C&D Fund shall have any rights to purchase the Covered
Options pursuant to this Section 5, and this Section 5 shall not apply to a
sale as part of a Public Offering or at any time thereafter.
(f) PURCHASE PRICE. Subject to Section 10(c), the purchase
price to be paid to the Grantee (or his estate) for the Covered Option (the
"Purchase Price") shall be equal to the excess, if any, of (a) the fair market
value of the Shares which may be purchased upon exercise of the Covered Option
(the "Fair Market Value") as of the effective date of the termination of
employment that gives rise to the right or obligation to repurchase (such
effective date, the "Determination Date"), over (b) the aggregate exercise price
of the Covered Option. Whenever determination of the Fair Market Value of such
Shares is required by this Agreement, such Fair Market Value shall be such
amount as is determined in good faith by the Board. In making a determination of
Fair Market Value, the Board shall give due consideration to such factors as it
deems appropriate, including, without limitation, the earnings and certain other
financial and
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operating information of the Company and the Subsidiaries in recent periods, the
potential value of the Company and the Subsidiaries as a whole, the future
prospects of the Company and the Subsidiaries and the industries in which they
compete, the history and management of the Company and the Subsidiaries, the
general condition of the securities markets, the fair market value of securities
of companies engaged in businesses similar to those of the Company and the
Subsidiaries and the Applicable Share Valuation, as defined below. The
determination of Fair Market Value will not give effect to any restrictions on
transfer of the Shares or the fact that such Shares would represent a minority
interest in the Company. For purposes of this Agreement, the term "Applicable
Share Valuation" shall mean the annual valuation of the Shares performed by an
independent valuation firm chosen by the Board as of the last day of the last
fiscal year of the Company ending prior to the Determination Date, except that,
in the case of a Determination Date occurring during the fourth fiscal quarter
of any fiscal year of the Company beginning with the fourth quarter of the 1996
fiscal year of the Company, the term "Applicable Share Valuation" shall mean the
annual valuation of the Shares performed by an independent valuation firm chosen
by the Board as of the last day of such fourth fiscal quarter. Such annual
valuations shall be performed as promptly as practicable following the end of
each fiscal year of the Company, beginning with the 1996 fiscal year of the
Company. The Fair Market Value as determined in good faith by the Board and in
the absence of fraud shall be binding and conclusive upon all parties hereto. If
the Company at any time subdivides (by any stock split, stock dividend or
otherwise) the Common Stock into a greater number of shares, or combines (by
reverse stock split or otherwise) the Common Stock into a smaller number of
shares, the Purchase Price shall be appropriately adjusted to reflect such
subdivision or combination.
(g) CLOSING OF PURCHASE; PAYMENT OF PURCHASE PRICE. Subject to
Section 10, the closing of a purchase pursuant to this Section 5 shall take
place at the principal office of the Company on the tenth business day following
the receipt by the Grantee (or his estate) of the C&D Fund's or the Company's
notice of exercise of the right to purchase any of the Covered Options pursuant
to Section 5(c). At the closing, (i) subject to the proviso below, the Company,
shall pay the Purchase Price to the Grantee (or his estate) by delivery of a
check for the Purchase Price payable to the order of the Grantee (or his estate)
and (ii) the Grantee (or his estate) shall deliver to the Company such instru-
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ments as the Company may reasonably request signed by the Grantee (or his
estate); provided, however, that if the Determination Date occurs during the
first or last fiscal quarter of any fiscal year of the Company, the Company may
defer the payment of a portion of the Purchase Price until the tenth business
day following receipt by the Company of the Applicable Share Valuation (such
tenth business day, the "Deferred Payment Date"). In the event of any such
deferral, (i) at the closing of the purchase of the Covered Option, the Company
shall pay to the Grantee (or his estate) an amount (the "First Installment
Amount") equal to 80% of the excess of (a) the Fair Market Value of the Shares
which may be purchased upon exercise of the Covered Option, determined pursuant
to Section 5(f) hereof on the basis of the most recent available valuation of
the Shares, over (b) the aggregate exercise price of the Covered Option, and
(ii) no later than the Deferred Payment Date, the Company shall pay an
additional amount to the Grantee (or his estate) equal to the excess, if any, of
(a) the sum of (1) the Purchase Price for the Covered Option and (2) an amount
calculated by multiplying the First Installment Amount by a percentage equal to
the average annual cost to the Company of its bank indebtedness obligations
outstanding during the period that payment of a portion of the Purchase Price is
delayed hereunder or, if there are no such obligations outstanding, one
percentage point greater than the average annual prime rate charged during such
period by Chase Bank or such other nationally recognized bank designated by the
Company, over (b) the First Installment Amount.
(h) APPLICATION OF THE PURCHASE PRICE TO CERTAIN LOANS. The
Grantee agrees that the Company and the C&D Fund shall be entitled to apply any
amounts to be paid by the Company or the C&D Fund, as the case may be, to
repurchase the Covered Option pursuant to this Section 5 to discharge any
indebtedness of the Grantee to the Company or any of its direct or indirect
subsidiaries, or indebtedness that is guaranteed by the Company or any of its
subsidiaries, including, but not limited to, any indebtedness of the Grantee
incurred to purchase any shares of Common Stock.
(i) WITHHOLDING. Whenever Shares are to be issued pursuant to
the Option, the Company may require the recipient of the Shares to remit to the
Company an amount sufficient to satisfy any applicable U.S. federal, state and
local and non-U.S. tax withholding requirements. In the event any cash is paid
to the Grantee or his estate or beneficiary pursuant to this Section 5, the
Company shall have the right to withhold an amount from such payment sufficient
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26
to satisfy any applicable U.S. federal, state and local and non-U.S. tax
withholding requirements. If shares of Common Stock are traded on a national
securities exchange or bid and ask prices for shares of Common Stock are quoted
on the NASDAQ National Market System ("NASDAQ") operated by the National
Association of Securities Dealers, Inc., the Company may, if requested by the
Grantee, withhold Shares to satisfy applicable withholding requirements, subject
to the provisions of the Plan and any rules adopted by the Board or the
Committee regarding compliance with applicable law, including, but not limited
to, Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended (the
"Exchange Act").
6. MANNER OF EXERCISE. To the extent that the Options shall
have become and remain exercisable as provided in Section 3 and subject to such
reasonable administrative regulations as the Board or the Committee may have
adopted, such Options may be exercised, in whole or in part, by notice to the
Secretary of the Company in writing given 15 business days prior to the date on
which the Grantee will so exercise any of the Options (the "Exercise Date"),
specifying the number of Shares with respect to which the Options are being
exercised (the "Exercise Shares") and the Exercise Date, PROVIDED that if shares
of Common Stock are traded on a U.S. national securities exchange or bid and ask
prices for shares of Common Stock are quoted over NASDAQ, notice may be given
five business days before the Exercise Date. On or before the Exercise Date, the
Company and the Grantee shall enter into a management stock subscription
agreement (the "Exercise Management Stock Subscription Agreement") substantially
in the form attached to the Plan as Exhibit B, or in such other form as may be
agreed upon by the Company and the Grantee. In accordance with the Exercise
Management Stock Subscription Agreement, (a) on or before the Exercise Date, the
Grantee shall deliver to the Company full payment for the Exercise Shares in
United States dollars in cash, or cash equivalent satisfactory to the Company,
and in an amount equal to the aggregate option exercise price for the Exercise
Shares and (b) on the Exercise Date, the Company shall deliver to the Grantee a
certificate or certificates representing the Exercise Shares, registered in the
name of the Grantee. If shares of common stock of the Company are listed for
trading on a national securities exchange or bid and ask prices for shares of
common stock of the Company are quoted over NASDAQ, the Grantee may, in lieu of
cash, tender shares of common stock of the Company having a market price on the
Exercise Date equal to the aggregate option exercise price for the Exercise
Shares or may deliver a combination
14
27
of cash and shares of common stock of the Company having a market price equal to
the difference between such aggregate exercise price and the amount of such cash
as payment for the aggregate option exercise price for the Exercise Shares,
subject to such rules and regulations as may be adopted by the Board or the
Committee to provide for the compliance of such payment procedure with
applicable law, including Section 16(b) of the Exchange Act. The Company may
require the Grantee to furnish or execute such other documents as the Company
shall reasonably deem necessary (i) to evidence such exercise, (ii) to determine
whether registration is then required under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and (iii) to comply with or satisfy the
requirements of the Securities Act, applicable state or non-U.S. securities laws
or any other law.
7. GRANTEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) INVESTMENT INTENTION. The Grantee represents and warrants
that the Options have been, and any Exercise Shares will be, acquired by him
solely for his own account for investment and not with a view to or for sale in
connection with any distribution thereof. The Grantee agrees that he will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any of the Options or Exercise Shares (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of any of the Options or Exercise
Shares), except in compliance with the Securities Act and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state and foreign securities or
"blue sky" laws. The Grantee further understands, acknowledges and agrees that
none of the Exercise Shares may be transferred, sold, pledged, hypothecated or
otherwise disposed of unless the provisions of the related Exercise Management
Stock Subscription Agreement and the Certificate of Incorporation of the
Company shall have been complied with or have expired.
(b) LEGEND. The Grantee acknowledges that any certificate
representing the Exercise Shares shall bear an appropriate legend, which will
include, without limitation, the following language:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TRANSFER RESTRICTIONS, HOLDBACK AND OTHER PROVISIONS OF A
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED AS OF OCTOBER
8,
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1996, AND NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED
BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT IN
ACCORDANCE WITH THE PROVI SIONS OF SUCH MANAGEMENT STOCK
SUBSCRIPTION AGREE MENT, A COPY OF WHICH IS ON FILE WITH THE
SECRE TARY OF THE COMPANY. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE ENTITLED TO CERTAIN OF THE BENEFITS OF AND ARE
BOUND BY THE OBLIGATIONS SET FORTH IN A REGISTRATION AND
PARTICIPATION AGREEMENT, DATED AS OF AUGUST 31, 1996, AND ANY
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THERETO, AMONG THE
COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS (i) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL
BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SUCH ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH
DISPOSITION AND (ii) SUCH DISPOSITION IS PURSUANT TO
REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM."
(c) SECURITIES LAW MATTERS. The Grantee acknowledges receipt
of advice from the Company that (i) the Exercise Shares will not be registered
under the Securities Act or any state or foreign securities or "blue sky" laws,
(ii) it is not anticipated that there will be any public market for the Exercise
Shares, (iii) the Exercise Shares must be held indefinitely and the Grantee must
continue to bear the economic risk of the investment in the Exercise Shares
unless the Exercise Shares are subsequently registered under the Securities Act
and such state or foreign laws or an exemption from registration is available,
(iv) Rule 144 under the Securities Act ("Rule 144") is not presently available
with respect to sales of securities of the Company and the Company has made no
covenant to make
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Rule 144 available, (v) when and if the Exercise Shares may be disposed of
without registration in reliance upon Rule 144, such disposition can generally
be made only in limited amounts in accordance with the terms and conditions of
such Rule, (vi) the Company does not plan to file reports with the Commission or
make information concerning the Company publicly available, (vii) if the
exemption afforded by Rule 144 is not available, sales of the Exercise Shares
may be difficult to effect because of the absence of public information
concerning the Company, (viii) a restrictive legend in the form heretofore set
forth shall be placed on the certificates representing the Exercise Shares and
(ix) a notation shall be made in the appropriate records of the Company
indicating that the Exercise Shares are subject to restrictions on transfer set
forth in this Agreement and, if the Company should in the future engage the
services of a stock transfer agent, appropriate stop-transfer restrictions will
be issued to such transfer agent with respect to the Exercise Shares.
(d) COMPLIANCE WITH RULE 144. If any of the Exercise Shares
are to be disposed of in accordance with Rule 144 under the Securities Act, the
Grantee shall transmit to the Company an executed copy of Form 144 (if required
by Rule 144) no later than the time such form is required to be transmitted to
the Commission for filing and such other documentation as the Company may
reasonably require to assure compliance with Rule 144 in connection with such
disposition.
(e) ABILITY TO BEAR RISK. The Grantee covenants that he will
not exercise all or any portion of any of the Options prior to the registration
of the Shares under the Securities Act unless (i) the financial situation of the
Grantee is such that he can afford to bear the economic risk of holding the
Exercise Shares for an indefinite period and (ii) he can afford to suffer the
complete loss of his investment in the Exercise Shares.
(f) REGISTRATION; RESTRICTIONS ON TRANSFER; HOLDBACK UPON
PUBLIC OFFERING. In respect of any Exercise Shares purchased upon exercise of
any of the Options, the Grantee shall be entitled to the rights and subject to
the obligations created under the Registration and Participation Agreement,
dated as of August 31, 1996, as the same may be amended from time to time, among
the Company and certain stockholders of the Company, to the extent set forth
therein. The Grantee shall also be subject to the restrictions on transfer
contained in the Exercise
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30
Management Stock Subscription Agreement. Further, the Grantee agrees that, in
the event that the Company files a registration statement under the Securities
Act with respect to an underwritten public offering of any shares of its
capital stock, the Grantee will not effect any public sale (including a sale
under Rule 144) or distribution of any shares of Common Stock (other than as
part of such underwritten public offering) during the 20 days prior to and the
180 days after the effective date of such registration statement.
(g) SECTION 83(b) ELECTION. The Grantee agrees that, within 20
days after any Exercise Date, he shall give notice to the Company as to whether
or not he has made or will make an election pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, with respect to the Exercise Shares
purchased on such date, and acknowledges that he will be solely responsible for
any and all tax liabilities payable by him in connection with his receipt of
the Exercise Shares or attributable to his making or failing to make such an
election.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Grantee that (a) the Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding obligation
of the Company enforceable against the Company in accordance with its terms,
and (C) the Exercise Shares, when issued, delivered and paid for, upon exercise
of any of the Options in accordance with the terms hereof and the Exercise
Management Stock Subscription Agreement, will be duly and validly issued, fully
paid and nonassessable, and free and clear of any liens or encumbrances other
than those created pursuant to this Agreement or otherwise in connection with
the transactions contemplated hereby.
9. CHANGE IN CONTROL.
(a) ACCELERATED EXERCISABILITY AND PAYMENT. Unless the Board
shall otherwise determine in the manner set forth in Section 9(c), in the event
of a Change in Control, each Service Option (whether or not then exercisable)
and the Applicable Portion of the Performance Options, determined as provided in
Section 9(b) below, shall be cancelled in exchange for a payment in cash of an
amount equal to the excess, if any, of the Change in Control Price
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31
over the aggregate exercise price for such Options. Such payment shall be made
within 30 days following the closing of the transaction constituting the Change
in Control. Subject to Section 9(c) below, all Performance Options then
outstanding, other than the Applicable Portion of such Performance Options,
shall be canceled and forfeited effective as of the closing of such transaction.
(b) DETERMINATION OF EXERCISABLE PERFORMANCE OPTIONS. For
purposes of Section 9(a), the Applicable Portion of the Performance Options that
shall be canceled in exchange for the payment described in Section 9(a) shall be
determined on the basis of the cumulative EBITDA achieved during the period from
the Grant Date to the last day of the calendar quarter ending prior to the date
of the consummation of the transaction constituting the Change in Control for
which the applicable financial information is available.
(c) ALTERNATIVE OPTIONS. Notwithstanding Sections 9(a)
and 9(b), no cancellation, acceleration of exercisability, vesting or cash
settlement or other payment shall occur with respect to any Option if the Board
reasonably determines in good faith, prior to the occurrence of a Change in
Control, that such Option shall be honored or assumed, or new rights substituted
therefor (such honored, assumed or substituted Option being hereinafter referred
to as an "Alternative Option") by the New Employer, PROVIDED that any such
Alternative Option must:
(i) provide the Grantee with rights and entitlements
substantially equivalent to or better than the
rights, terms and conditions applicable under such
Option, including, but not limited to, an identical
or better exercise and vesting schedule, and
identical or better timing and methods of payment;
(ii) have substantially equivalent economic value to such
Option (determined at the time of the Change in
Control); and
(iii) have terms and conditions which provide that in the
event that the Grantee suffers an Involuntary
Termination within two years following a Change in
Control:
(1) any conditions on the Grantee's rights
under, or any restrictions on transfer
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or exercisability applicable to, each such
Alternative Option shall be waived or shall
lapse, as the case may be; or
(2) the Grantee shall have the right to
surrender such Alternative Option within 30
days following such termination in exchange
for a payment in cash equal to the excess of
the Fair Market Value of the common stock
subject to the Alternative Option over the
price, if any, that the Grantee would be
required to pay to exercise such Alternative
Option.
10. CERTAIN RESTRICTIONS ON REPURCHASES.
(a) FINANCING AGREEMENTS, ETC. Notwithstanding any other
provision of this Agreement, the Company shall not be permitted to repurchase
any Covered Options from the Grantee if (i) such repurchase would result in a
violation of the terms or provisions of, or result in a default or an event of
default under, any financing or security agreement or document entered into in
connection with the Spin-off or the operations of the Company or the
Subsidiaries from time to time (such agreements and documents, as each may be
amended, modified or supplemented from time to time, are referred to herein as
the "Financing Agreements"), in each case as the same may be amended, modified
or supplemented from time to time, or (ii) such repurchase would violate any of
the terms or provisions of the Certificate of Incorporation of the Company, or
(iii) the Company has no funds legally available therefor under the General
Corporation Law of the State of Delaware.
(b) DELAY OF REPURCHASE. In the event that a repurchase by the
Company otherwise permitted or required under Section 5(c) is prevented solely
by the terms of Section 10(a), (i) such repurchase will be postponed and will
take place without the application of further conditions or impediments (other
than as set forth in Section 5 hereof or in this Section 10) at the first
opportunity thereafter when the Company has funds legally available therefor and
when such repurchase will not result in any default, event of default or
violation under any of the Financing Agreements or in a violation of any term or
provision of the Certificate of Incorporation of the Company and (ii) such
repurchase obligation shall rank against other similar repurchase obligations
with respect to shares of Common Stock or
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options in respect thereof according to priority in time of (A) the effective
date of the termination of employment in connection with any repurchase
obligation arising pursuant to an exercise of the option of the Company under
Section 5(c)(i) of the applicable management stock option agreements or under
the comparable provisions of any applicable management stock subscription
agreements, or (B) as to any repurchase obligation arising pursuant to an
exercise of any holder's right to require a repurchase under any applicable
management stock subscription agreement, the date upon which the Company
receives written notice of such exercise, PROVIDED that any such repurchase
obligations as to which a common date determines priority under clause (A) or
(B) above shall be of equal priority and shall share pro rata in any repurchase
payments made pursuant to clause (i) above and PROVIDED, FURTHER, that any
repurchase commitment with respect to shares of Common Stock arising from
Permanent Disability, death, Retirement or financial hardship pursuant to any
applicable management stock subscription agreement shall have priority over any
other repurchase obligation.
(c) PURCHASE PRICE ADJUSTMENT. In the event that a repurchase
of any Covered Options from the Grantee is delayed pursuant to this Section 10,
the purchase price for such Covered Options when the repurchase of such Covered
Options eventually takes place as contemplated by Section 10(b) shall be the
sum of (i) the Purchase Price of such Covered Option determined in accordance
with Section 5(f) at the time that the repurchase of such Option would have
occurred but for the operation of this Section 10, plus (ii) an amount equal to
interest on such Purchase Price for the period from the date on which the
completion of the repurchase would have taken place but for the operation of
this Section 10 to the date on which such repurchase actually takes place (the
"Delay Period") at a rate equal to the weighted average cost of the Company's
bank indebtedness obligations outstanding during the Delay Period or, if there
are no such obligations outstanding, one percentage point greater than the
average prime rate charged during such period by Chase Bank or such other
nationally recognized bank designated by the Company.
11. NO RIGHTS AS STOCKHOLDER. The Grantee shall have no voting
or other rights as a stockholder of the Company with respect to any Shares
covered by the Options until the exercise of the Options and the issuance of a
certificate or certificates to him for such Shares. No adjustment shall be made
for dividends or other rights for
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which the record date is prior to the issuance of such certificate or
certificates.
12. CAPITAL ADJUSTMENTS. The number and price of the Shares
covered by the Options shall be proportionately adjusted to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of the Company. Subject to any required action by the
stock holders of the Company, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options shall pertain to
the securities and other property, if any, that a holder of the number of
shares of Common Stock covered by the Options would have been entitled to
receive in connection with such event.
13. MISCELLANEOUS.
(a) NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to the Company, the C&D Fund or the
Grantee, as the case may be, at the following addresses or to such other address
as the Company, the C&D Fund or the Grantee, as the case may be, shall specify
by notice to the others:
(i) if to the Company, to it at:
c/o McCarthy, Crisanti & Maffei, Inc.
One Chase Manhattan Plaza, 37th Floor
New York, New York 10005
ATTENTION: General Counsel
(ii) if to the Grantee, to the Grantee at the
address set forth on the signature page hereof.
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(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
ATTENTION: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or on the third business day after the
mailing thereof. Copies of any notice or other communication given under this
Agreement shall also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
ATTENTION: Alberto Cribiore
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
ATTENTION: Franci J. Blassberg, Esq.
The C&D Fund also shall be given a copy of any notice or other communication
between the Grantee and the Company under this Agreement at its address as set
forth above.
(b) BINDING EFFECT; BENEFITS. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Except as provided in Section 5, nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
(c) WAIVER; AMENDMENT.
(i) WAIVER. Any party hereto may by written notice to the
other parties (A) extend the time for the
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36
performance of any of the obligations or other actions of the other
parties under this Agreement, (B) waive compliance with any of the
conditions or covenants of the other parties contained in this
Agreement and (C) waive or modify performance of any of the
obligations of the other parties under this Agreement, PROVIDED that
any waiver of the provisions of Section 5 must be consented to
by the C&D Fund. Except as provided in the preceding sentence, no
action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no
failure by a party to exercise any right or privilege hereunder shall
be deemed a waiver of such party's rights or privileges hereunder or
shall be deemed a waiver of such party's rights to exercise the same
at any subsequent time or times hereunder.
(ii) AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Grantee and
the Company, PROVIDED that any amendment adversely affecting the rights
of the C&D Fund hereunder must be consented to by the C&D Fund. The
parties hereto acknowledge that the Company's consent to an amendment
or modification of this Agreement is subject to the terms and
provisions of the Financing Agreements.
(d) ASSIGNABILITY. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or the Grantee without the prior written consent of
the other parties. The C&D Fund may assign from time to time all or any portion
of its rights under Section 5 to one or more persons or other entities
designated by it.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, REGARDLESS OF THE
LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICT OF LAWS.
(f) SECTION AND OTHER HEADINGS, ETC. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or
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37
interpretation of this Agreement. In this Agreement all references to "dollars"
or "$" are to United States dollars.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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38
IN WITNESS WHEREOF, the Company and the Grantee have executed
this Agreement as of the date first above written.
MCM GROUP, INC.
By:
----------------------------------------
Name:
Title:
THE GRANTEE:
[Name]
By:
----------------------------------------
Name:
Attorney-in-fact
Address of the Grantee:
Address
Initial Value Options Premium Options
--------------------- ---------------
Total Number of
Shares of Common
Stock for the
Purchase of Which
Options have Been
Granted: Amount4 Shares Amount4 Shares
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39
EXHIBIT B
[Form of Management Stock Subscription Agreement]
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MANAGEMENT STOCK SUBSCRIPTION AGREEMENT
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, dated as of October
8, 1996, between MCM Group, Inc., a Delaware corporation (the "Company"), and
the Purchaser whose name appears on the signature page hereof (the "Purchaser").
W I T N E S S E T H:
WHEREAS, on August 31, 1996, 100% of the outstanding Class A
common stock of the Company (the "Company Common Stock") was distributed to the
stockholders of record of VK/AC Holding, Inc. ("VK/AC") on the record date for
such distribution (such distribution, the "Spin-off"), including the Clayton &
Dubilier Private Equity Fund IV Limited Partnership, a Connecticut limited
partnership and majority stockholder of VK/AC (together with any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc., the "C&D Fund");
WHEREAS, immediately prior to the Spin-off, the Company
granted options to purchase an aggregate of approximately 48,359 shares of the
Class A common stock of the Company to those members of management of VK/AC and
its subsidiaries, including the Company and its subsidiaries, who, on the
effective date of the Spin-off, held options to purchase the common stock of
VK/AC;
WHEREAS, in connection with the Spin-off, the Board of
Directors of the Company has adopted the MCM Group, Inc. Stock Purchase Plan
(the "Stock Purchase Plan");
WHEREAS, following the Spin-off, the Company will issue up to
an aggregate of 18,200 shares of its Class C Common Stock, par value $.01 per
share (the "Common Stock"), to the Purchaser and to certain other purchasers who
are executives, senior officers or other key employees of the Company or one of
its direct or indirect subsidiaries, pursuant to the Stock Purchase Plan, this
Agreement and other substantially identical management stock subscription
agreements and will grant options to purchase up to 44,052 shares of Common
Stock to the Purchaser and such other executive officers and key employees
pursuant to the MCM Group, Inc. Stock Option Plan;
WHEREAS, the Purchaser (an executive, senior officer or other
key employee of the Company or one of its
41
direct or indirect subsidiaries) desires to subscribe for and purchase, and the
Company desires to sell to the Purchaser, the aggregate number of shares of
Common Stock set forth on the signature page hereof (each a "Share" and,
collectively, the "Shares");
NOW, THEREFORE, to implement the foregoing and in
consideration of the mutual agreements contained herein, the parties hereto
hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK.
(a) PURCHASE OF COMMON STOCK. Subject to all of the terms
and conditions of this Agreement, the Purchaser hereby subscribes for and shall
purchase, and the Company shall sell to the Purchaser, the Shares at a purchase
price of $100.00 per Share, at the Closing provided for in Section 2(a) hereof.
Notwithstanding anything in this Agreement to the contrary, the Company shall
have no obligation to sell any Common Stock to (I) any person who will not be an
employee of the Company or a direct or indirect subsidiary of the Company
immediately following the Closing at which such Common Stock is to be sold or
(II) any person who is a resident of a jurisdiction in which the sale of Common
Stock to him would constitute a violation of the securities, "blue sky" or other
laws of such jurisdiction.
(b) CONSIDERATION. Subject to all of the terms and
conditions of this Agreement, the Purchaser shall deliver to the Company at the
Closing referred to in Section 2(a) hereof (i) immediately available funds in an
amount equal to 40% of the aggregate purchase price set forth on the signature
page hereof and (ii) a fully executed promissory note (the "Promissory Note")
substantially in the form attached hereto as Annex A, evidencing the full
recourse interest bearing loan by the Company to the Purchaser of a principal
amount equal to 60% of such aggregate purchase price.
2. CLOSING.
(a) TIME AND PLACE. Except as otherwise agreed by the
Company and the Purchaser, the closing (the "Closing") of the transaction
contemplated by this Agreement shall be held at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York at 10:00 a.m. (New York time) on
October 8, 1996.
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(b) DELIVERY BY THE COMPANY. At the Closing the Company shall
deliver to the Purchaser a stock certificate registered in such Purchaser's name
and representing the Shares, which certificate shall bear the legends set forth
in Section 3(b).
(c) DELIVERY BY THE PURCHASER. At the Closing the Purchaser
shall deliver to the Company the consideration referred to in Section 1(b)
hereof.
3. PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) INVESTMENT INTENTION. The Purchaser represents and
warrants that he is acquiring the Shares solely for his own account for
investment and not with a view to or for sale in connection with any
distribution thereof. The Purchaser agrees that he will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any of the Shares (or solicit any offers to buy, purchase or otherwise acquire
or take a pledge of any Shares), except in compliance with the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder, and in
compliance with applicable state and foreign securities or "blue sky" laws. The
Purchaser further understands, acknowledges and agrees that none of the Shares
may be transferred, sold, pledged, hypothecated or otherwise disposed of (i)
unless the provisions of Sections 4 through 8 hereof, inclusive, shall have
been complied with or have expired, (ii) unless the provisions of the
Certificate of Incorporation have been complied with or have expired, (iii)
unless (A) such disposition is pursuant to an effective registration statement
under the Securities Act, (B) the Purchaser shall have delivered to the Company
an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company, to the effect that such disposition is exempt from
the provisions of Section 5 of the Securities Act or (C) a no-action letter from
the Commission, reasonably satisfactory to the Company, shall have been
obtained with respect to such disposition and (IV) unless such disposition is
pursuant to registration under any applicable state securities laws or an
exemption therefrom.
(b) LEGENDS. The Purchaser acknowledges that the certificate
or certificates representing the Shares shall bear an appropriate legend, which
will include, without limitation, the following language:
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43
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TRANSFER RESTRICTIONS, HOLDBACK AND OTHER PROVISIONS OF A
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED AS OF OCTOBER
8, 1996, AND NEITHER THIS CERTIFICATE NOR THE SHARES
REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH MANAGEMENT
STOCK SUBSCRIPTION AGREEMENT, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE ENTITLED TO CERTAIN OF THE BENEFITS OF AND ARE
BOUND BY THE OBLIGATIONS SET FORTH IN A REGISTRATION AND
PARTICIPATION AGREEMENT, DATED AS OF AUGUST 31, 1996, AND ANY
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THERETO, AMONG THE
COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS (I) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL
BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SUCH ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH
DISPOSITION AND (II) SUCH DISPOSITION IS PURSUANT TO
REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM."
(c) SECURITIES LAW MATTERS. The Purchaser acknowledges
receipt of advice from the Company that (i) the Shares have not been registered
under the Securities Act or any state or foreign securities or "blue sky" laws,
(ii) it is not anticipated that there will be any public market for the Shares,
(iii) the Shares must be held indefinitely and the Purchaser must continue to
bear the economic risk of the investment in the Shares unless the Shares are
subsequently registered under the Securities Act and such state or foreign laws
or an exemption from registration is available,
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44
(IV) Rule 144 promulgated under the Securities Act ("Rule 144") is not presently
available with respect to sales of securities of the Company and the Company has
made no covenant to make Rule 144 available, (v) when and if the Shares may be
disposed of without registration in reliance upon Rule 144, such disposition can
generally be made only in limited amounts in accordance with the terms and
conditions of such Rule, (vi) the Company does not plan to file reports with the
Commission or make information concerning the Company publicly available, (vii)
if the exemption afforded by Rule 144 is not available, sales of the Shares may
be difficult to effect because of the absence of public information concerning
the Company, (viii) a restrictive legend in the form heretofore set forth shall
be placed on the certificates representing the Shares and (ix) a notation shall
be made in the appropriate records of the Company indicating that the Shares are
subject to restrictions on transfer set forth in this Agreement and, if the
Company should in the future engage the services of a stock transfer agent,
appropriate stop-transfer restrictions will be issued to such transfer agent
with respect to the Shares.
(d) COMPLIANCE WITH RULE 144. If any of the Shares are to be
disposed of in accordance with Rule 144, the Purchaser shall transmit to the
Company an executed copy of Form 144 (if required by Rule 144) no later than the
time such form is required to be transmitted to the Commission for filing and
such other documentation as the Company may reasonably require to assure
compliance with Rule 144 in connection with such disposition.
(e) ABILITY TO BEAR RISK. The Purchaser represents and
warrants that (I) the financial situation of the Purchaser is such that he can
afford to bear the economic risk of holding the Shares for an indefinite period
and (II) he can afford to suffer the complete loss of his investment in the
Shares.
(f) QUESTIONNAIRE. The Purchaser agrees to furnish such
documents and comply with such reasonable requests of the Company as may be
necessary to substantiate his status as a qualifying investor in connection
with the private offering of shares of Common Stock to the Purchaser and the
other purchasers to whom such shares are being sold in connection with the
Spin-off. The Purchaser represents and warrants that all information contained
in such documents and any other written materials concerning the status of the
Purchaser furnished by the Purchaser to the Company in
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45
connection with such requests will be true, complete and correct in all material
respects.
(g) ACCESS TO INFORMATION. The Purchaser represents and
warrants that (i) he has carefully reviewed the materials furnished to him in
connection with the transaction contemplated hereby, (ii) he has been granted
the opportunity to ask questions of, and receive answers from, representatives
of the Company concerning the terms and conditions of the purchase of the Shares
and to obtain any additional information that he deems necessary to verify the
accuracy of the information contained in such materials and (iii) his knowledge
and experience in financial and business matters is such that he is capable of
evaluating the risks of the investment in the Shares.
(h) REGISTRATION; RESTRICTIONS ON SALE UPON PUBLIC OFFERING.
The Purchaser shall be entitled to the rights and subject to the obligations
created under the Registration and Participation Agreement, dated as of August
31, 1996, as the same may be amended from time to time, among the Company and
certain stockholders of the Company, to the extent provided therein. The
Purchaser agrees that, in the event that the Company files a registration
statement under the Securities Act with respect to an underwritten public
offering of any shares of its capital stock, the Purchaser will not effect any
public sale (including a sale under Rule 144) or distribution of any shares of
the Common Stock (other than as part of such underwritten public offering)
during the 20 days prior to and the 180 days after the effective date of such
registration statement.
(i) SECTION 83(B) ELECTION. The Purchaser agrees that, within
20 days after the Closing, he shall give notice to the Company as to whether or
not he has made or will make an election pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, with respect to the Shares purchased
at such Closing, and acknowledges that he will be solely responsible for any and
all tax liabilities payable by him in connection with his receipt of the Shares
or attributable to his making or failing to make such an election.
4. RESTRICTIONS ON DISPOSITION OF SHARES. Neither the
Purchaser nor any of his heirs or representatives shall sell, assign, transfer,
pledge or otherwise directly or indirectly dispose of or encumber any of the
Shares to or with any other person, firm or corporation (including, without
limitation, transfers to any other holder of the Com-
6
46
pany's capital stock, dispositions by gift, by will, by a corporation as a
distribution in liquidation and by operation of law other than a transfer of
Shares by operation of law to the estate of the Purchaser upon the death of the
Purchaser, PROVIDED that such estate shall be bound by all provisions of this
Agreement and the Certificate of Incorporation of the Company) except as
provided in Sections 5 through 8 hereof, inclusive and in the transfer
restrictions contained in the Certificate of Incorporation of the Company. The
restrictions contained in this Section 4 (but not the restrictions contained in
the Certificate of Incorporation which shall terminate only as provided therein)
shall terminate in the event that an underwritten public offering of the Class A
common stock of the Company led by one or more underwriters at least one of
which is of nationally recognized standing (a "Public Offering") has been
consummated and shall not apply to a sale as part of a Public Offering or at any
time thereafter.
5. OPTIONS OF THE COMPANY AND THE C&D FUND UPON PROPOSED
DISPOSITION.
(a) RIGHTS OF FIRST REFUSAL. If the Purchaser desires to
accept an offer (which must be in writing and for cash, be irrevocable by its
terms for at least 60 days and be a bona fide offer as determined in good faith
by the Board of Directors of the Company (the "Board") or the Executive
Committee thereof) from any prospective purchaser to purchase all or any part of
the Shares at any time owned by him, he shall give notice in writing to the
Company and the C&D Fund (i) designating the number of Shares proposed to be
sold, (ii) naming the prospective purchaser of such Shares and (iii) specifying
the price (the "Offer Price") at and terms (the "Offer Terms") upon which he
desires to sell the same. During the 30-day period following receipt of such
notice by the Company and the C&D Fund (the "First Refusal Period"), the Company
shall have the right to purchase from the Purchaser all (but not less than all)
of the Shares specified in such notice, at the Offer Price and on the Offer
Terms. The Company hereby undertakes to use reasonable efforts to act as
promptly as practicable following receipt of such notice to determine whether it
shall elect to exercise such right. If the Company fails to exercise such rights
within the First Refusal Period, the C&D Fund shall have the right to purchase
all (but not less than all) of the Shares specified in such notice, at the Offer
Price and on the Offer Terms, at any time during the period beginning at the
earlier of (x) the end of the First Refusal Period and (y) the date of receipt
by the C&D Fund of
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written notice that the Company has elected not to exercise its rights under
this Section 5(a) and ending 30 days thereafter (the "Second Refusal Period").
The rights provided hereunder shall be exercised by written notice to the
Purchaser given at any time during the applicable period. If such right is
exercised, the Company or the C&D Fund, as the case may be, shall deliver to the
Purchaser a certified or bank check for the Offer Price, payable to the order of
the Purchaser, against delivery of certificates or other instruments
representing the Shares so purchased, appropriately endorsed by the Purchaser.
If such right shall not have been exercised prior to the expiration of the
Second Refusal Period, then at any time during the 30 days following the
expiration of the Second Refusal Period, the Purchaser may sell such Shares to
(but only to) the intended purchaser named in his notice to the Company and the
C&D Fund at the Offer Price and on the Offer Terms specified in such notice,
free of all restrictions or obligations imposed by, and free of any rights or
benefits set forth in, Sections 5 through 8, inclusive, of this Agreement,
PROVIDED that such intended purchaser shall have agreed in writing to make and
be bound by the representations, warranties and covenants set forth in Section 3
hereof, other than those set forth in Sections 3(g), the first sentence of 3(h)
and 3(i), pursuant to an instrument of assumption satisfactory in substance and
form to the Company. The right of the Purchaser to sell Shares set forth in this
Section 5(a), subject to the rights of first refusal set forth in this Section
5(a), shall be suspended during the Option Periods referred to in Section 6
hereof, but the provisions of Section 6 shall not otherwise restrict the
ability of the Purchaser to sell the Shares, whether before or after such
Option Periods, pursuant to the terms and subject to the restrictions set forth
in this Section 5(a). The rights of the Company and the C&D Fund under the
Certificate of Incorporation of the Company shall not be effected by the
provisions of this Section 5(b).
(b) PUBLIC OFFERING. In the event that a Public Offering has
been consummated, neither the Company nor the C&D Fund shall have any rights to
purchase the Shares from the Purchaser pursuant to this Section 5 and this
Section 5 shall not apply to a sale as part of a Public Offering or at any time
thereafter.
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6. OPTIONS EFFECTIVE ON TERMINATION OF EMPLOYMENT OR
UNFORESEEN PERSONAL HARDSHIP OF THE PURCHASER.
(a) TERMINATION OF EMPLOYMENT. If the Purchaser's active
employment with the Company and any direct and indirect subsidiaries of the
Company that employ the Purchaser is terminated for any reason whatsoever the
Company shall have an option to purchase all or a portion of the Shares then
held by the Purchaser (or, if his employment was terminated by his death, his
estate) and shall have 60 days from the date of the Purchaser's termination
(such 60-day period being hereinafter referred to as the "First Option Period")
during which to give notice in writing to the Purchaser (or his estate) of its
election to exercise or not to exercise such option, in whole or in part. The
Company hereby undertakes to use reasonable efforts to act as promptly as
practicable following such termination to make such election. If the Company
fails to give notice that it intends to exercise such option within the First
Option Period or the Company gives notice that it intends to exercise such
option with respect to only a portion of the Shares, the C&D Fund shall have the
right to purchase all or a portion of the Shares then held by the Purchaser (or
his estate) that will not be repurchased by the Company and shall have until the
expiration of the earlier of (X) 60 days following the end of the First Option
Period, or (Y) 60 days from the date of receipt by the C&D Fund of written
notice that the Company does not intend to exercise such option or intends to
exercise such option with respect to only a portion of the Shares (such 60-day
period being hereinafter referred to as the "Second Option Period"), to give
notice in writing to the Purchaser (or his estate) of the C&D Fund's exercise of
its option, in whole or in part. If the options of the Company and the C&D Fund
to purchase the Shares pursuant to this subsection are not exercised with
respect to all of the Shares as provided herein (other than as a result of
Section 11 hereof), the Purchaser (or his estate) shall be entitled to retain
the Shares which could have been acquired on exercise thereof, subject to all of
the provisions of this Agreement (including without limitation Section 5(a)). If
the Company and the C&D Fund have failed to exercise their respective options
pursuant to this Section 6(a) with respect to all of the Shares within the time
periods specified herein, and if the Purchaser's active employment with each of
the Company and any direct and indirect subsidiaries of the Company that employ
the Purchaser is terminated (A) by such employer or employers without Cause, (B)
by the Purchaser by Retirement at Normal Retirement Age, (C) by reason of the
Permanent Disability or
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death of the Purchaser, or (D) if, as of the effective date of such termination,
the Purchaser is employed by the Company under an effective Employment
Agreement, dated as of the date hereof (the "Employment Agreement"), among the
Company or any of its direct or indirect subsidiaries and the Purchaser, by the
Purchaser for Good Reason (as such term is defined in the Employment Agreement),
then on notice from the Purchaser (or his estate) in writing and delivered to
the Company within 30 days following the end of the Second Option Period, the
Company shall purchase all (but not less than all) of the Shares then held by
the Purchaser (or his estate). All purchases pursuant to this Sec tion 6(a) by
the Company or the C&D Fund shall be for a purchase price and in the manner
prescribed by Section 7 hereof.
(b) UNFORESEEN PERSONAL HARDSHIP. In the event that the
Purchaser, while in the employment of the Company or any direct or indirect
subsidiary of the Company, experiences Unforeseen Personal Hardship, the Board
will carefully consider any request by the Purchaser that the Company
repurchase the Purchaser's Shares at a price determined in accordance with
Section 7 hereof, but the Company shall have no obligation to repurchase such
Shares. The Board shall consider such request with respect to Unforeseen
Personal Hardship as soon as practicable after receipt by the Company of a
written request by the Purchaser, such request to include sufficient details of
the Purchaser's Unforeseen Personal Hardship to permit the Board to review the
request and the circumstances in an informed manner.
(c) CERTAIN DEFINITIONS. As used in this Agreement the
following terms shall have the following meanings:
(i) "CAUSE" shall mean (A) the willful failure by the
Purchaser to perform substantially his duties as an employee of the
Company or any Subsidiary (other than any such failure due to physical
or mental illness) after a demand for substantial performance is
delivered to the Purchaser by the executive to which the Purchaser
reports or by the Board, which notice identifies the manner in which
such executive or the Board, as the case may be, believes that the
Purchaser has not substantially performed his duties, (B) the
Purchaser's engaging in willful and serious misconduct that is or is
expected to be injurious to the Company or any Subsidiary, (C) the
Purchaser's having been convicted of, or entered a plea of guilty or
NOLO CONTENDERE to, a crime that constitutes a felony, (D) the willful
and
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material breach by the Purchaser of any written covenant or agreement
with the Company or any Subsidiary, not to disclose any information
pertaining to the Company, any Subsidiary or any Affiliate or not to
compete or interfere with the Company, any Subsidiary or any Affiliate
or (E) any violation by the Purchaser of any federal, state or foreign
securities laws; PROVIDED that in the event that the Purchaser is
employed by the Company or a Subsidiary under an effective employment
agreement on the date of determination and such employment agreement
shall contain a different definition of Cause, the definition of Cause
contained in such employment agreement shall be substituted for the
definition set forth above for all purposes hereunder.
(ii) "RETIREMENT AT NORMAL RETIREMENT AGE" shall mean
retirement at age 60 or later.
(iii) "PERMANENT DISABILITY" shall mean a physical or mental
disability or infirmity that prevents the performance of a Purchaser's
employment-related duties lasting (or likely to last, based on
competent medical evidence presented to the Board) for a period of six
months or longer. The Board's reasoned and good faith judgment as to
Permanent Disability shall be final and shall be based on such
competent medical evidence as shall be presented to it by the Purchaser
or by any physician or group of physicians or other competent medical
expert employed by the Purchaser or the Company to advise the Board.
(iv) "UNFORESEEN PERSONAL HARDSHIP" shall mean financial
hardship arising from (x) extraordinary medical expenses or other
expenses directly related to illness or disability of the Purchaser, a
member of the Purchaser's immediate family or one of the Purchaser's
parents or (y) payments necessary or required to prevent the eviction
of the Purchaser from the Purchaser's principal residence or
foreclosure on the mortgage on that residence. The Board's reasoned and
good faith determination of Unforeseen Personal Hardship shall be
binding on the Company and the Purchaser.
(d) NOTICE OF TERMINATION. The Company shall give written
notice of any termination of the Purchaser's active employment with each of the
Company and any direct or indirect subsidiaries of the Company that employ the
Purchaser to the C&D Fund, except that if such termination (if
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other than as a result of death) is by the Purchaser, the Purchaser shall give
written notice of such termination to the Company and the Company shall give
written notice of such termination to the C&D Fund.
(e) PUBLIC OFFERING. In the event that a Public Offering has
been consummated, none of the Company, the C&D Fund or the Purchaser shall have
any rights to purchase or sell the Shares, as the case may be, pursuant to this
Section 6 and this Section 6 shall not apply to a sale as part of a Public
Offering.
7. DETERMINATION OF THE PURCHASE PRICE; MANNER OF PAYMENT.
(a) PURCHASE PRICE. For the purposes of any purchase of the
Shares pursuant to Section 6, and subject to Section 11(c), the purchase price
per Share to be paid to the Purchaser (or his estate) for each Share shall be a
net amount (such net amount, the "Purchase Price") equal to the excess of (i)
the fair market value (the "Fair Market Value") of such Share as of the
effective date of the termination of employment that gives rise to the right or
obligation to repurchase or, in the case of a repurchase as a result of
Unforeseen Personal Hardship, as of the date such Shares are repurchased (such
date of termination or repurchase, as applicable, the "Determination Date"),
over (ii) the principal balance and accrued interest outstanding under the
Promissory Note as of the closing date for such repurchase; PROVIDED that if the
Purchaser's employment is terminated by the Company or any of its direct or
indirect subsidiaries for Cause, the Purchase Price for such Share shall be the
lesser of (i) the Fair Market Value of such Share as of the effective date of
the termination of employment that gives rise to the right or obligation to
repurchase and (ii) the price at which the Purchaser purchased such Share from
the Company. Whenever determination of the Fair Market Value of such Shares is
required by this Agreement, such Fair Market Value shall be such amount as is
determined in good faith by the Board. In making a determination of Fair Market
Value, the Board shall give due consideration to such factors as it deems
appropriate, including, without limitation, the earnings and certain other
financial and operating information of the Company and its subsidiaries in
recent periods, the potential value of the Company and its Subsidiaries as a
whole, the future prospects of the Company and its subsidiaries and the
industries in which they compete, the history and management of the Company and
its subsidiaries, the general condition
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of the securities markets, the fair market value of securities of companies
engaged in businesses similar to those of the Company and its subsidiaries and
the Applicable Share Valuation (as defined below). The determination of Fair
Market Value will not give effect to any restrictions on transfer of the Shares
or the fact that such Shares would represent a minority interest in the Company.
For purposes of this Agreement, the term "Applicable Share Valuation" shall mean
the annual valuation of the Shares performed by an independent valuation firm
chosen by the Board as of the last day of the last fiscal year of the Company
ending prior to the Determination Date, except that, in the case of a
Determination Date occurring during the fourth fiscal quarter of any fiscal year
of the Company beginning with the fourth quarter of the 1996 fiscal year of the
Company, the term "Applicable Share Valuation" shall mean the annual valuation
of the Shares performed by an independent valuation firm chosen by the Board as
of the last day of such fourth fiscal quarter. Such annual valuations shall be
performed as promptly as practicable following the end of each fiscal year of
the Company, beginning with the 1996 fiscal year of the Company. The Fair Market
Value as determined in good faith by the Board and in the absence of fraud
shall be binding and conclusive upon all parties hereto. If the Company at any
time subdivides (by any stock split, stock dividend or otherwise) the Common
Stock into a greater number of shares, or combines (by reverse stock split or
otherwise) the Common Stock into a smaller number of shares, the Purchase Price
(including any minimum or maximum Purchase Price specified herein or in effect
as a result of a prior adjustment) shall be appropriately adjusted to reflect
such subdivision or combination.
(b) CLOSING OF PURCHASE; PAYMENT OF PURCHASE PRICE. Subject
to Section 11, the closing of a purchase pursuant to this Section 6 shall take
place at the principal office of the Company on the tenth business day following
whichever of the following is applicable: (i) the receipt by the Purchaser (or
his estate) of the notice of the C&D Fund or the Company, as the case may be, of
its exercise of its option to purchase pursuant to Section 6(a) or (ii) the
Company's receipt of notice by the Purchaser (or his estate) to sell Shares
pursuant to Section 6(a) or (iii) the Board's determination (which shall be
delivered to the Purchaser) that the Company is authorized to purchase Shares as
a result of Unforeseen Personal Hardship pursuant to Section 6(b). At the
closing, (i) subject to the proviso below, the Company shall pay to the
Purchaser (or his estate) an amount equal to the Purchase Price and (ii) the
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Purchaser (or his estate) shall deliver to the Company such certificates or
other instruments representing the Shares so purchased, appropriately endorsed
by the Purchaser (or his estate), as the Company may reasonably require;
provided, however, that if the Determination Date occurs during the first or
last fiscal quarter of any fiscal year of the Company, the Company may elect to
pay the Purchase Price in two installments. In any such event, (i) at the
closing of the purchase of the Shares, the Company shall pay to the Purchaser
(or his estate) a net amount (the "First Installment Amount") equal to 80% of
the Fair Market Value of the Shares, determined pursuant to Section 7(a) hereof
on the basis of the most recent available valuation of the Shares, reduced by
the principal balance and accrued interest then outstanding under the Promissory
Note, and (ii) no later than the tenth business day following receipt by the
Company of the Applicable Share Valuation, the Company shall pay an additional
amount to the Purchaser (or his estate) equal to the sum of (1) the excess (the
"Excess Payment"), if any, of (A) the Purchase Price for the Shares, over (B)
the First Installment Amount and (2) an amount calculated by multiplying the
Excess Payment by a percentage equal to the average annual cost to the Company
of its bank indebtedness obligations outstanding during the period commencing on
the closing date of the purchase of the Shares and ending on the date of payment
of such additional amount pursuant to this clause (ii) or, if there are no such
obligations outstanding, one percentage point greater than the average annual
prime rate charged during such period by Chase Bank or such other nationally
recognized bank designated by the Company.
(c) APPLICATION OF THE PURCHASE PRICE TO CERTAIN LOANS. The
Purchaser agrees that the Company and the C&D Fund shall be entitled to apply
any amounts to be paid by the Company or the C&D Fund, as the case may be, to
repurchase Shares pursuant to Section 5 or 6 hereof to discharge any
indebtedness of the Purchaser to the Company or any of its direct or indirect
subsidiaries, including, without limitation, indebtedness of the Purchaser
incurred to purchase the Shares or indebtedness that is guaranteed by the
Company or any of its direct or indirect subsidiaries.
8. TAKE-ALONG RIGHTS.
(a) TAKE-ALONG NOTICE. If the C&D Fund intends to effect a
sale of all of its shares of common stock of the Company to a third party (a
"100% BUYER") and elects to exercise its rights under this Section 8, the C&D
Fund shall
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deliver written notice (a "TAKE-ALONG NOTICE") to the Purchaser, which notice
shall (i) state (w) that the C&D Fund wishes to exercise its rights under this
Section 8 with respect to such transfer, (x) the name and address of the 100%
Buyer, (y) the per share amount and form of considera tion the C&D Fund proposes
to receive for its shares of common stock of the Company and (z) drafts of
purchase and sale documentation setting forth the terms and conditions of
payment of such consideration and all other material terms and conditions of
such transfer (the "DRAFT SALE AGREEMENT"), (ii) contain an offer (the
"TAKE-ALONG OFFER") by the 100% Buyer to purchase from the Purchaser all of the
Shares, on and subject to the same price, terms and conditions offered to the
C&D Fund and (iii) state the anticipated time and place of the closing of such
transfer (a "SECTION 8 CLOSING"), which (subject to such terms and conditions)
shall occur not fewer than five (5) days nor more than ninety (90) days after
the date such Take-Along Notice is delivered, PROVIDED that if such Section 8
Closing shall not occur prior to the expiration of such 90-day period, the C&D
Fund shall be entitled to deliver another Take-Along Notice with respect to such
Take-Along Offer.
(b) CONDITIONS TO TAKE-ALONG. Upon delivery of a Take-Along
Notice, the Purchaser shall have the obligation to transfer all of the Shares
pursuant to the Take-Along Offer, as such offer may be modified from time to
time, PROVIDED that the C&D Fund transfers all of its shares of common stock of
the Company to the 100% Buyer at the Section 8 Closing and that all shares of
common stock of the Company held by the C&D Fund are sold to the 100% Buyer at
the same price, and on the same terms and conditions. Within 10 days of receipt
of the Take-Along Notice, the Purchaser shall (i) deliver to the C&D Fund or an
affiliate thereof designated in the Take-Along Notice certificates representing
the Shares, duly endorsed for transfer or accompanied by duly executed stock
powers, and (ii) execute and deliver to the C&D Fund a power of attorney and a
letter of transmittal and custody agreement in favor, and in form and substance
reasonably satisfactory to, the C&D Fund appointing the C&D Fund or one or more
persons designated by the C&D Fund (the "Custodian") as the true and lawful
attorney-in-fact and custodian for the Purchaser, with full power of
substitution, and authorizing the Custodian to execute and deliver a purchase
and sale agreement substantially in the form of the Draft Sale Agreement and to
take such actions as the Custodian may deem necessary or appropriate to effect
the sale and transfer of the Shares to the 100% Buyer, upon receipt of the
purchase price therefor set forth in the
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Take-Along Notice at the Section 8 Closing, free and clear of all security
interests, liens, claims, encumbrances, charges, options, restrictions on
transfer, proxies and voting and other agreements of whatever nature, together
with all other documents delivered with such notice and required to be executed
in connection with the sale thereof pursuant to the Take-Along Offer. The
Custodian shall hold the Shares and other documents in trust for the Purchaser
pending completion or abandonment of such sale. If, within 90 days after the C&D
Fund delivers the Take-Along Notice, the C&D Fund has not completed the sale of
all of the shares of common stock of the Company owned by the C&D Fund and the
Purchaser to the 100% Buyer and another Take-Along Notice with respect to such
Take-Along Offer has not been sent to the Purchaser, the C&D Fund shall return
to the Purchaser all certificates representing the Shares and all other
documents that the Purchaser delivered in connection with such sale. The C&D
Fund shall be permitted to send only two Take-Along Notices with respect to any
one Take-Along Offer. Promptly after the Section 8 Closing, the C&D Fund shall
give notice thereof to the Purchaser, shall remit to the Purchaser the total
consideration for the Shares sold pursuant thereto, and shall furnish such other
evidence of the completion and time of completion of such sale and the terms
thereof as may reasonably be requested by the Purchaser.
(c) REMEDIES. The Purchaser acknowledges that the C&D Fund
would be irreparably damaged in the event of a breach or a threatened breach by
the Purchaser of any of its obligations under this Section 8 and the Purchaser
agrees that, in the event of a breach or a threatened breach by the Purchaser of
any such obligation, the C&D Fund shall, in addition to any other rights and
remedies available to it in respect of such breach, be entitled to an injunction
from a court of competent jurisdiction (without any requirement to post bond)
granting it specific performance by the Purchaser of his obligations under this
Section 8. In the event that the C&D Fund shall file suit to enforce the
covenants contained in this Section 8 (or obtain any other remedy in respect of
any breach thereof), the prevailing party in the suit shall be entitled to
recover, in addition to all other damages to which it may be entitled, the costs
incurred by such party in conducting the suit, including reasonable attorneys'
fees and expenses. In the event that, following a breach or a threatened breach
by the Purchaser of the provisions of this Section 8, the C&D Fund does not
obtain an injunction granting it specific performance of the Purchaser's
obligations under this Section 8 in connection
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with any proposed sale prior to the time the C&D Fund completes the sale of its
shares of common stock of the Company or the C&D Fund, in its sole discretion,
abandons such sale, then the Company shall have the option to purchase the
Shares from the Purchaser at a purchase price per Share equal to the lesser of
(i) the price per share at which the Purchaser purchased the Shares from the
Company pursuant to this Agreement and (ii) the price per share offered in the
applicable Take-Along Offer.
(d) PUBLIC OFFERING. In the event that a Public Offering has
been consummated, the provisions of this Section 8 shall terminate and cease to
have further effect.
9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Purchaser that (a) the Company has been
duly incorporated and is an existing corporation in good standing under the
laws of the State of Delaware, (b) this Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company enforceable against the Company in accordance
with its terms, and (c) the Shares, when issued, delivered and paid for in
accordance with the terms hereof, will be duly and validly issued, fully paid
and nonassessable, and free and clear of any liens or encumbrances other than
those created pursuant to this Agreement, or otherwise in connection with the
transactions contemplated hereby.
10. COVENANTS OF THE COMPANY.
(a) RULE 144. The Company agrees that at all times after it
has filed a registration statement after the date hereof pursuant to the
requirements of the Securities Act or Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), relating to any class of equity
securities of the Company (other than (i) the registration of equity securities
of the Company and/or options in respect thereof to be offered primarily to
directors and members of management and employees of the Company, any of its
direct or indirect subsidiaries or any of their respective predecessors, and
senior executives of, or consultants to, corporations in which entities managed
or sponsored by Clayton, Dubilier & Rice, Inc. have made equity investments, or
(ii) the registration of equity securities and/or options in respect thereof
solely on Form S-4 or S-8 or any successor form), it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Commission
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thereunder (or, if the Company is not required to file such reports, it will,
upon the request of the Purchaser, make publicly available such information as
necessary to permit sales pursuant to Rule 144 under the Securities Act), and
will take such further action as the Purchaser may reasonably request, all to
the extent required from time to time to enable the Purchaser to sell Shares
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144, as such Rule may be amended from time to
time, or (ii) any successor rule or regulation hereafter adopted by the
Commission.
(b) STATE SECURITIES LAWS. The Company agrees to use its best
efforts to comply with all state securities or "blue sky" laws applicable to the
sale of the Shares to the Purchaser, PROVIDED that the Company shall not be
obligated to qualify or register the Shares under any such law or to qualify as
a foreign corporation or file any consent to service of process under the laws
of any jurisdiction or subject itself to taxation as doing business in any such
jurisdiction.
11. CERTAIN RESTRICTIONS ON REPURCHASES.
(a) FINANCING AGREEMENTS, ETC. Notwithstanding any other
provision of this Agreement, the Company shall not be permitted or obligated to
repurchase any Shares from the Purchaser if (i) such repurchase would result in
a violation of the terms or provisions of, or result in a default or an event of
default under any financing or security agreement or document entered into in
connection with the Spin-off or in connection with the operations of the Company
or its subsidiaries from time to time (such agreements and documents, as each
may be amended, modified or supplemented from time to time, are referred to
herein as the "Financing Agreements"), in each case as the same may be amended,
modified or supplemented from time to time, or (ii) such repurchase would
violate any of the terms or provisions of the Certificate of Incorporation of
the Company, or (iii) the Company has no funds legally available therefor under
the General Corporation Law of the State of Delaware.
(b) DELAY OF REPURCHASE. In the event that a repurchase by
the Company otherwise permitted or required under Section 6(a) is prevented
solely by the terms of Section 11(a), (i) such repurchase will be postponed and
will take place without the application of further conditions or impediments
(other than as set forth in Section 7 hereof or in this Section 11) at the first
opportunity thereafter when
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the Company has funds legally available therefor and when such repurchase will
not result in any default, event of default or violation under any of the
Financing Agreements or in a violation of any term or provision of the
Certificate of Incorporation of the Company and (ii) such repurchase
obligation shall rank against other similar repurchase obligations with respect
to shares of Common Stock or options in respect thereof according to priority
in time of (A) the effective date of the termination of employment in
connection with any repurchase obligation arising pursuant to an exercise of
the option of the Company (x) under Section 6(a) of this Agreement or under the
comparable provision of any other applicable management stock subscription
agreement or (y) under any comparable provisions regarding the repurchase of
options of any applicable management stock option agreement, or (B) as to any
repurchase obligation arising pursuant to an exercise of any purchaser's right
to require a repurchase under Section 6(a) of this Agreement or the comparable
provisions of any other applicable management stock subscription agreement, the
date upon which the Company receives written notice of such exercise, PROVIDED
that any such repurchase obligations as to which a common date determines
priority under clause (A) or (B) above shall be of equal priority and shall
share pro rata in any repurchase payments made pursuant to clause (i) above and
PROVIDED, FURTHER, that any repurchase commitment arising from Permanent
Disability, death or Retirement at Normal Retirement Age or any repurchase
commitment made by the Board pursuant to Section 6(b) or the comparable
provisions of any other applicable management stock subscription agreement
shall have priority over any other repurchase obligation.
(c) PURCHASE PRICE ADJUSTMENT. In the event that a repurchase
of Shares from the Purchaser is delayed pursuant to this Section 11, the
purchase price per Share when the repurchase of such Shares eventually takes
place as contemplated by Section 11(b) shall be (i) if the repurchase is
pursuant to an exercise of the option of the Company under Section 6(a), the
sum of (A) the Purchase Price determined in accordance with Section 7 hereof at
the time that the repurchase of such Shares would have occurred but for the
operation of this Section 11, plus (B) an amount equal to interest on such
Purchase Price for the period from the date on which the completion of the
repurchase would have taken place but for the operation of this Section 11 to
the date on which such repurchase actually takes place (the "Delay Period") at
a rate equal to the weighted average cost of the Company's bank indebtedness
obligations outstanding
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during the Delay Period or, if there are no such obligations outstanding, one
percentage point greater than the average prime rate charged during such period
by Chase Bank or such other nationally recognized bank designated by the
Company, or (ii) if the repurchase is pursuant to an exercise of the Purchaser's
right to require a repurchase under Section 6(a), the Fair Market Value of such
Shares (determined as set forth in Section 7(a)) on the date on which such
repurchase actually takes place.
12. MISCELLANEOUS.
(a) NOTICES. All notices and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to the Company, the C&D Fund or the
Purchaser, as the case may be, at the following addresses or to such other
address as the Company, the C&D Fund or the Purchaser, as the case may be, shall
specify by notice to the others:
(i) if to the Company, to it at:
c/o McCarthy, Crisanti & Maffei, Inc.
One Chase Manhattan Plaza, 37th Floor
New York, New York 10005
ATTENTION: General Counsel
(ii) if to the Purchaser, to the Purchaser at the address
set forth on the signature page hereof.
(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
ATTENTION: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or on the third business day after the
mailing thereof.
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Copies of any notice or other communication given under this Agreement shall
also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
ATTENTION: Alberto Cribiore
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
ATTENTION: Franci J. Blassberg, Esq.
The C&D Fund also shall be given a copy of any notice or other communication
between the Purchaser and the Company under this Agreement at its address as set
forth above.
(b) BINDING EFFECT; BENEFITS. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Except as provided in Sections 4 through 8,
inclusive, nothing in this Agreement, express or implied, is intended or shall
be construed to give any person other than the parties to this Agreement or
their respective successors or assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision contained herein.
(c) WAIVER; AMENDMENT.
(i) WAIVER. Any party hereto may by written notice to the
other parties (A) extend the time for the performance of any of the
obligations or other actions of the other parties under this Agreement,
(B) waive compliance with any of the conditions or covenants of the
other parties contained in this Agreement and (C) waive or modify
performance of any of the obliga tions of the other parties under this
Agreement, PROVIDED that any waiver of the provisions of Sections 4
through 8, inclusive, must be consented to by the C&D Fund. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations,
warranties, covenants or agreements contained herein. The waiver by any
party hereto of a
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breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no
failure by a party to exercise any right or privilege hereunder shall
be deemed a waiver of such party's rights or privileges hereunder or
shall be deemed a waiver of such party's rights to exercise the same at
any subsequent time or times hereunder.
(ii) AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Purchaser and
the Company, PROVIDED that any amendment adversely affecting the rights
of the C&D Fund hereunder must be consented to by the C&D Fund. The
parties hereto acknowledge that the Company's consent to an amendment
or modification of this Agreement is subject to the terms and
provisions of the Financing Agreements.
(d) ASSIGNABILITY. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or the Purchaser without the prior written consent of
the other parties. The C&D Fund may assign from time to time all or any portion
of its rights under Sections 4 through 8, inclusive, to one or more persons or
other entities designated by it.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, REGARDLESS OF THE
LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICT OF LAWS.
(f) SECTION AND OTHER HEADINGS, ETC. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Purchaser have
executed this Agreement as of the date first above written.
MCM GROUP, INC.
By: _______________________________
Name:
Title:
THE PURCHASER:
Name
By: _______________________________
Name:
Attorney-in-fact
Address of the Purchaser:
Address
Total Number of Shares of
Common Stock to be
Purchased: Amount1 Shares
Aggregate Purchase Price: $Amount3
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