Exhibit 10.8
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UNITED INDUSTRIES CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is entered
into as of January 20, 1999, by and between UNITED INDUSTRIES CORPORATION, a
Delaware corporation (the "Company"), and Stephan R. Brian ("Optionee") pursuant
to the United Industries Corporation 1999 Stock Option Plan (the "Plan"). The
Company and Optionee are referred to collectively herein as the "Parties."
Capitalized terms used but not defined herein shall have the meaning set forth
in the Plan.
Simultaneously with the execution of this Agreement, the
parties hereto have executed a Management Agreement, dated as of the date hereof
(the "Management Agreement"), to which this Agreement is attached as Annex A.
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Options and Effective Date.
1.1 Grant. The Company hereby grants to Optionee pursuant to the
Plan an option (the "Option") to purchase all or any part of
an aggregate of 600,000 shares (the "Class A Shares") of the
Company's Class A Voting Common Stock, par value $0.01 per
share, and 600,000 shares (the "Class B Shares" and,
together with the Class A Shares (the "Shares")) of the
Company's Class B Non-Voting Common Stock, par value $0.01
per share (collectively, "Common Stock"), on the terms and
conditions set forth herein and in the Plan as in effect on
the Grant Date (as defined below), the terms of which are
incorporated herein by reference.
1.2 Grant Date. The Grant Date of this Option is January 20,
1999 (the "Grant Date").
2. Exercise Price. The exercise price for the Shares of Common Stock
covered by this Option shall be $5.00 per share (the "Exercise
Price").
3. Adjustment and Termination of Options. Subject to the restrictions,
and under the circumstances described, in the Plan and this Agreement,
the Company shall adjust the number and kind of Shares and the
Exercise Price thereof, and this Option shall be terminated in certain
circumstances, in accordance with the provisions of the Plan.
4. Exercise of Options.
4.1 When Exercisable.
(a) Rate of Exercise for 5-Year Options. Optionee's
right to exercise this Option as to 400,000 of the
Shares (200,000 Class A Shares and 200,000
Class B Shares) subject thereto (the "5 Year
Options") shall vest ratably over
the five (5) year period commencing on the Grant
Date in accordance with the following schedule if
(but only if) Optionee is employed by the Company
or any of its Subsidiaries as of each such date:
Cumulative Shares of
Date 5 Year Option Vested
1st Anniversary of Grant Date 80,000
2nd Anniversary of Grant Date 160,000
3rd Anniversary of Grant Date 240,000
4th Anniversary of Grant Date 320,000
5th Anniversary of Grant Date 400,000
(b) Rate of Exercise on TARSAP Options.
(i) Optionee shall not be vested with the right to
exercise this Option with respect to 800,000 of the Shares
(400,000 Class A Shares and 400,000 Class B Shares) (the
"TARSAP Shares") subject thereto (the "TARSAP Options")
until ten (10) years after the Grant Date, at which time
Optionee shall acquire the vested right to exercise the
TARSAP Options and purchase one hundred percent (100%) of
the TARSAP Shares if (but only if) Optionee is an employee
of the Company or any of its Subsidiaries as of such date.
(ii) Acceleration of TARSAP Options.
Notwithstanding the foregoing, if on and after the
publication of each written determination by the Board of
Directors of the Company (the "Board") or a committee
thereof which is authorized to do so that the Company has
met at least ninety percent (90%) of its objective for
EBITDA (as defined below) (100% of the Company's objective
referred to herein as the "Performance Goals") with respect
to any fiscal year commencing with the fiscal year ending
December 31, 1999 and continuing for each of the four fiscal
years thereafter (which Performance Goals are set forth on
Annex I attached hereto), then (subject to the other
restrictions in the Plan and this Agreement), Optionee shall
acquire the vested right to exercise the TARSAP Options to
purchase ten percent (10%) of the TARSAP Shares, and for
each additional one percent (1%) achievement over ninety
percent (90%) of the Performance Goals for any such fiscal
year, as so determined, Optionee shall acquire the vested
right to exercise the TARSAP Options to purchase an
additional one percent (1%) of the TARSAP Shares, but no
more than twenty percent (20%) of the TARSAP Shares in
respect of each full fiscal year. Additionally, on and after
publication of a written determination by the Board or a
committee thereof which is authorized to do so that the
Company has met at least eighty seven and one-half percent
(87.5%) of its Performance Goals for the fiscal year ending
December 31, 2003 and at least ninety percent (90%) of its
cumulative Performance Goals for the five fiscal years
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ending December 31, 2003 ("Five Year Performance Goals"),
then subject to the other restrictions in the Plan and this
Agreement, (i) Optionee shall acquire the vested right to
exercise the TARSAP Options to purchase fifty percent (50%)
of the TARSAP Shares as to which Optionee had not otherwise
acquired the vested right to exercise, and (ii) for each
additional one percent (1%) achievement over ninety percent
(90%) of the Five Year Performance Goals, as so determined,
Optionee shall acquire the vested right to exercise this
TARSAP Option to purchase an additional five percent (5%) of
the TARSAP Shares as to which Optionee has not otherwise
acquired the vested right to exercise (such additional
exercise rights pursuant to clauses (i) and (ii) above are
referred to herein as the "Additional Exercise Rights").
Such determinations shall be made by the Board or such
committee within ten (10) days after receipt of audited
financial statements for each fiscal year. The Board's or
committee's determination as to whether the Company has met
such objectives shall be final and not subject to dispute.
In addition, the Board or a committee thereof shall have
complete discretion to modify such objectives from time to
time for any year or years to reflect business combinations
or dispositions, fiscal year changes, purchases or sales of
assets or any other circumstances the Board or committee
thereof deems relevant. For purposes hereof, "EBITDA" shall
mean earnings before interest, taxes, depreciation and
amortization, excluding any non-recurring or extraordinary
items, as determined in accordance with generally accepted
accounting principles, consistently applied.
(iii) Acceleration Upon Sale. Notwithstanding any
provision to the contrary in this Section 4.1(b), but
subject to the other restrictions in the Plan and this
Agreement, in the event of a Sale (as defined below) prior
to December 31, 2003, the TARSAP Options shall become vested
and immediately exercisable to the extent set forth below.
On and after publication of a written determination by the
Board or a committee thereof which is authorized to do so
that the Company has met at least eighty seven and one-half
percent (87.5%) of its Performance Goals for the last
twelve (12) full months and at least ninety percent (90%) of
its cumulative Performance Goals for the completed fiscal
years (if any) and the Interim Period (as defined below)
(based on months elapsed), the Board or such committee shall
treat the percentage of cumulative Performance Goals
achieved through the completed fiscal years (if any) and
Interim Period as the percentage of Five Year Performance
Goals achieved and on that basis shall determine the
Additional Exercise Rights with respect to all 800,000
TARSAP Options as to which Optionee had not otherwise
acquired the vested right to exercise consistent with the
method set forth in the second sentence of Section
4.1(b)(ii) above. The percentage of Five Year Performance
Goals for such period shall be computed by dividing (i) the
sum of EBITDA achieved for the completed fiscal years (if
any) and the Interim Period by (ii) the annual Performance
Goals for the completed fiscal years (if any) and the
monthly Performance Goals for the Interim Period. For
purposes hereof, the term "Interim Period" shall mean the
period beginning on the first day of the then current fiscal
year and ending on the last full month of that uncompleted
fiscal year.
For purposes hereof, the term "Sale" shall mean:
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(w) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of voting securities of (a)
the Company or (b) the surviving entity in any reorganization, merger
or consolidation (each an "Acquisition") involving the Company (any
such entity referred to herein as the "Corporation") where such
Acquisition causes such Person to own more than fifty percent (50%) of
the combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of
directors, other than acquisitions by the Thomas H. Lee Company or its
affiliates;
(x) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company;
(y) the acquisition by a third party not affiliated with the
Company of all or substantially all of the Company's assets; or
(z) individuals who constitute the Board on the date of the
Company's initial public sale of equity securities registered under
the Securities Act (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board thereafter. Any person
becoming a director subsequent to such date whose, election, or
nomination for election, is, at any time, approved by a vote of at
least a majority of the directors comprising the Incumbent Board shall
be considered a member of the Incumbent Board.
The accelerated vesting provided in this Section 4.1(b)(iii) shall
take effect immediately prior to but contingent upon the Sale giving rise to
such accelerated vesting. The phrase "immediately prior to the Sale" shall be
understood to mean sufficiently in advance of a Sale to permit the Optionee to
take all steps reasonably necessary to permit the Optionee to become a
shareholder of the Company as of the consummation of such Sale with respect to
the TARSAP Shares subject to the accelerated vesting provided in this Section
4.1(b)(iii). The Board or committee thereof may in good faith shorten the
Interim Period or make approximations of EBITDA during the Interim Period in
order to comply with the preceding sentence.
(c) Partial Exercise. Subject to the other
restrictions in the Plan and this Agreement, the
Options may be exercised for all or a part of the
Shares with respect to which each Option is
exercisable under Section 4.1(a) and (b) above.
4.2 Method of Exercise; Stockholders Agreement. Subject to
Section 4.1 and the other restrictions in the Plan and this
Agreement, Options are exercisable from time to time by
Optionee, who shall complete, execute and deliver to the
Company a Form of Exercise and Stock Transfer Power
substantially in the form attached hereto or in such other
form as the Company may require. Except as otherwise
permitted by
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Section 6(d) of the Plan, such notice shall be accompanied
by payment in full for the Shares to be purchased. Payment
of the Exercise Price may be made: (i) in cash, (ii) in
shares of Common Stock which either (A) were purchased by
Optionee in other than a compensatory transaction, (B) have
been held by Optionee free and clear for at least six (6)
months prior to the use thereof to pay part or all of the
Exercise Price or (C) otherwise are considered "mature"
shares for purposes of generally accepted accounting
principles, as determined by the Company's outside auditors,
or (iii) so long as the Common Stock is publicly traded, by
delivery to the Committee of irrevocable instructions to a
stockbroker to deliver promptly to the Company an amount of
sale or loan proceeds sufficient to pay a portion of the
Exercise Price subject to this clause (iii), or a
combination of the methods specified in clauses (i), (ii)
and (iii), or in the sole discretion of the Committee,
through a cashless exercise procedure. Optionee shall also
execute and deliver to the Company a copy of the Company's
Stockholders Agreement, dated as of January 20, 1999, in the
form in effect at the time of exercise (as amended and
modified from time to time, the "Stockholders Agreement"),
if Optionee has not previously done so. Upon due exercise of
any Option and (if required) execution and delivery of the
Stockholders Agreement, subject to the terms and conditions
in this Agreement, the Company shall issue in the name of
Optionee and deliver to Optionee a certificate for the
Shares in respect of which such Option shall have been
exercised, but no Shares will be issued until arrangements
satisfactory to Company have been made for appropriate
income tax withholding, if any, pursuant to Section 12
hereof.
4.3 Exercise After Termination of Employment; Termination of
Options.
(a) Definitions. For purposes of this Section 4.3, the
capitalized terms Good Reason, Cause, and
Disability shall have the meanings set forth in
the Management Agreement.
(b) Termination Without Good Reason. Upon any
termination of employment by Optionee without Good
Reason, the Options may, to the extent exercisable
and not terminated pursuant to Section 4.3(e), be
exercised only within thirty (30) days after the
date of such employment termination. This Section
4.3(b) shall not, however, extend the term of the
Options beyond that specified in Section 4.3(e).
For purposes of this Section 4.3(b), the extent to
which the Options are exercisable shall be
determined as of the date of termination of
employment.
(c) Termination by Virtue of Death or Disability or
Without Cause or With Good Reason. Upon any
termination of employment of Optionee by virtue of
Optionee's death or Disability or upon any
termination of employment by Optionee with Good
Reason, or by the Company without Cause, the
Options may, to the extent exercisable and not
terminated pursuant to Section 4.3(e), be
exercised only within twelve (12) months after the
date
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of such termination. This Section 4.3 (c) shall
not extend the term of the Options beyond that
specified in Section 4.3(e). For purposes of this
Section 4.3(c), the extent to which the Options
are exercisable shall be determined as of the date
of termination of employment.
(d) Termination for Cause. The Option shall terminate
immediately upon termination of the employment of
Optionee for Cause.
(e) Other Termination. The Options shall not be
exercisable after the earliest of (i) a Sale
(provided that Optionee has at least five (5)
business days prior to the Sale to exercise the
Options or the Options are treated as exercised in
connection with such Sale) or (ii) January 20,
2009.
(f) Company Repurchase; Extension of Exercise Period.
If Optionee properly elects to exercise all or any
portion of the Option following a termination of
Optionee's employment as described in Section
4.3(c) (a "Post-Termination Exercise"), at the
written request of Optionee delivered to the
Company prior to or simultaneously with the
attempted exercise of such Option, the Company
shall either:
(i) offer to purchase from Optionee, within
fifteen (15) days following its receipt of such request, at
a purchase price equal to Fair Market Value, such portion of
the Shares obtained by Optionee through the Post-Termination
Exercise having an aggregate Fair Market Value equal to the
excess of (A) Optionee's aggregate federal, state and local
income tax obligations in respect of the Post-Termination
Exercise over (B) any amounts related to income tax
previously withheld by the Company with respect to such
Post-Termination Exercise; or
(ii) extend the period during which Optionee may
exercise the Options specified in Optionee's notice until
the earlier of (A) such time as the Company elects to comply
with Section 4.3(f)(i), above (disregarding the fifteen (15)
day period referenced therein), and (B) such time as the
Shares to be received by Optionee upon the exercise of the
Options specified in Optionee's notice are registered under
the Securities Act and freely tradable.
5. Non-transferability of Options. The Options shall not be transferable
or assignable except upon Optionee's death by will or the laws of
descent and distribution and shall be exercisable, during Optionee's
lifetime, only by Optionee.
6. Purchase for Investment; Other Representations of Optionee; Legends.
6.1 Investment Intent. As provided in the Plan, in the event
that the offering of Shares with respect to which the
Options are being exercised is not registered under the
Securities Act, but an exemption is available that requires
an investment
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representation or other representation, Optionee, if
electing to purchase Shares, will be required to represent
that such Shares are being acquired for investment and not
with a view to distribution thereof, and to make such other
reasonable and customary representations regarding matters
relevant to compliance with applicable securities laws as
are deemed necessary by counsel to the Company. Stock
certificates evidencing such unregistered Shares that are
acquired upon exercise of the Options shall bear restrictive
legends in substantially the following form and such other
restrictive legends as are required or advisable under the
provisions of any applicable laws or are provided for in the
Stockholders Agreement or any other agreement to which
Optionee is a party:
THE SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT
BE TRANSFERRED AT ANY TIME IN THE ABSENCE OF (I) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS WITH RESPECT TO SUCH SHARES AT SUCH TIME, OR (II) AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL, TO THE
EFFECT THAT SUCH TRANSFER AT SUCH TIME WILL NOT VIOLATE THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
6.2 Other Representations. Optionee hereby represents and
warrants to the Company as follows:
(a) Access to Information. Because of Optionee's
business relationship with the Company and with
the management of the Company, Optionee has had
access to all material and relevant information
concerning the Company, thereby enabling Optionee
to make an informed investment decision with
respect to his investment in the Company, and all
pertinent data and information requested by
Optionee from the Company or its representatives
concerning the business and financial condition of
the Company and the terms and conditions of this
Agreement have been furnished. Optionee
acknowledges that Optionee has had the opportunity
to ask questions of and receive answers from and
to obtain additional information from the Company
and its representatives concerning the present and
proposed business and financial condition of the
Company.
(b) Financial Sophistication. Optionee has such
knowledge and experience in financial and business
matters that Optionee is capable of evaluating the
merits and risks of investing in the Shares.
(c) Understanding the Investment Risks. Optionee
understands that:
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(i) An investment in the Shares
represents a highly speculative investment, and
there can be no assurance as to the success of the
Company in its business; and
(ii) There is at present no market for
the Shares and there can be no assurance that a
market will develop in the future.
(d) Understanding of the Nature of the Shares.
Optionee understands and agrees that:
(i) There can be no assurance that the
Shares will be registered under the Securities Act
or any state securities laws and if they are not
so registered, they will only be issued and sold
in reliance upon certain exemptions contained in
the Securities Act and applicable state securities
laws, and the representations and warranties of
Optionee contained herein, which will have to be
renewed as to the Shares at the times of exercise
of the Options, are essential to any claim of
exemption by the Company under the Securities Act
and such state laws;
(ii) If the Shares are not so
registered, the Shares will be "restricted
securities" as that term is defined in Rule 144
promulgated under the Securities Act;
(iii) The Option cannot be exercised and
the Shares will not be sold to Optionee and
Optionee cannot resell or transfer the Shares
without registration under the Securities Act and
applicable state securities laws unless the
Company receives an opinion of counsel acceptable
to it (as to both counsel and the opinion) that
such registration is not necessary, the cost of
such opinion to be borne by the Company;
(iv) Only the Company can register the
Shares under the Securities Act and applicable
state securities laws;
(v) The Company has not made any
representations to Optionee that the Company will
register the Shares under the Securities Act or
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any applicable state securities laws, or with
respect to compliance with any exemption
therefrom;
(vi) Optionee is aware of the conditions
for Optionee's obtaining an exemption for the
resale of the Shares under the Securities Act and
any applicable state securities laws; and
(vii) The Company may, from time to
time, make stop transfer notations in its transfer
records to ensure compliance with the Securities
Act and any applicable state securities laws, and
any additional restrictions imposed by state
securities administrators.
(e) Investment Intent. Optionee acknowledges that:
(i) Optionee is acquiring the Option for
Optionee's own account and not on behalf of any
other person;
(ii) Optionee is acquiring the option
for investment and not with a view to distribution
or with the intent to divide Optionee's
participation with others or resell or otherwise
distribute the Options or the Shares;
(iii) Neither Optionee nor anyone acting
on Optionee's behalf has paid or will pay a
commission or other remuneration to any person in
connection with the acquisition of the Options or
the Shares; and
(iv) At the time of exercise of any
Option, Optionee will have to make all the
representations and warranties contained in this
Section 6 with respect to the Shares to be issued
and other representations concerning investment
intent as a condition of the issuance of the
Shares by the Company.
7. Restriction on Issuance of Shares. The Company shall not be obligated
to sell or issue any Shares pursuant to this Agreement if such
issuance would result in the violation of any laws, including the
Securities Act or any applicable state securities laws. The Company
agrees to use its reasonable best efforts to qualify for available
exemptions under the Securities Act or any applicable state
securities laws which will enable it to issue Shares hereunder in
compliance with applicable law.
8. Rights as a Shareholder. Optionee shall have no rights as a
shareholder with respect to any Shares covered by the Options until
the date of exercise and payment of the Exercise Price in accordance
with the terms of this Agreement. Subject to Section 3 hereof, no
adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
9. No Employment Rights. This Agreement shall not confer upon Optionee
any right with respect to the continuance as an employee of the
Company or any Subsidiary, nor shall it interfere in any way with the
right of the Company or any Subsidiary to terminate such employment
at any time.
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10. Governing Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by, and construed in accordance with, the laws of the State
of Delaware, without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
11. Notices. All notices and other communications under this Agreement
shall be in writing, and shall be deemed to have been duly given on
the date of delivery if delivered personally or when received if
mailed to the party to whom notice is to be given, by certified mail,
return receipt requested, postage prepaid, or by reputable overnight
courier service (charges prepaid), or transmitted by facsimile with
answer-back confirmation to the following address, or any other
address specified, by notice duly given:
To Optionee at: Stephan R. Brian
401 E. Ontario, Unit #2810
Chicago, IL 60601
To the Company at: United Industries Corporation
8825 Page Boulevard
St. Louis, MO 63114
Attention: President
Telecopy: (314) 253-5941
12. Withholdings. Except to the extent prohibited by applicable law,
Optionee may satisfy any required withholding obligation upon the
exercise of an Option hereunder by either of the following methods, or
by a combination of such methods: (a) tendering a cash payment or (b)
delivering to the Company previously acquired Shares, or having the
Company withhold Shares otherwise deliverable upon the exercise of an
Option, in either case having an aggregate Fair Market Value,
determined as of the date the withholding obligation arises, less than
or equal to the amount of the total withholding obligation.
13. Pro Rata Exercise. The Shares of Common Stock covered by this Option
shall only be exercised, if at all, ratably among the Class A Shares
and Class B Shares, based on the aggregate number of Class A Shares
and Class B Shares subject to the Options granted hereunder.
14. Registration of Shares. At any time after UIC Holdings, L.L.C.,
together with its affiliates, holds less than 25% of the Common Stock
held by such entities as of the date hereof, Optionee shall have the
right to cause the Company to register all of the Shares on a Form
S-8, along with a Form S-3 reoffer prospectus, under the Securities
Act of 1933, as amended from time to time, or any successor form
thereto, and the Company shall use its reasonable best efforts to
comply with such request in a timely manner.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
UNITED INDUSTRIES CORPORATION
By
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Name:
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Title:
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OPTIONEE:
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Stephan R. Brian
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