[FORM OF LETTER AGREEMENT]
V.S.M. INVESTORS, LLC
c/o Vestar Capital Partners IV, L.P.
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October 14, 2000
[Name of Executive]
[Address of Executive]
Dear __________:
1. Pursuant to the terms of the Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement") among V.S.M.
Investors, LLC, a Delaware limited liability company ("Investors"), V.S.M.
Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of
Investors ("Holdings"), V.S.M Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Holdings ("Acquisition"), and Sunrise Medical,
Inc., a Delaware corporation (the "Company"), Acquisition will be merged into
the Company (the "Merger").
2. By executing this letter agreement, you hereby
agree that (i) so long as the Merger Agreement has not been terminated, you
will not exercise any options to purchase Company common stock that you hold
on the date hereof or that you acquire after the date of this letter agreement
(the "Options") and (ii) upon consummation of the Merger:
(a) you hereby agree to the termination and
cancellation of all of your Options as of the date (the "Tender Offer
Date") Acquisition first purchases any shares of Company common stock
pursuant to Acquisition's offer to purchase all of the outstanding
shares of common stock, par value $1.00 per share, of the Company,
regardless of whether you will be entitled to receive any
consideration therefor pursuant to the Merger Agreement,
(b) you hereby grant to Acquisition a proxy to
vote at any annual or special meeting of stockholders of the Company,
or to take any action by written consent in lieu of such meeting with
respect to, or to otherwise take action in respect of, any and all
shares of Company common stock issuable upon exercise of your Options
("Option Shares"), in connection with any matter.
THIS PROXY SHALL BE IRREVOCABLE AND SHALL BE DEEMED TO BE
COUPLED WITH AN INTEREST. THIS AGREEMENT SHALL REVOKE ALL
PRIOR PROXIES OR WRITTEN CONSENTS GIVEN BY THE UNDERSIGNED AT
ANY TIME WITH RESPECT TO THE OPTION SHARES AND NO SUBSEQUENT
PROXIES OR WRITTEN CONSENTS MAY BE
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GIVEN (AND IF GIVEN WILL BE DEEMED NOT TO BE EFFECTIVE) BY THE
UNDERSIGNED WITH RESPECT TO THE OPTION SHARES,
(c) If the Merger is not consummated in accordance
with the Merger Agreement, any and all Options terminated pursuant to
this letter agreement will be reinstated as if such Options were never
terminated and had remained outstanding on and after the Tender Offer
Date, and
(d) you will use 55% of the pre-tax proceeds
received pursuant to this Section 2 in connection with the
non-qualified options to purchase _________ shares of Company common
stock issued to you on ________, to purchase _________ Class A
Participating Preferred Units of Investors at a price of $10 per
Unit, _________ Class B Common Units at a price of $.50 per Unit,
__________ Class C Common Units at a price of $.20 per Unit and
_________ Class D Common Units at a price of $.10 per Unit, and
Investors will issue to you such Units.
3. You hereby represent and warrant to Investors that:
(a) as of the date hereof, you have been granted
and continue to hold outstanding Options to purchase _________ shares
of Company common stock,
(b) you are competent to and have sufficient
capacity to execute and deliver this letter agreement and to perform
your obligations hereunder and this letter agreement has been duly
executed and delivered by you,
(c) assuming the due execution and delivery of
this letter agreement by Investors, this letter agreement constitutes
your valid and binding obligation, enforceable against you in
accordance with its terms, and
(d) the execution, delivery and performance of
this letter agreement by you will not (i) conflict with or violate
any law, rule, regulation, ordinance, writ, injunction, judgment or
decree applicable to you or by which any of your assets may be bound
or affected or (ii) result in any breach of any terms or conditions
of, or constitute a default under, any contract, agreement or
instrument to which you are a party or by which you are bound.
4. You further agree that, prior to the first purchase
of shares of common stock of the Company pursuant to the Tender Offer referred
to in the Merger Agreement, you will execute and deliver to each of Investors
and its subsidiaries that are party thereto (and each of Investors and its
subsidiaries that are party thereto agree to execute and deliver to you) each
of the following agreements:
(e) an Employment Agreement substantially in the
form attached hereto as Exhibit 1, pursuant to which you will be
employed as _______________, and you will receive, among other things:
- a base salary equal to the base salary you
currently receive from the Company;
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- the ability to participate in an annual bonus
plan pursuant to which your target bonus will
be __% of your base salary and your maximum
bonus will be __% of your base salary; and
- in the event of termination of your employment
with Investors and its subsidiaries without
Cause or your resignation for Good Reason
(each as defined in the Employment Agreement),
severance benefits, including a payment equal
to __________;
and in consideration for the above, you will agree to be bound by
certain restrictive covenants, including a covenant not to compete with
Investor or any of its subsidiaries for a period equal to the greater
of (x) ___ years from the consummation of the Merger and (y) ___ years
after the termination of your employment with Investors and its
subsidiaries.
(f) a Management Unit Subscription Agreement (the
"Subscription Agreement"), substantially in the form attached hereto as
Exhibit 2;
(g) a Securityholders Agreement substantially in
the form attached hereto as Exhibit 3; and
(h) an Amended and Restated Limited Liability
Company Agreement of Investors containing terms consistent with the
provisions of the term sheet attached hereto as Exhibit 4 and such
other provisions as are reasonable and customary in a limited liability
company agreement of such nature.
5. You hereby represent that you have carefully
reviewed this agreement and the Exhibits hereto, including, without
limitation, Section 3 of the Subscription Agreement. You also represent and
warrant that:
(a) your financial situation is such that you can
afford to bear the economic risk of holding securities of Investors
for an indefinite period of time, have adequate means for providing
for your current needs and personal contingencies, and can afford to
suffer a complete loss of your proposed investment in Investors;
(b) your knowledge and experience in financial and
business matters are such that you are capable of evaluating the merits
and risks of your proposed investment in Investors;
(c) you understand that your proposed investment
in Investors is a speculative investment which involves a high degree
of risk of loss, there are substantial restrictions on the
transferability of the securities of Investors and, on the Closing
Date (as defined in form of Subscription Agreement) and for an
indefinite period following the Closing (as defined in the form of
Subscription Agreement), there will be no public market for the
securities of Investors and, accordingly, it may not be possible for
you to liquidate your proposed investment in case of emergency, if at
all;
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(d) if you cease to be an employee of Investors or
its subsidiaries, your proposed investment may be repurchased at a
price which may be less than the fair market value thereof;
(e) you understand and take cognizance of all the
risk factors related to your proposed investment and no representations
or warranties have been made to you or your representatives concerning
(i) your proposed investment, (ii) Investors and its subsidiaries,
(iii) the prospects of any thereof or (iv) other matters;
(f) you have been given the opportunity to examine
all documents and to ask questions of, and to receive answers from,
Investors and its representatives concerning Investors and its
subsidiaries, the transactions contemplated by the Merger Agreement
and this letter agreement and the Exhibits hereto and to obtain any
additional information that you deem necessary;
(g) all information which you have provided to
Investors and its representatives concerning you and your financial
position is complete and correct as of the date hereof; and
(h) you are an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act of 1933, as amended.
6. You further represent that you have received and
carefully reviewed the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2000 and all amendments thereto, and any and all
subsequent filings made by the Company with the Securities and Exchange
Commission and (b) the financial information provided by Vestar Capital
Partners pursuant to its memorandum dated October 5, 2000.
7. You agree after the date hereof to cooperate with
Investors in taking action reasonably necessary to consummate the transactions
contemplated by this letter agreement and the Exhibits hereto, including the
execution and delivery of ancillary agreements reasonably necessary to
effectuate the aforesaid transactions, and to consent to modifications to the
Exhibits hereto that do not adversely affect you.
8. Entry into this letter agreement and the other
agreements referenced herein has been approved by the persons and/or entities
who own more than 75% of the voting power of all (a) outstanding units of
Investors, (b) outstanding stock of Holdings and (c) outstanding stock of
Acquisition (determined in a manner consistent with Section 280G(b)(5) of the
Internal Revenue Code of 1986, as amended and the proposed regulations
promulgated thereunder).
9. The provisions of this letter agreement shall be
binding upon and accrue to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that Vestar Capital Partners IV, L.P. is a third party beneficiary of
this letter agreement and shall have the right to enforce the provisions
hereof.
10. This letter agreement may be amended only by a
written instrument signed by the parties hereto. No waiver by any party hereto
of any of the provisions hereof shall be effective unless set forth in a
writing executed by the party so waiving.
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11. This letter agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed therein.
12. Any suit, action or proceeding with respect to this
letter agreement, or any judgment entered by any court in respect of any
thereof, shall be brought in any court of competent jurisdiction in the State
of Delaware, and the parties hereto hereby submit to the exclusive
jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. The parties hereto hereby irrevocably waive (i) any
objections which any of them may now or hereafter have to the laying of the
venue of any suit, action or proceeding arising out of or relating to this
letter agreement brought in any court of competent jurisdiction in the State
of Delaware, (ii) any claim that any such suit, action or proceeding brought
in any such court has been brought in any inconvenient forum and (iii) any
right to a jury trial.
13. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when
personally delivered, telecopied (with confirmation of receipt), one day after
deposit with a reputable overnight delivery service (charges prepaid) and
three days after deposit in the U.S. Mail (postage prepaid and return receipt
requested) to the address set forth below or such other address as the
recipient party has previously delivered notice to the sending party.
(a) If to Investors:
V.S.M. Investors, LLC
c/o Vestar Capital Partners
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Attn: General Counsel
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with a copy to:
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Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to you, to the address shown beneath your
name on the signature page attached hereto.
14. This letter agreement and the Exhibits hereto
contain the entire understanding of the parties with respect to the subject
matter hereof and thereof. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein and therein.
This letter agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
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15. This letter agreement may be executed in separate
counterparts, and by different parties on separate counterparts each of which
shall be deemed an original, but all of which shall constitute one and the
same instrument.
16. Each of you acknowledges and agrees that a
violation of any of the terms of this letter agreement will cause Investors
and its subsidiaries irreparable injury for which adequate remedy at law is
not available. Accordingly, it is agreed that Investors shall be entitled to
an injunction, restraining order or other equitable relief to prevent breaches
of the provisions of this letter agreement and to enforce specifically the
terms and provisions hereof in any court of competent jurisdiction in the
United States or any state thereof, in addition to any other remedy to which
it may be entitled at law or equity.
17. Your rights and remedies and the rights and
remedies of Investors and its subsidiaries under this letter agreement shall
be cumulative and not exclusive of any rights or remedies which any of them
would otherwise have hereunder or at law or in equity or by statute, and no
failure or delay by any party in exercising any right or remedy shall impair
any such right or remedy or operate as a waiver of such right or remedy, nor
shall any single or partial exercise of any power or right preclude such
party's other or further exercise or the exercise of any other power or right.
The waiver by any party hereto of a breach of any provision of this letter
agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by either 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.
Very truly yours,
V.S.M. INVESTORS, LLC
By:
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Name:
Title:
Agreed and accepted as of the
Date first written above:
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[Name of Executive]
[Address of Executive]
CONSENT OF SPOUSE
I, ____________, the undersigned spouse of Executive, hereby
acknowledge that I have read the foregoing letter agreement (the "AGREEMENT")
and that I understand its contents. I am aware that the Agreement provides for
the cancellation of my spouse's options to purchase shares of common stock of
Sunrise Medical, Inc. under certain circumstances in consideration for cash
and imposes restrictions on the use of the proceeds received by my spouse in
connection therewith. I agree that my spouse's interest in the common stock of
Sunrise Medical, Inc. is subject to the Agreement and any interest I may have
in such common stock shall also be irrevocably bound by the Agreement and,
further, that my community property interest in such common stock, if any,
shall be similarly bound by the Agreement.
I am aware that the legal, financial and other matters
contained in the Agreement are complex and that I am encouraged to seek advice
with respect thereto from independent legal counsel and/or financial advisors.
I have either sought such advice or determined after carefully reviewing the
Agreement that I hereby waive such right.
Acknowledged and agreed this ___ day of
October, 2000.
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Name:
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Witness
EXHIBIT 1
EXHIBIT 2
EXHIBIT 3
EXHIBIT 4
EMPLOYMENT AGREEMENT
(__________________________)
EMPLOYMENT AGREEMENT (the "Agreement") dated as of ______
__, 2000 by and between ___________ (along with its successors, the "Company")
and ____________. (the "Executive").
WHEREAS, the Company desires to employ Executive and to
enter into an agreement embodying the terms of such employment, and the
Executive desires to accept such employment and enter into such an agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
agree as follows:
1. EFFECTIVENESS OF AGREEMENT/PRIOR AGREEMENTS.
a. Notwithstanding any other provision of this
Agreement, this Agreement shall constitute a binding obligation of the parties
hereto as of the date hereof but shall only become effective as of the date
that shares of Company Common Stock are first purchased pursuant to the Offer
(the "Effective Date"), as such terms are defined in the Agreement and Plan of
Merger dated as of _____________ ____, 2000 by and among V.S.M. Investors,
LLC, V.S.M. Holdings, Inc., V.S.M. Acquisition Corp. and the Company (as it
may be amended from time to time, the "Merger Agreement"). If the Merger
Agreement is terminated for any reason, this Agreement shall, on such
termination date, be null and void.
b. PRIOR AGREEMENTS. Effective immediately
preceding the Effective Date, this Agreement supersedes and renders null and
void all prior agreements and understandings (including any verbal agreements
or understandings) between Executive and the Company and/or its affiliates
(excluding V.S.M. Investors, LLC) [(other than the Promissory Note dated
______ __, ____, and the _____________________)] regarding the terms and
conditions of Executive's employment with the Company and/or its affiliates,
including, without limitation: [the employment agreement between Executive and
the Company, dated______________, as amended; the Severance Agreement, dated
________ ___ ____, as amended; the Change in Control Agreement, dated _____
___, ____, as amended; the Terms and Conditions of Change in Control Agreement
between the Company and "Employee", dated __________ __, ____, as amended; and
the Indemnification Agreement between Executive and the Company, dated _______
__, ____, as amended] (such agreements together with any other prior
agreements and understandings, collectively, the "Prior Agreements"). In
addition, the provisions of this Agreement shall supersede and take precedence
over conflicting provisions of the Merger Agreement as applied to Executive.
It is expressly understood that from and after the Closing the Company and its
affiliates shall have no further obligations, and Executive shall
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have no further rights, under the Prior Agreements, including, without
limitation, any right to any severance, termination or change of control
related payments and benefits.
2. EMPLOYMENT TERM. The term of Executive's employment
pursuant to this Agreement shall be the period commencing upon the Effective
Date and terminating on the date Executive's employment hereunder terminates
pursuant to Section 7 (the "Employment Term").
3. POSITION.
a. During the Employment Term, Executive shall
serve as _________________. In such position, Executive shall have such duties
and authority as shall be determined from time to time by the Company or the
Chief Executive Officer of the Company. Upon the vote or request of the
Company stockholders, Executive shall serve without additional compensation on
the Board of Directors of the Company (the "Board") and upon the vote or
request of the Board, Executive shall serve without additional compensation on
any applicable committee thereof and/or upon the vote or request of any person
or entity possessing authority with respect to such matters, Executive shall
serve without additional compensation on the board of directors of any
affiliate or subsidiary of the Company.
b. During the Employment Term, Executive shall
devote his full business time and best efforts to the performance of his
duties hereunder and shall not engage in any other business, profession or
occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without the
prior written consent of the Board.
4. BASE SALARY. During the Employment Term, the
Company shall pay Executive a base salary (the "Base Salary") at the annual
rate of $______, payable in regular installments in accordance with the
Company's usual payment practices. Executive shall be entitled to such
increases in Base Salary, if any, as may be determined from time to time in
the sole discretion of the Board and such higher annual rate shall thereafter
be deemed to be the Base Salary for purposes of this Agreement.
5. ANNUAL BONUS. With respect to the fiscal year of
the Company ending June 30, 2001, Executive shall continue to participate in
an annual incentive compensation plan of the Company (which plan shall be
different from the one currently in effect in that all performance targets
shall be EBITDA based), and shall continue to have bonus opportunities that
are the same as the opportunities provided under the plan currently in effect.
With respect to each full fiscal year of the Company thereafter, commencing
with the fiscal year ending June 30, 2002, the Board shall establish and adopt
an annual incentive compensation plan for selected Company employees which
shall provide bonuses based upon the plan participant's position with the
Company and performance of his or her duties with respect to the Company, and
Executive shall be provided, during the Employment Term, an opportunity to
earn an annual bonus ("Annual Bonus") under such, plan commensurate with his
position in the Company.
6. EMPLOYEE BENEFITS; PERQUISITES; BUSINESS EXPENSES.
During the Employment Term, Executive shall be entitled to receive perquisites
and employee benefits (excluding other severance benefits) as may be in effect
from time to time (collectively,
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"Employee Benefits"), on the same basis as those Employee Benefits are
generally made available to other senior executives of the Company. During the
Employment Term, reasonable business expenses incurred by Executive in the
performance of Executive's duties hereunder shall be reimbursed by the Company
in accordance with Company policies.
7. TERMINATION. The Employment Term and Executive's
employment hereunder may be terminated by either party at any time and for any
reason; provided that Executive shall be required to give the Company at least
60 days advance written notice of any resignation of Executive's employment.
Notwithstanding any other provision of this Agreement, the provisions of this
Section shall exclusively govern Executive's rights upon termination of
employment hereunder.
a. BY THE COMPANY FOR CAUSE OR BY EXECUTIVE'S
RESIGNATION WITHOUT GOOD REASON. (i) The Employment Term and Executive's
employment hereunder may be terminated by the Company for "Cause" (as defined
below) and shall terminate automatically upon Executive's resignation without
"Good Reason" (as defined in Section 7(c)).
(ii) For purposes of this Agreement "Cause" shall mean:
(A) Executive's indictment for a felony or a crime involving
moral turpitude which in the reasonable judgment of the Board has materially
interfered with the ability of Executive to perform his duties hereunder or
has caused significant harm to the Company or its business;
(B) Executive's conviction of a felony or a crime involving
moral turpitude or a plea of guilty or nolo contendere involving such a crime;
(C) Executive's commission of an act of fraud or
embezzlement or malfeasance or willful misconduct in the performance of his
duties hereunder, including any material misrepresentation or concealment on
any report submitted to the Company (or any of its stockholders or affiliates);
(D) Executive's violation of written Company policies
regarding employment, including without limitation substance abuse, sexual
harassment and discrimination, which violation, in the reasonable judgment of
the Board, has materially interfered with the ability of Executive to perform
his duties hereunder or has caused significant harm to the Company or its
business, but excluding any violation which results from an unintentional act
or which results from an intentional act which Executive did not know would
constitute such a violation (unless Executive reasonably should have known
that such action could constitute such a violation);
(E) Repeated failure by Executive to comply with the
reasonable directives of the Board or the Chief Executive Officer of the
Company consistent with Executive's duties hereunder, PROVIDED Executive does
not cure such failure promptly following receipt of notice of such failure; or
(F) Executive's material breach of any of the provisions of
this Agreement or any other agreement he has entered into with the Company or
any of its stockholders or affiliates.
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(iii) If Executive's employment is terminated by the Company
for Cause, or if Executive resigns without Good Reason, Executive shall be
entitled to receive: (A) Base Salary through the date of termination; (B) any
Annual Bonus earned but unpaid as of the date of termination for any
previously completed Annual Bonus performance period; (C) reimbursement for
any unreimbursed business expenses properly incurred and reported by Executive
in accordance with Company policy prior to the date of Executive's
termination; and (D) such Employee Benefits, if any, as to which Executive may
be entitled under the terms of the documents governing the provisions of such
benefits (the amounts described in clauses (A) through (D) hereof being
referred to as the "Accrued Rights").
Following such termination of Executive's employment by the
Company for Cause or resignation by Executive without Good Reason, except as
set forth in this Section 7(a)(iii), Executive shall have no further rights to
any compensation or any other benefits under this Agreement; provided however,
that if (x) Executive's employment is terminated by the Company for Cause
pursuant to Section 7(a)(ii)(A) above because he has been indicted and (y) it
subsequently becomes reasonably certain that Executive will not be convicted
of any of the counts set forth in such indictment other than as a result of a
plea of nolo contendere by Executive or a plea of guilty by Executive to one
or more other charges, then Executive shall be entitled to receive in addition
to the Accrued Rights a lump sum payment, payable in cash within 10 days
following the date that it becomes so reasonably certain, equal to (a) the
product of (i) _______, multiplied by (ii) [the sum of (x) the] Base Salary
[plus (y) the target Annual Bonus in respect of the fiscal year most recently
completed prior to the date on which Executive was terminated by the Company]
minus (b) the value of any other cash severance or termination benefits that
are payable or were paid to Executive under any other plan, program or
arrangement of the Company.
b. DISABILITY OR DEATH. (i) The Employment Term and
Executive's employment hereunder shall terminate upon Executive's death and
may be terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six consecutive months
or for an aggregate of 180 days in any twelve month period to perform
Executive's duties hereunder (such incapacity is hereinafter referred to as
"Disability"). Any question as to the existence of the Disability of Executive
as to which Executive and the Company cannot agree shall be determined in
writing by a qualified independent physician selected and compensated by the
Company.
(ii) Upon termination of Executive's employment hereunder
for death or the termination of Executive's employment by the Company as a
result of Disability, Executive, his estate or legal representative (as the
case may be) shall be entitled to receive the Accrued Rights.
Following Executive's termination of employment due to death
or the termination of Executive's employment by the Company as a result of
Disability, except as set forth in this Section 7(b)(ii), Executive shall have
no further rights to any compensation or any other benefits under this
Agreement.
c. BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY
EXECUTIVE FOR GOOD REASON. (i) The Employment Term and Executive's employment
hereunder may be terminated by the Company without Cause or by Executive's
resignation for Good Reason.
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(ii) For purposes of this Agreement, "Good Reason" shall
mean:
(A) (1) the Company's assignment to Executive of any duties
materially inconsistent with Executive's position with the Company, or (2) a
change by the Company in the conditions of Executive's employment, which
assignment or change affects Executive in a materially and negatively adverse
manner;
(B) (1) the Company's reduction of Executive's Base Salary,
or (2) the Company's failure to pay to Executive any portion of Executive's
current compensation or to pay to Executive any portion of an installment of
deferred compensation under any deferred compensation program of the Company,
in either event within 15 days following the date either such payment was due;
(C) the Company's imposition of a requirement that Executive
be principally based at a location that is more than 30 miles away from the
location at which, or outside of the country in which, Executive is currently
principally based (other than a temporary relocation related to travel on the
Company's business);
(D) the Company's failure to permit Executive's
participation in any material incentive compensation plan applicable to senior
executives of the Company on a basis consistent with Executive's position in
the Company and the performance of Executive's duties (unless Executive is
permitted to participate in other arrangements which provide, in the
aggregate, equal or superior economic opportunities to Executive);
(E) the Company's failure to continue to provide Executive
with benefits substantially comparable, in the aggregate, to those enjoyed by
Executive under any of the Company's vacation, life insurance, medical, health
and accident, disability or other benefit plans in which Executive
participated at the time of the Closing, PROVIDED that the cost of providing
such benefits is not materially greater than the cost of providing such
benefits as of the date hereof; or
(F) the Company's failure to obtain an agreement from any
successor to the Company to assume and agree to perform this Agreement.
Notwithstanding anything to the contrary in the foregoing:
(1) Executive shall only have Good Reason to terminate employment following
the Company's failure to remedy the act or omission which is alleged to
constitute Good Reason within 15 days following the Company's receipt of
written notice from Executive specifying such act or omission; and (2) none of
the foregoing acts or omissions shall be deemed to constitute Good Reason if
such act or omission is a direct consequence of or directly related to the
Company's ceasing to be publicly owned or the change in the nature and number
of stockholders in the Company.
(iii) If Executive's employment is terminated by the Company
without Cause (other than by reason of death or Disability) or if Executive
resigns for Good Reason, Executive shall be entitled to receive: (A) the
Accrued Rights; (B)[a lump sum payment, payable in cash within 10 days following
Executive's termination of employment, equal to (a) the product of (i) _______,
multiplied by (ii) the sum of (x) the Base Salary plus (y) the target Annual
Bonus in
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respect of the fiscal year most recently completed] [an aggregate amount,
payable in _____ equal monthly installments, equal to (a) the product of (i)
________ multiplied by (ii) the Base Salary] minus (b) the value of any other
cash severance or termination benefits payable to Executive under any other
plan, program or arrangement of the Company; (C) [Employee Benefits (excluding
any pension, incentive or equity related benefits)][health benefits]
[medical dental and life insurance benefits], until the earlier of the
[_______] anniversary of the date of termination or the date Executive becomes
eligible to receive comparable benefits from another employer (either because
he becomes employed by, or becomes an independent contractor with respect, to
such employer)(provided that any insured benefits remain insurable on the same
basis as existed prior to termination); and (D) reasonable outplacement
services provided by Company until the earlier of the six month anniversary of
the date of termination or the date Executive becomes employed by, or an
independent contractor with respect to, another employer.
Following Executive's termination of employment by the
Company without Cause (other than by reason of Executive's death or
Disability) or by Executive's resignation for Good Reason, except as set forth
in this Section 7(c)(iii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
d. NOTICE OF TERMINATION. Any purported
termination of employment by the Company or by Executive (other than due to
Executive's death) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 12(h) hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
e. BOARD RESIGNATION. Upon termination of this
Agreement for any reason, Executive agrees to resign, as of the date of such
termination, from the Board and, as applicable, from the board of directors of
any of the subsidiaries or affiliates of the Company.
8. NON-COMPETITION. Executive acknowledges and
recognizes the highly competitive nature of the businesses of the Company and
its affiliates and accordingly agrees as follows:
a. During the period commencing on the date
hereof and ending on the [later to occur of two years from the Closing
(as such term is defined in the Merger Agreement or the ]________ anniversary
of the date Executive's employment with the Company terminates, Executive
shall not, whether on Executive's own behalf or on behalf of or in conjunction
with any other person or entity, directly or indirectly (A) solicit, or assist
in soliciting, the business of any client or prospective client of the Company
or any of its subsidiaries or affiliates, or hire any employee of the Company
or any of its subsidiaries or affiliates, or interfere with, or attempt to
interfere with, the relationships between the Company or any of its
subsidiaries or affiliates, on the one hand, and any of their respective
customers, clients, suppliers, partners, members, employees or investors, on
the other hand; or (B) become an employee, agent, representative, consultant,
partner, shareholder or holder of any other financial interest with respect to
any person or entity that competes with the Company or any of
7
its subsidiaries or affiliates (or that conducts the type of business that the
Company or any of its subsidiaries has taken concrete action to conduct in the
future).
b. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in this
Section 8 to be reasonable, if a final judicial determination is made by a
court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction
against Executive, the provisions of this Agreement shall not be rendered void
but shall be deemed amended to apply as to such maximum time and territory and
to such maximum extent as such court may judicially determine or indicate to
be enforceable. Alternatively, if any court of competent jurisdiction finds
that any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained
herein.
9. CONFIDENTIALITY; INVENTIONS.
a. CONFIDENTIALITY. Executive shall not at any
time (whether during or after Executive's employment with the Company)
disclose or use for Executive's own benefit or purposes or the benefit or
purposes of any other person, firm, partnership, joint venture, association,
corporation or other business organization, entity or enterprise other than
the Company and any of its subsidiaries or affiliates, any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, manufacturing processes, financing
methods, plans, or the business and affairs of the Company generally, or of
any subsidiary or affiliate of the Company; PROVIDED that the foregoing shall
not apply to information which is not unique to the Company or which is
generally known to the industry or the public other than as a result of
Executive's breach of this covenant. Except as required by law, Executive
shall not disclose to anyone, other than his immediate family and legal or
financial advisors, the existence or contents of this Agreement. Executive
agrees that upon termination of Executive's employment with the Company for
any reason, he shall return to the Company immediately all memoranda, books,
papers, plans, information, letters and other data, and all copies thereof or
therefrom, in any way relating to the business of the Company and its
affiliates, except that he may retain personal notes, notebooks and diaries
that do not contain confidential information of the type described in the
preceding sentence. Executive further agrees that he shall not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
b. PRIOR INVENTIONS. Executive has attached
hereto, as Exhibit A, a list describing all inventions, works of authorship
(including software, related items, databases, documentation, site content,
text or graphics), developments, improvements, and trade secrets
("Inventions") which were created or contributed to by Executive either solely
or jointly with others prior to Executive's employment with the Company
(collectively referred to as "Prior Inventions") which relate to the Company's
proposed or current business, services, products or research and development;
or, if no such list is attached, Executive represents that there are no such
Prior Inventions. If in the course of Executive's employment with the Company,
Executive uses or relies upon a Prior Invention in Executive's creation or
contribution to any work of
8
authorship, invention, product, service, process, machine or other property of
the Company, Executive shall inform the Company promptly and, upon request,
use Executive's best efforts to procure any consents of third parties
necessary for the Company's use of such Prior Invention. To the fullest extent
permissible by law, Executive hereby grants the Company a non-exclusive
royalty-free, irrevocable, perpetual, worldwide license under all of
Executive's Prior Inventions to make, have made, copy, modify, distribute, use
and sell works of authorship, products, services, processes and machines and
to otherwise operate the Company's current and future business.
c. OWNERSHIP OF INVENTIONS. Executive agrees
that Executive shall promptly make full written disclosure to the Company, and
hereby assign to the Company, or its designee, all of Executive's right, title
and interest in and to any and all Inventions, whether or not patentable,
which Executive may solely or jointly conceive or develop or reduce to
practice, or cause to be conceived or developed or reduced to practice, during
the period of time Executive is in the employ of the Company (collectively
referred to as "Company Inventions"). Executive further acknowledges that all
original works of authorship which are created or contributed to by Executive
(solely or jointly with others) within the scope of and during the period of
Executive's employment with the Company are to be deemed "works made for
hire," as that term is defined in the United States Copyright Act, and the
copyright and all intellectual property rights therein shall be the sole
property of the Company. To the extent any of such works are deemed not to be
"works made for hire," Executive hereby assigns the copyright and all other
intellectual property rights in such works to the Company.
d. CONTRACTS WITH THE UNITED STATES. Executive
agrees to execute any licenses or assignments as required by any contract
between the Company and the United States or any of its agencies.
e. MAINTENANCE OF RECORDS. Executive agrees to
keep and maintain adequate and current written records of all Company
Inventions made by Executive (solely or jointly with others) during the term
and within the scope of Executive's employment with the Company. The records
shall be in the form of notes, sketches, drawings, and any other format that
may be specified by the Company. The records shall be available to and remain
the sole property and intellectual property of the Company at all times.
f. FURTHER ASSURANCES. Executive covenants to
take all requested actions and execute all requested documents to assist the
Company, or its designee, at the Company's expense, in every way to secure the
Company's above rights in the Prior Inventions and Company Inventions and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto in any and all countries, and to pursue any patents or
registrations with respect thereto. This covenant shall survive the
termination of this Agreement. If the Company is unable for any other reason
to secure Executive's signature on any document for this purpose, then
Executive hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Executive's agent and attorney in fact, to
act for and in Executive's behalf and stead to execute any documents and to do
all other lawfully permitted acts in connection with the foregoing.
9
10. SPECIFIC PERFORMANCE. Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach of
any of the provisions of Section 8, 9 or 10 would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to cease making any payments or providing
any benefit otherwise required by this Agreement and obtain equitable relief
in the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
11. EXCESS PARACHUTE PAYMENTS. If (i) any payments to
Executive from the Company constitute "excess parachute payments" (as defined
in Section 280G(b) of the Internal Revenue Code of 1986, as amended (the
"Code")), (ii) the relevant "change in the ownership" (within the meaning of
Section 280G(b)(2)(A)(i)(I) of the Code) is the "Merger" (as defined in the
Merger Agreement), and (iii) Executive is therefore obligated to pay a tax
pursuant to Section 4999 of the Code in relation to such payments, then the
Company shall pay Executive an additional amount equal to such tax (the
"Parachute Bonus"), plus an amount (the "Amount") equal to the amount of
ordinary income tax, payroll tax and any excise tax that Executive is
obligated to pay with respect to the Parachute Bonus and the Amount, such that
the Executive shall have no out-of-pocket tax liability for the Parachute
Bonus or the Amount.
12. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the state where
Executive primarily works.
b. ARBITRATION. Executive and the Company agree
to use final and binding arbitration to resolve any dispute between them with
respect to any matter arising from or relating to this Agreement. The
arbitrator in any such arbitration shall be limited to selecting one of the
proposed determinations submitted by the parties as its final determination
with respect to the arbitration and shall not have the authority to alter in
any way any proposed determination so submitted.
c. ENTIRE AGREEMENT/AMENDMENTS. This Agreement
contains the entire understanding of the parties with respect to the
employment of Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with
respect to the subject matter herein other than those expressly set forth
herein. This Agreement may not be altered, modified or amended except by
written instrument signed by the parties hereto.
d. NO WAIVER. The failure of a party to insist
upon strict adherence to any term of this Agreement on any occasion shall not
be considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
e. SEVERABILITY. In the event that any one or
more of the provisions of this Agreement shall be or become invalid, illegal
or unenforceable in any respect, the validity,
10
legality and enforceability of the remaining provisions of this Agreement
shall not be affected thereby.
f. ASSIGNMENT. This Agreement shall not be
assignable by Executive. This Agreement may be assigned by the Company to a
person or entity which is an affiliate or a successor in interest to
substantially all of the business operations of the Company. Upon such
assignment, the rights and obligations of the Company hereunder shall become
the rights and obligations of such affiliate or successor person or entity.
g. SUCCESSORS; BINDING AGREEMENT. This
Agreement shall inure to the benefit of and be binding upon personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devises and legatees.
h. NOTICE. For the purpose of this Agreement,
notices and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand or
overnight courier or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below Agreement, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
If to the Company:
------------------
------------------
------------------
Attention:
With copies to:
Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
General Counsel
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to Executive:
To the most recent address of Executive set forth in the
personnel records of the Company.
With a copy to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
i. EXECUTIVE REPRESENTATION. Executive hereby represents to
the Company that the execution and delivery of this Agreement by Executive
and the Company and the performance by Executive of Executive's duties
hereunder shall not constitute a breach of, or otherwise contravene, the
terms of any employment agreement or other agreement or policy to which
Executive is a party or otherwise bound.
j. COOPERATION. Executive shall provide his reasonable
cooperation in connection with any action or proceeding (or any appeal from
any action or proceeding) which relates to events occurring during
Executive's employment hereunder. This provision shall survive any
termination of this Agreement.
k. WITHHOLDING TAXES. The Company may withhold from any
amounts payable under this Agreement such federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or regulation.
l. COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
[COMPANY] [EXECUTIVE]
-------------------------------------- ------------------------------------
By:
Title:
EMPLOYMENT AGREEMENT
(▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇)
EMPLOYMENT AGREEMENT (the "Agreement") dated as of ______ __, 2000 by and
between Sunrise Medical Inc. (along with its successors, the "Company") and M.
N. H. (the "Executive").
WHEREAS, the Company desires to employ Executive and to enter into an
agreement embodying the terms of such employment, and the Executive desires to
accept such employment and enter into such an agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. EFFECTIVENESS OF AGREEMENT/PRIOR AGREEMENTS.
a. Notwithstanding any other provision of this Agreement, this
Agreement shall constitute a binding obligation of the parties hereto as of the
date hereof but shall only become effective as of the date that shares of
Company Common Stock are first purchased pursuant to the Offer (the "Effective
Date"), as such terms are defined in the Agreement and Plan of Merger dated as
of _____________ ____, 2000 by and among V.S.M. Investors, LLC, V.S.M. Holdings,
Inc., V.S.M. Acquisition Corp. and the Company (as it may be amended from time
to time, the "Merger Agreement"). If the Merger Agreement is terminated for any
reason, this Agreement shall, on such termination date, be null and void.
b. PRIOR AGREEMENTS. Effective immediately preceding the Effective
Date, this Agreement supersedes and renders null and void all prior agreements
and understandings (including any verbal agreements or understandings) between
Executive and the Company and/or its affiliates (excluding V.S.M. Investors,
LLC)(other than the Associate Patent and Trade Secret Agreement), regarding the
terms and conditions of Executive's employment with the Company and/or its
affiliates, including, without limitation: the employment agreement between
Executive and the Company, dated December 17, 1999, as amended; the Severance
Agreement, executed by Executive and by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, on behalf of the
Company, dated ________ ___ 2000 (attached as Exhibit C to the December 19, 1999
employment agreement), as amended; the Change in Control Agreement executed by
Executive and by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, on behalf of the Company, dated _____ ___,
____ (attached as Exhibit D to the December 19, 1999 employment agreement), as
amended; the Terms and Conditions of Change in Control Agreement between the
Company and "Employee", dated __________ __, ____, as amended; and the
Indemnification Agreement between Executive and the Company, dated April 28,
1998, as amended (such agreements together with any other prior agreements and
understandings, collectively, the "Prior Agreements"). In addition, the
provisions of this Agreement shall supersede and take precedence over
conflicting provisions of the Merger Agreement as applied to Executive. It is
expressly understood that from and after the Closing the Company and its
affiliates shall have no further obligations, and Executive shall have no
further rights, under the
2
Prior Agreements, including, without limitation, any right to any severance,
termination or change of control related payments and benefits.
2. EMPLOYMENT TERM. The term of Executive's employment pursuant to this
Agreement shall be the period commencing upon the Effective Date and terminating
on the date Executive's employment hereunder terminates pursuant to Section 7
(the "Employment Term").
3. POSITION.
a. During the Employment Term, Executive shall serve as President and
Chief Executive Officer of the Company. In such position, Executive shall have
such duties and authority as shall be determined from time to time by the Board
of Directors of the Company (the "Board"). Upon the vote or request of the
Company stockholders, Executive shall serve without additional compensation on
the Board and upon the vote or request of the Board, Executive shall serve
without additional compensation on any applicable committee thereof and/or upon
the vote or request of any person or entity possessing authority with respect to
such matters, Executive shall serve without additional compensation on the board
of directors of any affiliate or subsidiary of the Company.
b. During the Employment Term, Executive shall devote his full
business time and best efforts to the performance of his duties hereunder and
shall not engage in any other business, profession or occupation for
compensation or otherwise which would conflict or interfere with the rendition
of such services either directly or indirectly, without the prior written
consent of the Board; PROVIDED that nothing herein shall preclude Executive from
continuing to serve on the board of directors or trustees of any business
corporation or charitable organization on which he currently serves and which is
identified on Exhibit A hereto; PROVIDED in each case, and in the aggregate,
that such activities do not conflict or interfere with the performance of
Executive's duties hereunder or conflict with Section 8.
4. BASE SALARY. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the annual rate of $_______,
payable in regular installments in accordance with the Company's usual payment
practices. Executive shall be entitled to such increases in Base Salary, if any,
as may be determined from time to time in the sole discretion of the Board and
such higher annual rate shall thereafter be deemed to be the Base Salary for
purposes of this Agreement.
5. ANNUAL BONUS. With respect to the fiscal year of the Company ending
June 30, 2001, Executive shall continue to participate in an annual incentive
compensation plan of the Company (which plan shall be different from the one
currently in effect in that all performance targets shall be EBITDA based), and
shall continue to have bonus opportunities that are the same as the
opportunities provided under the plan currently in effect. With respect to each
full fiscal year of the Company thereafter, commencing with the fiscal year
ending June 30, 2002, the Board shall establish and adopt an annual incentive
compensation plan for selected Company employees which shall provide bonuses
based upon the plan participant's position with the Company and performance of
his or her duties with respect to the Company, and Executive shall be provided,
during the Employment Term, an opportunity to earn an annual bonus ("Annual
Bonus") under such plan, commensurate with his position in the Company.
3
6. EMPLOYEE BENEFITS; PERQUISITES; BUSINESS EXPENSES. During the
Employment Term, Executive shall be entitled to receive perquisites and employee
benefits (excluding other severance benefits) as may be in effect from time to
time (collectively, "Employee Benefits"), on the same basis as those Employee
Benefits are generally made available to other senior executives of the Company.
During the Employment Term, reasonable business expenses incurred by Executive
in the performance of Executive's duties hereunder shall be reimbursed by the
Company in accordance with Company policies.
7. TERMINATION. The Employment Term and Executive's employment hereunder
may be terminated by either party at any time and for any reason; provided that
Executive shall be required to give the Company at least 60 days advance written
notice of any resignation of Executive's employment. Notwithstanding any other
provision of this Agreement, the provisions of this Section shall exclusively
govern Executive's rights upon termination of employment hereunder.
a. BY THE COMPANY FOR CAUSE OR BY EXECUTIVE'S RESIGNATION WITHOUT GOOD
REASON. (i) The Employment Term and Executive's employment hereunder may be
terminated by the Company for "Cause" (as defined below) and shall terminate
automatically upon Executive's resignation without "Good Reason" (as defined in
Section 7(c)).
(ii) For purposes of this Agreement "Cause" shall mean:
(A) Executive's indictment for a felony or a crime involving moral
turpitude, which in the reasonable judgment of the Board has materially
interfered with the ability of Executive to perform his duties hereunder or has
caused significant harm to the Company or its business;
(B) Executive's conviction of a felony or a crime involving moral
turpitude or a plea of guilty or nolo contendere involving such a crime;
(C) Executive's commission of an act of fraud or embezzlement or
malfeasance or willful misconduct in the performance of his duties hereunder,
including any material misrepresentation or concealment on any report submitted
to the Company (or any of its stockholders or affiliates);
(D) Executive's violation of written Company policies regarding
employment, including without limitation substance abuse, sexual harassment and
discrimination, which violation, in the reasonable judgment of the Board, has
materially interfered with the ability of Executive to perform his duties
hereunder or has caused significant harm to the Company or its business, but
excluding any violation which results from an unintentional act or which results
from an intentional act which Executive did not know would constitute such a
violation (unless Executive reasonably should have known that such action could
constitute such a violation);
(E) Repeated failure by Executive to comply with the reasonable
directives of the Board consistent with Executive's duties hereunder, PROVIDED
Executive does not cure such failure promptly following receipt of notice of
such failure; or
4
(F) Executive's material breach of any of the provisions of this
Agreement or any other agreement he has entered into with the Company or any of
its stockholders or affiliates.
(iii) If Executive's employment is terminated by the Company for
Cause, or if Executive resigns without Good Reason, Executive shall be entitled
to receive: (A) Base Salary through the date of termination; (B) any Annual
Bonus earned but unpaid as of the date of termination for any previously
completed Annual Bonus performance period; (C) reimbursement for any
unreimbursed business expenses properly incurred and reported by Executive in
accordance with Company policy prior to the date of Executive's termination; and
(D) such Employee Benefits, if any, as to which Executive may be entitled under
the terms of the documents governing the provisions of such benefits (the
amounts described in clauses (A) through (D) hereof being referred to as the
"Accrued Rights").
Following such termination of Executive's employment by the Company
for Cause or resignation by Executive without Good Reason, except as set forth
in this Section 7(a)(iii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement; provided however, that
if (x) Executive's employment is terminated by the Company for Cause pursuant to
Section 7(a)(ii)(A) above because he has been indicted and (y) it subsequently
becomes reasonably certain that Executive will not be convicted of any of the
counts set forth in such indictment other than as a result of a plea of nolo
contendere by Executive or a plea of guilty by Executive to one or more other
charges, then Executive shall be entitled to receive in addition to the Accrued
Rights a lump sum payment, payable in cash within 10 days following the date
that it becomes so reasonably certain, equal to (a) the product of (i) three,
multiplied by (ii) the sum of (x) the Base Salary plus (y) the target Annual
Bonus in respect of the fiscal year most recently completed prior to the date on
which Executive was terminated by the Company minus (b) the value of any other
cash severance or termination benefits that are payable or were paid to
Executive under any other plan, program or arrangement of the Company..
b. DISABILITY OR DEATH. (i) The Employment Term and Executive's
employment hereunder shall terminate upon Executive's death and may be
terminated by the Company if Executive becomes physically or mentally
incapacitated and is therefore unable for a period of six consecutive months or
for an aggregate of 180 days in any twelve month period to perform Executive's
duties hereunder (such incapacity is hereinafter referred to as "Disability").
Any question as to the existence of the Disability of Executive as to which
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician selected and compensated by the Company.
(ii) Upon termination of Executive's employment hereunder for death or
the termination of Executive's employment by the Company as a result of
Disability, Executive, his estate or legal representative (as the case may be)
shall be entitled to receive the Accrued Rights.
Following Executive's termination of employment due to death or the
termination of Executive's employment by the Company as a result of Disability,
except as set forth in this Section 7(b)(ii), Executive shall have no further
rights to any compensation or any other benefits under this Agreement.
5
c. BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD
REASON. (i) The Employment Term and Executive's employment hereunder may be
terminated by the Company without Cause or by Executive's resignation for Good
Reason.
(ii) For purposes of this Agreement, "Good Reason" shall mean:
(A) (1) the Company's assignment to Executive of any duties materially
inconsistent with Executive's position with the Company, or (2) a change by the
Company in the conditions of Executive's employment, which assignment or change
affects Executive in a materially and negatively adverse manner;
(B) (1) the Company's reduction of Executive's Base Salary, or (2) the
Company's failure to pay to Executive any portion of Executive's current
compensation or to pay to Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company, in either
event within 15 days following the date either such payment was due;
(C) the Company's imposition of a requirement that Executive be
principally based at a location that is more than 30 miles away from the
location at which, or outside of the country in which, Executive is currently
principally based (other than a temporary relocation related to travel on the
Company's business);
(D) the Company's failure to permit Executive's participation in any
material incentive compensation plan applicable to senior executives of the
Company on a basis consistent with Executive's position in the Company and the
performance of Executive's duties (unless Executive is permitted to participate
in other arrangements which provide, in the aggregate, equal or superior
economic opportunities to Executive);
(E) the Company's failure to continue to provide Executive with benefits
substantially comparable, in the aggregate, to those enjoyed by Executive under
any of the Company's vacation, life insurance, medical, health and accident,
disability or other benefit plans in which Executive participated at the time of
the Closing, PROVIDED that the cost to the Company of providing such benefits is
not materially greater than the cost of providing such benefits as of the date
hereof; or
(F) the Company's failure to obtain an agreement from any successor to
the Company to assume and agree to perform this Agreement.
Notwithstanding anything to the contrary in the foregoing: (1) Executive
shall only have Good Reason to terminate employment following the Company's
failure to remedy the act or omission which is alleged to constitute Good Reason
within 15 days following the Company's receipt of written notice from Executive
specifying such act or omission; and (2) none of the foregoing acts or omissions
shall be deemed to constitute Good Reason if such act or omission is a direct
consequence of or directly related to the Company's ceasing to be publicly owned
or the change in the nature and number of stockholders in the Company.
6
(iii) If Executive's employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for
Good Reason, Executive shall be entitled to receive: (A) the Accrued Rights; (B)
a lump sum payment, payable in cash within 10 days following Executive's
termination of employment, equal to (a) the product of (i) three, multiplied by
(ii) the sum of (x) the Base Salary plus (y) the target Annual Bonus in respect
of the fiscal year most recently completed, minus (b) the value of any other
cash severance or termination benefits payable to Executive under any other
plan, program or arrangement of the Company; (C) Employee Benefits (excluding
any pension, incentive or equity related benefits), until the earlier of the
third anniversary of the date of termination or the date Executive becomes
eligible to receive comparable benefits from another employer (either because he
becomes employed by, or becomes an independent contractor with respect, to such
employer)(provided that any insured benefits remain insurable on the same basis
as existed prior to termination); and (D) reasonable outplacement services
provided by Company until the earlier of the six month anniversary of the date
of termination or the date Executive becomes employed by, or an independent
contractor with respect to, another employer.
Following Executive's termination of employment by the Company without
Cause (other than by reason of Executive's death or Disability) or by
Executive's resignation for Good Reason, except as set forth in this Section
7(c)(iii), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
d. NOTICE OF TERMINATION. Any purported termination of employment by
the Company or by Executive (other than due to Executive's death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 12(h) hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
e. BOARD RESIGNATION. Upon termination of this Agreement for any
reason, Executive agrees to resign, as of the date of such termination from the
Board and, as applicable, from the board of directors of any of the subsidiaries
or affiliates of the Company.
8. NON-COMPETITION. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and its affiliates and
accordingly agrees as follows:
a. During the period commencing on the date hereof and ending on the
third anniversary of the date Executive's employment with the Company
terminates, Executive shall not, whether on Executive's own behalf or on behalf
of or in conjunction with any other person or entity, directly or indirectly (A)
solicit, or assist in soliciting, the business of any client or prospective
client of the Company or any of its subsidiaries or affiliates, or hire any
employee of the Company or any of its subsidiaries or affiliates, or interfere
with, or attempt to interfere with, the relationships between the Company or any
of its subsidiaries or affiliates, on the one hand, and any of their respective
customers, clients, suppliers, partners, members, employees or investors, on the
other hand; or (B) become an employee, agent, representative, consultant,
partner, shareholder or holder of any other financial interest with respect to
any
7
person or entity that competes with the Company or any of its subsidiaries or
affiliates (or that conducts the type of business that the Company or any of its
subsidiaries has taken concrete action to conduct in the future).
b. It is expressly understood and agreed that although Executive and
the Company consider the restrictions contained in this Section 8 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against Executive, the provisions
of this Agreement shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such maximum extent as such
court may judicially determine or indicate to be enforceable. Alternatively, if
any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
9. CONFIDENTIALITY; INVENTIONS.
a. CONFIDENTIALITY. Executive shall not at any time (whether during or
after Executive's employment with the Company) disclose or use for Executive's
own benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company; PROVIDED that the foregoing shall not apply to information which
is not unique to the Company or which is generally known to the industry or the
public other than as a result of Executive's breach of this covenant. Except as
required by law, Executive shall not disclose to anyone, other than his
immediate family and legal or financial advisors, the existence or contents of
this Agreement. Executive agrees that upon termination of Executive's employment
with the Company for any reason, he shall return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company
and its affiliates, except that he may retain personal notes, notebooks and
diaries that do not contain confidential information of the type described in
the preceding sentence. Executive further agrees that he shall not retain or use
for his account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of the
Company or its affiliates.
b. PRIOR INVENTIONS. Executive has attached hereto, as Exhibit B, a
list describing all inventions, works of authorship (including software, related
items, databases, documentation, site content, text or graphics), developments,
improvements, and trade secrets ("Inventions") which were created or contributed
to by Executive either solely or jointly with others prior to Executive's
employment with the Company (collectively referred to as "Prior Inventions")
which relate to the Company's proposed or current business, services, products
or research and development; or, if no such list is attached, Executive
represents that there are no such Prior Inventions. If in the course of
Executive's employment with the Company, Executive
8
uses or relies upon a Prior Invention in Executive's creation or contribution to
any work of authorship, invention, product, service, process, machine or other
property of the Company, Executive shall inform the Company promptly and, upon
request, use Executive's best efforts to procure any consents of third parties
necessary for the Company's use of such Prior Invention. To the fullest extent
permissible by law, Executive hereby grants the Company a non-exclusive
royalty-free, irrevocable, perpetual, worldwide license under all of Executive's
Prior Inventions to make, have made, copy, modify, distribute, use and sell
works of authorship, products, services, processes and machines and to otherwise
operate the Company's current and future business.
c. OWNERSHIP OF INVENTIONS. Executive agrees that Executive shall
promptly make full written disclosure to the Company, and hereby assign to the
Company, or its designee, all of Executive's right, title and interest in and to
any and all Inventions, whether or not patentable, which Executive may solely or
jointly conceive or develop or reduce to practice, or cause to be conceived or
developed or reduced to practice, during the period of time Executive is in the
employ of the Company (collectively referred to as "Company Inventions").
Executive further acknowledges that all original works of authorship which are
created or contributed to by Executive (solely or jointly with others) within
the scope of and during the period of Executive's employment with the Company
are to be deemed "works made for hire," as that term is defined in the United
States Copyright Act, and the copyright and all intellectual property rights
therein shall be the sole property of the Company. To the extent any of such
works are deemed not to be "works made for hire," Executive hereby assigns the
copyright and all other intellectual property rights in such works to the
Company.
d. CONTRACTS WITH THE UNITED STATES. Executive agrees to execute any
licenses or assignments as required by any contract between the Company and the
United States or any of its agencies.
e. MAINTENANCE OF RECORDS. Executive agrees to keep and maintain
adequate and current written records of all Company Inventions made by Executive
(solely or jointly with others) during the term and within the scope of
Executive's employment with the Company. The records shall be in the form of
notes, sketches, drawings, and any other format that may be specified by the
Company. The records shall be available to and remain the sole property and
intellectual property of the Company at all times.
f. FURTHER ASSURANCES. Executive covenants to take all requested
actions and execute all requested documents to assist the Company, or its
designee, at the Company's expense, in every way to secure the Company's above
rights in the Prior Inventions and Company Inventions and any copyrights,
patents, mask work rights or other intellectual property rights relating thereto
in any and all countries, and to pursue any patents or registrations with
respect thereto. This covenant shall survive the termination of this Agreement.
If the Company is unable for any other reason to secure Executive's signature on
any document for this purpose, then Executive hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as Executive's
agent and attorney in fact, to act for and in Executive's behalf and stead to
execute any documents and to do all other lawfully permitted acts in connection
with the foregoing.
9
10. SPECIFIC PERFORMANCE. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 8, 9 or 10 would be inadequate and, in recognition of this
fact, Executive agrees that, in the event of such a breach or threatened breach,
in addition to any remedies at law, the Company, without posting any bond, shall
be entitled to cease making any payments or providing any benefit otherwise
required by this Agreement and obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available.
11. EXCESS PARACHUTE PAYMENTS. If (a) any payments to Executive from the
Company constitute "excess parachute payments" (as defined in Section 280G(b) of
the Internal Revenue Code of 1986, as amended (the "Code")), (b) the relevant
"change in the ownership" (within the meaning of Section 280G(b)(2)(A)(i)(I) of
the Code) is the "Merger" (as defined in the Merger Agreement), and (c)
Executive is therefore obligated to pay a tax pursuant to Section 4999 of the
Code in relation to such payments, then the Company shall pay Executive an
additional amount equal to such tax (the "Parachute Bonus"), plus an amount (the
"Amount") equal to the amount of ordinary income tax, payroll tax and any excise
tax that Executive is obligated to pay with respect to the Parachute Bonus and
the Amount, such that the Executive shall have no out-of-pocket tax liability
for the Parachute Bonus or the Amount.
12. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state where Executive primarily works.
b. ARBITRATION. Executive and the Company agree to use final and
binding arbitration to resolve any dispute between them with respect to any
matter arising from or relating to this Agreement. The arbitrator in any such
arbitration shall be limited to selecting one of the proposed determinations
submitted by the parties as its final determination with respect to the
arbitration and shall not have the authority to alter in any way any proposed
determination so submitted.
c. ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein. This Agreement may not be altered,
modified or amended except by written instrument signed by the parties hereto.
d. NO WAIVER. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
e. SEVERABILITY. In the event that any one or more of the provisions
of this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity,
10
legality and enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
f. ASSIGNMENT. This Agreement shall not be assignable by Executive.
This Agreement may be assigned by the Company to a person or entity which is an
affiliate or a successor in interest to substantially all of the business
operations of the Company. Upon such assignment, the rights and obligations of
the Company hereunder shall become the rights and obligations of such affiliate
or successor person or entity.
g. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributes, devises and legatees.
h. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or overnight courier or
three days after it has been mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If to the Company:
------------------
------------------
------------------
Attention:
With copies to:
Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
General Counsel
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to Executive:
11
To the most recent address of Executive set forth in the personnel
records of the Company.
12
With a copy to:
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
i. EXECUTIVE REPRESENTATION. Executive hereby represents to the
Company that the execution and delivery of this Agreement by Executive and the
Company and the performance by Executive of Executive's duties hereunder shall
not constitute a breach of, or otherwise contravene, the terms of any employment
agreement or other agreement or policy to which Executive is a party or
otherwise bound.
j. COOPERATION. Executive shall provide his reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or
proceeding) which relates to events occurring during Executive's employment
hereunder. This provision shall survive any termination of this Agreement.
k. WITHHOLDING TAXES. The Company may withhold from any amounts
payable under this Agreement such federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.
l. COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
SUNRISE MEDICAL INC. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------- ------------------------------------
By:
Title:
MANAGEMENT UNIT SUBSCRIPTION AGREEMENT
THIS MANAGEMENT UNIT SUBSCRIPTION AGREEMENT (this "AGREEMENT") is made
as of _______ __, 2000, by and between V.S.M. Investors, LLC, a Delaware limited
liability company (the "COMPANY"), and the individual named on the signature
page hereto (the "EXECUTIVE").
WHEREAS, on the terms and subject to the conditions hereof, the
Executive desires to subscribe for and acquire from the Company, and the Company
desires to issue and sell to the Executive, the Company's Class A Participating
Preferred Units (the "Class A Units"), Class B Common Units (the "Class B
Units"), Class C Common Units (the "Class C Units") and Class D Common Units
(the "Class D Units"; collectively with the Class A Units, the Class B Units and
the Class C Units, the "Units"), in each case in the amounts set forth on
SCHEDULE I, as hereinafter set forth; and
WHEREAS, this Agreement is one of several agreements being entered into
by the Company on or after the date hereof with certain persons who are or will
be key employees of the Company or one or more subsidiaries (collectively with
the Executive, the "MANAGEMENT INVESTORS") as part of a management equity
purchase plan designed to comply with Rule 701 promulgated under the Securities
Act (as defined below);
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 ACQUISITION. The term "ACQUISITION" means the consummation of the
transactions contemplated by the Agreement and Plan of Merger dated as of ______
__, 2000, by and among the Company, V.S.M. Holdings, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("HOLDINGS"), V.S.M.
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Holdings ("MERGER SUB"), and ___________, a Delaware corporation.
1.2 AGREEMENT. The term "Agreement" shall have the meaning set forth
in the preface.
1.3 APPLICABLE PERCENTAGE. Except as provided otherwise in the next
sentence, the term "Applicable Percentage" shall mean: (i) 20% during the
one-year period commencing on the first anniversary of the Closing Date; (ii)
40% during the one-year period commencing on the second anniversary of the
Closing Date; (iii) 60% during the one-year period commencing on the third
anniversary of the Closing Date; (iv) 80% during the one-year period commencing
on the fourth anniversary of the Closing Date; and (v) 100% on and after the
fifth anniversary of the Closing Date, and such Applicable Percentage after the
first anniversary of the Closing Date and prior to the fifth anniversary of the
Closing Date shall be calculated on an accrual basis for each
1 OF 20
full month that has passed between each such anniversary date. Notwithstanding
the foregoing, (A) upon and after the occurrence of a Sale of the Company, such
Applicable Percentage shall mean 100%, (B) in the event of a termination by
Executive of Executive's employment with the Company and its subsidiaries
without Good Reason or a termination of Executive's employment with the Company
and its subsidiaries for Cause, such Applicable Percentage in clauses (i) and
(ii) shall be 0%, and in clauses (iii) and (iv) and (v) shall be 40%, 75% and
100%, respectively, (C) in the event of a termination by Executive of
Executive's employment with the Company and its subsidiaries with Good Reason or
a termination of Executive's employment with the Company and its subsidiaries by
the Company without cause or due to death, Disability or Retirement, if 90% of
the Class D Case (as defined in the operating agreement of the Company) has been
achieved for the fiscal year ended in 2004, such Applicable Percentage in clause
(iv) shall be 100%, (D) in the event of a termination of Executive's employment
with the Company and its subsidiaries for Cause, such Applicable Percentage will
not be calculated on a monthly accrual basis subsequent to any anniversary of
the Closing Date, and (E) in the event of a termination by Executive of
Executive's employment with the Company and its subsidiaries without Good
Reason, such Applicable Percentage will not be calculated on a monthly accrual
basis prior to the third anniversary of the Closing Date.
1.4 BOARD. The "Board" shall mean the Company's Management Committee.
1.5 CAUSE. The term "Cause" used in connection with the termination of
employment of the Executive shall have the same meaning ascribed to such term in
any employment or severance agreement then in effect between Executive and the
Company or one of its subsidiaries or, if no such agreement containing a
definition of "Cause" is then in effect, shall mean a termination of employment
of the Executive by the Company or any subsidiary thereof due to (i) the
commission by the Executive of an act of fraud or embezzlement, (ii) the
indictment or conviction of the Executive for a felony or a crime involving
moral turpitude or a plea by Executive of guilty or nolo contendere involving
such a crime, (iii) the malfeasance or willful misconduct by the Executive in
the performance of Executive's duties, including any misrepresentation or
concealment by Executive on any report submitted to the Company (or any of its
securityholders or affiliates), (iv) the violation by Executive of a written
Company policy regarding employment, including without limitation substance
abuse, sexual harassment or discrimination, (v) the willful failure of the
Executive to render services to the Company or any of its subsidiaries in
accordance with Executive's employment which failure amounts to a material
neglect of the Executive's duties to the Company or any of its subsidiaries,
(vi) the repeated failure of the Executive to comply with reasonable directives
of the Board or the Chief Executive Officer of the Company consistent with the
Executive's duties or (vii) the material breach by Executive of any of the
provisions of any agreement between Executive, on the one hand, and the Company
or a securityholder or an affiliate of the Company, on the other hand.
1.6 CLOSING. The term "Closing" shall have the meaning set forth in
Section 2.2.
1.7 CLOSING DATE. The term "Closing Date" shall have the meaning set forth
in Section 2.2.
1.8 COMPANY. The term "Company" shall have the meaning set forth in the
preface.
2
1.9 COST. The term "Cost" shall mean, with respect to Units, the price per
unit paid by the Executive (as proportionately adjusted for all subsequent
distributions of units and other recapitalizations).
1.10 DISABILITY. The term "Disability" of the Executive shall mean the
inability of the Executive to perform the essential functions of Executive's
job, with or without reasonable accommodation, by reason of a physical or mental
infirmity, for a continuous period of six months. The period of six months shall
be deemed continuous unless Executive returns to work for at least 30
consecutive business days during such period and performs during such period at
the level and competence that existed prior to the beginning of the six-month
period. The date of such Disability shall be on the first day of such six-month
period.
1.11 EMPLOYEE AND EMPLOYMENT. The term "employee" shall mean any employee
(as defined in accordance with the regulations and revenue rulings then
applicable under Section 3401(c) of the Internal Revenue Code of 1986, as
amended) of the Company or any of its subsidiaries, and the term "employment"
shall include service as a part- or full-time employee to the Company or any of
its subsidiaries.
1.12 EXECUTIVE. The term "Executive" shall have the meaning set forth in
the preface.
1.13 EXECUTIVE GROUP. The term "Executive Group" shall have the meaning set
forth in Section 4.1(a).
1.14 FAIR MARKET VALUE. The term "Fair Market Value" used in connection
with the value of Units shall mean the average of the closing prices of the
sales of the Company's Units on all securities exchanges on which the Units may
at the time be listed, or, if there have been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any day the Units are not so listed,
the average of the representative bid and asked prices quoted in the NASDAQ
System as of 4:00 P.M., New York time, or, if on any day the Units are not
quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated or any similar successor organization, in
each such case averaged over a period of 21 days consisting of the day as of
which the Fair Market Value is being determined and the 20 consecutive business
days prior to such day. If at any time the Units are not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the Fair Market Value shall be the fair value of the Units determined in
good faith by the Board (without taking into account the effect of any
contemporaneous repurchase of Units at less than Fair Market Value under Section
4); provided that if the Executive disagrees in good faith with the Board's
determination, the Executive shall promptly notify the Company in writing of
such disagreement, in which event an independent appraiser, accountant or
investment banking firm (the "ARBITER") selected by mutual agreement of the
Executive and the Board shall make a determination of the fair market value
thereof (disregarding any discount for minority interest or marketability of
units and assuming the prior conversion, exercise or exchange of all securities
convertible into or exchangeable or exercisable for Units) solely by (i)
reviewing a single written presentation timely made by each of the Company and
the Executive setting forth their respective resolutions of the dispute and the
bases
3
therefor and (ii) accepting either the Executive's or the Company's proposed
resolution of the dispute. Promptly following the Company's receipt of
Executive's written notice of disagreement, the Company shall make available to
Executive all data (including reports of employees and outside advisors) relied
upon by the Board in making its determination. The Executive's and the Company's
written presentations must be submitted to the Arbiter within 30 days of the
Arbiter's engagement. The Arbiter shall notify the Executive and the Company of
its decision within 40 days of its engagement. The party whose proposed
resolution is not accepted shall pay all of the Arbiter's fees and expenses. If
the Executive's proposed resolution is accepted, the Company also shall pay all
of the Executive's reasonable out-of-pocket fees and expenses (including
reasonable fees and expenses of counsel and one appraiser, accountant or
investment banking firm) incurred in connection with the arbitration. Each of
the Company and the Executive agrees to execute, if requested by the Arbiter, a
reasonable engagement letter with the Arbiter.
1.15 FINANCING DEFAULT. The term "Financing Default" shall mean an event
which would constitute (or with notice or lapse of time or both would
constitute) an event of default under any of the following as they may be
amended from time to time: (i) the Credit Agreement dated as of _______ __, 2000
among Merger Sub, the lenders party thereto and Bankers Trust Company, as agent
for such lenders, and $40 million of Subordinated Notes dated _______ __, 2000
issued by Merger Sub or Holdings (collectively the "Senior Financing
Agreements"), and any extensions, renewals, refinancings or refundings thereof
in whole or in part; (ii) any other agreement under which an amount of
indebtedness of the Company or any of its subsidiaries in excess of $1,000,000
is outstanding as of the time of the aforementioned event, and any extensions,
renewals, refinancings or refundings thereof in whole or in part; (iii) any
provisions of the operating agreement of the Company or the Company's or any of
its subsidiaries' organizational documents designating the terms of the
Company's units or capital stock or setting forth restrictive financial
covenants; (iv) any amendment of, supplement to or other modification of any of
the instruments referred to in clauses (i) through (iii) above; and (v) any of
the securities issued pursuant to or whose terms are governed by the terms of
any of the agreements set forth in clauses (i) through (iv) above, and any
extensions, renewals, refinancings or refundings thereof in whole or in part.
1.16 GOOD REASON. The term "Good Reason" shall have the same meaning
ascribed to such term in any employment or severance agreement then in effect
between Executive and the Company or one of its subsidiaries or, if no such
agreement containing a definition of "Good Reason" is then in effect, shall mean
a change by the Company in Executive's duties and responsibilities which is
materially inconsistent with Executive's position in the Company, or a material
reduction in Executive's annual base salary (excluding any reduction in
Executive's salary that is part of a plan to reduce salaries of comparably
situated employees of the Company generally); provided that, notwithstanding
anything to the contrary in the foregoing, (i) Executive shall only have "Good
Reason" to terminate employment following the Company's failure to remedy the
act or omission which is alleged to constitute "Good Reason" within fifteen (15)
days following the Company's receipt of written notice from Executive specifying
such act or omission and (ii) none of the foregoing acts or omissions shall be
deemed to constitute "Good
4
Reason" if such act or omission is a direct consequence of the Company not being
publicly owned or of a change in the natures and number of the Company's
securityholders.
1.17 MANAGEMENT INVESTORS. The term "Management Investors" shall have the
meaning set forth in the preface.
1.18 PERMITTED TRANSFEREE. The term "Permitted Transferee" means any
transferee of Units pursuant to clauses (f) or (g) of the definition of "Exempt
Employee Transfer" as defined in the Securityholders Agreement.
1.19 PERSON. The term "Person" shall mean any individual, corporation,
partnership, limited liability company, trust, joint stock company, business
trust, unincorporated association, joint venture, governmental authority or
other entity of any nature whatsoever.
1.20 PUBLIC OFFERING. The term "Public Offering" shall have the meaning set
forth in the Securityholders Agreement.
1.21 PURCHASE PRICE. The term "Purchase Price" shall have the meaning set
forth in Section 2.1.
1.22 RETIREMENT. The term "Retirement" shall mean, with respect to the
Executive, the Executive's retirement as an employee of the Company or any of
its subsidiaries on or after reaching age 65 or such earlier age as may be
otherwise determined by the Board after at least three years employment with the
Company after the Closing Date. [NOTE TO DRAFT: NEED TO CONFIRM THAT ALL
EXECUTIVES ARE UNDER THE AGE OF 62.]
1.23 SALE OF THE COMPANY. The term "Sale of the Company" shall have the
meaning set forth in the Securityholders Agreement.
1.24 SECURITIES ACT. The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and all rules and regulations promulgated thereunder,
as the same may be amended from time to time.
1.25 SECURITYHOLDERS AGREEMENT. The term "Securityholders Agreement" shall
mean the Securityholders Agreement dated as of the Closing Date among Vestar,
the Management Investors and the Company, as it may be amended or supplemented
thereafter from time to time.
1.26 TERMINATION DATE. The term "Termination Date" means the date upon
which Executive's employment with the Company and its subsidiaries is
terminated.
1.27 VESTAR. The term "Vestar" means Vestar Capital Partners IV, L.P., a
Delaware limited partnership.
2. SUBSCRIPTION FOR AND PURCHASE OF UNITS.
2.1 PURCHASE OF UNITS. Pursuant to the terms and subject to the conditions
set forth in this Agreement, the Executive hereby subscribes for and agrees to
purchase, and the Company
5
hereby agrees to issue and sell to the Executive, on the Closing Date the number
of Units set forth in Schedule I attached hereto at the applicable prices per
unit and for the aggregate amounts (the "Purchase Price") set forth in Schedule
I attached hereto.
2.2 THE CLOSING. The closing (the "Closing") of the purchase of Units
hereunder shall take place simultaneously with or immediately prior to the
consummation of the Acquisition on such date (the "Closing Date"). At the
Closing, the Executive shall deliver to the Company the Purchase Price, payable
by delivery of the amount in cash set forth on Schedule I attached hereto, by
delivery of a cashier's or certified check or by wire transfer in immediately
available funds.
2.3 SECTION 83(B) ELECTION. Within 30 days after the Closing, Executive
shall make a timely election with the Internal Revenue Service under Section
83(b) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder in the form of Exhibit A attached hereto.
3. INVESTMENT REPRESENTATIONS AND COVENANTS OF THE EXECUTIVE.
3.1 UNITS UNREGISTERED. The Executive acknowledges and represents that
Executive has been advised by the Company that:
(a) the offer and sale of the Units have not been registered under the
Securities Act;
(b) the Units must be held indefinitely and the Executive must
continue to bear the economic risk of the investment in the Units
unless the offer and sale of such Units are subsequently registered
under the Securities Act and all applicable state securities laws or
an exemption from such registration is available;
(c) there is no established market for the Units and it is not
anticipated that there will be any public market for the Units in the
foreseeable future;
(d) a restrictive legend in the form set forth below and the legends
set forth in Section 8.2(a) and (b) of the Securityholders Agreement
shall be placed on the certificates representing the Units:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE OPTIONS AND OTHER PROVISIONS SET FORTH IN A MANAGEMENT
UNITS SUBSCRIPTION AGREEMENT BETWEEN THE ISSUER AND __________ DATED
AS OF _______ __, 2000, AS AMENDED AND MODIFIED FROM TIME TO TIME, A
COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE"; and
6
(e) a notation shall be made in the appropriate records of the Company
indicating that the Units are subject to restrictions on transfer and,
if the Company should at some time in the future engage the services
of a securities transfer agent, appropriate stop-transfer instructions
will be issued to such transfer agent with respect to the Units.
3.2 ADDITIONAL INVESTMENT REPRESENTATIONS. The Executive represents and
warrants that:
(a) the Executive's financial situation is such that Executive can
afford to bear the economic risk of holding the Units for an
indefinite period of time, has adequate means for providing for
Executive's current needs and personal contingencies, and can afford
to suffer a complete loss of Executive's investment in the Units;
(b) the Executive's knowledge and experience in financial and business
matters are such that Executive is capable of evaluating the merits and
risks of the investment in the Units;
(c) the Executive understands that the Units are a speculative
investment which involves a high degree of risk of loss of Executive's
investment therein, there are substantial restrictions on the
transferability of the Units and, on the Closing Date and for an indefinite
period following the Closing, there will be no public market for the Units
and, accordingly, it may not be possible for the Executive to liquidate
Executive's investment in case of emergency, if at all;
(d) the terms of this Agreement provide that if the Executive ceases
to be an employee of the Company or its subsidiaries, the Company and its
affiliates have the right to repurchase the Units at a price which may be
less than the Fair Market Value thereof;
(e) the Executive understands and has taken cognizance of all the risk
factors related to the purchase of the Units and, other than as set forth
in this Agreement, no representations or warranties have been made to the
Executive or Executive's representatives concerning the Units or the
Company or their prospects or other matters;
(f) the Executive has been given the opportunity to examine all
documents and to ask questions of, and to receive answers from, the Company
and its representatives concerning the Company and its subsidiaries, the
Acquisition, the Securityholders Agreement, the Company's organizational
documents and the terms and conditions of the purchase of the Units and to
obtain any additional information which the Executive deems necessary;
[and]
(g) all information which the Executive has provided to the Company
and the Company's representatives concerning the Executive and Executive's
financial position is complete and correct as of the date of this
Agreement; [and
7
(h) the Executive is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act.]
4. CERTAIN SALES UPON TERMINATION OF EMPLOYMENT.
4.1 PUT OPTION.
(a) If the Executive's employment with the Company and its
subsidiaries terminates due to the Disability, death or Retirement of the
Executive prior to the earlier of (i) a Public Offering or (ii) a Sale of the
Company, the Executive and the Executive's Permitted Transferees (hereinafter
sometimes collectively referred to as the "EXECUTIVE GROUP") shall have the
right, subject to the provisions of Section 5 hereof, for 90 days following the
date that is six (6) months after the date of such termination of employment of
the Executive, to sell to the Company, and the Company shall be required to
purchase (subject to the provisions of Section 5 hereof), on one occasion from
each member of the Executive Group, all (but not less than all) of the number of
Class A Units then held by the Executive Group that equals the product of (x)
the total number of Class A Units collectively held by the Executive Group and
(y) the Applicable Percentage (measured as of the Termination Date), at a price
per unit equal to the applicable purchase price determined pursuant to Section
4.1(c).
(b) If the Executive Group desires to exercise its option to require
the Company to repurchase units pursuant to Section 4.1(a), the members of the
Executive Group shall send one written notice to the Company setting forth such
members' intention to collectively sell all of their Class A Units pursuant to
Section 4.1(a) within the six-month period described therein, which notice shall
include the signature of each member of the Executive Group. Subject to the
provisions of Section 5.1, the closing of the purchase shall take place at the
principal office of the Company on a date specified by the Company no later than
the 60th day after the giving of such notice.
(c) In the event of a purchase by the Company pursuant to Section
4.1(a), the purchase price per unit shall be Fair Market Value (measured as of
the purchase date); PROVIDED that in any case the Board shall have the right, in
its sole discretion, to increase any of the foregoing purchase prices.
4.2 CALL OPTIONS.
(a) If the Executive's employment with the Company or any of its
subsidiaries terminates for any of the reasons set forth in clauses (i), (ii) or
(iii) below prior to a Sale of the Company, or if the Executive engages in
"Competitive Activity" (as defined in Section 6.1 of this Agreement), the
Company and/or Vestar shall have the right and option to purchase, from time to
time after such termination of employment, for a period of 90 days following (x)
in the case of unvested Units, the date of Executive's termination of employment
and (y) in the case of vested Units, the date that is six (6) months after the
date on which the Units first vest, and each member of the Executive Group shall
be required to sell to the Company and/or Vestar, any or all of such Units then
held by such member of the Executive Group (it being understood that if Units of
any class subject to repurchase hereunder may be
8
repurchased at different prices, the Company and/or Vestar may elect to
repurchase only the portion of the Units of such class subject to repurchase
hereunder at the lower price), at a price per unit equal to the applicable
purchase price determined pursuant to Section 4.2(c):
(i) if the Executive's active employment with the Company and its
subsidiaries is terminated due to the Disability, death or Retirement of
the Executive;
(ii) if the Executive's active employment with the Company and its
subsidiaries is terminated by the Company and its subsidiaries without
Cause or by the Executive for Good Reason;
(iii) if the Executive's active employment with the Company and its
subsidiaries is terminated (A) by the Company or any of its subsidiaries
for Cause or (B) by the Executive for any other reason not set forth in
Section 4.2(a)(i) or Section 4.2(a)(ii).
(b) If the Company desires to exercise one of its options to purchase
Units pursuant to this Section 4.2, the Company shall, not later than 90 days
after (x) in the case of unvested Units, the date of Executive's termination of
employment and (y) in the case of vested Units, the date that is six (6) months
after the vesting date of such Units, send written notice to each member of the
Executive Group of its intention to purchase Units, specifying the number of
Units to be purchased (the "CALL NOTICE"). If for any reason the Company does
not elect to purchase all of the Units held by the Executive Group then subject
to repurchase, Vestar shall be entitled to purchase the Units then subject to
repurchase that the Company has not elected to purchase (the "AVAILABLE Units").
As soon as practicable after the Company has determined that there will be
Available Units, but in any event within 45 days after the date that is six (6)
months after the relevant vesting date, the Company shall give written notice
(the "OPTION NOTICE") to Vestar setting forth the number of Available Units and
the purchase price for the Available Units. Vestar may elect to purchase any or
all of the Available Units by giving written notice to the Company within 30
days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within fifteen days after the expiration of the
30-day period set forth above, the Company shall notify each member of the
Executive Group as to the number of Units being purchased from such holder by
Vestar (the "SUPPLEMENTAL CALL NOTICE"). At the time the Company delivers the
Supplemental Call Notice to the members of the Executive Group, the Company
shall also deliver written notice to Vestar setting forth the number and class
of Units Vestar is entitled to purchase, the aggregate purchase prices and the
time and place of the closing of the transaction. If the units of any class to
be repurchased by the Company and Vestar are to be repurchased at more than one
price, the units of varying price shall be allocated among the Company and
Vestar pro rata according to the aggregate number of units to be purchased by
each of them. Subject to the provisions of Section 5, the closing of the
purchase shall take place at the principal office of the Company on a date
specified by the Company no later than the 60th day after the giving of the
later of the Call Notice or the Supplemental Call Notice.
(c) In the event of a purchase by the Company and/or Vestar pursuant
to Section 4.2(a), the purchase price shall be (in each case after taking
account of any prior purchases pursuant to Section 4.2(a)):
9
(i) with respect to a purchase of Class A Units or Class B Units, if
the Executive engages in "Competitive Activity" (as defined in Section 6.1
of this Agreement), a price per unit equal to the lesser of (A) Fair Market
Value (measured as of the "Activity Date" (as defined in Section 6.2 of
this Agreement)) and (B) Cost;
(ii) with respect to a purchase of Class A Units or Class B Units, in
the case of a termination of employment described in Section 4.2(a)(i) or
Section 4.2(a)(ii), with respect to the number of units being purchased
which are the product of (x) the total number of units being purchased and
(y) the Applicable Percentage (measured as of the Termination Date), a
price per unit equal to Fair Market Value (measured as of the purchase
date), and (if the Applicable Percentage (measured as of the Termination
Date) is less than 100%) the purchase price with respect to the remaining
units being sold shall be a price per unit equal to Cost;
(iii) with respect to a purchase of Class A Units or Class B Units, in
the case of a termination of employment described in Section
4.2(a)(iii)(A), a price per unit equal to the lesser of (A) Fair Market
Value (measured as of the Termination Date) and (B) Cost;
(iv) with respect to a purchase of Class A Units or Class B Units, in
the case of a termination of employment described in Section
4.2(a)(iii)(B), with respect to the number of units being purchased which
are the product of (x) the total number of units being purchased and (y)
the Applicable Percentage (measured as of the Termination Date), a price
per unit equal to Fair Market Value (measured as of the purchase date), and
(if the Applicable Percentage (measured as of the Termination Date) is less
than 100%) the purchase price with respect to the remaining units being
sold shall be a price per unit equal to the lesser of (A) Fair Market Value
(measured as of the Termination Date) and (B) Cost;
(v) with respect to a purchase of Class C Units or Class D Units, if
the Executive engages in a Competitive Activity or in the case of a
termination of employment described in Section 4.2(a)(iii)(A) or a
termination of employment prior to the third anniversary of the date hereof
described in Section 4.2(a)(iii)(B), a price per unit equal to Cost; and
(vi) with respect to a purchase of Class C Units or Class D Units, in
the case of a termination of employment described in Section 4.2(a)(i) or
Section 4.2(a)(ii) or a termination of employment on or after the third
anniversary of the date hereof described in Section 4.2(a)(iii)(B), a price
per unit equal to Fair Market Value (measured as of the Termination Date
without giving effect to any performance targets set forth in the operating
agreement of the Company which may have been achieved after the Termination
Date).
PROVIDED that in any case the Board shall have the right, in its sole
discretion, to increase any purchase price set forth above.
10
4.3 OBLIGATION TO SELL SEVERAL. If there is more than one member of the
Executive Group, the failure of any one member thereof to perform its
obligations hereunder shall not excuse or affect the obligations of any other
member thereof, and the closing of the purchases from such other members by the
Company shall not excuse, or constitute a waiver of its rights against, the
defaulting member.
5. CERTAIN LIMITATIONS ON THE COMPANY'S OBLIGATIONS TO PURCHASE UNITS.
5.1 DEFERRAL OF PURCHASES. (a) Notwithstanding anything to the contrary
contained herein, the Company shall not be obligated to purchase any Units at
any time pursuant to Section 4, regardless of whether it has delivered a notice
of its election to purchase any such units, (i) to the extent that the purchase
of such units or the payment to the Company or one of its subsidiaries of a cash
dividend or distribution by a subsidiary of the Company to fund such purchase
(together with any other purchases of Units pursuant to Section 4 or pursuant to
similar provisions in agreements with other employees of the Company and its
subsidiaries of which the Company has at such time been given or has given
notice and together with cash dividends and distributions to fund such other
purchases) would result (A) in a violation of any law, statute, rule,
regulation, policy, order, writ, injunction, decree or judgment promulgated or
entered by any federal, state, local or foreign court or governmental authority
applicable to the Company or any of its subsidiaries or any of its or their
property or (B) after giving effect thereto, in a Financing Default, or (ii) if
immediately prior to such purchase there exists a Financing Default which
prohibits such purchase, dividend or distribution. The Company shall within
fifteen days of learning of any such fact so notify the members of the Executive
Group that it is not obligated to purchase units hereunder.
(b) Notwithstanding anything to the contrary contained in Section 4,
any Units which a member of the Executive Group has elected to sell to the
Company or which the Company has elected to purchase from members of the
Executive Group, but which in accordance with Section 5.1(a) are not purchased
at the applicable time provided in Section 4, shall be purchased by the Company
on or prior to the fifteenth day after such date or dates that (after taking
into account any purchases (and related dividends and distributions) to be made
at such time pursuant to agreements with other employees of the Company and its
subsidiaries) the purchase of such units (and related dividends and
distributions) are no longer prohibited under Section 5.1(a), and the Company
shall give the members of the Executive Group five days prior notice of any such
purchase.
5.2 PAYMENT FOR UNITS. If at any time the Company elects or is
required to purchase any Units pursuant to Section 4, the Company shall pay the
purchase price for the Units it purchases (i) first, by the cancellation of any
indebtedness, if any, owing from the Executive to the Company or any of its
subsidiaries (which indebtedness shall be applied pro rata against the proceeds
receivable by each member of the Executive Group receiving consideration in such
repurchase) and (ii) then, by the Company's delivery of a check or wire transfer
of immediately available funds for the remainder of the purchase price, if any,
against delivery of the certificates or other instruments representing the Units
so purchased, duly endorsed; provided that if any of the conditions set forth in
Section 5.1(a) exists which prohibits such cash payment (either directly or
indirectly as a result of the prohibition of a related cash dividend or
distribution), the
11
portion of the cash payment so prohibited may be made, to the extent such
payment is not prohibited, by the Company's delivery of a junior subordinated
promissory note (which shall be subordinated and subject in right of payment to
the prior payment of any debt outstanding under the Senior Financing Agreements
and any modifications, renewals, extensions, replacements and refunding of all
such indebtedness) of the Company (a "Junior Subordinated Note") in a principal
amount equal to the balance of the purchase price, payable in up to five equal
annual installments commencing on the first anniversary of the issuance thereof
and bearing interest payable annually at the publicly announced prime rate of
Bankers Trust Company on the date of issuance; provided further that if any of
the conditions set forth in Section 5.1(a) exists which prohibits such payment
by delivery of a Junior Subordinated Note, the portion of the payment so
prohibited may be made, to the extent such payment is not prohibited, by the
Company's delivery of preferred units of the Company having an aggregate
liquidation preference equal to the balance of the purchase price; provided
further that in the case of a purchase pursuant to Section 4.2(a)(iii) the
Company may elect at any time to deliver a Junior Subordinated Note in a
principal amount equal to all or a portion of the cash purchase price (in lieu
of paying such portion of the purchase price in cash), which Junior Subordinated
Note shall mature on the fifth anniversary of its issuance and accrue interest
annually at the publicly announced prime rate of Bankers Trust Company on the
date of issuance, which interest shall be payable at maturity. The Company shall
use its reasonable efforts to repurchase Units pursuant to Section 4.1(a) or
Section 4.2(a)(i) or Section 4.2(a)(ii) with cash and/or to prepay any Junior
Subordinated Notes or redeem any preferred units issued in connection with a
repurchase of Units pursuant to Section 4.1(a) or Section 4.2(a)(i) or Section
4.2(a)(ii). The Company shall have the right set forth in clause (i) of the
first sentence of this Section 5.2 whether or not the member of the Executive
Group selling such units is an obligor of the Company. Any Junior Subordinated
Note shall become prepayable upon a Sale of the Company from net cash proceeds,
if any, payable to the Company or its unitholders; to the extent that sufficient
net cash proceeds are not so payable, the Junior Subordinated Note shall be
cancelled in exchange for such other non-cash consideration received by
unitholders in the Sale of the Company having a fair market value equal to the
principal of and accrued interest on the note. Any Junior Subordinated Note also
shall become prepayable upon the consummation of an initial Public Offering. The
principal of and accrued interest on any such note may be prepaid in whole or in
part at any time at the option of the Company. If interest is required to be
paid on any Junior Subordinated Note prior to maturity and any of the conditions
set forth in Section 5.1(a) exists which prohibits the payment of such interest
in cash, such interest may be cumulated and accrued until and to the extent that
such prohibition no longer exists.
6. NONCOMPETITION.
6.1 COMPETITIVE ACTIVITY. Executive shall be deemed to have engaged in
"Competitive Activity" if, during the period commencing on the date hereof and
ending on the second anniversary of the date Executive ceases to hold any Units,
Executive, whether on Executive's own behalf or on behalf of or in conjunction
with any other person or entity, directly or indirectly (A) solicits, or assists
in soliciting, the business of any client or prospective client of the Company
or any of its subsidiaries or affiliates (collectively, the "Entities"), or
hires any employee of any of the Entities, or interferes with, or attempts to
interfere with, the relationships
12
between any of the Entities, on the one hand, and any of its customers, clients,
suppliers, partners, members, employees or investors, on the other hand; or (B)
becomes an employee, agent, representative, consultant, partner, shareholder or
holder of any other financial interest with respect to any person or entity that
competes with any of the Entities (or that conducts the type of business that
any of the Entities has taken concrete action to conduct in the future).
6.2 ACTIVITY DATE. If Executive engages in Competitive Activity, the
"Activity Date" shall be the first date on which Executive engages in such
Competitive Activity.
6.3 REPAYMENT OF PROCEEDS. If Executive engages in Competitive Activity,
then Executive shall be required to pay to the Company, within ten business days
following the Activity Date, an amount equal to the excess, if any, of (A) the
aggregate proceeds Executive received upon the sale or other disposition of
Executive's Units, over (B) the aggregate Cost of such Units.
7. MISCELLANEOUS.
7.1 TRANSFERS TO PERMITTED TRANSFEREES. Prior to the transfer of Units to
a Permitted Transferee (other than a transfer subsequent to a Sale of the
Company), the Executive shall deliver to the Company a written agreement of the
proposed transferee (a) evidencing such Person's undertaking to be bound by the
terms of this Agreement and (b) acknowledging that the Units transferred to such
Person will continue to be Units for purposes of this Agreement in the hands of
such Person. Any transfer or attempted transfer of Units in violation of any
provision of this Agreement or the Securityholders Agreement shall be void, and
the Company shall not record such transfer on its books or treat any purported
transferee of such Units as the owner of such Units for any purpose.
7.2 RECAPITALIZATIONS, EXCHANGES, ETC., AFFECTING UNITS. The provisions of
this Agreement shall apply, to the full extent set forth herein with respect to
Units, to any and all securities of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in exchange for, or in substitution of the
Units, by reason of any dividend payable in units, issuance of units,
combination, recapitalization, reclassification, merger, consolidation or
otherwise.
7.3 EXECUTIVE'S EMPLOYMENT BY THE COMPANY. Nothing contained in this
Agreement shall be deemed to obligate the Company or any subsidiary of the
Company to employ the Executive in any capacity whatsoever or to prohibit or
restrict the Company (or any such subsidiary) from terminating the employment of
the Executive at any time or for any reason whatsoever, with or without Cause.
7.4 BINDING EFFECT. The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns; provided, however, that no
Transferee shall derive any rights under this Agreement unless and until such
Transferee has executed and delivered to the Company a valid undertaking and
becomes bound by the terms of this Agreement; and provided further that Vestar
13
is a third party beneficiary of this Agreement and shall have the right to
enforce the provisions hereof.
7.5 AMENDMENT; WAIVER. This Agreement may be amended only by a written
instrument signed by the parties hereto. No waiver by any party hereto of any of
the provisions hereof shall be effective unless set forth in a writing executed
by the party so waiving.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
7.7 JURISDICTION. Any suit, action or proceeding with respect to this
Agreement, or any judgment entered by any court in respect of any thereof, shall
be brought in any court of competent jurisdiction in the State of Delaware, and
each of the Company and the members of the Executive Group hereby submits to the
exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Each of the members of the Executive Group and the
Company hereby irrevocably waives any objections which it may now or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Agreement brought in any court of competent jurisdiction in
the State of Delaware, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum.
7.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
telecopied (with confirmation of receipt), one day after deposit with a
reputable overnight delivery service (charges prepaid) and three days after
deposit in the U.S. Mail (postage prepaid and return receipt requested) to the
address set forth below or such other address as the recipient party has
previously delivered notice to the sending party.
(a) If to the Company:
V.S.M. Investors, LLC
c/o Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
14
(b) If to the Executive, to the address as shown on the unit register
of the Company.
7.9 INTEGRATION. This Agreement and the documents referred to herein or
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
7.10 COUNTERPARTS. This Agreement may be executed in separate counterparts,
and by different parties on separate counterparts each of which shall be deemed
an original, but all of which shall constitute one and the same instrument.
7.11 INJUNCTIVE RELIEF. The Executive and Executive's Permitted Transferees
each acknowledges and agrees that a violation of any of the terms of this
Agreement will cause the Company irreparable injury for which adequate remedy at
law is not available. Accordingly, it is agreed that the Company shall be
entitled to an injunction, restraining order or other equitable relief to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction in the
United States or any state thereof, in addition to any other remedy to which it
may be entitled at law or equity.
7.12 RIGHTS CUMULATIVE; WAIVER. The rights and remedies of the Executive
and the Company under this Agreement shall be cumulative and not exclusive of
any rights or remedies which either would otherwise have hereunder or at law or
in equity or by statute, and no failure or delay by either party in exercising
any right or remedy shall impair any such right or remedy or operate as a waiver
of such right or remedy, nor shall any single or partial exercise of any power
or right preclude such party's other or further exercise or the exercise of any
other power or right. 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 either 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.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Management Unit Subscription
Agreement as of the date first above written.
-----------------
By:____________________________________
Its:____________________________________
15
____________________________________
EXECUTIVE]
16
CONSENT OF SPOUSE
I, ____________, the undersigned spouse of Executive, hereby acknowledge
that I have read the foregoing Management Unit Subscription Agreement (the
"AGREEMENT") and that I understand its contents. I am aware that the Agreement
provides for the repurchase of my spouse's Units (as defined in the Agreement)
under certain circumstances and imposes other restrictions on the transfer of
such Units. I agree that my spouse's interest in the Units is subject to the
Agreement and any interest I may have in such Units shall also be irrevocably
bound by the Agreement and, further, that my community property interest in such
Units, if any, shall be similarly bound by the Agreement.
I am aware that the legal, financial and other matters contained in the
Agreement are complex and I am encouraged to seek advice with respect thereto
from independent legal and/or financial counsel. I have either sought such
advice or determined after carefully reviewing the Agreement that I hereby waive
such right.
Acknowledged and agreed this ___ day of
_____________, 2000.
Name:
__________________________________
__________________________________
Witness
17
SCHEDULE I
NUMBER AMOUNT
------ ------
Class A Units: $
Class B Units:
Class C Units:
CLASS D UNITS: ________________
Total $
EXHIBIT A
ELECTION TO INCLUDE UNITS IN GROSS
INCOME PURSUANT TO SECTION 83(B) OF THE
INTERNAL REVENUE CODE
The undersigned purchased units (the "Units") of V.S.M. Investors, LLC
(the "COMPANY") on ______ __, 2000. The undersigned desires to make an election
to have the Units taxed under the provision of Section 83(b) of the Internal
Revenue Code of 1986, as amended ("CODE Section 83(b)"), at the time the
undersigned purchased the Units.
Therefore, pursuant to Code Section 83(b) and Treasury Regulation
Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Units (described below), to report as taxable income for
calendar year ____ the excess, if any, of the Units' fair market value on ____
__, 2000 over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Section 1.83-2(e):
1. The name, address and social security number of the undersigned:
______________________________
______________________________
______________________________
SSN:__________________________
2. A description of the property with respect to which the election is
being made: _______ Class A Participating Preferred Units, ______ Class B Common
Units, ____ Class C Common Units and _____ Class D Common Units.
3. The date on which the property was transferred: _______ __, 2000.
The taxable year for which such election is made: calendar year ____.
4. The restrictions to which the property is subject: The Units are
subject to a time-based vesting schedule and, in the case of Class C and Class D
Units, certain performance objectives. If the undersigned ceases to be employed
by the Company or any of its subsidiaries under certain circumstances, all or a
portion of the Units may be subject to repurchase by the Company at the original
purchase price paid for the Units, regardless of the fair market value of the
Units on the date of such repurchase. The Units are also subject to transfer
restrictions.
5. The aggregate fair market value on ______ __, 2000 of the property
with respect to which the election is being made, determined without regard to
any lapse restrictions: $_______.
6. The aggregate amount paid for such property: $_______.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations Section 1.83-2(e)(7).
Dated: ______ __, 2000 _____________________________
[NAME]
SECURITYHOLDERS AGREEMENT
DATED _________ __, 2000
AMONG
V.S.M. INVESTORS, LLC
AND
THE OTHER PARTIES HERETO
TABLE OF CONTENTS
PAGE
SECURITYHOLDERS AGREEMENT................................................................................1
ARTICLE I REPRESENTATIONS AND WARRANTIES OF THE PARTIES..................................................1
1.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................1
1.2 REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS..................................1
ARTICLE II VOTING AGREEMENTS.............................................................................2
2.1 ELECTION OF MANAGEMENT COMMITTEE MEMBERS AND DIRECTORS.................................2
2.2 OTHER VOTING MATTERS...................................................................3
ARTICLE III TRANSFERS OF SECURITIES......................................................................4
3.1 RESTRICTIONS ON TRANSFER OF EMPLOYEE SECURITIES........................................4
3.2 RESTRICTIONS ON TRANSFERS OF VESTAR SECURITIES.........................................4
3.3 SECURITIES ACT COMPLIANCE..............................................................6
3.4 CERTAIN TRANSFEREES BOUND BY AGREEMENT.................................................7
3.5 TRANSFERS IN VIOLATION OF AGREEMENT....................................................7
ARTICLE IV TAKE-ALONG RIGHTS ON APPROVED SALE............................................................7
4.1 TAKE-ALONG RIGHTS......................................................................7
ARTICLE V REGISTRATION RIGHTS............................................................................8
5.1 DEMAND REGISTRATIONS...................................................................8
5.2 INCIDENTAL REGISTRATION...............................................................10
5.3 HOLDBACK AGREEMENTS...................................................................12
5.4 REGISTRATION PROCEDURES...............................................................12
5.5 REGISTRATION EXPENSES.................................................................16
5.6 INDEMNIFICATION; CONTRIBUTION.........................................................16
5.7 RULES 144 AND 144A....................................................................19
i
5.8 UNDERWRITTEN REGISTRATIONS............................................................20
5.9 NO INCONSISTENT AGREEMENTS............................................................20
ARTICLE VI PRE-EMPTIVE RIGHTS...........................................................................20
6.1 ISSUANCE OF NEW SECURITIES TO AFFILIATES..............................................20
ARTICLE VII AMENDMENT AND TERMINATION...................................................................21
7.1 AMENDMENT AND WAIVER..................................................................21
7.2 TERMINATION OF CERTAIN PROVISIONS.....................................................22
7.3 TERMINATION OF AGREEMENT..............................................................22
7.4 TERMINATION AS TO A PARTY.............................................................22
ARTICLE VIII MISCELLANEOUS..............................................................................22
8.1 CERTAIN DEFINED TERMS.................................................................22
8.2 LEGENDS...............................................................................28
8.3 SEVERABILITY..........................................................................29
8.4 ENTIRE AGREEMENT......................................................................29
8.5 SUCCESSORS AND ASSIGNS................................................................29
8.6 COUNTERPARTS..........................................................................29
8.7 REMEDIES..............................................................................29
8.8 NOTICES...............................................................................30
8.9 GOVERNING LAW.........................................................................30
8.10 DESCRIPTIVE HEADINGS..................................................................31
ii
SECURITYHOLDERS AGREEMENT
This Securityholders Agreement (this "Agreement") is entered into as
of _________ __, 2000 by and among (i) V.S.M. Investors, LLC, a Delaware
limited liability company (the "Company"), (ii) Vestar, (iii) initial parties
to this Agreement who are identified as Employees on the signature page
hereto (each, an "Employee;" collectively, the "Employees"), and (iv) each
other holder of Securities who hereafter executes a separate agreement to be
bound by the terms hereof (Vestar, the Employees and each other Person that
is or may become a party to this Agreement as contemplated hereby are
sometimes referred to herein collectively as the "Securityholders" and
individually as a "Securityholder"). Certain capitalized terms used herein
are defined in Section 8.1.
The parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF THE PARTIES
1.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Securityholders that as of the date of
this Agreement:
(a) it is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, it has
full power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby, and the execution,
delivery and performance by it of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action;
(b) this Agreement has been duly and validly executed and delivered
by the Company and constitutes a legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms; and
(c) the execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby will not, with or without the giving of notice or lapse
of time, or both (i) violate any provision of law, statute, rule or
regulation to which the Company is subject, (ii) violate any order, judgment
or decree applicable to the Company, or (iii) conflict with, or result in a
breach or default under, any term or condition of the Company's
organizational documents or any agreement or instrument to which the Company
is a party or by which it is bound.
1.2 REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS. Each
Securityholder (as to himself or itself only) represents and warrants to the
Company and the other Securityholders that, as of the time such
Securityholder becomes a party to this Agreement:
2
(a) this Agreement (or the separate joinder agreement executed by
such Securityholder) has been duly and validly executed and delivered by such
Securityholder, and this Agreement constitutes a legal and binding obligation
of such Securityholder, enforceable against such Securityholder in accordance
with its terms; and
(b) the execution, delivery and performance by such Securityholder
of this Agreement (or any joinder to this Agreement) and the consummation by
such Securityholder of the transactions contemplated hereby (and thereby)
will not, with or without the giving of notice or lapse of time, or both, (i)
violate any provision of law, statute, rule or regulation to which such
Securityholder is subject, (ii) violate any order, judgment or decree
applicable to such Securityholder, or (iii) conflict with, or result in a
breach or default under, any term or condition of any agreement or other
instrument to which such Securityholder is a party or by which such
Securityholder is bound.
ARTICLE II
VOTING AGREEMENTS
2.1 ELECTION OF MANAGEMENT COMMITTEE MEMBERS AND DIRECTORS. (a)
Each Person, other than the Company, that is a party to this Agreement hereby
agrees that such Person will vote, or cause to be voted, all voting
securities of the Company over which such Person has the power to vote or
direct the voting, and will take all other necessary or desirable action
within such Person's control, and the Company will take all necessary and
desirable actions within its control, to cause the authorized number of
members or directors for each of the respective management committees or
boards of directors of the Company and its Subsidiaries to be established at
up to seven directors, and to elect or cause to be elected to the respective
management committees or boards of directors of the Company and each of its
Subsidiaries and cause to be continued in office, the following individuals:
(i) up to six members/directors designated by the Vestar Majority
Holders (the "Vestar Directors")
(ii) 1 member/director, who shall be the chief executive officer of
the Company (the "Management Director")
(b) If at any time either the Employee Majority Holders or the
Vestar Majority Holders, as the case may be, shall notify the other parties
to this Agreement of their desire to remove, with or without cause, any
individual from a Company or Subsidiary directorship for which such Person or
Persons have designation rights pursuant to paragraph (a) above, all such
parties so notified will vote, or cause to be voted, all voting securities of
the Company and its Subsidiaries over which they have the power to vote or
direct the voting, and shall take all such other actions promptly as shall be
necessary or desirable to cause the removal of such director.
(c) If at any time any Management Director or Vestar Director
ceases to serve on the management committee or board of directors of the
Company or any Subsidiary of the Company (whether due to resignation, removal
or otherwise), the
3
Securityholders entitled to designate the Management Director or the Vestar
Directors, as appropriate, shall be entitled to designate a successor
member/director to fill the vacancy created thereby on the terms and subject
to the conditions of paragraph (a) above. Each Person that is a party hereto
agrees to vote, or cause to be voted, all voting securities of the Company
and its Subsidiaries over which such Person has the power to vote or direct
the voting, and shall take all such other actions as shall be necessary or
desirable to cause the designated successor to be elected to fill such
vacancy.
(d) Nothing in this Agreement shall be construed to impair any
rights that the unitholders or stockholders of the Company or any Subsidiary
of the Company may have to remove any director for cause under applicable
law, the Operating Agreement or the organizational documents of the Company
or such Subsidiary, as the case may be. No such removal of an individual
designated pursuant to this Section 2.1 for cause shall affect any of the
Securityholders' rights to designate a different individual pursuant to this
Section 2.1 to fill the position from which such individual was removed.
(e) Subject to Section 7.2, the provisions of this Section 2.1
shall remain in effect following the first Public Offering.
2.2 OTHER VOTING MATTERS. (a) Each party to this Agreement hereby
agrees that such party will vote, or cause to be voted, all voting securities
of the Company and its Subsidiaries over which such party has the power to
vote or direct the voting, either in person or by proxy, whether at a
securityholders meeting, or by written consent, in the manner in which Vestar
directs in connection with the approval of any amendment or amendments to the
Company's organizational documents, the merger, security exchange,
combination or consolidation of the Company with any other Person or Persons,
the sale, lease or exchange of all or substantially all of the property and
assets of the Company and its Subsidiaries on a consolidated basis, and the
reorganization, recapitalization, liquidation, dissolution or winding-up of
the Company.
(b) In order to effectuate the provisions of Sections 2.1 and 2.2
hereof, each holder of Employee Securities hereby grants to ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, or if ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cease to be the Chief Executive Officer
of the Company, to his successor in such position with the Company, or if the
Chief Executive Officer of the Company shall be unable to exercise this proxy
due to illness or absence or if the position of Chief Executive Officer of
the Company shall be vacant, to the General Counsel of the Company, a proxy
to vote at any annual or special meeting of Securityholders, or to take any
action by written consent in lieu of such meeting with respect to, or to
otherwise take action in respect of, all of the Securities owned or held of
record by such holder in connection with the matters set forth in Sections
2.1 and 2.2 hereof in accordance with the provisions of Sections 2.1 and 2.2
hereof. Each of the proxies granted hereby is irrevocable and is coupled with
an interest. To effectuate the provisions of this Section 2, the Secretary of
each of the Company and each Subsidiary of the Company, or if there be no
Secretary such other officer or employee of the Company or such Subsidiary as
the management committee or board of directors of the Company or such
Subsidiary may appoint to fulfill the duties of the Secretary, shall not
record any vote or consent or other action contrary to the terms of this
Section 2.
4
ARTICLE III
TRANSFERS OF SECURITIES
3.1 RESTRICTIONS ON TRANSFER OF EMPLOYEE SECURITIES. No holder of
Employee Securities may Transfer any Employee Securities except in an Exempt
Employee Transfer.
3.2 RESTRICTIONS ON TRANSFERS OF VESTAR SECURITIES.
(a) TAG-ALONG RIGHTS. Prior to making any Transfer of Vestar
Securities (other than a Transfer described in Section 3.2(b)) any holder of
Vestar Securities proposing to make such a Transfer (for purposes of this
Section 3.2, a "Selling Holder") shall give at least thirty (30) days' prior
written notice to each holder of Employee Securities (for purposes of this
Section 3.2, each an "Other Holder") and the Company, which notice (for
purposes of this Section 3.2, the "Sale Notice") shall identify the type and
amount of Vestar Securities to be sold (for purposes of this Section 3.2, the
"Offered Securities"), describe the terms and conditions of such proposed
Transfer, and identify each prospective Transferee. Any of the Other Holders
may, within fifteen (15) days of the receipt of the Sale Notice, give written
notice (each, a "Tag-Along Notice") to the Selling Holder that such Other
Holder wishes to participate in such proposed Transfer upon the terms and
conditions set forth in the Sale Notice, which Tag-Along Notice shall specify
the Employee Securities such Other Holder desires to include in such proposed
Transfer; provided, however, that (1) each Other Holder shall be required, as
a condition to being permitted to sell Employee Securities pursuant to this
Section 3.2(a) in connection with a Transfer of Offered Securities, to elect
to sell Employee Securities of the same type and class and in the same
relative proportions (which proportions shall be determined on a unit for
unit or, as the case may be, share for share basis and on the basis of
aggregate liquidation value with respect to Preferred Units or Preferred
Stock) as the Securities which comprise the Offered Securities, (2) no
Employee Security that is subject to vesting shall be entitled to be sold
pursuant to this Section 3.2(a) unless such Employee Security has fully
vested; and (3) to exercise its tag-along rights hereunder, each Other Holder
must agree to make to the Transferee the same representations, warranties,
covenants, indemnities and agreements as the Selling Holder agrees to make in
connection with the Transfer of the Offered Securities (except that in the
case of representations and warranties pertaining specifically to, or
covenants made specifically by, the Selling Holder, the Other Holders shall
make comparable representations and warranties pertaining specifically to
(and, as applicable, covenants by) themselves), and must agree to bear his or
its ratable share (which may be joint and several but shall be based on the
value of Securities that are Transferred) of all liabilities to the
Transferees arising out of representations, warranties and covenants (other
than those representations, warranties and covenants that pertain
specifically to a given Securityholder, who shall bear all of the liability
related thereto), indemnities or other agreements made in connection with the
Transfer. Each Securityholder will bear (x) its or his own costs of any sale
of Securities pursuant to this Section 3.2(a) and (y) its or his pro-rata
share (based upon the relative amount of Securities sold) of the costs of any
sale of Securities pursuant to this Section 3.2(a) (excluding all amounts
paid to any Securityholder or his or
5
its Affiliates as a transaction fee, broker's fee, finder's fee, advisory
fee, success fee, or other similar fee or charge related to the consummation
of such sale) to the extent such costs are incurred for the benefit of all
Securityholders and are not otherwise paid by the Transferee.
If none of the Other Holders gives the Selling Holder a timely
Tag-Along Notice with respect to the Transfer proposed in the Sale Notice,
then (notwithstanding the first sentence of this Section 3.2(a)) the Selling
Holder may Transfer such Offered Securities on the terms and conditions set
forth, and to or among any of the Transferees identified (or Affiliates of
Transferees identified), in the Sale Notice at any time within ninety (90)
days after expiration of the fifteen-day period for giving Tag-Along Notices
with respect to such Transfer. Any such Offered Securities not Transferred by
the Selling Holder during such ninety-day period will again be subject to the
provisions of this Section 3.2(a) upon subsequent Transfer. If one or more
Other Holders give the Selling Holder a timely Tag-Along Notice, then the
Selling Holder shall use all reasonable efforts to obtain the agreement of
the prospective Transferee(s) to the participation of the Other Holders in
any contemplated Transfer, on the same terms and conditions as are applicable
to the Offered Securities, and no Selling Holder shall transfer any of its
shares to any prospective Transferee if such prospective Transferee(s)
declines to allow the participation of the Other Holders. If the prospective
Transferee(s) is unwilling or unable to acquire all of the Offered Securities
and all of the Employee Securities specified in a timely Tag-Along Notice
upon such terms, then the Selling Holder may elect either to cancel such
proposed Transfer or to allocate the maximum number of each class of
Securities that the prospective Transferees are willing to purchase (the
"Allocable Shares") among the Selling Holder and the Other Holders giving
timely Tag-Along Notices as follows (it being understood that the prospective
Transferees shall be required to purchase Securities of the same class on the
same terms and conditions taking into account the provisions of clause (1) of
the first paragraph of this Section 3.2(a), whether or not they are
represented by voting trust certificates, and to consummate such Transfer on
those terms and conditions):
(i) each participating Securityholder (including the Selling
Holder) shall entitled to sell a number of shares of each class of
Securities (taking into account the provisions of clause (1) of the
first paragraph of this Section 3.2(a)) (not to exceed, for any Other
Holder, the number of shares of such class of Securities identified in
such Other Holder's Tag-Along Notice) equal to the product of (A) the
number of Allocable Shares of such class of Securities and (B) a
fraction, the numerator of which is such Securityholder's Ownership
Percentage of such class of Securities and the denominator of which
is the aggregate Ownership Percentage for all participating
Securityholders of such class of Securities; and
(ii) if after allocating the Allocable Shares of any class of
Securities to such Securityholders in accordance with clause (i) above,
there are any Allocable Shares of such class that remain unallocated,
then they shall be allocated (in one or more successive allocations
on the basis of the allocation
6
method specified in clause (i) above) among the Selling Holder and
each such Other Holder that has elected in its Tag-Along Notice to
sell a greater number of shares of such class of Securities than
previously has been allocated to it pursuant to clause (i) and
this clause (ii) (all of whom (but no others) shall, for purposes of
clause (i) above, be deemed to be the participating Securityholders)
until all such Allocable Shares have been allocated in accordance with
this clause (ii).
(b) EXCLUDED TRANSFERS. The rights and restrictions contained
in Section 3.2(a) shall not apply with respect to any of the following
Transfers of Securities:
(i) any Transfer of Vestar Securities in a Public Sale;
(ii) any Transfer of Vestar Securities to and among the
partners of Vestar and the partners, securityholders and employees of
such partners (subject to compliance with Sections 3.3 and 3.4 hereof);
(iii) any Transfer of Vestar Securities in accordance with
Section 4.1;
(iv) any Transfer of Vestar Securities incidental to the
exercise, conversion or exchange of such securities in accordance with
their terms, any combination of shares (including any reverse stock
split) or any recapitalization, reorganization or reclassification of,
or any merger or consolidation involving, the Company;
(v) any Transfer of Vestar Securities to employees or
directors of, or consultants to, any of the Company and its
Subsidiaries; and
(vi) any Transfer constituting an Exempt Individual
Transfer.
(c) EXCLUDED SECURITIES. No Securities that have been
transferred by the Selling Holder or an Other Holder in a Transfer pursuant
to the provisions of Section 3.2(a) ("Excluded Securities") shall be subject
again to the restrictions set forth in Section 3.2(a), nor shall any
Securityholder holding Excluded Securities be entitled to exercise any rights
as an Other Holder under Section 3.2(a) with respect to such Excluded
Securities, and no Excluded Securities held by a Selling Holder or any Other
Holder shall be counted in determining the respective participation rights of
such Holders in a Transfer subject to Section 3.2(a).
(d) The provisions of this Section 3.2 shall remain in effect
following the first Public Offering.
3.3 SECURITIES ACT COMPLIANCE. No Securities may be transferred
by a Securityholder (other than pursuant to an effective registration
statement under the Securities Act) unless such Securityholder first delivers
to the Company an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Company, to the effect that such Transfer is
not required to be registered under the Securities Act.
7
3.4 CERTAIN TRANSFEREES BOUND BY AGREEMENT. Subject to
compliance with the other provisions of this Article III, any Securityholder
may Transfer any Securities held by such Securityholder in accordance with
applicable law; provided, however, that if the Transfer is not made pursuant
to a Public Sale or a transaction the consummation of which will cause the
termination of this Agreement pursuant to Article VII, then the Transferor of
such Security shall first deliver to the Company a written agreement of the
proposed Transferee (excluding a Transferee that is a Limited Partner) to
become a Securityholder and to be bound by the terms of this Agreement (unless
such proposed Transferee is already a Securityholder). All Employee Securities
will continue to be Employee Securities in the hands of any Transferee (other
than the Company, Vestar or any Transferee in a Public Sale); provided that
Employee Securities Transferred pursuant to an exercise of tag-along rights as
an Other Holder under Section 3.2(a) shall not be subject to the provisions of
Section 3.1 in the hands of the Transferee or any subsequent Transferee. All
Vestar Securities will continue to be Vestar Securities in the hands of any
Transferee (other than the Company, the Employees or a Transferee in a Public
Sale).
3.5 TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Securities in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Securities as the owner of
such Securities for any purpose.
ARTICLE IV
TAKE-ALONG RIGHTS
ON APPROVED SALE
4.1 TAKE-ALONG RIGHTS.
(a) If Vestar elects to consummate, or to cause the
Company to consummate, a transaction constituting a Sale of the Company,
Vestar shall notify the Company and the other Securityholders in writing of
that election, the other Securityholders will consent to and raise no
objections to the proposed transaction, and the Securityholders and the
Company will take all other actions reasonably necessary or desirable to cause
the consummation of such Sale of the Company on the terms proposed by Vestar.
Without limiting the foregoing, (i) if the proposed Sale of the Company is
structured as a sale of assets or a merger or consolidation, or otherwise
requires stockholder approval, the Securityholders and the Company will vote
or cause to be voted all Securities that they hold or with respect to which
such Securityholder has the power to direct the voting and which are entitled
to vote on such transaction in favor of such transaction and will waive any
appraisal rights which they may have in connection therewith, and (ii) if the
proposed Sale of the Company is structured as or involves a sale or redemption
of Securities, the Securityholders will agree to sell their pro-rata share of
the Securities being sold in such Sale of the Company on the terms and
conditions approved by Vestar, and the Securityholders will execute any
merger, asset purchase, security purchase, recapitalization or other sale
agreement approved by Vestar in connection with such Sale of the Company.
8
(b) The obligations of the Securityholders with respect
to the Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Sale of the Company, all of the
holders of a particular class or series of Securities shall receive the same
form and amount of consideration per share, unit or amount of Securities, or
if any holders of a particular class or series of Securities are given an
option as to the form and amount of consideration to be received, all holders
of such class or series will be given the same option, (ii) all holders of
then currently exercisable rights to acquire a particular class or series of
Securities will be given an opportunity to either (A) exercise such rights
prior to the consummation of the Sale of the Company and participate in such
sale as holders of such Securities or (B) upon the consummation of the Sale of
the Company, receive in exchange for such rights consideration equal to the
amount determined by multiplying (1) the same amount of consideration per
share, unit or amount of Securities received by the holders of such type and
class of Securities in connection with the Sale of the Company less the
exercise price per share, unit or amount of such rights to acquire such
Securities by (2) the number of shares, units or aggregate amount of
Securities represented by such rights, and (iii) the holders of Preferred
Units or, as the case may be, Preferred Stock shall receive consideration in
respect of all of the issued and outstanding shares of Preferred Units or, as
the case may be, Preferred Stock in such Sale of the Company having a fair
market value equal to the aggregate liquidation value and preferred return of
such Preferred Units or, as the case may be, Preferred Stock before any
consideration is paid in respect of the Common Units or, as the case may be,
Common Stock in such Sale of the Company.
(c) Each Securityholder will bear its or his pro-rata
share (based upon the relative amount of Securities sold) of the reasonable
costs of any sale of Securities pursuant to a Sale of the Company to the
extent such costs are incurred for the benefit of all Securityholders and are
not otherwise paid by the Company or the acquiring party. Costs incurred by or
on behalf of a Securityholder for its or his sole benefit will not be
considered costs of the transaction hereunder. In the event that any
transaction that Vestar elects to consummate or cause to be consummated
pursuant to this Section 4.1 is not consummated for any reason, the Company
will reimburse Vestar for all actual and reasonable expenses paid or incurred
by Vestar in connection therewith.
(d) Notwithstanding any provision in this Agreement to
the contrary, Vestar Capital Partners shall be entitled to be paid customary
and reasonable fees by the Company for any investment banking services
provided by it in connection with a Sale of the Company. The provisions of
this Section 4.1 shall remain in effect following the first Public Offering.
ARTICLE V
REGISTRATION RIGHTS
5.1 DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. Subject to the
provisions of this Article V, the holders of a majority of Vestar Securities
that constitute Registrable Securities
9
shall have the right (the "Vestar Demand Right"), in each case to request
registration under the Securities Act of all or any portion of the Registrable
Securities held by such Securityholders (in each case, referred to herein as
the "Requesting Holders") by delivering a written notice to the principal
business office of the Company, which notice identifies the Requesting Holders
and specifies the number of Registrable Securities to be included in such
registration (the "Registration Request"). Subject to the restrictions set
forth in paragraph 5.1(d), the Company will give prompt written notice of such
Registration Request (the "Registration Notice") to all other holders of
Registrable Securities and will thereupon use its best efforts to effect the
registration (a "Demand Registration") under the Securities Act on any form
available to the Company of:
(i) the Registrable Securities requested to be
registered by the Requesting Holders;
(ii) all other Registrable Securities of the
same type and class which the Company has received a written request
to register within 30 days after the Registration Notice is given and
any securities of the Company proposed to be included in such
registration by the Company for its own account; and
(iii) any securities of the Company proposed to be
included in such registration by the holders of registration rights
granted other than pursuant to this Agreement ("Other Registration
Rights").
(b) PRESERVATION OF DEMAND REGISTRATION. A registration
undertaken by the Company at the request of the Requesting Holder will not
count as a Demand Registration:
(i) if, pursuant to the Vestar Demand Right the
Requesting Holders fail to register and sell at least 75% of the
Registrable Securities requested to be included in such registration
by them, unless such failure results from any act of, or failure to
act by, any of the Requesting Holders (provided that if the
Requesting Holders withdraw their Registration Request prior to the
time the registration statement therefore is declared effective and
promptly reimburse the Company for all Registration Expenses incurred
by the Company in connection with effecting such registration, such
Registration Request shall not count as a Demand Registration); or
(ii) if the Requesting Holders withdraw a
Registration Request (A) upon the determination of the Management
Committee or, as the case may be, Board of Directors of the Company
to postpone the filing or effectiveness of a Registration Statement
pursuant to paragraph 5.1(d) or (B) within ten days of receiving
notice from the Company of its intent to exercise its Priority Right
in connection with such registration.
(c) PRIORITY ON DEMAND REGISTRATION. If the sole or
managing underwriter of a Demand Registration advises the Company in writing
that in its opinion the number of Registrable Securities and other securities
requested to be included
10
exceeds the number of Registrable Securities and other securities which can be
sold in such offering without adversely affecting the distribution of the
securities being offered, the price that will be paid in such offering or the
marketability thereof, the Company will include in such registration the
greatest number of (i) Registrable Securities proposed to be registered by the
holders thereof, (ii) securities having Other Registration Rights that are
pari passu with the demand rights granted in respect of Registrable Securities
hereunder proposed to be registered by the holders thereof and (iii)
securities proposed to be registered by the Company for its own account which
in the opinion of such underwriters can be sold in such offering without
adversely affecting the distribution of the securities being offered, the
price that will be paid in such offering or the marketability thereof, ratably
among the holders of Registrable Securities, the holders of such Other
Registration Rights and the Company, based (A) as between the Company and such
holders requesting registration, on the respective amounts of securities
requested to be registered, and (B) as among the holders requesting
registration, on the respective amounts of Registrable Securities (whether
requested to be registered pursuant to Section 5.1 or 5.2) and securities
subject to such Other Registration Rights, as the case may be, held by each
such holder; provided, however, that the Company shall have the right (the
"Priority Right") to receive priority over all holders of Registrable
Securities in any Demand Registration to be effected under this Section 5.1
with respect to securities that the Company proposes to include in such
registration for its own account by giving written notice of its election to
exercise such Priority Right to the holders of Registrable Securities
requesting registration thereof.
(d) RESTRICTIONS ON DEMAND REGISTRATIONS. Except as
otherwise provided in this Section 5.1(d), the Company shall be obligated to
effect six Demand Registrations pursuant to a Vestar Demand Right. Any Demand
Registration requested must be for a firmly underwritten public offering to be
managed by an underwriter or underwriters of recognized national standing
selected by the Requesting Holders and reasonably acceptable to the Company.
(e) STOCK SPLITS. In connection with any Demand
Registration pursuant to this Section 5.1, each party to this Agreement will
vote, or cause to be voted, all securities of the Company over which it has
the power to vote or direct the voting to effect any stock split which, in the
opinion of the sole or managing underwriter, is necessary to facilitate the
effectiveness of such Demand Registration.
5.2 INCIDENTAL REGISTRATION.
(a) REQUESTS FOR INCIDENTAL REGISTRATION. At any time
the Company proposes to register any shares of Common Stock under the
Securities Act (other than registrations on such form(s) solely for
registration of Common Stock in connection with any employee benefit plan or
dividend reinvestment plan or a merger or consolidation), including
registrations pursuant to Section 5.1(a), whether or not for sale for its own
account, the Company will give written notice to each holder of Registrable
Securities at least thirty (30) days prior to the initial filing of such
Registration Statement with the SEC of its intent to file such registration
statement and of such holder's rights under this Section 5.2. Upon the written
request of any holder of Registrable Securities made
11
within twenty (20) days after any such notice is given (which request shall
specify the Registrable Securities intended to be disposed of by such holder),
the Company will use its best efforts to effect the registration (an
"Incidental Registration") under the Securities Act of all Registrable
Securities which the Company, as the case may be, has been so requested to
register by the holders thereof; PROVIDED, HOWEVER, that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the Registration Statement filed in connection with such
Incidental Registration (each an "Incidental Registration Statement"), the
Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable Securities
and, thereupon, (a) in the case of a determination not to register, the
Company shall be relieved of its obligation to register any Registrable
Securities under this Section 5.2 in connection with such registration (but
not from its obligation to pay the expenses incurred in connection therewith),
and (b) in the case of a determination to delay registration, the Company
shall be permitted to delay registering any Registrable Securities under this
Section 5.2 during the period that the registration of such other securities
is delayed.
(b) PRIORITY ON INCIDENTAL REGISTRATION. If the sole or
managing underwriter of a registration advises the Company in writing that in
its opinion the number of Registrable Securities and other securities
requested to be included exceeds the number of Registrable Securities and
other securities which can be sold in such offering without adversely
affecting the distribution of the securities being offered, the price that
will be paid in such offering or the marketability thereof, the Company will
include in such registration the Registrable Securities and other securities
of the Company in the following order of priority:
(i) first, the greatest number of securities of
the Company proposed to be included in such registration by the
Company for its own account and by holders of Other Registration
Rights that have priority over the incidental registration rights
granted to holders of Registrable Securities under this Agreement,
which in the opinion of such underwriters can be so sold; and
(ii) second, after all securities that the Company
proposes to register for its own account or for the accounts of
holders of Other Registration Rights that have priority over the
incidental registration rights under this Agreement have been
included, the greatest amount of Registrable Securities and
securities having Other Registration Rights that are pari passu with
Registrable Securities, in each case requested to be registered by
the holders thereof which in the opinion of such underwriters can be
sold in such offering without adversely affecting the distribution of
the securities being offered, the price that will be paid in such
offering or the marketability thereof, ratably among the holders of
Registrable Securities (whether requested to be registered pursuant
to Section 5.1 or 5.2) and securities subject to such Other
Registration Rights based on the respective amounts of Registrable
Securities and securities subject to such Other Registration Rights
held by each such holder.
12
(c) Upon delivering a request under this Section 5.2, a
Securityholder (excluding Vestar and its Affiliates, but including any other
Permitted Transferee of any thereof) will, if requested by the Company,
execute and deliver a custody agreement and power of attorney in form and
substance reasonably satisfactory to the Company and one of the Vestar
Directors with respect to such Securityholder's Securities to be registered
pursuant to this Section 5.2 (a "Custody Agreement and Power of Attorney").
The Custody Agreement and Power of Attorney will provide, among other things,
that the Securityholder will deliver to and deposit in custody with the
custodian and attorney-in-fact named therein (who shall be reasonably
satisfactory to one of the Vestar Directors) a certificate or certificates
representing such Securities (duly endorsed in blank by the registered owner
or owners thereof or accompanied by duly executed stock powers in blank) and
irrevocably appoint said custodian and attorney-in-fact with full power and
authority to act under the Custody Agreement and Power of Attorney on such
Securityholder's behalf with respect to the matters specified therein. Such
Securityholder also agrees to execute such other agreements as the Company may
reasonably request to further evidence the provisions of this Section 5.2.
5.3 HOLDBACK AGREEMENTS. (a) Each holder of Registrable
Securities agrees that if requested in connection with an underwritten
offering made pursuant to a Registration Statement for which such
Securityholder has registration rights pursuant to this Article V by the
managing underwriter or underwriters of such underwritten offering, such
holder will not effect any Public Sale or distribution of any of the
securities being registered or any securities convertible or exchangeable or
exercisable for such securities (except as part of such underwritten
offering), during the period beginning 10 days prior to, and ending 180 days
after, the closing date of each underwritten offering made pursuant to such
Registration Statement (or for such shorter period as to which the managing
underwriter or underwriters may agree, provided that such shorter period
applies equally to all holders of Registrable Securities).
(b) The Company agrees (i) not to effect any public
sale or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven days
prior to and during the 180-day period beginning on the effective date of any
underwritten Demand Registration (or for such shorter period as to which the
managing underwriter or underwriters may agree), except as part of such Demand
Registration or in connection with any employee benefit or similar plan, any
dividend reinvestment plan, or a business acquisition or combination and (ii)
to use all reasonable efforts to cause each holder of at least 5% (on a
fully-diluted basis) of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, which are or may be
purchased from the Company at any time after the date of this Agreement (other
than in a registered offering) to agree not to effect any sale or distribution
of any such securities during such period (except as part of such underwritten
offering, if otherwise permitted).
5.4 REGISTRATION PROCEDURES. In connection with the
registration of any Registrable Securities, the Company shall effect such
registrations to permit the sale of
13
such Registrable Securities in accordance with the intended method or methods
of disposition thereof, and pursuant thereto the Company shall as
expeditiously as possible:
(a) Prepare and file with the SEC a Registration
Statement or Registration Statements on a form available for the sale of the
Registrable Securities by the holders thereof in accordance with the intended
method of distribution thereof, and use its best efforts to cause each such
Registration Statement to become effective;
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary
to keep such Registration Statement continuously effective for a period ending
on the earlier of (i) 90 days from the effective date and (ii) such time as
all of such securities have been disposed of in accordance with the intended
method of disposition thereof; cause the related prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such prospectus as so
supplemented.
(c) Notify the selling holders of Registrable
Securities promptly (but in any event within two business days), and confirm
such notice in writing, (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of
Registrable Securities the Company becomes aware that the representations and
warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 5.4(h) below cease to be true
and correct in all material respects, (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Securities for offer or sale in any jurisdiction, (v) if the
Company becomes aware of the happening of any event that makes any statement
made in such Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in such
Registration Statement, prospectus or documents so that, in the case of such
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case
of the prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the
14
use of a prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment.
(e) Deliver to each selling holder of Registrable
Securities and the underwriters, if any, without charge, as many copies of the
prospectus or prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request; and
the Company hereby consents to the use of such prospectus and each amendment
or supplement thereto by each of the selling holders of Registrable Securities
and the underwriters or agents, if any, in connection with the offering and
sale of the Registrable Securities covered by such prospectus and any
amendment or supplement thereto.
(f) Prior to any public offering of Registrable
Securities, to use its best efforts to register or qualify, and cooperate with
the selling holders of Registrable Securities, the underwriters, if any, the
sales agents and their respective counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or "blue
sky" laws of such jurisdictions within the United States as any selling holder
or the managing underwriters reasonably request in writing; provided, however,
that the Company will not be required to (i) qualify generally to do business
in any jurisdiction where it is not then so qualified or (ii) take any action
that would subject it to general service of process in any such jurisdiction
where it is not then so subject.
(g) Upon the occurrence of any event contemplated by
Section 5.4(c)(v) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(h) Enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and take all such
other actions as are reasonably requested by the managing or sole underwriter
in order to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such representations
and warranties to the underwriters, with respect to the business of the
Company and its subsidiaries, and the Registration Statement, prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters), addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
14
requested by underwriters; (iii) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
Subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included
in the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings;
and (iv) if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the holders of
Registrable Securities than those set forth in Section 5.6 hereof (or such
other provisions and procedures acceptable to holders of a majority of the
Registrable Securities covered by such Registration Statement and the managing
underwriters or agents) with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(i) Comply with all applicable rules and regulations of
the SEC and make generally available to its Securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the Securities
Act) no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities
are sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering, commencing
on the first day of the first fiscal quarter of the Company after the
effectiveness of a Registration Statement, which statements shall cover said
12-month periods.
(j) (i) Use its best efforts to cause all such
Registrable Securities covered by such registration statement to be listed on
the principal securities exchange on which Common Stock is then listed (if
any), if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) if no Common Stock is then so listed, use
its best efforts to, either (as the Company may elect) (x) cause all such
Registrable Securities to be listed on a national securities exchange or (y)
secure designation of all such Registrable Securities as a NASDAQ "national
market system security" within the meaning of Rule 11Aa2-1 or, failing that,
to secure NASDAQ authorization for such shares and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such shares with the National Association of
Securities Dealers, Inc. ("NASD").
The Company may require each holder of Registrable Securities as to which any
registration is being effected to furnish to the Company such information
regarding such holder and the distribution of such Registrable Securities as
the Company may, from time to time, reasonably request in writing; PROVIDED
that such information shall be used only in connection with such registration.
The Company may exclude from such registration the Registrable Securities of
any holder who unreasonably fails to furnish such information promptly after
receiving such request. Each holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
16
Section 5.4(c)(ii), 5.4(c)(iv) or 5.4(c)(v), such holder will forthwith
discontinue disposition of such Registrable Securities covered by such
Registration Statement or prospectus until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 5.4, or
until it is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any amendments or
supplements thereto.
5.5 REGISTRATION EXPENSES. Subject to Section
5.1(b)(i), all fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, whether or
not any Registration Statement is filed or becomes effective, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or "blue sky" laws), (ii) reasonable
messenger, telephone and delivery expenses, (iii) fees and disbursements of
counsel for the Company, (iv) fees and disbursements of all independent
certified public accountants referred to in Section 5.4(h), (v) underwriters'
fees and expenses (excluding discounts, commissions, or fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Securities), (vi) Securities
Act liability insurance, if the Company so desires such insurance, (vii)
internal expenses of the Company, (viii) the expense of any annual audit, (ix)
the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange, and (x) the fees and
expenses of any Person, including special experts, retained by the Company. In
connection with any Demand Registration or Incidental Registration hereunder,
the Company shall reimburse the holders of the Registrable Securities being
registered in such registration for the reasonable fees and disbursements of
not more than one counsel (together with appropriate local counsel) chosen by
the Requesting Holders, if pursuant to a Demand Registration, or the Company,
in all other cases, and other reasonable out-of-pocket expenses of the holders
of Registrable Securities incurred in connection with the registration of the
Registrable Securities.
5.6 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
without limitation as to time, indemnify and hold harmless, to the full extent
permitted by law, each holder of Registrable Securities, the officers,
directors, agents and employees of each of them, each Person who controls each
such holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act), the officers, directors, agents and employees of each
such controlling person and any financial or investment adviser (each, an
"Indemnified Party"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, actions or proceedings (whether
commenced or threatened) reasonable costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys' fees) and reasonable
expenses (including reasonable expenses of investigation) (collectively,
"Losses"), as incurred, arising out of or based upon (i) any untrue or alleged
untrue statement of a material fact contained in any Registration Statement,
prospectus or form of prospectus or in any amendment or
17
supplements thereto or in any preliminary prospectus, or arising out of or
based upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except to the extent that the same arise out of or are based upon information
furnished in writing to the Company by such Indemnified Party or the related
holder of Registrable Securities expressly for use therein or (ii) any
violation by the Company of any federal, state or common law rule or
regulation applicable to the Company and relating to action required of or
inaction by the Company in connection with any such registration; PROVIDED,
HOWEVER, that the Company shall not be liable to any Person who participates
as an underwriter in the offering or sale of Registrable Securities or any
other Person, if any, who controls such underwriters within the meaning of the
Securities Act to the extent that any such Losses arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus if (i) such Person failed to send
or deliver a copy of the prospectus with or prior to the delivery of written
confirmation of the sale by such Person to the Person asserting the claim from
which such Losses arise, (ii) the prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged omission,
and (iii) the Company has complied with its obligations under Section 5.4(c).
Each indemnity and reimbursement of costs and expenses shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified party.
(b) INDEMNIFICATION BY HOLDERS. In connection with any
Registration Statement in which a holder of Registrable Securities is
participating, such holder, or an authorized officer of such holder, shall
furnish to the Company in writing such information as the Company reasonably
requests for use in connection with any Registration Statement or prospectus
and agrees, severally and not jointly, to indemnify, to the full extent
permitted by law, the Company, its directors, officers, agents and employees,
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling persons, from and against
all Losses arising out of or based upon any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, prospectus, or
form of prospectus, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent, but only to the extent,
that such untrue or alleged untrue statement is contained in, or such omission
or alleged omission is required to be contained in, any information so
furnished in writing by such holder to the Company expressly for use in such
Registration Statement or prospectus and that such statement or omission was
relied upon by the Company in preparation of such Registration Statement,
prospectus or form of prospectus; PROVIDED, HOWEVER, that such holder of
Registrable Securities shall not be liable in any such case to the extent that
the holder has furnished in writing to the Company within a reasonable period
of time prior to the filing of any such Registration Statement or prospectus
or amendment or supplement thereto information expressly for use in such
Registration Statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading, information previously furnished to
the Company, and the Company failed to include such information therein. In no
event shall the liability of any
18
selling holder of Registrable Securities hereunder be greater in amount than
the dollar amount of the proceeds (net of payment of all expenses) received by
such holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
indemnified party.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
Person shall be entitled to indemnity hereunder (an "indemnified party"), such
indemnified party shall give prompt notice to the party or parties from which
such indemnity is sought (the "indemnifying parties") of the commencement of
any action, suit, proceeding or investigation or written threat thereof (a
"Proceeding") with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; PROVIDED, HOWEVER, that the
failure to so notify the indemnifying parties shall not relieve the
indemnifying parties from any obligation or liability except to the extent
that the indemnifying parties have been prejudiced by such failure. The
indemnifying parties shall have the right, exercisable by giving written
notice to an indemnified party promptly after the receipt of written notice
from such indemnified party of such Proceeding, to assume, at the indemnifying
parties' expense, the defense of any such Proceeding, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that an indemnified
party or parties (if more than one such indemnified party is named in any
Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless: (i) the indemnifying parties agree to pay such fees and
expenses; (ii) the indemnifying parties fail promptly to assume the defense of
such Proceeding or fail to employ counsel reasonably satisfactory to such
indemnified party or parties; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such indemnified
party or parties and the indemnifying parties or an affiliate of the
indemnifying parties or such indemnified parties, and there may be one or more
defenses available to such indemnified party or parties that are different
from or additional to those available to the indemnifying parties, in which
case, if such indemnified party or parties notifies the indemnifying parties
in writing that it elects to employ separate counsel at the expense of the
indemnifying parties, the indemnifying parties shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
indemnifying parties, it being understood, however, that, unless there exists
a conflict among indemnified parties, the indemnifying parties shall not, in
connection with any one such Proceeding or separate but substantially similar
or related Proceedings in the same jurisdiction, arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties. Whether or not
such defense is assumed by the indemnifying parties, such indemnifying parties
or indemnified party or parties will not be subject to any liability for any
settlement made without its or their consent (but such consent will not be
unreasonably withheld). The indemnifying parties shall not consent to entry of
any judgment or enter into any settlement which (i) provides for other than
monetary damages without the consent of the indemnified party or parties
(which consent shall not be unreasonably withheld or delayed) or (ii) does not
include as an
19
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party or parties of a release, in form and substance satisfactory
to the indemnified party or parties, from all liability in respect of such
Proceeding for which such indemnified party would be entitled to
indemnification hereunder.
(d) CONTRIBUTION. If the indemnification provided for
in this Section 5.6 is unavailable to an indemnified party or is insufficient
to hold such indemnified party harmless for any Losses in respect of which
this Section 5.6 would otherwise apply by its terms, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall have
a joint and several obligation to contribute to the amount paid or payable by
such indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party, on the one hand, and indemnified party, on the other hand,
shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been taken by,
or relates to information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in
connection with any Proceeding, to the extent such party would have been
indemnified for such expenses if the indemnification provided for in Section
5.6(a) or 5.6(b) was available to such party. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section
5.6(d) were determined by pro-rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in this Section 5.6(d). Notwithstanding the provisions of this Section
5.6(d), an indemnifying party that is a selling holder of Registrable
Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such indemnifying party exceeds
the amount of any damages that such indemnifying party has otherwise been
required to pay by reasons of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
5.7 RULES 144 AND 144A. At all times after the Company
effects its first Public Offering, the Company shall file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as such
information is necessary to permit sales under Rule 144A), and will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act within
the limitation of the exemptions
20
provided by Rule 144 and Rule 144A. Upon the request of any holder of
Registrable Securities, the Company shall deliver to such holder a written
statement as to whether it has complied with such requirements.
5.8 UNDERWRITTEN REGISTRATIONS. No holder of Registrable
Securities may participate in any underwritten registration hereunder unless
such holder (a) agrees to sell such holder's Registrable Securities on the
basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements.
5.9 NO INCONSISTENT AGREEMENTS. The Company has not and
will not, enter into any agreement with respect to the Company's securities
that is inconsistent with the rights granted to the holders of Registrable
Securities in this Article V or otherwise conflicts with the provisions hereof.
ARTICLE VI
PRE-EMPTIVE RIGHTS
6.1 ISSUANCE OF NEW SECURITIES TO AFFILIATES.
(a) If at any time after the date of this Agreement the
Company proposes to issue or sell any Common Units, Common Stock, Common Stock
Equivalents, Preferred Units or Preferred Stock of the Company (collectively,
"New Securities"), in each case to Vestar or any Affiliate of Vestar, the
Company shall first offer to sell to the holders of Employee Securities a
portion of each type of such New Securities equal to the quotient determined
by dividing (x) the number of Fully-Diluted Units held or beneficially owned
by such holder of Employee Securities by (y) the total number of Fully-Diluted
Units outstanding immediately prior to such issuance or sale. The holders of
Employee Securities shall be entitled to purchase such New Securities at the
most favorable price and on the most favorable terms as such New Securities
are to be offered to Vestar or any Affiliate of Vestar.
(b) In order to exercise its purchase rights hereunder,
each holder of Employee Securities must, within thirty days after receipt of
written notice from the Company describing in reasonable detail the New
Securities being offered, the purchase price thereof, the payment terms and
the percentage of the New Securities available to such holder pursuant to
Section 6.1(a), deliver a written notice to the Company describing its
election to exercise its purchase rights hereunder.
(c) Upon the expiration of the offering periods
described above, the Company shall be entitled to sell such New Securities
which the holders of Employee Securities have not elected to purchase during
the ninety days following such expiration on terms and conditions no more
favorable to the purchasers thereof than those offered to the holders of
Employee Securities. Any New Securities to be sold by the Company to
21
Vestar or any Affiliate of Vestar after such ninety-day period must be
reoffered to the holders of Employee Securities pursuant to the terms of this
Section 6.1.
(d) The provisions of this Section 6.1 will not apply
to the following issuances of New Securities:
(i) any New Securities issued upon the
conversion or exercise of any Common Stock Equivalents not
issued in violation of this Section 6.1;
(ii) any issuance of New Securities incident to
the exercise, conversion or exchange of any securities of the
Company that were not issued in violation of this Section 6.1, a
subdivision of shares (including any stock dividend or stock
split), any combination of shares (including any reverse stock
split) or any recapitalization, reorganization or
reclassification of the Company; or
(iii) any New Securities issued in connection with
the acquisition by the Company of another Person that is not an
Affiliate of Vestar (whether by acquisition of stock or by
merger or consolidation, or the acquisition of all or
substantially all of such Person's assets).
(e) Nothing in this Section 6.1 shall be deemed to
prevent Vestar or any Affiliate of Vestar from purchasing for cash any New
Securities without first complying with the provisions of this Section 6.1;
PROVIDED, that in connection with such purchase, (a) the Company's Management
Committee or Board of Directors has determined in good faith (1) that the
Company needs an immediate cash investment, (2) that no alternative financing
on terms no less favorable to the Company in the aggregate than such purchase
is available which is of a type that could be obtained without having to
comply with this Section 6.1, and (3) that the delay caused by compliance with
the provisions of this Section 6.1 in connection with such investment would be
reasonably likely to cause severe and immediate harm to the Company, (b) the
Person making such purchase (for purposes of this Section 6.1, the "Purchasing
Holder") gives prompt notice to the holders of Employee Securities of the
Purchasing Holder's investment, which notice shall describe in reasonable
detail the New Securities being purchased by the Purchasing Holder and the
purchase price thereof, and (c) the Purchasing Holder and the Company take all
steps necessary to enable the holders of Employee Securities to effectively
exercise their respective rights under this Section 6.1 with respect to their
purchase of a pro-rata share of the New Securities issued to the Purchasing
Holder after such purchase by the Purchasing Holder on the terms specified in
Section 6.1(a).
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 AMENDMENT AND WAIVER. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this
Agreement shall be effective against the Company or the Securityholders unless
such modification, amendment or waiver is approved in writing by each of the
Company, Vestar and the Employee Majority Holders. The failure of any party to
enforce any of the provisions of this
22
Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
7.2 TERMINATION OF CERTAIN PROVISIONS. The provisions of
Article II shall terminate upon the consummation of the Company's first Public
Offering if, and only to the extent, required by the managing underwriter of
such Public Offering; provided, however, that none of the limitations set
forth in Article II on Vestar's ability to cause the other Securityholders to
vote their Securities in the manner Vestar directs in connection with the
transactions specified in Section 2.2 may be terminated with respect to any of
such rights granted to Vestar in Section 2.2.
7.3 TERMINATION OF AGREEMENT. This Agreement will
terminate in respect of all Securityholders (a) with the written consent of
the Company, the Vestar Majority Holders and the Employee Majority Holders,
(b) upon the dissolution, liquidation or winding-up of the Company or (c) upon
the consummation of a Sale of the Company (except with respect to the rights
to Incidental Registration under Article V, which shall survive). The
termination of this Agreement will not affect any indemnification or
contribution obligations under Section 5.6, which shall survive such
termination.
7.4 TERMINATION AS TO A PARTY. Any Person who ceases to
hold any Securities shall cease to be a Securityholder and shall have no
further rights or obligations under this Agreement (except with respect to any
indemnification and contribution obligations under Section 5.6, which shall
survive).
ARTICLE VIII
MISCELLANEOUS
8.1 CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the meanings set forth or as referenced below:
"AFFILIATE" of any particular Person means any other Person
Controlling, Controlled by or under common Control with such particular Person
or, in the case of a natural Person, any other member of such Person's Family
Group.
"AGREEMENT" has the meaning set forth in the preface.
"AGREEMENT OF MERGER" means the Agreement and Plan of Merger
dated as of October __, 2000 by and among the Company, V.S.M. Holdings, Inc.,
V.S.M. Acquisition Corp. and __________.
"ALLOCABLE SHARES" has the meaning set forth in Section
3.2(a).
"CALL OPTION" has the meaning given to such term in the
Management Subscription Agreements.
23
"CLOSING DATE" has the meaning given such term in the
Agreement of Merger.
"CLOSING FEE" means the fee to be paid to Vestar and its
Affiliates on the Closing Date in the aggregate amount of $[_________].
"COMMON STOCK" means, collectively, following the conversion
of the Company into a corporation or the Company being merged into, or
otherwise succeeded by, a corporation, the common stock of the Company and any
other class or series of authorized capital stock of the Company which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company.
"COMMON STOCK EQUIVALENTS" means (without duplication with
any Common Units, Common Stock or other Common Stock Equivalents) rights,
warrants, options, convertible securities, or exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Units, Common Stock or securities
exercisable for or convertible or exchangeable into Common Units or Common
Stock, as the case may be, whether at the time of issuance or upon the passage
of time or the occurrence of some future event.
"COMMON UNITS" has the meaning set forth in the Operating
Agreement.
"COMPANY" has the meaning set forth in the preface.
"CONTROL" (including, with correlative meaning, all
conjugations thereof) means with respect to any Person, the ability of another
Person to control or direct the actions or policies of such first Person,
whether by ownership of voting securities, by contract or otherwise.
"DEMAND REGISTRATION" has the meaning given to such term in
Section 5.1(a).
"EMPLOYEE MAJORITY HOLDERS" means the Person or Persons
having beneficial ownership of a majority of the Preferred Units or, as the
case may be, Preferred Stock and a majority of the Common Units or, as the
case may be, Common Stock constituting Employee Securities.
"EMPLOYEE SECURITIES" means (a) the Preferred Units and
Common Units acquired by the Employees on or after the date of this Agreement
under the Management Subscription Agreements, (b) any Securities, Common
Units, Common Stock, Common Stock Equivalents, Preferred Units or Preferred
Stock hereafter acquired by any holder of Employee Securities, and (c) any
securities of the Company issued with respect to the securities referred to in
clauses (a) or (b) above by way of a payment-in-kind, stock dividend or stock
split or in connection with a combination of shares, exchange, conversion,
recapitalization, merger, consolidation or other reorganization.
24
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"EXCLUDED SECURITIES" has the meaning set forth in Section
3.2(c).
"EXEMPT EMPLOYEE TRANSFER" means a Transfer of Employee
Securities (a) pursuant to an exercise of tag-along rights as an Other Holder
under Section 3.2, (b) pursuant to a Sale of the Company under Section 4.1 or
other transaction approved under Section 2.2, (c) to the Company pursuant to a
Call Option under a Management Subscription Agreement, (d) to the Company
pursuant to an exercise of a Put Option under a Management Subscription
Agreement, (e) pursuant to a Public Sale, (f) upon the death of the holder
pursuant to the applicable laws of descent and distribution, (g) solely to or
among such Employee's Family Group, or (h) incidental to the exercise,
conversion or exchange of such securities in accordance with their terms, any
combination of shares (including any reverse stock split) or any
recapitalization, reorganization or reclassification of, or any merger or
consolidation involving, the Company.
"EXEMPT INDIVIDUAL TRANSFER" means a Transfer of Vestar
Securities held by a natural person (a) upon the death of the holder pursuant
to the applicable laws of descent and distribution, (b) solely to or among
such Person's Family Group, or (c) to the Company incidental to the exercise,
conversion or exchange of such securities in accordance with their terms, any
combination of shares (including any reverse stock split) or any
recapitalization, reorganization or reclassification of, or any merger or
consolidation involving, the Company.
"FAMILY GROUP" means, with respect to any individual, such
individual's spouse and descendants (whether natural or adopted) and any
trust, partnership, limited liability company or similar vehicle established
and maintained solely for the benefit of (or the sole members or partners of
which are) such individual, such individual's spouse and/or such individual's
descendants.
"FULLY-DILUTED UNITS" means, as of any date of
determination, the number of shares of Common Stock outstanding plus (without
duplication) all Common Units or, as the case may be, shares of Common Stock
issuable, whether at such time or upon the passage of time or the occurrence
of future events, upon the exercise, conversion or exchange of all
then-outstanding Common Stock Equivalents.
"INCIDENTAL REGISTRATION" has the meaning given such term in
Section 5.2(a).
"INDEMNIFIED PARTY" has the meaning given such term in
Section 5.6(a).
"LIMITED PARTNER" means a limited partner of Vestar
(excluding any such limited partner who is an employee either of the general
partner of Vestar or an Affiliate of the general partner of Vestar).
"LOSSES" has the meaning given such term in Section 5.6(a).
25
"MANAGEMENT AGREEMENT" means the management agreement dated
the Closing Date (and as in effect on such date) between the Company and
Vestar Capital Partners.
"MANAGEMENT SUBSCRIPTION AGREEMENTS" mean the unit
subscription agreements between the Company and the respective Employees.
"MEMBER" has the meaning given such term in the Operating
Agreement.
"NASD" has the meaning given such term in Section 5.4(j).
"NASDAQ" means the National Association of Securities
Dealers Automated Quotation System.
"NEW SECURITIES" has the meaning given to such term in
Section 6.1(a).
"OPERATING AGREEMENT" means the Operating Agreement dated as
of _________ __, 2000 among the Company, Vestar and the other parties thereto.
"OTHER HOLDER" has the meaning given such term in Section
3.2(a).
"OTHER REGISTRATION RIGHTS" has the meaning given such term
in Section 5.1(a)(iii).
"OWNERSHIP PERCENTAGE" means, for each Securityholder and
with respect to a type and class of Security, the percentage obtained by
dividing the number of units or shares of such Security held by such
Securityholder by the total number of units or shares of such Security (other
than Excluded Securities) outstanding.
"PERSON" means an individual, a partnership, a joint
venture, a corporation, an association, a joint stock company, a limited
liability company, a trust, an unincorporated organization or a government or
any department or agency or political subdivision thereof.
"PREFERRED STOCK" means collectively, following the
conversion of the Company into a corporation or the company being merged into,
or otherwise succeeded by, a corporation, the Series A Participating Preferred
Stock and any other class or series of authorized capital stock of the Company
that is limited to a fixed sum or percentage of par value or stated value in
respect of the rights of the holders thereof to participate in dividends and
in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company.
"PREFERRED UNITS" has the meaning set forth in the Operating
Agreement.
"PRIORITY RIGHT" has the meaning given such term in Section
5.1(c)(i).
"PROCEEDING" has the meaning given such term in Section
5.6(c).
26
"PUBLIC OFFERING" means a sale of Common Stock to the public
in an offering pursuant to an effective registration statement filed with the
SEC pursuant to the Securities Act, as then in effect, provided that a Public
Offering shall not include an offering made in connection with a business
acquisition or combination or an employee benefit plan.
"PUBLIC SALE" means a sale of Securities pursuant to a
Public Offering or a Rule 144 Sale.
"PURCHASING HOLDER" has the meaning given such term in
Section 6.1(e).
"PUT OPTION" has the meaning given such term in the
Management Subscription Agreements.
"REGISTRABLE SECURITIES" means any Vestar Securities and
Securities that are of the same type and class as the Vestar Securities. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been (i) Transferred in a Public Sale or
(ii) otherwise Transferred and new certificates not bearing the legend set
forth in Section 8.2(b) hereof shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or such state
securities or blue sky laws then in force. For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable Securities whenever such
Person has the right to acquire such Registrable Securities (upon conversion
or exercise in connection with a Transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been affected.
"REGISTRATION EXPENSES" means all amounts payable by the
Company pursuant to Section 5.5.
"REGISTRATION NOTICE" has the meaning given such term in
Section 5.1(a).
"REGISTRATION REQUEST" has the meaning given such term in
Section 5.1(a).
"REGISTRATION STATEMENT" means any registration statement of
the Company under which any of the Registrable Securities are included therein
pursuant to the provisions of this Agreement, including the prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"REQUESTING HOLDER" has the meaning given such term in
Section 5.1(a).
"RULE 144" means Rule 144 adopted under the Securities Act
(or any successor rule or regulation).
27
"RULE 144 SALE" means a sale of Securities to the public
through a broker, dealer or market-maker pursuant to the provisions of Rule
144 adopted under the Securities Act (or any successor rule or regulation).
"SALE OF THE COMPANY" means the consummation of a
transaction, whether in a single transaction or in a series of related
transactions that are consummated contemporaneously (or consummated pursuant
to contemporaneous agreements), with any other Person or Persons on an
arm's-length basis, pursuant to which such party or parties (a) acquire
(whether by merger, stock purchase, recapitalization, reorganization,
redemption, issuance of capital stock or otherwise) more than 50% of the Fully
Diluted Units or voting stock of V.S.M. Holdings, Inc. or (b) acquire assets
constituting all or substantially all of the assets of the Company and its
Subsidiaries on a consolidated basis.
"SALE NOTICE" has the meaning given such term in Section
3.2(a).
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the Vestar Securities and
the Employee Securities.
"SECURITYHOLDER" has the meaning given such term in the
preface.
"SECURITIES ACT" means the Securities Act of 1933, as
amended from time to time.
"SELLING HOLDER" has the meaning given such term in Section
3.2(a).
"SUBSIDIARY" means any corporation with respect to which
another specified corporation has the power to vote or direct the voting of
sufficient securities to elect directors having a majority of the voting power
of the board of directors of such corporation.
"TAG-ALONG NOTICE" has the meaning given such term in
Section 3.2(a).
"TRANSFER" means (in either the noun or the verb form,
including with respect to the verb form, all conjugations thereof within their
correlative meanings) with respect to any security, the gift, sale,
assignment, transfer, pledge, hypothecation or other disposition (whether for
or without consideration, whether directly or indirectly, and whether
voluntary, involuntary or by operation of law) of such Security or any
interest therein.
"VESTAR" means Vestar Capital Partners IV, L.P., a Delaware
limited partnership.
"VESTAR DEMAND RIGHT" has the meaning given such term in
Section 5.1(a).
"VESTAR DIRECTORS" has the meaning given such term in
Section 2.1(a)(ii).
28
"VESTAR MAJORITY HOLDERS" means the Person or Persons
holding a majority of the Preferred Units or Preferred Stock and a majority of
the Common Units or Common Stock constituting Vestar Securities.
"VESTAR SECURITIES" means (a) Vestar Units, (b) Securities,
Common Units, Common Stock, Common Stock Equivalents, Preferred Units or
Preferred Stock hereafter acquired by Vestar, and (c) any securities of the
Company issued with respect to the securities referred to in clauses (a) or
(b) above by way of a payment-in-kind, stock dividend, or stock split or in
connection with a combination of shares, exchange, conversion,
recapitalization, merger, consolidation or other reorganization.
"VESTAR UNITS" means the Preferred Units issued to Vestar on
the Closing Date.
8.2 LEGENDS.
(a) SECURITYHOLDERS AGREEMENT. Each certificate or
instrument evidencing Securities and each certificate or instrument issued in
exchange for or upon the Transfer of any such Securities (if such securities
remain subject to this Agreement after such Transfer) shall be stamped or
otherwise imprinted with a legend (as appropriately completed under the
circumstances) in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE CONSTITUTE
["EMPLOYEE SECURITIES"] ["VESTAR SECURITIES"] UNDER A CERTAIN
SECURITYHOLDERS AGREEMENT DATED AS OF _____________, 2000
AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND
CERTAIN OF THE COMPANY'S SECURITYHOLDERS AND, AS SUCH, ARE
SUBJECT TO CERTAIN VOTING PROVISIONS, PURCHASE RIGHTS AND
RESTRICTIONS ON TRANSFER SET FORTH IN THE SECURITYHOLDERS
AGREEMENT. A COPY OF SUCH SECURITYHOLDERS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST."
(b) RESTRICTED SECURITIES. Each instrument or
certificate evidencing Securities and each instrument or certificate issued in
exchange or upon the Transfer of any Securities shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED OR SOLD UNLESS IT HAS BEEN
29
REGISTERED UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE (AND, IN SUCH CASE, AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SHALL HAVE
BEEN DELIVERED TO THE COMPANY TO THE EFFECT THAT SUCH OFFER OR
SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES
ACT)."
(c) REMOVAL OF LEGENDS. Whenever in the opinion of the
Company and counsel reasonably satisfactory to the Company (which opinion
shall be delivered to the Company in writing) the restrictions described in
any legend set forth above cease to be applicable to any Securities, the
holder thereof shall be entitled to receive from the Company, without expense
to the holder, a new instrument or certificate not bearing a legend stating
such restriction.
8.3 SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
8.4 ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
8.5 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the
Securityholders and any subsequent holders of Securities and the respective
successors and assigns of each of them, so long as they hold Securities.
8.6 COUNTERPARTS. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
8.7 REMEDIES. The Company and the Securityholders shall
be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement
(including costs of enforcement) and to exercise all other rights existing in
their favor. The parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement
and that the Company or any Securityholder may in its or his sole discretion
apply to any court of law or equity of competent jurisdiction for specific
30
performance or injunctive relief (without posting a bond or other security) in
order to enforce or prevent any violation of the provisions of this Agreement.
8.8 NOTICES. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any
other recipient at the address indicated on the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices will be deemed
to have been given hereunder when sent by facsimile (receipt confirmed)
delivered personally, five days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Company's
address is:
V.S.M. Investors, LLC
c/o Vestar Capital Partners IV, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Managing Director
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
A copy of each notice given to the Company shall be given to Vestar (and no
notice to the Company shall be effective until such copy is delivered to
Vestar) at the following address:
Vestar Capital Partners IV, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
General Counsel
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
8.9 GOVERNING LAW. The Delaware Limited Liability
Company Act (and, following the conversion of the Company into a corporation
or the Company being merged into, or otherwise succeeded by, a corporation,
the relevant state corporation law)
31
shall govern all questions arising under this Agreement concerning the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity and interpretation of this Agreement
shall be governed by and construed in accordance with the domestic laws of the
State of New York applicable to contracts made and to be performed in the
State of New York.
8.10 DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOLLOW]
32
IN WITNESS WHEREOF, the parties hereto have executed this
Securityholders Agreement on the day and year first above written.
V.S.M. INVESTORS, LLC
By: -----------------------------------
Name:
Title:
VESTAR CAPITAL PARTNERS IV, L.P.
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates Corporation IV,
its General Partner
By: -------------------------
Name:
Title: Managing Director
CONFIDENTIAL
PROJECT MOONSHINE
TERM SHEET FOR PRINCIPAL PROVISIONS OF MANAGEMENT EQUITY
AND SEVERANCE ARRANGEMENTS
-------------------------------------------------------------------------------------------------------------------------
STRUCTURE CHART The chart attached hereto as Attachment A sets forth the proposed organization and capitalization of
V.S.M. Investors, LLC ("LLC" or the "Company") and its subsidiaries.
-------------------------------------------------------------------------------------------------------------------------
ROLLOVER EQUITY G-7: 55% (subject to adjustment to the extent that more than 45% of a holder's gross proceeds are
needed to pay taxes thereon) of all pre-tax proceeds of mega-grants must be rolled over into Class
A Participating Preferred Units (the "rollover equity").
OTHER MEMBERS OF OPERATING COMMITTEE AND AD HOC OPERATING COMMITTEE: If they elect to rollover,
must rollover 55% (subject to adjustment as described above) of all pre-tax proceeds of mega-grants
into rollover equity.
REQUIRED ROLLOVER: The total amount rolled over by the "G-7" and the other members of the Operating
Committee and Ad Hoc Operating Committee must be at least 68% of 55% of all pre-tax proceeds of all
of Moonshine's mega-grants.
OTHER EMPLOYEES: Will have the choice of whether or not to rollover the proceeds of their
mega-grant options, PROVIDED THAT actual participation is at an appropriate level.
The amount of equity that will be received through the rollover of the mega-grants will be 10% of
the Class A Participating Preferred Units (8.79% of the fully diluted equity of LLC), regardless of
whether 6/9, 7/9 or 9/9 of the mega-grants will become exercisable upon the change of control,
PROVIDED THAT, if the amount of the rollover is less than $6.4 million due to employees electing no
rollover and other employees do not make up the difference, the equity percentage (and the
Additional Units referred to below) shall be reduced proportionately. Any Class A Participating
Preferred Units not purchased by the employees will be purchased by the Sponsor Group.
-------------------------------------------------------------------------------------------------------------------------
LLC EQUITY The LLC will be managed by Vestar Capital Partners IV, L.P. and will have a management committee
structured as described in the Securityholders Agreement. Distributions to holders of LLC units
shall be made as follows:
First, to the holders of the Class A Participating Preferred Units until they have received a return
of their investment and a 12.75% preferred return (compounded on a quarterly basis).
Second, to the holders of Class A Participating Preferred Units until they have received $10 per
share.
Third, at least 87.9% of remaining distributions to holders of Class A Participating Preferred Units
(Vestar Capital Partners IV, LP and Park Avenue Investors (the "Sponsor Group"): 79.11%; and
rollover equity participants: 8.79%) and up to 12.1% of remaining distributions to the holders of
Class B, C and D Common Units. The actual amount distributable to the Class B, C and D Common Units
will be reduced to the extent that such units are repurchased or if applicable performance targets
or return hurdles (as discussed below) are not achieved. For example, if 10% of such units are
repurchased from departing employees, the maximum amount distributable in respect of the Class B, C
and D Common Units would be 90% of 12.1% or 10.89%. The balance would be distributed to holders of
Class A
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Participating Preferred Units.
-------------------------------------------------------------------------------------------------------------------------
NON-MEGA GRANT Cash paid with respect to any options that are in the money and that were not part of the recent
OPTIONS "mega-grants" will not be required to be rolled over into equity.
-------------------------------------------------------------------------------------------------------------------------
CALLS ON ROLLOVER An employee is "vested" in 100% of the principal amount of his rollover equity (subject to losses
EQUITY that may be incurred as a result of a decline in the value of the underlying equity). The
appreciation on the rollover equity, if any, from the closing is subject to a vesting schedule that
is built into the call terms. Following a termination of an employee's employment, any call of
rollover equity can be made for 90 days after (x) in the case of rollover equity that is not vested
as to appreciation, the date of the termination of employee's employment and (y) in the case of
rollover equity that is vested as to appreciation as well as principal, the date that is 6 months
after the date on which such rollover equity first vests as to appreciation as well as principal.
-------------------------------------------------------------------------------------------------------------------------
GOOD EXIT PRICE: The rollover equity held by an employee who leaves upon a "Good Exit" (I.E.,
voluntarily with good reason, death, disability, retirement or fired without cause) after closing
will be subject to call in whole or in part at the following prices:
-------------------------------------------------------------------------------------------------------------------------
ANNIVERSARY OF CLOSING PRICE = COST PRICE = FMV
---------------------- ------------ -----------
-------------------------------------------------------------------------------------------------------------------------
Before 1st 100% 0%
After 1st, before 2nd 80% 20%
After 2nd, before 3rd 60% 40%
After 3rd, before 4th 40% 60%
After 4th, before 5th 20% 80%
After 5th 0% 100%
--------------------------------------------------------------------------------------------------------------------------
VOLUNTARY QUIT PRICE: The rollover equity held by an employee who leaves voluntarily without good
reason following the closing (a "VOLUNTARY QUIT") will be subject to call at the following prices:
-------------------------------------------------------------------------------------------------------------------------
PRICE = LOWER OF
ANNIVERSARY OF CLOSING COST OR FMV PRICE = FMV
---------------------- ----------- -----------
--------------------------------------------------------------------------------------------------------------------------
Prior to 3rd 100% 0%
After 3rd, before 4th 60% 40%
After 4th, before 5th 25% 75%
After 5th 0% 100%
--------------------------------------------------------------------------------------------------------------------------
For each of the charts listed above, after a percentage of the equity is subject to call at fair
market value ("FMV") (for Good Exit, after 1st anniversary, for Voluntary Quit, after 3rd
anniversary) the increase in the Applicable Percentage between the anniversaries of the closing is
accrued monthly (e.g., for Voluntary Quit, between years 3 and 4, the percentage subject to purchase
of FMV increases by approximately 3.42% per month, for Good Exit, the year to year increase is at
approximately 1.67% per month). In the case of an employee who leaves upon a "Good Exit", if 90% of
the Class D Case discussed below has been achieved as of the fourth anniversary, the Applicable
Percentage will be 100%.
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TERMINATION FOR CAUSE: The rollover equity held by an employee who is terminated for cause
following the closing will be subject to call at the lesser of FMV or cost.
-------------------------------------------------------------------------------------------------------------------------
PAYMENT TERMS GOOD EXIT: The call or put will generally be paid in cash (after payment of any debt owed by the
UPON EXERCISE OF employee to LLC and its subsidiaries). The only exception is when applicable law, regulation or
order of any governmental or judicial authority, the LLC operating agreement
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
CALL OR PUT or the financing documents or financial provisions of the organizational documents of the LLC and
its subsidiaries (the "Governing Documents") preclude a cash payment by LLC to employee or a cash dividend or
distribution to LLC or one of its subsidiaries by a subsidiary of LLC to fund a cash payment by LLC to
employee or would be in default as a result of such a cash payment, dividend or distribution. In that case,
the purchase price will be in the form of an interest bearing junior subordinated note (or partially in cash,
to the extent allowed under the Governing Documents). The note shall be payable as soon as cash may be paid
under the Governing Documents and, in all events, at a sale of the Company or an IPO from net cash proceeds
payable to the LLC or its unitholders in such sale or IPO.
CAUSE TERMINATION OR A VOLUNTARY QUIT: Purchase price is payable with an interest bearing note.
Principal and interest on the note is payable in a balloon payment five years after the call (with
acceleration at a Company sale or IPO from net cash proceeds payable to the LLC or its unitholders
in such sale or IPO).
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PUT RIGHTS Generally, no put rights. There is a limited right prior to an IPO or sale of the LLC for deceased,
retired and disabled employees to put all of their units that are vested as to appreciation as well
as principal for 90 days after the date that is 6 months after the date of the employee's
termination of employment at such units' FMV at the purchase date.
-------------------------------------------------------------------------------------------------------------------------
DETERMINING FMV FMV will be determined by the Board in good faith. If an employee disputes the Board's valuation,
he will have the opportunity to submit the issue to an independent arbiter, under a "baseball"
arbitration procedure whereby the Company and the employee will each propose a value and the arbiter
will choose one of the two values. The Company will provide the employee with all data (including
reports of employees and outside advisors) relied upon by the Board in making its determination, and
will pay the employee's reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel and one appraiser, accountant or investment banking firm) if the arbiter selects the
employee's proposed value. The arbiter will be an organization experienced in valuation acceptable
to both parties.
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
ADDITIONAL UNITS At or shortly following closing, management will be permitted to purchase, at a nominal price,
additional classes (Class B, C and D Common Units) of units in the LLC (the "Additional Units"),
which will represent the right to receive 12.1% of the increase in the value of the common equity*
of the LLC. The Class B Units will represent the right to receive 4.033% of the increase in the
value of the common equity of the LLC subject to the period of the employee's post-closing service.
The Class C Units will represent the right to receive 4.033% of the increase in the value of
common equity upon a liquidity event, e.g., a sale of the Company, to the extent that:
1. the Sponsor Group has achieved the return hurdle for the Class C Units described under
"Impact of Exit/Sale" below, or
2. the performance targets of the Company set forth in the Class C Case have been met in
each of the five years after the closing. The Class C Case is attached hereto as Attachment B.
If the return hurdles are not achieved as a result of a sale, the Class C Units may be entitled
-------------------------------------------------------------------------------------------------------------------------
------------------
* This includes the Class A Participating Preferred Units.
-------------------------------------------------------------------------------------------------------------------------
to partial distributions of the proceeds from that sale. For each year that the relevant
performance targets are met prior to the sale, the Class C Units are entitled to 20% of the full
distribution right. For example, if the Company is sold after the end of the third year and all
of the performance targets were met for Class C Units for each of the three preceding years, but,
if any of the remaining Class C Units were entitled to any distribution, the return hurdles would
not be met, the holders of Class C Units would be entitled to 60% of the full distribution right
of 4.033% (or 2.4198%) of the increase in common equity value over $10 per unit (assuming none of
the Class C Units have been repurchased as described below). No partial credit for a year will
be given if the performance for that year does not at least equal the target objectives for the
year. Notwithstanding the foregoing, if (x) the target objectives for the fiscal year ended in
2004 have not been met, (y) the actual performance for the following year exceeds the target
objectives for such year (the "Excess") and (z) the addition of such Excess to the actual
performance for the fiscal year ended in 2004 results in the target objectives for the fiscal
year ended in 2004 to be met, then credit will be given for the achievement of such target
objectives.
The economic rights of Class D Units are identical to those of the Class C Units except that the
performance targets for the Class D Units are set forth in the Class D Case. The Class D Case is
attached hereto as Attachment C.
The Additional Units will be subject to call on terms substantially similar to those applicable to
the rollover equity (except as otherwise described below with respect to the Class C Units and the
Class D Units).
The performance targets for the Class C and Class D Units will be subject to reasonable
adjustments by the LLC Management Committee to reflect any acquisitions or dispositions of
material assets, mergers or other business combination transactions effected by LLC and its
subsidiaries.
-------------------------------------------------------------------------------------------------------------------------
CALLS ON CLASS B The Class B Units will have the repurchase price determined solely by reference to the period of
ADDITIONAL UNITS the employee's post-closing service, in accordance with the following schedule:
-------------------------------------------------------------------------------------------------------------------------
GOOD EXIT PRICE:
--------------------------------------------------------------------------------------------------------------------------
ANNIVERSARY OF CLOSING PRICE = COST PRICE = FMV
---------------------- ------------ -----------
--------------------------------------------------------------------------------------------------------------------------
Before 1st 100% 0%
After 1st, before 2nd 80% 20%
After 2nd, before 3rd 60% 40%
After 3rd, before 4th 40% 60%
After 4th, before 5th 20% 80%
After 5th 0% 100%
--------------------------------------------------------------------------------------------------------------------------
VOLUNTARY QUIT PRICE:
---------------------
--------------------------------------------------------------------------------------------------------------------------
PRICE = LOWER OF
ANNIVERSARY OF CLOSING COST OR FMV PRICE = FMV
---------------------- ----------- -----------
--------------------------------------------------------------------------------------------------------------------------
Prior to 3rd 100% 0%
After 3rd, before 4th 60% 40%
After 4th, before 5th 25% 75%
After 5th 0% 100%
-------------------------------------------------------------------------------------------------------------------------
For each of the charts listed above, after a percentage
of the equity is subject to call at
-------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
FMV (for Good Exit, after 1st anniversary, for Voluntary Quit, after 3rd anniversary) the increase
in the Applicable Percentage between the anniversaries of the closing is accrued monthly (e.g.,
for Voluntary Quit, between years 3 and 4, the percentage subject to purchase of FMV increases
by approximately 3.42% per month, for Good Exit, the year to year increase is at approximately
1.67% per month). In the case of an employee who leaves upon a "Good Exit", if 90% of the Class
D Case has been achieved for the fiscal year ended in 2004, the Applicable Percentage will be
100%.
--------------------------------------------------------------------------------------------------------------------------
TERMINATION FOR CAUSE: Class B Units held by an employee who is terminated for cause following
the closing will be subject to call at the lesser of FMV or cost.
--------------------------------------------------------------------------------------------------------------------------
CALLS ON CLASS C The call price with respect to the Class C Units will be FMV; provided that, in the case of a
ADDITIONAL UNITS Voluntary Quit prior to the third anniversary or a termination for Cause, the call price will be
cost. If less than all of the Class C Units of a holder has been called, such holder will not
be entitled to receive any increase in the value of the remaining Class C Units held by such
holder which is attributable to the achievement of performance targets after the event giving
rise to such call. Class C Units that have achieved full distribution rights may be called at
their fair market value as of the date of the employee's termination of employment.
--------------------------------------------------------------------------------------------------------------------------
CALLS ON CLASS D The call provisions with respect to the Class D Units will be identical to those of the Class C
ADDITIONAL UNITS Units, except that the achievement of full distribution rights with respect to the Class D Units
will based upon the achievement of the EBITDA and leverage targets stated in the Class D Case
for the relevant year.
--------------------------------------------------------------------------------------------------------------------------
IMPACT OF EXIT/SALE All Class B Units become entitled to their full distribution rights upon a sale of the LLC.
Class C Units and Class D Units will become entitled to their full distribution rights upon a
sale of the LLC if stated return levels are achieved as described below.
The Class C Units will become entitled to their full distribution rights to the extent that,
after giving effect to such distribution rights, the Sponsor Group receive sale proceeds in the
form of cash or readily marketable securities that (1) are at least as equal to 2 times the
Sponsor Group's investment and (2) represent at least a 25% (compounded annually) IRR on its
investment.
The Class D Units will become entitled to their full distribution rights to the extent that,
after giving effect to such distribution rights, the Sponsor Group receives sale proceeds in the
form of cash or readily marketable securities that (1) are at least as equal to 3 times the
Sponsor Group's investment and (2) represent at least a 35% (compounded annually) IRR on its
investment.
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
SEVERANCE FOR G-7, THE For G-7, the Operating Committee members and the Ad Hoc Operating Committee members, the
OPERATING COMMITTEE AND change of control agreements will be terminated, but the existing levels of basic severance
THE AD HOC OPERATING benefits will remain in effect except as provided otherwise in the forms of employment
COMMITTEE agreement being provided concurrently herewith. However, the definitions of cause and good
reason under such agreements will be amended to read as set forth in the forms of
employment agreement being provided concurrently herewith.
--------------------------------------------------------------------------------------------------------------------------
EXISTING NON-CIC SEVERANCE Severance agreements for employees not referred to above who do not currently have change
AGREEMENTS FOR of control agreements will be left in place, subject to modification to make clear that a
material breach of any agreement with the Company or a member of the Sponsor Group or of
any employment policy of the Company will constitute
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
OTHER EXECUTIVE cause for termination.
--------------------------------------------------------------------------------------------------------------------------
EXCISE TAX PROTECTION The Company will provide each employee who invests in the LLC with a full gross-up of any
excise taxes (including payment for the income, employment and excise taxes payable in
respect of the gross-up amount) that the employee may incur as a result of the current
transaction.
--------------------------------------------------------------------------------------------------------------------------
NONCOMPETITION AGREEMENTS Each of the employees will enter into reasonable noncompetition agreements with the LLC and
its subsidiaries covering a period equal to the greater of two years from closing or a
number of years from termination of employment equal to the number of years of base salary
that the employee is entitled to receive as severance. The employees will also provide
covenants regarding nonsolicitation of employees, customers and clients for a similar
period (which will apply following all terminations of employment, regardless of the
reason). The unit subscription agreement also will contain reasonable non-competition
covenants covering a period equal to two years from the date on which the employee ceases
to be a unitholder and will provide, in the event of a breach of the non-competition
covenants, for the forfeiture of all net proceeds in excess of principal (if any) received
by the employee from the disposition of his units and the right of LLC and its affiliates
to call any or all of the employee's units at cost.
--------------------------------------------------------------------------------------------------------------------------
MANAGEMENT AGREEMENT The form of Management Agreement referred to in the Securityholders Agreement is attached
hereto as Attachment D.
--------------------------------------------------------------------------------------------------------------------------
* This includes the Class A Participating Preferred Units.
ATTACHMENT D
MANAGEMENT AGREEMENT
This Agreement is made as of this ___ day of __________, 2000,
among Sunrise Medical Inc., a Delaware corporation (the "Company"), V.S.M.
Holdings, Inc., a Delaware corporation ("Parent"), V.S.M. Investors, LLC, a
Delaware limited liability company ("Investors"), Vestar Capital Partners
("Vestar") and Park Avenue Equity Management, LLC ("PAEM").
WHEREAS, Vestar and PAEM, by and through their officers, employees,
agents, representatives and affiliates, have expertise in the areas of corporate
management, finance, investment, acquisitions and other matters relating to the
business of the Company; and
WHEREAS, each of Investors, Parent and the Company desires to avail
itself, for the term of this Agreement, of the expertise of Vestar and PAEM in
the aforesaid areas, in which it acknowledges the expertise of Vestar and PAEM.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions herein set forth, the parties hereto agree as follows:
1. APPOINTMENT. Each of Investors, Parent and the Company hereby
appoints Vestar and PAEM to render the advisory and consulting services
described in Paragraph 2 hereof commencing upon the Effective Time (as defined
in Section 3(b) hereof).
2. SERVICES. Each of Vestar and PAEM hereby agrees that commencing
upon the Effective Time it shall render to each of Investors, Parent and the
Company (and their subsidiaries) by and through such of Vestar's and PAEM's
respective officers, employees, agents, representatives and affiliates as Vestar
and PAEM, as the case may be, in each of their sole discretion, shall designate
from time to time, advisory and consulting services in relation to the affairs
of Investors, Parent and the Company (and their subsidiaries) in connection with
strategic financial planning, and other services not referred to in the next
sentence, including, without limitation, advisory and consulting services in
relation to the selection, supervision and retention of independent auditors,
the selection, retention and supervision of outside legal counsel, and the
selection, retention and supervision of investment bankers or other financial
advisors or consultants. It is expressly agreed that the services to be
performed hereunder shall not include (x) investment banking or other financial
advisory services rendered by any of Vestar, PAEM and their respective
affiliates to Investors, Parent and the Company (and their subsidiaries) after
the Effective Time in connection with acquisitions, divestitures, refinancings,
restructurings and similar transactions by Investors, Parent and the Company
(and their subsidiaries) or (y) full or part-time employment by any of the
Company and its subsidiaries of any employee or partner of any of Vestar, PAEM
and any of their respective affiliates, in each case, for which Vestar, PAEM and
their respective affiliates shall be entitled to receive additional
compensation.
3. FEES. (a) In consideration of the services contemplated by
Paragraph 2, subject to the provisions of Paragraph 6, Investors, Parent and
the Company and their respective successors hereby jointly and severally
agree to pay to Vestar and PAEM an aggregate per annum management fee (the
"Fee") equal to the greater of (i) $750,000 and (ii) an amount per annum
equal to 1.25% of Consolidated EBITDA (as defined in the Credit Agreement
entered into on ______ __, 2000 among V.S.M. Acquisition Corp., the lenders
party thereto and Bankers Trust Company, as administrative agent for such
lenders), before deducting the Fee payable pursuant to this Section 3
("Adjusted EBITDA"), commencing at the Effective Time. The Fee shall be
payable semi-annually in advance (based on clause (i) above in 2000 and
thereafter based on the greater of clause (i) above and 1.25% of the prior
year's Adjusted EBITDA), with an adjustment of the Fee for any fiscal year
payable promptly following the determination of Adjusted EBITDA for such
fiscal year or on termination of this Agreement. The Fee shall be allocated
between PAEM and Vestar as follows: (i) PAEM's percentage of the Fee shall
equal (X) the total dollar amount of equity actually contributed by PAEM to
Investors and its subsidiaries, divided by (Y) the total dollar amount of
equity actually contributed by all equity investors in Investors and its
subsidiaries (other than employees of the Company) to Investors and its
subsidiaries; and (ii) Vestar shall receive the balance of the Fee. The
semi-annual Fee payments shall be non-refundable (except for any downward
adjustment as described above).
(b) Investors, Parent and the Company and their respective
successors also hereby jointly and severally agree to pay Vestar and PAEM at the
effective time (the "Effective Time") of the merger provided for in the
Agreement and Plan of Merger dated as of October 16, 2000, among the Company,
Investors, Parent and V.S.M. Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Merger Agreement"), a transaction fee
equal to $5 million plus all of Out-of-Pocket Expenses (as defined in Section 4)
incurred by Vestar and PAEM prior to the Effective Time for services rendered by
Vestar and PAEM in connection with the consummation of the Offer and the Merger
referred to in the Merger Agreement. $4 million of such transaction fee will
be payable to Vestar and $1 million of such transaction fee will be payable
to PAEM.
4. REIMBURSEMENTS. In addition to the Fee, Investors, Parent and
the Company hereby jointly and severally agree, at the direction of Vestar or
PAEM, as the case may be, to pay directly or reimburse Vestar or PAEM for its
reasonable Out-of- Pocket Expenses incurred after the Effective Time in
connection with the services provided for in Paragraph 2 hereof. For the
purposes of this Agreement, the term "Out- of-Pocket Expenses" shall mean the
amounts paid by or on behalf of Vestar or PAEM, as the case may be, in
connection with the services contemplated hereby, including reasonable (i)
fees and disbursements of any independent professionals and organizations,
including independent auditors and outside legal counsel, investment bankers
or other financial advisors or consultants, (ii) costs of any outside
services or independent contractors, such as financial printers, couriers,
business publications or similar services, and (iii) transportation, per
diem, telephone calls, word processing expenses or any similar expense not
associated with its ordinary operations. All reimbursements for Out-of-Pocket
Expenses shall be made promptly upon or as soon as practicable after
presentation by Vestar and PAEM of the statement in connection therewith.
5. INDEMNIFICATION. Investors, Parent and the Company hereby jointly
and severally agree to indemnify and hold harmless Vestar, PAEM and affiliates
and their respective affiliates and partners, officers, directors, employees,
agents, representatives and
stockholders (each being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities of whatever kind or nature, joint or
several, absolute, contingent or consequential, to which such Indemnified Party
may become subject under any applicable federal or state law, or any claim made
by any third party, or otherwise, to the extent they relate to or arise out of
the services contemplated by this Agreement or the engagement of Vestar and PAEM
pursuant to, and the performance by Vestar and PAEM of the services contemplated
by, this Agreement. Investors, Parent and the Company hereby jointly and
severally agree to reimburse any Indemnified Party for all reasonable costs
and expenses (including reasonable attorneys' fees and expenses) as they are
incurred in connection with the investigation of, preparation for or defense
of any pending or threatened claim for which the Indemnified Party would be
entitled to indemnification under the terms of the previous sentence, or any
action or proceeding arising therefrom, whether or not such Indemnified Party
is a party hereto. Investors, Parent and the Company will not be liable under
the foregoing indemnification provision to the extent that any loss, claim,
damage, liability, cost or expense is determined by a court, in a final
judgment from which no further appeal may be taken, to have resulted
primarily from the gross negligence or willful misconduct of Vestar or PAEM.
None of Investors, Parent and the Company shall be obligated to make any
payment to Vestar or PAEM hereunder unless and until the Effective Time has
occurred.
6. TERM. This Agreement shall be in effect on the date hereof and
shall terminate upon the earlier to occur of (i) the termination of the Merger
Agreement or (ii) such time after the Effective Time as Vestar Capital Partners
IV, L.P., a Delaware limited partnership ("VCP"), Park Avenue Equity
Partners, LP, a Delaware limited partnership ("PAE"), and the respective
partners therein and the respective affiliates thereof, in the aggregate,
hold directly or indirectly through Investors and Parent, or otherwise, less
than 20% of the voting power of the Company's outstanding voting stock. The
provisions of Paragraphs 4, 5, 7 and 8 and the joint and several obligation
of Investors, Parent and the Company to pay Fees accrued during the term of
this Agreement pursuant to Section 2 shall survive the termination of this
Agreement.
7. PERMISSIBLE ACTIVITIES. Subject to all applicable provisions
of New York law that impose fiduciary duties upon Vestar , PAEM or their
respective partners or affiliates, nothing herein shall in any way preclude
Vestar , PAEM or their respective partners, officers, employees or affiliates
from engaging in any business activities or from performing services for its
or their own account or for the account of others, including for companies
that may be in competition with the business conducted by the Company.
8. GENERAL. (a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in writing and signed
by the parties to this Agreement and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) Any and all notices hereunder shall, in the
absence of receipted hand delivery, be deemed duly given when mailed, if the
same shall be sent by registered or certified mail, return receipt requested,
and the mailing date shall be deemed the date from which all time periods
pertaining to a date of notice shall run. Notices shall be addressed to the
parties at the following addresses:
to Vestar: Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
If to PAEM: Park Avenue Equity Management, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: _____________
to Investors, Parent
the Company: ___________________
Attention:
In either case,
with copies to: Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
and
Park Avenue Equity Management, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ________________
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(a) This Agreement shall constitute the entire Agreement
between the parties with respect to the subject matter hereof, and shall
supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
(b) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN. THE PARTIES TO THIS AGREEMENT HEREBY
AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT. This Agreement shall inure to the benefit of,
and be binding upon, Vestar, PAEM, the Indemnified Parties, Investors, Parent,
the Company and their respective successors and assigns.
(c) This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each set of
counterparts showing execution by all parties shall be deemed an original, but
all of which shall constitute one and the same instrument.
(d) The waiver by any party of any breach of this Agreement shall not operate as
or be construed to be a waiver by such party of any subsequent breach.
WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers or agents as set forth
below.
VESTAR CAPITAL PARTNERS
By its General Partner:
By:
-------------------------------------------
Name:
Title:
PARK AVENUE EQUITY MANAGEMENT, LLC
By its General Partner:
By:
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Name:
Title:
SUNRISE MEDICAL INC.
By:
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Name:
Title:
V.S.M. INVESTORS, LLC
By:
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Name:
Title:
V.S.M. HOLDINGS, INC.
By:
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Name:
Title:
V.S.M. ACQUISITION CORP.
By:
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Name:
Title: