Exhibit 10.18
EXECUTION COPY
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of
February 6, 2004 (the "EFFECTIVE DATE"), by and among Medtech/Denorex, LLC, a
Delaware limited liability company (the "COMPANY"), Medtech/Denorex Management,
Inc., a Delaware corporation ("EMPLOYER"), and ▇▇▇▇▇ ▇. ▇▇▇▇ ("EXECUTIVE").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will acquire from the Company, and the Company will issue to
Executive, Class B Preferred Units of the Company (the "CLASS B PREFERRED
UNITS") and Common Units of the Company (the "COMMON UNITS"). Certain
definitions are set forth in SECTION 11 of this Agreement.
Employer desires to employ Executive and Executive desires to be
employed by Employer upon the terms set forth herein.
The execution and delivery of this Agreement by the Company and
Executive is a condition to (A) the purchase of Class B Preferred Units and
Common Units by GTCR Fund VIII, L.P., a Delaware limited partnership ("GTCR FUND
VIII"), GTCR Fund VIII/B, L.P., a Delaware limited partnership ("GTCR FUND
VIII/B"), GTCR Co-Invest II, L.P., a Delaware limited partnership ("GTCR
CO-INVEST") and the TCW/Crescent Purchasers (as defined herein) pursuant to a
Unit Purchase Agreement among the Company and such Persons dated as of the date
hereof (the "PURCHASE AGREEMENT") and (B) the purchase of warrants to acquire
Class B Preferred Units and Common Units by GTCR Capital Partners, L.P., a
Delaware limited partnership ("GTCR CAPITAL PARTNERS") and the TCW/Crescent
Lenders (as defined herein) pursuant to a Warrant Agreement between the Company
and such Persons dated as of the date hereof. Each of GTCR Fund VIII, GTCR Fund
VIII/B, GTCR Co-Invest and the TCW/Crescent Purchasers is sometimes individually
referred to herein as an "EQUITY INVESTOR" and, collectively, as the "EQUITY
INVESTORS." Each of GTCR Capital Partners and the TCW/Crescent Lenders is
sometimes individually referred to herein as a "DEBT INVESTOR" and,
collectively, as the "DEBT INVESTORS." Each of the Equity Investors and the Debt
Investors is sometimes individually referred to herein as an "INVESTOR" and,
collectively, as the "INVESTORS." Certain provisions of this Agreement are
intended for the benefit of, and will be enforceable by, the Investors.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
PROVISIONS RELATING TO EXECUTIVE SECURITIES
1. ACQUISITION AND ISSUANCE OF EXECUTIVE SECURITIES.
(a) Upon execution of this Agreement, Executive will acquire,
and the Company will issue, 2,504,310 Common Units at a price of $0.10
per unit and
749.569 Class B Preferred Units at a price of $1,000 per unit, for an
aggregate purchase price of $1,000,000. Upon the execution of this
Agreement, the Company will deliver to Executive copies of the
certificates representing such Executive Securities (as defined below),
and Executive will contribute, assign, transfer, convey and deliver to
the Company the following in full consideration for such Executive
Securities:
(i) that number of shares of Medtech Common Stock
with an aggregate Medtech Common Stock Value, determined as of the
Closing Date, of $798,570; and
(ii) that number of shares of Denorex Common Stock
with an aggregate Denorex Common Stock Value, determined as of the
Closing Date, of $201,430.
If the Medtech Common Stock Value and/or the Denorex Common Stock Value
determined as of the Closing Date is increased after the Closing Date pursuant
to adjustments thereto contemplated by the Stock Purchase Agreement, then the
Company shall issue to Executive for no additional consideration (I) the number
of Co-Invest Common Units and Class B Preferred Units (using the same ratio then
in effect as between such units) having an aggregate value equal to such
increase (assuming a Class B Preferred Unit value of $1,000 per unit and a
Co-Invest Common Unit value of $0.10 per unit) and (II) the number of Co-Invest
Common Units and Class B Preferred Units (using the same ratio then in effect as
between such units) having an aggregate value equal to the Class B Yield (as
defined in the LLC Agreement) that would have accrued on the Class B Preferred
Units issued pursuant to the foregoing clause (I) had such units been issued as
of the Closing Date (assuming a Class B Preferred Unit value of $1,000 per unit
and a Co-Invest Common Unit value of $0.10 per unit). If the Medtech Common
Stock Value and/or the Denorex Common Stock Value determined as of the Closing
Date is decreased after the Closing Date pursuant to adjustments thereto
contemplated by the Stock Purchase Agreement, then Executive shall forfeit to
the Company at no cost the number (using the same ratio then in effect as
between such units) of Co-Invest Common Units and Class B Preferred Units (and
the Class B Yield relating thereto) having an aggregate value equal to such
decrease (assuming a Class B Preferred Unit value of $1,000 per unit and a
Co-Invest Common Unit value of $0.10 per unit).
(b) In addition to the Executive Securities acquired pursuant to
SECTION 1(a) above, the Company will issue 27,667 Common Units to
Executive in exchange for Executive's Distribution Offset and
Contribution Obligation (as defined herein). Upon the execution of this
Agreement, the Company will deliver to Executive copies of the
certificates representing such Executive Securities.
(c) 2,351,336 of the Common Units acquired pursuant to SECTIONS
1(a) AND (b) hereof are referred to herein as the "CARRIED COMMON
UNITS." The remaining Common Units that are acquired pursuant to
SECTIONS 1(a) AND (b) above are referred to herein as the "CO-INVEST
COMMON UNITS." All Class B
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Preferred Units and the Co-Invest Common Units acquired by Executive
hereunder are referred to herein as the "CO-INVEST UNITS."
(d) Within 30 days after the acquisition of the Carried Common
Units hereunder, Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder in the form of EXHIBIT A
attached hereto.
(e) 293,917 of the Carried Common Units are referred to herein
as the "STANDARD CARRIED COMMON UNITS."
(f) Until released upon the occurrence of a Sale of the Company
or a Public Offering as provided below, all certificates evidencing
Executive Securities shall be held by the Company for the benefit of
Executive and the other holder(s) of Executive Securities, if any. Upon
the occurrence of a Sale of the Company, the Company will return all
certificates evidencing Executive Securities to the record holders
thereof. Upon the consummation of a Public Offering, the Company will
return to the record holders thereof certificates evidencing the
Co-Invest Units and the Vested Carried Common Units.
(g) In connection with the acquisition and issuance of the
Executive Securities, Executive represents and warrants to the Company
that:
(i) The Executive Securities to be acquired by
Executive pursuant to this Agreement will be acquired for Executive's
own account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act, or any applicable state
securities laws, and the Executive Securities will not be disposed of in
contravention of the Securities Act or any applicable state securities
laws.
(ii) Executive is an executive officer of the Company
and Employer, is sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in the Executive
Securities.
(iii) Executive is able to bear the economic risk of
his investment in the Executive Securities for an indefinite period of
time because the Executive Securities have not been registered under the
Securities Act and, therefore, cannot be sold unless subsequently
registered under the Securities Act or an exemption from such
registration is available.
(iv) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of Executive Securities and has had full access to such other
information concerning the Company and its Subsidiaries as he has
requested.
(v) Executive has full legal capacity to execute and
deliver this Agreement and to perform his obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of
Executive, enforceable in accordance
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with its terms, and the execution, delivery and performance of this
Agreement by Executive, to the best of his knowledge, does not and will
not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or
decree to which Executive is subject. This representation is subject to
SECTION 1(g)(vi) below.
(vi) Except as set forth on SCHEDULE 1(g)(vi)
attached hereto, Executive is neither party to, nor bound by, any other
employment agreement, consulting agreement, noncompete agreement,
non-solicitation agreement or confidentiality agreement.
(vii) Executive is a resident of the State of New
York.
(viii) As of the date of this Agreement, Executive is
the holder of record and owns beneficially the number of shares of
Medtech Common Stock and Denorex Common Stock being contributed to the
Company by Executive pursuant to SECTION 1(a) of this Agreement (the
"CONTRIBUTED SHARES"). Other than the transfer restrictions set forth
in, with respect to the Contributed Shares consisting of Medtech Common
Stock, the Medtech Stockholders Agreement, and, with respect to the
Contributed Shares consisting of Denorex Common Stock, the Denorex
Stockholders Agreement, Executive owns the Contributed Shares free and
clear of all liens, pledges, voting agreements, voting trusts, proxy
agreements, claims, security interests, restrictions, mortgages, deeds
of trust, tenancies, and other possessory interests, conditional sale or
other title retention agreements, assessments, easements, rights of way,
covenants, restrictions, rights of first refusal, defects in title,
encroachments, and other burdens, options or encumbrances of any kind
(collectively, "LIENS"). There are no agreements, instruments or other
arrangements restricting or otherwise affecting the transfer of the
Contributed Shares or the other transactions contemplated by this
SECTION 1. Upon the consummation of the transactions contemplated by
SECTION 1(a) of this Agreement, the Company will receive good and valid
title to the shares of Medtech Common Stock and Denorex Common Stock
being contributed to the Company by Executive pursuant to SECTION 1(a)
of this Agreement, free and clear of all Liens.
(h) As an inducement to the Company to issue the Executive
Securities to Executive, and as a condition thereto, Executive
acknowledges and agrees that neither the issuance of the Executive
Securities to Executive nor any provision contained herein shall entitle
Executive to remain in the employment of the Company, Employer or any of
their respective Subsidiaries or affect the right of the Company or
Employer to terminate Executive's employment at any time for any reason,
subject to the remaining terms of this Agreement and any other agreement
between Executive and any such parties.
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2. VESTING OF CARRIED COMMON UNITS.
(a) The Co-Invest Units acquired by Executive shall be vested
upon the acquisition thereof. The Carried Common Units (including the
Standard Carried Common Units which shall vest on a basis proportionate
to the total number of Carried Common Units) shall be subject to vesting
in the manner specified in this SECTION 2.
(b) Except as otherwise provided in this SECTION 2, the Carried
Common Units shall become vested in accordance with the following
schedule, if and only if as of each such date provided below, Executive
has been continuously employed by the Company, Employer or any of their
respective Subsidiaries from the Effective Date through and including
such date:
CUMULATIVE PERCENTAGE OF
DATE CARRIED COMMON UNITS VESTED
----------------------------------------- -----------------------------
Effective Date 15.00%
First Anniversary of Effective Date 32.00%
Second Anniversary of Effective Date 49.00%
Third Anniversary of Effective Date 66.00%
Fourth Anniversary of Effective Date 83.00%
Fifth Anniversary of Effective Date 100.00%
(c) If Executive ceases to be employed by the Company, Employer
and their respective Subsidiaries on any date other than an anniversary
date specified in the schedule above, the cumulative percentage of
Carried Common Units to become vested shall be determined on a PRO RATA
basis according to the number of days elapsed since the Effective Date,
or the most recent anniversary date, as the case may be.
(d) Upon the occurrence of a Sale of the Company, all Carried
Common Units which have not yet become vested shall become vested at the
time of the consummation of the Sale of the Company, if, as of such
time, Executive has been continuously employed by the Company, Employer
or any of their respective Subsidiaries from the Effective Date through
and including such date.
(e) Carried Common Units that have become vested ("VESTED
CARRIED COMMON UNITS") and the Co-Invest Common Units are referred to
herein as "VESTED COMMON UNITS." The Vested Common Units and the Class B
Preferred Units are collectively referred to herein as "VESTED UNITS."
All Carried Common Units that have not vested are referred to herein as
"UNVESTED COMMON UNITS."
3. REPURCHASE OPTIONS.
(a) SEPARATION REPURCHASE OPTION.
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(i) Subject to the terms and conditions set forth in
this SECTION 3(a) and SECTION 5 below, the Company and the Equity
Investors will have the right to repurchase (the "SEPARATION REPURCHASE
OPTION") from Executive and his transferees (other than the Company and
the Equity Investors) all or any portion of (A) the Unvested Common
Units, in the event Executive ceases to be employed by the Company,
Employer and their respective Subsidiaries for any reason, and (B) the
Vested Carried Common Units and the Co-Invest Units, in the event of
Executive's (I) death, (II) Disability, (iii) resignation other than for
Good Reason from Executive's employment with the Company, Employer or
any of their respective Subsidiaries, (iv) employment termination with
Cause by the Company, Employer or any of their respective Subsidiaries
or (V) employment termination when there is Substantial Underperformance
(each a "SEPARATION REPURCHASE EVENT"). The Separation Repurchase Option
with respect to Vested Units under SECTIONS 3(a)(i)(B)(I) and
3(a)(i)(B)(II) shall be valid only if Executive fails to exercise the
Separation Put Right (if applicable) within the Put Election Period
provided in SECTION 4(a)(i) below. The Company may assign its repurchase
rights set forth in this SECTION 3(a) to any Person.
(ii) For any Separation Repurchase Option, (A) the
purchase price for each Unvested Common Unit will be the lesser of (I)
Executive's Original Cost for such unit and (II) the Fair Market Value
of such unit as of the date of the Separation Repurchase Event, (B) the
purchase price for each Vested Common Unit will be the Fair Market Value
of such unit as of the date of the Separation Repurchase Event; PROVIDED
THAT, if Executive's employment is terminated with Cause, the purchase
price for each Vested Common Unit will be the lesser of (I) Executive's
Original Cost for such unit and (II) the Fair Market Value of such unit
as of the effective date of Executive's termination with Cause and (C)
the purchase price for each Class B Preferred Unit will be the Fair
Market Value of such unit as of the date of the Separation Repurchase
Event; PROVIDED THAT, if Executive's employment is terminated with
Cause, the purchase price for each Class B Preferred Unit will be the
lesser of (I) Executive's Original Cost for such unit and (II) the Fair
Market Value of such unit as of the effective date of Executive's
termination with Cause.
(iii) The Company (with the approval of the Board) may
elect to purchase all or any portion of the Unvested Common Units and/or
the Vested Units by delivering written notice (the "SEPARATION
REPURCHASE NOTICE") to the holder or holders of such securities within
ninety (90) days after the Separation Repurchase Event. The Separation
Repurchase Notice will set forth the number of Unvested Common Units and
Vested Units to be acquired from each holder, the aggregate
consideration to be paid for such units and the time and place for the
closing of the transaction. The number of Executive Securities to be
repurchased by the Company shall first be satisfied to the extent
possible from the Executive Securities held by Executive at the time of
delivery of the Separation Repurchase Notice. If the number of Executive
Securities then held by Executive is less than the total number of
Executive Securities that the Company has elected
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to purchase, the Company shall purchase the remaining Executive
Securities elected to be purchased from the Permitted Transferee(s) of
Executive Securities under this Agreement, PRO RATA according to the
number of Executive Securities held by such Permitted Transferee(s) at
the time of delivery of such Separation Repurchase Notice (determined as
nearly as practicable to the nearest unit). The number of Unvested
Common Units and Vested Units to be repurchased hereunder will be
allocated among Executive and the Permitted Transferee(s) of Executive
Securities (if any) PRO RATA according to the number of Executive
Securities to be purchased from such Person.
(iv) If for any reason the Company does not elect to
purchase all of the Executive Securities pursuant to the Separation
Repurchase Option, the Equity Investors shall be entitled to exercise
the Separation Repurchase Option for all or any portion of the Executive
Securities the Company has not elected to purchase (the "AVAILABLE
SEPARATION SECURITIES"). As soon as practicable after the Company has
determined that there will be Available Separation Securities, but in
any event within four months after the Separation Repurchase Event, the
Company shall give written notice (the "SEPARATION OPTION NOTICE") to
the Equity Investors setting forth the number of Available Separation
Securities and the purchase price for the Available Separation
Securities. The Equity Investors may elect to purchase any or all of the
Available Securities by giving written notice to the Company within 30
days after the Separation Option Notice has been given by the Company.
If the Equity Investors elect to purchase an aggregate number greater
than the number of Available Separation Securities, the Available
Separation Securities shall be allocated among the Equity Investors
based upon the number of Common Units owned by each Equity Investor. As
soon as practicable, and in any event within ten days after the
expiration of the 30-day period set forth above, the Company shall
notify each holder of Executive Securities under this Agreement as to
the number of units being purchased from such holder by the Equity
Investors (the "SUPPLEMENTAL SEPARATION REPURCHASE NOTICE"). At the time
the Company delivers the Supplemental Repurchase Notice to such
holder(s) of Executive Securities, the Company shall also deliver
written notice to each Equity Investor setting forth the number of units
such Equity Investor is entitled to purchase, the aggregate purchase
price and the time and place of the closing of the transaction.
(v) The closing of the purchase of the Executive
Securities pursuant to the Separation Repurchase Option shall take place
on the date designated by the Company in the Separation Repurchase
Notice or Supplemental Separation Repurchase Notice, which date shall
not be more than 30 days nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay
for the Executive Securities to be purchased by it pursuant to the
Separation Repurchase Option by first offsetting amounts outstanding
under any bona fide debts owed by Executive to the Company and will pay
the remainder of the purchase price by, at its option, (A) a check or
wire transfer of funds, (B) if the purchase is being made by a corporate
successor to the Company, the issuance of a subordinated promissory note
of such successor bearing interest
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at a rate equal to the prime rate (as published in THE WALL STREET
JOURNAL from time to time) and having such maturity as the Company shall
determine in good faith, not to exceed three years, (C) issuing in
exchange for such securities a number of the Company's Class A Preferred
Units (having the rights and preferences set forth in the LLC Agreement)
equal to (I) the aggregate portion of the repurchase price for such
Executive Securities determined in accordance with this SECTION 3(a)
paid by the issuance of Class A Preferred Units DIVIDED BY (II) 1,000,
and for purposes of the LLC Agreement each such Class A Preferred Unit
shall as of its issuance be deemed to have Capital Contributions made
with respect to such Class A Preferred Unit equal to $1,000, or (D) any
combination of clauses (A), (B) and (C) as the Board may elect in its
discretion. Each Equity Investor will pay for the Executive Securities
purchased by it by a check or wire transfer of immediately available
funds. The Company and the Equity Investors will be entitled to receive
customary representations and warranties from the sellers regarding such
sale and to require that all sellers' signatures be guaranteed.
By way of example only for the purpose of clarifying the mechanics of
SECTION 3(a)(v)(C), if the Company intends to repurchase 20,025,000
Common Units by issuance of Class A Preferred Units and the aggregate
repurchase price for such Common Units determined in accordance with
this SECTION 3(a) is $400,500, then the Company would issue to Executive
400.5 Class A Preferred Units, and for purposes of the LLC Agreement
each whole Class A Preferred Unit issued to Executive would as of its
issuance be deemed to have Capital Contributions made for such Class A
Preferred Unit of $1,000, and the Capital Contributions made for the
one-half Class A Preferred Unit would be $500.
(vi) Notwithstanding anything to the contrary
contained in this Agreement, if the Fair Market Value of Executive
Securities is finally determined to be an amount at least 10% greater
than the per unit repurchase price for such unit of Executive Securities
in the Separation Repurchase Notice or in the Supplemental Separation
Repurchase Notice, each of the Company and the Equity Investors shall
have the right to revoke its exercise of the Separation Repurchase
Option for all or any portion of the Executive Securities elected to be
repurchased by it by delivering notice of such revocation in writing to
the holders of Executive Securities during the thirty-day period
beginning on the date that the Company and/or the Equity Investors are
given written notice that the Fair Market Value of a unit of Executive
Securities was finally determined to be an amount at least 10% greater
than the per unit repurchase price for Executive Securities set forth in
the Separation Repurchase Notice or in the Supplemental Separation
Repurchase Notice.
(b) DILUTION REPURCHASE OPTION.
(i) Capitalized terms used in this SECTION 3(b) or
elsewhere in this Agreement but not otherwise defined herein shall have
the following meanings:
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(A) "FOLLOW-ON PURCHASER EQUITY INVESTMENT"
means an investment as equity financing in the Company
by one or more Purchasers after the Effective Date
pursuant to the Purchase Agreement.
(B) "FOLLOW-ON PURCHASER EQUITY INVESTMENT
AMOUNT" means, with respect to any Follow-on Purchaser
Equity Investment, the aggregate dollar amount of such
Follow-on Purchaser Equity Investment.
(C) "FULLY-DILUTED EQUITY" means, at any
time of determination, the then outstanding Equity
Securities plus (without duplication) all shares or
units (or other denominations) of Equity Securities
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 the then
outstanding Equity Equivalents.
(D) "MAXIMUM NUMBER OF REPURCHASABLE
STANDARD CARRIED COMMON UNITS" means with respect to any
Follow-on Purchaser Equity Investment, the product of
the Maximum Percentage of Repurchaseable Standard
Carried Common Units MULTIPLIED BY the number of
Standard Carried Common Units owned by Executive
immediately prior to the Follow-on Purchaser Equity
Investment.
(E) "MAXIMUM PERCENTAGE OF REPURCHASEABLE
STANDARD CARRIED COMMON UNITS" means, with respect to
any Follow-on Purchaser Equity Investment, the sum,
expressed as a percentage and rounded to the nearest
one-hundredth of a percent, of the Purchaser Equity Fund
Dilution Percentage PLUS the Purchaser Mezzanine Fund
Dilution Percentage.
(F) "POST-MONEY EQUITY VALUE" means, with
respect to any Follow-on Purchaser Equity Investment,
the sum of the Pre-Money Equity Value PLUS the Follow-on
Purchaser Equity Investment Amount.
(G) "PRE-MONEY EQUITY VALUE" means, with
respect to any Follow-on Purchaser Equity Investment,
the Fair Market Value of the Fully-Diluted Equity of the
Company immediately prior to the Follow-on Purchaser
Equity Investment.
(H) "PURCHASER EQUITY FUND DILUTION
PERCENTAGE" means, with respect to any Follow-on
Purchaser Equity Investment, the quotient, expressed as
a percentage and rounded to the nearest one-hundredth of
a percent, equal to the Follow-on
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Purchaser Equity Investment Amount divided by the
Post-Money Equity Value.
(I) "PURCHASER MEZZANINE FUND DILUTION
FACTOR" means 5.53%.
(J) "PURCHASER MEZZANINE FUND DILUTION
PERCENTAGE" means, with respect to any Follow-on
Purchaser Equity Investment, the product, expressed as a
percentage and rounded to the nearest one-hundredth of a
percent, of the Purchaser Equity Fund Dilution
Percentage MULTIPLIED BY the Purchaser Mezzanine Fund
Dilution Factor.
(ii) Subject to the terms and conditions set forth in
this SECTION 3(b), in the event of any Follow-on Purchaser Equity
Investment, the Investors will have the right to repurchase (the
"DILUTION REPURCHASE OPTION") from Executive and his transferees
(including for this purpose the Company and, with respect to any
Standard Carried Common Units acquired other than pursuant to the
Dilution Repurchase Option, the Investors) all or any portion of
Executive's Maximum Number of Repurchasable Standard Carried Common
Units as of such Follow-on Purchaser Equity Investment.
(iii) For any Dilution Repurchase Option, the purchase
price for each Standard Carried Common Unit will be Executive's Original
Cost for such unit PLUS interest on such amount at a rate of 8% per
annum from the date hereof until the date of exercise of such Dilution
Repurchase Option.
(iv) As soon as practicable after the Company has
determined the Maximum Number of Repurchasable Standard Carried Common
Units, the Company shall give written notice (the "DILUTION REPURCHASE
OPTION NOTICE") to the Investors setting forth the Maximum Number of
Repurchasable Standard Carried Common Units and the purchase price
therefor. The Investors may elect to purchase any or all of the Maximum
Number of Repurchasable Standard Carried Common Units by giving written
notice to the Company within 30 days after the Dilution Repurchase
Option Notice has been given by the Company. If the Investors elect to
purchase an aggregate number greater than the Maximum Number of
Repurchasable Standard Carried Common Units, the Maximum Number of
Repurchasable Standard Carried Common Units shall be allocated among the
Investors based upon the number of Common Units owned by each Investor.
As soon as practicable, and in any event within 10 days after the
expiration of the 30-day period set forth above, the Company shall
notify each holder of the Standard Carried Common Units as to the number
of units being purchased from such holder by the Investors, the
aggregate consideration to be paid for such units and the time and place
for the closing of the transaction (the "DILUTION REPURCHASE NOTICE").
At such time, the Company shall also deliver written notice to each
Investor setting forth the number of units such Investor is
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entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction.
(v) The number of Standard Carried Common Units to
be repurchased by the Investors shall first be satisfied to the extent
possible from the Standard Carried Common Units held by Executive at the
time of delivery of the Dilution Repurchase Notice. If the number of
Standard Carried Common Units then held by Executive is less than the
total number of Standard Carried Common Units that the Investors have
elected to purchase, the Investors shall purchase the remaining Standard
Carried Common Units elected to be purchased from the Permitted
Transferee(s) of Executive Securities under this Agreement, PRO RATA
according to the number of Executive Securities held by such Permitted
Transferee(s) at the time of delivery of such Dilution Repurchase Notice
(determined as nearly as practicable to the nearest unit). The number of
Standard Carried Common Units, vested and unvested, to be repurchased
hereunder shall be allocated among Executive and the Permitted
Transferee(s) of Executive Securities (if any), PRO RATA according to
the number of Standard Carried Common Units to be purchased from such
Person.
(vi) The closing of the purchase of the Standard
Carried Common Units pursuant to the Dilution Repurchase Option shall
take place on the date designated in the Dilution Repurchase Notice,
which date shall not be more than 30 days nor less than five days after
the delivery of such notice. Each Investor will pay for the Executive
Securities to be purchased by it pursuant to the Dilution Repurchase
Option by a check or wire transfer of immediately available funds. The
Investors will be entitled to receive customary representations and
warranties from the sellers regarding such sale and to require that all
sellers' signatures be guaranteed.
4. PUT RIGHTS.
(a) SEPARATION PUT RIGHT.
(i) In the event Executive ceases to be employed by
the Company, Employer and their respective Subsidiaries as a result of
Executive's (A) death, (B) Disability, (C) employment termination by the
Company, Employer or any of their respective Subsidiaries without Cause
when there is not Substantial Underperformance or (D) resignation from
his employment for Good Reason when there is not Substantial
Underperformance (each a "SEPARATION PUT EVENT"), Executive may elect
(the "SEPARATION PUT ELECTION"), subject to and in accordance with the
terms of this SECTION 4(a) AND SECTION 5 below, to require the Company
to purchase from Executive and the other holders of Executive Securities
under this Agreement all (but not less than all) of the Vested Units
held by Executive or such holders by delivering written notice (the
"SEPARATION PUT EXERCISE NOTICE") to the Company before the expiration
of the Put Election Period, specifying in such Separation Put Exercise
Notice the number and type of Vested Units required to be purchased by
the Company.
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(ii) For any Separation Put Election, the purchase
price for each Vested Unit will be the Fair Market Value of such unit as
of the Put Event Date.
(iii) The closing of the purchase of the Vested Units
pursuant to the Separation Put Election shall take place on a date to be
designated by the Company in the Company Separation Purchase Price
Notice, which date shall not be more than 30 days nor less than five
days after the Separation Put Exercise Notice is received by the
Company. The Company shall specify in writing to Executive the aggregate
consideration to be paid for such units and the time and place for the
closing of the transaction within five days after receipt of the
Separation Put Exercise Notice (the "COMPANY SEPARATION PURCHASE PRICE
NOTICE"). The Company will pay for the Vested Units to be purchased by
it pursuant to the Separation Put Election by first offsetting amounts
outstanding under any bona fide debts owed by Executive to the Company
and will pay the remainder of the purchase price by a check or wire
transfer of immediately available funds. The Company will be entitled to
receive customary representations and warranties from the sellers
regarding such sale and to require that all sellers' signatures be
guaranteed.
(iv) Notwithstanding anything herein to the contrary,
the purchase obligations of the Company pursuant to this SECTION 4(a)
shall terminate if, prior to the consummation of such purchase
obligations, a Public Offering or a Sale of the Company occurs (such
termination effective as of the consummation of the Public Offering or
Sale of the Company, as the case may be).
(b) CLASS B PREFERRED UNIT PUT RIGHT. (i) Upon the occurrence of
a Preferred Put Event described in clause (ii) or (iii) of the
definition thereof, the Company shall deliver to Executive a written
notice notifying Executive of the occurrence of the Preferred Put Event
(each of such notice and the acknowledgement contemplated by clause (i)
of the definition of "Preferred Put Event," a "PREFERRED PUT EVENT
NOTICE").
(ii) In the event of a Preferred Put Event, Executive
may elect (the "PREFERRED PUT ELECTION"), subject to and in accordance
with the terms of this SECTION 4(b) and SECTION 5 below, to require the
Company to purchase from Executive and the Permitted Transferee(s) of
Executive Securities all or any portion of the Maximum Number of Put
Class B Preferred Units held by Executive or such Permitted
Transferee(s) by delivering written notice (the "PREFERRED PUT EXERCISE
NOTICE") to the Company before the expiration of the Put Election
Period, specifying in such Preferred Put Exercise Notice the number of
Class B Preferred Units required to be purchased by the Company.
(iii) For any Preferred Put Election, the purchase
price for each Class B Preferred Unit to be purchased (limited to the
Maximum Number of Put Class B Preferred Units) will be the Fair Market
Value of such unit as of the date of the Preferred Put Event.
12
(iv) The closing of the purchase of the Class B
Preferred Units pursuant to the Preferred Put Election shall take place
on a date to be designated by the Company in the Company Preferred
Purchase Price Notice, which date shall not be more than 30 days nor
less than five days after the Preferred Put Exercise Notice is received
by the Company. The Company shall specify in writing to Executive the
aggregate consideration to be paid for such units and the time and place
for the closing of the transaction within five days after receipt of the
Preferred Put Exercise Notice (the "COMPANY PREFERRED PURCHASE PRICE
NOTICE"). The Company will pay for the Class B Preferred Units to be
purchased by it pursuant to the Preferred Put Election by first
offsetting amounts outstanding under any bona fide debts owed by
Executive to the Company and will pay the remainder of the purchase
price by a check or wire transfer of immediately available funds. The
Company will be entitled to receive customary representations and
warranties from the sellers regarding such sale and to require that all
sellers' signatures be guaranteed.
5. LIMITATIONS ON CERTAIN REPURCHASES. Notwithstanding anything to
the contrary contained in this Agreement, all repurchases of Executive
Securities by the Company pursuant to any of the Separation Repurchase Option,
Separation Put Election or Preferred Put Election shall be subject to the
ability of the Company to pay the purchase price from its readily available cash
resources (without imposing any obligation on the Company to raise financing to
fund the repurchases) and also subject to applicable restrictions contained in
the
Delaware Limited Liability Company Act, the
Delaware General Corporation Law
or such other governing corporate or limited liability company law, applicable
federal and state securities laws, and in the Company's and its Subsidiaries'
debt and equity financing agreements. If any such restrictions prohibit (A) the
repurchase of Executive Securities hereunder which the Company is otherwise
entitled or required to make or (B) dividends or other transfers of funds from
one or more Subsidiaries to the Company to enable such repurchases, then the
Company may (in the case of the Separation Repurchase Option), or shall (in the
case of the Separation Put Election or Preferred Put Election), make such
repurchases as soon as it is permitted to make repurchases or receive funds from
Subsidiaries under such restrictions. Furthermore, in the event of a
disagreement in accordance with the terms herein relating to the determination
of the Fair Market Value of any Executive Securities, the time periods described
herein with respect to purchases of Executive Securities under SECTIONS 3 and 4
herein shall be tolled until any such determination has been made in accordance
with the terms provided herein.
6. RESTRICTIONS ON TRANSFER OF EXECUTIVE SECURITIES.
(a) TRANSFER OF EXECUTIVE SECURITIES. The holders of Executive
Securities shall not Transfer any interest in any units of Executive
Securities, except pursuant to (i) the provisions of SECTIONS 3 or 4
hereof, (ii) the provisions of Section 1 of the Securityholders
Agreement (a "PARTICIPATING SALE"), (iii) an Approved Sale (as defined
in Section 4 of the Securityholders Agreement) or (iv) the provisions of
SECTION 6(b) below.
13
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
SECTION 6 will not apply with respect to any Transfer of (i) Executive
Securities made pursuant to applicable laws of descent and distribution
or to such Person's legal guardian in the case of any mental incapacity
or among such Person's Family Group or (ii) Common Units at such time as
the Investors sell Common Units in a Public Sale, but in the case of
this clause (ii) only an amount of units (the "TRANSFER AMOUNT") equal
to the lesser of (A) the sum of the number of Vested Carried Common
Units and Co-Invest Common Units owned by Executive and (B) the result
of the number of Common Units owned by Executive multiplied by a
fraction (the "TRANSFER FRACTION"), the numerator of which is the number
of Common Units sold by the Investors in such Public Sale and the
denominator of which is the total number of Common Units held by the
Investors prior to the Public Sale; PROVIDED that, if at the time of a
Public Sale of units by the Investors, Executive chooses not to Transfer
the Transfer Amount, Executive shall retain the right to Transfer an
amount of Common Units at a future date equal to the lesser of (x) the
sum of the number of Vested Carried Common Units and Co-Invest Common
Units owned by Executive at such future date and (y) the result of the
number of Common Units owned by Executive at such future date multiplied
by the Transfer Fraction; PROVIDED further that the restrictions
contained in this SECTION 6 will continue to be applicable to the
Executive Securities after any Transfer of the type referred to in
clause (i) above and the transferees of such Executive Securities must
agree in writing to be bound by the provisions of this Agreement and the
LLC Agreement. Any transferee of Executive Securities pursuant to a
Transfer in accordance with the provisions of clause (i) of this SECTION
6(b) is herein referred to as a "PERMITTED TRANSFEREE." Upon the
Transfer of Executive Securities pursuant to this SECTION 6(b), the
transferring holder of Executive Securities will deliver a written
notice (a "TRANSFER NOTICE") to the Company. In the case of a Transfer
pursuant to clause (i) hereof, the Transfer Notice will disclose in
reasonable detail the identity of the Permitted Transferee(s).
(c) TERMINATION OF RESTRICTIONS. The restrictions set forth in
this SECTION 6 will continue with respect to each unit of Executive
Securities until the earlier of (i) the date on which such unit of
Executive Securities has been transferred in a Public Sale permitted by
this SECTION 6, or (ii) the consummation of a Sale of the Company.
7. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE SECURITIES.
(a) LEGEND. The certificates representing the Executive
Securities will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED AS OF FEBRUARY 6, 2004, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
14
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A
SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY
AND OTHER PARTIES, DATED AS OF FEBRUARY 6, 2004. A COPY OF
SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Securities may
Transfer any Executive Securities (except pursuant to SECTION 3, SECTION
4 or SECTION 6(b) of this Agreement, Section 4 of the Securityholders
Agreement or an effective registration statement under the Securities
Act) without first delivering to the Company a written notice describing
in reasonable detail the proposed Transfer, together with an opinion of
counsel (reasonably acceptable in form and substance to the Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such
transfer. In addition, if the holder of the Executive Securities
delivers to the Company an opinion of counsel that no subsequent
Transfer of such Executive Securities shall require registration under
the Securities Act, the Company shall promptly upon such contemplated
Transfer deliver new certificates for such Executive Securities that do
not bear the Securities Act portion of the legend set forth in SECTION
7(a). If the Company is not required to deliver new certificates for
such Executive Securities not bearing such legend, the holder thereof
shall not Transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the
conditions contained in this SECTION 7.
PROVISIONS RELATING TO EMPLOYMENT
8. EMPLOYMENT. Employer agrees to employ Executive and Executive
accepts such employment for the period beginning as of the date hereof and
ending upon his separation pursuant to SECTION 8(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES.
(i) During the Employment Period, Executive shall
serve as the Chief Executive Officer of Employer and shall have the
normal duties, responsibilities and authority implied by such position,
including, without limitation, the responsibilities associated with all
aspects of the daily operations of Employer and the identification,
negotiation, completion and integration of any acquisitions made by the
Company, Employer or any of their respective Subsidiaries, subject to
the power of the Board to expand or limit such duties, responsibilities
and authority and to override actions of the Chief Executive Officer.
15
(ii) Executive shall report to the Board, and
Executive shall devote his best efforts and, except as otherwise
requested or directed by the Board with respect to services to be
provided by the Company or any of its Subsidiaries pursuant to the
Transition Services Agreement, his full business time and attention to
the business and affairs of the Company, Employer and their
Subsidiaries.
(b) SALARY, BONUS AND BENEFITS. During the Employment Period,
Employer will pay Executive a base salary of $425,000 per annum (the
"ANNUAL BASE SALARY"). The existing Medtech/Denorex bonus program will
continue through the fiscal year ending March 31, 2004. Beginning with
fiscal year 2005, the Board shall develop a new bonus program which may
incorporate subjective and objective criteria for bonus achievement
different from the criteria contained in the existing Medtech/Denorex
bonus program; PROVIDED, HOWEVER, THAT the maximum bonus payment
potentials to Executive will not be decreased from those provided in the
existing Medtech/Denorex bonus program. In addition, during the
Employment Period, Executive will be entitled to such other benefits
approved by the Board and made available to the senior management of the
Company, Employer and their Subsidiaries, which shall include no less
than four (4) weeks paid vacation per calendar year and medical, dental,
life and disability insurance. The Board, on a basis consistent with
past practice, shall review the Annual Base Salary of Executive and may
increase the Annual Base Salary by such amount as the Board, in its sole
discretion, shall deem appropriate. The term "Annual Base Salary" as
used in this Agreement shall refer to the Annual Base Salary as it may
be so increased.
(c) SEPARATION. The Employment Period will continue until (i)
Executive's death, Disability or resignation from employment with the
Company, Employer and their respective Subsidiaries or (ii) the Company,
Employer and their respective Subsidiaries decide to terminate
Executive's employment with or without Cause. If (A) Executive's
employment is terminated without Cause pursuant to clause (ii) above or
(B) Executive resigns from employment with the Company, Employer or any
of their respective Subsidiaries for Good Reason, then during the period
commencing on the date of termination of the Employment Period and
ending on the first anniversary of the date of termination (the
"SEVERANCE PERIOD"), Employer shall pay to Executive, in equal
installments on the Employer's regular salary payment dates, an
aggregate amount equal to (I) his Annual Base Salary, plus (II) an
amount equal to the annual bonus, if any, paid or payable to Executive
by Employer for the last fiscal year ended prior to the date of
termination. In addition, if Executive is entitled on the date of
termination to coverage under the medical and prescription portions of
the Welfare Plans, such coverage shall continue for Executive and
Executive's covered dependents for a period ending on the first
anniversary of the date of termination at the active employee cost
payable by Executive with respect to those costs paid by Executive prior
to the date of termination; PROVIDED, that this coverage will count
towards the depletion of any continued health care coverage rights that
Executive and Executive's dependents may have pursuant to the
Consolidated Omnibus Budget
16
Reconciliation Act of 1985, as amended ("COBRA"); PROVIDED further, that
Executive's or Executive's covered dependents' rights to continued
health care coverage pursuant to this SECTION 8(c) shall terminate at
the time Executive or Executive's covered dependents become covered, as
described in COBRA, under another group health plan, and shall also
terminate as of the date Employer ceases to provide coverage to its
senior executives generally under any such Welfare Plan. Notwithstanding
the foregoing, (I) Executive shall not be entitled to receive any
payments or benefits pursuant to this SECTION 8(c) unless Executive has
executed and delivered to Employer a general release in form and
substance satisfactory to Employer and (II) Executive shall be entitled
to receive such payments and benefits only so long as Executive has not
breached the provisions of SECTIONS 9 or 10 hereof. The release
described in the foregoing sentence shall not require Executive to
release any claims for any vested employee benefits, workers
compensation benefits covered by insurance or self-insurance, claims to
indemnification to which Executive may be entitled under the Company's
or its Subsidiaries' certificate(s) of incorporation, by-laws or under
any of the Company's or its Subsidiaries' directors or officers
insurance policy(ies) or applicable law, or equity claims to
contribution from the Company or its Subsidiaries or any other Person to
which Executive is entitled as a matter of law in respect of any claim
made against Executive for an alleged act or omission in Executive's
official capacity and within the scope of Executive's duties as an
officer, director or employee of the Company or its Subsidiaries. Not
later than eighteen (18) months following the termination of Executive's
employment, the Company and its Subsidiaries for which the Executive has
acted in the capacity of a senior manager, shall sign and deliver to
Executive a release of claims that the Company or its Subsidiaries has
against Executive; PROVIDED THAT, such release shall not release any
claims that the Company or its Subsidiaries commenced prior to the date
of the release(s), any claims relating to matters actively concealed by
Executive, any claims to contribution from Executive to which the
Company or its Subsidiaries are entitled as a matter of law or any
claims arising out of mistaken indemnification by the Company or any of
its Subsidiaries. Except as otherwise provided in this SECTION 8(c) or
in the Employer's employee benefit plans or as otherwise required by
applicable law, Executive shall not be entitled to any other salary,
compensation or benefits after termination of Executive's employment
with Employer.
9. CONFIDENTIAL INFORMATION.
(a) OBLIGATION TO MAINTAIN CONFIDENTIALITY. Executive
acknowledges that the information, observations and data (including
trade secrets) obtained by him during the course of his performance
under this Agreement concerning the business or affairs of the Company,
Employer and their respective Subsidiaries and Affiliates ("CONFIDENTIAL
INFORMATION") are the property of the Company, Employer or such
Subsidiaries and Affiliates, including information concerning
acquisition opportunities in or reasonably related to the Company's and
Employer's business or industry of which Executive becomes aware during
the Employment Period. Therefore, Executive agrees that he will not
disclose to any
17
unauthorized Person or use for his own account (for his commercial
advantage or otherwise) any Confidential Information without the Board's
written consent, unless and to the extent that the Confidential
Information, (i) becomes generally known to and available for use by the
public other than as a result of Executive's acts or omissions to act,
(ii) was known to Executive prior to Executive's employment with
Employer, the Company or any of their Subsidiaries and Affiliates or
(iii) is required to be disclosed pursuant to any applicable law, court
order or other governmental decree. Executive shall deliver to the
Company at a Separation, or at any other time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts
and software and other documents and data (and copies thereof) relating
to the Confidential Information, Work Product (as defined below) or the
business of the Company, Employer and their respective Subsidiaries and
Affiliates (including, without limitation, all acquisition prospects,
lists and contact information) which he may then possess or have under
his control.
(b) OWNERSHIP OF PROPERTY. Executive acknowledges that all
discoveries, concepts, ideas, inventions, innovations, improvements,
developments, methods, processes, programs, designs, analyses, drawings,
reports, patent applications, copyrightable work and mask work (whether
or not including any Confidential Information) and all registrations or
applications related thereto, all other proprietary information and all
similar or related information (whether or not patentable) that relate
to the Company's, Employer's or any of their respective Subsidiaries' or
Affiliates' actual or anticipated business, research and development, or
existing or future products or services and that are conceived,
developed, contributed to, made, or reduced to practice by Executive
(either solely or jointly with others) while employed by the Company,
Employer or any of their respective Subsidiaries or Affiliates
(including any of the foregoing that constitutes any proprietary
information or records) ("WORK PRODUCT") belong to the Company, Employer
or such Subsidiary or Affiliate and Executive hereby assigns, and agrees
to assign, all of the above Work Product to the Company, Employer or to
such Subsidiary or Affiliate. Any copyrightable work prepared in whole
or in part by Executive in the course of his work for any of the
foregoing entities shall be deemed a "work made for hire" under the
copyright laws, and the Company, Employer or such Subsidiary or
Affiliate shall own all rights therein. To the extent that any such
copyrightable work is not a "work made for hire," Executive hereby
assigns and agrees to assign to the Company, Employer or such Subsidiary
or Affiliate all right, title, and interest, including without
limitation, copyright in and to such copyrightable work. Executive shall
promptly disclose such Work Product and copyrightable work to the Board
and perform all actions reasonably requested by the Board (whether
during or after the Employment Period) to establish and confirm the
Company's, Employer's or such Subsidiary's or Affiliate's ownership
(including, without limitation, assignments, consents, powers of
attorney, and other instruments).
(c) THIRD PARTY INFORMATION. Executive understands that the
Company, Employer and their respective Subsidiaries and Affiliates will
receive from third
18
parties confidential or proprietary information ("THIRD PARTY
INFORMATION") subject to a duty on the Company's, Employer's and their
respective Subsidiaries' and Affiliates' part to maintain the
confidentiality of such information and to use it only for certain
limited purposes. During the Employment Period and thereafter, and
without in any way limiting the provisions of SECTION 9(a) above,
Executive will hold Third Party Information in the strictest confidence
and will not disclose to anyone (other than personnel and consultants of
the Company, Employer or their respective Subsidiaries and Affiliates
who need to know such information in connection with their work for the
Company, Employer or any of their respective Subsidiaries and
Affiliates) or use, except in connection with his work for the Company,
Employer or any of their respective Subsidiaries and Affiliates, Third
Party Information unless expressly authorized by a member of the Board
(other than himself if Executive is on the Board) in writing.
(d) USE OF INFORMATION OF PRIOR EMPLOYERS. During the Employment
Period and thereafter, Executive will not improperly use or disclose any
confidential information or trade secrets, if any, of any former
employers or any other Person to whom Executive has an obligation of
confidentiality, and will not bring onto the premises of the Company,
Employer or any of their respective Subsidiaries or Affiliates any
unpublished documents or any property belonging to any former employer
or any other Person to whom Executive has an obligation of
confidentiality unless consented to in writing by the former employer or
Person. Executive will use in the performance of his duties only
information which is (i) generally known and used by persons with
training and experience comparable to Executive's and which is (x)
common knowledge in the industry or (y) otherwise legally in the public
domain, (ii) otherwise provided or developed by the Company, Employer or
any of their respective Subsidiaries or Affiliates or (iii) in the case
of materials, property or information belonging to any former employer
or other Person to whom Executive has an obligation of confidentiality,
approved for such use in writing by such former employer or Person.
10. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges that
in the course of his employment with Employer he will become familiar with the
Company's, Employer's and their respective Subsidiaries' trade secrets and with
other confidential information concerning the Company, Employer and such
Subsidiaries and that his services will be of special, unique and extraordinary
value to the Company, Employer and such Subsidiaries. Therefore, Executive
agrees that:
(a) NONCOMPETITION. During the Employment Period and also during
the period commencing on the date of termination of the Employment
Period and ending on the first anniversary of the date of termination,
he shall not anywhere in the United States, directly or indirectly, own,
manage, control, participate in, consult with, render services for, or
in any manner engage in any business (i) competing with a brand of the
Company, Employer, Medtech, Denorex, any business acquired by such
Persons, or any Subsidiaries of such Persons, representing 10% or more
of the consolidated revenues or EBITDA of the Company and its
Subsidiaries for the trailing 12 months ending on the last day of
19
the last completed calendar month immediately preceding the date of
termination of the Employment Period or (ii) in which the Company,
Employer Medtech, Denorex, any business acquired by such Persons, or any
Subsidiaries of such Persons has conducted discussions or has requested
and received information relating to the acquisition of such business by
such Person (x) within one year prior to the Separation and (y) during
the Severance Period, if any. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock
of any class of a corporation that is publicly traded, so long as
Executive has no active participation in the business of such
corporation.
(b) NONSOLICITATION. During the Employment Period and also
during the period commencing on the date of termination of the
Employment Period and ending on the first anniversary of the date of
termination, Executive shall not directly or indirectly through another
entity (i) induce or attempt to induce any employee of the Company,
Employer or any of their respective Subsidiaries to leave the employ of
the Company, Employer or any such Subsidiary, or in any way interfere
with the relationship between the Company, Employer and any of their
respective Subsidiaries and any employee thereof, (ii) hire any person
who was an employee of the Company, Employer or any of their respective
Subsidiaries within 180 days after such person ceased to be an employee
of the Company, Employer or any of their respective Subsidiaries
(PROVIDED, HOWEVER, THAT such restriction shall not apply for a
particular employee if the Company has provided its written consent to
such hire, which consent, in the case of any person who was not a key
employee of the Company, Employer or any of their respective
Subsidiaries, shall not be unreasonably withheld), (iii) induce or
attempt to induce any customer, supplier, licensee or other business
relation of the Company, Employer or any of their respective
Subsidiaries to cease doing business with the Company, Employer or any
such Subsidiary or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation and the
Company, Employer or any Subsidiary or (iv) directly or indirectly
acquire or attempt to acquire an interest in any business relating to
the business of the Company, Employer or any of their respective
Subsidiaries and with which the Company, Employer and any of their
respective Subsidiaries has conducted discussions or has requested and
received information relating to the acquisition of such business by the
Company, Employer or any of their respective Subsidiaries in the two
year period immediately preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of SECTION 9 or
this SECTION 10, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree
that the maximum duration, scope or geographical area reasonable under
such circumstances shall be substituted for the stated period, scope or
area and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum duration, scope and area permitted
by law. Because Executive's services are unique and because Executive
has access to Confidential Information, the parties hereto agree that
money damages would be an inadequate remedy for any breach of this
Agreement. Therefore, in the event of a breach or threatened breach of
this
20
Agreement, the Company, Employer, their respective Subsidiaries or their
successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to
enforce, or prevent any violations of, the provisions hereof (without
posting a bond or other security).
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges that the
provisions of this SECTION 10 are in consideration of: (i) employment
with the Employer, (ii) the issuance of the Executive Securities by the
Company and (iii) additional good and valuable consideration as set
forth in this Agreement. In addition, Executive agrees and acknowledges
that the restrictions contained in SECTION 9 and this SECTION 10 do not
preclude Executive from earning a livelihood, nor do they unreasonably
impose limitations on Executive's ability to earn a living. In addition,
Executive acknowledges (i) that the business of the Company, Employer
and their respective Subsidiaries will be conducted throughout the
United States, (ii) notwithstanding the state of incorporation or
principal office of the Company, Employer or any of their respective
Subsidiaries, or any of their respective executives or employees
(including the Executive), it is expected that the Company and Employer
will have business activities and have valuable business relationships
within its industry throughout the United States and (iii) as part of
his responsibilities, Executive will be traveling throughout the United
States in furtherance of Employer's business and its relationships.
Executive agrees and acknowledges that the potential harm to the Company
and Employer of the non-enforcement of SECTION 9 and this SECTION 10
outweighs any potential harm to Executive of its enforcement by
injunction or otherwise. Executive acknowledges that he has carefully
read this Agreement and has given careful consideration to the
restraints imposed upon Executive by this Agreement, and is in full
accord as to their necessity for the reasonable and proper protection of
confidential and proprietary information of the Company, Employer and
their Subsidiaries now existing or to be developed in the future.
Executive expressly acknowledges and agrees that each and every
restraint imposed by this Agreement is reasonable with respect to
subject matter, time period and geographical area.
GENERAL PROVISIONS
11. DEFINITIONS.
"AFFILIATE" means, (i) with respect to any Person, any Person that
controls, is controlled by or is under common control with such Person or an
Affiliate of such Person, and (ii) with respect to any Investor, any general or
limited partner of such Investor, any employee or owner of any such partner, or
any other Person controlling, controlled by or under common control with such
Investor.
"BOARD" means the Company's board of managers (or its equivalent).
"CAUSE" means (i) the intentional or knowing commission of a felony or a
crime involving moral turpitude or the commission of any other act or omission
involving
21
dishonesty or fraud with respect to the Company, Employer or any of their
respective Subsidiaries or any of their customers or suppliers, (ii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iii) gross negligence or willful misconduct
with respect to the Company, Employer or any of their respective Subsidiaries,
(iv) conduct tending to bring the Company, Employer or any of their respective
Subsidiaries into substantial public disgrace or disrepute or (v) any breach by
Executive of SECTIONS 9 or 10 of this Agreement. Notwithstanding the foregoing,
if it is alleged or determined that actions taken by Executive caused the
Company, Employer or any of their respective Subsidiaries to engage in illegal
activities or operations, the taking of such actions by Executive shall not
constitute "Cause" hereunder if Executive had a reasonable and good faith belief
that such actions were not in violation of any law, rule, regulation or court
order, were in the best interests of the Company, Employer and their respective
Subsidiaries and were taken in the ordinary course of business.
"CLASS A PREFERRED UNITS" means the Class A Preferred Units, as defined
in the LLC Agreement.
"CLOSING DATE" has the meaning set forth in the Stock Purchase
Agreement.
"CREDIT AGREEMENT" means that certain Credit Agreement dated as of the
date hereof, by and among Medtech Acquisition, Inc., Denorex Acquisition, Inc.,
▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital, a division of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services
Inc., the financial institutions parties thereto and the other parties named
therein, as the same may be amended, supplemented or otherwise modified from
time to time, at any renewal, extension, refunding, restructuring, replacement
or refinancing thereof (whether with the original agent or lenders or another
agent or agents or other lenders and whether provided under the original Credit
Agreement or any other credit agreement).
"DEBT" has the meaning set forth in the Credit Agreement.
"DENOREX" means The Denorex Company, a
Delaware corporation.
"DENOREX COMMON STOCK" means the Class A Common Stock, par value $0.01
per share, of Denorex.
"DENOREX COMMON STOCK VALUE" means the portion of the Denorex Equity
Purchase Price allocable to each share of Denorex Common Stock.
"DENOREX EQUITY PURCHASE PRICE" has the meaning set forth in the Stock
Purchase Agreement.
"DENOREX STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of The
Denorex Company, dated November 6, 2006, among Denorex and its stockholders.
"DISABILITY" means the disability of Executive caused by any physical or
mental injury, illness or incapacity as a result of which Executive is unable to
effectively
22
perform the essential functions of Executive's duties as determined by the Board
in good faith.
"DISTRIBUTION OFFSET AND CONTRIBUTION OBLIGATION" means the offset and
contribution obligations set forth in Section 4.1(b) of the LLC Agreement with
respect to Executive's distributions thereunder.
"EBITDA" has the meaning set forth in the Credit Agreement.
"EQUITY EQUIVALENTS" means, at any time, without duplication with any
other Equity Securities or Equity Equivalents, any rights, warrants, options,
convertible securities or Debt, exchangeable securities or Debt, or other
rights, exercisable for or convertible or exchangeable into, directly or
indirectly, Equity Securities and securities convertible or exchangeable into
Equity Securities, whether at the time of issuance or upon the passage of time
or the occurrence of a future event.
"EQUITY SECURITIES" means all shares or units of Common Units, Class A
Preferred Units, Class B Preferred Units and other Units (as defined in the LLC
Agreement) or other equity interests in the Company (including other classes or
series thereof having different rights) as may be authorized for issuance by the
Company from time to time. Equity Securities will also include equity of the
Company (or a corporate successor to the Company or a Subsidiary of the Company)
issued with respect to Equity Securities (i) by way of a unit split, unit
dividend, conversion, or other recapitalization, (ii) by way of reorganization
or recapitalization of the Company in connection with the incorporation of a
corporate successor in accordance with Section 15.7 of the LLC Agreement, or
(iii) by way of a distribution of securities of a Subsidiary of the Company to
the members of the Company following or with respect to a Subsidiary Public
Offering.
"EXECUTIVE SECURITIES" means all Class B Preferred Units and Common
Units acquired by Executive hereunder. Executive Securities will continue to be
Executive Securities in the hands of any holder other than Executive (except for
the Company, the Investors and transferees in a Public Sale, which transferees,
other than as provided in SECTION 3(b)(ii) above, shall not be subject to the
provisions of this Agreement with respect to such securities), and except as
otherwise provided herein, each such other holder of Executive Securities will
succeed to all rights and obligations attributable to Executive as a holder of
Executive Securities hereunder. Executive Securities (or, individually, any
particular type of equity security included therein) will also include equity
securities of the Company (or a corporate successor to the Company or a
Subsidiary of the Company) issued with respect to Executive Securities (or,
individually, any particular type of equity security included therein) (i) by
way of a unit split, unit dividend, conversion, or other recapitalization, (ii)
by way of reorganization or recapitalization of the Company in connection with
the incorporation of a corporate successor in accordance with Section 15.7 of
the LLC Agreement or (iii) by way of a distribution of securities of a
Subsidiary of the Company to the members of the Company following or with
respect to a Subsidiary Public Offering. For the avoidance of doubt, all
Unvested Common Units shall remain Unvested Common Units after a Transfer
thereof, unless such Transfer is to the Company, an Investor or a transferee in
a Public Sale.
23
"FAIR MARKET VALUE" of each unit of Executive Securities or other Equity
Securities, as the case may be (as applicable, the "APPLICABLE SECURITIES"),
means the average of the closing prices of the sales of such Applicable
Securities on all securities exchanges on which such Applicable Securities 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 such Applicable Securities
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 such
Applicable Securities 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 such
Applicable Securities are not listed on any securities exchange or quoted in the
NASDAQ System or the over-the-counter market, the Fair Market Value will be the
fair value of such Applicable Securities as determined in good faith by the
Board (taking into account, as of such date of determination, Executive's
Distribution Offset and Contribution Obligation). If Executive reasonably
disagrees with such determination, Executive shall deliver to the Board a
written notice of objection (an "OBJECTION") within thirty (30) days after
delivery of the Separation Repurchase Notice (or if no Separation Repurchase
Notice is delivered, then within thirty (30) days after delivery of the
Supplemental Separation Repurchase Notice), the Dilution Repurchase Notice, the
Company Separation Purchase Price Notice or the Company Preferred Purchase Price
Notice, as applicable. Upon receipt of Executive's Objection, the Board and
Executive will negotiate in good faith to agree on such Fair Market Value. If
such agreement is not reached within 20 days after the delivery of the
Objection, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and Executive, which appraiser shall submit to the Board
and Executive a report within 30 days of its engagement setting forth such
determination. If the parties are unable to agree on an appraiser within 25 days
after delivery of the Objection, within seven days, each party shall submit the
names of four nationally recognized firms that are engaged in the business of
valuing non-public securities, and each party shall be entitled to strike two
names from the other party's list of firms, and the appraiser shall be selected
by lot from the remaining four investment banking firms. The expenses of such
appraiser shall be borne equally by Executive and the Company. The determination
of such appraiser as to Fair Market Value shall be final and binding upon all
parties.
"FAMILY GROUP" means a Person's spouse and descendants (whether natural
or adopted), and any trust, family limited partnership, limited liability
company or other entity wholly owned, directly or indirectly, by such Person or
such Person's spouse and/or descendants that is and remains solely for the
benefit of such Person and/or such Person's spouse and/or descendants and any
retirement plan for such Person.
"GOOD REASON" means (i) any material diminution in Executive's position,
title, authority, powers, functions, duties or responsibilities with Employer,
(ii) the permanent relocation or transfer of Employer's principal office outside
a 30 mile radius from
24
Irvington, New York or (iii) any failure of Employer to comply with the Annual
Base Salary and bonus provisions of SECTION 8(b) hereof.
"LLC AGREEMENT" means the Amended and Restated Limited Liability Company
Agreement of the Company, dated as of the date hereof, as amended from time to
time pursuant to its terms.
"MAXIMUM NUMBER OF PUT CLASS B PREFERRED UNITS" means the product of (i)
the number of Class B Preferred Units acquired by Executive hereunder and held
of record and beneficially by Executive as of the date of the Preferred Put
Event, multiplied by (ii) a fraction (A) the numerator of which is the number of
Class B Preferred Units that remain unpurchased by the Equity Investors on the
date of the Preferred Put Event pursuant to Section 1B of the Purchase Agreement
and (B) the denominator of which is the total number of Class B Preferred Units
to be purchased by the Equity Investors pursuant to Section 1B of the Purchase
Agreement.
"MEDTECH" means Medtech Holdings, Inc., a
Delaware corporation.
"MEDTECH COMMON STOCK" means the Class A-2 Common Stock, par value $0.01
per share, of Medtech.
"MEDTECH COMMON STOCK VALUE" means the portion of the Medtech Equity
Purchase Price allocable to each share of Medtech Common Stock.
"MEDTECH EQUITY PURCHASE PRICE" has the meaning set forth in the Stock
Purchase Agreement.
"MEDTECH STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of
Medtech, dated March 1, 2001, among Medtech and its stockholders.
"ORIGINAL COST" means, with respect to each Common Unit purchased
hereunder, $0.10, and, with respect to each Class B Preferred Unit purchased
hereunder, $1,000 (each as proportionately adjusted for all subsequent unit
splits, unit dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, investment fund, any other business
entity and a governmental entity or any department, agency or political
subdivision thereof.
"PREFERRED PUT EVENT" means the first to occur of the following events:
(i) the receipt by Executive from the Equity Investors of an acknowledgment in
writing that the Equity Investors will not purchase all of the Class B Preferred
Units contemplated to be purchased by the Equity Investors pursuant to Section
1B of the Purchase Agreement, (ii) the execution and delivery of a definitive
agreement to consummate a Sale of the Company if at the time of such occurrence
the Equity Investors have not previously acquired all of the Class B Preferred
Units contemplated to be purchased by the Equity Investors pursuant to Section
1B of the Purchase Agreement or (iii) a Public Offering if
25
at the time of such occurrence the Equity Investors have not previously acquired
all of the Class B Preferred Units contemplated to be purchased by the Equity
Investors pursuant to Section 1B of the Purchase Agreement.
"PRO FORMA EBITDA" means, for each month during the applicable period,
an amount equal to (i) with respect to fiscal years 2004 through 2008, the
monthly EBITDA projections set forth on EXHIBIT B attached hereto, and (ii) with
respect to each fiscal year following fiscal year 2008, the monthly EBITDA
projections prepared by or on behalf of management of the Company and approved
by the Board or a committee thereof, as such EBITDA projections under clauses
(i) and (ii) above may subsequently be adjusted, with the approval of the Board,
to reflect subsequent acquisitions or dispositions of businesses or other
events, circumstances or occurrences that affect such projections. If EBITDA
projections are determined on an annual (and not a monthly) basis for any fiscal
year, then monthly EBITDA projections for each month during such fiscal year
shall equal the quotient of the annual EBITDA projection for such fiscal year
divided by 12.
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of equity securities of the Company or a
corporate successor to the Company.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k) prior to a Public Offering).
"PURCHASER" has the meaning set forth in the Purchase Agreement.
"PUT ELECTION PERIOD" means the period of time commencing on the date,
as applicable, on which the Preferred Put Event Notice is received by Executive
or on which the Separation Put Event occurs and expiring at 5:00 p.m., Chicago,
Illinois time, on the 20th business day thereafter for all Separation Put Events
other than death and Disability. If the Separation Put Event is triggered by the
Executive's death or Disability, the Put Election Period will be extended to 45
business days.
"PUT EVENT DATE" means the date on which a Separation Put Event or a
Preferred Put Event, as applicable, occurs.
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any Person or group of related Persons other than the
Investors or their Affiliates in the aggregate acquire(s) (i) equity securities
of the Company possessing the voting power (other than voting rights accruing
only in the event of a default, breach or event of noncompliance) to elect a
majority of the Board (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's equity, securityholder or voting
agreement, proxy, power of attorney or otherwise) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis; PROVIDED that a
Public Offering shall not constitute a Sale of the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
26
"SECURITYHOLDERS AGREEMENT" means the Securityholders Agreement, dated
as of even date herewith, among the Company and certain of its securityholders,
as amended from time to time pursuant to its terms.
"SEPARATION" means the cessation of employment of Executive with the
Company, Employer and their respective Subsidiaries for any reason.
"STOCK PURCHASE AGREEMENT" means that certain Stock Purchase Agreement,
made as of January 7, 2004, among Medtech, Denorex, each stockholder of Medtech,
each stockholder of Denorex, Medtech Acquisition, Inc., and Denorex Acquisition,
Inc.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director or
general partner of such limited liability company, partnership, association, or
other business entity. For purposes hereof, references to a "SUBSIDIARY" of any
Person shall be given effect only at such times that such Person has one or more
Subsidiaries, and, unless otherwise indicated, the term "Subsidiary" refers to a
Subsidiary of the Company.
"SUBSIDIARY PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of equity securities of Employer or
another Subsidiary of the Company.
"SUBSTANTIAL UNDERPERFORMANCE" means the occurrence or existence of
either or both of the following: (i) at any time during the 12-month period
ending on and including the date of termination of the Employment Period (A) a
default, whether or not cured, caused by the failure to make any Material
Payment of any Debt (unless a clerical error caused such failure and such
failure was cured immediately upon discovery), (B) any other material event of
default (after giving effect to any applicable grace period) relating to any
Material Debt the effect of which default is to cause, or to permit the holder
or holders of such Material Debt (or a trustee or agent on behalf of such holder
or holders) to cause, any such Material Debt to become due prior to its stated
maturity (without regard to any subordination provisions relating thereto) or
(C) any Material Debt shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof or (ii) as of
27
the date of the termination of the Employment Period, EBITDA for the 12-month
period ending on the last day of the last completed calendar month immediately
preceding the date of the termination of the Employment Period equals an amount
less than 85% of aggregate Pro Forma EBITDA for the same 12-month period. For
purposes of this definition, "Debt" shall mean, as of any date of determination,
any Debt of the Company, Employer or any of their respective Subsidiaries;
"Material Payment" shall mean any payment equal to or greater than $100,000; and
"Material Debt" shall mean any Debt having an outstanding principal balance in
excess of $3 million.
"TCW/CRESCENT LENDERS" means collectively, TCW/Crescent Mezzanine
Partners III, L.P., a Delaware limited partnership, TCW/Crescent Mezzanine Trust
III, a Delaware business trust, and TCW/Crescent Mezzanine Partners III
Netherlands, L.P., a Delaware limited partnership, any of their Affiliates or
any investment fund for whom Trust Company of the West or any Affiliate of Trust
Company of the West acts as an account manager.
"TCW/CRESCENT PURCHASERS" means collectively, TCW/Crescent Mezzanine
Partners III, L.P., a Delaware limited partnership, TCW/Crescent Mezzanine Trust
III, a Delaware business trust, and TCW/Crescent Mezzanine Partners III
Netherlands, L.P., a Delaware limited partnership, any of their Affiliates or
any investment fund for whom Trust Company of the West or any Affiliate of Trust
Company of the West acts as an account manager.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
"TRANSITION SERVICES AGREEMENT" means that certain Transition Services
Agreement, dated as of even date herewith, by and among The Spic and Span
Company, a Delaware corporation, and Medtech.
"WELFARE PLANS" mean the welfare benefit plans, practices, policies and
programs provided by Employer to the extent applicable generally to other senior
executives of the Company.
12. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
IF TO EMPLOYER:
Medtech/Denorex Management, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
WITH COPIES TO:
28
GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
IF TO THE COMPANY:
Medtech/Denorex, LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
WITH COPIES TO:
GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
IF TO EXECUTIVE:
▇▇▇▇▇ ▇. ▇▇▇▇
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
WITH A COPY TO:
Ford ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
IF TO THE INVESTORS:
See the attached INVESTOR NOTICE SCHEDULE.
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this
29
Agreement will be deemed to have been given when so delivered or sent or, if
mailed, five days after deposit in the U.S. mail.
13. GENERAL PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive 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 Executive Securities as the owner of such equity for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith
embody the complete agreement and understanding among the parties and
supersede and preempt 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, including, but not
limited to, the Employment Letter Agreement, dated February 1, 2001,
between Executive and The Spic and Span Company.
(d) NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be
applied against any party.
(e) COUNTERPARTS. This Agreement may be executed and delivered
in separate counterparts (including by means of facsimile), each of
which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Investors and their respective successors
and assigns (including subsequent holders of Executive Securities);
provided that the rights and obligations of Executive under this
Agreement shall not be assignable except in connection with a permitted
transfer of Executive Securities hereunder.
(g) CHOICE OF LAW. The law of the State of Delaware will govern
all questions concerning the relative rights of the Company, Employer
and its securityholders. All other questions concerning the
construction, validity and interpretation of this Agreement and the
exhibits hereto will be governed by and
30
construed in accordance with the internal laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other
than the State of Delaware.
(h) MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE
BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR
INCIDENTAL TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY
AND/OR THE RELATIONSHIP ESTABLISHED AMONG THE PARTIES HEREUNDER.
(i) EXECUTIVE'S COOPERATION. During the Employment Period and
thereafter, Executive shall cooperate with the Company, Employer and
their respective Subsidiaries and Affiliates in any disputes with third
parties, internal investigation or administrative, regulatory or
judicial proceeding as reasonably requested by the Company (including,
without limitation, Executive being available to the Company upon
reasonable notice for interviews and factual investigations, appearing
at the Company's request to give testimony without requiring service of
a subpoena or other legal process, volunteering to the Company all
pertinent information and turning over to the Company all relevant
documents which are or may come into Executive's possession, all at
times and on schedules that are reasonably consistent with Executive's
other permitted activities and commitments). In the event the Company
requires Executive's cooperation in accordance with this paragraph after
the Employment Period, the Company shall reimburse Executive for
reasonable travel expenses (including lodging and meals, upon submission
of receipts) and compensate Executive for his time at a rate that is
mutually agreeable to Executive and the Company.
(j) REMEDIES. Each of the parties to this Agreement (and the
Investors as third-party beneficiaries) will be entitled to enforce its
rights under this Agreement specifically, to recover damages and costs
(including attorney's fees) caused by any breach of any provision of
this Agreement and to exercise all other rights existing in its 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 any party may in its sole discretion apply to any court of law
31
or equity of competent jurisdiction (without posting any bond or
deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this
Agreement.
(k) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the
Company, Employer, Executive and the Majority Holders (as defined in the
Purchase Agreement).
(l) INSURANCE. The Company, at its discretion, may apply for and
procure in its own name and for its own benefit life and/or disability
insurance on Executive in any amount or amounts considered available.
Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and deliver any applications or
other instruments in writing as may be reasonably necessary to obtain
and constitute such insurance. Executive hereby represents that he has
no reason to believe that his life is not insurable at rates now
prevailing for healthy men of his age.
(m) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or
holiday in the state in which the Company's chief executive office is
located, the time period shall be automatically extended to the business
day immediately following such Saturday, Sunday or holiday.
(n) INDEMNIFICATION AND REIMBURSEMENT OF PAYMENTS ON BEHALF OF
EXECUTIVE. The Company and its Subsidiaries shall be entitled to deduct
or withhold from any amounts owing from the Company or any of its
Subsidiaries to Executive any federal, state, local or foreign
withholding taxes, excise taxes, or employment taxes ("TAXES") imposed
with respect to Executive's compensation or other payments from the
Company or any of its Subsidiaries or Executive's ownership interest in
the Company, including, without limitation, wages, bonuses, dividends,
the receipt or exercise of equity options and/or the receipt or vesting
of restricted equity. In the event the Company or any of its
Subsidiaries does not make such deductions or withholdings, Executive
shall indemnify the Company and its Subsidiaries for any amounts paid
with respect to any such Taxes, together with any interest, penalties
and related expenses thereto.
(o) REASONABLE EXPENSES. Employer agrees to pay the reasonable
fees and expenses of Executive's counsel arising in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(p) TERMINATION. This Agreement (except for the provisions of
SECTIONS 8(a) and (b)) shall survive a Separation and shall remain in
full force and effect after such Separation.
32
(q) ADJUSTMENTS OF NUMBERS. All numbers set forth herein that
refer to unit prices or amounts will be appropriately adjusted to
reflect unit splits, unit dividends, combinations of units and other
recapitalizations affecting the subject class of equity.
(r) DEEMED TRANSFER OF EXECUTIVE SECURITIES. If the Company
(and/or the Investors and/or any other Person acquiring securities)
shall make available, at the time and place and in the amount and form
provided in this Agreement, the consideration for the Executive
Securities to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the Person from whom such
units are to be repurchased shall no longer have any rights as a holder
of such units (other than the right to receive payment of such
consideration in accordance with this Agreement), and such units shall
be deemed purchased in accordance with the applicable provisions hereof
and the Company (and/or the Investors and/or any other Person acquiring
securities) shall be deemed the owner and holder of such units, whether
or not the certificates therefor have been delivered as required by this
Agreement.
(s) NO PLEDGE OR SECURITY INTEREST. The purpose of the Company's
retention of Executive's certificates is solely to facilitate the
repurchase provisions set forth in SECTIONS 3 and 4 herein and Section 4
of the Securityholders Agreement and does not constitute a pledge by
Executive of, or the granting of a security interest in, the underlying
equity.
(t) RIGHTS GRANTED TO GTCR FUND VIII AND ITS AFFILIATES. Any
rights granted to GTCR Fund VIII, GTCR Fund VIII/B, GTCR Co-Invest and
their Affiliates hereunder may also be exercised (in whole or in part)
by their designees.
(u) SUBSIDIARY PUBLIC OFFERING. If, after consummation of a
Subsidiary Public Offering, the Company distributes securities of such
Subsidiary to members of the Company, then such securities will be
treated in the same manner as (but excluding any "preferred" features of
the units with respect to which they were distributed) the units with
respect to which they were distributed for purposes of SECTIONS 1(g), 2,
3, 4, 5, 6 and 7 hereof and, in connection therewith, such Subsidiary
may be treated as the Company for purposes of the Company's rights with
respect to such securities.
* * * * *
33
IN WITNESS WHEREOF, the parties hereto have executed this
Senior
Management Agreement on the date first written above.
MEDTECH/DENOREX, LLC
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Title: Secretary
--------------------------
MEDTECH/DENOREX MANAGEMENT, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Title: Vice President
--------------------------
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Agreed and Accepted:
GTCR FUND VIII, L.P.
By: GTCR Partners VIII, L.P.
Its: General Partner
By: GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, L.L.C.
Its: General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Principal
GTCR FUND VIII/B, L.P.
By: GTCR Partners VIII, L.P.
Its: General Partner
By: GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, L.L.C.
Its: General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Principal
[MEDTECH/DENOREX: SIGNATURE PAGE TO
SENIOR MANAGEMENT AGREEMENT (▇▇▇▇▇ ▇.
▇▇▇▇)]
34
GTCR CO-INVEST II, L.P.
By: GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, L.L.C.
Its: General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Principal
GTCR CAPITAL PARTNERS, L.P.
By: GTCR Mezzanine Partners, L.P.
Its: General Partner
By: GTCR Partners VI, L.P.
Its: General Partner
By: GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.C.
Its: General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Principal
TCW/CRESCENT MEZZANINE PARTNERS III, L.P.
TCW/CRESCENT MEZZANINE TRUST III
TCW/CRESCENT MEZZANINE PARTNERS III
NETHERLANDS, L.P.
By: TCW/Crescent Mezzanine
Management III, L.L.C.,
its Investment Manager
By: TCW Asset Management Company,
its Sub-Advisor
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Managing Director
[MEDTECH/DENOREX: SIGNATURE PAGE TO
SENIOR MANAGEMENT AGREEMENT (▇▇▇▇▇ ▇.
▇▇▇▇)]
35
EXHIBIT A
__________, 2004
PROTECTIVE ELECTION TO INCLUDE MEMBERSHIP
INTEREST IN GROSS INCOME PURSUANT TO
SECTION 83(b) OF THE INTERNAL REVENUE CODE
On February [__], 2004, the undersigned acquired a limited liability
company membership interest (the "MEMBERSHIP INTEREST") in Medtech/Denorex, LLC,
a Delaware limited liability company (the "COMPANY"), for $[________]. Pursuant
to the Operating Agreement of the Company, the undersigned is entitled to an
interest in Company capital exactly equal to the amount paid therefor and an
interest in Company profits.
Based on current Treasury Regulation Section1.721-1(b), Proposed
Treasury Regulation Section1.721-1(b)(1), and Revenue Procedures 93-27 and
2001-43, the undersigned does not believe that issuance of the Membership
Interest to the undersigned is subject to the provisions of Section83 of the
Internal Revenue Code (the "CODE"). In the event that the sale is so treated,
however, the undersigned desires to make an election to have the receipt of the
Membership Interest taxed under the provisions of Code Section83(b) at the time
the undersigned acquired the Membership Interest.
Therefore, pursuant to Code Section83(b) and Treasury Regulation
Section1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Membership Interest, to report as taxable income for the
calendar year 2004 the excess (if any) of the value of the Membership Interest
on [_____], 2004 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:
[NAME]
[ADDRESS]
[SSN]
2. A description of the property with respect to which the election is
being made: A membership interest in the Company entitling the undersigned to an
interest in the Company's capital exactly equal to the amount paid therefor and
___% of the Company's profits.
3. The date on which the Membership Interest was transferred: [_____],
2004. The taxable year for which such election is made: 2004.
4. The restrictions to which the property is subject: If the undersigned
ceases to be employed by the Company or any of its subsidiaries, the unvested
portion of the units will be subject to repurchase by the Company at the lower
of cost or market value.
A-1
5. The fair market value on [_____], 2004 of the property with respect to
which the election is being made, determined without regard to any lapse
restrictions and in accordance with Revenue Procedure 93-27: $[AMOUNT PAID OR TO
BE PAID].
6. The amount paid or to be paid for such property: $[AMOUNT PAID OR TO BE
PAID]
* * * * *
A copy of this election is being furnished to the Company pursuant to
Treasury Regulation Section 1.83-2(e)(7). A copy of this election will be
submitted with the 2003 federal income tax return of the undersigned pursuant to
Treasury Regulation Section 1.83-2(c).
Dated: [_____], 2004
------------------------------------------
[NAME]
A-2
EXHIBIT B
EBITDA
Fiscal Year Annual EBITDA
----------- -------------
2004 $ 30,665,000
2005 $ 34,722,000
2006 $ 38,468,000
2007 $ 42,547,000
2008 $ 46,626,000
B-1
INVESTOR NOTICE SCHEDULE
IF TO GTCR FUND VIII, L.P., GTCR FUND VIII/B, L.P. OR GTCR CO-INVEST II, L.P.:
c/o GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
IF TO GTCR CAPITAL PARTNERS:
GTCR Capital Partners, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
IF TO THE TCW/CRESCENT LENDERS AND/OR TCW/CRESCENT PURCHASERS:
TCW/Crescent Mezzanine Partners III, L.P.
TCW/Crescent Mezzanine Trust III
TCW/Crescent Mezzanine Partners III Netherlands, L.P.
▇/▇ ▇▇▇/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ LLP
3000 Thanksgiving Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE 1(g)(vi)
EXECUTIVE: DOCUMENTS PARTY TO/BOUND BY:
---------- ----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ Spic and Span Employee Agreement
Spic and Span Termination Agreement