Exhibit 10.4
Form of Option Cancellation Agreement
OPTION CANCELLATION AGREEMENT
This Option Cancellation Agreement (the "Agreement") is entered into as
of , 1996, between Lamcor, Incorporated, a Minnesota corporation ("Lamcor"), and
, a resident of the State of ("Option Holder").
RECITALS
A. As of the date hereof; Option Holder holds options (collectively,
the "Lamcor Options") for the purchase of shares of the common stock of Lamcor,
no par value per share ("Lamcor Common Stock"), at an exercise price per share
stated in Schedule A hereto.
B. The Lamcor Options are evidenced by those certain stock option
agreements dated _________________________ and ______________________________ ,
respectively, all of which are attached hereto as Exhibit A (each such
agreement, an "Option Agreement").
C. Lamcor, Packaging Acquisition Corporation ("Buyer") and LI
Acquisition Corporation, a wholly owned subsidiary of Buyer ("Sub"), have
entered into an Agreement and Plan of Merger dated September ___, 1996 (the
"Merger Agreement"), pursuant to which at the "Effective Time" (as defined in
the Merger Agreement) Sub will merge with and into Lamcor and Lamcor, as the
surviving corporation, will become a wholly owned subsidiary of Buyer (the
"Merger"). Capitalized terms used herein and undefined shall have the meaning
given such terms in the Merger Agreement.
D. Pursuant to the terms of the Merger Agreement, promptly after the
Effective Time each shareholder of Lamcor ("Shareholder") will receive $4.12 per
share of Lamcor Common Stock, less $0.12 per share to be held in escrow for one
year following the closing of the Merger (the "Closing").
E. As a condition to the Closing, at the Effective Time each option or
warrant to purchase shares of Lamcor capital stock will be canceled in exchange
for a cash payment to the holder of each such option, including the Option
Holder (collectively, the "Holders").
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, the parties hereby agree
as follows:
1. Determination of the Number of Lamcor Options Canceled. The Option
Holder represents and warrants that the number of Lamcor Options stated in
Schedule A are the only options or rights for the purchase of Lamcor capital
stock held or exercisable by the Option Holder as of the date hereof; and that
no such options or rights have been sold, transferred, assigned, hypothecated or
otherwise disposed of by the Option Holder prior to the date hereof. The number
of Lamcor Options to be surrendered, canceled and terminated pursuant to Section
2 of this Agreement shall be all Lamcor Options outstanding and in effect as of
the Effective Time (whether or not exercisable). This Agreement does not expand
or extend the rights of the Option Holder. If the Option Holder's employment
with Lamcor is terminated or the Option Holder dies or becomes disabled prior to
the Closing, the rights of the Option Holder or his estate will be as provided
in the applicable Option Agreements, subject to surrender, cancellation and
termination thereof pursuant to Section 2 of this Agreement if the Lamcor
Options to which such rights relate are outstanding at the Effective Time.
2. Cancellation of Lamcor Options Release. At the Effective Time (and
without any further action by the parties hereto), all of the Lamcor Options,
the Option Agreements and all rights of the Option Holder thereunder or with
respect thereto shall be automatically surrendered, canceled and terminated in
consideration for the Cash Payment (as defined in Section 3 below). The Option
Holder hereby releases and discharges Lamcor and Buyer and their respective
parents, subsidiaries or affiliate corporations and each officer, director,
agent, attorney and employee of the foregoing from and in respect of all claims,
demands, remedies, actions, causes of action, rights of action, damages or other
liabilities, known or unknown and whether or not asserted or accrued, in any way
relating to, based upon or arising out of the Lamcor Options, the Option
Agreements and all rights of the Option Holder arising thereunder or with
respect thereto. Upon receipt of the Cash Payment at the Closing, the Option
Holder shall deliver to Buyer all executed original Option Agreements marked
"Canceled." In the event that the Option Holder is unable to locate all executed
original Option Agreements, Option Holder agrees to execute at Lamcor's request
an appropriate affidavit to the effect that such executed originals have been
misplaced and that neither such executed originals nor any interest therein have
been sold, transferred, assigned, hypothecated or otherwise disposed of prior to
the loss thereof. The Option Holder's agreement to cancel the Lamcor Options in
exchange for the Cash Payment is irrevocable, subject only to Section 8 below.
3. Cash Payment. In consideration for the cancellation of the Lamcor
Options, Lamcor will pay to the Option Holder at the Closing for each Lamcor
Option an amount in cash (the "Cash Payment") equal to the product of (a) the
difference (if positive) between $4.12 and the price at which the Option Holder
could purchase each share of Lamcor Common Stock to which such Lamcor Option
relates, multiplied by (b) the number of shares of Lamcor Common Stock subject
to such Lamcor Option as if such Lamcor Option was then fully exercisable, less
(y) the product of $0.12 multiplied by the number of shares referenced in clause
(b) above, and less (z) any taxes required to be withheld pursuant to Section 4
below.
4. Tax Withholding. Lamcor may deduct and withhold from the Cash
Payment the amount of any taxes required to be withheld pursuant to applicable
federal, state and local laws. To the extent that amounts are so withheld by
Lamcor, such withheld amounts shall be treated for the purposes of this
Agreement as having been paid to the Option Holder.
5. Escrow Arrangements. Lamcor shall cause to be delivered to the
Escrow Agent at the Effective Time on behalf of the Option Holder and all other
Holders an amount equal to (a) $0.12 multiplied by (b) the number of shares of
Lamcor capital stock subject to such options or warrants (together with funds
delivered to the Escrow Agent on behalf of the Shareholders, the "Escrowed
Funds"). The term "Escrow Claim" means any and all claims, individually or in
the aggregate, made by Buyer within one year after the Effective Time for the
purpose of compensating Buyer for Losses resulting from (x) the breach or
inaccuracy of any representation or warranty of Lamcor contained in the Merger
Agreement, (y) the failure of Lamcor to perform any covenant or agreement of
Lamcor under the Merger Agreement, and (z) all Lamcor Expenses in excess of
$275,000; provided, however, that Buyer shall not be entitled to assert a claim
against the Escrowed Funds for breaches of representations and warranties
pursuant to the preceding clause (x) if Buyer had actual knowledge of the breach
at the Effective Time; provided further, that Buyer shall not be entitled to
assert an Escrow Claim against the Escrowed Funds unless each such Escrow Claim
is in excess of $1,000.00. An Escrow Claim shall be satisfied or liquidated only
from the Escrowed Funds in accordance with the terms and conditions of the
Escrow Agreement; provided, however, that Buyer shall not be entitled to receive
any of the Escrowed Funds unless (i) the Surviving Corporation is not in breach
in any Material respect of any of its covenants or agreements arising after the
Effective Time and (ii) the aggregate amount of all Escrow Claims arising out of
clauses (x) and (y) of the preceding sentence exceeds $50,000. Once such $50,000
threshold has been reached, Buyer shall be entitled to full payment for all
Escrow Claims arising out of such clauses (x) and (y) out of the Escrowed Funds
as if no such limitation on payment had existed, provided that the conditions of
clause (i) of the preceding sentence is satisfied at the time of payment. Buyer
shall pay all fees and expenses in connection with the escrow and the Escrowed
Funds, without reimbursement therefor to Buyer from the Escrowed Funds.
Notwithstanding the foregoing, any amount of Lamcor Expenses in excess of
$275,000 shall be paid to Buyer out of the Escrowed Funds, to the extent
thereof; without regard to such $50,000 threshold.
6. Holders' Representative.
(a) The Option Holder irrevocably makes, constitutes and appoints ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ as its agent (the "Holders' Representative") and authorizes and
empowers him to fulfill the role of Holders' Representative hereunder and under
the Escrow Agreement. In the event of the resignation of the Holders'
Representative, the resigning Holders' Representative shall appoint a successor
from among the Holders and who shall agree in writing to accept such
appointment. If the Holders' Representative should die or become incapacitated,
his successor shall be appointed within 15 days of his death or incapacity by a
majority of the Shareholders pursuant to Section 11.16 of the Merger Agreement.
The choice of a successor Holders' Representative appointed in any manner
permitted above shall be final and binding upon all of the Holders. The
decisions and actions of any successor Holders' Representative shall be, for all
purposes, those of a Holders' Representative as if originally named herein.
(b) Each Holder other than the Option Holder has made, constituted and
appointed and by the execution of this Agreement the Option Holder hereby
irrevocably makes, constitutes and appoints the Holders' Representative as such
person's true and lawful attorney in fact and agent, for such person and in such
person's name, place and stead for all purposes necessary or desirable in order
for the Holders' Representative to take the actions contemplated by this
Agreement and the Escrow Agreement on behalf of the Option Holder, with the
ability to execute and deliver all instruments, certificates and other documents
of every kind incident to the foregoing to all intents and purposes and with the
same effect as the Option Holder could do personally, and the Option Holder
hereby ratifies and confirms as his, her or its own act, all that the Holders'
Representative shall do or cause to be done pursuant to the provisions hereof.
(c) The death or incapacity of the Option Holder shall not terminate
the authority and agency of the Holders' Representative.
(d) Buyer shall be entitled to rely exclusively upon any communication
given or other action taken by the Holders' Representative pursuant hereto and
shall not be liable for any action taken or not taken in reliance upon the
Holders' Representative. Buyer shall not be obligated to inquire as to the
authority of the Holders' Representative to take any action that the Holders'
Representative takes or purports to take on behalf of the Option Holder.
(e) The Option Holder agrees to indemnify the Holders' Representative
and to hold him or her harmless against any and all loss, liability or expense
incurred without bad faith on the part of the Holders' Representative and
arising out of or in connection with his or her duties as Holders'
Representative, including the reasonable costs and expenses incurred by the
Holders' Representative in defending against any claim or liability in
connection herewith (the "Representative's Expenses"), and authorize the
Holder's Representative to receive following the first anniversary of the
Effective Date a portion of the amount by which the then remaining balance of
the Escrowed Funds exceeds the sum of the Tentatively Impounded Funds (as
defined in the Escrow Agreement) equal to the Representative's Expenses in
accordance with Section 6(f) of the Escrow Agreement; provided, however, that
Buyer shall pay all reasonable Representative's Expenses incurred by the
Holders' Representative and its counsel in defending against any Escrow Claim in
the event that the Holders' Representative prevails in such defense, and the
Holder authorizes a maximum amount equal to the lesser of (i) Five Thousand
Dollars ($5,000.00), or (ii) the actual amount of the reasonable
Representative's Expenses incurred by the Holders' Representative and its
counsel in carrying out the provisions of Section 11.16(e) of the Merger
Agreement and this Section 6(e) (as evidenced by a written notice from the
Holders' Representative to Buyer setting forth the actual amount and a
description of such Representative's Expenses), to be remitted prior to the
first anniversary of the Effective Date to the Holders' Representative out of
the Escrowed Funds upon the Escrow Agent's receipt of written notice from Buyer
stating the amount to be so remitted.
7. Prohibition on Transfer. Except as contemplated herein, the Option
Holder agrees not to sell, transfer, assign, hypothecate or otherwise dispose of
any of the Lamcor Options, the Option Agreements or any rights of the Option
Holder thereunder or with respect thereto.
8. All Obligations Contingent upon Closing. All of the rights and
obligations of the parties to this Agreement are subject to the Closing. If the
Merger Agreement is terminated for any reason, the Lamcor Options shall remain
in effect pursuant to their respective terms, this Agreement shall terminate and
no party hereto shall have any liability to any other party under this
Agreement.
9. General. This Agreement shall be governed by the laws of the State
of Minnesota. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and may be amended only in writing
signed by the parties hereto. This Agreement may be signed in multiple
counterparts, each of which shall constitute an original and all of which shall
constitute one and the same Agreement, and shall be binding upon and inure to
the benefit of the parties and their respective heirs, successors, assigns and
personal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the latest date indicated below.
LAMCOR, INCORPORATED: OPTION HOLDER:
By:_________________________________ Signature:_____________________________
Its:________________________________ Name:__________________________________
Date:_______________________________ Date:__________________________________
SCHEDULE A
# of Shares of
Issuable upon
Exercise of Option
Name of Date of Option Lamcor Expiration Exercise Price
Option Holder Agreement Options Date ($/Share)
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