Exhibit (c)(3)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of February 10, 1998, by
and between ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇, ▇▇. (the "Executive") and ▇▇▇▇▇▇▇▇▇▇ Tank Lines,
Inc., an Illinois corporation (the "Company").
WHEREAS, the Executive is currently an employee of the Company;
WHEREAS, concurrently with the execution and delivery of this
Agreement, MTL Inc. and Sombrero Acquisition Corp. are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of the date
hereof; and
WHEREAS, MTL Inc. and Sombrero Acquisition Corp. intend that the
Company continue the employment of the Executive pursuant to the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the Company and the Executive hereby agree as follows:
1. Employment. The Company hereby employs the Executive, and
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the Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth. The Executive's employment hereunder shall
commence, and shall be effective only upon, the occurrence of the "Effective
Time" of the Merger Agreement (the "Effective Date").
2. Term. Subject to the provisions for earlier termination
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as herein provided, the employment of the Executive hereunder will be for the
period commencing on the Effective Date and ending on the second anniversary of
such date. On the first anniversary of the Effective Date, and on each
anniversary thereafter, the term of this Agreement shall automatically be
extended by an additional one year unless, no later than 90 days prior to any
such renewal date, either the Company or the Executive gives written notice to
the other that the term will not be extended, in which case the Executive's
employment hereunder shall terminate upon the expiration of the then-current
term. The period of the Executive's employment under this Agreement, as it may
be terminated or extended from time to time as provided herein, is referred to
hereafter as the "Employment Period."
3. Duties and Responsibilities. The Executive will be employed
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by the Company in the same capacity as such Executive is currently employed by
the Company. The Executive will faithfully perform the duties and
responsibilities of such office, as they may be assigned from time to time by
the Board of Directors of the Company (the "Board") or the Board's designee. The
Executive shall devote full-time attention and energy during all business hours
during the Employment Period (subject to sick leave and vacation time taken in
accordance with Company policy) to the business of the Company, and at all times
the Executive shall use his best efforts to serve and advance the business of
the Company. During the Employment Period, the Executive will not be engaged in
any other business activity which, in the reasonable judgment of the Board or
its designee, conflicts with the duties of the Executive hereunder, whether or
not such activity is pursued for gain, profit or other pecuniary advantage,
except for such passive investments permitted under Section 7(a)(i) hereof.
4. Compensation and Benefits.
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(a) Base Salary. The Company will pay to the Executive an annual
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base salary of not less than $192,238.80, payable in accordance with the
Company's normal payroll policy. The Executive's base salary shall be reviewed
annually by the Board and shall be subject to increase at the option and sole
discretion of the Board.
(b) Bonus. The Executive shall be eligible to receive, at the
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sole discretion of the Board, an annual cash bonus based on pre-determined
performance standards established pursuant to the Company's Goal-Oriented
Compensation Achievement Plan on the date hereof, or such other annual bonus
plan as may be in effect from time to time. The Executive shall have a target
bonus of 42% of his base salary under such plan. The bonus target under such
plan for 1998 shall be based on the annual bonus targets that have been set
prior to the Effective Date hereof, but adjusted by the Compensation Committee
of the Board (in consultation with management) to reflect the effect on the
Company of the transactions contemplated by the Merger Agreement. In addition,
the Company will reserve an additional bonus amount equal to 18% of base salary,
payable in whole or in part based on guidelines established and evaluated by the
Compensation Committee of the Board (in consultation with management) relating
to extraordinary performance by the Company and Executive.
(c) Benefits. In addition to the salary and cash bonus referred
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to above, the Executive shall be entitled during the Employment Period to
participate in such employee benefit plans or programs of the Company, and shall
be entitled to such other fringe benefits, as are from time to time made
available by the Company generally to employees of the Executive's position,
tenure, salary, and other qualifications, on terms and conditions at least as
favorable as those provided to such similarly situated employees. The employee
benefits plans available to the Executive during the Employment Period shall be
comparable, in the aggregate, to those made available to the Executive by the
Company immediately prior to the Effective Date. The Executive acknowledges and
agrees that the Company does not guarantee the adoption of any particular
employee benefit plan or program or other fringe benefit during the Employment
Period, and participation by the Executive in any such plan or program shall be
subject to the rules and regulations applicable thereto.
(d) Stock Options. Upon consummation of the transactions
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contemplated under the Merger Agreement, the Executive shall be granted options
to purchase 25,500 shares of common stock of the Company under the terms of the
Option Plan described in Attachment A hereto (the "New Options"). In addition,
the Executive
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shall be eligible for such other awards, if any, under the Option Plan or any
other stock option or other equity-based incentive plan as shall be granted to
the Executive from time to time by the Board or its designee, in its sole
discretion.
(e) Expenses. The Company will reimburse the Executive, in
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accordance with the practices in effect from time to time for other officers or
staff personnel of the Company, for all reasonable and necessary business
expenses incurred by the Executive for or on behalf of the Company in the
performance of the Executive's duties hereunder, upon presentation by the
Executive to the Company of appropriate vouchers or documentation.
5. Termination. The Company reserves the right to terminate
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the Executive's employment hereunder at any time with or without Cause (as
defined herein), subject to the provisions of section 6(d) hereof. In addition,
the Executive's employment hereunder may be terminated by the Company under the
following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
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upon his death.
(b) Disability. If, as a result of the Executive's incapacity due
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to physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full-time basis for three consecutive months or for a
period in excess of six months within any twelve month period (whether or not
consecutive), and within thirty days after written notice of termination is
given (which may occur before or after the end of such absence period) shall not
have returned to the performance of his duties hereunder on a full-time basis,
the Company may terminate the Executive's employment hereunder on the basis of
disability.
(c) For Cause. The Company may terminate the Executive's
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employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder if such
termination shall be the result of:
(i) the willful failure by the Executive to substantially perform
his duties hereunder (which shall be deemed to include, without limitation,
habitual absenteeism or dereliction of duty), which failure continues
following written notice to the Executive by the Company;
(ii) disobeying in a material respect any written and legally
appropriate directives of the Board that are specific in nature;
(iii) a material breach of the Executive's fiduciary duty to the
Company or fraud, willful misconduct or material dishonesty in connection
with the Executive's performance hereunder;
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(iv) the material breach of any of the covenants set forth in
Section 7 hereof; or
(v) indictment or conviction for, or plea of guilty or nolo
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contendere to a charge of commission of a felony.
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Any termination of the Executive's employment for Cause by the Company shall be
communicated by a written notice of termination, indicating the specific
termination provision in the Agreement relied upon and setting forth the facts
that provide the basis for the Executive's termination. Such notice must be
given at least thirty days prior to termination, and the Executive shall have
the opportunity during such notification period to cure or correct any failure
or breach upon which the Executive's termination is based.
(d) Good Reason. The Executive may terminate his employment
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hereunder for "Good Reason." For purposes of this Agreement, the Executive shall
have "Good Reason" to terminate his employment if such termination shall be the
result of:
(i) a material diminution by the Company in the Executive's duties
and responsibilities as contemplated by Section 3 hereof;
(ii) a material breach by the Company of its compensation and
benefit obligations under Section 4 hereof; or
(iii) an involuntary relocation by more than 50 miles of the
Executive's principal place of business as of the Effective Date.
Any termination of the Executive's employment for Good Reason by the Executive
shall be communicated by a written notice of termination, indicating the
specific termination provision in the Agreement relied upon and setting forth
the facts that provide the basis for the Executive's termination. Such notice
must be given at least thirty days prior to termination, and the Company shall
have the opportunity during such notification period to cure or correct any
failure or breach upon which the Executive's termination is based.
6. Compensation Upon Termination.
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(a) Death. If the Executive's employment is terminated by his
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death, the Company shall pay to the Executive's legal representative (in
accordance with Section 18 hereof) (i) any unpaid base salary through the date
of death and for sixty days thereafter and (ii) a pro rata annual bonus as
calculated in accordance with Section 6(f) hereof. Except as provided in Section
6(g) hereof, the Company shall have no further obligation to the Executive
hereunder.
(b) Disability. During any period that the Executive fails to
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perform his duties hereunder as a result of incapacity due to disability as
described in Section 5(b) above, the Executive shall continue to receive his
full salary at the rate then in effect for such period until his employment is
terminated pursuant to Section 5(b) hereof, provided
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that payments so made to the Executive during the disability period shall be
reduced by the sum of the amounts, if any, paid to the Executive at or prior to
the time of any such payment under any disability benefit plans of the Company
or under the Social Security disability insurance program. The Executive shall
also receive a pro rata annual bonus for the year of termination as calculated
in accordance with Section 6(f) hereof.
(c) For Cause; Voluntary Termination, Etc. If the Executive's
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employment shall be terminated (i) by the Company for Cause, (ii) by the
Executive other than for Good Reason or (iii) by either party by providing
written notice of termination pursuant to Section 2 of this Agreement, the
Company shall pay the Executive his base salary through the final date of
employment and, except as provided in Section 6(g) hereof, the Company shall
have no further obligation to the Executive hereunder.
(d) Without Cause; Good Reason. In the event of termination of
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the Executive's employment hereunder by the Company without Cause (other than
upon death or disability) or by the Executive for Good Reason, the Executive
shall be entitled to the following severance pay and benefits:
(i) severance payments in the form of continuation of the
Executive's base salary as in effect immediately prior to such termination
over the then-remaining current term hereof (the "Severance Period");
(ii) continuation during the Severance Period of coverage under the
group medical benefits plan in which the Executive is participating at the
time of termination; provided, however, that the Company's obligation to
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provide such coverage shall be terminated if the Executive obtains
comparable substitute coverage from another employer at any time during the
Severance Period; and
(iii) a pro rata bonus as calculated in accordance with Section 6(f)
hereof.
(e) Sole Remedy. The parties agree that the foregoing shall
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constitute the Executive's sole and exclusive rights and remedies by reason of
termination pursuant to this Section 6, and that with respect to Section 6(d)
above, such amounts shall constitute an agreement between the parties of
liquidated damages for the Executive by reason of any such termination. It is
further understood that neither party hereto shall be entitled to punitive,
consequential or special damages with respect to any claim hereunder, and each
party waives all such rights and remedies if any.
(f) Pro Rata Bonus. If the Executive's employment is terminated
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under Section 5 hereof as a result of death, disability, by the Company without
Cause or by the Executive for Good Reason, the Executive shall receive a pro
rata portion of the annual bonus for the year in which the termination occurs
(based on the period of service prior to such termination), with such amount
calculated and paid following the completion of the year based on the Company's
performance applicable under the terms
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of the bonus plan, to be applied on a basis consistent with the methodology used
for other plan participants.
(g) Other Benefits. The benefits payable to the Executive under
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this Agreement are not in lieu of any benefits payable under any employee
benefit plan, program or arrangement of the Company, and upon termination the
Executive will receive such benefits or payments, if any, as he may be entitled
to receive pursuant to the terms of such plans, programs and arrangements.
7. Restrictive Covenants.
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(a) Covenant Not to Compete.
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(i) During the Employment Period and until (A) the expiration of
the then-current remaining term of this Agreement, in the event the
Executive is terminated by the Company for Cause or the Executive
voluntarily resigns other than for Good Reason or (B) the expiration of the
Severance Period, if the Executive is terminated by the Company without
Cause or resigns for Good Reason (the "Restricted Period"), the Executive
will not, within any geographical area in which the Company or any of its
subsidiaries, affiliates or owner-operators conducts business, directly or
indirectly own, manage, operate, control, be employed by or participate in
the ownership, management, operation or control of, or be connected in any
manner with, any entity that engages in the bulk transportation services
business or any related service in the bulk transportation services
industry in which the Company or any of its subsidiaries is engaged on the
date of the Executive's termination of employment (the "BTS Business"),
except that the Executive shall be allowed to invest his assets in the
securities of public companies engaged in the BTS Business if such holdings
are passive investments which do not involve the Executive's holding with
respect to any such entity the position of officer, director, employee,
consultant or general partner, or owning directly or indirectly two percent
(2%) or more of the stock, whether voting or not, of any such entity, and
which do not involve the Executive becoming a secured or unsecured creditor
of any such entity.
(ii) At its sole option, the Company may extend by a period of up to
one year the Restricted Period applicable under Sections 7(a)(i) and (iii)
hereof by providing to the Executive the severance payments and benefits
referred to in Section 6(d)(i)-(ii) hereof for the duration of any such
extended period. The Company shall notify the Executive if it wishes to
exercise this option not later than 90 days prior to the expiration of the
then-current Restricted Period.
(iii) During the Restricted Period, the Executive agrees to refrain
from interfering with the employment relationship between the Company, its
subsidiaries and its affiliates and their respective employees, members of
the Company's "Affiliate Program" (as defined in the Merger Agreement) or
other independent owner/operators by soliciting any of such individuals to
participate in
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independent business ventures, and the Executive agrees to refrain from
soliciting business from any client or prospective client of the Company or
any of its subsidiaries or affiliates for the Executive's benefit or for
any entity in which the Executive has an interest or is employed.
(iv) In the event of a knowing, willful and material breach of the
restrictive covenants set forth in this Section 7(a), the Company shall
have the right, in its sole discretion, and in addition to its right of
enforcement under Section 8 hereof and any other right of enforcement or
recovery available to the Company at law or equity or under this Agreement,
to (a) suspend or cancel the Executive's right to exercise the New Options
(whether or not then otherwise exercisable), (b) suspend or cancel the
Executive's pending right to receive an issuance of shares in settlement of
any New Option exercise, and/or (c) either (1) cancel the shares issued
upon exercise of the New Options (with repayment to the Executive of the
full purchase price paid for such shares) or (2) require the Executive to
pay to the Company in cash an amount equal to the gain realized by the
Executive upon exercise of any New Option; provided, however, that the
foregoing shall not apply to any New Options exercised more than six months
prior to the date of termination of employment. The Company shall provide
at least five days advance notice and opportunity to cure before exercising
this right.
(b) Intellectual Property. During the Employment Period, the
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Executive will disclose to the Company all ideas, inventions, creations,
business plans and other intellectual property developed by the Executive during
such period which relate directly or indirectly to the BTS Business, including,
without limitation, any process, operation, product or improvement which may be
patentable or copyrightable. The Executive agrees that such will be the property
of the Company and that the Executive will, at the Company's request and cost,
do whatever is necessary to secure the rights thereto by patent, copyright or
otherwise to the Company. The Executive shall be prohibited from making use of
or implementing any such ideas, inventions or business plans in connection with
his employment with a business that is considered a competitor under Section
7(a)(i) hereof.
(c) Confidentiality. During the Employment Period and at all
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times thereafter, the Executive agrees that he will not divulge to anyone (other
than the Company or any persons employed or designated by the Company) any
knowledge or information of any type whatsoever of a confidential nature
relating to the business of the Company or any of its subsidiaries or
affiliates, including, without limitation, all types of trade secrets (unless
readily ascertainable from public or published information or trade sources),
product design and customer and supplier information. The Executive further
agrees not to disclose, publish or make use of any such knowledge or information
for personal purposes or for the benefit of any person, firm, corporation or
other entity (other than the Company or any persons employed or designated by
the Company) without the prior written consent of the Company.
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(d) Remedy for Breach. In addition to any remedies available to
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the Company at law or under this Agreement, the Executive hereby consents and
agrees that the Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent any continuation of
any violation of the provisions of this Section 7 and the Executive hereby
consents that such restraining order or injunction may be granted.
8. Enforcement. It is the desire and intent of the parties
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hereto that the provisions of this Agreement be enforceable by a court of
competent jurisdiction to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, to the extent that a restriction contained in this Agreement is
more restrictive than permitted by the laws of any jurisdiction where this
Agreement may be subject to review and interpretation, the terms of such
restriction, for the purpose only of the operation of such restriction in such
jurisdiction, will be the maximum restriction allowed by the laws of such
jurisdiction and such restriction will be deemed to have been revised
accordingly herein.
9. Survival. Notwithstanding anything contained in this
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Agreement to the contrary, the provisions of Sections 6, 7 and 8 hereof will
survive the expiration or other termination of this Agreement until, by their
terms, such provisions are no longer operative.
10. Effectiveness. This Agreement shall become effective
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upon consummation of the transactions contemplated by the Merger Agreement and
prior thereto shall be of no force and effect. If the Merger Agreement shall be
terminated in accordance with its terms, this Agreement shall automatically be
deemed to have been terminated and shall thereafter be of no force or effect.
11. Notices. Notices and other communications hereunder will
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be in writing and will be delivered personally or sent by air courier or first
class certified or registered mail, return receipt requested and postage
prepaid, addressed as follows:
if to the Executive: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and if to the Company: ▇▇▇▇▇▇▇▇▇▇ Tank Lines, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Apollo Management, L.P.
1301 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement will be deemed to have been given on the
date of delivery, if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business day after the date
when sent, if sent by mail, in each case addressed to such party as provided in
this Section 11 or in accordance with the latest unrevoked direction from such
party.
12. Arbitration. Except as specifically provided in Section
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8 hereof, any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a single
arbitrator in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The attorney's fees and expenses of the prevailing party
shall be paid by the non-prevailing party, based on a determination made by the
arbitrator for this purpose as to which party is the prevailing party hereunder.
Arbitrators will be selected from the American Arbitration Association's panel
of arbitrators in the New York region and the location of the arbitration
proceeding shall be in Hillsborough County, Florida.
13. Governing Law. This Agreement will be governed by, and
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construed and enforced in accordance with, the laws of the State of Florida,
without reference to conflict of law principles.
14. Waiver of Breach. The waiver by either party of a breach
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of any provision of this Agreement by the other party must be in writing and
will not operate or be construed as a waiver of any subsequent breach by such
other party.
15. Entire Agreement; Amendments. This Agreement contains
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the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings among the parties
with respect thereof, including, without limitation, the employment agreement
entered into by and between the parties on February 23, 1989. This Agreement
may be amended only by an agreement in writing signed by the parties hereto.
16. Headings. The section headings contained in this
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Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
17. Severability. Any provision of this Agreement that is
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prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render unenforceable
such provision in any other jurisdiction.
18. Assignment; Successors. This Agreement is personal in
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its nature and the parties hereto shall not, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided, that (i) the provisions hereof
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will inure to the benefit of, and be binding upon, each successor of the
Company, whether by merger, consolidation, transfer of all or substantially all
of its assets or otherwise and (ii) all of the Executive's rights to
compensation following his death shall inure to the benefit of his heirs,
estate, personal representatives or designees or other legal representatives as
the case may be.
19. Shareholders Agreement. The parties hereto shall use
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reasonable efforts to enter into a Shareholders Agreement effective as of the
Effective Date hereof substantially in accordance with the terms attached hereto
as Attachment B.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
▇▇▇▇▇▇▇▇▇▇ TANK LINES, INC.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
EXECUTIVE
/s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
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Attachment A
OPTION PLAN
Issuer MTL Inc. ("Company")
Percent of
Outstanding
Common Stock Assuming $68,000,000 in initial equity at $40 per share and
1,700,000 shares outstanding, options with respect to a total
of 188,889 shares will be available for grant.
Allocation The option shares shall be allocated by the Compensation
Committee of the Board of Directors (the "Compensation
Committee"), except that ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ will each receive initial option grants of
25,500 shares.
Time Vesting 50% of each option grant will time vest in equal increments
over four years ending on the fourth anniversary of the last
day of the quarter during which the Merger shall become
effective. Assuming the Merger becomes effective on April 15,
1998, such options will vest in equal 25% increments on June
30, 1999, 2000, 2001 and 2002.
Performance
Vesting 50% of each option grant will vest upon the attainment by the
Company of per share equity targets on annual target dates
commencing with the first anniversary of the last day of the
calendar quarter during which the Merger shall become
effective. For purposes of vesting, the performance-based
options shall be divided into three equal tiers subject to the
following per share equity targets:
Year 1 Year 2 Year 3 Year 4
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Tier 1 56.00 78.40 109.76 153.66
Tier 2 54.00 72.90 98.42 132.86
Tier 3 52.00 67.60 87.88 114.24
Options not vested under the above schedule will still vest
based on continued employment until 10 years or sooner as
determined by the Board of Directors of the Company.
For each target that is achieved, the options attributable to
the tier meeting the target for such year will vest on the last
day of the applicable calendar quarter, provided that the
determination as to whether a target was achieved shall be made
when the Company's audited financials for the applicable period
become available. If the target per share equity levels for a
tier are not achieved for any
1
year, the Compensation Committee, upon consultation with
management, will have the discretion to cause all or part of
such options to vest. In addition, for any year in which a per
share equity target for a tier is missed by less than 20%, the
shares that did not vest in such year with respect to such tier
shall vest if either (i) the per share equity target for such
tier is attained for the next succeeding year, or (ii) for the
next succeeding year the per share equity target for a tier is
missed by less than 20% and the per share equity target is
attained for the second succeeding year. Awards not vested by
year 4 will no longer be qualified for performance vesting.
Per share equity will equal ((i) EBITDA for the relevant
trailing twelve-month period times (ii) 6.5); plus ((i) cash
plus the aggregate exercise price of "in the money" options,
minus (ii) liquidation value of debt and preferred stock);
divided by (as of the date of calculation) ((i) number of
shares outstanding plus (ii) number of shares subject to "in
the money" options and (iii) other in the money convertible and
derivative securities).
The calculation of EBITDA shall be subject to the following
adjustments: (1) EBITDA shall exclude non-recurring
extraordinary items other than business acquisitions and
dispositions, as well as other unusual gains and losses as
approved by the Compensation Committee in its sole discretion;
(2) EBITDA shall be adjusted to reflect business acquisitions
or dispositions occurring in the first three quarters of a year
on a pro-forma combined basis as if the transaction had
occurred at the beginning of such year, taking into account
synergies (as mutually agreed) that are allowed to be included
in pro-forma calculations under regulation S-X; and (3) EBITDA
shall exclude Apollo's annual management fee charged to the
company.
In the event of the sale of the Company (including a merger or
the sale of substantially all of the assets or the stock of the
Company) other than to an affiliate of Apollo: (i) if such sale
occurs prior to the end of Year 4, all performance-based
options shall become time vested options to the extent that the
fair market value of the per share consideration received in
the sale (after giving effect to the vesting described herein)
equals or exceeds the per share equity target established for
the applicable tier for the year in which such transaction
occurs (with such target to be prorated for the time that a
sale closes during any such year); (ii) if such sale occurs
after Year 4, and the performance target for any tier has not
been met (but is missed by less than 20%), the options with
respect to such
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tier shall be eligible for full vesting upon such sale to the
extent that the fair market value of the per share
consideration received in the sale (after giving effect to the
vesting described herein) equals or exceeds the per share
equity target that would be applicable for such year assuming
that the targets set forth in the foregoing schedule were
extrapolated based on a progression rate consistent with the
annual targets for such tier (with such target to be prorated
for the time that a sale closes during any such year).
Exercise Price $40 per share, Apollo's assumed per share buy-in price.
Expiration Date Options expire ten years from the date of grant.
Vesting Vesting of options will occur only during an employee's term of
employment, provided that options will become fully vested in
the event of a termination of employment without "cause" or for
"good reason" (as defined in the Employment Agreement) within
six months following the sale of the Company.
IPO If the Company sells shares of Common Stock in a qualified
public offering (the "Offering") before the end of Year 4, the
per share equity performance targets for December 31 of each
year after the close of the Offering will be measured against
the average closing stock price for the 30 trading days
immediately preceding the applicable target date.
Adjustments The options will be subject to standard adjustment provisions
in the event of corporate reorganization, recapitalization,
stock dividends, stock splits, etc.
Shareholders
Agreement All stock acquired pursuant to exercise of the options will be
subject to the terms of the Shareholders Agreement.
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Attachment B
TERM SHEET FOR SHAREHOLDERS' AGREEMENT
--------------------------------------
. Parties:
- Apollo Entities ("Apollo")
- Management Shareholders ("Management Shareholders")
- ▇▇▇▇▇▇▇ Shareholders (the Management Shareholders and the ▇▇▇▇▇▇▇
Shareholders, collectively, the "Shareholders")
. Board of Directors:
- The parties agree that, if employed by the Company, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. shall
be appointed to serve as directors of the Company if they so choose.
. Affiliate Transactions:
- Any transactions between the Company and any affiliate (including
Apollo) shall be on an arms-length basis as determined in good faith by the
board of directors of the Company in their reasonable business judgment. The
parties agree and acknowledge that the Company will pay the management fees to
Apollo as set forth in the Management Agreement between Apollo and the Company.
The parties further agree that Apollo shall be entitled to a transaction fee of
up to one point per transaction as determined in the sole discretion of Apollo.
Except as set forth above, no other fees shall be payable to Apollo, except as
approved by a majority of the disinterested directors of the Company.
. Restrictions on Transfer:
- Common Stock, Options, and, to the extent applicable, Preferred
Stock will be restricted securities under the Securities Act.
- Certificates shall contain standard legends.
- Tag-Along Rights: If Apollo transfers shares (i) in a public
offering (as provided below under Registration Rights including, without
limitation, underwriters' cutbacks) or (ii) individually, or in any series of
related transactions, greater than 10% of the class of securities outstanding,
Shareholders can tag-along their pro rata share on the
same terms and conditions as Apollo as set forth in the tag-along notice
required to be given by Apollo to the Shareholders.
- Drag-Along Rights: If Apollo proposes to sell 50% or more of its
initial ownership or 50% or more of the outstanding capital stock of the
Company, Apollo may require Shareholders to sell their pro rata portion of their
shares (including requiring the exercise of Options held by Shareholders and the
sale of such shares) on the same terms and conditions as Apollo as set forth in
the drag-along notice. If the drag-along sale would include a prohibition on
Shareholders from competing in any line of business or geographic area, the
Shareholders shall not be required to sell to such third party, but shall be
obligated to sell their pro rata portion directly to Apollo. The drag-along
rights shall not apply to a sale to an affiliate of Apollo.
- No Sale Period: Shareholders will not sell their shares or options
for a period of two and one-half years, subject to the rights contained herein
under the headings "Tag-Along Rights," "Drag-Along Rights," "Registration
Rights" and "Other Liquidity Events."
- Right of First Refusal: Following the end of the no sale period,
if any Shareholder proposes to sell its shares (other than to a permitted
transferee), such Management Shareholder shall submit to Apollo a right of first
refusal notice which shall state the terms of the proposed transaction. Apollo
shall give notice of its intention to purchase all, but not less than all of
such shares at the price and on the terms set forth in the right of first
refusal notice. Any transferee shall be required to execute the Shareholders
Agreement.
. Registration Rights:
- Shareholders will have unlimited piggy-back registration rights
other than with respect to an initial public offering. The Company will give at
least five days notice prior to the anticipated filing date, and the
Shareholders will have two business days to notify the Company of its desire to
be included in such registration statement. The Company will use its reasonable
best efforts to include the Shareholders shares in such registration statement;
provided that if such registration involves an underwritten public offering,
such Shareholders agree to sell their shares to the underwriters on the same
terms as the Company. In addition, Shareholders' piggy-back rights shall be
subject to certain public offering limitations, including pro rata cut-backs of
Shareholders shares due to underwriter market limitations and non-pro rata cut-
backs at the underwriter's request. Each shareholder will agree not to sell any
shares during the black-out period prior to a public offering by the Company and
during the period after the effective date of a registration statement equal to
the lesser of 180 days and such shorter period as the Company and the lead
managing underwriter agree. Registration expenses shall be the responsibility of
the Company and selling expenses relating to the underwriting shall be the
responsibility of the selling Shareholders. It is expressly understood that the
rights of
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any selling shareholder to include shares in a piggy-back registration shall be
subordinate to those of the Company.
. Indemnification:
- The Company shall provide standard indemnification to all
Shareholders against liability arising out of untrue statements of material
facts in the registration statement or prospectus (except for information
provided by such Shareholders, in their capacity as a Shareholder.)
- All Shareholders shall indemnify the Company against liability
arising out of untrue statements of material facts in connection with
information provided by such Shareholders, in their capacity as a Shareholder,
for inclusion in the registration statement or prospectus.
. Contribution:
- If indemnification is unavailable, then each indemnifying party
shall contribute such amount payable as a result of such liability in proportion
to reflect the relative benefits and relative faults of the Company and the
Shareholders.
. Public Offerings:
- Shareholders may not participate in any underwritten public
offering, unless they agree to sell their shares on the basis provided in the
underwriting arrangements and comply with the covenants and agreements contained
in such underwriting agreement.
- All Shareholders shall maintain the confidentiality of information
made available in connection with their investment in the Company.
- Expiration of Registration Rights: The rights of Shareholders to
registration rights shall expire on the date which is the earlier of (i) the
date upon which all such securities may be resold under Rule 144 without
limitation and (ii) four years from the date of the Shareholders' Agreement.
. Other Liquidity Events:
- Upon termination of any Management Shareholder under the conditions
specified, the parties shall have the following put/call options with respect to
the Stock and Options held by such terminating Management Shareholder:
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For Cause (other Without Cause
than Special Cause): For Special Cause: Voluntary Termination or Good Reason
-------------------- ------------------ --------------------- --------------
Stock: Company or Apollo can Company or Apollo can Company or Apollo can Management Shareholder
call at Fair Market call at cost, purchase call at Fair Market may put Stock with a
Value, purchase price price payable Value, purchase price Fair Market Value equal
payable immediately. immediately. payable immediately. to the Management
Shareholder's original
investment in the
Stock, purchase price
payable promptly (after
allowing the Company a
reasonable time period
to finance such
purchase), subject to
debt and legal
requirements. Apollo
may, but shall not be
required to, honor the
Company's obligations
with respect to the put.
Vested Company or Apollo can Company or Apollo can Company or Apollo can No put or call.
Options: call at Fair Market call at cost. call at Fair Market Options will continue
Value, purchase price Value, purchase price throughout the exercise
payable immediately. payable immediately. If period.
not purchased, Options
will continue
throughout the exercise
period.
- If a Management Shareholder remains employed after four years he
shall be entitled to put Stock with a Fair Market Value equal to such Management
Shareholder's original investment in the Stock. The purchase price shall be paid
promptly (after allowing the Company a reasonable time period to finance such
purchase), subject to debt and legal requirements. Apollo may, but shall not be
required to, honor the Company's obligations with respect to the put.
- For the purposes of the foregoing "Cause" and "Good Reason" shall
be defined as set forth in the relevant Employment Agreement of the Management
Shareholder and "Special Cause" shall mean a Cause event which results in damage
to the business, reputation or financial condition of the Company. In each case,
if not purchased pursuant to the put or call, the Shareholder can continue to
hold the Stock
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- The Fair Market Value of a share of Stock will be calculated on the
same basis as "Per share equity" as set forth under the heading "Performance
Vesting" in the Option Plan term sheet of today's date.
- All puts and calls above must be exercised and closed within 180
days of the date on which they are triggered.
- The Company will use commercially reasonable efforts to cause the
covenants in its debt agreements to allow exercise of the put/call options in
the event of Management Shareholder termination. However, decision to call
remains at the Company's sole discretion.
- The foregoing provisions under the heading "Other Liquidity Events"
replace the provisions relating to "Repurchase Rights" set forth in the draft
Options Plan term sheet and only apply to the Management Shareholders.
. Financial Reporting:
- The Company shall provide each Shareholder with copies of its
quarterly (unaudited) and annual audited financial statements promptly upon
their completion in any period during which a Shareholder remains a Shareholder,
but is not an officer of the Company.
. Preemptive Rights:
- The Shareholders shall be entitled to customary preemptive rights
with respect to the sale of Common Stock or other equity convertible into Common
Stock of the Company; provided, that (i) the Shareholder remains an employee (or
consultant) and a Shareholder at the time he exercises such right and (ii) such
Shareholder must act within the time frame presented by the Company with respect
to the exercise of such preemptive rights.
. Public Offering:
- If the Company is a public company, this agreement shall be of no
further force and effect, except the provisions under the headings "Registration
Rights," "Tag-Along Rights" and "Drag-Along Rights" shall survive
notwithstanding the Company being a public company.
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