EXHIBIT 10.17
FORM OF
STOCK PURCHASE, VESTING AND REPURCHASE AGREEMENT
This STOCK PURCHASE, VESTING AND REPURCHASE AGREEMENT (this
"Agreement") is entered into as of ________, between City Truck Holdings, Inc.,
a Delaware corporation (the "Company"), and _____________ ("Investor" or "you").
In consideration of the agreements contained herein, the parties agree as
follows:
1. Issuance. The Company agrees to issue to you, and you hereby
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purchase from the Company on the date hereof, _____ shares (the "Shares") of the
Company's common stock ("Common Stock") for $1.00 per share in cash. All of the
Shares are subject to vesting as set forth in Section 2, and one-half of the
Shares are Eligible Time Accelerated Stock ("ETA Stock").
2. Vesting of the Shares.
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(a) 10% of the Shares shall become vested as of the last day of each
fiscal year of the Company (the "Fiscal Year End Date") from fiscal 1998 through
fiscal 2002 and 16.66% of the Shares shall become vested as of the Fiscal Year
End Date of each of fiscal 2003, 2004 and 2005, subject to the earlier vesting
of ETA Stock as described below. All Shares (in excess of the Shares scheduled
to vest in any such year) which vests as ETA Stock under Section 2(b) will
reduce in inverse order the Shares scheduled to vest, beginning with the Fiscal
Year End Date in fiscal 2005.
(b) Annex A, attached hereto and incorporated herein by reference,
sets forth the vesting provisions and performance criteria (the "Performance
Criteria") for the ETA Stock. If the Company meets the Performance Criteria for
fiscal 1998, 1999, 2000, 2001 or 2002, 20.00% of the ETA Stock will vest as of
the Fiscal Year End Date of such year. (For example, if the Performance
Criteria for fiscal 1998 and 1999 were met, but no other Performance Criteria
were met, 40% of the ETA Stock would vest.)
If the Company does not achieve Plan EBITDA required to vest 100% of
an installment of ETA Stock in any one Performance Year, but in the immediately
following Performance Year the Company's actual EBITDA exceeds Plan EBITDA, the
Company will add the dollar amount by which the Company's EBITDA exceeds Plan
EBITDA in such Performance Year to the Company's EBITDA for the Performance Year
immediately prior thereto and vest the additional ETA Stock that would have
vested in that Performance Year with the addition of the dollar amount carried
back; subject to the limitations set forth elsewhere in this Agreement in the
case of termination of employment and acquisitions of the Company. Such vesting
for the earlier Performance Year is referred to herein as "Catch Up Vesting."
(c) Anything in this Agreement to the contrary notwithstanding, if
the Company is acquired by a third party or parties through an asset purchase,
merger or sale of more than 50% (in value) of the outstanding equity securities
of the Company (an "Acquisition"), (i)
all Shares scheduled to vest pursuant to Section 2(a) in the calendar year in
which the Acquisition is closed (and not previously repurchased by the Company
pursuant to Section 3) shall vest immediately prior to the Acquisition closing
date and (ii) if the calendar year in which the Acquisition is scheduled to
close is a Performance Year, all ETA Stock eligible to vest in such year shall
vest immediately prior to the Acquisition closing date; provided, however, that
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such ETA Stock shall only vest if Year to Date EBITDA as of the Acquisition
closing date (or a date reasonably close and prior thereto) equaled or exceeded
90% of year-to-such-date Plan EBITDA; and provided further that an initial
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public offering or other issuance of securities by the Company shall not
constitute an Acquisition.
(d) You will be entitled to "Catch Up Vesting" (as defined in Annex
A) with respect to all shares eligible to vest in a Performance Year prior to
any Performance Year in which an Acquisition is closed if ETA Stock vested for
the year in which the Acquisition is scheduled to close pursuant to Section
2(c). Shares of ETA Stock that are eligible for Catch Up Vesting but that do
not vest pursuant to the preceding sentence shall be subject to the Company's
Purchase Option provided in Section 3. In addition, the Company shall have the
right to purchase pursuant to Section 3 all shares of ETA Stock which were
eligible for accelerated vesting with respect to Performance Years prior to the
calendar year in which the Acquisition is closed which did not so accelerate
pursuant to Section 2(c) or Section 2(b) and Annex A.
(e) The proceeds of the Acquisition attributable to all unvested
Shares outstanding on the closing date of the Acquisition (other than ETA Stock
repurchased pursuant to the preceding sentence) (the "Escrowed Acquisition
Proceeds"), will be deposited with the Escrow Agent and will be distributed to
you one year after the Acquisition closing date, but only if you are then an
employee of the Company; provided that if (i) you are terminated at the time of
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or after the Acquisition or (ii) you are not offered a job with commensurate
salary and responsibilities by the acquiring entity (or a subsidiary or parent
thereof), then the Escrowed Acquisition Proceeds will be distributed to you
immediately.
(f) Anything in this Agreement to the contrary notwithstanding, all
unvested Shares shall vest immediately upon death or disability. "Disability"
means that you are totally physically disabled, as determined in writing by your
personal physician and, at the Company's option, confirmed by a physician
selected by the Company. You will allow any such physicians to conduct such
physical examinations and tests and to review such of your medical records as he
or they deem appropriate.
3. Company Purchase Option.
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(a) If you voluntarily Terminate your Employment prior to December
31, 2002, the Company will have the unconditional right and option to purchase
any or all of your Shares (whether vested or unvested) for $1.00 per share and
you shall be released from the Covenant Not to Compete pursuant to Section 4(b).
As used in this Agreement, "Termination of Employment" means the time when the
employee-employer relationship between you and the Company is terminated for any
reason whatsoever, with or without cause, whether voluntary or involuntary. In
this Agreement in the context of employment, the term "Company" shall mean a
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subsidiary or parent of the Company if you are then employed by such subsidiary
or parent. "Terminate your Employment" has a correlative meaning.
(b) If there is a Termination of Employment for any reason other than
a voluntary termination, you can choose either to (i) allow the Company the
unconditional right and option to purchase all of your Shares (whether vested or
unvested) for $1.00 per share and be released from the Covenant Not to Compete
pursuant to Section 4(b) or (ii) to keep only your Shares which are vested and
be subject to the Covenant Not to Compete pursuant to Section 4(b), in which
case the Company will have the unconditional right and option to purchase the
unvested Shares for $1.00 per share. The Company's right and option set forth
in Sections 3(a), 3(b) and 3(c) is referred to herein as the "Purchase Option."
(c) In the event of an Acquisition, the Company may purchase for
$1.00 per share all shares of ETA Stock eligible for accelerated vesting in any
Performance Year prior to the calendar year in which the Acquisition is closed,
which did not accelerate and vest pursuant to Section 2.
(d) The Purchase Option, if exercised, must be exercised no later
than 60 days after a Termination of Employment, or the Shares subject thereto
will automatically be deemed vested. The Purchase Option may be exercised in
whole or in part. The Purchase Option will be effective when delivered or
mailed and must be exercised in writing and sent to Investor as provided in
Section 12(b) of this Agreement and to the Escrow Agent (as defined in Section 6
hereof) as provided in the Joint Escrow Instructions. Amounts due to you as a
result of exercise of the Purchase Option shall be payable in cash promptly
after exercise of the Purchase Option or, in the case of ETA Stock and/or "Catch
Up Vesting," as soon as reasonably practical after determination of whether or
not any applicable Performance Criteria were met.
4. Covenant Not To Compete.
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(a) Recitals. Investor acknowledges and agrees that he has technical
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expertise associated with the heavy duty truck parts business and related
businesses, all to the extent conducted by the Company as of the date of
termination of employment (the "Business") and is well known in the Business
community throughout the United States. In addition, Investor has valuable
business contacts with clients and potential clients of the Business and with
professionals in the Business. Furthermore, Investor's reputation and goodwill
are an integral part of his business success throughout the areas where the
Business is and will be conducted. If Investor deprives the Company of any of
his goodwill or in any manner uses his reputation and goodwill in competition
with the Company, the Company will be deprived of the benefits it has bargained
for pursuant to this Agreement. The Company would not have entered into this
Agreement but for Investor's Covenant Not To Compete.
(b) Covenant Not To Compete. During your employment by the Company
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and for a period of twelve (12) months thereafter (the "Term"), you will not,
directly or indirectly, own (except through ownership of less than 5% of the
securities of a publicly traded company), manage, join, operate or control, or
participate in the ownership, management,
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operation or control of, or be connected as a director, officer, employee,
partner, consultant or otherwise with, or permit your name to be used by or in
connection with, any profit or non-profit business or organization which is
engaged in the Business in whole or in part, anywhere in the United States so
long as the Company carries on the Business therein.
(c) No Solicitation of Customers or Employees. Investor agrees that:
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(i) during the Term, Investor shall not, directly or
indirectly, divert or take away (or attempt to do so) from the Company or any
affiliate of the Company (including without limitation by divulging to any
competitor or potential competitor of the Company) any person, firm, corporation
or other entity who is or was a customer of Company or any subsidiary of Company
or whose identity is known to Investor at the date hereof or the date of
Termination of Employment as one whom the Company or any affiliate of the
Company intends to solicit, except in connection with any business endeavor
which is not prohibited by Section 4(b) hereof; and
(ii) during the Term, Investor shall not, directly or
indirectly, hire or offer employment to or seek to hire or offer employment
(other than employment with the Company or a subsidiary thereof) to any employee
of the Company or any subsidiary of the Company whose employment is continued by
the Company after the date hereof or any employee of any successor or affiliate
of the Company which is engaged in the Business, unless the Company first
terminates the employment of such employee or the Company gives its written
consent to such employment or offer of employment.
(d) Severability of Provisions. In the event that the provisions of
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this Section 4 should ever be adjudicated by a court of competent jurisdiction
to exceed the time or geographic or other limitations permitted by applicable
law, then such provisions shall be deemed reformed to the maximum time or
geographic or other limitations permitted by applicable law, as determined by
such court in such action. Without limiting the foregoing, the covenants
contained herein shall be construed as separate covenants, covering their
respective subject matters, with respect to (i) each of the separate counties of
the state of California and other places in which Company or any of its
subsidiaries transacts any business, (ii) each business conducted by Company or
any of its subsidiaries, and (iii) the Company and its successors separately.
Each breach of the covenants set forth herein shall give rise to a separate and
independent cause of action.
(e) Injunctive Relief. Investor acknowledges that (i) the provisions
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of Section 4(b) and 4(c) and Section 9 are reasonable and necessary to protect
the legitimate interests of the Company, and (ii) any violation of Section 4(b)
or 4(c) or Section 9 will result in irreparable injury to the Company, the exact
amount of which will be difficult to ascertain, and that the remedies at law for
any such violation would not be reasonable or adequate compensation to the
Company for such a violation. Accordingly, you agree that if you violate the
provisions of Section 4(b) or 4(c) or Section 9, in addition to any other remedy
which may be available at law or in equity, the Company shall be entitled to
specific performance and injunctive relief, without posting bond or other
security, and without the necessity of proving actual damages.
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(f) Other Agreement. The provisions of this Section 4 are in
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addition to any Employee Confidentiality Agreement previously executed by you,
which remains in effect.
5. No Employment Agreement. Nothing contained in this Agreement (i)
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obligates the Company, or any subsidiary or parent of the Company, to employ
Investor in any capacity whatsoever, or (ii) prohibits or restricts the Company
(or any such subsidiary or parent) from terminating the employment of Investor
at any time or for any reason whatsoever, with or without cause, and Investor
hereby acknowledges and agrees that neither the Company nor any other person has
made any representations or promises whatsoever to Investor concerning
Investor's employment or continued employment by the Company.
6. Escrow of Shares. As security and to ensure the availability for
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delivery of Shares in case of an exercise of the Purchase Option, Investor will
deposit with the escrow agent (the "Escrow Agent") named in the joint escrow
instructions attached hereto as Annex B (the "Joint Escrow Instructions"),
certificates representing the Shares, together with 10 stock assignments duly
endorsed in blank, a copy of which is attached hereto as Annex C. Such
documents are to be held by the Escrow Agent pursuant to the Joint Escrow
Instructions. In the case of any conflict or inconsistency between this Section
6 and the Joint Escrow Instructions, the Joint Escrow Instructions shall
control.
7. Change in Capitalization. If from time to time during the term of
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this Agreement there is (i) any stock dividend or stock split or similar event
or (ii) any consolidation, merger or sale of all, or substantially all, of the
assets of the Company in which the consideration receivable by Investor consists
of securities, then in such event any and all new, substituted or additional
securities to which Investor may become entitled by reason of his ownership of
the Shares shall immediately become subject to this Agreement and shall assume
the same status with respect to vesting as the Shares upon which such dividend
was paid or in substitution for which such additional securities were
distributed. While the total price for all Shares subject to the Purchase
Option shall remain the same after each such event, the price per Share upon
exercise of the Purchase Option shall be appropriately adjusted by the Board of
Directors of the Company.
8. Investor Representations and Agreements. Investor hereby
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represents and warrants, and agrees with, the Company as set forth below.
(a) Investor has full power and authority to execute, deliver and
perform his obligations under this Agreement and this Agreement is a valid and
binding obligation of Investor, enforceable in accordance with its terms.
Investor is not subject to any agreement not to compete or other restriction on
his ability to acquire the shares of Common Stock being acquired pursuant to
this Agreement or to be an employee of the Company or any of its subsidiaries.
(b) Investor has reviewed this Agreement and the Stockholders'
Agreement (as defined) and all annexes, schedules and exhibits attached hereto
and thereto, and has received
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all such business, financial and other information as he deems necessary and
appropriate to enable him to evaluate the financial risk inherent in making an
investment in the Common Stock.
(c) Investor is acquiring the Shares acquired hereunder with his own
property for investment, for his own account, and not as a nominee or agent for
any other person, firm or corporation, and not with a view to the sale or
distribution of all or any part thereof. Investor does not have any contract,
undertaking, agreement or arrangement with any person, firm or corporation to
sell, transfer or grant participation to such person, firm or corporation, with
respect to any of the Shares.
(d) Investor understands and agrees that (i) the Shares will not be
registered under the Securities Act of 1933, as amended (the "Act"), in part
based upon an exemption from registration predicated on the accuracy and
completeness of his representations and warranties appearing herein and (ii) he
will not be permitted to sell, transfer or assign any of the Shares until they
are registered under the Act or an exemption from the registration and
prospectus delivery requirements of the Act is available, and (iii) there is no
assurance that such an exemption from registration will ever be available or
that the Shares will ever be able to be sold.
(e) Investor has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of his
investment in the Company, has the ability to bear the economic risks of its
investment for an indefinite period of time.
9. Restriction on Sale or Transfer. Except as provided herein, none
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of the Shares (whether vested or unvested) (or any beneficial interest therein)
shall be sold, transferred, assigned or pledged (including transfer by operation
of law) and any attempt to make any such sale, transfer, assignment or pledge
shall be null and void and of no effect. The Company shall not be required (a)
to transfer on its books any Shares which shall have been sold, pledged or
disposed of in violation of any of the provisions of this Agreement or (b) to
treat as owner of such Shares or to accord the right to vote or to pay dividends
to any purported transferee of Shares in violation of this Agreement.
10. Legends. In addition to any legends required by the
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Stockholders' Agreement, the certificates representing the Shares will bear
substantially the following legend:
"The shares represented by this certificate are subject to repurchase under
certain circumstances by the issuer pursuant to a Stock Purchase, Vesting
and Repurchase Agreement between the Issuer and the initial purchaser, to
which reference is made for a ▇▇▇▇▇▇ description of such repurchase
rights."
11. Stockholders' Agreement; Covenant Regarding 83(b) Election. In
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connection with this Agreement, Investor agrees to become a party to the
Stockholders' Agreement dated as of September 30, 1998 among the Company and its
stockholders. Investor's signature on this Agreement shall also constitute his
or its signature on the Stockholders' Agreement. Investor also hereby covenants
and agrees that he will make an election pursuant to Treasury Regulation 1.83-2
with respect to the Shares and will furnish the Company with a copy
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of the form of election Investor has filed and evidence that such an election
has been filed in a timely manner.
12. General Provisions.
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(a) No Assignments. Except as specifically provided to the contrary
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in this Agreement, neither party shall transfer, assign or encumber any of its
or his rights, privileges, duties or obligations under this Agreement without
the prior written consent of the other party, and any attempt to so transfer,
assign or encumber shall be void; provided, however, that the Company may assign
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this Agreement and its rights hereunder in connection with a sale of all of the
stock of or all or substantially all of the assets of the Company.
(b) Notices. All notices, requests, consents and other
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communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given and made and served either by personal delivery
to the person for whom it is intended or by telecopy, receipt of which is
acknowledged by the telecopy number set forth below for the applicable
addressee, or if deposited, postage prepaid, registered or certified mail,
return receipt requested, in the United States mail:
(i) if to Investor, addressed to Investor at his address shown
on the stock register maintained by the Company, or at such other address
as Investor may specify by written notice to the Company, or
(ii) if to the Company, to it at c/o HDA Parts System, Inc., ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, with a
copy to Brentwood Associates, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, or at such
other address as the Company may specify by written notice to Investor.
Each such notice, request, consent and other communication shall be deemed to
have been given upon receipt thereof as set forth above or, if sooner, three
days after deposit as described above. The addresses for the purposes of this
Section 12(b) may be changed by giving written notice of such change in the
manner provided herein for giving notice. Unless and until such written notice
is received, the addresses provided herein shall be deemed to continue in effect
for all purposes hereunder.
(c) Choice of Law. This Agreement shall be governed by and construed
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in accordance with the internal laws, and not the laws of conflicts of laws, of
the State of Delaware.
(d) Severability. The parties hereto agree that the terms and
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provisions in this Agreement are reasonable and shall be binding and enforceable
in accordance with the terms hereof and, in any event, that the terms and
provisions of this Agreement shall be enforced to the fullest extent permissible
under law. In the event that any term or provision of this Agreement shall for
any reason be adjudged to be unenforceable or invalid, then such unenforceable
or invalid term or provision shall not affect the enforceability or validity of
the remaining terms and provisions of this Agreement, and the parties hereto
hereby agree to replace such unenforceable
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or invalid term or provision with an enforceable and valid arrangement which in
its economic effect shall be as close as possible to the unenforceable or
invalid term or provision.
(e) Parties in Interest. All of the terms and provisions of this
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Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective permitted successors and assigns of the parties hereto.
(f) Modification, Amendment and Waiver. No modification, amendment
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or waiver of any provision of this Agreement shall be effective against the
Company or Investor unless approved in writing, and, in the case of the Company,
authorized by its Board of Directors. The failure at any time to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of any of the parties thereafter
to enforce each and every provision hereof in accordance with its terms.
(g) Integration. This Agreement constitutes the entire agreement of
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the parties with respect to the subject matter hereof and supersedes all prior
negotiations, understandings and agreements, written or oral.
(h) Headings. The headings of the sections and paragraphs of this
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Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(i) Counterparts. This Agreement may be executed in counterpart with
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the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
(and, by execution hereof, the Stockholders' Agreement of the Company) to be
executed as of the date first above written.
CITY TRUCK HOLDINGS, INC.
By:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
INVESTOR
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Name:
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ANNEX A
CITY TRUCK HOLDINGS, INC.
PERFORMANCE CRITERIA
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This Annex A sets forth the Performance Criteria, detailed vesting
provisions with respect to the vesting of ETA Stock, which is a part of the
Shares to be acquired by Investor pursuant to the Stock Purchase, Vesting and
Repurchase Agreement dated as of ______________ among the Company and Investor
(the "Agreement"). Capitalized terms used herein and not defined have the
meanings ascribed to them in the Agreement.
As stated in Section 2(b) of the Agreement, 20% of the ETA Stock shall
become eligible for vesting as of the end of each fiscal year from fiscal 1998
through fiscal 2002 (each of such full fiscal years being defined in the
Agreement as a Performance Year).
For each Performance Year, the amount of Eligible ETA Stock that shall
become vested (effective as of the end of the fiscal year) will be determined by
comparing the Company's actual EBITDA (as defined below) as of the end of such
fiscal year (as determined from its audited financial statements) to Plan EBITDA
(as defined below) for such fiscal year. The percentage of Eligible ETA Stock
that shall become vested at the end of each Performance Year shall be as set
forth in the following table:
Actual EBITDA as a % Percentage of Eligible
of Plan ETA Stock that
EBITDA shall become vested
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less than 85.00% 0%
88.75% 30%
92.50% 60%
96.25% 80%
100% 100%
Vesting between the percentages listed in the table above will be
linearly interpolated.
"EBITDA" means, for any fiscal year, consolidated pre-tax income plus
interest expense (including non-cash interest, amortization of original issue
discount and the interest component of capital leases) on indebtedness and
amortization of goodwill, covenants not to compete and similar intangibles, all
as determined in accordance with generally accepted accounting principles and as
reflected in the Company's audited consolidated financial statements.
"Plan EBITDA" means, for each Performance Year, the dollar amount of
EBITDA set forth in the Operating Plan developed by management and approved by
the Board of Directors. Plan EBITDA will be adjusted from time to time as may
be mutually agreed upon to reflect the expected contribution to EBITDA of
acquisitions or major corporate projects.