EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement ("Agreement") made and entered into this 27th day
of March 1997 by and between MS FARM JOURNAL CORPORATION. a Delaware corporation
(the "General Partner"), and XXXXX X. XXXXXXX, having a residence at the address
set forth beneath his signature below ("Employee").
WHEREAS, the General Partner desires to cause Farm Journal. Inc.
("Employer") to employ Employee to obtain the benefit of his services as
President, Chief Operating Officer and a Member of the Board of Employer and
Employee desires to accept such employment.
NOW, THEREFORE, in consideration of the promises and of the respective
covenants and agreements set forth herein and for other good and valuable
consideration, the General Partner and Employee hereby agree as follows:
1. Employment. Upon the closing (the "Closing") of the acquisition
----------
(the "acquisition") of Employer by Farm Journal Holdings Inc., (i) the General
Partner will to cause Employer to employ Employee and to enter into a written
assumption of this Agreement and all obligations of Employer hereunder and (ii)
Employee hereby accepts employment with Employer on all the terms and conditions
of this Agreement.
2. Term. The term of this Agreement shall be for a period of five (5)
----
years (the "Initial Term"), commencing one day after the Closing (the
"Employment Date") and terminating on the fifth anniversary of the Employment
Date, unless sooner terminated as set forth in Sections 10 and 11. Unless either
party gives notice to the other to the contrary prior to the end of the Initial
Term or any Renewal Term (as defined below), this Agreement shall be renewed
upon the end of the Initial Term or such Renewal Term, as the case may be, for
an additional one-year period (any such one-year period being refined to herein
as a "Renewal Term").
3. Compensation.
------------
(a) Salary. Employer agrees to pay Employee during the Term of this Agreement,
------
a base salary at a rate of One Hundred Sixty Thousand Dollars ($160,000) per
year (such amount, as the same may be adjusted by the Employer's Board of
Directors (the "Board"), the "Base Salary"), payable periodically in accordance
with the normal payment schedule and practices of Employer. The Employee's Base
Salary shall be reviewed annually by Employer and Employee and performance
raises may be given when warranted in the sole discretion of the Board. All
payments shall be subject to withholding and other applicable taxes.
(b) Bonus Payments. Employee shall be entitled to receive, in addition to the
--------------
Base Salary, such bonus payments, if any, as the Board or the Compensation
Committee of the Board, in its sole discretion, may specify. The amount of any
annual bonus specified by the Board or such Compensation Committee may be up to
100% of Employee's Base Salary. The objectives to be followed by Employer in
determining the amount of any bonus may include both quantitative measures
(including, for
example and without limitation, improving revenue, cash flow, net income,
earnings per share and return on assets) and qualitative measures (including,
for example and without limitation, developing a superior competitive position,
creating a corporate culture characterized by enthusiasm, productive activity
and high ethical standards and building an effective team at all levels of the
organization).
4. Duties and Responsibilities.
---------------------------
As Officer and Employee. Employer hereby employs Employee upon the terms and
-----------------------
conditions set forth in this Agreement, to serve as President and Chief
Operating Officer of the Employer in which office Employee shall perform the
executive duties vested in such offices by the By-Laws of the Employer.
Sole Employment is with Employer. During his term of employment, Employee shall
--------------------------------
not directly or indirectly render any services of a business, commercial or
professional nature to any other person, firm, corporation or organization,
whether for compensation or otherwise, without the prior written consent of the
Board, except for such charitable, academic, professional or trade services
which do not interfere with Employee performing his duties hereunder (as
determined by the Board).
(a) As Director. The Board shall cause Employee to be nominated for election
-----------
and, for so long as the Employer shall remain an indirect, wholly-owned
subsidiary of MS Farm International Limited Partnership (the "Partnership") the
General Partner shall cause the Employee to be elected as a director of Employer
during the entire employment term. As a director, Employee shall serve on the
Executive Committee and on such other committees of the Board as the Board may
request. Employee agrees that he shall not be entitled to receive any
compensation for serving as a director of Employer or as a director, officer or
employee of Employer's subsidiaries or other affiliates other than the
compensation to be paid to Employee by Employer pursuant to this Agreement.
(b) Employee Acceptance. Employee hereby accepts the employment and duties
-------------------
contemplated herein, and Employee agrees to devote his full working time to the
performance of his duties and the business of Employer, and to comply with all
significant lawful policies of the Employer which may be in effect from time to
time.
5. Expenses. Employer agrees to pay or reimburse Employee for all
--------
reasonable, ordinary and properly vouchered business expenses (including for
necessary business travel) and client entertainment expenses incurred after the
Employment Date in the performance of his services under this Agreement in
accordance with all applicable policies and procedures of Employer for expense
reimbursement.
6. Equity Participation and Other Benefits.
---------------------------------------
(a) Purchase of Class A Limited Partner Interests. Employee shall purchase for
---------------------------------------------
$200,000 two Units as defined in the Limited Partnership Memorandum dated
February 1997, of MS Farm International Limited Partnership (the "Partnership")
(as the same may be supplemented) of Class A Limited Partner interests of the
Partnership.
(b) Purchase of Class B Limited Partner Interests. In connection with the
---------------------------------------------
closing of the Acquisition of the Company by Farm Journal Holdings Corp.,
Employee will be entitled on the
2
Employment Date to purchase an equity participation interest in the Partnership
as set forth on Annex A hereto.
(c) Other Benefit Plans. In addition to the compensation specified in Section
-------------------
3 hereinabove, during the term of Employee's employment with Employer, Employee
shall be entitled to participate in or receive benefits under any employee
benefit plan or other arrangement made available generally by Employer, now or
in the future, to its key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements.
7. Employer's Authority. Employee agrees to observe and comply with
--------------------
the lawful rules and regulations of Employer respecting performance of duties,
reimbursement of expenses and other matters relating to Employer's business.
8. Covenant to Retain Employer's Confidences and Trade Secrets. By
-----------------------------------------------------------
virtue of his employment, Employee will have continuing access to privileged and
confidential information, including without limitation trade secrets, relating
to Employer, or any of Employer's subsidiaries or affiliates, or any of their
respective businesses (any such information being referred to collectively
herein as "Confidential Information"). It is acknowledged and agreed that
Employer will suffer immeasurable and irreparable harm if Confidential
Information is used or exploited outside the scope of this Agreement or
Confidential Information is disclosed in breach of this Agreement. Accordingly,
during the period of his employment hereunder and following termination of his
employment with Employer, Employee shall not, without the written consent of the
Board or of a person (other than Employee) authorized thereby, use, exploit or
disclose to any person any Confidential Information; provided, however, that
Confidential Information shall not include any information that already is
lawfully (and without breach of any duty or agreement to preserve
confidentiality) in the public domain or prevent Employee from using general
know-how not proprietary to Employer; and provided further that Employee shall
not be required to keep confidential any such information, and may disclose such
information, under the following circumstances:
(i) Employee may disclose Confidential Information to another
employee of Employer or to representatives or agents of Employer (such as
independent accountants and legal counsel) when such disclosure is reasonably
necessary or appropriate in connection with the performance by Employee of his
duties as an executive officer of Employer,
(ii) Employee may disclose Confidential Information at the express
direction of any authorized governmental entity acting within the scope of its
jurisdiction,
(iii) Employee may disclose Confidential Information pursuant to a
subpoena or other court process, or
(iv) Employee may disclose Confidential Information as otherwise
required by law or the rules, regulations or orders of any applicable regulatory
body acting within the scope of its jurisdiction, but, before any such
disclosure may be made under the foregoing clause (ii), (iii) or (iv), Employee
shall cause Employer (or if after the termination of Employee's employment with
Employer, shall afford to Employer a reasonable opportunity) to exercise
3
reasonably appropriate measures to object to such disclosure and to provide for
the confidential treatment of the information if so disclosed. Employee
acknowledges and agrees that all Confidential Information, that are or have been
learned, developed or created by him during or in connection with his employment
with Employer, shall belong to, and shall remain the sole property of, Employer.
Employee shall not be entitled to keep or reproduce any such information or
materials after his employment with Employer terminates. Employee shall, at any
time requested by Employer (either during or after his employment with
Employer), promptly make all disclosures, execute all instruments and perform
all acts reasonably necessary to vest in Employer, fully and completely, all
such rights and information, and Employee promptly shall deliver to Employer all
memoranda, notes, reports, lists and other documents (and all copies thereof),
in whatever media contained, which he may then have in his possession, custody
or control, and which contain any Confidential Information.
9. Covenant Not to Compete. Employee acknowledges that the services
-----------------------
he will render to Employer are of a special and unique character, any loss of
which cannot adequately be compensated by damages or an action at law. In view
of the unique value to Employer of the services of Employee for which Employer
has contracted hereunder, the confidential information obtained by (or disclosed
to) Employee as a consequence of his employment with Employer and the harm that
would result to the business of Employer as a result of competition between
Employee and Employer; as a material inducement to Employer to enter into this
Agreement; and as a material inducement to Employer to pay Employee the
compensation provided in this Agreement on the terms and conditions hereof,
Employee covenants and agrees as follows:
(a) Employee will not (without the prior written consent of Employer (which
consent may be withheld by Employer in its sole discretion for any reason)) for
so long as he shall be employed by Employer commencing with the Employment Date
and for a period ending on the second anniversary (or, if Employee is fired
without Cause, the first anniversary) following the termination of his
employment with Employer under this Agreement for any reason whatsoever, for his
own account or otherwise, and whether alone or in concert with others, directly
or indirectly:
(i) compete with Employer in any manner in those segments of the
publishing, market research, data management business or any other business
activity in which Employer, at the time of termination, is substantially engaged
or which Employer then is actively pursuing (the "Business"), or manage,
operate, control, be employed by, participate in, render financial or other
assistance to or be connected in any manner with the ownership, management,
representatives, operations or control of that part of any business that
competes with any of the Business, or solicit business as contemplated by
paragraph (ii) below;
(ii) solicit or accept solicitations in competition with Employer of any
Business of any advertiser, customer or client of Employer at the time of
termination, or any person or entity who, within the one (1) year immediately
preceding the time of termination, was an advertiser, customer or client of
Employer or was solicited by Employer to be an advertiser, customer or client;
provided, however, Employer agrees that the provisions of this clause (ii) shall
-------- -------
not restrict the ability of Employee to be employed by any advertiser of
Employer; or
4
(iii) offer employment to or employ any person who is, at the time of such
offer, or who had been within one (1) year prior to the time of such offer, (x)
an employee of Employer or its subsidiaries or (y) an independent contractor or
consultant of Employer engaged in editorial, research, skilled production or
data management, managerial or sales work, unless, in the case of an employee,
such person shall have been terminated by Employer without cause, or shall have
terminated his or her employment with the consent of Employer, and shall have
worked at least six months at another employer prior to the date when such
person first is employed or offered employment by Employee; or
(iv) request, suggest or cause any past, present or future advertisers,
customers or clients of the Employer, the Partnership or any of their
affiliates, to cancel or terminate, or change the terms of, any business
relationship with the Employer, the Partnership or any of their affiliates or
request or cause any vendor, printer, manufacturer or material supplier to
cancel or terminate, or change the terms of, any business relationship with the
Employer; provided, however, Employer agrees that the provisions of this clause
-------- -------
(iv) shall not prohibit the Employee, if employed by any advertiser of Employer,
from negotiating in good faith, on behalf of such advertiser, the terms of such
advertiser's business relationship with Employer.
(b) Employee shall not at any time, whether alone or in concert with others,
directly or indirectly say or perform acts that will disparage the reputation,
trade name, integrity and goodwill of the Employer, any of its publications or
businesses, the Partnership or any of the Employer's officers, employees,
agents, directors, stockholders and/or affiliates, including, but not limited
to, MS Farm Journal Corporation and Xxxxxx Xxxxxx & Co., Inc. Employer shall not
of any time, whether alone or in concert with others, make statements to third
parties disparaging the reputation of Employee; provided that this agreement
--------
shall not in any manner restrict or limit, or constitute a waiver of, the
exercise by Employer of all rights and remedies hereunder.
(c) Employee acknowledges and agrees that Employer conducts its Business
throughout the continental United States and intends to conduct it in certain
non-United States jurisdictions. The specific provisions of this covenant not to
compete by Employee are limited to and binding only within those markets and
geographical boundaries, including without limitation the continental United
States, in which Employer is engaged in Business or where Employer, at the time
of termination, is actively and in good faith pursuing the engagement of
Business.
(d) Employee acknowledges that this Section is an essential element of this
Agreement, and that but for this Section, Employer would not have entered into
this Agreement. Employee also acknowledges that the provisions of this Section
are reasonable and necessary to protect the legitimate interests of Employer and
that any breach of the terms, covenants or agreements set forth in this Section
shall be competitively unfair and may cause irreparable damage to Employer
because of the special and unique services to be performed by Employee under
this Agreement and that recovery of damages at law will not be an adequate
remedy. Accordingly, Employee agrees that for any breach or threatened breach of
the terms, covenants and agreements of this Section, in addition to any other
rights or remedies Employer may have, Employer may apply to any court of law or
equity having jurisdiction to enforce the specific performance of the foregoing
provisions and may apply for injunctive relief against any act which would
violate any such provisions. Employer agrees that for any breach of the
agreement of Employer set forth in the last sentence of clause (b) of this
Section 9, in addition to any other rights or remedies
5
Employee may have, Employee may apply to any court of law or equity having
jurisdiction for injunctive relief against statements by Employer that would
violate such agreement.
10. Termination without Severance. Except for the covenants, terms
-----------------------------
and conditions contained in Sections 8, 9 and 14 (and, to the extent applicable
to said sections, Sections 15 through 19), this Agreement shall be terminated
immediately:
(a) Upon the death of Employee; or
(b) Upon the Total Disability of Employee. Total Disability shall mean any
condition of illness or physical or mental incapacity or disability which
prevents or appears reasonably likely to prevent Employee from performing the
essential functions of his position (as determined by a physician mutually
acceptable to Employer and Employee or a necessary representative of Employee),
with or without reasonable accommodation, on a full-time basis for ninety (90)
consecutive days or ninety (90) days within any one hundred eighty (180) day
period; or
(c) If Employee is fired with Cause. For purposes of this Agreement, "Cause"
shall mean any of the following, as determined by the Board:
(i) Employee's material breach of Sections 8 and 9 hereof or Employee's
material failure or Employee's refusal to follow written policies or directions
of the Board (which the Board believes in good faith to be in the best interests
of Employer) or Employee's material failure to perform his duties as set forth
in Sections 4 and 7 of this Agreement or as assigned by the Board from time to
time in accordance with Sections 4 and 7 of this Agreement;
(ii) Employee acts dishonestly and the same adversely affects Employer; or
(iii) Employee is or has engaged in gross misconduct which is employment
related, or Employee is convicted of a felony or any crime involving moral
turpitude, fraud or misrepresentation; or
(d) If Employee voluntarily quits his employment.
11. Termination with Severance. Except for the covenants, terms and
--------------------------
conditions contained in Sections 8 and 9 (and, to the extent applicable to said
sections, Sections 14 through 19), and subject to the terms and conditions of
this Section 11, this Agreement may be terminated upon either of the following
two events: (i) at the election of Employer at any time without Cause, by giving
written notice of such election to Employee; and (ii) at the election of
Employee, by giving written notice to the Board, if Employer (at a time when
Employee is not in material breach of this Agreement) is in material breach of
this Agreement and such breach continues for thirty (30) or more days after
Employee gives written notice of such material breach to the Board. In the
event of any termination pursuant to the foregoing sentence, Employee shall be
entitled, without any duty to mitigate, to continue to receive his then-existing
Base Salary under Section 4(a) hereof for a period of three months following the
date of such termination (provided that such number of months shall increase by
one month for each completed full year of Employee's employment by Employer).
The rights of Employee under the foregoing sentence to his Base Salary and the
obligations of Employer pertaining thereto, are contingent upon (i) Employee
executing and delivering to Employer (in form and substance
6
satisfactory to Employer) a release in favor of Employer, all affiliates of
Employer and all of Employer's and such affiliate's respective stockholders,
partners, officers, directors, employees, agents and representatives, from any
and all claims arising under this Agreement or as a result of Employee's
employment relationship with Employer or any of Employer's predecessors or
affiliates and (ii) Employee complying with all of his post-termination
obligations, including, but not limited to, his obligations under Section 8 and
9 hereof.
12. Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by reputable overnight
courier or by registered or certified mail (return receipt requested), postage
prepaid, or by telecopy (immediately followed by telephone confirmation of
delivery of such telecopy with the intended recipient of such notice or by
notice in writing sent promptly by registered or certified mail as provided
above), to the parties to this Agreement at the following addresses or at such
other address for a party as shall be specified by like notice:
(a) If to Employer, at:
Farm Journal, Inc.
Centre Square West
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Board of Directors
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
7
If to Employee, at his address set forth beneath his signature below with a copy
to:
Farm Journal, Inc.
Centre Square West
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
All such notices and communications shall be deemed to have been received on the
date of delivery, on the date that the telecopy is confirmed as having been
received, on the next business day after being sent by reputable overnight
courier or on the third business day after mailing, as the case may be.
13. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and undertakings, written and oral. This
Agreement may be amended only by a subsequent written agreement of Employee and
Employer. No waiver by Employee or by Employer of any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar provision or condition at the same or any prior or
subsequent time. This Agreement shall be binding upon and shall inure to the
benefit of Employee, his heirs, executors, administrators, beneficiaries and
legal representatives and shall be binding and inure to the benefit of Employer
and its successors and assigns.
14. Merger and Consolidation Assignment. (a) Upon the Closing of the
-----------------------------------
Acquisition, all rights and obligations of the General Partner under this
Agreement shall immediately be assigned to and assumed by Employer and the
General Partner shall have no other obligations of any kind hereunder. If
Employer at any time merges or consolidates with any other corporation or sells
or otherwise transfers all or a substantial portion of its assets or shares of
stock to another corporation or entity, the provisions of the Agreement shall be
binding upon the inure to the benefit of the corporation or entity surviving or
resulting from such merger of consolidation or to which such assets or shares of
stock have been sold or transferred. This Agreement, being personal to
Employee, may not be assigned by Employee.
(b) The execution of this Agreement by the General Partner shall not obligate
the General Partner in any manner with respect to the completion of the
Acquisition and Employee expressly acknowledges and agrees that (I) it shall
hold the General Partner and its affiliates harmless against any loss or damages
suffered by Employee as a result of the failure of the Acquisition to close
(regardless of the cause of such failure), (ii) that the General Partner shall
have no obligation to perform and pay the obligations of the Employer hereunder
and (iii) except with respect to the obligation of the General Partner under
Section 1 to cause Employer to employ Employee upon the Closing of the
Acquisition, the General Partner shall have no obligations or liability
hereunder.
8
15. Applicable Law and Jurisdiction.
-------------------------------
(a) This Agreement shall be governed by and construed in accordance with the
internal law of the State of New York without regard to its conflicts of law
principles.
(b) The parties agree that the exclusive place of jurisdiction for any action,
suit or proceeding relating to this Agreement shall be in the courts of the
United States of America sitting in the Borough of Manhattan in the City of New
York or, if such courts shall not have jurisdiction over the subject matter
thereof, in the courts of the State of New York sitting therein, and each such
party hereby irrevocably and unconditionally agrees to submit to the
jurisdiction of such courts for purposes of any such action, suit or proceeding.
Each party irrevocably waives any objection it may have to the venue of any
action, suit or proceeding brought in such courts or to the convenience of the
forum. Final judgment in any such action, suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment, a certified
or true copy of which shall be conclusive evidence of the fact and the amount of
any indebtedness or liability of any party therein described.
16. Entire Agreement; Article and Section Headings. This Agreement
----------------------------------------------
sets forth the entire agreement of the parties hereto, and supersedes all prior
communications, whether oral or written, with respect to the subject matter
hereof. The articles, section and other headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
17. Reformation and Severability. In the event that any one or more
----------------------------
of the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the same shall be construed and, if necessary,
reformed in substance, by limiting it so as to be valid and enforceable to the
maximum extent permitted by applicable law, and the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired and
shall remain in full force and effect to the fullest extent permitted by law.
The parties shall negotiate in good faith to replace an invalid, illegal or
unenforceable provision with a valid provision the economic effect of which is
as close as possible to that of the invalid, illegal or unenforceable provision.
18. Enforceability. The failure of either party at any time to
--------------
require performance by the other party of any provision hereunder shall in no
way affect the right of that party thereafter to enforce the same, nor shall it
affect any other party's right to enforce the same, or to enforce any of the
other provisions in this Agreement, nor shall the waiver by either party of the
breach of any provision hereof be taken or held to be a waiver of any subsequent
breach of such provisions or as a waiver of the provision itself.
19. Survival. The respective obligations of, and benefits afforded
--------
to, Employee and Employer as provided in Sections 8, 9, 11 and 14 of this
Agreement (and, to the extent applicable to said Sections 8, 9, 11 or 14,
Sections 15 through 20), shall survive termination of this Agreement.
20. Other Agreements. Employee represents and warrants to Employer
----------------
that Employee has not entered into any contract or agreement of any nature with
any person, firm or
9
corporation which in connection with Employee's previous employment, contains
any restraints on Employee's future services.
21. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be a single agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date first above written
MS FARM JOURNAL CORPORATION
EMPLOYEE:
/s/ Xxxxx X. Xxxxxxx By: /s/ X. Xxxx Xxxxxx, III
--------------------- ------------------------
XXXXX X. XXXXXXX Title:
Employee's Residential Address:
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx #0
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
10
ANNEX A
-------
All terms not defined herein shall have the meaning set forth in the
Employment Agreement to which this Annex is attached.
Employee shall be granted the opportunity (subject to vesting) to realize
the financial benefit of a 10 year option at fair market value on 4% of the
limited partnership interests in MS Farm International Limited Partnership (the
"Partnership") on a fully diluted basis after giving effect to the limited
partnership interests issued at the closing of the acquisition ("Acquisition")
of the Company by Farm Journal Holding Inc. ("Holdings") (including interests
issued within six months thereafter, up to a maximum of 100 Units, i.e.,
$10,000,000) and the issuance of a similar interest to the Company's Chief
Operating Officer (the "Interest").
On the date Employee joins the Company, one fifth of such Interest shall
vest. Another four-fifths of such Interest shall vest in five equal
installments on each of the five anniversaries of the employment date (or at
such later date as the audited financials for the prior year are issued)
provided (i) that Employee continues to be employed by Employer on such date and
(ii) that the following financial targets are met:
First anniversary: EBITDA for the prior year
(1997) is at least $2.830 million (as shown on the
audited financials for the prior year)
Second anniversary: EBITDA for the prior year
(1998) is at least $3.643 million (as shown on the
audited financials for the prior year)
Third anniversary: EBITDA for the prior year
(1999) is at least $5.290 million (as shown on the
audited financials for the prior year)
Fourth anniversary: EBITDA for the prior year is at
least $5.819 million (110% of the
third anniversary target) and 20%
of the prior year's net revenues (as shown on the
audited financials for the prior year)
Fifth anniversary: EBITDA for the prior year is at
least $6.4 million and 20% of the
prior year's net revenues (as shown on the audited
financials for the prior year)
In the event of a firm underwritten initial public offering ("IPO") pursuant to
an effective registration statement on Form S-1 under the Securities Act of
1933, as amended (the "Act") at a value that implies a pre-IPO equity valuation
of the Company of at least three times the Partnership's investment in the
company, 25% of such Interest not then vested shall vest, with the remaining
amounts to be vested on a pro rata basis in accordance with the schedule, and
subject to the conditions, set forth above.
In the event the Company is subject to a "Change in Control" all such
Interest shall vest immediately. A "Change in Control" means any merger or
consolidation of Employer, any sale or other transfer of all or substantially
all of Employer's assets, or any sale of a majority of the capital stock of
Employer or of a majority of any class of equity of any stockholder of
Employer, if as a result of such transaction neither Xxxxxxx Ean Xxxxx, Xxxxxx
Xxxxxx & Co., Inc. nor any of its affiliates or associates (or any employee or
associate of Xxxxxx Xxxxxx & Co., Inc. or its affiliates) (including any of
such person's estates or heirs) shall own or control, directly or indirectly, a
majority or controlling voting interest in Employer or the successor to
Employer. Employee acknowledges and agrees that MS Farm Journal Corporation,
as the general partner of the Partnership, is an affiliate of Xxxxxx Xxxxxx &
Co., Inc.
It is currently anticipated that the Interest will be implemented through
Employee purchasing for an amount to be agreed (e.g., $500) on the closing date
of the Acquisition a Class B Limited Partner interest of the Partnership. The
Class B Limited Partner interest shall be equivalent to the Class A Limited
Partner interest except that the proceeds of such sale will be used to purchase
junior stock ("Junior Stock") of Holdings representing 4% of the common stock
of Holdings actually acquired on such closing date with the proceeds of all
Limited Partner interests sold by the Partnership (and acquired with the
proceeds of Limited Partner interest sold within six months thereafter, up to a
maximum of 100 Units, i.e., $ 1 0,000,000 (inclusive of Units sold on or prior
to the closing date of the Acquisition)).
The terms of the Junior Stock will include mandatory redemption and other
provisions to implement the vesting schedule set forth above. The Certificate
of Incorporation of Holdings will be amended to provide mandatory redemption
provisions in respect of the Junior Stock to provide for a mandatory redemption
at the original purchase price of shares of Junior Stock (or any shares of
capital stock issued in exchange for, on conversion of, as a dividend or other
distribution in respect of, or as part of a recapitalization involving the
Junior Stock) at such time and to the extent that such shares of capital stock
are no longer capable of being vested in favor of Employee.
The Junior Stock will be subject to the conversion provisions applicable
thereto under the Certificate of Incorporation of Holdings attached hereto.
The Junior Stock will have voting rights identical to the shares of stock into
which it may be converted from time to time.
In the event of an IPO, the Junior Stock will become convertible into the
stock that is the subject of such offering.
For purposes of this paragraph, Affiliate shall mean any person who is an
affiliate of Employer within the meaning of Rule 144 under the Act. So long as
Employee is an Affiliate, Employee shall be entitled to participate in any
registration under the Act of the sale of securities
2
of Holdings by controlling Affiliates. Such participation shall be on the same
terms as are made available to other Affiliates participating in such
registration, and, at the option of Employee, shall include up to Employee's
vested pro rata share of the Holdings equity securities to be registered, based
on the number of shares that are the subject of the such registration held by
Employee as compared to the total number of shares of the same class of
Employer equity beneficially held (within the meaning of Securities and
Exchange Commission Rule 13d-d under the Securities Exchange Act of 1934, as
amended) by all Affiliates.
All certificates representing the shares of Junior Stock (and any shares of
capital stock issued in exchange for, on conversion of, as a dividend or other
distribution in respect of, or as part of a recapitalization involving the
Junior Stock) shall bear a legend substantially in the following form, in
addition to any other legends that may be required under Federal or state
securities laws:
"The shares of stock represented by this certificate are subject to
mandatory redemption in accordance with the terms of the Certificate of
Incorporation of the Issuer."
3
