EXHIBIT 10.16
STOCKHOLDERS AGREEMENT
This Agreement dated as of May 1, 1997 is among Mortgage Portfolio
Services, Inc., a Delaware corporation (the "Company"); NAB Asset Corporation, a
Texas corporation ("NAB"); and the following persons (each an "Executive"):
Xxxxx X. Xxxxxx, Xxxxx Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx Xxxxxx and Xxxxx X.
Xxxxxxxx. Capitalized terms used in this Agreement are defined in the preceding
sentence or in Section 1.
Recitals
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a. The Executives are currently serving as officers of the Company and are
the owners of certain shares of MPS Common Stock.
b. NAB is currently the owner of more than 80% of the outstanding shares
of MPS Common Stock.
c. The MPS Common Stock is not publicly traded.
d. NAB desires to grant the Executive certain options, which may become
exercisable under certain circumstances, to purchase a portion of NAB's MPS
Common Shares.
e. The Executives have requested that the Company and NAB provide them
with a means, under certain circumstances, of selling or exchanging their shares
of MPS Common Stock, and the Company and NAB are willing to do so, under the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of their mutual promises contained herein,
the parties agree as follows:
Section 1. Interpretation
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(a) Definitions. As used in this Agreement, the following terms have the
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following meanings:
"Adjusted Total Economic Value" means an amount equal to the Total Economic
Value as of the applicable Determination Date minus the Reserve Amount as of
such date.
"Agreement" means this Agreement, as the same may be amended from time to
time.
"Aggregate Purchase Price" means, with respect to any purchase of shares of
MPS Common Stock from the owner thereof pursuant to the exercise of an Option,
an amount, stated in United States Dollars, equal to the product of (i) the
price per share payable for such shares multiplied by (ii) the total number of
such shares being purchased from such owner.
"Applicable Percent" means (i) 37.5% in the case of Xxxxx X. Xxxxxx; (ii)
17.5% in the case of Xxxxx Xxxxxx; (iii) 17.5% in the case of Xxxxxx X. Xxxxxx;
(iv) 2.5% in the case of Xxxxx Xxxxxx; (v) 2.5% in the case of Xxxxx X.
Xxxxxxxx; and (vi) such other percent or percents as may hereafter be determined
in the case of another person or other persons, if any, who hereafter become
"Executives" within the meaning of this Agreement and become parties to this
Agreement.
"Asset Sale Transaction" is defined in Section 11(a)
"Bring Along Right" is defined in Section 11(b)
"Budgeted Pre-Tax Income" means, with respect to any fiscal year,
forecasted Pre-Tax Income for such year as set forth in a budget approved by the
Company's Board of Directors by no later than May 31 of such year.
"Buy-Out Payment" has the meaning given to such term in the Option
Agreement.
"Buy-Out Right" has the meaning given to such term in the Option
Agreement.
"Call Option" is defined in Section 4(a).
"Call Option Commencement Date" means, with respect to any Executive Shares
owned by any Executive, the earlier to occur of (i) the date on which the
Employment of the Executive who owns such shares terminates for any reason or
(ii) (A) April 18, 2003 with respect to KEEP Shares or (B) July 2, 1999 with
respect to Non-KEEP Shares.
"Call Option Exercise Period" is defined in Section 4(b).
"Closing" means the closing of (i) any purchase or sale of shares of MPS
Common Stock from or to an Executive pursuant to this Agreement (including a
Stock Sale Transaction) or (ii) the making of a Termination Payment.
"Closing Date" means the date on which a Closing occurs.
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"Come-Along Exercise Period" is defined in Section 11(b).
"Come-Along Notice" is defined in Section 11(b).
"Come-Along Right" is defined in Section 11(b)
"Company" is defined in the opening paragraph of this Agreement.
"Company Exercise Notice" is defined in Section 10(a).
"CPS" means Consumer Portfolio Services, Inc., a California corporation.
"Determination Date" means, for all purposes of this Agreement with respect
to any Executive, the end of the three-month calendar period (March 31, June 30,
September 30 or December 31) next preceding the date which is the earlier to
occur of (i) the date on which such Executive's Employment terminates or (ii)
the date on which the Put Option or the Call Option is exercised as to his KEEP
Shares; provided, however, that if a Sale Notice is given to such Executive
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prior to such exercise of the Put Option or the Call Option as to his KEEP
Shares and prior to the termination of his Employment, then, in such case,
unless and until the related Sale Transaction is abandoned or terminated or
deemed abandoned or terminated pursuant to Section 11(c), "Determination Date"
means the end of the three-month calendar period (March 31, June 30, September
30 or December 31) next preceding the date on which such Sale Notice is given.
"Determination Notice" is defined in Section 5(c).
"Employment" and "Employed" means, with respect to an Executive, such
Executive's full-time employment with (or being employed on a full-time basis
by) the Company, either directly or through a business entity which leases the
services of such Executive to the Company.
"Exchange Option" is defined in Section 9(a)
"Exchange Option Exercise Period" is defined in Section 10(c).
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"Executive" is defined in the opening paragraph of this Agreement.
"Executive" also includes each person who, after the date hereof, becomes a
party to this Agreement by an agreement in writing which states, among other
things, that such person is intended to be an "Executive" within the meaning of
this Agreement.
"Executive Exercise Notice" is defined in Section 10(b).
"Executive Shares" means, at any time, the shares of MPS Common Stock
(other than Option Shares) owned by the Executives or their permitted
transferees, if any, at such time. On the date hereof, the number of Executive
Shares owned by each Executive is as follows:
Name No. Shares
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Xxxxx X. Xxxxxx 750
Xxxxx Xxxxxx 350
Xxxxxx X. Xxxxxx 350
Xxxxx Xxxxxx 50
Xxxxx X. Xxxxxxxx 50
"Executive Shares Number" means two thousand (2,000), subject to
appropriate adjustment in the event of any stock split, stock combination
(reverse stock split) or stock dividend of or on the outstanding shares of MPS
Common Stock. By way of example, if the Company were to effect a two-for-one
split of MPS Common Stock, the Executive Shares Number would be changed to four
thousand (4,000). By way of additional example, if the Company were to effect a
one-for-four reverse stock split of MPS Common Stock, the Executive Shares
Number would be changed to five hundred (500).
"Exercise Notice" means any of a Company Exercise Notice, an Executive
Exercise Notice, a Parent Company Exercise Notice, the Come-Along Notice and
notice of exercise of the Bring-Along Right contained in a Sale Notice, as
applicable.
"Exercise Period" means any of the Put Option Exercise Period, the Call
Option Exercise Period, the Exchange Option Exercise Period, the Second Call
Option Exercise Period, the Last Option Exercise Period, the Termination Right
Exercise Period and the Come-Along Exercise Period, as applicable.
"First Buy-Out Payment" has the meaning given such term in the Option
Agreement.
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"First Buy-Out Right" has the meaning given such term in the Option
Agreement.
"First KEEP Determination Date" is defined in Section 5(d)(i).
"First Option" has the meaning given such term in the Option Agreement.
"First Option Shares" has the meaning given such term in the Option
Agreement.
"First Year" is defined in Section 5(d)(i).
"Fourth Option" has the meaning given such term in the Option Agreement.
"GAAP" means generally accepted accounting principals as used by the
Financial Accounting Standards Board and/or the American Institute of
Certificate Public Accountants, consistently applied and maintained through the
periods indicated.
"including" means including without limitation.
"Initial KEEP Consideration" means an amount, stated in United States
Dollars, equal to the lesser of (i) the KEEP Amount as of the applicable
Determination Date or (ii) the product of (A) such KEEP Amount multiplied by (B)
a fraction the numerator of which is twenty (20) and the denominator of which is
the KEEP Number. The Initial KEEP Consideration may be a negative number.
"Interested Management Shareholders" means, with respect to a Determination
Notice, all Management Shareholders who, at a Closing relating to which such
Determination Notice is given, are to receive a payment from the Company, the
Parent Company or a Purchaser in an amount calculated in part by reference to
the amount of the Total Economic Value which is the subject of such
Determination Notice.
"KEEP Amount" means an amount equal to the lesser of (i) 40% of the Total
Economic Value as of the applicable Determination Date or (ii) 60% of Adjusted
Total Economic Value as of such date. The KEEP Amount may be a negative number.
"KEEP Number" means a number determined by multiplying (i) 100 by (ii) a
fraction the numerator of which is the KEEP Amount and the denominator of which
is Total Economic Value, both as of the applicable Determination Date.
"KEEP Shares" means Executive Shares, if any, which become and are
redesignated as KEEP Shares in accordance with the provisions of Section 5(d).
"Last Option Commencement Date" means a date which is the later to occur of
(i) a
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date which is the next day after the Closing Date on or by which all Executive
Shares owned by the Executives shall have been purchased by one or both of the
Company and the Parent Company pursuant to one or more exercises of one or more
of the Put Option, the Call Option and the Exchange Option or (ii) a date which
is the next day after the Closing Date for the purchase and sale of Option
Shares pursuant to the exercise of the Second Call Options.
"Last Option Exercise Period" is defined in Section 7(b).
"Last Option Purchase Price" is defined in Section 7(c).
"Management Options" means the First Option, the Third Option and the
Second Call Options.
"Management Option Shares" means the First Option Shares, the Third Option
Shares and the Executive Option Shares.
"Management Shareholders" means, at any time, the persons who, at such
time, own or hold any Management Shares.
"Management Shares" means First Option Shares, Third Option Shares, KEEP
Shares, Non-KEEP Shares, and Option Shares; provided, however, that after July
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1, 1999 Non-KEEP Shares shall not be deemed to be, and shall not be included in
the definition of, Management Shares. For purposes of this definition only, (i)
at any time prior to July 2, 1999 all shares which are not then, but which
thereafter may become, subject to the First Option shall be deemed at such time
to be issued and outstanding First Option Shares owned by the holder of the
First Option; (ii) all shares which at any time are subject to the First Option
shall be deemed at such time to be issued and outstanding First Option Shares
owned by the holder of the First Option; (iii) all shares which at any time are
then or may thereafter become subject to the Third Option shall be deemed at
such time to be issued and outstanding Third Option Shares owned by the holder
of the Third Option; and (iv) all shares which at any time are then or
thereafter may become subject to a Second Call Option shall be deemed at such
time to be issued and outstanding Option Shares owned by the holder of such
Second Call Option.
"Manager" has the meaning given such term in the Option Agreement. As of
the date of this Agreement, the Manager is Xxxxxx X. Xxxxxxxxx.
"Mandatory Exercise" is defined in Section 10(d).
"MPS Common Stock" means the common stock, par value $0.01 per share, of
the
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Company.
"MPS Preferred Stock" means the preferred stock, par value $0.01 per share,
of the Company.
"MPS Subsidiary" means, at any time, a corporation more than 50% of whose
voting stock is then owned, directly or indirectly (through one or more other
MPS Subsidiaries), by the Company or whose financial statements the Company is
then otherwise required to consolidate with its own pursuant to GAAP.
"NAB" is defined in the opening paragraph of this Agreement.
"NAB Common Stock" means the common stock, par value $0.10 per share, of
NAB.
"NAB Note" is defined in Section 9(a).
"Non-KEEP Shares" means Executive Shares which have not become KEEP Shares.
"Note" is defined in Section 10(e)(ii).
"Objection Notice" is defined in Section 5(c).
"Objection Notice Period" is defined in Section 5(c).
"Option" means any of the Call Option, the Exchange Option, the Put Option,
the Second Call Options, the Second Put Option, the Third Call Option and the
Termination Right, as applicable.
"Option Agreement" means that certain Option Agreement of even date
herewith among the Company, the Parent Company and the Manager.
"Option Shares" is defined in Section 6(b).
"Original Cost" means One Dollar ($1.00), subject to appropriate adjustment
in the event of any stock split, stock combination (reverse stock split) or
stock dividend of or on the outstanding shares of MPS Common Stock. By way of
example, if the Company were to effect a two-for-one split of the MPS Common
Stock, the Original Cost would be changed to fifty cents ($0.50). By way of
further example, if the Company were to effect a one-for-four reverse stock
split of MPS Common Stock, the Original Cost would be changed to four dollars
($4.00).
"Parent Company" means, at any time, the common parent corporation of a
group of corporations of which the Company then is a member, which parent
corporation owns, directly or indirectly (through one or more subsidiaries), at
least 50% of the outstanding shares of MPS Common Stock at such time. As of the
date hereof, NAB is the Parent
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Company.
"Parent Company Affiliate" means, at any time, any corporation or entity
which at such time owns, directly or indirectly (through one or more
subsidiaries), twenty-five percent (25%) or more of the issued and outstanding
shares of the Parent Company Common Stock. As of the date of this Agreement,
the only Parent Company Affiliate is CPS.
"Parent Company Common Stock" means the common stock of the Parent Company.
As of the date hereof, the NAB Common Stock is the Parent Company Common Stock.
"Parent Company Exchange Shares" means the shares of Parent Company Common
Stock, if any, to be issued by the Parent Company at the Closing of an exercise
of an Exchange Option or the Termination Right.
"Parent Company Exercise Notice" is defined in Section 10(c).
"Parent Company's MPS Common Shares" means, at any time, the shares of MPS
Common Stock which are owned by the Parent Company at such time. As of the date
hereof, the Parent Company's MPS Common Shares consist of 8,000 shares of MPS
Common Stock which are owned by NAB.
"Parent Company's MPS Preferred Shares" means, at any time, the shares of
MPS Preferred Stock which are owned by the Parent Company at such time. As of
the date hereof, the Parent Company's MPS Preferred Shares consist of 2,250
shares of MPS Preferred Stock which are owned by NAB.
"Parent Company Stock Price" is defined in Section 9(b).
"Personal Representative" means the executor, administrator or other
representative of the estate of an Executive who has died or the conservator,
receiver or trustee in bankruptcy of or with respect to the person or assets of
an Executive appointed as such by a court of competent jurisdiction.
"Pre-Tax Income" means, for any period, the consolidated income before
income taxes of the Company and the MPS Subsidiaries for such period, computed
in accordance with GAAP. Pre-Tax Income shall not include the results of
operations of any stockholder of the Company. If the Company's financial
statements are audited for any period, Pre-Tax Income for such period shall be
as set forth therein.
"Purchaser" is defined in Section 11(a)
"Put Option" is defined in Section 3(a).
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"Put Option Exercise Period" is defined in Section 3(b).
"Reserve Amount" means an amount equal to the sum of (i) Two Million Five
Hundred Thousand Dollars ($2,500,000) plus (ii) an amount equal to the product
of (A) Two Million Five Hundred Thousand Dollars ($2,500,000) multiplied by (B)
a fraction the denominator of which is 365 and the numerator of which is the
number of days elapsed from July 10, 1996 through the applicable Determination
Date. The amount calculated pursuant to the preceding sentence shall be reduced
by the amount, if any, of any cash dividends paid by the Company on the Parent
Company's MPS Preferred Shares and by the amount, if any, paid by the Company to
repurchase or redeem any of the Parent Company's MPS Preferred Shares during the
period from the date hereof to such Determination Date.
"Residual KEEP Consideration" means an amount equal to (i) the sum of the
KEEP Amount as of the applicable Determination Date plus Three Million Three
Hundred Thousand Dollars ($3,300,000) minus (ii) the Initial KEEP Consideration
as of such date.
"Sale Notice" is defined in Section 11(a).
"Sale Notice Period" is defined in Section 11(a) .
"Sale Transaction" is defined in Section 11(a).
"Second Buy-Out Payment" has the meaning given such term in the Option
Agreement.
"Second Buy-Out Right" has the meaning given such term in the Option
Agreement.
"Second Call Option" is defined in Section 6(a).
"Second Call Option Exercise Period" is defined in Section 6(d).
"Second Call Option Purchase Price" is defined in Section 6(c).
"Second KEEP Determination Date" is defined in Section 5(d)(ii).
"Section Option" has the meaning given such term in the Option Agreement.
"Second Put Option" is defined in Section 7(a).
"Second Year" is defined in Section 5(d)(ii).
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"Selling Stockholder" means an Executive, a Manager or other person or
entity that is obligated to sell shares of MPS Common Stock at a Closing
pursuant to the exercise of an Option or any option granted in the Option
Agreement or that is entitled to receive a Termination Payment or a Buy-Out
Payment at a Closing.
"Stock Purchase Restriction" means any provision of (i) any agreement,
document or instrument to which the Company is a party, (ii) applicable law or
(iii) the Company's Certificate of Incorporation or By-laws which prohibits, or
the effect of which is to prohibit, the purchase of Executive Shares or Option
Shares by the Company pursuant to the exercise of an Option or the making of a
Termination Payment pursuant to an exercise of the Termination Right.
"Stock Sale Transaction" is defined in Section 11(a).
"Termination Payment" is defined in Section 6(f).
"Termination Right" is defined in Section 6(f).
"Termination Right Exercise Period" is defined in Section 6(f).
"Third Call Option" is defined in Section 8.
"Third KEEP Determination Date" is defined in Section 5(d)(iv).
"Third Option" has the meaning given such term in the Option Agreement.
"Third Option Shares" has the meaning given such term in the Option
Agreement.
"Third Year" is defined in Section 5(d)(iv).
"Total Economic Value" means, as of any Determination Date, the fair market
value of one hundred percent (100%) of the equity ownership of the Company on
such date, determined in accordance with the provisions of Section 5(c).
"Transfer" means (i) when used as a verb, to sell, assign, transfer,
encumber, pledge or otherwise dispose of; and (ii) when used as a noun, a sale,
transfer, encumbrance, pledge or other disposition.
"Valuation" means the amount stated to be the Total Economic Value in the
Valuation Report or, if Total Economic Value is stated in a Valuation Report to
be within a range of amounts, the mid-point or average of such range.
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"Valuation Agreement" is defined in Section 5(c).
"Valuation Firm" is defined in Section 5(c).
"Valuation Report" is defined in Section 5(c).
(b) Provisions Pertaining to Interpretation. For all purposes of this
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Agreement:
(i) references to any person refer to such person and his successors in
title and assigns or (as the case may be) his successors, assigns, heirs,
executors, administrators or other legal representatives;
(ii) references to any agreement, instrument or document refer to such
agreement, instrument or document as originally executed, or, if
subsequently varied, supplemented, amended, restated, or replaced from time
to time, as so varied, supplemented, amended, restated or replaced and in
effect at the relevant time of reference thereto;
(iii) words importing the singular only shall include the plural and vice
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versa; and pronouns in any gender are to be construed as masculine,
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feminine or neuter as the context requires; and all references to dollars
shall be in United States Dollars.
Section 2. Restrictions on Transfer; Legend.
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An Executive shall not Transfer any of his Executive Shares or Option
Shares prior to April 18, 2006 except (i) pursuant to the exercise of any
Option, (ii) in accordance with Section 11 or (iii) upon the death of such
Executive, by will or the laws of descent and distribution; provided, however,
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that a Transfer pursuant to preceding clause (iii) shall not be effective and
the Company shall not be obligated to record such Transfer on its books or to
issue a certificate representing the shares so Transferred in the name of the
transferee unless and until such transferee shall have executed an agreement, in
form and substance satisfactory to the Company's Board of Directors, by which
such transferee becomes a party to this Agreement and to be bound hereby to the
same extent as the deceased Executive was prior to his death.
Each certificate evidencing Executive Shares and Option Shares shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
The securities represented by this certificate are subject to
restrictions on transfer and other provisions contained in a Stockholders
Agreement
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dated as of May 1, 1997 among the issuer of such securities (the
"Company"), NAB Asset Corporation and certain other stockholders of the
Company. A copy of such Agreement will be furnished without charge by the
Company to the holder hereof upon written request.
The securities represented by this certificate have not been registered
under the Securities Act of 1933. The securities have been acquired for
investment and may not be sold, transferred or assigned in the absence of
an effective registration statements for these securities under the
Securities Act of 1933 or an opinion of the Company's counsel that
registration is not required under said Act.
The first paragraph of the legend set forth above shall be removed from
such certificates upon the earlier to occur of (i) any Transfer thereof pursuant
to exercise of any Option other than a Second Call Option or (ii) the
termination of this Agreement. The second paragraph of such legend shall be
removed if and when the statements made therein are no longer accurate or
applicable.
Section 3. Put Option.
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(a) Grant. Subject to Sections 3(b), 5, 9, 10 and 11, the Company hereby
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grants to the Executives, acting as a group, the right and option (the "Put
Option") to require the Company to purchase all, but not less than all, of their
Executive Shares for a purchase price determined in accordance with Section 5.
(b) Exercise Period. The Put Option shall be exercisable at any time
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during the period (the "Put Option Exercise Period") beginning on March 18, 2001
and ending on April 17, 2003.
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Section 4. Call Option.
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(a) Grant. Subject to Sections 4(b), 5, 9, 10 and 11, each Executive
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hereby grants to the Company the right and option (the "Call Option") to
purchase all, but not less than all, of the Executive Shares owned by such
Executive for a purchase price determined in accordance with Section 5.
(b) Exercise Period. Each Call Option shall be exercisable at any time or
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from time to time during the period (the "Call Option Exercise Period")
beginning on the Call Option Commencement Date and ending on April 17, 2005. If
the Company exercises the Call Option, the Second Option or the First Buy-Out
Right at any time after April 17, 2003 and prior to April 18, 2005 as to any
KEEP Shares, any First Option Shares or the First Option then owned or held by
any Executive or the Manager, it shall be obligated to exercise at the same time
its Call Options as to all other KEEP Shares then owned by the Executives.
Section 5. Purchase Price for Executive Shares;
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Valuation; Redesignation of Shares.
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(a) Non-KEEP Shares. The purchase price per share payable at a Closing for
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any Non-KEEP Shares shall be an amount equal to the lesser of (i) the Original
Cost or (ii) two times the book value per share of such shares as of the related
Determination Date; provided, however, that if such book value per share is zero
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or a negative amount, then, in such case, the purchase price per share payable
to an Executive for his Non-KEEP Shares at such Closing shall be an amount equal
to the quotient obtained by dividing (i) One Dollar ($1.00) by (ii) the
aggregate number of Non-KEEP Shares then being purchased from such Executive.
(b) KEEP Shares. The purchase price per share payable at a Closing for any
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KEEP Shares owned by an Executive shall be the greater of (i) an amount equal to
the quotient obtained by dividing (A) the applicable Initial KEEP Consideration
by (B) the Executive Shares Number or (ii) an amount equal to the quotient
obtained by dividing (A) One Dollar ($1.00) by (B) the aggregate number of KEEP
Shares then being purchased from such Executive.
(c) Determination of Total Economic Value. Upon the giving of an
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Exercise Notice (which for purposes of this Section 5(c), also includes an
Exercise Notice as defined in the Option Agreement) in respect of which the
applicable KEEP Amount must be calculated, the Board of Directors of the Parent
Company or, if there is then no Parent Company, the Board of Directors of the
Company shall determine the applicable Total Economic Value and shall provide
such determination in writing (the "Determination Notice") to all Interested
Management Shareholders within ten (10) business days after the
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date of such Exercise Notice. The Determination Notice shall set forth the
basis for such determination of Total Economic Value.
If the Interested Management Shareholders, acting as a group (if there is
more than one), desire to object to the determination of the Total Economic
Value set forth in the Determination Notice, they may do so by giving notice
thereof in writing (the "Objection Notice") to the Parent Company or the
Company, as applicable. To be effective, an Objection Notice must (i) be signed
by Interested Management Shareholders owning a majority of the Management Shares
then owned by all Interested Management Shareholders, (ii) set forth their basis
for objecting to the Determination Notice, (iii) specify the Total Economic
Value proposed by them, (iv) set forth their calculation thereof and (v) be
given to the Parent Company or the Company, as applicable, during the period
(the "Objection Notice Period") ending on the tenth (10th) business day after
the date of the related Determination Notice. If the Interested Management
Shareholders fail to give an Objection Notice during the Objection Notice
Period, then, in such case, the determination of Total Economic Value set forth
in the Determination Notice shall be deemed to be accepted and agreed to by
them, and such determination shall be conclusive and binding on the Company, the
Parent Company and all Interested Management Shareholders.
If an Objection Notice is given during the Objection Notice Period, then,
in such case, such Total Economic Value shall be determined in writing (the
"Valuation Report") by a nationally recognized investment firm (the "Valuation
Firm") which is engaged in the valuation of businesses and their securities.
The Valuation Firm shall be selected by the Board of Directors of the Parent
Company or, if there is then no Parent Company, by the Board of Directors of the
Company.
If Total Economic Value is determined by a Valuation Firm pursuant to the
preceding paragraph and if at the Closing for which Total Economic Value is
being determined the owners of more than 25% of the Management Shares are to
receive payment from the Company, the Parent Company or a Purchaser pursuant to
the terms of this Agreement or the Option Agreement, then, in such case, the
Company shall pay all the fees and expenses of such determination by the
Valuation Firm. In any other case, such fees and expenses shall be paid as
follows: (i) one hundred percent (100%) by the Company if the Valuation is
ninety percent (90%) or less of the Total Economic Value set forth in the
Determination Notice; (ii) one hundred percent (100%) by the Interested
Management Shareholder if the Valuation is one hundred ten percent (110%) or
more of the Total Economic Value set forth in the Determination Notice; and
(iii) fifty percent (50%) by the Company and fifty percent (50%) by the
Interested Management Shareholders if the Valuation is more than ninety percent
(90%) and less than one hundred ten percent (110%) of the Total Economic Value
set forth in the Determination Notice.
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The obligations of the Interested Management Shareholders referred to in
the preceding paragraph, if any arise, shall be satisfied by them pro rata based
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on their ownership of Management Shares (but not based on the ownership of such
shares by any Management Shareholder who is not an Interested Management
Shareholder). By way of example, if an Interested Management Shareholder were
to own ten percent (10%) of the Management Shares owned by all Interested
Management Shareholders, then, in such case, he would be obligated to pay ten
percent (10%) of that portion, if any, of the fees and expenses of the Valuation
Firm which the Interested Management Shareholders are obligated to pay pursuant
to the preceding paragraph. If the Company pays the Valuation Firm for any fees
and expenses which an Interested Management Shareholder is obligated to pay,
then, in such case, such Interested Management Shareholder shall be obligated to
reimburse the Company for the same, and the Company or the Parent Company (on
behalf of the Company) may, but shall not be obligated to, effect such
reimbursement by reducing the amount otherwise payable to him at any Closing.
Notwithstanding the foregoing, Total Economic Value may be determined at
any time by an agreement in writing (the "Valuation Agreement") which (i) is
signed by the Company and by the Parent Company, if any, (ii) is signed by
Interested Management Shareholders who own more than fifty percent (50%) of the
Management Shares owned by all Interested Management Shareholders; and (iii) is
approved by the Boards of Directors of the Company and the Parent Company, if
any. A Valuation Agreement, if entered into, shall be conclusive and binding on
each Interested Management Shareholder even if he is not a signatory thereto,
and on the Company and the Parent Company. If a Valuation Agreement is entered
into, the Company and the Parent Company, as applicable, shall not be obligated
to select a Valuation Firm to determine Total Economic Value, and any
determination of Total Economic Value theretofore made by the Valuation Firm
shall be superseded and replaced by the determination thereof set forth in the
Valuation Agreement.
(d) Redesignation as KEEP Shares. All Executive Shares shall initially be
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Non-KEEP Shares. Non-KEEP Shares may become KEEP Shares as follows:
(i) On July 1, 1997 (the "First KEEP Determination Date") thirty-three
and one-third percent (33 %) of the Non-KEEP Shares owned by an Executive
shall become and be redesignated as KEEP Shares if such Executive has been
continuously Employed from the date hereof through the First KEEP
Determination Date. The parties acknowledge and agree that (A) actual Pre-
Tax Income for the fiscal year ended December 31, 1996 (the "First Year")
was a negative $351,000 and (B) Budgeted Pre-Tax Income for the First Year
was a negative $457,000.
(ii) On July 1, 1998 (the "Second KEEP Determination Date") thirty-three
and one-third percent (33 %) of the Non-KEEP Shares owned by an Executive
shall become and be redesignated as KEEP Shares (in addition to any such
shares which
15
became KEEP Shares prior thereto) if (A) such Executive has been
continuously Employed from the date hereof through the Second KEEP
Determination Date and (B) either (x) actual Pre-Tax Income for the fiscal
year ending December 31, 1997 (the "Second Year") equals or exceeds eighty
percent (80%) of Budgeted Pre-Tax Income for the Second Year or (y) the
cumulative actual Pre-Tax Income for the First Year and the Second Year
equals or exceeds eighty percent (80%) of the cumulative Budgeted Pre-Tax
Income for the First Year and the Second Year. The parties acknowledge and
agree that Budgeted Pre-Tax Income for the Second Year is $2,874,484 and
that cumulative Budgeted Pre-Tax Income for the First Year and the Second
Year is $2,417,484.
(iii) In the event that any Non-KEEP Shares owned by an Executive
eligible to become KEEP Shares on the First KEEP Determination Date did not
become KEEP Shares on such date, such shares shall become and be
redesignated as KEEP Shares on the Second KEEP Determination Date if (A)
such Executive has been continuously Employed from the date hereof through
the Second KEEP Determination Date and (B) the cumulative Pre-Tax Income
for the First Year and the Second Year equals or exceeds eighty percent
(80%) of cumulative Budgeted Pre-Tax Income for the First Year and the
Second Year.
(iv) On July 1, 1999 (the "Third KEEP Determination Date") thirty-three
and one-third percent (33 %) of the Non-KEEP Shares owned by an Executive
shall become and be redesignated as KEEP Shares (in addition to any such
shares which became KEEP Shares prior thereto) if (A) such Executive has
been continuously Employed from the date hereof through the Third KEEP
Determination Date and (B) either (x) actual Pre-Tax Income for the fiscal
year ending December 31, 1998 (the "Third Year") equals or exceeds eighty
percent (80%) of Budgeted Pre-Tax Income for the Third Year or (y) the
cumulative actual Pre-Tax Income for the First Year, the Second Year and
the Third Year equals or exceeds eighty percent (80%) of the cumulative
Budgeted Pre-Tax Income for the First Year, the Second Year and the Third
Year.
(v) In the event that any Non-KEEP Shares owned by an Executive which
were eligible to become KEEP Shares on the First KEEP Determination Date or
the Second KEEP Determination Date did not become KEEP Shares on either or
both of such dates, such shares shall become and be redesignated as KEEP
Shares on the Third KEEP Determination Date, if (A) such Executive has been
continuously Employed from the date hereof through the Third KEEP
Determination Date and (B) the cumulative actual Pre-Tax Income for the
First Year, the Second Year and the Third Year equals or exceeds eighty
percent (80%) of the cumulative Budgeted Pre-Tax
16
Income for the First Year, the Second Year and the Third Year.
(vi) In the event that a Sale Transaction is consummated prior to the
determination of actual Pre-Tax Income for the Third Year, then, in such
case, for purposes of such Sale Transaction only, all Non-KEEP Shares owned
by an Executive shall be presumed to be KEEP Shares unless such Executive
has not been continuously Employed during the period from the date hereof
through the date of the related Sale Notice. If an Executive has not been
continuously Employed throughout such period, such presumption shall not be
applicable, and, for purposes of such Sale Transaction, such Executive's
only KEEP Shares shall be those shares, if any, that became such pursuant
to any of items (i) through (iii) of this Section 5(d). The presumption
referred to in the second preceding sentence shall take effect as of the
date of the related Sales Notice; provided, however, that if such Sale
-------- -------
Transaction is abandoned or terminated or deemed abandoned or terminated
pursuant to Section 11(c), then, in such case, such presumption shall no
longer be applicable.
Section 6. Second Call Option
---------- ------------------
(a) Grant. Subject to Sections 6(b), 6(c), 6(d), 6(e), 10 and 11, the
-----
Parent Company hereby grants to each Executive the right and option to
purchase, during the Second Call Option Exercise Period specified in Section
6(d), that number of the Parent Company's MPS Common Shares which is determined
in accordance with Section 6(b) for a purchase price per share determined in
accordance with Section 6(c). Each Option granted in this Section 6(a) is
referred to in this Agreement as a "Second Call Option."
(b) Number of Option Shares. The number of the Parent Company's MPS Common
------------------------
Shares, if any, which become subject to a Second Call Option granted to any
Executive in this Section 6 shall be zero (0) if (i) none of such Executive's
Non-KEEP Shares shall have been redesignated as KEEP Shares prior to July 2,
1999 pursuant to Section 5(d) or (ii) the KEEP Amount constitutes 20% or less of
Total Economic Value as of the applicable Determination Date or (iii) the Second
Call Option Purchase Price is equal to or greater than the applicable Last
Option Purchase Price. In any other case, such number shall be equal to the
product obtained by multiplying (A) the Executive Shares Number by (B) such
Executive's Applicable Percent and by (C) a fraction the numerator of which is
the aggregate number of all of such Executive's Non-KEEP Shares, if any, which
shall have been redesignated as KEEP Shares on or before July 1, 1999 pursuant
to Section 5 (d) and the denominator of which is the total number of Executive
Shares owned by such Executive (as set forth in the definition of "Executive
Shares" in Section 1(a)), subject to appropriate adjustment (in the manner
described in the definition of "Executive Shares Number" in Section 1(a)) in the
event of any stock split, stock combination (reverse stock split) or stock
dividend of or on the outstanding shares of MPS Common Stock.
17
The shares, if any, of MPS Common Stock which become subject to the Second
Call Options pursuant to this Section 6(b) are referred to in this Agreement as
the "Option Shares." The term "Option Shares" also refers to the shares, if
any, which are transferred and assigned to the Executives pursuant to exercise
of the Second Call Options.
(c) Purchase Price. The purchase per share payable by an Executive at a
--------------
Closing for the Option Shares upon exercise of a Second Call Option (the "Second
Call Option Purchase Price") shall be One Thousand Seven Hundred Dollars
($1,700), subject to appropriate adjustment in the event of any stock split,
stock combination (reverse stock split) or stock dividend of or on the
outstanding shares of MPS Common Stock. By way of example, if the Company were
to effect a two-for-one split of MPS Common Stock, the Second Call Option
Purchase Price would be changed to Eight Hundred Fifty Dollars ($850). By way
of additional example, if the Company were to effect a one-for-four reverse
stock split of MPS Common Stock, the Second Call Option Purchase Price would be
changed to Six Thousand Eight Hundred Dollars ($6,800).
(d) Exercise Period. Subject to Section 10, each Second Call Option shall
---------------
be exercisable at any time during the period (i) beginning on a date which is
the next day after the Closing Date on or by which (A) all Executive Shares
owned by the Executives shall have been purchased by one or both the Company and
the Parent Company pursuant to one or more exercises of one or more of the Put
Option, the Call Option and the Exchange Option and (B) the First Buy-Out
Payment shall have made to the Manager or all First Option Shares owned by the
Manager shall have been purchased by one or both of the Company and the Parent
Company pursuant to the exercise of one or more of the options granted in the
Option Agreement and (ii) ending on July 31, 2005. In addition, subject to
Sections 10 and 11, if a Sale Notice is given prior to July 31, 2005, then, in
such case, each Second Call Option shall also be exercisable during the Come-
Along Exercise Period in the case of a Stock Sale Transaction or during the 30-
day period from and after the date of the Sale Notice relating to an Asset Sale
Transaction. Any period during which a Second Call Option may be exercised
pursuant to this Section 6(d) is referred to in this Agreement as a "Second Call
Option Exercise Period."
(e) Non- Assignability. The Second Call Options are not assignable or
------------------
transferable except by will or the laws of descent and distribution, and each
Second Call Option may be exercised, if it becomes exercisable, only by the
Executive holding such Option during his lifetime (within the applicable
Exercise Period).
(f) Buy-Out of Second Call Option. Subject to Sections 9, 10 and 11, the
------------------------------
Parent Company shall have the right (the "Termination Right") to terminate any
Second Call Option by making a payment (the "Termination Payment") to the
Executive who then holds
18
such Second Call Option in an amount equal to the product obtained by
multiplying (i) the amount obtained by subtracting the Second Call Option
Purchase Price from the applicable Last Option Purchase Price by (ii) the number
of shares subject to the Second Call Option held by such Executive; provided,
--------
however, that, if the Second Call Option Purchase Price equals or exceeds the
-------
applicable Last Option Purchase Price, then, in such case, the amount of the
Termination Payment shall be One Dollar ($1.00). The Termination Right may be
exercised, as to a Second Call Option held by any Executive, at any time during
any Second Call Option Exercise Period whether or not such Second Call Option
has theretofore been exercised; provided, however, that, if the Employment of
-------- -------
such Executive terminates prior to the beginning of the Second Call Option
Exercise Period, then, in such case, the Termination Right as to his Second Call
Option may also be exercised by the Parent Company at any time during the period
from and after the date on which the Call Option or the Put Option is exercised
as to such Executive's KEEP Shares until the expiration of the Second Call
Exercise Option Period; and provided, further, that the Termination Right may be
-------- -------
exercised in any Sale Notice given prior to July 31, 2005. If the Parent
Company exercises the Termination Right or the Buy-Out Right at any time after
the beginning of the Second Call Option Period as to any Second Call Option or
Third Option then outstanding, it shall be obligated to exercise at the same
time its Termination Right as to all Second Call Options then outstanding. If a
Termination Right as to any Second Call Option is exercised after the exercise
of such Second Call Option and prior to the related Closing thereof, such
exercise of the Termination Right shall supersede and take precedence over such
exercise of such Second Call Option. Any period of time during which a
Termination Right may be exercised is referred to in this Agreement as a
"Termination Right Exercise Period."
(g) No Stockholder Rights. An Executive shall not have any voting or other
---------------------
rights as a stockholder of the Company with respect to the Option Shares unless
and until such shares are transferred to him pursuant to exercise of his Second
Call Option. Prior to such transfer, the Parent Company shall have all of the
rights incident to ownership of such shares.
Section 7. Second Put Option.
---------- -----------------
(a) Grant. If any Option Shares are transferred and assigned to the
-----
Executives pursuant to the exercise of one of more Second Call Options, then, in
such case, subject to Sections 7(b), 7(c), 9, 10 and 11, the Company hereby
grants to the Executives, acting as a group, the right and option (the "Second
Put Option") to require the Company to purchase all, but not less than all, of
their Option Shares for a purchase price determined in accordance with Section
7(c).
(b) Exercise Period. The Second Put Option shall be exercisable at any
---------------
time during the period (the Last Option Exercise Period") beginning on the Last
Option Commencement Date and ending on December 31, 2005.
19
(c) Purchase Price. The purchase price per share payable by the Company
--------------
for any Option Shares owned by an Executive at a Closing pursuant to exercise of
the Second Put Option (the "Last Option Purchase Price") shall be the greater of
(i) an amount equal to the quotient obtained by dividing (A) the applicable
Residual KEEP Consideration by (B) the Executive Shares Number or (ii) an amount
equal to the quotient obtained by dividing (A) One Dollar ($1.00) by (B) the
aggregate number of Option Shares then being purchased from such Executive.
Section 8. Third Call Option.
---------- -----------------
Grant. If any Option Shares are transferred and assigned to the Executives
-----
pursuant to the exercise of one or more Second Call Options, then, in such case,
subject to Sections 9, 10 and 11, each Executive hereby grants to the Company
the right and option (the "Third Call Option") to purchase all, but not less
than all, of the Option Shares owned by such Executive for a purchase price per
share equal to the Last Option Purchase Price. The Third Call Option shall be
exercisable at any time during the Last Option Exercise Period. If the Company
exercises a Third Call Option or a Fourth Option at any time as to any Option
Shares or Third Option Shares then owned by an Executive or the Manager, it
shall be obligated to exercise at the same time its Third Call Options as to all
Option Shares then owned by the Executives.
Section 9. Exchange Option; Parent Company Exchange Shares.
--------- ------------------------------------------------
(a) Subject to Sections 9(b), 9(c), 10 and 11, if, and on each occasion
that, a Put Option or Call Option is exercised as to any KEEP Shares or a Second
Put Option or a Third Call Option is exercised as to any Option Shares or the
Parent Company exercises its Termination Right, then, in any such case, the
Parent Company, if any, shall have the right and option (the "Exchange Option")
(i) to assume the Company's rights and obligations, if any, to acquire such KEEP
Shares or Option Shares and (ii) to pay, and to require each Executive whose
KEEP Shares, Second Call Option or Option Shares are subject to such Option
exercise to accept payment of the Aggregate Purchase Price therefor or the
Termination Payment in the form of cash or shares of Parent Company Common Stock
or any combination thereof, as determined by the Parent Company; provided,
--------
however, that if NAB is the Parent Company on the Closing Date and is making the
-------
Termination Payment, it shall also have the right to elect to pay up to 50% of
each Termination Payment, if any, in the form of its three-year promissory note
(the "NAB Note") in accordance with Section 10(e)(iii). If the Parent Company
exercises the Exchange Option or the Termination Right and elects to pay all or
any portion of the Aggregate Purchase Price for such KEEP Shares or Option
Shares or the Termination Payment with shares of Parent Company Common Stock,
then, in such case, the number of shares of Parent Company Common Stock issuable
20
to any Executive at the applicable Closing thereof shall be that number which is
equal to the quotient (rounded to the nearest whole number) obtained by dividing
so much of such Aggregate Purchase Price or the Termination Payment as the
Parent Company elects to pay in the form of such shares by the Parent Company
Stock Price.
(b) As used in this Agreement, the term "Parent Company Stock Price" means
the average daily market price per share of Parent Company Common Stock during
the thirty (30) consecutive trading days next preceding the date on which the
Parent Company gives notice of exercise of the Exchange Option.
The market price for each such trading day shall be the last sale price on
such day on the New York Stock Exchange, or, if Parent Company Common Stock is
not then listed or admitted to trading on the New York Stock Exchange, on the
American Stock Exchange, or, if Parent Company Common Stock is not then listed
or admitted to trading on the American Stock Exchange, on such other principal
stock exchange on which such stock is then listed or admitted to trading or, if
no sale takes place on such day on any such exchange, the average of the closing
bid and asked prices on such day as officially quoted on any such exchange, or,
if Parent Company Common Stock is not then listed or admitted to trading on any
stock exchange, the market price for each such trading day shall be the last
sale price on such day as reported in the National Association of Securities
Dealers, Inc. Automated Quotations System, or if Parent Company Common Stock is
not on the National Market List, the average of the closing reported bid and
asked prices on such day in the over-the-counter market, as furnished by the
National Quotation Bureau, Inc., or if such firm at the time is not engaged in
the business of reporting such prices, as furnished by any similar firm then
engaged in such business and selected by the Parent Company, or, if there is no
such firm, as furnished by any member of the National Association of Securities
Dealers, Inc. selected by the Parent Company. In the event that, after the
Parent Company exercises an Exchange Option and determines the number of Parent
Company Exchange Shares, there is a change in Parent Company Common Stock
through stock dividend, stock split or stock combination (reverse stock split),
the Board of Directors of the Parent Company shall make such adjustments to the
Exchange Option as may be necessary or appropriate to prevent dilution or
enlargement of rights under the Exchange Option. No such adjustments to the
Exchange Option shall be made as a result of the issuance of shares of the
Parent Company Common Stock by the Parent Company, from time to time, (i) upon
exercise of options or warrants hereunder, heretofore or hereafter granted, (ii)
upon conversion of securities heretofore or hereafter issued by the Parent
Company or any of its subsidiaries into shares of Parent Company Common Stock,
(iii) in connection with any public or private offering of shares of Parent
Company Common Stock or (iv) in connection with any other issuance and sale of
shares of Parent Company Common Stock.
(c) The Exchange Option shall not be exercisable by the Parent Company at
any time
21
when the Parent Company Common Stock is not generally publicly traded.
Section 10. Option Exercise and Closing Procedures.
----------- ---------------------------------------
(a) Exercise by the Company. If the Company desires to exercise the Call
-----------------------
Option or the Third Call Option, it may do so at any time during the applicable
Exercise Period by giving written notice thereof (the "Company Exercise Notice")
to all applicable Selling Stockholders and, if such exercise relates to KEEP
Shares or Option Shares, to the Parent Company.
(b) Exercise by the Executives. If the Executives desire to exercise any
--------------------------
Option granted to them, they may do so at any time during the applicable
Exercise Period only by giving written notice thereof (the "Executive Exercise
Notice") to the Parent Company with respect to the Second Call Options and to
the Company and the Parent Company, if any, with respect to the Put Option and
the Second Put Option. To be effective, an Executive Exercise Notice must be
signed by Management Shareholders then owning more than fifty percent (50%) of
the Management Shares. An Executive Exercise Notice shall be binding upon, and
shall be deemed to have been signed by, all of the persons then owning any
Executive Shares, Second Call Options or Option Shares, as applicable.
Accordingly, by way of example and not by way of limitation, if an Executive
Exercise Notice is given with respect to the Put Option, it shall obligate each
person then owning any Executive Shares to sell all of his Executive Shares to
the Company pursuant to such exercise of the Put Option or, if the Exchange
Option is thereafter exercised in respect thereof, to the Parent Company
pursuant to such exercise of the Exchange Option, regardless of whether or not
such person signed the related Executive Exercise Notice or desires to sell such
shares.
(c) Exercise by the Parent Company. If the Parent Company desires to
------------------------------
exercise an Exchange Option or the Termination Right (whether or not in
connection with the Exchange Option) or the Bring-Along Right, it may do so by
giving written notice thereof (the "Parent Company Exercise Notice") to the
Company and all applicable Selling Stockholders at any time during the
Termination Right Exercise Period in the case of the Termination Right or, in
the case of an Exchange Option unrelated to the Termination Right, during the
period (the "Exchange Option Exercise Period") beginning on the date the related
Executive Exercise Notice or the related Company Exercise Notice, as
applicable, is given and ending in a date which is thirty (30) days thereafter
or, in the case of the Bring-Along Right, in the Sale Notice. If the Parent
Company elects to pay any portion of the Aggregate Purchase Price or the
Termination Payment in the form of shares of Parent Company Common Stock, the
Parent Company Exercise Notice shall (i) specify the amount, if any, of the
Aggregate Purchase Price or Termination Payment, as applicable, that the Parent
Company is paying in the form of such shares and the amount, if any, thereof, if
any. which it is paying in cash (and, if NAB is then the Parent Company and is
making a Termination Payment, the portion
22
thereof, if any, which it is paying in the form of a NAB Note), (ii) set forth
the amount of the Parent Company Stock Price and the details of its calculation
thereof and (iii) set forth the number of shares of Parent Company Common Stock,
if any, and the amount of cash, if any, to be delivered or paid to each
applicable Selling Stockholder at the Closing as purchase price for the
Executive Shares or Option Shares or in satisfaction of the Termination Payment.
The percentage of the total consideration payable in the form of shares of
Parent Company Common Stock at any Closing shall be the same for each Selling
Stockholder at the same Closing. By way of example, if the Parent Company
determines to pay to any Selling Stockholder 50% of the total consideration in
the form of shares of Parent Company Common Stock at a Closing, then, in such
case, the Parent Company shall be obligated to pay to each other Selling
Stockholder at the same Closing 50% of such other Selling Stockholder's total
consideration in the form of such shares.
(d) Closing. Except as otherwise provided in this Section 10(d), if an
-------
Executive Exercise Notice or Company Exercise Notice is given (and the related
Exchange Option is not exercised) or if a Parent Company Exercise Notice is
given with respect to a Termination Right, the related Closing shall take place
at 10:00 a.m., local time, on a date determined by the Company or the Parent
Company, as applicable, which date shall not be more than forty-five (45) or
less than thirty-one (31) business days after the date on which the related
Exercise Notice is given. The party determining the Closing Date shall give
notice thereof to the other parties no less than ten (10) days prior thereto.
If the Parent Company exercises an Exchange Option relating to such Executive
Exercise Notice or Company Exercise Notice during the applicable Exchange Option
Exercise Period, then, in such case, the Closing of the purchase and sale of
shares pursuant to such exercise of the Exchange Option shall take place twenty
(20) business days after the date of the related Parent Company Exercise Notice.
If the Company exercises an Option which it is obligated to exercise by the
terms of this Agreement because of the exercise of an option or a Buy-Out Right
granted in the Option Agreement (a "Mandatory Exercise"), then, in such case,
the Closing related to the Mandatory Exercise (or of any exercise of the
Exchange Option relating thereto) shall occur simultaneously with and at the
location of the closing of the related exercise of such option or Buy-Out Right
under the Option Agreement, and the same shall be deemed to constitute one and
the same Closing for purposes of Section 5(c), 10(c), 10(e)(ii) and 10(e)(iii).
If the Executives give an Exercise Notice with respect to the Second Call
Options pursuant to the second sentence of Section 6(d) or if the Parent Company
gives an Exercise Notice with respect to the Termination Right during the period
specified in the second sentence of Section 6(d), the Closing Date for the
purchase and sale of Option Shares or the making of the Termination Payment, as
applicable, pursuant to such Exercise Notice shall be the date of the closing
of the related Sale Transaction; provided, however, that if such Sale
-------- -------
Transaction is abandoned or terminated or deemed abandoned or terminated
pursuant to Section 11(c), then, in such case, such Exercise Notice shall be
deemed to be revoked and
23
withdrawn without prejudice to the Executives' right thereafter to exercise the
Second Call Options or the Parent Company's right thereafter to exercise the
Termination Right if and to the extent that such Options or Termination Right
are or become otherwise exercisable in accordance with the terms of this
Agreement.
Except as otherwise provided in the next sentence, the Closing shall take
place at the principal executive offices of the Company (in the case of a
Closing pursuant to an Executive Exercise Notice or a Company Exercise Notice)
or of the Parent Company (in the case of a Closing pursuant to a Parent Company
Exercise Notice) or at such other place as the Company or the Parent Company, as
applicable, may reasonably designate. If an Exercise Notice is given with
respect to any Second Call Option or Termination Right pursuant to the second
sentence of Section 6(d) or during the period specified in such sentence, the
Closing thereof Termination shall take place on the date of and at the time and
at the location of the closing of the related Sale Transaction. If the Closing
under this Agreement and a closing under the Option Agreement take place at or
in connection with a closing of a Sale Transaction, the same shall be deemed to
constitute one and the same Closing for purposes of Sections 5(c), 10(c),
10(e)(ii) and 10(e)(iii).
(e) Deliveries at Closing. At the Closing the applicable parties shall
---------------------
make the following deliveries:
(i) If the Closing relates to a sale of shares of MPS Common Stock to
the Company or the Parent Company, each Selling Stockholder shall deliver
to the Company or the Parent Company, as applicable, the certificate(s)
representing the Executive Shares or Option Shares, as applicable, which
are then being sold by him, together with duly executed stock powers (with
signature guaranty if requested by the transferee, and all necessary tax
stamps, if any) transferring such shares to the Company or the Parent
Company as applicable. In addition, if a Selling Stockholder is a Personal
Representative, he shall deliver to the Company or the Parent Company, as
applicable, evidence of his appointment and qualification as such (and his
authority to sell such shares) satisfactory to the Company or the Parent
Company, as applicable. If the Closing relates to an exercise of the
Termination Right, each Selling Stockholder shall execute and deliver to
the Parent Company, a release and termination of his Second Call Option, in
form and substance satisfactory to the Parent Company.
(ii) If the Company is the purchaser of the Executive Shares or Option
Shares, the Company shall pay the applicable Aggregate Purchase Price to
each applicable Selling Stockholder. If NAB is the Parent Company on the
Closing Date, the Company shall have the right to elect to pay up to fifty
percent (50%) of the Aggregate Purchase Price to each Selling Stockholder
in the form of the Company's
24
three-year promissory note (the "Note"), which shall be delivered to each
Selling Stockholder at the Closing. Each Note, if any is issued, shall
provide that (A) the principal thereof is payable in twelve (12) equal (or
approximately equal) quarterly installments beginning at the end of the
calendar quarter in which the Closing Date falls, (B) the principal thereof
outstanding from time to time shall bear interest at the rate of nine
percent (9%) per annum payable quarterly in arrears with each installment
of principal, and (C) the Note is prepayable at any time, in whole or in
part, without penalty or premium. Each such Note shall contain such other
terms and provisions as are customary in such instruments as reasonably
determined in good faith by the Company. The percentage of total
consideration payable in the form of a Note shall be the same for each
Selling Stockholder at the same Closing. By way of example, if the Company
determines to pay any Selling Stockholder at a Closing fifty percent (50%)
of his total consideration in the form of a Note, then, in such case, the
Company shall be obligated to pay each other Selling Stockholder at the
same Closing fifty percent (50%) of such other Selling Stockholder's total
consideration in the form of a Note. The Company shall deliver to each
Selling Stockholder that amount of cash, which, when added to the principal
amount of the Note delivered to such Selling Stockholder, equals the total
consideration payable to such Selling Stockholder. If NAB is not the Parent
Company on the Closing Date, the Company shall be obligated to pay the
entire amount of the applicable consideration to each Selling Stockholder
in cash.
(iii) If the Parent Company is the purchaser of the Executive Shares or
Option Shares, as applicable, or if it is making the Termination Payment,
the Parent Company shall deliver the following to each Selling Stockholder
at the Closing: (A) if the Parent Company is paying all or a portion of
such Selling Stockholder's Aggregate Purchase Price or the Termination
Payment with Parent Company Exchange Shares, a stock certificate
representing the applicable number of Parent Company Exchange Shares in the
name of such Selling Stockholder; (B) if the Parent Company is paying all
or a portion of such Selling Stockholder's Aggregate Purchase Price or the
Termination Payment in cash, a payment of the amount thereof in cash to
such Selling Stockholder; (C) if NAB is the Parent Company on the Closing
Date and is issuing a NAB Note in payment of a portion of the Termination
Payment, a duly executed NAB Note in the applicable principal amount
payable to such Selling Stockholder; and (D) if the Parent Company is
paying all or a portion of such Selling Stockholder's Aggregate Purchase
Price or the Termination Payment with Parent Company Exchange Shares, a
Registration Rights Agreement (containing provisions which are customary in
such an agreement) pursuant to which the Parent Company undertakes to file,
within sixty (60) days after the Closing (and to keep effective for a
period of three years thereafter), a Registration Statement with the
Securities and Exchange Commission (on an appropriate form authorized by
such Commission) covering the
25
future sale (by the Selling Stockholders) of all Parent Company Exchange
Shares being issued to such Selling Stockholders. Such Registration Rights
Agreement shall be duly executed by the Parent Company and dated the
Closing Date; provided, however, that the Parent Company's obligation to
-------- -------
deliver such Registration Rights Agreement is subject to the condition that
the Selling Stockholders shall have executed and delivered the same at the
Closing. The payment and other terms of the NAB Note shall be the same as
the terms specified for the Note in Section 10(e)(ii), mutatis mutandis.
------- --------
The percentage of Termination Payment or Buy-Out Payment payable in the
form of a NAB Note at any Closing shall be the same for each Selling
Stockholder at the same Closing.
(iv) In the case of a Closing pursuant to exercise of the Second Call
Options, (A) NAB shall deliver to each person then purchasing Option Shares
certificate(s), in such person's name, representing the applicable number
of Option Shares which such person is then purchasing and (B) each such
person shall pay to NAB, in cash, the Aggregate Purchase Price for such
shares.
Payments in cash at any Closing shall be made by certified or cashier's
check or, if agreed to by the applicable parties, by wire transfer of funds in
accordance with precise written instructions provided to the paying party by the
receiving party at least three (3) business days prior to the Closing Date.
(f) Limitation on Purchase of Executive Shares; Assignment of Call Option.
---------------------------------------------------------------------
Notwithstanding any other provision of this Agreement and notwithstanding any
exercise of an Option, the Company shall not be obligated to, and shall not,
purchase any Executive Shares or Option Shares pursuant to exercise of an Option
at any time when a Stock Purchase Restriction exists and is applicable;
provided, however, that the existence or applicability of a Stock Purchase
-------- -------
Restriction shall not prevent exercise of an Option, but shall merely postpone
the Closing of the purchase and sale of Executive Shares or Option Shares
pursuant to such exercise until such time as no Stock Purchase Restriction
exists. The Company shall use reasonable efforts to obtain any consents or
waivers which would eliminate the existence or applicability of any Stock
Purchase Restriction. In the event that a Closing is postponed in accordance
with the second preceding sentence, each Aggregate Purchase Price otherwise
payable at the postponed Closing shall be increased by an interest-like accrual
on such amount at the rate of nine percent (9%) per annum from the date on which
the Closing would have taken place but for the existence of a Stock Purchase
Restriction to the date of the actual Closing. If at any time, the Company is
unable, because of the existence of a Stock Purchase Restriction at such time,
to purchase any Non-KEEP Shares, then, in such case, the Company may assign to
the Parent Company or any other person or entity the Company's rights to
purchase such shares pursuant to exercise of a Call Option.
26
(g) Board Approval for Exercise. The Company shall not exercise any Option
---------------------------
without the approval of its Board of Directors. The Parent Company shall not
exercise any Exchange Option or Termination Right without the approval of its
Board of Directors.
Section 11. Sale Transactions; Come-Along and Bring-Along Rights.
---------- ----------------------------------------------------
(a) If at any time during the Sale Notice Period (as defined below) the
Parent Company proposes to sell more than 50% of the Parent Company's MPS Common
Shares (other than pursuant to exercise of the Second Call Options or the Third
Option) in a private transaction or proposes to sell any such shares in a public
offering (a "Stock Sale Transaction"), or if the Company proposes to sell its
business and substantially all of its assets (an "Asset Sale Transaction"), in
either case to a third-party purchaser or purchasers (the "Purchaser") which is
not a Parent Company Affiliate, in a single transaction or related series of
transactions pursuant to a bona fide offer from, or letter of intent or contract
---- ----
with, a Purchaser or an underwriter, then, in such case, the Parent Company or
the Company, as applicable, shall give each Executive notice thereof (the "Sale
Notice") not less than thirty (30) days prior to the proposed closing thereof;
provided, however, that no Sale Notice is required to be given to any Executive
-------- -------
who does not then own or hold any Executive Shares or Option Shares or an
outstanding Second Call Option. The Sale Notice shall specify in reasonable
detail the material terms of the Sale Transaction. As used herein, the term
"Sale Transaction" means a Stock Sale Transaction or an Asset Sale Transaction
and (ii) the term "Sale Notice Period" means the period beginning on the date
hereof and ending on the tenth anniversary of the date hereof.
(b) The Management Shareholders, acting as a group, shall have the right
(the "Come-Along Right") to require, as a condition to the consummation of a
Stock Sale Transaction, that the Purchaser acquire that percentage of their KEEP
Shares and Management Option Shares, if any, in the Stock Sale Transaction as
equals the percentage of the Parent Company's MPS Common Shares that are
proposed to be sold in such Stock Sale Transaction and (ii) the Parent Company
shall have the right (the "Bring-Along Right") to require each Executive to sell
that percentage of his KEEP Shares and Management Option Shares, if any, in the
Stock Sale Transaction as equals the percentage of the Parent Company's MPS
Common Shares that are proposed to be sold in such Stock Sale Transaction. In
any Stock Sale Transaction for which a Sale Notice is given prior to April 18,
2005 and which does not constitute and is not part of a public offering of
shares of MPS Common Stock, (A) the purchase price per share payable to each
Executive for his KEEP Shares, if any, shall be determined in accordance with
Section 5(b) and (B) the purchase price per share payable to each Executive for
his Option Shares (assuming exercise of the Second Call Options), if any, shall
be determined in accordance with Section 7(c). In any other Stock Sale
Transaction the purchase price per share payable to each Executive for his KEEP
Shares, if any, and his Option Shares (assuming exercise of the Second Call
Options),
27
if any, being sold in such transaction shall be the same as the purchase price
per share payable to the Parent Company for the Parent Company's MPS Common
Shares being sold in such transaction. The nature or composition of the
consideration paid to each Executive for his KEEP Shares and Option Shares, if
any, which are being sold in such transaction shall be the same as is applicable
to the Parent Company's MPS Common Shares which are being sold in such
transaction. By way of example, and not be way of limitation, if the aggregate
consideration to be paid by the Purchaser for the Parent Company's MPS Common
Shares consists of 50% cash and 50% promissory note issued by the Purchaser,
then, in such case, the aggregate consideration to be paid to each Executive for
his KEEP Shares and Option Shares, if any, shall consist of 50% cash and 50%
promissory note (having the same terms (other than principal amount) as the
promissory note issued to the Parent Company) issued by the Purchaser.
The Sale Notice relating to a Stock Sale Transaction shall state whether
the Parent Company is exercising its Bring-Along Right. If the Bring-Along
Right is not exercised, the Executives, acting as a group, shall have a period
(the "Come-Along Exercise Period") of twenty (20) days from and after the date
of the Sale Notice to give notice (the "Come-Along Notice") to the Parent
Company of their exercise of the Come-Along Right, which notice shall also state
whether the Executives are then exercising any Second Call Options granted to
them which are then outstanding. If the Come-Along Notice states that the
Executives are then exercising the Second Call Options, then such notice shall
also constitute the Executive Exercise Notice with respect to the Second Call
Options. If the Executives do not exercise the Second Call Options during the
Come-Along Exercise Period, then, in such case, subject to the next sentence,
the Second Call Options shall be deemed to have expired unexercised as of the
end of such period, and the Parent Company shall be free to sell to the
Purchaser in the Stock Sale Transaction, for the Parent Company's own account
and free from such Second Call Options, all of the shares subject to the Second
Call Options. Notwithstanding the preceding sentence, if such Stock Sale
Transaction is abandoned or terminated or deemed abandoned or terminated
pursuant to Section 11(c), then, in such case, such deemed expiration of the
Second Call Options shall be automatically rescinded, and such Second Call
Options shall once again be in effect from and after the date of such actual or
deemed abandonment or termination (unless such Options otherwise shall have
expired by their terms) until the end of the Second Call Option Exercise Period.
To be effective, the Come-Along Notice must be signed by Management
Shareholders who then own more than fifty percent (50%) of the Management
Shares. If the Parent Company does not exercise the Bring-Along Right and if
the Come-Along Notice is not given during the Come-Along Exercise Period, the
Executives shall be deemed to have elected not to participate in such Stock Sale
Transaction.
If any Executive sells any of his KEEP Shares and Option Shares, if any,
in the Stock
28
Sale Transaction pursuant to an exercise of the Bring-Along Right or the Come-
Along Right, he shall be obligated, on demand, to pay, or to reimburse the
Parent Company for, as applicable, (i) all underwriting expenses and discounts
applicable to his shares in any public offering and (ii) that percentage of all
costs and expenses (including reasonable attorney's fees and disbursements)
incurred by the Parent Company in connection with the Stock Sale Transaction as
equals the percentage obtained by multiplying 100 by a fraction the numerator of
which is the number of shares sold by such Executive in such transaction and the
denominator of which is the total number of shares sold by the Parent Company
and the Management Shareholders (including such Executive) in such transaction.
At any closing of a Stock Sale Transaction which occurs after July 1, 1999, each
Executive shall be obligated to sell and transfer all Non-Keep Shares then owned
by such Executives to the Company or the Company's designee for a purchase per
share equal to the Original Cost.
In any Stock Sale which constitutes or is part of a public offering of
shares of MPS Common Stock, each person selling shares of MPS Common Stock in
such transaction shall be obligated, if so requested by the Company or the
Parent Company, to execute and deliver such underwriting, representation,
standstill and other agreements with the underwriters in such offering are
customary in such transactions or as are executed and delivered by the Parent
Company.
(c) A Sale Notice shall take precedence over any Exercise Notice then
pending or thereafter given except for an Exercise Notice relating to any Second
Call Option, the Termination Right or an Exchange Option relating to any Second
Call Option or the Termination Right. Notwithstanding any other provision of
this Agreement, the Closing related to any Exercise Notice over which a Sale
Notice takes precedence shall not take place unless the related Sale Transaction
is abandoned or terminated. If such Sale Transaction is abandoned or
terminated, such Closing shall take place on a date which in the later to occur
of (i) the thirtieth business day after the date of such abandonment or
termination or (ii) the Closing Date determined in accordance with Section
10(d). A Sale Transaction shall be deemed abandoned or terminated if it is not
consummated within one hundred fifty (150) days after the date of the related
Sale Notice or if the Parent Company or the Company gives notice to the Manager
that such Sale Transaction has been abandoned or terminated
(d) Within one hundred eighty (180) days after the consummation of an Asset
Sale Transaction, the Company shall: (i) in the case of an Asset Sale for which
the date of the Sale Notice is prior to April 18, 2005, purchase all of the
Executive Shares and Option Shares then outstanding for an amount per share (A)
determined in accordance with Section 5(b) for KEEP Shares, (B) determined in
accordance with Section 5(a) for Non-KEEP Shares and (C) determined in
accordance with Section 7(c) for Option Shares or (ii) in the case of any other
Asset Sale Transaction, either (A) purchase all of the Executive Shares and
Option Shares, if any, then outstanding for a price per share equal to their net
book value per share or (B)
29
adopt a plan of complete liquidation pursuant to which the net assets, if any,
of the Company shall be distributed pro rata to its stockholders (subject to the
--- ----
limitation that the distribution per share on Non-KEEP Shares shall not exceed
the Original Cost) in accordance and compliance with the Company's Certificate
of Incorporation and applicable law. In the case of a purchase of KEEP Shares
and Option Shares pursuant to clause (ii) (A) the preceding sentence, their net
book value per share shall be determined by the Board of Directors of the
Company in good faith. Such determination shall be conclusive and final in the
absence of manifest bad faith or fraud. In determining such net book value, the
Board of Directors shall take into account, among other things, reasonable
reserves for contingent liabilities.
(e) Neither the Come-Along Right nor the Bring-Along Right shall apply, or
be exercisable with respect to, any proposed or actual sale or transfer of any
of the Parent Company's MPS Common Shares to a Parent Company Affiliate;
provided, however, that any subsequent proposed or actual sale or transfer
-------- -------
thereof by such Parent Company Affiliate to a buyer that is not also a Parent
Company Affiliate shall be subject to such rights as if the prior Parent Company
were the selling party.
Section 12. Sale by NAB to a NAB Affiliate. If the Parent Company sells
----------- ------------------------------
and transfers the Parent Company's MPS Common Shares to any Parent Company
Affiliate, then, in such case, in connection with such sale and transfer, the
transferring Parent Company shall (i) assign to such transferee Parent Company
Affiliate all of the Transferring Parent Company's rights under this Agreement
and (ii) cause such transferee Parent Company Affiliate to become a party to and
assume all of the transferring Parent Company's obligations under this
Agreement, including its obligations under Sections 6 and 11.
Section 13. Examples of Calculations. Schedule I to this Agreement sets
----------- ------------------------
forth examples of certain calculations which may be required to be made pursuant
to this Agreement.
Section 14. Specific Performance. The shares of MPS Common Stock cannot
----------- --------------------
be readily purchased or sold on the open market, and for that reason, among
others, the parties will be irreparably damaged in the event that this Agreement
is not specifically enforced. Should any controversy arise concerning a sale or
disposition of any shares of MPS Common Stock, an injunction may be issued
restraining any sale or disposition pending the determination of such
controversy, and the resolution thereof shall be enforceable in a court of
equity by an injunction or a decree of specific performance. However such
remedy shall be cumulative and not exclusive, and shall be in addition to any
other remedies at law or in equity which the parties may have.
Section 15. Amendments. No amendments to this Agreement or waiver or
----------- ----------
discharge to any provision hereof shall be made or be effective unless the same
(i) is in
30
writing; (ii) is signed by an authorized officer of each of the Company and the
Parent Company, if any, (iii) is approved by the Boards of Directors of the
Company and the Parent Company, if any; and (iv) is signed by Management
Shareholders then owning more than fifty percent (50%) of the Management Shares;
provided, however, that, if any such amendment, waiver or discharge would
-------- -------
materially and adversely affect the rights or obligations (under this Agreement
or the Option Agreement) of fewer than all of the Management Shareholders then
owning Management Shares then, in such case, such amendment, waiver or discharge
shall not be made or be effected unless it is also signed by the Management
Shareholders whose rights and obligations are adversely affected.
Section 16. Termination. This Agreement shall terminate on the earlier to
---------- -----------
occur of:
(i) the date on or by which both of the following events shall have
occurred: (A) all of the Executive Shares shall have been purchased by
the Company or the Parent Company or by a Purchaser in a Stock Sale
Transaction and (B) either (x) all of the Option Shares, if any, shall
have been purchased by the Company or the Parent Company or by a
Purchaser in a Stock Sale Transaction or (y) it shall have been
determined that no shares of the Parent Company's MPS Common Shares are
then or will thereafter become subject to any Second Call Options or
(z) the Second Call Options shall have been terminated pursuant to one
or more exercises of the Termination Right and the making of one or
more Termination Payments;
(ii) the date on which any shares of MPS Common Stock are sold in a
public offering; or
(iii) the tenth anniversary of the date of this Agreement.
Section 17. Notices. All notices, requests, demands and other
---------- -------
communications hereunder must be in writing and shall be deemed to have been
duly given if delivered by hand or mailed by first class, registered or
certified mail, return receipt requested, postage and registry fees prepaid, and
addressed as follows:
(a) If to the Company:
Mortgage Portfolio Services, Inc.
LBJ Financial Center
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Chairman of the Board
31
(b) If to the Parent Company or the Company:
NAB Asset Corp.
00000 Xxx Xxxxxx Xxx., Xxxxx 000
Xxxxxx, XX 00000
Attn: President
(c) If to any Executive, at the address set forth below his name on the
signature page(s) hereof.
Any of the foregoing parties by notice in writing mailed to the other parties
may change the name and address to which notices, requests, demands and other
communications to him shall be mailed.
Any notice or other communication pursuant to this Agreement shall be deemed
to have been duly given or made and to have become effective (i) when delivered
in hand to the party to which it is directed, or, if sent by certified or
registered mail, return receipt requested, or by telex, facsimile transmission
or telegraph, and properly transmitted and addressed in accordance with of this
Section 17 when received by the addressee, or (ii) on the third business day
following the day of the dispatch thereof, whichever of (i) or (ii) shall be the
earlier.
Section 18. Acknowledgment Regarding Option Agreement. Each of the
---------- -----------------------------------------
Executives acknowledges that the Company has provided him with a copy of the
Option Agreement and he has had an opportunity to read it before signing this
Agreement.
Section 19. Miscellaneous. This Agreement (i) contains the entire
---------- -------------
understanding of the parties with respect to the subject matter hereof; (ii)
supersedes all prior agreements and understandings if any, with respect to such
subject matter; (iii) shall inure to the benefit of and be binding upon the
Company, NAB and the Executives and their respective successors, permitted
assigns, personal representatives and heirs; (iv) shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws; and (v) may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
taken further shall constitute one and the same instrument.
End of Text of Agreement.
Signatures appear on next page.
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MORTGAGE PORTFOLIO SERVICES, INC. THE EXECUTIVES:
By: __________________________ ______________________________
Name: Xxxxxxx X. Xxxxx Xxxxx X. Xxxxxx
Title: Chairman of the Board 0000 Xxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
NAB ASSET CORPORATION ______________________________
Xxxxx Xxxxxx
By: __________________________ 0000 Xxxxxxx Xxxxx
Name: Xxxxxxx X. Xxxxx Xxxxxxxxxx, XX 00000
Title: President
______________________________
Xxxxxx X. Xxxxxx
0000 Xxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
________________________________
Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxx Xxx, XX 00000
_______________________________
Xxxxx X. Xxxxxxxx
1. 0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
33
