EXHIBIT 10.14
CENTURY MAINTENANCE SUPPLY, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made and
entered into as of __________, 1998 ("Grant Date"), by and between Century
Maintenance Supply, Inc., a Delaware corporation (the "Company"), and
____________ ("Optionee") pursuant to the Company's 1998 Nonqualified Stock
Option Plan (the "Plan"). All capitalized terms not otherwise defined herein
shall have the meanings set forth in the Plan.
R E C I T A L S
- - - - - - - -
A. Optionee is a director, employee or consultant of the Company and/or
of a direct or indirect subsidiary of the Company (individually, a "Subsidiary,"
and collectively, the "Subsidiaries"), and the Company considers it desirable to
give Optionee an added incentive to advance the Company's interests.
B. The Committee has determined to grant Optionee the right to purchase
shares of common stock of the Company ("Common Stock") pursuant to the terms and
conditions of this Agreement and of the Plan.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
and pursuant to the authority granted to the Committee (as defined in the Plan)
by the Board of Directors of the Company, the parties agree as follows:
1. Option; Number of Shares; Price. The Company hereby grants to
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Optionee the right (the "Option") to purchase up to a maximum of _______ shares
(the "Shares") of the Common Stock, at a purchase price of____ per share (the
"Option Price") to be paid in accordance with Section 6 hereof. The Option and
the right to purchase all or any portion of the Shares is subject to the terms
and conditions stated in this Agreement and in the Plan including, without
limitation, the provisions of Sections 4 and 11 of the Plan under which the
Option shall be subject to modification and Sections 11, 15 and 16 of the Plan
and Sections 3 and 4 hereof pursuant to which the Option is subject to
acceleration and/or termination. It is intended that the Option will not
qualify for treatment as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Exercisability. The Option shall become exercisable as set forth in
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Schedule A.
[There will be a different agreement for each option]
3. Term of Agreement. Except for the rights conferred upon the Company
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pursuant to Section 8 below, the Option, and Optionee's right to exercise the
Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Section 2 hereof (if applicable) or
pursuant to the Sections 11, 15, or 16 of the Plan;
(b) the expiration of seven (7) years from the date hereof;
(c) thirty (30) days after the date of termination of Optionee's
employment or other relationship with the Company and all of the Subsidiaries
(unless such termination was for Cause (as defined in paragraph (e) below), or
unless such termination results from Optionee's death or Disability (within the
meaning of Section 22(e)(3) of the Code);
(d) one hundred and eighty (180) days after the date of termination of
Optionee's employment or other relationship with the Company and all of the
Subsidiaries, if such termination results from Optionee's death or Disability;
or
(e) on the date of termination of Optionee's employment or other
relationship with the Company and all of the Subsidiaries, if such termination
was for Cause. "Cause" shall mean (i) Optionee's conviction of, or the entry of
a pleading of guilty or nolo contendre by Optionee to, a felony or a crime
involving moral turpitude, (ii) Optionee's material failure to perform the
duties required under his or her employment or other relationship, material
failure to comply with the Company's or a Subsidiary's standard policies and
procedures generally applicable to employees, or failure to comply with any
provision of any employment or other agreement after having received written
notice from the Company or a Subsidiary identifying such failure and after
having received an opportunity of at least ten (10) days in which to cure the
failure so identified if such failure is susceptible to cure, (iii) a willful
act by Optionee as a result of which he or she receives an improper personal
benefit at the expense of the Company and/or a Subsidiary, (iv) an act of fraud
or dishonesty committed by Optionee against the Company and/or a Subsidiary, or
(v) any other misconduct by Optionee that is materially injurious to the
business or reputation of the Company and/or a Subsidiary.
4. Termination of Employment or Other Relationship. The termination for
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any reason of Optionee's employment or other relationship with the Company and
all of the Subsidiaries shall not accelerate the time at which any or all of the
Option becomes exercisable or affect the number of Shares with respect to which
the Option may be exercised. The Option may only be exercised with respect to
that number of Shares which could have been purchased under the Option had the
Option been exercised by Optionee on the date of such termination.
5. Death of Optionee; No Assignment. The rights of Optionee under this
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Agreement may not be assigned or transferred except by will or by the laws of
descent or distribution, and may be exercised during the lifetime of Optionee
only by Optionee. However, in the event the
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Optionee becomes Disabled, a designee of Optionee, or if Optionee has not
designated anyone, his or her legal representative, may exercise the Option on
behalf of Optionee (provided the Option would have been exercisable by Optionee)
until the right to exercise the Option expires pursuant to Section 3 hereof. Any
attempt to sell, pledge, assign, hypothecate, transfer or otherwise dispose of
the Option in contravention of this Agreement or the Plan shall be void. If
Optionee should die while Optionee is engaged in an employment or other
relationship with the Company and/or any Subsidiary and provided Optionee's
rights hereunder shall have become exercisable, in whole or in part pursuant to
Section 2 hereof, Optionee's designee, legal representative, legatee, or the
person who acquired the right to exercise the Option by reason of the death of
Optionee (individually, a "Successor") shall succeed to Optionee's rights under
this Agreement. After the death of Optionee, only a Successor may exercise the
Option.
6. Exercise of Option. On or after time at which the Option becomes
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exercisable in accordance with Section 2 hereof and until termination of the
Option in accordance with Section 3 hereof, the Option may be exercised by the
Optionee (or such other person specified in Section 5 hereof) to the extent
exercisable as determined under Section 2 hereof, upon delivery of the following
to the Company at its principal executive offices:
(a) a written notice of exercise (the "Notice") which identifies this
Agreement and states the whole number of Shares (which may not be less than one
hundred (100), or all of the Shares if less than one hundred (100) Shares then
remain covered by the Option) then being purchased;
(b) a check, cash or any combination thereof in the amount of the
Option Price multiplied by the number of Shares specified in the Notice (the
"Purchase Price") (or payment of the Purchase Price in such other form of lawful
consideration as the Committee, after considering the provisions of Section 8 of
the Plan, may approve, including the surrender of Shares or a cashless exercise
involving a broker);
(c) a check or cash in the amount requested by the Company or a
Subsidiary to satisfy the Company's or a Subsidiary withholding obligations
under federal, state or other applicable tax laws with respect to the taxable
income, if any, recognized by Optionee in connection with the exercise, in whole
or in part, of the Option (unless as provided in Section 17 of the Plan, the
Company and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other income paid to Optionee by the
Company or any Subsidiary or, if permitted by the Committee, the surrender of
other shares of Common Stock held by the Optionee, provided any arrangement set
forth in this parenthetical shall satisfy the requirements of applicable tax
laws); and
(d) a written representation and undertaking in such form and
substance as the Company may require, setting forth the investment intent of
Optionee, or a Successor, as the case may be, and such other agreements,
representations and undertakings as described in the Plan, including an
acknowledgment that Optionee has reviewed the memorandum regarding Code Section
83(b), attached hereto as Schedule B.
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7. Restriction on Transfer of Shares Acquired Upon Exercise of Option.
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(a) Except as otherwise provided in paragraph (b) below and by Section
8(b) and (c), Optionee may not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of (collectively, "Transfer") any of the Shares acquired upon
exercise of the Option prior to the earlier of July 8, 2000 or an Initial Public
Offering (as defined below). In connection with any public offering, Optionee
agrees to execute a reasonable lock up agreement (for up to 180 days) covering
the Shares. Any purported Transfer or Transfers (including involuntary
Transfers initiated by operation of legal process), of any of the Shares or any
right, title or interest therein, except in strict compliance with the terms and
conditions of this Agreement, shall be null and void. The term "Initial Public
Offering" shall mean an underwritten public offering which results in gross
proceeds to the Company in excess of $15 million from the sale of Common Stock.
(b) Optionee may, at any time, Transfer any or all of the Shares: (i)
inter vivos to Optionee's spouse or issue, a trust for their or Optionee's
benefit or pursuant to any will or testamentary trust or (ii) upon Optionee's
death, to any person in accordance with the laws of descent and/or testamentary
distribution (such persons are collectively referred to herein as "Permitted
Transferees"). Notwithstanding the foregoing in this Section 7(b), Shares shall
not be Transferred pursuant to this Section 7(b) until the Permitted Transferee
executes a valid undertaking, in form and substance reasonably satisfactory to
the Company and FSEP IV (as defined below) to the effect that the Permitted
Transferee and the Shares so Transferred shall thereafter remain subject to all
of the provisions of this Agreement (including the Repurchase Option (as defined
in Section 8(c) hereof)), as though the Permitted Transferee were a party to
this Agreement, bound in every respect in the same way as Optionee. Transfers
made in accordance with this subparagraph (b) shall not be subject to the
provisions of Section 8 of this Agreement.
8. Right of First Refusal; Drag Along Rights; Repurchase Option.
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(a) At any time on or after July 8, 2000, Optionee may sell for cash
(and only for such form of consideration) any or all of the Shares to any third
party subject to the provisions of this Section 8 and Section 10(b). Prior to
any such intended sale, Optionee shall first give written notice (the "Notice")
to the Company specifying (i) Optionee's bona fide intention to sell such
Shares; (ii) the name(s) and address(es) of the proposed purchaser(s); (iii) the
number of Shares Optionee proposes to sell (the "Offered Shares"); (iv) the
price for which Optionee proposes to sell the Offered Shares (the "Proposed
Purchase Price"); and (v) all other material terms and conditions of the
proposed sale. Within thirty (30) days of receipt of the Notice, the Company
may elect to purchase any or all of the Offered Shares at the Proposed Purchase
Price and on the terms and conditions set forth in the Notice by delivery of
written notice of such election to Optionee. Xxxxxx Xxxxxxx and FS Equity
Partners IV, L.P., a Delaware limited partnership ("FSEP IV"), shall then have
an additional thirty (30) days to notify the Optionee of their decision to
purchase any shares not purchased by the Company, on a pro rata basis. The
notice(s) from the Company, Xxxxxx Xxxxxxx, and/or FSEP IV shall specify a day,
which shall not be more than sixty (60) days after such second notice is
delivered, on or before which Optionee shall surrender (if Optionee has not
already done so) the certificate or certificates representing the
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Offered Shares (with a stock assignment or stock assignments duly endorsed in
blank) at the principal office of the Company. Within sixty (60) days after
delivery of such second notice to Optionee, the Company, Xxxxxx Xxxxxxx, and/or
FSEP IV shall deliver to Optionee one or more checks, payable to Optionee, in an
amount equal to the Proposed Purchase Price. If Optionee fails to so surrender
such certificate or certificates on or before such date, from and after such
date the Offered Shares shall be deemed to be no longer outstanding, and
Optionee shall cease to be a stockholder with respect to such Shares and shall
have no rights with respect thereto except only the right to receive payment of
the price determined pursuant to this Section 8(a), without interest, upon
surrender of the certificate or certificates therefor (with a stock assignment
or assignments duly endorsed in blank). If the Company, Xxxxxx Xxxxxxx, and FSEP
IV do not elect to purchase all of the Offered Shares, Optionee shall be
entitled to sell the remaining portion of the Offered Shares to the purchaser(s)
named in the Notice at the price specified in the Notice or at a higher price
and on the terms and conditions set forth in the Notice; provided, however, that
such sale must be consummated within one hundred twenty (120) days from the date
of the Notice and any proposed sale after such one hundred twenty (120) day
period may be made only by again complying with the procedures set forth in this
Section 8(a). This right of first refusal shall terminate upon an Initial Public
Offering.
(b) If FSEP IV (and its affiliates) proposes to sell to a third-party
buyer all or (in a transaction which contemplates the partial retention by the
Company's existing securityholders of a portion of the Company's issued and
outstanding securities) a substantial portion of its interest in the Company
(whether such sale is by way of purchase, merger, recapitalization or other form
of transaction), then at the request of FSEP IV, the Optionee shall sell the
same percentage of his or her Options and/or Shares to such third party on the
same terms and conditions as apply to the sale by FSEP IV of its interest in
Company (in the case of Options, deducting the Option Price from the
consideration to be received for shares of Common Stock; if the Option Price is
greater than the consideration to be received, then such Options shall be
canceled without any payment to Optionee). Optionee agrees to such sale and to
execute such agreements, powers of attorney, voting proxies or other documents
and instruments as may be necessary or desirable to consummate such sale.
Optionee further agrees to timely take such other actions as FSEP IV may
reasonably request as necessary in connection with the approval of the
consummation of such sale, including voting all Shares in favor of such sale and
waiving any dissenters' rights and, in the event such transaction is structured
as a recapitalization, agreeing to transfer and retain those percentages of
Shares and Options as are requested by FSEP IV. Optionee shall be required to
make customary representations and warranties in connection with such transfer
with respect to its own authority to transfer and its title to the securities
transferred. This obligation will survive the Company's Initial Public Offering,
but will terminate once FSEP IV's percentage ownership in the Company
(calculated on a fully-diluted basis) drops below twenty percent (20%).
(c) In the event that Optionee's employment or other relationship with
the Company and all of its Subsidiaries terminates for any reason (including,
without limitation, by reason of Optionee's death, disability, retirement,
voluntary resignation or dismissal by the Company or any of its Subsidiaries,
with or without Cause), the Company shall have the option (the "Repurchase
Option") to purchase from Optionee all or any portion of the Shares acquired by
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Optionee pursuant to this Option for a period of one hundred eighty (180) days
after the effective date of such termination (the effective date of termination
is hereinafter referred to as the "Termination Date"); provided that such one
hundred eighty (180) day period shall be extended to a date ten (10) days after
the one hundred eighty (180) day anniversary of the date on which Optionee
purchased any Shares pursuant to this Option Agreement after the Termination
Date. The purchase price (the "Repurchase Price") for each Share to be purchased
pursuant to the Repurchase Option shall be equal to (i) the Fair Market Value
(as defined below), in the event Optionee's employment or other relationship
with the Company and all of its Subsidiaries terminates by reason of Optionee's
death or Disability, (ii) the greater of the Option Price or Book Value, in the
event such employment or other relationship is terminated for any other reason.
As used herein, (i) the "Fair Market Value" shall be the fair market value (as
determined in good faith by the Board of Directors of the Company) of a Share as
of the date of repurchase by the Company, (ii) the "Book Value" shall be equal
to the Option Price (subject to adjustment as set forth below) plus the net
income or minus the net loss per Share for all shares of Common Stock from the
Grant Date to the end of the fiscal quarter immediately preceding the
Termination Date, in each case, as determined by the Board of Directors of the
Company, which determination shall be binding. The Repurchase Price for any
Shares to be purchased pursuant to the Repurchase Option shall be increased or
decreased appropriately to reflect any distribution of stock or other securities
of the Company or any successor or assign of the Company which is made in
respect of, in exchange for or in substitution of the Shares by reason of any
split, reverse split, combination, recapitalization, reclassification, merger,
consolidation or otherwise. The Repurchase Option shall be exercised by the
Company by delivery to Optionee, within the period specified above, of a written
notice specifying (a) the number of Shares to be purchased and (b) a day, which
shall not be more than thirty (30) days after the date such notice is delivered,
on or before which Purchaser shall surrender the certificate or certificates
representing the Shares to be purchased pursuant to the Repurchase Option (duly
endorsed in blank) at the principal office of the Company in exchange for a
check, payable to Optionee in the amount equal to the Repurchase Price,
calculated as provided in this Section 8(c), for all Shares to be purchased. If
Optionee fails to surrender the certificate or certificates evidencing the
Shares on or before such date, from and after such date the Shares which the
Company elected to repurchase shall be deemed to be no longer outstanding, and
Purchaser shall cease to be a stockholder with respect to such Shares and shall
have no rights with respect thereto, except only the right to receive payment of
the Repurchase Price, without interest, upon surrender of the certificate or
certificates therefor (with a stock assignment or stock assignments duly
endorsed in blank). The provisions of this Section 8(c) will terminate upon the
Company's Initial Public Offering.
(d) The obligations of the Optionee pursuant to this Section 8 shall
be binding on any transferee of any of the Options or the Shares and any
transfer of any of the Options or Shares shall be void unless a written
commitment to be bound by such provisions from such transferee is delivered to
the Company, Xxxxxx Xxxxxxx and FSEP IV prior to any transfer. The obligations
of the Optionee pursuant to this Section 8 shall apply to any securities
received in substitution or exchange for the Options or the Shares, including
(without limitation) pursuant to Section 11 of the Plan. The rights of FSEP IV
under this Section 8 shall be assignable to a Permitted Transferee or to an
entity which purchases at least 50% of the shares of Common Stock then held by
FSEP IV.
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9. Tag-Along Right.
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(a) Prior to the consummation by FSEP IV of any sale of all or any
portion of its interest in the Company (the "FS Shares") to any person (other
than a Permitted Transferee) (a "Third Party"), FSEP IV and/or Xxxxxx Xxxxxxx
shall cause each bona fide offer from such Third Party to purchase such FS
Shares from FSEP IV (an "FS Third-Party Offer") to be reduced to writing and
shall send written notice of such FS Third-Party Offer (the "FS Initial Offer
Notice") to Optionee. Each FS Third-Party Offer shall include an offer to
purchase Shares from Optionee in the amounts determined in accordance with
Section 9(b), at the same time, at the same price and on the same terms as the
sale by FSEP IV and, if applicable, Xxxxxx Xxxxxxx, to the Third Party, and
according to the terms and conditions of this Agreement. The FS Initial Offer
Notice shall be accompanied by a true copy of the FS Third-Party Offer. If any
Optionee desires to accept the offer contained in the FS Initial Offer Notice,
such Optionee shall furnish written notice to FSEP IV, within 20 days after its
receipt of the FS Initial Offer Notice, indicating such Optionee's irrevocable
acceptance of the offer included in the FS Initial Offer Notice and setting
forth the maximum number of Shares such Optionee agrees to sell to the Third
Party (the "FS Acceptance Notice"). If such Optionee does not furnish an FS
Acceptance Notice to FSEP IV in accordance with these provisions by the end of
such 20-day period, such Optionee shall be deemed to have irrevocably rejected
the offer contained in the FS Initial Offer Notice. All Shares set forth in the
FS Acceptance Notice of such Optionee together with the Shares proposed to be
sold by FSEP IV and, if applicable, Xxxxxx Xxxxxxx to the Third Party are
referred to collectively as "All Offered Shares". Within three days after the
date on which the Third Party informs FSEP IV of the total number of Shares
which such Third Party has agreed to purchase in accordance with the terms
specified in the FS Initial Offer Notice, FSEP IV shall send written notice (the
"FS Final Notice") to such Optionee setting forth the number of Shares such
Optionee shall sell to the Third Party as determined in accordance with Section
9(b), which number shall not exceed the maximum number specified by such
Optionee in its FS Acceptance Notice. Within five days after the date of the FS
Final Notice (or such shorter period as may reasonably be requested by FSEP IV
to facilitate the sale), such Optionee shall furnish to FSEP IV (i) a written
undertaking to deliver, upon the consummation of the sale of Shares to the Third
Party as indicated in the FS Final Notice, the certificates representing the
Shares held by such Optionee which will be transferred pursuant to such FS
Third-Party Offer (such shares shall be referred to herein as the "Optionee
Included Shares") and (ii) a limited power-of-attorney authorizing FSEP IV to
transfer the Optionee Included Shares pursuant to the terms of such FS Third-
Party Offer. Each of FSEP IV, Xxxxxx Xxxxxxx, if applicable, and such Optionee
shall be required to make representations and warranties in connection with such
transfer with respect to its own authority to transfer and its title to the
Shares transferred. In any such transaction, such Optionee will cooperate with
FSEP IV, Xxxxxx Xxxxxxx, if applicable, and the Company to facilitate the
transaction.
(b) Allocation of Included Shares. The maximum number of Shares that
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may be sold by FSEP IV, Xxxxxx Xxxxxxx, if applicable, the Optionees and all
other holders of the Company's Common Stock who have rights to participate in
sales of FS Shares pursuant to written agreements by and between FSEP IV and any
such holder (the "Other FS Tag-Along Rights Holders") in any sale governed by
this Section 9 shall be (i) All Offered Shares in the event
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the Third Party has agreed to purchase All Offered Shares as well as all shares
of the Company's Common Stock that the Other FS Tag-Along Rights Holders who
have elected to participate in such sale seek to include in such sale, or (ii)
such number of shares of the Company's Common Stock equal to the product of (A)
the total number of shares of the Company's Common Stock which the Third Party
has agreed to purchase times (B) a fraction, the numerator of which is the total
number of shares of the Company's Common Stock owned by FSEP IV, Xxxxxx Xxxxxxx,
the Optionees, or each Other FS Tag-Along Rights Holder who has elected to
participate in such sale, as the case may be, specified in the FS Final Notice
on the date of the FS Final Notice, and the denominator of which is the total
number of shares of the Company's Common Stock, in the aggregate, owned on the
date of the FS Final Notice by FSEP IV, Xxxxxx Xxxxxxx, the Optionees and the
Other FS Tag-Along Rights Holder who have elected to participate in such sale;
provided, however, that, in the event FSEP IV, Xxxxxx Xxxxxxx, the Optionees or
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any Other FS Tag-Along Rights Holder elects to sell a number of shares of the
Company's Common Stock which is less than the number of shares such holder could
sell pursuant to clause (ii) above, the shares of the Company's Common Stock
that the others of such holders can sell in such transaction shall be increased
by an aggregate amount equal to the number of shares which any of FSEP IV,
Xxxxxx Xxxxxxx, the Optionees or any Other FS Tag-Along Rights Holder could have
sold in such transaction but chose not to sell, and any such increase shall be
allocated among such other holders on a pro rata basis based upon the total
number of shares of the Company's Common Stock owned on the date of the FS Final
Notice by such other holders.
(c) Consummation. FSEP IV shall have 180 days from the date of the FS
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Final Notice in which to sell to the Third Party the shares owned by FSEP IV,
Xxxxxx Xxxxxxx, if applicable, and the Optionee Included Shares on terms which
are not materially less favorable to the sellers of Shares than those specified
in the applicable FS Initial Offer Notice; provided, however, that in the event
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there is a decrease in the price to be paid by the Third Party for the Shares to
be sold from the price set forth in the FS Initial Offer Notice, which decrease
is acceptable to FSEP IV, other than material change in terms which are less
favorable to FSEP IV, but which are acceptable to FSEP IV, FSEP IV shall notify
the selling Optionee of such decrease or change in terms, and such Optionee
shall have five business days from the date of receipt of the notice of such
decrease or change in terms to reduce the number of Shares it will sell to such
Third Party as previously indicated in the applicable FS Acceptance Notice, and
the number of shares that all other participating stockholders (including Other
FS Tag-Along Rights Holders) may transfer shall be increased in accordance with
the provisions of Section 9(b). FSEP IV shall act as agent for such Optionee in
connection with such sale and shall cause to be remitted to such Optionee the
total sales price of the Optionee Included Shares sold pursuant thereto, which
consideration shall be in the same form as the consideration received by FSEP IV
and as specified in the applicable FS Initial Offer Notice, net of such
Optionee's pro rata portion (based on the total value of the consideration
received by such Optionee compared to the aggregate consideration received by
all stockholders in the transaction) of the reasonable out-of-pocket expenses
(not including any expenses paid or payable to an affiliate of FSEP IV) incurred
and paid by FSEP IV in connection with such sale. If and to the extent that, at
the end of 180 days following the date of the FS Final Notice, FSEP IV has not
completed the sale contemplated thereby, FSEP IV shall return to such Optionee
all certificates representing the Optionee Included
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Shares and all powers-of-attorney which such Optionee may have transmitted
pursuant to the terms thereof.
(d) Termination and Assignment. The obligations of FSEP IV pursuant
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to the provisions of this Section 9 shall not apply to sales of shares by FSEP
IV in connection with, and will terminate upon, the consummation of an Initial
Public Offering. The rights granted to the Optionees under this Section 9 shall
not be assignable except to a Permitted Transferee in accordance with Section
7(b); provided, that the Permitted Transferee executes a written undertaking to
be and becomes bound by this Agreement in the same manner and to the same extent
as the other Optionees. A distribution by FSEP IV to its partners of the FS
Shares shall not give rise to any rights under this Section 9.
10. Representations and Warranties of Optionee.
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(a) Optionee represents and warrants that the Shares to be purchased
pursuant to the exercise of the Option are being acquired by Optionee for
Optionee's personal account, for investment purposes only, and not with a view
to the distribution, resale or other disposition thereof.
(b) Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"), on the basis of
certain exemptions from such registration requirement. Accordingly, Optionee
agrees that Optionee's exercise of the Option may be expressly conditioned upon
Optionee's delivery to the Company of such representations and undertakings as
the Company may require in order to secure the availability of such exemptions,
including a representation that Optionee is acquiring the Shares for investment
and not with a present intention of selling or otherwise disposing of such
Shares. Optionee acknowledges that, because Shares received upon exercise of an
Option may be unregistered, Optionee may be required to hold the Shares
indefinitely unless they are subsequently registered for resale under the
Securities Act or an exemption from such registration is available.
(c) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and liabilities connected
with the Option are set forth herein and in the Plan.
11. No Rights as Stockholder. Optionee shall have no rights as a
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stockholder of any shares of Common Stock covered by the Option until the date
an entry evidencing such ownership is made in the stock transfer books of the
Company (the "Exercise Date"). Except as may be provided under Section 11 of
the Plan, the Company will make no adjustment for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the Exercise Date.
12. Limitation of Company's Liability for Nonissuance. The inability of
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the Company to obtain, from any regulatory body having jurisdiction or stock
exchange on which the Common Stock is traded, registration, qualification or
other necessary authorization, or the unavailability of
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an exemption from registration or qualification obligation deemed by the
Company's counsel to be necessary for the lawful issuance and sale of any shares
of its Common Stock hereunder and under the Plan shall suspend the Company's
obligation to permit the exercise of this Option or to issue any Shares
thereupon and shall relieve the Company of any liability in respect of the
nonissuance or sale of such Shares as to which such requisite authority or
exemption shall not have been obtained.
13. This Agreement Subject to Plan. This Agreement is made under the
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provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control. A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge. The interpretation of the Committee of any provision of the
Plan or this Agreement, and any determination with respect thereto or hereto by
the Committee, shall be binding on all parties.
14. Restrictive Legends. Optionee hereby acknowledges that federal
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securities laws and the securities laws of the state in which Optionee resides
or is employed may require the placement of certain restrictive legends upon the
Shares issued upon exercise of the Option, and Optionee hereby consents to the
placing of any such legends upon certificates evidencing the Shares as the
Company, or its counsel, may deem necessary. Any and all certificates now or
hereafter issued evidencing the Shares shall have endorsed upon them a legend
substantially as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH THE TERMS
AND CONDITIONS OF THAT CERTAIN OPTION AGREEMENT DATED AS OF JULY __, 1998,
BY AND BETWEEN CENTURY MAINTENANCE SUPPLY, INC. AND THE ORIGINAL PURCHASER
HEREOF, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE COMPANY."
15. Notices. All notices, requests and other communications hereunder
-------
shall be in writing and, (a) if given by telegram, telecopy or telex, shall be
deemed to have been validly served, given or delivered when sent, (b) if given
by personal delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery and, (c) if mailed, shall be deemed to have been
validly served, given or delivered three (3) business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses and numbers (or such other address(es) and numbers as a party may
designate for itself by like notice):
10
If to the Company or Xxxxxx Xxxxxxx:
Century Maintenance Supply, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
If to FSEP IV:
Xxxxxxx Xxxxxx & Co. Incorporated
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: J. Xxxxxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
If to Optionee, at the address appearing on the signature page hereof.
16. Not an Employment or Other Agreement. Nothing contained in this
------------------------------------
Agreement shall confer or imply any rights to an employment or other
relationship or rights to a continued employment by, or rights to any other
relationship with, the Company and/or any Subsidiary in favor of Optionee or
limit the ability of the Company and/or any Subsidiary to terminate, with or
without cause, in its sole and absolute discretion, the employment of, or other
relationship with, Optionee, subject to the terms of any written employment or
other agreement to which Optionee is a party.
17. Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of Delaware without regard to the conflict of law
provisions thereof.
18. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and both of which together shall be deemed one
Agreement.
19. Amendments; Further Assurances. This Agreement may be amended only by
------------------------------
a written agreement executed by both of the parties hereto, Xxxxxxx and FSEP IV
(if the amendment would affect Xxxxxxx or FSEP IV). Each party hereto agrees to
perform any further acts and execute and deliver any documents which may be
necessary to carry out the intent of this Agreement.
20. Recapitalizations or Exchanges Affecting the Company's Capital. The
--------------------------------------------------------------
provisions of this Agreement shall apply to any and all stock or other
securities of the Company or any successor or assign of the Company, which may
be issued in respect of, in exchange for or in substitution of, the Shares by
reason of any split, reverse split, recapitalization, reclassification,
combination, merger, consolidation or otherwise, and such Shares or other
securities shall be encompassed within the term "Shares" for purposes of this
Agreement.
11
21. Disclosure. The Company shall have no duty or obligation to
----------
affirmatively disclose to Optionee, and Optionee shall have no right to be
advised of, any material information regarding the Company or any Subsidiaries
at any time prior to, upon or in connection with (a) the Optionee's purchase of
Shares under this Agreement, or (b) the Company's repurchase of Shares under
this Agreement.
22. Successors and Assigns. The Company, FSEP IV and Xxxxxxx may assign
----------------------
with absolute discretion any or all of its rights and/or obligations and/or
delegate any of its duties under this Agreement to any of its affiliates,
successors and/or assigns, and this Agreement shall inure to the benefit of, and
be binding upon, such respective affiliates, successors and/or assigns of the
Company in the same manner and to the same extent as if such affiliates,
successors and/or assigns were original parties hereto. Without limiting the
foregoing, the Company may assign the Repurchase Option and/or the right of
first refusal provided for in Section 8 of this Agreement, respectively, to any
nominee, affiliate, successor and/or assign, and FSEP IV may assign its rights
under Section 8 hereof to any transferee. Optionee may not assign any or all of
his or her rights and/or obligations and/or delegate any or all of his or her
duties under this Agreement without the prior written consent of the Company,
Xxxxxxx and FSEP IV, as applicable.
In witness whereof, the Company and Optionee have executed this Agreement
as of the date first above written.
THE COMPANY:
CENTURY MAINTENANCE SUPPLY, INC.
By: ___________________________________
Name: ____________________________
Title: ___________________________
OPTIONEE:
_______________________________________
Address:
____________________________
____________________________
____________________________
12
[Time-Vested Options]
SCHEDULE A
SCHEDULE OF EXERCISABILITY
Percentage of Option Exercisable Date Exercisable/1/
-------------------------------- ----------------
33-1/3rd First Anniversary of Grant Date
33-1/3rd Second Anniversary of Grant Date
33-1/3rd Third Anniversary of Grant Date
----------------
/1/ In the event of an "Extraordinary Event," as defined in Section 11 of the
Plan, all of the shares of Common Stock that are subject to the Option shall
become exercisable immediately prior to the consummation of such event.
13
[Performance-Vested Options]
SCHEDULE A
SCHEDULE OF EXERCISABILITY
The shares of Common Stock subject to the Option shall become exercisable
based on satisfaction of Annual EBITDA targets and Cumulative EBITDA Targets
(each as defined in the table listed below). For purposes of the Option,
"EBITDA" is defined as earnings before taking into consideration interest
expense, income taxes, depreciation and amortization expense, extraordinary
charges related to the writeoff of deferred financing fees, and noncash
compensation expenses, if applicable (and also includes the fees and expenses
incurred in connection with the recapitalization of the Company in July 1998, as
well as in connection with any financing or other public offering), as reported
in the Company's financial statements for the fiscal years ended December 31,
1998, 1999, 2000 and 2001. EBITDA targets at all times are adjustable in the
discretion of the Board of Directors, taking into account, for example, mergers,
acquisitions, asset sales, deviations from the Company's business plan in the
number of new distribution centers that are opened, other extraordinary
corporate events and extraordinary losses and gains, significant changes in the
level of capital expenditures, as well as changes in accounting treatment.
($ IN MILLIONS) 1998 1999 2000 2001
--------------- ---- ---- ---- ----
Annual EBITDA Target $26.9 $33.9 $42.0 $52.4
Annual % Vested 25% 25% 25% 25%
90-100% of Cumulative EBITDA Target --- --- --- $139.7-
$155.2
Non-duplicative Cumulative % Vested --- --- --- 50% -
100%
25% of Options vest and become exercisable on each of December 31, 1998,
1999, 2000 and 2001 upon determination by the Board that the Company has
achieved the Annual EBITDA Target for such fiscal year specified above. In
addition, to the extent that any such installment remains unvested as of
December 31, 2001, the remaining unvested Options will vest upon determination
by the Board that the Company has achieved a Cumulative EBITDA Target of $155.2
million for the four year period ending December 31, 2001. If greater than 90%
but less than 100% of the Cumulative EBITDA Target of $155.2 million is
achieved, then a pro rata amount (between 50% and 100%) of the original number
of options will vest and become exercisable (inclusive of installments
previously vested). However, the Cumulative EBITDA Target will only vest
options to the extent that a greater number of options would vest under such
test than have previously vested based on achievement of the Annual EBITDA
Target.
14
For example, if 50% of the Options would have vested upon application of
the Annual EBITDA Targets, but 80% would have vested when applying the
Cumulative EBITDA Targets, then an additional 30% of the Options originally
granted will also vest.
15
[Xxxxxxx Performance Options]
SCHEDULE A
SCHEDULE OF EXERCISABILITY
The shares of Common Stock subject to the Option shall vest based on
satisfaction of Annual EBITDA targets and Cumulative EBITDA Targets (each as
defined in the table listed below). For purposes of the Option, "EBITDA" is
defined as earnings before taking into consideration interest expense, income
taxes, depreciation and amortization expense, extraordinary charges related to
the writeoff of deferred financing fees, and noncash compensation expenses, if
applicable (and also includes the fees and expenses incurred in connection with
the recapitalization of the Company in July 1998, as well as in connection with
any financing or other public offering), as reported in the Company's financial
statements for the fiscal years ended December 31, 1998, 1999 and 2000. EBITDA
targets at all times are adjustable in the discretion of the Board of Directors,
taking into account, for example, mergers, acquisitions, asset sales, deviations
from the Company's business plan in the number of new distribution centers that
are opened, other extraordinary corporate events and extraordinary losses and
gains, significant changes in the level of capital expenditures, as well as
changes in accounting treatment.
($ IN MILLIONS) 1998 1999 2000
--------------- ---- ---- ----
Annual EBITDA Target $26.9 $33.9 $42.0
Annual % Vested 33-1/3% 33-1/3% 33-1/3%
90-100% of Cumulative EBITDA Target --- --- $92.5-
$102.8
Non-duplicative Cumulative % Vested --- --- 75%-
100%
33-1/3% of Options vest on each of December 31, 1998, 1999 and 2000 upon
determination by the Board that the Company has achieved the Annual EBITDA
Target for such fiscal year specified above, and shall become exercisable on
that date which is one year following the applicable vesting date as described
in the last paragraph below of this Schedule A. In addition, to the extent that
any such installment remains unvested as of December 31, 2000, the remaining
unvested Options will vest upon determination by the Board that the Company has
achieved a Cumulative EBITDA Target of $102.8 million for the three year period
ending December 31, 2000. If greater than 90% but less than 100% of the
Cumulative EBITDA Target of $102.8 million is achieved, then a pro rata amount
(between 75% and 100%) of the original number of options will vest and become
exercisable (inclusive of installments previously vested). However, the
Cumulative EBITDA Target test will only vest options to the extent that a
greater
16
number of options would vest under such test than have previously vested
based on achievement of the Annual EBITDA Targets.
For example, if 50% of the Options would have vested upon application of
the Annual EBITDA Targets, but 80% would have vested when applying the
Cumulative EBITDA Target, then an additional 30% of the Options originally
granted will also vest.
Notwithstanding the foregoing, options that vest will not become
exercisable until the date that is one year following the applicable vesting
date; provided, that in the case of an "Extraordinary Event" as described in
Section 11 of the Plan, all Options that have vested but which are not yet
exercisable because of this one-year delay shall accelerate and become
immediately exercisable.
17
SCHEDULE B
SECTION 83(b) MEMO
18
