EXHIBIT 10.19
EXECUTIVE STOCK PURCHASE AGREEMENT
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This Executive Stock Purchase Agreement (the "Agreement") is made as of
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November 24, 1999 (the "Closing Date") between Panolam Industries Holdings,
Inc., a Delaware corporation ("Holdings") and Xxxxxx X. Xxxxxx, Xx. (the
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"Executive").
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WHEREAS, the Executive and Holdings (the "Parties") and Panolam Industries
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International, Inc., a Delaware corporation ("International") have entered into
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a certain Employment Agreement dated as of November 24, 1999 (the "Employment
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Agreement").
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WHEREAS, pursuant to the Employment Agreement, the Executive has elected to
purchase certain shares of Holdings' common stock.
WHEREAS, the Parties and Panolam Acquisition Company, L.L.C., a Delaware
limited liability company ("PAC") have entered into a certain Executive
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Stockholders' Agreement dated as of November 24, 1999 (the "Executive
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Stockholders' Agreement"), which agreement sets forth certain rights and
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obligations relating to, among other things, the shares of Holdings common stock
being purchased by the Executive under this Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. Purchase of Shares. As of the date hereof, Holdings hereby sells to
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the Executive, and the Executive hereby purchases from Holdings, 2,717.5 shares
of Holdings' common stock, par value $.01 per share (the "Purchased Shares"),
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for a purchase price of $1,287.94 per share and an aggregate purchase price of
$3,500,000. Promptly upon full execution of this Agreement by the Parties, (i)
the Executive shall deliver to Holdings a promissory note (the "Executive
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Note"), in substantially the form attached as Exhibit E to the Employment
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Agreement, for the aggregate purchase price of the Purchased Shares, (ii) the
Parties shall each execute a pledge agreement in substantially the form attached
as Exhibit F to the Employment Agreement under which the Executive pledges the
Purchased Shares to Holdings as security for his obligations under the Executive
Note, and (iii) Holdings shall deliver to the Executive a copy of, and a receipt
for, certificates representing the Purchased Shares.
2. Section 83(b) Election. Within 30 days after the Executive purchases
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the Purchased Shares, he shall make an election with the Internal Revenue
Service under Section 83(b) of the Internal Revenue Code in the form of Exhibit
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A attached hereto and shall make a similar election with the State of
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Connecticut.
3. Representations and Warranties of the Executive. In connection with
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the purchase and sale of the Purchased Shares hereunder, the Executive
represents and warrants to Holdings that:
(i) The Purchased Shares are being acquired for the Executive's own
account and not with a view to, or intention of, distribution thereof
in violation of the 1933 Act or any applicable state securities laws,
and the Purchased Shares will not be disposed of in contravention of
the 1933 Act or any applicable state securities laws.
(ii) The Executive is an "accredited investor" as defined under Rule
501(e)(2) of the 1933 Act and is sophisticated in financial matters
and is able to evaluate the risks and benefits of the investment in
the Purchased Shares.
(iii) The Executive is able to bear the economic risk of his
investment in the Purchased Shares for an indefinite period of time
and understands that the Purchased Shares have not been registered
under the 1933 Act, are being sold to the Executive in reliance on the
exemption from 1933 Act registration provided under Section 4(2) of
the 1933 Act, and cannot be sold or transferred by the Executive
unless subsequently registered under the 1933 Act or an exemption from
such registration is available.
(iv) The Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Purchased Shares and has had full access to such other information
concerning Holdings as he has requested. The Executive has reviewed,
or has had an opportunity to review, a copy of the Purchase Agreement,
and the Executive is familiar with the transactions contemplated
thereby. The Executive has also reviewed, or has had an opportunity
to review, the following documents: (A) Holdings' Certificate of
Incorporation and Bylaws; (B) the loan agreements, notes and related
documents with Holdings' senior lenders; and (C) Holdings' pro forma
balance sheet dated as of September 30, 1999.
4. Acknowledgment by the Executive. As an inducement to Holdings to issue
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the Purchased Shares and as a condition thereto, the Executive acknowledges and
agrees that:
(i) neither the issuance of the Purchased Shares to the Executive nor
any provision contained herein shall entitle the Executive to remain
in the employment of International, Holdings or any of their
subsidiaries or affect the right of International and Holdings to
terminate the Executive's employment at any time and for any reason;
and
(i) Holdings shall have no duty or obligation to disclose to the
Executive, and the Executive shall have no right to be advised of, any
material information regarding Holdings or its subsidiaries (including
without limitation any financing, acquisition or going public plans or
proposals or any projections or forecasts) at any time prior to, upon
or in connection with any repurchase of Purchased Shares by Holdings.
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5. Compensatory Nature of Arrangement. Holdings and the Executive
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acknowledge and agree that this Agreement has been executed and delivered, and
the Purchased Shares have been issued hereunder, in connection with and as a
part of the compensation and incentive arrangements among Holdings,
International and the Executive.
6. Forfeiture of Shares. In the event (i) that the Executive's
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employment under the Employment Agreement is terminated (x) for "Cause" (as
defined in, and determined in accordance with, the Employment Agreement) or (y)
voluntarily by the Executive in a termination to which Section 9(e) of the
Employment Agreement applies, and (ii) neither a "Qualified Public Offering" nor
a "Sale of Holdings" (as such terms are defined in the Executive Stockholders'
Agreement) has occurred as of the Termination Date, then (a) the Purchased
Shares (and any securities received in respect of such Purchased Shares) shall,
except to the extent that such Purchased Shares or securities have previously
been "Transferred" pursuant to an exercise of "Tag-Along Rights," "Drag-Along
Rights" or an "Approved Sale" (as such terms are defined in the Executive
Stockholders' Agreement), be forfeited to Holdings and (b) the Promissory Note
shall be canceled; provided that, if any portion of the Promissory Note has
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already been repaid by application of the proceeds received pursuant to the
exercise of Tag-Along Rights or Drag-Along Rights or in an Approved Sale, then
Purchased Shares with an aggregate Fair Market Value equal to the amount
outstanding under the Promissory Note shall be forfeited to Holdings.
7. Miscellaneous. The following Sections of the Employment Agreement
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shall be deemed incorporated into this Agreement as if fully set forth herein,
except that (A) all references to "the Company" shall be disregarded, (B) the
term "Covered Claim" as used in Section 15 of the Employment Agreement shall be
deemed to include only claims arising under or relating to this Agreement and
(C) all references to attached "forms of agreement" shall be disregarded:
(i) Section 13 (relating to assignments and transfers),
(ii) Section 14 (relating to representations),
(iii) Section 15 (relating to dispute resolution),
(iv) Section 16 (relating to notices),
(v) Section 17(a) (the "integration clause"), which shall be deemed
to include the Employment Agreement and the agreements forms of which are
attached to the Employment Agreement,
(vi) Section 17(b) (relating to severability),
(vii) Section 17(c) (relating to amendments and waivers),
(viii) Section 17(d) (relating to headings),
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(ix) Section 17(e) (second sentence only) (relating to the Executive's
death or incompetence),
(x) Section 17(f) (relating to survival of provisions),
(xi) Section 17(j) (relating to governing law) and
(xii) Section 17(k) (relating to counterparts).
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
THE EXECUTIVE
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Xxxxxx X. Xxxxxx, Xx.
PANOLAM INDUSTRIES HOLDINGS, INC.
By: __________________________________
Name:
Title:
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EXHIBIT A
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ELECTION TO INCLUDE STOCK IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased shares of Common Stock, par value $.01 per share
(the "Shares"), of Panolam Industries Holdings, Inc. (the "Company") on November
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24, 1999 (the "Closing Date"). Under certain circumstances, the Company has the
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right to cause the undersigned (or the holder of the Shares, if different from
the undersigned) to forfeit the Shares should the undersigned cease to be
employed by the Company or its subsidiaries. Hence, the Shares are subject to a
substantial risk of forfeiture and are non-transferable. The undersigned
desires to make an election to have the Shares taxed under the provisions of
Internal Revenue Code '83(b) at the time the undersigned purchased the Shares.
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Therefore, pursuant to Internal Revenue Code '83(b) and Treasury Regulation
(S)1.83-2 promulgated thereunder, the undersigned hereby makes an election, with
respect to the Shares (described below), to report as taxable income for
calendar year 1999 the excess (if any) of the Shares' fair market value on the
Closing Date over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation (S)1.83-2(e):
1. The name, address and social security number of the undersigned:
2. A description of the property with respect to which the election is
being made: 2,717.5 shares of Panolam Industries Holdings, Inc. Common Stock,
par value $.01 per share.
3. The date on which the property was transferred: November 24, 1999.
The taxable year for which such election is made: Calendar year 1999.
4. The restrictions to which the property is subject:
5. The fair market value on the Closing Date of the property with respect
to which the election is being made, determined without regard to any lapse
restrictions: $1,287.94 per share of Common Stock.
6. The amount paid for such property: $1,287.94 per share of Common
Stock.
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A copy of this election has been furnished to the Secretary of the Company
pursuant to Treasury Regulations (S)1.83-2(e)(7).
Dated:
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Xxxxxx X. Xxxxxx, Xx.
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