EXHIBIT 10.39
STOCK APPRECIATION RIGHTS AGREEMENT
-----------------------------------
This Stock Appreciation Rights Agreement, dated as of April 22, 1998, by
and between ▇▇▇▇▇▇▇ Products, Inc., a Delaware corporation (the "Company"), and
-------
▇▇▇▇ ▇. ▇▇▇▇▇ ("Executive").
---------
WHEREAS, the Company desires to provide stock appreciation rights to
Executive as an incentive for Executive to remain in the service of the Company
by allowing Executive to realize 0.375% of the appreciation of the value of the
Company's Common Stock from April 22, 1998 through the first Cash-Out Event,
subject and according to the provisions set forth herein; and
WHEREAS, in consideration of (1) the mutual covenants and agreements
herein set forth, (2) the Executive's continued service with the Company, and
(3) the special benefits accruing to the Company and Executive hereunder and in
connection herewith, the parties hereto agree as follows:
1. Definitions.
-----------
"Asset Sale" is defined in the definitions of Cash-Out Event.
----------
"Board of Directors" means the Company's Board of Directors or any
------------------
properly constituted committee thereof. Any determinations by the Board of
Directors hereunder will be final, non-appealable, binding and conclusive.
"Business Combination" is defined in the definition of Cash-Out Event.
--------------------
"Cash-Out Event" means (a) the closing of any merger, combination,
--------------
consolidation or similar business transaction involving the Company in which the
holders of Common Stock immediately prior to such closing are not the holders,
directly or indirectly, of a majority of the ordinary voting securities of the
surviving person in such transaction immediately after such closing (a "Business
--------
Combination"); (b) the closing of any sale or transfer by the Company of all or
-----------
substantially all of its assets to an acquiring person in which the holders of
Common Stock immediately prior to such closing are not the holders of a majority
of the ordinary voting securities of the acquiring person immediately after such
closing (an "Asset Sale"); or (c) the closing of any sale by the holders of
----------
Common Stock of an amount of Common Stock that equals or exceeds a majority of
the shares of Common Stock immediately prior to such closing to a person in
which the holders of the Common Stock immediately prior to such closing are not
the holders of a majority of the ordinary voting securities of such person
immediately after such closing (a "Stock Sale").
----------
"Cash-Out Value" means the net aggregate consideration received by the
--------------
holders of Common Stock in connection with a Cash-Out Event, after deduction of
any transaction costs incurred by or paid by the Company and its stockholders in
connection with the Cash-Out Event, including but not limited to any
termination, severance or other payments made in connection with the Cash-Out
Event in respect of employment, stock appreciation right or similar arrangements
with the employees of the Companies.
"Cause" means any of the following: (i) Executive's commission or
-----
conviction of any crime or criminal offense involving monies or other property;
(ii) Executive's commission or conviction of fraud or embezzlement; (iii)
Executive's breach of any of Executive's fiduciary duties to the Company or its
stockholders or making of a willful misrepresentation or omission which breach,
misrepresentation or omission would reasonably be expected to materially
adversely affect the business, properties, assets, condition (financial or
other) or prospects of the Company, provided, that, the Executive has been given
notice and 60 days from such notice fails to cure the breach, misrepresentation
or omission; (iv) Executive's willful and continual neglect or failure to
discharge Executive's duties, responsibilities or obligations (other than
arising solely due to physical or mental disability) prescribed by this
Agreement or any other agreement between the Executive and the Company,
provided, that Executive has been given notice and 60 days from such notice
fails to cure the neglect or failure; (v) Executive's habitual drunkenness or
substance abuse, which materially interferes with Executive's ability to
discharge Executive's duties, responsibilities and obligations prescribed by
this Agreement or any other agreement between the Executive and the Company,
provided that Executive has been given notice and 60 days from such notice fails
to cure such drunkenness or abuse; (vi) Executive's violation of any non-
competition or confidentiality agreement with the Company in any agreement with
the Company provided, that Executive has been given notice and 60 days from such
notice fails to cure the violation; or (vii) Executive's gross neglect of his
duties and responsibilities, as determined by the Board of Directors of the
Company, provided, that Executive has been given notice and 60 days from such
notice fails to cure the neglect.
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Companies" means the Company and its successors or any of its direct or
---------
indirect subsidiaries, now or hereafter existing.
"Cost" means with respect to the stock appreciation right, $1.00.
----
"Credit Agreement" means the Revolving Credit and Acquisition Loan
----------------
Agreement, dated as of April 22, 1998, as amended from time to time, by and
among the Company, BankBoston, N.A., as agent for itself and the other lending
banks, and the other parties listed on the signature pages thereto, including
all exhibits and schedules thereto, each as amended, supplemented or revised
from time to time.
"Determination Period" means the last four consecutive completed fiscal
--------------------
quarters as set forth on the audited financial statements of the Company
immediately preceding the exercise of
2
the stock appreciation right for which Fair Market Value shall be used to
determine the Exercise Payment.
"EBITDA" the net income of the Company plus taxes, net interest expense,
------ ----
depreciation and amortization, each of which shall be determined in accordance
with GAAP and in accordance with the Company's books and records.
"Employment Agreement" means the Employment Agreement, dated as of April
--------------------
__, 1998, between the Company and the Executive, as amended, supplemented or
revised from time to time.
"Exercise Payment" is defined in Section 3(b).
---------------- ------------
"Fair Market Value" means, for any Determination Period, an amount equal
-----------------
to (i) 6.0 multiplied by EBITDA for the Determination Period less (ii) the
----
aggregate amount of all indebtedness and capitalized leases of the Companies
(including, without limitation, the Credit Agreement and the Indenture)
outstanding immediately prior to the closing date of the Cash-Out Event
(including, without limitation, interest and premiums accrued but unpaid
immediately prior to such date) all determined in accordance with GAAP less
----
(iii) the aggregate amount of preferred stock of the Company immediately prior
to the date of the exercise of the stock appreciation rights including accrued,
but unpaid, dividends, all determined in accordance with GAAP immediately prior
to the such date plus (iv) cash or cash equivalents held by the Companies
----
immediately prior to the date of the exercise of the stock appreciation rights;
provided, however, that Fair Market Value shall in no event be less than Cost.
-------- -------
"Financing Agreements" means any senior or subordinated debt, preferred
--------------------
stock, common or other capital stock, lease or other financing agreements,
instruments and documents, including without limitation the Credit Agreement and
the Indenture, binding upon the Company or any of its subsidiaries, or their
respective properties and assets, from time to time in effect.
"GAAP" means the generally accepted accounting principals in the United
----
States of America in effect from time to time, applied on a consistent basis
both as to classification of items and to amounts.
"Indenture" means the Indenture, dated as of April 22, 1998, by and among
---------
the Company, its subsidiaries and State Street Bank and Trust Company, as
Trustee.
"Management Subscription Agreement" means the Management Subscription
---------------------------------
Agreement, dated as of August 16, 1995, by and among the Company and the other
parties listed on the signature pages thereto, including all exhibits and
schedules thereto, each as amended, supplemented or revised from time to time.
"Starting Value" means $40.0 million.
--------------
3
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
August 16, 1995, among the Company, the stockholders of the Company and the
other parties listed on the signature pages thereto, including all exhibits and
schedules thereto, each as amended, supplemented or revised from time to time.
"Stock Sale" is defined in the definition of Cash-Out Event.
----------
"Stop Payment Event" shall mean Executive's conduct at termination
------------------
involving actions, omissions or circumstances involving Cause (as defined in the
Employment Agreement).
"Three Year Junior Note" means a promissory note of the Company in the
----------------------
form attached as Exhibit A.
---------
"Vested Percentage Interest" shall mean the amount specified on Annex A
-------------------------- -------
for the relevant period.
2. Grant.
-----
(a) The Company hereby grants to the Executive a stock appreciation right
relating to the Company in respect of the Measurement Period. Such stock
appreciation right corresponds as set forth herein to, with respect to an
exercise in connection with a Cash-Out Event, the amount calculated in
accordance with Section 3.
---------
(b) Subject to the provisions of Section 6, the initial term of the stock
---------
appreciation right granted hereunder shall be until the tenth anniversary of the
date hereof, after which it shall be automatically renewed annually for
successive one-year periods so long as Executive's Employment Agreement with the
Company remains in full force and effect.
(c) The parties agree and acknowledge that this Agreement does not confer
upon Executive or the stock appreciation right any rights or interests as a
stockholder of the Company, and that no fiduciary duties are owed by the Company
or their respective directors, officers and stockholders in respect of the
rights granted hereunder. Executive further agrees and acknowledges that the
Company is not, and shall not be, restricted or limited in any manner from
entering into or modifying any Financing Agreements that restrict or limit
payments hereunder, incurring indebtedness, engaging in Cash-Out Events,
allocating amounts, determining rates or otherwise making determinations in
respect of indebtedness or EBITDA, making other adjustments pursuant to this
Agreement, issuing shares or other stock appreciation or similar rights,
irrespective of any dilution or other effect thereof, or otherwise taking
actions that may affect the stock appreciation right granted hereunder.
3. Exercise Pursuant to a Cash-Out Event. Upon the consummation of a
-------------------------------------
Cash-Out Event, the Company will, within five (5) business days after the Cash
Out Event, pay to Executive the Exercise Payment. Executive agrees and
acknowledges that all decisions regarding
4
a Cash-Out Event, including timing, terms and conditions and the consideration
relating thereto, are at the sole and absolute discretion of the Company or the
Board of Directors.
The "Exercise Payment" shall mean an amount equal to the product of: (i)
-------
the Vested Percentage Interest as of the date of the Cash-Out Event multiplied
----------
by (ii) an amount equal to (x) the Cash-Out Value minus (y) the Starting Value.
-- -----
4. Exercise Pursuant to Termination of Employment. Subject to the
----------------------------------------------
provisions of Section 6, if the employment by the Company of the Executive is
---------
terminated at any time for any reason other than Cause or voluntary termination
by the Executive before the consummation of a Cash-Out Event, then the Company
may, at the Company's option, exercise all, but not less than all, of the stock
appreciation right granted hereunder, and receive an amount equal to the product
-------
of (i) the Vested Percentage Interest multiplied by (ii) an amount equal to (x)
-------------
the Fair Market Value minus (y) the Starting Value. Executive acknowledges and
-----
agrees that all or any portion of the Exercise Payment under this Section 4 may
---------
be paid by the Company, at the Company's option, in Three Year Junior Notes.
5. Limitations of Payment and Other Matters.
----------------------------------------
(a) In the event that, in connection with any Cash-Out Event, the holders
of Common Stock receive consideration in a form other than cash, then Executive,
upon exercise of his stock appreciation right, will receive payment in the same
form and subject to the same conditions as the holders of Common Stock.
(b) All payments in respect of the exercise or purchase of stock
appreciation right hereunder will be subject to the withholding and payment of
applicable payroll, withholding and other taxes and other governmental charges,
and will be further subject to set-off for any obligations or liabilities of or
claims by the Company against Executive.
(c) In the event of the termination of Executive at any time prior to the
closing of the payments upon the exercise of the stock appreciation rights
(including without limitation payments under any Three Year Junior Note) in
connection with a Stop Payment Event, then, notwithstanding such exercise, the
Company may, at any time prior to such closing, exercise its rights under
Section 6, which exercise by the Company will take precedence over, and nullify,
---------
the Executive's exercise of his stock appreciation right.
(d) Notwithstanding anything to the contrary contained in this Agreement,
all payments upon exercise of the stock appreciation right or repurchase of such
right pursuant to Section 5, including issuances of and payments by the Company
---------
on, the Three Year Junior Notes, shall be subject to (i) applicable restrictions
contained in any applicable law, (ii) restrictions contained in the Company's
and its subsidiaries' Financing Agreements, including the Credit Agreement and
the Indenture, each as amended and in effect from time to time, and any Senior
Indebtedness (as defined in the Three Year Junior Notes) and (iii) the
availability of cash to make any lump sum cash payments. If any such
restrictions or unavailability prohibit Exercise Payments or the
5
repurchase of the stock appreciation right hereunder which the Company is
otherwise entitled or required to make, the Company may make such Exercise
Payments or repurchases as soon as it is permitted to do so under such
restrictions. The inability of the Company to make payments pursuant to the
immediately preceding sentence will not constitute a breach hereunder or entitle
Executive to accelerate or otherwise demand payment therefor, or negate or
otherwise affect, or permit the recision of, the exercise or repurchase of stock
appreciation right or any other provision of this Agreement.
(e) In the event of any reorganization of the Company, whether voluntary
or involuntary, or in bankruptcy, insolvency, receivership or similar proceeding
relating to the Company, all payments in respect of the exercise or purchase of
stock appreciation right hereunder will be subject to the prior payment in full
in cash of all amounts due under the Financing Agreements.
6. Termination of Employment. If Executive's employment by the Company
-------------------------
is terminated at any time prior to the expiration of the stock appreciation
rights granted hereunder circumstances involving Cause or a voluntary
termination by the Executive, then the Company shall have an option,
irrespective of any prior exercise of the stock appreciation right, exercisable
upon 30 days' notice given at any time and exercisable within six months after
such termination, to purchase from Executive or his transferee(s) all the
Executive's stock appreciation rights, irrespective of the amount of time
elapsed from the date of this Agreement at a purchase price equal to Cost.
7. Right of Set-Off. The Company, in addition to any other rights or
----------------
remedies available to the Company, shall be entitled to set-off and reduce any
amounts payable to the Executive hereunder for (a) any obligations or
liabilities of the Executive to the Company or (b) any claims by the Company
against the Executive under this Agreement, the Management Subscription
Agreement, the Stockholders Agreement, the Employment Agreement or any other
agreement, written or oral, between the Company and the Executive, in each case,
after such obligation, liability or claim becomes a final decision of a court of
competent jurisdiction which is not subject to appeal.
8. Transfers, etc.
--------------
(a) Stock appreciation right shall not be transferable by Executive
otherwise than by will or by the laws of descent and distribution. During the
lifetime of Executive a stock appreciation right shall be exercisable only by
the Executive or by the Executive's guardian or legal representative.
(b) Executive shall not have the rights of a stockholder as to securities
to be delivered upon exercise of the stock appreciation right until such
securities shall have been delivered to Executive by the Company.
6
9. Stockholder Approval. This Agreement has been or will be approved by
--------------------
the requisite majority of the Company's stockholders for purposes of Section
280(G)(b)(5)(B) of the Internal Revenue Code.
10. Heirs, etc. This Agreement shall be binding on the Executive, his
----------
heirs and personal representatives and the Companies and their respective
successors and assigns.
11. Counterparts. This Agreement may be executed in two or more
------------
counterparts, any one of which shall be deemed an original without reference to
the others.
12. Employment. This Agreement is not, and shall not be construed in any
----------
way, as an employment agreement for the benefit of Executive.
13. Amendments. This Agreement may not be amended or modified, and no
----------
waivers hereunder may be granted, except with the approval of each of the
parties hereto and the holder(s) of a majority of the outstanding Common Stock
of the Company.
14. Notice. Any notice, request, demand or other communication required
------
or permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent by certified or registered mail, return receipt
requested, as follows (or to such other addressee or address as shall be set
forth in a notice given in the same manner):
If to Executive: ________________________
________________________
________________________
If to Company: If to the Company to:
▇▇▇▇▇▇▇ Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
7
Any such notices shall be deemed to be given on the date personally delivered or
such return receipt is issued.
15. Executive's Representation. Executive hereby warrants and represents
--------------------------
to the Company that Executive has carefully reviewed and considered the
provisions of this Agreement, and in connection therewith, has consulted with
such advisors as he considers appropriate, and that Executive is not subject to
any covenants, agreements or restrictions, including without limitation any
covenants, agreements or restrictions which would be breached or violated by
Executive's execution of this Agreement.
16. Company Obligations. Executive agrees and acknowledges that this
-------------------
Agreement and the Company's obligations hereunder are solely obligations and
liabilities of the Company. None of the Company's directors, officers,
employees, stockholders and affiliates or any other persons shall be obligated
on liable in respect of this Agreement, and Executive hereby releases them from
any such obligation of liability.
17. Entire Agreement. This Agreement and the Management Subscription
----------------
Agreement, as applicable, reflect the entire agreement among the parties
relating to the subject matter of this Agreement, and supersede and terminate
all prior agreements, obligations, commitments or understandings relating to
such subject matter.
18. Severability. If, for any reason, any provision hereof shall be
------------
determined to be invalid or unenforceable, the validity and effect of the other
provisions hereof shall not be affected thereby. Whenever possible, each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein. If any court determines that any provision hereof is
unenforceable because of the power to reduce the scope or duration of such
provision, as the case may be and, in its reduced form, such provision shall
then be enforceable.
19. Waiver of Breach; Enforcement. The waiver by the Company, the
-----------------------------
Company or Executive of a breach of any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any other breach of such
other party. Each of the parties (and third party beneficiaries) to this
Agreement shall be entitled to enforce its rights under this breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. Executive shall pay to the Company any costs (including legal fees and
expenses) incurred by Parent to enforce or protect its rights hereunder.
20. Litigation. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED
----------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
8
STATE OF NEW YORK, AND NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY
LAW OTHER THAN THAT OF NEW YORK, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-
OFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING
OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE
OR DECREE OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON. THE
PARTIES AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT MAY BE COMMENCED IN THE STATE COURTS, OR IN THE UNITED STATES DISTRICT
COURTS IN NEW YORK, NEW YORK. THE PARTIES CONSENT TO SUCH JURISDICTION, AGREE
THAT VENUE WILL BE PROPER IN SUCH COURTS AND WAIVE ANY OBJECTIONS BASED UPON
FORUM NON CONVENIENS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION 20 SHALL NOT
-------------------- ----------
BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY ACTION UNDER THIS AGREEMENT IN ANY
OTHER JURISDICTION.
9
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.
EXECUTIVE
_______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ PRODUCTS, INC.
By:____________________________
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Title: Vice President
10
Annex A
-------
Date Vested Percentage Interest
---- --------------------------
Before April 22, 1999 0%
On or after April 22, 1999 0.125%
On or after April 22, 2000 0.250%
On or after April 22, 2001 0.375%
Exhibit A
---------
Three Year Junior Note
----------------------
