1
EXHIBIT 10.4
EXECUTIVE SECURITIES AGREEMENT
THIS EXECUTIVE SECURITIES AGREEMENT, dated as of April 30, 1996 (this
"Agreement"), is made by and among Collectible Champions, Inc., a Delaware
corporation (the "Company"), Xxxx Xxxxxxxxx ("Xxxxxxxxx"), Xxxx Xxxxx
("Xxxxx"), Xxxxx Xxxxxxxx ("Xxxxxxxx"), Xxxxx Xxxx ("Camp"), Xxxxxx Xxxxx &
Partners, L.P., a Delaware limited partnership, Xxxxx Capital Partners II
Limited Partnership, a Wisconsin limited partnership, BCP II Affiliates Fund
Limited Partnership, a Wisconsin limited partnership, Nassau Capital Partners
L.P., a Delaware limited partnership, NAS Partners I L.L.C., a Delaware limited
liability company, Xxxxxx Xxxx, Xxxx Xxxxx, and Xxxxx Xxxxx. Stoelting, Olsen,
Xxxxxxxx and Camp are referred to herein collectively as the "Executives."
Certain capitalized terms used herein are defined in Section 3 below.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Acknowledgment of Purchase Agreement. The Company and the
Executives are parties to a Securities Purchase Agreement of even date herewith
(the "Purchase Agreement"), pursuant to which, among other things, the Company
shall sell to each Executive, and each Executive shall purchase from the
Company (i) the number of shares of Common Stock, par value $.01 per share (the
"Common") set forth opposite such Executive's name on the Schedule of
Purchasers attached to the Purchase Agreement, (ii) the number of shares of its
Series A Preferred Stock, par value $.01 per share (the "Series A Preferred")
set forth opposite such Executive's name on the Schedule of Purchasers attached
to the Purchase Agreement and (iii) Series A Junior Subordinated Promissory
Notes (the "Notes") in the principal amount set forth opposite such Executive's
name on the Schedule of Purchasers attached to the Purchase Agreement. The
Common and the Series A Preferred are collectively referred to herein as the
"Stock." The Stock and the Notes are collectively referred to herein as the
"Securities."
2. Repurchase Option.
(a) Generally. Subject to Section 2(f) below, in the event an
Executive ceases to be employed by the Company and its Subsidiaries for any
reason (the "Termination"), all of the Executive Securities purchased by such
Executive pursuant to the Purchase Agreement (the "Eligible Executive
Securities") (whether held by such Executive or any other Person) will be
subject to repurchase by the Company and/or the Investors, at their option,
pursuant to the terms and conditions set forth in this Section 2 (the
"Repurchase Option"); provided, that neither the Company nor the Investors
shall have any obligation to repurchase any Executive Securities.
(b) Repurchase Price. Upon exercise of the Repurchase Option, the
purchase price for each share of Executive Securities shall be (i) if
Executive's Termination is for Cause, the lesser of its Fair Market Value and
its Original Cost, or (ii) if Executive's Termination occurs for any reason
other than Cause, its Fair Market Value.
2
(c) Company's Option. The Board of Directors of the Company (the
"Board") may elect to have the Company purchase all or any portion of the
Eligible Executive Securities by delivering written notice (the "Repurchase
Notice") to the holder(s) of such Eligible Executive Securities within 120 days
after the Termination Date; provided that Eligible Executive Securities may be
purchased only by purchasing a proportionate "strip" of all classes of such
Eligible Executive Securities. The Repurchase Notice will set forth the number
of shares of each class of Stock and the principal amount of the Notes to be
acquired from each holder by the Company and/or the Investors, the
consideration to be paid for such shares and notes and the time and place for
the closing of such purchase. For purposes of this Agreement, references to
Securities of a certain "class" means Securities which are Notes, Common Stock
or Preferred Stock.
(d) Repurchase by Investors. If for any reason the Company does not
elect to purchase all of the Eligible Executive Securities pursuant to the
Repurchase Option, the Investors shall be entitled to exercise the Repurchase
Option for all or any portion of the shares of Eligible Executive Securities
the Company has not elected to purchase (the "Available Securities"); provided
that Eligible Executive Securities may be purchased only by purchasing a
proportionate "strip" of all classes of such Eligible Executive Securities. As
soon as practicable after the Company has determined that there will be
Available Securities, but in any event within 60 days after the Termination,
the Company shall give written notice (each, an "Option Notice") to the
Investors setting forth the number of Available Securities of each class and
the purchase price for each class of Available Securities. Each Investor may
elect to purchase any quantity of Available Securities (in a proportionate
strip of such Securities) (his "Election Quantity") at the price and on the
terms specified therein by delivering written notice of such election to the
Company as soon as practical but in any event within 20 days after delivery of
the Option Notice. If the Election Quantities in aggregate exceed the number
of Available Securities, each Investor electing to purchase Available
Securities (each, a "Participating Investor") will be allocated first, up to
such Investor's Election Quantity, his or its pro rata portion based upon such
Investor's proportionate ownership of shares of Common Stock on a Fully-Diluted
Basis relative to the total number of shares of Common Stock owned by all
Participating Investors on a Fully-Diluted Basis, and then, if there are still
unallocated Available Securities, his or its pro rata portion of the remaining
Available Securities, up to his or its Election Quantity, based upon such
Investor's proportionate ownership of shares of Common Stock on a Fully-Diluted
Basis to the total number of shares of Common Stock owned by Participating
Investors on a Fully-Diluted Basis who, after the previous allocation, have not
been allocated their Election Quantity of Available Securities (with such
allocation being repeated until all Available Securities have been allocated).
(e) Closing. The closing of the purchase of the Eligible Executive
Securities pursuant to the Repurchase Option shall take place on the date
designated by the Company in the Repurchase Notice, which date shall not be
more than 60 days nor less than five days after the delivery of such notice.
The Company and/or the Investors will pay for the Eligible Executive Securities
to be purchased pursuant to the Repurchase Option by delivery of a check or
wire transfer of funds; provided that the Company shall be entitled to pay for
all or any portion of the Eligible Executive Securities to be purchased by it
by delivery of a subordinated promissory note with simple interest accruing at
the prime lending rate announced by The First National Bank of Boston from time
to time and with interest payable semi-annually and principal payable in three
equal annual
- 2 -
3
installments; provided that any such notes shall contain subordination language
acceptable to the Company's lenders and other financing parties, and if any of
such parties prohibit payment on any such notes, the Company will pay the
principal and interest on such notes at the earliest time such payments are so
permitted. If the Executive's employment by the Company is terminated by
reason of death, Disability or by the Company without Cause or by the Executive
with Good Reason and the Company is exercising the Repurchase Option, the
Company shall pay Executive that portion of the purchase price of the Eligible
Executive Securities which is equal to the lesser of, with respect to each such
Eligible Executive Security, its Fair Market Value and its Original Cost in
cash at the earliest time such payment may be made under the Credit Agreement
(or the terms of any agreement pursuant to which the loans under Credit
Agreement are refinanced which are not more restrictive than the relevant terms
of the Credit Agreement) with the balance of the purchase price being payable
with promissory notes as described above. Furthermore, the Company may pay the
purchase price for such shares by offsetting amounts outstanding under any bona
fide debts for borrowed money owed by the Executive to the Company. If any
Eligible Executive Securities are purchased from a holder thereof by delivery
of a subordinated promissory note, the obligation of the Company under such
subordinated promissory note may, at the request of such holder, be secured by
a pledge of such Eligible Executive Securities. In connection with any
repurchase pursuant to the Repurchase Option, the purchasers of Eligible
Executive Securities hereunder shall be entitled to receive from the sellers of
Eligible Executive Securities customary representations and warranties
regarding ownership, title, and authority to sell the Eligible Executive
Securities, and to require all sellers' signatures to be guaranteed.
(f) Termination of Repurchase Right. The right of the Company and the
Investors to repurchase Eligible Executive Securities pursuant to this Section
2 shall terminate upon the consummation of a Qualified Public Offering.
3. Definitions.
"Cause," with respect to each Executive, has the meaning given such
term in such Executive's Employment Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" means the Common and the Nonvoting Common.
"Credit Agreement" means the Credit Agreement, dated as of the date
hereof, by and among the Company, certain affiliates of the Company and The
First National Bank of Boston, as lender and agent, an the other lenders named
therein, as amended, modified and supplemented from time to time.
"Disability," with respect to each Executive, has the meaning given
such term in such Executive's Employment Agreement.
- 3 -
4
"Employment Agreement" means, with respect to each Executive, the
Employment Agreement, dated as of the date hereof, between such Executive and
Racing Champions, Inc., as amended from time to time.
"Executive Securities" means (i) the Securities issued to the
Executives pursuant to the Purchase Agreement and (ii) all securities issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) above by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. Executive Securities shall continue to be Executive Securities
in the hands of any holder other than the Executive (except for the Company,
the Investors and purchasers in a Public Sale or a Sale of the Company), and
each such transferee thereof shall succeed to the rights and obligations of a
holder of Executive Securities hereunder. As to any particular Executive
Securities, such securities shall cease to be Executive Securities when they
have been repurchased by the Company or any Investor, sold in a Public Sale or
pursuant to a Sale of the Company. References made in this Agreement to number
of shares of Executive Securities when made with respect to debt securities
shall be deemed to refer to the principal amount of such securities.
"Fair Market Value" with respect to any Executive Security means the
average of the closing prices of sale of such Executive Security on all
domestic securities exchanges on which such Executive Security may at the time
be listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day such Executive Security is not so listed,
the average of the representative bid and asked prices quoted in The Nasdaq
Stock Market as of 4:00 P.M., New York time, on such day, or, if on any day
such Executive Security is not quoted on The Nasdaq Stock Market, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which "Fair Market Value"
is being determined and the 20 consecutive business days prior to such day;
provided that if such Executive Security is listed on any domestic securities
exchange the term "business days" as used in this sentence means business days
on which such exchange is open for trading. If at any time such Executive
Security is not listed on any domestic securities exchange or quoted on The
Nasdaq Stock Market or the domestic over- the-counter market, the "Fair Market
Value" of such Executive Security shall be determined in good faith by the
Board; provided that if at such time there are any Founder Directors and the
Requisite Founder Directors do not concur with the "Fair Market Value"
determined by the Board with respect to a class of Executive Securities, the
Executive from whom the Company and/or the Investors propose to purchase such
Executive Securities may request that an investment banking firm mutually
acceptable to the Company and such Executive determine the "Fair Market Value"
of the Executive Securities of such class. The determination of such
investment banking firm shall be final and binding on the Company and all
holders of Executive Securities from which the Company and/or the Investors
propose to purchase such class of Executive Securities, and the fees and
expenses of such investment banking firm shall be paid 50% by the Company and
50% by such Executive. The definition of "Fair Market Value" for purposes of
any Executive's Option Agreement shall be this definition and not the
definition set forth for such term in such Option Agreement, notwithstanding
anything to the contrary set forth in such Executive's Option Agreement.
- 4 -
5
"Founder Director" at any time means Xxxxxx Xxxx, Xxxx Xxxxx or Xxxxx
Xxxxx if at such time such individual is a member of the Board.
"Fully-Diluted Basis" includes, without duplication, (i) all shares of
Common Stock outstanding at the time of determination, (ii) all shares of
Common Stock issuable upon the exercise, conversion or exchange of all
warrants, options or other rights to subscribe for or to acquire, directly or
indirectly, Common Stock, whether or not then exercisable or convertible, and
(iii) all shares of Common Stock issuable upon the conversion or exchange of
all stock or other securities which are convertible into or exchangeable for,
directly or indirectly, Common Stock, whether or not then convertible or
exchangeable.
"Good Reason," with respect to each Executive, has the meaning given
such term in such Executive's Employment Agreement.
"Investor" means any holder of Investor Registrable Securities (as such
term is defined in the Registration Agreement) and any holder of Founder
Registrable Securities (as such term is defined in the Registration
Agreement).
"Nonvoting Common" means the Company's Nonvoting Common Stock, par
value $.01 per share.
"Option Agreement" means, with respect to each Executive, the Stock
Option Agreement, dated as of the date hereof, between such Executive and the
Company, as amended from time to time.
"Original Cost" means, as of a given date, (i) with respect to each
share of Common, $1.00, and (ii) with respect to each share of Series A
Preferred, $100.00 (in each case, as adjusted for all subsequent stock splits,
stock dividends and other recapitalizations).
"Person" means any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization and governmental entity or any department, agency
or political subdivision thereof.
"Preferred Stock" means the Class A Preferred and the Company's Class B
Preferred Stock, par value $.01 per share.
"Public Sale" means any sale pursuant to a registered public offering
under the Securities Act or any sale to the public pursuant to Rule 144 or Rule
144A promulgated under the Securities Act effected through a broker, dealer or
market maker.
"Qualified Public Offering" means the sale in a firm commitment
underwritten public offering registered under the Securities Act of shares of
Common Stock to the public in which the aggregate offering price paid by the
public is not less than $20 million.
- 5 -
6
"Requisite Founder Directors" at any time means (i) if there are three
Founder Directors at such time, any two Founder Directors, (ii) if there are
two Founder Directors at such time, any one Founder Director or (iii) if there
is one Founder Director at such time, such Founder Director.
"Registration Agreement" means the Registration Agreement, dated as of
the date hereof, by and among the Company, the Executives and certain other
Persons, as amended from time to time.
"Sale of the Company" has the meaning given such term in the
Stockholders Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
the date hereof, by and among the Company, the Executives and certain other
Persons, as amended from time to time.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership, association
or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed
to have a majority ownership interest in a partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses or shall be
or control any managing director or general partner of such partnership,
association or other business entity.
4. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Executive at the address set forth in such
Executive's Employment Agreement, to each Investor at the address indicated on
the books and records of the Company and to the Company at the addresses
indicated below:
- 6 -
7
Notices to the Company:
Collectible Champions, Inc.
000 Xxxxxxxxx Xxxx, Xxxx. X-000
Xxxx Xxxxx, XX 00000
Attn: President
with copies to:
Xxxxxx Xxxxx & Partners, L.P.
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Avy X. Xxxxx
Xxxxxx Xxxx
and to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxxxxxxxx
Xxxxxxx X. Perl
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
5. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such 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 will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
6. Complete Agreement. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
- 7 -
8
7. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
8. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Executives, the Company, the
Investors and their respective heirs, successors and assigns, except that no
Executive may assign his rights or delegate his obligations hereunder without
the prior written consent of the Company (provided that if any party assigns
its rights hereunder, such party shall nonetheless remain responsible for the
performance of all of his or its obligations hereunder).
9. Governing Law. The corporate law of Delaware will govern all issues
concerning the relative rights of the Company and its stockholders. All other
issues concerning this Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Illinois.
10. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and all of
the Executives, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement; provided that no provision of Section 2 which
affects the Investors may be amended or waived without the prior written
consent of the Investors which hold a majority of the Common Stock held by
Investors.
11. Remedies. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
12. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
- 8 -
9
IN WITNESS WHEREOF, the parties hereto have executed this Executive
Securities Agreement on the day and year first above written.
COLLECTIBLE CHAMPIONS, INC.
By:/s/ Xxxxxx X. Xxxx
--------------------
Its:President
-------------------
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Xxxx Xxxxxxxxx
/s/ Xxxx X. Xxxxx
-----------------------
Xxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
-----------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxx
-----------------------
Xxxxx Xxxx
XXXXXX XXXXX & PARTNERS, L.P.
By: Xxxxxx Xxxxx & Partners, L.L.C.
Its: General Partner
By:/s/ Avy X. Xxxxx
--------------------
Its: Managing Director
XXXXX CAPITAL PARTNERS II LIMITED PARTNERSHIP
By: Xxxxxx X. Xxxxx & Co. Incorporated
Its: General Partner
By:/s/ Xxxxxx X. Xxxxx
---------------------
Its: Managing Director
--------------------
BCP II AFFILIATES FUND LIMITED PARTNERSHIP
By: Xxxxxx X. Xxxxx & Co. Incorporated
Its: General Partner
By: /s/ Xxxxxx X. Xxxxx
--------------------
Its: Managing Director
--------------------
10
[CONTINUATION OF SIGNATURE PAGE TO EXECUTIVE SECURITIES AGREEMENT]
NASSAU CAPITAL PARTNERS L.P.
By: Nassau Capital L.L.C.
Its: General Partner
By:/s/ Xxxxxxxxx Sweemar
----------------------
Its: Member
---------------------
NAS PARTNERS I L.L.C.
By:/s/ Xxxxxxxxx Sweemar
---------------------
Its: Member
-------------------
/s/ Xxxxxx X. Xxxx
------------------------
Xxxxxx Xxxx
/s/ Xxxx X. Xxxxx
------------------------
Xxxx Xxxxx
/s/ Xxxxx X. X. Xxxxx
------------------------
Xxxxx Xxxxx
