EXHIBIT 10.6
NONQUALIFIED STOCK OPTION AGREEMENT
___________ ___, 2005
Re: NewQuest Holdings, Inc. (the "Company") Grant of Nonqualified
Stock Option
To the Participant Identified on the Signature Page attached hereto:
The Company is pleased to advise you that its Board of Directors has
granted to you a stock option (an "Option"), as provided below, under the
NewQuest Holdings, Inc. 2005 Stock Option Plan (the "Plan"), a copy of which is
attached hereto and incorporated herein by reference. Certain terms used herein
are defined in Section 17 hereof.
1. Option.
(a) Terms. Your Option is for the purchase of up to the number of
Common Shares written next to your name on the signature page attached hereto
(the "Option Shares") at the price per share written next to your name on the
signature page (the "Exercise Price"), payable upon exercise as set forth in
Section 1(b) below. Your Option shall expire at the close of business ten (10)
years from the date of issuance (the "Expiration Date"), subject to earlier
expiration as provided in Section 3(b) below. Your Option is not intended to be
an "incentive stock option" within the meaning of Section 422 of the Code.
(b) Payment of Option Price. Subject to Sections 2 and 3 below, your
Option may be exercised in whole or in part upon payment of an amount (the
"Option Price") equal to the Exercise Price multiplied by the number of Option
Shares to be acquired. Payment of the Option Price shall be made in cash
(including check, bank draft, or money order).
2. Exercisability/Vesting.
(a) Normal Vesting. Your Option may be exercised only to the extent it
has become vested. Your Option shall vest and become exercisable with respect to
fifty percent (50%) of your Option Shares as described in Section 2(b) below
(the "Time Shares") and with respect to fifty percent (50%) of your Option
Shares as described in Section 2(c) below (the "Performance Shares").
(b) Time Shares. Except as otherwise provided herein, your Option
shall become vested and exercisable on the first anniversary of the Closing Date
with respect to twenty percent (20%) of the Time Shares if and only if you have
been continuously employed by the Company or any of its Subsidiaries from the
date of this Agreement through and including such date. On
the last day of each calendar month thereafter (commencing on the first calendar
month after the first anniversary of the Closing Date), an additional
1.666666667% of the Time Shares shall become vested and exercisable, if and only
if you have been continuously employed by the Company or any of its Subsidiaries
from the date of this Agreement through and including such date. The number of
Option Shares with respect to which your Option may be exercised shall not
increase once you cease to be employed by the Company or any of its
Subsidiaries.
(c) Performance Shares. Your Option shall fully vest and become
exercisable with respect to all of your Performance Shares on the seventh
anniversary of the date hereof if and only if you are, and have been,
continuously employed by the Company from the date of this Agreement through the
seventh anniversary of the date hereof. Notwithstanding the foregoing and except
as otherwise provided herein, your Option shall vest and become exercisable with
respect to twenty percent (20%) of the Performance Shares following the end of
each of the five fiscal years commencing with the fiscal year ending December
31, 2005, if the Company has met the EBITDA Goal (as defined below) for such
year. In addition, to the extent EBITDA in any of the Company's fiscal years
ending December 31, 2005 through 2009 exceeds the EBITDA Goal for such fiscal
year, such excess amount may be carried backward (but not forward) to the
earliest prior year in which the EBITDA Goal was not met, and the amount of
Performance Shares for which your Option shall be vested and exercisable for
such earlier year shall be recalculated on the basis of such increased EBITDA
amount in accordance with the provisions of this paragraph. Set forth on Annex A
attached hereto are certain performance goals, expressed in terms of EBITDA,
which are referred to herein as the Company's "EBITDA Goals." Notwithstanding
anything to the contrary in this Agreement, the EBITDA Goal for any fiscal year
of the Company may be adjusted by the Board, in consultation with management,
upon the occurrence of any mergers, acquisitions, divestitures or other
significant events (including, without limitation, any adjustments to reflect
anticipated contributions resulting from the entry into new markets).
(d) Acceleration of Vesting.
(i) If you have been continuously employed by the Company or a
Subsidiary from the date of this Agreement until the consummation of a
Sale of the Company, the portion of your outstanding Option which has
not become vested as of the date of such event shall immediately vest
and become exercisable with respect to 100% of the Time Shares
immediately prior to the consummation of such Sale of the Company;
(ii) If you have been continuously employed by the Company or a
Subsidiary from the date of this Agreement until the consummation of a
Sale of the Company prior to the fifth anniversary of the Closing
Date, the portion of your outstanding Option which has not become
eligible for vesting at the date of such event shall immediately vest
and become exercisable with respect to the number of the Performance
Shares equal to (a) the number of Performance Shares which would have
been subject to vesting after the date of the consummation of such
Sale of the Company multiplied by (b) your Current Vested Performance
Percentage as of the date of the consummation of such Sale of the
Company. For example, if (x) the Company has met the EBITDA Goal for
the Company's fiscal
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years ending December 31, 2005 and December 31, 2006, (y) the Company
has not met the EBITDA Goal for the Company's fiscal year ending
December 31, 2007, and (z) a Sale of the Company is consummated on
July 5, 2008, then your Option shall become vested and exercisable
with respect to the number of Performance Shares equal to
approximately 27% of the total number of Performance Shares available
under this Option (which, together with the portion of your Option
with respect to your Performance Shares which had already become
vested and exercisable pursuant to Section 2(c) above, shall equal the
number of Performance Shares equal to approximately 67% of the total
number of Performance Shares available under this Option).(1) Such
Performance Shares shall vest and become exercisable immediately prior
to the consummation of such Sale of the Company.
(iii) Notwithstanding Section 2(d)(ii) hereof, if you have been
continuously employed by the Company or a Subsidiary from the date of
this Agreement until the consummation of a Sale of the Company prior
to the fifth anniversary of the Closing Date and pursuant to which the
GTCR Investors receive Cash Inflows in an aggregate amount in excess
of three (3.0) times the GTCR Investors' aggregate Cash Outflows with
respect to the GTCR Investors' Preferred Shares and Common Shares
(assuming vesting of Common Shares and all options to acquire Common
Shares to be vested in connection with such Sale of the Company), the
portion of your outstanding Option which has not become vested at the
date of such event (whether due to a failure to meet EBITDA Goals or
otherwise) shall immediately vest and become exercisable with respect
to 100% of the Performance Shares. Such Performance Shares shall vest
and become exercisable immediately prior to the consummation of such
Sale of the Company.
(iv) Notwithstanding any provision to the contrary in this
Agreement, if you have been continuously employed by the Company or a
Subsidiary from the date of this Agreement until the consummation of a
Sale of the Company, in the event of a Sale of the Company, the Board
may provide, in its sole discretion, that your Option (or a portion
thereof) shall immediately vest and become exercisable with respect to
your Performance Shares in connection with such Sale of the Company.
(v) Notwithstanding any provision to the contrary in this
Agreement, in any event, any portion of your Option which has not been
exercised prior to or in connection with the Sale of the Company shall
expire and be forfeited, unless otherwise determined by the Committee
in its sole discretion.
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(1) Note: The 27% would equal (a) 40% (i.e. the portion of Performance Shares
which would have been subject to vesting after the date of the consummation
of such Sale of the Company) multiplied by (b) 66.67% (i.e. the Current
Vested Performance Percentage as of the date of the consummation of such
Sale of the Company).
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3. Expiration of Option.
(a) Normal Expiration. In no event shall any part of your Option be
exercisable after the Expiration Date set forth in Section 1(a) above.
(b) Early Expiration Upon Termination of Employment. If your
employment with the Company or any of its Subsidiaries terminates, any portion
of your Option that was not vested and exercisable on your Date of Termination
shall expire and be forfeited as of such date, and any portion of your Option
that was vested and exercisable on such Date of Termination shall expire and be
forfeited as of such date, except that: (i) if your employment terminates
because you die or become subject to any Disability, your Option shall expire
180 days after your Date of Termination, but in no event after the Expiration
Date, (ii) if your employment terminates because you retire (with the approval
of the Board), your Option shall expire 30 days after your Date of Termination,
but in no event after the Expiration Date, and (iii) if you are discharged other
than for Cause, your Option shall expire 90 days after your Date of Termination,
but in no event after the Expiration Date.
4. Procedure for Exercise. You may exercise all or any portion of your
Option, to the extent it has vested and is outstanding, at any time and from
time to time prior to its expiration, by delivering written notice to the
Company (to the attention of the Company's Secretary) and your written
acknowledgment that you have read and have been afforded an opportunity to ask
questions of management of the Company or management's designee, including but
not limited to the Board or an officer of the Company designated by the Board,
regarding all financial and other information provided to you regarding the
Company, together with payment of the Option Price in accordance with the
provisions of Section 1(b) above. As a condition to any exercise of your Option,
you shall permit the Company to deliver to you all financial and other
information regarding the Company it believes necessary to enable you to make an
informed investment decision, and you shall make all customary investment
representations which the Company requires. Following any exercise of your
Option, the Company shall hold all stock certificates issuable to you as a
custodian on your behalf.
5. Securities Laws Restrictions and Other Restrictions on Transfer of
Option Shares. You represent that when you exercise your Option you shall be
purchasing Option Shares for your own account and not on behalf of others. You
understand and acknowledge that federal and state securities laws govern and
restrict your right to offer, sell, or otherwise dispose of any Option Shares
unless your offer, sale, or other disposition thereof is registered under the
Securities Act and state securities laws, or in the opinion of the Company's
counsel, such offer, sale, or other disposition is exempt from registration or
qualification thereunder. You agree that you shall not offer, sell, or otherwise
dispose of any Option Shares in any manner which would: (i) require the Company
to file any registration statement with the Securities and Exchange Commission
(or any similar filing under state law) or to amend or supplement any such
filing, (ii) violate or cause the Company to violate the Securities Act, the
rules and regulations promulgated thereunder, or any other state or federal law
or (iii) violate the terms and conditions of this Agreement or the Plan. You
further understand that the certificates for any Option Shares you purchase
shall bear such legends as the Company deems necessary or desirable in
connection with the Securities Act or other rules, regulations or laws. In
addition, you understand that, prior to the exercise of your Option, you will
have an opportunity to ask questions and
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receive answers concerning the terms of the Option Shares, and will have the
opportunity to review a copy of the Company's Certificate of Incorporation.
6. Non-Transferability of Option. Your Option is personal to you and is not
transferable by you other than by will or the laws of descent and distribution.
During your lifetime only you (or your guardian or legal representative) may
exercise your Option. In the event of your death, your Option may be exercised
only (i) by the executor or administrator of your estate or the person or
persons to whom your rights under the Option shall pass by will or the laws of
descent and distribution and (ii) to the extent that you were entitled hereunder
at the date of your death.
7. Conformity with Plan. Your Option is intended to conform in all respects
with, and is subject to all applicable terms, conditions and provisions of, the
Plan (which is incorporated in its entirety herein by reference).
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. By executing and returning the enclosed
copy of this Agreement, you acknowledge your receipt of this Agreement and the
Plan and agree to be bound by all of the terms of this Agreement and the Plan.
8. Rights of Participants. Nothing in this Agreement shall interfere with
or limit in any way the right of the Company or any of its Subsidiaries to
terminate your employment at any time (with or without cause), nor confer upon
you any right to continue in the employ of the Company or any of its
Subsidiaries for any period of time or to continue your present (or any other)
rate of compensation, and in the event of your termination of employment
(including, but not limited to, termination by the Company or any of its
Subsidiaries without cause) any portion of your Option that was not previously
exercised shall be forfeited in accordance with Section 3(b) above. Nothing in
this Agreement shall confer upon you any right to be selected again as a Plan
participant or to be selected as a participant or beneficiary of any other
Company or Subsidiary plan or program, and nothing in the Plan or this Agreement
shall provide for any adjustment to the number of Option Shares subject to your
Option upon the occurrence of subsequent events except as provided in Section 10
below.
9. Withholding of Taxes. The Company shall be entitled, if necessary or
desirable, to withhold, from any amounts due and payable by the Company to you
(or secure payment from you in lieu of withholding), the amount of any
withholding or other tax due from the Company with respect to any shares
issuable under the Option, and the Company may defer the exercise of the Option
or the issuance of the Option Shares thereunder unless such taxes are paid or
the Company is indemnified to its reasonable satisfaction. Notwithstanding any
provision of this Option to the contrary, in connection with the transfer of
this Option to a transferee pursuant to Section 12 hereof, you shall remain
liable for any withholding taxes required to be withheld upon exercise of such
Option by the transferee.
10. Adjustments. In the event of a reorganization, recapitalization, stock
dividend or stock split, or combination or other change in the Common Shares,
the Board or the Committee may, in order to prevent the dilution or enlargement
of rights under your Option, make such adjustments in the number and type of
shares authorized by the Plan, the number and type of shares covered by your
Option, and the Exercise Price specified herein, in each case as may be
determined by the Board or the Committee to be appropriate and equitable.
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11. Right to Purchase Option Shares Upon Termination of Employment. Prior
to a Public Offering or a Sale of the Company, your Option Shares shall be
subject to the Repurchase Option set forth in this Section 11.
(a) Repurchase of Option Shares on Termination. If your employment
with the Company or any of its Subsidiaries terminates for any reason, then the
Company shall have the right, but not the obligation, to repurchase all or any
portion of your Option Shares at a price per share equal to, (i) if your
employment with the Company or any of its Subsidiaries is terminated for Cause,
the lesser of (A) the Fair Market Value of such Option Shares as of the Date of
Termination, (B) the Fair Market Value of such Option Shares as of the date of
the Repurchase Notice (as defined in Section 11(b) below) and (C) the Exercise
Price of such Option Shares, and (ii) if your employment with the Company or any
of its Subsidiaries is terminated for any reason other than for Cause, the Fair
Market Value of such Option Shares as of the date of the Repurchase Notice.
(b) Repurchase Procedure for the Company. The Company may elect to
repurchase all or any portion of your Option Shares (the "Available Option
Shares") if your employment with the Company or any of its Subsidiaries has
terminated (the "Repurchase Option") by delivery of written notice (a
"Repurchase Notice") to you within 180 days after your Date of Termination for
any Option Shares issued 181 days or more prior to the Date of Termination (or
in the case of Option Shares issued 180 days or less prior to the Date of
Termination or issued at any time after the Date of Termination upon exercise of
this Option, no earlier than 181 days and no later than 271 days after the date
of the issuance of such Option Shares) (the "Repurchase Notice Period"). The
Repurchase Notice shall set forth the amount of Option Shares to be acquired,
the aggregate consideration to be paid for such Option Shares, and the time and
place for the closing of the transaction. The number of Option Shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the Option Shares held by you at the time of delivery of the Repurchase Notice.
If the number of Option Shares then held by you is less than the total number of
Option Shares the Company has elected to purchase, the Company shall purchase
the remaining shares elected to be purchased from the other holder(s) of Option
Shares under this Agreement, pro rata according to the number of Option Shares
held by such other holder(s) at the time of delivery of such Repurchase Notice
(determined as close as practicable to the nearest whole shares). The number of
Option Shares to be repurchased hereunder shall be allocated among you and the
other holders of Option Shares (if any) pro rata according to the number of
Option Shares to be purchased from such persons.
(c) Repurchase Procedure for the Eligible Stockholders. If for any
reason the Company does not elect to purchase all of the Available Option
Shares, then the Board may (but shall not be required to) permit the Eligible
Stockholders to exercise the Repurchase Option for all or any portion of the
Available Option Shares that were not repurchased by the Company pursuant to
Section 11(b) above (the "Remaining Option Shares"). In the event the Board
permits the Eligible Stockholders to exercise the Repurchase Option, then within
60 days after the beginning of the Repurchase Notice Period corresponding to
such Available Option Shares, the Company shall give written notice (the "Option
Notice") to each Eligible Stockholder setting forth the number of Remaining
Option Shares and the purchase price for the Remaining Option Shares. The
Eligible Stockholders may elect to purchase all or any portion of the Remaining
Option Shares by giving written notice to the Company within 20 days after the
Option Notice
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has been delivered to the Eligible Stockholders by the Company. If the Eligible
Stockholders elect to purchase an aggregate amount of Remaining Option Shares in
excess of the amount of Remaining Option Shares specified in the Option Notice,
then the Remaining Option Shares shall be allocated among the Eligible
Stockholders based on the number of Preferred Shares owned by each Eligible
Stockholder on the date of the Option Notice. Any Eligible Stockholder may
condition its election to purchase such Remaining Option Shares on the election
of one or more other Eligible Stockholder to purchase Remaining Option Shares.
As soon as practicable, and in any event within 10 days after the expiration of
the 20-day period set forth in the immediately preceding sentence, the Company
shall deliver a Repurchase Notice to the holders of such Remaining Option Shares
setting forth the aggregate consideration to be paid by the respective Eligible
Stockholder for such Remaining Option Shares and the time and place for the
closing of the transaction. At the time the Company delivers such Repurchase
Notice to the holders of such Remaining Option Shares, the Company shall also
deliver written notice to each Eligible Stockholder setting forth the amount of
securities such Eligible Stockholder is entitled to purchase, the aggregate
purchase price, and the time and place of the closing of the transaction.
(d) Manner of Payment. If the Company elects to purchase all or any
portion of such Option Shares, including Option Shares held by one or more of
your transferees, then, within 180 days of the first date of the Repurchase
Notice Period, the Company shall pay for such Option Shares (i) by offsetting
obligations owed by you or your transferee(s) to the Company, (ii) with a
subordinated promissory note of the Company, which subordinated promissory note
shall (x) bear interest at a rate equal to the interest rate of the Company and
its Subsidiaries with respect to its indebtedness for borrowed money as of the
date of the Repurchase Notice (which shall be payable annually in cash unless
otherwise prohibited), (y) have all principal payment due no later than on the
earlier of the third anniversary of the date of issuance and the date of a Sale
of the Company; and (z) be subordinated on terms and conditions satisfactory to
the holders of the Company's indebtedness for borrowed money or (iii) at the
Company's option, by certified check or wire transfer of funds. If an Eligible
Stockholder elects to purchase all or any portion of the Remaining Option
Shares, such Eligible Stockholder shall pay for such Option Shares by certified
check or wire transfer of funds on a date to be determined by the Committee
within 180 days of the first date of the Repurchase Notice Period. The Committee
shall determine whether the purchasers of Option Shares hereunder shall be
entitled to receive customary representations and warranties form the sellers
regarding such sale of shares (including representations and warranties
regarding good title to such shares, free and clear of any liens or
encumbrances).
(e) Other Restrictions. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Option Shares by the Company
shall be subject to applicable restrictions contained in the Delaware General
Corporation Law and in the Company's and its Subsidiaries debt and equity
financing agreements. If any such restrictions prohibit the repurchase of Option
Shares hereunder which the Company is otherwise entitled or required to make,
the time periods provided in this Section 11 shall be suspended, and the Company
will make such repurchases as soon as it is permitted to do so under such
restrictions.
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12. Restrictions on Transfer.
(a) Transfer of Option Shares. The holders of Option Shares shall not
sell, transfer, assign, pledge, or otherwise dispose of (a "Transfer") any
interest in any Option Shares, except pursuant to (i) a Public Sale, (ii) a Sale
of the Company, or (iii) the provisions of Section 12(b) hereof.
(b) Certain Permitted Transfers. The restrictions set forth in this
Section 12 shall not apply with respect to any Transfer of Option Shares made by
will or pursuant to applicable laws of descent and distribution or to such
Person's legal guardian in case of any mental incapacity or among such Person's
Family Group; provided that the restrictions contained in this Section 12 will
continue to be applicable to the Option Shares after any Transfer of the type
referred to in this Section 12(b) and the transferees of such Option Shares will
agree in writing to be bound by the provisions of this Agreement. Any transferee
of Option Shares pursuant to a transfer in accordance with the provisions of
this Section 12(b) is herein referred to as a "Permitted Transferee." Upon the
transfer of Option Shares pursuant to this Section 12(b), you will deliver a
written notice (a "Transfer Notice") to the Company. The Transfer Notice will
disclose in reasonable detail the identity of the Permitted Transferee(s).
(c) Termination of Restrictions. The restrictions set forth in this
Section 12 will continue with respect to each Option Share until the earlier of
(i) the date on which such Option Share has been transferred in a Public Sale in
compliance with the terms hereof or (ii) the consummation of a Sale of the
Company.
13. Additional Restrictions on Transfer.
(a) Restrictive Legend. The certificates representing the Option
Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
[DATE OF OPTION EXERCISE] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS, AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN
OPTION AGREEMENT BETWEEN THE COMPANY AND PARTICIPANT DATED AS OF [DATE OF
OPTION AGREEMENT]. A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT
THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) Opinion of Counsel. You may not sell, transfer, or dispose of any
Option Shares (except pursuant to an effective registration statement under the
Securities Act) without
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first delivering to the Company an opinion of counsel reasonably acceptable in
form and substance to the Company that registration under the Securities Act or
any applicable state securities law is not required in connection with such
transfer (unless waived by the Company).
(c) Holdback. You agree not to effect any public sale or distribution
of any equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 180 days after the effectiveness of any underwritten offering of the
Company's equity securities except as part of such underwritten registration if
otherwise permitted.
14. Sale of the Company.
(a) If the Board approves a Sale of the Company (the "Approved Sale"),
you shall consent to and raise no objections against the Approved Sale, and if
the Approved Sale is structured as a sale of stock, you shall vote for, consent
to, raise no objection against, and agree to sell your Common Shares and
surrender any stock options owned by you on the terms and conditions approved by
the Board, subject to the provisions of Section 14(b). You shall take all
necessary and desirable actions in connection with the consummation of the
Approved Sale.
(b) Your obligations with respect to the Approved Sale are subject to
the satisfaction of the following conditions: (i) upon the consummation of the
Approved Sale, you shall receive the same amount of consideration per Common
Share as other holders of Common Shares; and (ii) if you have currently
exercisable or convertible rights to acquire Common Shares, then you shall be
given the opportunity to either (A) exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as a holder of
Common Shares or (B) upon the consummation of the Approved Sale, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per Common Share received by
the holders of Common Shares in connection with the Approved Sale less the
exercise or conversion price per Common Share of such rights to acquire Common
Shares by (2) the number of Common Shares represented by such rights.
(c) If the Board enters into any negotiation or transaction for which
Rule 506 (or any similar rule then in effect) promulgated by the Securities and
Exchange Commission may be available with respect to such negotiation or
transaction (including a merger, consolidation, or other reorganization), you
shall, at the request of the Company, appoint a "purchaser representative" (as
such term is defined in Rule 501) reasonably acceptable to the Company. If you
appoint a purchaser representative designated by the Company, then the Company
shall pay the fees of such purchaser representative. However, if you decline to
appoint the purchaser representative designated by the Company, then you shall
appoint another purchaser representative (reasonably acceptable to the Company),
and you shall be responsible for the fees of the purchaser representative so
appointed.
(d) You shall bear the pro-rata share (based upon the aggregate
consideration received in such sale) of the costs of any sale of Common Shares
pursuant to an Approved Sale to the extent such costs are reasonable and
incurred for the benefit of all holders of Common Shares and are not otherwise
paid by the Company or the acquiring party. Costs incurred by the holders of
Common Shares on their own behalf shall not be considered costs of the
transaction
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hereunder.
(e) Any portion of your Option which has not been exercised prior to
or in connection with the Sale of the Company shall be forfeited.
(f) The provisions of this Section 14 shall terminate upon the
consummation of a Public Offering.
15. Confidentiality; Noncompetition and Nonsolicitation.
(a) Obligation to Maintain Confidentiality. You acknowledge that the
information, observations and data (including trade secrets) obtained by you
during the course of your employment with the Company and its Subsidiaries
concerning the business or affairs of the Company and its respective
Subsidiaries and Affiliates ("Confidential Information") are the property of the
Company or such Subsidiaries and Affiliates, including information concerning
acquisition opportunities in or reasonably related to the Company's business or
industry of which you become aware. Therefore, you agree that you will not
disclose to any unauthorized Person or use for your own account any Confidential
Information without the Board's written consent, unless and to the extent that
the Confidential Information, (i) becomes generally known to and available for
use by the public other than as a result of your acts or omissions to act, (ii)
was known to you prior to your employment with the Company or any of its
Subsidiaries and Affiliates, or (iii) is required to be disclosed pursuant to
any applicable law or court order. You agree to deliver to the Company at the
Date of Termination, or at any other time the Company may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) or the business of the
Company and its respective Subsidiaries and Affiliates (including, without
limitation, all acquisition prospects, lists and contact information) which you
may then possess or have under your control.
(b) Ownership of Property. You acknowledge that all discoveries,
concepts, ideas, inventions, innovations, improvements, developments, methods,
processes, programs, designs, analyses, drawings, reports, patent applications,
copyrightable work and mask work (whether or not including any confidential
information) and all registrations or applications related thereto, all other
proprietary information and all similar or related information (whether or not
patentable) that relate to the Company's or any of its Subsidiaries' or
Affiliates' actual or anticipated business, research and development, or
existing or future products or services and that are conceived, developed,
contributed to, made, or reduced to practice by you (either solely or jointly
with others) while employed by the Company or any of its Subsidiaries or
Affiliates (including any of the foregoing that constitutes any proprietary
information or records) ("Work Product") belong to the Company or such
Subsidiary or Affiliate and you hereby assign, and agree to assign, all of the
above Work Product to the Company or to such Subsidiary or Affiliate. Any
copyrightable work prepared in whole or in part by you in the course of your
work for any of the foregoing entities shall be deemed a "work made for hire"
under the copyright laws, and the Company or such Subsidiary or Affiliate shall
own all rights therein. To the extent that any such copyrightable work is not a
"work made for hire," you hereby assign and agree to assign to the Company or
such Subsidiary or Affiliate all right, title, and interest, including without
limitation, copyright in and to such copyrightable work. You shall promptly
disclose such Work Product and copyrightable work to the Board and perform all
actions reasonably requested by the Board (whether before or after the Date of
Termination) to establish and confirm the Company's or such Subsidiary's or
Affiliate's ownership (including, without limitation, assignments, consents,
powers of attorney, and other instruments).
10
(c) Third Party Information. You understand that the Company and its
Subsidiaries and Affiliates will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's and its Subsidiaries and Affiliates' part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During your employment and thereafter, and without in any way limiting
the provisions of Section 15(a) above, you agree to hold Third Party Information
in the strictest confidence and will not disclose to anyone (other than
personnel and consultants of the Company or its Subsidiaries and Affiliates who
need to know such information in connection with their work for the Company or
its Subsidiaries and Affiliates) or use anywhere in the United States, except in
connection with your work for the Company or its Subsidiaries and Affiliates,
Third Party Information unless expressly authorized by the Board in writing.
(d) Use of Information of Prior Employers. During your employment, you
will not improperly use or disclose any confidential information or trade
secrets, if any, of any former employers or any other Person to whom you have an
obligation of confidentiality, and will not bring onto the premises of the
Company or any of its Subsidiaries or Affiliates any unpublished documents or
any property belonging to any former employer or any other Person to whom you
have an obligation of confidentiality unless consented to in writing by the
former employer or Person. You will use in the performance of your duties only
information which is (i) generally known and used by persons with training and
experience comparable to yours and which is (x) common knowledge in the industry
or (y) is otherwise legally in the public domain, (ii) is otherwise provided or
developed by the Company or any of its Subsidiaries or Affiliates or (iii) in
the case of materials, property or information belonging to any former employer
or other Person to whom you have an obligation of confidentiality, approved for
such use in writing by such former employer or Person.
(e) Noncompetition. In further consideration of the issuance of the
Option to you hereunder, you acknowledge that during the course of your
employment with the Company or any of its Subsidiaries you shall become
familiar, and during your employment with NewQuest, LLC, a Texas limited
liability company ("NQLLC"), or any of its Subsidiaries you have become familiar
with the Company's, and its Subsidiaries' trade secrets and with other
Confidential Information concerning the Company, NewQuest and their predecessors
and Subsidiaries and that your services have been and shall continue to be of
special, unique and extraordinary value to the Company, NewQuest and their
Subsidiaries, including NQLLC, and therefore you agree that, while employed by
the Company or any of its Subsidiaries, and for a period of eighteen months
after your Date of Termination (the "Noncompete Period"), you shall not directly
or indirectly own any interest in, manage, control, participate in, consult
with, render services for, be employed in an executive, managerial or
administrative capacity by, or in any manner engage in any business competing
with the businesses of the Company, NewQuest or their Subsidiaries, as such
businesses exist prior to your Date of Termination, or, as of your Date of
Termination, are contemplated to exist during the twelve-month period following
your Date of Termination (the "Restricted Business"), within any geographical
area in which the Company, NewQuest or any of its Subsidiaries engage or plan to
engage in such businesses. Nothing herein shall prohibit you from (i) being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as you have no active
participation in the business of such corporation or (ii) becoming employed,
engaged, associated or otherwise participating with a separately managed
division or Subsidiary of a competitive business that
11
does not engage in the Restricted Business (provided that services are provided
only to such division or Subsidiary).
(f) Nonsolicitation. You agree that, during the Noncompete Period, you
shall not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the Company and any of its Subsidiaries and any employee
thereof, (ii) hire any person who was an employee of the Company or any of its
Subsidiaries within the twelve-month period immediately prior to the Date of
Termination, or (iii) induce or attempt to induce any customer, supplier,
licensee, licensor, franchisee or other business relation of the Company or any
of its Subsidiaries to cease doing business, or reduce the amount of business
done, with the Company or such Subsidiary or in any adverse way interfere with
the business relationship between any such customer, supplier, licensee or
business relation and the Company and any Subsidiary. Notwithstanding the
foregoing, nothing in this Agreement shall prohibit you from employing an
individual (i) with the consent of the Company or (ii) who responded to general
solicitations in publications or on websites, or through the use of search
firms, so long as such general solicitations or search firm activities are not
targeted specifically at an employee of Holdings or any of its Subsidiaries.
(g) Enforcement. Because your services are unique and because you have
access to Trade Secrets and other Confidential Information, the parties hereto
agree that money damages would be an inadequate remedy for any breach of this
Agreement, including, without limitation, any breach of this Section 15.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company and its Subsidiaries or their successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security).
(h) Acknowledgments. You acknowledge that the provisions of this
Section 15 are (i) in addition to, and not in limitation of, any obligation of
yours under the terms of any employment agreement with the Company or a
Subsidiary, and (ii) in consideration of employment with the Company or its
Subsidiaries, the issuance of the Option by the Company and additional good and
valuable consideration as set forth in this Agreement. In addition, you agree
and acknowledge that the restrictions contained in this Section 15 do not
preclude you from earning a livelihood, nor do they unreasonably impose
limitations on your ability to earn a living. You agree and acknowledge that the
potential harm to the Company and its Subsidiaries of the non-enforcement of
this Section 15 outweighs any potential harm to you of its enforcement by
injunction or otherwise. You acknowledge that you have carefully read this
Agreement and have given careful consideration to the restraints imposed upon
you by this Agreement, and are in full accord as to their necessity for the
reasonable and proper protection of confidential and proprietary information of
the Company, its Subsidiaries and Affiliates now existing or to be developed in
the future. You expressly acknowledge and agree that each and every restraint
imposed by this Agreement is reasonable with respect to subject matter, time
period and geographical area.
16. Remedies. The parties hereto (and the Eligible Stockholders as
third-party beneficiaries hereof) shall be entitled to enforce their respective
rights under this Agreement
12
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights existing in their favor. The
parties hereto acknowledge and agree that money damages would not be an adequate
remedy for any breach of the provisions of this Agreement and that any party
hereto (and the Eligible Stockholders as third-party beneficiaries hereof) may,
in their sole discretion, apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
17. Definitions. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Act" shall mean the Securities Act of 1933, as amended, and any successor
statute.
"Agreement" shall mean this stock option agreement.
"Affiliate" shall mean, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by or under common control with
such Person.
"Board" shall mean the board of directors of the Company.
"Cash Inflows" with respect to any Preferred Shares or Common Shares shall
include the following received in connection with a Sale of the Company:
(i) all cash payments distributed to the holder of such Preferred
Shares or Common Shares with respect to, or as consideration or in
exchange for such Preferred Shares or Common Shares (whether such
payments are received from the Company or any other Person),
including, without duplication, all cash payments received by such
holder with respect to or in exchange for the property described in
the proviso in (ii) below and all cash dividends and distributions
received with respect to such Preferred Shares or Common Shares; and
(ii) the Fair Market Value of all securities and other property
received by such holder with respect to, or as consideration or in
exchange for such Preferred Shares or Common Shares (whether such
payments are received from the Company or any other Person),
including, without duplication, the Fair Market Value of property
received by such holder with respect to or in exchange for the
property described in the proviso below; provided that in the event
that Preferred Shares or Common Shares or other property is received
subject to contingencies or restrictions that are reasonably likely to
affect its Fair Market Value (e.g., non-publicly traded securities or
publicly traded securities subject to material restrictions or
limitations, other than customary underwriter lockups or other
restrictions or limitations that constitute customary limitations
arising by virtue of the relative priority of such securities with
respect to the issuer thereof or the short-swing profit recovery rules
under the Securities Exchange Act of 1934, as amended, or a right to
receive future consideration pursuant to an earn-out), the Fair Market
Value of such property shall reflect appropriate discounts.
13
"Cash Outflows" with respect to any Preferred Shares or Common Shares,
shall include the sum of all cash payments by such holder to the Company to
purchase the Preferred Shares and Common Shares.
"Cause" shall have the meaning given to such term in the Plan.
"Closing Date" means March 1, 2005.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Common Shares" shall mean shares of the Company's common stock, par value
$0.01 per share, and any other shares into which such stock may be changed or
converted by reason of a recapitalization, reorganization, merger,
consolidation, or any other change in the corporate structure or capital stock
of the Company.
"Company" shall mean NewQuest Holdings, Inc., a Delaware corporation, and
(except to the extent the context requires otherwise) any subsidiary corporation
of NewQuest Holdings, Inc. as such term is defined in Section 424(f) of the
Code.
"Current Vested Performance Percentage." means, as of any date, an amount
equal to (A) the aggregate number of Performance Shares vested and exercisable
as of such date divided by (B) the aggregate number of Performance Shares which
would have been vested and exercisable as of such date pursuant to Section 2(c)
above if the Company had met the EBITDA Goal for each of the Company's fiscal
years ending prior to such date.
"Date of Termination" shall have the meaning given to such term in the
Plan.
"Disability" shall have the meaning given to such term in the Plan.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization, excluding any non-recurring or extraordinary items, as determined
in accordance with generally accepted accounting principles, applied on a basis
consistent with the Company's past practices; provided that, the calculation of
EBITDA shall exclude (i) the management fee payable to GTCR pursuant to that
certain Professional Services Agreement between GTCR and the Company, (ii)
non-recurring extraordinary items (as determined by the Board in its
discretion), and (iii) all start-up costs to the extent related to expansion
into new markets.
"Eligible Stockholders" shall mean the Stockholders as defined in the
Stockholders Agreement.
"Fair Market Value" of any property shall be determined in good faith by
the Committee.
"Family Group" shall mean, with respect to a Person who is an individual,
such Person's spouse and descendants (whether natural or adopted), and any
trust, family limited partnership, limited liability company or other entity
wholly owned, directly or indirectly, by such Person or such Person's spouse
and/or descendants that is and remains solely for the benefit of such Person
and/or such Person's spouse and/or descendants and any retirement plan for such
Person.
14
"GTCR" means GTCR Xxxxxx Xxxxxx XX L.L.C., a Delaware limited liability
company.
"GTCR Investors" means GTCR Fund VIII, L.P., a Delaware limited
partnership, GTCR Fund VIII/B, L.P., a Delaware limited partnership, GTCR
Co-Invest II, L.P., a Delaware limited partnership, and any investment fund
managed by GTCR or any of its Affiliates that at any time executes a counterpart
to the Stockholders Agreement.
"Option Shares" shall mean (i) all Common Shares issued or issuable upon
the exercise of the Option and (ii) all Common Shares issued with respect to the
Common Shares referred to in clause (i) above by way of stock dividend or stock
split or in connection with any conversion, merger, consolidation or
recapitalization or other reorganization affecting the Common Shares. Option
Shares shall continue to be Option Shares in the hands of any holder other than
you (except for (x) the Company, (y) to the extent acquired pursuant to Section
11, by any Eligible Stockholder, and (z) to the extent that you are permitted to
transfer Option Shares pursuant to Sections 12 or 13 hereof, purchasers pursuant
to a Public Offering under the Securities Act), and each such transferee thereof
shall succeed to the rights and obligations of a holder of Option Shares
hereunder.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Shares" shall mean shares of the Company's Preferred Stock, par
value $0.01 per share, and any other shares into which such stock may be changed
or converted by reason of a recapitalization, reorganization, merger,
consolidation, or any other change in the corporate structure or capital stock
of the Company.
"Public Offering" shall mean an initial public offering and sale,
registered under the Act, of equity securities of the Company, as approved by
the Board.
"Public Sale" shall mean any sale of Common Shares to the public pursuant
to which such Common Shares have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering such Common Shares or to the public through a broker, dealer, or market
maker pursuant to the provisions of Rule 144 (or any similar provision then in
force) under the Securities Act, other than Rule 144(k) prior to a Public
Offering.
"Sale of the Company" shall have the meaning given to such term in the
Plan.
"Stockholders Agreement" means that certain Stockholders Agreement, dated
as of March 1, 2005, by and among the Company, the GTCR Investors, and the other
parties thereto, as amended from time to time pursuant to its terms.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association, or 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
15
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 limited liability company, partnership, association, or other
business entity (other than a corporation), a majority of partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by that 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 limited liability company, partnership,
association, or other business entity (other than a corporation) if such Person
or Persons shall be allocated a majority of limited liability company,
partnership, association, or other business entity gains or losses or shall be
or control any managing director or general partner of such limited liability
company, partnership, association, or other business entity. For purposes
hereof, references to a "Subsidiary" of any Person shall be given effect only at
such times that such Person has one or more Subsidiaries, and, unless otherwise
indicated, the term "Subsidiary" refers to a Subsidiary of the Company.
18. Amendment. Except as otherwise provided herein and notwithstanding
anything to the contrary in the Plan, any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Plan participants who have been granted options to purchase a majority of the
options under the Plan (based on the number of underlying Common Shares issuable
upon the exercise of all such options) theretofore granted under the Plan
(unless you will be treated in a manner different from other Plan participants,
in which case your individual written consent will also be required), and, so
long as any Preferred Shares remain issued and outstanding, the Eligible
Stockholders who hold a majority of all Preferred Shares held by the Eligible
Stockholders.
19. Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
successors and permitted assigns of the parties hereto whether so expressed or
not.
20. Severability. Whenever possible, each provision of this Agreement shall
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 prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
21. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts (including by means of telecopied or electronically
transcribed signature pages), each of which shall constitute an original, but
all of which taken together shall constitute one and the same Agreement.
22. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
23. Governing Law. The corporate law of the State of Delaware shall govern
all questions concerning the relative rights of the Company and its
stockholders. All other questions
16
concerning the construction, validity and interpretation of this Agreement shall
be governed by the internal law, and not the law of conflicts, of the State of
Delaware.
24. Adjustments of Numbers. All numbers set forth herein which refer to
share prices or amounts will be appropriately adjusted to reflect stock splits,
stock dividends, combinations of shares and other recapitalizations affecting
the subject class of stock.
25. 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 or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands, and other communications shall
be sent to you and the Company at the addresses indicated on the Notices
Schedule attached hereto 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. Any notices required to be sent to any Eligible Stockholders
shall be sent to such Eligible Stockholders at such address as set forth in the
Stockholders Agreement or at such other address or to the attention of such
other person as such Person has specified by prior written notice to the
Company.
26. Third-Party Beneficiary. The Company and you acknowledge that each of
the Eligible Stockholders (so long as such Person is an Eligible Stockholder) is
a third-party beneficiary under this Agreement.
27. Exemptions. The Company and you acknowledge and agree that this
Agreement has been executed and delivered, and the Option has been granted
hereunder, in connection with and as a part of the compensation and incentive
arrangements between the Company and you. Each of the Option granted hereunder
and any issuance of Option Shares upon exercise of the Option is intended to
qualify for an exemption (the "Exemption") from the registration requirements
under the Act, pursuant to Rule 701 thereof, and under applicable state
securities laws. In the event that any provision of the Plan or this Agreement
would cause the Option granted hereunder to not qualify for the Exemption, you
and the Company agree that this Agreement shall be deemed automatically amended
to the extent necessary to cause the Option to qualify for the Exemption.
28. Entire Agreement. This Agreement constitutes the entire understanding
between you and the Company, and supersedes all other agreements, whether
written or oral, with respect to the subject matter hereof.
* * * *
17
Please execute the extra copy of this Agreement in the space below and
return it to the Company's Chief Financial Officer at its executive offices to
confirm your understanding and acceptance of the agreements contained in this
Agreement.
Very truly yours,
NewQuest Holdings, Inc.
By:
------------------------------------
Title:
---------------------------------
Enclosures: 1. Extra copy of this Agreement
2. Copy of the Plan
The undersigned hereby acknowledges having read this Agreement and the Plan
and hereby agrees to be bound by all provisions set forth herein and in the
Plan.
Dated as of: PARTICIPANT
------------------------
Number of Option Shares Name:
------------- ----------------------------------
Exercise Price $ Address:
------------- -------------------------------
SPOUSAL CONSENT
The undersigned spouse of Participant hereby acknowledges that I have read
the foregoing Stock Option Agreement and that I understand its contents. I am
aware that the Agreement provides for the repurchase of my spouse's Common
Shares under certain circumstances and imposes other restrictions on the
transfer of such Common Shares. I agree that my spouse's interest in the Common
Shares is subject to this Agreement and any interest I may have in such Common
Shares shall be irrevocably bound by this Agreement and further that my
community property interest, if any, shall be similarly bound by this Agreement.
I am aware that the legal, financial, and other matters contained in this
Agreement are complex and I am free to seek advice with respect thereto from
independent counsel. I have either sought such advice or determined after
carefully reviewing this Agreement that I will waive such right.
----------------------------------------
Name:
----------------------------------
Witness
--------------------------------
