EXHIBIT 10.13
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into by and between XXXXX X.
XXXXXXX ("Grantor") and XXXXXX XXXXXXXX ("Grantee"), effective as of April 1,
1998 (the "Grant Date").
In consideration of the premises, mutual covenants and agreements
herein, the Grantor and Grantee agree as follows:
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. The Grantor hereby grants to Grantee a
nonstatutory stock option to purchase from the Grantor, at the price of $1.25
per share (the "Exercise Price"), up to 25,000 shares of common stock of
KnowledgeLink Interactive, Inc. (the "Corporation"), par value of $0.0001 per
share (also referred to in this Agreement as "Stock"), subject to the provisions
of this Agreement (the "Option"). The Option shall expire at 5:00 p.m. Eastern
Time on the tenth anniversary of the Grant Date (the "Expiration Date"), unless
fully exercised or terminated earlier pursuant to this Agreement.
ARTICLE 2
VESTING
SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated
pursuant to the provisions of this Agreement, Grantee shall become vested in the
shares subject to the Option pro rata over three years in accordance with the
vesting schedule attached hereto and made a part hereof (the "Vesting
Schedule"); provided, however, that Grantee must be in the continuous employ of
the Corporation from the Grant Date through the applicable vesting date
specified on the Vesting Schedule for vesting to occur.
SECTION 2.2 ACCELERATION OF VESTING. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, vesting of the Option
granted to Grantee hereunder shall be accelerated so that the unvested portion
of the Option shall become one hundred percent (100%) vested in Grantee upon a
Change of Control. For purposes of this Agreement, the term "Change of Control"
shall mean (i) the sale of all or
substantially all of the assets of the Corporation, (ii) the sale of more than
fifty percent (50%) of the outstanding capital stock of the Corporation in a
non-public sale, (iii) the dissolution or liquidation of the Corporation, or
(iv) any merger, share exchange, consolidation or other reorganization or
business combination of the Corporation if immediately after such transaction
either (A) persons who were directors of the Corporation immediately prior to
such transaction do not constitute at least a majority of the directors of the
surviving entity, or (B) persons who hold a majority of the voting capital stock
of the surviving entity are not persons who held a majority of the voting
capital stock of the Corporation immediately prior to such transaction.
ARTICLE 3
EXERCISE OF OPTION
SECTION 3.1 EXERCISABILITY OF OPTION. Pursuant to the terms of the
Agreement, the Option may be exercised at any time, and from time to time, with
respect to the number of shares subject to the Option in which Grantee is then
vested.
SECTION 3.2 SHAREHOLDERS' AGREEMENT. The Grantor in his sole discretion
may require as a condition precedent to the exercise of the Option granted
pursuant to Section 1.1, that Grantee or such other person exercising the Option
be, or shall execute and become, a party to a Shareholders' Agreement in
substantially in the form attached hereto as Exhibit A.
SECTION 3.3 MANNER OF EXERCISE. The Option may be exercised, in whole
or in part, by delivering written notice to the Grantor in such form as the
Grantor may require from time to time; provided, however, that the Option may
not be exercised at any one time as to fewer than one hundred (100) shares (or
such number of shares as to which the Option is then exercisable if such number
of shares then exercisable is less than one hundred (100)). Such notice shall
specify the number of shares of Stock subject to the Option as to which the
Option is being exercised, and shall be accompanied by full payment of the
Exercise Price for such shares. Payment of the Exercise Price shall be made in
cash (or cash equivalents acceptable to the Grantor in the Grantor's
discretion). In the Grantor's sole and absolute discretion, the Grantor may
authorize payment of the Exercise Price to be made, in whole or in part, by such
other means as the Grantor may prescribe. The Option may be exercised only in
multiples of whole shares and no partial shares shall be issued.
If the Stock is registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, the Grantor, subject to such limitations as he
may determine, may authorize payment of the Exercise Price, in whole or in part,
by delivery of a properly executed exercise notice, together with irrevocable
instructions: (i) to a brokerage firm approved by the Grantor to deliver
promptly to the Grantor the aggregate amount of sale or loan proceeds to pay the
Exercise Price, and (ii) to the Grantor to instruct the Corporation's Transfer
Agent to transfer ownership of the purchased shares and to deliver the
certificates for such purchased shares directly to such brokerage firm.
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SECTION 3.4 TRANSFER OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of
this Agreement and upon payment of the Exercise Price for the shares of Stock as
to which the Option is exercised and delivery of such executed Shareholders'
Agreement as may be required by the Grantor pursuant to Section 3.2, the Grantor
shall instruct the Corporation's Transfer Agent to transfer ownership of the
purchased shares to the Grantee or such other person exercising the Option, as
the case may be, and to deliver certificates therefor as soon as practicable
thereafter. The stock certificates for any shares of Stock transferred hereunder
shall, unless such shares are registered or an exemption from registration is
available under applicable federal and state law, bear a legend restricting
transferability of such shares and referencing the Shareholders' Agreement, if
applicable.
ARTICLE 4
TERMINATION OF OPTION
SECTION 4.1 TERMINATION, IN GENERAL. The Option granted hereby shall
terminate and be of no force or effect after the Expiration Date set forth in
Section 1.1, unless terminated prior to such time as provided below.
SECTION 4.2 TERMINATION OF EMPLOYMENT FOR REASON OTHER THAN RETIREMENT,
DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the
provisions of the Agreement, (i) the unvested portion of the Option shall
terminate immediately upon the Grantee's termination of employment with the
Corporation for any reason and (ii) the vested portion of the Option shall
terminate ninety days after the date Grantee is no longer employed by the
Corporation and its affiliates for any reason other than Grantee's Retirement,
death or Disability. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period. Notwithstanding the
foregoing, the Option shall terminate in its entirety, regardless of whether the
Option is vested in whole or in part, upon termination of the employment of the
Grantee by the Corporation or an affiliate for "Cause."
If Grantee is a party to a written employment agreement with the
Corporation or an affiliate which contains a definition of "cause," "termination
for cause" or words of similar import, whether Grantee is terminated for "Cause"
pursuant to this Section 4.2 shall be determined according to the terms of and
in a manner consistent with the provisions of such written employment agreement.
If Grantee is not party to such a written employment agreement with the
Corporation or an affiliate, then for purposes of this Section 4.2, "Cause"
shall mean (i) gross negligence or willful misconduct or any substantiated act
by Grantee involving dishonesty or bad faith against the Corporation or an
affiliate, or any act or omission that demonstrates a lack of integrity of
Grantee with respect to the Corporation or an affiliate; (ii) Grantee engaging
in acts or omissions the likely consequence of which is material injury to the
Corporation's or an affiliate's business, property or reputation; (iii) breach
or threatened breach by Grantee of any non-competition or confidentiality
agreement entered into between Grantee and the Corporation or its affiliate;
(iv) chronic use of alcohol, drugs or other similar substances
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affecting Grantee's work performance; or (v) Grantee being convicted of, or
pleading guilty or nolo contendere to, or being indicted for a felony or other
crime involving theft, fraud or moral turpitude. The good faith determination by
the Grantor of whether the Grantee's employment was terminated by the
Corporation or an affiliate for "Cause" shall be final and binding for all
purposes hereunder.
SECTION 4.3 TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Retirement, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment at any time within ninety
days after such date of termination, but not later than the end of the stated
term of the Option. Unless sooner terminated, the Option shall terminate in its
entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Retirement shall mean termination of
employment on or after age 65 or termination of employment on or after the
attainment of such younger age and satisfaction of such minimum service
requirement, if any, specified by the Corporation's qualified retirement plan in
effect at such time, but excluding any termination for Cause.
SECTION 4.4 UPON GRANTEE'S DEATH. Unless the Option has earlier
terminated pursuant to the provisions of this Agreement, upon Grantee's death,
(i) the unvested portion of the Option shall terminate immediately and (ii)
Grantee's executor, personal representative, or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
the case may be, may exercise all or any part of the outstanding Option with
respect to the shares of Stock as to which the Option is vested as of the
Grantee's date of death, provided such exercise occurs within six months after
the date of Grantee's death, but not later than the end of the stated term of
the Option. Unless sooner terminated, the Option shall terminate in its entirety
upon the expiration of such six-month period.
SECTION 4.5 TERMINATION OF EMPLOYMENT BY REASON OF DISABILITY. Unless
the Option has earlier terminated pursuant to the provisions of this Agreement,
in the event that Grantee ceases, by reason of Disability, to be an employee of
the Corporation or an affiliate, (i) the unvested portion of the Option shall
terminate immediately and (ii) the outstanding Option may be exercised in whole
or in part with respect to the shares of Stock as to which the Option is vested
as of the date of Grantee's termination of employment due to Disability at any
time within ninety days after the date of such termination, but not later than
the end of the stated term of the Option. Unless sooner terminated, the Option
shall terminate in its entirety upon the expiration of such ninety-day period.
For purposes of this Agreement, Disability shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or
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mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve
months.
ARTICLE 5
DRAG-ALONG RIGHTS
SECTION 5.1 DRAG-ALONG RIGHTS. If at any time any shareholder of the
Corporation or group of shareholders owning a majority or more of the voting
capital stock of the Corporation proposes to enter into any transaction
involving (i) a sale of more than fifty percent (50%) of the outstanding voting
capital stock of the Corporation in a non-public sale or (ii) any merger or
consolidation of the Corporation immediately after which a majority of the
directors of the surviving entity is not comprised of persons who were directors
of the Corporation immediately prior to such transaction or after which persons
who hold a majority of the common stock of the surviving entity are not persons
who held voting capital stock of the Corporation immediately prior to such
transaction, the Grantor or the Corporation may require Grantee to participate
in such transaction by giving Grantee written notice thereof at least ten (10)
days in advance of the date of the transaction or the date that tender is
required, as the case may be. Upon receipt of such notice, Grantee shall sell,
assign, tender or transfer the same percentage of the Option to the extent
vested as the percentage of the shares of common stock proposed to be sold,
assigned, tendered or transferred by the transferring shareholders collectively,
upon the same terms and conditions applicable to the transferring shareholders
and at a price equal to the difference between the Exercise Price per share
under the Option and the price per share of common stock the transferring
shareholders will receive pursuant to the terms of the transaction. The
provisions of this Section 5.1 shall apply in the event of Grantee's death, to
Grantee's executor, personal representative or the person to whom the Option
shall have been transferred by will or the laws of descent and distribution, as
though such person is Grantee.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Corporation
(or an affiliate or Grantor) and Grantee, or as a contractual right of Grantee
to continue in the employ of the Corporation or an affiliate, or as a limitation
of the right of the Corporation or an affiliate to discharge Grantee at any
time.
SECTION 6.2 NO RIGHTS OF SHAREHOLDER. Grantee shall not have any of the
rights of a shareholder with respect to the shares of common stock that may be
transferred upon the exercise of the Option until such shares of common stock
have been transferred to him upon the due exercise of the Option.
SECTION 6.3 NON-QUALIFIED NATURE OF AGREEMENT. This Agreement is
intended to be an agreement concerning a stock option arrangement which does not
qualify under section 422 of the Internal Revenue Code, and this Agreement shall
be so construed.
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SECTION 6.4 THE CORPORATION'S RIGHTS. The existence of this Option
shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or other stocks with preference ahead of or
convertible into, or otherwise affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all or
any part of the Corporation's assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 6.5 WITHHOLDING OF TAXES. The Corporation or any affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option. In lieu of such deduction, the
Corporation or Grantor may require Grantee to make a cash payment to the
Corporation or an affiliate equal to the amount required to be withheld. If
Grantee does not make such payment when requested, the Grantor may refuse to
instruct the Corporation's Transfer Agent to transfer ownership of the purchased
shares until arrangements satisfactory to the Grantor for such payment have been
made.
SECTION 6.6 GRANTEE. Whenever the word "Grantee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will or by the laws of
descent and distribution, the word "Grantee" shall be deemed to include such
person.
SECTION 6.7 NONTRANSFERABILITY OF OPTION. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution
and during the lifetime of Grantee, the Option may be exercised only by Grantee
or, during the period Grantee is under a legal disability, by Grantee's guardian
or legal representative. Except as provided above, the Option may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process.
SECTION 6.8 ADJUSTMENTS; CORPORATE TRANSACTIONS. In the event of
changes in the common stock of the Corporation owned by the Grantor and subject
to this Option by reason of any stock dividend, split-up, recapitalization,
merger, consolidation, business combination or exchange of shares and the like,
the Grantor shall, in his discretion, make appropriate adjustments to the
number, kind and price of shares covered by the Option, and shall, in his
discretion and without the consent of the Grantee, make any other adjustments in
the Option, including but not limited to reducing the number of shares subject
to the Option or providing or mandating alternative settlement methods such as
settlement of the Option in cash or in shares of common stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to the Option as the Grantor shall, in his sole discretion,
determine to be necessary or appropriate.
-6-
The Grantor, in his sole discretion and without consent of the Grantee,
may make any modifications to the Option, including but not limited to
cancellation, forfeiture, surrender or other termination of the Option in whole
or in part regardless of the vested status of the Option, in order to facilitate
any business combination that is authorized by the Board of the Corporation to
comply with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.
The Grantor is authorized to make, in his discretion and without the
consent of the Grantee, adjustments in the terms and conditions of the Option in
recognition of unusual or nonrecurring events affecting the Corporation, or the
financial statements of the Corporation or any subsidiary or affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Grantor determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Option.
SECTION 6.9 INVESTMENT REPRESENTATIONS; LEGEND.
-----------------------------------
(a) Representations. The Grantee represents, warrants and covenants
that:
(1) Any shares purchased upon exercise of this Option shall be
acquired for the Grantee's account for investment only and not with a view to,
or for sale in connection with, any distribution of the shares in violation of
the Securities Act of 1933 (the "Securities Act") or any rule or regulation
under the Securities Act, and that he will not distribute the same in violation
of any state or federal law or regulation.
(2) The Grantee has had such opportunity as he has deemed
adequate to obtain from representatives of the Corporation such information as
is necessary to permit the Grantee to evaluate the merits and risks of his
investment in the Corporation.
(3) The Grantee is able to bear the economic risk of holding
shares acquired pursuant to the exercise of this Option for an indefinite
period.
(4) The Grantee understands that (A) the shares acquired
pursuant to the exercise of this Option will not be registered under the
Securities Act or under the securities laws of any state and are "restricted
securities" within the meaning of Rule 144 under the Securities Act; (B) such
shares cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act, and such registration or
qualification as may be necessary under the securities laws of any state, or an
exemption from registration is then available; (C) in any event, the exemption
from registration under Rule 144 will not be available for at least one (1) year
from date of exercise and even then will not be available unless a public market
then exists for the common stock of the Corporation, adequate information
concerning the Corporation is then available to the public and other terms and
conditions of Rule 144 are complied with; and (D) there is as of the date of
this Agreement no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Corporation and the neither
the Grantor nor the Corporation has any obligation or current
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intention to register any shares acquired pursuant to the exercise of this
Option under the Securities Act.
By making payment upon exercise of this Option, the Grantee shall be
deemed to have reaffirmed, as of the date of such payment, the representations
made in this Section 6.9.
(b) Legend on Stock Certificates. All stock certificates representing
shares of common stock of the Corporation transferred by the Grantor to the
Grantee upon exercise of this Option shall have affixed thereto a legend
substantially in the following form, in addition to any other legends required
by applicable state law:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
SECTION 6.10 RESERVATION OF SHARES. The Grantor will reserve and set
apart and have at all times, free from preemptive rights, a number of shares of
common stock of the Corporation deliverable upon the exercise of this Option
sufficient to enable the Grantor at any time to fulfill all of his obligations
hereunder. In the event the Grantor desires to sell or otherwise transfer any
portion of these reserved shares to any party other than the Grantee, the
Grantor may unilaterally cancel the Option with respect to those shares. If the
Grantor cancels the Option (or a part of the Option), then the Grantor shall pay
to the Grantee an amount equal to the difference between the aggregate Exercise
Price under the Option with respect to the portion of the Option so cancelled
and the greater of either (i) the fair market value, as determined in good faith
by the Board of Directors of the Corporation, of such shares to be sold or
otherwise transferred by the Grantor, or (ii) such other consideration that the
Grantor receives upon such sale or transfer.
SECTION 6.11 NOTICES. All notices and other communications made or
given pursuant to the Agreement shall be in writing and shall be sufficiently
made or given if hand-delivered or mailed by certified mail, addressed to
Grantee at the address contained in the records of the Corporation, or addressed
to the Grantor, care of the Corporation or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.
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SECTION 6.12 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in a written
document signed by each of the parties hereto. Any oral or written agreements,
representations, warranties, written inducements, or other communications made
prior to the execution of the Agreement shall be void and ineffective for all
purposes.
SECTION 6.13 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, other than the
conflict of laws principles thereof.
SECTION 6.14 HEADINGS. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESS: XXXXX X. XXXXXXX
/s/ Xxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxxx
------------------ --------------------
WITNESS: XXXXXX XXXXXXXX
/s/ Xxx X. Xxxxxxx /s/ Xxxx Xxxxxx Xxxxxxxx
------------------ ------------------------
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VESTING SCHEDULE
(XXXXXX XXXXXXXX 4/1/98 STOCK OPTION GRANT
BY XXXXX X. XXXXXXX)
---------------------------------- -------------------------------- --------------------------------
AGGREGATE AGGREGATE AGGREGATE
PERCENTAGE PERCENTAGE PERCENTAGE
VESTING OF VESTED VESTING OF VESTED VESTING OF VESTED
DATE SHARES DATE SHARES DATE SHARES
---------------------------------- -------------------------------- --------------------------------
5/1/98 2.778% 5/1/99 36.111% 5/1/00 69.444%
---------------------------------- -------------------------------- --------------------------------
6/1/98 5.556% 6/1/99 38.889% 6/1/00 72.222%
---------------------------------- -------------------------------- --------------------------------
74/1/98 8.333% 7/1/99 41.667% 7/1/00 75.000%
---------------------------------- -------------------------------- --------------------------------
8/1/98 11.111% 8/1/99 44.444% 8/1/00 77.778%
---------------------------------- -------------------------------- --------------------------------
9/1/98 13.889% 9/1/99 47.222% 9/1/00 80.556%
---------------------------------- -------------------------------- --------------------------------
10/1/98 16.667% 10/1/99 50.000% 10/1/00 83.333%
---------------------------------- -------------------------------- --------------------------------
11/1/98 19.444% 11/1/99 52.778% 11/1/00 86.111%
---------------------------------- -------------------------------- --------------------------------
12/1/98 22.222% 12/1/99 55.556% 12/1/00 88.889%
---------------------------------- -------------------------------- --------------------------------
1/1/99 25.000% 1/1/00 58.333% 1/1/01 91.667%
---------------------------------- -------------------------------- --------------------------------
2/1/99 27.778% 2/1/00 61.111% 2/1/01 94.444%
---------------------------------- -------------------------------- --------------------------------
3/1/99 30.556% 3/1/00 63.889% 3/1/01 97.222%
---------------------------------- -------------------------------- --------------------------------
4/1/99 33.333% 4/1/00 66.667% 4/1/01 100%
---------------------------------- -------------------------------- --------------------------------
The number of shares subject to the Option in which the Grantee shall be vested
as of a particular vesting date shall be rounded down to the nearest whole
share. However, vesting will be rounded up to the nearest whole share with
respect to the last vesting date reflected on this Vesting Schedule.
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EXERCISE NOTICE
Xxxxx X. Xxxxxxx
c/o KnowledgeLink Interactive, Inc.
000 Xxxxxxxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Xx. Xxxxxxx:
I, Xxxxxx Xxxxxxxx, hereby exercise the Option granted to me on April
1, 1998, by you, Xxxxx X. Xxxxxxx (the "Grantor"), and notify you of my desire
to purchase ____________ shares of KnowledgeLink Interactive, Inc. (the
"Company") common stock at a price of $1.25 per share pursuant to the exercise
of said Option. This will confirm my understanding with respect to the shares to
be transferred to me by reason of this exercise of the Option (the shares to be
transferred pursuant hereto shall be collectively referred to hereinafter as the
"Shares") as follows:
(a) I am acquiring the Shares for my own account for
investment with no present intention of dividing my interest with others or of
reselling or otherwise disposing of any of the Shares.
(b) The Shares being transferred to me are not registered
under the Securities Act of 1933, as amended (the "Act"), in reliance upon one
or more exemptions contained in the Act, and such reliance is based in part on
the above representation.
(c) The certificates for the Shares will bear a legend
substantially as follows:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares evidenced
by this certificate, filed and made effective under the Securities Act
of 1933, or an opinion of counsel satisfactory to the Corporation to
the effect that registration under such Act is not required.
The shares of stock represented by this certificate are
subject to restrictions on transfer, an option to purchase and a market
stand-off agreement set forth in a certain Shareholders' Agreement
between the Corporation and the registered owner of this certificate
(or his predecessor in interest), and no transfer of such shares may be
made without compliance with that Agreement. A copy of that Agreement
is available for inspection by any shareholder of the Corporation at
the office of the Corporation upon appropriate request and without
charge."
Appropriate stop transfer instructions will be issued by the Company and the
Grantor to the Company's Transfer Agent.
(d) Since the Shares have not been registered under the Act,
they must be held indefinitely until an exemption from the registration
requirements of the Act is available or they are subsequently registered, in
which event the representation in Paragraph (a) hereof shall terminate. As a
condition to any transfer of the shares, I understand that the issuer will
require an opinion of counsel satisfactory to the issuer to the effect that such
transfer does not require registration under the Act or any state securities
law.
(e) The Company is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.
(f) I am a party to a Shareholders' Agreement with the Company
and others, pursuant to which I have agreed to certain restrictions on the
transferability of the Shares and other matters relating thereto.
Total Amount Enclosed: $__________
Date:________________________ ____________________________________
Xxxxxx Xxxxxxxx
Received by Xxxxx X. Xxxxxxx on
___________________________, 199__
----------------------------------
Xxxxx X. Xxxxxxx
EXHIBIT A
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KNOWLEDGELINK INTERACTIVE, INC.
OPTIONEE/SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of
____________, ____, is made by and among KNOWLEDGELINK INTERACTIVE, INC., a
Delaware corporation (the "Company"), and the other parties now or hereafter
listed on Exhibit A hereto, as the same may be amended from time to time (all
Shareholders party to this Agreement shall be individually and collectively
referred to as the "Shareholder" or the "Shareholders", as applicable).
W I T N E S S E T H:
WHEREAS, the Shareholders are owners of shares of issued and
outstanding common stock of the Company (the "Shares"); and
WHEREAS, the Company and the Shareholders wish to enter into
appropriate agreements among themselves to assure continuity in the ownership
and management of the Company and to provide a market for the Shares upon the
occurrence of certain events which otherwise could be disruptive for the
Company.
NOW, THEREFORE, in consideration of the foregoing and the premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER;
VOLUNTARY TRANSFER; TRANSFER UPON DEATH
---------------------------------------
1.1 RESTRICTIONS ON TRANSFER.
-------------------------
(A) IN GENERAL. No Shareholder shall sell, transfer, give,
pledge, encumber or otherwise dispose of his Shares without the written consent
of the holders of two-thirds of the issued and outstanding Shares, except in
accordance with the terms of this Agreement, and any attempted transfer in
violation of this Agreement shall be null and void and not recognized for any
purpose.
(B) LIFETIME TRANSFER. Each of the Shareholders agrees that he
will not transfer any Shares now or hereafter owned by him except as hereinafter
provided. For purposes of this Agreement, the term "transfer" shall mean any
sale, assignment or other disposition, whether or not for value, and any pledge,
encumbrance or creation of any other security interest in the Shares.
(C) TRANSFER UPON DEATH. Notwithstanding anything herein to
the contrary, a Shareholder may transfer any of his Shares by will or the laws
of descent and distribution. Any Shares so transferred shall remain subject to
this Agreement, and all rights, obligations and provisions for purchase of such
Shares hereunder shall remain unaffected by such a transfer.
1.2 LEGEND ON CERTIFICATES.
-----------------------
The Shareholders shall cause the following legend to be conspicuously
noted upon all certificates representing Shares of the Company now or hereafter
owned by each of them:
"Transfer of any interest in the securities represented by
this certificate is subject to a Shareholders' Agreement dated
__________, ____, by and among KnowledgeLink Interactive, Inc., a
Delaware corporation, and the Shareholders (as defined therein), and no
such transfer may be made without compliance with that Agreement. A
copy of that Agreement is available for inspection at the office of the
corporation upon appropriate request.
The Securities represented by this certificate have not been
registered under the Securities Act of 1933 or the applicable
securities act of any state but have been issued in reliance upon
exemptions from registration contained in said acts. No sale, offer to
sell or other transfer of the securities represented by this
certificate may be made unless a registration statement under said acts
is in effect with respect to the securities, or an exemption from the
registration provisions of such acts is then applicable."
An executed copy of this Agreement shall at all times be kept on file at the
office of the Company and shall be open for inspection by each Shareholder or
any person claiming any right or interest through a Shareholder in any Share
which is subject to this Agreement.
ARTICLE II
SHARE TRANSFERS
---------------
2.1 OPTION UPON VOLUNTARY TRANSFER. Except as otherwise provided in
Section 1.1 hereof, any Shareholder who receives a bona fide written offer from
a third party to purchase all or any portion of his Shares (an "Offer"), such
Shareholder (in this context, a "Transferring Shareholder") shall be obligated,
before accepting any such Offer, to first offer such Shares for purchase by the
Company as hereinafter provided.
(A) NOTICE OF TRANSFER. Prior to accepting any Offer, the
Transferring Shareholder shall give written notice (a "Notice of Offer") to the
Company stating the date the Notice of Offer is sent to the Company (the "Notice
Date"), the number of Shares to be transferred by the Transferring Shareholder
pursuant to the Offer (the "Transferable Shares"), the name and address of the
proposed transferee, the per-Share price offered by the proposed transferee and
the other terms of the Offer.
(B) COMPANY'S OPTION TO PURCHASE. The Company shall have the
right and option to purchase all or any of the Transferable Shares for the price
and upon the other terms hereinafter provided. Such option may be exercised only
by giving written notice to the Transferring Shareholder within thirty (30) days
after the Notice Date, stating the number of Shares which the Company desires to
purchase. Any purchase of Transferable Shares by the Company under this Section
2.1 shall be consummated within ninety (90) days after the Notice Date.
(C) SALE TO THIRD PARTY. If the Company fails to purchase all
of the Transferable Shares pursuant to subsection (b) of this Section 2.1, then
the Transferring Shareholder shall be entitled to sell the unpurchased Shares
for the price and upon the terms and conditions set forth in the Notice of
Offer, subject to the remaining provisions of this Agreement, including, without
limitation, the following:
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(I) The proposed transferee shall become a party to
this Agreement.
(II) If the transfer constitutes a Change of Control
as contemplated by Section 4.1 below, the Transferring Shareholder shall have
complied with the requirements of Section 4.1(a).
Notwithstanding anything in this Agreement to the contrary other than the
provisions of Section 2.2, the Shareholder shall not be entitled to make a
voluntary transfer of his Shares to a third party so long as the Shareholder is
employed by or in a service relationship with the Company or any of its
affiliates.
(D) REOFFER UPON FAILURE TO SELL OR MODIFICATION OF TERMS. If
the Transferring Shareholder fails to consummate a sale or transfer to the
proposed transferee within ninety (90) days after the Notice Date, or if the
proposed transferee modifies the material terms of the offer or makes a new
Offer, then no sale or transfer of the Transferable Shares may be made
thereafter to the proposed transferee or to any other transferee without again
complying in full with the provisions of this Section 2.1.
(E) OPINION OF COUNSEL. Notwithstanding the foregoing, the
Shareholders also agree that no permitted transfer will occur unless and until a
registration statement has been filed for the Shares permitting their transfer
under the Securities Act of 1933, as amended, and any applicable state
securities laws, or the Company has received an opinion of counsel that an
exemption is available and registration is not required under such laws.
2.2 OPTION UPON INVOLUNTARY TRANSFER. If other than by reason of a
Shareholder's death any Shares are transferred by operation of law to any person
other than the Company, or if (i) any Shareholder shall be adjudicated as
bankrupt or make an assignment for the benefit of creditors; (ii) bankruptcy
proceedings in which a Shareholder is alleged to be insolvent or unable to pay
his debts as they mature are instituted by or against that Shareholder and that
Shareholder consents thereto or admits in writing the material allegations of
the petitions filed in those proceedings; (iii) a Shareholder's Shares are
attached; (iv) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and the sale of his Shares is contemplated or threatened
under legal process as a result of that judgment; (v) any execution process is
issued against a Shareholder's Shares; or (vi) any other form of legal
proceeding or process is instituted by which a Shareholder's Shares may be sold
or transferred voluntarily or involuntarily and the same remains undismissed for
sixty (60) days, then in each case, such transfer or event shall be deemed to be
the giving of a Notice of Offer and the Company shall have the right (but not
the obligation), exercisable in accordance with Sections 2.1(b) above, to
purchase any or all of that Shareholder's Shares for a Purchase Price equal to
the Fair Market Value (determined in accordance with Article V below) of such
Shares.
2.3 PURCHASE PRICE. The purchase price for any Share purchased by the
Company under this Article II shall be equal to the lesser of: (a) Fair Market
Value per Share (as described in Article V below); and (b) if the proposed
transfer is a sale, the per-Share price offered by the proposed purchaser and
identified in the Notice of Offer.
-3-
ARTICLE III
PURCHASE OF SHARES UPON DEATH, PERMANENT DISABILITY OR TERMINATION OF
---------------------------------------------------------------------
EMPLOYMENT OF A SHAREHOLDER
---------------------------
3.1 OPTION OF COMPANY TO PURCHASE SHARES. Upon: (a) the death or
permanent disability of any Shareholder as certified to the Company by the
Shareholder's physician or, if such disability is insured by the Company, as
determined in accordance with such disability insurance policy, or (b) the
termination of such Shareholder's employment by the Company (with or without
cause) or by the Shareholder for any reason, the Company shall have the right
and option to purchase, and such Shareholder or his personal representative,
estate, heirs or legatees, as the case may be, shall have the obligation to
sell, any or all of such Shareholder's Shares, which option may be exercised at
any time and from time to time by the Company by giving written notice to the
Shareholder or personal representative, estate, heirs or legatees, as the case
may be, stating the number of Shares to be purchased.
3.2 PURCHASE PRICE OF SHARES. The purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to their Fair Market
Value as determined under Article V of this Agreement. Notwithstanding the
immediately preceding sentence, in the event that the Shareholder's employment
is terminated by the Company for "cause", the purchase price for any Shares sold
and purchased pursuant to this Article III shall be equal to the exercise price
per Share tendered to the Company by the Shareholder upon exercise of the option
pursuant to which the Shares were acquired. For purposes of this Agreement, if
the Shareholder is a party to a written employment agreement with the Company or
an affiliate which contains a definition of "cause", "termination for cause" or
any other similar term or phrase, whether such Shareholder is terminated for
"cause" pursuant to this Article III shall be determined according to the terms
of and in a manner consistent with the provisions of such written employment
agreement. If the Shareholder is not party to such a written employment
agreement with the Company or an affiliate, then for purposes of this Article
III, "cause" shall mean willful misconduct in connection with the Shareholder's
duties or willful failure to perform his or her responsibilities in the best
interests of the Company (including, without limitation, breach by the
Shareholder of any provision of any employment, non-disclosure, non-competition
or other similar agreement between the Shareholder and the Company). The good
faith determination by the Board of Directors of the Company of whether the
Shareholder's employment was terminated by the Company for "cause" shall be
final and binding for all purposes hereunder.
ARTICLE IV
FUNDAMENTAL TRANSACTIONS
------------------------
4.1 CHANGE OF CONTROL.
------------------
(A) Notwithstanding anything contained herein to the contrary,
if at any time a shareholder of the Company or group of shareholders (including
shareholders not party to this Agreement) owning a majority or more of the
voting capital stock proposes to enter into any transaction involving a Change
of Control (defined below) that involves the sale, assignment, tender or
transfer of voting capital stock, the Company and/or the transferring
shareholder(s) may require each Shareholder to participate in such Change of
Control transaction by giving such Shareholders written notice thereof at least
ten (10) days in advance of the date of the transaction or the date that tender
is required, as the case may be. Upon receipt of such notice, each Shareholder
shall tender the same proportionate amount of shares owned by him or her as the
transferring shareholder(s) propose to sell or tender of the Shares
-4-
owned by them, at the same price and upon the same terms and conditions
applicable to the transferring shareholder(s) in the transaction. In addition,
if at any time the Company and/or any shareholder(s) propose to enter into any
Change of Control transaction, the Company and/or transferring shareholder(s)
may require each Shareholder to vote in favor of such transaction, where
approval of the Shareholders is required by law or otherwise sought, by giving
all of the Shareholders notice thereof within the time prescribed by law and the
Company's Certificate of Incorporation and By-Laws for giving notice of a
meeting of Shareholders called for the purpose of approving such transaction. If
the Company or transferring shareholder(s) requires such vote, each Shareholder
agrees that he or she will, if requested, deliver his or her proxy to the person
designated by the Company or such transferring shareholder(s) to vote his or her
shares in favor of such Change of Control transaction.
(B) For purposes of this Section 4.1, a "Change of Control"
shall mean (i) the sale of all or substantially all of the assets of the
Company; (ii) the sale of more than fifty percent (50%) of the outstanding
common stock of the Company in a non-public sale; (iii) any merger, share
exchange, consolidation or other reorganization or business combination of the
Company, if immediately after such transaction either (A) persons who were
directors of the Company immediately prior to such transaction do not constitute
at least a majority of the directors of the surviving entity, or (B) persons who
hold a majority of the voting capital stock of the surviving entity are not
persons who held a majority of the voting capital stock of the Company
immediately prior to such transaction; or (iv) the dissolution or liquidation of
the Company.
4.2 PUBLIC OFFERING. In the event that the Company enters into an
underwriting agreement to make an initial public offering of the common stock of
the Company, each Shareholder shall become a party to any stand-off or lock-up
agreement with respect to his or her Shares as the underwriter may request.
ARTICLE V
FAIR MARKET VALUE; INSURANCE PROCEEDS;
--------------------------------------
PAYMENT OF PURCHASE PRICE
-------------------------
5.1 IN GENERAL. For purposes of this Agreement, the fair market value
of Shares (the "Fair Market Value") shall be determined in good faith by the
Board of Directors. Fair Market Value shall mean that price at which a willing
buyer would pay a willing seller for the Shares, neither being under any
compulsion to buy or sell and both having reasonable knowledge of the relevant
facts. In making such determination, the Board of Directors may take into
account any valuation factors it deems appropriate or advisable in its sole
discretion, including, without limitation, profitability, financial position,
asset value or other factor relating to the value of the Company, as well as
discounts to account for minority interests and lack of marketability.
5.2 USE OF INSURANCE PROCEEDS. If the Company is required to purchase
the Shares of a deceased Shareholder pursuant to Section 3.1, and the Company is
the owner and beneficiary of any insurance policy on the life of the deceased
Shareholder, the Company may use the total death benefit payable to the
beneficiary under such policy to pay the purchase price for such deceased
Shareholder's Shares, and the excess, if any, of the insurance proceeds over the
purchase price of the Shares shall remain the property of the Company.
5.3 PAYMENT OF PURCHASE PRICE. In the event that the Company purchases
Shares pursuant to this Agreement, an amount equal to at least 25% of the
Purchase Price shall be payable by the
-5-
Company in cash at settlement of the purchase and sale of the Shares. The
balance, if any, of the Purchase Price shall be payable according to the terms
of a three-year Promissory Note (the "Note") in such form as the Company may
specify from time to time. The Note shall reflect the payment of annual
installments of principal and interest, with an interest rate equal to the
applicable federal rate for debt instruments of similar term under Section
1274(d)(1) of the Internal Revenue Code of 1986, as amended, which is in effect
as of the date the Note is made. The Company shall not be obligated to make any
payment due the payee under the Note at a time when the Company does not have
sufficient legally available funds to make such payment or when the payment
would violate the provisions of a senior debt instrument of the Company.
5.4 LEGALLY AVAILABLE FUNDS. If, at the time the Company is obligated
or elects to purchase Shares from any Shareholder hereunder, the Company does
not have funds legally available for the purchase of those Shares, then (a) the
Company shall purchase that number of Shares which it legally may purchase, and
(b) the Company shall remain obligated to purchase any remaining Shares at such
time or times as it has funds legally available for such purpose.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 TERMINATION.
------------
This Agreement and all restrictions, obligations and rights hereunder
shall terminate upon the successful completion of any firm underwritten public
offering of equity securities of the Company or as otherwise determined by the
Board of Directors of the Company. The termination of this Agreement for any
reason shall not affect any right or remedy existing hereunder before the
effective date of its termination.
6.2 APPLICABLE LAW.
---------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland.
6.3 NOTICES.
--------
Any notice required hereunder or permitted to be given hereunder shall
be given in writing and shall be deemed to have been validly given when
delivered by hand or deposited with the U.S. Postal Service as first-class mail,
postage prepaid, (a) if to the Company, at its then executive office, and (b) if
to a Shareholder, at the address of that Shareholder as then shown on the
Company's records, or at such other address as such Shareholder may have
designated in writing to the Company.
6.4 BINDING EFFECT.
---------------
This Agreement shall be binding upon and inure to the benefit of the
Company, the Shareholders, and their respective transferees, heirs, personal
representatives, successors and assigns. None of the Shareholders may assign
this Agreement or any of his rights or obligations hereunder. None of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
creditor of the Company.
-6-
6.5 ENTIRE AGREEMENT; AMENDMENT.
----------------------------
This Agreement represents the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings related to the subject matter hereof. This
Agreement may not be amended or modified except by a writing executed by all of
the parties hereto.
6.6 SEVERABILITY.
-------------
If any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be effected or impaired thereby.
6.7 ARBITRATION.
------------
The parties agree that any dispute arising under or in connection with
this Agreement shall be resolved by final and binding arbitration conducted in
Baltimore, Maryland in accordance with the Commercial Rules of the American
Arbitration Association.
6.8 CAPTIONS.
---------
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provision hereof.
6.9 COUNTERPARTS.
-------------
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which when taken together, shall constitute one
and the same instrument.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.}
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date set forth opposite its or his name.
KNOWLEDGELINK INTERACTIVE, INC.
Date of Execution: By:
------------------ ----------------------------
Name:
---------------------------
(SEAL) Title:
--------------------------
(SEAL)
--------------------------------
Shareholder
-8-
[SIGNATURE PAGE FOR ADDITIONAL SHAREHOLDERS --
MAY BE DUPLICATED FOR ADDITIONAL
SIGNATURES, INCLUDING COUNTERPART
SIGNATURES, AS NECESSARY]
IN WITNESS WHEREOF, the parties have executed and delivered, and have agreed to
become bound by, the provisions of the Shareholders' Agreement by and among
KnowledgeLink Interactive, Inc. and the other parties listed on Exhibit A
thereto, as the same may be from time to time amended, modified or supplemented,
as of the date indicated below.
Date of Execution:
------------------ ------------------
Name:
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Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
----- -------------
Date of Execution:
------------------ ------------------
Name:
---- --------------
-9-
EXHIBIT A
SHAREHOLDERS
------------
-10-
