October 23, 1997
Xx. Xxxxxxx X. Xxxxxxx
000 Xxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Re: Incentive Compensation
Dear Xxxxxxx:
This letter (the "Agreement") sets forth the terms pursuant to
which InfoNow Corporation (the "Company") agrees to compensate
you ("Xxxxxxx"), in connection with the sale of all or
substantially all the assets, business or equity securities of
the Company (the "Transaction"). The term of this Agreement
shall commence as of the date hereof and shall expire upon the
later of (i) 18 months from the date hereof or (ii) the date
on which Xxxxxxx is no longer President or CEO of the Company.
This Agreement and the compensation specified herein is in
addition to and supplements any and all other compensation to
be paid to Xxxxxxx in connection with his employment by the
Company.
For purposes of this Agreement, a Transaction, whether
affected in one Transaction or in a series of Transactions,
means (i) any merger, consolidation, reorganization or
combination pursuant to which the business of the Company is
directly or indirectly acquired by another party, (ii) the
acquisition by another party directly or indirectly of more
than 51% of the common stock or other class of capital stock
or equity interest in the Company, or all or a substantial
portion of the assets of the Company, in each case whether by
tender or exchange offer, negotiated purchase or otherwise,
(iii) the acquisition, through a proxy contest or through
another method not involving the acquisition of the Company's
voting capital stock, or by another party with the power to
directly or indirectly direct or cause the direction of the
management and policy of the Company.
If the Transaction is closed during the term of this Agreement
or within 120 days after Xxxxxxx has ceased to be President or
CEO of the Company, then upon closing the Transaction, the
Company shall pay to Xxxxxxx or cause Xxxxxxx to be paid a
transaction fee (the "Transaction Fee") calculated as follows:
If the transaction is completed at a transaction value (the
"Transaction Value") of less than $7.5 million, then
Xxxxxxx will receive no Transaction Fee; or
If the transaction is completed at a Transaction Value of $7.5
million but less than $14.0 million, then the Company
shall pay or cause Xxxxxxx to be paid four percent of the
total proceeds received for the Company; or
If the transaction is completed at a Transaction Value of
$14.0 million but less than $20.0 million, then the
Company shall pay or cause Xxxxxxx to be paid eight
percent of the total proceeds received for the Company;
or
If the transaction is completed at a Transaction Value of
$20.0 million or greater, then the Company shall pay or
cause Xxxxxxx to be paid twelve percent of the total
proceeds received for the Company.
Any cash received by the Company for the issuance of InfoNow
equity after the date of this Agreement will be added to the
above threshold values.
For purposes of this Agreement, the Transaction Value shall
mean the sum of (i) with respect to each class of capital
stock of the Company the product of (a) the highest
consideration paid or payable for a share of such class of
capital stock of the Company determined as described in the
following paragraph and (b) the sum of (1) the total number of
shares of such class of capital stock of the Company plus (2)
the number of shares of such class issuable upon exercise of
options, warrants or other rights, or conversion or exchange
of securities, all as outstanding on the date of this letter
and, without duplication, as thereafter issued or granted;
(ii) the aggregate face amount of any debt (including capital
lease obligations) of the Company which is assumed,
refinanced, repaid, or remaining outstanding or otherwise
borne by the purchaser; (iii) without duplication the
aggregate liquidation value of any preferred stock or other
preferential interests redeemed or remaining outstanding; and
(iv) the fair market value of any assets of any of the
shareholders of the Company that are purchased. Transaction
Value excludes working capital items (including the Company's
normal levels of accounts payable, accruals, and income taxes
payable).
The determination of the "consideration paid or payable for a
share of such class of capital stock" in connection with a
Transaction shall include cash, securities (valued in
accordance with the following paragraph), or other assets or
consideration paid or payable by the purchaser or any of its
affiliates, as the case may be, determined without regard to
any allocations between the Company or its affiliates,
including but not limited to but without duplication (i)
assets (net of debt or payables) of the Company retained by
the Company or its stockholders and affiliates, (ii) any
deferred installments of the purchase price, (iii) any portion
of the purchase price held in escrow subsequent to closing
which is payable pursuant to the terms of the escrow
arrangement, irrespective of whether such amounts are in fact
paid, (iv) any extraordinary compensation paid directly or
indirectly by the purchaser to principals, management or
employees of the Company or affiliates of the Company in
connection with or in anticipation of the Transaction,
including but not limited to cash payments, stock or option
grants, consulting arrangements and non-competition
arrangements, (v) any payments to the Company or affiliates of
the Company for non-competition agreements, (vi) any payments
pursuant to earn-outs, royalties or other similar
arrangements, (vii) any payments payable after closing upon
the occurrence of certain contingencies or conditions or the
satisfaction of certain earnings, sales levels or other
performance objectives which are agreed to on or before the
closing, irrespective of whether such amounts are in fact
paid, and (viii) the amount of any dividends or other
extraordinary payments or distributions to stockholders of the
Company in connection with or in anticipation of the
Transaction, and (ix) consideration paid by the purchaser or
its affiliates to the Company or its affiliates as a deposit,
reimbursement of expenses, liquidated damages, walk-away fee,
or other arrangement.
In the event that all or a portion of the Transaction Value
for a Transaction is paid in stock or other securities,
deferred installments or other non-cash consideration, the
amount of the Transaction Fee payable with respect to such
items shall be determined on the basis of the fair market cash
equivalent value of such non-cash consideration as of the date
preceding the date of the Transaction as reasonably determined
by Xxxxxxx and the Company, provided that the value of
securities (received as consideration) which have an existing
public trading market shall be determined by the mean of the
closing bid and ask price for such securities during the 20
trading days prior to the closing date.
Any portion of the Transaction Fee which is payable with
respect to any earn-out, royalty or similar arrangement where
the amount payable is not a certain amount, shall be
calculated and paid at the closing based upon the estimated
net present value thereof as reasonably determined by Xxxxxxx
and the Company.
If a Transaction takes the form of a purchase of assets and an
assumption of liabilities, then the "Transaction Value" of the
Company shall be deemed to include the amount of cash,
securities, or other consideration paid to the Company, its
shareholders, and affiliates in respect of the assets, plus
the aggregate face amount of all liabilities, including
accounts payable, accruals, and income taxes payable, assumed
by the purchaser and its affiliates.
Unless other terms or arrangements are approved in writing by
Xxxxxxx, the Transaction Fee shall be based upon and payable
out of the total proceeds of a Transaction prior to any
distribution to shareholders or fees paid to any other party.
This Agreement is governed by the laws of the State of
Colorado, without regard to principles of conflicts of laws.
The parties hereby submit to the exclusive jurisdiction of,
and waive any venue objections against, District Court in and
for Boulder County, Colorado, and consent to the personal
jurisdiction of such court for the purposes of this Agreement.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and
except as otherwise explicitly provided, supersedes all prior
understandings, written or oral, with respect to the subject
matter hereof.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed to be an original
but all of which shall constitute one and the same instrument.
If the terms set forth herein are acceptable to you, please so
indicate by executing a copy of this letter in the space
provided below and returning an executed counterpart to the
undersigned.
Very truly yours,
InfoNow Corporation
By:/S/ Xxxxx Xxxx
-----------------
Xxxxx Xxxx, Chairman
Accepted and agreed to this
23 day of October, 1997
By:/s/ Xxxxxxx X. Xxxxxxx
_____________________________
Xxxxxxx X. Xxxxxxx
Xx. Xxxxxxx X. Xxxxxxx
October 23, 1997
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