IVI PUBLISHING, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made effective as of this 11th day of December, 1997,
by and between IVI PUBLISHING, INC., a Minnesota corporation (the "Company"),
and XXXXXX X. XXXXXXX ("Optionee").
W I T N E S S E T H:
WHEREAS, Optionee on the date hereof is a key employee of the Company;
and
WHEREAS, as an inducement for the Optionee to become an employee of the
Company, the Company wishes to grant a nonqualified stock option to Optionee to
purchase shares of the Company's Common Stock, which option is granted outside
of any of the Company's current stock option plans; and
WHEREAS, the Board has authorized the grant of a nonqualified stock
option to Optionee and has determined that, as of the effective date of this
Agreement, the fair market value of the Company's Common Stock is $2.50 per
share;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate of four hundred fifty thousand
(450,000) shares of Common Stock at a per share price of $2.50 on the terms and
conditions set forth herein, subject to adjustment pursuant to Paragraph 4
below. This Option is not intended to be an incentive stock option within the
meaning of Section 422, or any successor provision, of the Code, and the
regulations thereunder.
2. Duration and Exercisability.
a. Term and Vesting Schedule. The term during which this
Option may be exercised shall terminate on December 10, 2007, except as
otherwise provided in Paragraphs 2(c) through 2(f) below. This Option shall vest
and become exercisable according to the following schedule:
37,500 shares on November 10, 1998
3,125 shares on the tenth day of each month from December 10,
1998 through November 10, 2001
300,000 shares on November 10, 2002 (subject to acceleration as
outlined in Paragraph 2(b) below) Once the Option becomes exercisable to the
extent of one hundred percent (100%) of the aggregate number of shares specified
in Paragraph 1, Optionee may continue to exercise this Option under the terms
and conditions of this Agreement until the termination of the Option as provided
herein. If Optionee does not purchase upon an exercise of this Option the full
number of shares which Optionee is then entitled to purchase, Optionee may
purchase upon any subsequent exercise prior to this Option's termination such
previously unpurchased shares in addition to those Optionee is otherwise
entitled to purchase.
b. Acceleration of Exercisability. The exercisability of the
300,000 shares which become exercisable on November 10, 2002 shall be
accelerated as to:
(i) 25,000 shares upon the occurrence of each of the following
events:
o Closing price of the Company's Common Stock is $5.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $6.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $7.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $8.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $9.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $10.00
per share or more for forty (40) consecutive trading
days;
(ii) 30,000 shares upon the occurrence of each of the
following events:
o Closing price of the Company's Common Stock is $11.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $12.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $13.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $14.00
per share or more for forty (40) consecutive trading
days;
o Closing price of the Company's Common Stock is $15.00
per share or more for forty (40) consecutive trading
days;
c. Termination of Employment (other than Change of Control,
Disability or Death). If Optionee's employment with the Company or any
Subsidiary is terminated for any reason other than because of a "change of
control transaction" as described in Paragraph 4 below or because of disability
or death, this Option shall completely terminate on the earlier of (i) the close
of business on the three-month anniversary date of such termination of
employment, and (ii) the expiration date of this Option stated in Paragraph 2
above.
In such period following the termination of Optionee's employment, this
Option shall be exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding such termination of employment but had not
previously been exercised. To the extent this Option was not exercisable upon
such termination of employment or if Optionee does not exercise the Option
within the time specified in this Paragraph 2(c), all rights of Optionee under
this Option shall be forfeited.
d. Change of Control. If Optionee's employment with the
Company or any Subsidiary is terminated because of a "change of control
transaction (as set forth in Paragraph 4 below)", this Option shall completely
terminate on the earlier of (i) the close of business on the three-month
anniversary date of such termination of employment and (ii) the expiration date
of this Option stated in Paragraph 2(a) above; provided, however, that if (a)
such transaction is treated as a "pooling of interests" under generally accepted
accounting principles and (b) Optionee is an "affiliate" of the Company or
Subsidiary under applicable legal and accounting principles, this Option shall
completely terminate on the later of (A) the close of business on the
three-month anniversary date of such termination of employment or (B) the close
of business on the date that is sixty (60) days after the date on which
affiliates are no longer restricted from selling, transferring or otherwise
disposing of the shares of stock received in the change of control transaction.
In such period following the termination of Optionee's employment upon
a change of control transaction, this Option shall be fully exercisable unless
the acceleration of the exercisability of this Option has been prevented as
provided in Paragraph 4 below, in which case, this Option shall be exercisable
only to the extent the Option was exercisable on the vesting date immediately
preceding such termination of employment, but had not previously been exercised.
To the extent this Option was not exercisable upon such termination of
employment or if Optionee does not exercise the Option within the time specified
in this Paragraph 2(d), all rights of Optionee under this Option shall be
forfeited.
e. Disability. If Optionee ceases to be an employee of the
Company or any Subsidiary due to disability (as such term is defined in Code
Section 22(e)(3), or any successor provision), this Option shall completely
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of such termination of employment, and (ii) the expiration date
under this Option stated in Paragraph 2(a) above. In such period following such
termination of employment, this Option shall be exercisable only to the extent
the Option was exercisable on the vesting date immediately preceding the date of
Optionee's termination of employment. If Optionee does not exercise the Option
within the time specified in this Paragraph 2(e), all rights of Optionee under
this Option shall be forfeited.
f. Death. In the event of Optionee's death, this Option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the date of Optionee's death, and (ii) the expiration date
of this Option stated in Paragraph 2(a) above. In such period following
Optionee's death, this Option shall be exercisable by the person or persons to
whom Optionee's rights under this Option shall have passed by Optionee's will or
by the laws of descent and distribution only to the extent the Option was
exercisable on the vesting date immediately preceding the date of Optionee's
death. If such person or persons do not exercise this Option within the time
specified in this Paragraph 2(f), all rights under this Option shall be
forfeited.
3. Manner of Exercise.
a. General. The Option may be exercised only by Optionee (or
other proper party in the event of death or incapacity), subject to such
administrative rules as the Administrator may deem advisable, by delivering
within the Option Period the attached form or such other form acceptable by the
Administrator ("Exercise Notice") to the Company at its principal office. The
Exercise Notice shall state the number of shares as to which the Option is being
exercised and shall be accompanied by payment in full of the Option price for
all shares designated in the notice. The exercise of the Option shall be deemed
effective upon receipt of such notice by the Company and upon payment that
complies with the terms of this Agreement. The Option may be exercised with
respect to any number or all of the shares as to which it can then be exercised
and, if partially exercised, may be so exercised as to the unexercised shares
any number of times during the Option period as provided herein.
b. Form of Payment. Payment of the Option price by Optionee
shall be in the form of cash, personal check, certified check or previously
acquired shares of Common Stock of the Company, or any combination thereof. Any
stock so tendered as part of such payment shall be valued at its Fair Market
Value (as defined in Paragraph 5(c) below) on the date of exercise of the
Option. For purposes of this Agreement, "previously acquired shares of Common
Stock" shall include shares of Common Stock that are already owned by Optionee
at the time of exercise.
c. Stock Transfer Records. As soon as practicable after the
effective exercise of all or any part of the Option, Optionee shall be recorded
on the stock transfer books of the Company as the owner of the shares purchased,
and the Company shall deliver to Optionee one or more duly issued stock
certificates evidencing such ownership. All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.
4. Recapitalization, Sale, Merger, Exchange or Liquidation. In the
event of an increase or decrease in the number of shares of Common Stock
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company, the
number of shares of Option Stock covered by this Option, to the extent
outstanding and the price per share thereof shall be adjusted by the Board to
reflect such change. Additional shares which may be credited pursuant to such
adjustment shall be subject to the same restrictions as are applicable to the
shares with respect to which the adjustment relates. In the event of:
(i) an acquisition of the Company by a corporation, partnership,
trust or other entity not controlled by the Company through
(A) the sale of substantially all of the Company's assets and
the consequent discontinuance of its business or (B) through a
merger, consolidation, exchange, reorganization,
reclassification, extraordinary dividend, divestiture or
liquidation of the Company, other than a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation (collectively
referred to as a "transaction"), or
(ii) a change of control such that (A) any individual, partnership,
trust or other entity becomes after the effective date of this
Option the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 35% or more of
the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections of
directors of the Company, or (B) individuals who constitute
the Board of Directors of the Company on the effective date of
this Option cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director
subsequent to the effective date of this Option whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors comprising the Board of Directors of the Company
on the effective date of this Option (either by a specific
vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this
clause (B) considered as though such person were a member of
the Board of Directors of the Company on the effective date of
this Option ((A) and (B) collectively with the transactions
described in (i) above referred to as "change of control
transactions"),
this Option shall become immediately exercisable, whether or not such Option had
become exercisable prior to the change of control transaction; provided,
however, that if the acquiring party seeks to have the transaction accounted for
on a "pooling of interests" basis and, in the opinion of the Company's
independent certified public accountants, accelerating the exercisability of
this Option would preclude a pooling of interests under generally accepted
accounting principles, the exercisability of this Option shall not accelerate.
In addition to the foregoing, in the event of such a change of control
transaction, the Board may provide for one or more of the following:
(a) the complete cancellation of this Option to the extent not
exercised prior to a date specified by the Board (which date shall give
Optionee a reasonable period of time in which to exercise the Option
prior to the effectiveness of such change of control transaction);
(b) the Optionee holding this Option shall receive, with respect to
each share of Option Stock subject to this Option, as of the effective
date of any such change of control transaction, cash in an amount equal
to the excess of the Fair Market Value of such Option Stock on the date
immediately preceding the effective date of such change of control
transaction over the Option price per share of this Option; provided
that the Board may, in lieu of such cash payment, distribute to the
Optionee shares of stock of the Company or shares of stock of any
corporation succeeding the Company by reason of such change of control
transaction, such shares having a value equal to the cash payment
herein; or
(c) provide to the Optionee the right to exercise this Option as to an
equivalent number of shares of stock of the corporation succeeding the
Company by reason of such transaction.
The Board may restrict the rights of or the applicability of this Paragraph 4 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code or any other applicable law or regulation.
The right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets shall not be limited in any way.
5. Miscellaneous.
a. Employment; Rights as Shareholder. This Agreement shall not
confer on Optionee any right with respect to continuance of employment by the
Company or any of its Subsidiaries, nor will it interfere in any way with the
right of the Company to terminate such employment. Optionee shall have no rights
as a shareholder with respect to shares subject to this Option until such shares
have been issued to Optionee upon exercise of this Option. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Paragraph 4
above.
b. Securities Law Compliance. The exercise of all or any parts
of this Option shall only be effective at such time as counsel to the Company
shall have determined that the issuance and delivery of Common Stock pursuant to
such exercise will not violate any state or federal securities or other laws.
Optionee may be required by the Company, as a condition of the effectiveness of
any exercise of this Option, to agree in writing that all Common Stock to be
acquired pursuant to such exercise shall be held, until such time that such
Common Stock is registered and freely tradable under applicable state and
federal securities laws, for Optionee's own account without a view to any
further distribution thereof, that the certificates for such shares shall bear
an appropriate legend to that effect and that such shares will not be
transferred or disposed of except in compliance with applicable state and
federal securities laws.
c. Fair Market Value. "Fair Market Value" shall mean (i) if
the Company's Common Stock is reported by the Nasdaq National Market or Nasdaq
SmallCap Market or is listed upon an established stock exchange or exchanges,
the reported closing price of such stock by the Nasdaq National Market or Nasdaq
SmallCap Market or on such stock exchange or exchanges on a certain date or, if
no sale of such stock shall have occurred on such date, on the next preceding
day on which there was a sale of stock; (ii) if such stock is not so reported by
the Nasdaq National Market or Nasdaq SmallCap Market or listed upon an
established stock exchange, the average of the closing "bid" and "asked" prices
quoted by the National Quotation Bureau, Inc. (or any comparable reporting
service) on such date, or if there are no quoted "bid" and "asked" prices on
such date, on the next preceding date for which there are such quotes; or (iii)
if such stock is not publicly traded as of such date, the per share value as
determined by the Board, or the Committee, in its sole discretion by applying
principles of valuation with respect to all such stock.
d. Withholding Taxes. In order to permit the Company to
receive a tax deduction in connection with the exercise of this Option, the
Optionee agrees that as a condition to any exercise of this Option, the Optionee
will also pay to the Company, or make arrangements satisfactory to the Company
or make arrangements satisfactory to the Company regarding payment of, any
federal, state local or other taxes required by law to be withheld with respect
to the Option's exercise.
e. Nontransferability. During the lifetime of Optionee, the
accrued Option shall be exercisable only by Optionee or by the Optionee's
guardian or other legal representative, and shall not be assignable or
transferable by Optionee, in whole or in part, other than by will or by the laws
of descent and distribution.
f. Lockup Period Limitation. Optionee agrees that in the event
the Company advises Optionee that it plans an underwritten public offering of
its Common Stock in compliance with the Securities Act of 1933, as amended, and
that the underwriter(s) seek to impose restrictions under which certain
shareholders may not sell or contract to sell or grant any option to buy or
otherwise dispose of part or all of their stock purchase rights of the
underlying Common Stock, Optionee hereby agrees that for a period not to exceed
180 days from the date of the prospectus, Optionee will not sell or contract to
sell or grant an option to buy or otherwise dispose of this Option or any of the
underlying shares of Common Stock without the prior written consent of the
underwriter(s) or its representative(s).
g. Blue Sky Limitation. Notwithstanding anything in this
Agreement to the contrary, in the event the Company makes any public offering of
its securities and determines in its sole discretion that it is necessary to
reduce the number of issued but unexercised stock purchase rights so as to
comply with any state securities or Blue Sky law limitations with respect
thereto, the Board of Directors of the Company shall have the right (i) to
accelerate the exercisability of this Option and the date on which this Option
must be exercised, provided that the Company gives Optionee 15 days' prior
written notice of such acceleration, and (ii) to cancel any portion of this
Option which is not exercised prior to or contemporaneously with such public
offering. Notice shall be deemed given when delivered personally or when
deposited in the United States mail, first class postage prepaid and addressed
to Optionee at the address of Optionee on file with the Company.
h. Accounting Compliance. Optionee agrees that, in the event a
"change of control transaction" (as defined in Paragraph 4 above) is treated as
a "pooling of interests" under generally accepted accounting principles and
Optionee is an "affiliate" of the Company or any Subsidiary (as defined in
applicable legal and accounting principles) at the time of such change of
control transaction, Optionee will comply with all requirements of Rule 145 of
the Securities Act of 1933, as amended, and the requirements of such other legal
or accounting principles, and will execute any documents necessary to ensure
such compliance.
i. Stock Legend. If applicable, the Company may put an
appropriate legend on the certificates for any shares of Common Stock purchased
by Optionee (or, in the case of death, Optionee's successors) to reflect the
restrictions of Paragraphs 5(b), 5(f), 5(g) and 5(h) of this Agreement.
j. Scope of Agreement. This Agreement shall bind and inure to
the benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee permitted by Paragraph 5(e) above.
k. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least ten years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator. Arbitration will be conducted pursuant to the provisions
of this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the provisions
of this Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
IVI PUBLISHING, INC.
By: /s/ Xxxxxxx x. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxxx, Vice President
COMPANY
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
OPTIONEE
OPTION EXERCISE FORM
To: IVI Publishing, Inc.
I hereby exercise stock options granted to purchase shares of Common
Stock of IVI Publishing, Inc. (the "Company") as follows:
Date of Options Exercise Number of
Grant Awarded Price Shares Exercised
As payment for the exercise of the above listed stock options and for
the amount of federal, state and local tax which the Company is required by law
or believes appropriate to withhold and the cost of any applicable state or
federal documentary tax stamps, I am enclosing and elect the following method of
payment (check appropriate box):
[ ] Check (cashier's, certified or personal) in the amount of $________________
[ ] Shares of the Company's Common Stock which have been held by
me for at least six months and which are valued at fair market value
listed below.
Certificate No. Acquisition Date Number of Shares Fair Market Value
NOTE: All shares of Common Stock must be properly assigned to IVI Publishing,
Inc.
[ ] Irrevocable instructions, a copy of which is attached hereto
and is subject to the Company's approval, to my broker who must be
acceptable to you to promptly deliver to the Company an amount
sufficient to pay such amounts from either (i) the proceeds of sale
through the broker of a sufficient number of shares purchased by me
upon exercise of the Option as set forth above or (ii) the loan
proceeds from borrowings by me from the broker, and the Company is
hereby instructed to issue and deliver the shares purchased by me upon
exercise of the option as set forth above directly to and in the name
of the broker.
Unless the third payment option above is selected, in which case the
shares will be issued and delivered as described therein, please have _____
certificates issued in blocks of ________ shares per certificate registered as
follows:
Name
Mailing Address
Social Security Number
Very truly yours,
Signature of Optionee
Printed Name of Optionee
