DAMARK INTERNATIONAL, INC.
STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT made on December 17, 1998, by and between DAMARK
INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and Xxxxxxx X.
Xxxxxxx (the "Optionee");
W I T N E S S E T H:
WHEREAS, the Optionee serves as a member of the Company's Board of
Directors; and
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of its Class A common stock, par value $.01, (the "Common
Stock"),
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the
parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (hereinafter called the "Option") to purchase all or any
part of an aggregate of twenty thousand (20,000) shares of Common Stock (the
"Option Shares") (such number being subject to adjustment as provided in
Paragraph 4 hereof) on the terms and conditions herein set forth.
2. PURCHASE PRICE. Subject to the provisions of Paragraph 4 hereof,
the purchase price for the Option Shares shall be $5.781 per share, which has
been determined to be the fair market value of the Option Shares at the date
of grant of the Option.
3. TERM AND VESTING OF OPTION. The Option shall expire (the
"Expiration Date") upon the earlier to occur of: (a) the close of business
on the tenth anniversary of the date hereof or (b) one (1) year after the
date on which the Optionee is no longer a director of the Company. Prior to
the Expiration Date, the Optionee shall be entitled to exercise the Option as
to all or any part of the Option Shares for which the Option may be exercised
at any time after (i) the first anniversary of the date hereof for one-third
of the total number of Option Shares if the Optionee is then a director of
the Company, (ii) the second anniversary of the date hereof for one-third of
the total number of Option Shares if the Optionee is then a director of the
Company, and (iii) the third anniversary of the date hereof for one-third of
the total number of Option Shares if the Optionee is then a director of the
Company; provided, however, in the event of a sale of all or substantially
all of the assets of the Company or a merger, consolidation or other
reorganization of the Company in which the shareholders of the Company
immediately prior to such merger, consolidation or reorganization constitute
less than eighty percent (80%) of the voting power of the surviving
corporation, all of the Option Shares shall be exercisable upon the
occurrence of such event. Notwithstanding the foregoing, the Option may in no
event be exercised by anyone to any extent in the event of a voluntary
dissolution, liquidation or winding up of the affairs of the Company, after
the close of business on the later of (i) the date of the twentieth day after
the mailing of written notice of such
dissolution, liquidation or winding up, and (ii) the record date for
determination of holders of Common Stock entitled to participate therein.
4. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If all or any
portion of this Option shall be exercised subsequent to any share dividend,
recapitalization, merger, consolidation, exchange of shares or reorganization
as a result of which shares of any class shall be issued in respect to
outstanding Common Stock, or if Common Stock shall be changed into the same
or a different number of shares of the same or another class or classes, the
person so exercising this Option shall receive, for the aggregate price paid
upon such exercise, the aggregate number and class of shares to which they
would have been entitled if Common Stock (as authorized at the date hereof)
had been purchased at the date hereof for the same aggregate price (on the
basis of the price per share set forth in Paragraph 2 hereof) and had not
been disposed of. No fractional share shall be issued upon any such exercise
and the aggregate price paid shall be appropriately reduced on account of any
fractional share not issued.
5. METHOD EXERCISE. Subject to the terms and conditions of this
Agreement, the Option may be exercised by written notice to the Company at
its principal office and place of business in the State of Minnesota. Such
notice shall state the election to exercise the Option and the number of
Option Shares in respect of which it is being exercised, and shall be signed
by the person so exercising the Option. Such notice shall be accompanied by
the payment of the full purchase price of such Option Shares and the delivery
of such payment to the Treasurer of the Company. The certificate for the
Option Shares as to which the Option shall have been so exercised shall be
registered in the name of the person exercising the Option. If the Optionee
shall so request in the notice exercising the Option, the certificate shall
be registered in the name of the Optionee and another person jointly with
right of survivorship, and shall be delivered as provided above to or upon
the written order of the person exercising the Option. In the event the
Option shall be exercised by any person other than Optionee, such notice
shall be accompanied by appropriate proof of the right of such person to
exercise the Option.
6. RESERVATION OF SHARES. The Company shall, at all times during the
term of the Option, reserve and keep available such number of shares of its
capital stock as will be sufficient to satisfy the requirements of this
Agreement, and shall pay all original issue and transfer taxes with respect
to the issue and transfer of Option Shares pursuant hereto, and all other
fees and expenses necessarily incurred by the Company in connection therewith.
7. NO RIGHTS AS STOCKHOLDER. The holder of the Option shall not have
any of the rights of a stockholder with respect to the Option Shares covered
by the Option except to the extent that one or more certificates for shares
shall be delivered to him upon the due exercise of the Option.
8. NO REGISTRATION REQUIREMENTS AND INVESTMENT PURPOSE. The Company
shall not be deemed by reason of issuance of any shares under the Option to
have any obligation to register such shares under the Securities Act of 1933,
as amended, or maintain in effect any registration of such Option Shares. In
addition, unless the Option Shares have been so registered, the Option is
granted on the condition that the acquisition of shares hereunder shall be
for investment purposes only and the person acquiring Option Shares upon
exercise of the Option must bear the economic risk of the investment for an
indefinite period of time since the shares so acquired cannot be sold unless
they
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are subsequently registered or an exemption from such registration is
available. Optionee agrees that a legend may be placed on the stock
certificates acknowledging the restrictions on subsequent distribution of the
shares issued upon exercise of this Option.
9. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, assigns and
representatives and shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
DAMARK INTERNATIONAL, INC.
By /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx, Chairman and
Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
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