STOCK OPTION AGREEMENT
AGREEMENT, dated as of January 25, 1999, between FRANKLIN ELECTRONIC
PUBLISHERS, INC. (the "Company"), a Pennsylvania corporation, and XXXXXX XXXXXX
("Optionee").
WHEREAS, in accordance with your employment letter (the "Employment
Letter) dated December 21, 1998, between the Company and Optionee, the Company
has agreed to grant to Optionee an option to purchase shares of common stock, no
par value (the "Common Stock"), of the Company.
NOW, THEREFORE, the parties hereby agree as follows:
1. Subject to the terms and conditions set forth in this Agreement,
the Company grants to Optionee an option (the "Option") to purchase from the
Company all or any part of an aggregate of 15,000 shares (the "Optioned Shares")
of Common Stock.
2. The purchase price per share shall be $10.125 (the "Option
Price").
3. Optionee may, with the prior approval of the Board of Directors
of the Company (the "Board"), transfer for no consideration the Option to or for
the benefit of the Optionee's Immediate Family, a trust for the exclusive
benefit of Optionee and/or Optionee's Immediate Family or to a partnership or
limited liability company for Optionee and/or one or more members of the
Optionee's Immediate Family, subject to such limits as the Board may establish,
and the transferee shall remain subject to all the terms and conditions
applicable to the Option prior to such transfer. The term "Immediate Family"
shall mean the Optionee's spouse, parents, children, stepchildren, adoptive
relationships, sisters, brothers and grandchildren and any of their respective
spouses.
4. Subject to the condition that the Option shall not be exercised
after January 25, 2009, Optionee may (a) during the period commencing on the
first anniversary of the date of this Agreement and ending on the day preceding
the second anniversary of such date, exercise the Option with respect to
one-fourth of the Optioned Shares, (b) during the period commencing on such
second anniversary and ending on the day preceding the third anniversary of the
date of this Agreement, exercise the Option with respect to one and one-half of
the Optioned Shares, (c) during the period commencing on such third anniversary,
exercise the Option with respect to three fourths of the Optioned Shares, and
(d) during the period commencing on such fourth anniversary, exercise the Option
with respect to all of the Optioned Shares. In the event of a "change of
control" of the Company, the Option shall immediately vest and become fully
exercisable. For purposes of this Agreement, "change of control" shall have the
meaning set forth in Exhibit A annexed hereto. Subject to the foregoing, any
exercise of the Option may be either in whole at any time or in part at any time
and from time to time.
5. Optionee shall not be deemed to be the holder of any of the
Optioned Shares unless and until a certificate for such Shares shall have been
issued. Nothing contained in this Agreement shall be deemed to confer upon
Optionee the right to vote or to consent, or to receive notice as a shareholder,
in respect of meetings of shareholders for the election of directors of the
Company or any other matters or any other rights whatsoever as a shareholder of
the Company. No dividends or rights shall be payable or accrued in respect of
the Option or the Optioned Shares until, and only to the extent, that this
Option shall have been exercised.
6. Upon payment of the purchase price therefor, the Optioned Shares
issued upon exercise of the Option shall be fully paid and nonassessable except
as otherwise provided in the Business Corporation Law of 1988 of the
Commonwealth of Pennsylvania.
7. (a) In order to exercise the Option, Optionee shall deliver to
the Company written notice of intent to exercise the Option, in form and
substance satisfactory to the Company, specifying the number of Optioned Shares
with respect to which the Option is being exercised, and accompanied by payment
to the Company of the Option Price for the Shares so specified. Payment shall be
made by certified check, payable to the order of the Company; provided, however,
that all or any portion of such payment may be made in kind by the delivery of
shares of the Common Stock which have been owned by Optionee for a minimum
period of six months having a fair market value on the date of delivery equal to
the portion of the Option Price so paid; provided, further, however, that,
subject to the requirements of Regulation T (as in effect from time to time)
promulgated under the Securities Exchange Act of 1934, as amended, the Board may
implement procedures to allow a broker chosen by Optionee to make payment of all
or any portion of the option price payable upon the exercise of the Option and
to receive, on behalf of Optionee, all or any portion of the Optioned Shares
issuable upon such exercise. The Company shall cause the certificates
representing the Optioned Shares to be issued upon such exercise to be issued as
promptly as practicable upon receipt of such payment.
(b) Certificates representing the Optioned Shares issued upon
exercise of the Option shall bear the following legend:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933. Such securities may not be sold or
transferred except pursuant to a registration statement under such Act,
which is effective and current with respect to such securities, or upon
receipt by the Company of an opinion of counsel reasonably satisfactory to
the Company that such sale or transfer is exempt from the registration
requirements of such Act."
8. The Company shall, at all times until the expiration of the
Option, reserve for issuance and delivery upon exercise thereof, the number of
Optioned Shares that the Company would be required to issue and deliver upon
such exercise.
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9. In the event that a dividend shall be declared upon the Common
Stock payable in shares of Common Stock, the Optioned Shares shall be adjusted
by adding to such Shares the number of shares which would be distributable
thereon if such Shares had been outstanding on the date fixed for determining
the stockholders entitled to receive such stock dividend. In the event that the
outstanding shares of Common Stock shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, whether through reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or consolidation,
whether or not the Company is the surviving corporation, then there shall be
substituted for the Optioned Shares the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock shall be so
changed, or for which each such Share shall be exchanged. In the event that
there shall be any change, other than as specified in this paragraph 9, in the
number or kind of outstanding shares of Common Stock, or of any stock or other
securities into which the Common Stock shall have been changed, or for which it
shall have been exchanged, then, if the Board shall, in its sole discretion,
determine that such change equitably requires an adjustment in the number or
kind of shares subject to the Option, such adjustment shall be made by the Board
and shall be effective and binding for all purposes of the Option. In the case
of any such substitution or adjustment as provided for in this paragraph 9, the
Option Price for each Optioned Share shall be the Option Price for all shares of
stock or other securities which shall have been substituted for such Optioned
Share or to which such Optioned Share shall have been adjusted in accordance
with the provisions of this paragraph 9. No adjustment or substitution provided
for in this paragraph 9 shall require the Company to sell a fractional share. In
the event of the dissolution or liquidation of the Company, or a merger in which
the Company is not the surviving corporation, the Option shall terminate.
10. The existence of the Option shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
11. By acceptance hereof, Optionee represents and warrants that the
Option is being acquired by Optionee solely for his own account and not with a
view to, or for sale in connection with, the distribution thereof. The Optioned
Shares to be purchased upon exercise of the Option shall be registered by the
Company under the Securities Act of 1933 on a Registration Statement on Form S-8
as promptly as reasonably practicable following the date of this Agreement.
Optionee shall not attempt to dispose of any or all of the Optioned Shares
unless and until they have been validly registered under said Act or the Company
has determined, based on an opinion of counsel reasonably satisfactory to the
Company, that the intended disposition is exempt from the registration
requirements of said Act.
12. In the event Optionee's employment or service with the Company
terminates by reason of death, retirement on or subsequent to his or her 65th
birthday or permanent disability, the Option shall become immediately
exercisable in full. In the event Optionee leaves the employ or service of the
Company for any reason, whether voluntarily or otherwise, other than by reason
of death, the Option shall, to the extent it is exercisable on the
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date of such termination of employment or service, terminate upon the earlier to
occur of (a) the expiration of two years after such termination of employment or
service or (b) January 25, 2009; provided, however, that in the case in which
Optionee dies subsequent to leaving the employ or service of the Company, the
Option shall terminate upon the earlier to occur of (i) the expiration of six
months after the date of such death, or (ii) January 25, 2009. In the event
Optionee's employment or service with the Company terminates by reason of death,
the Option shall become immediately exercisable in full and shall terminate upon
the earlier to occur of (i) the expiration of six months after the date of such
death or (ii) January 25, 2009.
13. As a condition of the granting of the Option, Optionee agrees
that any dispute or disagreement which may arise under or as a result of or
pursuant to this Agreement shall be determined by the Board, in its sole
discretion, and that any interpretations by the Board of the terms of this
Agreement shall be final, binding and conclusive.
14. All notices provided for in the Option shall be in writing and
shall be given when personally delivered or sent by registered or certified
mail, return receipt requested; if intended for the Company, shall be addressed
to it, attention of its General Counsel, at Franklin Electronic Publishers,
Inc., 0 Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000, or at such other address
of which the Company shall have given notice to Optionee in the manner herein
provided; and if intended for Optionee, shall be addressed to him at the address
set forth in handwriting below, or at such other address of which Optionee shall
have given notice to the Company in the manner herein provided.
15. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New Jersey applicable to contracts made and to be
performed wholly within said State without giving effect to the conflict of laws
principles thereof.
IN WITNESS WHEREOF, the Company and Optionee have duly executed this
Agreement as of the date first above written.
FRANKLIN ELECTRONIC PUBLISHERS, INC.
By /s/
-----------------------------------------
Title: Executive Vice President
AGREED TO:
/s/ Xxxxxx Xxxxxx
--------------------------
Xxxxxx Xxxxxx
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EXHIBIT A
"Change of control" means (i) the accumulation by a party (other than
Bermuda Trust Co. Ltd. as trustee for the Xxxx Xxx Trust), or parties acting as
a group, of more than twenty percent (20%) or more of the shares of the common
stock of the Company; (ii) a merger or consolidation of the Company in which the
Company does not survive as an independent public company; (iii) a sale of all
or substantially all of the assets of the Company; (iv) a merger or
consolidation of the Company in which the Company survives as an independent
public company if the shareholders of the Company immediately prior to such
merger or consolidation own less than 50% of either the then-outstanding shares
of stock of such surviving company or the combined voting power of the
then-outstanding securities of such surviving company; (v) if during any period
of 24 consecutive months the individuals who, at the beginning of such period,
constitute the Board of Directors (the "Incumbent Directors") cease for any
reason other than death to constitute at least a majority thereof; provided,
however, that a director who was not a director at the beginning of such 24
month period shall be deemed to have satisfied such 24 month requirement (and be
an Incumbent Director) if such director was elected by, or on the recommendation
of or with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they were directors at
the beginning of such 24 month period) or by prior operation of this clause (v);
or (vi) the approval by Franklin's shareholders or Board of Directors of a
liquidation or dissolution of the Company.
