Stock Option Agreement Net Perceptions, Inc. with Albert W. Weggeman
Net
Perceptions, Inc.
with
Xxxxxx
X. Xxxxxxxx
Stock
Option Agreement (the
“Agreement”) made as of this 3rd day of October, 2006, by and between Net
Perceptions, Inc., a Delaware corporation, having its principal office at Xxx
Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 (the “Company”), and
Xxxxxx X. Xxxxxxxx, an individual residing at the address set forth on the
signature page hereof (the “Optionee”).
Whereas,
the
Company and the Optionee have entered into an employment agreement dated as
of
September 22, 2006 (the "Employment Agreement"), pursuant to which the Optionee
shall serve as the Company's President and Chief Executive Officer;
and
Whereas,
the
Employment Agreement provides that the Company shall issue options to the
Optionee with terms and provisions as set forth in a stock option agreement
in a
form satisfactory to the Company, and the parties hereto intend that this
Agreement shall constitute such agreement.
Now,
Therefore, the
parties agree as follows:
1. Option
Grant.
Subject
to the provisions hereinafter set forth, the Company hereby grants to the
Optionee, as of October 3, 2006 (the “Grant Date”), the right, privilege and
option (the “Option” or "Options") to purchase all or any part of an aggregate
of 2,491,419 shares (the “Shares”) of common stock of the Company,
$0.0001 par
value
per share (the “Common Stock”), such number being subject to adjustment as
provided in Section 7 hereof.
2. Exercise
Price.
Subject
to adjustment as provided in Section 7 hereof, the purchase price of the Common
Stock as to which this Options may be exercised (the “Exercise Price”) shall be
$0.64 per Share.
3. Exercise
of Options.
The term
of the Options shall be for a period of ten (10) years from the Grant Date
and
shall expire without further action being taken at 5:00 p.m., Eastern United
States time, on the tenth anniversary of the Grant Date (or, if such date is
a
Saturday, Sunday or legal holiday, on the last day prior to such anniversary
date as is not a Saturday, Sunday or legal holiday), subject to earlier
termination as provided in Section 5 hereof (the “Expiration Date”). The Options
may be exercised at any time, or from time to time, prior to the Expiration
Date
as to any part or all of the Options when vested in accordance with Section
4
below.
4. Vesting. The
Options shall vest in accordance with the following schedule:
4.1 Options
to purchase 1,245,709 Shares (the "Time-vesting Options") shall vest in
thirty-six equal monthly consecutive tranches commencing on November 3,
2006.
4.2 Options
to purchase 1,245,710 Shares (the "Performance Options") shall vest as
follows:
(a) 415,237
Performance Options (the “First Performance Options”) shall vest as of March 31,
2008, if the Company’s EBITDA for the year ending December 31, 2007
(“Year 1”) is not less than $13,800,000 (the “Year 1 Target”); if the Year
1 Target is not achieved, and if the sum of the Company’s EBITDA for the years
ending December 31, 2007 and 2008 is not less than the sum of the Year 1 Target
plus the Year 2 Target (as defined below), then the First Performance Options
shall vest, as of March 31, 2009.
(b) 415,237
Performance Options (the “Second Performance Options”) shall vest as of March
31, 2009, if the Company’s EBITDA for the year ending December 31, 2008
(“Year 2”) is not less than $15,700,000 (the “Year 2 Target”); if the Year
2 Target is not achieved, and if the sum of the Company’s EBITDA for the years
ending December 31, 2008 and 2009 is not less than the sum of the Year 2 Target
plus the Year 3 Target (as defined below), then the Second Performance Options
shall vest, as of March 31, 2010.
(c) 415,236
Performance Options (the “Third Performance Options”) shall vest as of March 31,
2010, if the Company’s EBITDA for the year ending December 31, 2009
(“Year 3”) is not less than $17,200,000 (the “Year 3 Target”); if
(i) the Year 3 Target is not achieved, and (ii) the Company renews the
employment agreement of the Employee for another three-year term, and
(iii) the sum of the Company’s EBITDA for the years ending December 31,
2009 and 2010 is not less than the sum of the Year 3 Target plus the Year 4
Target (as defined hereinafter), then the Third Performance Options shall vest,
as of March 31, 2011. “Year 4 Target” means an amount of the Company’s EBITDA
for the year ending December 31, 2010 that will be agreed upon by the parties
in
the renewed employment agreement, if any.
(d) For
purposes hereof, "EBITDA" shall mean earnings before interest, taxes,
depreciation and amortization, without giving effect to any acquisitions from
and after the commencement of the Optionee's employment with the Company, and
shall be determined by the Company on a consistent basis by reference to the
Company’s audited financial statements included in its annual report on Form
10-K for the relevant year. For the years ending December 31, 2006 and 2007,
EBITDA as aforesaid shall be increased by the amount of expenses relating to
the
acquisition and financing on October 3, 2006, of Concord Steel and Wilmington
Steel to the extent such expenses are not capitalized and
amortized.
5. Termination.
5.1 Termination
for Any Reason Except Death, Disability or Cause.
If
Optionee is terminated for any reason other than Optionee’s death, permanent
disability or cause (each as defined in Section 7(a) and 7(b) of the Employment
Agreement), then this Option, to the extent (and only to the extent) that it
is
vested in accordance with the provisions of Section 4 hereof on the effective
date of termination, may be exercised by Optionee no later than thirty (30)
days
after said date , but in any event no later than the Expiration
Date.
2
5.2 Termination
Because of Death or Disability.
If
Optionee is terminated because of death or permanent disability of Optionee
pursuant to Section 7(a) of the Employment Agreement, then this Option, to
the
extent that it is vested in accordance with the schedule set forth in Section
4
hereof on the date of termination, may be exercised by Optionee (or Optionee’s
legal representative or authorized assignee) no later than twelve (12) months
after the date of termination, but in any event no later than the Expiration
Date.
5.3 Termination
for Cause by the Company, or Voluntarily by the Optionee.
If an
Optionee is terminated pursuant to Section 7(b) ("Cause") of the Employment
Agreement, or if the Optionee voluntarily terminates his employment, neither
the
Optionee, nor the Optionee’s estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to any Shares
whatsoever, whether or not the Optionee may receive payment from the Company
or
any subsidiary, after such termination, for vacation pay, for services rendered
prior to termination, for services rendered for the day on which termination
occurs, for salary in lieu of notice, or for any other benefits. For the purpose
of this paragraph, termination of service shall be deemed to occur on the date
when the Company dispatches notice or advice to the Optionee that Optionee’s
service is terminated.
5.4 No
Obligation to Employ.
Nothing
in this Agreement shall confer on Optionee any right to continue in the employ
of, or other relationship with, the Company, a Subsidiary or an Affiliate,
or
limit in any way the right of the Company or any Affiliate or Subsidiary of
the
Company to terminate Optionee’s employment or other relationship at any time,
with or without Cause. This Agreement does not constitute an employment or
other
service contract. This Agreement does not guarantee employment or other service
for the length of time of the vesting schedule or for any portion thereof as
set
forth herein.
6. Manner
of Exercise.
6.1 Stock
Option Exercise Procedures.
To
exercise this Option, Optionee (or in the case of exercise after Optionee’s
death, Optionee’s executor, administrator, heir or legatee, as the case may be)
shall execute and deliver to the Company an option exercise notice (the "Option
Exercise Notice" or "Exercise Notice"), and pay the Exercise Price with respect
to the number of Options then being exercised, by immediately available funds.
Exercise of the Options shall not be deemed effective until receipt of the
Exercise Notice and payment of the full amount of consideration for the Options
then being exercised, together with such additional documents and information
as
the Company may reasonably require.
6.2 Limitations
on Exercise.
This
Option may not be exercised unless such exercise is in compliance with all
applicable federal and state securities laws, as they are in effect on the
date
of exercise.
6.3 Payment.
An
exercise of this Option shall be accompanied by full payment of the aggregate
Exercise Price for the Shares being purchased (a) in cash (by check), or (b)
provided that a public market for the Company’s stock exists: (1) through a
“same day sale” commitment from Optionee and a broker-dealer that is a member of
the National Association of Securities Dealers (an “NASD Dealer”) whereby
Optionee irrevocably elects to exercise this Option and to sell a portion of
the
Shares so purchased to pay for the aggregate Exercise Price and whereby the
NASD
Dealer irrevocably commits upon receipt of such Shares to forward the aggregate
Exercise Price directly to the Company; or (2) through a “margin” commitment
from Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise
this Option and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
aggregate Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the aggregate Exercise Price directly to
the
Company. Notwithstanding the foregoing, the Board of Directors, in its absolute
discretion, may allow for the full payment of the aggregate Exercise Price
for
the Shares being purchased to be made by any other method which is in accordance
with the provisions hereof.
3
6.4 Tax
Withholding.
Prior
to the issuance of the Shares upon exercise of this Option, Optionee must pay
or
provide for any applicable federal or state withholding obligations of the
Company. If the Board of Directors permits, the Optionee may provide for payment
of withholding taxes upon exercise of this Option by requesting that the Company
retain Shares with a Fair Market Value (determined as of the date that the
tax
must be withheld) equal to the amount of taxes required to be withheld. In
such
case, the Company shall issue the net number of Shares to the Optionee by
deducting the Shares retained from the Shares issuable upon
exercise.
6.5 Issuance
of Shares.
Provided that the exercise procedures, including payment, are completed in
accordance with the provisions hereof, the Company shall issue the Shares
registered in the name of Optionee, Optionee’s authorized assignee, or
Optionee’s legal representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
7. Certain
Adjustments.
7.1 In
the
event of a payment of a stock dividend or the declaration and effecting of
a
stock split (including a reverse stock split):
(i) the
number of Shares acquirable upon exercise of Options then unexercised shall
be
adjusted to the number determined by multiplying the number of Shares by a
fraction (which may be greater than 1), of which the numerator
shall
equal the number of shares of Common Stock issued and outstanding immediately
after such stock dividend or stock split, and the denominator
shall be
the number of the shares of Common Stock issued and outstanding immediately
prior to the declaration of such stock dividend or stock split; and
(ii) the
Exercise Price per Share acquirable upon exercise of Options then unexercised
shall be adjusted to the number determined by multiplying the Exercise Price
by
a fraction (which may be greater than 1), of which the numerator
shall
equal the number of the shares of Common Stock issued and outstanding
immediately prior to the declaration of such stock dividend or stock split,
and
the denominator
shall
equal the number of shares of Common Stock issued and outstanding immediately
after such stock dividend or stock split.
4
7.2 If
the
Company is a party to a merger, consolidation or other similar reorganization
(collectively, a "Reorganization"), and the Company is not the surviving entity
in the Reorganization, the Options shall be subject to the provisions of such
agreement or plan of Reorganization. Such agreement or plan shall provide for
any one or more of the following:
(i) the
assumption of the Options by the surviving entity in the Reorganization, or
any
parent or subsidiary thereof;
(ii) the
substitution by the surviving entity or any parent or sub-si-diary thereof
of
options to acquire securities of the surviving entity or any parent or
subsidiary thereof;
(iii) the
immediate full vesting and accelerated expiration of the Options;
(iv) settlement
of the value of the Options in cash or cash equivalents, followed immediately
by
cancellation of the Options.
The
terms
of any of the foregoing shall be in the absolute discretion of the Company
and
the other parties to the Reorganization.
8. Compliance
With Laws and Regulations.
The
exercise of this Option and the issuance and transfer of Shares to the Optionee
shall be subject to compliance by the Company and Optionee with (i) all
applicable requirements of federal and state securities laws, (ii) all
ap-plicable requirements of any stock exchange on which the Company’s Common
Stock may be listed and (iii) any applicable policy of the Company regarding
the
trading of securities of the Com-pany, each at the time of such issuance and
transfer. Optionee understands that the Com-pany is under no obligation to
register or qualify the Shares with the Securities and Exchange Com-mission,
any
state securities commission or any stock exchange or market to effect such
compliance.
9. Nontransferability
of Option.
This
Option may not be transferred in any manner other than transfers by will or
by
the laws of descent and distribution or to members of the Optionee’s immediate
family, to trusts solely for the benefit of such immediate family members and
to
partnerships or limited liability companies in which such family members and/or
trusts are the only partners or members, as the case may be. For this purpose,
“immediate family” means the Optionee’s spouse, parents, children, stepchildren,
grandchildren and legal dependants. Any transfer of Options made under this
provision will not be effective until notice of such transfer is delivered
to
the Company. The terms of this Option shall be binding upon the executors,
administrators, successors and assigns of Optionee. No purported transfer shall
be deemed effective unless accomplished in accordance with applicable federal
and state securities laws.
5
10. Privileges
of Stock Ownership.
Optionee
shall not have any of the rights of a stockholder with respect to any Shares
until the Shares are issued to Optionee.
11. Interpretation.
Any
dispute regarding the interpretation of this Agreement shall be submitted by
Optionee or the Company to the Board of Directors for review. The resolution
of
such a dispute by the Board of Directors shall be final and binding on the
Company and Optionee.
12. Entire
Agreement.
This
Agreement and those portions of the Employment Agreement referred to herein
constitute the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersede all prior understandings
and
agreements with respect to such subject matter; provided,
however,
that any
agreement, covenant or undertaking by the Optionee with respect to the sale
or
any other transfer of any capital stock of the Company, whether in force on
the
date hereof or hereafter made, is deemed incorporated herein and made a part
hereof..
13. Notices.
Any
notice required to be given or delivered to the Company under the terms of
this
Agreement shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. Any notice required to be given
or
delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated above or to such other address as such party may designate
in
writing from time to time to the Company. All notices shall be deemed to have
been given or delivered upon: personal delivery; three (3) days after deposit
in
the United States mail by certified or registered mail (return receipt
requested); one (1) business day after deposit with any return receipt express
courier (prepaid); or one (1) business day after transmission by
facsimile.
14. Successors
and Assigns.
The
Company may assign any of its rights under this Agreement. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Optionee and Optionee’s heirs, executors,
administrators, legal representatives, successors and assigns.
15. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, applicable to agreements made and to be performed entirely
within such state, other than conflict of laws principles thereof directing
the
application of any law other than that of Delaware.
16. Acceptance;
Tax Consequences.
Optionee
hereby acknowledges receipt of a copy of this Agreement. Optionee has read
and
understands the terms and provisions of the Agreement and accepts this Option
subject to all the terms and conditions of this Agreement. Optionee
acknowledges that there may be adverse tax consequences upon exercise of this
Option or disposition of the Shares and that the Company has advised Optionee
to
consult a tax advisor prior to such exercise or
disposition.
6
17. Covenants
of the Optionee. The
Optionee agrees (and for any heir, executor, administrator, legal
representative, successor, or assignee hereby agrees), as a condition upon
exercise of the Option granted hereunder:
(a) Upon
the
request of the Board of Directors, to execute and deliver a certificate, in
form
satisfactory to the Board of Directors, certifying that the Shares being
acquired upon exercise of the Option are for such person’s own account for
investment only and not with any view to or present intention to resell or
distribute the same. The Optionee hereby agrees that the Company shall have
no
obligation to deliver the Shares issuable upon exercise of the Option unless
and
until such certificate shall be executed and delivered to the Company by the
Optionee or any successor.
(b) Upon
the
request of the Board of Directors, to execute and deliver a certificate, in
form
satisfactory to the Board of Directors, certifying that any subsequent resale
or
distribution of the Shares by the Optionee shall be made only pursuant to either
(i) a Registration Statement on an appropriate form under the Securities Act
of
1933, as amended (the “Securities Act”), which Registration Statement has become
effective and is current with regard to the Shares being sold, or (ii) a
specific exemption from the registration requirements of the Securities Act,
but
in claiming such exemption the Optionee shall, prior to any offer of sale or
sale of such Shares, obtain a prior favorable written opinion of counsel, in
form and substance satisfactory to counsel for the Company, as to the
application of such exemption thereto. The foregoing restriction contained
in
this subparagraph (b) shall not apply to (i) issuances by the Company so long
as
the Shares being issued are registered under the Securities Act and a prospectus
in respect thereof is current, or (ii) re-offerings of Shares by Affiliates
of
the Company (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) if the Shares being re-offered are
registered under the Securities Act and a prospectus in respect thereof is
current.
(c) That
certificates evidencing Shares purchased upon exercise of the Option shall
bear
a legend, in form satisfactory to counsel for the Company, manifesting the
investment intent and resale restrictions of the Optionee described in this
Section.
(d) That
upon
exercise of the Option granted hereby, or upon sale of the Shares purchased
upon
exercise of the Option, as the case may be, the Company shall have the right
to
require the Optionee to remit to the Company, or in lieu thereof, the Company
may deduct, an amount of shares or cash sufficient to satisfy federal, state
or
local withholding tax requirements, if any, prior to the delivery of any
certificate for such Shares or thereafter, as appropriate.
18. Obligations
of the Company
18.1 Upon
the
exercise of this Option in whole or in part, the Company shall cause the
purchased Shares to be issued only when it shall have received the full payment
of the aggregate Exercise Price in accordance with the terms of this
Agreement.
7
18.2 The
Company shall cause certificates for the Shares as to which the Option shall
have been exercised to be registered in the name of the person or persons
exercising the Option, which certificates shall be delivered by the Company
to
the Optionee only against payment of the full Exercise Price in accordance
with
the terms of this Agreement for the portion of the Option exercised.
18.3 In
the
event that the Optionee shall exercise this Option with respect to less than
all
of the Shares of Common Stock that may be purchased under the terms hereof,
the
Company shall issue to the Optionee a new Option, duly executed by the Company
and the Optionee, in form and substance identical to this Option, for the
balance of Shares of Common Stock then issuable pursuant to the terms of this
Option.
18.4 Notwithstanding
anything to the contrary contained herein, neither the Company nor its transfer
agent shall be required to issue any fraction of a Share of Common Stock in
connection with the exercise of this Option, and the Company shall, upon
exercise of this Option in whole or in part, issue the largest number of whole
Shares of Common Stock to which this Option is entitled upon such full or
partial exercise and shall return to the Optionee the amount of the aggregate
Exercise Price paid by the Optionee in respect of any fractional
Share.
18.5 The
Company may endorse such legend or legends upon the certificates for Shares
issued to the Optionee and may issue such “stop transfer” instructions to its
transfer agent in respect of such Shares as, in its discretion, it determines
to
be necessary or appro-priate to: (i) prevent a violation of, or to perfect
an
exemption from, the registration requirements of the Securities Act; (ii)
implement the provisions of this Agreement and any agreement between the Company
and the Optionee with respect to such Shares; or (iii) permit the Company to
determine the occurrence of a disqualifying disposition, as described in Section
421(b) of the Code, of Shares transferred upon exercise of an incentive stock
option granted pursuant to this Agreement.
18.6 The
Company shall pay all issue or transfer taxes with respect to the issuance
or
transfer of Shares to the Optionee, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a
Registration Statement under the Securities Act, which fees and expenses shall
be borne by the Optionee, unless such Registration Statement under the
Securities Act has been filed by the Company for its own corporate purposes
(and
the Company so states) in which event the Optionee shall bear only such fees
and
expenses as are attributable solely to the inclusion of the Shares he or she
receives in the Registration Statement.
18.7 All
Shares issued following exercise of the Option and the payment of the Exercise
Price in accordance with the terms of this Agreement therefore shall be fully
paid and non-assessable to the extent permitted by law.
8
19. Miscellaneous
19.1 If
the
Optionee loses this Agreement representing the Option granted hereunder, or
if
this Agreement is stolen or destroyed, the Company shall, subject to such
reasonable terms as to indemnity as the Board of Directors, in its absolute
discretion shall require, enter into a new option agreement pursuant to which
the Company shall issue a new Option, in form and substance identical to this
Option, and in substitution for, the Option so lost, stolen or destroyed, and
in
the event this Agreement representing the Option shall be mutilated, the Company
shall, upon the surrender hereof, enter into a new option agreement pursuant
to
which the Company shall issue a new Option, in form and substance identical
to
this Option, and in substitution for, the Option so mutilated.
19.2 This
Agreement cannot be amended, supplemented or changed, and no provision hereof
can be waived, except by a written instrument making specific reference to
this
Agreement and signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought. A waiver of any right
derived hereunder by the Optionee shall not be deemed a waiver of any other
right derived hereunder.
19.3 This
Agreement may be executed in any number of counterparts, but all counterparts
will together constitute but one agreement.
19.4 Any
dispute regarding the interpretation of this Agreement shall be submitted by
Optionee or the Company for review. The resolution of such a dispute by Company
shall be final and binding on the Company and Optionee.
[Signature
page follows:]
9
In
Witness Whereof,
the
Company has caused this Stock Option Agreement to be executed in duplicate
by
its duly authorized representative, and Optionee has executed this Agreement
in
duplicate.
|
Optionee:
__________________________________
Xxxxxx
X. Xxxxxxxx
|
Net
Perceptions, Inc.
By:_____________________________________
Xxxxx
X. Xxxxx,
Chief
Administrative Officer
|
|
Optionee's
Address:
_______________________________
_______________________________
_______________________________
_______________________________
|
