[EXHIBIT 10.2.6]
EXHIBIT "B"
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd
day of May, 2003, by and between Film and Music
Entertainment, Inc., a Nevada Corporation (hereinafter
"Company" or "Employer") and Xxxxxxx Xxxxx (hereinafter
"Employee"), a key employee of the Company.
WITNESSETH:
WHEREAS, the employee has provided valuable services to
the Company and the Employer in the development of the
Employer's business;
WHEREAS, in recognition of the importance of the
Employee, the Employer and the Employee are entering into a
five (5) year employment agreement (the "Employment
Agreement") contemporaneous with the execution and delivery
of this Agreement, and the Company is willing to provide the
Employee the substantial stock options under this Agreement
in partial consideration for the covenants and agreements of
the Employee contained in the Employment Agreement,
including Section 4.2 therein;
WHEREAS, the Board of Directors of Company (hereinafter
"Board") has authorized and approved the granting of the
option to purchase the number of shares of Common Stock of
Company on the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto have agreed, and to
hereby agree, as follows:
1. Grant of Option. Company hereby grants to the
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Employee the right and option (hereinafter "Option") to
purchase all or any part of an aggregate of Nine Million
(9,000,000) shares of Common Stock of Company on the terms
and conditions set forth in this Agreement.
2. Purchase Price. Term and Vesting of Options. The
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purchase price of the shares of Common Stock of Company subject
to this Option shall be 50% of the closing price of the Common
Stock on May, 2003. Unless sooner terminated pursuant to
paragraph 7 below, the Option shall terminate on May 30,
2013. Subject to Employee faithfully executing his duties
under the Employment Agreement dated May, 2003, the shares
subject to the Option shall vest and become exercisable on
the following dates:
November 23 ,2003 1,125,000
May, 2004 1,125,000
November 23, 2004 1,125,000
May 23, 2005 1,125,000
November 23, 2005 1,125,000
May 23, 2006 1,125,000
November 23, 2006 1,125,000
May 23, 2007 Balance remaining
The purchase price of the shares as to which the Option
may be exercised shall be paid in full in cash or as
otherwise provided for by resolution of the Board of
Directors at the time of exercise. Except as provided
in paragraphs 8 and 20 of this Agreement, the Option
may not be exercised unless the Employee shall have
been in the continuous employ of Company, or one or
more of its affiliates or subsidiaries, from the date
hereof to the date of the exercise of the Option.
3. Deposit of Options. The employee agrees that at the
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option of the Company, the Options, any common Stock
of the Company obtained upon their exercise and the
certificate(s) evidencing the same shall be deposited
with the Trustee of the Voting Trust under the
Company's Voting Trust Agreement dated May 23, 2003
(the "Voting Trust) and shall be held and distributed
in accordance with, and subject to the terms and
conditions of this Agreement and the Voting Trust.
4. Adjustments. If the number or type of shares of Common
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Stock of the Company outstanding shall be changed or
if the Company distributes to the holders of its
Common Stock any stock of the Company or any security
convertible into stock of the Company, as a result of
recapitalization, stock split, stock dividend,
exchange, consolidation, combination, combination of
shares, or reorganization or other event in which the
Company is the surviving corporation, the Board shall
make such proportionate increase or decrease in the
number, kind and price of the shares subject to the
Option as it may deem appropriate in the same manner
as the adjustment made for employee options generally
for such events, and in doing so may eliminate any
fractional shares which might result from such
proportionate increase or decrease.
5. Not a stockholder. The holder of the Option shall not
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have any rights of a stockholder of the Company with
respect to the shares covered by the Option except to
the right to vote those shares reflected in the
Option and to the extent that the certificates for
such shares shall be delivered to him upon the due
exercise of the Option.
6. Non-Transferability of Option. The Option shall not
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be transferable except by win or the laws of descent and
distribution, and may be exercised during the
lifetime of the Employee on]y by the Employee except
as provided in paragraph 10 of this agreement.
Without limiting the generality of the foregoing
restriction of transferability, the Option may not be
assigned, transferred (except as provided in the
preceding sentence), pledged, or hypothecated in any
way, shall not be assignable by operation of law and
shall not be subject to execution, attachment, or
similar process. Any attempted assignment, transfer,
pledge, hypothecation, or other disposition of the
Option contrary to the provision hereof, and the levy
of any execution, attachment, or similar process upon
the Option, shall be null and void and without
effect.
7. Acceleration of Vesting of Option. In the event of
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(i) the sale of all or substantially all of the assets
of the Company, or (ii) 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 fifty-one percent (51%) of the voting power
of the surviving corporation, then all of the shares
subject to the Option shall be vested and exercisable
in full upon the occurrence of such event. In
addition, in the event of a Going Private Transaction
(as defined below) is consummated, then all of the
shares subject to the Option shall become fully
vested upon the closing of the Going Private
Transaction and shall be entitle to receive from the
Company, in consideration for the cancellation of all
rights under the Option, cash in an amount equal to
the excess of the price per share for the common
stock of the Company paid to shareholders in the
Going Private Transaction over the option exercise
price of the Option multiplied by the number of shares
subject to the Option. The term "Going Private
Transaction" means any transaction or series of
transactions between the Company and any entity
directly or indirectly controlled by a private
company, individual(s) and/or entity including a sale
of all or substantially all of the assets of the
Company to such an entity or any merger,
consolidation or other reorganization of the Company
with such an entity for which a filing is required
under Regulation 13e-3 of thru Securities and
Exchange Commission.
8. Termination of Employment. On the date
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hereof, the Company and Employee have entered into an
employment agreement (the "Employment Agreement"). In
the event that the employment of the Employees shall
be terminated (i) by the Company for "Cause" (as
defined in the Employment Agreement), or (ii) by
reason of the death or disability of the Employee,
the Option may be exercised by the Employee (to the
extent that shall have been entitled to do so at the
termination of his employment), or by Employee's
estate or by the person who acquires the right to
exercise the Employee's Option by reason of the
Employee's death, at any time within one (I) month
after such termination, except as provided in
paragraph 10 below on the case of death. In the event
the Company terminates the Employee's employment
without Cause or the Employee terminates his
employment due to a material breach of the Employment
Agreement by the Company, and such breach remains
uncured after ten (10) days written notice from the
Employee to the Company, the Option shall continue
to vest according to the schedule in paragraph 2 above
for the balance of the term of the Employment
Agreement, not including any employment option
periods then not yet exercised, and be exercisable
as if such termination did not occur and the Employee
continued to be employed by the Company for the
balance of such term, not including any employment
option periods then not yet exercised; provided that
the Employee complies with the covenants and
agreements in the Employment Agreement which
continue after the termination of his employment.
Method of Exercising Option.
9. Method of Exercising Option.
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(a) Subject to the terms and conditions of this
Agreement, the Option may be exercised at any time
and from time to time prior to the expiration
date specified in such option, by written notice to
the corporate Secretary of the Company at its
executive offices with a copy to the Chairman of the
Board of Directors. Such notice shall state the
election to exercise the Option and the number of
shares in respect of which it is being exercised,
shall be signed by the person or persons so
exercising the Option, and shall be accompanied by
payment of the full purchase price of such shares.
The Company shall deliver a certificate or
certificates representing such shares as soon as
practicable after the notice shall be received.
Payment of such purchase price shall be made by a
certified check payable to the order of the Company.
The certificate or certificates for the shares as to
which the Option shall have been so exercised shall
be registered in the name of the person or persons so
exercising the Option ( or, if the Option shall be
exercised by the Employee and if the Employee shall
request in the notice exercising the Option, shall be
registered in the name of the Employee and another
person jointly, with right of survivorship) and shall
be delivered as provided above to or upon the written
order of the person or persons exercising the Option.
In the event the Option shall be exercised pursuant
to paragraph 10 of this Agreement by any person or
persons other than the Employee, such notice shall
be accompanied by appropriate proof of the right of
such person or persons to exercise the Option. All
shares that shall be purchased upon the exercise of
the Option as provided herein shall be duly
authorized and validly issued and shall be fully paid
and nonassessable.
(b) It shall be a condition to the obligation
of the Company to issue or transfer shares of
Common Stock upon exercise of the Option granted
hereunder by delivery of shares, that the Employee
(or any authorized representative) pay to the
Company, upon its demand, such amount as may be
requested by the Company for the purpose of
satisfying its ability to withhold federal, state or
local income or other taxes incurred by reason of the
exercise of the Option or the transfer of shares upon
such exercise. If the amount requested by the Company
to satisfy such withholding tax liability is not
paid, the Company may refuse to issue or transfer
shares of Common Stock upon exercise of the Option.
(c) The Company shall not be required
to issue or transfer any certificates for shares
purchased upon exercise of this Option until all
applicable requirements of law have been complied
with and such shares have been listed on any
securities exchange or system on which the Common
Stock may be listed.
10. Death of Employee. In the event of the
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death of the Employee, the estate of the Employee
or the person who acquires the right to exercise
the Employee's Option by reason of the Employee's
death, whether by request, inheritance or in testate
succession, shall have the right to exercise the
Option (to the extent the Employee shall have
entitled to exercise the Option at the time of his
death) within twelve (12) months following the
death of the Employee (but not after the expiration
of the Option on May
30, 2013) for the number of shares which the Employee
was entitled top purchase at time of his death, but
only if the person to whom the Option was granted was
at the time of his death in the employ of the Company
or any of its subsidiaries or of a corporation (or of
a parent or subsidiary of such corporation) issuing
or assuming the Option in the transaction to which
Section 425 (a) of the Internal Revenue Code of 1954,
as amended, (herein called the "Internal Revenue
Code") was applicable. Any such exercise shall be
made by (i) delivering written notice to the
Secretary of the Company specifying the number of
shares of Common Stock with respect to which the
Option is being exercised, (ii) paying or causing to
be paid to the Company the purchase price of such
shares, and (iii) providing the Company with such
evidence as the Company may request to demonstrate
that the person or persons exercising the Option has
or have the right to do so and that all taxes or
other assessments with respect to the Common Stock
issuable upon exercise of the Option have been paid
or adequate provisions for such payment has been
made. Upon being satisfied that the person or persons
exercising the Option has or have right to do so and
that all taxes or other assessment with respect to
the Common Stock covered thereby have been paid or
provided for, the Company shall issue certificates
for such shares in such denominations as the persons
exercising the Option may direct, and shall deliver
such shares in accordance with reasonable
instructions contained in the notice.
11. Reservation of Shares. The Company shall at all
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times during the term of the Option reserve and keep
available such number of shares of the Common Stock
as will be sufficient to satisfy the requirement of
the Agreement, shall pay all original issue and
transfer taxes with respect to the issue and transfer
of shares pursuant hereto and all other fees and
expenses necessarily incurred by the Company in
connection therewith and will from time to time use
its best efforts to comply with all laws and
regulations which, in the opinion of counsel for the
Company, shall be applicable thereto.
12. Restricted Securities and Investment
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Representation. By execution of this Agreement, the
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Employee agrees and understands that the shares of
Common Stock issuable upon exercise of this Option
have not been registered under applicable under
federal and state securities laws and, therefore,
constitute "restricted securities" within the meaning
of federal securities laws, that the shares may only
be resold pursuant to an applicable exemption from
registration or pursuant to an effective registration
statement and that the shares will bear a restrictive
legend and stop transfer restrictions to such effect.
Further, the Employee represents that the shares
acquired by exercise of the Option are being acquired
for investment and not with a view to resale or
distribution thereof to the public. By exercising the
Option, the Employee acknowledges that he or she has
received all financial and other information
concerning the Company he or she deems necessary or
has requested. In addition, the Employee agrees to
furnish the Company with a certificate to the effect
of the foregoing upon exercise of the Option.
The Company will use reasonable efforts to register
the shares of Common Stock, which may be issued upon
the exercise of this Option on a Form S-8
Registration Statement under the Securities Act of
1933, as amended.
13. Definitions. As used herein, the term
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"subsidiary" shall mean any present or future
corporation which would be a "subsidiary corporation"
of the Company, as the term is defined in Section 425
(f) of the Internal Revenue Code of 1954 as amended.
14. Governing Law. This Agreement shall be
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governed by and construed in accordance with the laws
of the State of California. Employee and Company
consent to exclusive venue for the adjudication of
any disputes pertaining to the interpretation or
enforcement of this Agreement in the County of Los
Angeles, California U.S.A. Employee and Company
consent to the exercise of personal jurisdiction over
Employee and Company by any court located in the
County of Los Angeles, California U.S.A. having
subject matter jurisdiction over any such dispute.
Nothing contained in this paragraph shall be deemed a
limitation upon either party's right to seek the
enforcement of a lawfully issued judgment in any
other court of competent jurisdiction.
IN WITNESS WEHEREOF, the company has caused this
Agreement to be duly executed by its officers thereunto
duly authorized, and the Employee has hereunto set his
hand and seal, all on the day and year first above
written.
FILM AND MUSIC ENTERTAINMENT, INC.
("Employer")
BY: /s/Xxxx Xxxxx
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Its: President
/s/Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
("Employee")
