Exhibit 10(v)
SANDBOX ENTERTAINMENT CORPORATION
ISO AWARD AGREEMENT UNDER 1995 EQUITY INCENTIVE PLAN
[DATE]
______________________
______________________
______________________
Dear _____________:
I am happy to advise you that you have been selected by the Board of
Directors (the "Board") administering the 1995 Equity Incentive Plan of Sandbox
Entertainment Corporation (the "Company"), to receive an incentive stock option
and that on _______, 1996, you were granted an option to purchase
________________ (__________) shares of the Company's Class A Common Stock
($.001 par value) at a price of ___________ ($_____) per share (the "Stock").
The option granted to you is subject to the terms and conditions of the
Company's 1995 Equity Incentive Plan (the "Plan") and such additional terms and
conditions as are set forth in this Award Agreement (collectively the
"Agreement"). The terms of the Plan are incorporated by reference in this Award
Agreement and govern the granting, holding and exercise of your option as though
set forth in full in this letter. A copy of the Plan is attached as Exhibit A
for your review. All capitalized terms used in this Award Agreement and not
otherwise defined herein shall have the meanings expressly assigned thereto in
the Plan.
The Board has imposed the following additional terms and conditions
relating to your option and its exercise:
1. You may exercise your option, only in accordance with Paragraph 3
below, by delivery to the Company (in care of its Secretary) at the principal
offices of the Company, presently located at 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx
000, Xxxxxxx, Xxxxxxx 00000, xxxxxxx, irrevocable notice of exercise in the form
attached to this letter as Exhibit B, specifying the number of shares with
respect to which the option is being exercised, together with payment of the
exercise price for those shares in cash or by check. Any other form of exercise
or tender may be refused by the Company, acting through the Board or otherwise,
in its discretion.
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2. Your option is not transferable other than by will or the laws of
descent and distribution and is exercisable, during your lifetime, only by you.
You may not assign or otherwise transfer or encumber your option or any interest
in your option to any person in any way.
3. (a) Provided you are then an employee of the Company and subject to
the further provisions of this Paragraph 3, your option shall first vest and
become exercisable, with respect to the shares subject to your option on the
dates set forth below (the "Vesting Dates"), and not before, with respect to the
designated number of shares as follows:
Number of Shares Vesting Vesting Dates
2,000 ___________, 1997
2,000 ___________, 1998
2,000 ___________, 1999
2,000 ___________, 2000
2,000 ___________, 2001
Notwithstanding any other provision of this Agreement (other than
Paragraph 3(f) below), your option, to the extent not previously exercised,
shall automatically terminate and be of no further force or effect on and as of
5:00 o'clock p.m., M.S.T., of the date which is the tenth (10th) anniversary of
the date of grant of this option.
(b) In the event you leave the Company for any reason whatsoever
(including your death or Disability, or termination by your voluntary
resignation or at the direction of the Company, with or without Cause) prior to
any Vesting Date, your unexpired option shall automatically terminate to the
extent it has not vested pursuant to Paragraph 3(a) above or Paragraph 3(f)
below, and your rights with respect to the option to the extent it has vested
shall be governed by Section 6.3 of the Plan and Paragraphs 3(c) and 3 (g)
below.
(c) In the event you leave the employment of the Company for any reason
whatsoever, including termination by your voluntary resignation or at the
direction of the Company, with or without Cause, or of your death or Disability,
the Company (or its nominee) shall have the right (but not the obligation) to
purchase any shares of Stock held by you (including shares acquired pursuant to
Section 6.3 of the Plan). If the termination of your employment is for Cause,
the purchase price for your Stock shall be the lower of the exercise price you
paid for such shares or the Fair Market Value per share of such Stock, as
defined in the Plan. If the termination is for any other reason, the purchase
price for your Stock shall be the Fair Market Value per share.
(i) The Company (or its nominee) shall exercise this right to
repurchase the shares of Stock, if at all, within six (6) months
following the date of
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the termination of your employment with the Company by delivering
written notice of exercise to you or your personal representative.
(ii) Payment on such exercise by the Company shall be made by
an initial payment on the Consummation Date (defined below) equal to
20% of the purchase price, and the balance shall be made in four (4)
equal annual installments of principal and accrued interest commencing
on the first anniversary of the Consummation Date, and on the next four
(4) anniversaries of the Commencement Date. Interest shall commence to
accrue from the Consummation Date at the prime rate of interest in
effect on the Consummation Date as announced in the Wall Street Journal
(or a reasonable substitute selected by the Board), and it shall be
adjusted annually thereafter to the then-existing Wall Street
Journal-announced prime rate (or a reasonable substitute selected by
the Board), which adjusted rate of interest shall remain in effect for
the entire year then beginning (interim changes in the prime rate
during the year being disregarded). The "Consummation Date" for
purposes of this Paragraph shall be the sixtieth (60th) day following
delivery of the Company's notice of exercise, provided that such date
may be extended by you or your personal representative by written
notice to a date not later than the earlier of ten (10) days after all
holding periods under Section 422 of the Internal Revenue Code expire
or consummation of a transaction (e.g., merger, consolidation, stock
sale) pursuant to which the holder of your shares would be entitled to
receive consideration of any kind. The Company may, at its election,
prepay amounts due under this Paragraph, without premium or penalty.
(d) In the event any shares of Stock acquired pursuant to exercise of
options hereunder, or any interest therein, are to be transferred, voluntarily
or involuntarily (including, without limitation, any sale, encumbrance,
foreclosure or transfer in lieu thereof, or by operation of law, any division of
marital property on account of divorce or legal separation being deemed a
"transfer" for purposes hereof, but excluding transfers to which Paragraph 3(c)
hereof applies), the Company (or its nominee) shall have a right of first
refusal as follows:
(i) You (or the holder of such shares if not you) shall give
the Company advance written notice detailing all the terms of the
proposed transfer. The Company (or its nominees) shall have the right
(but not the obligation), exercisable upon delivery to the transferring
shareholder of written notice of acceptance within thirty (30) days
following receipt of the notice of proposed transfer described in the
preceding sentence, to repurchase all or any of such shares on the
terms and conditions set forth in such notice;
provided that the per share purchase price shall be the lesser
of (X) the price, plus the Fair Market Value of any non-cash
consideration, stated in the notice or (Y) the Fair Market
Value of
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the shares (and shall be the Fair Market Value in the event of
a transfer not involving any consideration); and
provided further that the purchase price shall be payable, at
the election of the Company (or its nominees), either on the
terms set forth in the transferor's notice or in installments
with interest as set forth in Paragraph 3(c)(ii). The Company
may, at its election, prepay amounts due under this Paragraph,
without premium or penalty.
(ii) The date for consummating such purchase shall be the
sixtieth (60th) day following delivery of the Company's (or its
nominees') notice of exercise, provided that such date may be extended
by the transferring shareholder by written notice to a date not later
than the earlier of ten (10) days after all holding periods under
Section 422 of the Code expire. Failure by the Company (or its
nominees) (without default by the transferring shareholder) to close
such purchase within the above 60-day period shall give the
transferring shareholder the right to transfer such shares or interest
therein on the terms and to the person described in the notice during
the 60 days following expiration of the original 60-day period;
provided that the shares or interest therein to be transferred shall
for all purposes remain subject to this agreement. If the transferring
shareholder fails to close the proposed transfer on those terms within
such second 60-day period, the proposed transfer shall again be subject
to the terms of this Paragraph 3(d). Notwithstanding the foregoing,
such shares may be transferred or retransferred without invoking this
right of first refusal between you and trusts of which you and/or your
spouse are the sole beneficiaries by giving prior written notice
certifying such a transfer is to be made; provided that following any
such transfer, such shares shall remain subject to this right of first
refusal and all the other provisions of this Agreement.
(e) For so long as the Company's right to repurchase the Stock as set
forth in this Paragraph 3 remains effective, neither you, nor your personal
representative(s), devisee(s), heir(s), successor(s), or assignee(s) shall sell,
assign or otherwise transfer any shares of Stock or interest therein without
obtaining the written agreement of the purchaser, assignee or transferee that
the shares remain subject to this repurchase right, and you agree that
certificates evidencing the Stock may be legended to reflect the foregoing
restrictions.
(f) In its sole discretion, the Board may waive or accelerate vesting
of options, or waive or extend expiration dates (other than the final expiration
date set forth in Paragraph 3(a) above). In addition, vesting shall
automatically be deemed waived on the date which is thirty (30) days prior to a
"Change in Control". For purposes of this Agreement, "Change of Control" means
each of the following:
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(A) Any transaction, or series of transactions, whereby any
person (as that term is used in Section 13 and 14(d)(2) of the Exchange
Act), excluding affiliates of the Company as of the Effective Date, is
or becomes the beneficial owner (as that term is used in Section 13(d)
of the Exchange Act) directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities;
(B) Any merger, consolidation, or liquidation of the Company
in which the Company is not the continuing or surviving corporation or
pursuant to which Stock would be converted into cash, securities, or
other property, other than a merger or consolidation with a wholly
owned Subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial
change in the shareholders of the Company and all then outstanding
Awards are assumed by the successor corporation, which assumption shall
be binding on all Participants; or
(C) The sale, transfer, or other disposition of all or
substantially all of the assets of the Company.
(g) Paragraph 3(d) shall terminate and be of no further force or effect
automatically upon the closing of an initial public stock offering of the
Company's common stock under the Securities Act the result of which is that the
Company's common stock is traded, or quoted, as applicable, on a national
securities exchange, over the counter on NASDAQ, or through the NASD's National
Market System (an "IPO").
4. The Company will reserve or keep available at all times sufficient
shares of its common stock to permit the exercise of your option and all other
options granted or to be granted under the Plan.
5. It is contemplated that the common stock in the Company to be issued
to you upon exercise of your option will not be registered under the Securities
Act of 1933, as amended (the "Act") or any applicable state securities laws, in
reliance on exemptions from registration thereunder. If in the opinion of
counsel satisfactory to the Company no exemption from registration is then
available, or if such issuance is otherwise in violation of applicable law at
the time purchase rights are exercised under this option, then the Company's
obligation to issue shares of its common stock upon exercise of your option
shall be suspended until such time as the Company's counsel determines that an
exemption from registration is available and such shares can be issued without
violation of law. If such an exemption is available in the opinion of such
counsel, and such issuance is not otherwise in violation of applicable law you
(or your personal representative(s), devisee(s), or heir(s)) will deliver to the
Company as a condition precedent to giving notice of each exercise, an
investment letter agreement in form and substance satisfactory to the Company to
enable the Company to comply with the Act or other applicable securities laws
and which may, among other things, limit or condition the right to dispose of
shares acquired
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under your option. Dispositions of the shares of Stock acquired by exercise of
your option will be permitted only if in the opinion of counsel satisfactory to
the Company such disposition is not in violation of the Act, any applicable
state securities laws, or any other applicable law, regulation or rule, and you
(or your personal representative(s), devisee(s), or heir(s)) deliver to the
Company a letter agreement in form and substance satisfactory to the Company
whereby your successor(s) or assign(s) agrees to be bound by the terms and
conditions of Paragraph 3 above and this Paragraph 5. You (and your personal
representative(s), devisee(s), or heir(s)) agree to pay all costs of obtaining
any legal opinions and all costs in connection with proposed exercise of your
option or dispositions of shares acquired pursuant to your option.
6. You agree to pay to the Company or to make arrangements satisfactory
to the Board to pay to the Company, at such time as any income is recognized by
you with respect to this option, any Federal, state, or local taxes of any kind
required by law to be withheld on such income by the Company. In the event of a
disposition or other transfer by you of common stock issued to you upon exercise
of your options, you agree to provide to the Company promptly written notice
describing in reasonable detail the disposition or transfer, including without
limitation the sale price, if any, and date of transfer or disposition.
7. The Board may effect certain amendments to the Plan (within the
limitations prescribed by the Plan) and the Board has the ultimate and
conclusive authority to interpret and administer the Plan and options (including
this option) granted under it.
8. The Plan and this option granted to you thereunder are governed by,
and shall be interpreted according to, the laws of the State of Arizona.
9. Each party hereto agrees to do all such things and take all such
actions, and to make, execute and deliver such other documents and instruments,
as shall be reasonably requested to carry out the provisions, intent and purpose
of this Agreement.
Section 422 of the Internal Revenue Code of 1986, as amended, provides
for advantageous tax treatment upon the disposition of shares acquired pursuant
to an incentive stock option such as you have been granted herein. However, in
order to qualify presently for such advantageous treatment, you must make no
disposition of Company shares acquired by you pursuant to this option within two
(2) years from the date of grant of the option nor within one (1) year after the
shares of the Stock are transferred to you. Although the foregoing holding
period requirements do not represent a term or condition of the option, you may
find that it is in your best interests to comply with them. Because the tax
effect may vary depending on your personal circumstances, and the tax laws may
change from time to time, it is strongly recommended that you consult with tax
counsel or a tax advisor in order to realize any available tax benefits
associated with this option.
This Award Agreement only grants the options described above and is not
an employment agreement or a promise or assurance of continued employment for
any period
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of time, including any period of time necessary to permit full exercise of the
options under Paragraph 1 above.
Please acknowledge your receipt of this Award Agreement, together with
the materials referred to herein and your agreement to the terms and conditions
of your option as set forth herein and in the Plan by signing the enclosed copy
of this letter and returning it promptly to the Secretary of the Company at the
address set forth in Section 1 of this letter. Any questions concerning any
matter relating to your incentive stock option or the Plan should also be
addressed to the Secretary.
Very truly yours,
Sandbox Entertainment Corporation
By _____________________________
Its Authorized Officer
ACCEPTED AND AGREED:
_________________________
Employee
The undersigned, as spouse of the grantee identified above, hereby confirms that
the community property of Employee and the undersigned is subject to and bound
by the agreement set forth above.
_________________________
Spouse of Employee
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EXHIBIT "A"
[Attach Plan]
-------------
EXHIBIT "B"
NOTICE OF EXERCISE OF OPTION
TO PURCHASE SHARES OF
SANDBOX ENTERTAINMENT CORPORATION
AND RECORD OF STOCK TRANSFER
I hereby exercise my Incentive Stock Option granted by Sandbox
Entertainment Corporation under the 1995 Equity Incentive Plan (the "Plan")
subject to all the terms and provisions referred to in the Plan and my related
Award Agreement dated _______________, and notify you of my desire to purchase
_______ shares of Common Stock of Sandbox Entertainment Corporation (the
"Company") which were offered to me pursuant to said Option. Enclosed is my
check in the sum of $_______ in full payment for such shares.
I hereby represent that the _______ shares of the Company's Common
Stock to be delivered to me pursuant to the above-mentioned exercise of the
Option granted to me on _______ are being acquired by me as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares. I also represent that I have read and fully understand the Plan and the
Award Agreement, including without limitation the restrictions on transfer of
the shares hereby being acquired and the Company's repurchase rights with
respect to such shares. I agree to indemnify the Company and its subsidiaries,
together with their respective officers and directors, against any and all
liabilities, losses, damages and expenses (including reasonable attorney fees)
arising from or in connection with any disposition of the shares hereby being
acquired, or any interest therein, in violation of applicable securities laws or
regulations.
Dated: _______________, 19__.
_________________________________
Employee's Signature
_________________________________
Signature of Employee's Spouse
Receipt is hereby acknowledged of the delivery to me by _______ on
_______ of stock certificates for _______ shares of Common Stock purchased by me
pursuant to the terms and conditions of the 1995 Equity Incentive Plan referred
to above, which shares were transferred to me on Sandbox Entertainment
Corporation's stock record books on _______, 19__.
_________________________________
Employee
