THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE SECURITIES ACT AND QUALIFICATION
UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of the 10th day of December, 1997, by and between
Netter Digital Entertainment, Inc., a Delaware corporation ("Optionor"), and
Xxxxxxxx Xxxxxx ("Optionee") with reference to the following facts:
A. Optionor and Optionee have entered into a Consulting
Agreement of even date herewith (the "Consulting Agreement") pursuant
to which Optionor has engaged Optionee to act as a financial advisor
and consultant for a period of three (3) months commencing October 10,
1997.
B. In partial consideration of Optionee's services to be
performed under the Consulting Agreement, Optionor has agreed to grant
to Optionee an option to purchase up to 150,000 authorized and
unissued shares of Optionor's Common Stock ("Common Stock").
C. The Board of Directors of Optionor has approved Optionor's
execution, delivery and performance of the Consulting Agreement,
including the grant by Optionor to Optionee of an option to purchase
up to 150,000 shares of Common Stock, upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. GRANT OF OPTION; TERM AND CONSIDERATION.
1.1 Grant of Option. Optionor hereby grants to Optionee
an irrevocable option (the "Option") to purchase up to an aggregate of
150,000 shares of Common Stock (the "Option Shares") at the price of
$2.75 per Option Share (the "Exercise Price"), all on the terms,
covenants and conditions set forth in this Agreement.
1.2 Term. The term of the Option (the "Term") shall
commence as of the date hereof and shall expire at 5:00 p.m. Pacific
Standard Time on March 10, 1998.
2. EXERCISE OF OPTION. Optionee may exercise the Option,
if at all, at any time during the Term by delivering written notice of
exercise to Optionor specifying the number of Option Shares to be
purchased and accompanied by payment of the Option Shares to be
purchased, which payment shall be either (a) in the form of a certified
or bank cashier's check, payable to the order of Optionor, or (b) by
delivery to Optionor of shares of Common Stock having an aggregate "Fair Market
Value" (as defined below) equal to the "Aggregate Exercise Price" (as
defined below) of the Option Shares to be purchased. As used herein,
the term "Aggregate Exercise Price" shall mean the amount of the Exercise
Price times the number of Option Shares to be purchased. As used
herein, the term "Fair Market Value" shall mean the fair market value
of the Common Stock on the date such shares are delivered in payment of
the Exercise Price, which fair market value shall be equal to the
closing sales or closing bid price of one share of the Common Stock according
to the NASDAQ quotations for the business day immediately preceding the
day such shares are delivered to the Company. As soon as practicable
after any exercise of this Option in accordance with the foregoing
provisions, Optionor shall deliver to Optionee at the main office of
Optionor, or at such other place as shall be mutually acceptable, a
certificate or certificates representing the Option Shares as to which
the Option has been exercised.
3. RESTRICTION ON ISSUANCE OF OPTION SHARES AND
DELIVERY. If authorization of any regulatory commission or agency is
required for the lawful delivery of any certificate representing Option
Shares, Optionor may withhold delivery of such certificate until such
authorization has been granted. Optionor will make reasonable efforts
to obtain such authorizations, but if Optionor is unable to obtain such
authorizations from such regulatory commission or agency, which
counsel for Optionor deems necessary for the lawful delivery of such
certificate, Optionor shall be relieved from any liability for failure
to deliver such certificate until such time that such authorization is
obtained or is obtainable.
4. RIGHTS AS SHAREHOLDER. Optionee shall have no rights
as a shareholder with respect to any Option Shares covered by the
Option until the date of issuance of a stock certificate to Optionee for such
Option Shares. No adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock
certificate is issued.
5. CHANGES IN CAPITAL STRUCTURE. The Exercise Price and
the number of Option Shares issuable upon the exercise of the Option
shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 5. Upon each adjustment of
the Exercise Price, Optionee shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of shares of
Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Option Shares
issuable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
5.1 Subdivision or Combination of Stock. In case
Optionor shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect
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immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of
Optionor shall be combined into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased.
5.2 Dividends In Common Stock, Other Stock Property,
Reclassification. If at any time or from time to time the holders of
Common Stock (or any shares of stock or other securities at the time
receivable upon exercise of the Option) shall have received or become
entitled to receive, without payment thereof,
(a) any shares of Common Stock or any shares of
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Common Stock, or any rights or
options to subscribe for, purchase or otherwise acquire any of the
foregoing by way of dividend or other distribution;
(b) any cash paid or payable otherwise than as a
regular periodic cash dividend at a rate which is substantially
consistent with Optionor's Certificate of Incorporation or past practice (or, in
the case of an initial dividend, at a rate which is substantially
consistent with industry practice); or
(c) any Common Stock or other securities or
property (including cash) by way of a spin-off, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 5.1 above),
then and in each such case, Optionee shall, upon the exercise of the
Option, be entitled to receive, in addition to the number of shares of
Common Stock receivable thereupon, and without payment of any
additional consideration thereof, the amount of stock and other
securities and property (including cash in the cases referred to in clauses (b)
and (c) above) which Optionee would hold on the date of such exercise had
it been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such
shares and/or all other additional stock and other securities and
property.
5.3 Reorganization, Reclassification, Consolidation,
Merger or Sale. If any reorganization of the capital stock of Optionor, or
any consolidation or merger of Optionor with another corporation, or the
sale of all or substantially all of its assets to another corporation shall
be effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provisions shall be made whereby the Optionee shall thereafter have the
right to purchase and receive (in lieu of the shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the number of shares
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of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby. In any such case,
appropriate provision shall be made with respect to the rights and
interests of Optionee to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price
and of the number of Option Shares issuable and receivable upon the
exercise of the Option) shall thereafter be applicable, as nearly as may be
practical, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of the Option. Optionor will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than Optionor) resulting
from such consolidation or the corporation purchasing such assets shall
assume by written instrument, executed and mailed or delivered to
Optionee at the last address of Optionee appearing on the books of
Optionor, the obligation to deliver to Optionee such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
Optionee may be entitled to purchase.
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
Optionee represents and warrants to Optionor that this Agreement has
been duly authorized and approved by all necessary corporate action on
the part of Optionee, has been duly executed and delivery by Optionee
and constitutes a valid and legally binding obligation of Optionee
enforceable in accordance with its terms.
7. REPRESENTATIONS AND WARRANTIES OF OPTIONOR.
Optionor represents, warrants and covenants to Optionee that:
(a) this Agreement has been duly authorized and
approved by all necessary corporate action on the part of Optionor, has
been duly executed and delivered by Optionor and constitutes a valid
and legally binding obligation of Optionor enforceable in accordance with
its terms;
(b) Optionor is not subject to or obligated under any
provision of (i) its Certificate of Incorporation or Bylaws, (ii) any
contract, (iii) any license, franchise or permit, or (iv) any law, regulation,
order, judgment or decree that would be breached or violated by its execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby;
(c) no authorization, consent or approval of, or any
filing with, any public body or authority is necessary for consummation by it
of the transactions contemplated by this Agreement;
(d) Optionor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to enter into and
perform this Agreement; and
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(e) Optionor has taken all necessary corporate action to
authorize and reserve for issuance upon exercise of the Option the
Option Shares, and the Option Shares, when issued and delivered by Optionor
to Optionee upon exercise of the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be free and clear of any
claims, liens, encumbrances, security interest and charges of any
nature whatsoever incurred by Optionor.
8. RESTRICTIONS ON TRANSFERABILITY; COMPLIANCE WITH
SECURITIES ACT.
8.1 Restrictions on Transferability. The Option is not
transferable. The Option Shares shall not be transferable except upon
the conditions specified in the legend set forth at the beginning of this
Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act. Optionee will cause any proposed
transferee of the Option Shares to agree to take and hold such
securities subject to the provisions and upon the conditions specified in such
legend.
8.2 Restrictive Legend. Each certificate representing
(a) the Option, (b) the Option Shares, and (c) any other securities
issued in respect of the Option Shares shall be stamped or otherwise imprinted
with the legend materially similar to the legend set forth at the
beginning of this Agreement; provided that no legend shall be affixed to any
certificate representing any Option Shares, or other securities issued
in respect of the Option Shares, issued following the registration of
such shares.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF
OPTION. The rights and obligations of Optionor and of Optionee
contained in Section 8 shall survive the exercise of the Option.
10. FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of the Option. Optionor shall, in lieu of issuing any
fractional share, pay Optionee a sum in cash equal to such fraction
multiplied by the then effective Exercise Price.
11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally
or sent by facsimile (and promptly confirmed by mail) to the parties as
follows (or at such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of
changes of address shall only be effective upon receipt):
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If to Optionor to:
Netter Digital Entertainment, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxxx LLP
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
If to Optionee to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx Xxxxxx & Xxxxxx LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
12. NUMBER AND GENDER. Terms used herein in any number
or gender include other numbers or genders, as the context may require.
13. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
14. GOVERNING LAW. This Agreement and performance under
it, shall be construed in accordance with and under the laws of the
State of California. Should a court or other body of competent jurisdiction
determine that any term or provision of this Agreement is excessive in
scope, such term or provision shall be adjusted rather than voided and
6
interpreted so as to be enforceable to the fullest extent possible, and
all other terms and provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.
15. BINDING EFFECT; PARTIES IN INTEREST. This Agreement
shall be binding upon, inure to the benefit of, and be enforceable by
the successor and assigns of the parties hereto. Nothing expressed or
referred to in this Agreement is intended or shall be construed to give
any person other than the parties to this Agreement, or their respective
successors or assigns, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
16. ENTIRE AGREEMENT; MODIFICATIONS, AMENDMENTS
AND WAIVERS. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof.
No amendment, change or modification of this Agreement shall be valid
unless it is in writing, is signed by all of the parties hereto, and
expressly states that an amendment, change or modification of this Agreement is
being made. No claim of waiver, consent or acquiescence with respect
to any provision of this Agreement shall be made against any party hereto
except on the basis of a written instrument executed by or on behalf of
such party. The party hereto for whose benefit a condition is herein
inserted shall have the unilateral right to waive such condition.
17. TAXES. All taxes resulting from the issuance or exercise
of the Option are the responsibility of the Optionee. Optionor assumes no
responsibility for any taxes resulting from such issuance or exercise.
18. FURTHER ASSURANCES. Each of the parties hereto shall
execute and deliver any and all additional papers and documents, and
shall do any and all further acts and thing, as may be reasonably
necessary in connection with the performance of their obligations
hereunder and to carry out the intent of this Agreement.
19. ATTORNEYS FEES. In the event that any party hereto
brings an action or proceeding for a declaration of the rights of the
parties under this Agreement, for injunctive relief, for an alleged
breach or default, or any other action arising out of this Agreement or the
transactions contemplated hereby, or in the event that any party is in
default of its obligations pursuant hereto, whether or not suit is
filed or prosecuted to final judgement, the prevailing party shall be entitled
to reasonable attorneys' fees, in addition to any other court costs
incurred and any other damages or relief awarded.
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IN WITNESS WHEREOF, Optionor and Optionee have executed this
Agreement as of the date first above written.
"OPTIONOR"
NETTER DIGITAL ENTERTAINMENT, INC.
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxx
----------------------------
Name: Xxxxxxx Xxxxxx
Its: Chairman
"OPTIONEE"
/s/ Xxxxxxxx Xxxxxx
---------------------------
Xxxxxxxx Xxxxxx
