EXHIBIT 10.42
LAS VEGAS ENTERTAINMENT NETWORK, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
WITH
XXXXXX X. XXXXXXX
This Nonqualified Stock Option Agreement (the "Agreement") is made and entered
into as of October 1, 1997 (the "Date of Grant"), between Las Vegas
Entertainment Network, Inc., a Delaware corporation (the "Company"), and
Xxxxxx X. Xxxxxxx (the "Optionee"), with reference to the following facts.
A. Optionee is an employee and director of the Company.
B. Prior to March 1, 1995, Optionee was granted options to
purchase (i) 130,000 shares of the Company's common stock (the "130,000 Share
Option") and (ii) 1,500,000 shares of the Company's common stock (the "1,500,000
Share Option").
C. On or about March 1, 1995 the Compensation Committee of the
Company's Board of Directors (the "Committee") approved the grant to Optionee of
an option to purchase 4,000,000 of the authorized but unissued shares of the
Company's common stock at an exercise price of $1.00 per share (the "1995
Option"). In connection with such grant, the 1,500,000 Share Option was canceled
and Optionee's right to acquire shares of the Company's common stock thereunder
was terminated.
D. On or about March 1, 1995, Optionee was granted an option
to purchase 4,000,000 of the authorized but unissued shares of common stock of
CountryLand Properties, Inc. ("CountryLand"), a Nevada corporation and a
wholly-owned subsidiary of the Company for an exercise price of $1.00 per share
(the "CountryLand Option"), which option was contingent upon the nonexercise of
the 1995 Option.
E. In connection with the liquidation of CountryLand, the
CountryLand Option was terminated and Optionee was granted an option to purchase
4,000,000 shares of the authorized but unissued shares of common stock of
Casino-Co., Inc. ("Casino-Co."), a Nevada corporation and a wholly-owned
subsidiary of the Company, at an exercise price of $1.00 per share (the
"Casino-Co. Option"), which option is contingent upon the nonexercise of the
1995 Option.
F. The exercise of the CountryLand Option and Casino-Co.
Option were contingent, respectively, on CountryLand and Casino-Co. issuing
additional shares of stock to the Company such that, immediately after each
issuance, the total outstanding shares of common stock of CountryLand and
Casino-Co., as the case may be, equaled the total outstanding shares of common
stock of the Company on March 1, 1995 (the effective date of the grant of the
CountryLand Option).
G. Casino-Co. and CountryLand did not issue any additional shares of common
stock and, accordingly, Optionee was not (and currently is not) entitled to
exercise the CountryLand Option or the Casino-Co. Option.
H. The Company has determined that it would be to the
advantage and interest of the Company and its shareholders to grant the option
provided for herein to Optionee as an inducement to remain in the service of the
Company and as an incentive for increased efforts during such service.
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I. In consideration for the grant of the option, Optionee and the Company, for
itself and on behalf of CountryLand and Casino-Co., have agreed to cancel
the Casino-Co. Option.
J. Concurrently with the execution of this Agreement, Optionee is entering
into an employment agreement with the Company (the "Employment Agreement").
In consideration of the foregoing recitals and the covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option; Certain Terms and Conditions. The Company
hereby grants to Optionee, and Optionee hereby accepts, as of the Date of Grant,
subject to all of the terms and conditions set forth in this Agreement, an
option (the "Option") to purchase all or any part of an aggregate of 4,000,000
shares of the presently authorized but unissued shares of the Company's common
stock, subject to adjustment as set forth in Section 3 hereof (the "Option
Shares"), at an exercise price of One Dollar ($1.00) per share (the "Exercise
Price"), which option shall expire at 5:00 p.m., Los Angeles time, on September
30, 2002 (the "Expiration Date"), unless sooner terminated pursuant to Section 2
below. This Option is not intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). This Option may be exercisable, in whole or in part, at any time prior
to its termination.
2. Cessation of Employment. The period for exercising this Option will end on
the Expiration Date, subject, however, to the following provisions:
(a) Death, Disability or Termination for Good Reason. Notwithstanding anything
to the contrary in this Agreement, if Optionee's employment with the
Company shall terminate as a result of his death or the termination of the
Employment Agreement as a result of Executive's "Disability" or for "Good
Reason" (as those terms are defined in the Employment Agreement), then the
Option shall terminate on the earlier of the Expiration Date or the first
anniversary of the date of Optionee's death or the termination of his
Employment Agreement by reason of Disability or Good Reason, as applicable.
In the event of death or Disability, the Option may be exercisable by
Optionee's executor or administrator, or by the person or persons to whom
Optionee's rights under this Option shall have passed by will or by the
applicable laws of descent or distribution.
(b) Other Events Causing Termination of Employment. If Optionee ceases to be an
employee of the Company for "Cause" (as defined in the Employment
Agreement) or as a result of Optionee's election to terminate the
Employment Agreement for other than "Good Reason" (as defined in the
Employment Agreement), the Option shall terminate on the earlier of the
Expiration Date or ninety (90) days following the termination of the
Employment Agreement.
3. Adjustments. In the event that the Company's common stock
or any outstanding securities of the class then subject to the Option are
increased, decreased or exchanged for or converted into cash, property and/or a
different number or kind of securities, or cash, property and/or securities are
distributed in respect of such common stock or outstanding securities, in either
case as a result of a reorganization, merger, consolidation, recapitalization,
reclassification, dividend (other than a regular, periodic cash dividend) or
other distribution, stock split, reverse stock split or the like, or in the
event that substantially all of the property and assets of the Company are sold,
then the Committee shall make appropriate and proportionate adjustments in the
number and type of shares or other securities or cash or other property that may
thereafter be acquired upon the exercise of the Option in order to preserve, but
not increase, the benefit to Optionee; provided, however, that any such
adjustments in the Option shall be made without changing the aggregate Exercise
Price of the then unexercised portion of the Option.
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4. Exercise.
(a) The Option shall be exercisable during Optionee's lifetime only by Optionee
or by his guardian or legal representative, and after Optionee's death or
Disability only by the person or persons designated in Section 2(a). The
Option may only be exercised by the delivery to the Company of a written
notice of such exercise (the "Exercise Notice"), which notice shall specify
the number of Option Shares to be purchased (the "Purchased Shares") and
the aggregate Exercise Price for such shares, together with payment in full
of such aggregate Exercise Price in cash or by check payable to the
Company; provided, however, that payment of such aggregate Exercise Price
may instead be made, in whole or in part, by one or more of the following
means:
(i) by the delivery to the Company of a recourse promissory note in a form and
amount satisfactory to the Committee, provided that the principal amount of
such note shall not exceed the excess of such aggregate Exercise Price over
the aggregate par value of the Purchased Shares; and provided further that
such promissory note shall (i) have a maturity date of not more than five
(5) years from the exercise date, (ii) accrue interest at the "prime rate"
published from time to time in The Wall Street Journal, (iii) provide for
interest payments on each anniversary date of the note, and (iv) require
principal payments either (A) in equal installments over the term of the
note, or (B) upon the note's maturity;
(ii) by the delivery to the Company of a certificate or certificates
representing shares of common stock, duly endorsed or accompanied by a duly
executed stock powers, which delivery effectively transfers to the Company
good and valid title to such shares, free and clear of any pledge,
commitment, lien, claim or other encumbrance (such shares to be valued on
the basis of their aggregate fair market value, as reasonably determined by
the Committee, on the date of such exercise); and/or
(iii)by reducing the number of shares of common stock to be delivered to such
Optionee upon exercise of this Option (such reduction to be valued on the
basis of the aggregate fair market value of the additional shares of common
stock on the date of exercise that would otherwise have been delivered to
Optionee upon exercise of the Option, as determined by the Committee in its
reasonable discretion); provided, in each case, that the Company is not
then prohibited from purchasing or acquiring common stock.
(b) As soon as practicable after receipt of an Exercise Notice, the Company
shall, without transfer or issue tax or incidental expenses to Optionee,
deliver to Optionee at the office of the Company, or such other place as
may be mutually acceptable to the Company and Optionee, a certificate or
certificates for such Purchased Shares, which certificate or certificates
may bear such legend or legends with respect to restrictions on transfer
thereof as counsel for the Company deems to be required by applicable
provisions of law and this Agreement; provided, however, that nothing
herein shall be deemed to impose upon the Company any obligation to deliver
any Purchased Shares to Optionee if, in the opinion of counsel for the
Company, doing so would violate any provision of (i) federal or state
securities laws or regulations, including "Blue Sky" laws, (ii) any
applicable listing requirements of any national securities exchange; or
(iii) any other law or regulation applicable to the issuance or transfer of
such shares. In no event shall the Company be required to take any
affirmative action to comply with any of such laws, regulations or
requirements, nor shall the Company be liable for any failure to deliver
Purchased Shares because such Purchased Shares have not been registered or
because a registration statement with respect thereto is not current or
because such delivery would otherwise be in violation of any applicable law
or regulation.
The term "current" when used herein to refer to a registration
statement shall mean a registration statement that has been declared effective
by the Securities and Exchange Commission and, in
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the opinion of counsel for the Company, does not include any untrue statement of
material fact and includes all material facts required to be stated therein or
that are necessary to make the statements therein not misleading.
(c) Each exercise of the Option shall be deemed to be a reaffirmation to the
Company by Optionee of all Optionee's representations, warranties and
undertakings under Section 6 hereof as if such representations, warranties
and undertakings are made on and as of the date of such exercise.
5. Cancellation of Other Options. As of the Effective Date,
Optionee acknowledges that the 1,500,000 Share Option, the 1995 Option, the
CountryLand Option and the Casino- Co. Option have been canceled and Optionee
has no rights thereunder to purchase the common stock of the Company,
CountryLand or Casino-Co., as applicable.
6. Optionee Representations and Undertakings. Optionee hereby represents,
warrants and undertakes as follows and affirms such representations,
warranties and undertakings as of the Date of Grant and as of the date
hereof:
(a) Optionee and his adviser, if any, have been furnished with and have
reviewed this Agreement and understand the risks of, and other
considerations relating to, Optionee's investment in the Company;
(b) Optionee acknowledges that the offering and sale of this Option and the
Purchased Shares by the Company are intended to be exempt from registration
under the Securities Act of 1933, as amended (the "Act") and any applicable
"Blue Sky" laws, and that the Purchased Shares cannot be sold, assigned,
pledged or otherwise disposed of unless they are subsequently registered or
qualified under the Act and any applicable "Blue Sky" laws and regulations,
or an exemption from such registration or qualification is available.
Optionee also understands that sales, transfers, pledges and other
dispositions of the Purchased Shares are further restricted by the
provisions of the federal and state securities laws;
(c) Optionee represents to the Company that (i) the Purchased Shares will be
acquired for his private personal investment for his own account with no
intention of distributing such Purchased Shares to others, (ii) Optionee
has no contract, undertaking, agreement or arrangement with any person to
sell, transfer or otherwise distribute for him any of the Purchased Shares
or any interest therein, and (iii) Optionee is presently not engaged, nor
does he plan to engage within the presently foreseeable future, in any
discussion with any person relative to such sale, transfer or other
distribution of any of the Purchased Shares or any interest therein;
(d) Optionee (i) either alone or together with his advisers, has such knowledge
and business or financial experience that Optionee is capable of evaluating
the merits of the prospective investment in the Company and making an
investment decision with respect to the Company, and (ii) is and will be
able to bear the economic risk to this investment;
(e) As the Chairman of the Company's Board of Directors and as its Chief
Executive Officer, Optionee is familiar with the Company and all material
matters pertaining to this investment; and
(f) Optionee is not relying on the Company for advice with respect to
individual tax considerations involved in this investment.
7. Payment of Taxes.
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(a) If the Company becomes obligated to withhold an amount on account of any
tax imposed as a result of the exercise of the Option, including, without
limitation, any federal, state, local or other income tax, or any F.I.C.A.,
state disability insurance tax or other employment tax (the "Withholding
Liability"), then Optionee shall, on the date of exercise and as a
condition to the issuance of the Purchased Shares, pay the Withholding
Liability to the Company in cash or by check payable to the Company (the
first date upon which the Company is so obligated shall be referred to
herein as the "Withholding Date"). Optionee hereby consents to the Company
withholding the full amount of the Withholding Liability from any
compensation or other amounts otherwise payable to Optionee if Optionee
does not pay the Withholding Liability to the Company on the date of
exercise of the Option, and Optionee agrees that the withholding and
payment of any such amount by the Company to the relevant taxing authority
shall constitute full satisfaction of the Company's obligation to pay such
compensation or other amounts to Optionee. Notwithstanding the foregoing,
in the discretion of Optionee, the payment of such amount to the Company
may be made, in whole or in part:
(i) with shares of common stock delivered to the Company by Optionee on the
Withholding Date (such shares to be valued on the basis of their fair
market value on the Withholding Date, as reasonably determined by the
Committee), provided that the Company is not then prohibited from
purchasing or acquiring common stock, and/or
(ii) by reducing the number of shares of common stock to be delivered to such
Optionee upon exercise of this Option (such reduction to be valued on the
basis of the aggregate fair market value of the additional shares of common
stock on the date of exercise that would otherwise have been delivered to
Optionee upon exercise of the Option, as determined by the Committee in its
reasonable discretion), provided that the Company is not then prohibited
from purchasing or acquiring common stock;
provided, in each case, that Optionee shall have made such an election
to have shares of common stock delivered or withheld in accordance herewith at
least thirty (30) days prior to the date on which shares are to be delivered or
withheld.
(b) If any portion of the Withholding Liability remains unpaid as of the
Withholding Date, the Committee may, in its discretion, elect to treat any
portion or all of the unpaid amount as a recourse loan to the Optionee,
payable on such terms as the Committee may determine. Such loan shall be
evidenced by a recourse promissory note executed by Optionee in favor of
the Company, which shall permit Optionee to prepay the loan at anytime
without penalty.
8. Notices. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or within one day following mailing by
overnight courier, postage prepaid, return receipt requested, to the Company at
its principal executive office and marked "Attention: Chief Financial Officer,"
or to Optionee at the address set forth on the signature page to this Agreement.
Any party's address may be changed upon written notification to the other party
in the manner provided in this Section 8.
9. Nontransferability. Neither the Option nor any interest therein may be
sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.
10. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same Agreement.
11. Severability. In the event any one or more provisions of this Agreement is
declared judicially void or otherwise unenforceable, the remainder of this
Agreement shall survive and such provision(s) shall be deemed modified or
amended so as to fulfill the intent of the parties hereto.
12. Governing Law. This Agreement and the Option granted hereunder shall be
governed by and construed and enforced in accordance with the laws of the
State of California.
IN WITNESS WHEREOF, the Company and Optionee have duly
executed this Agreement as of the Date of Grant.
LAS VEGAS ENTERTAINMENT
NETWORK, INC.
By: _____________________________
Title: _____________________________
OPTIONEE
/s/Xxxxxx X. Xxxxxxx
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Xxxxxx Xxxxxxx
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Xxxx, Xxxxx and Zip Code
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