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EXHIBIT 10.40
FORM OF STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") dated October ___, 1996 is
entered into between THE XXXXXX ENTERTAINMENT COMPANY, a California corporation
("Company"), and XXXXXXX XXX ("Optionee"). This Option is granted under, and is
governed by, the Company's 1994 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of Fifteen Thousand (15,000) shares of Company's common
stock ("Common Stock") at a price of $8.125 per share [the closing price on
October 1, 1996]. The Option granted hereunder is not intended to qualify as an
"Incentive Stock Option" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended. The grant of this Option is subject to
confirmation by the Company's Stock Option Committee.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof, unless
sooner terminated in accordance with the provisions set forth herein or in the
Plan;
(b) The Option shall become exercisable (i) on September 30, 1997
with respect to one-third of the number of shares of Stock subject to the
Option, (ii) on September 30, 1998 with respect to an additional one-third of
the number of shares of Stock subject to the Option, (iii) on September 30, 1999
with respect to the remaining one-third of the shares of Stock subject to the
Option, and (vi) as otherwise provided pursuant to Sections 2(c) and (d) hereof
or in accordance with Section 4.7 of the Plan;
(c) If Optionee ceases to be employed by the Company or a
Subsidiary for any reason other than the Optionee's death or permanent
disability (within the meaning of Section 105(d)(4) of the Code), the unvested
Optionee's Options shall immediately become void and of no further force or
effect; provided, however, that if such cessation of employment shall be due to
the Optionee's voluntary resignation with the consent of the Board of Directors
of the Company or such Subsidiary, expressed in the form of a written
resolution, or shall be due to the Optionee's retirement under the provisions of
any pension or retirement plan of the Company or such Subsidiary then in effect,
then within three months after the date the Optionee ceases to be an employee of
the Company or such Subsidiary such Option may be exercised to the extent
exercisable on the date of such cessation of employment. A leave of absence
approved in writing the Board of Directors or the Committee shall not be deemed
a termination of employment for the purposes of this Section 2, but no Option
may be exercised during any such leave of absence, except during the first three
months thereof;
(d) If Optionee dies or becomes permanently disabled while
employed by the Company or a Subsidiary, Optionee's Option shall expire one year
after the date of such death or permanent disability. During such period after
death, such Option may, to the extent that it remains unexercised (but
exercisable by the Optionee according to such Option's terms) upon the
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date of such death, be exercised by the person or persons to whom the Optionee
rights under the Option shall pass by the Optionee's will or by the laws of
descent and distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been
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registered under the Securities Act or applicable state securities law; (b) any
subsequent sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; and (c) if requested by the
Company, Optionee shall submit a written statement, in form satisfactory to
counsel for the Company, to the effect that such representation (x) is true and
correct as of the date of purchase of any shares hereunder, or (y) is true and
correct as of the date of any sale of any such shares, as applicable. A legend
to the foregoing effect shall be placed upon any shares received upon exercise
of this Option. As a further condition precedent to any exercise of the Option,
Optionee shall comply with all regulations and requirements of any regulatory
authority having control of or supervision over the issuance of the shares and,
in connection therewith, shall execute any documents which the Board or any
committee authorized by the Board shall in its sole discretion deem necessary or
advisable.
8. DELIVERY OF CERTIFICATES.
Upon the exercise of the Option in whole or in part, the Company
shall deliver one or more certificates representing the number of shares
purchased against full payment therefor. The Company shall pay all original
issue or transfer taxes and all fees and expenses incident to such delivery,
except as otherwise provided in Section 3.2.
9. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by
reason of any stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off or
other similar change in capitalization, or any distribution to holders of Common
Stock other than a cash dividend, the number and class of shares available under
this Plan, the number and class of shares under each outstanding option and the
purchase price per share, shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
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12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
13. COUNTERPARTS. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE XXXXXX ENTERTAINMENT COMPANY,
a California corporation
By: _______________________________________
Its: _______________________________________
AGREED AND ACCEPTED:
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XXXXXXX XXX
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EXHIBIT A
The parties acknowledge that (a) Executive has a pre-existing
arrangement with a partner licensing products for sale in Asia, the United
Kingdom and Ireland, and (b) Executive is a shareholder in a retail business in
Ireland heretofore operated by Executive's wife, and that no such business
activities shall be prohibited or limited in any way by any provision of this
Agreement, so long as they do not materially and directly interfere with
Executive's performance of his obligations to Company hereunder. Furthermore,
nothing set forth in Paragraph 3(a) above shall be construed to prohibit or
limit Executive from having an ownership interest, directly or by operation of
community property laws, inheritance or the like, in any business entity owned
and operated, in whole or in substantial part, by Executive's wife, so long as
Executive does not actively participate in the operation of any such business
entity.
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