[EXHIBIT 10.2.4]
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
Xxxxxxxx X. Xxxxxx (hereinafter "Employee"), a key employee of the
Company.
WITNESSETH:
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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 Employee the
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right and option (hereinafter "Option") to purchase all of any
part of an aggregate of One Million Six Hundred Thousand
(1,600,000) 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 purchase
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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 200,000
May 23, 2004 200,000
November23, 2004 200,000
May 23, 2005 200,000
November 23, 2005 200,000
May 23, 2006 200,000
November 23, 2006 200,000
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 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
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Common 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
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not 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 will or the laws of descent and
distribution, and may be exercised during the lifetime of
the Employee only 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 (i) the sale
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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 s filing is required under Regulation 1Je-J of thru
Securities and Exchange Commission.
8. Termination of Employment. On the date hereof, the Company and
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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 (1) 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.
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 death of the Employee, the
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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 times during the
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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 Representation. By
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execution of this Agreement, the 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.
14. Governing Law. This Agreement shall be governed by and
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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 Xxxx
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Its: President
/s/Xxxxxxxx X. Xxxxxx
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Xxxxxxxx X. Xxxxxx
("Employee")
