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EXHIBIT 10.11
TCI MUSIC, INC.
1997 STOCK INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION RIGHTS AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of the 11th day of
July, 1997 (the "Effective Grant Date"), by and between TCI MUSIC, INC., a
Delaware corporation (the "Company"), and the person signing adjacent to the
caption "Grantee" on the signature page hereof (the "Grantee").
The Company has adopted the TCI Music, Inc. 1997 Stock Incentive
Plan (the "Plan"), a copy of which is attached to this Agreement as Exhibit A
and by this reference made a part hereof, for the benefit of certain eligible
persons as set forth in the Plan. Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Plan.
Pursuant to the Plan, the Committee has determined that it is in
the interests of the Company and its stockholders to grant the options and
rights provided herein in order to provide Grantee with additional remuneration
for services rendered, to encourage Grantee to remain in the employ of the
Company or its Subsidiaries and/or to increase Grantee's personal interest in
the continued success and progress of the Company by providing a method whereby
Grantee is encouraged to invest in the capital stock of the Company.
The Company and Grantee therefore agree as follows:
1. GRANT OF OPTION; OPTION TERM. Subject to the terms and
conditions herein, the Company grants to the Grantee during the period
commencing on the Effective Grant Date and expiring at 5:00 p.m., Denver,
Colorado time ("Close of Business") on July 11, 2007, the tenth anniversary of
the Effective Grant Date (the "Option Term"), subject to earlier termination as
provided in paragraphs 8 and 12(b) below, an option to purchase from the
Company, at the price per share set forth on Schedule 1 hereto (the "Series A
Stock Option Price"), the number of shares of Series A Common Stock of the
Company ("Series A Stock") set forth on said Schedule 1 (the "Series A Stock
Option Shares"). The Series A Stock Option Price and Series A Stock Option
Shares are subject to adjustment pursuant to paragraph 12 below. This option is
as a "Nonqualified Stock Option" and is hereinafter referred to as the "Series A
Stock Option".
2. GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
conditions herein and in tandem with the Series A Stock Option, the Grantee
shall also have, during the Option Term, subject to earlier termination as
provided in paragraphs 8 and 12(b) below, a stock appreciation right with
respect to each Series A Stock Option Share (individually, a "Series A Stock
Tandem SAR" and
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collectively, the "Series A Stock Tandem SARs"). Upon exercise of a Series A
Stock Tandem SAR in accordance with this Agreement, the Company shall, subject
to paragraph 6 below, make payment as follows:
(a) the amount of payment shall equal the amount by which
the Fair Market Value of the Series A Stock Option Share on the date of
exercise of the Series A Stock Tandem SAR exceeds the Series A Stock
Option Price; and
(b) payment of the amount determined in accordance with
clause (a) shall be made in the sole discretion of the Committee in
shares of Series A Stock (valued at their Fair Market Value as of the
date of exercise of such Series A Stock Tandem SAR), in cash, or partly
in cash and partly in shares of Series A Stock.
3. REDUCTION UPON EXERCISE. The exercise of any number of Series A
Stock Tandem SARs shall cause a corresponding reduction in the number of Series
A Stock Option Shares which shall apply against the Series A Stock Option Shares
then available for purchase. The exercise of the Series A Stock Option to
purchase any number of Series A Stock Option Shares shall cause a corresponding
reduction in the number of Series A Stock Tandem SARs.
4. CONDITIONS OF EXERCISE; VESTING. The Series A Stock Option and
Series A Stock Tandem SARs are exercisable only in accordance with the
conditions stated in this paragraph.
(a) Except as otherwise provided in paragraph 12(b) below or
in the last sentence of this subparagraph (a), the Series A Stock Option
may only be exercised to the extent the Series A Stock Option Shares
have become available for purchase in accordance with the following
schedule:
Percentage of Series A Stock Option
Date Shares Available for Purchase
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Effective Grant Date 20%
First Anniversary of Effective Grant Date 40%
Second Anniversary of Effective Grant Date 60%
Third Anniversary of Effective Grant Date 80%
Fourth Anniversary of Effective Grant Date 100%
Notwithstanding the foregoing, all Series A Stock Option Shares shall
become available for purchase if during the Option Term Grantee's
employment with the Company and its Subsidiaries (i) shall terminate by
reason of (x) termination by the Company or any Subsidiary without cause
(as defined in Section 11.2(b) of the Plan), (y) termination by Grantee
for good reason (as defined herein) or (z) Disability, (ii) shall
terminate pursuant to provisions of a written employment agreement, if
any, between the Grantee and the Company which expressly permits the
Grantee to terminate such employment upon the occurrence of specified
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events (other than the giving of notice and passage of time), or (iii)
shall terminate because Grantee dies while employed by the Company or a
Subsidiary.
(b) A Series A Stock Tandem SAR with respect to a Series A
Stock Option Share shall be exercisable only if the Series A Stock
Option Share is then available for purchase in accordance with
subparagraph (a).
(c) To the extent the Series A Stock Option or Series A
Stock Tandem SARs become exercisable, such Series A Stock Option or
Series A Stock Tandem SARs may be exercised in whole or in part (at any
time or from time to time, except as otherwise provided herein) until
expiration of the Option Term or earlier termination thereof.
(d) Grantee acknowledges and agrees that the Committee may,
in its discretion and as contemplated by Section 7.5 of the Plan, adopt
rules and regulations from time to time after the date hereof with
respect to the exercise of Series A Stock Tandem SARs and that the
exercise by Grantee of the Series A Tandem SARs will be subject to the
further condition that such exercise is made in accordance with all such
rules and regulations as the Committee may determine are applicable
thereto.
5. MANNER OF EXERCISE. The Series A Stock Option or a Series A
Stock Tandem SAR may be exercised only by delivering to the Company all of the
following and shall be considered exercised (as to the number of Series A Stock
Option Shares or Series A Stock Tandem SARs specified in the notice referred to
in subparagraph (a) below) on the later of (i) the date of exercise designated
in the written notice referred to in subparagraph (a) below (or if the date so
designated is not a business day, the first business day following such date) or
(ii) the first business day on which the Company has received all of the
following:
(a) Written notice, in such form as the Committee may
require, stating that Grantee is exercising the Series A Stock Option
and/or the Series A Stock Tandem SAR, setting forth the date of such
exercise and designating, among other things, the date of exercise, the
number of Series A Stock Option Shares to be purchased and/or the number
of Series A Stock Tandem SARs to be exercised; the aggregate purchase
price to be paid by Grantee (in the case of the exercise of Series A
Stock Option Shares) and the manner in which such payment is being paid;
(b) If the Series A Stock Option is to be exercised, payment
of the Series A Stock Option Price for each Series A Stock Option Share
to be purchased in cash or in such other form, or combination of forms,
of payment contemplated by Section 6.6(a) of the Plan as the Committee,
in its sole discretion, may permit;
(c) Payment of, or other provision acceptable to the
Committee for, any and all withholding taxes required to be withheld by
the Company upon such exercise in accordance with paragraph 6 hereof;
and
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(d) Any other documentation that the Committee may
reasonably require (including, without limitation, proof satisfactory to
the Committee that the Award is then exercisable for the number of
Series A Stock Option Shares or Series A Stock Tandem SARs).
6. MANDATORY WITHHOLDING FOR TAXES. It shall be a condition
precedent to any exercise of the Series A Stock Option Shares or the Series A
Stock Tandem SARs that Grantee make provision acceptable to the Company and in
accordance with the Plan for the payment or withholding of any and all federal,
state and local taxes and other amounts required to be withheld by the Company
to satisfy the tax liability associated with such exercise, as determined by the
Board.
7. DELIVERY BY THE COMPANY. As soon as practicable after receipt of
all items referred to in paragraph 5, and subject to the withholding referred to
in paragraph 6, the Company shall deliver to the Grantee certificates issued in
Grantee's name for the number of Series A Stock Option Shares purchased by
exercise of the Series A Stock Option and for the number of shares of Series A
Stock to which the Grantee is entitled by the exercise of Series A Stock Tandem
SARs and any cash payment to which the Grantee is entitled by the exercise of
Series A Stock Tandem SARs. If delivery is by mail, delivery of shares of Series
A Stock shall be deemed effected for all purposes when a stock transfer agent of
the Company shall have deposited the certificates in the United States mail,
addressed to the Grantee, and any cash payment shall be deemed effected when a
Company check, payable to Grantee and in an amount equal to the amount of the
cash payment, shall have been deposited in the United States mail, addressed to
the Grantee.
8. EARLY TERMINATION OF OPTION AND TANDEM SARS. Unless otherwise
determined by the Committee, in its sole discretion, the Series A Stock Option
and Series A Stock Tandem SARs shall terminate, prior to the expiration of the
Series A Stock Option Term, at the time specified below:
(a) If Grantee's employment with the Company and its
Subsidiaries terminates (i) other than (x) by the Company for "cause"
(as defined in Section 11.2(b) of the Plan) (see (d) below), (y) by the
Grantee with "good reason" (as defined herein) (see (e) below) or (z) by
the Company without cause (see (e) below), and (ii) other than (x) by
reason of death or Disability (see (b) and (c) below), (y) with the
written consent of the Company or the applicable Subsidiary (see (e)
below) or (z) without such consent if such termination is pursuant to
provisions of a written employment agreement (see (e) below), if any,
between the Grantee and the Company which expressly permit the Grantee
to terminate such employment upon the occurrence of specified events
(other than the giving of notice and passage of time), then the Series A
Stock Option and all Series A Stock Tandem SARs shall terminate at the
Close of Business on the first business day following the expiration of
the 90-day period which began on the date of termination of Grantee's
employment;
(b) If Grantee dies while employed by the Company or a
Subsidiary, or prior to the expiration of a period of time following
termination of Grantee's employment during which the Series A Stock
Option and Series A Stock Tandem SARs remain exercisable as
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provided in paragraph (a), the Series A Stock Option and all Series A
Stock Tandem SARs shall terminate at the Close of Business on the first
business day following the expiration of the one-year period which began
on the date of death;
(c) If Grantee's employment with the Company and its
Subsidiaries terminates by reason of Disability, then the Series A Stock
Option and all Series A Stock Tandem SARs shall terminate at the Close
of Business on the first business day following the expiration of the
one-year period which began on the date of termination of Grantee's
employment;
(d) If Grantee's employment with the Company and its
Subsidiaries is terminated by the Company for "cause" (as defined in
Section 11.2(b) of the Plan), then the Series A Stock Option and all
Series A Stock Tandem SARs shall terminate immediately upon such
termination of Grantee's employment; or
(e) If Grantee's employment (i) is terminated by Grantee (x)
with "good reason" (as defined herein), (y) with the written consent of
the Company or the applicable Subsidiary or (z) pursuant to provisions
of a written employment agreement, if any, between the Grantee and the
Company which expressly permit the Grantee to terminate such employment
upon the occurrence of specified events (other than the giving of notice
and passage of time), or (ii) by the Company without "cause" (as defined
in Section 11.2(b) of the Plan), then the Series A Stock Option Term
shall terminate early only as provided for in paragraph 8(b) above or
12(b) below or as provided pursuant to the terms of any such written
employment agreement.
In any event in which the Series A Stock Option and Series A
Stock Tandem SARs remain exercisable for a period of time following the date of
termination of Grantee's employment as provided above, the Series A Stock Option
and Series A Stock Tandem SARs may be exercised during such period of time only
to the extent the same were exercisable as provided in paragraph 4 above on such
date of termination of Grantee's employment. A change of employment is not a
termination of employment within the meaning of this paragraph 8 provided that,
after giving effect to such change, the Grantee continues to be an employee of
the Company or any Subsidiary. Notwithstanding any period of time referenced in
this paragraph 8 or any other provision of this paragraph to the contrary, the
Series A Stock Option and all Series A Stock Tandem SARs shall in any event
terminate upon the expiration of the Option Term.
"Good reason" for purposes of the Agreement shall be deemed to
have occurred upon the happening of any of the following:
(i) any reduction in Grantee's annual rate of salary;
(ii) either (x) a failure of the Company to continue in
effect any employee benefit plan in which Grantee was participating or
(y) the taking of any action by the Company that would adversely affect
Grantee's participation in, or materially reduce Grantee's benefits
under, any such employee benefit plan, unless such failure or such
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taking of any action, adversely affects the senior members of the
corporate management of the Company generally;
(iii) the assignment to Grantee of duties and responsibilities
that are materially more oppressive or onerous than those attendant to
Grantee's position immediately after the date hereof;
(iv) the relocation of the office location as assigned to
Grantee by the Company to a location more than 20 miles from Grantee's
then current location without Grantee's consent; or
(v) the failure of the Company to obtain, prior to the time
of any reorganization, merger, consolidation, disposition of all or
substantially all of the assets of the Company or similar transaction
effective after the date hereof, in which the Company is not the
surviving person, the unconditional assumption in writing or by
operation of law of the Company's obligations to Grantee under this
Agreement by each direct successor to the Company in any such
transaction.
9. AUTOMATIC EXERCISE OF SERIES A STOCK TANDEM SARS. Immediately
prior to the termination of the Series A Stock Option, as provided in paragraph
8 above, or the expiration of the Option Term, all remaining Series A Stock
Tandem SARs shall be deemed to have been exercised by the Grantee.
10. NONTRANSFERABILITY OF SERIES A STOCK OPTION AND SERIES A STOCK
TANDEM SARS. During Grantee's lifetime, the Series A Stock Option and Series A
Stock Tandem SARs are not transferable (voluntarily or involuntarily) other than
pursuant to a domestic relations order and, except as otherwise required
pursuant to a domestic relations order, are exercisable only by the Grantee or
Grantee's court appointed legal representative. The Grantee may designate a
beneficiary or beneficiaries to whom the Series A Stock Option and Series A
Stock Tandem SARs shall pass upon Grantee's death and may change such
designation from time to time by filing a written designation of beneficiary or
beneficiaries with the Committee on the form annexed hereto as Exhibit B or such
other form as may be prescribed by the Committee, provided that no such
designation shall be effective unless so filed prior to the death of Grantee. If
no such designation is made or if the designated beneficiary does not survive
the Grantee's death, the Series A Stock Option and Series A Stock Tandem SARs
shall pass by will or the laws of descent and distribution. Following Grantee's
death, the Series A Stock Option and any Series A Stock Tandem SARs, if
otherwise exercisable, may be exercised by the person to whom such option or
right passes according to the foregoing and such person shall be deemed the
Grantee for purposes of any applicable provisions of this Agreement.
11. NO SHAREHOLDER RIGHTS; NO GUARANTEE OF EMPLOYMENT.
(a) The Grantee shall not be deemed for any purpose to be,
or to have any of the rights of, a stockholder of the Company with
respect to any shares of Series A Stock as to
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which this Agreement relates until such shares shall have been issued to
Grantee by the Company. Furthermore, the existence of this Agreement
shall not affect in any way the right or power of the Company or its
stockholders to accomplish any corporate act, including, without
limitation, the acts referred to in Section 11.17 of the Plan.
(b) Nothing contained in this Agreement, and no action by
the Company or the Committee with respect hereto, shall confer or be
construed to confer on Grantee any right to continue in the employ of
the Company or any Subsidiary or interfere in any way with the right of
the Company or any employing Subsidiary to terminate Grantee's
employment at any time, with or without "cause."
12. ADJUSTMENTS.
(a) The Series A Stock Option and Series A Stock Tandem SARs
shall be subject to adjustment (including, without limitation, as to the
number of Series A Stock Option Shares and the Series A Stock Option
Price per share) in the sole discretion of the Committee and in such
manner as the Committee may deem equitable and appropriate in connection
with the occurrence of any of the events described in Section 4.2 of the
Plan following the Effective Grant Date; provided, however, that
adjustments shall be made to the Series A Stock Option if, and in the
same manner that, adjustments are being made in connection with the
occurrence of any such event to any other option granted under the Plan.
Adjustments to the Option Price shall be made on a per share basis so
that the aggregate remaining Series A Stock Option Price is unchanged.
(b) In the event of any Approved Transaction, Board Change
or Control Purchase, the Series A Stock Option and all Series A Stock
Tandem SARs shall become exercisable in full without regard to paragraph
4(a); provided, however, that to the extent not theretofore exercised
the Series A Stock Option and all Series A Stock Tandem SARs shall
terminate upon the first to occur of the consummation of the Approved
Transaction, the expiration of the Series A Stock Option Term or the
earlier termination of the Series A Stock Option and Series A Stock
Tandem SARs pursuant to paragraph 8 hereof. Notwithstanding the
foregoing, the Committee may, in its discretion, determine that the
Series A Stock Option and Series A Stock Tandem SARs will not become
exercisable on an accelerated basis in connection with an Approved
Transaction and/or will not terminate if not exercised prior to
consummation of the Approved Transaction, if the Board or the surviving
or acquiring corporation, as the case may be, shall have taken or made
effective provision for the taking of such action as in the opinion of
the Committee is equitable and appropriate to substitute a new Award for
the Award evidenced by this Agreement or to assume this Agreement and
the Award evidenced hereby and in order to make such new or assumed
Award, as nearly as may be practicable, equivalent to the Award
evidenced by this Agreement as then in effect (but before giving effect
to any acceleration of the exercisability hereof unless otherwise
determined by the Committee), taking into account, to the extent
applicable, the kind and amount of securities, cash or other assets into
or for which the Series A Stock may be changed, converted or exchanged
in connection with the Approved Transaction.
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13. RESTRICTIONS IMPOSED BY LAW. Grantee acknowledges that neither
the Series A Stock Option nor any of the Series A Stock Option Shares has been
registered under the Securities Act of 1933 and that the Series A Stock Option
Shares may not be transferred in the absence of such registration or the
availability of an exemption therefrom under such Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Neither the Company nor any other person shall have any obligation to register
any Series A Stock Option Shares, or any transfer of Series A Stock Option
Shares, under the Securities Act of 1933, the Securities Exchange Act of 1934 or
any other state or federal securities law. Certificates representing Series A
Stock Option Shares purchased by Grantee hereunder may bear such restrictive and
other legends as counsel for the Company shall require in order to insure
compliance with any such law or any rule or regulation promulgated thereunder.
Without limiting the generality of Section 11.9 of the Plan, the Grantee agrees
that Grantee will not exercise the Series A Stock Option or any Series A Stock
Tandem SAR and that the Company will not be obligated to deliver any shares of
Series A Stock or make any cash payment, if counsel to the Company determines
that such exercise, delivery or payment would violate any applicable law or any
rule or regulation of any governmental authority or any rule or regulation of,
or agreement of the Company with, any securities exchange or association upon
which the Series A Stock is listed or quoted. The Company shall in no event be
obligated to take any affirmative action in order to cause the exercise of the
Series A Stock Option or any Series A Stock Tandem SAR or the resulting delivery
of shares of Series A Stock or other payment to comply with any such law, rule,
regulation or agreement.
14. NOTICE. Unless the Company notifies the Grantee in writing of a
different procedure, any notice or other communication to the Company with
respect to this Agreement shall be in writing and shall be:
(a) delivered personally to the following address:
TCI Music, Inc.
c/o Liberty Media Corporation
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
or
(b) sent by first class mail, postage prepaid and addressed
as follows:
TCI Music, Inc.
c/o Tele-Communications, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Legal Department
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Any notice or other communication to the Grantee with respect to this Agreement
shall be in writing and shall be delivered personally, or shall be sent by first
class mail, postage prepaid, to Grantee's address as listed in the records of
the Company on the Effective Grant Date, unless the Company has received written
notification from the Grantee of a change of address.
15. AMENDMENT. Notwithstanding any other provisions hereof, this
Agreement may be supplemented or amended from time to time as approved by the
Committee as contemplated by Section 11.8 of the Plan. Without limiting the
generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented (i) to
cure any ambiguity or to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein,
or (ii) to add to the covenants and agreements of the Company for the
benefit of Grantee or surrender any right or power reserved to or
conferred upon the Company in this Agreement, subject, however, to any
required approval of the Company's stockholders and, provided, in each
case, that such changes or corrections shall not adversely affect the
rights of Grantee with respect to the Award evidenced hereby, or (iii)
to make such other changes as the Company, upon advice of counsel,
determines are necessary or advisable because of the adoption or
promulgation of, or change in or of the interpretation of, any law or
governmental rule or regulation, including any applicable federal or
state securities laws; and
(b) subject to Section 11.8 of the Plan and any required
approval of the Company's stockholders, the Award evidenced by this
Agreement may be cancelled by the Committee and a new Award made in
substitution therefor, provided that the Award so substituted shall
satisfy all of the requirements of the Plan as of the date such new
Award is made and no such action shall adversely affect the Series A
Stock Option or any Series A Stock Tandem SAR to the extent then
exercisable.
16. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
17. CONSTRUCTION. References in this Agreement to "this Agreement"
and the words "herein," "hereof," "hereunder" and similar terms include all
Exhibits and Schedules appended hereto, including the Plan. This Agreement is
entered into, and the Award evidenced hereby is granted, pursuant to the Plan
and shall be governed by and construed in accordance with the Plan and the
administrative interpretations adopted by the Committee thereunder. All
decisions of the Committee upon questions regarding the Plan or this Agreement
shall be conclusive. Unless otherwise expressly stated herein, in the event of
any inconsistency between the terms of the Plan and this Agreement, the terms of
the Plan shall control. The headings of the paragraphs of this Agreement have
been included for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
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18. DUPLICATE ORIGINALS. The Company and the Grantee may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement.
19. RULES BY COMMITTEE. The rights of the Grantee and obligations of
the Company hereunder shall be subject to such reasonable rules and regulations
as the Committee may adopt from time to time hereafter.
20. ENTIRE AGREEMENT. This Agreement is in satisfaction of and in
lieu of all prior discussions and agreements, oral or written, between the
Company and Grantee regarding the subject matter hereof. Grantee and the Company
hereby declare and represent that no promise or agreement not herein expressed
has been made and that this Agreement contains the entire agreement between the
parties hereto with respect to the Series A Stock Options and Series A Stock
Tandem SARs and replaces and makes null and void any prior agreements between
Grantee and the Company regarding the Series A Stock Options.
21. GRANTEE ACCEPTANCE. Grantee shall signify acceptance of the
terms and conditions of this Agreement by signing in the space provided at the
end hereof and returning a signed copy to the Company.
TCI MUSIC, INC.
By: /s/ XXXXXX XXXXX XXX
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Name: Xxxxxx Xxxxx Xxx
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Title: Vice President - Finance
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ACCEPTED:
/s/ XXX X. XXXXXX
-----------------------------------------------
Name: Xxx X. Xxxxxx
------------------------------------------
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Schedule 1 to Non-Qualified Stock Option
and Stock Appreciation Rights Agreement
dated as of July 11, 1997
TCI MUSIC, INC. 1997 INCENTIVE PLAN
Grantee: Xxx X. Xxxxxx
Xxxxx Date: July 11, 1997
Option Price: $6.25 per share
Option Shares: 200,000 shares of Series A TCI Music Common Stock ("Series
A Stock"), $.01 par value per share.
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