EXHIBIT 10.58
K-TEL INTERNATIONAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT made and entered into as of October 19, 1998, by and
between K-TEL INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and
XXXXXXXX XXXXXX, a New York resident (the "Optionee");
W I T N E S S E T H:
WHEREAS, the Optionee has consented to serving as the Company's
President; and
WHEREAS, the Company desires to afford the Optionee an opportunity
to purchase shares of its common stock, par value $.01, (the "Common Stock"),
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the
right and option (hereinafter called the "Option") to purchase all or any part
of an aggregate of two hundred thousand (200,000) shares of Common Stock (the
"Option Shares") (such number being subject to adjustment as provided in
Paragraph 4 hereof) on the terms and conditions herein set forth. The Option is
a non-qualified stock option under the Internal Revenue Code of 1986, as
amended.
2. Purchase Price. Subject to the provisions of Paragraph 4 hereof,
the purchase price for the Option Shares shall be $6.50 per share, which has
been determined to be the fair market value of the Option Shares at the date of
grant of the Option.
3. Term and Vesting of Option. The Option shall expire (the
"Expiration Date") upon the earlier to occur of: (a) the close of business on
the tenth anniversary of the date hereof or (b) thirty (30) days after the date
on which the Optionee is no longer employed by the Company. Prior to the
Expiration Date, the Optionee shall be entitled to exercise the Option as to all
or any part of the Option Shares which have theretofore become vested. The
Option Shares shall vest and become exercisable as follows: (1) 66,666 shares
upon and after the first anniversary of the date hereof, (2) 66,666 shares upon
and after the second anniversary of the date hereof, and (3) 66,667 shares upon
and after the third anniversary of the date hereof; provided, however, in the
event of (i) the sale 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 entitled
to receive from the Company in cancellation of all rights under the Option and
this Agreement, in cash the excess of the price per share for the common stock
of the Company paid to shareholders (other than Xxxxxx Xxxxx or any entity which
he controls) 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 Xxxxxx
Xxxxx, 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 a filing is required under Regulation
13e-3 of the Securities and Exchange Commission. Notwithstanding the foregoing,
the Option may in no event be exercised by anyone to any extent in the event of
a voluntary dissolution, liquidation or winding up of the affairs of the
Company, after the close of business on the later of (i) the date of the
twentieth day after the mailing of written notice of such dissolution,
liquidation or winding up, and (ii) the record date for determination of holders
of Common Stock entitled to participate therein.
4. Adjustments for Changes in Capital Structure. If all or any
portion of this Option shall be exercised subsequent to any share dividend,
recapitalization, merger, consolidation, exchange of shares or reorganization as
a result of which shares of any class shall be issued in respect to outstanding
Common Stock, or if Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes, the person so
exercising this Option shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares to which they would have been
entitled if Common Stock (as authorized at the date hereof) had been purchased
at the date hereof for the same aggregate price (on the basis of the price per
share set forth in Paragraph 2 hereof) and had not been disposed of. No
fractional share shall be issued upon any such exercise and the aggregate price
paid shall be appropriately reduced on account of any fractional share not
issued.
5. Method Exercise. Subject to the terms and conditions of this
Agreement, the Option may be exercised by written notice to the Company at its
principal office and place of business in the State of Minnesota. Such notice
shall state the election to exercise the Option and the number of Option Shares
in respect of which it is being exercised, and shall be signed by the person so
exercising the Option. Such notice shall be accompanied by the payment of the
full purchase price of such Option Shares and the delivery of such payment to
the Treasurer of the Company. The certificate for the Option Shares as to which
the Option shall have been so exercised shall be registered in the name of the
person exercising the Option. If the Optionee shall so request in the notice
exercising the Option, the certificate shall be registered in the name of the
Optionee and another person jointly with right of survivorship, and shall be
delivered as provided above to or upon the written order of the person
exercising the Option. In the event the Option shall be exercised by any person
other than Optionee, such notice shall be accompanied by appropriate proof of
the right of such person to exercise the Option.
6. Reservation of Shares. The Company shall, at all times during the
term of the Option, reserve and keep available such number of shares of its
capital stock as will be sufficient to satisfy the requirements of this
Agreement, and shall pay all original issue and transfer taxes with respect to
the issue and transfer of Option Shares pursuant hereto, and all other fees and
expenses necessarily incurred by the Company in connection therewith.
7. No Rights as Stockholder. The holder of the Option shall not have
any of the rights of a stockholder with respect to the Option Shares covered by
the Option except to the extent that one or more certificates for shares shall
be delivered to him upon the due exercise of the Option.
8. Registration and Investment Purpose. The Company shall use
reasonable efforts to have the shares issuable upon the exercise of this Option
registered on a Form S-8 Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. Unless the Option
Shares have been so registered, the Option is granted on the condition that the
acquisition of shares hereunder shall be for investment purposes only and the
person acquiring Option Shares upon exercise of the Option must bear the
economic risk of the investment for an indefinite period of time since the
shares so acquired cannot be sold unless they are subsequently registered or an
exemption from such registration is available. Optionee agrees that a legend may
be placed on the stock certificates acknowledging the restrictions on subsequent
distribution of the shares issued upon exercise of this Option.
9. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, successors, assigns and
representatives and shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
K-TEL INTERNATIONAL, INC.
By /s/Xxxxxx Xxxxx
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Xxxxxx Xxxxx, Chairman and
Chief Executive Officer
/s/Xxxxxxxx Xxxxxx
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Xxxxxxxx Xxxxxx
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