[EXHIBIT 10.2.2]
EXHIBIT "B"
-----------
NON-OUALIFIED 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 Xxxx
Xxxx (hereinafter "Employee"), a key employee of the Company.
WITNESSETH:
-----------
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 right and option (hereinafter "Option") to purchase all of
any part of an aggregate of Eighteen million (18,000,000) 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
--------------
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 2,250,000
May 23, 2004 2,250,000
November 23, 2004 2,250,000
May 23, 2005 2,250,000
November 23, 2005 2,250,000
May 23, 2006 2,250,000
November 23, 2006 2,250,000
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 pr 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
------------------
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 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 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 the
shares reflected in the Option and 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 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 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 13e-3 of thru Securities
and Exchange Commission.
8. Termination of Employment. On the date hereof, the
-------------------------
Company and 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.
---------------------------
(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 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 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
---------------------------------------------------
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.
13. Definitions. As used herein, the term "subsidiary" shall
-----------
mean any present or future corporation which would be a
"subsidiary corporation" of the Company, as the term is defined
in Section 425 (1) of the Internal Revenue Code of 1954 as
amended.
14. Governing Law. This Agreement shall be governed by and
-------------
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/Xxxxxxxx X. Xxxxxx
--------------------------------
Its: Secretary
/s/Xxxx Xxxx
-----------------------------------
Xxxx Xxxx
("Employee")
