EXHIBIT 4.5
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of February
1997, between K-tel International, Inc., a Minnesota corporation (herein called
the "Company") and Xxxxxxx Xxxxxx, an employee of the Company or one or more of
its subsidiaries (herein called the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires, by affording the Employee an opportunity
to purchase shares of its common stock, (herein called the"Common Stock"), as
provided in this Agreement, to provide Employee with an incentive to create
value for the shareholders of the Company and to make the Company successful;
and
WHEREAS, the Board of Directors of the Company (herein called the
"Board") has authorized and approved the granting of the option to purchase the
number of shares of Common Stock of the 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
do hereby agree, as follows:
1. Grant of Option. The Company hereby irrevocably grants to the
Employee the right and option (herein called the "Option") to purchase all or
any part of an aggregate of 30,000 shares of Common Stock of the Company on the
terms and conditions set forth in this Agreement. The option is a Nonqualified
Stock Option under the Plan.
2. Purchase Price and Term of Option. The purchase price of the shares
of the Common Stock subject to the Option, the dates on which shares are subject
to the Option may be exercised and the date on which the Option terminates are
as follows:
Date First Date Option
Number of Shares Exercisable Terminates Price Per Share
---------------- ----------- ---------- ---------------
7,500 February 27, 1997 February 27, 2007 $8.25
7,500 February 27, 1998 February 27, 2007 $8.25
7,500 February 27, 1999 February 27, 2007 $8.25
7,500 February 27, 2000 February 27, 2007 $8.25
The purchase price of the shares as to which the Option may be exercised shall
be paid in full in cash at the time of exercise. Except as provided in
paragraphs 7 and 9 of this Agreement, the Option may not be exercised unless the
Employee shall have been in the continuous employ of the Company, or one or more
of its subsidiaries, from the date hereof to the date of the exercise of the
Option.
3. 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, sock split, stock
dividend, exchange, consolidation, 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, and in doing so may
eliminate any fractional shares which might result from such proportionate
increase or decrease.
4. Not a Stockholder. The holder of the Option shall not have any of
the rights of a stockholder of the Company with respect to the shares covered by
the Option except to the extent that the certificate or certificates for such
shares shall be delivered to him upon the due exercise of the Option.
5. 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
paragraphs 7 and 9 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 provisions hereof, and the levy of any execution, attachment, or
similar process upon the Option, shall be null and void and without effect.
6. Employment. Subject to the provisions of any written contract
between the Company or one or more of its subsidiaries and the Employee, the
employment of the Employee shall be at the pleasure of the Board of Directors of
each employing corporation and at such compensation as such employing
corporation or corporations shall reasonably determine. In the event Employee
shall (a) be employed by a competitor of, or shall be engaged in any activity in
competition with, the Company without the Company's consent, (b) divulge without
the consent of the Company any secret or confidential information belonging to
the Company, or (c) engage in any other activities which would constitute
grounds of Employee's discharge by the Company (or the employing corporation)
for cause, the Options (and any other option or options held by him or her under
the Plan), to the extent not therefore exercised, shall forthwith terminate.
Nothing in this Agreement shall confer upon the Employee any right to continue
in the employ of the Company or of any of its subsidiaries or interfere in any
way with the right of the Company or any of its subsidiaries to terminate his
employment at any time.
7. Termination of Employment. In the event that the employment of the
Employee shall be terminated (otherwise than by reason of death), the Option
may, subject to the provisions of paragraph 6 hereof, be exercised by the
Employee (to the extent that he shall have been entitled to do so at the
termination of his employment) at any time within one (1) month after such
termination. So long as the Employee shall continue to be an Employee of the
Company or one or more of its subsidiaries, the Option shall not be affected by
any change of duties or position. A termination of employment shall also occur
in the event of the sale of one or more subsidiaries of the Company which employ
Employee if Employee does not remain in the employ of the Company or one of its
other subsidiaries which is not sold; and any such termination of employment
shall be deemed to have occurred on the date of the sale of the subsidiary
employing Employee.
8. Method of Exercising Option.
(a) Subject to the terms and conditions of this Agreement, the Option
may be exercised, at any time prior to the expiration date specified in such
option, by written notice to the Company at its executive offices. 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 so
request in the notice exercising the Option, shall be registered in the name of
the Employee and another person jointly, with right or survivorship) and shall
be delivered as provided above to or upon the written order of the Employee
exercising the Option. In the event the Option shall be exercised pursuant to
paragraph 9 of the 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 fully paid and
non-assessable.
(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 under the
plan 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 liability 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 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 then
be listed.
9. 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 intestate succession, shall have the right to exercise the Option
within twelve (12) months following the death of the Employee (but not after the
expiration of the Option) for the number of shares which the Employee was
entitled to purchase at the 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
(a) 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, and (b) paying or causing to be paid to the Company the purchase
price of such shares (c) 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 provision 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 person or persons exercising the Option may direct,
and shall deliver such shares in accordance with reasonable instructions
contained in the notice.
10. 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 this 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.
11. 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 federal and state securities laws and, therefore, constitute
"restricted securities" within the meaning of the 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 and agrees to hold the shares acquired
by exercise of the Option 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.
12. 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(f) of the Internal Revenue Code
of 1954 as amended.
13. Governing law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, 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.
K-TEL INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
Its: President
Employee: /s/ Xxxxxxx Xxxxxx
