EXHIBIT 10.71
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (this "Agreement") is entered
into as of January 1, 1998, by and between NEWSTAR MEDIA INC., a California
corporation (the "Corporation"), and XXX XXXXXX (the "Participant"), on behalf
of the Xxxxxx-Xxxxxx Family Trust.
W I T N E S S E T H
WHEREAS, the Participant and the Corporation (fka Dove Audio, Inc.) are
parties to that certain Stock Option Award Agreement dated as of April 1996 (the
"Prior Stock Option Agreement"), pursuant to which the Participant was granted
an option to purchase 300,000 shares of common stock of the Corporation on the
terms and conditions thereunder (the "Prior Option");
WHEREAS, the Participant and the Corporation have agreed to cancel and
terminate the Prior Stock Option Agreement and the Prior Option and enter into
this Agreement;
WHEREAS, pursuant to the Corporation's 1994 Stock Incentive Plan (the
"Plan"), the Corporation's Stock Incentive Plan Committee (the "Committee")
committed to grant to the Participant, effective as of January 1, 1998 (the
"Grant Date"), an Option (the "Option") to purchase all or any part of 150,000
shares of Common Stock, par value $0.01 per share, of the Corporation (the
"Common Stock") upon the terms and conditions hereinafter set forth (capitalized
terms not otherwise defined herein shall have the respective meanings assigned
to them in the Plan).
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. GRANT OF OPTION. The Corporation has granted to the Participant as a
matter of separate inducement and agreement in connection with the Participant's
employment with, or other services provided by the Participant to, the
Corporation, but not in lieu of any salary or other compensation for such
employment or services, the right and option to purchase, in accordance with the
Plan and on the terms and conditions hereinafter set forth, all or any part of
an aggregate of 150,000 shares (the "Shares") of Common Stock at the price of
$1.50 per share (the "Exercise Price"), exercisable from time to time subject to
the provisions of this Agreement and the Plan prior to the close of business on
January 2, 2009 (the "Expiration Date").
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2. VESTING AND EXERCISE OF OPTION. The Option is to vest 1/3 January 1,
1998; 1/3 January 1, 1999; 1/3 January 1, 2000. Notwithstanding the vesting of
any portion or all of the options, the Option may not be exercised as to less
than 100 shares at any one time unless the number of Shares purchased is the
total number at the time available for purchase under an installment of the
Option. The Option may be exercised only as to whole shares; fractional share
interests shall be disregarded except that they may be accumulated.
3. TERMINATION/ACCELERATION OF OPTIONS.
(a) If the Participant's employment by the Corporation terminates
for any reason other than Retirement, death or Total Disability, the Participant
shall have, subject to earlier termination pursuant to or as contemplated by
Section 1, three months from the date of termination of employment to exercise
any Option to the extent it shall have become exercisable on or prior to that
date, and any Option not exercisable up to that date shall terminate.
Notwithstanding the preceding sentence, in the event the Participant is
discharged for cause as determined by the Corporation in its sole discretion,
all Options shall lapse immediately upon such termination of employment.
(b) If the Participant's employment by the Corporation terminates as
a result of Retirement or Total Disability, the Participant or Participant's
Personal Representative, as the case may be, shall have, subject to earlier
termination pursuant to or as contemplated by Section 1, 12 months from the date
of termination of employment to exercise any Option to the extent it shall have
become exercisable on or prior to that date, and any Option not exercisable on
that date shall terminate.
(c) If the Participant's employment by the Corporation terminates as
a result of death while the Participant is employed by the Corporation or during
the 12 month period referred to in subsection (b) above, the Participant's
Option shall be exercisable by the Participant's Beneficiary, subject to earlier
termination pursuant to or as contemplated by Section 1, during the 12-month
period following the Participant's death, as to all or any part of the shares of
Common Stock covered thereby, including all shares as to which the Option would
not otherwise be exercisable.
(d) In the event of termination of employment with the Corporation
for any reason, other than discharge for cause, the Corporation may, in its
discretion, increase the portion of the Option available to the Participant, or
Participant's Beneficiary or Personal Representative, as the case may be, upon
such terms as the Corporation shall determine.
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(e) If any entity ceases to be a Subsidiary, such action shall be
deemed for purposes of this Section 3 to be a termination of employment of each
employee of that entity.
(f) Upon the occurrence of an Event each Option shall become
immediately exercisable to the full extent theretofore not exercisable.
Acceleration of the vesting of the Option shall comply with applicable
regulatory requirements, including, without limitation, Rule 16b-3 promulgated
by the Commission pursuant to the Exchange Act and Section 422 of the Code.
(g) For purposes of this Section 3, the following terms shall have
the following meanings:
a. "BENEFICIARY" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the benefits
specified under this Plan in the event of a Participant's death.
b. "EVENT" shall mean any of the following:
(i) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
(ii) Approval by the shareholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or into one or
more entities which are not Subsidiaries, as a result of which less than 50% of
the outstanding voting securities of the surviving or resulting entity are, or
are to be, owned by former shareholders of the Corporation; or
(iii) Approval by the shareholders of the Corporation of the
sale of substantially all of the Corporation's business and/or assets to a
person or entity which is not a Subsidiary.
(iv) "PERSONAL REPRESENTATIVE" shall mean the person or
persons who, upon the disability or incompetence of a Participant, shall have
acquired on behalf of the Participant by legal proceeding or otherwise the power
to exercise the rights and receive the benefits specified in this Plan.
(v) "RETIREMENT" shall mean retirement as defined in
termination of employment with the Corporation pursuant to the Corporation's
retirement policy, as in effect from time to time.
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(vi) "TOTAL DISABILITY" shall mean a permanent and total
disability" within the meaning of Section 22(e)(3) of the Code.
3. METHOD OF EXERCISE AND PAYMENT.
(a) EXERCISE OF OPTION. Each exercise of the Option shall be by
means of written notice of exercise in the form attached hereto as Exhibit A
duly delivered to the Corporation, specifying the number of whole Shares with
respect to which the Option is being exercised (the "Exercised Shares"),
together with any written statements required hereunder and payment equaling the
Exercise Price multiplied by the number of Exercised Shares (the "Aggregate
Price"), in cash or by check payable to the order of the Corporation. The
Participant may also deliver in payment of a portion or all of the Aggregate
Price certificates for Common Stock, which shall be valued at the Fair Market
Value of such Common Stock on the date of exercise of the Option. With the prior
written consent of the Committee, the Participant may pay for all or a portion
of the Aggregate Price by means of a promissory note to the Corporation, on such
terms and conditions as the Committee may determine.
4. CONTINUANCE OF EMPLOYMENT. Nothing contained in this Agreement or in
the Plan shall confer upon the Participant any right to continue in the employ
of, or to continue rendering services to, the Corporation or constitute any
contract or agreement of engagement or employment. The Participant acknowledges
that the Corporation has the right to terminate the Participant's employment or
services at will except as may be otherwise provided by separate agreement.
Nothing contained in this Agreement or in the Plan shall interfere in any way
with the right of the Corporation to (i) terminate the employment or services of
the Participant at any time for any reason whatsoever, with or without cause, or
(ii) reduce the compensation received by the Participant from the rate in
existence on the Grant Date.
5. NON-ASSIGNABILITY OF OPTION. Other than by will or the laws of
descent and distribution, or pursuant to a "qualified domestic relations order"
as defined by the Code, no benefit payable under, or interest in, the Plan or in
any Grant shall be subject in any manner to anticipation, alienation, sale
transfer, assignment, pledge, encumbrance or charge, regardless of any community
property or other interest therein of the Participant's spouse or such spouse's
successor in interest, and any such attempted action shall be void and no such
benefit or interest shall be, in any manner, liable for, or subject to, debts,
contracts, liabilities, engagements or torts of any Eligible Person, Participant
or Beneficiary. In the event that the spouse of the Participant shall have
acquired a community property interest in the Option, the Participant, or his or
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her permitted transferee, may exercise it on behalf of the spouse of the
Participant or such spouse's successor in interest. Amounts payable pursuant to
a Grant shall be paid only to the Participant or, in the event of the
Participant's death, to the Participant's Beneficiary or, in the event of the
Participant's Total Disability, to the Participant's Personal Representative or,
if there is none, to the Participant.
6. ADJUSTMENTS UPON SPECIFIED CHANGES. Upon the occurrence of certain
Events relating to the Corporation's stock, such as stock splits, combinations,
extraordinary cash dividends, or mergers in which the Corporation is not the
Surviving Corporation as further set forth in the Plan, adjustments will be made
in the number and kind of shares that may be issuable under, or in the
consideration payable with respect to, the Option.
7. ACCELERATION. Upon the occurrence of certain Events, the Option may
become immediately exercisable to the full extent theretofore not exercisable
unless prior to an Event the Committee determines otherwise. However, no Option
may become exercisable on a date less than six months after the Grant Date.
8. APPLICATION OF SECURITIES LAWS.
(a) No shares of Common Stock may be purchased pursuant to the
Option unless and until any then applicable requirements of the Commission, and
any other regulatory agencies, including any other state securities agencies
having jurisdiction over the Corporation or such issuance, and any exchanges
upon which the Common Stock may be listed, shall have been fully satisfied. The
Participant represents, agrees and certifies that:
(1) The Participant (A) can bear the economic risk of losing the
Participant's entire investment in the Shares; and (B) has adequate means of
providing for the Participant's current needs and possible personal
contingencies.
(2) The Participant has had an opportunity to ask questions of
and receive answers from the Chief Financial Officer and President concerning
the terms and conditions of this investment. The Participant has received and
reviewed a copy of the Plan.
(3) The Participant understands that the Option and the Shares
issuable upon exercise of the Option may not have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities act, in reliance on available exemptions from registration or
qualification thereunder, as the case may be, and that the Corporation is
relying the Participant's representations and warranties herein in availing
itself of said exemptions.
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(4) The Option hereby granted to the Participant is being
acquired solely for the Participant's own account for investment purposes, and
is not being purchased with a view to or for the purposes of the resale,
transfer or other distribution thereof; and the Participant has no present plans
to enter into any contract, undertaking, agreement or arrangement for such
resale, transfer or distribution, and the Participant further agrees that the
Option and Common Stock acquired pursuant to the Option will not be transferred
or distributed without (a) first having presented to the Corporation a written
opinion of legal counsel in form and substance satisfactory to the Corporation's
counsel indicating the proposed transfer will not be in violation of any of the
provisions of the Securities Act and applicable state securities laws and the
rules and regulations promulgated thereunder, or (b) a registration statement
covering the resale of such Common Stock being effective. Finally, the
Participant recognizes that, if applicable, a legend reading substantially as
follows shall be placed on all certificates representing the Common Stock and a
stop order shall be placed against a transfer of same in accordance with the
following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
(5) The Participant either has a preexisting personal or
business relationship with the Corporation or any of its officers, directors or
controlling persons, or by reason of the Participant's business or financial
experience reasonably can be assumed to have the capacity to protect his or her
own interests in connection with acquisition of the Option and exercise thereof.
The foregoing representations and warranties are and will be true and
accurate as of both the Grant Date and the date of delivery of Common Stock
acquired pursuant to the Option and shall survive such delivery.
(b) The Committee may impose such conditions on the Option or on its
exercise or acceleration or on the payment of any withholding obligation
(including without limitation restricting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements,
including, without limitation restricting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements,
including, without limitation, Rule 16b-3 (or any successor rule) promulgated by
the Commission pursuant to the Securities Exchange Act of 1934, as amended.
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9. NOTICES. Any notice to be given to the Corporation under the terms
of this Agreement or pursuant to the Plan shall be in writing and addressed to
the Secretary of the Corporation at its principal office and any notice to be
given to the Participant shall be sent to the Participant at the address given
beneath the Participant's signature hereto, or at such other address as either
party may hereafter designate in writing to the other party. Any such notice
shall be deemed to have been duly given on the date of delivery, if delivered by
hand, or 3 days after deposit into U.S. mails of a notice sent by registered or
certified mail (postage and registry or certification fee prepaid).
10. EFFECT OF AGREEMENT. This Agreement shall be assumed by, be binding
upon and inure to the benefit of any successor or successors of the Corporation
to the extent provided in the Plan.
11. TAX WITHHOLDING. The provisions of the Plan are hereby incorporated
and shall govern any withholding that the Corporation is required to make with
respect to an exercise of the Option as well as the Corporation's right to
condition a transfer of Common Stock upon compliance with the applicable
withholding requirements of federal, state and local authorities. No Common
Stock acquired pursuant to an exercise of the Option may be transferred until
the Corporation has withheld, or has received payment from the Participant of,
all amounts the Corporation is required to withhold.
12. TERMS OF THE PLAN GOVERN. Except with respect to terms specifically
set forth in this Agreement (including, without limitation, Section 3 and the
definition of "Event"), the Option and this Agreement are subject to, and the
Corporation and the Participant agree to be bound by, all of the terms and
conditions of the Plan, which terms and conditions are hereby incorporated as
though set forth at length. In the event of a conflict between this Agreement
and the Plan, the terms of the Plan shall govern (except for a conflict between
this Agreement and the Plan with respect to Section 3 of this Agreement, in
which case the terms of this Agreement shall govern). The rights of the
Participant are subject to limitations, adjustments, modifications, suspension
and termination in certain circumstances and upon the occurrence of certain
conditions as set forth in the Plan.
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13. LIABILITY OF CORPORATION. The inability of the Corporation to
obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Common Stock
pursuant to the Option shall relieve the Corporation of any liability in respect
of the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained.
14. STOCKHOLDER RIGHTS. The Participant shall not have any rights of a
stockholder with respect to any Shares covered by this Option unless such Shares
have been issued to the Participant by the Corporation pursuant to the valid
exercise of the Option and the full payment by the Participant of the Exercise
Price in respect thereof.
15. LAWS APPLICABLE TO CONSTRUCTION. The interpretation, performance
and enforcement of the Participant's Grant and this Agreement shall be governed
by the laws of the State of California.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Participant has
hereunto set his or her hand as of the date and year first above written.
NEWSTAR MEDIA INC.
By: /s/ XXXXXX XXXXXXXXXX
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Title:
PARTICIPANT
/s/ XXXXXX XXXXXX AS TRUSTEE FOR
THE XXXXXX-XXXXXX FAMILY TRUST
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XXX XXXXXX
0000 Xxxxxx Xxxxxx
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(Address)
Xxxxxx Xxxx, XX 00000
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(City, State, Zip Code)
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Exhibit "A"
NewStar Media Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
I am the holder of an option (the "Option") granted by Dove
Entertainment, Inc., a California corporation (the "Corporation"), on
[_________________], to purchase up to an aggregate of ______________ shares
(subject to anti-dilution adjustments) of the Corporation's Common Stock,
pursuant to the terms of an Incentive Stock Option Agreement ("Agreement") dated
as of [__________________]. I hereby exercise my Option with respect to
__________ shares of Common Stock subject to the Option at the price of $1.50
per share as provided for in the Agreement, and I present herewith funds payable
to the order of the Corporation in the amount of $__________, which represents
the full purchase price for the number of shares purchased upon this exercise.
I represent and warrant that I have received a copy of the Company's
1994 Stock Incentive Plan dated November 29, 1994, with respect to the Option
and the shares of Common Stock issuable upon exercise thereof. I understand that
the Corporation may use the proceeds from the exercise of this Option for
general corporation purposes.
The certificates evidencing the shares purchased upon this exercise
should be registered in my name and delivered to me.
I further hereby understand and confirm that the sale, exchange or
other disposition of the shares acquired hereby shall also be subject to any and
all other requirements and restrictions set forth in said Agreement (including,
without limitation, Paragraph 5 of said Agreement) and the Internal Revenue Code
of 1986, as amended.
Very truly yours,
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