Exhibit 10.42
STOCK OPTION AGREEMENT
BETWEEN
XXXXXX XXXXXX, XX.
AND @ENTERTAINMENT, INC.
THIS STOCK OPTION AGREEMENT ("Option Agreement"), is made effective
as of December 14, 1998 (the "Effective Date"), by and between Xxxxxx Xxxxxx,
Xx. ("Employee") and @Entertainment, Inc., a Delaware corporation (the
"Company").
1. GRANT OF OPTION AND OPTION PERIOD.
a. The Company hereby grants Employee an option (the "Option") to
purchase two hundred thousand (200,000) shares (the "Shares") of the
Company's common stock (the "Common Stock"), with a par value of $0.01
per share, pursuant to the terms and conditions set forth in this Option
Agreement. The exercise price for the Option (the "Exercise Price") shall be
Fourteen Dollars and Thirty Cents (U.S. $14.30) per share.
b. The option to purchase Sixty-Six Thousand Six Hundred and
Sixty-Six (66,666) of these Shares will vest each year beginning on July 1,
1999, with the final Sixty-Six Thousand Six Hundred and Sixty-seven (66,667)
of the Shares vesting on July 1, 2001. Provided, however, that (i) the Option
shall vest in full immediately on the date of a "Change in Control" of
@Entertainment, Inc. (for purposes of this clause, the term "Change in
Control" shall have the same meaning as that term has in the Indenture dated
as of July 14, 1998, between @Entertainment, Inc. and Bankers Trust Company
as trustee with respect to those certain 14 1/2% Senior Discount Notes of the
Company due 2008 (the "Indenture"); (ii) that portion of the Option which has
not yet vested on the date of the occurrence of the Vesting Event (as defined
herein) shall vest immediately on the date that Canal + S.A., acting
individually or in connection with any other "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), becomes the direct or indirect
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that such person or group shall be deemed to have "beneficial
ownership" of all securities that such person or group has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time) of 15% or more of the then outstanding common stock
(including such person's or group's securities which are convertible into
common stock) of the Company and has the right to nominate at least one
member of the Board of Directors of the Company (the "Vesting Event"); and
(iii) no portion of such Option shall vest after the date (the "Cut-Off
Date") that is the earlier of (a) the date that the Executive Employment
Agreement dated as of December 14, 1998 between Poland Communications, Inc.
and Employee (the "Employment Agreement") is terminated, and (b) the date on
which the Company sends Employee a notice referred to in Section 8 of the
Employment Agreement.
2. MANNER OF EXERCISE.
Subject to the conditions and restrictions contained in Section 3 below, the
Option shall be exercised by delivering written notice of exercise to the
Secretary of the Company. Such notice shall be irrevocable and must be
accompanied by payment in cash, banker's draft or such other form of
consideration as the Company may approve, and a signed Subscription
Agreement, reasonably acceptable to both parties.
3. NON-TRANSFERABILITY.
Neither this Option nor any interest therein may be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner (other than by will or
by the laws of descent and distribution during the option period described in
Section 1, or in a manner as may be established from time to time by the
Board of Directors or the Company's Stock Option Committee pursuant to the
Company's 1997 Stock Option Plan). This Option is not assignable by
operation of law or subject to execution, attachment or similar process. During
Employee's lifetime, the Option can only be exercised by Employee. Any
attempted sale, pledge, assignment, hypothecation or other transfer of the
Option or any interest therein contrary to the provisions hereof, or the
levy of any execution, attachment or similar process upon the Option or any
interest therein shall be null and void and without force or effect. No
transfer of the Option by gift or trust to a family member, by will or by the
laws of descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished written notice thereof executed
by the trustee(s) of a trust established for a family member or the personal
representative of the estate of Employee which shall be accompanied by an
authenticated copy of the documents appointing such trustee(s) or of the
letters testamentary appointing such personal representative, or such other
evidence as the Company may deem reasonably necessary to establish the
validity of the transfer, and also evidence as the Company may deem
reasonably necessary to establish the acceptance by the transferee or
transferees of the terms and conditions of the Option. The terms of the Option
transferred by will or by the laws of descent and distribution shall be
binding upon the executors, administrators, heirs and successors of Employee.
The terms of the Option transferred in trust shall be binding upon the
trustee(s) of such trust.
4. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK.
In the event of any change in the outstanding Common Stock of the Company due
to stock dividends, recapitalizations, reorganizations, mergers,
consolidations, split-ups, rights offering, warrants, or exchange of shares,
the number and kind of the Shares and/or the
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purchase price per Share will be appropriately adjusted, upwards or
downwards, consistent with such change. The reasonable determination of the
Company regarding any adjustment will be final and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of
any class shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of the Shares.
5. NO STOCK RIGHTS.
Employee shall not be entitled to vote, be deemed the holder of any Shares,
have the right to receive dividends with respect to any Shares, or otherwise
have any of the rights of a stockholder of the Company with respect to any
Shares, unless and until Employee has exercised the Option with respect to
such Shares in accordance with the terms and conditions of this Option
Agreement.
6. RESERVATION AND ISSUANCE OF SHARES.
a. The Company will at all times have authorized, and reserve and
keep available, free from preemptive rights, the number of shares of Common
Stock that is sufficient for the purpose of enabling it to satisfy any
obligation to issue the shares of Common Stock deliverable upon exercise of
the Option.
b. The Company covenants that all Shares will, upon issuance in
accordance with the terms of this Agreement, be duly authorized, fully paid
and non-assessable.
7. LOCK-UP ARRANGEMENTS
a. During the term of this Option Agreement, Employee, if requested
by the Company and the lead underwriter of any public offering of the Common
Stock or other securities of the Company (the "Lead Underwriter"), hereby
irrevocably agrees not to sell, contract to sell, grant any option to
purchase, transfer the economic risk of ownership in, make any short sale of,
pledge or otherwise transfer or dispose of any interest in any Common Stock
or any securities convertible into or exchangeable or exercisable for or any
other rights to purchase or acquire Common Stock (except Common Stock
included in such public offering or acquired on the public market after such
offering) during the 180 day period following the effective date of a
registration statement of the Company filed under the Securities Act of 1933,
as amended, or such shorter period of time as the Lead Underwriter shall
specify. Employee further agrees to sign such documents as may be requested
by the Lead Underwriter to effect the foregoing and agrees that the Company
may impose stop-transfer instructions with respect to such Common Stock or
such other securities subject until the end of such period. The Company and
Employee acknowledge that each Lead
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Underwriter of a public offering of the Company's stock, during the period of
such offering and for the 180 day period thereafter, is an intended
beneficiary of this Section 7.
b. Employee hereby agrees that if the Vesting Event occurs, Employee
will not offer, sell, contract to sell, grant any option to purchase,
transfer the economic risk of ownership in, make any short sale of, pledge,
hypothecate or otherwise transfer or dispose of, any shares of Common Stock
that Employee acquired through the exercise of that portion of the Option
which vested upon the occurrence of the Vesting Event pursuant to Section
1(b)(ii) hereof, prior to the earlier of: (a) the expiration of a one year
period measured from the date that the Vesting Event occurs; or (b) the
expiration of the Employment Agreement by passage of time or by reason of
Employee's death or permanent disability. The obligations contained in the
proceeding sentence shall be referred to herein as the "Company Lock-Up
Agreement." Provided however, that in the event that Employee's employment
with the Company is terminated by the Company without cause (as defined in
Section 8 of the Employment Agreement) at any time after the Vesting Event
has occurred, the Company Lock-Up Agreement shall terminate on the Cut-Off
Date.
8. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE. In order to induce the
Company to accept this Option Agreement, Employee hereby represents and
warrants to the Company as follows:
a. If in the future Employee desires to offer or dispose of the
Option or any of the Shares or any interest therein, he will do so only in
compliance with applicable securities laws and this Option Agreement.
b. Employee acknowledges that there may be restrictions under the
securities laws of the jurisdiction(s) in which he resides on the sale of the
Shares he obtains on exercise of the Option, and that he should seek legal
assistance before proceeding with the purchase or sale of said Shares.
c. Employee agrees that the representations and warranties of
Employee set forth in this Section 8 shall survive the exercise of the Option
and the termination or expiration of this Option Agreement for a period of
six months.
9. GOVERNING LAW.
This Option Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware without regard to the principles of
conflicts of laws or choice of law.
10. BENEFIT.
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This Option Agreement shall be binding upon the Company, Employee, their
heirs, executors, administrators, legal representatives, successors, and
permitted assigns, and Employee in furtherance thereof may execute a will
directing Employee's executor to perform this Option Agreement and to execute
all documents necessary to effectuate the purposes of this Option Agreement,
but the failure to execute such a will shall not affect the rights of the
Company or the obligations of Employee's estate as provided in this Option
Agreement. Nothing in this Option Agreement, expressed or implied, is
intended to confer upon any person, other than the parties hereto, any rights
or remedies under or by reason of this Option Agreement.
11. SPECIFIC PERFORMANCE.
a. The parties to this Option Agreement hereby agree that an award
of damages alone is inadequate to remedy a breach of terms of this Option
Agreement and that specific performance, injunctive relief or other equitable
remedy is the only way by which the intent of this Option Agreement may be
adequately realized upon breach by one or more of the parties. Such remedy
shall, however, be cumulative and not exclusive, and shall be in addition to
any other remedy which the parties may have.
b. In furtherance of and not in limitation of the foregoing,
should any dispute arise concerning a sale, purchase, encumbrance, pledge,
transfer, hypothecation, assignment or other disposition of the Option or any
of the Shares which is alleged to contravene the provisions of this Option
Agreement, an injunction may be issued restraining any such transaction
pending the determination of such controversy.
12. WAIVER.
Failure to insist upon strict compliance with any of the terms, covenants or
conditions of this Option Agreement shall not be deemed a waiver of such
terms, covenants or conditions, nor shall any waiver or relinquishment of any
right or power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
13. NOTICE.
a. All notices required to be given under the terms of this
Agreement or which any of the Parties may desire to give hereunder shall be
in writing and delivered personally or sent by express delivery, by
facsimile, or by registered or certified mail with proof of receipt, postage
and expenses prepaid and with return receipt requested addressed as follows:
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IF TO THE COMPANY:
@Entertainment, Inc.
c/o Chase Enterprises
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
X.X.X.
Facsimile: (000) 000-0000
Attention: Xxxxxxxxxx X. Xxxxx
With a copy to:
Xxxx X. Xxxx
Xxxxx & XxXxxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, X.X. 00000
X.X.X.
Facsimile: (000) 000-0000
IF TO EMPLOYEE:
Xxxxxx X. Xxxxxx, Xx.
Xx. Xxxxxxxxxxx 0X xxxx X
00-000 Xxxxxxxx, Xxxxxx
Facsimile: ( )
b. Notice given in accordance with this Section 13 shall be deemed
to have been given when delivered personally, or when received if sent via
express delivery, facsimile, or registered or certified mail, postage prepaid
and return receipt requested.
c. Any party may change its address for notices by communicating
its new address in writing to the other party.
14. ENTIRE AGREEMENT. This Option Agreement is subject to that certain
Employment Agreement between Employee and Poland Communications, Inc. as of
December 14, 1998, and in the event of a conflict between them, the
provisions of the Employment Agreement shall prevail. Except as provided in
the foregoing sentence, this Option Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by writing executed by all of the parties.
15. SEVERABILITY.
The invalidity or unenforceability of any provisions of this Option Agreement
shall in no way affect the validity or enforceability of any other provision
hereof.
16. HEADINGS.
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The headings to the sections of this Option Agreement are used for reference
only and are not to be construed as limiting or extending the provisions
hereof.
17. COUNTERPARTS.
This Option Agreement may be executed in any number of counterparts, each of
which shall be considered an original but all of which shall constitute the
Option Agreement by and among the parties.
IN WITNESS THEREOF, the undersigned have executed this Option
Agreement effective as of the date first above written.
@Entertainment, Inc., a
Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx, III
--------------------------
Xxxxxx X. Xxxxxx, III
Its: Chief Executive Officer
/s/ Xxxxxx X. Xxxxxx, Xx.
--------------------------
Xxxxxx X. Xxxxxx, Xx.
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