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EXHIBIT 10.20
DEN: Digital Entertainment Network, Inc.
0000 Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
as of April 29, 1999
Xx. Xxxxx Xxxxxx
0000 Xxxxxx Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Mr. Xxxxxx Xxxxxx
0000 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Xx. Xxxx Xxxxx
0000 Xxxxxxx Xxxxxxx
Xxx Xxxxxxx, XX 00000
Mr. H. Xxxxx Xxxxx III
000 Xxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
Re: Termination of Anti-Dilution Rights and Related Matters
Gentlemen:
Reference is made to (i) DEN Executive Employment Agreement, dated as
of July 2, 1998 (the "Xxxxxx Employment Agreement"), between Digital
Entertainment Network, Inc. ("DEN") and Xxxxx Xxxxxx, (ii) Subscription and
Stockholder's Agreement, dated as of August 27, 1998, between DEN and Xxxxx
Xxxxxx (the "Stockholder's Agreement"), (iii) that certain letter agreement,
dated as of August 5, 1998, between DEN and Xxxxxx Xxxxxx (the "Winter Letter
Agreement"), (iv) DEN Executive Employment Agreement, dated as of August 31,
1998 (the "Xxxxx Employment Agreement"), (vi) DEN Executive Employment
Agreement, dated as of March 22, 1999, between DEN and H. Xxxxx Xxxxx III (the
"Xxxxx Employment Agreement"), and (vii) that certain letter agreement, dated as
of October 27, 1998, among DEN, Xxxxx Xxxxxx, Xx Xxxxxx and Xxxx Xxxxx (the
"4-Party Agreement", and together with the Xxxxxx Employment Agreement, the
Stockholder's Agreement, the Winter Letter Agreement, the Xxxxx Employment
Agreement, the Xxxxx Employment Agreement and the 4-Party Agreement, the
"Executive Agreements").
The parties hereto agree that, in consideration of the grant to Messrs.
Neuman, Winter, Xxxxx and Xxxxx (each, an "Executive") of non-qualified stock
options (the "Options") to purchase 29,767, 18,605, 5,581 and 14,884 shares of
DEN's common stock, par value $.01 per share (the "Common Stock"), respectively,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, and notwithstanding anything to the contrary in any of the
Executive Agreements, none of Messrs. Neuman, Winter, Xxxxx and Xxxxx shall
have, effective as of today
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and continuing indefinitely until otherwise agreed in writing, any anti-dilution
and/or percentage protection with respect to any issuances by the Company of
shares of Common Stock or other securities exercisable or exchangeable for, or
convertible into, Common Stock. In addition to the issuances described in the
foregoing sentence, the Executives shall also receive a grant of stock options
pursuant to, or consistent with, the 4-Party Agreement attributable to grants of
stock options during the period of April 1, 1999 through April 28, 1999.
Accordingly, the following provisions, each as modified by the 4-Party
Agreement, are hereby terminated: (i) Section 4(e)(viii)(B) of the Xxxxxx
Employment Agreement, (ii) Section 10 of the Stockholder's Agreement, (iii)
Section 1 of the Winter Letter Agreement, (iv) Section 4(e) of the Xxxxx
Employment Agreement and (v) Section 4(d) of the Xxxxx Employment Agreement.
Without limitation of the foregoing, the Executives agree that they shall have
no anti-dilution and/or percentage protection with respect to (i) the making of
a convertible loan by Xxxx Xxxxxxx-Xxxxxx or any affiliated trust (other than as
set forth in Section 2(a) of the 4-Party Agreement) to DEN and (ii) the issuance
of equity to Messrs Xxxx Xxxxx and Xxxx Xxxxx pursuant to that certain letter
agreement, dated as of April 1999, among DEN, Xxxx Xxxxx and Xxxx Xxxxx.
The Options shall (i) vest 10% as of the date of grant (which is as of
today), with the balance vesting, subject to continued employment with DEN, in
four equal installments on each of the first four anniversaries of the date of
grant; provided, however, that if such Executive's employment is terminated for
any reason other than voluntary termination by the applicable Executive (other
than as a result of a material and uncured breach (after giving effect to
applicable notice and cure periods) by DEN of the applicable Executive
Employment Agreement), expiration of the applicable employment agreement, death,
"disability" or "cause" (as such terms are defined in the applicable Executive's
employment agreement with DEN), such Executive's Options shall automatically
become fully vested and shall remain exercisable for the periods specified in
the applicable stock option agreement, (ii) have a $10 per share exercise price,
(iii) be non-qualified stock options and (iv) shall be issued pursuant and
subject to the terms and conditions of DEN's Amended and Restated 1998 Incentive
Compensation Plan, including without limitation the requirements that a stock
option agreement in substantially the form attached hereto as Exhibit A and the
"Lock-Up Agreement" be entered into. As used in this letter agreement, the term
"LockUp Agreement" shall mean any lock-up agreement as may be required by DEN's
underwriters; provided, that such lock-up agreement shall (i) only contain terms
and conditions as may be required by such underwriters and (ii) be substantially
similar in length of duration and all other material respects as the lock-up
agreements that other senior executives and affiliates of DEN enter into.
The parties hereto agree to take such further actions that may be
necessary or appropriate to implement the transactions contemplated by this
letter agreement, including, without limitation, the amending and restating of
the Executive Agreements to contain terms not inconsistent with those set forth
herein.
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Please acknowledge your agreement to the foregoing by signing below
where indicated next to your name.
Very truly yours,
DIGITAL ENTERTAINMENT NETWORK, INC.
By: /s/ XXXX XXXXXXXX
_________________________________________
Name: Xxxx Xxxxxxxx
Title: Chief Technical Officer
& Executive Vice President
AGREED AND ACCEPTED:
/s/ XXXXX XXXXXX
_____________________________
Xxxxx Xxxxxx
/s/ XXXXXX XXXXXX
_____________________________
Xxxxxx Xxxxxx
/s/ XXXX XXXXX
_____________________________
Xxxx Xxxxx
/s/ H. XXXXX XXXXX III
_____________________________
H. Xxxxx Xxxxx III
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EXHIBIT A
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") dated as of
__________________ ("Grant Date"), is between Digital Entertainment Network,
Inc., a Delaware corporation (the "Company"), and _______________, an employee,
director, officer or consultant of the Company or any Affiliate (the
"Participant").
WHEREAS, the Company desires, by affording the Participant an
opportunity to purchase shares of the Company's Common Stock as hereinafter
provided, to carry out the purposes of the Digital Entertainment Network, Inc.
Amended and Restated 1998 Incentive Compensation Plan (the "Plan"); and
WHEREAS, the Committee has duly made all determinations necessary or
appropriate to the grants hereunder; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto have agreed, and do
hereby agree, as follows:
1. Definitions.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Plan.
2. Grant of Option, Option Price and Term.
(a) The Company hereby grants to the Participant, as a matter
of separate agreement and not in lieu of salary or any other
compensation for services, the right and option (the "Option") to
purchase _____ shares of the Common Stock of the Company ("Option
Shares") on the terms and conditions herein set forth. Participant
shall have all the rights and obligations as provided for in this
Agreement.
(b) For each of the Option Shares purchased, the Participant
shall pay to the Company $10 per share (the "Option Price").
Accordingly, the aggregate Option Price to exercise all of the Option
is $_________.
(c) The term of this Option shall be a period of ten (10)
years from the Grant Date (the "Option Period"). The termination of the
Option Period shall result in the termination and cancellation of the
Option. In no event shall the Option be exercisable for any period
greater than the Option Period. During the Option Period, the Option
shall be exercisable in accordance with the determination of the
Committee, but in no event later
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than the earlier of (i) the date the Option is vested or (ii)
immediately prior to a Change in Control.
(d) Subject to Sections 2(e) and 2(f) below, unvested options
shall be forfeited at Termination of Employment for any reason. The
percentage of Options which are vested and which will not be forfeited
at Termination of Employment (unless such termination is for Cause)
shall be determined in accordance with the following schedule:
Cumulative Number of
Date Option Shares Vested
---- --------------------
On Grant Date [10%]
First Anniversary
of Grant Date [32.5%]
Second Anniversary
of Grant Date [55%]
Third Anniversary
of Grant Date [77.5%]
Fourth Anniversary
of Grant Date [100.0%]
========
Total Number of Option Shares [100%]
(e) Notwithstanding the foregoing Section 2(d), all Options
shall be 100% vested upon a Change in Control.
(f) Any portion of the Option which is not vested, pursuant to
Section 2(d) or 2(e), as of a Participant's Termination of Employment
shall be canceled simultaneously with the date of such Termination of
Employment; provided, however, if Participant's Termination of
Employment is due to any reason other than quit, expiration of his
employment agreement with the Company, death, Disability or Cause, the
Option shall automatically become fully vested upon the date of such
termination.
(g) The Option granted hereunder is designated as a
non-qualified stock option.
(h) The Company shall not be required to issue any fractional
Option Shares.
3. Termination of Option.
(a) If Participant incurs a Termination of Employment due to
death, any unexpired and unexercised portion of the Option, to the
extent then exercisable, shall thereafter be fully exercisable for a
period of one hundred eighty (180) days following the
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date of the appointment of a Representative or until the expiration of
the Option Period, whichever period is shorter.
(b) If Participant incurs a Termination of Employment due to a
Disability, any unexpired and unexercised portion of the Option, to the
extent then exercisable, shall thereafter be fully exercisable for the
period of one hundred eighty (180) days immediately following the date
of such Termination of Employment or until the expiration of the Option
Period, whichever period is shorter, and Participant's death at any
time following such Termination of Employment due to Disability shall
not affect the foregoing.
(c) If Participant's Termination of Employment is voluntary on
the part of the Participant (including due to Retirement) or is
involuntary on the part of Participant (but is not due to death or
Disability or with Cause), any unexercised portion of the Option shall
immediately terminate, except that the Option, to the extent then
exercisable, may be exercised for a period of thirty (30) days
immediately following the date of such Termination of Employment or
until the expiration of the Option Period, whichever period is shorter.
(d) If Participant's Termination of Employment is for Cause,
any unexercised portion of the Option shall terminate immediately,
without any exercise thereof. The death or Disability of Participant
after a Termination of Employment otherwise provided herein shall not
extend the time permitted to exercise the Option.
4. Exercise. The Option shall be exercisable during the Participant's
lifetime only by the Participant (or his or her guardian or legal
representative), and after the Participant's death only by the Representative.
The Option may only be exercised by the delivery to the Company of a properly
completed written notice, in form satisfactory to the Committee, which notice
shall specify the number of Option Shares to be purchased and the aggregate
Option Price for such shares, together with payment in full of such aggregate
Option Price. Payment shall only be made:
(a) in cash or by check;
(b) with the prior written approval of the Committee, by the
delivery to the Company of a valid and enforceable stock certificate
(or certificates) representing shares of Common Stock held by the
Participant, which is endorsed in blank or accompanied by an executed
stock power (or powers) and guaranteed in a manner acceptable to the
Committee;
(c) with the prior approval of the Committee, by a loan
extended by the Company;
(d) with the prior approval of the Committee, by authorizing
the Company to retain shares of Common Stock which would otherwise be
issuable upon exercise of the Option having a total Fair Market Value
on the date of delivery equal to the Option Price;
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(e) with the prior approval of the Committee, by the delivery
of cash or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise; or
(f) with the prior approval of the Committee, in any
combination of (a), (b), (c), (d) or (e).
If any part of the payment of the Option Price is made in shares of Common
Stock, such shares shall be valued by using their Fair Market Value as of their
date of delivery.
The Option shall not be exercised unless there has been compliance with
all the preceding provisions of this Paragraph 4, and, for all purposes of this
Agreement, the date of the exercise of the Option shall be the date upon which
there is compliance with all such requirements.
5. Payment of Withholding Taxes. If the Company is obligated to withhold
an amount on account of any tax imposed as a result of the exercise of the
Option, the Participant shall be required to pay such amount to the Company, as
provided in the Plan.
6. Requirements of Law; Registration and Transfer Requirements. The
Company shall not be required to sell or issue any shares under the Option if
the issuance of such shares shall constitute a violation of any provision of any
law or regulation of any governmental authority applicable to the Company. This
Option and each and every obligation of the Company hereunder are subject to the
requirement that the Option may not be exercised or performed, in whole or in
part, unless and until the Option Shares are listed, registered or qualified,
properly marked with a legend or other notation, or otherwise restricted, as is
provided for in the Plan.
7. Adjustments/Change in Control. In the event of a Change in Control or
other corporate restructuring provided for in the Plan, the Participant shall
have such rights, and the Committee shall take such actions, as provided in the
Plan.
8. Nontransferability. A Participant may at any time make a transfer of
shares of Common Stock received pursuant to the exercise of an Option to his
parents, spouse or descendants, to any trust for the benefit of the foregoing or
to a partnership the interests of which are for the foregoing or to a custodian
under a uniform gifts to minors act or similar statute for the benefit of any of
the Participant's descendants. An Option and any interest in the Option may not
otherwise be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner without the prior written consent of the
Company, and any such attempted sale, assignment, conveyance, gift, pledge,
hypothecation or transfer other than as permitted herein shall be null and void;
provided, however, after consummation of the Company's initial public offering
of Common Stock that results in the Common Stock being listed on a national
securities exchange, including without limitation the Nasdaq Stock Market,
shares of Common Stock for which the Option was exercised may be transferred
without the consent of Company, subject to applicable securities laws, rules and
regulations.
9. Plan. Notwithstanding any other provision of this Agreement, the Option
is granted pursuant to the Plan, as shall be adopted by the Company, and is
subject to all the terms and
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conditions of the Plan, as the same may be amended from time to time; provided,
however, that no provision of the Plan shall deprive the Participant, without
the Participant's consent, of the Option or of any of Participant's rights under
this Agreement. The interpretation and construction by the Committee of the
Plan, this Agreement and the Option, and such rules and regulations as may be
adopted by the Committee for the purpose of administering the Plan, shall be
final and binding upon the Participant.
10. Stockholder Rights. Until the Option shall have been duly exercised to
purchase such Option Shares and such shares have been officially recorded as
issued on the Company's official stockholder records, no person or entity shall
be entitled to vote, receive distributions or dividends or be deemed for any
purpose the holder of any Option Shares, and adjustments for dividends or
otherwise shall be made only if the record date therefor is subsequent to the
date such shares are recorded and after the date of exercise and without
duplication of any adjustment.
11. Employment Rights. No provision of this Agreement or of the Option
granted hereunder shall give the Participant any right to continue in the employ
of the Company or any of its Affiliates, create any inference as to the length
of employment of the Participant, affect the right of the Company or its
Affiliates to terminate the employment of the Participant, with or without
cause, or give the Participant any right to participate in any employee welfare
or benefit plan or other program (other than the Plan) of the Company or any of
its Affiliates.
12. Disclosure Rights. The Company shall have no duty or obligation to
affirmatively disclose to the Participant or a Representative, and the
Participant or Representative shall have no right to be advised of, any material
information regarding the Company or an Affiliate at any time prior to, upon or
in connection with the exercise of an Option.
13. Changes in Company's Capital Structure. The existence of the Option
shall not affect in any way the right or authority of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
14. Investment Representation and Agreement. If, in the opinion of counsel
for the Company, a particular representation is required under the Securities
Act of 1933 or any other applicable federal or state law, or any regulation or
rule of any governmental agency, the Company may require such representations as
the Company reasonably may determine to be necessary.
15. Governing Law. This Agreement and the Option granted hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California (other than its laws respecting choice of law).
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16. Entire Agreement. This Agreement, together with the Plan, constitute
the entire obligation of the parties hereto with respect to the subject matter
hereof and shall supersede any prior expressions of intent or understanding with
respect to this transaction.
17. Amendment. Any amendment to this Agreement shall be in writing and
signed by the Company and the Participant.
18. Waiver; Cumulative Rights. The failure or delay of either party to
require performance by the other party of any provision hereof shall not affect
its right to require performance of such provision unless and until such
performance has been waived in writing. Each and every right hereunder is
cumulative and may be exercised in part or in whole from time to time.
19. Counterparts. This Agreement may be signed in two counterparts, each of
which shall be an original, but both of which shall constitute but one and the
same instrument.
20. Notices. Any notice which either party hereto may be required or
permitted to give the other shall be in writing and may be delivered personally
or by mail, postage prepaid, addressed to the Secretary of the Company, at its
then corporate headquarters, and to the Participant at his address as shown on
the Company's records, or to such other address as the Participant, by notice to
the Company, may designate in writing from time to time.
21. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
22. Severability. If any provision of this Agreement shall for any reason
by held to be invalid or unenforceable, such invalidity or unenforceability
shall not effect any other provision hereof, and this Agreement shall be
construed as if such invalid or unenforceable provision were omitted.
23. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon each successor and assign of the Company. All obligations
imposed on the Participant or a Representative, and all rights granted to the
Company hereunder, shall be binding upon the Participant's or the
Representative's heirs, legal representatives and successors.
24. Tax Consequences. The Participant agrees to undertake to determine and
be responsible for any and all tax consequences to himself with respect to the
Option.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and the Participant has
hereunto set his hand, all as of the day and year first above written.
DIGITAL ENTERTAINMENT NETWORK, INC.
By:____________________________________
Name:
Title:
PARTICIPANT:
_______________________________________
