EXHIBIT 10.3
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of February 25, 1999 between
K-tel International, Inc., a Minnesota corporation (herein called the "Company")
and ________________, a Director of the Company (herein called the "Director").
W I T N E S S E T H
WHEREAS, the Company desires, by affording the Director an opportunity
to purchase shares of its common stock, (herein called the "Common Stock"), as
provided in this Agreement; 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:
10. GRANT OF OPTION. The Company hereby irrevocably grants to the
Director the right and option (herein called the "Option") to purchase all or
any part of an aggregate of 5,000 shares of Common Stock of the Company on the
terms and conditions set forth in this Agreement.
11. 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
PER SHARE NUMBER OF SHARES EXERCISABLE DATE OPTION TERMINATES
--------- ---------------- ----------- ----------------------
$8.7313 5,000 February 25, 1999 February 25, 2009
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 6 and 8 of this Agreement, the Option may not be
exercised unless the Director shall have been in the elected a Director of the
Company from the date hereof to the date of the exercise of the Option.
12. 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 of shares, or reorganization or
other event in which the Company is the surviving corporation, the Board shall,
pursuant to the terms of the Plan, 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.
13. 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.
14. 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 Director only by the Director 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.
15. TERMINATION OF DIRECTORSHIP. In the event that the term of the
Director shall be terminated by election, resignation or cause (otherwise than
by reason of death), the Option may, subject to the provisions of paragraph 5
hereof, be exercised by the Director (to the extent that he shall have been
entitled to do so) at any time within one (1) month after such termination. So
long as the Director shall continue to be an Director of the Company, the Option
shall not be affected by any change of duties or position.
16. 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 Director and if the Director shall so
request in the notice exercising the Option, shall be registered in the name of
the Director and another person jointly, with right or survivorship) and shall
be delivered as provided above to or upon the written order of the Director
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 Director,
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 Director (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.
17. DEATH OF DIRECTOR. In the event of the death of the Director, the
estate of the Director or the person who acquires the right to exercise the
Director's Option by reason of the Director'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 Director (but not after the
expiration of the Option) for the number of shares which the Director 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 assessments 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.
18. DISPOSAL OF SHARES ACQUIRED. In order to enable the Company to
avail itself of any income tax deduction to which it may be entitled, the
Director shall notify the Company of its intent to dispose of any of the shares
acquired pursuant to exercise of this Option within two (2) years from the date
of the grant of the Option and one (1) year from the date of exercise of the
Option. Promptly after such disposition the Director shall notify the Company of
the number of shares disposed of, the dates of acquisition and disposition of
such shares, and the consideration, if any, received on such disposition.
19. 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.
20. INVESTMENT REPRESENTATION. By exercising the Option, the Director
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 Director agrees to furnish the Company with a certificate to the effect of
the foregoing upon exercise of the Option.
21. 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.
22. 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 Director has
hereunto set his hand and seal, all on the day and year first above written.
K-TEL INTERNATIONAL, INC.
By
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Xxxxxx Xxxxx, Chairman and
Chief Executive Officer
--------------------------
[name of Director]
