As filed with the Securities and Exchange Commission on December 30, 1997
Registration No.33-___________
SECURITIES AND EXCHANGE COMMISSION
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
NETTER DIGITAL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3392054
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5125 Lankershim Boulevard
North Hollywood, California 91601
(Address of principal executive offices) (Zip Code)
Netter Digital Entertainment, Inc. 1997 Incentive Stock Option Plan
Netter Digital Entertainment, Inc. 1997 Directors' Stock Option Plan
Consultant's Stock Option Agreement
(Full title of the Plans)
Douglas Netter, President and Chief Executive Officer
Netter Digital Entertainment, Inc.
5125 Lankershim Boulevard
North Hollywood, California 91601
(Name and address of agent for service)
(818) 753-1990
(Telephone number, including area code, of agent for service)
Copy to:
Kenneth A. Luer
Ervin, Cohen & Jessup
9401 Wilshire Boulevard, 9th Floor
Beverly Hills, CA 90212
(310) 273-6333
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of maximum maximum Amount of
securities to Amounts to offering price aggregate registration
be registered be registered per unit offering price fee
- -------------- --------------- ---------------- -------------- --------------
Common Stock 600,000 shares $1.875(*) $1,125,000(*) $331.88
issuable under
the 1997
Incentive Stock
Option Plan
- --------------------------------------------------------------------------------
Common Stock 350,000 shares $1.875(*) $656,250(*) $193.59
issuable under
the 1997 Directors'
Stock Option Plan
- --------------------------------------------------------------------------------
Common Stock 150,000 shares $2.75 $412,500 $121.69
issuable under
the Consultant's
Stock Option
Agreement
================================================================================
(*) Calculated pursuant to Rule 457(h)(1).
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Netter Digital Entertainment, Inc. ("Netter Digital") hereby
incorporates by reference into this Registration Statement the following
documents:
(a) Netter Digital's Annual Report on Form 10-KSB for the year
ended June 30, 1997;
(b) Netter Digital's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1997; and
(c) The description of the Common Stock of Netter Digital
contained in its Registration Statement filed pursuant to
Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as such description may be
amended from time to time.
All reports and other documents filed by Netter Digital subsequent
to the date of this Registration Statement pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference into this Registration
Statement and to be considered a part hereof from the date of filing of
such documents.
Item 6. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of
Delaware (the "GCL") permits a corporation to, and the registrant's
bylaws require that it, indemnify any person who is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by
such person (other than in an action by or in right of the corporation) in
his capacity as or arising out of his status as a director or officer of the
corporation or, if serving at the request of the corporation, as a director
or officer of another corporation, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
As permitted under Section 145 of the GCL, the registrant's bylaws
also provide that it shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the corporation, or is or was serving at the request of the corporation as
a director or officer of another corporation, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation. However, in such an action by or
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on behalf of a corporation, no indemnification may be made in respect of
any claim, issue or matter as to which the person is adjudged liable for
negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that the court determines that,
despite the adjudication of liability but in view of all the circumstances,
the person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
In addition, the indemnification provided by section 145 shall not
be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office.
The bylaws also provide that the registrant may purchase and
maintain insurance on behalf of any person who is or was a director or
officer of the registrant, or is serving at the request of the registrant as a
director or officer of another corporation, against any liability incurred by
such person in any such capacity, or arising out of his status as such,
regardless of whether the registrant is empowered to indemnify such
person under the provisions of the bylaws. Netter Digital currently
maintains such insurance.
The registrant's Certificate of Incorporation (the "Certificate")
provides that the registrant shall indemnify, to the fullest extent
permitted by law, each of its officers, directors, employees and agents.
Item 8. Exhibits
4.1 Netter Digital Entertainment, Inc. 1997 Incentive Stock Option
Plan (the "1997 Plan").
4.2 Form of Incentive Stock Option Agreement used in connection with
the 1997 Plan.
4.3 Form of Nonstatutory Stock Option Agreement used in connection
with the 1997 Plan.
4.4 Netter Digital Entertainment, Inc. 1997 Directors' Stock Option
Plan (the "Directors' Plan").
4.5 Form of Stock Option Agreement used in connection with the
Directors' Plan.
4.6 Consulting Agreement, dated October 1, 1997, by and between
Netter Digital Entertainment, Inc. and Geoffrey Talbot.
4.7 Stock Option Agreement, dated December 10, 1997, by and
between Netter Digital Entertainment, Inc. and Geoffrey Talbot.
5.1 Opinion of Ervin, Cohen & Jessup LLP.
23.1 Consent of Feldman Radin & Co., P.C.
23.2 Consent of Ervin, Cohen & Jessup LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (set forth on Pages II-5 and II-6).
Item 9. Undertakings
A. The registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more that a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement related to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being regis-
tered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of North Hollywood, State of
California, on December 30, 1997.
NETTER DIGITAL ENTERTAINMENT, INC.
By /s/ Douglas Netter
-----------------------------
Douglas Netter,
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Thomas Jorgenson and
Chad Kalebic, and each of them, as true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
post-effective amendments to this Registration Statement, and to file the
same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the foregoing, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/ Douglas Netter Chairman of the Board, President December 30, 1997
- ------------------------- and Chief Executive Officer
Douglas Netter
/s/ John Copeland Executive Vice President December 30, 1997
- ------------------------- and Secretary
John Copeland
/s/ Thomas L. Jorgenson Chief Operating Officer December 30, 1997
- -------------------------
Thomas L. Jorgenson
/s/ Chad Kalebic Chief Financial Officer and December 30, 1997
- ------------------------- Controller (Principal Financial
Chad Kalebic and Accounting Officer)
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/s/ Kate Netter Forte Director December 30, 1997
- -------------------------
Kate Netter Forte
/s/ Leonard Silverman Director December 30, 1997
- -------------------------
Leonard Silverman
/s/ Paul Costa Director December 30, 1997
- -------------------------
Paul Costa
/s/ Lenart Ringquist Director December 30, 1997
- -------------------------
Lenart Ringquist
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EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
- ------- ----------- -------------
4.1 Netter Digital Entertainment, Inc. 1997 Incentive
Stock Option Plan (the "1997 Plan").
4.2 Form of Incentive Stock Option Agreement used
in connection with the 1997 Plan.
4.3 Form of Nonstatutory Stock Option Agreement
used in connection with the 1997 Plan.
4.4 Netter Digital Entertainment, Inc. 1997
Directors' Stock Option Plan (the "Directors'
Plan").
4.5 Form of Stock Option Agreement used in
connection with the Directors' Plan.
4.6 Consulting Agreement, dated October 1, 1997,
by and between Netter Digital Entertainment,
Inc. and Geoffrey Talbot.
4.7 Stock Option Agreement, dated October 1, 1997,
by and between Netter Digital Entertainment,
Inc. and Geoffrey Talbot.
5.1 Opinion of Ervin, Cohen & Jessup LLP.
23.1 Consent of Feldman Radin & Co., P.C.
23.2 Consent of Ervin, Cohen & Jessup LLP (included
in Exhibit 5.1).
24.1 Powers of Attorney (included on pages II-5 and
II-6 hereof).
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NETTER DIGITAL ENTERTAINMENT, INC.
1997 INCENTIVE STOCK OPTION PLAN
1. Purpose. This Netter Digital Entertainment, Inc., 1997
Incentive Stock Option Plan (the "Plan") is intended to allow designated
employees, executive officers and consultants, including employee
directors, (all of whom are sometimes collectively referred to herein as
"Employees") of Netter Digital Entertainment, Inc., a Delaware
corporation ("Netter Digital"), and Subsidiaries which it may have from
time to time (Netter Digital and such Subsidiaries being together referred
to herein as the "Company") to receive certain options under the Plan
("Stock Options") to purchase Netter Digital's common stock, $.01 par
value per share ("Common Stock"), as herein provided. "Subsidiary" shall
mean each corporation which is a "subsidiary corporation" of Netter
Digital, within the definition contained in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). The purpose of the Plan
is to provide Employees with additional incentives to make significant
and extraordinary contributions to the long-term performance and
growth of the Company and to attract and retain Employees of
exceptional ability.
2. Administration.
2.1 The Plan shall be administered by the Board of
Directors of Netter Digital (the "Board").
2.2 The Board shall have full and complete authority, in
its discretion, but subject to the express provisions of the Plan: to
approve the Employees nominated by the management of the Company
to be granted Stock Options; to determine the number of Stock Options
to be granted to an Employee; to determine the time or times at which
Stock Options shall be granted; to establish the terms and conditions
upon which Stock Options may be exercised; to remove or adjust any
restrictions and conditions upon Stock Options; to specify, at the time of
grant, provisions relating to the exercisability of Stock Options and to
accelerate or otherwise modify the exercisability of any Stock Options; to
reprice Stock Options; and to adopt such rules and regulations and to
make all other determinations deemed necessary or desirable for the
administration of the Plan. All interpretations and constructions of the
Plan by the Board, and all of its actions hereunder, shall be binding and
conclusive on all persons for all purposes.
2.3 The Company hereby agrees to indemnify and hold
harmless each Board member and each employee of the Company, and
the estate and heirs of such Board member or employee, against all
claims, liabilities, expenses, penalties, damages or other pecuniary
losses, including legal fees, which such Board member or employee or his
or her estate or heirs may suffer as a result of his or her responsibilities,
obligations or duties in connection with the Plan, to the extent that
insurance, if any, does not cover the payment of such items.
3. Eligibility and Participation. Employees eligible under the
Plan shall be approved by the Board from those Employees who, in the
opinion of the management of the Company, are in positions which
enable them to make significant and extraordinary contributions to the
long-term performance and growth of the Company. In selecting
Employees to whom Stock Options may be granted, consideration shall
be given to factors such as employment position, duties and responsibil-
ities, ability, productivity, length of service, morale, interest in the
Company and recommendations of supervisors.
4. Grants. The Board may grant Stock Options in such
amounts, at such times, and to such Employees nominated by the
management of the Company as the Board, in its discretion, may deter-
mine; provided, however, that the maximum number of shares of
Common Stock which Stock Options may be granted for any one
Employee shall be 300,000. Stock Options granted under the Plan shall
constitute "incentive stock options" within the meaning of Section 422 of
the Code, if so designated by the Board on the date of grant. The Board
shall also have the discretion to grant Stock Options which do not
constitute incentive stock options and any such Stock Options shall be
designated non-statutory stock options by the Board on the date of grant.
The aggregate fair market value (determined as of the time an incentive
stock option is granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Employee
during any one calendar year (under all plans of the Company and any
parent or subsidiary of the Company) may not exceed the maximum
amount permitted under Section 422 of the Code (currently
$100,000.00). Non-statutory stock options shall not be subject to the
limitations relating to incentive stock options contained in the preceding
sentence. Subject to the provisions of paragraph 11 hereof, the number
of shares of Common Stock issued and issuable pursuant to the exercise
of Stock Options granted hereunder shall not exceed 600,000. Each
Stock Option shall be evidenced by a written agreement (the "Option
Agreement") in a form approved by the Board, which shall be executed on
behalf of the Company and by the Employee to whom the Stock Option
is granted. If a Stock Option expires, terminates or is cancelled for any
reason without having been exercised in full, the shares of Common
Stock not purchased thereunder shall again be available for purposes of
the Plan.
5. Purchase Price. The purchase price (the "Exercise Price") of
shares of Common Stock subject to each Stock Option ("Option Shares")
shall equal the fair market value ("Fair Market Value") of such shares on
the date of grant of such Stock Option. Notwithstanding the foregoing,
the Exercise Price of Option Shares subject to an incentive stock option
granted to an Employee who at the time of grant owns stock possessing
more than 10% of the total combined voting power of all classes of stock
of the Company or of any parent or Subsidiary shall be at least equal to
110% of the Fair Market Value of such shares on the date of grant of
such Stock Option. The Fair Market Value of a share of Common Stock
on any date shall be equal to the closing price of the Common Stock for
the last preceding day on which Netter Digital's shares were traded, and
the method for determining the closing price shall be determined by the
Board.
6. Option Period. The Stock Option period (the "Term") shall
commence on the date of grant of the Stock Option and shall be ten years
or such shorter period as is determined by the Board. Notwithstanding
the foregoing, the Term of an incentive stock option granted to an
Employee who at the time of grant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company
or of any parent or subsidiary shall not exceed five years. Each Stock
Option shall provide that it is exercisable over its term in such periodic
installments as the Board in its sole discretion may determine. Such
provisions need not be uniform. If an Employee shall not in any period
purchase all of the Option Shares which the Employee is entitled to
purchase in such period, the Employee may purchase all or any part of
such Option Shares at any time prior to the expiration of the Stock
Option.
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7. Exercise of Options.
7.1 Each Stock Option may be exercised in whole or in
part (but not as to fractional shares) by delivering it for surrender or
endorsement to the Company, attention of the Corporate Secretary, at the
principal office of the Company, together with payment of the Exercise
Price and an executed Notice and Agreement of Exercise in the form
prescribed by paragraph 7.2. Payment may be made in cash, by cashier's
or certified check or by surrender of previously owned shares of the
Company's Common Stock valued pursuant to paragraph 5 (if the Board
authorizes payment in stock).
7.2 Exercise of each Stock Option is conditioned upon the
agreement of the Employee to the terms and conditions of this Plan and
of such Stock Option as evidenced by the Employee's execution and
delivery of a Notice and Agreement of Exercise in a form to be determined
by the Board in its discretion. Such Notice and Agreement of Exercise
shall set forth the agreement of the Employee that: (a) no Option Shares
will be sold or otherwise distributed in violation of the Securities Act of
1933 (the "Securities Act") or any other applicable federal or state
securities laws, (b) each Option Share certificate may be imprinted with
legends reflecting any applicable federal and state securities law
restrictions and conditions, (c) the Company may comply with said
securities law restrictions and issue "stop transfer" instructions to its
Transfer Agent and Registrar without liability, (d) if the Employee (a
"Section 16 Reporting Person") is subject to the reporting requirements
of Section 16(a) of the Securities and Exchange Act of 1934 ("Exchange
Act"), the Employee will furnish to the Company a copy of each Form 4
or Form 5 filed by said Employee and will timely file all reports required
under federal securities laws, and (e) the Employee will report all sales of
Option Shares to the Company in writing on a form prescribed by the
Company.
7.3 No Stock Option shall be exercisable unless and until
any applicable registration or qualification requirements of federal and
state securities laws, and all other legal requirements, have been fully
complied with. The Company will use reasonable efforts to maintain the
effectiveness of a Registration Statement under the Securities Act for the
issuance of Stock Options and shares acquired thereunder, but there
may be times when no such Registration Statement will be currently
effective. The exercise of Stock Options may be temporarily suspended
without liability to the Company during times when no such Registration
Statement is currently effective, or during times when, in the reasonable
opinion of the Board, such suspension is necessary to preclude violation
of any requirements of applicable law or regulatory bodies having
jurisdiction over the Company. If any Stock Option would expire for any
reason except the end of its term during such a suspension, then, if the
exercise of such Stock Option is duly tendered before its expiration, such
Stock Option shall be exercisable and exercised (unless the attempted
exercise is withdrawn) as of the first day after the end of such
suspension. The Company shall have no obligation to file any
Registration Statement covering resales of Option Shares.
8. Continuous Employment. Except as provided in paragraph
10 below, an Employee may not exercise a Stock Option unless from the
date of grant to the date of exercise such Employee remains continuously
in the employ of the Company. For purposes of this paragraph 8, the
period of continuous employment of an Employee with the Company shall
be deemed to include (without extending the term of the Stock Option)
any period during which such Employee is on leave of absence with the
consent of the Company, provided that such leave of absence shall not
3
exceed three (3) months and that such Employee returns to the employ
of the Company at the expiration of such leave of absence. If such
Employee fails to return to the employ of the Company at the expiration
of such leave of absence, such Employee's employment with the
Company shall be deemed terminated as of the date such leave of
absence commenced. The continuous employment of an Employee with
the Company shall also be deemed to include any period during which
such Employee is a member of the Armed Forces of the United States,
provided that such Employee returns to the employ of the Company
within ninety (90) days (or such longer period as may be prescribed by
law) from the date such Employee first becomes entitled to discharge. If
an Employee does not return to the employ of the Company within ninety
(90) days (or such longer period as may be prescribed by law) from the
date such Employee first becomes entitled to discharge, such Employee's
employment with the Company shall be deemed to have terminated as of
the date such Employee's military service ended.
9. Restrictions on Transfer. Incentive stock options granted
under this Plan shall be transferable only by will or the laws of descent
and distribution. The Board shall have discretion to grant non-statutory
stock options that are not subject to the restrictions on transfer relating
to incentive stock options contained in the preceding sentence; provided,
however, that non-statutory stock options granted to a Section 16
Reporting Person shall be subject to such restrictions on transfer as may
be required to qualify for the exemption provided for in Rule 16b-3
promulgated by the Securities and Exchange Commission pursuant to
the Exchange Act ("Rule 16b-3") or otherwise imposed by the Board in its
sole and absolute discretion. No interest of any Employee under the Plan
shall be subject to attachment, execution, garnishment, sequestration,
the laws of bankruptcy or any other legal or equitable process. Each
Stock Option shall be exercisable during an Employee's lifetime only by
such Employee and, in the case of non-statutory stock options, such
Employee's permitted transferees.
10. Termination of Employment.
10.1 Subject to the discretion of the Board with respect to
non-statutory Stock Options, upon termination of an Employee's
employment with the Company by reason of death, all outstanding Stock
Options to the extent exercisable on the date of death of the Employee
shall remain in full force and effect and may be exercised pursuant to the
provisions thereof at any time prior to expiration at the end of the fixed
term thereof. Upon termination of an Employee's employment with the
Company by reason of Disability, all outstanding Stock Options to the
extent exercisable on the date of termination of employment may be
exercised pursuant to the provisions thereof at any time until the earlier
of the end of the fixed term thereof and the expiration of twelve months
following termination of the Employee's employment. Unless otherwise
provided by the Board, all Stock Options to the extent not presently
exercisable by such Employee at the date of death or termination of
employment by reason of Disability shall terminate as of the date of death
or such termination of employment and shall not be exercisable
thereafter.
10.2 Subject to the discretion of the Board with respect to
non-statutory Stock Options, upon the termination of the Employee's
employment with the Company for any reason other than the reasons set
forth in paragraph 10.1 hereof, the Stock Option may be exercised during
the period of three months following the date of such termination of
employment, but only to the extent that such Stock Option was
outstanding and exercisable on such date of termination of employment.
Unless otherwise provided by the Board, all Stock Options to the extent
4
not then presently exercisable by such Employee shall terminate as of the
date of such termination of employment and shall not be exercisable
thereafter.
10.3 For purposes of this Plan, "Disability" shall mean total
and permanent incapacity of an Employee, due to physical impairment
or legally established mental incompetence, to perform the usual duties
of such Employee's employment with the Company, which disability shall
be determined: (i) on medical evidence by a licensed physician designated
by the Board, or (ii) on evidence that the Employee has become entitled
to receive primary benefits as a disabled employee under the Social
Security Act in effect on the date of such disability.
11. Adjustments Upon Change in Capitalization.
11.1 The number and class of shares subject to each out-
standing Stock Option, the Exercise Price thereof (but not the total price)
and the maximum number of Stock Options that may be granted under
the Plan shall be proportionately adjusted in the event of any increase or
decrease in the number of the issued shares of Common Stock which
results from a split-up or consolidation of shares, payment of a stock
dividend or dividends exceeding a total of five percent (5%) for which the
record dates occur in any one fiscal year, a recapitalization (other than
the conversion of convertible securities according to their terms), a
combination of shares or other like capital adjustment, so that upon
exercise of the Stock Option, the Employee shall receive the number and
class of shares such Employee would have received had such Employee
been the holder of the number of shares of Common Stock for which the
Stock Option is being exercised upon the date of such change or increase
or decrease in the number of issued shares of the Company.
11.2 Upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which Netter
Digital is not the surviving corporation or in which Netter Digital survives
as a wholly-owned subsidiary of another corporation, or upon a sale of
all or substantially all of the property of the Company to another
corporation, or any dividend or distribution to shareholders of more than
ten percent (10%) of the Company's assets, adequate adjustment or other
provisions shall be made by the Company or other party to such
transaction so that there shall remain and/or be substituted for the
Option Shares provided for herein, the shares, securities or assets which
would have been issuable or payable in respect of or in exchange for such
Option Shares then remaining, as if the Employee had been the owner of
such Option Shares as of the applicable date. Any securities so
substituted shall be subject to similar successive adjustments.
11.3 In the sole discretion of the Board, Stock Options may
include provisions, on terms (which need not be uniform) authorized by
the Board in its sole discretion, that accelerate the Employees' rights to
exercise Stock Options upon a "Change in Control" (as defined by the
Board in its sole discretion) of the Company.
12. Withholding Taxes. The Company shall have the right at
the time of exercise of any Stock Option to make adequate provision for
any federal, state, local or foreign taxes which it believes are or may be
required by law to be withheld with respect to such exercise ("Tax
Liability"), to ensure the payment of any such Tax Liability. The
Company may provide for the payment of any Tax Liability by any of the
following means or a combination of such means, as determined by the
Board in its sole and absolute discretion in the particular case: (i) by
requiring the Employee to tender a cash payment to the Company, (ii) by
withholding from the Employee's salary, (iii) by withholding from the
5
Option Shares which would otherwise be issuable upon exercise of the
Stock Option that number of Option Shares having an aggregate fair
market value (determined in the manner prescribed by paragraph 5) as
of the date the withholding tax obligation arises that is equal to the
Employee's Tax Liability or (iv) by any other method deemed appropriate
by the Board. Satisfaction of the Tax Liability of a Section 16 Reporting
Person may be made by the method of payment specified in clause (iii)
above upon satisfaction of such additional conditions as the Board shall
deem in its sole and absolute discretion as appropriate in order for such
withholding of Option Shares to qualify for the exemption provided for in
Section 16b-3 of the Exchange Act.
13. Relationship to Other Employee Benefit Plans. Stock
Options granted hereunder shall not be deemed to be salary or other
compensation to any Employee for purposes of any pension, thrift, profit-
sharing, stock purchase or any other employee benefit plan now main-
tained or hereafter adopted by the Company.
14. Amendments and Termination. The Board of Directors
may at any time suspend, amend or terminate this Plan. No amendment
or modification of this Plan may be adopted, except subject to
shareholder approval, which would materially increase the number of
securities which may be issued under this Plan (except for adjustments
pursuant to paragraph 11 hereof) or change the designation of Employees
eligible to receive incentive stock options under the Plan.
15. Successors in Interest. The provisions of this Plan and the
actions of the Board shall be binding upon all heirs, successors and
assigns of the Company and of Employees.
16. Other Documents. All documents prepared, executed or
delivered in connection with this Plan shall be, in substance and form,
as established and modified by the Board or by persons under its
direction and supervision; provided, however, that all such documents
shall be subject in every respect to the provisions of this Plan, and in the
event of any conflict between the terms of any such document and this
Plan, the provisions of this Plan shall prevail. All Stock Options shall be
evidenced by written agreements executed by the Company and the
Employees to whom the Stock Options have been granted.
17. No Obligation to Continue Employment. This Plan and
grants hereunder shall not impose any obligation on the Company to
continue to employ any Employee. Moreover, no provision of this Plan or
any document executed or delivered pursuant to this Plan shall be
deemed modified in any way by any employment contract between an
Employee (or other employee) and the Company.
18. Misconduct of an Employee. Notwithstanding any other
provision of this Plan, if an Employee commits fraud or dishonesty
toward the Company or wrongfully uses or discloses any trade secret,
confidential data or other information proprietary to the Company, or
intentionally takes any other action materially inimical to the best
interests of the Company, as determined by the Board, in its sole and
absolute discretion, such Employee shall forfeit all rights and benefits
under this Plan.
19. Term of Plan. This Plan was adopted by the Board effective
August 29, 1997. No Stock Options may be granted under this Plan after
August 28, 2007.
6
20. Governing Law. This Plan shall be construed in accordance
with, and governed by, the laws of the State of Delaware.
21. Shareholder Approval. No Stock Option shall be
exercisable unless and until the shareholders of the Company have
approved this Plan and all other legal requirements have been fully
complied with.
22. Privileges of Stock Ownership. The holder of a Stock
Option shall not be entitled to the privileges of stock ownership as to any
shares of the Company common stock not actually issued to such holder.
IN WITNESS WHEREOF, this Plan has been executed effective as
of the 29th day of August, 1997.
NETTER DIGITAL ENTERTAINMENT, INC.
By ______________________________
Its______________________________
7
NETTER DIGITAL ENTERTAINMENT, INC.
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (the "Agreement") is made
and entered into as of _____________, 199_ (hereinafter referred to as the
"Date of Grant"), by and between NETTER DIGITAL ENTERTAINMENT,
INC., a Delaware corporation (the "Company"), and ___________________
("Optionee"), with reference to the following facts:
A. The Company has duly adopted a 1997 Incentive Stock
Option Plan (hereinafter referred to as the "Plan") which authorizes the
Board of Directors of the Company (the "Board") to grant nonstatutory
stock options or incentive stock options, within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
which is intended to encourage ownership of stock of the Company by
designated employees, executive officers and consultants, including
employee directors, and to provide additional incentive for them to
promote the success of the Company.
B. The Board has determined that Optionee is entitled to
participate in the Plan, and has taken appropriate action to authorize the
granting of an incentive stock option to Optionee for the number of
shares, at the price per share and on the terms set forth in this
Agreement.
C. Optionee desires to participate in the Plan and to receive an
incentive stock option on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option.
The Company hereby grants to Optionee the right and option
(hereinafter referred to as the "Option") to purchase all or any part of an
aggregate of _________ shares (the "Option Shares") of common stock,
$.01 par value, of the Company (the "Common Stock") on the terms and
conditions set forth in this Agreement.
2. Purchase Price.
The purchase price (the "Exercise Price") of each Option
Share shall be $__.__.
3. Option Period.
The Option shall commence on the Date of Grant and shall
expire, and all rights to purchase the Option Shares shall terminate, at
the close of business on the day immediately preceding the tenth
anniversary of the Date of Grant, unless terminated earlier as provided
in this Agreement. Notwithstanding the foregoing, the term of the Option
shall not exceed five years if, on the Date of Grant, Optionee owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any parent or subsidiary. The
Option shall not be exercisable until the time at which all legal
requirements in connection with the Plan have been fully complied with.
Subject to the foregoing, the Option shall be subject to the following
vesting schedule:_______________; provided, however, if Optionee shall not
in any one exercise period purchase all of the Option Shares which
Optionee is entitled to purchase in such period, Optionee may purchase
all or any part of such Option Shares at any time after the end of such
period and prior to the expiration of the Option. Notwithstanding the
foregoing, (a) if Optionee is subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
the Option shall not be exercisable until at least six months and one day
from the Date of Grant and (b) the sum of the fair market value of (i) the
Option Shares which are subject to incentive stock options and (ii) all
shares of Common Stock which are subject to incentive stock options
that have been granted to Optionee under the Plan or any other option
plan of the Company, which are first exercisable in any one calendar year
may not exceed $100,000.00 (determined on the Date of Grant).
4. Exercise of Option.
4.1 The Option shall be exercised by delivering this
Agreement for endorsement to the Company, at its principal office,
attention of the Corporate Secretary, together with a Notice and
Agreement of Exercise (in the form attached hereto or specified from time
to time by the Board) indicating the number of Option Shares Optionee
wishes to purchase and full payment of the Exercise Price of such shares.
In no event shall the Company be required to issue or transfer fractional
shares.
4.2 Payment for Option Shares may be made in cash, by
cashier's or certified check or (if the Board authorizes payment in stock)
by delivery to the Company of shares of Common Stock, duly assigned to
the Company by a stock power with signatures guaranteed as provided
on the back of the stock certificate. The value of each share delivered in
payment of the Exercise Price of Option Shares shall be the fair market
value ("Fair Market Value") of the Common Stock on the date such shares
are delivered. The Fair Market Value of a share of the Common Stock on
any date shall be equal to the closing price of the Common Stock for the
last preceding day on which the Company's shares were traded, and the
method for determining the closing price shall be determined by the
Board.
5. Employment of Optionee.
5.1 Except as otherwise provided in paragraph 6 of this
Agreement, Optionee may not exercise the Option unless, at the time of
exercise, Optionee is an employee of the Company and has been in the
employ of the Company continuously since the Date of Grant. For
purposes of this paragraph, the period of continuous employment with
the Company shall be deemed to include (without extending the term of
the Option) any period during which Optionee is on leave of absence with
the consent of the Company, provided that such leave of absence shall
not exceed three months and Optionee returns to the employ of the
Company at the expiration of such leave of absence. If Optionee fails to
return to the employ of the Company at the expiration of such leave of
absence, Optionee's employment with the Company shall be deemed
terminated as of the date such leave of absence commenced. The
continuous employment of Optionee with the Company shall also be
deemed to include any period during which Optionee is a member of the
2
Armed Forces of the United States, provided that Optionee returns to the
employ of the Company within 90 days (or such longer period as may be
prescribed by law) from the date Optionee first becomes entitled to dis-
charge. If Optionee does not return to the employ of the Company within
90 days from the date Optionee first becomes entitled to discharge (or
such longer period as may be prescribed by law), Optionee's employment
with the Company shall be deemed to have terminated as of the date
Optionee's military service ended.
5.2 Nothing contained herein shall be construed to impose
upon the Company any obligation to employ Optionee for any period or
to supersede or in any way alter, increase or diminish the respective
rights and obligations of the Company and Optionee under any
employment contract now or hereafter existing between them.
6. Termination of Employment.
6.1 If the employment of Optionee with the Company shall
terminate by reason of death, unless otherwise provided by the Board,
(a) the Option, to the extent then presently exercisable, shall remain in
full force and effect and may be exercised pursuant to the provisions
hereof, including expiration at the end of the fixed term hereof, and (b)
the Option, to the extent not then presently exercisable, shall terminate
as of the date of such termination of employment and shall not be
exercisable thereafter. If the employment of Optionee with the Company
shall terminate by reason of Disability (as defined in the Plan), unless
otherwise provided by the Board, (a) the Option, to the extent then
presently exercisable, shall remain in full force and effect and may be
exercised pursuant to the provisions hereof, at any time until the earlier
of the end of the fixed term hereof and the expiration of twelve months
following termination of Optionee's employment, and (b) the Option, to
the extent not then presently exercisable, shall terminate as of the date
of such termination of employment and shall not be exercisable there-
after.
6.2 If the employment of Optionee with the Company shall
terminate for any reason other than the reasons set forth in paragraph
6.1 hereof, unless otherwise provided by the Board, (a) the Option, to the
extent then presently exercisable shall remain exercisable only for a
period of three months after the date of such termination of employment
and may be exercised during such period pursuant to the provisions
hereof, including expiration at the end of the fixed term hereof, and (b)
the Option, to the extent not then presently exercisable, shall terminate
as of the date of such termination of employment and shall not be
exercisable thereafter.
7. Securities Laws Requirements.
7.1 The Option shall not be exercisable unless and until any
applicable registration or qualification requirements of federal and state
securities laws, and all other requirements of law or any regulatory
bodies having jurisdiction over such exercise or issuance and delivery,
have been fully complied with. The Company will use reasonable efforts
to maintain the effectiveness of a Registration Statement under the
Securities Act of 1933 (the "Securities Act") for the issuance of the Option
and the Option Shares but there may be times when no such Registration
Statement will be currently effective. Exercise of the Option may be
temporarily suspended without liability to the Company during times
when no such Registration Statement is currently effective, or during
3
times when, in the reasonable opinion of the Board, such suspension is
necessary to preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company. If the Option
would expire for any reason except the end of its term during such a
suspension, then if exercise of the Option is duly tendered before its
expiration, the Option shall be exercisable and exercised (unless the
attempted exercise is withdrawn) as of the first day after the end of such
suspension. The Company shall have no obligation to file any
Registration Statement covering resales of the Option Shares.
7.2 Upon each exercise of the Option, Optionee shall
represent, warrant and agree, by the Notice and Agreement of Exercise
delivered to the Company, that (a) no Option Shares will be sold or
otherwise distributed in violation of the Securities Act or any other
applicable federal or state securities laws, (b) if Optionee is subject to the
reporting requirements under Section 16(a) of the Exchange Act,
Optionee will furnish to the Company a copy of each Form 4 or Form 5
filed by Optionee and will timely file all reports required under federal
securities laws, and (c) Optionee will report all sales of Option Shares to
the Company in writing on the form prescribed from time to time by the
Company. All Option Share certificates may be imprinted with legend
conditions reflecting federal and state securities law restrictions and
conditions and the Company may comply therewith and issue "stop
transfer" instructions to its transfer agents and registrars without
liability.
8. Non-transferability of Option.
The Option shall be transferable only pursuant to Optionee's
will or the laws of descent and distribution, and may be exercised, during
the lifetime of Optionee, only by Optionee. Without limiting the generality
of the foregoing, the Option may not be assigned, transferred (except as
provided above), pledged or hypothecated in any way, shall not be
assignable by operation of law and shall not be subject to attachment,
execution, garnishment, sequestration, the law of bankruptcy or any
other legal or equitable process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition contrary to the provisions of
this Agreement, and the levy of any execution, attachment or similar
process thereupon, shall be null and void and without effect.
9. Changes in Capitalization.
9.1 The number and class of shares subject to the Option,
the Exercise Price (but not the total price), and the minimum number of
shares as to which the Option may be exercised at any one time, shall be
proportionately adjusted in the event of any increase or decrease in the
number of the issued shares of Common Stock which results from a
split-up or consolidation of shares, payment of a stock dividend or stock
dividends exceeding a total of five percent (5%) for which the record dates
occur in any one fiscal year, a recapitalization (other than the conversion
of convertible securities according to their terms), a combination of
shares or other like capital adjustment, so that upon exercise of the
Option, Optionee shall receive the number and class of shares Optionee
would have received had Optionee been the holder of the number of
shares of Common Stock for which the Option is being exercised upon
the date of such change or increase or decrease in the number of issued
shares of the Company.
4
9.2 Upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which the
Company is not the surviving corporation, or in which the Company
survives as a wholly-owned subsidiary of another corporation, or upon
a sale of all or substantially all of the property of the Company to another
corporation, or any dividend or distribution to stockholders of more than
10% of the Company's assets, adequate adjustment or other provisions
shall be made by the Company or other party to such transaction so that
there shall remain and/or be substituted for the Option Shares provided
for herein, the shares, securities or assets which would have been
issuable or payable in respect of or in exchange for the Option Shares
then remaining under the Option, as if Optionee had been the owner of
such shares as of the applicable date. Any securities so substituted shall
be subject to similar successive adjustments.
10. Relationship to Other Employee Benefit Plans.
The Option shall not be deemed to be salary or other
compensation to Optionee for purposes of any pension, thrift, profit
sharing, stock purchase or other employee benefit plan now maintained
or hereafter adopted by the Company.
11. Misconduct of Optionee.
Notwithstanding any other provision of this Agreement or
the Plan, if Optionee shall commit fraud or dishonesty toward the
Company, wrongfully use or disclose any trade secret, confidential data
or other information proprietary to the Company or intentionally take any
other action materially inimical to the best interests of the Company, as
determined by the Board in its sole and absolute discretion, Optionee
shall forfeit all rights and benefits under this Agreement.
12. Subsidiary.
The term "subsidiary" as used herein, shall mean each
corporation which is a "subsidiary corporation" of the Company, within
the definition contained in Section 424(f) of the Code. Unless the context
indicates otherwise, references to the Company shall include all
subsidiaries of the Company and any parent it may have in the future.
13. Privileges of Ownership.
Optionee shall not have any of the rights of a stockholder
with respect to the shares covered by the Option except to the extent that
share certificates have actually been issued and registered in Optionee's
name on the books of the Company or its registrar upon the due exercise
of the Option. The Company shall be allowed a reasonable time following
notice of exercise in which to accomplish the issuance and registration.
5
14. Reference to Plan and Internal Revenue Code.
This Agreement and the Option are subject to all of the
terms and conditions of the Plan, which are hereby incorporated by
reference. In the event of any conflict between this Agreement and the
Plan, the provisions of the Plan shall prevail. Inasmuch as the Option is
intended to constitute an "incentive stock option" within the meaning of
Section 422 of the Code, and the Regulations issued thereunder, as said
Section or Regulations may be amended from time to time, all
interpretations and provisions of this Agreement, the Option and the Plan
shall be resolved to the extent possible, in accordance with the
requirements of said Section and Regulations and in a way which
preserves the Option as an incentive stock option. To the extent that any
portion of the Option does not qualify as an incentive stock option, that
portion shall constitute a non-statutory stock option provided that the
status of the remaining portion of the Option as an incentive stock option
is not effected thereby.
15. Notices.
Any notice to be given under the terms of this Agreement
shall be addressed to the Company in care of its Corporate Secretary at
5125 Lankershim Boulevard, North Hollywood, California 91601, and any
notice to be given to Optionee shall be addressed to Optionee at the
address appearing on the employment records of the Company, or at
such other address or addresses as either party may hereafter designate
in writing to the other. Any such notice shall be deemed duly given when
enclosed in a properly sealed envelope, addressed as herein required and
deposited, postage prepaid, in a post office or branch post office regularly
maintained by the United States Government.
16. Withholding Taxes.
The Company shall have the right at the time of exercise of
the Option to make adequate provision for any federal, state, local or
foreign taxes which it believes are or may be required by law to be
withheld with respect to such exercise ("Tax Liability"), to ensure the
payment (through withholding from Optionee's salary or the Option
Shares or otherwise as the Company shall deem in its sole and
conclusive discretion to be in its best interests) of any such Tax Liability.
17. Number and Gender.
Terms used herein in any number or gender include other
numbers or genders, as the context may require.
18. Counterparts.
This Agreement may be executed in one or more counter-
parts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6
19. Governing Law.
This Agreement and performance under it, shall be
construed in accordance with and under the laws of the State of
Delaware. Should a court or other body of competent jurisdiction
determine that any term or provision of this Agreement is excessive in
scope, such term or provision shall be adjusted rather than voided and
interpreted so as to be enforceable to the fullest extent possible, and all
other terms and provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.
IN WITNESS WHEREOF, the Company and Optionee have
executed this Agreement as of the Date of Grant.
"OPTIONEE" "COMPANY"
NETTER DIGITAL ENTERTAINMENT, INC.
______________________________
(Signature)
______________________________ By ____________________________
(Print Name) Its____________________________
7
NETTER DIGITAL ENTERTAINMENT, INC.
NOTICE AND AGREEMENT OF EXERCISE
OF INCENTIVE STOCK OPTION
_________ , 199_
I hereby exercise my Netter Digital Entertainment, Inc. Incentive
Stock Option dated _______ , 199_, as to _______ shares of Netter Digital
Entertainment, Inc. common stock, $.01 par value (the "Option Shares").
Enclosed are the documents and payment specified in Paragraph
4 of my Option Agreement. I understand that no Option Shares shall be
issued and delivered unless and until any applicable registration
requirements of the Securities Act of 1933, as amended, any listing
requirements of any securities exchange on which stock of the same class
is then listed, and any other requirements of law or any regulatory bodies
having jurisdiction over such issuance and delivery, shall have been fully
complied with. I hereby represent, warrant and agree, to and with Netter
Digital Entertainment, Inc. (the "Company"), that:
a. The Option Shares I am purchasing are being acquired for my
account, and no other person (except, if I am married, my spouse) will
own any interest therein.
b. I will not sell or dispose of my Option Shares in violation of the
Securities Act of 1933 or any other applicable Federal or state securities
laws. I will obtain the Company's advice prior to any disposition of my
Option Shares.
c. I agree that the Company may, without liability, place legend
conditions upon my Option Shares and issue "stop transfer" restrictions
requiring compliance with applicable securities laws and the terms of my
Option.
d. If and so long as I am subject to reporting requirements under
Section 16(a) of the Securities Exchange Act of 1934, I will furnish to the
Company a copy of each Form 4 or Form 5 filed by me and will timely file
all reports required under the Federal securities laws.
e. I will report to the Company all sales of Option Shares on the
form prescribed from time to time by the Company.
The number of Option Shares specified above are to be issued in
the following registration (husband and wife will be shown to be joint
tenants unless I state that the Option Shares will be held as community
property or as tenants in common):
__________________________________ _______________________________
(Print your name) (Signature)
__________________________________ _______________________________
(Option - Print name of spouse
if you wish joint registration _______________________________
Address
NETTER DIGITAL ENTERTAINMENT, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
This Nonstatutory Stock Option Agreement (the "Agreement") is
made and entered into as of ________, 199_ (hereinafter referred to
as the "Date of Grant"), by and between NETTER DIGITAL
ENTERTAINMENT, INC., a Delaware corporation (the "Company"), and
____________________ ("Optionee"), with reference to the following facts:
A. The Company has duly adopted a 1997 Incentive Stock
Option Plan (hereinafter referred to as the "Plan") which authorizes the
Board of Directors of the Company (the "Board") to grant nonstatutory
stock options or incentive stock options, within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
which is intended to encourage ownership of stock of the Company by
designated employees, executive officers and consultants, including
employee directors, and to provide additional incentive for them to
promote the success of the Company.
B. The Board has determined that Optionee is entitled to
participate in the Plan, and has taken appropriate action to authorize the
granting of a nonstatutory stock option to Optionee for the number of
shares, at the price per share and on the terms set forth in this
Agreement.
C. Optionee desires to participate in the Plan and to receive an
option on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option.
The Company hereby grants to Optionee the right and option
(hereinafter referred to as the "Option") to purchase all or any part of an
aggregate of _________ shares (the "Option Shares") of common stock,
$.01 par value, of the Company (the "Common Stock") on the terms and
conditions set forth in this Agreement.
2. Purchase Price.
The purchase price (the "Exercise Price") of each Option
Share shall be $__.__.
3. Option Period.
The Option shall commence on the Date of Grant and shall
expire, and all rights to purchase the Option Shares shall terminate, at
the close of business on the day immediately preceding the tenth
anniversary of the Date of Grant, unless terminated earlier as provided
in this Agreement. The Option shall not be exercisable until the time at
which all legal requirements in connection with the Plan have been fully
complied with. Subject to the foregoing, the Option shall be subject to
the following vesting schedule:_______________; provided, however, if
Optionee shall not in any one exercise period purchase all of the Option
Shares which Optionee is entitled to purchase in such period, Optionee
may purchase all or any part of such Option Shares at any time after the
end of such period and prior to the expiration of the Option.
Notwithstanding the foregoing, if Optionee is subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Option shall not be exercisable until at least six
months and one day from the Date of Grant.
4. Exercise of Option.
4.1 The Option shall be exercised by delivering this
Agreement for endorsement to the Company, at its principal office,
attention of the Corporate Secretary, together with a Notice and
Agreement of Exercise (in the form attached hereto or specified from time
to time by the Board) indicating the number of Option Shares Optionee
wishes to purchase and full payment of the Exercise Price of such shares.
In no event shall the Company be required to issue or transfer fractional
shares.
4.2 Payment for Option Shares may be made in cash, by
cashier's or certified check or (if the Board authorizes payment in stock)
by delivery to the Company of shares of Common Stock, duly assigned to
the Company by a stock power with signatures guaranteed as provided
on the back of the stock certificate. The value of each share delivered in
payment of the Exercise Price of Option Shares shall be the fair market
value ("Fair Market Value") of the Common Stock on the date such shares
are delivered. The Fair Market Value of a share of the Common Stock on
any date shall be equal to the closing price of the Common Stock for the
last preceding day on which the Company's shares were traded, and the
method for determining the closing price shall be determined by the
Board.
5. Employment of Optionee.
5.1 Except as otherwise provided in paragraph 6 of this
Agreement, Optionee may not exercise the Option unless, at the time of
exercise, Optionee is an employee of the Company and has been in the
employ of the Company continuously since the Date of Grant. For
purposes of this paragraph, the period of continuous employment with
the Company shall be deemed to include (without extending the term of
the Option) any period during which Optionee is on leave of absence with
the consent of the Company, provided that such leave of absence shall
not exceed three months and Optionee returns to the employ of the
Company at the expiration of such leave of absence. If Optionee fails to
return to the employ of the Company at the expiration of such leave of
absence, Optionee's employment with the Company shall be deemed
terminated as of the date such leave of absence commenced. The
continuous employment of Optionee with the Company shall also be
deemed to include any period during which Optionee is a member of the
Armed Forces of the United States, provided that Optionee returns to the
employ of the Company within 90 days (or such longer period as may be
prescribed by law) from the date Optionee first becomes entitled to dis-
charge. If Optionee does not return to the employ of the Company within
90 days from the date Optionee first becomes entitled to discharge (or
such longer period as may be prescribed by law), Optionee's employment
with the Company shall be deemed to have terminated as of the date
Optionee's military service ended.
5.2 Nothing contained herein shall be construed to impose
upon the Company any obligation to employ Optionee for any period or
to supersede or in any way alter, increase or diminish the respective
2
rights and obligations of the Company and Optionee under any
employment contract now or hereafter existing between them.
6. Termination of Employment.
6.1 If the employment of Optionee with the Company shall
terminate by reason of death, unless otherwise provided by the Board,
(a) the Option, to the extent then presently exercisable, shall remain in
full force and effect and may be exercised pursuant to the provisions
hereof, including expiration at the end of the fixed term hereof, and (b)
the Option, to the extent not then presently exercisable, shall terminate
as of the date of such termination of employment and shall not be
exercisable thereafter. If the employment of Optionee with the Company
shall terminate by reason of Disability (as defined in the Plan), unless
otherwise provided by the Board, (a) the Option, to the extent then
presently exercisable, shall remain in full force and effect and may be
exercised pursuant to the provisions hereof, at any time until the earlier
of the end of the fixed term hereof and the expiration of twelve months
following termination of Optionee's employment, and (b) the Option, to
the extent not then presently exercisable, shall terminate as of the date
of such termination of employment and shall not be exercisable there-
after.
6.2 If the employment of Optionee with the Company shall
terminate for any reason other than the reasons set forth in paragraph
6.1 hereof, unless otherwise provided by the Board, (a) the Option, to the
extent then presently exercisable shall remain exercisable only for a
period of three months after the date of such termination of employment
and may be exercised during such period pursuant to the provisions
hereof, including expiration at the end of the fixed term hereof, and (b)
the Option, to the extent not then presently exercisable, shall terminate
as of the date of such termination of employment and shall not be
exercisable thereafter.
7. Securities Laws Requirements.
7.1 The Option shall not be exercisable unless and until any
applicable registration or qualification requirements of federal and state
securities laws, and all other requirements of law or any regulatory
bodies having jurisdiction over such exercise or issuance and delivery,
have been fully complied with. The Company will use reasonable efforts
to maintain the effectiveness of a Registration Statement under the
Securities Act of 1933 (the "Securities Act") for the issuance of the Option
and the Option Shares but there may be times when no such Registration
Statement will be currently effective. Exercise of the Option may be
temporarily suspended without liability to the Company during times
when no such Registration Statement is currently effective, or during
times when, in the reasonable opinion of the Board, such suspension is
necessary to preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company. If the Option
would expire for any reason except the end of its term during such a
suspension, then if exercise of the Option is duly tendered before its
expiration, the Option shall be exercisable and exercised (unless the
attempted exercise is withdrawn) as of the first day after the end of such
suspension. The Company shall have no obligation to file any
Registration Statement covering resales of the Option Shares.
3
7.2 Upon each exercise of the Option, Optionee shall
represent, warrant and agree, by the Notice and Agreement of Exercise
delivered to the Company, that (a) no Option Shares will be sold or
otherwise distributed in violation of the Securities Act or any other
applicable federal or state securities laws, (b) if Optionee is subject to the
reporting requirements under Section 16(a) of the Exchange Act,
Optionee will furnish to the Company a copy of each Form 4 or Form 5
filed by Optionee and will timely file all reports required under federal
securities laws, and (c) Optionee will report all sales of Option Shares to
the Company in writing on the form prescribed from time to time by the
Company. All Option Share certificates may be imprinted with legend
conditions reflecting federal and state securities law restrictions and
conditions and the Company may comply therewith and issue "stop
transfer" instructions to its transfer agents and registrars without
liability.
8. Transferability of Option.
If Optionee is subject to the reporting requirements of
Section 16(a) of the Exchange Act at the time of a proposed transfer, the
Option shall be transferable only if such transferability or transfer would
not cause the Option to fail to qualify for the exemption provided for in
Section 16b-3 of the Exchange Act, as determined by the Board in its sole
and absolute discretion. The Option may be exercised, during the
lifetime of Optionee, only by Optionee and Optionee's permitted
transferees. Notwithstanding the foregoing, the Option shall not be
assignable by operation of law and shall not be subject to attachment,
execution, garnishment, sequestration, the law of bankruptcy or any
other legal or equitable process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition contrary to the provisions of
this Agreement, and the levy of any execution, attachment or similar
process thereupon, shall be null and void and without effect.
9. Changes in Capitalization.
9.1 The number and class of shares subject to the Option,
the Exercise Price (but not the total price), and the minimum number of
shares as to which the Option may be exercised at any one time, shall be
proportionately adjusted in the event of any increase or decrease in the
number of the issued shares of Common Stock which results from a
split-up or consolidation of shares, payment of a stock dividend or stock
dividends exceeding a total of five percent (5%) for which the record dates
occur in any one fiscal year, a recapitalization (other than the conversion
of convertible securities according to their terms), a combination of
shares or other like capital adjustment, so that upon exercise of the
Option, Optionee shall receive the number and class of shares Optionee
would have received had Optionee been the holder of the number of
shares of Common Stock for which the Option is being exercised upon
the date of such change or increase or decrease in the number of issued
shares of the Company.
9.2 Upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which the
Company is not the surviving corporation, or in which the Company
survives as a wholly-owned subsidiary of another corporation, or upon
a sale of all or substantially all of the property of the Company to another
corporation, or any dividend or distribution to stockholders of more than
10% of the Company's assets, adequate adjustment or other provisions
4
shall be made by the Company or other party to such transaction so that
there shall remain and/or be substituted for the Option Shares provided
for herein, the shares, securities or assets which would have been
issuable or payable in respect of or in exchange for the Option Shares
then remaining under the Option, as if Optionee had been the owner of
such shares as of the applicable date. Any securities so substituted shall
be subject to similar successive adjustments.
10. Relationship to Other Employee Benefit Plans.
The Option shall not be deemed to be salary or other
compensation to Optionee for purposes of any pension, thrift, profit
sharing, stock purchase or other employee benefit plan now maintained
or hereafter adopted by the Company.
11. Misconduct of Optionee.
Notwithstanding any other provision of this Agreement or
the Plan, if Optionee shall commit fraud or dishonesty toward the
Company, wrongfully use or disclose any trade secret, confidential data
or other information proprietary to the Company or intentionally take any
other action materially inimical to the best interests of the Company, as
determined by the Board in its sole and absolute discretion, Optionee
shall forfeit all rights and benefits under this Agreement.
12. Subsidiary.
The term "subsidiary" as used herein, shall mean each
corporation which is a "subsidiary corporation" of the Company, within
the definition contained in Section 424(f) of the Code. Unless the context
indicates otherwise, references to the Company shall include all
subsidiaries of the Company and any parent it may have in the future.
13. Privileges of Ownership.
Optionee shall not have any of the rights of a stockholder
with respect to the shares covered by the Option except to the extent that
share certificates have actually been issued and registered in Optionee's
name on the books of the Company or its registrar upon the due exercise
of the Option. The Company shall be allowed a reasonable time following
notice of exercise in which to accomplish the issuance and registration.
14. Reference to Plan.
This Agreement and the Option are subject to all of the
terms and conditions of the Plan, which are hereby incorporated by
reference. In the event of any conflict between this Agreement and the
Plan, the provisions of the Plan shall prevail.
5
15. Notices.
Any notice to be given under the terms of this Agreement
shall be addressed to the Company in care of its Corporate Secretary at
5125 Lankershim Boulevard, North Hollywood, California 91601, and any
notice to be given to Optionee shall be addressed to Optionee at the
address appearing on the employment records of the Company, or at
such other address or addresses as either party may hereafter designate
in writing to the other. Any such notice shall be deemed duly given when
enclosed in a properly sealed envelope, addressed as herein required and
deposited, postage prepaid, in a post office or branch post office regularly
maintained by the United States Government.
16. Withholding Taxes.
The Company shall have the right at the time of exercise of
the Option to make adequate provision for any federal, state, local or
foreign taxes which it believes are or may be required by law to be
withheld with respect to such exercise ("Tax Liability"), to ensure the
payment (through withholding from Optionee's salary or the Option
Shares or otherwise as the Company shall deem in its sole and
conclusive discretion to be in its best interests) of any such Tax Liability.
17. Number and Gender.
Terms used herein in any number or gender include other
numbers or genders, as the context may require.
18. Counterparts.
This Agreement may be executed in one or more counter-
parts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
/////
/////
/////
6
19. Governing Law.
This Agreement and performance under it, shall be
construed in accordance with and under the laws of the State of
Delaware. Should a court or other body of competent jurisdiction
determine that any term or provision of this Agreement is excessive in
scope, such term or provision shall be adjusted rather than voided and
interpreted so as to be enforceable to the fullest extent possible, and all
other terms and provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.
IN WITNESS WHEREOF, the Company and Optionee have
executed this Agreement as of the Date of Grant.
"OPTIONEE" "COMPANY"
NETTER DIGITAL ENTERTAINMENT, INC.
________________________________
(Signature)
By _________________________
________________________________
(Print Name) Its_________________________
7
NETTER DIGITAL ENTERTAINMENT, INC.
NOTICE AND AGREEMENT OF EXERCISE
OF NONSTATUTORY STOCK OPTION
_________ , 199_
I hereby exercise my Netter Digital Entertainment, Inc.
Nonstatutory Stock Option dated ________, 199_, as to __________ shares
of Netter Digital Entertainment, Inc. common stock, $.01 par value (the
"Option Shares").
Enclosed are the documents and payment specified in Paragraph
4 of my Option Agreement. I understand that no Option Shares shall be
issued and delivered unless and until any applicable registration
requirements of the Securities Act of 1933, as amended, any listing
requirements of any securities exchange on which stock of the same class
is then listed, and any other requirements of law or any regulatory bodies
having jurisdiction over such issuance and delivery, shall have been fully
complied with. I hereby represent, warrant and agree, to and with Netter
Digital Entertainment, Inc. (the "Company"), that:
a. The Option Shares I am purchasing are being acquired for my
account, and no other person (except, if I am married, my spouse) will
own any interest therein.
b. I will not sell or dispose of my Option Shares in violation of the
Securities Act of 1933 or any other applicable Federal or state securities
laws. I will obtain the Company's advice prior to any disposition of my
Option Shares.
c. I agree that the Company may, without liability, place legend
conditions upon my Option Shares and issue "stop transfer" restrictions
requiring compliance with applicable securities laws and the terms of my
Option.
d. If and so long as I am subject to reporting requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended, I will
furnish to the Company a copy of each Form 4 and Form 5 filed by me
and will timely file all reports required under the Federal securities laws.
e. I will report to the Company all sales of Option Shares on the
form prescribed from time to time by the Company.
The number of Option Shares specified above are to be issued in
the following registration (husband and wife will be shown to be joint
tenants unless I state that the Option Shares will be held as community
property or as tenants in common):
______________________________ _________________________________
(Print your name) (Signature)
______________________________ _________________________________
(Option - Print name of spouse
if you wish joint registration _________________________________
Address
NETTER DIGITAL ENTERTAINMENT, INC.
1997 DIRECTORS' STOCK OPTION PLAN
1. Purpose.
This Netter Digital Entertainment, Inc. 1997 Directors' Stock
Option Plan (the "Plan") is intended to promote the best interests of Netter
Digital Entertainment, Inc., a Delaware corporation ("Netter Digital"), and
its stockholders by providing to each member of Netter Digital's Board of
Directors (the "Board") who is a Non-Employee Director (as defined in
paragraph 3 herein) the opportunity to acquire a proprietary interest in
Netter Digital by receiving options ("Stock Options") to purchase Netter
Digital's common stock, $.01 par value ("Common Stock"), as herein
provided. The Plan is intended to promote an increased incentive and
personal interest in the welfare of Netter Digital by those individuals who
are primarily responsible for shaping the long-range plans of Netter
Digital, assist Netter Digital in attracting and retaining on its Board
persons of exceptional competence and provide compensation for service
as a director of Netter Digital.
2. Administration.
2.1 The Plan shall be administered by the Board or by a
duly authorized committee of the Board. Unless and until the Board
specifically delegates administration of the Plan to a committee of the
Board empowered to administer the Plan, all references in the Plan to the
"Committee" shall mean the Board.
2.2 The Committee shall have no discretion as to (a) the
selection of directors to whom Stock Options may be granted, (b) the
number of Stock Options granted to each director, (c) the times at which
or the periods within which Stock Options may be exercised, or (d) except
to the limited extent provided in paragraph 5, the price at which Stock
Options may be exercised. However, the Committee shall have full and
complete authority, subject to the express provisions of the Plan, to adopt
such rules and regulations and to make all other determinations that are
deemed necessary or desirable for the administration of the Plan. All
interpretations and constructions of the Plan by the Committee, and all
of its actions hereunder, shall be binding and conclusive on all persons
for all purposes.
2.3 Netter Digital shall indemnify and hold harmless each
Committee member and each director and employee of Netter Digital, and
the estate and heirs of such Committee member, director or employee,
against all claims, liabilities, expenses, penalties, damages or other
pecuniary losses, including legal fees, which such Committee member,
director or employee or his or her estate or heirs may suffer as a result
of his or her responsibilities, obligations or duties in connection with the
Plan, to the extent that insurance, if any, does not cover the payment of
such items.
1
3. Eligibility.
Each member of the Board who is not an employee of Netter Digital
or any of its Subsidiaries (as herein defined) or of any parent corporation
of Netter Digital (a "Non-Employee Director") automatically shall receive
annual grants of Stock Options under the Plan. Consulting services
performed on behalf of Netter Digital or any of its affiliates by a member
of the Board will not affect his or her eligibility to participate in the Plan.
Eligibility shall be determined with respect to each director reelected or
first elected after this Plan is adopted by the Board, on the date such
director is so reelected or elected, as the case may be, and on each
anniversary thereof. A Stock Option, once granted to a Non-Employee
Director, shall remain in effect in accordance with its terms even if the
optionee later enters the employ of Netter Digital or a Subsidiary or
parent. "Subsidiary" shall mean each corporation which is a "subsidiary
corporation" of Netter Digital within the definition contained in Section
424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
4. Grants.
4.1 Each Non-Employee Director who is reelected after
this Plan is adopted by the Board shall be automatically granted an
initial Stock Option ("Initial Stock Option") to purchase 10,000 shares of
Common Stock on the date of such reelection, and each Non-Employee
Director who is first elected a director after this Plan is adopted by the
Board shall be automatically granted an Initial Stock Option to purchase
30,000 shares of Common Stock on the date of such election.
4.2 Each Non-Employee Director serving on the Board
also automatically shall be granted an additional Stock Option
("Additional Stock Option") to purchase 10,000 shares of Common Stock
on each successive anniversary of the date on which the Non-Employee
Director was granted an Initial Stock Option, provided that the Non-
Employee Director continues to satisfy the eligibility requirements set
forth in paragraph 3, and provided further that in no event shall any
Non-Employee Director be granted more than four such Additional Stock
Options.
4.3 Subject to the provisions of paragraph 11 of this Plan,
the number of shares of Common Stock issued and issuable upon the
exercise of Stock Options granted under this Plan shall not exceed
350,000.
5. Purchase Price.
The purchase price (the "Exercise Price") of shares of Common
Stock subject to each Stock Option ("Option Shares") shall equal the fair
market value ("Fair Market Value") of such shares on the date of grant
(the "Date of Grant") of such Stock Option. The Fair Market Value of a
share of Common Stock on any date shall be equal to the closing price of
the Common Stock for the last preceding day on which Netter Digital's
shares were traded, and the method for determining the closing price
shall be determined by the Committee.
6. Option Period.
The term of each Stock Option shall commence on the Date of
Grant and shall be five years. Each Stock Option shall first be
exercisable in full six months and one day after the Date of Grant.
2
7. Exercise of Options.
7.1 Each Stock Option may be exercised in whole or in
part (but not as to fractional shares) by delivering it for surrender or
endorsement to Netter Digital, attention of the Corporate Secretary, at
Netter Digital's principal office, together with payment of the Exercise
Price and an executed Notice and Agreement of Exercise in the form
prescribed by paragraph 7.2. Payment may be made in cash, by cashier's
or certified check or by surrender of previously owned shares of Netter
Digital's Common Stock valued pursuant to paragraph 5 (if the
Committee authorizes payment in stock).
7.2 Exercise of each Stock Option is conditioned upon the
agreement of the Non-Employee Director to the terms and conditions of
this Plan and of such Stock Option as evidenced by the Non-Employee
Director's execution and delivery of a Notice and Agreement of Exercise
in a form to be determined by the Committee in its discretion. Such
Notice and Agreement of Exercise shall set forth the agreement of the
Non-Employee Director that: (a) no Option Shares will be sold or
otherwise distributed in violation of the Securities Act of 1933 (the
"Securities Act") or any other applicable federal or state securities laws;
(b) each Option Share certificate may be imprinted with legends reflecting
any applicable federal and state securities law restrictions and
conditions; (c) Netter Digital may comply with said securities law
restrictions and issue "stop transfer" instructions to its Transfer Agent
and Registrar without liability; and (d) each Non-Employee Director will
furnish to Netter Digital a copy of each Form 4 or Form 5 filed by said
Non-Employee Director under Section 16(a) of the Securities Exchange
Act of 1934 (the "Exchange Act") and will timely file all reports required
under the federal securities laws.
7.3 No Stock Option shall be exercisable unless and until
any applicable registration or qualification requirements of federal and
state securities laws, and all other legal requirements, have been fully
complied with. Netter Digital will use reasonable efforts to maintain the
effectiveness of a Registration Statement under the Securities Act for the
issuance of Stock Options and shares acquired thereunder, but there
may be times when no such Registration Statement will be currently
effective. The exercise of Stock Options may be temporarily suspended
without liability to Netter Digital during times when no such Registration
Statement is currently effective, or during times when, in the reasonable
opinion of the Committee, such suspension is necessary to preclude
violation of any requirements of applicable law or regulatory bodies
having jurisdiction over Netter Digital. If any Stock Option would expire
for any reason except the end of its term during such a suspension, then,
if the exercise of such Stock Option is duly tendered before its expiration,
such Stock Option shall be exercisable and exercised (unless the
attempted exercise is withdrawn) as of the first day after the end of such
suspension. Netter Digital shall have no obligation to file any
Registration Statement covering resales of Option Shares.
8. Continuous Directorship.
Except as provided in paragraph 10 below, a Non-Employee
Director may not exercise a Stock Option unless from the Date of Grant
to the date of exercise such Non-Employee Director continuously serves
as a director of Netter Digital.
3
9. Restrictions on Transfer.
Each Stock Option granted under this Plan shall be subject to
such restrictions on transfer as may be required to qualify for the
exemption provided for in Rule 16b-3 promulgated by the Securities and
Exchange Commission pursuant to the Exchange Act or otherwise
imposed by the Board in its sole discretion. No interest of any Non-
Employee Director under the Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any
other legal or equitable process. Each Stock Option granted under this
Plan shall be exercisable during a Non-Employee Director's lifetime only
by such Non-Employee Director or by such Non-Employee Director's legal
representative.
10. Termination of Service.
Upon the termination of the service of a Non-Employee Director as
a director of Netter Digital for any reason, (a) all Stock Options to the
extent then presently exercisable by such Non-Employee Director shall
remain exercisable only for a period of ninety (90) days after the date of
such termination of service and may be exercised pursuant to the
provisions thereof, including expiration at the end of the fixed term
thereof, and (b) all Stock Options to the extent not then presently
exercisable by such Non-Employee Director shall terminate as of the date
of such termination of service and shall not be exercisable thereafter.
11. Adjustments Upon Change in Capitalization.
11.1 The number and class of shares subject to each
outstanding Stock Option, the Exercise Price thereof (but not the total
price) and the maximum number of Stock Options that may be granted
under the Plan shall be proportionately adjusted in the event of any
increase or decrease in the number of the issued shares of Common
Stock which results from a split-up or consolidation of shares, payment
of a stock dividend or dividends exceeding a total of five percent (5%) for
which the record dates occur in any one fiscal year, a recapitalization
(other than the conversion of convertible securities according to their
terms), a combination of shares or other like capital adjustment, so that
upon exercise of the Stock Option, the Non-Employee Director shall
receive the number and class of shares such NonEmployee Director
would have received had such Non-Employee Director been the holder of
the number of shares of Common Stock for which the Stock Option is
being exercised upon the date of such change or increase or decrease in
the number of issued shares of Netter Digital.
11.2 Upon a reorganization, merger or consolidation of
Netter Digital with one or more corporations as a result of which Netter
Digital is not the surviving corporation or in which Netter Digital survives
as a subsidiary of another corporation, or upon a sale of all or
substantially all of the property of Netter Digital to another corporation,
or any dividend or distribution to stockholders of more than ten percent
(10%) of Netter Digital's assets, adequate adjustment or other provisions
shall be made by Netter Digital or the other party to such transaction so
that there shall remain and/or be substituted for the Option Shares
provided for herein, the shares, securities or assets which would have
4
been issuable or payable in respect of or in exchange for such Option
Shares then remaining, as if the Non-Employee Director had been the
owner of such Option Shares as of the applicable date. Any securities so
substituted shall be subject to similar successive adjustments.
12. Withholding Taxes.
Netter Digital shall have the right at the time of exercise of any
Stock Option to make adequate provision for any federal, state, local or
foreign taxes which it believes are or may be required by law to be
withheld with respect to such exercise ("Tax Liability"), to ensure the
payment of any such Tax Liability. Netter Digital may provide for the
payment of any Tax Liability by any of the following means or a
combination of such means, as determined by the Committee in its sole
and absolute discretion in the particular case: (i) by requiring the Non-
Employee Director to tender a cash payment to Netter Digital; (ii) by
withholding from the Non-Employee Director's cash compensation; (iii)
by withholding from the Option Shares which would otherwise be
issuable upon exercise of the Stock Option that number of Option Shares
having an aggregate fair market value (determined in the manner
prescribed by paragraph 5) as of the date the withholding tax obligation
arises that is equal to the Non-Employee Director's Tax Liability; or (iv)
by any other method deemed appropriate by the Committee. Satisfaction
of the Tax Liability of a Non-Employee Director may be made by the
method of payment specified in clause (iii) above upon satisfaction of
such additional conditions as the Committee shall deem in its sole and
absolute discretion as appropriate in order for such withholding of Option
Shares to qualify for the exemption provided for in Section 16b-3 of the
Exchange Act.
13. Amendments and Termination.
The Board of Directors may at any time suspend, amend or
terminate this Plan; provided, however, that the provisions of paragraphs
3, 4, 5 and 6 of this Plan may not be amended more than once every six
months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act or the rules and regulations thereunder.
No amendment or modification of this Plan may be adopted, except
subject to stockholder approval, which would: (a) materially increase the
benefits accruing to Non-Employee Directors under this Plan; (b)
materially increase the number of securities which may be issued under
this Plan (except for adjustments pursuant to paragraph 11 hereof); or
(c) materially modify the requirements as to eligibility for participation in
the Plan.
14. Successors in Interest.
The provisions of this Plan and the actions of the Committee shall
be binding upon all heirs, successors and assigns of Netter Digital and
of Non-Employee Directors.
15. Other Documents.
All documents prepared, executed or delivered in connection with
this Plan shall be, in substance and form, as established and modified by
the Committee or by persons under its direction and supervision;
provided, however, that all such documents shall be subject in every
respect to the provisions of this Plan, and in the event of any conflict
between the terms of any such document and this Plan, the provisions
of this Plan shall prevail.
5
16. Misconduct of a Non-Employee Director.
Notwithstanding any other provision of this Plan, all unexercised
Stock Options held by a Non-Employee Director shall automatically
terminate as of the date his or her directorship is terminated, if such
directorship is terminated on account of any act of fraud, embezzlement,
misappropriation or conversion of assets or opportunities of Netter
Digital. Upon termination of such Stock Options, such Non-Employee
Director shall forfeit all rights and benefits under this Plan.
17. Term of Plan.
This Plan was adopted by the Board on August 29, 1997. No Stock
Options may be granted under this Plan after August 28, 2007.
18. Governing Law.
This Plan shall be construed in accordance with, and governed by,
the laws of the State of Delaware.
19. Privileges of Stock Ownership.
The holder of a Stock Option shall not be entitled to the privileges
of stock ownership as to any shares of Netter Digital Common Stock not
actually issued to such holder.
IN WITNESS WHEREOF, this Plan has been executed on August 29, 1997.
NETTER DIGITAL
ENTERTAINMENT, INC.
By:_________________________
Its:________________________
6
NETTER DIGITAL ENTERTAINMENT, INC.
DIRECTOR STOCK OPTION AGREEMENT
This Director Stock Option Agreement (the "Agreement") is made
and entered into as of ________________, by and between NETTER
DIGITAL ENTERTAINMENT, INC., a Delaware corporation (the
"Company"), and _________________ ("Optionee"), with reference to the
following facts:
A. The Company has duly adopted a 1997 Directors' Stock
Option Plan (hereinafter referred to as the "Plan"), under which (1) each
present Non-Employee Director who was reelected a director after the
Plan was adopted by the Board was granted automatically an initial stock
option to purchase 10,000 shares of the Company's Common Stock at
Fair Market Value as of the Date of Grant, (2) each present and future
Non-Employee Director who was or will be first elected a director after the
Plan was adopted by the Board was or will be granted automatically an
initial stock option to purchase 30,000 shares of the Company's Common
Stock at Fair Market Value as of the Date of Grant, and (3) each present
and future Non-Employee Director will be granted automatically an
additional stock option to purchase 10,000 shares of the Company's
Common Stock at Fair Market Value as of the Date of Grant on each
successive anniversary of the date on which such Non-Employee Director
was granted an initial stock option, in order to promote an increased
incentive and personal interest in the Company by those individuals who
are primarily responsible for shaping the long-range plans of the
Company. The Plan is administered by the Committee. All capitalized
terms used in this Agreement that are not otherwise defined herein shall
have the meanings attributed to them in the Plan.
B. Optionee became a Non-Employee Director on
________________, and the stock option represented by this Agreement was
granted to Optionee automatically on _____________, 19__ (the "Date of
Grant").
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option
The Company has granted to Optionee the right and option
(hereinafter referred to as the "Option") to purchase from time to time all
or any part of an aggregate of _______ shares (the "Option Shares") of the
common stock, $.01 par value, of the Company ("Common Stock") on the
terms and conditions set forth in this Agreement.
2. Purchase Price
The purchase price (the "Exercise Price") of each Option
Share shall be $_____.
3. Option Period
The Option shall commence on the Date of Grant and shall
expire, and all rights to purchase Option Shares shall terminate, at the
close of business on the day immediately preceding the fifth anniversary
of the Date of Grant, unless terminated earlier as provided in this
Agreement. Subject to the foregoing, the Option shall first be exercisable
in full six months and one day after the Date of Grant.
4. Exercise of Option
The Option shall be exercised (in whole or in part) by
delivering this Agreement for endorsement to the Company, at its
principal office, attention of the Corporate Secretary, together with a
Notice and Agreement of Exercise (in the form attached hereto or
specified from time to time by the Committee) indicating the number of
Option Shares Optionee wishes to purchase and full payment of the
Exercise Price of such Option Shares. Payment shall be made in cash,
by cashier's or certified check, or by surrender of previously owned
shares of the Common Stock valued at Fair Market Value on the date of
exercise (if the Committee authorizes payment in stock). In no event
shall the Company be required to issue or transfer fractional shares.
5. Directorship of Optionee
5.1 Except as provided in Paragraph 5.2, Optionee may
not exercise the Option unless Optionee serves as a director of the
Company continuously from the Date of Grant to the date of exercise.
5.2 Upon the termination of Optionee's service as a
director of the Company for any reason, the Option (a) to the extent then
presently exercisable, shall remain exercisable only for a period of ninety
(90) days after the date of such termination of service and may be
exercised pursuant to the provisions hereof, including expiration at the
end of the fixed term thereof, and (b) to the extent not then presently
exercisable, shall terminate as of the date of such termination of service
and shall not be exercisable thereafter.
6. Securities Laws Requirements
6.1 The Option shall not be exercisable unless and until
any applicable registration or qualification requirements of federal and
state securities laws and all other requirements of law or any regulatory
bodies having jurisdiction over such exercise or issuance and delivery
have been fully complied with. The Company will use reasonable efforts
to maintain the effectiveness of a Registration Statement under the
Securities Act of 1933 (the "Securities Act") for the issuance of the Option
Shares, but there may be times when no such Registration Statement will
be currently effective. Exercise of the Option may be temporarily
suspended without liability to the Company during times when no such
Registration Statement is currently effective, or during times when, in the
reasonable opinion of the Committee, such suspension is necessary to
preclude violation of any requirements of applicable law or regulatory
bodies having jurisdiction over the Company. If the Option would expire
for any reason except the end of its term during such a suspension, then,
if exercise of the Option is duly tendered before its expiration, the Option
shall be exercisable and exercised (unless the attempted exercise is
withdrawn) as of the first day after the end of such suspension. The
Company shall have no obligation to file any Registration Statement
covering resales of the Option Shares.
2
6.2 Upon each exercise of the Option, Optionee shall
represent, warrant and agree, by the Notice and Agreement of Exercise
delivered to the Company, that (a) no Option Shares will be sold or other-
wise distributed in violation of the Securities Act or any other applicable
federal or state securities laws, (b) Optionee will furnish to the Company
a copy of each Form 4 filed by Optionee pursuant to the reporting
requirements under Section 16(a) of the Securities Exchange Act of 1934
(the "Exchange Act") and will timely file all reports required under federal
securities laws, and (c) Optionee will report all sales of Option Shares to
the Company in writing on the form prescribed from time to time by the
Company. All certificates for Option Shares may be imprinted with
legend conditions reflecting federal and state securities law restrictions
and conditions and the Company may comply therewith and issue "stop
transfer" instructions to its transfer agents and registrars without
liability.
7. Withholding Taxes
The Committee shall have the right at the time of exercise of
the Option to make adequate provision in any manner permitted by the
Plan for any federal, state, local or foreign taxes which it believes are or
may be required by law to be withheld with respect to such exercise, to
ensure the payment of any such taxes.
8. Non-transferability of Option
If Optionee is subject to the reporting requirements of
Section 16(a) of the Exchange Act at the time of a proposed transfer, the
Option shall be transferable only if such transferability or transfer would
not cause the Option to fail to qualify for the exemption provided for in
Section 16b-3 of the Exchange Act, as determined by the Committee in
its sole and absolute discretion. The Option may be exercised, during the
lifetime of Optionee, only by Optionee and Optionee's legal representative.
Notwithstanding the foregoing, the Option shall not be assignable by
operation of law and shall not be subject to attachment, execution,
garnishment, sequestration, the law of bankruptcy or any other legal or
equitable process. Any attempted assignment, transfer, pledge, hypothe-
cation or other disposition contrary to the provisions of this Agreement,
and the levy of any execution, attachment or similar process thereupon,
shall be null and void and without effect.
9. Changes in Capitalization
9.1 The number and class of shares subject to the Option,
the Exercise Price (but not the total price) and the minimum number of
shares as to which the Option may be exercised at any one time shall be
proportionately adjusted in the event of any increase or decrease in the
number of the issued shares of Common Stock of the Company which
results from a split-up or consolidation of shares, payment of a stock div-
idend or stock dividends exceeding a total of five percent (5%) for which
the record dates occur in any one fiscal year, a recapitalization (other
than the conversion of convertible securities according to their terms), a
combination of shares or other like capital adjustment, so that upon
exercise of the Option, Optionee shall receive the number and class of
shares Optionee would have received had Optionee been the holder of the
3
number of shares of Common Stock for which the Option is being exer-
cised upon the date of such change or increase or decrease in the
number of issued shares of the Company.
9.2 Upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which the
Company is not the surviving corporation or in which the Company
survives as a subsidiary of another corporation, a sale of all or substan-
tially all of the property of the Company to another corporation or any
dividend or distribution to shareholders of more than ten percent of the
Company's assets, adequate adjustment or other provisions shall be
made by the Company or other party to such transaction so that there
shall remain and/or be substituted for the Option Shares provided for
herein, the shares, securities or assets which would have been issuable
or payable in respect of or in exchange for the Option Shares then
remaining under the Option, as if Optionee had been the owner of such
shares as of the applicable date. Any securities so substituted shall be
subject to similar successive adjustments.
10. Misconduct of Optionee
Notwithstanding any other provision of this Agreement, all
unexercised Options held by Optionee hereunder shall automatically
terminate as of the date Optionee's directorship is terminated, if such
directorship is terminated on account of any act of fraud, embezzlement,
misappropriation or conversion of assets or opportunities of the
Company. Upon such termination of the Option, Optionee shall forfeit
all rights and benefits under this Agreement.
11. Privileges of Ownership
Optionee shall not have any of the rights of a stockholder
with respect to the shares covered by the Option except to the extent that
share certificates have actually been issued and registered in Optionee's
name on the books of the Company or its registrar upon the due exercise
of the Option. The Company shall be allowed a reasonable time following
notice of exercise in which to accomplish the issuance and registration.
12. Reference to Plan
This Agreement and the Option are subject to all of the
terms and conditions of the Plan, which are hereby incorporated by
reference. In the event of any conflict between this Agreement and the
Plan, the provisions of the Plan shall prevail.
13. Notices
Any notice to be given under the terms of this Agreement
shall be addressed to the Company in care of its Corporate Secretary at
5125 Lankershim Boulevard, North Hollywood, California 91601, and any
notice to be given to Optionee shall be addressed to Optionee at
Optionee's address appearing on the records of the Company, or at such
other address or addresses as either party may hereafter designate in
writing to the other. Any such notice shall be deemed duly given when
enclosed in a properly sealed envelope, addressed as herein required and
4
deposited, postage prepaid, in a post office or branch post office regularly
maintained by the United States Government.
14. Governing Law.
This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company and Optionee have
executed this Agreement as of the Date of Grant.
"OPTIONEE"
____________________________________
"COMPANY"
NETTER DIGITAL ENTERTAINMENT, INC.
By__________________________________
Its_________________________________
5
NETTER DIGITAL ENTERTAINMENT, INC.
NOTICE AND AGREEMENT OF EXERCISE
OF DIRECTOR STOCK OPTION
_________ , ____
I hereby exercise my Netter Digital Entertainment, Inc. Director
Stock Option dated ______________, as to ______ shares of Netter Digital
Entertainment, Inc. common stock, $.01 par value (the "Option Shares").
Enclosed are the documents and payment specified in Paragraph
4 of my Option Agreement. I understand that no Option Shares will be
issued and delivered to me unless and until any applicable registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable requirements of law or any regulatory bodies
having jurisdiction over such issuance and delivery have been fully
complied with. I hereby represent, warrant and agree, to and with Netter
Digital Entertainment, Inc. (the "Company"), that:
a. The Option Shares are being acquired for my account, and no
other person (except, if I am married, my spouse) will own any interest
therein.
b. I will not sell or dispose of my Option Shares in violation of the
Securities Act or any other applicable federal or state securities laws.
c. The Company may, without liability, place legend conditions
upon the Option Shares and issue "stop transfer" restrictions requiring
compliance with applicable securities laws and the terms of my Option
Agreement.
d. So long as I am subject to reporting requirements under Section
16(a) of the Securities Exchange Act of 1934, I will furnish to the
Company a copy of each Form 4 filed by me and will timely file all reports
required under the federal securities laws.
e. I will report to the Company all sales of Option Shares on the
form prescribed from time to time by the Company.
The Option Shares specified above are to be issued in the following
registration (husband and wife will be shown to be joint tenants unless
I state that the Option Shares will be held as community property or as
tenants in common):
__________________________________ ________________________________
(Print your name) (Signature)
__________________________________ ________________________________
(Option - Print name of spouse if
you wish joint registration)
________________________________
Address
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into as of
December 10, 1997, by and between Netter Digital Entertainment, Inc.,
a Delaware corporation ("Company") and Geoffrey Talbot ("Consultant")
with reference to the following facts:
A. Company is in the business of digital entertainment
production and services and the manufacture and distribution of lighting
products (collectively, the "Business").
B. Consultant has expertise in managing companies engaged in
the Business, in developing business plans for companies engaged in the
Business, in identifying and analyzing other companies which might be
acquired by or merged into the Company to augment and enhance the
Business, and in advising the Company concerning its operations and
financial growth.
C. Consultant was formerly Acting Chief Financial Officer and
a member of the Board of Directors of the Company.
D. Company now wishes to engage Consultant, and Consultant
wishes to provide services to Company, in the capacity of an independent
consultant on the terms and conditions set forth below.
E. Company acknowledges that Consultant is the Chief
Executive Officer and a full-time employee of J. C. Williamson
Entertainment Inc. ("JCW") and that JCW may at times be in a
competitive position with the Company in the marketplace.
NOW, THEREFORE, the parties agree as follows:
1. Engagement. Commencing effective as of the date of this
Agreement, and continuing thereafter for a period of three (3) months,
Company engages Consultant, and Consultant hereby accepts such
engagement with Company, to render independent consulting services
regarding Company's operations and, in particular, the organization,
implementation and operation of the Business, including, but not limited
to, reviewing business plans for the Company, advising the Company
concerning its operations and financial growth (but not including
identifying and/or analyzing other companies which might be acquired
by or merged into the Company, which services, if requested by
Company, shall be the subject of a separate mutual agreement).
Consistent with his primary duty to JCW, Consultant shall use
reasonable efforts and judgment to promote the business of the Company
during the term of this Agreement. Consultant shall render service as
and when requested by the Company; provided (i) the Company shall give
Consultant not less than one day's notice of the Company's intention to
utilize the services of Consultant and (ii) Consultant shall not be required
to reschedule any business appointments or travel arrangements he
otherwise may have. Further, notwithstanding any other provision of this
Agreement, Consultant shall not be required to render services outside
the greater Los Angeles area or for a period exceeding ten (10) hours per
month.
2. Compensation. In consideration for the services to be
performed by Consultant, the Company shall grant to Consultant (i) a
base consulting fee at the rate of $500.00 per month (payable monthly
commencing with the date hereof) and (ii) an option to acquire 150,000
shares of the common stock of the Company upon the terms and
conditions set forth in a Stock Option Agreement, which Stock Option
Agreement shall be in the form attached hereto as Exhibit "A". In
addition, Company shall reimburse Consultant for his reasonable out-of-
pocket expenses incurred at Company's request, provided such expenses
are pre-approved by the Company and are supported by vouchers or
receipts detailing the expenses for which reimbursement is being
claimed.
3. Registration of Shares. The Company agrees to use
reasonable efforts to cause the shares subject to the Stock Option
Agreement to be registered pursuant to a Form S-8 on or before
December 20, 1997.
4. Independent Contractor. In the performance of its duties
and obligations hereunder, Consultant shall at all times act and perform
in the capacity of an independent contractor. Company shall neither
have nor exercise any control or direction over the methods by which
Consultant shall perform its services, it being the sole interest of
Company to assure that the services shall be performed and the results
achieved in a competent, efficient and satisfactory manner. Company
shall have no responsibility to Consultant for income tax withholding,
payroll taxes, worker's compensation, unemployment or disability
insurance, group medical insurance, pension or profit sharing
contributions, or other benefits extended to employees of Company.
5. No Contracting Authority. Unless expressly authorized in
writing in advance by Company, Consultant shall not have any power or
authority to bind Company by any contract or engagement or pledge its
credit, or render it liable for any purpose or in any amount.
6. Termination. This Agreement may be terminated at any time
(i) by mutual agreement, or (ii) by the Company "for cause" if Consultant
dies or is permanently disabled, or materially breaches any of his
obligations or agreements hereunder (the cure of which breach is not
commenced within thirty (30) days after written notice thereof and
thereafter diligently prosecuted to completion by Consultant), or (iii) by
Consultant "for cause" if the Company materially breaches any of its
obligations or agreements hereunder (the cure of which breach is not
commenced within thirty (30) days after written notice thereof and
thereafter diligently prosecuted to completion by the Company).
2
7. General Provisions.
a. Subject to Paragraph 7.e below, the rights and
obligations of Company under this Agreement shall inure to the benefit
of and shall be binding upon the successors and assigns of Company.
b. Any notice to be given to Company under the terms of
this Agreement shall be addressed to Company at the address of its
principal place of business, and any notice to be given to Consultant
shall be addressed to him at his home address last shown on the records
of Company, or at such other address as either party may hereafter
designate in writing to the other. Any such notice shall be deemed duly
given when deposited in the United States mail, certified or registered
mail, postage prepaid, addressed as aforesaid or when served personally.
c. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a
waiver of any such provision or provisions, nor prevent that party
thereafter from enforcing each and every other provision of this
Agreement. The rights granted both parties herein are cumulative and
shall not constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.
d. This Agreement contains the entire agreement between
the parties hereto with respect to the subject matter hereof, supersedes
all prior agreements and understandings between the parties and may
not be modified or terminated orally. No modification, termination or
attempted waiver shall be valid unless in writing and signed by the party
against whom the same is sought to be enforced.
e. The rights under this Agreement shall not be
assignable nor the duties delegable by either party without the prior
written consent of the other, except that Company may assign its rights
hereunder in connection with the sale of all or substantially all of its
assets or business. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person or entity, other than the
parties hereto and their successors in interest and permitted assignees,
any rights or remedies under or by reason of this Agreement unless so
stated to the contrary.
/ / /
/ / /
/ / /
3
f. This Agreement shall be construed, interpreted and enforced
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
"COMPANY" "CONSULTANT"
Netter Digital Entertainment, Inc.
By: /s/ Douglas Netter /s/ Geoffrey Talbot
-------------------------- -------------------------
Douglas Netter, Chairman Geoffrey Talbot
4
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE SECURITIES ACT AND QUALIFICATION
UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement") is made and
entered into as of the 10th day of December, 1997, by and between Netter
Digital Entertainment, Inc., a Delaware corporation ("Optionor"), and
Geoffrey Talbot ("Optionee") with reference to the following facts:
A. Optionor and Optionee have entered into a Consulting
Agreement of even date herewith (the "Consulting Agreement") pursuant
to which Optionor has engaged Optionee to act as a financial advisor and
consultant for a period of three (3) months commencing October 10,
1997.
B. In partial consideration of Optionee's services to be
performed under the Consulting Agreement, Optionor has agreed to grant
to Optionee an option to purchase up to 150,000 authorized and
unissued shares of Optionor's Common Stock ("Common Stock").
C. The Board of Directors of Optionor has approved Optionor's
execution, delivery and performance of the Consulting Agreement,
including the grant by Optionor to Optionee of an option to purchase up
to 150,000 shares of Common Stock, upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
1. GRANT OF OPTION; TERM AND CONSIDERATION.
1.1 Grant of Option. Optionor hereby grants to Optionee
an irrevocable option (the "Option") to purchase up to an aggregate of
150,000 shares of Common Stock (the "Option Shares") at the price of
$2.75 per Option Share (the "Exercise Price"), all on the terms, covenants
and conditions set forth in this Agreement.
1.2 Term. The term of the Option (the "Term") shall
commence as of the date hereof and shall expire at 5:00 p.m. Pacific
Standard Time on March 10, 1998.
2. EXERCISE OF OPTION. Optionee may exercise the Option,
if at all, at any time during the Term by delivering written notice of
exercise to Optionor specifying the number of Option Shares to be
purchased and accompanied by payment of the Option Shares to be
purchased, which payment shall be either (a) in the form of a certified or
bank cashier's check, payable to the order of Optionor, or (b) by delivery
to Optionor of shares of Common Stock having an aggregate "Fair Market
Value" (as defined below) equal to the "Aggregate Exercise Price" (as
defined below) of the Option Shares to be purchased. As used herein, the
term "Aggregate Exercise Price" shall mean the amount of the Exercise
Price times the number of Option Shares to be purchased. As used
herein, the term "Fair Market Value" shall mean the fair market value of
the Common Stock on the date such shares are delivered in payment of
the Exercise Price, which fair market value shall be equal to the closing
sales or closing bid price of one share of the Common Stock according to
the NASDAQ quotations for the business day immediately preceding the
day such shares are delivered to the Company. As soon as practicable
after any exercise of this Option in accordance with the foregoing
provisions, Optionor shall deliver to Optionee at the main office of
Optionor, or at such other place as shall be mutually acceptable, a
certificate or certificates representing the Option Shares as to which the
Option has been exercised.
3. RESTRICTION ON ISSUANCE OF OPTION SHARES AND
DELIVERY. If authorization of any regulatory commission or agency is
required for the lawful delivery of any certificate representing Option
Shares, Optionor may withhold delivery of such certificate until such
authorization has been granted. Optionor will make reasonable efforts
to obtain such authorizations, but if Optionor is unable to obtain such
authorizations from such regulatory commission or agency, which
counsel for Optionor deems necessary for the lawful delivery of such
certificate, Optionor shall be relieved from any liability for failure to
deliver such certificate until such time that such authorization is
obtained or is obtainable.
4. RIGHTS AS SHAREHOLDER. Optionee shall have no rights
as a shareholder with respect to any Option Shares covered by the Option
until the date of issuance of a stock certificate to Optionee for such
Option Shares. No adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate
is issued.
5. CHANGES IN CAPITAL STRUCTURE. The Exercise Price and
the number of Option Shares issuable upon the exercise of the Option
shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 5. Upon each adjustment of the
Exercise Price, Optionee shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of
Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Option Shares
issuable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
5.1 Subdivision or Combination of Stock. In case
Optionor shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect
2
immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of
Optionor shall be combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be
proportionately increased.
5.2 Dividends In Common Stock, Other Stock Property,
Reclassification. If at any time or from time to time the holders of
Common Stock (or any shares of stock or other securities at the time
receivable upon exercise of the Option) shall have received or become
entitled to receive, without payment thereof,
(a) any shares of Common Stock or any shares of
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Common Stock, or any rights or
options to subscribe for, purchase or otherwise acquire any of the
foregoing by way of dividend or other distribution;
(b) any cash paid or payable otherwise than as a
regular periodic cash dividend at a rate which is substantially consistent
with Optionor's Certificate of Incorporation or past practice (or, in the
case of an initial dividend, at a rate which is substantially consistent with
industry practice); or
(c) any Common Stock or other securities or
property (including cash) by way of a spin-off, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than
shares of Common Stock issued as a stock split, adjustments in respect
of which shall be covered by the terms of Section 5.1 above),
then and in each such case, Optionee shall, upon the exercise of the
Option, be entitled to receive, in addition to the number of shares of
Common Stock receivable thereupon, and without payment of any
additional consideration thereof, the amount of stock and other securities
and property (including cash in the cases referred to in clauses (b) and
(c) above) which Optionee would hold on the date of such exercise had it
been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such
shares and/or all other additional stock and other securities and
property.
5.3 Reorganization, Reclassification, Consolidation, Merger
or Sale. If any reorganization of the capital stock of Optionor, or any
consolidation or merger of Optionor with another corporation, or the sale
of all or substantially all of its assets to another corporation shall be
effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provisions shall be made whereby the Optionee shall thereafter have the
right to purchase and receive (in lieu of the shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the number of shares
3
of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby. In any such case,
appropriate provision shall be made with respect to the rights and
interests of Optionee to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Exercise Price and
of the number of Option Shares issuable and receivable upon the exercise
of the Option) shall thereafter be applicable, as nearly as may be
practical, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of the Option. Optionor will not effect any
such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than Optionor) resulting from
such consolidation or the corporation purchasing such assets shall
assume by written instrument, executed and mailed or delivered to
Optionee at the last address of Optionee appearing on the books of
Optionor, the obligation to deliver to Optionee such shares of stock,
securities or assets as, in accordance with the foregoing provisions,
Optionee may be entitled to purchase.
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
Optionee represents and warrants to Optionor that this Agreement has
been duly authorized and approved by all necessary corporate action on
the part of Optionee, has been duly executed and delivery by Optionee
and constitutes a valid and legally binding obligation of Optionee
enforceable in accordance with its terms.
7. REPRESENTATIONS AND WARRANTIES OF OPTIONOR.
Optionor represents, warrants and covenants to Optionee that:
(a) this Agreement has been duly authorized and
approved by all necessary corporate action on the part of Optionor, has
been duly executed and delivered by Optionor and constitutes a valid and
legally binding obligation of Optionor enforceable in accordance with its
terms;
(b) Optionor is not subject to or obligated under any
provision of (i) its Certificate of Incorporation or Bylaws, (ii) any contract,
(iii) any license, franchise or permit, or (iv) any law, regulation, order,
judgment or decree that would be breached or violated by its execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby;
(c) no authorization, consent or approval of, or any filing
with, any public body or authority is necessary for consummation by it
of the transactions contemplated by this Agreement;
(d) Optionor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to enter into and
perform this Agreement; and
4
(e) Optionor has taken all necessary corporate action to
authorize and reserve for issuance upon exercise of the Option the Option
Shares, and the Option Shares, when issued and delivered by Optionor
to Optionee upon exercise of the Option, will be duly authorized, validly
issued, fully paid and nonassessable, and will be free and clear of any
claims, liens, encumbrances, security interest and charges of any nature
whatsoever incurred by Optionor.
8. RESTRICTIONS ON TRANSFERABILITY; COMPLIANCE WITH
SECURITIES ACT.
8.1 Restrictions on Transferability. The Option is not
transferable. The Option Shares shall not be transferable except upon the
conditions specified in the legend set forth at the beginning of this
Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act. Optionee will cause any proposed
transferee of the Option Shares to agree to take and hold such securities
subject to the provisions and upon the conditions specified in such
legend.
8.2 Restrictive Legend. Each certificate representing
(a) the Option, (b) the Option Shares, and (c) any other securities issued
in respect of the Option Shares shall be stamped or otherwise imprinted
with the legend materially similar to the legend set forth at the beginning
of this Agreement; provided that no legend shall be affixed to any
certificate representing any Option Shares, or other securities issued in
respect of the Option Shares, issued following the registration of such
shares.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF
OPTION. The rights and obligations of Optionor and of Optionee
contained in Section 8 shall survive the exercise of the Option.
10. FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of the Option. Optionor shall, in lieu of issuing any
fractional share, pay Optionee a sum in cash equal to such fraction
multiplied by the then effective Exercise Price.
11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or
sent by facsimile (and promptly confirmed by mail) to the parties as
follows (or at such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of
changes of address shall only be effective upon receipt):
5
If to Optionor to:
Netter Digital Entertainment, Inc.
5125 Lankershim Boulevard
North Hollywood, California 91601
Fax: (818) 753-7655
with a copy to:
Ervin, Cohen & Jessup LLP
9401 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Attn: Kenneth A. Luer, Esq.
Fax: (310) 859-2325
If to Optionee to:
Geoffrey Talbot
425 Maple Drive, Suite 202
Beverly Hills, CA 90210
Fax: (310) 273-2589
with a copy to:
Resch Polster Alpert & Berger LLP
10390 Santa Monica Boulevard, Fourth Floor
Los Angeles, California 90025-5053
Attn: Aaron Grunfeld, Esq.
Fax: (310) 552-3209
12. NUMBER AND GENDER. Terms used herein in any number
or gender include other numbers or genders, as the context may require.
13. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
14. GOVERNING LAW. This Agreement and performance under
it, shall be construed in accordance with and under the laws of the State
of California. Should a court or other body of competent jurisdiction
determine that any term or provision of this Agreement is excessive in
scope, such term or provision shall be adjusted rather than voided and
6
interpreted so as to be enforceable to the fullest extent possible, and all
other terms and provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.
15. BINDING EFFECT; PARTIES IN INTEREST. This Agreement
shall be binding upon, inure to the benefit of, and be enforceable by the
successor and assigns of the parties hereto. Nothing expressed or
referred to in this Agreement is intended or shall be construed to give any
person other than the parties to this Agreement, or their respective
successors or assigns, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision contained herein.
16. ENTIRE AGREEMENT; MODIFICATIONS, AMENDMENTS
AND WAIVERS. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. No
amendment, change or modification of this Agreement shall be valid
unless it is in writing, is signed by all of the parties hereto, and expressly
states that an amendment, change or modification of this Agreement is
being made. No claim of waiver, consent or acquiescence with respect to
any provision of this Agreement shall be made against any party hereto
except on the basis of a written instrument executed by or on behalf of
such party. The party hereto for whose benefit a condition is herein
inserted shall have the unilateral right to waive such condition.
17. TAXES. All taxes resulting from the issuance or exercise of
the Option are the responsibility of the Optionee. Optionor assumes no
responsibility for any taxes resulting from such issuance or exercise.
18. FURTHER ASSURANCES. Each of the parties hereto shall
execute and deliver any and all additional papers and documents, and
shall do any and all further acts and thing, as may be reasonably
necessary in connection with the performance of their obligations
hereunder and to carry out the intent of this Agreement.
19. ATTORNEYS FEES. In the event that any party hereto
brings an action or proceeding for a declaration of the rights of the
parties under this Agreement, for injunctive relief, for an alleged breach
or default, or any other action arising out of this Agreement or the
transactions contemplated hereby, or in the event that any party is in
default of its obligations pursuant hereto, whether or not suit is filed or
prosecuted to final judgement, the prevailing party shall be entitled to
reasonable attorneys' fees, in addition to any other court costs incurred
and any other damages or relief awarded.
7
IN WITNESS WHEREOF, Optionor and Optionee have executed this
Agreement as of the date first above written.
"OPTIONOR"
NETTER DIGITAL ENTERTAINMENT, INC.
a Delaware corporation
By: /s/ Douglas Netter
----------------------------
Name: Douglas Netter
Its: Chairman
"OPTIONEE"
/s/ Geoffrey Talbot
---------------------------
Geoffrey Talbot
8
ERVIN, COHEN & JESSUP LLP
NINTH FLOOR
9401 WILSHIRE BOULEVARD
BEVERLY HILLS, CALIFORNIA 90212-2974
TELEPHONE: (310) 273-6333
FAX: (310) 859-2325
DECEMBER 29, 1997
Netter Digital Entertainment, Inc.
5125 Lankershim Boulevard
North Hollywood, California
Re: Form S-8 Registration Statement
Dear Gentlemen:
We have acted as your counsel in connection with the preparation
of a Registration Statement on Form S-8 to be filed with the Securities
and Exchange Commission (the "Registration Statement") with respect to
(i) 600,000 shares of Common Stock of Netter Digital Entertainment, Inc.,
a Delaware corporation (the "Company"), reserved for issuance from time
to time upon the exercise of stock options granted pursuant to the
Company's 1997 Incentive Stock Option Plan (the "1997 Plan"), (ii)
350,000 shares of Common Stock of the Company reserved for issuance
from time to time upon the exercise of stock options granted pursuant to
the Company's 1997 Directors' Stock Option Plan (the "Directors' Plan"),
and (iii) 150,000 shares of Common Stock of the Company reserved for
issuance upon the exercise of stock options granted pursuant to that
certain Stock Option Agreement, dated October 1, 1997, between the
Company and Geoffrey Talbot (the "Consultant's Stock Option
Agreement). The foregoing shares of Common Stock are hereinafter
referred to as the "Shares".
We have made such legal and factual examinations and inquiries
as we deemed advisable for the purpose of rendering this opinion. Based
upon our examinations and inquiries, it is our opinion that the Shares
have been duly authorized by the Board of Directors of the Company and,
when issued in accordance with the terms of and against payment of the
exercise prices provided for in, respectively, (i) the 1997 Plan and options
granted pursuant thereto, (ii) the Directors' Plan and options granted
pursuant thereto, or (iii) the Consultant's Stock Option Agreement, the
Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ ERVIN, COHEN & JESSUP LLP
ERVIN, COHEN & JESSUP LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement on Form S-
8 of our report dated August 15, 1997 relating to the financial
statements of Netter Digital Entertainment, Inc. as of June 30, 1997
and for each of the years in the two year period then ended.
/s/ Feldman Radin & Co., P.C.
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December 29, 1997 Feldman Radin & Co., P.C.
New York, New York Certified Public Accountants
