<PAGE>
As filed with the Securities and Exchange Commission on September 10, 1999
Registration Statement No. 333-___
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------------------------
VALLEY MEDIA, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2556440
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1280 Santa Anita Court, Woodland, California 95776
(Address of Principal Executive Offices) (Zip Code)
1994 Stock Option Plan
Amended and Restated 1997 Stock Option Plan
(Full title of the plan)
J. Randolph Cerf, Chief Financial Officer
Valley Media, Inc.
1280 Santa Anita Court
Woodland, California 95776
(530) 661-6600
(Name and address, including zip code, and
telephone number, including area code, of agent for service)
Calculation of Registration Fee
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Title of Securities Amount to be Maximum Aggregate Amount of
to be Registered Registered Offering Price Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
Common Stock
par value $.001
per share:
<S> <C> <C> <C> <C>
1994 Stock Option Plan 884,400 $13.81(1) $12,213,564(1) $3,395.37
Amended and Restated 1997 1,206,000 $13.81(1) $16,654,860(1) $4,630.05
Stock Option Plan
TOTAL 2,090,400 Shares $28,868,424 $8,025.42
========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457, on the basis of the average of the high and low price of
the Registrant's Common Stock as reported on the Nasdaq National Market on
September 7, 1999.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- ------------------------------------------------
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference: (a) the
Registrant's Annual Report on Form 10-K for the fiscal year ended April 3, 1999,
(b) the Registrant's Current Report on Form 8-K dated July 2, 1999, (c) the
Registrant's Quarterly Report on Form 10-Q for the quarter ended July 3, 1999,
and (d) the description of the Registrant's Common Stock contained in its
Registration Statement on Form 8-A dated March 22, 1999.
All documents subsequently filed by the Issuer pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended,
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such documents.
Item 4. Description of Securities.
- ----------------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
- -----------------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers.
- --------------------------------------------------
As permitted by Delaware law, the Registrant's Amended and Restated
Certificate of Incorporation provides that no director will be personally liable
to it or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability
. for a breach of duty of loyalty
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
. under Section 174 of the Delaware General Corporation Law
. for any transaction from which the director derived an improper
personal benefit
The Amended and Restated Certificate of Incorporation further provides
that the Registrant must indemnify its directors and executive officers and may
indemnify its other officers and employees and agents to the fullest extent
permitted by Delaware law. The Registrant believes that indemnification under
its Amended and Restated Certificate of
2
<PAGE>
Incorporation covers negligence and gross negligence on the part of indemnified
parties. The Amended and Restated Certificate of Incorporation also permits the
Registrant to secure insurance on behalf of any officer, director, employee or
other agent for any liability arising out of his or her actions in such
capacity, regardless of whether Delaware law would permit indemnification.
The Registrant has entered into indemnification agreements with each
of its directors and officers. These agreements, among other things, require
the Registrant to indemnify such directors and officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of the Registrant, arising out of such person's services as a director or
officer of the Registrant, any subsidiary of the Registrant or any other company
or enterprise to which the person provides services at the request of the
Registrant.
The Registrant also maintains an insurance policy insuring its
directors and officers against liability for certain acts and omissions while
acting in their official capacities.
There is no litigation pending, and neither the Registrant nor any of
its directors know of any threatened litigation, which might result in a claim
for indemnification by any director or officer.
Item 7. Exemption from Registration Claimed.
- --------------------------------------------
Not applicable.
Item 8. Exhibits.
- -----------------
Exhibit
Number Description of Document
- ------ -----------------------
4.1 1994 Stock Option Plan and form of Option Agreement under the
Plan (incorporated by reference to exhibit 10.8 to the
Registrant's Registration Statement on Form S-1, Registration No.
333-69329).
4.2 Amendment No. 1 to 1994 Stock Option Plan (incorporated by
reference to exhibit 10.8.1 to the Registrant's Registration
Statement on Form S-1, Registration No. 333-69329).
4.3 Amended and Restated 1997 Stock Option Plan.
4.4 Form of Option Agreement under Amended and Restated 1997 Stock
Option Plan.
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
23.1 Consent of Deloitte & Touche LLP.
3
<PAGE>
23.2 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation (included in Exhibit 5.1).
Item 9. Undertakings.
- ---------------------
The undersigned 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 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;
(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; and
(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.
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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Act of 1934) that is incorporated by reference in the registration
statement 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.
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 registered, 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.
4
<PAGE>
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
of 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 Woodland, State of California, on September 7, 1999.
VALLEY MEDIA, INC.
By:/s/ Robert R. Cain
--------------------------
Robert R. Cain
President and Chief Executive Officer
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 date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Barnet J. Cohen Chairman of the Board September 7, 1999
- --------------------------------
Barnet J. Cohen
/s/ Robert R. Cain President, Chief Executive Officer September 7, 1999
- -------------------------------- and Director (Principal Executive
Robert R. Cain Officer)
/s/ J. Randolph Cerf Chief Financial Officer (Principal September 7, 1999
- -------------------------------- Financial and Accounting Officer)
J. Randolph Cerf
/s/ Lawrence Archibald Director September 7, 1999
- --------------------------------
Lawrence Archibald
/s/ Christopher Mottern Director September 7, 1999
- --------------------------------
Christopher Mottern
/s/ Wendy Paskin-Jordan Director September 7, 1999
- --------------------------------
Wendy Paskin-Jordan
/s/ James Sha Director September 7, 1999
- --------------------------------
James Sha
</TABLE>
5
<PAGE>
EXHIBIT LIST
------------
Exhibit
Number Description of Document
- ------ -----------------------
4.1 1994 Stock Option Plan and form of Option Agreement under the Plan
(incorporated by reference to exhibit 10.8 to the Registrant's
Registration Statement on Form S-1, Registration No. 333-69329).
4.2 Amendment No. 1 to 1994 Stock Option Plan (incorporated by
reference t exhibit 10.8.1 to the Registrant's Registration
Statement on Form S-1, Registration No. 333-69329).
4.3 Amended and Restated 1997 Stock Option Plan.
4.4 Form of Option Agreement under Amended and Restated 1997 Stock
Option Plan.
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation (included in Exhibit 5.1).
6
<PAGE>
EXHIBIT 4.3
VALLEY MEDIA, INC.
AMENDED AND RESTATED 1997 STOCK PLAN
I. GENERAL PROVISIONS
A. Adoption and Purpose of the Plan. This Amended and Restated 1997 Stock
--------------------------------
Plan (the "Plan") has been adopted by the board of directors (the "Board") of
Valley Media, Inc., a Delaware corporation (the "Company"), and is subject to
the approval of its stockholders. The purpose of this Plan is to advance the
interests of the Company and its shareholders by enabling the Company to attract
and retain qualified directors, officers, key employees, independent
contractors, consultants and advisers by providing them with an opportunity for
investment in the Company.
B. Certain Definitions. The defined terms set forth in Exhibit A attached
------------------- ---------
hereto and incorporated herein (together with other capitalized terms defined
elsewhere in this Plan) will govern the interpretation of this Plan.
C. Eligibility. The Company may grant Awards under this Plan only to (i)
-----------
persons who, at the time of such grant, are directors, officers or key employees
of the Company or any of its Subsidiaries, and (ii) persons who, and entities
which, at the time of such grant, are independent contractors, consultants or
advisers of the Company or any of its Subsidiaries ("Eligible Persons").
D. Shares Reserved for Awards. In no event will the Company issue, in the
--------------------------
aggregate, more than 1,206,000 Shares (inclusive of Shares issued pursuant to
the 1997 Stock Option Plan prior to its amendment and restatement hereunder)
pursuant to Awards.
E. Administration. This Plan will be administered and interpreted by the
--------------
Board, or by a committee consisting of two or more members of the Board,
appointed by the Board for such purpose (the Board, or such committee, referred
to herein as the "Administrator"). Subject to the express terms and conditions
hereof, the Administrator is authorized to prescribe, amend and rescind rules
and regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. The
Administrator's interpretation of the Plan or any Awards granted pursuant
thereto and all decisions and determinations by the Administrator with respect
to the Plan shall be final, binding, and conclusive on all parties.
Specifically, the Administrator will have full and final authority in its
discretion, subject to the specific limitations on that discretion as are set
forth herein and in the Certificate of Incorporation and Bylaws of the Company,
at any time to:
a. Select the Eligible Persons to receive Awards under the Plan.
b. Determine the Awards to be made to each person selected.
c. Determine the time or times when Awards will be made.
1
<PAGE>
d. Determine the conditions (including performance requirements) to
which the Awards may be subject.
e. Prescribe the form or forms evidencing Awards.
II. OPTIONS
A. Options. Options may be granted hereunder ("Options") that represent the
-------
right by the grantee thereof (each, including any permitted transferee
hereunder, an "Optionee") to acquire Shares (which if acquired pursuant to the
exercise of an Option will be referred to as "Option Stock") subject to the
terms and conditions of this Plan and a written agreement between the Company
and the Optionee to evidence each such Option (an "Option Agreement"). In no
event may any Eligible Person be granted Options under the Plan during any
fiscal year of the Company entitling such person to acquire more than 150,000
Shares. With respect to each Option, the Administrator shall determine the terms
and conditions of that Option, to be set forth in the Option Agreement
evidencing that Option (the form of which also being subject to approval by the
Administrator), including at a minimum the following:
(i) the total number of Shares of Option Stock that may be acquired
by the Optionee pursuant to that Option;
(ii) whether that Option will be designated an "incentive stock
option" as defined in Section 422 of the Code (an "ISO"), in which case the
Option will be subject to all of the special provisions set forth in section B
below;
(iii) the per share purchase price to be paid to the Company by the
Optionee to acquire the Option Stock issuable upon exercise of the Option (the
"Option Price"); provided that the Option Price will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares as of the Grant
Date, unless the Optionee is a 10% shareholder, in which case the Option Price
will not be less than one hundred ten percent (110%) of such Fair Market Value;
(iv) the maximum period or term during which that Option will be
exercisable (the "Option Term") and/or the last date on which that Option may be
exercised (the "Expiration Date"), provided that in no event may the Expiration
Date be later than, or the Option Term be longer than, 10 years from the Grant
Date;
(v) the maximum period after any person ceases, for any reason, to be
an Eligible Person (a "Loss of Eligibility Status"), whether resulting from his
or her death, disability or any other reason, during which period (the "Grace
Period") the Option will be exercisable, subject to the earlier end of the
Option Term, provided that if the Administrator fails to specify such Grace
Periods, but subject to the provisions of section B below with respect to ISOs,
the following Grace Periods will apply (and in no event may the Administrator
select Grace Periods that are shorter than the following): (A) 30 days after
such Loss of Eligibility Status, other than by reason of the Original Holder's
death or disability, (B) 180 days after such Loss of Eligibility Status by
reason of the Original Holder's death or disability ;
2
<PAGE>
(vi) the form or forms of legal consideration in addition to cash
(including without limitation Shares and unexercised Vested Options) that the
Company will accept as payment of all or a portion of the Option Price or Tax
Withholding Liability to be paid by the Optionee upon the exercise of an Option
granted hereunder, and the fair market value of such non-cash consideration;
(vii) the conditions (e.g., the passage of time or the occurrence of
events), if any, that must be satisfied prior to the vesting of the right to
exercise all, or specified portions of, an Option (such portions being described
as a percentage of the total number of Shares of Option Stock that may be
acquired by the Optionee pursuant to that Option; the vested portion being
referred to as a "Vested Option" and the unvested portion being referred to as
an "Unvested Option"); provided that if the Option Agreement does not otherwise
specify, the Option will initially be deemed an entirely Unvested Option but
portions of the Option will become a Vested Option on the following schedule:
one-forty eighth (1/48) will become a Vested Option as of the last day of each
successive calendar month beginning with the calendar month in which the Grant
Date occurs, subject to the condition that the Original Holder does not suffer a
Loss of Eligibility Status prior to each such vesting date.
B. Special Provisions Relating to ISOs. Notwithstanding anything else in
-----------------------------------
this Plan to the contrary, the following provisions will apply to each Option
granted hereunder that is designated as an ISO and that is intended to qualify
for the treatment available pursuant to Section 422 of the Code:
(i) such ISO may be granted only to Eligible Persons who, as of the
Grant Date, are employees of the Company or its Subsidiaries (as determined by
Section 3401(c) of the Code);
(ii) to the extent that the Fair Market Value of Option Stock
(determined as of the Grant Date) with respect to which all ISOs are exercisable
for the first time by any individual during any calendar year (pursuant to this
Plan and all other plans of the Company and/or its Subsidiaries) exceeds
$100,000, the Option will not be treated as an ISO;
(iii) the Option Price of an ISO will not be less than 100% of the Fair
Market Value of the Shares as of the Grant Date, except as set forth in
paragraph (iv) below;
(iv) in the case of an ISO granted to an Optionee who is a 10%
shareholder: (a) the Option Price will not be less than one hundred ten percent
(110%) of the Fair Market Value of the Shares as of the Grant Date; and (b) the
Option Term may not be more than five years; and
(v) notwithstanding any Grace Period selected by the Administrator,
the tax treatment available pursuant to Section 422 of the Code upon the
exercise of an ISO will not be available to an Optionee who exercises any ISO
more than (i) three months following the Original Holder's Loss of Eligibility
Status other than by reason of his or her death or permanent and total
disability within the meaning of Section 22(e)(3) of the Code, or (ii) twelve
(12) months following such Original Holder's Loss of Eligibility Status by
reason or his or her permanent and total disability, whichever case may be
applicable.
3
<PAGE>
C. Additional Terms and Conditions of Stock Option Agreements. No Option
----------------------------------------------------------
will be deemed granted hereunder merely upon the authorization thereof by the
Administrator, but will be deemed granted hereunder only upon the execution of
an Option Agreement evidencing the same by both the Optionee and a duly
authorized officer of the Company. In addition to the terms and conditions
thereof to be determined by the Administrator pursuant to section A above,
unless otherwise stated therein, each Option Agreement will be deemed to include
the following terms and conditions:
1. Exercise of the Option; Issuance of Share Certificate. That portion
-----------------------------------------------------
of the Option that is a Vested Option may be exercised by giving written notice
thereof to the Company, on such form as may be specified by the Administrator,
but in any event stating: the Optionee's intention to exercise the Option; the
date of exercise; the number of full shares of Option Stock to be purchased
(which number will be no less than 100 Shares, without regard to adjustments to
the number of Shares subject to the Option pursuant to section VI.G below, or,
if less, all of the remaining Shares subject to the Option); the amount and form
of payment of the Option Price; and such assurances of the Optionee's investment
intent as the Company may require to ensure that the transaction complies in all
respects with the requirements of the 1933 Act and other applicable securities
laws. The notice of exercise will be signed by the person or persons exercising
the Option. In the event that the Option is being exercised by the
representative of Optionee, the notice will be accompanied by proof satisfactory
to the Company of the representative's right to exercise the Option. The notice
of exercise will be accompanied by full payment of the Option Price for the
number of Shares of Option Stock to be purchased, in United States dollars, in
cash, by check made payable to the Company, or in the form of such other legal
consideration for the purchase of Shares as may be approved by the
Administrator. The Administrator may allow the Option to be exercised, and the
purchase price paid, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions to a
Company-designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares. In addition, to the extent required by applicable
federal, state, local or foreign law, and as a condition to the Company's
obligation to issue any Shares upon the exercise of the Option in full or in
part, Optionee will make arrangements satisfactory to the Company for the
payment of any applicable Tax Withholding Liability that may arise by reason of
or in connection with such exercise. Such arrangements may include, in the
Company's sole discretion, that the Optionee tender to the Company the amount of
such Tax Withholding Liability, in cash, by check made payable to the Company,
in Company stock, or in the form of such other payment as may be approved by the
Administrator.
2. Compliance with Law. Notwithstanding any other provision of this
-------------------
Plan, Options may be granted pursuant to this Plan, and Option Stock may be
issued pursuant to the exercise thereof by an Optionee, only after and on the
condition that there has been compliance with all applicable federal and state
securities laws. The Company will not be required to list, register or qualify
any shares of Option Stock upon any securities exchange, under any state or
federal law, or with the Securities and Exchange Commission or any State agency,
or secure the consent or approval of any governmental regulatory authority,
except that if at any time the Board determines, in its discretion, that such
listing, registration or qualification of the Shares of Option Stock, or any
such consent or approval, is necessary or desirable as a condition of or in
4
<PAGE>
connection with the exercise of an Option and the purchase of shares of Option
Stock thereunder, that Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, consent or approval is
effected or obtained free of any conditions that are not acceptable to the
Board, in its discretion.
3. Restrictions on Transfer.
------------------------
a. Options Nontransferable. No Options will be transferable by the
-----------------------
Original Holder otherwise than by will or the laws of descent and distribution.
During the lifetime of the Original Holder, the Option will be exercisable only
by the Original Holder.
b. Prohibited Transfers. All Transfers of Option Stock not complying
--------------------
with the specific limitations and conditions set forth in this section 3 are
expressly prohibited. Any prohibited Transfer is void and of no effect. For
purposes of this section 3, the term "Option Stock" includes all Shares issued
by the Company as a stock split, stock dividend, and other similar distributions
in respect of shares of Option Stock.
c. Market Standoff. If in connection with any public offering of
---------------
securities of the Company (or any Successor Entity), the underwriter or
underwriters managing such offering so requests, then each Optionee and each
Holder of shares of Option Stock will agree to not sell or otherwise Transfer
any such Shares (other than Shares included in such underwriting) without the
prior written consent of such underwriter, for such period of time as may be
requested by the underwriter (not to exceed 210 days) commencing on the
effective date of the registration statement filed with the Securities and
Exchange Commission in connection with such offering.
4. Change of Control Transactions. Notwithstanding any other provision of
------------------------------
this Plan, in the event of a Change of Control Transaction (as defined herein):
(i) immediately prior to the consummation of such Change in
Control Transaction all Options that are not then vested shall become vested;
(ii) with respect to all Options that are outstanding as of the
consummation of such Change of Control Transaction, the Board, in its sole
discretion, may determine that it is in the best interests of the Company, and
if so may take all appropriate action either to:
a. cancel all such Options effective immediately prior to the
consummation of the Change of Control Transaction and, in connection with each
Option, notify the Optionee of the proposed Change of Control Transaction
reasonably prior to its consummation so that the Optionee will have an
opportunity to exercise the Option immediately prior to such consummation; or
b. require the Successor Entity in such Change of Control Transaction
to assume the outstanding Options or substitute therefor comparable options of
such Successor Entity (or of its parent or its Subsidiary); and
(iii) with respect to all shares of Option Stock that have been
issued and that are outstanding as of the consummation of such Change of Control
Transaction, the
5
<PAGE>
Company will have the right (but not the obligation) to repurchase all (but not
less than all) of the Shares by paying the Holder thereof cash, or canceling any
indebtedness of such Holder to the Company, or both, at a closing to be held
contemporaneously with the consummation of the Change of Control Transaction,
provided that the repurchase price for such Shares will be an amount per share
that is equal to the Fair Market Value of the Shares based on the Board's good
faith estimate of the valuation of the Company implied by the estimated fair
market value of the total consideration to be paid in connection with the Change
of Control Transaction.
For purposes of this section 4: the term "Change of Control Transaction"
means (i) the sale of all or substantially all of the assets of the Company;
(ii) any change in ownership or control of the outstanding voting securities of
the Company following which any Person other than Barnet J. Cohen, Barbara C.
Cohen, any Affiliate or Associate of Barnet J. Cohen or Barbara C. Cohen, or the
Company's Employee Stock Ownership Plan, beneficially owns, together with its
Affiliates and Associates, thirty five percent (35%) or more of the outstanding
voting securities of the Company; (iii) any change in the membership of the
Company's Board of Directors after the closing date of the Company's Initial
Public Offering following which Continuing Directors do not constitute a
majority of the Board; or (iv) a Business Combination immediately following
which the stockholders of the Company immediately prior to such Business
Combination do not hold more than sixty five percent (65%) of the outstanding
voting securities of the Successor Entity in the same proportion as such
shareholders held Common Stock of the Company immediately prior to such Business
Combination; the term "Business Combination" means a merger or consolidation of
the Company and one or more other Persons in which the Company or a subsidiary
of the Company is a merging or consolidating party.
5. Additional Restrictions on Transfer; Investment Intent. By accepting an
------------------------------------------------------
Option and/or shares of Option Stock under this Plan, the Optionee will be
deemed to represent, warrant and agree that, unless a registration statement is
in effect with respect to the offer and sale of shares of Option Stock: (i)
neither the Option nor any such Shares will be freely tradeable and must be held
indefinitely unless such Option and such Shares are either registered under the
1933 Act or an exemption from such registration is available; (ii) the Company
is under no obligation to register the Option or any such Shares; (iii) upon
exercise of the Option, the Optionee will purchase the shares of Option Stock
for his or her own account and not with a view to distribution within the
meaning of the 1933 Act, other than as may be effected in compliance with the
1933 Act and the rules and regulations promulgated thereunder; (iv) no one else
will have any beneficial interest in the Option Stock; (v) the Optionee has no
present intention of disposing of the Option Stock at any particular time; and
(vi) neither the Option nor the Shares have been qualified under the securities
laws of any state and may only be offered and sold pursuant to an exception from
qualification under applicable state securities laws.
6. Stock Certificates; Legends. Certificates representing shares of Option
---------------------------
Stock will bear all legends required by law and necessary or appropriate in the
Administrator's discretion to effectuate the provisions of this Plan and of the
applicable Option Agreement.
7. Other Provisions. Each Option Agreement may contain such other terms,
----------------
provisions and conditions, including restrictions on the Transfer of shares of
Option Stock, and rights of the Company to repurchase such shares, not
inconsistent with this Plan, as may be determined by the Administrator in its
sole discretion.
6
<PAGE>
8. Specific Performance. Under those circumstances in which the Company
--------------------
chooses to timely exercise its rights to repurchase shares of Option Stock as
provided herein, the Company will be entitled to receive such Shares in specie
in order to have the same available for future issuance without dilution of the
holdings of other shareholders of the Company. By accepting shares of Option
Stock, the Holder thereof therefore acknowledges and agrees that money damages
will be inadequate to compensate the Company and its shareholders if such a
repurchase is not completed as contemplated hereunder and that the Company will,
in such case, be entitled to a decree of specific performance of the terms
hereof or to an injunction restraining such holder (or such Holder's personal
representative) from violating this Plan or Option Agreement, in addition to any
other remedies that may be available to the Company at law or in equity.
9. No Stockholder Rights. No rights or privileges of a shareholder in the
---------------------
Company are conferred by reason of the granting of the Option. No Optionee will
become a shareholder in the Company with respect to any Shares of Option Stock
unless and until the Option has been properly exercised and the Option Price
fully paid as to the portion of the Option exercised.
III. STOCK APPRECIATION RIGHTS
Any Option granted under the Plan may include an SAR, either at the
time of grant or by amendment. SARs may be granted to an Eligible Participant
independent of any prior or contemporaneous Option grant and shall be
exercisable as provided therein without regard to any Option. In no event may
any Eligible Person be granted separately exercisable SARs under the Plan during
any fiscal year of the Company entitling such person to acquire more than
150,000 Shares (or the cash equivalent of such Shares). In addition to such
terms and conditions not inconsistent with the Plan as the Administrator shall
impose, SARs shall be subject to the following terms:
A. Right To Exercise. An SAR granted with an Option shall be exercisable to
-----------------
the extent and only to the extent the Option is exercisable. An SAR not included
in an Option shall have a "purchase price" ascribed thereto by the Administrator
in granting such SAR, which shall not be less than the Fair Market Value of the
Shares on the Date of Grant.
B. Payment. An exercisable SAR shall entitle the Holder to surrender
-------
unexercised the SAR or the Option in which it is included, as the case may be,
or any portion thereof, and, to receive in exchange therefore that number of
Shares having an aggregate Fair Market Value equal to the excess of the Fair
Market Value of one share over the purchase price per share specified in such
SAR or Option times the number of Shares called for by the SAR or Option, or
portion thereof, which is so surrendered. The Administrator shall be entitled
to elect to settle the Company's obligation arising out of the exercise of an
SAR by the payment of cash or partially be payment of cash and partially by the
delivery of Shares, the total value of which shall be in either case equal to
the aggregate Fair Market Value of the Shares it would otherwise be obligated to
deliver. The Administrator shall also have the right to place such limitations
and restrictions on the obligation to make such cash payments or deliver Shares
under SARs as it, in its sole discretion, deems to be in the best interest of
the Company. The Fair Market Value for SAR exercise shall be determined on the
basis of the closing price on the trading day next preceding the date on which
the SAR is exercised. To the extent that an SAR included in an
7
<PAGE>
Option is exercised, such Option shall be deemed to have been exercised, and
shall not be deemed to have lapsed.
C. Special Rules Governing SARs. An SAR not included in an Option shall be
----------------------------
evidenced by an agreement between the Company and the Holder in a form approved
by the Administrator. Any SAR granted under the Plan shall be subject to such
terms and conditions not inconsistent with the Plan as the Administrator shall
impose, including the following:
(i) The SAR will lapse no later than the underlying Option for
SARs accompanying an Option or, for freestanding SARs, no later than 10 years
from its Grant Date;
(ii) Such terms as the Administrator determines are necessary or
desirable to qualify the SAR under Rule 16b-3 as promulgated by the SEC under
the Securities Exchange Act of 1934 for those Holders to whom such qualification
is relevant.
D. Other Limitations. Such other limitations as the Administrator shall
-----------------
impose.
IV. PERFORMANCE SHARES
A. General. One or more Awards of Performance Shares may be made to an
-------
Eligible Participant. Performance Shares shall be credited to a Performance
Share account to be maintained for each such Holder. Each Performance Share
shall be deemed to be the equivalent of one Share. The maximum value of any
Award of Performance Shares under the Plan to any Eligible Person during any
fiscal year of the Company shall not exceed the fair market value equivalent of
150,000 Shares, such fair market value to be determined as of the date of such
Award and by assuming that any performance goals in connection with such Award
have been met as of such date. The Award of Performance Shares under the Plan
shall not entitle the Holder to any interest in or to any dividend, voting, or
other rights of a shareholder. The value of the Performance Shares in a
Holder's Performance Share account at the time of Award or the time of payment
shall be the Fair Market Value at any such time of an equivalent number of
Shares.
B. Award Period And Performance Goals. The Administrator shall determine
----------------------------------
and include in a Performance Share Award grant the period of time for which a
Performance Share Award is made ("Award Period"). The Administrator shall also
establish performance objectives ("Performance Goals") to be met by the Company,
a Subsidiary or a division during the Award Period as a condition to payment of
the Performance Share Award. The Performance Goals will be based on cash flow,
expenses, increases in stock price, market share, net income (before, or after,
taxes), net operating income, return on assets, return on equity, return on
investment, revenue, total shareholder return, earnings per share, or
implementation of processes or projects. In establishing the Performance Goals,
the Administrator may apply the performance criteria as a measure of the
performance of any, all or any combination of the Company, any Subsidiary, any
division or any product or service category. The Performance Goals may include
minimum and optimum objectives or a single set of objectives. The Administrator
shall set forth the Performance Goals relating to any Award in a written
statement provided to the Eligible Person not later than the 90th day of the
Award Period to which such Award relates.
8
<PAGE>
C. Payment Of Performance Share Awards. The Administrator shall establish
-----------------------------------
the method of calculating the amount of payment to be made under a Performance
Share Award if the Performance Goals are met, including the fixing of a maximum
payment. The Performance Share Award shall be expressed in terms of Shares.
After the completion of an Award Period, the performance of the Administrator,
subsidiary or division shall be measured against the Performance Goals, and the
Administrator shall determine whether all, none or any portion of a Performance
Share Award shall be paid. The Administrator, in its discretion, may elect to
make payment in Shares, cash or a combination of Shares and cash. Any cash
payment shall be based on the Fair Market Value of Shares on, or as soon as
practicable prior to, the date of payment.
D. Requirement Of Employment. A grantee of a Performance Share Award must
-------------------------
remain in the employment of the Company until the completion of the Award Period
in order to be entitled to payment under the Performance Share Award, provided
that the Administrator may, in its sole discretion, provide for a partial
payment upon the grantee's death or total disability (as defined in Section
22(e)(3) of the Code) or upon the occurrence of a Change in Control Transaction.
E. Dividends. The Administrator may, in its discretion, at the time of the
---------
granting of a Performance Share Award, provide that any dividends declared on
the Common Stock during the Award Period, and that would have been paid with
respect to Performance Shares had they been owned by a grantee, be (i) paid to
the grantee or (ii) accumulated for the benefit of the grantee and used to
increase the number of Performance Shares of the grantee.
V. STOCK ISSUANCES
A. Stock Issuance Terms. Shares may be issued as a Stock Issuance through
--------------------
direct and immediate issuances to an Eligible Person. In no event may any
Eligible Person be granted Stock Issuances under the Plan during any fiscal year
of the Company of more than 150,000 Shares. Each such Stock Issuance shall be
evidenced by a Stock Issuance Agreement which complies with the terms specified
below.
1. Purchase Price. The purchase price per Share shall be fixed by the
--------------
Administrator, but shall not be less than the par value of a Share. Shares may
be issued as Stock Issuances for any of the following items of consideration
which the Administrator may deem appropriate in each individual instance:
a. cash or check made payable to the Company;
b. past services rendered to the Company (or any Subsidiary); or
c. the foregoing of salary or bonus otherwise payable to the Holder
by the Company as accrued through the Grant Date for the Stock Issuance.
2. Vesting Provisions. Shares issued as Stock Issuances may, in the
------------------
discretion of the Administrator, be fully and immediately vested upon issuance
or may vest in one or more installments over time or upon attainment of
specified performance objectives. The elements of the vesting schedule
applicable to any unvested Shares issued as the Stock Issuances, namely:
9
<PAGE>
a. the service period to be completed by the Holder or the
performance objectives to be attained;
b. the number of installments in which the Shares are to vest;
c. the interval or intervals (if any) which are to lapse between
installments;
d. the effect which death, disability or other event designated by
the Plan Administrator is to have upon the vesting schedule; and
e. such holding periods, if any, as must be satisfied prior to the
sale of any Shares granted as Stock Issuances shall be determined by the
Administrator and incorporated into the Stock Issuance Agreement.
B. Stockholder Rights. The Holder shall have full stockholder rights with
------------------
respect to any Shares issued to the Holder as Stock Issuances, whether or not
the Holder's interest in those shares is vested. Accordingly, the Holder shall
have the right to vote such shares and to receive any regular cash dividends
paid on such shares.
C. Return Of Shares. Should the Holder suffer a Loss of Eligibility Status
----------------
while holding one or more unvested Shares issued as Stock Issuances or should
the performance objectives not be attained with respect to one or more such
unvested Shares, then those shares shall be immediately surrendered to the
Company for cancellation and the Holder shall have no further stockholder rights
with respect to those shares. To the extent the surrendered Shares were
previously issued to the Holder for consideration paid in cash or cash
equivalent (including the Holder's purchase-money indebtedness), the Company
shall repay to the Holder the cash consideration paid for the surrendered shares
and shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Holder attributable to the surrendered Shares. The Administrator
may in its discretion waive the surrender and cancellation of one or more
unvested Shares otherwise required hereunder.
D. Escrow. Unvested Shares may, in the Administrator's discretion, be held
------
in escrow by the Company until the Holder's interest in such shares vests or any
holding periods expire, or may be issued directly to the Holder with restrictive
legends on the certificates evidencing those unvested shares.
VI. MISCELLANEOUS
A. Financing. The Administrator may permit any Optionee or Eligible Person
---------
to pay the option exercise price upon exercise of an Option or the purchase
price of Shares issued as Stock Issuances by delivering a full-recourse,
interest bearing promissory note payable in one or more installments. The terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Administrator in its sole discretion. In
no event may the maximum credit available to the Optionee or Eligible Person
exceed the sum of (i) the aggregate option exercise price or purchase price
payable for the purchased shares plus (ii) any Tax Withholding Liability in
connection with the option exercise or share purchase.
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<PAGE>
B. Tax Withholding. The Corporation's obligation to deliver shares of
---------------
Common Stock upon the exercise of options or the issuance or vesting of such
shares under the Plan shall be subject to the satisfaction of all Tax
Withholding Liability requirements. The Administrator may, in its discretion,
provide any or all holders of non-statutory Options or unvested Shares under the
Plan with the right to use Shares and vested Options in satisfaction of all or
part of the Tax Withholding Liability arising in connection with the exercise of
their Options or the vesting of their Shares.
C. Term Of The Plan. The 1997 Stock Option Plan shall continue until the
----------------
effective date of this Plan, which date shall be the date of approval of the
Plan by the stockholders of the Company. At such date the 1997 Stock Option
Plan shall be amended and restated as the Plan. The Plan shall terminate upon
the earliest to occur of (i) March 31, 2009, or (ii) the date on which all
shares available for issuance under the Plan shall have been issued as fully-
vested shares. Should the Plan terminate on March 31, 2009, then all Options
and unvested Stock Issuances outstanding at that time shall continue to have
force and effect in accordance with the provisions of the documents evidencing
such Options or issuances.
D. Amendment Of The Plan. The Board shall have complete and exclusive power
---------------------
and authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect the rights and obligations
with respect to Awards at the time outstanding under the Plan unless the Holder
consents to such amendment or modification. In addition, certain amendments may
require stockholder approval pursuant to applicable laws or regulations.
E. Regulatory Approvals. The implementation of the Plan, the granting of
--------------------
any Option and the issuance of any Shares under the Plan shall be subject to the
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the stock options granted under it and the
Shares issued pursuant to it.
No Shares or other assets shall be issued or delivered under the Plan
unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Shares are then listed for trading.
F. No Employment/Service Rights. Nothing in the Plan shall confer upon any
----------------------------
Eligible Person or Holder any right to continue as an employee or consultant, as
the case may be, of the Company or any Subsidiary for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Company (or any Subsidiary employing or retaining such person) or of any
Eligible Person or Holder, which rights are hereby expressly reserved by each,
to terminate such person's employment or consulting relationship at any time for
any reason, with or without cause.
G. Adjustment For Changes In Capitalization. If any change is made to the
----------------------------------------
Shares by reason of any stock split, stock dividend, recapitalization,
combination of Shares, exchange of shares or other change affecting the
outstanding Shares as a class without the Company's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
for which any one
11
<PAGE>
person may be granted Options, separately exercisable SARs and Stock Issuances
under the Plan per calendar year, (iii) the number and/or class of securities
and the exercise price per share in effect under each outstanding Option or
other Award, as applicable. Such adjustments to the outstanding Options or other
Award, as applicable are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such Options or such other
Award. The adjustments determined by the Administrator shall be final, binding
and conclusive.
H. Notice. Any notice required to be delivered under this Plan to the
------
Company shall be directed to the attention of the Corporate Secretary at the
Company's principal executive offices. Any notice required to be delivered to
any Holder or Eligible Person shall be delivered to the address of such person
as maintained in the records of the Company. Notices shall be deemed given when
delivered, either in person or by an independent courier service, or on the
fifth business day after having been mailed via United States mail, postage
prepaid and properly addressed.
Date Plan Adopted by Board of Directors: May 18, 1999
Date Plan Approved by the Stockholders: July 23, 1999
12
<PAGE>
VALLEY RECORD DISTRIBUTORS
1997 Stock Option Plan
Exhibit A
Definitions
-----------
1. "10% shareholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions set forth in
Section 424(d) of the Code at the time he or she is granted an Option, stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company and/or of its Subsidiaries.
2. "1933 Act" means the Securities Act of 1933, as amended.
3. "Affiliate" means, with respect to a first Person, a second Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the first Person.
4. "Associate" means, with respect to a Person, (a) any corporation or
organization of which such Person is an officer or partner or, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities, (b) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, and (c) any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person.
5. "Award" means, individually or collectively, any Option, SAR, Stock
Issuance or Performance Share Award.
6. "Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of the Code as
enacted at the time of the Plan's adoption by the Board and as subsequently
amended, or to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise).
7. "Continuing Director" means, at any given time, a member of the
Company's Board of Directors who was (a) a member of the Board on the closing
date of the Company's Initial Public Offering, (b) elected to the Board by the
Board after the closing date of the Company's Initial Public Offering, provided
that a majority of the Continuing Directors voted in favor of such election, or
(c) nominated to the Board by the Board after the closing date of the Company's
Initial Public Offering, provided that a majority of the Continuing Directors
voted in favor of such nomination, and subsequently elected to the Board by the
stockholders of the Company.
8. "Donative Transfer" with respect to Shares of Option Stock means any
Transfer, other than a Permitted Transfer or an Involuntary Transfer, without
the receipt of cash or other legal consideration in payment therefor.
9. "Fair Market Value" means, with respect to the Shares and as of the
date that is relevant to such a determination (e.g., on the Grant Date), the
market price per share of such Shares determined by the Administrator,
consistent with the requirements of Section 422 of the
13
<PAGE>
Code and to the extent consistent therewith, as follows: (a) if the Shares are
traded on a stock exchange on the date in question, then the Fair Market Value
will be equal to the closing price reported by the applicable composite-
transactions report for such date; (b) if the Shares are traded over-the-counter
on the date in question and are classified as a national market issue, then the
Fair Market Value will be equal to the last-transaction price quoted by the
NASDAQ system for such date; (c) if the Shares are traded over-the-counter on
the date in question but are not classified as a national market issue, then the
Fair Market Value will be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for such date;
and (d) if none of the foregoing provisions is applicable, then the Fair Market
Value will be determined by the Administrator in good faith on such basis as it
deems appropriate, taking into consideration the provisions of Section
260.141.50 of Title 10 of the California Code of Regulations.
10. "Grant Date" means, with respect to an Award, the date on which the
agreement evidencing that Award is entered into between the Company and the
Holder, or such other date as may be set forth in that agreement as the "Grant
Date" which will be the effective date of that agreement.
11. "Holder" means a person who has been granted an Award.
12. "Initial Public Offering" means the closing of the first sale of
securities of the Company, or of any Successor Entity, to the public, through a
firm commitment underwriting, for an aggregate price (exclusive of underwriters'
discounts and commissions and expenses of the offering) of at least seven
million five hundred thousand dollars ($7,500,000), pursuant to an effective
registration statement (other than on Form S-8 or S-4 or successor forms to
either of such forms) filed with the Securities and Exchange Commission under
the 1933 Act.
13. "Original Holder" means the original Eligible Person to whom an Option
is granted under the Plan, even if such Option is transferred pursuant to the
terms of the Plan.
14. "Performance Share" means an Award granted under Section IV of the
Plan.
15. "Person" means any individual, corporation, partnership, limited
liability company, sole proprietorship, joint venture or other organization.
16. "SAR" means a Stock Appreciation Right granted under Section III of
the Plan, whether or not granted in tandem with an Option.
17. "Shares" means shares of the Company's Common Stock, $.001 par value
per share.
18. "Stock Issuance" means an issuance of Shares as an Award under Section
V of the Plan.
19. "Subsidiary" has the same meaning as "subsidiary corporation" as
defined in Section 424(f) of the Code.
14
<PAGE>
20. "Successor Entity" means a corporation or other entity that acquires
all or substantially all of the assets of the Company, or which is the surviving
or parent entity resulting from a Business Combination, as that term is defined
in section II.C.6 of the Plan.
21. "Tax Withholding Liability" in connection with the exercise of any
Option or receipt of any Award means all federal and state income taxes, social
security tax, and any other taxes applicable to the compensation income arising
from the transaction required by applicable law to be withheld by the Company.
22. "Transfer" with respect to Shares includes, without limitation, a
voluntary or involuntary sale, assignment, transfer, conveyance, pledge,
hypothecation, encumbrance, disposal, loan, gift, attachment or levy of those
Shares.
15
<PAGE>
EXHIBIT 4.4
Stock Option Agreement
Under the 1997 Stock Plan
of Valley Media, Inc.
This Agreement is made effective as of ________ ___, 199__ (the "Grant
Date"), between Valley Media, Inc., a Delaware corporation (the "Company"), and
the undersigned Optionee.
The Parties Agree as Follows:
1. Option Grant. Subject to all of the terms and conditions of this
------------
Agreement and of the Company's 1997 Stock Plan (the "Plan"), Optionee will have
an option (the "Option") to purchase __________ shares of the Company's common
stock (the "Shares"), for an exercise price per share equal to $________ (the
"Option Price"). The Option will expire on _______________, ____, _____, and
will be of no further force or effect thereafter. [optional: The Option is
intended to be an Incentive Stock Option ("ISO") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended.]
2. Vesting and Exercise. The Option will become a Vested Option [on the
--------------------
following schedule: [ALTERNATIVE VESTING SCHEDULE] [on the schedule set forth
in Section II.A.(vii) of the Plan]; provided that in each case the Original
Holder of the Option does not suffer a Loss of Eligibility Status prior to each
such vesting date.
3. Representations and Warranties of Optionee. Optionee represents and
------------------------------------------
warrants that he or she is acquiring the Option, and will acquire any Shares
obtained upon exercise of the Option, for investment purposes only, for
Optionee's own account, and with no view to the distribution thereof, in a
manner not consistent with the provisions of the Securities Act of 1933.
4. No Employment Rights. This Agreement gives Optionee no right to be
--------------------
retained as an employee of the Company and/or its Subsidiaries.
5. Terms of the Plan. Optionee understands that the Plan includes
-----------------
important terms and conditions that apply to the Option. Capitalized
terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Plan. Those terms include: important
conditions to the right of Optionee to exercise the Option; important
restrictions on the ability of Optionee to transfer the Option or to
Transfer any of the shares of Option Stock received upon exercise of
the Option; and early termination of the Option following the
occurrence of certain events. Optionee has read the plan, agrees to be
bound by its terms, and makes each of the representations required to
be made by Optionee under it. Optionee further acknowledges that the
Company has given no tax advice concerning the Option and has advised
Optionee to consult with his or her own tax or financial advisor about
the tax treatment of the Option and its exercise.
1
<PAGE>
6. Miscellaneous. Neither this Agreement nor the Option is assignable by
-------------
either party, except as expressly provided herein. All of the covenants and
provisions of this Agreement by or for the benefit of the Company or Optionee
shall bind and inure to the benefit of their respective successors. This
Agreement (including the Plan) constitutes the final and complete expression of
all of the terms of the understanding and agreement between the parties hereto
concerning the subject matter hereof. This Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by the Company and Optionee. This
Agreement shall be construed and governed by the substantive laws of the State
of California.
The parties hereby have entered into this Agreement as of the Grant Date.
Valley Media, Inc.
By:________________________________________
Title:_____________________________________
"Optionee"
Address:
Social Security No.: _______________
Attachments: (1) Consent of Spouse
(2) Amended and Restated 1997 Stock Plan
2
<PAGE>
EXHIBIT 5.1
September 8, 1999
Valley Media, Inc.
1280 Santa Anita Court
Woodland, CA 95776
Re: 2,090,400 Shares of Common Stock, Par Value $0.001 Per Share
------------------------------------------------------------
Dear Ladies and Gentlemen:
You have requested our opinion as counsel for Valley Media, Inc., a
Delaware corporation (the "Company"), in connection with the registration
statement on Form S-8 (together with all amendments and exhibits thereto, the
"Registration Statement") filed with the Securities and Exchange Commission with
respect to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of 2,090,400 shares of Common Stock of the Company (the
"Offered Shares") under the Company's 1994 Stock Option Plan and Amended and
Restated 1997 Stock Option Plan (the "Plans").
We have examined originals or copies certified or otherwise identified
to our satisfaction as authentic copies of the Registration Statement, the
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws of the Company, resolutions adopted by the Board of Directors and
stockholders of the Company, a certificate of an officer of the Company, and
such other corporate records of the Company and other documents of which we are
aware as we considered necessary for purposes of enabling us to render the
opinion set forth below.
In connection with this opinion we have assumed the following: (a)
the authenticity of original documents and the genuineness of all signatures;
(b) the conformity to the originals of all documents submitted to us as copies;
and (c) the truth, accuracy and completeness of the information, representations
and warranties contained in the instruments, documents, records and certificates
we have reviewed.
As to the matters of fact material to our opinions, we have relied on
our review of the documents referred to above and statements made to us by
officers of the Company. We have not independently verified any factual matters
or any assumptions made by us in this letter and disclaim any inference as to
the reasonableness of any such assumption.
Based upon the foregoing and subject to the exceptions, qualifications
and limitations set forth hereinafter, we are of the opinion that upon the
issuance and sale of the Offered Shares in accordance with the terms of the
respective Plans, the Offered Shares will be legally issues, fully paid and non-
assessable.
1
<PAGE>
We are members of the bar of the State of California and are not
admitted to practice in any other jurisdiction. The opinions set forth above
are limited in all respects to matters governed by the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware.
The opinion set forth herein is given as of the date hereof and is
expressly limited to the matter stated. No opinion is implied or may be
inferred beyond what is explicitly stated in this letter.
Copies of this letter may not be circulated or furnished to any other
person or entity, and this letter may not be referred to in any report or
document furnished to any other person or entity, without our prior written
consent.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
HOWARD, RICE, NEMEROVSKI, CANADY, FALK &
RABKIN
A Professional Corporation
By:/s/ Daniel J. Winnike
----------------------------
Daniel J. Winnike
DJW/mef
2
<PAGE>
[LOGO OF DELOITTE & TOUCHE LLP APPEARS HERE] EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Valley Media, Inc. on Form S-8 of our report dated May 14, 1999,
appearing in the Annual Report on Form 10-K of Valley Media, Inc. for the year
ended April 3, 1999.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
September 8, 1999
1
