<PAGE>
As filed with the Securities and Exchange Commission on February 28, 2000
Registration No. 333-______________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
K-TEL INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
--------------
MINNESOTA 3652 41-0946588
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation Classification Code Number) No.)
Or Organization)
2605 FERNBROOK LANE NORTH
MINNEAPOLIS, MINNESOTA 55447-4736
(Address, including Zip Code, of Principal Executive Offices)
------------------
K-TEL INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
K-TEL INTERNATIONAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENTS
(Full Title of the Plan)
------------------
STEVEN A. KAHN COPIES TO:
Chief Financial Officer AVRON L. GORDON, ESQ.
K-tel International, Inc. JAMES R. SANKOVITZ, ESQ.
2605 Fernbrook Lane North Briggs and Morgan,
Minneapolis, MN 55447-4736 Professional Association
(612) 559-6800 2400 IDS Center
(Name, Address, including Zip Code, Minneapolis, MN 55402-2157
and Telephone Number, including (612) 334-8400
Area Code, of Agent for Service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE
=================================================== ================== ================== ============== ==============
<S> <C> <C> <C> <C>
K-TEL INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
Options to purchase Common Stock . . . . . . . . 1,500,000 N/A N/A N/A
Common Stock (par value $0.01) . . . . . . . . . 1,500,000 shares $5.28 (2) $7,920,000.00 $2,090.88
K-TEL INTERNATIONAL, INC.
1998 NON-QUALIFIED STOCK OPTION AGREEMENT
Option to purchase Common Stock . . . . . . . . 200,000 N/A N/A N/A
Common Stock (par value $0.01) . . . . . . . . . 200,000 shares $6.50 (3) $1,300,000.00 $343.20
K-TEL INTERNATIONAL, INC.
1999 NONQUALIFIED STOCK OPTION AGREEMENTS
Options to purchase Common Stock . . . . . . . . 15,000 N/A N/A N/A
Common Stock (par value $0.01) . . . . . . . . . 15,000 shares $8.7313 (3) $130,969.50 $34.58
=============================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the K-tel International, Inc. 1997
Stock Option Plan and K-tel International, Inc. Nonqualified Stock Option
Agreements by reason of any stock dividend, stock split, recapitalization
or other similar transaction effected without the receipt of consideration
which results in an increase in the number of outstanding shares of Common
Stock.
(2) Calculated solely for the purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the average of the
high and low sales prices for such stock as reported by the Nasdaq National
Market on February 24, 2000.
(3) Calculated solely for the purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended.
==============================================================================
<PAGE>
REGISTRATION OF ADDITIONAL SECURITIES
This Registration Statement is being filed by K-tel International, Inc.
(the "Company") pursuant to General Instruction E to the Form S-8 Registration
Statement under the Securities Act of 1933, as amended, to register an
additional 1,500,000 shares of the Company's Common Stock, $.01 par value (the
"Common Stock"), issuable pursuant to the Company's 1997 Stock Option Plan (the
"Plan"), 200,000 shares of Common Stock, issuable pursuant to the exercise of a
1998 Nonqualified Stock Option Agreement issued to Lawrence Kieves in 1998 and
15,000 shares of Common Stock, issuable pursuant to the exercise of 1999
Nonqualified Stock Option Agreements issued to three non-employee directors of
the Company in 1999. 600,000 shares of Common Stock issuable under the Plan have
been previously registered pursuant to the Company's Form S-8 Registration
Statement filed with the Securities and Exchange Commission on October 15, 1998
(Registration No. 333-65755) and 1,400,000 shares of Common Stock issuable under
the Plan have been previously registered pursuant to the Company's Form S-8
Registration Statement filed with the Securities and Exchange Commission on
March 16, 1999 (Registration No. 333-74471). The information contained in the
Company's Form S-8 Registration Statements dated October 15, 1998, and March 16,
1999, are hereby incorporated by reference in this registration statement.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to documents we file with the SEC. The information incorporated by
reference is considered to be part of this registration statement. Information
that we file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until all of the shares covered by this registration
statement have been sold:
- Annual Report on Form 10-K for the year ended June 30, 1999,
filed with the Commission on September 28, 1999;
- Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1999 and December 31, 1999;
- Current Reports on Form 8-K filed on October 8, 1999, December
16, 1999 and January 21, 2000.
- Definitive Schedule 14A (Proxy Statement) filed with the
Commission on December 6, 1999; and
- Description of our common stock contained in our Current
Report on Form 8-K filed with the Commission on June 2, 1999.
All documents subsequently filed by the Company 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 hereunder have been sold or which deregisters all of the
securities offered then remaining unsold, shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of 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
Article V, Section 5.01 of our Bylaws provides that we shall indemnify
persons to the extent required by Minnesota Statutes, section 302A.521. Section
302A.521 provides that a Minnesota business corporation shall indemnify any
director, officer, employee or agent of a corporation made or threatened to be
made a party to a proceeding, by reason of the former or present official
capacity (as defined) of the person, against judgments, penalties, fines,
including, without limitation, excise taxes assessed against the person with
respect to an employee benefit plan, settlements and reasonable expenses
incurred by the person in connection with the proceeding if certain statutory
standards are met. "Proceeding" means a threatened, pending or completed civil,
criminal, administrative, arbitration or investigative proceeding, including one
by or in the right of the
II-1
<PAGE>
corporation. Section 302A.521 contains detailed terms regarding such right of
indemnification and reference is made thereto for a complete statement of
such indemnification rights.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
5.1 Opinion of Briggs and Morgan, Professional Association.
10.1 K-tel International, Inc. 1997 Stock Option Plan, as amended.
10.2 K-tel International, Inc. Nonqualified Stock Option Agreement
issued October 19, 1998.
10.3 Form of K-tel International, Inc. Nonqualified Stock Option
Agreements for 5,000 shares issued February 25, 1999.
23.1 Consent of Briggs and Morgan, Professional Association (included
in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on Signature Page).
</TABLE>
II-2
<PAGE>
ITEM 9. UNDERTAKINGS.
(a) 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: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (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; and (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.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act 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 SEC such indemnification
is against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Minneapolis and State of Minnesota, on the 28th day
of February, 2000.
K-TEL INTERNATIONAL, INC.
By /s/ Philip Kives
-----------------------------------
Philip Kives
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip Kives and Steven A. Kahn as his 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 amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, 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 their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons on the dates and in the
capacities indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Philip Kives Chairman of the Board, Chief Executive FEBRUARY 28, 2000
- -------------------------------- Officer and Director (Principal -----------------
Philip Kives Executive Officer)
/s/ Steven A. Kahn Vice President and Chief Financial FEBRUARY 28, 2000
- -------------------------------- Officer (Principal Financial Officer -----------------
Steven A. Kahn and Principal Accounting Officer)
/s/ Lawrence Kieves Director FEBRUARY 28, 2000
- -------------------------------- -----------------
Lawrence Kieves
/s/ Herbert Davis Director FEBRUARY 28, 2000
- -------------------------------- -----------------
Herbert Davis
/s/ Jay William Smalley Director FEBRUARY 28, 2000
- -------------------------------- -----------------
Jay William Smalley
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ David Wolinsky Director FEBRUARY 28, 2000
- --------------------------------- -----------------
David Wolinsky
/s/ Dennis W. Ward Director FEBRUARY 28, 2000
- --------------------------------- -----------------
Dennis W. Ward
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
5.1 Opinion of Briggs and Morgan, Professional Association.
10.1 K-tel International, Inc. 1997 Stock Option Plan, as amended.
10.2 K-tel International, Inc. Nonqualified Stock Option Agreement
issued October 19, 1998.
10.3 Form of K-tel International, Inc. Nonqualified Stock Option
Agreements for 5,000 shares issued February 25, 1999.
23.1 Consent of Briggs and Morgan, Professional Association
(included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on Signature Page).
</TABLE>
II-6
<PAGE>
EXHIBIT 5.1
BRIGGS AND MORGAN,
PROFESSIONAL ASSOCIATION
2400 IDS CENTER
MINNEAPOLIS, MN 55402
(612) 334-8400
February 28, 2000
K-tel International, Inc.
2605 Fernbrook Lane North
Minneapolis, MN 55447
RE: K-TEL INTERNATIONAL, INC.
REGISTRATION STATEMENT ON FORM S-8
K-TEL INTERNATIONAL, INC. 1997 STOCK OPTION PLAN, AS AMENDED
1998 NONQUALIFIED STOCK OPTION AGREEMENT
1999 NONQUALIFIED STOCK OPTION AGREEMENTS
Gentlemen:
In connection with the registration on Form S-8 under the Securities
Act of 1933, as amended, of 1,500,000 shares of Common Stock to be issued under
the K-tel International, Inc. 1997 Stock Option Plan, 200,000 shares of Common
Stock to be issued under one K-tel International, Inc. Nonqualified Stock Option
Agreement issued October 19, 1998, and 15,000 shares of Common Stock to be
issued under three K-tel International, Inc. Nonqualified Stock Option
Agreements issued February 25, 1999, we have examined such documents and have
reviewed such questions of law as we have considered necessary and appropriate
for the purposes of this opinion and, based thereon, we advise you that, in our
opinion, when such shares have been issued and sold pursuant to the applicable
provisions of the agreements and in accordance with the Registration Statement,
such shares will be validly issued, fully paid and nonassessable shares of the
Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
above described Registration Statement.
Very truly yours,
BRIGGS AND MORGAN,
Professional Association
By: /s/ Avron L. Gordon
---------------------
Avron L. Gordon
<PAGE>
EXHIBIT 10.1
K-TEL INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
(AS AMENDED)
---------------------------------------
PART I
PURPOSES; DEFINITIONS; SHAREHOLDER APPROVAL;
RESERVATION OF SHARES; AND PARTICIPATION IN PLAN
ARTICLE I.
PURPOSES
1.1 PURPOSE OF PLAN. The purpose of this K-tel International, Inc. 1997
Stock Option Plan (the "Plan") is to provide incentives to employees, directors,
consultants and independent contractors of the Company and/or any Subsidiary who
contribute, and are expected to contribute, to the success of the Company and
any Subsidiary, to provide a means of rewarding outstanding performance, and to
enhance the interest of such employees in the Company's continued success and
progress by providing them a proprietary interest in the Company. Further, this
Plan is designed to enhance the Company's ability to maintain a competitive
position in attracting and retaining qualified personnel necessary for the
continued success and progress of the Company.
ARTICLE II.
DEFINITIONS
2.1 Certain terms used herein shall have the meaning below stated,
subject to the provisions of Section 7.1.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee appointed by the Board, consisting solely of
persons who are Non-Employee Directors within the meaning Rule 16b-3(3)(i), or
if no Committee is appointed by the Board, the Board.
"Common Stock" means, subject to the provisions of Section 9.3, the Common
Stock of the Company, par value $.01 per share.
"Company" means K-tel International, Inc., a Minnesota corporation.
"Disability" means (subject to Section 6.2) a physical or mental
impairment of sufficient severity such that an Employee is permanently unable to
continue his employment with the Company as determined by the Committee.
2
<PAGE>
"Employee" means an employee (including an officer) of the Company or of
any Subsidiary of the Company.
"Fair Market Value" means, with respect to an Incentive Stock Option, the
value of a share of the Company's Common Stock as of any date, determined as
follows:
(a) If the Common Stock is quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination;
(b) If the Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which the Common
Stock is listed or admitted to trading; or
(c) If the Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal; or if none of the
foregoing is applicable, by the Board of Directors or Committee in good faith.
With respect to a Non-Statutory Stock Option, Fair Market Value of a
share of the Company's Common Stock shall be determined in the manner described
in clauses (a) through (c) above, except that the Fair Market Value of a share
of Common Stock shall be the average of the price of the Common Stock for the
five trading days immediately preceding the time of the grant of an option if
the option is granted prior to the close of the market, or ending on the date of
grant if the Non-Statutory Stock Option is granted after the close of the
market.
"Incentive Stock Option" means an option to purchase common Stock, granted
by the Company to an Employee pursuant to Section 5.1, which is intended to meet
the requirements of Section 422 of the Code and which is designated at the time
of the award of an Incentive Stock Option.
"Non-Employee Director" shall mean a member of the Board of Directors of
the Company who is a Non-Employee Director as defined by Rule 16 b-3(b)(3)(i)
under the Securities Exchange Act of 1934, as amended.
"Non-Statutory Option" means an option to purchase Common Stock granted by
the Company to an Optionee pursuant to Section 5.1, which is not an Incentive
Stock Option.
"Option" means an Incentive Stock Option or a Non-Statutory Option.
"Optionee" means the holder of an Option granted under the Plan.
"Plan" means the K-tel International, Inc. 1997 Stock Option Plan, as set
forth herein and as from time to time amended.
"Subsidiary" means a subsidiary or parent corporation, as defined in
Section 425(e) and (f) of the Code, with respect to the Company.
"1933 Act" means the Securities Act of 1933, as amended.
3
<PAGE>
ARTICLE III.
SHAREHOLDER APPROVAL; RESERVATIONS OF SHARES
3.1 SHAREHOLDER APPROVAL. This Plan was approved by the Board of
Directors on February 18, 1997 and by the Company's shareholders on February 4,
1998.
3.2 SHARES RESERVED UNDER PLAN. Subject to adjustment under the
provisions of Section 9.3 hereof, the maximum number of shares of Common Stock
which may be issued and sold under this Plan is 3,500,000 shares. Such shares
may be either authorized and unissued shares or shares issued and thereafter
acquired by the Company. Shares issued pursuant to this Plan shall be subject to
all applicable provisions of the Articles of Incorporation and Bylaws of the
Company in existence at the time of issuance of such shares and at all times
thereafter. If Options granted under this Plan shall terminate or cease to be
exercisable by reason of expiration, surrender for cancellation or otherwise
without having been wholly exercised, new Options may be granted under this Plan
covering the number of shares to which such termination or cessation relates. At
no time may the sum of the maximum number of shares issuable under outstanding
Options granted under this Plan and the number of shares previously issued under
Options granted under this Plan exceed the maximum number of shares that may be
issued and sold under this Plan, as above stated.
ARTICLE IV.
PARTICIPATION IN PLAN
4.1 ELIGIBILITY TO RECEIVE OPTIONS. Options under this Plan may be
granted only to Employees of the Company or a Subsidiary (including prospective
employees), directors, consultants, advisors and independent contractors of the
Company who render bona fide services to the Company not in connection with the
offer and sale of the Company's securities in a capital-raising transaction.
4.2 PARTICIPATION NOT GUARANTEE OF EMPLOYMENT. Nothing in this Plan or
in the instrument evidencing the grant of an Option shall in any manner be
construed to limit in any way the right of the Company or a Subsidiary to
terminate an Employee's employment at any time without regard to the effect of
such termination on any rights such Employee would otherwise have under this
Plan, or give any right to such an Employee to remain employed by the Company or
a Subsidiary in any particular position or at any particular rate of
compensation.
4.3 GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Non-Employee Directors
of the Corporation shall be entitled to receive stock options for the purchase
of 5,000 shares of Common Stock at an option price equal to the Fair Market
Value of the Common Stock on the date of initial election commencing on and
after the annual meeting of the shareholders of the Company in 2000, and upon
each re-election to the Board by the shareholders at an annual or special
meeting of the shareholders of the Company thereafter. Each such option shall
constitute a Non-Statutory Stock Option. Options granted pursuant to this
Subsection 4.3 shall be exercisable as provided in Section 5.2(a). The form of
an option granted to a non-employee director shall be approved by the Board of
Directors or the Committee.
4
<PAGE>
PART II
OPTIONS;
TERMINATION OF EMPLOYMENT AND DEATH
ARTICLE V.
OPTIONS
5.1 GRANTS OF OPTIONS.
(a) GRANT. The Committee may grant Incentive Stock Options and/or
Non-Statutory Options to persons eligible to receive options pursuant to Section
4.1, subject to the limitations provided in Section 5.1(f) and Section 7.1. All
Options under this Plan shall be granted within ten years of February 18, 1997,
the date on which this Plan was adopted by the Board of Directors subject to
approval of the Plan by shareholders.
(b) OPTION PRICE. The purchase price per share of Common Stock
under each Incentive Stock Option and Non-Statutory Option shall be
determined by the Committee but shall be not less than 100% of the Fair
Market Value per share of such Common Stock on the date the Option is granted
for Incentive Stock Options and no less than 85% of the Fair Market Value per
share of such Common Stock on the date the Option is granted for
Non-Statutory Options. The purchase price per share may be subject to
adjustment in accordance with the provisions of Section 9.3 hereof.
(c) OPTIONS AGREEMENTS. Options shall be evidenced by option
agreements in such form and containing such terms and conditions as the
committee shall approve, which terms and conditions need not be the same for
all Options.
(d) OPTIONS NONTRANSFERABLE. Except with the prior written
consent of the Committee, an Option granted under this Plan shall by its
terms be nontransferable by the Optionee other than by will or the laws of
descent and distribution, and, during the lifetime of the Optionee, shall be
exercisable only by such Optionee. No transfer of an Option by an Optionee by
will or by the laws of descent and distribution shall be effective to bind
the Company unless the Company shall have been furnished with written notice
thereof and a copy of the will and/or such other evidence as the Committee
may determine necessary to establish the validity of the transfer.
(e) SUBSTITUTION AND CANCELLATION. The Committee may, in its
sole discretion, grant to an Optionee who has been granted an Option under
this Plan, in exchange for the surrender and cancellation of such Option, a
new Option having a purchase price lower (or higher) than the purchase price
provided in the Option so surrendered and cancelled and containing such other
terms as the Committee may deem appropriate, subject to Section 5.1(b) and
such other limitations or restrictions with respect to an Incentive Stock
Option as may be imposed by the Code.
(f) ANNUAL PER-EMPLOYEE LIMITATION. The number of shares of
Common Stock subject to all Options granted to an optionee during any
calendar year shall not exceed 1,000,000 shares.
5.2 EXERCISE.
(a) TERM OF OPTIONS; VESTING; AND EXERCISE. The term of each
Option granted under this Plan shall not exceed ten (10) years from the date
of grant; provided that the duration of an Option granted to a Non-Employee
Director pursuant Section 4.3 shall be a term commencing on the date of
5
<PAGE>
grant and ending on the earlier of (a) ten (10) years after the date of grant
or (b) the date an optionee ceases to be a director, plus a time period equal
to the number of complete months the optionee continuously served as a member
of the Board. An Option granted under this Plan shall become vested and
exercisable at such rate and on such conditions as the Committee shall
determine at the time such Option is granted.
(b) EXERCISE; PAYMENT ON EXERCISE. Options shall be exercised by
delivering to the Company an exercise notice in the form prescribed by the
Committee. No shares of Common Stock shall be issued on the exercise of an
Option unless paid for in full at the time of purchase as provided in the
next sentence and until the provisions of 9.4 shall have been satisfied.
Payment for shares of Common Stock purchased upon the exercise of an Option
shall be made (i) in cash, or (ii) the following alternative forms of
payment: (A) in whole or in part in shares of Common Stock held by the
Optionee for at least six months and valued at the then Fair Market Value
thereof, or (B) by delivery to the Company of irrevocable instructions to the
Optionee's broker, which instructions and broker shall be satisfactory to the
Company, to promptly deliver to the Company the total purchase price for the
shares of the Option being exercised from the sale proceeds for such shares
or the loan proceeds for such shares or any other securities which the
Optionee may have in his account with such broker, and the Company will
deliver such shares directly to such broker in accordance with such
procedures as the Committee may establish, which alternative forms of payment
may be permitted by the Committee at the time the Option is granted or at any
time thereafter during the term of the Option. Stock certificates for the
shares of Common Stock so paid for will be issued and delivered to the person
entitled thereto only at the Company's office in Minneapolis, Minnesota. No
Optionee shall have any rights as a shareholder with respect to any share of
Common Stock covered by an Option unless and until such Optionee shall have
become the holder of record of such share and, except as otherwise permitted
in Section 9.3 hereof, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property or distributions
or other rights) in respect of such share for which the record date is prior
to the date on which such Optionee shall have become the holder of record
thereof.
(c) DISSOLUTION, LIQUIDATION, ETC. If at any time after an
Option has become exercisable and prior to its exercise and expiration, a
voluntary dissolution, liquidation (other than a liquidation into another
corporation which agrees to continue this Plan) or winding up of the affairs
of the Company shall be proposed, the Company shall cause notice in writing
to be mailed to each person holding an Option under this Plan, which notice
shall be mailed not less than twenty days prior to the closing of the
transfer books of the Company or the record date for determination of the
holders of common Stock of the Company entitled to participate in such
dissolution, liquidation or winding up, as the case may be, to the end that
during such notice period the holder of any Option, to the extent that the
same is then exercisable by such holder, subject to the terms of Article V
hereof, may purchase Common Stock in accordance with the terms of the Option
and be entitled, in respect of the number of shares so purchased, to all the
rights of the other holders of Common Stock of the Company with respect to
such proposed dissolution, liquidation or winding up of the affairs of the
Company. Each Option at the time outstanding and all rights thereunder shall
terminate at the close of business on the twentieth day after mailing of such
notice to the holder of such Option or on the record date for determination
of holders of Common Stock entitled to participate in such dissolution,
liquidation or winding up, whichever date is later.
(d) EXERCISE OF OPTIONS. In the event that an Optionee exercises
an Option, such Optionee shall comply with all requirements set forth in the
option agreement for such Options in connection with the purchase of shares
of Common Stock under this Plan.
5.3 INCENTIVE STOCK OPTIONS.
(a) ANNUAL LIMITATION. In no event shall any Optionee be granted
an Incentive Stock Option under this Plan or any other plan of the Company or
any Subsidiary if such option would, during the calendar year in which the
option first becomes exercisable when combined with other Incentive Stock
Options which first become exercisable in such calendar year, entitle such
Optionee, to purchase shares of Common Stock or shares of any Subsidiary
having an aggregate fair market value (determined as of the time
6
<PAGE>
such option or options were granted) in excess of $100,000. In the event an
option granted hereunder is designated an Incentive Stock Option ad exceeds
the limitations set forth in this Section 5.3(a), whether at the time of
grant or thereafter, such option shall be an Incentive Stock Option only to
the extent permitted hereby and the balance thereof shall be a Non-Statutory
Option for the purposes of this Plan.
(b) INCENTIVE STOCK OPTIONS GRANTED TO TEN PERCENT SHAREHOLDERS.
No Incentive Stock Option shall be granted to any Employee who owns, directly
or indirectly pursuant to Section 425(d) of the Code, stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary, unless at the time such Incentive
Stock Option is granted, the price of the Incentive Stock Option is at least
110% of the Fair Market Value of the Common Stock subject to the Incentive
Stock Option and such Incentive Stock Option, by its terms, is not
exercisable after the expiration of five (5) years from the date such
Incentive Stock Option is granted.
(c) NOTICE. Each Optionee shall give prompt notice to the
Company of any disposition of shares acquired upon exercise of an Incentive
Stock Option if such disposition occurs within either two years after the
date of grant or one year after the date of transfer of such shares to the
Optionee upon the exercise of such Incentive Stock Option.
(d) CONSENT. To the extent appropriate to avoid a "modification"
or other event described in Section 425(h) of the Code, an Optionee's rights
under an Incentive Stock Option (including the rights to pay the exercise
price in Common Stock) shall be set forth in the option agreement for such
Option entered into at the date of grant, so as to preclude any requirement
that further Committee consent be given after the date of grant.
ARTICLE VI.
TERMINATION OF EMPLOYMENT
6.1 TERMINATION OF EMPLOYMENT. Unless earlier terminated in accordance
with its terms, an Option granted to an employee shall terminate thirty (30)
days after any termination of the Optionee's employment with the Company or any
Subsidiary for any reason other than as a result of the death or disability of
the Optionee or, in the case of death or disability of any Optionee, 120 days
after the death or the termination of the Optionee's employment due to
disability.
6.2 EMPLOYMENT. For all purposes of this Plan, and any Option granted
hereunder, "employment" of an employee shall be defined in accordance with the
provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor
regulations).
PART III
ADMINISTRATION, AMENDMENT AND TERMINATION
OF PLAN; MISCELLANEOUS
ARTICLE VII.
ADMINISTRATION OF PLAN
7.1 THE COMMITTEE. This Plan shall be administered by the Board or a
Committee of the Board consisting of two or more directors, each of whom shall
be a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)(i) of the
Securities and Exchange Commission and shall be appointed by, and serve a the
pleasure of, the Board. A majority of the Committee shall constitute a quorum
thereof and the actions of a majority of the Committee at a meeting at which a
quorum is present, or actions unanimously
7
<PAGE>
approved in writing by all members of the Committee, shall be the actions of
the Committee. Vacancies occurring on the Committee shall be filled by the
Board. The Committee shall have full and final authority to interpret this
Plan and the agreements evidencing Options granted hereunder (which
agreements need not be identical), to prescribe, amend and rescind rules and
regulations, if any, relating to this Plan and to make all determinations
necessary or advisable for the administration of this Plan. The Committee's
determination in all matters referred to herein shall be conclusive and
binding for all purposes and upon all persons including, but without
limitation, the company, the shareholders of the Company, the Committee and
each of the members thereof, and the Employees and the Optionees, and their
respective personal representatives, heirs and assigns.
7.2 LIABILITY OF COMMITTEE. No member of the Committee shall be liable
for anything done or omitted to be done by such member or by any other member of
the Committee in connection with this Plan, except for the willful misconduct or
gross negligence of such member. The Committee shall have power to engage
outside consultants, auditors or other professional help to assist in the
fulfillment of the Committee's duties under this Plan at the Company's expense.
7.3 DETERMINATIONS OF THE COMMITTEE. In making its determinations
concerning the Employees, who shall receive Options as well as the number of
shares to be covered thereby and time or times at which they shall be granted,
the Committee shall take into account the nature of the services rendered by the
respective Employees and their past, present, and potential contribution to the
Company's success and such other factors as the Committee may deem relevant. The
Committee shall also determine the form of option agreements to be issued under
this Plan and the terms and conditions to be included therein, provided such
terms and conditions are not inconsistent with the terms of this Plan. In its
discretion or in accordance with a direction from the Board, the Committee may
waive any provisions of any option agreement, provided such waiver is not
inconsistent with the terms of this Plan as then in effect.
ARTICLE VIII.
AMENDMENT AND TERMINATION OF PLAN
8.1 AMENDMENT OF PLAN AND OPTIONS
(a) GENERALLY. The Board may at any time terminate or amend this
Plan in any respect, provided, however, that the Board shall not, without the
approval of the shareholders of the Company, amend this Plan in any manner
that requires such shareholder approval pursuant to any law, regulation or
rule relating to the listing of the Company's securities. No termination or
amendment of this Plan, without the consent of the holder of any Option then
existing, may terminate such holder's Option or materially and adversely
affect such holder's rights thereunder.
(b) AMENDMENTS RELATING TO INCENTIVE STOCK OPTIONS. To the
extent applicable, this Plan is intended to permit the issuance of Incentive
Stock Options in accordance with the provisions of Section 422 of the Code. The
Plan may be modified or amended at any time, both prospectively and
retroactively, and in such manner as to affect Incentive Stock Options
previously granted (after taking into account Section 425(h) of the Code,
relating to "modifications," etc.), if such amendment or modification is
necessary for this Plan and the Incentive Stock Options granted hereunder to
qualify under said provisions of the Code.
(c) AMENDMENT OR ASSUMPTION OF OPTIONS. Within the limitations
of the Plan, the Committee may modify, extend or assume outstanding options
or may accept the cancellation of outstanding options (whether granted by the
Company or by another issuer) in return for the grant of new options for the
same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option. The Committee may at any time (a) offer to buy
out
8
<PAGE>
for a payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
8.2 TERMINATION. The Board of Directors of the Company may at any time
terminate this Plan as of any date specified in a resolution adopted by the
Board. If not earlier terminated, this Plan shall terminate on the tenth
anniversary of the effective date of the Plan. No Options may be granted after
this Plan has terminated. After this Plan shall terminate, the function of the
Committee will be limited to supervising the administration of Options
previously granted.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1 RESTRICTIONS UPON GRANT OF OPTIONS. The registration or
qualification under any Federal or state law of any shares of Common Stock
issuable upon the exercise of Options granted pursuant to this Plan (whether to
permit the grant of Options or the resale or other disposition of any such
shares of Common Stock by or on behalf of the Optionees receiving such shares)
may be necessary or desirable and, in any such event, delivery of the
certificates for such shares of Common Stock shall, if the Board of Directors,
in its sole discretion, shall determine, not to be made until such listing,
registration or qualification shall have been completed.
9.2 RESTRICTIONS UPON RESALE OF UNREGISTERED STOCK. If the shares of
Common Stock that have been transferred to an Optionee pursuant to the terms of
this Plan are not registered under the 1933 Act, pursuant to an effective
registration statement, such Optionee, if the Committee shall deem it advisable,
may be required to represent and agree in writing (i) that any shares of Common
Stock acquired by such Optionee pursuant to this Plan will not be sold except
pursuant to an effective registration statement under the 1933 Act, or pursuant
to an exemption from registration under the 1933 Act and (ii) that such Optionee
is acquiring such shares of Common Stock for such Optionee's own account and not
with a view to the distribution thereof.
9.3 ADJUSTMENTS. In the event of any change whether through
recapitalization, merger, consolidation, stock dividend, split-up, or amount of
the Company's capital stock (or any other transaction described in Section
425(a) of the Code) after any Option is granted hereunder and prior to the
exercise thereof, the Option, to the extent that it has not been exercised,
shall entitle the holder to such number and kind of securities as such holder
would have been entitled to had such holder actually owned the stock subject to
the Option at the time of the occurrence of such change. If any such event
should occur, the number of shares subject to Options which are authorized to be
issued hereunder, but which have not been issued, shall be similarly adjusted.
If any other event shall occur, prior to the exercise of an Option granted to an
Optionee hereunder, which shall increase or decrease the amount of capital stock
outstanding and which the Committee, in its sole discretion, shall determine
equitably requires an adjustment in the number of shares which the holder should
be permitted to acquire, such adjustment as the Committee shall determine may be
made, and when so made shall be effective and binding for all purposes of this
Plan.
9.4 WITHHOLDING OF TAXES. Each Optionee who exercises an Option to
purchase Common Stock shall, prior to the issuance of any shares, pay to the
Company, or make arrangements (including withholding of shares of Common Stock
purchased upon exercise of the Option at the Fair Market Value thereof)
satisfactory to the committee regarding payment of, any taxes of any kind
required by law to be withheld with respect to the transfer to such Optionee of
such shares of Common Stock and/or amounts upon exercise of such Option.
9
<PAGE>
9.5 USE OF PROCEEDS. The proceeds from the sale of Common Stock
pursuant to Options granted under this Plan shall constitute general funds of
the Company and may be used for such corporate purposes as the Company may
determine.
9.6 OTHER GRANTS. Options may be granted under this Plan from time to
time in substitution for stock options held by employees of other corporations
who are or are about to become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary, or the acquisition by the Company or a Subsidiary of
the assets of the employing corporation, or the acquisition by the Company or a
Subsidiary of stock of the employing corporation as the result of which it
becomes a Subsidiary of the Company. The terms and conditions of the substituted
Options so granted may vary from the terms and conditions set forth n Part II to
such extent as the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the substituted stock incentives.
9.7 OTHER BENEFITS. Nothing contained herein shall prevent the Company
from establishing other incentive plans in which Employees under the Plan may
also participate. No award under this Plan shall be considered as compensation
in calculating any insurance, pension or other benefit for which the recipient
is eligible unless any such insurance, pension or other benefit is granted under
a plan which expressly provides that compensation under this Plan (and
specifying the type of such compensation) shall be considered as compensation
under such plan.
10
<PAGE>
EXHIBIT 10.2
K-TEL INTERNATIONAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT made and entered into as of October 19, 1998, by and
between K-TEL INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and
LAWRENCE KIEVES, a New York resident (the "Optionee");
W I T N E S S E T H
WHEREAS, the Optionee has consented to serving as the Company's
President; and
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of its common stock, par value $.01, (the "Common Stock"),
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate of two hundred thousand (200,000) shares of Common Stock (the "Option
Shares") (such number being subject to adjustment as provided in Paragraph 4
hereof) on the terms and conditions herein set forth. The Option is a
non-qualified stock option under the Internal Revenue Code of 1986, as amended.
2. PURCHASE PRICE. Subject to the provisions of Paragraph 4 hereof, the
purchase price for the Option Shares shall be $6.50 per share, which has been
determined to be the fair market value of the Option Shares at the date of grant
of the Option.
3. TERM AND VESTING OF OPTION. The Option shall expire (the "Expiration
Date") upon the earlier to occur of: (a) the close of business on the tenth
anniversary of the date hereof or (b) thirty (30) days after the date on which
the Optionee is no longer employed by the Company. Prior to the Expiration Date,
the Optionee shall be entitled to exercise the Option as to all or any part of
the Option Shares which have theretofore become vested. The Option Shares shall
vest and become exercisable as follows: (1) 66,666 shares upon and after the
first anniversary of the date hereof, (2) 66,666 shares upon and after the
second anniversary of the date hereof, and (3) 66,667 shares upon and after the
third anniversary of the date hereof; provided, however, in the event of (i) the
sale of all or substantially all of the assets of the Company, or (ii) a merger,
consolidation or other reorganization of the Company in which the shareholders
of the Company immediately prior to such merger, consolidation or reorganization
constitute less than fifty-one percent (51%) of the voting power of the
surviving corporation, then all of the shares subject to the Option shall be
vested and exercisable in full upon the occurrence of such event. In addition,
in the event of a Going Private Transaction (as defined below) is consummated,
then all of the shares subject to the Option shall become fully vested upon the
closing of the Going Private Transaction and shall be entitled to receive from
the Company in cancellation of all rights under the Option and this Agreement,
in cash the excess of the price per share for the common stock of the Company
paid to shareholders (other than Philip Kives or any entity which he controls)
in the Going Private Transaction over the option exercise price of the Option
multiplied by the number of shares subject to the Option. The term "Going
Private Transaction" means any transaction or series of transaction between the
Company and any entity directly or indirectly controlled by Philip Kives,
including a sale of all or substantially all of the assets of the Company to
such an entity or any merger, consolidation or other reorganization of the
Company with such
<PAGE>
an entity for which a filing is required under Regulation 13e-3 of the
Securities and Exchange Commission. Notwithstanding the foregoing, the Option
may in no event be exercised by anyone to any extent in the event of a
voluntary dissolution, liquidation or winding up of the affairs of the
Company, after the close of business on the later of (i) the date of the
twentieth day after the mailing of written notice of such dissolution,
liquidation or winding up, and (ii) the record date for determination of
holders of Common Stock entitled to participate therein.
4. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If all or any portion
of this Option shall be exercised subsequent to any share dividend,
recapitalization, merger, consolidation, exchange of shares or reorganization as
a result of which shares of any class shall be issued in respect to outstanding
Common Stock, or if Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes, the person so
exercising this Option shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares to which they would have been
entitled if Common Stock (as authorized at the date hereof) had been purchased
at the date hereof for the same aggregate price (on the basis of the price per
share set forth in Paragraph 2 hereof) and had not been disposed of. No
fractional share shall be issued upon any such exercise and the aggregate price
paid shall be appropriately reduced on account of any fractional share not
issued.
5. METHOD EXERCISE. Subject to the terms and conditions of this
Agreement, the Option may be exercised by written notice to the Company at its
principal office and place of business in the State of Minnesota. Such notice
shall state the election to exercise the Option and the number of Option Shares
in respect of which it is being exercised, and shall be signed by the person so
exercising the Option. Such notice shall be accompanied by the payment of the
full purchase price of such Option Shares and the delivery of such payment to
the Treasurer of the Company. The certificate for the Option Shares as to which
the Option shall have been so exercised shall be registered in the name of the
person exercising the Option. If the Optionee shall so request in the notice
exercising the Option, the certificate shall be registered in the name of the
Optionee and another person jointly with right of survivorship, and shall be
delivered as provided above to or upon the written order of the person
exercising the Option. In the event the Option shall be exercised by any person
other than Optionee, such notice shall be accompanied by appropriate proof of
the right of such person to exercise the Option.
6. RESERVATION OF SHARES. The Company shall, at all times during the
term of the Option, reserve and keep available such number of shares of its
capital stock as will be sufficient to satisfy the requirements of this
Agreement, and shall pay all original issue and transfer taxes with respect to
the issue and transfer of Option Shares pursuant hereto, and all other fees and
expenses necessarily incurred by the Company in connection therewith.
7. NO RIGHTS AS STOCKHOLDER. The holder of the Option shall not have
any of the rights of a stockholder with respect to the Option Shares covered by
the Option except to the extent that one or more certificates for shares shall
be delivered to him upon the due exercise of the Option.
8. RESIGNATION AND INVESTMENT PURPOSE. The Company shall use reasonable
efforts to have the shares issuable upon the exercise of this Option registered
on a Form S-8 Registration Statement with the Securities and Exchange Commission
under the Securities Act of 1933, as amended. Unless the Option Shares have been
so registered, the Option is granted on the condition that the acquisition of
shares hereunder shall be for investment purposes only and the person acquiring
Option Shares upon exercise of the Option must bear the economic risk of the
investment for an indefinite period of time since the shares so acquired cannot
be sold unless they are subsequently registered or an exemption from such
registration is available. Optionee agrees that a legend may be placed on the
stock certificates acknowledging the restrictions on subsequent distribution of
the shares issued upon exercise of this Option.
2
<PAGE>
9. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, assigns and
representatives and shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
K-TEL INTERNATIONAL, INC.
By /s/ Philip Kives
-------------------------
Philip Kives, Chairman and
Chief Executive Officer
/s/ Lawrence Kieves
------------------------
Lawrence Kieves
3
<PAGE>
EXHIBIT 10.3
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of February 25, 1999 between
K-tel International, Inc., a Minnesota corporation (herein called the "Company")
and ________________, a Director of the Company (herein called the "Director").
W I T N E S S E T H
WHEREAS, the Company desires, by affording the Director an opportunity
to purchase shares of its common stock, (herein called the "Common Stock"), as
provided in this Agreement; and
WHEREAS, the Board of Directors of the Company (herein called the
"Board") has authorized and approved the granting of the option to purchase the
number of shares of Common Stock of the Company on the terms set forth in this
Agreement,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto have agreed, and
do hereby agree, as follows:
10. GRANT OF OPTION. The Company hereby irrevocably grants to the
Director the right and option (herein called the "Option") to purchase all or
any part of an aggregate of 5,000 shares of Common Stock of the Company on the
terms and conditions set forth in this Agreement.
11. PURCHASE PRICE AND TERM OF OPTION. The purchase price of the shares
of the Common Stock subject to the Option, the dates on which shares are subject
to the Option may be exercised and the date on which the Option terminates are
as follows:
<TABLE>
<CAPTION>
DATE FIRST
PER SHARE NUMBER OF SHARES EXERCISABLE DATE OPTION TERMINATES
--------- ---------------- ----------- ----------------------
<S> <C> <C> <C>
$8.7313 5,000 February 25, 1999 February 25, 2009
</TABLE>
The purchase price of the shares as to which the Option may be
exercised shall be paid in full in cash at the time of exercise. Except as
provided in paragraphs 6 and 8 of this Agreement, the Option may not be
exercised unless the Director shall have been in the elected a Director of the
Company from the date hereof to the date of the exercise of the Option.
12. ADJUSTMENTS. If the number or type of shares of Common Stock of the
Company outstanding shall be changed or if the Company distributes to the
holders of its Common Stock any stock of the Company or any security convertible
into stock of the Company, as a result of recapitalization, stock split, stock
dividend, exchange, consolidation, combination of shares, or reorganization or
other event in which the Company is the surviving corporation, the Board shall,
pursuant to the terms of the Plan, make such proportionate increase or decrease
in the number, kind and price of the shares subject to the Option as it may deem
appropriate, and in doing so may eliminate any fractional shares which might
result from such proportionate increase or decrease.
<PAGE>
13. NOT A STOCKHOLDER. The holder of the Option shall not have any of
the rights of a stockholder of the Company with respect to the shares covered by
the Option except to the extent that the certificate or certificates for such
shares shall be delivered to him upon the due exercise of the Option.
14. NON-TRANSFERABILITY OF OPTION. The Option shall not be transferable
except by will or the laws of descent and distribution, and may be exercised
during the lifetime of the Director only by the Director except as provided in
paragraphs 7 and 9 of this Agreement. Without limiting the generality of the
foregoing restriction of transferability, the Option may not be assigned,
transferred (except as provided in the preceding sentence), pledged, or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the Option
contrary to the provisions hereof, and the levy of any execution, attachment, or
similar process upon the Option, shall be null and void and without effect.
15. TERMINATION OF DIRECTORSHIP. In the event that the term of the
Director shall be terminated by election, resignation or cause (otherwise than
by reason of death), the Option may, subject to the provisions of paragraph 5
hereof, be exercised by the Director (to the extent that he shall have been
entitled to do so) at any time within one (1) month after such termination. So
long as the Director shall continue to be an Director of the Company, the Option
shall not be affected by any change of duties or position.
16. Method of Exercising Option.
(a) Subject to the terms and conditions of this Agreement, the
Option may be exercised, at any time prior to the expiration date specified in
such option, by written notice to the Company at its executive offices. Such
notice shall state the election to exercise the Option and the number of shares
in respect of which it is being exercised, shall be signed by the person or
persons so exercising the Option, and shall be accompanied by payment of the
full purchase price of such shares. The Company shall deliver a certificate or
certificates representing such shares as soon as practicable after the notice
shall be received. Payment of such purchase price shall be made by a certified
check payable to the order of the Company. The certificate or certificates for
the shares as to which the Option shall have been so exercised shall be
registered in the name of the person or persons so exercising the Option (or, if
the Option shall be exercised by the Director and if the Director shall so
request in the notice exercising the Option, shall be registered in the name of
the Director and another person jointly, with right or survivorship) and shall
be delivered as provided above to or upon the written order of the Director
exercising the Option. In the event the Option shall be exercised pursuant to
paragraph 9 of the Agreement by any person or persons other than the Director,
such notice shall be accompanied by appropriate proof of the right of such
person or persons to exercise the Option. All shares that shall be purchased
upon the exercise of the Option as provided herein shall be fully paid and
non-assessable.
(b) It shall be a condition to the obligation of the Company to
issue or transfer shares of Common Stock upon exercise of the Option granted
under the plan by delivery of shares, that the Director (or any authorized
representative) pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying its liability to
withhold federal, state or local income or other taxes incurred by reason of
the exercise of the Option or the transfer of shares upon such exercise. If
the amount requested is not paid, the Company may refuse to issue or transfer
shares of Common Stock upon exercise of the Option.
(c) The Company shall not be required to issue or transfer any
certificates for shares purchased upon exercise of this Option until all
applicable requirements of law have been complied with and such shares have
been listed on any securities exchange or system on which the Common Stock
may then be listed.
<PAGE>
17. DEATH OF DIRECTOR. In the event of the death of the Director, the
estate of the Director or the person who acquires the right to exercise the
Director's Option by reason of the Director's death, whether by request,
inheritance or intestate succession, shall have the right to exercise the Option
within twelve (12) months following the death of the Director (but not after the
expiration of the Option) for the number of shares which the Director was
entitled to purchase at the time of his death, but only if the person to whom
the Option was granted was at the time of his death in the employ of the Company
or any of its subsidiaries or of a corporation (or of a parent or subsidiary of
such corporation) issuing or assuming the Option in the transaction to which
Section 425(a) of the Internal Revenue Code of 1954, as amended, (herein called
the "Internal Revenue Code") was applicable. Any such exercise shall be made by
(a) delivering written notice to the Secretary of the Company specifying the
number of shares of Common Stock with respect to which the Option is being
exercised, and (b) paying or causing to be paid to the Company the purchase
price of such shares (c) providing the Company with such evidence as the Company
may request to demonstrate that the person or persons exercising the Option has
or have the right to do so and that all taxes or other assessments with respect
to the Common Stock issuable upon exercise of the Option have been paid or
adequate provision for such payment has been made. Upon being satisfied that the
person or persons exercising the Option has or have right to do so and that all
taxes or other assessments with respect to the Common Stock covered thereby have
been paid or provided for, the Company shall issue certificates for such shares
in such denominations as the person or persons exercising the Option may direct,
and shall deliver such shares in accordance with reasonable instructions
contained in the notice.
18. DISPOSAL OF SHARES ACQUIRED. In order to enable the Company to
avail itself of any income tax deduction to which it may be entitled, the
Director shall notify the Company of its intent to dispose of any of the shares
acquired pursuant to exercise of this Option within two (2) years from the date
of the grant of the Option and one (1) year from the date of exercise of the
Option. Promptly after such disposition the Director shall notify the Company of
the number of shares disposed of, the dates of acquisition and disposition of
such shares, and the consideration, if any, received on such disposition.
19. RESERVATION OF SHARES. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirement of this Agreement,
shall pay all original issue and transfer taxes with respect to the issue and
transfer of shares pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith, and will from time to time use
its best efforts to comply with all laws and regulations which, in the opinion
of counsel for the Company, shall be applicable thereto.
20. INVESTMENT REPRESENTATION. By exercising the Option, the Director
acknowledges that he or she has received all financial and other information
concerning the Company he or she deems necessary or has requested. In addition,
the Director agrees to furnish the Company with a certificate to the effect of
the foregoing upon exercise of the Option.
21. DEFINITIONS. As used herein, the term "subsidiary" shall mean any
present or future corporation which would be a "subsidiary corporation" of the
Company, as the term is defined in Section 425 (f) of the Internal Revenue Code
of 1954 as amended.
22. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized, and the Director has
hereunto set his hand and seal, all on the day and year first above written.
K-TEL INTERNATIONAL, INC.
By
---------------------------
Philip Kives, Chairman and
Chief Executive Officer
--------------------------
[name of Director]
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our reports
dated September 27, 1999, included in K-tel International, Inc.'s Form 10-K
for the year ended June 30, 1999 and to all references to our Firm included
in this registration statement.
/s/ ARTHUR ANDERSEN LLP
------------------------
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
February 28, 2000
