February 24, 1997
Stanley Berk
3615 Malibu Country Drive
Malibu, CA 90265
Dear Stan:
This letter is delivered pursuant to that certain Settlement Agreement and
General Release (the "Settlement Agreement") of even date herewith by and
between you, Stephen P. Grayson, individually and on behalf of the Stephen P.
Grayson Profit Sharing Plan (collectively,"Grayson") and Stanley Berk &
Associates, a partnership of which you and Grayson are the general partners
("SB&A"), (collectively, you, Grayson and SB&A are referred to herein as the
"Berk Parties"), on the one hand, and Karl-Magnus S. Karlsson and Scoop, Inc., a
California corporation (the "Company"), on the other hand. This letter sets
forth the terms and conditions upon which I grant to you, Stanley Berk, an
option (the "Option") to purchase shares of Common Stock of the Company
currently owned by me.
1. OPTION SHARES AND EXERCISE PRICE. I hereby grant to you the right to
purchase 11,250 shares of the Company's Common Stock (the "Shares"), at a per
share exercise price equal to 120% of the initial public offering price of the
Company's Common Stock (the "Exercise Price"), subject to the terms and
conditions set forth herein. In the event the Company does not complete an
initial public offering of its Common Stock ("IPO") by June 30, 1997, the
Exercise Price shall be $7.20 per share.
2. EXERCISE PERIOD. The Option may be exercised by you as to all or,
subject to the proviso below, any lesser number of Shares at any time and from
time to time during the period (the "Exercise Period") from and after 6:30 a.m.
Pacific Standard time on the earlier of the date the IPO is consummated or July
1, 1997, and until 5:00 p.m. Pacific Standard time on February 23, 2000 (the
"Expiration Date"); provided, however, that the Exercise Period shall expire and
the Option shall terminate immediately in the event any of the Berk Parties
commits the breach described in paragraph 2.6 of the Settlement Agreement or
materially breaches paragraph 1.5, paragraph 1.6 or any other term, provision or
covenant of the Settlement Agreement; and provided further, that the Option
shall be exercisable in multiples of 2,500 Shares unless all of the Shares
covered by the Option are being exercised.
Stanley Berk
Page 2
3. EXERCISE OF OPTION. You may exercise the Option as to all or any
permitted multiple of the Shares from time to time during the Exercise Period by
delivering to me at the principal executive office of the Company at 2540 Red
Hill Avenue, Suite 100, Santa Ana, California 92705 or at such other address as
I may designate in writing to you: (i) written notice of such exercise and (ii)
payment in cash or by certified or bank cashier's check of the aggregate
Exercise Price for the Shares being purchased pursuant to such exercise.
4. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If during the Exercise
Period the outstanding shares of Common Stock of the Company are increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation through
reorganization, merger, recapitalization, stock split, combination of shares or
stock dividends payable with respect to such Common Stock, appropriate
adjustments in the number of Shares (or other securities) then subject to the
Option and the Exercise Price will be made effective as of the date of such
occurrence so that upon exercising the Option immediately after such event, you
would be entitled to receive the number of Shares or other securities that you
would have owned immediately following such event if you had exercised the
Option immediately prior to such event. Whenever the number of Shares
purchasable upon the exercise of the Option is adjusted, as herein provided, the
per share Exercise Price shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the numerator of which shall
be the number of Shares purchasable upon the exercise of the Option immediately
prior to such adjustment, and the denominator of which shall be the number of
Shares so purchasable immediately thereafter.
5. REPRESENTATIONS AND WARRANTIES. You represent and warrant to me as
follows, and agree that any exercise of the Option will constitute your
acknowledgment that such representations and warranties are true and correct as
if made effective as of the date of such exercise:
(i) You are acquiring the Option and, upon exercise of the Option will be
acquiring any Shares covered thereby, for your own account
as principal, not as a nominee or agent, for investment purposes
only and not with a view to resell or otherwise distribute or
transfer the Option or any such Shares and no other individual
and entity (collectively, "Person") has a direct or indirect
beneficial interest in the Option or in any of the Shares. Further,
you do not have any contract, undertaking, agreement or arrangement
with any Person to sell, transfer or grant participations with
respect to the Option or any Shares to such Person or to any third
Person.
Stanley Berk
Page 3
(ii) You have such knowledge and experience in financial matters as to be
capable of evaluating the merits and risks of an investment in the
Shares. You understand that the Shares are a speculative investment
which involve a high degree of risk of loss of the entire investment.
Any exercise of the Option will constitute your representation and
warranty that you (a) have obtained such information concerning the
Company as you have deemed necessary to evaluate the merits and risks
of an investment in the Shares, (b) have determined, based solely upon
your own evaluation of such information, that the Shares are a
suitable investment for it and (c) have not relied on any oral or
written representations or warranties made by me, the Company or any
officer, employee or agent of either in connection with making an
investment in the Shares.
(iii) You understand that any investment in the Shares is an illiquid
investment. In particular, you recognize that (a) you must bear the
economic risk of any investment in the Shares for an indefinite period
of time since neither the Option or the Shares have been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and therefore neither the Option or the Shares can be assigned, sold,
transferred or otherwise disposed of unless either they are
subsequently registered under the Securities Act or an exemption from
such registration is available and a favorable opinion of counsel
acceptable to the Company to that effect is obtained (if requested by
the Company), and (b) no established market for the Company's Common
Stock currently exists and it is possible that no public market for
the Company's Common Stock will develop in the future. You also
understand that the certificates representing any Shares acquired by
you upon exercise of the Option will bear restrictive legends
identifying such Shares as "restricted securities," as such term is
defined under Rule 144 promulgated under the Securities Act, as well
as any other legends which may be required under applicable federal or
state securities laws.
(iv) You are an "accredited investor" as defined in Rule 501 of Regulation
D promulgated under the Securities Act.
The foregoing representations and warranties in this paragraph 5 shall survive
any exercise(s) of the Option.
6. DISPUTE RESOLUTION. In the event any dispute arises with respect to
this letter agreement, such dispute shall be resolved by an arbitrator mutually
acceptable to you and me. If we cannot agree on an arbitrator, we will each
select on arbitrator and then the two arbitrators so selected will select a
third arbitrator who will resolve the dispute. The arbitration will be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect.
Stanley Berk
Page 4
Please acknowledge your acceptance of the terms and conditions described
above by executing this letter where indicated below and returning it to me.
/S/ KARL-MAGNUS S. KARLSSON
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Karl-Magnus S. Karlsson
Accepted and Agreed
as of February 24, 1997
/s/ STANLEY BERK
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STANLEY BERK