EXHIBIT 10.2
AVENUE ENTERTAINMENT GROUP, INC.
STOCK OPTION AGREEMENT
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Cary Brokaw
10202 W. Washington Boulevard, David Lean Building, Room 119
Culver City, CA 90232
You have been granted a Nonstatutory Stock Option to purchase Common
Stock of the Company, subject to the terms and conditions of this Agreement, as
follows:
Date of Grant: September 2, 2005
Vesting Terms: Fully vested as of Date of Grant
Exercise Price per Share: $0.50
Total Number of Shares Granted: 500,000
Total Exercise Price $250,000.00
Term/Expiration Date: 5-Year Anniversary of Date of Grant
(September 2, 2010).
II. AGREEMENT
---------
1. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "AGREEMENT" means this stock option agreement between the
Company and Optionee evidencing the terms and conditions of this Option.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock options under U. S. state corporate laws, U.S. federal
and state securities laws, the Code, any stock exchange or quotation system on
which the Common Stock is listed or quoted and the applicable laws of any
foreign country or jurisdiction that may apply to this Option.
(c) "BOARD" means the Board of Directors of the Company or any
committee of the Board which has been designated by the Board to administer this
Agreement.
(d) "CODE" means the U.S. Internal Revenue Code of 1986, as
amended.
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Avenue Entertainment, Inc., a Delaware
corporation.
(g) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined, its Fair Market Value shall be (i) the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on any established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market for the last market trading day prior to the time of
determination, as reported in THE WALL STREET JOURNAL, (ii) the average of the
closing bid and ask prices quoted in the over-the-counter market, or (iii) if no
such quotations are available, such other source as the Board deems reliable.
(h) "NONSTATUTORY STOCK OPTION" means an Option not intended
to qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(i) "NOTICE OF GRANT" means a written notice, in Part I of
this Agreement, evidencing certain the terms and conditions of this Option
grant. The Notice of Grant is part of the Option Agreement.
(j) "OPTION" means this stock option.
(k) "OPTIONED STOCK" means the Common Stock subject to this
Option.
(l) "OPTIONEE" means the person named in the Notice of Grant
or such person's successor.
(m) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(n) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of this Agreement.
(o) "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
2. GRANT OF OPTION. The Board hereby grants to Optionee named in the
Notice of Grant attached as Part I of this Agreement the Option to purchase the
number of Shares, as set forth in the Notice of Grant, at the exercise price per
share set forth in the Notice of Grant (the "Exercise Price"), subject to the
terms and conditions of this Agreement.
-2-
3. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable at any time
during its term in accordance with the terms of the Notice of Grant and the
applicable provisions of this Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company. The Exercise Notice shall be completed by Optionee and delivered to
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
(c) LEGAL COMPLIANCE. No Shares shall be issued pursuant to
the exercise of this Option unless such issuance and exercise complies with
Applicable Laws. Assuming such compliance, for income tax purposes the Exercised
Shares shall be considered transferred to Optionee on the date the Option is
exercised with respect to such Exercised Shares.
(d) BUYOUT PROVISIONS. The Board may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Board shall establish and communicate to Optionee at
the time that such offer is made. Optionee may accept or reject any such offer
in Optionee's sole discretion.
4. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless
exercise program implemented by the Company; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by Optionee for more than
six (6) months on the date of surrender, AND (ii) have a Fair Market Value on
the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
5. OPTIONEE'S REPRESENTATIONS. In the event the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
at the time this Option is exercised, Optionee shall, if required by the
Company, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or her Investment Representation Statement in the
form attached hereto as Exhibit B.
-3-
6. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
7. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Agreement.
8. DEATH OF OPTIONEE. If Optionee dies, the Option may be exercised by
Optionee's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance. The Option may be exercised by the executor or
administrator of Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under Optionee's will or the laws of descent or
distribution.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by this Option, as well as the price per share of Common Stock covered by this
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to this Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that this Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that this Option shall terminate as of a
date fixed by the Board and give Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, this Option shall be assumed or an equivalent option
or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation refuses
to assume or substitute for this Option, the Board shall notify Optionee in
writing or electronically at least fifteen (15) days before such merger or sale
of substantially all of the assets of the Company so that Optionee shall have
time to exercise his Option before the date of such merger or sale of
substantially all of the assets of the Company, and the Option shall terminate
-4-
upon the closing of such merger or sale of substantially all of the assets of
the Company. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for each Share of
Optioned Stock subject to the Option, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
11. TAX CONSEQUENCES. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice. Optionee understands that the Company may be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of any
compensation income recognized at the time of exercise, and may refuse to honor
the exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
-5-
(c) REFUSAL TO TRANSFER. The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Exercise Notice or (ii) to treat
as owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
13. REGISTRATION OF SHARES. Upon the written request of Optionee, the
Company shall use its reasonable efforts to cause all Optioned Stock to be
registered pursuant to the Securities Act, pursuant to a registration statement
on Form S-8 or Form S-3 or such other registration form as may be available for
such purpose. The Company shall use all reasonable efforts to cause such
registration statement to become effective within 60 days after Optionee's
request therefor, and shall cause such registration statement to remain
effective until all Optioned Stock has been resold pursuant to such registration
statement, or may be sold pursuant to Rule 144 promulgated under the Securities
Act without regard to any volume restrictions.
14. ENTIRE AGREEMENT; GOVERNING LAW. This Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and may not be modified
adversely to Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by the internal substantive
laws, but not the choice of law rules, of California.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of this Agreement. Optionee has reviewed this
Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all provisions
of this Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions relating
to this Agreement. Optionee further agrees to notify the Company upon any change
in the residence address indicated below.
OPTIONEE: AVENUE ENTERTAINMENT GROUP, INC.,
a Delaware corporation
/S/ CARY BROKAW By: /S/ GENE FELDMAN
- ---------------------------------- ---------------------------------
Cary Brokaw Gene Feldman, its President &
Chief Executive Officer
-6-