EXHIBIT 10.27
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into as of September 16, 1999, between Sportsprize Entertainment Inc. (the
"Company"), a Nevada corporation, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Executive"), a
resident of Pacific Palisades, California.
WHEREAS, the Company wishes to employ the Executive to perform services for
the Company on the terms and conditions set forth in this Agreement, and the
Executive wishes to be retained and employed by the Company on such terms and
conditions.
NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth below and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the Executive
accepts such employment and agrees to perform services for the Company, for the
period and upon the other terms and conditions set forth in this Agreement.
2. Term. Unless terminated at an earlier date in accordance with Section 9
of this Agreement, the term of the Executive's employment hereunder shall be for
a period of two years, commencing on September 16, 1999. Thereafter, the term of
this Agreement shall be automatically extended for successive one-year periods
unless either party objects to such extension by written notice to the other
party at least 90 days prior to the expiration of the initial term or any
extension term.
3. Position and Duties.
(a) Service with Company. During the term of the Executive's employment,
the Executive agrees to perform reasonable employment duties as the Board of
Directors of the Company shall assign to him from time to time which are
normally and customarily vested in the offices of President and Chief Financial
Officer of a corporation, including but not limited to, guiding the Company from
an executive management level, and being specifically responsible for content,
technology, e-commerce operational activities, financial affairs, human
resources and administration. The Executive also agrees to serve, for any period
for which he is elected, as a director of the Company; provided, however, that
the Executive shall not be entitled to any additional compensation for serving
as a director. The Executive's initial title shall be "President and Chief
Financial Officer". The Executive acknowledges that as "Chief Financial
Officer", he also will be "Treasurer" of the Company.
The Executive acknowledges that the Company intends to hire a Chairman of
the Board and Chief Executive Officer ("CEO") in the near future. In the event
that a CEO is hired by the Company, Executive shall report directly to the CEO.
Throughout the term of this Agreement, except for the CEO, the Executive shall
be the most senior operational and financial executive at the Company, with
responsibility for content, technology, e-commerce operations, financial
affairs, human resources and administration. However, in the event that the
Company grows significantly
to a size that would necessitate the separation and/or reassignment of a portion
of Executive's operational and financial duties and responsibilities, then the
Board, CEO and Executive will work together cooperatively in good faith and
delegate Executive's financial duties to another Executive. At such time,
Executive's title shall change to President and Chief Operating Officer.
(b) Performance of Duties. The Executive agrees to serve the Company
faithfully and to the best of his ability and to devote his full business time,
attention and efforts to the business and affairs of the Company during his
employment by the Company. The Executive hereby confirms that he is under no
contractual commitments inconsistent with his obligations set forth in this
Agreement, and that during the term of this Agreement, he will not perform
services for any other corporation, firm, entity or person which are
inconsistent with the provisions of this Agreement. While he remains employed by
the Company, the Executive may participate in reasonable charitable activities
and personal investment activities so long as such activities do not interfere
with the performance of his obligations under this Agreement. Additionally, the
Executive shall be permitted to hold one or two outside directorships in
companies not directly competitive with the business of the Company.
(c) Location of Service. Throughout the term of this Agreement, except for
travel incident to the business of the Company, the Executive shall perform his
duties and responsibilities under this Agreement principally from an office
provided by the Company in Los Angeles County, California.
4. Compensation.
(a) Base Salary. As compensation for all services to be performed by the
Executive under this Agreement, the Company shall pay to the Executive a monthly
base salary of $14,583.33, less any applicable deductions and withholdings. Such
salary shall be paid in arrears on a semi-monthly basis in accordance with the
Company's normal payroll procedures and policies. Effective on September 1,
2000, and at the beginning of each subsequent year of Executive's employment
with the Company, the Executive's monthly base salary shall be increased by at
least 15%.
(b) Incentive Compensation. In addition to the base salary, the Executive
shall be eligible to participate in any bonus or incentive compensation plans
that may be established by the Board of Directors of the Company from time to
time applicable to the Executive or other senior executives at the Company.
(c) Participation in Benefit Plans. While he is employed by the Company,
the Executive shall be eligible to participate in all employee benefit plans or
programs (including Company paid medical and dental coverage) of the Company to
the extent that the Executive meets the requirements for each individual plan.
The Company provides no assurance as to the adoption or continuance of any
particular employee benefit plan or program, and the Executive's participation
in any such plan or program shall be subject to the provisions, rules and
regulations applicable thereto.
2
(d) Vacations/Holidays. The Executive shall be entitled to 15 days of paid
vacation for each year of employment. Additionally, the Executive shall be
entitled to ten paid holidays for each year of employment. The Company hereby
acknowledges that during the month of August 1999, Executive worked a total of
12 days as a Consultant for the Company. As compensation for his services during
this period, Executive shall be entitled to an additional 12 days of paid time
off during 1999.
(e) Expenses. The Company will pay or reimburse the Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, subject to the Company's normal
policies for expense reporting and verification.
(f) Issuance of Stock Option. Concurrently with the execution of this
Agreement, the Company is granting to the Executive an option to purchase up to
600,000 shares of the Company's common stock pursuant to the Company's Stock
Option Plan. Such option shall be subject to the vesting schedule and terms and
conditions set forth in the form of stock option agreement attached as Exhibit A
hereto.
5. Confidential Information. Except as permitted or directed by the
Company's Board of Directors or Chief Executive Officer, during the term of his
employment and for a period of two years thereafter, the Executive shall not
divulge, furnish or make accessible to anyone or use in any way (other than in
the ordinary course of the business of the Company) any confidential or secret
knowledge or information of the Company that the Executive has acquired or
become acquainted with or will acquire or become acquainted with prior to the
termination of his employment by the Company whether developed by himself or by
others, concerning any trade secrets, confidential or secret designs, processes,
formulae, plans, devices or material (whether or not patented or patentable)
directly or indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company. The Executive
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company, and that any disclosure or other use of such
knowledge or information other than for the sole benefit of the Company would be
wrongful and would cause irreparable harm to the Company. During the term of his
employment and for a period of two years thereafter, the Executive will refrain
from any acts that would reduce the value of such knowledge or information to
the Company. The foregoing obligations of confidentiality shall not apply to any
knowledge or information that is now published or which subsequently becomes
generally publicly known in the form in which it was obtained from the Company,
other than as a direct or indirect result of the breach of this Agreement by the
Executive.
6. Ventures. If, during the term of his employment, the Executive is
engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company. Except
as approved by the Company's Board of Directors or Chief Executive Officer, the
Executive shall not be entitled to any interest in such project, program or
venture or to any commission, finder's fee or other compensation in connection
therewith other than the compensation
3
to be paid to the Executive as provided in this Agreement. The Executive shall
have no interest, direct or indirect, in any vendor or customer of the Company.
7. Noncompetition Covenant.
(a) Agreement Not to Compete. During the term of his employment with the
Company, the Executive, for a period of one year after the termination of such
employment (where such termination is pursuant to clause (iii) or (v) of Section
9(a)), shall not, directly or indirectly, engage in competition with the Company
in any manner or capacity (e.g., as an advisor, principal, agent, partner,
officer, director, stockholder, employee, member of any association or
otherwise) in any phase of the business which the Company is conducting with
respect to similar sports-related entertainment games for the Internet during
the term of this Agreement, including the design, development, distribution, and
marketing related to the sports-related entertainment games for the Internet
being sold by the Company or hire any current employee of the Company.
(b) Geographic Extent of Covenant. The obligations of the Executive under
Section 7(a) shall apply to any geographic area in which the Company (i) has
engaged in business during the term of this Agreement through production,
promotional, sales or marketing activity, or otherwise, or (ii) has otherwise
established any customer or supplier relations.
(c) Limitation of Covenant. Ownership by the Executive, as a passive
investment, of the capital stock of any corporation listed on a national
securities exchange or publicly traded on Nasdaq shall not constitute a breach
of this Section 7.
(d) Indirect Competition. The Executive will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this Section 7
if such activity were carried out by the Executive, either directly or
indirectly. In particular the Executive agrees that he will not, directly or
indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.
(e) Acknowledgment. The Executive agrees that the restrictions and
agreements contained in this Section 7 are reasonable and necessary to protect
the interests of the Company and that any violation of this Section 7 will cause
substantial and irreparable harm to the Company that would not be quantifiable
and for which no adequate remedy would exist at law and accordingly injunctive
relief shall be available for any violation of this Section 7.
(f) Blue Pencil Doctrine. If the duration or geographical extent of, or
business activities covered by, this Section 7 are in excess of what is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. The Executive acknowledges the uncertainty of the law in this
respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
4
8. Patent and Related Matters.
(a) Disclosure and Assignment. Upon request, the Executive will promptly
disclose in writing to the Company complete information concerning each and
every invention, discovery, improvement, device, design, apparatus, practice,
process, method or product, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by the Executive,
either solely or in collaboration with others, during the term of this
Agreement, during regular working hours, relating either directly or indirectly
to the business, products, practices or techniques of the Company
("Developments"). The Executive, to the extent that he has the legal right to do
so, hereby acknowledges that any and all of the Developments are the property of
the Company and hereby assigns and agrees to assign to the Company any and all
of the Executive's right, title and interest in and to any and all of the
Developments. At the request of the Company, the Executive will confer with the
Company and its representatives for the purpose of disclosing all Developments
to the Company as the Company shall reasonably request during the period ending
one year after termination of the Executive's employment with the Company.
(b) Future Developments. As to any future Developments made by the
Executive that relate to the business, products or practices of the Company and
that are first conceived or reduced to practice during the term of this
Agreement, but which are claimed for any reason to belong to an entity or person
other than the Company, the Executive will promptly disclose the same in writing
to the Company and shall not disclose the same to others if the Company, within
20 days thereafter, shall claim ownership of such Developments under the terms
of this Agreement. If the Company makes no such claim, the Executive hereby
acknowledges that the Company has made no promise to receive and hold in
confidence any such information disclosed by the Executive.
(c) Limitation on Sections 8(a) and 8(b). The provisions of Section 8(a)
and 8(b) shall not apply to any Development meeting the following conditions:
(i) such Development was developed entirely on the Executive's
own time;
(ii) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information;
(iii) such Development does not relate (A) directly to the
business of the Company or (B) to the Company's actual or demonstrably
anticipated research or development; and
(iv) such Development does not result from any work performed by
the Executive for the Company.
(d) Assistance of the Executive. During the term of this Agreement, upon
request and without further compensation therefor, but at no personal expense to
the Executive, the Executive will do all lawful acts, including but not limited
to, the execution of papers and lawful oaths and the giving of testimony, that
in the opinion of the Company, may be necessary or desirable in obtaining,
sustaining, reissuing, extending and enforcing United States and foreign
copyrights and Letters Patent, including but not limited to, design patents, on
the Developments, and for perfecting,
5
affirming and recording the Company's complete ownership and title thereto, and
to cooperate otherwise in all proceedings and matters relating thereto.
(e) Records. The Executive will keep complete, accurate and authentic
accounts, notes, data and records of the Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, the Executive will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, the Executive will surrender the same, and all copies thereof, to the
Company upon the conclusion of his employment.
(f) Obligations, Restrictions and Limitations. The Executive understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. The Executive shall be bound by all such obligations,
restrictions and limitations applicable to any such invention conceived or
developed by him while he is employed by the Company and shall take any and all
further action which may be required to discharge such obligations and to comply
with such restrictions and limitations.
(g) Copyrightable Material. All right, title and interest in all
copyrightable material that the Executive shall conceive or originate, either
individually or jointly with others, and which arise out of the performance of
this Agreement, will be the property of the Company and are by this Agreement
assigned to the Company along with ownership of any and all copyrights in the
copyrightable material. Upon request and without further compensation therefor,
but at no expense to the Executive, the Executive shall execute all papers and
perform all other acts necessary to assist the Company to obtain and register
copyrights on such materials in any and all countries. Where applicable, works
of authorship created by the Executive for the Company in performing his
responsibilities under this Agreement shall be considered "works made for hire,"
as defined in the U.S. Copyright Act.
(h) Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by the Executive that arises out of the performance of
his obligations or responsibilities under this Agreement or any related material
or information shall be the property of the Company, and all rights therein are
assigned to the Company by this Agreement.
9. Termination of Employment.
(a) Grounds for Termination. The Executive's employment shall terminate
prior to the expiration of the initial term set forth in Section 2 or any
extension thereof in the event that at any time:
(i) The Executive dies,
(ii) The Executive becomes "disabled," so that he cannot perform
the essential functions of his position with reasonable accommodation,
6
(iii) The Board of Directors of the Company elects to terminate
this Agreement for "cause" and notifies the Executive in writing of such
election,
(iv) The Board of Directors of the Company elects to terminate
this Agreement without "cause" and notifies the Executive in writing of
such election, or
(v) The Executive elects to terminate this Agreement and
notifies the Company in writing of such election.
If this Agreement is terminated pursuant to clause (i), (ii) or (iii) of
this Section 9(a), such termination shall be effective immediately. If this
Agreement is terminated pursuant to clause (iv) or (v) of this Section 9(a),
such termination shall be effective 30 days after delivery of the notice of
termination.
(b) "Cause" Defined. "Cause" means:
(i) The Executive has breached the provisions of Section 5, 7 or
8 of this Agreement in any material respect,
(ii) The Executive has engaged in willful and material
misconduct, including willful and material failure to perform the
Executive's duties as an officer or employee of the Company and has failed
to cure such default within 30 days after receipt of written notice of
default from the Company,
(iii) The Executive has committed fraud, misappropriation or
embezzlement in connection with the Company's business, or
(iv) The Executive has been convicted of a felony offense.
In the event that the Company terminates the Executive's employment for
"cause" pursuant to clause (i),(ii) of this Section 9(b) or pursuant to clause
(iii) with respect to "misappropriation" only of this Section 9(b), and the
Executive objects in writing to the Board's determination that there was proper
"cause" for such termination within 30 days after the Executive is notified of
such termination, the matter shall be resolved by arbitration in accordance with
the provisions of Section 10(a). If the Executive fails to object to any such
determination of "cause" in writing within such 30-day period, he shall be
deemed to have waived his right to object to that determination. If such
arbitration determines that there was not proper "cause" for termination, such
termination shall be deemed to be a termination pursuant to clause (iv) of
Section 9(a) and the Executive's sole remedy shall be to receive the wage
continuation benefits contemplated by Section 9(f).
(c) Effect of Termination Notwithstanding any termination of this
Agreement, the Executive, in consideration of his employment hereunder to the
date of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to periods, activities or obligations upon or
subsequent to the termination of the Executive's employment.
7
(d) "Disabled" Defined. "Disabled" means any mental or physical condition
that renders the Executive unable to perform the essential functions of his
position, with reasonable accommodation, for a period in excess of three
consecutive months in any twelve month period.
(e) Surrender of Records and Property. Upon termination of his employment
with the Company, the Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof that relate in
any way to the business, products, practices or techniques of the Company, and
all other property, trade secrets and confidential information of the Company,
including, but not limited to, all documents that in whole or in part contain
any trade secrets or confidential information of the Company, which in any of
these cases are in his possession or under his control.
(f) Salary Continuation. If the Executive's employment by the Company is
terminated by the Company pursuant to Section 9(a)(iii) or (v), the Executive's
right to base salary and benefits shall immediately terminate, except as may
otherwise be required by applicable law. In the event that the Executive's
employment is terminated in accordance with Section 9(a)(i), (ii) or (iv), then
the Company shall continue to make the normal base salary payments throughout
the remaining term of the Agreement net of any life insurance payments or
disability payments made to the Executive as part of the Company's benefit
plans.
In either event, if the Executive's employment by the Company terminates,
the Executive also shall be entitled to receive a pro rata portion (based on the
number of days of employment during that fiscal year) of any bonus payment that
would have been payable to him for that fiscal year pursuant to Section 4(b) as
if the Executive had been in the employ of the Company for the full fiscal year.
No bonus will be payable to the Executive with respect to any fiscal year in
which the Executive was employed by the Company for less than six months or with
respect to any fiscal year after the fiscal year in which the Executive's
employment terminated.
10. Settlement of Disputes.
(a) Arbitration. Except as provided in Section 10(b), any claims or
disputes of any nature between the Company and the Executive arising from or
related to the performance, breach, termination, expiration, application or
meaning of this Agreement or any matter relating to the Executive's employment
and the termination of that employment by the Company shall be resolved
exclusively by arbitration in Los Angeles, California, in accordance with the
applicable rules of the American Arbitration Association. In the event of
submission of any dispute to arbitration, each party shall, not later than 30
days prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at the
hearing and a list of all persons each party intends to call at the hearing. The
fees of the arbitrator(s) and other costs incurred by the Executive and the
Company in connection with such arbitration shall be paid by the party that is
unsuccessful in such arbitration.
The decision of the arbitrator(s) shall be final and binding upon both
parties. Judgment of the award rendered by the arbitrator(s) may be entered in
any court of competent jurisdiction.
8
(b) Resolution of Certain Claims--Injunctive Relief. Section 10(a) shall
have no application to claims by the Company asserting a violation of Section 5,
7, 8 or 9(e) or seeking to enforce, by injunction or otherwise, the terms of
Section 5, 7, 8 or 9(e). Such claims may be maintained by the Company in a
lawsuit subject to the terms of Section 10(c). The Executive acknowledges that
it would be difficult to fully compensate the Company for damages resulting from
any breach by him of the provisions of this Agreement. Accordingly, the
Executive agrees that, in addition to, but not to the exclusion of any other
available remedy, the Company shall have the right to enforce the provisions of
Sections 5, 7, 8 and 9(e) by applying for and obtaining temporary and permanent
restraining orders or injunctions from a court of competent jurisdiction without
the necessity of filing a bond therefor, and without the necessity of proving
actual damages, and the Company shall be entitled to recover from the Executive
its reasonable attorneys' fees and costs in enforcing the provisions of Sections
5, 7, 8 and 9(e).
(c) Venue. Any action at law, suit in equity or judicial proceeding arising
directly, indirectly, or otherwise in connection with, out of, related to or
from this Agreement, or any provision hereof, shall be litigated only in the
courts of the State of California. The Executive and the Company consent to the
jurisdiction of such courts over the subject matter set forth in Section 10(b).
11. Miscellaneous.
(a) Entire Agreement. This Agreement (including the exhibits, schedules and
other documents referred to herein) contains the entire understanding between
the parties hereto with respect to the subject matter hereof and supersedes any
prior understandings, agreements or representations, written or oral, relating
to the subject matter hereof.
(b) Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and all of which taken together shall
constitute one and the same agreement, and any party hereto may execute this
Agreement by signing any such counterpart.
(c) Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule, the validity, legality and
enforceability of the other provision of this Agreement will not be affected or
impaired thereby. In furtherance and not in limitation of the foregoing, should
the duration or geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid and enforceable
under applicable law, then such provision shall be construed to cover only that
duration, extent or activities which may validly and enforceably be covered. The
Executive acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement be given the construction which renders its
provision valid and enforceable to the maximum extent (not exceeding its express
terms) possible under applicable law.
(d) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, personal
representatives and, to the extent permitted by subsection (e), successors and
assigns.
9
(e) Assignability. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof shall be assignable
(including by operation of law) by either party without the prior written
consent of the other party to this Agreement, except that the Company may,
without the consent of the Executive, assign its rights and obligations under
this Agreement to any corporation, firm or other business entity with or into
which the Company may merge or consolidate, or to which the Company may sell or
transfer all or substantially all of its assets, or of which 50% or more of the
equity investment and of the voting control is owned, directly or indirectly,
by, or is under common ownership with, the Company. After any such assignment by
the Company, the Company shall be discharged from all further liability
hereunder and such assignee shall thereafter be deemed to be the Company for the
purposes of all provisions of this Agreement including this Section 11.
(f) Modification, Amendment, Waiver or Termination. No provision of this
Agreement may be modified, amended, waived or terminated except by an instrument
in writing signed by the parties to this Agreement. No course of dealing between
the parties will modify, amend, waive or terminate any provision of this
Agreement or any rights or obligations of any party under or by reason of this
Agreement. No delay on the part of the Company in exercising any right hereunder
shall operate as a waiver of such right. No waiver, express or implied, by the
Company of any right or any breach by the Executive shall constitute a waiver of
any other right or breach by the Executive.
(g) Notices. All notices, consents, requests, instructions, approvals or
other communications provided for herein shall be in writing and delivered by
personal delivery, overnight courier, mail or electronic facsimile addressed to
the receiving party at the address set forth herein. All such communications
shall be effective when received.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
SportsPrize Entertainment Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Phone No. (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address set forth above by notice to each other
party given as provided herein.
(h) Headings. The headings and any table of contents contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
10
(i) Governing Law. ALL MATTERS RELATING TO THE INTERPRETATION,
CONSTRUCTION, VALIDITY AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW PROVISIONS THEREOF.
(j) Third-Party Benefit. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights, remedies, obligations or
liabilities of any nature whatsoever.
(k) Withholding Taxes. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph.
SPORTSPRIZE ENTERTAINMENT INC.
By -------------------------------------
Its -----------------------------------
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
11
Exhibit A
STOCK OPTION AGREEMENT
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
1999 STOCK OPTION PLAN
THIS AGREEMENT is entered into as of the 16th day of September, 1999 ("Date
of Grant") between Sportsprize Entertainment Inc., a Nevada corporation (the
"Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has approved
and adopted the 1999 Stock Option Plan (the "Plan"), pursuant to which the Board
is authorized to grant to employees and other selected persons stock options to
purchase common stock, without par value, of the Company (the "Common Stock");
WHEREAS, the Plan provides for the granting of stock options that either
(i) are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) do not qualify under Section 422 of the Code ("Non-Qualified Stock
Options");
WHEREAS, the Board has authorized the grant to Optionee of options to
purchase a total of 600,000 shares of Common Stock (the "Options"), which
Options are intended to be (select one):
--------- Incentive Stock Options
X Non-Qualified Stock Options;
---------
NOW, THEREFORE, the Company agrees to offer to the Optionee the option to
purchase, upon the terms and conditions set forth herein and in the Plan,
600,000 shares of Common Stock. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Plan.
1. Exercise Price. The exercise price of the options shall be $0.50 per
share for 200,000 shares of Common Stock, $1.00 per share for 200,000 shares of
Common Stock and $2.00 per share for 200,000 shares of Common Stock.
2. Limitation on the Number of Shares. If the Options granted hereby are
Incentive Stock Options, the number of shares which may be acquired upon
exercise thereof is subject to the limitations set forth in Section 5(a) of the
Plan.
3. Vesting Schedule. The Options are exercisable in accordance with the
following vesting schedule:
(a) 25,000 of the $0.50 Options will vest immediately and 25,000 of the
$0.50 Options will vest each month thereafter for the 7 months following
the Date of Grant;
(b) 25,000 of the $1.00 Options will vest 8 months from the Date of Grant
and 25,000 of the $1.00 Options will vest each month thereafter;
(c) 25,000 of the $2.00 Options will vest 16 months from the Date of Grant
and 25,000 of the $2.00 Options will vest each month thereafter.
Once the Options are vested, the Optionee shall have the right to exercise
any or all of the vested Options at his discretion.
All of the unvested Options shall vest immediately on completion of the
acquisition of the Company by way of a Change of Control.
Definition of Change in Control. As used in this Agreement, "Change in
Control" means the occurrence of any of the following events during the term of
this Agreement:
(a) The sale to any purchaser of (i) all or substantially all of the
assets of the Company or (ii) capital stock representing more than 50% of
the stock of the Company entitled to vote generally in the election of
directors of the Company; or
(b) The merger or consolidation of the Company with another
corporation if, immediately after such merger or consolidation, less than a
majority of the combined voting power of the then-outstanding securities
entitled to vote generally in the election of directors of the surviving or
resulting corporation in such merger or consolidation is held, directly or
indirectly, in the aggregate by the holders immediately prior to such
transaction of the outstanding securities of the Company; or
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report or item therein), each promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d) (2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing 50% or more of the combined voting power of
the voting stock of Company; or
(d) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form, or report or
item therein) that a Change in Control of the Company has occurred or will
occur in the future pursuant to any then existing contract or transaction.
4. Options not Transferable. This Option may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or otherwise)
other than by will, by applicable laws of descent and distribution or (except in
the case of an Incentive Stock Option) pursuant to a qualified domestic
relations order, and shall not be subject to execution, attachment or similar
process; provided, however, that if this Option represents a Non-Qualified Stock
Option, such Option is transferable without payment of consideration to
immediate family
2
members of the Optionee or to trusts or partnerships established exclusively for
the benefit of the Optionee and the Optionee's immediate family members. Upon
any attempt to transfer, pledge, hypothecate or otherwise dispose of any Option
or of any right or privilege conferred by the Plan contrary to the provisions
thereof, or upon the sale, levy or attachment or similar process upon the rights
and privileges conferred by the Plan, such Option shall thereupon terminate and
become null and void.
5. Investment Intent. By accepting the option, the Optionee represents and
agrees that none of the shares of Common Stock purchased upon exercise of the
Option will be distributed in violation of applicable federal and state laws and
regulations.
6. Termination of Employment and Options. Vested Options shall terminate,
to the extent not previously exercised, upon the occurrence of the first of the
following events:
(i) Expiration: Ten (10) years.
(ii) Termination for Cause: The expiration of thirty (30) days from the
date of an Optionee's termination of employment or contractual relationship
with the Company or any Related Corporation for cause.
(iii) Termination Due to Death or Disability: The expiration of one (1)
year from the date of the death of the Optionee or cessation of an
Optionee's employment or contractual relationship by reason of Disability
(as defined in Section 5(g) of the Plan). If an Optionee's employment or
contractual relationship is terminated by death, any Option held by the
Optionee shall be exercisable only by the person or persons to whom such
Optionee's rights under such Option shall pass by the Optionee's will or by
the laws of descent and distribution.
(iv) Termination Due to Cessation of Employment: The expiration of ninety
(90) days from the date an Optionee ceases to be employed by the Company.
(v) Termination for Any Other Reason: The expiration of three (3) months
from the date of an Optionee's termination of employment with the Company
or any Related Corporation for any reason whatsoever other than cause,
death or Disability (as defined in Section 5(g) of the Plan).
Each unvested Option granted pursuant hereto shall terminate immediately upon
termination of the Optionee's employment with the Company for any reason
whatsoever, including death or Disability unless vesting is accelerated in
accordance with Section 5(f) of the Plan.
7. Stock. In the case of any stock split, stock dividend or like change in
the nature of shares of Stock covered by this Agreement, the number of shares
and exercise price shall be proportionately adjusted as set forth in Section
5(m) of the Plan.
8. Exercise of Option. Options shall be exercisable, in full or in part, at
any time after vesting, until termination; provided, however, that any Optionee
who is subject to the reporting and liability provisions of Section 16 of the
Securities Exchange Act of 1934 with respect to the Common Stock shall be
precluded from selling or transferring any Common Stock
3
or other security underlying an Option during the six (6) months immediately
following the grant of that Option. If less than all of the shares included in
the vested portion of any Option are purchased, the remainder may be purchased
at any subsequent time prior to the expiration of the Option term. No portion of
any Option for less than fifty (50) shares (as adjusted pursuant to Section 5(m)
of the Plan) may be exercised; provided, that if the vested portion of any
Option is less than fifty (50) shares, it may be exercised with respect to all
shares for which it is vested. Only whole shares may be issued pursuant to an
Option, and to the extent that an Option covers less than one (1) share, it is
unexercisable.
Each exercise of the Option shall be by means of delivery of a notice of
election to exercise (which may be in the form attached hereto as Exhibit A) to
the Secretary of the Company at its principal executive office, specifying the
number of shares of Common Stock to be purchased and accompanied by payment in
cash by certified check or cashier's check in the amount of the full exercise
price for the Common Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of an Option may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives:
(i) by delivering to the Company shares of Common Stock previously held by
such person or by the Company withholding shares of Common Stock otherwise
deliverable pursuant to exercise of the Option, which shares of Common
Stock received or withheld shall have a fair market value at the date of
exercise (as determined by the Plan Administrator) equal to the aggregate
purchase price to be paid by the Optionee upon such exercise;
(ii) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a
sufficient portion of the shares and deliver directly to the Company the
amount of sale or margin loan proceeds to pay the exercise price; or
(iii) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
9. Holding Period for Incentive Stock Options. Period for Incentive Stock
Options. In order to obtain the tax treatment provided for Incentive Stock
Options by Section 422 of the Code, the shares of Common Stock received upon
exercising any Incentive Stock Options received pursuant to this Agreement must
be sold, if at all, after a date which is later of two (2) years from the date
of this agreement is entered into and one (1) year from the date upon which the
Options are exercised. The Optionee agrees to report sales of such shares prior
to the above determined date to the Company within one (1) business day after
such sale is concluded. The Optionee also agrees to pay to the Company, within
five (5) business days after such sale is concluded, the amount necessary for
the Company to satisfy its withholding requirement required by the Code in the
manner specified in Section 5(l)(2) of the Plan. Nothing in this Section 9 is
intended as a representation that Common Stock may be sold without registration
under state and federal securities laws or an exemption therefrom, or that such
registration or exemption will be available at any specified time.
4
10. Subject to 1999 Stock Option Plan . The terms of the Options are
subject to the provisions of the Plan, as the same may from time to time be
amended, and any inconsistencies between this Agreement and the Plan, as the
same may be from time to time amended, shall be governed by the provisions of
this Agreement.
11. Professional Advice. The acceptance of the Options and the sale of
Common Stock issued pursuant to the exercise of Options may have consequences
under federal and state tax and securities laws which may vary depending upon
the individual circumstances of the Optionee. Accordingly, the Optionee
acknowledges that he or she has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and his or her dealings
with respect to Options for the Common Stock. Without limiting other matters to
be considered, the Optionee should consider whether upon the exercise of
Options, the Optionee will file an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code.
12. No Employment Relationship. Whether or not any Options are to be
granted under this Plan shall be exclusively within the discretion of the Plan
Administrator, and nothing contained in this Plan shall be construed as giving
any person any right to participate under this Plan. The grant of an Option
shall in no way constitute any form of agreement or understanding binding on the
Company or any Related Company, express or implied, that the Company or any
Related Company will employ or contract with an Optionee for any length of time,
nor shall it interfere in any way with the Company's or, where applicable, a
Related Company's right to terminate Optionee's employment at any time, which
right is hereby reserved,
13. Entire Agreement. This Agreement is the only agreement between the
Optionee and the Company with respect to the Options, and this Agreement and the
Plan supersede all prior and contemporaneous oral and written statements and
representations and contain the entire agreement between the parties with
respect to the Options
14. Notices. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
The Company: SportsPrize Entertainment Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attention: Board of Directors or Chief
Executive Officer
The Optionee: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
5
Sportsprize Entertainment Inc.
By: -------------------------- -----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its:--------------------------
THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS FOR THE ISSUANCE OF
SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS
CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED
UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE.
THE SHARES OF STOCK ISSUED PURSUANT TO THE EXERCISE OF OPTIONS WILL BE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933
AND WILL BEAR A LEGEND RESTRICTING RESALE UNLESS THEY ARE REGISTERED UNDER STATE
AND FEDERAL SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE
COMPANY IS NOT OBLIGATED TO REGISTER THE SHARES OF STOCK OR TO MAKE AVAILABLE
ANY EXEMPTION FROM REGISTRATION.
6
EXHIBIT A
---------
Notice of Election to Exercise
------------------------------
This Notice of Election to Exercise shall constitute proper notice pursuant
to Section 5(h) of the SportsPrize Entertainment Inc. 1999 Stock Option Plan
(the "Plan") and Section 8 of that certain Stock Option Agreement (the
"Agreement") dated as of the ----- day of -------, 1999 between SportsPrize
Entertainment Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase
-------- shares of the common stock of the Company at a price of $-----------
per share, for aggregate consideration of $---------, on the terms and
conditions set forth in the Agreement and the Plan. Such aggregate
consideration, in the form specified in Section 8 of the Agreement, accompanies
this notice.
The undersigned has executed this Notice this ----- day of ------, 19--.
------------------------------------
Signature
------------------------------------
Name (typed or printed)