Employee Nonqualified Stock Option Agreement - Media Arts Group Inc. and Thomas Kinkade
MEDIA ARTS GROUP, INC.
EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), is made
and entered into as of December 3, 1997 between MEDIA ARTS GROUP, INC., a
Delaware corporation (the "Company"), and Thomas Kinkade("Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. GRANT OF OPTION; EFFECTIVE DATE.
1.1 GRANT. The Company hereby grants to Optionee a NONQUALIFIED
stock option (the "NQO") to purchase all or any part of an aggregate of 600,000
shares (the "NQO Shares") of the Company's common stock ("Common Stock") on the
terms and conditions set forth herein.
1.2 EFFECTIVE DATE. The effective date of this NQO is December 3,
1997("Effective Date").
2. EXERCISE PRICE. The exercise price for purchase of the shares of
Common Stock covered by this NQO shall be $12.375 per share.
3. TERM. Subject to Section 5.2, this NQO shall expire on the
fifteenth anniversary of the Effective Date.
4. ADJUSTMENT OF NQOS. The Company shall adjust the number and kind
of shares and the exercise price thereof in the event of any merger,
reorganization, consolidation, recapitalization, stock dividend, stock split,
spin-off, sale of substantial assets, or other change in corporate structure
affecting the Common Stock; provided, that the number of shares subject to this
NQO shall always be rounded down to the nearest whole number.
5. EXERCISE OF OPTIONS.
<PAGE>
5.1 TIME OF EXERCISE. This NQO shall be exercisable with respect
to 100% of the NQO Shares commencing on December 3, 1997.
5.2 EXERCISE AFTER TERMINATION OF EMPLOYEE STATUS. In the event
that Optionee ceases to be an employee of the Company or any of its subsidiaries
for any reason other than death or permanent disability, this NQO may be
exercised at any time within twelve (12) months after the date of termination
(but in no event after the expiration date of this NQO), but not thereafter. If
Optionee's termination is due to death or permanent disability, or Optionee dies
or becomes disabled within the period that this NQO remains exercisable after
termination, this NQO may be exercised by the Optionee in the case of
disability, by the Optionee's personal representative or by the person to whom
this NQO is transferred by will or the laws of descent and distribution, at any
time within two years after the death or two years after the disability, as the
case may be, of Optionee (but in no event after the expiration of this NQO).
5.3 MANNER OF EXERCISE. Optionee may exercise this NQO, or any
portion of this NQO, by giving written notice to the Company at its principal
executive office, to the attention of the Secretary of the Company, accompanied
by a copy of the Stock Purchase Agreement in substantially the form attached
hereto as Exhibit 1 executed by Optionee (or at the option of the Company such
other form of stock purchase agreement as shall then be acceptable to the
Company), payment of the exercise price and payment of any applicable
withholding taxes. The date the Company receives written notice of an exercise
hereunder accompanied by payment will be considered as the date this NQO was
exercised.
Promptly after receipt of written notice of exercise of the NQO, the
Company shall, without stock issue or transfer taxes to the Optionee or other
person entitled to exercise, deliver to the Optionee or other person a
certificate or certificates for the requisite number of Shares. The Optionee or
transferee of the Optionee shall not have any privileges as a shareholder with
respect to any NQO Shares covered by this NQO until the date of issuance of a
stock certificate.
<PAGE>
5.4 PAYMENT. Payment in full, shall be made for all NQO Shares
purchased at the time written notice of exercise of the NQO is given to the
Company, either (i) in cash or (ii) pursuant to a loan evidenced by a promissory
note; provided that the par value of the Common Stock shall be paid in cash.
Proceeds of any payment shall constitute general funds of the Company. At the
time of exercise of the NQO (or at such later time(s) as the Company may
prescribe), the Optionee shall remit to the Company all United States federal
and state withholding taxes determined by the Company to be applicable.
6. NONASSIGNABILITY OF NQO. This NQO is not assignable or transferable
by Optionee except by will, the laws of descent and distribution and to the
extent approved by the Committee, pursuant to a qualified domestic relations
order as defined by the Code or the rules thereunder. Except as otherwise
provided in Section 5.2 in the event of an Optionee's death or disability, only
the Optionee may exercise the NQO. Any attempt to assign, pledge, transfer,
hypothecate or otherwise dispose of this NQO in a manner not herein permitted,
and any levy of execution, attachment or similar process on this NQO, shall be
null and void.
7. MARKET STANDOFF. Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of the securities of the Company under the
Securities Act of 1933, as amended (the "Act"), Optionee shall not sell or
otherwise transfer any shares acquired upon exercise of this NQO (the "Exercised
Shares") for a period of up to 365 days following the effective date of a
Registration Statement filed under the Act. The Company may impose stop-transfer
instructions with respect to the Exercised Shares subject to the foregoing
restrictions until the end of each such 365-day period.
8. RESTRICTION ON ISSUANCE OF SHARES.
8.1 LEGALITY OF ISSUANCE. The Company shall not be obligated to
sell or issue any Exercised Shares pursuant to this Agreement if such sale or
issuance, in the opinion of the Company and the Company's counsel, might
constitute a violation
<PAGE>
by the Company of any provision of law, including without limitation the
provisions of the Act.
8.2 REGISTRATION OR QUALIFICATION OF SECURITIES. The Company may,
but shall not be required to, register or qualify the sale of this NQO or any
Exercised Shares under the Act or any other applicable law. The Company shall
not be obligated to take any affirmative action in order to cause the grant or
exercise of this option or the issuance or sale of any Exercised Shares pursuant
thereto to comply with any law.
9. RESTRICTION ON TRANSFER. Regardless of whether the sale of the
Exercised Shares has been registered under the Act or has been registered or
qualified under the securities laws of any state, the Company may impose
restrictions upon the sale, pledge or other transfer of Exercised Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and the Company's counsel, such restrictions are
necessary or desirable in order to achieve compliance with the provisions of the
Act, the securities laws of any state, or any other law.
10. STOCK CERTIFICATE RESTRICTIVE LEGENDS. Stock certificates
evidencing Exercised Shares may bear such restrictive legends as the Company and
the Company's counsel deem necessary or advisable under applicable law or
pursuant to this Agreement, including, without limitation, the following
legends:
"The offering and sale of the securities represented hereby have
not been registered under the Securities Act of 1933, as amended (the
"Act"). Any transfer of such securities will be invalid unless a
Registration Statement under the Act is in effect as to such transfer
or in the opinion of counsel for the Company such registration is
unnecessary in order for such transfer to comply with the Act."
"The securities represented hereby are subject to restrictions on
transfer for a period of 365 days following the effective date of a
registration statement under the Act for an offering of the Company's
securities as more fully provided in an
<PAGE>
agreement relating to the option to purchase such securities."
11. INFORMATION TO OPTIONEE. During the period this NQO is outstanding,
the Company shall provide Optionee on an annual or other periodic basis
financial and other information regarding the Company in accordance with Rule
260.140.41.2 promulgated under the California Corporate Securities Law of 1968,
if applicable.
12. ASSIGNMENT; BINDING EFFECT. Subject to the limitations set forth in
this Agreement, this Agreement shall be binding upon and inure to the benefit of
the executors, administrators, heirs, legal representatives and successors of
the parties hereto; provided, however, that Optionee may not assign any of
Optionee's rights under this Agreement.
13. DAMAGES. Optionee shall be liable to the Company for all costs and
damages, including incidental and consequential damages, resulting from a
disposition of shares which is not in conformity with the provisions of this
Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents. The parties agree that the exclusive jurisdiction and
venue of any action with respect to this Agreement shall be in the Superior
Court of California for the County of San Jose or the United States District
Court for the Northern District of California, and each of the parties hereby
submits to the exclusive jurisdiction and venue of such courts for the purpose
of such action. The parties agree that service of process in any such action may
be effected by delivery of the summons to the parties in the manner provided for
delivery of notices set forth in Section 15.
15. NOTICES. All notices and other communications under this Agreement
shall be in writing. Unless and until the Optionee is notified in writing to the
contrary, all notices, communications and documents directed to the Company and
related
<PAGE>
to the Agreement, if not delivered by hand, shall be mailed, addressed as
follows:
MEDIA ARTS GROUP, INC.
521 Charcot Avenue
San Jose, California 95131
Attn: James F. Landrum, Jr.
Snr. Vice President & General Counsel
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for the Optionee and related to
this Agreement, if not delivered by hand, shall be mailed to Optionee's last
known address as shown on the Company's books. Notices and communications shall
be mailed by first class mail, postage prepaid; documents shall be mailed by
registered mail, return receipt requested, postage prepaid. All mailings and
deliveries related to this Agreement shall be deemed received only when actually
received.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
MEDIA ARTS GROUP, INC.
By: /s/James F. Landrum
---------------------------------
Vice President & General Counsel
The Optionee hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement.
/s/ Thomas Kinkade
---------------------------------
Thomas Kinkade
Optionee's spouse indicates by the execution of this NONQUALIFIED Stock
Option Agreement his/her consent to be bound by the terms thereof as to his/her
interests, whether as community property or otherwise, if any, in the options
granted hereunder, and in any Exercised Shares purchased pursuant to this
Agreement.
/s/ Nanette Kinkade
---------------------------------
Nanette N. Kinkade
EXHIBITS
Exhibit 1 from Section 5.3 Stock Purchase Agreement
<PAGE>
EXHIBIT 1 FROM SECTION 5.3 OF THE
MEDIA ARTS GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
MEDIA ARTS GROUP, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of _________________, 199_, between MEDIA ARTS GROUP, INC., a California
corporation doing business in the State of California under the name MAGI (the
"Company"), and ___________ ("Purchaser").
THE PARTIES AGREE AS FOLLOWS:
1. PURCHASE OF SHARES. Pursuant to an NONQUALIFIED stock option
agreement ("Option Agreement") between the parties attached hereto as Exhibit 1,
the Company hereby sells to Purchaser, and Purchaser hereby buys from the
Company, ______________ shares (the "Exercised Shares") of the Company's Common
Stock ("Common Stock") on the terms and conditions set forth herein and in the
Option Agreement, the terms and conditions of the Option Agreement being hereby
incorporated into this Agreement by reference.
2. PURCHASE PRICE. Purchaser shall purchase the Exercised Shares from
the Company, and the Company shall sell the Exercised Shares to Purchaser, at a
price of $_______ per share (the "Exercise Price"), for a total purchase price
of $_____ (the "Purchase Price").
3. MANNER OF PAYMENT. Purchaser shall pay the Purchase Price of the
Exercised Shares in cash.
4. STOCK CERTIFICATE RESTRICTIVE LEGENDS. Stock certificates evidencing
Exercised Shares may bear such restrictive legends as the Company and the
Company's counsel deem necessary or advisable under applicable law or pursuant
to this Agreement, including without limitation, the following legends:
<PAGE>
"The offering and sale of the securities represented hereby have
not been registered under the Securities Act of 1933, as amended (the
"Act"). Any transfer of such securities will be invalid unless a
Registration Statement under the Act is in effect as to such transfer
or in the opinion of counsel for the Company such registration is
unnecessary in order for such transfer to comply with the Act."
"The securities represented hereby are subject to restrictions on
transfer for a period of 365 days following the effective date of a
registration statement under the Act for an offering of the Company's
securities as more fully provided in an agreement relating to the
option to purchase such securities."
5. REPRESENTATIONS, WARRANTIES, COVENANTS, AND ACKNOWLEDGMENTS OF
PURCHASER. Purchaser hereby represents, warrants, covenants, acknowledges and
agrees that:
5.1 INVESTMENT. Purchaser is acquiring the Exercised Shares for
Purchaser's own account, and not for the account of any other person. Purchaser
is acquiring the Exercised Shares for investment and not with a view to
distribution or resale thereof except in compliance with applicable laws
regulating securities.
5.2 BUSINESS EXPERIENCE. Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company evidenced by the
purchase of the Exercised Shares.
5.3 RELATION OF COMPANY. Purchaser is presently an employee or
advisor to, the Company and in such capacity has become personally familiar with
the business, affairs, financial condition and results of operations of the
Company.
<PAGE>
5.4 ACCESS TO INFORMATION. Purchaser has had the opportunity to
ask questions of, and to receive answers from, appropriate executive officers of
the Company with respect to the terms and conditions of the transactions
contemplated hereby and with respect to the business, affairs, financial
condition, and results of operations of the Company. Purchaser has had access to
such financial and other information as is necessary in order for Purchaser to
make a fully-informed decision as to investment in the Company by way of
purchase of the Exercised Shares, and has had the opportunity to obtain any
additional information necessary to verify any of such information to which
Purchaser has had access.
5.5 SPECULATIVE INVESTMENT. Purchaser's investment in the Company
represented by the Exercised Shares is highly speculative in nature and is
subject to a high degree of risk of loss in whole or in part. The amount of such
investment is within Purchaser's risk capital means and is not so great in
relation to Purchaser's total financial resources as would jeopardize the
personal financial needs of Purchaser or Purchaser's family in the event such
investment were lost in whole or in part.
5.6 REGISTRATION. Purchaser may bear the economic risk of
investment for an indefinite period of time in the event the sale to Purchaser
of the Exercised Shares is not registered under the Securities Act of 1933, as
amended (the "Act"), and the Exercised Shares cannot be transferred by Purchaser
unless such transfer is registered under the Act or an exemption from such
registration is available. The Company has made no agreements or covenants to
register the transfer of any of the Shares under the Act. The Company has made
no representations, warranties, or covenants whatsoever as to whether any
exemption from the Act, including without limitation any exemption for limited
sales in routine brokers' transactions pursuant to Rule 144, will be available;
if the exemption under Rule 144 is available at all, it will not be available
until at least two years after payment of cash for the Exercised Shares and not
then unless: (a) a public trading market then exists in the Company's common
stock; (b) adequate information as to the Company's financial and other affairs
and operations is then
<PAGE>
available to the public; and (c) all other terms and conditions of Rule 144 have
been satisfied.
5.7 PUBLIC TRADING. The Company has made no representation,
covenant or agreement as to whether there will continue to be a public market
for its Common Stock.
5.8 TAX ADVICE. The Company has made no warranties or
representations to Purchaser with respect to the income tax consequences of the
transactions contemplated by this Agreement or the Option Agreement and
Purchaser is in no manner relying on the Company or its representatives for an
assessment of such tax consequences.
6. BINDING EFFECT. Subject to the limitations set forth in this
Agreement, this Agreement shall be binding upon, and inure to the benefit of,
the executors, administrators, heirs, legal representatives, successors and
assigns of the parties hereto.
7. TAXES. The Company may require Purchaser to pay to the Company,
any applicable withholding taxes resulting from the purchase of Exercised Shares
hereunder or from the lapse of any restrictions imposed on the Exercised Shares.
8. DAMAGES. Purchaser shall be liable to the Company for all
costs and damages, including incidental and consequential damages, resulting
from a disposition of Exercised Shares which is not in conformity with the
provisions of this Agreement.
9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents. The parties agree that the exclusive jurisdiction and
venue of any action with respect to this Agreement shall be in the Superior
Court of California for the County of San Jose or the United States District
Court for the Northern District of California, and each of the parties hereby
submits to the exclusive jurisdiction and venue of such courts for the purpose
of such action. The parties agree that service of process in any such action may
be effected by delivery of the summons to the
<PAGE>
parties in the manner provided for delivery of notices set forth in Section 10.
10. NOTICES. All notices and other communications under this Agreement
shall be in writing. Unless and until Purchaser is notified in writing to the
contrary, all notices, communications and documents directed to the Company and
related to the Agreement, if not delivered by hand, shall be mailed, addressed
as follows:
MEDIA ARTS GROUP, INC.
521 Charcot Ave.
San Jose, California 95131
Attn: James F. Landrum, Jr.
Snr. Vice President & General Counsel
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for Purchaser and related to this
Agreement, if not delivered by hand, shall be mailed to Purchaser's last known
address as shown on the Company's books. Notices and communications shall be
mailed by registered mail, return receipt requested, postage prepaid. All
mailings and deliveries related to this Agreement shall be deemed received only
when actually received.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MEDIA ARTS GROUP, INC.
By
---------------------------------------
Title
------------------------------------
Purchaser hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement.
------------------------------------
Purchaser's spouse indicates by the execution of this Agreement her
consent to be bound by the terms herein as to her interests, whether as
community property or otherwise, if any, in the Exercised Shares hereby
purchased.
------------------------------------
Purchaser's Spouse
EXHIBITS
Exhibit 1 from Section 1 Option Agreement