Exhibit 10.7
 
THE ORCHARD ENTERPRISES, INC.

Stock Option Agreement
(Amended and Restated 2008 Stock Plan)

THIS STOCK OPTION AGREEMENT (this “Option Agreement”) is made as of [DATE], by
and between The Orchard Enterprises, Inc., a Delaware corporation (the
“Corporation”), and [NAME] (the “Optionee”).

WHEREAS, the Board of Directors of the Corporation (the “Board”) has duly
adopted, and the stockholders of the Corporation have approved, the Amended and
Restated 2008 Stock Plan (the “Plan”), which Plan authorizes the Corporation
under Section 5.1 thereof to grant stock options to eligible persons for the
purchase of shares of the Corporation’s Common Stock (the “Stock”); and

WHEREAS, the Compensation Committee of the Board has determined that it is
desirable and in the best interests of the Corporation and its stockholders to
grant the Optionee an option to purchase a certain number of shares of Stock as
provided in the Plan, in order to provide the Optionee with an incentive to
advance the interests of the Corporation, all according to the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties hereby agree as follows:

1.           Grant of Stock Option.  Subject to the terms of the Plan, the
Corporation hereby grants to the Optionee the right and option (the “Option”) to
purchase from the Corporation, on the terms and subject to the conditions set
forth in this Option Agreement, [# OF SHARES] shares of Stock (the “Option
Shares”).  The date of grant of this Option is [DATE OF GRANT] (the “Date of
Grant”).  This Option shall not constitute an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”).

2.           Terms of Plan.  The Option granted pursuant to this Option
Agreement is granted subject to the terms and conditions set forth in the Plan,
a copy of which has been delivered to the Optionee.  All terms and conditions of
the Plan, as may be amended from time to time, are hereby incorporated into this
Option Agreement by reference and shall be deemed to be a part of this Option
Agreement, without regard to whether such terms and conditions are otherwise set
forth in this Option Agreement.  In the event that there is any inconsistency
between the provisions of this Option Agreement and of the Plan, the provisions
of the Plan shall govern.

3.           Exercise Price.  As required under Section 5.2 of the Plan, the
exercise price for the shares of Stock subject to the Option granted by this
Option Agreement is $[PRICE] per share, the Fair Market Value (as defined in the
Plan) on the Date of Grant (the “Exercise Price”).

4.           Exercise of Option.  Subject to the provisions of the Plan and
subject to the earlier expiration or termination of this Option in accordance
with its terms, the Option granted pursuant to this Option Agreement shall be
exercisable only as follows:

 
 

--------------------------------------------------------------------------------

 

4.1.          Time of Exercise of Option.  One-third (1/3) of the Option Shares
shall vest on the one (1) year anniversary of the Date of Grant, and
thereafter  one-twelfth (1/12) of the Option Shares shall vest quarterly on each
third (3rd) month anniversary of the Date of Grant for the next twenty-four (24)
months, such that all Option Shares will be fully vested 36 months from the Date
of Grant; provided that the Optionee is employed by the Corporation on each such
vesting date.
 
4.2.          Termination of Option.  This Agreement and the Option granted
hereby shall terminate automatically and without further notice on the earliest
of (i) 90 calendar days from the date that the Optionee ceases to be a full-time
employee of the Corporation for any reason other than death, (ii) one year after
the Optionee’s death, if such death occurs while the Optionee is an employee of
the Corporation, and (iii) seven (7) years from the Date of Grant.
 
4.3.          Exercise Upon Death.  All of the Shares shall become exercisable
upon Optionee’s death if the Optionee was an employee of the Corporation at the
time of Optionee’s death.
 
4.4.          Method of Exercise of Option.
 
4.4.1.     To the extent then exercisable, the Option may be exercised in whole
or in part by written notice to the Corporation in the form attached hereto as
Exhibit A stating the number of shares for which the Option is being exercised
and delivery to the Corporation of the aggregate Exercise Price for the Option
Shares covered by such exercise notice.  The date of such notice shall be the
exercise date. Payment equal to the aggregate Exercise Price of the shares shall
be payable in cash in the form of currency or check or other cash equivalent
acceptable to the Corporation. In no event shall the Option be exercised for a
fractional share.
 
4.4.2.     In the case of Optionee’s death, the Option may be exercised by the
executor or administrator of the Optionee’s estate or by any person or persons
who shall have acquired the Option directly from the Optionee by bequest or
inheritance.
 
4.4.3.     As soon as practicable upon the Corporation’s receipt of the
Optionee’s notice of exercise and payment, the Corporation shall direct the due
issuance of the shares so purchased.
 
4.4.4.     As a further condition precedent to the exercise of this Option in
whole or in part, the Optionee shall comply with all regulations and the
requirements of any regulatory authority having control of, or supervision over,
the issuance of the shares of Stock and in connection therewith shall execute
any documents which the Board shall in its sole discretion deem necessary or
advisable.

5.           Non-Transferability of Options.  During the lifetime of an
Optionee, only such Optionee (or, in the event of legal incapacity or
incompetency, the Optionee’s guardian or legal representative) may exercise the
Option.  No Option shall be assignable or transferable by the Optionee to whom
it is granted, other than by will or the laws of intestacy.

6.           Compliance with Law.  The Corporation shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
however, that notwithstanding any other provision of this Option Agreement, the
Option shall not be exercisable if the exercise thereof would result in a
violation of any such law.

 
 

--------------------------------------------------------------------------------

 

7.           Rights as Stockholder.  Neither the Optionee nor any executor,
administrator, distributee or legatee of the Optionee’s estate shall be, or have
any of the rights or privileges of, a stockholder of the Corporation in respect
of any shares of Stock issuable hereunder unless and until such shares have been
fully paid and certificates representing such shares have been endorsed,
transferred and delivered, and the name of the Optionee (or of such personal
representative, administrator, distributee or legatee of the Optionee’s estate)
has been entered as the stockholder of record on the books of the Corporation.

8.           Tax Withholding.  If the Corporation shall be required to withhold
any federal, state, local or foreign tax in connection with exercise of this
Option, it shall be a condition to such exercise that the Optionee pay or make
provision satisfactory to the Corporation for payment of all such taxes.

9.           Disclaimer of Rights. No provision in this Option Agreement shall
be construed to confer upon the Optionee the right to be employed by the
Corporation or any subsidiary, or to interfere in any way with the right and
authority of the Corporation or any subsidiary either to increase or decrease
the compensation of the Optionee at any time, or to terminate any employment or
other relationship between the Optionee and the Corporation or any subsidiary.

10.         Interpretation of this Option Agreement.  All decisions and
interpretations made by the Board or the Compensation Committee thereof with
regard to any question arising under the Plan or this Option Agreement shall be
binding and conclusive on the Corporation and the Optionee and any other person
entitled to exercise the Option as provided for herein.

11.         Compliance with Section 409A of the Code.  To the extent applicable,
it is intended that this Agreement and the Plan comply with the provisions of
Section 409A of the Code, so that the income inclusion provisions of Section
409A(a)(1) do not apply to Optionee.  This Agreement and the Plan shall be
administered in a manner consistent with this intent, and any provision that
would cause the Agreement or the Plan to fail to satisfy Section 409A of the
Code shall have no force and effect until amended to comply with Section 409A of
the Code (which amendment may be retroactive to the extent permitted by Section
409A of the Code and may be made by the Company without the consent of the
Optionee).

12.         Governing Law; Exclusive Venue.  This Option Agreement shall be
governed in accordance with the laws of the State of New York.  The parties
hereto grant to the U.S. District Court for the Southern District of New York,
or the Supreme Court of the State of New York, New York County, exclusive
jurisdiction to hear any disputes arising out of or relating to this Option
Agreement; no action may be instituted in any other venue.

13.         Binding Effect.  Subject to all restrictions provided for in this
Option Agreement, the Plan, and by applicable law relating to assignment and
transfer of this Option Agreement and the Option provided for herein, this
Option Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.

 
 

--------------------------------------------------------------------------------

 

14.         Notice.  Any notice hereunder by the Optionee to the Corporation
shall be in writing and shall be deemed duly given if mailed or delivered to the
Corporation at its principal office, addressed to the attention of the Chief
Financial Officer or if so mailed or delivered to such other address as the
Corporation may hereafter designate by notice to the Optionee.  Any notice
hereunder by the Corporation to the Optionee shall be in writing and shall be
deemed duly given if mailed or delivered to the Optionee at the address
specified below by the Optionee for such purpose, or if so mailed or delivered
to such other address as the Optionee may hereafter designate by written notice
given to the Corporation.

15.         Severability.  If any provision of this Option Agreement is held
illegal or invalid for any reason by a court of competent jurisdiction, the
illegality or invalidity shall not affect the remaining provisions hereof, and
this Option Agreement shall be construed and administered as if the illegal or
invalid provision had not been included.

16.         Entire Agreement; Waiver.  This Option Agreement and the Plan
together constitute the entire agreement and supersedes all prior understandings
and agreements, written or oral, of the parties hereto with respect to the
subject matter hereof.  Except for amendments to the Plan incorporated into this
Option Agreement by reference pursuant to Section 2 above, neither this Option
Agreement nor any term hereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Corporation and the Optionee;
provided, however, that the Corporation unilaterally may waive any provision
hereof in writing to the extent that such waiver does not adversely affect the
interests of the Optionee hereunder, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any
other provision hereof.
 
17.         Counterparts.  This Option Agreement may be executed in any number
of counterparts, including by facsimile, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto have duly executed this Option Agreement
as of the day and year first above written.

THE ORCHARD ENTERPRISES, INC.
 
OPTIONEE:
       
By:
       
Name: Greg Scholl
 
Name:  [NAME]
 
Title: President & CEO
         
Address for Notice:
     
[ADDRESS]

 
 

--------------------------------------------------------------------------------

 

Exhibit A
(To Stock Option Agreement)

Stock Option Exercise Notice

The Orchard Enterprises, Inc.
 
23 East 4th Street, 3rd Floor
 
New York, New York 10003
 
Attention: Chief Financial Officer
 
Facsimile: (212) 201-9292
Date:____________________________

 
The undersigned hereby irrevocably elects to exercise the within Option to
purchase vested shares of Common Stock (the “Option Shares”) of The Orchard
Enterprises, Inc., a Delaware corporation (the “Corporation”).  The undersigned
elects to purchase the Option Shares as follows:

1.
Exercise of Option (fill in both blanks)

Number of Shares
                     ____________________________________________

Exercise Price Per
Share            ____________________________________________        
 
2.
Method of Payment (check one)

________
I am enclosing a check in the amount of the aggregate Exercise Price and taxes,
if applicable

________
A wire transfer for the aggregate Exercise Price and taxes, if applicable, will
be sent to the Corporation by my broker _____ OR from my bank _____

(In the case of nonqualified stock options, contact the Corporation’s stock
administrator to determine the amount of any taxes due.)

3.
Exercise and Holding (complete if applicable)

________
I will be exercising and holding the Option Shares.  Please have the certificate
representing the Option Shares delivered to me (or my designee, as stated below)
at the following address:

Address: _____________________________________________________________
 
               _____________________________________________________________

4.
Simultaneous Exercise and Sale (complete if applicable)

________
I will be exercising and selling the Option Shares.  Please have the certificate
representing the Option Shares delivered to my broker at the following address:

Address: _____________________________________________________________
 
               _____________________________________________________________
 
Signature: ______________________________________________
 
Print Name: _____________________________________________

 
Social Security Number: ___________________________________

 
 

--------------------------------------------------------------------------------