HOLLYWOOD PRODUCTIONS, INC.
14 East 60th Street
New York, NY 10022
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To
Be Held on June 30, 1997
To the Shareholders of HOLLYWOOD PRODUCTIONS, INC.
NOTICE IS HEREBY GIVEN that a Annual Meetings of Shareholders of HOLLYWOOD
PRODUCTIONS, INC. (the "Corporation") will be held at the Company's offices
located at 14 East 60th Street, New York, New York, on June 30, 1997 at 10:00
a.m. New York time, for the following purposes:
1. To elect three (3) Directors to the Corporation's Board of Directors to
hold office for a period of one year or until their successors are duly elected
and qualified;
2. To ratify an amendment to the Corporation's Senior Management Incentive
Plan to increase the number of shares of Common Stock authorized for issuance
thereunder from 250,000 to 750,000; and
3. To Ratify the Proposal to approve the Corporation's Non-Executive
Director Stock Option Plan
4. To transact such other business as may properly be brought before the
meeting or an adjournment thereof.
The close of business on May 5, 1997 has been fixed as the record date for
the determination of shareholders entitled to notice of, and to vote at, the
meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you plan to
attend, please complete, date and sign the accompanying proxy and return it
promptly in the enclosed envelope to assure that your shares are represented at
the meeting. If you do attend, you may revoke any prior proxy and vote your
shares in person if you wish to do so. Any prior proxy will automatically be
revoked if you execute the accompanying proxy or if you notify the Secretary of
the Corporation, in writing, prior to the Annual Meeting of Shareholders.
By order of the Board of Directors
Robert DiMilia, Secretary
Dated: June 6, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
HOLLYWOOD PRODUCTIONS, INC.
14 East 60th Street
New York, NY 10022
PROXY STATEMENT
FOR
Annual Meeting of Stockholders
To Be Held on June 30, 1997
This proxy statement and the accompanying form of proxy have been
mailed on June 6, 1997 to the stockholders of record on May 5, 1997 of Hollywood
Productions, Inc., a Delaware corporation (the "Corporation") in connection with
the solicitation of proxies by the Board of Directors of the Corporation for use
at the Annual Meeting to be held on June 30, 1997 and at any adjournment
thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Shares of the Corporation's common stock, par value $.001 per share
(the "Common Stock") represented by an effective proxy in the accompanying form
will, unless contrary instructions are specified in the proxy, be voted FOR (i)
the election of three (3) persons nominated by the Board of Directors as
directors (ii) the ratification of an amendment to the Corporation=s Senior
Management Incentive Plan to increase the number of shares of Common Stock
authorized for issuance thereunder from 250,000 to 750,000 shares and (iii) the
ratification of the proposal to approve the Corporation's Non-Executive Director
Stock Option Plan.
Any such proxy may be revoked at any time before it is voted.
A stockholder may revoke this proxy by notifying the Secretary of the
Corporation either in writing prior to the Annual Meeting or in person at the
Annual Meeting, by submitting a proxy bearing a later date or by voting in
person at the Annual Meeting. An affirmative vote of a plurality of the shares
of Common Stock, present in person or represented by proxy, at the Annual
Meeting and entitled to vote thereon is required to elect the Directors. A
stockholder voting through a proxy who abstains with respect to the election of
Directors is considered to be present and entitled to vote on the election of
directors at the meeting, and is in effect a negative vote, but a stockholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on the election of Directors shall not be
considered present and entitled to vote on the election of Directors. A
stockholder voting through a proxy who abstains with respect to approval of any
other matter to come before the meeting is considered to be present and entitled
to vote on that matter and is in effect a negative vote, but a stockholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on any such matter shall not be considered present
and entitled to vote thereon.
The Corporation will bear the cost of the solicitation of proxies by
the Board of Directors. The Board of Directors may use the services of its
Executive Officers and certain Directors to solicit proxies from stockholders in
person and by mail, telegram and telephone. Arrangements may also be made with
brokers, fiduciaries, custodians, and nominees to send proxies, proxy statements
and other material to the beneficial owners of the Common Stock held of record
by such persons, and the Corporation may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing.
The Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996
<PAGE>
including audited financial statements accompanies this proxy statement.
The principal executive offices of the Corporation are located at 14
East 60th Street, New York, NY 10022 the Corporation's telephone number is (212)
688-9223.
Independent Public Accountants
The Board of Directors of the Corporation has selected Scarano &
Lipton, P.C., Certified Public Accountants, as independent accountants of the
Corporation for the fiscal year ending December 31, 1997. Shareholders are not
being asked to approve such selection because such approval is not required. The
audit services provided by Scarano & Lipton, P.C. consisted of examination of
financial statements, services relative to filings with the Securities and
Exchange Commission, and consultation in regard to various accounting matters.
Representatives of Scarano & Lipton, P.C. are expected to be present at the
meeting and will have the opportunity to make a statement if they so desire and
answer appropriate questions.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the meeting are the Common Stock,
par value $.01 par value per share. The presence, in person or by proxy, of a
majority of shares entitled to vote will constitute a quorum for the meeting.
Each share of Common Stock entitles its holder to one vote on each matter
submitted to the stockholders. The close of business on May 5, 1997 has been
fixed as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and any adjournment thereof. At that date,
6,092,500 shares of Common Stock were outstanding. Voting of the shares of
Common Stock is on a non-cumulative basis.
The following table sets forth information as of May 5, 1997, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), known by the Corporation to be the
owner of more than 5% of the outstanding shares of Common Stock, (ii) each
Director, and (iii) all Officers and Directors as a group. Except to the extent
indicated in the footnotes to the following table, each of the individuals
listed below possesses sole voting power with respect to the shares of Common
Stock listed opposite his name.
<PAGE>
<TABLE>
<CAPTION>
Name And Address of Amount and Nature Percent of
Beneficial Owner Of Beneficial Owner Class (1)
- ---------------------- ------------------- ---------
<S> <C> <C>
European Ventures Corp. (2) 6,019,000 (3) 78.6%
P.O. Box 47
Road Town, Tortolla, British
Virgin Islands
Harold Rashbaum (2) 157,500 (4) 2.5%
c/o Hollywood Productions, Inc.
14 East 60th Street, Suite 402
New York, New York 10022
Alain A. Le Guillou, M.D. (2) -- --
c/o Hollywood Productions, Inc.
14 East 60th Street, Suite 402
New York, New York 10022
Robert DiMilia 50,000 (5) *
c/o Hollywood Productions, Inc.
14 East 60th Street, Suite 402
New York, New York 10022
All Officers and Directors 207,500 (5) 3.3%
(3 as a Group) (2)-(5)
</TABLE>
<PAGE>
(footnotes from previous page)
* Less than 1%
(1) Does not give effect to the issuance of (i) 4,400,000 shares of Common
Stock reserved for issuance upon the exercise of the Warrants, (ii) 240,000
shares of Common Stock reserved for issuance upon the exercise of the
underwriter's warrants and the Warrants underlying the underwriter's warrants
and (iii) 250,000 shares of Common Stock reserved for issuance under the
Company's 1995 Senior Management Incentive Plan, except for the 75,000 shares
issued thereunder and the 150,000 shares underlying option grant pursuant
thereto.
(2) Harold Rashbaum is the father-in-law of Ilan Arbel, the sole officer
and director of EVC.
(3) Includes 1,568,000 shares of Common Stock issuable upon the exercise of
Warrants owned by EVC.
<PAGE>
(4) Includes (i)50,000 shares of Common Stock under the Senior Management
Incentive Plan, pursuant to a vesting schedule, none of which have vested (ii)
100,000 shares of Common Stock pursuant to an option granted under the Company's
Senior Management Incentive Plan and (iii) 7,500 shares issued to H.B.R.
Consultants Sales Corp. in September 1996. See "Executive
Compensation-Employment and Consulting Agreements" and "Senior Management
Incentive Plan."
(5) Includes 50,000 shares of Common Stock issuable upon the exercise of an
option granted to Robert DiMilia under the Company's Senior Management Incentive
Plan.
Certain Reports
No person who, during the fiscal year ended June 30, 1996, was a
director, officer or beneficial owner of more than ten percent of the
Corporation's Common Stock (which is the only class of securities of the
Corporation registered under Section 12 of the Securities Exchange Act of 1934
(the "Act") (a "Reporting Person") failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year or prior
years. The foregoing is based solely upon a review by the Corporation of Forms 3
and 4 during the most recent fiscal year as furnished to the Corporation under
Rule 16a-3(d) under the Act, and Forms 5 and amendments thereto furnished to the
Corporation with respect to its most recent fiscal year, and any representation
received by the Corporation from any reporting person that no Form 5 is
required, except as described herein.
It is expected that the following will be considered at the meeting
and action taken thereon.
I. ELECTION OF DIRECTORS
The Board of Directors currently consists of three members elected for
a term of one year and until their successors are duly elected and qualified.
An affirmative vote of a plurality of the shares of Common Stock,
present in person or represented by proxy at the Annual Meeting, and entitled to
vote thereon is required to elect the directors. All proxies received by the
Board of Directors will be voted for the election as directors of the nominees
listed below if no direction to the contrary is given. In the event any nominee
is unable to serve, the proxy solicited hereby may be voted, in the discretion
of the proxies, for the election of another person in his stead. The Board of
Directors knows of no reason to anticipate this will occur.
The following table sets forth as of June 6, 1997, with respect to the
five nominees for election as directors of the Corporation:
<TABLE>
<CAPTION>
Position with Corporation; Director
Name Principal Occupation and Age Since
<S> <C> <C>
Harold Rashbaum President, CEO and Director; 70 1996
Robert DiMilia Vice President, Secretary and 1997
Director; 51
Alain A. Le Guillou, M.D. Director; 40 1996
</TABLE>
<PAGE>
The directors of the Company are elected annually by its stockholders and
the officers of the Company are appointed annually by its Board of Directors.
Vacancies on the Board of Directors may be filled by the remaining directors.
Each current director and officer will hold office until the next annual meeting
of stockholders, or until his successor is elected and qualified. All outside
directors receive a directors' fee of $1,000 per month, for their participation
as a director. The sole outside director is Alain D. Le Guillou, M.D. The
Company does not have key man insurance on the life of any of its officers or
directors. Harold Rashbaum is the father-in-law of Alain A. Le Guillou, M.D. On
January 10, 1997, Robert Melillo and the Company mutually agreed to the
resignation of Mr. Melillo as the President, Chief Executive Officer and
Director of the Company. As of that time, Harold Rashbaum took over as President
and Chief Executive Officer of the Company. Mr. Melillo remained as a consultant
to the Company at a weekly fee of $600 until April 1, 1997.
Harold Rashbaum has been the President, Chief Executive Officer, and
director of the Company since January 1997. Mr. Rashbaum had served as Secretary
and Treasurer of the Company since May 1996. When Robert Melillo, former
President and Chief Executive Officer, resigned Mr. Rashbaum was elected as
President and Chief Executive Officer. Since May 1996, Mr. Rashbaum served as
the secretary, treasurer and a director of D.L. Productions, Inc. and became
President in January 1997. From January 1991 to March 1992, he was a consultant
for National Wholesale Liquidators, Inc., a retailer of household goods and
housewares. From February 1996 to present, Mr. Rashbaum has been the president
and a director of H.B.R. Consultant Sales Corp., of which his wife is the sole
stockholder. From March 1992 to June 1995, Mr. Rashbaum was a consultant to 47th
Street Photo, Inc., a retailer of electronics, which position was at the request
of the bankruptcy court, during the time it was in Chapter 11. Mr. Rashbaum was
a consultant for Play Co. Toys & Entertainment Corp., since June 1995 and became
the Chairman of the board in October 1996, which company is a wholesaler and
retailer of children's toys.
Robert DiMilia, has been a Director, Vice President and Secretary of the
Company since January 10, 1997, prior to thereto he was a consultant to the
Company with respect to the production of the Motion Picture. From 1991 to 1994
Mr. DiMilia was a vice-president for The Bon Bon Group a national
payroll/accounting entertainment service company. From March 1995 to May 1996
Mr. DiMilia was a media and marketing consultant in the film industry working on
a variety of projects.
Alain A. Le Guillou, M.D. has been a director of the Company since May
1996. Since July 1995, Dr. Guillou has been a doctor of Pediatrics at Montefiore
Medical Group. From July 1992 to June 1995 Dr. Guillou was a Pediatric resident
at the University of Minnesota, Gillette Hospital, St. Paul, Minnesota. From
July 1991 to June 1992 Dr. Guillou was an intern at Montefiore Medical Center,
Bronx, N.Y. Dr. Guillou is the son-in-law of Harold Rashbaum.
<PAGE>
Significant Employees
Dan Stone, 61, had been the chairman of the board of Breaking Waves
since its inception in 1991 until the consummation of the Acquisition in
September 1996, at which time he became a consultant Mr. Stone has been the
president and a director of D. Stone Industries, Inc., and Dan Stone Industries,
Inc. since their inceptions in 1981 and 1991, respectively.
Malcolm Becker, 61, has been the vice-president of design,
merchandising and production of Breaking Waves, Inc., since its inception in
1991.
Michael Friedland, 59, has been the vice-president of design, marketing
and sales of Breaking Waves, Inc., since its inception in 1991.
The Company has agreed to indemnify its officers and directors with
respect to certain liabilities including liabilities which may arise under the
Securities Act of 1933. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to any charter, provision, by-law, contract,
arrangement, statute or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any such action, suit or proceeding) is asserted by such director,
officer or controlling person of the Company in connection with the Securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Board Meetings, Committees and Compensation
During the fiscal year ended December 31, 1996, no meetings of the
Board of Directors was held, action was taken on ____ (__) occasions by
unanimous written consent of the Board of Directors in lieu of meeting. The
Corporation does not pay its directors for attendance at meetings of the Board
of Directors or committee meetings.
The Board of Directors recommends that you vote "FOR" the nominees for
Director.
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid by the Company during the period ended December 31, 1996 to
each of the named executive officers of the Company.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Securities Restricted Securities
Name and Principal Underlying Underlying All Other
Position Year Salary($) Options/SARS ($) Award Compensation
- -------- ---- --------- ---------------- ----- ------------
<S> <C> <C> <C> <C> <C>
Harold Rashbaum 1996 (1) 26,000 100,000 (2) 50,000 (3) --
Chief Executive Officer
President
Robert Melillo 1996 (4) 69,200 -- 25,000 (5) --
Former Chief Executive Officer
</TABLE>
In October 1996, Mr. Rashbaum began receiving a salary of approximately
$100,000 per annum, which salary was increased to $156,000 IN March 1997. At the
closing of the Company's initial public offering H.B.R. Consulting Sales, Corp.,
a company controlled by Mr. Rashbaum and owned by his wife received 7,500 shares
of Common Stock and a consulting fee of $40,000. Includes options to purchase
shares of Common Stock issued in March 1997 under the Company's Senior
Management Incentive Plan. Includes shares issued under the Senior Management
Incentive Plan in June 1996, subject to a vesting schedule. See "Senior
Management Incentive Plan". 1 Mr. Melillo received an annual salary of $104,000
per annum up and through January 10, 1997, when he resigned as an officer and
director of the Company. He continued as a consultant until April 1997 and
received a consulting fee of $600 per week. See "Management". Mr. Melillo
received 50,000 shares of Common Stock in the Company pursuant to the Company's
Senior Management Incentive Plan, subject to a vesting schedule, whereby 25,000
shares would vest in each of June of 1997 and 1998. Upon the resignation of Mr.
Melillo on January 10, 1997, he returned 25,000 shares to the Company and the
Company agreed that the remaining shares should be vested.
Employment and Consulting Agreements
Prior to Harold Rashbaum becoming an officer and director of the
Company, he provided consulting to the Company through H.B.R. Consultant Sales
Corp., ("HBR"), a Company of which he is an officer and director and of which
his wife is the sole stockholder. HBR entered into an oral consulting agreement
with the Company whereby, it will receive 5% of the net profits of the Motion
Picture received by the Company. In addition, HBR received $40,000 and 7,500
shares of the Company's Common Stock at the closing of the Company's initial
public offering. Mr. Rashbaum receives a salary of $156,000 per annum for being
an officer of the Company. In addition, Mr. Rashbaum received 50,000 shares of
Common Stock under the Company's Senior Management Incentive Plan which shares
vest at the rate of 25,000 shares on each of June 1997 and 1998. Pursuant to the
restricted share agreement the shares only vest if Mr. Rashbaum continues to
provide services to the Company. Shares not vested shall be returned to the
Company's treasury. In March 1997, the Company granted Mr. Rashbaum as chief
executive officer an option to purchase 100,000 shares at $5 1/8 per share,
pursuant to the Company's Senior Management Incentive Plan.
<PAGE>
Dan Stone entered into a two year consulting agreement with Breaking
Waves as of January 1996, pursuant to which he oversees the operation of
Breaking Waves in return for a yearly consulting fee of $100,000. Mr. Stone
received $50,000 from the proceeds of the Company's initial public offering, as
payment in advance of half of the 1997 consulting fee, the balance of which is
being paid in weekly installments.
In November 1997, Breaking Waves entered into 3 year employment agreements
with each of Malcolm Becker and Michael Friedland. The agreements provide for a
salary of $110,000 for the term of employment and the receipt of shares of the
Company's Common Stock in each year of the agreements. The number of shares of
the Common Stock shall be equal to a Market Value (as hereinafter defined) of
$25,000 on the date of issuance, subject to a vesting schedule. The vesting
schedule shall be as follows; (i) 1/2 of the shares received on the date hereof
shall vest 90 days from the date hereof with the balance vesting 270 days from
the date hereof and (ii) on each subsequent annual issuance commencing November
27, 1997, 1/2 of theshares shall vest six months from issuance with the balance
vesting on the following anniversary. The shares vest pursuant to restricted
share agreements. "Market Value" shall mean (i) $5.00 per share with respect to
the shares issued in November 1996 and (ii) the average of the closing bid and
asked prices for a share of Common Stock for a period of 30 days ending five
days prior to the date of issuance, as officially reported by the principal
securities exchange on which the Common Stock is quoted. The agreements include
no-disclosure and non-compete clauses.
<PAGE>
Senior Management Incentive Plan
In May 1996, the Board of Directors adopted the Senior Management
Incentive Plan (the "Management Plan"), which was adopted by stockholder
consent. The Management Plan provides for the issuance of up to 250,000 shares
of the Company's Common Stock in connection with the issuance of stock options
and other stock purchase rights to executive officers and other key employees
and consultants. The board of directors, subject to stockholder approval, have
adopted a proposal to increase the shares issuable under the Management Plan to
750,000 shares.
See Appendix A for a copy of the Management Plan.
The Management Plan was adopted to provide the Board of Directors with
sufficient flexibility regarding the forms of incentive compensation which the
Company will have at its disposal for rewarding executive officers, employees
and consultants of the Company or a subsidiary or the Company, who render
significant services to personnel equity ownership in the Company through the
grant of stock options and other rights pursuant to the Management Plan to
enable the Company to attract and retain qualified personnel without
unnecessarily depleting the Company's cash reserves. The Management Plan is
designed to augment the Company's existing compensation programs and is intended
to enable the Company to offer a personal interest in the Company's growth and
success through awards of either shares of Common Stock or rights to acquire
shares of Common Stock to individuals who provide significant services to the
Company.
The Management Plan is intended to help the Company attract and retain
key executive management personnel whose performance is expected to have a
substantial impact on the Company's long-term profit and growth potential by
encouraging and assisting those persons to acquire equity in the Company. It is
contemplated that only employees who perform services of special importance to
the Company will be eligible to participate under the Management Plan. It is
anticipated that awards made under the Management Plan will be subject to
vesting periods, although the vesting periods are subject to the discretion of
the board or an administrator of the Management Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1995, in connection with the incorporation of the Company, EVC
acquired 5,000,000 shares of the Company's Common Stock and 2,000,000 Warrants
for aggregate consideration of $1,100,000. The sale of 1,400,000 shares of
Common Stock and 2,000,000 Warrants was registered for resale in the Company's
initial public offering of which 549,000 shares and 432,000 Warrants have been
resold to date.
Dan Stone entered into a two year consulting agreement with Breaking
Waves as of January 1996, pursuant to which he oversees the operation of
Breaking Waves in return for a yearly consulting fee of $100,000, which fee is
currently being paid in weekly installments. At the closing of the Acquisition,
Mr. Stone received $50,000 from the proceeds of the Offering, as payment in
advance of half of the 1997 consulting fee.
<PAGE>
In June 1996, the Company issued 50,000 shares of Common Stock to Robert
Melillo, the former chief executive officer, president and director of the
Company under the Company senior management incentive plan. The shares were to
vest at the rate of 25,000 in each of June 1997 and 1998. On January 10, 1997,
Mr. Melillo resigned and returned 25,000 shares to the Company. Pursuant to Mr.
Melillo's agreement with the Company, the remaining 25,000 shares became fully
vested.
Prior to Harold Rashbaum becoming an officer and director of the Company,
commencing in March 1996 he provided consulting to the Company through H.B.R.
Consultant Sales Corp., ("HBR"), a Company of which he is an officer and
director and of which his wife is the sole stockholder. HBR entered into an oral
consulting agreement with the Company whereby it will receive 5% of the net
profits of the Motion Picture received by the Company. In addition, HBR received
$40,000 and 7,500 shares of the Company's Common Stock at the closing of the
Acquisition from the Company. In June 1996 Mr. Rashbaum received 50,000 shares
of Common Stock under the Company's Senior Management Incentive Plan which
shares vest at the rate of 25,000 shares on each of June 1997 and 1998.
See "Executive Compensation-Employment and Consulting Agreements" for a
discussion of the Company's employment and consulting arrangements.
All transactions between the Company and any officer, director or 5%
stockholder will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the independent
disinterested directors of the Company. The Company believes that all prior
affiliated transactions were made on terms no less favorable to the Company than
available from unaffiliated parties.
II. Ratification of an Amendment to the Corporation=s
Senior Management Incentive Plan to Increase
the Number of Shares of Common Stock
Authorized for Issuance thereunder from
250,000 to 750,000.
The Board of Directors has unanimously approved, subject to shareholder
approval an amendment to the Management Plan to increase the number of shares
issuable under such plan from 250,000 shares to 750,000 shares. The Plan, as
originally adopted by shareholders of the Corporation's, is annexed hereto as
Appendix A.
<PAGE>
The Amendment to the Management Plan is necessary by reason of the fact
that, of the original 250,000 shares of Common Stock authorized under the plan,
75,000 shares under the Management Plan have been issued pursuant to a
restricted stock agreement and 150,000 shares are reserved for issuance pursuant
to options granted under the Management Plan, whereby there are only 25,000
shares available under the Plan. The remaining number of shares authorized under
the Plan has been deemed by the Board of Directors as insufficient to provide
for additional awards to attract and retain key executive management personnel
and to provide incentive to management personnel to maximize the shareholder
value. The Plan is designed to augment the Corporation's existing compensation
programs and is intended to enable the Corporation to have its executives, key
employees and consultants participate in the growth and success of the
Corporation through awards under the Management Plan in addition to and as an
alternative to cash compensation. Management believes that equity incentives are
necessary to attract, motivate and retain key personnel.
Management believes that the Corporation will expand its operations
during the current fiscal year and will be required to offer competitive
compensation packages to obtain and retain the qualified management which the
Corporation and its subsidiaries need in order to successfully and profitably
expand operations.
The affirmative vote of the holders of a majority of the shares of the
Corporation's Common Stock issued and outstanding on the record date. The
directors and officers of the Corporation and other principal shareholders
owning of record, beneficially, directly and indirectly, an aggregate of
approximately 4,658,500 shares of the Corporation's Common Stock constituting
approximately 76.5% of such shares outstanding on the record date, have agreed
to vote in favor of approval of this proposal.
The Board of Directors recommends that you vote "FOR"
this Proposal.
<PAGE>
III. Ratification of the Proposal to Approve the Corporation's
Non-Executive Director Stock Option Plan
General
The Company's Board of Directors has unanimously adopted the Company's
Non-Executive Director Stock Option Plan (the "Directors Plan"), subject to
approval by the Company's stockholders. Approval of the Directors Plan requires
the affirmative vote of a majority of the outstanding shares of Common Stock
represented and voting in person or by proxy at the Annual Meeting or any
adjournment thereof.
The following is a summary of the principal features of the Directors
Plan and is qualified by and subject to the actual provisions of the Directors
Plan, a copy of which is attached as Appendix B hereto.
Purpose and Eligibility
The Directors Plan provides for grants of stock options as a means of
attracting and retaining highly qualified independent directors for the Company.
The only persons eligible to participate in the Directors Plan are directors who
are not employees of the Company and have not within the past fiscal year
received any equity securities of the Company under any plan of the Company or
been employees of the Company or otherwise eligible to receive equity securities
under any plan of the Company (the "Eligible Directors").
The Company currently has one Eligible Director under the Directors
Plan, Alain A. Le Guillou, M.D. Grants under this plan shall have exercise
prices equal to the market price on the date of grant.
Option Awards
The Director's Plan provides that each Eligible Director automatically
receives grant of an option to purchase up to 5,000 shares of Common Stock
immediately on January 1 of each year in which the director has been a member of
the board for a continuous 12 month period.
All options granted under the Directors Plan are to be evidenced by
written option agreements or confirming memoranda, each of which must be
consistent with the Directors Plan but which may otherwise contain such
additional or unique features as the Company determines. Options granted under
the Directors Plan are not transferable.
Vesting and Exercise
Options granted under the Directors Plan vest and become exercisable
upon issuance. The option exercise price may be paid in cash or in any other
consideration the Company deems acceptable as provided in the Directors Plan,
including shares of Common Stock surrendered by the optionee or withheld from
the shares otherwise deliverable upon exercise. The Company is permitted to loan
the exercise price to the optionee or to allow exercise in a broker's
transaction in which the exercise price will not be received until after
exercise and subsequent sale of the underlying Common Stock. Consideration
received by the Company
<PAGE>
upon exercise of options granted under the Directors Plan will be used for
general working capital purposes.
Options granted under the Directors Plan may be exercised at any time
and before the expiration of five years from the date of their grant.
Securities Subject to Directors Plan
No more than 150,000 shares of Common Stock may be issued upon exercise
of options granted under the Directors Plan. The number of shares of Common
Stock available to individual optionees or under the Directors Plan in general,
as well as the number of shares for which issued or unissued options may be
exercised, and the exercise price per share of such options, will be
proportionately adjusted to reflect stock splits, stock dividends, and similar
capital stock transactions.
Administration, Amendment and Termination
The Directors Plan will be administered by the Company by two officer
who are also directors but not eligible under this plan, who will have the power
to discontinue, suspend or amend the Directors Plan in any manner, except that
the Company may not alter the Directors Plan, or exercise any discretion with
respect to, persons eligible to receive grants of options, the number of shares
of Common Stock subject to options, the timing of such grants, the exercise
price of options or the final date upon which options may be granted. Options
may be granted under the Directors Plan until January 1, 2007.
The affirmative vote of the holders of a majority of the shares of the
Corporation's Common Stock issued and outstanding on the record date. The
directors and officers of the Corporation and other principal shareholders
owning of record, beneficially, directly and indirectly, an aggregate of
approximately 4,658,500 shares of the Corporation's Common Stock constituting
approximately 76.5% of such shares outstanding on the record date, have agreed
to vote in favor of approval of this proposal.
The Board of Directors recommends that you vote "FOR"
this Proposal.
<PAGE>
FINANCIAL INFORMATION
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT THE ACCOMPANYING EXHIBITS TO STOCKHOLDERS WITHOUT
CHARGE UPON WRITTEN REQUEST THEREFOR SENT TO ROBERT DIMILIA, SECRETARY,
HOLLYWOOD PRODUCTIONS, INC., 14 EAST 60TH STREET, NEW YORK, NY 10022. EACH SUCH
REQUEST MUST SET FORTH A GOOD FAITH REPRESENTATION THAT AS OF MAY 5, 1997 THE
PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF SHARES OF THE
CORPORATION'S COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING OF
STOCKHOLDERS.
IV. OTHER BUSINESS
As of the date of this proxy statement, the only business which the
Board of Directors intends to present, and knows that others will present, at
the Annual Meeting is that herein above set forth. If any other matter or
matters are properly brought before the Annual Meeting, or any adjournments
thereof, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy on such matters in accordance with their judgment.
Shareholder Proposals
Proposals of shareholders intended to be presented at the
Corporation's 1998 Annual Meeting of Shareholders must be received by the
Corporation on or prior to February 28, 1998 to be eligible for inclusion in the
Corporation's proxy statement and form of proxy to be used in connection with
the 1998 Annual Meeting of Shareholders.
By Order of the Board of Directors,
Robert DiMilia
Secretary
June 6, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF IT IS MAILED
IN THE UNITED STATES OF AMERICA.
<PAGE>
Appendix A
SENIOR MANAGEMENT INCENTIVE PLAN OF
HOLLYWOOD PRODUCTIONS, INC.
1. PURPOSE OF THE PLAN
The purpose of the Senior Management Incentive Plan (the "Management
Plan") of Hollywood Productions, Inc. (the "Company") is to provide an incentive
to key management employees whose present and potential contributions to the
Company and its Subsidiaries (as such term is defined in Section 2 below) are or
will be important to the success of the Company by affording them an opportunity
to acquire a proprietary interest in the Company. It is intended that this
purpose will be effected through the issuance of (i) incentive stock rights,
(ii) stock options, (iii) stock appreciation rights; (iv) limited stock
appreciation rights and (v) shares of Common Stock, $.001 par value per share,
of the Company ("Common Stock") subject to restrictions on disposition
("restricted shares") (collectively, such options, rights and restricted shares
are referred to herein as "Awards"). Stock options may be granted under the
Management Plan which qualify as "Incentive Stock Options" under Section 422A of
the Internal Revenue Code of 1986, as it may be hereafter amended (the "Code").
Such options are sometimes referred to as an "ISO" or collectively as "ISOs."
Options may also be granted under the Plan which do not qualify as ISOs
("non-ISOs").
2. ELIGIBILITY
Awards may be made or granted to key management employees of the
Company or its Subsidiaries who are deemed to have the potential to have a
significant effect on the future success of the Company (such eligible persons
being referred to herein as "Eligible Participants"). The term "management
employees" shall include executive officers, key employees and consultants of
the Company or of a Subsidiary. A director of the Company or of any Subsidiary
who is not also an employee of the Company or of one of its Subsidiaries will
not be eligible to receive any Awards under the Management Plan. No ISO shall be
granted to an employee who, at the time the option is granted, owns stock
possessing more than 10% of the total combined voting power of all classes of
capital stock of the employer corporation (as such term is used in the Code) or
any Parent or Subsidiary of the employer corporation, provided, however, that an
ISO may be granted to such an employee if at the time such ISO is granted the
option price is at least one hundred ten percent (110%) of the fair market value
of stock subject to the ISO on the date of grant (as determined pursuant to
Subsection 8(a) hereof) and such ISO is by its terms not exercisable after the
expiration of five (5) years from the date such option is granted. The exercise
price of the non-ISOs may not be less than 85% of the fair market value of the
Common Stock on the date of grant. The terms "Subsidiary" and "Parent") as used
herein shall have the meanings given them in Section 425 of the Code. Awards may
be made to executive personnel who hold or have held options, rights or shares
under the Management Plan or any other plans of the Company.
<PAGE>
3. STOCK SUBJECT TO THE PLAN
The shares that may be issued upon exercise of options and rights and
which may be issued as restricted shares under the Management Plan shall not
exceed in the aggregate 750,000 shares of the Common Stock, as adjusted to give
effect to the anti-dilution provisions contained in Section 12 hereof. Such
shares may be authorized and unissued shares, or shares purchased by the Company
and reserved for issuance under the Management Plan. If a stock option or
incentive stock right for any reason expires or is terminated without having
been exercised in full, or if shares restricted are repurchased by the Company
in accordance with the terms thereof, those shares relating to an unexercised
stock option or incentive stock rights or shares which have been repurchased
shall again become available for grant and/or sale under the Management Plan.
4. AWARDS UNDER THE PLAN
Awards under the Management Plan may be of five types. They are: "incentive
stock rights," "stock options," "stock appreciation rights", "limited stock
appreciation rights" and "restricted shares. " "Incentive Stock rights" are
composed of incentive stock units which give the holder the right to receive,
without payment of cash or property to the Company, shares of Common Stock,
subject to the terms, conditions and restrictions described in Section 7 hereof.
An option, including an ISO, is a right to purchase Common Stock in accordance
with Section 8 hereof. A "stock appreciation right" is a right given to the
holder of a stock option to receive, upon surrender of all or a portion of his
stock option without payment of cash or property to the Company, a number of
shares of Common Stock and/or cash determined pursuant to a formula in
accordance with Section 9 hereof. A "limited stock appreciation right" is a
right given to a holder of a stock option to receive, upon the occurrence of
certain events generally constituting a change in control of the Company, a
number of shares of Common Stock and/or cash upon surrender of all or a portion
of his stock option without the payment of cash or property to the Company, in
accordance with Section 10 hereof. "Restricted shares" are shares of Common
Stock which, following issuance, are nontransferable and subject to substantial
risk of forfeiture until specific conditions based on continuing employment or
achievement of preestablished performance objectives are met, in accordance with
Section 11 hereof. Allreferences to "cash" herein shall mean "cash or certified
check. "
<PAGE>
5. ADMINISTRATION
(a) Procedure. The Management Plan shall be administered by the Board
of Directors or by a Committee of the Board of Directors, if one is appointed
for this purpose (the "Committee"). Committee members shall serve for such term
as the Board of Directors may in each case determine, and shall be subject to
removal at any time by the Board of Directors. Members of the Board of Directors
who are either eligible for awards or have been granted awards may not vote on
any matters affecting the administration of the Management Plan or the grant of
any Award pursuant to the Management Plan.
(b) Powers of the Board or Committee. As used herein, except as the
Committee's powers are specifically limited in Sections 5, 6, 20 and 21 hereof,
reference to the Board of Directors shall mean such Board or the Committee,
whichever is then acting with respect to the Management Plan. Subject to the
provisions of the Management Plan, the Board of Directors shall have the
authority in its discretion: (i) to determine, upon review of relevant
information, the fair market value of the Common Stock; (ii) to determine the
exercise price per share of stock options to be granted; (iii) to determine the
Eligible Participants to whom, and time or times at which, Awards shall be
granted and the number of shares to be issuable upon exercise of each stock
option or right or sold pursuant to restricted stock purchase agreements; (iv)
to construe and interpret the Management Plan; (v) to prescribe, amend and
rescind rules and regulations relating to the Management Plan; (vi) to determine
the terms and provisions of each Award (which need not be identical); and (vii)
to make all other determinations necessary to or advisable for the
administration of the Management Plan. Notwithstanding the foregoing, in the
event any employee of the Company or any of its Subsidiaries granted an Award
under the Management Plan is, at the time of such grant, a member of the Board
of Directors of the Company, the grant of such Award shall, in the event the
Board of Directors at the time such award is granted is not deemed to satisfy
the requirement of Rule 16(b)-3(b)(2)(i) or (ii) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), be subject to
the approval of an auxiliary committee consisting of not less than three persons
all of whom qualify as "disinterested persons" within the meaning of Rule
16(b)-3(d)(3) promulgated under the Exchange Act. In the event the Board of
Directors deems it impractical to form a committee of disinterested persons, the
Board of Directors is authorized to approve any award under the Management Plan.
6. DURATION OF THE PLAN
The Management Plan shall become effective upon the approval of the
requisite vote of the stockholders of the Company, and upon the approvals, if
required, of any other public authorities. The Management Plan shall remain in
effect for a term of ten (10) years from the date of adoption by the Board
unless sooner terminated under Section 20 hereof. Notwithstanding any of the
foregoing to the contrary, the Board of Directors (but not the Committee) shall
have the authority to amend the Management Plan pursuant to Section 20 hereof;
provided, however, that Awards already made shall remain in full force and
effect as if the Management Plan had not been amended or terminated.
<PAGE>
7. INCENTIVE STOCK RIGHTS
The Board of Directors, in its discretion, may grant to Eligible
Participants incentive stock rights composed of incentive stock units. Incentive
stock rights shall be granted pursuant to incentive stock rights agreements in
such form, and not inconsistent with the Management Plan, as the Board of
Directors shall approve from time to time and shall include substantially the
following terms and conditions as determined by the Board of Directors:
(a) Incentive Stock Units. An incentive stock rights agreement shall
specify the number of incentive stock units to which it pertains. Each incentive
stock unit shall be equivalent to one share of Common Stock. Each incentive
stock unit shall entitle the holder thereof to receive, without payment of cash
or property to the Company, one share of Common Stock in consideration for
services performed for the Company or any Subsidiary by the Eligible
Participant, subject to the lapse of the incentive periods (as hereinafter
defined).
(b) Incentive Period. The holder of incentive stock rights shall be
entitled to receive shares of Common Stock only after the lapse of such
incentive periods, and in such manner, as shall be fixed in the discretion of
the Board of Directors at the time of grant of such incentive stock rights.
(Such period or periods so fixed is or are herein referred to as an "incentive
period"). To the extent the holder of incentive stock rights receives shares of
Common Stock on the lapse of an incentive period, an equivalent number of
incentive stock units subject to such rights shall be deemed to have been
discharged.
(c) Termination by Reason of Death or Disability. In the event that the
recipient of incentive stock rights ceases to be employed by the Company or any
of its Subsidiaries during an incentive period due to death or permanent
disability (as determined by the Board of Directors), the holder of incentive
stock rights or, in the case of the death of the holder, the personal
representatives, heirs or legatees of such holder, shall be entitled to receive
a number of shares equal to an amount determined by multiplying the total number
of incentive stock units applicable to such incentive period by a fraction, the
numerator of which shall be the number of full calendar months between the date
of grant of the incentive stock rights and the date of such termination and the
denominator of which shall be the number of full calendar months between the
date of grant and the date such incentive period for such units would, but for
such termination, have lapsed. For purposes of this Subsection 7(c), this shall
constitute a lapse of the incentive period with respect to the number of
incentive stock units equal to the number of shares issued. Units upon which the
incentive period do not lapse pursuant to the foregoing sentence shall terminate
and be null and void on the date on which the recipient ceases to be employed by
the Company or any of its Subsidiaries.
<PAGE>
(d) Termination for Any Other Reason. In the event that the employment
by the Company of the recipient to whom incentive stock rights have been issued
under the Management Plan terminates for any reason (including dismissal by the
Company with or without cause), other than death or permanent disability, such
rights as to which the incentive period has not lapsed shall terminate and be
null and void on termination of the relationship.
(e) Issuance of Shares. Upon the lapse of an incentive period, the
Company shall deliver to the holder of the related incentive stock unit a
certificate or certificates representing the number of shares of Common Stock
equal to the number of incentive stock units with respect to which an incentive
period has lapsed. The Company shall pay all applicable transfer or issue taxes.
8. OPTIONS
Options shall be evidenced by stock option agreements in such form, and
not inconsistent with the Management Plan, as the Board of Directors shall
approve from time to time, which agreements shall contain in substance the
following terms and conditions:
(a) Option Price; Number of Shares. The option price, which shall be
approved by the Board of Directors, shall in no event be less than one hundred
percent (100%) in the case of ISOs, except with respect to 10% stockholders,
whereby the price shall be 110%, and in the case of non-ISOs eighty-five percent
(85%), of the fair market value of the Company's Common Stock at the time the
option is granted. The fair market value of the Common Stock, for the purposes
of the Management Plan, shall mean: (i) if the Common Stock is traded on a
national securities exchange or on the NASDAQ National Market System ("NMS"),
the per share closing price of the Common Stock on the principal securities
exchange on which they are listed or on NMS, as the case may be, on the date of
grant (or if there is no closing price for such date of grant, then the last
preceding business day on which there was a closing price); or (ii) if the
Common Stock is traded in the over-the-counter market and quotations are
published on the NASDAQ quotation system (but not on NMS), the closing bid price
of the Common Stock on the date of grant as reported by NASDAQ (or if there are
no closing bid prices for such date of grant, then the last preceding business
day on which there was a closing bid price); or (iii) if the Common Stock is
traded in the over-the-counter market but bid quotations are not published on
NASDAQ, the closing bid price per share for the Common Stock as furnished by a
broker-dealer which regularly furnishes price quotations for the Common Stock.
The option agreement shall specify the total number of shares to which
it pertains and whether such options are ISOs or are not ISOs. With respect to
ISOs granted under the Management Plan, the aggregate fair market value
(determined at the time an ISO is granted) of the shares of Common Stock with
respect to which ISOs are exercisable for the first time by such employee during
any calendar year shall not exceed $100,000 under all plans of the employer
corporation or its Parent or Subsidiaries.
<PAGE>
(b) Waiting Period and Exercise Dates. At the time an option is
granted, the Board of Directors will determine the terms and conditions to be
satisfied before shares may be purchased, including the dates on which shares
subject to the option may first be purchased. (The period from the date of grant
of an option until the date on which such option may first be exercised is
referred to herein as the "waiting period. ") At the time an option is granted,
the Board of Directors shall fix the period within which it may be exercised
which shall not be less than one (1) year nor, for an ISO, more than ten (10)
years (not more than 5 years for 10% stockholders) from the date of grant or,
for a non-ISO, for more than thirteen (13) years from the date of grant. (Any of
such periods is referred to herein as the "exercise period.")
(c) Form and Time of Payment. Stock purchased pursuant to an option
agreement shall be paid for at the time of purchase either in (i) cash or by
certified check or, in the discretion of the Board of Directors, as set forth in
the stock option agreement, (ii) through the delivery of shares of Common Stock,
or (iii) in a combination of the methods described above. Upon receipt of
payment, the Company shall, without transfer or issue tax to the option holder
or other person entitled to exercise the option, deliver to the option holder
(or such other person) a certificate or certificates for the shares so
purchased.
(d) Effect of Termination or Death. In the event that an option holder
ceases to be an employee of the Company or of any Subsidiary for any reason
other than permanent disability (as determined by the Board of Directors) and
death, any option, including any unexercised portion thereof, which was
otherwise exercisable on the date of termination, shall expire unless exercised
within a period of three months from the date on which the option holder ceased
to be so employed, but in no event after the expiration of the exercise period;
[provided, however, that, if the Board of Directors shall determine that an
option holder shall have been discharged for cause, options granted and not yet
exercised shall terminate immediately and be null and void as of the date of
discharge.] In the event of the death of an option holder during this three
month period, the option shall be exercisable by his or her personal
representatives, heirs or legatees to the same extent that the option holder
could have exercised the option if he or she had not died, for the three months
from the date of death, but in no event after the expiration of the exercise
period. In the event of the permanent disability of an option holder while an
employee of the Company or of any Subsidiary, any option granted to such
employee shall be exercisable for twelve (12) months after the date of permanent
disability, but in no event after the expiration of the exercise period. In the
event of the death of an option holder while an employee of the Company or any
Subsidiary, or during the twelve (12) month period after the date of permanent
disability of the option holder, that portion of the option which had become
exercisable on the date of death shall be exercisable by his or her personal
representatives, heirs or legatees at any time prior to the expiration of one
(1) year from the date of the death of the option holder, but in no event after
the expiration of the exercise period. Except as the Board of Directors shall
provide otherwise, in the event an option holder ceases to be an employee of the
Company or of any Subsidiary for any reason, including death, prior to the lapse
of the waiting period, his or her option shall terminate and be null and void.
(e) Other Provisions. Each option granted under the Management Plan may
contain such other terms, provisions, and conditions not inconsistent with the
Management Plan as may be determined by the Board of Directors.
<PAGE>
9. STOCK APPRECIATION RIGHTS
The Board of Directors may grant, in its discretion, stock appreciation
rights to the holder of any stock option under the Management Plan. Such rights
shall be granted pursuant to a stock appreciation rights agreement in such form,
and not inconsistent with the Management Plan, as the Board of Directors shall
approve from time to time (and which may be incorporated in the stock option
agreement governing the terms of the related option) and shall include
substantially the following terms and conditions as the Board of Directors shall
determine:
(a) Grant. Each right shall relate to a specific option granted under
the Management Plan and shall be granted to the option holder either
concurrently with the grant of such option, or at such later time as determined
by the Board of Directors.
(b) Exercise. A stock appreciation right shall entitle an option holder
to receive, without payment of cash or property to the Company, a number of
shares of Common Stock, cash, or a combination thereof in the amount determined
pursuant to Subsection 9(c) below. The Board of Directors shall determine
whether such payment shall be made in Common Stock, cash, or a combination
thereof. Unless otherwise determined by the Board of Directors, a right shall be
exercisable to no greater extent nor upon any more favorable conditions than its
related option is exercisable under Subsection 8(b) hereof. An option holder
wishing to exercise a right in accordance with this Subsection 9(b) shall give
written notice of such exercise to the Company, which notice shall state that
the holder of the right elects to exercise the right and the number of shares in
respect of which the right is being exercised. The effective date of exercise of
a right shall be the date on which the Company shall have received such notice.
Upon receipt of such notice, the Company shall: (i) deliver to the option holder
or other person entitled to exercise the right, a certificate or certificates
representing such shares; and/or (ii) pay cash. The Company shall pay all
applicable transfer or issue taxes. Notwithstanding the provisions of this
section, no stock appreciation right may be exercised within a period of six
months on the date of grant of such stock appreciation right and no stock
appreciation right granted with respect to an ISO may be exercised unless the
fair market value of the Common Stock on the date of exercise exceeds the
exercise price of the ISO.
(c) Number of Shares or Amount of Cash. The number of shares which
shall be issued pursuant to the exercise of a stock appreciation right shall be
determined by dividing (i) that portion, as elected by the option holder, of the
total number of shares which the option holder is eligible to purchase pursuant
to Subsection 8(b) hereof (and as adjusted pursuant to Section 12 hereof),
multiplied by the amount (if any) by which the fair market value (as determined
in accordance with Subsection 8(a) hereof) of a share of Common Stock on the
exercise date exceeds the option exercise price of the related option; by (ii)
the fair market value of a share of Common Stock on the exercise date. In lieu
of issuing shares of Common Stock on the exercise of a right, the Board of
Directors may elect to pay the cash equivalent of the fair market value on the
exercise date of any or all the shares which would otherwise be issuable on
exercise of the right. No fractional shares shall be issued under this
Subsection 9(c). In lieu of fractional shares, the option holder shall be
entitled to receive a cash adjustment equal to the same fraction of the fair
market value per share of Common Stock on the date of exercise.
<PAGE>
(d) Effect of Exercise. Upon the exercise of stock appreciation rights, the
related option shall be considered to have been exercised to the extent of the
number of shares of Common Stock with respect to which such stock appreciation
rights are exercised, and shall be considered to have been exercised to that
extent for purposes of determining the number of shares of Common Stock
available for the grant of options under the Management Plan. Upon the exercise
or termination of the related option, the stock appreciation rights with respect
to such related option shall be considered to have been exercised or terminated
to the extent of the number of shares of Common Stock with respect to which the
related option was so exercised or terminated.
(e) Effect of Termination or Death. In the event that an option holder
ceases to be an employee or consultant of the Company or any of its Subsidiaries
for any reason, his stock appreciation rights shall be exercisable only to the
extent and upon the conditions that its related option is exercisable under
Subsection 8(d).
10. LIMITED STOCK APPRECIATION RIGHTS
The Board of Directors may grant, in its discretion, limited stock
appreciation rights ("Limited Rights") to the holder of any option with respect
to all or a portion of the shares subject to such option. Such Limited Rights
shall be granted pursuant to an agreement in such form, and not inconsistent
with the Management Plan, as the Board of Directors shall approve from time to
time (and which may be incorporated in the stock option agreement governing the
terms of the related option) and shall include substantially the following terms
and conditions as the Board shall determine.
(a) Grants. A Limited Right may be granted concurrently with the grant
of the related option or at such later time as determined by the Board of
Directors.
(b) Exercise. Unless otherwise determined by the Board of Directors, a
Limited Right may be exercised only during the period (a) beginning on the first
day following any one of (i) the date of approval by the stockholders of the
Company of an Approved Transaction (as defined in Subsection 10(e) below), (ii)
the date of a Control Purchase (as defined in Subsection 10(e) below) or (iii)
the date of a Board Change (as defined in Subsection 10(e) below); and (b)
ending on the thirtieth day (or such other date specified in the stock option
agreement) following such date (such period herein referred to as the "Limited
Right Exercise Period"). Each Limited Right shall be exercisable during the
Limited Right Exercise Period only to the extent the related option is then
exercisable, and in no event after the termination of the related option.
Limited Rights granted under the Management Plan shall be exercisable in whole
or in part by notice to the Company. Such notice shall state that the holder of
the Limited Rights elects to exercise the Limited Rights and the number of
shares in respect of which the Limited Rights are being exercised. The effective
date of exercise of a Limited Right shall be deemed to be the date on which the
Company shall have received such notice.
<PAGE>
(c) Amount Paid Upon Exercise. Upon the exercise of Limited Rights, the
holder shall receive in cash an amount equal to the excess of the fair market
value (as determined pursuant to Subsection 8(a) above) on the date of exercise
of such Limited Rights of each share of Common Stock with respect to which such
Limited Right shall have been exercised over the exercise price per share of
Common Stock subject to the related option.
(d) Effect of Exercise. Upon the exercise of Limited Rights, the
related option shall be considered to have been exercised to the extent of the
number of shares of Common Stock with respect to which such Limited Rights are
exercised, and shall be considered to have been exercised to that extent for
purposes of determining the number of shares of Common Stock available for the
grant of options under the Management Plan. Upon the exercise or termination of
the related option, the Limited Rights with respect to such related option shall
be considered to have been exercised or terminated to the extent of the number
of shares of Common Stock with respect to which the related option was so
exercised or terminated.
(e) Definitions. For purposes of this Section 10:
(i) An "Approved Transaction" shall mean (A) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
(ii) A "Control Purchase" shall mean circumstances in which
any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act, corporation or other entity (other than the Company or any
employee benefit plan sponsored by the Company or any Subsidiary) (A) shall
purchase any Common Stock of the Company (or securities convertible into the
Company's Common Stock) for cash, securities or any other consideration pursuant
to a tender offer or exchange offer, without the prior consent of the Board of
Directors, or (B) shall become the "beneficial owner" (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the then outstanding securities of the Company ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in paragraph (d) of such
Rule 13d-3 in the case of rights to acquire the Company's securities).
<PAGE>
(iii) A "Board Change" shall mean circumstances in which, during any period
of two consecutive years or less, individuals who at the beginning of such
period constitute the entire Board shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
a majority of the directors then still in office.
11. RESTRICTED SHARES
The Board of Directors may authorize, in its discretion, the issuance
of restricted shares of Common Stock to Eligible Participants pursuant to
restricted share agreements in such form, and not inconsistent with the
Management Plan, as the Board of Directors shall approve from time to time. Any
amount of restricted shares issued shall be subject to the following terms:
(a) Restricted Period and Price. The Board of Directors shall prescribe
restrictions, terms and conditions, including but not limited to the period
("restricted period") during which the holder must continue to render services
to the Company in order to retain the restricted shares, in addition to those
provided in the Management Plan. The Board shall determine the price, if any, to
be paid by the holder for the restricted shares. Upon forfeiture of any
restricted shares; any amount paid by the holder shall be repaid in full by the
Company.
(b) Issuance of Restricted Shares. Restricted shares, when issued, will
be represented by a stock certificate or certificates registered in the name of
the holder to whom such restricted shares shall have been awarded. During the
restricted period, certificates representing the restricted shares and any
securities constituting retained distributions (as defined below in Subsection
11(c)) shall bear a restrictive legend to the effect that ownership of the
restricted shares, and the enjoyment of all rights appurtenant thereto, are
subject to the restrictions, terms and conditions provided in the Management
Plan and the applicable restricted shares agreement. Such certificates shall be
deposited by such holder with the Company, together with stock powers or other
instruments of assignment, each endorsed in blank, which will permit transfer to
the Company of all or any portion of the restricted shares and any retained
distributions that shall be forfeited or that shall not become vested in
accordance with the Management Plan and the applicable restricted shares
agreement.
(c) Rights With Respect to Restricted Shares. Restricted shares shall
constitute issued and outstanding shares of Common Stock for all corporate
purposes. The holder will have the right to vote such restricted shares, to
receive and retain all regular cash dividends, and such other distributions as
the Board may in its sole discretion designate, pay, or distribute on such
restricted shares and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such restricted shares, with the
exception that (i) the holder will not be entitled to delivery of the stock
certificate or certificates representing such restricted shares until the
restricted period shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled; (ii) the Company will retain
custody of the stock certificate or certificates representing the restricted
shares during the restricted period; (iii) other than regular cash dividends and
such other distributions as the Board may in its sole discretion designate, the
Company will retain custody of all distributions ("retained distributions") made
or declared with respect to the restricted shares (and such retained
distributions will be subject to the same restrictions, terms and conditions as
are applicable to the restricted shares) until such time, if ever, as the
restricted shares with respect to which such retained distributions shall have
been made, paid or declared shall have become vested, and such retained
distributions shall not bear interest or be segregated in separate accounts;
(iv) the holder may not sell, assign, transfer, pledge, exchange, encumber of
dispose of the restricted shares or any retained distributions during the
restricted period; and (v) a breach of any restrictions, terms or conditions
provided in the Management Plan or established by the Board with respect to any
restricted shares or retained distributions will cause a forfeiture of such
restricted shares and any retained distributions with respect thereto.
<PAGE>
(d) Completion of Restricted Period. On the last day of the restricted
period with respect to each Award of restricted shares, and the satisfaction of
any other applicable restrictions, terms and conditions (i) all or part of such
restricted shares shall become vested and (ii) any retained distributions with
respect to such restricted shares shall become vested. Unless the Administrator
determines otherwise, any such restricted shares and retained distributions that
shall not have become vested upon the termination of employment of the holder
shall be forfeited to the Company and the holder shall not thereafter have any
rights (including dividend and voting rights) with respect to such restricted
shares and retained distributions that shall have been so forfeited, provided,
however, that if a holder shall die, become totally disabled or is terminated by
the Company without cause during a restricted period with respect to any
restricted shares, then, unless the restricted share agreement relating to such
shares provide otherwise, the restricted period applicable to each award of
restricted shares to such holder shall be deemed to have expired and all such
restricted shares and retained distributions shall become vested.
12. RECAPITALIZATION
In the event that dividends are payable in Common Stock or in the event
there are splits, subdivisions or combinations of shares of Common Stock, the
number of shares available under the Management Plan shall be increased or
decreased proportionately, as the case may be, and the number of shares
delivered upon the exercise thereafter of any stock option or stock appreciation
right, upon distribution pursuant to incentive stock rights theretofore granted
or issued pursuant to restricted share agreements theretofore entered into shall
be increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price (where applicable).
13. ACCELERATION
Notwithstanding any contrary waiting period in any stock option
agreement, any incentive period in any incentive stock rights agreement or any
restricted period with respect to any restricted shares issued pursuant to any
restricted shares agreement, or in the Management Plan, but subject to any
determination by the Board of Directors to provide otherwise at the time such
Award is granted or subsequent thereto, each outstanding option granted under
the Management Plan shall, except as otherwise provided in the stock option
agreement, become exercisable in full for the aggregate number of shares covered
thereby, and each share issuable upon lapse of an incentive period or each share
issued pursuant to a restricted share agreement, except as otherwise provided in
the incentive stock rights agreement or restricted share agreement, as the case
may be, shall vest unconditionally on the first day following the occurrence of
any of the following: (a) the approval by the stockholders of the Company of an
Approved Transaction; (b) a Control Purchase; or (c) a Board Change.
14. CONTINUATION OF RELATIONSHIP; LEAVE OF ABSENCE
(a) Nothing in the Management Plan or any Award made hereunder shall
interfere with or limit in any way, the right of the Company or of any
Subsidiary to terminate any Eligible Participant's employment at any time, nor
confer upon any Eligible Participant any right to continue any such relationship
with the Company or Subsidiary.
(b) For purposes of the Management Plan, a transfer of a recipient of
options, rights or restricted shares hereunder from the Company to a Subsidiary
or vice versa, or from one Subsidiary to another, or a leave of absence duly
authorized by the Company shall not be deemed a termination of employment or a
break in the incentive, waiting, exercise or restricted period, as the case may
be. In the case of any employee on an approved leave of absence, the Board of
Directors may make such provisions with respect to continuance of stock rights,
options or restricted shares previously granted while on leave from the employ
of the Company or a Subsidiary as it may deem equitable.
<PAGE>
15. GENERAL RESTRICTION
Each Award made under the Management Plan shall be subject to the
requirement that, if at any time the Board of Directors shall determine, in its
sole and subjective discretion, that the registration, qualification or listing
of the shares subject to such Award upon a securities exchange or under any
state or federal law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting or exercise of such Award, the Company shall not be required to issue
such shares unless such registration, qualification, listing, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. Nothing in the Management Plan or any
agreement or grant hereunder shall obligate the Company to effect any such
registration, qualification or listing.
16. RIGHTS AS A STOCKHOLDER
The holder of a stock option, incentive stock right or limited stock
appreciation right shall have no rights as a stockholder with respect to any
shares covered by the stock option, incentive stock right, stock appreciation
right or limited stock appreciation right, as the case may be, until the date of
issuance of a stock certificate to him for such shares related to the exercise
or discharge thereof. No adjustment shall be made for the dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.
17. NONASSIGNABILITY OF AWARDS
No incentive stock right, stock option, stock appreciation right or
limited stock appreciation right shall be assignable or transferable by an
Eligible Participant except by will or by the laws of descent and distribution
and during the lifetime of an Eligible Participant may only be exercised by him.
18. WITHHOLDING TAXES
Whenever under the Management Plan shares are to be issued in satisfaction
of stock options, incentive stock rights, stock appreciation right or limited
stock appreciation rights granted thereunder, or pursuant to restricted share
agreements, the Company shall have the right to require the Eligible Participant
to remit to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares or at such later time as when the Company may
determine that such taxes are due. Whenever under the Management Plan payments
are to be made in cash, such payment shall be net of an amount sufficient to
satisfy federal, state and local withholding tax requirements.
<PAGE>
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Management Plan by the Board of Directors
nor any provision of the Management Plan shall be construed as creating any
limitations on the power of the Board (but not the Committee) to adopt such
additional compensation agreements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Management
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
20. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board of Directors (but not the Committee) may at any time amend,
alter, suspend or discontinue the Management Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
recipient of a stock option, incentive stock right, limited stock appreciation
right or restricted shares under any agreement theretofore entered into
hereunder, without his consent, or which, without the requisite vote of the
stockholders of the Company approving such action, would:
(a) except as is provided in Section 12 of the Management Plan, increase
the total number of shares of stock reserved for the purposes of the Management
Plan; or
(b) extend the duration of the Management Plan; or
(c) materially increase the benefits accruing to participants under the
Management Plan; or
(d) change the category of persons who can be Eligible Participants under
the Management Plan. Without limiting the foregoing, the Board of Directors may,
any time or from time to time, authorize the Company, without the consent of the
respective recipients, to issue new options or rights in exchange for the
surrender and cancellation of any or all outstanding options or rights.
21. LIMITATIONS ON EXERCISE.
Notwithstanding anything to the contrary contained in the Management
Plan, any agreement evidencing any Award hereunder may contain such provisions
as the Board deems appropriate to ensure that the penalty provisions of Section
4999 of the Code, or any successor thereto, will not apply to any stock or cash
received by the holder from the Company.
22. GOVERNING LAW
The Management Plan shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
<PAGE>
Appendix B
NON-EXECUTIVE DIRECTOR
STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Non-Executive Director Stock Option Plan (the
"Director Plan") is to provide a means by which (i) each director of Hollywood
Productions, Inc. (the "Company") who is not otherwise a full-time employee of
the Company or any subsidiary of the Company (each such person being hereafter
referred to as a "Non-Executive Director") and (ii) each person appointed as a
member of an Advisory Board established or maintained by the Company who is not
otherwise an employee of the Company or any subsidiary of the Company (each such
person being hereafter referred to as a "Non-Executive Director") and (ii) each
person appointed as a member of an
Advisory Board established or maintained by the Company who is not otherwise an
employee of the Company or any subsidiary of the Company or an Outside Director
(each such person being hereinafter referred to as an "Advisor") will be given
an opportunity to purchase Common Stock, $.001 par value per share, of the
Company ("Common Stock"). The Company, by means of the Director Plan, seeks to
attract and retain the services of qualified independent persons to serve as
Non-Executive Directors of the Company and as Advisors on the Company's various
Advisory Boards, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
2. ADMINISTRATION
(a) The Director Plan shall be administered by a committee (the
"Committee") which shall at all times consist of not less than two (2)
individuals who are officers and directors of the Company or other individuals
who are not entitled to participate in the Director Plan, to be appointed by the
Board of Directors and to serve at the pleasure of the Board of Directors.
(b) Grant of options under the Director Plan and the amount and nature
of the awards to be granted shall be automatic as described in Section 5 hereof.
However, all questions of interpretation of the Director Plan or of any options
issued under it shall be determined by the Committee and such determination
shall be final and binding upon all persons having an interest in the Director
Plan. A majority of the Committee's members shall constitute a quorum, and all
determinations shall be made by a majority of such quorum. Any determination
reduced to writing and signed by all of the members of the Committee shall be
fully effective as if it had been made by a majority vote at a meeting duly
called and held.
3. SHARES SUBJECT TO THE PLAN
Subject to the provisions of Section 9 hereof, the shares that may be
acquired pursuant to options granted under the Director Plan ("Options") shall
not exceed in the aggregate 150,000 shares of the Company's Common Stock.
<PAGE>
The Common Stock subject to the Director Plan may be in whole or in
part authorized and unissued shares of Common Stock or issued shares of Common
Stock which shall have been reacquired by the Company. If any Option shall
expire or terminate for any reason without having been exercised in full, the
unissued shares subject thereto shall again be available for purposes of the
Director Plan.
4. ELIGIBILITY
Options shall be granted only to (a) Non-Executive Directors serving on
the Board of directors of the Company and (b) Advisors serving on the Advisory
Boards of the Company. Non-Executive Directors shall not be entitled to receive
Options for serving as Advisors on Advisory Boards of the Company.
5. NON-DISCRETIONARY GRANTS
(a) Grants to Outside Directors
(i) Commencing on January 1, 1998, an Option to purchase 5,000
shares of Common Stock on the terms and conditions set forth herein shall be
granted to each Non-Executive Directors who has served for a period of twelve
months as of January 1, 1998, to each Non-Executive Director upon joining the
Board of Directors and to each Non-Executive directors on January 1 of each year
thereafter provided such individual has continually served as a Non-Executive
Director for the twelve month period immediately preceding the date of grant.
(ii) Notwithstanding the foregoing, in no event will the grant amount, that
is, the amount determined by multiplying the number of shares with respect to
which Options have been granted by the Fair Market Value (as defined in
Subsection 6(b) below) of the Company's Common Stock on the date of grant,
exceed $100,000 with respect to an annual grant to a Non-Executive Director. To
the extent the grant amount exceeds the foregoing limitations, the number of
shares subject to be granted to the Non-Executive Director will be reduced
accordingly.
(b) Grants to Advisors
(i) Each person who is appointed as an Advisor on an Advisory
Board established or maintained by the Company shall, upon such appointment and
on each anniversary of the effective date of his appointment, be granted options
to purchase 2,500 shares on the terms and conditions set forth herein.
(ii) Notwithstanding the foregoing, no Director who may serve
on an Advisory Board of the Company shall be entitled to receive any options
under the Director Plan for serving as an Advisor, and in no event will the
grant amount, as defined above in Section 5(a)(ii), exceed $50,000 with respect
to a grant to an Advisor on an annual basis. To the extent the grant amount
exceeds the foregoing limitations, the number of share subject to the Option to
be granted to the Advisor will be reduced accordingly.
<PAGE>
6. OPTION PROVISIONS
Each Option shall be evidenced by a written agreement ("Stock Option
Agreement") and shall contain the following terms and conditions:
(a) The term of each Option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") five (5) years from the date of grant. The term of each Option may
terminate sooner than such Expiration Date if the optionee's service as a
Non-Executive Director or Advisor of the company terminates for any reason or
for no reason. In the event of such termination of service, the Option shall
terminate (i) for Non-Executive Directors, on the earlier of the Expiration Date
or the date three (3) months following the date of termination of service;
provided that if termination is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or twelve (12) months following
the date of the optionee's death. In any and all circumstances, an option may be
exercised following termination of the optionee's service as a Non-Executive
Director or Advisor only as to that number of shares as to which it was
exercisable on the date of termination of such service, in accordance with the
provisions of Subsection 6(e) of the Director Plan.
(b) The exercise price of each option shall be one hundred percent
(100%) of the Fair Market Value of the shares subject to such option on the date
such option is granted. "Fair Market Value" of a share of Common Stock shall
mean (i) if the Common Stock is traded on a national securities exchange or on
the NASDAQ National Market System ("NMS"), the per share closing price of the
Common Stock on the principal securities exchange on which they are listed or on
NMS, as the case may be, on the date of grant (or if there is no closing price
for such date of grant, then the last preceding business day on which there was
a closing price); or (ii) if the Common Stock is traded in the over-the-counter
market and quotations are published on the NASDAQ quotation system (but not on
NMS), the per share closing bid price of the Common Stock on the date of grant
as reported by NASDAQ (or if there is no closing bid price for such date of
grant, then the last preceding business day on which there was a closing bid
price); or (iii) if the Common Stock is traded in the over-the-counter market
but bid quotations are not published on NASDAQ, the closing bid price per share
for the Common Stock as furnished by a broker-dealer which regularly furnishes
price quotations for the Common Stock; or (iv) if the Common Stock is not traded
or quoted on a national securities exchange, NMS, the NASDAQ Quotation System,
the over-the-counter market, or the pink sheets, then the fair market value of
each share of the Company's Common Stock shall be determined by the Company's
Board of Directors or by a Committee of the Board of Directors, if one has been
appointed, subject to the applicable laws of the State of Delaware and such
other laws as in such cases shall be applicable.
(c) Subject to state law and the Company's By-laws, the optionee may
elect to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash at the time of
exercise; or
<PAGE>
(ii) Payment by the issuance of a promissory note; or
(iii) Payment by delivery of shares of Common Stock of the Company already
owned by the optionee, which Common Stock shall be valued at Fair Market valued
at Fair Market Value on the date of exercise; or
(iv) Payment by a combination of the methods of payment specified in
Subsections 6(c)(i) - 6(c)(iii) above.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution and shall exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) All options granted under the Director Plan shall be non-qualified
stock options and do not qualify as incentive stock options within the meaning
of Section 422A(b), or any successor section, of the Internal Revenue Code, as
amended.
7. RIGHT OF COMPANY TO TERMINATE SERVICES
AS A NON-EXECUTIVE DIRECTOR OR ADVISOR
Nothing contained in the Director Plan or in any instrument executed
pursuant hereto shall confer upon any Non-Executive director of Advisor or any
right to continue in the service of the Company or any of its subsidiaries or
interfere in any way with the right of the Company or a subsidiary to terminate
the service of any Non-Executive Director or Advisor at any time, with or
without cause.
8. NON-ALIENATION OF BENEFITS
No right or benefit under the Director Plan shall be subject to
alienation, sale, assignment, hypothecation, pledge, exchange, transfer,
encumbrance or charge, and any attempt to alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same shall be void. No right
or benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities or torts of the person entitled to such benefit.
<PAGE>
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The Stock Option Agreements evidencing options may contain such
provisions as the Committee shall determine to be appropriate for the adjustment
of the number and class of shares subject to all outstanding options and the
option prices thereof in the event of changes in the outstanding Common Stock of
the Company by reason of any stock dividend, distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding Common Stock, the aggregate number and class of shares available
under the Director Plan and the number of shares subject to non-discretionary
grants pursuant to Section 5 hereof shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
10. TERMINATION AND AMENDMENT
Unless the Director Plan shall theretofore have been terminated as
hereinafter provided, the Director Plan shall terminate on June 1, 2007. The
Board may at any time, but not more than once every six (6) months except to
comply with changes in the Internal Revenue Code, amend, alter, suspend or
terminate the Director Plan; provided, however, that the Board may not, without
the requisite vote of the stockholders of the Company approving such action (i)
increase (except as provided in Section 9 hereof) the maximum number of shares
which may be issued under the Director Plan; (ii) extend the term of the
Director Plan; (iii) increase the requirements as to eligibility for
participation in the Director Plan; or (iv) increase the benefits accruing to
participants under the Director Plan. No termination, modification or amendment
of the Director Plan or any outstanding Stock Option Agreement may, without the
consent of the Non-Executive Director or Advisor to whom any option shall
theretofore have been granted, adversely affect the rights of such Director with
respect to such option.
11. EFFECTIVENESS OF THE PLAN
The Director Plan shall become effective upon the requisite vote of the
stockholders of the Company approving such action, and upon the approvals, if
required, of any other public authorities. Any grant of options under the
Director Plan prior to such approval shall be expressly subject to the condition
that the Director Plan shall have been so approved. Unless the Director Plan
shall be so approved, the Director Plan and all options theretofore made
thereunder shall be and become null and void.
12. GOVERNMENT AND OTHER REGULATIONS
The obligation of the Company with respect to options shall be subject
to (i) all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of a registration statement under the Securities Act of 1933, and
(ii) the rules and regulations of any securities exchange on which the Common
Stock may be listed.
13. GOVERNING LAW
The Director Plan shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
<PAGE>
