<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HOT TOPIC, INC.
(Exact name of Registrant as specified in its charter)
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California 77-0198182
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3410 Pomona Boulevard
Pomona, California 91768
(909) 869-6373
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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NON-PLAN STOCK OPTIONS
1996 EQUITY INCENTIVE PLAN, AS AMENDED
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN, AS
AMENDED
(Full title of the plan)
----------
Jay A. Johnson
Chief Financial Officer
HOT TOPIC, INC.
3410 Pomona Boulevard
Pomona, California 91768
(909) 869-6373
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
M. Wainwright Fishburn, Esq.
COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
(619) 550-6000
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<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options and Common Stock, no par value 572,688 $20.00-$24.38 $13,299,696.58 $3,945.74
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457. The price per share and aggregate
offering price are based upon (a) the actual exercise price for shares
subject to options granted outside of the 1996 Equity Incentive Plan, as
amended (the "Equity Plan"); (b) the actual exercise price for shares
subject to options previously granted under the Registrant's Equity Plan;
(c) additional shares of Common Stock available for future grant under the
Equity Plan calculated on the basis of the average of the high and low
sales price of Registrant's Common Stock on June 25, 1998 as
reported on the Nasdaq National Market System; (d) the actual exercise
price for shares subject to options previously granted under the
Registrant's 1996 Non-Employee Directors' Stock Option Plan, as amended
(the "Directors' Plan"); and (e) shares issuable under the Directors Plan
calculated on the basis of the average of the high and low sales price of
Registrant's Common Stock on June 25, 1998 as reported on the
Nasdaq National Market System. The following chart shows the calculation
of the registration fee.
<TABLE>
<CAPTION>
Offering Price Aggregate
Type of Shares Number of Shares Per Share Offering Price
-------------- ---------------- --------- --------------
<S> <C> <C> <C>
Common Stock issuable pursuant to outstanding options 5,000 $ 20.00 $ 100,000
issued outside of the Equity Plan
Common Stock issuable pursuant to outstanding options 5,000 $ 21.63 $ 108,150
issued outside of the Equity Plan
Common Stock issuable pursuant to outstanding options 12,688 $ 24.25 $ 307,684
issued outside of the Equity Plan
Common Stock issuable pursuant to outstanding 182,425 $ 21.63 $ 3,945,852.75
options under the Equity Plan
Common Stock available for grant under the Equity Plan 317,575 $ 24.25 $ 7,701,193.75
Common Stock available for grant under the Directors' 50,000 $ 24.25 $ 1,212,500.00
Plan
</TABLE>
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange act of 1934,
as amended (the "Exchange Act"), are hereby incorporated by reference into this
Registration Statement except as superseded or modified herein: (1) The Contents
of Registrant's Registration Statement on Form S-8 (SEC No. 333-13875) dated
October 10, 1996, pertaining to shares of the Registrant's Common Stock, the
same class of securities being registered pursuant to this Registration
Statement; and (2) Registrant's Annual report on Form 10-K for the year ended
January 31, 1998, Registrant's Quarterly Report on Form 10-Q for the period
ended May 2, 1998 and the description of Registrant's Common Stock, contained in
its Registration Statement on form 8-A dated September 16, 1996, including any
amendment or reports filed for the purpose of updating such description. All
documents filed by the Registrant with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold shall be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
by reference or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Registration Statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Amended and Restated Articles of Incorporation
provide that to the fullest extent permitted by California law, the Registrant's
directors will not be personally liable to the Registrant and its shareholders
for monetary damages for any breach of a
<PAGE> 4
director's fiduciary duty. The Amended and Restated Articles of Incorporation do
not, however, eliminate the duty of care, and in appropriate circumstances
equitable remedies such as an injunction or other forms of non-monetary relief
would remain available under California law. Each director will continue to be
subject to liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for acts or omissions that
the director believes to be contrary to the best interests of the Registrant or
its shareholders, for any transaction from which the director derived an
improper personal benefit, for acts or omissions involving a reckless disregard
for the director's duty to the Registrant or its shareholders when the director
was aware or should have been aware of a risk of serious injury to the
Registrant or its shareholders, for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the Registrant or its shareholders, for improper transactions between
the director and the Registrant and for improper distributions to shareholders
and loans to directors and officers. This provision also does not affect a
director's responsibilities under any other laws, such as the Federal securities
laws or state or Federal environmental laws.
In addition, the Registrant's Bylaws provide that the Registrant
shall indemnify its directors and may indemnify its officers, employees and
other agents to the fullest extent permitted by California law. The Registrant
is also empowered under its Bylaws to enter into indemnification contracts with
its directors and officers and to purchase insurance on behalf of any person
whom it is required or permitted to indemnify. Pursuant to this provision, the
Registrant has entered into indemnity agreements with each of its directors and
officers. In addition, the Registrant is required, subject to certain
exceptions, to advance all expenses incurred by any director or executive
officer in connection with a completed, pending or threatened action, suit or
proceeding upon receipt of an undertaking by such director or executive officer
to repay all amounts advanced by the Registrant on such person's behalf if it is
ultimately determined that such person is not entitled to be indemnified under
the Bylaws or otherwise.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
<PAGE> 5
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Registrant's Amended and Restated Articles of Incorporation. (1)
4.2 Registrant's Bylaws. (1)
4.3 Specimen Stock Certificate. (1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page 6.
99.1 1996 Equity Incentive Plan, as amended (the "Equity Plan").
99.2 Form of Incentive Stock Option Agreement under the Equity Plan. (1)
99.3 Form of Nonstatutory Stock Option Agreement under the Equity Plan. (1)
99.4 1996 Non-Employee Directors' Stock Option Plan, as amended (the "Directors Plan").
99.5 Form of Nonstatutory Stock Option Agreement under the Directors' Plan. (1)
99.6 Form of Nonstatutory Stock Option Agreement outside of the Plans.
</TABLE>
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(1) Filed as an exhibit to Amendment No. 1 to the Registration
Statement on Form SB-2 (No. 333-5054-LA), and incorporated
herein by reference.
<PAGE> 6
ITEM 9. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, as amended (the "Securities Act"), each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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 Securities Act and will be governed by the final
adjudication of such issue.
<PAGE> 7
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pomona, State of California, on June 30, 1998.
HOT TOPIC, INC.
By /s/ ORVAL D. MADDEN
--------------------------------------
Orval D. Madden
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Orval D. Madden and Jay A. Johnson and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any of
them, or his substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ROBERT M. JAFFE Chairman of the Board June 30, 1998
- -------------------------------------
Robert M. Jaffe
/s/ ORVAL D. MADDEN President, Chief Executive Officer June 30, 1998
- ------------------------------------- and Director(Principal Executive Officer)
Orval D. Madden
/s/ JAY A. JOHNSON Chief Financial Officer and Assistant June 30, 1998
- ------------------------------------- Secretary (Principal Financial and
Jay A. Johnson Accounting Officer)
/s/ EDGAR F. BERNER Director June 30, 1998
- -------------------------------------
Edgar F. Berner
/s/ STANLEY E. FOSTER Director June 30, 1998
- -------------------------------------
Stanley E. Foster
/s/ CORRADO FEDERICO Director June 30, 1998
- -------------------------------------
Corrado Federico
/s/ ANDREW SCHUON Director June 30, 1998
- -------------------------------------
Andrew Schuon
/s/ CECE SMITH Director June 30, 1998
- -------------------------------------
Cece Smith
</TABLE>
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
4.1 Registrant's Amended and Restated Articles of Incorporation. *
4.2 Registrant's Bylaws. *
4.3 Specimen Stock Certificate. *
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to Page 6.
99.1 1996 Equity Incentive Plan, as amended (the "Equity Plan").
99.2 Form of Incentive Stock Option Agreement under the Equity Plan. *
99.3 Form of Nonstatutory Stock Option Agreement under the Equity Plan. *
99.4 1996 Non-Employee Directors' Stock Option Plan, as amended (the "Directors' Plan").
99.5 Form of Nonstatutory Stock Option under the Directors' Plan *
99.6 Form of Nonstatutory Stock Option Agreement outside of the Equity Plan.
</TABLE>
- ----------
* Filed as an exhibit to Amendment No. 1 to the Registration Statement
on Form SB-2 (No. 333-5054-LA), and incorporated herein by reference.
<PAGE> 1
[COOLEY GODWARD LLP LETTERHEAD] EXHIBIT 5.1
June 30, 1998
Hot Topic, Inc.
3410 Pomona Boulevard
Pomona, California 91768
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Hot Topic, Inc. (the "Company") of a Registration Statement
on Form S-8 (the "Registration Statement") with the Securities and Exchange
Commission covering the offering of 572,688 shares of the Company's Common
Stock, no par value (the "Shares"), including 182,425 shares issuable pursuant
to outstanding stock options under the Company's 1996 Equity Incentive Plan, as
amended (the "Equity Plan"), 317,575 additional shares available for grant under
the Equity Plan, 50,000 shares available for grant under the Company's 1996
Non-Employee Directors' Stock Option Plan, as amended (the "Directors' Plan,"
and together with the Equity Plan, the "Plans") and 22,688 shares issuable
pursuant to outstanding stock options (the "Options") granted outside the Plans.
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Articles of Incorporation, as amended, and By-laws, as
amended, and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We have assumed
the genuineness and authenticity of all documents submitted to us as originals,
the conformity to originals of all documents submitted to us as copies thereof,
and the due execution and delivery of all documents where due execution and
delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and the Equity Plan, the Directors' Plan or the Options, as the case
may be, will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
/S/ M. WAINWRIGHT FISHBURN
- -----------------------------
M. Wainwright Fishburn, Jr.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8), pertaining to the Non-Plan Stock Options, 1996 Equity Incentive
Plan, as amended, and 1996 Non-Employee Directors' Stock Option Plan, as
amended, of our report dated March 13, 1998 with respect to the financial
statements of Hot Topic, Inc. included in Hot Topic Inc.'s Annual Report on Form
10-K for the fiscal year ended January 31, 1998 filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Los Angeles, California
June 29, 1998
<PAGE> 1
EXHIBIT 99.1
HOT TOPIC, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED JANUARY 20, 1993
AMENDED JULY 8, 1994
AMENDED MARCH 27, 1996
AMENDED AND RESTATED JUNE 14, 1996
AMENDED FEBRUARY 18, 1998
APPROVED BY SHAREHOLDERS MAY 27, 1998
INTRODUCTION
Originally adopted on January 20, 1993 as the "1993 Stock Option Plan
of Hot Topic, Inc.," the plan is hereby amended and restated and retitled the
"1996 Equity Incentive Plan."
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services
of persons who are now Employees or Directors of or Consultants to the Company
or its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
1.
<PAGE> 2
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "COMPANY" means Hot Topic, Inc., a California corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means
a right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Chief Executive Officer of the Company may determine, in his or
her sole discretion, whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board or the Chief Executive Officer of the Company,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
2.
<PAGE> 3
(k) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
Stock Market, the Fair Market Value of a share of common stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(2) If the common stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to
3.
<PAGE> 4
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted pursuant to subsection 8(b)(3) of the Plan.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(s) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "OPTION" means a stock option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONEE" means a person who holds an outstanding Option.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "PLAN" means this Hot Topic, Inc. 1996 Equity Incentive Plan.
(y) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.
(aa) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.
4.
<PAGE> 5
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(cc) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a
right granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in
Section 14.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
of the Board composed of not fewer than two (2) members (the "Committee"), all
of the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers
5.
<PAGE> 6
theretofore possessed by the Board, including the power to delegate to a
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such Subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Notwithstanding anything in this Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of the
Board the authority to grant Stock Awards to eligible persons who (1) are not
then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award, or (ii) not persons
with respect to whom the Company wishes to avoid the application of Section
162(m) of the Code.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate One Million Two Hundred Fifty Thousand
(1,250,000) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan. Shares subject
to Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants. Notwithstanding the foregoing, no
Stock Awards shall be granted to a Director (including a Director who is an
Employee or a Consultant) prior to August 15, 1996 (or such later date as the
amendments to Rule 16b-3 adopted by the Securities and Exchange Commission
pursuant to Release No. 34-37260 become effective
6.
<PAGE> 7
as to the Company), unless such Director is expressly declared eligible to
participate in the Plan by action of the Board or the Committee.
(b) No person shall be eligible for the grant of an Option or an
award to purchase restricted stock if, at the time of grant, such person owns
(or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant, or in the case of a
restricted stock purchase award, the purchase price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than Two Hundred Thousand (200,000)
shares of the Company's common stock in any twelve (12) month period. This
subsection 5(c) shall not apply prior to the date of the first registration of
an equity security of the Company under Section 12 of the Exchange Act and,
following such registration, shall not apply until (i) the earliest of: (A) the
first material modification of the Plan (including any increase to the number of
shares reserved for issuance under the Plan in accordance with Section 4); (B)
the issuance of all of the shares of common stock reserved for issuance under
the Plan; (C) the expiration of the Plan; or (D) the first meeting of
shareholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the
7.
<PAGE> 8
stock subject to the Option on the date the Option is granted. Notwithstanding
the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory
Stock Option) may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option may be
transferred by the Optionee upon such terms and conditions as are set forth in
the Option Agreement for such Nonstatutory Option, as the Board or the Committee
shall determine in its discretion, including (without limitation) pursuant to a
"domestic relations order" within the meaning of such rules, regulations or
interpretations of the Securities and Exchange Commission as are applicable for
purposes of Section 16 of the Exchange Act (a "DRO"). In the event of a transfer
of a Nonstatutory Option as provided in the Option Agreement, the transferee
shall be entitled to exercise such Nonstatutory Option to the extent of his or
her interest received in such transfer, subject to the terms and conditions of
the Option Agreement. Notwithstanding the foregoing, the person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the
8.
<PAGE> 9
shares allotted to that period, and may be exercised with respect to some or all
of the shares allotted to such period and/or any prior period as to which the
Option became vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date thirty (30) days after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise
of the Option following the termination of the Optionee's Continuous Status as
an Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of thirty (30) days after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
9.
<PAGE> 10
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
10.
<PAGE> 11
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted
stock purchase agreement shall be transferable except by will or the laws of
descent and distribution or, if the agreement so provides, pursuant to a DRO (as
defined in subsection 6(d) hereof), so long as stock awarded under such
agreement remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. If a Stock
Appreciation Right is granted to an individual who is at the time
11.
<PAGE> 12
subject to Section 16(b) of the Exchange Act (a "Section 16(b) Insider"), the
Stock Award Agreement of grant shall incorporate all the terms and conditions at
the time necessary to assure that the subsequent exercise of such right shall
qualify for the safe-harbor exemption from short-swing profit liability provided
by Rule 16b-3 promulgated under the Exchange Act (or any successor rule or
regulation). Except as provided in subsection 5(d), no limitation shall exist on
the aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent
Rights will be granted independently of any Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to Nonstatutory Stock
12.
<PAGE> 13
Options as set forth in Section 6. They shall be denominated in share
equivalents. The appreciation distribution payable on the exercised Independent
Right shall be not greater than an amount equal to the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (B) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of the affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option) or, in the
case of a 10% shareholder (as described in subsection 5(b)), not less than one
hundred ten percent (110%) of the Fair Market Value) per share of stock on the
new grant date. Notwithstanding the foregoing, the Board or the Committee may
grant an Option and/or Stock Appreciation Right with an exercise price lower
than that set forth above if such Option and/or Stock Appreciation Right is
granted as part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted, for the applicable year in
which it was granted, against the maximum award of Options and Stock
Appreciation Rights permitted to be granted pursuant to subsection 5(c) of the
Plan. The repricing of an Option and/or Stock Appreciation Right under this
Section 9, resulting in a reduction of the exercise price, shall be deemed to be
a cancellation of the original Option and/or Stock Appreciation Right and the
grant of a substitute Option and/or Stock Appreciation Right; in the event of
such repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of Options and
Stock Appreciation Rights permitted to be granted pursuant to subsection 5(c) of
the Plan. The provisions of this subsection 9(b) shall be applicable only to the
extent required by Section 162(m) of the Code.
13.
<PAGE> 14
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock under such Stock
Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to
whom a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause the right of the Company's Board of Directors
and/or the Company's shareholders to remove any Director pursuant to the terms
of the Company's Bylaws and the provisions of the California Corporations Code
(or the applicable laws of the Company's state of
14.
<PAGE> 15
incorporation if the Company's state of incorporation should change in the
future), or the right to terminate the relationship of any Consultant pursuant
to the terms of such Consultant's agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d), 7(b) or 8(b), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement,
the person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of the
common stock of the Company.
15.
<PAGE> 16
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares subject to award to any person
during any twelve (12) month period pursuant to subsection 5(c), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group (within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then: (i) any surviving or acquiring corporation shall assume any
Stock Awards outstanding under the Plan or shall substitute similar Stock Awards
(including an award to acquire the same consideration paid to the shareholders
in the transaction described in this subsection 13(b)) for those outstanding
under the Plan; or (ii) in the event any surviving or acquiring corporation
refuses to assume such Stock Awards or to substitute similar awards for those
outstanding under the Plan, then, (A) with respect to Stock Awards held by
persons then performing services as Employees, Directors or Consultants, the
vesting of such Stock Awards and, if applicable, exercisability of such Stock
Awards shall be accelerated prior to such event and the Stock Awards terminated
if not exercised after such acceleration and at or prior to such event, and (B)
with respect to any other Stock Awards outstanding under the Plan, such Stock
Awards shall be terminated if not exercised prior to such event.
16.
<PAGE> 17
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires shareholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(iii) Modify the Plan in any other way if such modification
requires shareholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment
to the Plan for shareholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section 162(m) of the Code
and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
17.
<PAGE> 18
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the date that is
ten (10) years following the earlier of (i) the date of the amendment and
restatement of the Plan as determined by the Board, or (ii) the date such
amendment and restatement is approved by the shareholders of the Company. No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan, as amended by the Board on June 14,1996, shall become
effective on the same day that the Company's initial public offering of shares
of common stock becomes effective. Prior to the effectiveness of such initial
public offering, the terms and conditions of the Plan as in effect prior to its
amendment by the Board on June 14, 1996 shall continue to apply. No Stock Awards
granted under the Plan shall be exercised unless and until the Plan has been
approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
18.
<PAGE> 1
EXHIBIT 99.4
HOT TOPIC, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON JUNE 14, 1996
APPROVED BY SHAREHOLDERS ON JULY 9, 1996
AMENDED ON FEBRUARY 18, 1998
APPROVED BY SHAREHOLDERS ON MAY 27, 1998
1. PURPOSE.
(a) The purpose of the 1996 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Hot Topic, Inc.
(the "Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services
of persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"), unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
1.
<PAGE> 2
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate eighty thousand (80,000) shares
of the Company's common stock. Such share reserve is comprised of the thirty
thousand (30,000) shares reserved for issuance upon adoption of the Plan plus an
additional fifty thousand (50,000) reserved for issuance in February, 1998. If
any option granted under the Plan shall for any reason expire or otherwise
terminate without having been exercised in full, the stock not purchased under
such option shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the
Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is elected or appointed for the first time to be
a Non-Employee Director shall automatically be granted, upon the date of his or
her initial election or appointment, an option to purchase five thousand (5,000)
shares of common stock (an "Initial Grant").
(b) On the date of each annual meeting of shareholders, commencing
with the 1998 annual meeting, each person who is then a Non-Employee Director
shall automatically be granted an option to purchase one thousand two hundred
fifty (1,250) shares of common stock (an "Annual Grant"). Notwithstanding the
foregoing, a Non-Employee Director shall not be entitled to an Annual Grant if
(i) such Non-Employee Director has served as a Non-Employee Director for less
than three (3) months, or (ii) such Non-Employee failed to attend at least
seventy five percent (75%) of the meetings (A) of the Board which occurred while
the Non-Employee Director was a member of the Board and (B) of each committee of
which such Non-Employee Director was a member.
6. OPTION PROVISIONS.
Each option shall be subject to 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") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or
2.
<PAGE> 3
for no reason, the option shall terminate on the earlier of the Expiration Date
or the date three (3) months following the date of termination of such service;
provided, however, that if such termination of service 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-Employee Director or employee of or consultant to
the Company or any Affiliate only as to that number of shares as to which it was
exercisable as of the date of termination of all such service under the
provisions of subparagraph 6(e).
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.
(c) Payment of the exercise price of each option is due in full in
cash upon any exercise when the number of shares being purchased upon such
exercise is less than 100 shares; but when the number of shares being purchased
upon an exercise is 100 or more shares, 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;
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or
(iii) Provided that at the time of the exercise the
Company's common stock is publicly traded and quoted regularly in The Wall
Street Journal, payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the
Company's common stock or pursuant to the terms of irrevocable instructions
issued by the optionee prior to the issuance of shares of the Company's common
stock.
(iv) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(iii) above.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, or pursuant to a domestic relations order, and
shall be exercisable during
3.
<PAGE> 4
the lifetime of the person to whom the option is granted only by such person (or
by his guardian or legal representative) or transferee pursuant to such an
order. Notwithstanding the foregoing, the optionee may, by delivering written
notice to the Company in a form satisfactory to the Company, designate a third
party who, in the event of the death of the optionee, shall thereafter be
entitled to exercise the option.
(e) The option shall become exercisable in installments over a period
of four (4) years from the date of grant as follows: twenty-five percent (25%)
shall be exercisable commencing on the date one year after the date of grant of
the option and six and one-quarter percent (6.25%) shall be exercisable at the
end of each calendar quarter thereafter, provided that the optionee has, during
the entire period prior to such vesting date, continuously served as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate of the Company, whereupon such option shall become fully exercisable
in accordance with its terms with respect to that portion of the shares
represented by that installment.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionee or permitting the optionee to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
4.
<PAGE> 5
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is
transferred under subparagraph 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
option unless and until such person has satisfied all requirements for exercise
of the option pursuant to its terms.
(b) Nothing in the Plan, or in any instrument executed pursuant
thereto, shall confer upon any Non-Employee Director any right to continue in
the service of the Company or any Affiliate in any capacity or shall affect any
right of the Company, its Board or shareholders or any Affiliate to remove any
Non-Employee Director pursuant to the Company's Bylaws and the provisions of the
laws of the Company's state of incorporation.
(c) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it
shall be a condition precedent to the Company's obligation to issue or transfer
shares to a Non-
5.
<PAGE> 6
Employee Director, or to evidence the removal of any restrictions on transfer,
that such Non-Employee Director make arrangements satisfactory to the Company to
insure that the amount of any federal or other withholding tax required to be
withheld with respect to such sale or transfer, or such removal or lapse, is
made available to the Company for timely payment of such tax.
(e) As used in this Plan, "fair market value" means, as of any date,
the value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
Stock Market, the fair market value of a share of common stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable.
(ii) If the common stock is quoted on The Nasdaq Stock
Market (but not on the National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the fair
market value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
(iii) In the absence of an established market for the common
stock, the fair market value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all
or substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is
6.
<PAGE> 7
not the surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4) the
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or any Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, then the time during which
options outstanding under the Plan may be exercised shall be accelerated prior
to such event and the options terminated if not exercised after such
acceleration and at or prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. Except as
provided in paragraph 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company
within twelve (12) months before or after the adoption of the amendment if such
amendment requires shareholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act, Section 162(m) of
the Internal Revenue Code or any Nasdaq or securities exchange requirements.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. No
options may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
7.
<PAGE> 8
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
shareholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
8.
<PAGE> 1
EXHIBIT 99.6
HOT TOPIC, INC.
NON-EMPLOYEE DIRECTORS' NONSTATUTORY STOCK OPTION
______________________________________, Optionee:
HOT TOPIC, INC. (the "Company") has on ______________, 199_ granted
to you, the optionee named above, an option to purchase shares of the common
stock of the Company ("Common Stock"). This option is not intended to qualify
and will not be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is _______________________
(_______).
2. VESTING. Subject to limitations contained herein, this option
shall become exercisable in installments over a period of four (4) years from
the date of grant as follows: twenty-five percent (25%) shall be exercisable
commencing on the date one year after the date of grant of the option and six
and one-quarter percent (6.25%) shall be exercisable at the end of each calendar
quarter thereafter, provided that the optionee has, during the entire period
prior to such vesting date, continuously served as a non-employee director or
employee of or consultant to the Company or any affiliate of the Company,
whereupon such option shall become fully exercisable in accordance with its
terms with respect to that portion of the shares represented by that
installment.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) The exercise price of this option is _________ ($ ) per share,
being the closing sales price of the Common Stock as quoted on the Nasdaq
National Market on the date of grant of this option.
(b) Payment of the exercise price of each option is due in full in
cash upon any exercise when the number of shares being purchased upon such
exercise is less than 1,000 shares; but when the number of shares being
purchased upon an exercise is 1,000 or more shares, 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;
(ii) Provided that at the time of the exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of shares of Common Stock already owned by the optionee,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances
1.
<PAGE> 2
or security interest, which Common Stock shall be valued at its fair market
value on the date preceding the date of exercise; or
(iii) Provided that at the time of the exercise the Common
Stock is publicly traded and regularly quoted in The Wall Street Journal,
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which results in the receipt of cash (or check) by the Company
either prior to the issuance of shares of the Common Stock or pursuant to the
terms of irrevocable instructions issued by the optionee prior to the issuance
of shares of the Common Stock.
(iv) Payment by a combination of the methods of payment
specified in subparagraph 3(b)(i), 3(b)(ii) and 3(b)(iii) above.
4. WHOLE SHARES. This option may only be exercised for whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Securities
Act of 1933, as amended (the "Securities Act") or, if such shares are not then
so registered, the Company has determined that such exercise and issuance would
be exempt from the registration requirements of the Securities Act.
6. TERM. 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") ten (10) years from the date of grant. If the optionee's
service as a non-employee director or employee of or consultant to the Company
or any affiliate terminates for any reason or for no reason, the option shall
terminate on the earlier of the Expiration Date or the date three (3) months
following the date of termination of all such service; provided, however, that
if such termination of service 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, this option may
be exercised following termination of the optionee's service as a non-employee
director or employee of or consultant to the Company or any affiliate only as to
that number of shares as to which it was exercisable as of the date of
termination of all such service.
7. EXERCISE. This option may be exercised by delivering a notice of
exercise (in a form designated by the Company), together with the exercise
price, to the Secretary of the Company, or to such other person as the Company
may designate, during regular business hours. By exercising this option you
agree that the Company may require you to enter an arrangement providing for the
cash payment by you to the Company of any tax withholding obligation of the
Company arising by reason of the exercise of this option or the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise.
8. TRANSFERABILITY. An option shall not be transferable except by
will or by the laws of descent and distribution, or pursuant to a domestic
relations order, and shall be exercisable during the lifetime of the person to
whom the option is granted only by such person (or by his guardian or legal
representative) or transferee pursuant to such an order. Notwithstanding the
foregoing, the optionee may, by delivering written notice to the Company in
2.
<PAGE> 3
a form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the option.
9. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to this
option (through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), this option will be appropriately adjusted in the class and number of
shares and price per share of stock subject to the option. Such adjustments
shall be made by the Board of Directors (the "Board"), the determination of
which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale
of all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors, then the time during which this option may be exercised
shall be accelerated prior to such event and shall terminate if not exercised
after such acceleration and at or prior to such event.
10. NOTICES. Any notices provided for in this option shall be given
in writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
11. OPTION NOT A SERVICE CONTRACT. Nothing in this option shall
confer upon any non-employee director any right to continue in the service of
the Company or any affiliate in any capacity or shall affect any right of the
Company, its Board or shareholders or any affiliate to remove any non-employee
director pursuant to the Company's Bylaws and the provisions of laws of the
Company's state of incorporation.
12. AUTHORITY. This option is subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted by the Company. This authority shall be exercised by the Board, or by a
committee of one or more members of the Board in the event that the Board
delegates its authority to a committee. The Board, in exercise
3.
<PAGE> 4
of this authority, may correct any defect, omission or inconsistency in this
option in a manner and to the extent the Board shall deem necessary or desirable
to make this option fully effective. References to the Board shall mean the
committee if a committee has been appointed by the Board. Any interpretations,
rules and regulations promulgated by the Board shall be final and binding upon
the Company and its successors in interest as well as you and your heirs,
assigns, and other successors in interest. The Board at any time, and from time
to time, may amend the terms of this option; provided, however, that your rights
and obligations under this option shall not be impaired by any such amendment
unless (i) the Company requests your consent and (ii) you consent in writing.
13. AVAILABLE SHARES. During the term of this option, the Company
shall at all times keep available the number of shares of stock required to
satisfy the exercise of such option.
Dated the _____ day of , __________________ 19__.
Very truly yours,
HOT TOPIC, INC.
By:_______________________________
Duly authorized on behalf
of the Board of Directors
4.
<PAGE> 5
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option;
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:
NONE_______________________________
(Initial)
OTHER __________________________
__________________________
__________________________
___________________________________
Optionee
___________________________________
Address
___________________________________
___________________________________
5.
<PAGE> 6
NOTICE OF EXERCISE
HOT TOPIC, INC.
3410 Pomona Blvd.
Pomona, California 91768 Date of Exercise: _______________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to
purchase the number of shares for the price set forth below.
<TABLE>
<S> <C>
Type of option: Nonstatutory
Stock option dated: __________________
Number of shares as
to which option is
exercised: __________________
Certificates to be
issued in name of: __________________
Total exercise price: $_________________
Cash payment delivered
herewith: $_________________
Value of ______ shares of
______________ common
stock delivered herewith(1): $_________________
</TABLE>
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the option and (ii) to provide for the
payment by me to you (in the manner designated by you) of your withholding
obligation, if any, relating to the exercise of this option.
I acknowledge that all certificates representing any of the shares
subject to the provisions of the option shall have endorsed thereon any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
Very truly yours,
___________________________________
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(1) This payment feature may be used with respect to an exercise of
1,000 or more shares. Shares must meet the public trading requirements set forth
in the option. Shares must be valued in accordance with the terms of the option
being exercised, must have been owned for the minimum period required in the
option, and must be owned free and clear of any liens, claims, encumbrances or
security interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
6.
