<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FOUR MEDIA COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 95-4599440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2813 WEST ALAMEDA AVENUE
Burbank, California 91505
(Address of Principal Executive Offices) (Zip Code)
FOUR MEDIA COMPANY NONQUALIFIED STOCK OPTIONS,
FOUR MEDIA COMPANY 1997 STOCK PLAN AND
FOUR MEDIA COMPANY 1997 DIRECTOR OPTION PLAN
(Full title of the plan)
ROBERT T. WALSTON
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
2813 WEST ALAMEDA STREET
BURBANK, CALIFORNIA 91505
(Name and address of agent for service)
(818) 840-7000
(Telephone Number, Including Area Code, of Agent for Service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities Amount to be Proposed maximum Proposed maximum Amount of
to be registered registered/1/ offering price per share/2/ aggregate offering price/2/ registration fee/2/
<S> <C> <C> <C> <C>
Common Stock
$.01 par value 3,442,750 $10.00 $24,296,393 $7,168.00
</TABLE>
1. Plus such additional number of shares ad may hereafter become issuable
pursuant to the antidilution provisions of the Plans and the Agreements.
2. Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) under the Securities Act of 1933, as amended. The
offering price per share and aggregate offering price are based upon (a)
the weighted average exercise price, for shares subject to outstanding
options granted under the Plans and the Agreements and (b) the average of
the high and low prices of the Company's Common Stock on the Nasdaq Stock
Market on July 23, 1998, for shares reserved for future issuance upon the
exercise of options to be granted under the Plans (pursuant to Rule 457(c)
under the Securities Act).
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information
The documents containing the information specified in this Item will be
sent or given to employees, consultants and directors who have been granted
options to purchase shares of Common Stock, $.01 par value, in Four Media
Company ("Options") under the Four Media Company 1997 Stock Plan and the 1997
Director Option Plan and pursuant to Nonqualified Stock Option Agreements with
Repurchase Provisions, and are not being filed with, or included in, this
Registration Statement on Form S-8 (the "Registration Statement") in accordance
with the rules and regulations of the Securities and Exchange Commission (the
"Commission").
Item 2. Registration Information and Employee Plan Annual Information
The documents containing the information specified in this Item will be
sent or given to employees, consultants and directors who have been granted
Options and are not being filed with, or included in, this Registration
Statement in accordance with the rules and regulations of the Commission.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The following documents, which have been heretofore filed with the
Commission by Four Media Company, a Delaware corporation (the "Registrant"), are
incorporated by reference in this Registration Statement:
(a) The Registrant's annual report on Form 10-K for the fiscal year ended
August 3, 1997 (File Number 0-21943), as filed with the Commission on November
4, 1997.
(b)(i) The Registrant's quarterly report on Form 10-Q for the fiscal
quarter ended November 2, 1997, as filed with the Commission on December 18,
1997.
(ii) The Registrant's quarterly report on Form 10-Q for the fiscal
quarter ended February 1, 1998, as filed with the Commission on March 17, 1998.
(iii) The Registrant's quarterly report on Form 10-Q for the fiscal
quarter ended May 3, 1998, as filed with the Commission on June 16, 1998.
<PAGE>
(iv) The Registrant's current report on Form 8-K, dated February 2,
1998, as filed with the Commission on February 18, 1998 and Amendment thereto on
Form 8-K/A, as filed with the Commission on March 17, 1998.
(v) The Registrant's current report on Form 8-K, dated May 4, 1998, as
filed with the Commission on May 19, 1998 and Amendment thereto on Form 8-K/A,
as filed with the Commission on July 17, 1998.
(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A under the caption "Description
of Capital Stock," as filed with the Commission on January 31, 1997 pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered have been sold
or which deregisters all such securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be part hereof from the date of
filing of such documents. Any statement contained herein or in a document
incorporated 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 incorporated or 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
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in parties by
reason of their serving or having served in such capacity. The DGCL provides,
however, that such person must have acted in good faith and in a manner he or
she reasonably believed to be in (or not opposed to) the best interests of the
corporation and, in the case of a criminal action, such person must have had no
reasonable cause to believe his or her conduct was unlawful. In addition, the
DGCL does not
3
<PAGE>
permit indemnification in an action or suit by or in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnify for expenses the court deems proper in
light of liability adjudication. With respect to present or former directors and
officers, indemnity is mandatory to the extent a claim, issue or matter has been
successfully defended.
The Company's Bylaws (the "Bylaws") provide for mandatory indemnification
of directors and officers generally to the same extent authorized by the DGCL.
Under the Bylaws, the Company shall advance expenses incurred by an officer or
director in defending any such action if the director or officer undertakes to
repay such amount if it is determined that he or she is not entitled to
indemnification. The Company has obtained directors' and officers' liability
insurance.
The Company has entered into separate indemnification agreements with its
directors and officers. Each indemnification agreement provides for, among
other things: (i) indemnification against any and all expenses, liabilities and
losses (including attorneys' fees, judgments, fines, taxes, penalties and
amounts paid in settlement) of any claim against an indemnified party unless it
is determined, as provided in the indemnification agreement, that
indemnification is not permitted under applicable law; and (ii) prompt
advancement of expenses to any indemnified party in connection with his or her
defense against any claim.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
4.1 Four Media Company 1997 Stock Plan and Stock Option Agreement, as amended
4.2 Four Media Company 1997 Director Option Plan and Director Stock Option
Agreement, as amended
4.3 Form of Nonqualified Stock Option Agreement with Repurchase Provisions
5.1 Opinion of Greenberg Glusker Fields Claman & Machtinger LLP regarding the
legality of the securities being registered
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Greenberg Glusker Fields Claman & Machtinger LLP (contained in
Exhibit 5.1)
24.1 Power of Attorney (contained in the signature page hereof)
Item 9. Undertakings
(a) The 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:
4
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee" table in the effective registration
statement;
(iii) 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 this Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered hereby which remain unsold at the
termination of the offering.
(b) 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 that is incorporated by reference in this 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.
(c) 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
5
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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 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.
6
<PAGE>
SIGNATURES
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 of 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 Burbank, State of California, on this 23rd day of
July, 1998.
FOUR MEDIA COMPANY
By: /s/ Robert T. Walston
---------------------
Robert T. Walston
Chairman of the Board and Chief Executive Officer
7
<PAGE>
POWER OF ATTORNEY
KNOW ALL ME BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert T. Walston and Alan S. Unger his true and
lawful attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, including post-effective amendments, 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 full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, and hereby ratifies and confirms all his said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
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 date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert T. Walston Chairman of the Board and July 16, 1998
- -------------------------- Chief Executive Officer
Robert T. Walston (principal executive officer)
/s/ Alan S. Unger Vice President and Chief Financial Officer July 16, 1998
- -------------------------- (principal financial and accounting officer)
Alan S. Unger
/s/ William Amon
- -------------------------- Director July 6, 1998
William Amon
/s/ Robert Bailey
- -------------------------- Director July 20, 1998
Robert Bailey
/s/ Paul Bricault
- -------------------------- Director July 10, 1998
Paul Bricault
/s/ John H. Donlon
- -------------------------- Director July 16, 1998
John H. Donlon
/s/ Edward Kirtman
- -------------------------- Director July 14, 1998
Edward Kirtman
/s/ Gavin W. Schutz
- -------------------------- Director July 16, 1998
Gavin W. Schutz
/s/ Shimon Topor
- -------------------------- Director July 14, 1998
Shimon Topor
/s/ Thomas Wertheimer
- -------------------------- Director July 10, 1998
Thomas Wertheimer
</TABLE>
8
<PAGE>
EXHIBIT INDEX
Exhibits
4.1 Four Media Company 1997 Stock Plan and Stock Option Agreement, as amended
4.2 Four Media Company 1997 Director Option Plan and Director Stock Option
Agreement, as amended
4.3 Form of Nonqualified Stock Option Agreement with Repurchase Provisions
5.1 Opinion of Greenberg Glusker Fields Claman & Machtinger LLP regarding the
legality of the securities being registered
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Greenberg Glusker Fields Claman & Machtinger LLP (contained in
Exhibit 5.1)
24.1 Power of Attorney (contained in the signature page hereof)
9
<PAGE>
EXHIBIT 4.1
FOUR MEDIA COMPANY 1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
--------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant of any Option
and subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder. Stock Purchase Rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(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 of Directors in
---------
accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means FOUR MEDIA COMPANY, a Delaware corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services. The term Consultant shall not include Directors
who are not compensated for their services or are paid only a Director's fee by
the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
company or between the Company, its Parent, any Subsidiary or successor. A
leave of absence approved by the Company shall include sick leave, military
leave or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract, including Company policies. If reemployment upon expiration
of a leave of absence approved by the Company is not so
1
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guaranteed, on the 91st day of such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.
(i) "Director" means a member of the Board of Directors of the Company.
--------
(j) "Employee" means any person, including Officers and Directors, employed
---------
by the Company or any Parent or Subsidiary of the Company. The payment of a
Director's fee by the Company shall not be sufficient to constitute "employment"
by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(l) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
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 National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the last market trading day prior to the time of
determination and reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to qualify as
-------------------------
an Incentive Stock Option.
(o) "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.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Option Agreement" means an agreement between the Company and an
----------------
Optionee pursuant to which the Optionee receives an Option or a Stock Purchase
Right.
2
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(r) "Optioned Stock" means the Common Stock subject to an Option or a Stock
--------------
Purchase Right.
(s) "Optionee" means an Employee or Consultant who receives an Option or
--------
Stock Purchase Right.
(t) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1997 Stock Plan.
----
(v) "Restricted Stock" means shares of Common Stock acquired pursuant to a
----------------
grant of Stock Purchase Rights under Section 11 below.
(w) "Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 12 below.
(x) "Stock Purchase Right" means a right to purchase Common Stock pursuant
--------------------
to Section 11 below.
(y) "Subsidiary" means a "subsidiary corporation," whether not or hereafter
----------
existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to Section 12, the maximum
-------------------------
aggregate number of Shares which may be subject to option and sold under the
Plan is 1,650,000 Shares; provided, however, that beginning August 1, 1997, the
number of Shares shall be increased each August 1st by five percent (5%) of the
total issued and outstanding Shares on such date. In no event, except as
subject to Section 12, shall more than 1,650,000 Shares be available for
issuance pursuant to Incentive Stock Option grants under the Plan.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the plan (unless
the Plan has terminated). However, Shares that have actually been issued under
the Plan, upon exercise of either an Option or Stock Purchase Right, shall not
be returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
3
<PAGE>
(i) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
Directors and Officers, and Employees and Consultants who are neither Directors
nor Officers.
(ii) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options and Stock Purchase Rights to Employees who are also
Officers or Directors of the Company, the Plan shall be administered by (A) the
Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan, or (B)
a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(iii) Administration With Respect to Other Employees and
--------------------------------------------------
Consultants. With respect to grants of Options and Stock Purchase Rights to
- -----------
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may be granted hereunder;
4
<PAGE>
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 14 of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options or Stock Purchase Rights.
5
<PAGE>
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds the limit imposed by Section 422(d) of the Code or any
successor statute thereto, such excess Options shall be treated as Nonstatutory
Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted. The Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 175,000 Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.
(iii) If an Option or Stock Purchase Right is cancelled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 12), the cancelled Option
shall be counted against the limit set forth in Section 5(d)(i). For this
purpose, if the exercise price of an Option is reduced, such reduction will be
treated as a cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as
6
<PAGE>
described in Section 18 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per Share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant;
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (6) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement, or (7)
any combination of the foregoing methods of payment. In making its determination
as to the type of consideration to accept, the Administrator
7
<PAGE>
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan. Notwithstanding the foregoing, no Option may be exercised earlier
than six (6) months from the date of grant of such Option.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote, receive dividends or any other rights
as a stockholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 hereof.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), such
Optionee may, but only within such period of time as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
not exceeding three (3) months after the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that the Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status of an Employee or Consultant as a result of his or
her "Disability," as such
8
<PAGE>
term is defined in Section 422(e)(3) of the Code, the Optionee may, but only
within twelve (12) months from the date of such termination (and in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that the Optionee was
not entitled to exercise the Option at the date of termination, or if the
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Option Agreement) by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option on the
date of death. 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 immediately revert to the Plan. If, after the
Optionee's death, the Optionee's estate or a person who acquires the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options and
--------------------------------------------------------
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator makes the determinations to grant the Stock
Purchase Right. The offer shall be accepted by execution of a
9
<PAGE>
Restricted Stock purchase agreement in the form determined by the Administrator.
Shares purchased pursuant to the grant of a Stock Purchase Right shall be
referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment or consulting relationship with the Company for any
reason (including death or Disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine.
(c) Rule 16b-3. Stock Purchase Rights granted to persons subject to
----------
Rule 16b-3 of the Exchange Act ("Insiders"), and Shares purchased by Insiders in
connection with Stock Purchase Rights, shall be subject to any restrictions
applicable thereto in compliance with Rule 16b-3. An Insider may only purchase
Shares pursuant to the grant of a Stock Purchase Right, and may only sell Shares
purchased pursuant to the grant of a Stock Purchase Right, during such time or
times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(e) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a stockholder
and shall be a stockholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per Share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any
10
<PAGE>
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of Shares of
stock of any class, or securities convertible into Shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option or Stock Purchase Right shall
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall have the right to exercise the Option
or Stock Purchase Right as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option or Stock Purchase
Right is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
11
<PAGE>
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain stockholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
12
<PAGE>
18. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
13
<PAGE>
FOUR MEDIA COMPANY
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
---------------------------
_______________
_______________
_______________
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number: _______________
Date of Grant: _______________
Vesting Commencement Date: _______________
Exercise Price per Share: $_______________
Total Number of Shares for which
Option is Granted: _______________
Total Exercise Price: $_______________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _______________
Vesting Schedule:
- ----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Termination Period:
- ------------------
[This Option, to the extent vested, may be exercised (a) for three (3)
months after termination of your employment or consulting relationship, unless
such termination is for "Cause" (as hereinafter defined) or you voluntarily
terminate your employment or consulting relationship in breach of any employment
or consulting agreement, in which case this Option may be exercised on the date
your employment or consulting relationship with the Company
1
<PAGE>
terminates, or (b) for such longer period as may be applicable upon death or
Disability of Optionee as provided in the Plan and this Agreement. In the event
of the Optionee's change in status from Employee to Consultant or Consultant to
Employee, this Option Agreement shall remain in effect. In no event shall this
Option be exercised later than the Term/Expiration Date as provided above.
"Cause" shall mean cause as defined in any written employment or consulting
agreement in effect from time to time between Optionee and the Company or its
subsidiaries, or if there is no written employment or consulting agreement in
effect at the time of termination, "Cause" means cause as defined in the latest
written employment or consulting agreement between Optionee and the Company or
its subsidiaries.]
or
[This Option, to the extent vested, may be exercised (a) for three (3)
months after termination of your employment or consulting relationship, unless
such termination is for "Cause" (as hereinafter defined) or you voluntarily
terminate your employment or consulting relationship in breach of any employment
or consulting agreement, in which case this Option may be exercised on the date
your employment or consulting relationship with the Company terminates, or (b)
for such longer period as may be applicable upon death or Disability of Optionee
as provided in the Plan and this Agreement. In the event of the Optionee's
change in status from Employee to Consultant or Consultant to Employee, this
Option Agreement shall remain in effect. In no event shall this Option be
exercised later than the Term/Expiration Date as provided above. "Cause" shall
mean any of the following: (a) Optionee has committed an act of gross
misconduct in connection with the performance of his duties on behalf of the
Company, as determined by the Company's Chief Executive Officer or the Company's
Board of Directors; or (b) Optionee demonstrates habitual negligence and/or
incompetence in the performance of his duties on behalf of the Company, as
determined by the Company's Chief Executive Officer or the Company's Board of
Directors; or (c) Optionee is convicted of or pleads nolo contendere to any
misdemeanor involving moral turpitude or to any felony; or (d) Optionee has
committed any act of fraud, misappropriation of funds or embezzlement in
connection with his employment or consulting relationship with the Company.]
AGREEMENT
---------
1. Grant of Option. FOUR MEDIA COMPANY, a Delaware corporation (the
---------------
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1997 Stock Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.
2
<PAGE>
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section
422(d), this Option shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option,
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, disability or other termination of the employment or
consulting relationship, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which (A)
in the case of Shares acquired pursuant to the exercise of an Option, have been
owned by the Optionee for more than six (6) months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised; or
3
<PAGE>
(d) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the Exercise Price.
5. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board.
6. Termination of Relationship. In the event an Optionee's Continuous
---------------------------
Status as an Employee or Consultant terminates, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
----------------------
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within twelve (12) months from the date of such termination (and
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination; provided, however, that
if such disability is not a "disability" as such term is defined in Section
422(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
4
<PAGE>
10. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) stockholders shall apply to
this Option.
11. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) Grant of Options. The Optionee will not recognize any income for
----------------
either federal or California income tax purposes upon grant of an Option under
the Plan, regardless of whether the Option qualifies as an ISO or is an NSO.
(b) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(c) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
422(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO to
be qualified as an ISO.
(d) Exercise of NSO. There may be a regular federal income tax
---------------
liability and California income tax liability upon the exercise of an NSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(e) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for more than one year, any gain or loss realized on disposition of the Shares
will be treated as long-term capital gain or loss for federal and California
income tax purposes; and if Shares are held for one year or less, any such
profit or loss will be treated as short-term capital gain or loss. However, if
5
<PAGE>
such Shares are held for more than one year but less than 18 months, any gain
will be treated as a mid-term gain. In the case of an ISO, if Shares received
pursuant to exercise of the Option are held for more than one year after
exercise and are disposed of more than two years after the date of grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares
purchased under an ISO are disposed of within such one-year period or within two
years after the date of grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the difference between the Exercise Price and the lesser of (1) the Fair
Market Value of the Shares on the date of exercise, or (2) the sale price of the
Shares.
(f) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This Option Agreement is governed by California law except for that
body of law pertaining to conflict of laws.
FOUR MEDIA COMPANY,
a Delaware corporation
By:___________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
6
<PAGE>
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated:__________________ _______________________
Optionee
Residence Address:
______________________
______________________
______________________
7
<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
FOUR MEDIA COMPANY
2813 W. ALAMEDA AVENUE
BURBANK, CA 91505
Attention: Secretary
Exercise of Option. Effective as of today, _________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________ shares of the Common Stock (the "Shares") of FOUR MEDIA COMPANY (the
"Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the [ ]
Incentive [ ] Nonstatutory Stock Option Agreement dated _______, 19__ (the
"Option Agreement"). Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Exercise Notice.
1. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
2. Rights as Stockholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12.
3. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
4. Restrictive Legend and Stop-Transfer Orders.
-------------------------------------------
(a) Legends. Optionee understands and agrees that the Company may
-------
cause the legend set forth below or legends substantially equivalent thereto, to
be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
1
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Notice or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been transferred.
5. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Exercise Notice to single or multiple assignees, and this Exercise Notice
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Exercise Notice
shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
6. Interpretation. Any dispute regarding the interpretation of this
--------------
Exercise Notice shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
7. Governing Law; Severability. This Exercise Notice shall be governed by
---------------------------
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Exercise Notice be determined by a court of law to be illegal or unenforceable,
the other provisions shall nevertheless remain effective and shall remain
enforceable.
8. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
2
<PAGE>
9. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Notice, the Plan and the
Option.
10. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
11. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Exercise Notice, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: FOUR MEDIA COMPANY
By:______________________________
Its:_____________________________
_________________________
(Signature)
Address: Address:
- ------- -------
_________________________ 2813 W. ALAMEDA AVENUE
BURBANK, CA 91505
_________________________
3
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : FOUR MEDIA COMPANY
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Shares, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Optionee is
acquiring these Shares for investment for Optionee's own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Shares constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Shares for the minimum
capital gains period specified under tax statutes, for a deferred sale, for or
until an increase or decrease in the market price of the Shares, or for a period
of one year or any other fixed period in the future. Optionee further
understands that the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Shares. Optionee understands
that the certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company and any other legend required under applicable laws.
(c) Optionee is familiar with the provisions of Rule 144 promulgated
under the Securities Act, which, in substance, permits limited public resale of
"restricted securities"
1
<PAGE>
acquired, directly or indirectly from the issuer thereof, in a non-public
offering subject to the satisfaction of certain conditions, including: (1) the
resale to occur not less than one year after the Shares were acquired, (2) the
resale being made through a broker in an unsolicited "broker's transaction" or
in transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, or a
nonaffiliate who has held the Shares less than two years, (3) the availability
of certain public information about the Company, (4) the amount of Shares being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (5) the timely filing of a Form 144, if applicable.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the Securities and Exchange Commission has expressed
its opinion that persons proposing to sell private placement securities other
than in a registered offering and otherwise than pursuant to Rule 144 will have
a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
Signature of Optionee:
___________________________
Date: ___________, 19__
2
<PAGE>
EXHIBIT 4.2
FOUR MEDIA COMPANY
AMENDED AND RESTATED 1997 DIRECTOR OPTION PLAN
Purposes of the Plan. The purposes of this Four Media Company Amended and
--------------------
Restated 1997 Director Option Plan are to attract the best available persons for
service as Outside Directors of the Company and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
1. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means FOUR MEDIA COMPANY, a Delaware corporation.
-------
(e) "Director" means a member of the Board.
--------
(f) "Employee" means any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(h) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
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 National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, 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 date 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 System (but not on
the National Market thereof) or 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 high bid and low asked prices for the
Common Stock on the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
-1-
<PAGE>
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(i) "Inside Director" means a Director who is an Employee.
---------------
(j) "Option" means a stock option granted pursuant to the Plan.
------
(k) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(l) "Optionee" means a Director who holds an Option.
--------
(m) "Outside Director" means a Director who is not an Employee.
----------------
(n) "Parent" means a "parent corporation," whether now or hereafter
------
existing as defined in Section 424(e) of the Code.
(o) "Plan" means this Four Media Company Amended and Restated 1997
----
Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
2. Stock Subject to the Plan. Subject to the provisions of Section 10 of the
-------------------------
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 700,000 Shares of Common Stock (the "Pool"). The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
3. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside Directors
--------------------
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
-2-
<PAGE>
(ii) Each existing Outside Director and each nominee to become an
Outside Director who becomes an Outside Director prior to the day after the
closing of the Company's initial public offering ("IPO") shall be granted an
Option to purchase 100,000 Shares (the "Option") on the effective date of the
Registration Statement relating to the IPO. Such Option grant shall be null and
void ab initio and of no force or effect if the closing of the IPO has not
occurred within two weeks of the effective date of the Registration Statement
relating to the IPO. Each Outside Director who first becomes an Outside Director
after the closing date of the IPO, either through election by the stockholders
of the Company or appointment by the Board to fill a vacancy, shall be granted
an Option to purchase 100,000 Shares on the date on which such person becomes an
Outside Director. The previous two sentences notwithstanding, no Inside Director
who ceases to be an Inside Director but who remains a Director shall receive an
Option.
(iii) Notwithstanding the provisions of subsection (ii) hereof, any
exercise of an Option granted before the Company has obtained stockholder
approval of the Plan, if required, in accordance with Section 16 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan, if required,
in accordance with Section 16 hereof.
(iv) The terms of any Option granted hereunder shall be as follows:
(A) The term of the Option shall be ten (10) years.
(B) The Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Sections 8
and 10 hereof.
(C) The exercise price per Share for all Options granted under
this Plan prior to the closing date of the IPO shall be the per Share price to
the public in the Company's IPO. The exercise price per Share for all other
grants shall be 100% of the Fair Market Value per Share on the date of grant of
the Option; provided however, that all Options granted during the twelve-month
period following the closing date of the IPO shall have an exercise price not
less than $10 per share. In the event that the date of grant of an Option is not
a trading day, the exercise price per Share shall be the Fair Market Value on
the next trading day immediately following the date of grant of the Option.
(D) Subject to Section 10 hereof, the Option shall become
exercisable as to one-quarter (1/4) of the Shares subject to the Option one year
after its date of grant, and as to an additional one-quarter( 1/4) at the end of
each year thereafter, provided that the Optionee continues to serve as a
Director on such dates.
(v) If any Option(s) to be granted under the Plan would cause the
number of Shares subject to outstanding Options plus the number of Shares
previously purchased under Options to exceed the Pool, then the remaining Shares
available for Option grant shall be granted under Options to Outside Directors
only to the extent then available, and if more than one Outside Director would
be so eligible, on a pro rata basis. No further grants shall be made until such
time, if any, as additional Shares become available for grant under the Plan
through action of
-3-
<PAGE>
the Board or the stockholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
4. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
5. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board or its approval by the stockholders of the Company
as described in Section 16 hereof. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 11.
6. Form of Consideration. The consideration to be paid for the Shares to be
---------------------
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other Shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale proceeds required to pay the exercise
price, or (v) any combination of the foregoing methods of payment.
7. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until, if
required, stockholder approval of the Plan in accordance with Section 16 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or
-4-
<PAGE>
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must comply with
----------
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor statute thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions, and
other transactions by Outside Directors that otherwise could be matched with
Plan transactions, for the maximum exemption from Section 16 of the Exchange
Act.
(c) Termination of Continuous Status as a Director. Subject to Section
----------------------------------------------
10 hereof, in the event an Optionee's status as a Director terminates (other
than upon the Optionee's death or total and permanent disability [as defined in
Section 22(e)(3) of the Code]) the Optionee may exercise his or her Option, but
only within three (3) months following the date of such termination, and only to
the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(d) Disability of Optionee In the event Optionee's status as a Director
----------------------
terminates as a result of total and permanent disability (as defined in Section
422(e)(3) of the Code), the Optionee may exercise his or her Option, but only
within twelve (12) months following the date of such termination, and only to
the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(e) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
8. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
-5-
<PAGE>
9. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control.
- -------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued and outstanding Shares resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued and outstanding Shares
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
--------------------
or into another corporation or the sale of substantially all of the assets of
the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(c) through (e)
above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
-6-
<PAGE>
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
10. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act (or any other applicable law or regulation), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
11. Time of Granting Options. The date of grant of an Option shall, for all
------------------------
purposes, be the date determined in accordance with Section 4 hereof.
12. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
----------------------------------
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
13. Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
14. Option Agreement. Options shall be evidenced by written option
----------------
agreements in
-7-
<PAGE>
such form as the Board shall approve.
15. Stockholder Approval. If required by any law or regulation (including
--------------------
Stock Exchange regulation) applicable to the Company, continuance of the Plan
shall be subject to approval by the stockholders of the Company at or prior to
the first annual meeting of stockholders held subsequent to the granting of an
Option hereunder. If required by law or regulation, such stockholder approval
shall be obtained in the degree and manner required under applicable state and
federal law.
16. Restatement of Prior Plan. This Plan amends, restates and supersedes in
-------------------------
its entirety that certain 1997 Director Option Plan approved by the Company's
Board of Directors as of November 19, 1996.
-8-
<PAGE>
FOUR MEDIA COMPANY
1997 AMENDED AND RESTATED DIRECTOR STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
---------------------------
_______________
_______________
_______________
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number: _______________
Date of Grant: _______________
Vesting Commencement Date: _______________
Exercise Price per Share: $_______________
Total Number of Shares for which
Option is Granted: _______________
Total Exercise Price: $_______________
Term/Expiration Date: _______________
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in four equal cumulative
installments on or after each successive annual anniversary of the Date of Grant
in accordance with the following schedule:
<TABLE>
<CAPTION>
Number of Shares Exercise
Becoming Exercisable Date
-------------------- --------
<S> <C> <C>
First Anniversary ___________________ _______
Second Anniversary ___________________ _______
Third Anniversary ___________________ _______
Fourth Anniversary ___________________ _______
Termination Period:
------------------
</TABLE>
This Option, to the extent vested, may be exercised for three (3) months
after termination of your status as a Director, or such longer period as may be
applicable upon death or Disability of
-1-
<PAGE>
Optionee as provided in the Plan. In no event shall this Option be exercised
later than the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. FOUR MEDIA COMPANY, a Delaware corporation (the
---------------
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the above Notice of Stock Option Grant,
at the exercise price per share set forth in the Notice of Stock Option Grant
(the "Exercise Price") subject to the terms, definitions and provisions of the
Amended and Restated 1997 Director Option Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option Agreement.
2. Exercise of Option,
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Stock
Option Grant and with the applicable provisions of the Plan and this Option
Agreement. In the event of Optionee's death, disability or cessation of service
as a Director, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. If the Shares purchasable pursuant to the
--------------------------
exercise of this Option have not been registered under the Securities Act of
1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his or her Investment Representation
Statement in the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following,
-2-
<PAGE>
or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which (A)
in the case of Shares acquired pursuant to the exercise of an Option, have been
owned by the Optionee for more than six (6) months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised; or
(d) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale proceeds required to pay the Exercise Price.
5. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company if the
Company determines that stockholder approval is required by law or any
regulations applicable to Company, or if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities or other
law or regulation, including any rule under Part 207 of Title 12 of the Code of
Federal Regulations ("Regulation G") as promulgated by the Federal Reserve
Board.
6. Termination of Continuous Status as a Director. In the event an
----------------------------------------------
Optionee's status as a Director terminates (other than upon the Optionee's death
or total and permanent disability), Optionee may, to the extent otherwise so
entitled at the date of such termination (the "Termination Date"), exercise this
Option during the Termination Period set out in the Notice of Stock Option
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
7. Disability of Optionee. In the event of termination of an Optionee's
----------------------
status as a Director as a result of his or her disability (as defined in Section
422(e)(3) of the Code), Optionee may, but only within twelve (12) months from
the date of such termination (and in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's status
-----------------
as a Director as a result of the death of Optionee, the Option may be exercised
at any time within twelve (12) months following the date of death (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 10 below), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent the
Optionee could exercise
-3-
<PAGE>
the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
11. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) Grant of Options. The Optionee will not recognize any income
----------------
for either federal or California income tax purposes upon grant of an Option
under the Plan.
(b) Exercise of Options. There may be a regular federal income tax
-------------------
liability and California income tax liability upon the exercise of an Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price.
(c) Disposition of Shares. If Shares received pursuant to exercise
---------------------
of the Option are held for more than one year, any gain or loss realized on
disposition of the Shares will be treated as long-term capital gain or loss for
federal and California income tax purposes; and if Shares are held for one year
or less, any such profit or loss will be treated as short-term capital gain or
loss. However, if such Shares are held for more than one year but less than 18
months, any gain will be treated as a mid-term gain.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This Option Agreement is governed by California law except for that
body of law pertaining to conflict of laws.
FOUR MEDIA COMPANY,
a Delaware corporation
By:___________________________
-4-
<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION IS EARNED ONLY BY CONTINUING SERVICE AS A DIRECTOR OF THE COMPANY (NOT
THROUGH THE ACT OF BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN
THE COMPANY'S 1997 AMENDED AND RESTATED DIRECTOR STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF SERVICE AS A DIRECTOR OR NOMINATION TO SERVE AS A
DIRECTOR, NOR SHALL IT INTERFERE IN ANY WAY WITH ANY RIGHTS WHICH THE DIRECTOR
OR THE COMPANY MAY HAVE TO TERMINATE THE DIRECTOR'S RELATIONSHIP WITH THE
COMPANY AT ANY TIME.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Stock Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Stock Option
Agreement and fully understands all provisions of the Option. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Company's Board of Directors or Compensation Committee
administering the Plan upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated:__________________ _______________________
Optionee
Residence Address:
______________________
______________________
______________________
-5-
<PAGE>
EXHIBIT A
---------
1997 AMENDED AND RESTATED DIRECTOR OPTION PLAN
EXERCISE NOTICE
FOUR MEDIA COMPANY
2813 W. ALAMEDA AVENUE
BURBANK, CA 91505
Attention: Secretary
Exercise of Option. Effective as of today, _________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________ shares of the Common Stock (the "Shares") of FOUR MEDIA COMPANY (the
"Company") under and pursuant to the Amended and Restated 1997 Director Option
Plan (the "Plan") and the Stock Option Agreement dated _______, 19__ (the
"Option Agreement"). Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Exercise Notice.
1. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
2. Rights as Stockholder. Until the stock certificate evidencing such Shares
---------------------
is issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 12.
Optionee shall enjoy rights as a stockholder until such time as Optionee
disposes of the Shares.
3. Tax Consultation. Optionee understands that Optionee may suffer adverse
----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
-1-
<PAGE>
4. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company may cause
-------
the legend set forth below or legends similar thereto, to be placed upon any
certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by the Company or by state or federal securities
laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Notice or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been transferred.
5. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Exercise Notice to single or multiple assignees, and this Exercise Notice
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Exercise Notice
shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
6. Interpretation. Any dispute regarding the interpretation of this Exercise
--------------
Notice shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the Compensation Committee thereof that
administers the Plan, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or Compensation
Committee shall be final and binding on the Company and on Optionee.
7. Governing Law; Severability. This Exercise Notice shall be governed by
---------------------------
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Exercise Notice be determined by a court of law to be illegal or unenforceable,
the other provisions shall nevertheless remain effective and shall remain
enforceable.
-2-
<PAGE>
8. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
9. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Notice.
10. Delivery of Payment. Optionee herewith delivers to the Company the full
-------------------
Exercise Price for the Shares.
11. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Exercise Notice, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee.
Submitted by: Accepted by:
OPTIONEE: FOUR MEDIA COMPANY
By:______________________________
Its:_____________________________
_________________________
(Signature)
Address: Address:
- ------- -------
_________________________ 2813 W. ALAMEDA AVENUE
BURBANK, CA 91505
_________________________
-3-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : FOUR MEDIA COMPANY
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Shares, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Optionee is acquiring
these Shares for investment for Optionee's own account only and not with a view
to, or for resale in connection with, any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the Shares constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act or qualified under any state securities laws in
reliance upon a specific exemption therefrom, which exemption may depend upon,
among other things, the bona fide nature of Optionee's investment intent as
expressed herein. In this connection, Optionee understands that, in the view of
the Securities and Exchange Commission, the statutory basis for such exemption
may be unavailable if Optionee's representation was predicated solely upon a
present intention to hold these Shares for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Shares, or for a period of one year or any
other fixed period in the future. Optionee further understands that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act and qualified under applicable state securities laws or an
exemption from such registration and/or qualification is available. Optionee
further acknowledges and understands that the Company is under no obligation to
register the Shares. Optionee understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are so registered and qualified or such registration or
qualification is not required in the opinion of counsel satisfactory to the
Company.
(c) Optionee is familiar with the provisions of Rule 144 promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired,
-1-
<PAGE>
directly or indirectly from the issuer thereof, in a non-public offering subject
to the satisfaction of certain conditions, including: (1) the resale being made
not less than one year after the Shares were acquired; (2) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); (3) the availability of certain public information about
the Company, (4) the amount of Shares being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (5) the timely
filing of a Form 144, if applicable.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the Securities and Exchange Commission has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
Signature of Optionee:
___________________________
Date: ___________, 19__
-2-
<PAGE>
EXHIBIT 4.3
FORM OF
FOUR MEDIA COMPANY
NONQUALIFIED STOCK OPTION AGREEMENT
WITH REPURCHASE PROVISIONS
__________
This Agreement is made by and between Four Media Company, a Delaware
corporation (the "Company"), and _____________ (the "Optionee") as of the 17th
day of October, 1996.
Company and Optionee agree as follows:
1. Grant of Option
---------------
Subject to the terms and conditions set forth herein, the Company grants to
Optionee a nonqualified stock option (a "Nonqualified Stock Option" or "Option")
to purchase ___________ ____________________ (_______) shares of the Company's
authorized and unissued Common Stock from the Company, at the price of
__________________ ($____) per share (the "Option Price"). This Option is
granted as a substitute for the option issued to Optionee by Company's wholly
owned subsidiary, 4MC-Burbank, Inc., formerly Four Media Company, formerly ATS
Acquisition Corp., pursuant to which Optionee held options to acquire ____
shares of the Common Stock of 4MC-Burbank, Inc. at the price of
_______________________________ ___________________________ ($________) per
share. Optionee hereby relinquishes such prior option.
2. Status of Options
-----------------
The Nonqualified Stock Option granted hereunder is granted to Optionee as
an employee of the Company, but it is not intended to qualify as an "incentive
stock option" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
3. Term of Option
--------------
The Option shall terminate on, and shall not be exercisable after, the
expiration of the earliest of (a) _________________, (b) three (3) months after
the date Optionee's employment with the Company terminates, if such termination
is for any reason other than Retirement, Permanent Disability, death or Cause,
(c) the date Optionee's employment with the Company terminates, if such
termination is for Cause, (d) one (1) year after the date Optionee's employment
with the Company terminates, if such termination is a result of Retirement,
Permanent Disability or death, or if such termination is for any reason other
than Retirement, Permanent Disability, death or Cause, and Optionee dies or
becomes Permanently Disabled within three (3) months after the date Optionee's
employment with the Company terminates, or (e) cancellation pursuant to Section
8.1 hereof; provided, however, that with respect to that portion of the Option
which would have been exercisable at the date of termination of employment
pursuant to Section 4.1 (the "Vested Options"), if such termination is not for
Cause, and if the stock underlying the Vested Options is not
<PAGE>
then registered under the Securities Act of 1933, the Vested Options shall
continue to be exercisable until the earliest of (a) ____________ ____, (b)
cancellation pursuant to Section 8.1 hereof, (c) eighteen (18) months after such
termination of employment, or (d) three (3) months after the date the stock
underlying the Options is registered under the Securities Act of 1933. For
purposes hereof, the stock underlying the Options, even if registered, shall not
be considered as registered unless and until any agreement of Optionee not to
sell such stock publicly has expired or has otherwise been terminated or been
waived.
4. Exercise
--------
4.1. Exercisability. The Option shall be exercisable as to one-half of the
--------------
number of shares subject to the Option on or after the date hereof and as to an
additional one-sixth on _____________ of each of the next three years commencing
_________________, if Optionee is then employed by the Company. If the
employment of Optionee is terminated by Company without Cause, and if such
termination is a material breach of any written employment agreement between
Optionee and Company, the Option shall be exercisable as to all shares subject
to the Option as of the date of such termination.
4.2. Notice of Exercise. The Optionee shall exercise the Option by
------------------
delivering to the Company, either in person or by certified or registered mail,
written notice of election to exercise, payment in full of the purchase price as
provided in Section 4.3 below and payment of the sums required by, or other
compliance with, the provisions of Section 4.4 below. The written notice shall
set forth the whole number of shares for which the Option is being exercised.
4.3. Payment of Purchase Price. The purchase price for any shares of
-------------------------
Common Stock of the Company with respect to which Optionee exercises this Option
shall be paid in full at the time Optionee delivers the written notice of
exercise to the Company. The purchase price shall be paid in cash or by check.
4.4. Withholding. Upon exercise of the Option, or any portion thereof,
-----------
Optionee shall pay to the Company, or make arrangements satisfactory to the
Board for payment to the Company of, all federal, state and local taxes, if any,
required to be withheld by the Company in connection with the exercise of the
Option or the relevant portion thereof.
4.5. Financing. Notwithstanding the provisions of Sections 4.3 and 4.4,
---------
the Company may extend and maintain, or arrange for the extension and
maintenance of, credit to Optionee to finance payment of the purchase price, or
payment of the sums required by Section 4.4, on such terms as may be approved by
the Board.
5. Issuance of Shares
------------------
Promptly after the Company's receipt of the written notice of exercise
provided for in Section 4.2 above, Optionee's payment in full of the purchase
price, and Optionee's compliance with the provisions of Section 4.4 above, the
Company shall deliver, or cause to be delivered to Optionee, separate
certificates for the whole number of shares with respect to which each portion
of
2
<PAGE>
the Option is being exercised by Optionee. Shares shall be registered in the
name of Optionee. If any law or regulation of the Securities and Exchange
Commission or of any other federal or state governmental body having
jurisdiction shall require the Company or Optionee to take any action prior to
the issuance to Optionee of the shares of Common Stock of the Company specified
in the written notice of election to exercise, or if any listing agreement
between the Company and any national securities exchange requires such shares to
be listed prior to issuance, the date for the delivery of such shares shall be
deferred until the completion of such action and/or such listing.
6. Fractional Shares
-----------------
In no event shall the Company be required to issue fractional shares upon
the exercise of any part of the Option.
7. Rights as a Shareholder
-----------------------
Optionee shall have no rights as a shareholder of the Company with respect
to any shares covered by the Option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such share
certificate is issued, except as provided in Section 8 below.
8. Effect of Certain Corporate Changes and Changes in Control
----------------------------------------------------------
8.1. Effect of Changes.
-----------------
Notwithstanding any other provision of this Agreement to the contrary, in
the event that (a) all or substantially all of the assets and business of the
Company are sold in substantially a single transaction, (b) the Company is
merged or consolidated with and into another corporation and is not the
surviving corporation of such merger or consolidation, or (c) eighty percent
(80%) or more in the fair market value of the outstanding capital stock of the
Company is acquired by another person, firm or corporation (including an
affiliate or parent), effective as of the earliest of (i) the date of execution
and delivery of binding agreements for the consummation of such event, or (ii)
adoption by the Board of a resolution approving such an event, or (iii) adoption
by the Board or the Shareholders of resolutions for the dissolution or
liquidation of the Company (a "Reorganization Event"), then the Board shall take
one of the following actions, the choice of which is in its sole discretion (or
other action with the agreement of the Optionee): (i) cause the surviving entity
or new owner, as the case may be, to agree to adopt this Agreement and to
continue in effect its terms as such terms were in effect as of the date of the
Reorganization Event, except that equitable adjustments shall be made, if
appropriate, to reflect the value of the Common Stock subject to the Options
immediately prior to and following the occurrence of the Reorganization Event;
(ii) cause the surviving entity or new owner, as the case may be, to grant new
stock options (the "Substitute Options"), in substitution for the unexercised
Options as of the date of the Reorganization Event; provided, however, that such
-------- -------
Substitute Options shall have a value, as of the date of such Reorganization
Event, equal to the value of such unexercised Options as of such date; (iii)
provide for the payment upon termination or cancellation of outstanding Options
of an amount in cash or
3
<PAGE>
securities equal to the excess, if any, of the Fair Market Value of the Common
Stock subject to such Options at the time of such termination or cancellation
over the aggregate exercise price of such Options; or (iv) advance the dates
upon which all outstanding Options vest.
8.2. Dilution and Other Adjustments.
------------------------------
The Board shall make appropriate and proportionate adjustments in the number
and class of shares subject to the Option and the purchase price of such shares
in the event of a stock dividend (but only on Common Stock), stock split,
reverse stock split, recapitalization, reorganization, merger, consolidation,
separation or like change in the capital structure of the Company. Such
adjustments shall be conclusive and binding for all purposes.
9. No Transfer of Option
---------------------
Optionee may not transfer all or any part of the Option except by Will or by
the laws of descent and distribution, and the Option shall not be exercisable
during the lifetime of Optionee by any person other than Optionee.
10. Investment Representation
-------------------------
Optionee hereby agrees with the Company that, unless the shares are then
registered, Optionee may be required, as a condition to the issuance of the
shares of Common Stock of the Company covered by the Option, to represent to the
Company that the shares issued pursuant to the exercise of the Option are being
acquired for investment and without a view to the distribution thereof; and that
the Company may restrict the transfer of the Shares of Common Stock and may
place a legend on the certificate(s) evidencing the shares of the Option
reflecting the fact that the shares were acquired for investment and cannot be
sold or transferred unless registered under Securities Act of 1933, as amended,
and/or registered or qualified under applicable state securities laws, or unless
counsel for the Company is satisfied that the circumstances of the proposed
transfer do not require such registration or qualification.
11. Optionee's Employment
---------------------
Nothing in the Plan or in this Agreement shall confer, or be deemed to
confer, upon Optionee any right to continue in the employ of the Company or
interfere in any way with any right of the Company to terminate Optionee's
employment at any time.
12. Repurchase Provisions
---------------------
Except as specified in Sections 12.1 and 12.9 below, the shares of Common
Stock of the Company originally subject to the Option specified in Section 1
above and (a) all shares of the Company's capital stock received as a dividend
or other distribution upon such shares, and (b) all shares of capital stock or
other securities of the Company into which such shares may be changed or for
which such shares shall be exchanged, whether through reorganization,
recapitalization, stock
4
<PAGE>
split-ups or the like, shall be subject to the provisions of this Section 12 and
are hereinafter referred to as "Restricted Shares."
12.1. Termination of Repurchase Provisions on Certain Corporate Changes and
---------------------------------------------------------------------
Changes in Control. Notwithstanding any other provision of this Agreement to
- ------------------
the contrary, in the event of a Reorganization Event as defined in Section 8.1,
all restrictions and repurchase rights imposed on the Restricted Shares under
this Section 12 shall lapse subject to reinstatement if such event is not
consummated.
12.2. No Sale or Pledge of Restricted Shares. Except as hereinafter
--------------------------------------
provided, Optionee agrees and covenants that he will not sell, pledge, encumber
or otherwise transfer or dispose of, and will not permit to be sold, encumbered,
attached or otherwise disposed of or transferred in any manner, either
voluntarily or by operation of law (all hereinafter collectively referred to as
"Transfers"), all or any portion of the Restricted Shares or any interest
therein except in accordance with and subject to the terms of this Section 12.
12.3. Voluntary Transfer Repurchase Option. If Optionee desires to effect a
------------------------------------
voluntary Transfer of any of the Restricted Shares during the continuation of
this Agreement, Optionee shall first give written notice to the Company of such
intent to Transfer (the "Offer Notice") specifying (a) the number of the
Restricted Shares (the "Offered Shares") and the date of the proposed Transfer
(which shall not be less than fifty-one (51) days after the giving of the Offer
Notice), (b) the name, address and principal business of the proposed transferee
(the "Transferee"), and (c) the price and other terms and conditions of the
proposed Transfer of the Offered Shares to the Transferee (the "Offer Price").
The Offer Notice by Optionee shall constitute an offer to sell all, but not less
than all, of the Offered Shares, at the Offer Price, to the Company and/or its
designated purchaser. If the Company desires to accept Optionee's offer to
sell, either for itself or on behalf of its designated purchaser, the Company
shall signify such acceptance by written notice to Optionee within fifty (50)
days following the giving of the Option Notice. Failing such acceptance,
Optionee's offer shall lapse on the fifty-first day following the giving of the
Option Notice. With such written acceptance, the Company shall designate a day
not later than ten (10) days following the date of the giving of its notice of
acceptance on which the Company or its designated purchaser shall deliver the
purchase price (in the form and manner set forth at Section 12.7) of the Offered
Shares and Optionee shall deliver to the Company or the designated purchaser, as
applicable, all certificates evidencing the Offered Shares endorsed in blank for
transfer or with separate stock powers endorsed in blank for transfer. Upon the
lapse of Optionee's offer without acceptance by the Company, Optionee shall be
free for a period of thirty (30) days thereafter to transfer the Offered Shares
not purchased by the Company or the designated purchaser to the Transferee (and
to no one else), for a price and on such terms and conditions as are no more
favorable to the Transferee than those set forth in the Offer Notice. After the
expiration of the thirty (30) day period, the restrictions of this Section 12
shall again apply to the Restricted Shares. The Offered Shares so transferred
by Optionee to the Transferee shall continue to be subject to all of the terms,
conditions and restrictions of this Section 12 and the Company shall have the
right to require, as a condition to such transfer, that the Transferee execute
an agreement substantially in the form and content of the provisions of this
Section 12.
5
<PAGE>
12.4. Involuntary Transfer Repurchase Option. Whenever Optionee has any
--------------------------------------
notice or knowledge of any attempted, pending or consummated involuntary
transfer or lien or charge upon any of the Restricted Shares, whether by
operation of law or otherwise, Optionee shall give immediate written notice
thereof to the Company. Whenever the Company has any other notice or knowledge
or any such attempted, impending or consummated involuntary transfer, lien or
charge, it shall give written notice thereof to Optionee. In either case,
Optionee agrees to disclose forthwith to the Company all pertinent information
in his possession relating thereto. If any of the Restricted Shares are
subjected to any such involuntary transfer, lien or charge, the Company and its
designated purchaser shall at all times have the immediate and continuing option
to purchase such of the Restricted Shares upon notice by the Company to Optionee
or other record holder at the price set forth in Section 12.7. Any of the
Restricted Shares so purchased by the Company or its designated purchaser shall
in every case be free and clear of such transfer, lien or charge.
12.5. Excepted Transfers. The provisions of Sections 12.3 and 12.4 above
------------------
shall not apply to transfers by Optionee to his spouse, lineal descendants or
trustees in trust for their benefit or his own benefit; provided, however, that
Optionee shall continue to be subject to all of the terms and provisions of this
Section 12 with respect to any remaining present or future interest whatsoever
he may have in such of the transferred Restricted Shares, and further provided
that the transferee of any such Restricted Shares shall likewise be subject to
all such terms and conditions of this Section 12 as though such transferee were
a party hereto.
12.6. Repurchase Option on Employment Termination. The Company shall have
-------------------------------------------
the right to purchase or designate a purchaser of all, but not less than all, of
the Restricted Shares for the purchase price specified in Section 12.7 below in
the event Optionee's employment relationship with the Company is either
voluntarily or involuntarily terminated, regardless of the reason for such
termination, including but not limited to death, Permanent Disability,
Retirement or otherwise. The Company shall have a period of fifty (50) days
after the later of (i) the date of such termination, or (ii) the expiration of
the right of Optionee to exercise any unexercised portion of his Option (or the
exercise of the entire unexercised portion of his Option, if earlier), to
exercise its rights to purchase hereunder. If such right of purchase is not
exercised within the aforementioned fifty (50) day period, the Restricted Shares
as to which such time period has expired shall no longer be subject to any of
the limitations imposed by the provisions of Section 12 of this Agreement. If
the Company chooses to exercise its right to purchase the Restricted Shares
hereunder, the Company shall give its notice of exercise to Optionee or his
legal representative within the aforesaid fifty (50) day period, specifying in
such notice the purchase price for the Restricted Shares and specifying in such
notice a date not later than ten (10) days following the date of the giving of
such notice on which the Company or its designated purchaser shall deliver, or
be prepared to deliver, the purchase price (in the form and manner set forth in
Section 12.8) and Optionee or his legal representative shall (subject to
satisfaction of any necessary probate proceedings) deliver all certificates
evidencing such Restricted Shares duly endorsed in blank for transfer or with
separate stock powers endorsed in blank for transfer.
12.7. Repurchase Price. For purposes of Section 12.4 or Section 12.6 above,
----------------
the per share purchase price of Restricted Shares shall be an amount equal to
the Fair Market Value of the Restricted Shares. If Optionee so requests after
termination of his employment, such purchase price
6
<PAGE>
shall be communicated to the Optionee in writing not less than ten (10) days
prior to the expiration of the right of Optionee to exercise any unexercised
portion of his Option, the failure of which shall constitute, and result only in
a waiver by Company of its repurchase option under Section 12.6.
12.8. Payment of Purchase Price. For purposes of Section 12.3 above, the
-------------------------
purchase price of the Restricted Shares shall be paid at the same times and in
the same manner as set forth in the Offer Notice. For purposes of Section 12.4
or 12.6 above, the purchase price shall be paid in such manner and over such
period (not to exceed two (2) years and payable not less frequently than
quarterly) as the Board shall determine; provided, however, that not less than
twenty-five percent (25%) of the purchase price shall be paid as a down payment
and the balance shall bear interest at the applicable federal rate, as presently
defined in the Code.
12.9. Termination of Repurchase Provisions Upon Public Offering. Upon the
---------------------------------------------------------
first sale of any shares of the Company's Common Stock in a public offering
pursuant to a registration statement filed under the Securities Act of 1933, as
then in effect, or any similar federal statute then in force, other than
registration statements on Form S-4 or S-8, or any similar forms, any and all
restrictions or repurchase rights imposed on Restricted Shares under this
Section 12 shall thereupon lapse and be without further force or effect.
12.10. Legend on Certificates. Prior to delivery of any certificates of the
----------------------
Restricted Shares, all certificates evidencing any of the Restricted Shares
shall be imprinted on the face and reverse side of such certificate with a
legend substantially as follows:
ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR ANY OTHER DISPOSITION OF THE
SHARES OF CAPITAL STOCK OR ANY INTEREST THEREIN REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND SUBJECT TO, THE TERMS AND PROVISIONS OF
AN AGREEMENT, DATED AS OF _________________________. A COPY OF SUCH
AGREEMENT AND ALL AMENDMENTS OR SUPPLEMENTS THERETO IS ON FILE IN THE
OFFICE OF THE SECRETARY OF THE ISSUER. BY ACCEPTANCE OF THIS CERTIFICATE,
THE HOLDER HEREOF AGREES TO BE BOUND BY THE TERMS OF SAID AGREEMENT AND ALL
AMENDMENTS OR SUPPLEMENTS THERETO.
13. Buy-Out
-------
In the event that at the time of termination of employment Optionee is
entitled to exercise any Options pursuant to the provisions of Section 4.1
hereof (the "Vested Options"), and in the event the stock underlying the Vested
Options is not then registered under the Securities Act of 1933, as amended, the
following shall apply:
13.1. If the termination of employment results from a termination of
Optionee by Company for Cause or from a termination by Optionee which is a
material breach of any employment agreement between Optionee and Company,
Optionee shall not be entitled to any benefits under this Section 13.
7
<PAGE>
13.2. If the termination of employment results from a termination by
Company of Optionee without Cause, or from the Retirement, Permanent Disability
or death of Optionee, and if Optionee or his representative tenders the
surrender of his Vested Options to Company within sixty (60) days after such
termination, Company will pay to Optionee an amount equal to the Fair Market
Value at the Valuation Date of the Common Stock underlying the Vested Options
less the exercise price of the Vested Options (the "Buy-Out Price") within
twelve (12) months after termination of such employment; provided, however, that
if at the time of such termination, or within twelve (12) months thereafter,
Company's Common Stock (other than the stock underlying the Vested Options) has
been registered or is registered under the Securities Act of 1933, as amended,
and if any agreement of Optionee not to sell the stock underlying the Vested
Options has expired or is otherwise terminated or waived during such period, in
lieu of making such payment and accepting such surrender, Company may register
the stock underlying the Vested Options under the Securities Act of 1933, as
amended.
13.3. If the termination of employment results from the action of Optionee
(other than Retirement or death), and not the action of Company, and in the
event such termination is not a material breach of any employment agreement
between Optionee and Company, and if Optionee tenders the surrender of his
Vested Options to Company within sixty (60) days after such termination, Company
will pay to Optionee an amount equal to one-half of the Buy-Out Price at the
Valuation Date within twelve (12) months after termination of such employment;
provided, however, that if at the time of such termination, or within twelve
(12) months thereafter, Company's Common Stock (other than the stock underlying
the Vested Options) has been registered or is registered under the Securities
Act of 1933, as amended, and if any agreement of Optionee not to sell the stock
underlying the Vested Options has expired or is otherwise terminated or waived
during such period, in lieu of making such payment and accepting such surrender,
Company may register the stock underlying the Vested Options under the
Securities Act of 1933, as amended.
14. Definitions
-----------
14.1. "Permanent Disability" means a physical or mental disability
authorizing or resulting in termination as defined in any written employment
agreement in effect from time to time between Optionee and Company or its
Subsidiaries or Affiliates; or if there is no written employment agreement in
effect at the time of termination, "Permanent Disability" means Disability as
defined in the latest written employment agreement between Optionee and Company
or its Subsidiaries and Affiliates.
14.2. "Retirement" means the voluntary termination of employment by
Optionee after the later of (i) the completion of ten (10) consecutive years of
employment with the Company or its Predecessors, Subsidiaries or Affiliates, or
(ii) attainment of age sixty-two (62).
14.3. "Cause" means cause as defined in any written employment agreement
in effect from time to time between Optionee and Company or its Subsidiaries or
Affiliates; or if there is no written employment agreement in effect at the time
of termination, "Cause" means cause as defined
8
<PAGE>
in the latest written employment agreement between Optionee and Company or its
Subsidiaries or Affiliates.
14.4. "Valuation Date" means the last day of the Company's fiscal year
coincident with or immediately prior to the date of termination of Optionee's
employment.
14.5. "Fair Market Value" means:
14.5.(a) If, at the Valuation Date, the Company's Common Stock is
traded publicly, the Fair Market Value of each Restricted Share or of each share
underlying a Vested Option shall mean the average of the high and low sales
price per share of stock (or, if sales prices are not reported, the average of
the bid and ask quotations) for the Valuation Date, as reported by NASDAQ (or,
if such shares are listed on a national stock exchange or another national
quotation system and sales prices on such exchange or system are generally
reported, as reported or quoted by the consolidated reporting system), or, if no
such sales were reported for the Valuation Date, for the most recent date on
which sales prices or quotations were available.
14.5.(b) If, at the Valuation Date, the Company's Common Stock is
not traded publicly:
14.5.(b)(i) the Fair Market Value of each Restricted Share
or of each share underlying a Vested Option shall mean the Fair Market Value of
the Company attributable to Common Stock divided by the number of issued and
outstanding shares of Common Stock of the Company on a fully diluted basis,
discounted for lack of marketability and discounted for its minority status. The
discount shall be determined by the Expert described in Section 14.5.(b)(ii)).
14.5.(b)(ii) the Fair Market Value of the Company shall be
the lesser of the following:
14.5.(b)(ii)(1) the value of the Company as of the
Valuation Date on a going concern basis based on the net assets and operating
performance of the Company, applying recognized standards for determination of
the going concern value of the privately held Company, as determined by an
independent Expert selected by Company. The Expert shall be designated within
thirty (30) days of the event giving rise to the need for valuation, and the
Expert shall be a nationally recognized valuation firm, a valuation division of
a national accounting firm, or a nationally recognized investment banking firm.
In order to determine that portion of the Fair Market Value attributable to
common stock, there shall be deducted from the value of the Company an amount
equal to the liquidation preference or other stated value of all non-convertible
equity securities senior to common stock.
14.5.(b)(ii)(2) the value of the Company determined
by the following formula based upon the certified financial statements of the
Company as of the Valuation Date: (a) earnings before interest, income taxes,
depreciation and amortization, multiplied by 5.3, less (b) all debt and an
amount equal to the liquidation preference or other stated value of all non-
convertible equity securities senior to common stock, plus or minus (c) any
working capital surplus
9
<PAGE>
or deficit. Debt shall mean all obligations for borrowed money, including
capital leases and any other obligations which would be considered as
indebtedness for borrowed money under generally accepted accounting principles.
15. General Provisions
------------------
15.1. Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties with respect to the subject matter hereof, and supersedes
any and all prior written or oral agreements between the parties with respect to
the subject matter hereof. There are no representations, agreements,
arrangements or understandings, either written or oral, between or among the
parties with respect to the subject matter hereof which are not set forth in
this Agreement.
15.2. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California.
15.3. Notices. Any notice given pursuant to this Agreement may be served
-------
personally on the party to be notified or may be mailed, with postage thereon
fully prepaid, by certified or registered mail, with return receipt requested,
addressed as set forth by the party's signature on this Agreement or at such
other address as such party may designate in writing from time to time. Any
notice given as provided in the preceding sentence shall be deemed delivered
when given if personally served,, or if mailed, ten (10) business days after
mailing.
15.4. Further Acts. Each party to this Agreement agrees to perform such
------------
further acts and to execute and deliver such other and additional documents as
may be reasonably necessary to carry out the provisions of this Agreement.
15.5. Severability. If any term, provision, covenant or condition of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable for any reason, such invalidity, illegality or unenforceability
shall not affect any of the other terms, provisions, covenants or conditions of
this Agreement, each of which shall be binding and enforceable.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
"COMPANY"
FOUR MEDIA COMPANY, a Delaware corporation
By: _______________________________
10
<PAGE>
"OPTIONEE"
______________________________
CONSENT OF SPOUSE
I acknowledge that I have read the foregoing Four Media Company Stock Option
Agreement with Repurchase Provisions (the "Agreement") and that I know its
contents. I am aware that by its provisions my spouse agrees to sell all shares
of the Company, including my community property interest in them, on the
occurrence of certain events specified in the Agreement. I hereby consent to
the sale, approve of the provisions of the Agreement and agree that those shares
and my interest in them are subject to the provisions of the Agreement and that
I will take no action at any time to hinder operation of the Agreement on those
shares or my interest in them.
___________________________________
(Name typed or printed)
Spouse of _________________________
(Name typed or printed)
11
<PAGE>
EXHIBIT 5.1
Law Offices of
Greenberg Glusker Fields Claman & Machtinger LLP
July 28, 1998
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-8 to
be filed by Four Media Company (the "Company") with the Securities and Exchange
Commission in connection with the registration under the Securities Act of 1933,
as amended, of an aggregate of 3,442,750 shares of Common Stock, par value $.01
per share (the "Common Stock"), to be issued by you pursuant to the Four Media
Company 1997 Stock Plan and the Four Media Company 1997 Director Option Plan
(the "Plans") and certain Non-Qualified Stock Option Agreements with Repurchase
Provisions (the "Agreements"), as follows:
(a) Seven hundred thousand shares upon the exercise of options granted or
to be granted under the 1997 Director Option Plan;
(b) Two million one hundred twenty-seven thousand six hundred twenty-five
shares upon the exercise of options granted or to be granted under the 1997
Stock Plan; and
(c) Six hundred fifteen thousand one hundred twenty-five shares upon the
exercise of options granted pursuant to the Agreements.
As your counsel, we are familiar with the proceedings taken and proposed to
be taken in connection with the authorization of the Plans and the Agreements
and the Common Stock to be issued pursuant to and in accordance with the Plans
and the Agreements, and we have examined such matters of fact and law as we have
deemed relevant in connection with this opinion.
Based upon the foregoing, we are of the opinion that the Common Stock has
been duly authorized by all necessary corporate action on the part of the
Company and, when issued in accordance with such authorization and with the
provisions of the Plans and the Agreements, as applicable, will be validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Respectfully submitted,
GREENBERG GLUSKER FIELDS
CLAMAN & MACHTINGER LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in this registration statement
of Four Media Company on Form S-8 of our report dated October 6, 1997 on our
audits of the consolidated financial statements of Four Media Company as of
August 3, 1997 and August 4, 1996 and for the years ended August 3, 1997, August
4, 1996, and July 30, 1995, which report is included in Four Media Company's
Annual Report on Form 10-K for the year ended August 3, 1997; our report dated
January 15, 1998 on our audits of the combined financial statements of Visualize
(d/b/a Pacific Ocean Post) and Affiliate as of October 31, 1997 and December 31,
1996 and for the ten months ended October 31, 1997 and the year ended December
31, 1996, which report is included in Four Media Company's Current Report on
Form 8-K dated February 2, 1998 (as amended on Form 8-K/A); our report dated
April 8, 1998 on our audits of the combined financial statements of Video
Symphony, Inc. and Affiliate as of December 31, 1997, 1996, and 1995 and for the
years then ended, which report is included in Four Media Company's Current
Report on form 8-K dated May 4, 1998 (as amended on form 8-K/A). We also
consent to the references to our firm under the caption "Experts".
PricewaterhouseCoopers LLP
Los Angeles, CA
July 28, 1998
