SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENTS
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. 1)
Check the appropriate box:
( ) Preliminary Information Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
(X) Definitive Information Statement
@ Entertainment, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule, or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
@ ENTERTAINMENT, INC.
ONE COMMERCIAL PLAZA
24TH FLOOR
HARTFORD, CT 06102
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement has been filed with the Securities and
Exchange Commission (the "SEC") and transmitted on or about April 10, 1998 to
the holders of record on March 30, 1998 (the "Record Date") of shares of common
stock, par value $.01 per share (the "Common Stock"), of @ Entertainment, Inc.,
a Delaware corporation ("@ Entertainment" or the "Company"). This Information
Statement is being furnished pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with the
following action:
AMENDING THE @ ENTERTAINMENT, INC. 1997 STOCK OPTION PLAN (THE
"1997 PLAN") FOR THE PURPOSE OF (1) INCREASING TO 4,436,000
THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
PURSUANT TO THE 1997 PLAN, (2) INCLUDING DIRECTORS AS ELIGIBLE
OPTIONEES, AND (3) PERMITTING TRANSFERS OF OPTIONS TO FAMILY
MEMBERS OF OPTIONEES UNDER CERTAIN CIRCUMSTANCES (THE "1997
PLAN AMENDMENTS").
VOTING SECURITIES
This Information Statement is being mailed on or about April 10, 1998
to all shareholders of record as of the Record Date.
The Company's Board of Directors on November 18, 1997 approved the 1997
Plan Amendments, subject to stockholder approval.
As of the close of business on March 30, 1998, the Company had
33,310,000 shares of Common Stock issued and outstanding, each entitled to one
vote with respect to the actions to be taken.
Stockholders who hold a majority of the issued and outstanding shares
of Common Stock have executed a written consent in favor of the 1997 Plan
Amendments, which vote was sufficient to approve the increase.
Stockholders of the Company as of the Record Date are entitled to
notice of the corporate action taken by written consent of holders of the issued
and outstanding shares of Common Stock. Such action will be effective twenty
(20) days following the mailing of this Information Statement.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of @ Entertainment's common stock as of the Record Date by
(i) each person known by @ Entertainment to own beneficially 5% or more of any
class of @ Entertainment's voting stock, (ii) each director and executive
officer of the Company, and (iii) all directors and executive officers of the
Company as a group. All percentages in this section were calculated on the basis
of outstanding securities plus securities deemed outstanding under Rule 13d-3 of
the Exchange Act.
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock
Name of Beneficial Owner Common Stock Outstanding(1)
- ------------------------ ------------ --------------
<S><C>
FIVE PERCENT STOCKHOLDERS:
Arnold L. Chase(2)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 10,303,000 29.4%
Chase Polish Enterprises, Inc(2)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 10,303,000 29.4%
Cheryl A. Chase(2)(3)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 11,036,000 31.5%
Polish Investments Holding L.P.(2)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 10,303,000 29.4%
ECO Holdings III Limited Partnership(4)
c/o Advent International Corp.
101 Federal Street
Boston, MA 02110.................................................... 9,524,000 27.2%
DIRECTORS AND EXECUTIVE OFFICERS:
David T. Chase........................................................ -- --
Robert E. Fowler, III(5)(6)........................................... 1,286,000 3.7%
Arnold L. Chase(7).................................................... 10,303,000 29.4%
Scott A. Lanphere(8).................................................. -- --
Jerzy Z. Swirski(9)................................................... -- --
Samuel Chisholm(10)................................................... -- --
David Chance(11)...................................................... -- --
Agnieszka Holland..................................................... -- --
John S. Frelas(6)(12)................................................. 48,000 *
George Makowski(6)(13)................................................ 385,000 1.1%
Przemyslaw Szmyt(6)(14)............................................... -- --
David Warner(6)(15)................................................... -- --
ALL DIRECTORS AND OFFICERS AS A GROUP (13 PERSONS(16)):............... 13,451,000 38.4%
</TABLE>
- --------------
* less than 1%.
(1) Based on a total number of outstanding shares of 35,029,000, which
includes 33,310,000 shares outstanding at March 30, 1997 and 1,719,000
shares subject to options which were exercisable within sixty days of
the Record Date.
(2) Pursuant to Schedules 13G filed on February 13, 1998 by Polish
Investments Holding L.P. ("PIHLP"), Chase Polish Enterprises, Inc.
("CPEI"), Arnold L.Chase and Cheryl A. Chase, as a result of their
control over management of PIHLP, Arnold L. Chase, CPEI and Cheryl A.
Chase may be deemed to share the power to direct the vote and
disposition of the 10,303,000 shares of Common Stock owned by PIHLP.
CPEI is the sole general partner of PIHLP. As general partner, CPEI
manages PIHLP, which includes directing the voting and disposition of
shares of Common Stock owned by PIHLP. Arnold L. Chase and Cheryl A.
Chase each own 50% of the outstanding capital stock of CPEI and are its
sole directors and executive officers.
2
<PAGE>
(3) Pursuant to Schedules 13G filed on February 13, 1998 by Arnold L. Chase
and Cheryl A. Chase, The Cheryl Anne Chase Martial Trust, a trust of
which Cheryl A. Chase and Kenneth N. Musen are joint trustees, owns
733,000 shares of Common Stock or 2.2% of the shares of Common Stock
outstanding. Cheryl A. Chase and Kenneth N. Musen are the beneficial
owners, as defined by Rule 13d-3(a) of the Exchange Act, of the shares
of Common Stock owned by the Cheryl Anne Chase Marital Trust.
(4) The general partner of ECO Holdings III Limited Partnership ("ECO") is
Advent ECO III LLC. Certain members of Advent ECO III LLC are venture
capital funds managed by Advent International Corporation. In its
capacity as manager of these funds, Advent International Corporation
exercises sole voting and investment power with respect to all shares
of Common Stock held on behalf of these funds.
(5) Mr. Fowler has been granted options to purchase 1,286,000 shares of
Common Stock at a price of $3.707 per share, subject to the terms and
conditions of a stock option agreement. All of Mr. Fowler's options are
exercisable.
(6) Messrs. Fowler, Frelas, Makowski, Szmyt and Warner, in connection with
@ Entertainment's initial public equity offering ("Initial Public
Equity Offering"), entered into an agreement with Goldman, Sachs & Co.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated that during the
two year period beginning July 30, 1997, such individuals will not
offer, sell, contract to sell or otherwise dispose of any securities of
@ Entertainment which are substantially similar to shares of Common
Stock or which are convertible into or exchangeable for securities
which are substantially similar to shares of Common Stock without the
prior written consent of Goldman, Sachs & Co. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
(7) Includes 10,303,000 shares of Common Stock owned by PIHLP which may be
deemed to be beneficially owned by Arnold Chase.
(8) Mr. Lanphere disclaims beneficial ownership of the shares held by ECO.
(9) Mr. Swirski disclaims beneficial ownership of the shares held by ECO.
(10) Mr. Chisholm has been granted options to purchase 500,000 shares of
Common Stock (subject to stockholder approval), vesting ratably over a
two year period, at an exercise price of $12.00 per share. None of Mr.
Chisholm's options are exercisable within 60 days of the Record Date.
(11) Mr. Chance has been granted options to purchase 500,000 shares of
Common Stock (subject to stockholder approval), vesting ratably over a
two year period, at an exercise price of $12.00 per share. None of Mr.
Chance's options are exercisable within 60 days of the Record Date.
(12) Mr. Frelas has been granted options to purchase 241,000 shares of
Common Stock at a price of $1.99170 per share, subject to the terms and
conditions of a stock option agreement, which options vest ratably over
a five year period. As of the Record Date, options to purchase 48,000
shares have vested.
(13) Mr. Makowski has been granted options to purchase 385,000 shares of
Common Stock at a price of $3.70808 per share, subject to the terms and
conditions of a stock option agreement. All of Mr. Makowski's options
are exercisable.
(14) Mr. Szmyt has been granted options to purchase 131,000 shares of Common
Stock at a price of $15.24 per share, subject to the terms and
conditions of a stock option agreement dated June 1997, which options
vest ratably over a three year period. Additionally, on January 26,
1998, Mr. Szmyt was granted options to purchase 75,000 shares of Common
Stock (subject to stockholder approval) at a price of $12.2375 per
share, which options vest ratably over a three year period. None of Mr.
Szmyt's options are exercisable within 60 days of the Record Date.
(15) Mr. Warner has been granted options to purchase 131,000 shares of
Common Stock at a price of $15.24 per share, subject to the terms and
conditions of a stock option agreement, which options vest ratably over
a five year period. Additionally, on January 26, 1998, Mr. Warner was
granted options to purchase 75,000 shares of Common Stock (subject to
stockholder approval) at a price of $12.2375 per share, which options
vest ratably over a three year period. None of Mr. Warner's options are
exercisable within 60 days of the Record Date.
(16) Includes 1,429,000 shares held by the Steele LLC and owned beneficially
by Richard B. Steele, who resigned as President of Poland
Communications, Inc. ("PCI") on June 23, 1997.
DIRECTORS' COMPENSATION
Messrs. Chisholm and Chance serve as Business Independent Directors of
the Company and Ms. Holland serves as an Artistic Independent Director of the
Company. Each Business Independent Director receives $5,000 for attendance at
each of
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<PAGE>
the five regular meetings of the Board of Directors, and an additional $5,000
for attendance at any special meetings of the Board of Directors. Each Artistic
Independent Director receives $5,000 for attendance at each of the five regular
meetings of the Board of Directors. Additionally, directors are eligible for
grants of options under the 1997 Plan. See Approval of Certain Amendments to the
1997 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding all
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer, each of the other four most highly compensated executive officers of
the Company and a former executive officer who would have been one of the four
most highly compensated executive officers at the end of the fiscal year 1997
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company for the last three fiscal years, to the extent that
those officers were in the employ of the Company. Columns relating to long-term
compensation have been omitted from the table as the Company did not have
capital stock-related award plans and there has been no compensation arising
from long-term incentive plans during the years reflected in the table.
<TABLE>
<CAPTION>
Other Annual Securities All Other
Salary Bonus Compensation Underlying Compensation
Name and Principal Position Year ($) ($) ($) Options/SA ($)
- --------------------------- ---- ------ ----- ------------ ---------- ------------
<S><C>
Robert E. Fowler, III............ 1997 337,500 381,250 25,872(1) 1,268,000 --
Chief Executive Officer and 1996 66,000(2) 66,000(2) -- -- --
Director 1995 66,000(2) 66,000(2) -- -- --
Richard B. Steele(3)............. 1997 207,595 -- -- -- 156,000(4)
1996 356,000(2) 250,000(2) -- -- 5,000(5)
1995 356,000(2) -- -- -- 7,500(5)
John S. Frelas................... 1997 155,746 350,000(6) 39,000(7) -- --
Chief Financial Officer, Vice 1996 46,153(8) -- 6,000(7) --
President, Treasurer 1995 -- -- -- 241,000 --
George Z. Makowski............... 1997 156,000 175,000(6) 68,400(9) -- --
Chief Operating Officer - 1996 -- -- -- 385,000 --
Cable 1995 -- -- -- -- --
1997 120,708 248,500(6) -- -- --
David Warner..................... 1996 -- -- -- 131,000 --
Chief Operating Officer - 1995 -- -- -- -- --
DTH 1997 146,667 70,000(6) -- -- --
1996 -- -- -- 131,000 --
Przemyslaw Szmyt................. 1995 -- -- -- -- --
Vice President, General --
Counsel,
Secretary
</TABLE>
- ---------------------
(1) Represents amounts paid or reimbursed by the Company for personal
travel related expenses.
(2) Represents only that portion of annual compensation attributable to
services performed on behalf of the Company. Additional compensation
may have been provided by companies that are affiliated with @
Entertainment and beneficially owned by the Chase Family for services
rendered to those companies.
(3) Mr. Steele was the President of PCI. He resigned on June 23, 1997.
(4) Represents amounts earned as deferred compensation.
(5) Represents portion of 401(k) plan paid pursuant to matching
contribution.
(6) Represents one-time bonus paid upon completion of @ Entertainment's
Initial Public Equity Offering.
(7) Represents amounts paid pursuant to housing allowance.
(8) Represents compensation for partial year of service beginning in
September 1996.
(9) Represents amounts paid pursuant to housing and tuition allowances.
4
<PAGE>
COMPENSATION PLANS
EMPLOYMENT AGREEMENTS
@ Entertainment has employment agreements with each of Messrs. Fowler,
Frelas, Makowski, Szmyt and Warner. PCI has employment agreements with each of
Mr. Keefe and Ms. Hansberry. @ Entertainment has entered into consultancy
arrangements with Messrs. Chisholm and Chance and Ms. Holland.
Mr. Fowler entered into a three-year employment agreement with PCI
effective at January 1, 1997. The employment agreement was assigned to @
Entertainment in June 1997 in connection with the Company's reorganization in
June 1997 (the "Reorganization"). Pursuant to such agreement, Mr. Fowler serves
as the Chief Executive Officer of @ Entertainment. Mr. Fowler receives a base
annual salary of $325,000, plus a travel allowance of approximately $30,000 per
annum and an unspecified annual incentive bonus. Pursuant to Mr. Fowler's
employment contract, and in part to induce Mr. Fowler to move closer to the
Company's operations in Europe, @Entertainment purchased Mr. Fowler's house in
Connecticut for approximately $354,000 in June 1997 (including payments of
$295,000 to extinguish the mortgages relating to the house), and sold the house
shortly thereafter to a third party for approximately $267,000. @ Entertainment
is obligated to pay Mr. Fowler the difference between the mortgage amounts of
$295,000 and the purchase price of $354,000. Mr. Fowler may terminate the
employment agreement at any time upon three months' written notice, and @
Entertainment may terminate the agreement at any time upon one month's written
notice (with an obligation to pay Mr. Fowler an additional two months' base
salary). In addition, @ Entertainment may terminate the agreement immediately
without further obligation to Mr. Fowler for cause (as defined in the employment
agreement).
Mr. Frelas entered into a five-year employment agreement with PCI
commencing on September 1, 1996. The employment agreement was assigned to @
Entertainment in June 1997 in connection with the Reorganization. Pursuant to
such agreement, Mr. Frelas serves as the Chief Financial Officer, Vice President
and Treasurer of @ Entertainment. Mr. Frelas receives a base annual salary of
$150,000, allowances for living and travel of approximately $40,000 per annum
and annual incentive bonuses of up to $50,000 if certain mutually agreed
objectives are met. He is eligible to receive a bonus of $50,000 for the
successful completion of a bank line of credit of $75 million or more. Mr.
Frelas or @ Entertainment may terminate the agreement at any time upon six
month's written notice. In addition, @ Entertainment may terminate the agreement
immediately without further obligation to Mr. Frelas for cause (as defined in
the employment agreement).
Mr. Makowski entered into a five-year employment agreement with PCI
commencing on January 21, 1997. The employment agreement was assigned to @
Entertainment in June 1997 in connection with the Reorganization. Pursuant to
such agreement, Mr. Makowski serves as the Chief Operating Officer--Cable
Operations of PCI. Mr. Makowski receives a base annual salary of $156,000,
allowances for living, family travel and education for his children of
approximately $105,000 per annum and annual incentive bonuses of up to $60,000
if certain mutually agreed objectives are met. Mr. Makowski or @ Entertainment
may terminate the agreement at any time upon six month's written notice. In
addition, @ Entertainment may terminate the agreement immediately without
further obligation to Mr. Makowski for cause (as defined in the employment
agreement).
Mr. Szmyt entered into a three-year agreement with PCI effective at
February 7, 1997, which was assigned to @ Entertainment in June 1997 in
connection with the Reorganization and was amended effective January 1, 1998.
Pursuant to such agreement, Mr. Szmyt serves as Vice President, General Counsel
and Secretary of @ Entertainment. Pursuant also to an employment agreement with
PTK-Warsaw and a services agreement with PCI, Mr. Szmyt receives annual
remuneration totaling $180,000. He is eligible to receive an annual
performance-based bonus of $40,000 per year. Mr. Szmyt may terminate his
contract with @ Entertainment at any time upon two months' written notice and @
Entertainment may terminate the contract at any time upon four months' written
notice. In addition, @ Entertainment may terminate the contract without further
obligation for cause (as defined in the agreement). Mr. Szmyt's employment
agreement with PTK-Warsaw may be terminated by either party upon one month's
written notice.
Mr. Warner entered into a five-year employment agreement with PCI
effective at April 7, 1997, which was assigned to @ Entertainment in June 1997
in connection with the Reorganization. Pursuant to such agreement, Mr. Warner
serves as Chief Operating Officer--DTH Operations of @EL. Mr. Warner receives an
annual salary of (pounds)95,000 (approximately $158,935, based on the exchange
rate of (pounds)1.00 =$1.673 at March 25, 1998), and receives an annual
performance-based bonus of up to (pounds)45,000 (approximately $75,285 based on
the approximate exchange rate of (pounds)1.00 = $1.673 at March 25, 1998). Mr.
Warner and @ Entertainment may terminate the contract at any time with six
months' written notice. In addition, @ Entertainment may terminate the contract
without further obligation for cause (as defined in the agreement).
5
<PAGE>
Mr. Keefe entered into a two-year employment agreement with PCI
effective at January 1, 1998. Pursuant to such agreement, Mr. Keefe serves as
the Chief Executive Officer of PCI. Mr. Keefe receives a base annual salary of
approximately $220,000, a monthly allowance for additional housing and cost of
living expenses of $5,000, an allowance for relocation expenses of up to
$20,000, and reimbursement of educational and tax planning expenses of up to an
aggregate amount of $23,000 per year. Mr. Keefe also receives a guaranteed bonus
of $100,000 in the first year of his employment and unspecified incentive
bonuses thereafter. He received an additional bonus of $200,000 upon the signing
of the employment agreement. Mr. Keefe may terminate the employment agreement at
any time upon three months' written notice, and PCI may terminate the agreement
at any time upon one month's written notice (with an obligation to pay Mr. Keefe
an additional five months' salary). In addition, PCI may terminate the agreement
immediately without further obligation to Mr. Keefe for cause (as defined in the
employment agreement). Mr. Keefe has been granted options to purchase 250,000
shares of Common Stock at a price of $12 per share, subject to the terms and
conditions of a stock option agreement with @ Entertainment. Options to purchase
31,250 shares of Common Stock shall vest at the end of each fiscal quarter on
March 31, June 30, September 30 and December 31 of 1998 and 1999, provided that
the options shall vest in full on the date of a change in control (as defined in
the employment agreement) in @ Entertainment or PCI.
Ms. Hansberry entered into a two-year agreement with PCI effective at
January 1, 1998. Pursuant to such agreement, Ms. Hansberry serves as Vice
President and General Counsel of PCI and receives an annual remuneration
totaling $150,000. She is eligible to receive annual performance-based bonuses
of up to $40,000 per year. Ms. Hansberry's initial year bonus of $40,000 is
guaranteed. Ms. Hansberry or PCI may terminate the agreement at any time upon
six months' written notice. In addition, PCI may terminate the agreement without
further obligation to Ms. Hansberry for cause (as defined in the agreement).
The Company has entered into a two-year consultancy arrangement with
Samuel Chisholm and David Chance (each individually a "Consultant"), pursuant to
which the Company will pay to a Consultant a fee of $10,000 per consultancy day,
which shall be a single day of at least seven hours during which a Consultant
provides consulting services to the Company ("Consultancy Day"), based on a
minimum, on average over each 12 month period, of a total of 4 Consultancy Days
per month, and the Company will pay an additional fee of $10,000 to a Consultant
for any additional days in any month on which a Consultant provides consulting
services to the Company. Additionally, Messrs. Chisholm and Chance were each
granted, subject to stockholder approval, options to purchase 500,000 shares of
Common Stock at an exercise price of $12 per share. The options vest ratably
over a two-year period commencing from the initial date of grant.
The Company has entered into a two-year consultancy arrangement with
Agnieszka Holland, pursuant to which the Company will pay to Ms. Holland a fee
of $25,000 per year, in 12 equal prorated amounts, for artistic consultancy
services.
1997 STOCK OPTION PLAN
1997 Plan provides for the grant to employees of the Company (including
officers, employee directors, and non-employee directors) of incentive stock
options within the meaning of Section 422 of the Code, and for the grant of
qualified stock options to employees and consultants of the Company
(collectively the "Options"). For a complete discussion of the 1997 Plan see
Approval of Certain Amendments to the 1997 Stock Option Plan.
The following table lists all grants of Options under the 1997 Plan to
the Named Executive Officers during 1997 and contains certain information about
potential value of these Options based upon certain assumptions as to the
appreciation of the Common Stock over the life of the Options.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Percent of
Number of Total
Securities Options/SARS Exercise
Underlying Granted to or Grant Date
Options/SARS Employees in Base Price Expiration Present Value
Name Granted (#) Fiscal Year (%) ($) Date ($)(1)
- ---- ------------ --------------- ---------- ---------- -------------
<S><C>
Robert E. Fowler, III........... 1,286,000 55.12% 3.707 1/01/07 16,576,540
Richard B. Steele............... -- -- -- -- --
John S. Frelas.................. -- -- -- -- --
George Z. Makowski.............. 385,000 16.50% 3.70808 1/01/07 2,964,500
David Warner.................... 131,000 5.62% 15.24 6/23/07 652,380
Przemyslaw Szmyt................ 131,000 5.62% 15.24 6/23/07 652,380
</TABLE>
- -----------------
(1) Calculated based upon a variation of the Black-Scholes option pricing
model in which the following assumptions were used: the expected
volatility of the Common Stock was 39.0%; the risk-free rate of return
was 6.25%, 6.25%, 6.31%, and 6.31% for Messrs. Fowler, Makowski, Warner
and Szmyt, respectively; the dividend yield was 0.0%; and the expected
time of exercise was four (4) years from the month of the grant.
The following table provides certain information with respect to the
number of shares of Common Stock represented by outstanding Options held by the
Named Executive Officers at December 31, 1997. Also reported are the values for
"in-the-money" options which represent the position spread between the exercise
price of any such existing stock options and the price of the Common Stock at
December 31, 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARS In-the-Money
Shares at Fiscal Options/SARS
Acquired on Value Year-End (#) Year-End ($)
NAME Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ -------- ------------------------- -------------------------
<S><C>
Robert E. Fowler, III.................. -- -- 1,286,000/0 9,539,548/--
Richard B. Steele...................... -- -- -- --
John S. Frelas......................... -- -- 48,000/193,000 430,398/1,762,727
George Z. Makowski..................... -- -- 385,000/-- 2,855,514/--
David Warner........................... -- -- --/131,000 --
Przemyslaw Szmyt....................... -- -- --/131,000 --
</TABLE>
APPROVAL OF AMENDING THE 1997 STOCK OPTION PLAN FOR THE PURPOSES OF (1)
INCREASING TO 4,436,000 THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE PURSUANT TO THE 1997 PLAN, (2) INCLUDING DIRECTORS AS ELIGIBLE
OPTIONEES, AND (3) PERMITTING TRANSFERS OF OPTIONS TO FAMILY MEMBERS OF
OPTIONS UNDER CERTAIN CIRCUMSTANCES (THE "1997 PLAN AMENDMENTS")
The 1997 Plan previously authorized 2,436,000 shares for issuance upon
exercise of stock options and provided that all options were non-transferable,
except by will and the law of descent. Additionally, the 1997 Plan did not
previously provide that all Directors were eligible for option grants. The
Company's Board of Directors has unanimously adopted a resolution to approve
amending the 1997 Plan for the purposes of (1) increasing to 4,436,000 the
number of shares of Common Stock reserved for issuance pursuant to the 1997
Plan, (2) including directors as eligible optionees, and (3) permitting
transfers of options to family members of options under circumstances (the "1997
Plan Amendments"). Four shareholders holding approximately 58.7% of the
outstanding shares of Common Stock, have voted all of such shares in favor of
the 1997 Plan Amendments which vote was sufficient to approve the increase. The
current text of the 1997 Plan, as modified pursuant to the 1997 Plan Amendments,
is attached hereto as Exhibit A. The material features of the 1997 Plan are
discussed below, but the description is subject to, and is qualified in its
entirety by, the full text of the 1997 Plan, as amended.
7
<PAGE>
The 1997 Plan is currently administered by the Board of Directors which
selects the optionees (from among those eligible), determines the number or
shares to be subject to each Option and determines the exercise price of each
Option. The Board of Directors may also appoint a Stock Option Committee to
perform such functions in the future. Currently, approximately 11 individuals
(including Messrs. Fowler, Frelas and Makowski, whose option agreements with PCI
became subject to the 1997 Plan pursuant to Assignment and Assumption Agreements
with @ Entertainment, Messrs. Szmyt and Warner, whose option agreements became
subject to the 1997 Plan pursuant to a resolution of the Board of Directors of @
Entertainment, and Messrs. Chisholm, Chance, and Keefe) participate in the 1997
Plan. Under the 1997 Plan, as amended, Directors of the Company will also be
eligible to receive stock option grants.
In addition, the Board of Directors has the authority to interpret the
1997 Plan and to prescribe, amend and rescind rules and regulations relating to
the 1997 Plan. The Board of Directors' interpretation of the 1997 Plan and
determinations pursuant to the 1997 Plan are final and binding on all parties
claiming an interest under the 1997 Plan. The maximum number of shares of Common
Stock that may be subject to Options under the 1997 Plan, as amended, 4,436,000
shares (of which 2,000,000 remain subject to stockholder approval), subject to
adjustment in accordance with the terms of the 1997 Plan. At March 19, 1998
options for 3,724,000 shares had been granted (of which 1,288,000 remain subject
to stockholder approval) and 712,000 shares remained available for future grants
(subject to stockholder approval). The exercise price of all incentive stock
options granted under the 1997 Plan must be at least equal to the fair market
value of the Common Stock on the date of grant. With respect to any participant
who owns stock possessing more than 10% of the voting power of all classes of
stock of @ Entertainment, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value on the grant date and
the maximum term of an incentive stock option must not exceed five years.
The term of all options granted under the 1997 Plan may not exceed ten
years. Options become exercisable at such times as determined by the Board of
Directors and as set forth in the individual stock option agreements. Payment of
the purchase price of each Option will be payable in full in cash upon the
exercise of the Option. In the discretion of the Board of Directors, payment may
also be made by surrendering shares owned by the optionee which have a fair
market value on the date of exercise equal to the purchase price, by delivery of
a full recourse promissory note meeting certain requirements or in some
combination of the above payment methods.
Under the 1997 Plan, all Options are non-transferable, except by will
or by the laws of descent and distribution. Additionally, under the 1997 Plan,
as amended, the Board of Directors will have the authority to designate that the
Options may be transferred by gifts in trust for family members.
In the event of a merger of @ Entertainment with or into another
corporation, as a result of which @ Entertainment is not the surviving
corporation, the 1997 Plan requires that outstanding Options be assumed or an
equivalent option substituted by the successor corporation or a parent or
subsidiary of such successor corporation. If the successor corporation does not
assume or substitute for the Options, the optionee will have the right to
exercise the Option as to those shares which are vested for a period beginning
not less than fifteen days prior to the proposed consummation of such
transaction and ending immediately prior to the consummation of such
transaction, at which time the Options will terminate.
The number of shares covered by the 1997 Plan and the number of shares
for which each Option is exercisable shall be proportionately adjusted for any
change in the number of issued shares resulting from any reorganization of @
Entertainment. In the event of dissolution or liquidation of @ Entertainment,
each Option shall terminate immediately prior to the consummation of such
action.
No Options may be granted under the 1997 Plan after ten years from its
effective date. The Board of Directors has authority to amend or terminate the
1997 Plan subject to certain limitations set forth in the 1997 Plan.
8
<PAGE>
The following table sets forth, as of the Record Date, certain
information regarding options granted under the 1997 Plan to the persons and
groups indicated.
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
Number of Shares Exercise
Subject to Options Price Dollar
Name and Position (#) ($) Value ($)(1)
- ----------------- ------------------ -------- ------------
<S><C>
Robert E. Fowler, III 1,286,000 3.707 13,397,548
Chief Executive Officer and Director
Richard B. Steele -- -- --
John S. Frelas 241,000 1.9917 2,924,125
CFO, Vice President, Treasurer
George Z. Makowski 385,000 3.70808 4,010,514
Chief Operating Officer - Cable
David Warner 131,000 15.24 --
Chief Operating Officer - DTH
75,000 12.24 141,375
Przemyslaw Szmyt 131,000 15.24 --
Vice President, General Counsel, Secretary
75,000 12.24 141,375
Executive Officers as a Group (7 persons) 2,574,000 6.02 20,862,270
Non-Employee Directors as a Group 1,000,000 12.00 2,125,000
(3 persons)
All Non-Executive Employees as a Group 150,000 15.00 --
</TABLE>
- -----------------
(1) Determined by multiplying the number of options held by the individual
times the difference between the exercise price of the option and the
market price of Company common stock at March 30, 1998 which was
$14.125.
9
<PAGE>
EXHIBIT A
@ ENTERTAINMENT, INC.
1997 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE.
The purpose of the @ ENTERTAINMENT, INC. 1997 Stock Option
Plan (the "Plan") is to advance the interests of the Corporation and its
shareholders by providing a means by which the Corporation and its Subsidiaries
shall be able to attract and retain qualified employees, consultants and
directors.
2. DEFINITIONS.
(a) Affiliate" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations that includes the Corporation
if each of such corporations, other than the last corporation in the chain, owns
at least 50% of the total voting power of one of the other corporations.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the committee appointed by the
Board to administer the Plan, or if no such committee is appointed, the Board.
(e) "Common Stock" shall mean the voting common stock of the
Corporation.
(f) "Consultant" shall mean any person who, or any employee of
any firm which, is engaged by the Company or any Affiliate to render consulting
services.
(g) "Corporation" shall mean @ ENTERTAINMENT, INC., a Delaware
corporation.
(h) "Director" shall mean any director of the Corporation who
is not an employee or consultant of the Corporation.
(i) "Effective Date" shall mean June 22, 1997.
(j) "Employee" shall mean any individual who is treated as an
employee on the applicable payroll/employment records of the Corporation or
Affiliate at the relevant time. For purposes of the Plan and only for purposes
of the Plan, and in regard to Nonstatutory Stock Options but not for Incentive
Stock Options, a Consultant of the Corporation or any Affiliate shall be deemed
to be an Employee, and service as a Consultant with the Corporation or any
Affiliate shall be deemed to be employment, but no Incentive Stock Option shall
be granted to a Consultant
<PAGE>
who is not an employee of the Corporation or any Affiliate within the meaning of
Section 3401 of the Code and the regulations thereunder. In the case of a
Consultant, the provisions governing when a termination of employment has
occurred for purposes of the Plan shall be set forth in the written stock option
agreement between the Optionee and the corporation, or, if not so set forth, the
Committee shall have the discretion to determine when a termination of
"employment" has occurred for purposes of the Plan.
(k) Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "Exercise Price" shall mean the price per Share at which
an Option may be exercised, as determined by the Committee and as specified in
the Optionee's stock option agreement.
(m) "Fair Market Value" shall mean the value of one Share of
Common Stock, determined as follows: (i) if the Shares are traded on an exchange
or on the Nasdaq National Market System, the reported "closing price" on the
date of valuation or if no trading occurred on such date, the next preceding day
on which trading occurred; (ii) if the Shares are traded over-the-counter on the
NASDAQ System (other than on the NASDAQ National Market System), the mean
between the bid and the ask prices on said System at the close of business on
the date of valuation or if no trading occurred on such date, the next preceding
day on which trading occurred; and (iii) if neither (i) nor (ii) applies, the
fair market value as determined by the Committee in good faith. Such
determination shall be conclusive and binding on all persons.
(n) "Incentive Stock Option" shall mean an Option of the type
described in Section 422(b) of the Code.
(o) Nonstatutory Stock Option" shall mean an Option of the
type not described in Section 422(b) or 423(b) of the Code.
(p) Option" shall mean an option to purchase Common Stock
granted pursuant to the Plan.
(q) Optionee" shall mean any person who holds an Option
pursuant to the Plan.
(r) Plan" shall mean this stock option plan as it may be
amended from time to time.
(s) Purchase Price" shall mean at any particular time the
Exercise Price times the number of Shares for which an Option is being
exercised.
(t) Share" shall mean one share of authorized Common Stock.
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<PAGE>
3. Administration.
(a) The Committee.
The plan shall be administered by a Committee appointed by the
Board. To the extent the Board deems it desirable for the Option to constitute
performance based compensation pursuant to Code Section 162(m), the Committee
shall consist of not less than two members, each of whom is an "outside
director" as defined in Code Section 162(m). To the extent the Board deems it
desirable for the Committee to satisfy the requirements for disinterested
administration under Rule 16b-3 under the Exchange Act, the Committee shall
consist of not less than two members, each of whom is a "nonemployee director"
as defined in Rule 16b-3.
(b) Powers of the Committee.
Subject to the provisions of the Plan, the Committee shall
have the authority, in its discretion and on behalf of the Corporation:
(i) to grant options;
(ii) to determine the Exercise Price per Share of
Options to be granted;
(iii) to determine Employee status and the
Employees or Directors to whom, and the time or times at which, Options shall be
granted and the number of Shares for which an Option will be exercisable;
(iv) to interpret the Plan;
(v) to prescribe, amend, and rescind rules and
regulations relating to the Plan;
(vi) to determine the terms and provisions of
each Option granted and, with the consent of the holder thereof, modify or amend
each Option;
(vii) to accelerate or defer, with the consent of
the Optionee, the exercise date of any Option;
(viii) to authorize any person to execute on behalf
of the Corporation any instrument required to effectuate the grant of an Option
previously granted by the Committee;
(ix) with the consent of the Optionee, to
reprice, cancel and regrant, or otherwise adjust the Exercise Price of an Option
previously granted by the Committee; and
3
<PAGE>
(x) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(c) Committee's Interpretation of the Plan.
The interpretation and construction by the Committee
of any provision of the Plan or of any Option granted hereunder, as well as any
determination made by the Committee pursuant to Section 3(b), shall be final and
binding on all parties claiming an interest in an Option granted under the Plan.
No member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option.
(d) Delegation by Committee
Subject to the provisions of the Plan, the Committee
shall have the authority, in its discretion and on behalf of the Corporation, to
delegate the following powers to any individual or individuals with respect to
the granting of Options to those Employees who are not subject to the
short-swing profit rules of Section 16 of the Exchange Act:
(i) The power to grant Options;
(ii) The power to determine Employee status and
the Employees and Directors to whom and the time or times at which Options shall
be granted and the number of Shares for which an Option will be exercisable; and
(iii) The power to determine the Exercise Price
per Share of Options to be granted.
In delegating its powers hereunder, the Committee may place any restrictions it
deems appropriate on the delegatee(s). Any delegation of power under this
Section shall be valid until it expires by its own terms, until revoked by the
Committee, or until revoked by the Board, whichever first occurs.
4. PARTICIPATION.
(a) Eligibility.
The Optionees shall be such persons as the Committee
may select from among the Employees and Directors, provided that Consultants and
Directors are not eligible to receive Incentive Stock Options.
4
<PAGE>
(b) Ten Percent Shareholders.
Any Employee who owns Stock possessing more than 10%
of the total combined voting power of all classes of outstanding stock of the
Corporation or any Affiliate shall not be eligible to receive an Incentive Stock
Option unless:
(i) the Exercise Price of the Shares subject to
such Option when granted is at least 110% of the Fair Market Value of such
Shares, and
(ii) such Option by its terms is not exercisable
after the expiration of five years from the date of grant.
(c) Stock Ownership.
For purposes of Paragraph 4(b), in determining stock
ownership, an Employee shall be considered as owning the stock owned, directly
or indirectly, by or for his or her brothers and sisters, spouse, ancestors, and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries,
respectively. Stock with respect to which such Employee or any other person
holds an option shall be disregarded.
(d) Outstanding Stock.
For purposes of Section 4(b), the term "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant of the Option to the Optionee but shall not include any share for
which an Option is exercisable by any person.
5. STOCK.
(a) Shares Subject to This Plan.
The aggregate number of Shares which may be issued
upon exercise of Options under the Plan shall not exceed 4,436,000 shares,
subject to adjustment pursuant to Section 9 hereof.
(b) Options Not to Exceed Shares Available.
The number of Shares for which an Option is
exercisable at any time shall not exceed the number of Shares remaining
available for issuance under the Plan. If any Option expires or is terminated,
the number of Shares for which such Option was exercisable may be made
exercisable pursuant to other Options under the Plan. The limitations
established by this
5
<PAGE>
Section 5(b) shall be subject to adjustment in the manner provided in Section 9
hereof upon the occurrence of an event specified therein.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock option
agreements between the Optionee and the Corporation in such form as the
Committee shall from time to time determine. No Option or purported Option shall
be a valid and binding obligation of the Corporation unless so evidenced in
writing.
(b) Number of Shares.
Each stock option agreement shall state the number of
Shares for which the Option is exercisable and shall provide for the adjustment
thereof in accordance with Section 9 hereof. The maximum number of shares with
respect to which options may be granted to any one Optionee, in the aggregate in
any calendar year, shall not exceed 1,500,000 Shares.
(c) Vesting.
An Optionee may not exercise his or her Option for
any Shares until the Option, in regard to such Shares, has vested. Each stock
option agreement shall include a vesting schedule which shall show when the
Option becomes exercisable. The vesting schedule shall not impose upon the
Corporation or any Affiliate any obligation to retain the Optionee in its employ
or under contract for any period or otherwise change the employment-at-will
status of an Optionee who is an employee of the Corporation or any Affiliate.
(d) Lapse of Options.
Each stock option agreement shall state the time or
times when the Option covered thereby lapses and becomes unexercisable in part
or in full. An Option shall lapse on the earliest of the following events
(unless otherwise determined by the Committee and reflected in an option
agreement):
(i) The tenth anniversary of the date of
granting the Option;
(ii) The first anniversary of the Optionee's
death;
6
<PAGE>
(iii) The first anniversary of the date the
Optionee ceases to be an Employee or Director due to total and permanent
disability, within the meaning of Section 22(e)(3) of the Code;
(iv) On the date provided in Section 6(h)(i),
unless with respect to a Nonstatutory Stock Option, the Committee otherwise
extends such period before the applicable expiration date;
(v) On the date provided in Section 9 for a
transaction described in such Section;
(vi) The date the Optionee files or has filed
against him or her a petition in bankruptcy; or
(vii) The expiration date specified in an
Optionee's stock option agreement.
(e) Exercise Price.
Each stock option agreement shall state the Exercise
Price for the Shares for which the Option is exercisable. Subject to Section
4(b), the Exercise Price of an Incentive Stock Option shall, when granted, be
not less than 100% of the Fair Market Value of the Shares for which the Option
is exercisable.
(f) Medium and Time of Payment.
The Purchase Price shall be payable in full in cash
upon the exercise of an Option but the Committee, in its sole discretion, may
allow the Optionee to pay the Purchase Price:
(i) by surrendering Shares in good form for
transfer, owned by the Optionee and having a Fair Market Value on the date of
exercise equal to the Purchase Price;
(ii) by delivery of a full recourse promissory
note ("Note") made by the Optionee in the amount of the Purchase Price, bearing
interest, compounded semiannually, at a rate not less than the rate determined
under Section 7872 of the Code to insure that no "foregone interest", as defined
in such section, will accrue, together with the delivery of a duly executed
standard form security agreement securing the Note by a pledge of the Shares
purchased; or
7
<PAGE>
(iii) in any combination of such consideration or
such other consideration and method of payment for the issuance of Shares to the
extent permitted under applicable law, as long as the sum of the cash so paid,
the Fair Market Value of the Shares so surrendered, and the amount of any Note
equals the Purchase Price.
The Committee or a stock option agreement may
prescribe requirements with respect to the exercise of Options, including the
submission by the Optionee of such forms and documents as the Committee may
require and, the delivery by the Optionee of cash sufficient to satisfy
applicable withholding requirements. The Committee may vary the exercise
requirements and procedures from time to time to facilitate, for example, the
broker-assisted exercise of Options.
(g) Nontransferability of Options.
During the lifetime of the Optionee, the Option shall
be exercisable only by the Optionee or the Optionee's conservator or legal
representative and shall not be assignable or transferable except as defined by
the Code. Notwithstanding the above, the Committee may desigante, at the time of
grant, that certain Options may be transferable by gifts in trust by family
members. In the event of the Optionee's death, the Option shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution.
(h) Termination of Employment Other than by Death or
Disability.
(i) If an Optionee ceases to be an Employee or
Director for any reason other than his or her death or disability, the Optionee
shall have the right, subject to the provisions of this Section 6, to exercise
any Option held by the Optionee at any time within ninety (90) days after his or
her termination of employment, but not beyond the otherwise applicable term of
the Option and only to the extent that on such date of termination of employment
the Optionee's right to exercise such Option had vested.
(ii) For purposes of this Section 6(h), the
employment relationship shall be treated as continuing intact while the Optionee
is an active employee of the Corporation or any Affiliate, or is on military
leave, sick leave, or other bona fide leave of absence to be determined in the
sole discretion of the Committee. The preceding sentence notwithstanding, in the
case of an Incentive Stock Option, employment shall be deemed to terminate on
the date the Optionee ceases active employment with the Corporation or any
Affiliate, unless the Optionee's reemployment rights are guaranteed by
applicable law or contract.
8
<PAGE>
(i) Death of Optionee.
If an Optionee dies while an Employee or Director, or
after ceasing to be an Employee or Director but during the period while he or
she could have exercised an Option under Section 6(h), any Option granted to the
Optionee may be exercised, to the extent it had vested at the time of death and
subject to the Plan, at any time within 12 months after the Optionee's death, by
the executors or administrators of his or her estate or by any person or persons
who acquire the Option by will or the laws of descent and distribution, but not
beyond the otherwise applicable term of the Option.
(j) Disability of Optionee.
If an Optionee ceases to be an Employee or Director
due to becoming totally and permanently disabled within the meaning of Section
22(e)(3) of the Code, as determined by the Committee or its delegate in its sole
discretion, any Option granted to the Optionee may be exercised to the extent it
had vested at the time of cessation and, subject to the Plan, at any time within
12 months after the Optionee's termination of employment, but not beyond the
otherwise applicable term of the Option.
(k) Rights as a Shareholder.
An Optionee, or a transferee of an Optionee, shall
have no rights as a shareholder of the Corporation with respect to any Shares
for which his or her Option is exercisable until the date of the issuance of a
stock certificate for such Shares. No adjustment shall be made for dividends,
ordinary or extraordinary or whether in currency, securities, or other property,
distributions, or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 9 hereof.
(l) Modification, Extension, and Renewal of Options.
Within the limitations of the Plan, the Committee may
modify, extend or renew outstanding Options or accept the cancellation of
outstanding Options for the granting of new Options in substitution therefor.
Notwithstanding the preceding sentence, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option previously granted.
(m) Options for Nonresident Aliens and Certain Employees
Employed Outside the United States.
The Committee shall be free to adopt sub-plans or to
modify the terms and conditions of Options relating to nonresident alien
Employees or Directors or Employees
9
<PAGE>
employed outside the United States or by Affiliates not incorporated in the
United States. Such sub-plans or modifications shall contain such terms and
conditions as the Committee in its discretion deems necessary or desirable to
facilitate compliance with local laws or to achieve favorable tax or legal
results.
(n) Other Provisions.
The stock option agreements authorized under the Plan
may contain such other provisions which are not inconsistent with the terms of
the Plan, including, without limitation, restrictions upon the exercise of the
Option, as the Committee shall deem advisable.
7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOs.
To the extent that the Fair Market Value of Shares (determined
for each Share as of the date of grant of the Option covering such Share)
subject to Options granted under this Plan (or any other plan of the Corporation
or any Affiliate) which are designated as Incentive Stock Options and which
become exercisable by an Optionee for the first time during a single calendar
year exceeds $100,000, the Option(s) (or portion thereof) covering such Shares
shall be recharacterized (to the extent of such excess over $100,000) as a
Nonstatutory Stock Option. In determining which Option(s) shall be treated as
Nonstatutory Stock Options under the preceding sentence, the Options shall be
taken into account in the order granted, with the result that a later granted
Option shall be recharacterized as a Nonstatutory Stock Option prior to such
recharacterization of a previously granted Option.
8. TERM OF PLAN.
Options may be granted pursuant to the Plan until ten years
following the Effective Date, and all Options which are outstanding on such date
shall remain in effect until they are exercised or expire by their terms. The
Plan shall expire for all purposes on the date 20 years following the Effective
Date.
9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS.
(a) Reorganizations.
The number of Shares covered by the Plan, as provided
in Section 5 hereof, and the number of Shares for which each Option is
exercisable shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from the payment of a Common Stock
dividend, a stock split, a reverse stock split or any other event which results
in an increase or decrease in the number of issued Shares effected without
receipt of consideration by the Corporation, and the Exercise Price shall be
proportionately increased in the event the
10
<PAGE>
number of Shares subject to such Option are decreased and shall be
proportionately decreased in the event the number of Shares subject to such
Option are increased. For the purposes of this paragraph, conversion of any
convertible securities of the Corporation shall not be deemed to have been
"effected without receipt of consideration." Adjustments 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 Corporation
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.
(b) Liquidation.
In the event of the dissolution or liquidation of the
Corporation, each Option shall terminate immediately prior to the consummation
of such action. The Committee shall notify the Optionee not less than fifteen
(15) days prior to the proposed consummation of a pending dissolution or
liquidation, and the Option shall be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such
action.
(c) Merger.
In the event of (i) a proposed merger of the
Corporation with or into another corporation, as a result of which the
Corporation is not the surviving corporation and (ii) the Option is not assumed
or an equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation, then in such case each Option shall
terminate immediately prior to the consummation of such transaction. The
Committee shall notify the Optionee not less than fifteen (15) days prior to the
proposed consummation of such transaction, and the Option shall be exercisable
as to all Shares which are vested prior to expiration and until immediately
prior to the consummation of such transaction.
(d) Determination by Committee.
All adjustments described in this Section 9 shall be
made by the Committee, whose determination shall be conclusive and binding on
all persons.
(e) Limitation on Rights of Optionee.
Except as expressly provided in this Section 9, no
Optionee shall have any rights by reason of any payment of any stock dividend,
stock split or reverse stock split or any other increase or decrease in the
number of shares of stock of any class, or by reason of any reorganization,
consolidation, dissolution, liquidation, merger, exchange, split-up or reverse
split-up, or spin-off of assets or stock of another corporation. Any issuance by
the Corporation of Shares, Options or securities convertible into Shares or
Options shall not affect, and no
11
<PAGE>
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of the Shares for which an Option is exercisable. Notwithstanding
the foregoing, if the Corporation shall enter into a transaction affecting the
Corporation's capital stock or distributions to the holders of its capital stock
for which a revision in the terms of each Option is not required pursuant to
this Section 9, the Committee shall have the right, but not the obligation, to
revise the terms of each Option in a manner the Committee, in its sole
discretion, deems fair and reasonable given the transaction involved. If
necessary or appropriate in connection with such transaction, the Committee may
declare that any Option shall terminate as of a date fixed by the Committee and
give each Optionee the right to exercise his Option in whole or in part,
including exercise as to Shares to which the Option would not otherwise be
exercisable.
(f) No Restriction on Rights of Corporation.
The grant of an Option shall not affect or restrict
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or to dissolve, liquidate, sell, or
transfer all or any part of its business or assets.
10. SECURITIES LAW REQUIREMENTS.
(a) Registration.
The Corporation shall not be under any obligation to
issue any Shares upon the exercise of any Option unless and until the
Corporation has determined that: (i) it and the Optionee have taken all actions
required to register the Shares under the Securities Act of 1933, or to perfect
an exemption from the registration requirements thereof; (ii) any applicable
listing requirement of any stock exchange on which the Common Stock is listed
has been satisfied; and (iii) all other applicable provisions of state, Federal
and foreign law have been satisfied.
(b) Market Standoff Agreement.
By acceptance of an Option, each Optionee agrees that
if so requested by the Corporation or any representative of the underwriters in
connection with any registration of any securities of the Corporation under the
Act, Optionee shall not sell or otherwise transfer any of the Shares or other
securities of the Corporation during the period requested by the Corporation or
the representative of the underwriters, as the case may be. Each Optionee agrees
that the Corporation may impose stop-transfer instructions with respect to the
securities subject to the foregoing restrictions.
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<PAGE>
11. EXERCISE OF UNVESTED OPTIONS.
The Committee may grant any Optionee the right to exercise any
Option prior to the complete vesting of such Option. Without limiting the
generality of the foregoing, the Committee may provide that if an Option is
exercised prior to having completely vested, the Shares issued upon such
exercise shall remain subject to vesting at the same rate as under the Option so
exercised and shall be subject to a right, but not an obligation, of repurchase
by the Corporation with respect to all unvested Shares if the Optionee ceases to
be an Employee or Director for any reason. For the purposes of facilitating the
enforcement of any such right of repurchase, at the request of the Committee,
the Optionee shall enter into the Joint Escrow Instructions with the Corporation
and deliver every certificate for his or her unvested Shares with a stock power
executed in blank by the Optionee and by the Optionee's spouse, if required for
transfer.
12. AMENDMENT OF THE PLAN.
The Board or the Committee may, from time to time, terminate,
suspend or discontinue the Plan, in whole or in part, or revise or amend it in
any respect whatsoever including, but not limited to, the adoption of any
amendment(s) deemed necessary or advisable to qualify the Options under rules
and regulations promulgated by the Securities and Exchange Commission with
respect to Employees or Directors who are subject to the provisions of Section
16 of the Securities Exchange Act of 1934, as amended, or to correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
Option granted thereunder, without approval of the shareholders of the
Corporation, but without the approval of the Corporation's shareholders, no such
revision or amendment shall:
(i) Increase the number of Shares subject to the
Plan, other than any increase pursuant to Section 9;
(ii) Materially modify the requirements as to
eligibility for receipt of an Incentive Stock Option;
(iii) Materially increase the benefits
accruing to Optionees receiving Incentive Stock Options under the Plan;
(iv) Extend the term of the Plan; or
(v) Amend this Section to defeat its purpose.
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<PAGE>
13. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of
Common Stock pursuant to the exercise of an Option shall be used for general
corporate purposes.
14. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote
of the holders of a majority of all classes of the outstanding shares present
and entitled to vote at the first meeting of shareholders of the Corporation
following the adoption of the Plan or by written consent, and in no event later
than one (1) year following the Effective Date. Prior to such approval, Options
may be granted but shall not be exercisable. Any amendment described in Section
12 (i) to (iv) shall also be subject to approval by the Corporation's
shareholders.
15. WITHHOLDING OF TAXES.
In the event the Corporation or an Affiliate determines that
it is required to withhold Federal, state, foreign or local taxes in connection
with the exercise of an Option or the disposition of Shares issued pursuant to
the exercise of an Option, the Optionee or any person succeeding to the rights
of the Optionee, as a condition to such exercise or disposition, may be required
to make arrangements satisfactory to the Corporation or the Affiliate to enable
it to satisfy such withholding requirements.
16. RIGHTS AS AN EMPLOYEE.
Neither the Plan nor any Option granted pursuant thereto shall
be construed to give any person the right to remain in the employ of the
Corporation or any Affiliate, or to affect the right of the Corporation or any
Affiliate to terminate such individual's employment at any time with or without
cause. The grant of an Option shall not entitle the Optionee to, or disqualify
the Optionee from, participation in the grant of any other Option under the Plan
or participation in any other benefit plan maintained by the Corporation or any
Affiliate.
17. DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR
CREATION OF IMPLIED RIGHTS.
In adopting and maintaining this Plan and granting options
hereunder, neither the Corporation nor any Affiliate makes any representations
or undertakings with respect to the initial qualification or treatment of
Options under federal or state tax or securities laws. The Corporation and each
Affiliate expressly disavows the creation of any rights in Employees, Directors,
Optionees, or beneficiaries of any obligations on the part of the Corporation,
any Affiliate or the Committee, except as expressly provided herein.
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18. INSPECTION OF RECORDS.
Copies of the Plan, records reflecting each Optionee's Option,
and any other documents and records which an Optionee is entitled by law to
inspect shall be open to inspection by the Optionee and his or her duly
authorized representative at the office of the Committee during normal business
hours.
19. INFORMATION TO OPTIONEES.
Each Optionee shall be provided with such information
regarding the Corporation as the Committee from time to time deems necessary or
appropriate; provided however, that each Optionee shall at all times be provided
with such information as is required to be provided from time to time pursuant
to applicable regulatory requirements, including, but not limited to, any
applicable requirements of the Securities and Exchange Commission, and any other
applicable governmental agencies.
20. DELAWARE LAW TO GOVERN.
All questions pertaining to the construction, interpretation,
regulation, validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of laws.
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