<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1999
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
BIGSTAR ENTERTAINMENT, INC.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3995258
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
19 FULTON STREET
5TH FLOOR
NEW YORK, NEW YORK 10038
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
BIGSTAR ENTERTAINMENT, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1999 STOCK OPTION AND INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
(FULL TITLE OF THE PLAN)
DAVID FRIEDENSOHN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BIGSTAR ENTERTAINMENT, INC.
19 FULTON STREET - 5TH FLOOR
NEW YORK, NEW YORK 10038
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(212) 981-6300
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
RUBI FINKELSTEIN, ESQ.
RICHARD D. HARROCH, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
(212) 506-5000
(212) 506-5151 (FAX)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
AMOUNT PROPOSED PROPOSED AMOUNT OF
TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE* OFFERING PRICE* FEE*
- ------------------------------------ ----------- ---------------- ----------------- -------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per
Share 258,117 $ 1.22 $7,436,902 $1,964
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C>
77,600 $ 2.99
225,283 $ 3.74
4,000 $ 4.13
2,500 $ 4.75
25,500 $ 4.875
27,000 $ 4.88
6,000 $ 5.38
4,000 $ 5.44
38,000 $ 5.63
5,000 $ 5.69
5,000 $ 5.75
17,509 $ 6.19
4,000 $ 6.50
10,000 $6.6875
2,500 $ 6.75
8,500 $ 6.94
9,000 $ 7.00
2,200 $7.0625
12,000 $ 7.25
20,000 $ 7.31
10,000 $ 7.38
2,000 $ 7.63
1,500 $ 7.81
25,000 $7.9375
55,000 $ 7.94
15,036 $ 8.50
564,275 $7.0625
</TABLE>
* Pursuant to Rule 457(h)(1), the proposed maximum offering price and the
proposed maximum aggregate offering price have been calculated on the basis
of $7.0625 per share, the average of the high and low prices of the Common
Stock on Nasdaq on January 7, 2000 with respect to 564,275 shares of Common
Stock and on the basis of the exercise prices of options previously granted
with respect to 872,245 shares of Common Stock.
<PAGE> 3
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information *
Item 2. Registrant Information and Employee Plan Annual Information *
* Information required by Part I to be contained in the Section
10(a) prospectus is omitted from this Registration Statement in
accordance with Rule 428 under the Securities Act of 1933, as
amended (the "Securities Act"), and the Note to Part I of Form
S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed by BigStar Entertainment, Inc. (the
"Registrant") with the Securities and Exchange Commission (the
"Commission") are hereby incorporated by reference in this
Registration Statement:
(a) The audited consolidated financial statements of
the Registrant contained in the prospectus dated August 2, 1999
filed by the Registrant under Rule 424(b) (Registration No.
333-77963).
(b) The Registrant's Quarterly Reports on Form 10-Q
for the Quarterly Periods ended June 30, 1999 and September 30,
1999 (File No. 000-26793).
(c) The description of the Registrant's Common Stock
contained in the Registrant's Registration Statement on Form 8-A
(File No. 000-26793), including any subsequent amendment or report
filed for the purpose of updating that description.
In addition, all documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment indicating that all of the securities offered hereunder
have been sold or deregistering all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference in this
Registration Statement 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 subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
The financial statements of the Registrant as of December 31, 1998 and for the
period from March 2, 1998 (inception) to December 31, 1998 have been
incorporated by reference in this Registration Statement in reliance upon the
report of Arthur Andersen LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. To the extent that Arthur Andersen LLP audits and
reports on financial statements of the
<PAGE> 4
Registrant issued at future dates, and consents to the use of their report
thereon, such financial statements also will be incorporated by reference in the
registration statement in reliance upon their report and said authority.
Item 4. Description of Securities
Inapplicable.
Item 5. Interests of Named Experts and Counsel
The validity of the Common Stock offered hereby will be passed
upon for the Registrant by Orrick, Herrington & Sutcliffe LLP, New
York, New York. Orrick, Herrington & Sutcliffe LLP beneficially
owns 19,400 shares of the Registrant's common stock.
Item 6. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides that
a corporation may indemnify directors and officers, as well as
other employees and individuals, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by any such person in connection
with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such
person being or having been a director, officer, employee or agent
of the Registrant. The Delaware General Corporation Law provides
that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise. The Registrant's Bylaws provide for indemnification by
the Registrant of its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits
a corporation to provide in its certificate of incorporation that
a director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases, redemptions or other distributions, or
(iv) for any transaction from which the director derived an
improper personal benefit. The Registrant's Certificate of
Incorporation provides for indemnification of its directors in
connection with any proceeding to the fullest extent permitted by
law.
The Registrant has obtained directors' and officers' insurance
providing indemnification for certain of the Registrant's
directors, officers and employees for certain liabilities.
Item 7. Exemption From Registration Claimed
Inapplicable.
<PAGE> 5
Item 8. Exhibits
Exhibit
Number Description
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP.
23.1 Consent of Orrick, Herrington & Sutcliffe LLP
(included in Exhibit 5.1 to this Registration
Statement).
23.2 Consent of Arthur Andersen LLP.
24 Powers of Attorney (included on page 5).
99.1 1998 Stock Option and Incentive Plan.
99.2 1999 Amended Stock Option and Incentive Plan.
99.3 1999 Employee Stock Purchase Plan (incorporated
by reference from Exhibit No. 10.9 to
Registration Statement File No. 333-77963).
Item 9. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(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 the 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 the Registration Statement;
and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i)and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in
the 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.
<PAGE> 6
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(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 the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(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 Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on the 13th of January,
2000.
BIGSTAR ENTERTAINMENT, INC.
(Registrant)
/s/ David Friedensohn
By:____________________________
David Friedensohn
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below each severally constitutes and appoints David Friedensohn and David
Levitsky, and each of them, as true and lawful attorneys-in-fact and agents,
with full powers of substitution and resubstitution, for them in their name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents, or any of them, or their 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
dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ David Friedensohn Chairman of the Board of Directors and
- ------------------------------- Chief Executive Officer January 13, 2000
David Friedensohn (Principal Executive Officer)
/s/ David Levitsky Executive Vice President, January 13, 2000
- ------------------------------- General Manager and Director
David Levitsky
/s/ Robert Yingling Chief Financial Officer January 13, 2000
- --------------------------------- (Principal Financial Officer)
Robert Yingling
/s/ D. Jonathan Merriman
- -------------------------------- Director January 13, 2000
D. Jonathan Merriman
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
/s/ William Lansing
- -------------------------------- Director January 13, 2000
William Lansing
/s/ Steven A. Ledger
- -------------------------------- Director January 13, 2000
Steven A. Ledger
/s/ Marleen McDaniel
- -------------------------------- Director January 13, 2000
Marleen McDaniel
- -------------------------------- Director
I. Martin Pompadur
</TABLE>
<PAGE> 9
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP.
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included
in Exhibit 5.1 to this Registration Statement).
23.2 Consent of Arthur Andersen LLP.
24 Powers of Attorney (included on page 5 of this
Registration Statement).
99.1 1998 Stock Option and Incentive Plan.
99.2 1999 Amended Stock Option and Incentive Plan.
99.3 1999 Employee Stock Purchase Plan (incorporated by
reference from Exhibit No. 10.9 to Registration
Statement File No. 333-77963).
<PAGE> 1
Exhibit 5.1
January 13, 2000
BigStar Entertainment, Inc.
19 Fulton Street
5th Floor
New York, New York 10038
Ladies and Gentlemen:
At your request, we are rendering this opinion in connection
with the proposed issuance pursuant to the BigStar Entertainment, Inc. 1998
Stock Option and Incentive Plan, 1999 Stock Option and Incentive Plan and 1999
Employee Stock Purchase Plan (each, a "Plan"), of up to 271,600, 864,920, and
300,000 shares, respectively (the "Shares"), of common stock, $0.001 par value
("Common Stock"), of BigStar Entertainment, Inc., a Delaware corporation (the
"Company").
We have examined instruments, documents, and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; and
(c) the truth, accuracy and completeness of the information, representations and
warranties contained in the records, documents, instruments and certificates we
have reviewed.
Based on such examination, we are of the opinion that the
Shares of Common Stock issuable by the Company pursuant to each Plan are duly
authorized shares of Common Stock, and, when issued in accordance with the
provisions of the applicable Plan, will be validly issued, fully paid, and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit
to the above referenced Registration Statement on Form S-8. In giving such
consent, we do not consider that we are "experts" within the meaning of such
term as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission issued thereunder with
respect to any part of the Registration Statement, including this opinion, as an
exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-8 of our report dated July
28, 1999 included in BigStar Entertainment, Inc.'s Registration Statement on
Form S-1 (File No. 333-77963) previously filed with the Securities and Exchange
Commission and to all references to our firm included in this Registration
Statement.
Arthur Andersen LLP
New York, New York
January 12, 2000
<PAGE> 1
Exhibit 99.1
BIGSTAR ENTERTAINMENT, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purposes of this Plan................................................................................... 1
2. Definitions............................................................................................. 1
3. Stock Subject to this Plan.............................................................................. 4
4. Administration of this Plan............................................................................. 4
5. Eligibility............................................................................................. 5
6. Term of Plan............................................................................................ 6
7. Exercise Price and Consideration........................................................................ 6
8. Options................................................................................................. 8
9. Stock Purchase Rights................................................................................... 10
10. Stock Appreciation Rights............................................................................... 10
11. Restricted Shares....................................................................................... 11
12. Performance Units and Performance Shares................................................................ 12
13. Non-Transferability of Options and Stock Purchase Rights................................................ 13
14. Adjustments Upon Changes in Capitalization, Merger or Other Events...................................... 13
15. Time of Grant........................................................................................... 14
16. Amendment and Termination............................................................................... 14
17. Conditions Upon Issuance of Shares...................................................................... 15
18. Reservation of Shares................................................................................... 15
19. Option, Stock Purchase and Stock Bonus Agreements....................................................... 16
20. Shareholder Approval.................................................................................... 16
21. Information to Optionees and Purchasers................................................................. 16
22. Right of Company to Terminate Employment or Consulting Services......................................... 16
23. Rights of First Refusal and Repurchase.................................................................. 17
24. Withholding............................................................................................. 17
25. Separability............................................................................................ 17
26. Non-Exclusivity of this Plan............................................................................ 18
27. Governing Law........................................................................................... 18
28. Cancellation of and Substitution for Nonstatutory Options............................................... 18
29. Market Standoff......................................................................................... 18
Exhibit 1 - Form of Stock Option Agreement
</TABLE>
-i-
<PAGE> 3
BIGSTAR ENTERTAINMENT, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1. Purposes of this Plan. The general purpose of this 1998 Stock
Option and Incentive Plan is to promote the interests of the Company and its
shareholders by (i) providing certain Employees of and Consultants to the
Company with additional incentives to continue and increase their efforts with
respect to achieving success in the business of the Company, its Affiliates and
its Subsidiaries, and (ii) attracting and retaining the best available personnel
to participate in the ongoing business operations of the Company and its
Subsidiaries.
Options granted under this Plan may be either Incentive Stock
Options or Nonstatutory Stock Options, as determined at the discretion of the
Board and as reflected in the terms of the written option agreements. The Board
may also grant Stock Purchase Rights hereunder.
2. Definitions. As used in this Plan, the following definitions
shall apply:
"Affiliates" means any other entity directly or indirectly
controlling, controlled by, or under common control, with the Company.
"Affiliated SAR" means a SAR that is granted in connection
with a related Option, and which will be deemed to automatically be exercised
simultaneous with the exercise of the related Option.
"Award" means, individually or collectively, a grant under
this Plan, including any Nonqualified Stock Options, Incentive Stock Options,
SARs, Restricted Stock, Performance Units, or Performance Shares.
"Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions applicable
to Awards granted to Participants under the Plan.
"Board" shall mean the Committee, if one has been appointed,
or the Board of Directors of the Company, if no Committee is appointed.
"Board of Directors" means the full Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or statutes thereto.
Reference to any particular Code section shall include any successor section.
"Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) of this Plan, if one is appointed, or
if no Committee is appointed, the Board of Directors.
<PAGE> 4
"Common Stock" shall mean the Common Stock of the Company.
"Company" shall mean BigStar Entertainment, Inc., a Delaware
corporation.
"Consultant" shall mean any person who is engaged by the
Company or by any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not.
"Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more than 90 days or reemployment upon
the expiration of such leave is guaranteed by contract or statute.
"Disinterested Person" shall mean a member of the Board of
Directors of the Company: (i) who was not during the one year prior to service
as an administrator of this Plan granted or awarded equity securities pursuant
to this Plan, or any other plan of the Company or any of its affiliates
entitling the participants therein to acquire equity securities of the Company
or any of its affiliates except as permitted by Rule 16b-3(c)(2)(i) promulgated
under the Exchange Act ("Rule 16b-3(c)(2)(i)"); or (ii) who is otherwise
considered to be a "disinterested person" in accordance with Rule
16b-3(c)(2)(i), or any other applicable rules, regulations or interpretations of
the Securities and Exchange Commission.
"Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company as
a common-law employee. The payment of a director's fee by the Company shall not
be sufficient to constitute "employment" by the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Freestanding SAR" means a SAR that is granted independently
of any Options.
"Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
"Major Event" shall be deemed to have occurred if (i) there
shall be consummated any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's common stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger generally have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger; (ii) there shall be consummated any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; (iii) proceedings or actions
for the liquidation or dissolution of the Company are initiated by the Company;
or (iv) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) (other than persons who beneficially own more than 30% of the capital stock
of the Company on a fully diluted and as converted basis outstanding as of the
date of adoption of
2
<PAGE> 5
this Plan by the Board of Directors) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of
the Company's outstanding capital stock on a fully diluted and as converted
basis at such time; provided, however, that a "Major Event" shall not be deemed
to have occurred solely by reason of the consummation of a public offering by
the Company of common stock registered under the Securities Act.
"Nonstatutory Stock Option" shall mean an Option which is not
intended to qualify as an Incentive Stock Option.
"Option" shall mean a stock option granted pursuant to this
Plan.
"Optioned Stock" shall mean the Common Stock subject to an
Option.
"Optionee" shall mean an Employee or Consultant who receives
an Option.
"Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
"Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
"Performance Unit" means an Award granted to an Employee
pursuant to Section 12.
"Performance Share" means an Award granted to an Employee,
pursuant to Section 12 herein.
"Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the occurrence of
other events as determined by the Committee, in its discretion), and the Shares
are subject to a substantial risk of forfeiture, as provided in Section 11.
"Plan" shall mean this 1998 Stock Option and Incentive Plan.
"Purchaser" shall mean an Employee or Consultant who exercises
a Stock Purchase Right.
"Restricted Stock" means an Award granted to a Participant
pursuant to Section 11.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 14 of this Plan.
3
<PAGE> 6
"Stock Appreciation Right" or "SAR" means an Award, granted
alone or in connection with a related Option, designated as a SAR, pursuant to
the terms of Section 10.
"Stock Purchase Right" shall mean a right to purchase Common
Stock pursuant to this Plan or the right to receive a bonus of Common Stock for
past services.
"Subsidiary" shall mean a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
"Tandem SAR" means a SAR that is granted in connection with a
related Option, the exercise of which shall require forfeiture of the right to
purchase a Share under the related Option (and when a Share is purchased under
the Option, a SAR shall similarly be cancelled).
3. Stock Subject to this Plan. Subject to the provisions of
Section 14 of this Plan, the maximum aggregate number of Shares under this Plan
is 485,000 (this takes into account the Company's 4 for 1 stock split approved
in March 1999 and .485 for 1 reverse stock split approved in July 1999). The
Shares may be authorized but unissued, or reacquired Common Stock, or both. If
an Option or Stock Purchase Right should expire, terminate, be cancelled or
become unexercisable for any reason without having been exercised in full, then
the unpurchased Shares which were subject thereto shall, unless this Plan shall
have been terminated, become available for future grant or sale under this Plan.
In addition, Shares issued under this Plan and later repurchased or otherwise
reacquired by the Company shall, unless this Plan shall have been terminated,
become available for future grant or sale under this Plan.
4. Administration of this Plan.
(a) Procedure. This Plan shall be administered by the
Board of Directors of the Company unless and until the Board of Directors
delegates administration to a Committee, as provided in this Section 4(a).
(i) Subject to Section 4(a)(ii), the Board of
Directors may appoint a Committee consisting of not less than two persons (who
need not be members of the Board of Directors) to administer this Plan on behalf
of the Board of Directors, subject to such terms and conditions not inconsistent
with this Plan as the Board of Directors may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board of
Directors. Members of the Board who are either eligible for Options and/or Stock
Purchase Rights or have been granted Options and/or Stock Purchase Rights may
vote on any matters affecting the administration of this Plan or the grant of
any Options and/or Stock Purchase Rights pursuant to this Plan, except that no
such member shall act upon the granting of an option to such member, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
of Options and/or Stock Purchase Rights to such member.
(ii) Notwithstanding the foregoing Section
4(a)(i), if the Company registers any class of any equity security pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of such registration, any grants of
Options and/or Stock Purchase Rights to directors or officers who are subject to
Section 16 of the Exchange Act shall be made only by a Committee consisting of
two or more persons,
4
<PAGE> 7
each of whom shall be a Disinterested Person (if necessary to meet the
requirements of Rule 16b-3 promulgated under the Exchange Act). The Board shall
otherwise comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act, as from time to time in effect, unless the Board expressly
declares that any such requirement shall not apply.
(iii) Subject to the foregoing Sections 4(a)(i)
and 4(a)(ii), from time to time the Board of Directors 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, or remove all members of the Committee and thereafter directly
administer this Plan. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board of Directors.
(b) Powers of the Board. Subject to the provisions of
this Plan, the Board shall have plenary authority, in its discretion and without
limitation, to do the following: (i) to grant Incentive Stock Options,
Nonstatutory Stock Options or Stock Purchase Rights; (ii) to determine, upon
review of relevant information and in accordance with Section 7 of this Plan,
the fair market value of the Common Stock; (iii) to determine the exercise price
per share of Options or Stock Purchase Rights to be granted, which exercise
price shall be determined in accordance with Section 7 hereof; (iv) to determine
the Employees or Consultants to whom, and the time or times at which, Options or
Stock Purchase Rights shall be granted and the number of Shares to be
represented by each Option or Stock Purchase Right; (v) to interpret this Plan;
(vi) to prescribe, amend and rescind rules and regulations relating to this
Plan, and in the exercise of this power, to correct any defect, omission or
inconsistency in this Plan or in any agreement relating to an Option or Stock
Purchase Right, in a manner and to the extent the Board shall deem necessary or
expedient to make this Plan fully effective; (vii) to determine the terms and
provisions of each Option or Stock Purchase Right granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option or Stock Purchase Right; (viii) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option or Stock Purchase Right previously granted by the Board; and (ix) to make
all other determinations deemed necessary or advisable for the administration of
this Plan.
(c) Board Determinations. In making determinations under
this Plan, the Board may take into account the nature of the services rendered
by the respective Employees, their present and potential contributions to the
success of the Company, or its Subsidiaries, as the case may be, and such other
factors as the Board in its discretion shall deem relevant. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees, Purchasers and any other holders of any Options and/or Stock
Purchase Rights granted under this Plan.
5. Eligibility.
(a) Options and Stock Purchase Rights may be granted to
Employees, provided that Incentive Stock Options may only be granted to
Employees. An Employee who has been granted an Option or Stock Purchase Right
may, if such Employee is otherwise eligible, be granted additional Option(s) or
Stock Purchase Right(s).
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(b) No Incentive Stock Option may be granted to an
Employee which, when aggregated with all other Incentive Stock Options granted
to such Employee by the Company or by any Parent or Subsidiary, would result in
Shares having an aggregate fair market value (determined for each Share as of
the date of grant of the Option covering such Share) in excess of $100,000 (or
such different amount as provided for under the Code requirements for Incentive
Stock Options) becoming first available for purchase upon exercise of one or
more incentive stock options during any calendar year.
(c) Section 5(b) of this Plan shall apply only to an
Incentive Stock Option evidenced by a stock option agreement which sets forth
the intention of the Company and the Optionee that such Option shall qualify as
an Incentive Stock Option. Section 5(b) of this Plan shall not apply to any
Option evidenced by a stock option agreement which sets forth the intention of
the Company and the Optionee that such Option shall be a Nonstatutory Stock
Option.
(d) On and after the effective date of the registration
of any class of equity security of the Company pursuant to Section 12 of the
Exchange Act, a member of the Board of Directors who is not an Employee shall
not be eligible for the benefits of this Plan unless at the time an Option or
Stock Purchase Right is granted to such member, the Board expressly declares
that such exclusion will not apply.
6. Term of Plan. This Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
vote of the holders of a majority of the outstanding shares of the Company
entitled to vote on the adoption of this Plan. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 16 of this Plan.
7. Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option or Stock Purchase Right shall be such
price as is determined by the Board, but shall be subject to the following
provisions:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock 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 Employee other than
an Employee described in Section 7(a)(i)(A), 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:
(A) granted to an Employee or
Consultant who, at the time of the grant of such Option, owns stock representing
more than ten percent (10%) of the voting
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<PAGE> 9
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 the grant.
(B) granted to any Employee or
Consultant, other than an Employee or Consultant described in Section
7(a)(ii)(A), the per share exercise price shall be no less than 85% of the fair
market value per share on the date of grant.
(iii) In the case of a Stock Purchase Right
granted to any person, the per share exercise price shall be no less than 85% of
the fair market value per share on the date of grant; provided, however, that if
such person at the time of the grant of such Stock Purchase Right, 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 100% of the fair market value per share on the date of the
grant.
(b) Fair market value shall be determined by the Board in
its discretion; provided, however, that where there is an active public market
for the Common Stock, the fair market value per share shall be determined as
follows:
(i) If the Company's Common Stock is traded on
an exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System, then the closing or last
sale price, respectively, on the date of grant, as reported in the Wall Street
Journal (or, if not so reported, as otherwise reported by the NASDAQ System).
(ii) If the Company's Common Stock is not traded
on an exchange or on the NASDAQ National Market System but is traded in the
over-the-counter market, then the mean of the closing bid and asked prices on
the date of grant as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the NASDAQ System).
(c) The consideration to be paid for the Shares to be
issued upon exercise of an Option or Stock Purchase Right, including the method
of payment, shall be determined by the Board and may consist entirely of cash,
check, promissory note or other deferred payment arrangement, other Shares of
Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option or Stock Purchase
Right shall be exercised, or any combination of such methods of payment, or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under applicable law. In making its determination as to the
type of consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
8. Options.
(a) Term of Option. The term of each Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the stock option agreement relating to such Option; provided that
the term of a Nonstatutory Stock Option may, as provided in Section 8(b)(iv), be
extended for a period of up to six (6) months. However, in the case of an Option
granted to an Employee who, at the time the Option is granted, owns stock
representing
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<PAGE> 10
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 time as may be provided in
the stock option agreement relating to such Option.
(b) Exercise of Option.
(i) Procedure for Exercise; Rights as a
Shareholder. Any Option granted under this Plan shall be exercisable at such
times and under such conditions as determined by the Board, such as vesting
conditions and/or performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of this Plan.
Notwithstanding anything herein to the contrary, no Option granted hereunder
shall have a vesting period in excess of five (5) years.
An Option may, but need not, include a provision
whereby at any time prior to termination of the Optionee's Continuous Status as
an Employee, the Optionee may elect to exercise the Option as to all or any part
of the Shares subject to the Option prior to the stated vesting date of the
Option or of any vesting installment or installments specified in the Option.
Any shares so purchased from any unvested installment or Option may be subject
to a repurchase right in favor of the Company or to any restriction the Board
determines to be appropriate.
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. An Option may not be exercised for a fraction of a
Share. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 7 of this 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 shareholder 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 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 11 of this 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 this Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(ii) Termination of Status as an Employee. In the
event of termination of an Optionee's Continuous Status as an Employee (as the
case may be), such Optionee may, but only within thirty (30) days after the date
of such termination (but in no event later than the date of expiration of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent that such Employee was entitled to exercise it at the date of such
termination. To the extent that such Employee was not entitled to exercise the
Option at the date of such termination, or if such Employee does not exercise
such Option (which such Employee was entitled to exercise) within such thirty
(30) day time period, the Option shall terminate.
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(iii) Disability of Optionee. Notwithstanding the
provisions of Section 8(b)(ii) above, in the event of termination of an
Optionee's Continuous Status as an Employee as a result of such Employee's
disability, such Employee may, but only within six (6) months from the date of
such termination (but in no event later than the date of expiration of the term
of such option as set forth in the Option Agreement), exercise the Option to the
extent such Employee was entitled to exercise it at the date of such
termination; provided however, that if the Option is an Incentive Stock Option
and the disability is not a total and permanent disability (as defined in
Section 422(c)(6) of the Code), then if the Optionee does not exercise the
Option within three months after such termination, such Option shall
automatically convert into a Nonstatutory Stock Option; and provided, further,
that if the termination is as a result of a total and permanent disability (as
defined in Section 422(c)(6) of the Code), such Employee may within one (1) year
from the date of such termination, but in no event later than the date of
expiration of the term of such option as set forth in the Option Agreement),
exercise the Option to the extent such Employee was entitled to exercise it at
the date of such termination. To the extent that such Employee was not entitled
to exercise the Option at the date of termination, or if such Employee does not
exercise such Option (which such Employee was entitled to exercise) within the
time periods specified above, as the case may be, the Option shall terminate.
(iv) Death of Optionee. In the event of the death
of an Optionee: (A) while the Optionee is an Employee or Consultant, (B) during
the thirty (30) day period described in Section 8(b)(ii), or (C) during the one
(1) year period described in Section 8(b)(iii), the Option may be exercised, at
any time within one (1) year following the date of death (but, in the case of an
Incentive Stock Option, in no event later than the date of expiration of the
term of such Incentive Stock 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 of the right to
exercise that had accrued at the time of death of the Optionee. To the extent
that such Employee or Consultant was not entitled to exercise the Option at the
date of death, or if such Employee or Consultant, estate or other person does
not exercise such Option (which such Employee or Consultant, estate or person
was entitled to exercise) within the one (1) year time period specified in this
Plan, the Option shall terminate.
9. Stock Purchase Rights.
(a) Rights to Purchase. After the Board determines that
it will offer an Employee or Consultant a Stock Purchase Right, it shall deliver
to the offeree a stock purchase agreement or stock bonus agreement, as the case
may be, setting forth the terms, conditions and restrictions relating to the
offer, including the number of Shares which such person shall be entitled to
purchase, and the time within which such person must accept such offer, which
shall in no event exceed six (6) months from the date upon which the Board made
the determination to grant the Stock Purchase Right. The offer shall be accepted
by execution of a stock purchase agreement or stock bonus agreement in the form
approved by the Board.
(b) Issuance of Shares. Forthwith after payment therefor,
the Shares purchased shall be duly issued; provided, however, that the Board may
require that the Purchaser make adequate provision for any federal and state
withholding obligations of the Company as a condition to the Purchaser
purchasing such Shares.
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(c) Other Provisions. The stock purchase agreement or
stock bonus agreement shall contain such other terms, provisions and conditions
not inconsistent with this Plan as may be determined by the Board, including
rights of first refusal as set forth in Section 20 hereof.
10. Stock Appreciation Rights.
(a) Grants of SARs. Tandem SARs may be awarded by the
Committee in connection with any Option granted under the Plan, either on the
Date of Grant of the Option or thereafter at any time prior to the exercise,
termination or expiration of the Option Nontandem SARs may also be granted by
the Committee at any time. On the Date of Grant of a Nontandem SAR, the
Committee shall specify the number of shares of Common Stock covered by such
right and the base price of shares of Common Stock to be used in connection with
the calculation described in Section 10(c) below. SARs shall be subject to such
terms and conditions not inconsistent with the other provisions of this Plan as
the Committee shall determine.
(b) Exercise of Tandem SARs. A Tandem SAR shall be
exercisable only to the extent that the related Option is exercisable and shall
be exercisable only for such period as the Committee may determine (which period
may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of a Tandem SAR, the related Option shall be
canceled with respect to an equal number of shares of Common Stock. A Tandem SAR
shall entitle the Grantee to surrender to the Corporation unexercised the
related Option, or any portion thereof, and to receive from the Corporation in
exchange therefor that number of shares of Common Stock having an aggregate fair
market value equal to (A) the excess of (i) the fair market value of one (1)
share of Common Stock as of the date the Tandem SAR is exercised over (ii) the
Option price per share specified in such Option, multiplied by (B) the number of
shares of Common Stock subject to the Option, or portion thereof, which is
surrendered. Cash shall be delivered in lieu of any fractional shares.
(c) Exercise of Nontandem SARs. A Nontandem SAR shall be
exercisable during such period as the Committee shall determine prior to the
Date of Grant. The exercise of a Nontandem SAR shall entitle the Grantee to
receive from the Corporation that number of shares of Common Stock having an
aggregate fair market value equal to (A) the excess of (i) the fair market value
of one (1) share of Common Stock as of the date on which the Nontandem SAR is
exercised over (ii) the base price of the shares covered by the Nontandem SAR,
multiplied by (B) the number of shares of Common Stock covered by the Nontandem
SAR, or the portion thereof being exercised. Cash shall be delivered in lieu of
any fractional shares.
(d) Settlement of SARs. As soon as is reasonably
practicable after the exercise of a SAR, the Corporation shall (i) issue, in the
name of the Grantee, stock certificates representing the total number of full
shares of Common Stock to which the Grantee is entitled pursuant to Section
10(b) or 10(c) hereof and cash in an amount equal to the fair market value, as
of the date of exercise, of any resulting fractional shares, and (ii) if the
Committee causes the Corporation to elect to settle all or part of its
obligations arising out of the exercise of the SAR in cash pursuant to Section
10(e), deliver to the Grantee an amount in cash equal to the fair market
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value, as of the date of exercise, of the shares of Common Stock it would
otherwise be obligated to deliver.
(e) Cash Settlement. The Committee, in its discretion,
may cause the Corporation to settle all or any part of its obligation arising
out of the exercise of a SAR by the payment of cash in lieu of all or part of
the shares of Common Stock it would otherwise be obligated to deliver in an
amount equal to the fair market value of such shares on the date of exercise.
11. Restricted Shares.
(a) Grant of Restricted Shares. The Committee may from
time to time cause the Corporation to issue Restricted Shares under the Plan,
subject to such restrictions, conditions and other terms as the Committee may
determine in addition to those set forth herein.
(b) Restrictions. At the time a grant of Restricted
Shares is made, the Committee shall establish a period of time (the "Restricted
Period") applicable to such Restricted Shares. Each grant of Restricted Shares
may be subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which shall be
applicable to all or any portion of the Restricted Shares. Except with respect
to grants of Restricted Shares intended to qualify as performance based
compensation for purposes of Section 162(m) of the Code, the Committee may also,
in its sole discretion, shorten or terminate the Restricted Period or waive any
other restrictions applicable to all or a portion of such Restricted Shares.
None of the Restricted Shares may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of prior to the date on which such Restricted
Shares vest in accordance with Section 11(c).
(c) Restricted Stock Certificates. The Corporation shall
issue, in the name of each Grantee, stock certificates with proper legends
representing the total number of Restricted Shares granted to the Grantee, as
soon as reasonably practicable after the Date of Grant. The Secretary of the
Corporation shall hold such certificates, properly endorsed for transfer, after
the Grantee's benefit until such time as the Restricted Shares are forfeited to
the Corporation or until the Restricted Shares vest. In lieu of the foregoing,
Restricted Shares awarded to a Grantee may be held under the Grantee's name in a
book entry account maintained by or on behalf of the Corporation.
(d) Rights of Holders of Restricted Shares. Except as
otherwise determined by the Committee either at the time Restricted Shares are
awarded or at any time thereafter prior to the lapse of the restrictions,
holders of Restricted Shares shall not have the right to vote such shares or the
right to receive any dividends with respect to such shares. All distributions,
if any, received by an employee or consultant with respect to Restricted Shares
as a result of any stock split-up, stock distribution, combination of shares, or
other similar transaction shall be subject to the restrictions of this Section
11.
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(e) Termination of Employment Relationship. Any
Restricted Shares granted pursuant to the Plan shall be forfeited if the Grantee
terminates employment or consultant relationship with the Corporation or its
subsidiaries for reasons other than death or disability prior to the expiration
or termination of the Period of Restriction and the satisfaction of any other
conditions applicable to such Restricted Shares. Upon such forfeiture, the
Secretary of the Corporation shall either cancel or retain in its treasury the
Restricted Shares that are forfeited to the Corporation. Upon the death of a
Grantee prior to his termination of employment or service as a consultant, or
upon a Grantee's termination of employment as a result of disability, all
Restricted Shares previously awarded to such Grantee which have not previously
vested shall be forfeited unless the Committee in its sole discretion shall
determine otherwise.
(f) Delivery of Restricted Shares. Subject to the
provisions of this Section, at such time as the Grantee shall become vested in
his Restricted Shares, the restrictions applicable to the Restricted Shares
shall lapse and a stock certificate for the number of Restricted Shares with
respect to which the restrictions have lapsed shall be delivered, free of all
such restrictions, to the Grantee or the Grantee's beneficiary or estate, as the
case may be.
12. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Subject to the
terms of the Plan, Performance Units and Performance Shares may be granted to
eligible Employees and Consultants at any time and from time to time, as shall
be determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Units and
Performance Shares granted to each Participant.
(b) Value of Performance Units/Shares. Each Performance
Unit shall have an initial value that is established by the Committee at the
time of the grant. Each Performance Share shall have an initial value equal to
the Fair Market Value of a Share on the date of grant. The Committee shall set
performance goals in its discretion which, depending on the extent to which they
are met, will determine the number and/or value of Performance Units/Shares that
will be paid out to the Participants. The time period during which the
performance goals must be met shall be called a "Performance Period."
Performance Periods of Awards granted to Insiders shall, in all cases, exceed
six (6) months in length.
(c) Earning of Performance Units/Shares. After the
applicable Performance Period has ended, the holder of Performance Units/Shares
shall be entitled to receive a payout of the number of Performance Unit/Shares
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been
achieved. Notwithstanding the preceding sentence, after the grant of a
Performance Unit/Share, the Committee, in its sole discretion, may waive the
achievement of any performance goals for such Performance Unit/Share.
(d) Form and Timing of Payment of Performance
Units/Shares. Payment of earned Performance Units/Shares shall be made in a
single lump sum, within forty-five (45) calendar days following the close of the
applicable Performance Period. The Committee, in its sole discretion, may pay
earned Performance Units/Shares in the form of cash, in Shares (which
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<PAGE> 15
have an aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares at the close of the applicable Performance Period) or in
combination thereof.
Prior to the beginning of each Performance Period,
Participants may, in the discretion of the Committee, elect to defer the receipt
of any Performance Unit/Share payout upon such terms as the Committee shall
determine.
(e) Cancellation of Performance Units/Shares. Subject to
the applicable Award Agreement, upon the earlier of (a) the Participant's
termination of employment, or (b) the date set forth in the Award Agreement, all
remaining Performance Units/Shares shall be forfeited by the Participant to the
Company, the Shares subject thereto shall again be available for grant under the
Plan.
(f) Nontransferability. Performance Units/Shares may not
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further a
Participant's rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's legal
representative.
13. 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 or Purchaser, only by the Optionee or Purchaser.
14. Adjustments Upon Changes in Capitalization, Merger or Other
Events. Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each outstanding Option and Stock
Purchase Right, and the number of shares of Common Stock which have been
authorized for issuance under this Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been returned to this Plan
upon cancellation or expiration of an Option or Stock Purchase Right, or
repurchase of Shares from a Purchaser or Optionee upon termination of employment
or otherwise, 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 of the Company or the
payment of a stock dividend with respect to the Common Stock. 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 Rights.
In the event of the dissolution or liquidation of the Company,
all Options and Stock Purchase Rights will terminate immediately prior to the
consummation of such proposed action if not previously exercised. The Board, at
its option, may provide for one or more of the following from time to time or in
any stock option agreement or stock purchase agreement that,
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<PAGE> 16
in the event of a Major Event, then (A) all Options and Stock Purchase Rights
will be assumed or equivalent options or stock purchase rights will be
substituted by such surviving corporation (or other entity) or a parent or
subsidiary of such surviving corporation (or other entity), (B) all Options and
Stock Purchase Rights will continue in full force and effect, or (C) all Options
and Stock Purchase Rights will terminate if not exercised prior to the
consummation of the transaction.
The foregoing adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
The grant of an Option or Stock Purchase Right pursuant to
this Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
15. Time of Grant. The date of grant of an Option or Stock
Purchase Right shall, for all purposes, be the date on which the Board makes the
determination granting such Option or Stock Purchase Right. 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.
16. Amendment and Termination.
(a) Amendment. The Board may amend this Plan from time to
time in such respects as the Board may deem advisable; provided that the
shareholders of the Company must approve the following amendments or revisions
within 12 months before or after the adoption of such revision or amendment:
(i) any increase in the number of Shares subject
to this Plan, other than in connection with an adjustment under Section 14 of
this Plan;
(ii) any change in the designation of the class
of persons eligible to be granted Options (to the extent such modification
requires shareholder approval in order for the Plan to satisfy the requirements
of Section 422(b) of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act); or
(iii) any other revision or amendment if such
revision or amendment requires shareholder approval in order for this Plan to
satisfy the requirements of Section 422(b) of the Code or to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act if applicable to
the Company.
(b) Shareholder Approval. If any amendment requiring
shareholder approval under Section 16(a) of this Plan is made subsequent to the
first registration of any class of equity securities by the Company under
Section 12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 20 of this Plan.
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(c) Suspension and Termination. The Board may suspend or
terminate this Plan at any time. No Options or Stock Purchase Rights may be
granted while this Plan is suspended or after it is terminated.
(d) Effect of Amendment; Termination or Suspension. Any
such amendment, termination or suspension of this Plan shall not affect Options
or Stock Purchase Rights already granted and such Options or Stock Purchase
Rights shall remain in full force and effect as if this Plan had not been
amended, terminated or suspended, unless mutually agreed otherwise between the
Optionee or Purchaser (as the case may be) and the Company, which agreement must
be in writing and signed by the Optionee or Purchaser (as the case may be) and
the Company.
17. 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, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange or other stock trading system upon which the Shares may then be listed.
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 make such representations and warranties at the time of any
such exercise as the Company may at that time determine, including without
limitation, representations and warranties that (i) the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares in violation of applicable federal or state securities
laws, and (ii) such person is knowledgeable and experienced in financial and
business matters and is capable of evaluating the merits and the risks
associated with purchasing the Shares.
18. 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 this 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 under this
Plan, 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.
19. Option, Stock Purchase and Stock Bonus Agreements. Options
shall be evidenced by written stock option agreements in such form as the Board
shall approve. Upon the exercise of Stock Purchase Rights, the Purchaser shall
sign a stock purchase agreement or stock bonus agreement in such form as the
Board shall approve.
20. Shareholder Approval.
(a) The shareholders of the Company shall have approved
this Plan within 12 months before or after this Plan is adopted. Any shares
purchased before shareholder approval is obtained shall be rescinded if
shareholder approval is not obtained within 12 months before or
15
<PAGE> 18
after this Plan is adopted. Such shares shall not be counted in determining
whether such approval is obtained.
(b) If the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) If the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act and if prior to such time
either (x) the shareholders of the Company did not approve this Plan or (y) the
Company did not solicit shareholder approval substantially in accordance with
Section 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder, then the Company shall take all necessary actions to qualify the
Plan under Rule 16(b)(3) promulgated under the Exchange Act at or prior to the
later of (A) the first annual meeting of shareholders held subsequent to the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (B) the granting of an Option hereunder to an
officer or director after such registration.
21. Information to Optionees and Purchasers. The Company shall
provide annually to each Optionee and Purchaser, during the period that such
Optionee or Purchaser has one or more Options or Stock Purchase Rights
outstanding, copies of the annual financial statements of the Company.
22. Right of Company to Terminate Employment or Consulting
Services. This Plan shall not confer upon any Optionee or holder of a Stock
Purchase Right any right with respect to continuation of employment by or the
rendition of consulting services to the Company, any of its Subsidiaries or its
Parent, nor shall it interfere in any way with his or her right or the
Company's, any of its Subsidiaries' or its Parent's right to terminate his or
her employment or services at any time, with or without cause.
23. Rights of First Refusal and Repurchase.
(a) The written agreements evidencing Options or Stock
Purchase Rights may contain such provisions as the Board shall determine (or
pursuant to a separate agreement) to the effect that if an Optionee or Purchaser
elects to sell all or any Shares that the Optionee or Purchaser acquired upon
the exercise of an Option or Stock Purchase Right, then any proposed sale of
such Shares by such Optionee or Purchaser shall be subject to a right of first
refusal in favor of the Company.
(b) The Board may require, at its option, that a stock
purchase agreement, stock option agreement, stock bonus agreement, or other
agreement pursuant to this Plan grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the Purchaser's
employment with the Company for any reason (including death or disability). The
repurchase price shall be at the higher of the original purchase price or fair
value of the Shares on the date of termination of employment. If the Board so
determines, the purchase price for shares repurchased may be paid by
cancellation of any indebtedness of the Purchaser to the
16
<PAGE> 19
Company. The repurchase option must be exercised by the Company within 90 days
of termination of employment for cash or cancellation of money indebtedness for
the Shares and the right shall terminate when the Company's Common Stock becomes
publicly traded. The Board may require such a repurchase right in other events.
(c) Certificates representing shares issued upon exercise
of Options or Stock Purchase Rights shall bear a restrictive legend to the
effect that the transferability of such shares is subject to the restrictions
contained in this Plan and the applicable written agreement between the Optionee
or Purchaser and the Company.
24. Withholding. The Company's obligation to deliver shares of
Common Stock under this Plan shall be subject to applicable federal, state and
local tax withholding requirements. To the extent provided by the terms of the
stock option agreement relating to an Option, the Optionee may satisfy any
federal, state or local tax withholding obligation relating to the exercise of
such Option by any or a combination of the following means: (i) cash payment or
wage withholding; (ii) authorizing the Company to withhold from the Shares
otherwise issuable to the Optionee upon exercise of the Option the number of
Shares having a fair market value less than or equal to the amount of the
withholding tax obligation; or (iii) delivering to the Company unencumbered
shares of Common Stock owned by the Optionee having a fair market value less
than or equal to the amount of the withholding tax obligation; provided,
however, that with respect to clauses (ii) and (iii) above the Board in its sole
discretion may disapprove such payment and require that such taxes be paid in
cash.
25. Separability. At a time when the Company has a class of equity
securities registered pursuant to Section 12 of the Exchange Act, if any of the
terms or provisions of this Plan conflict with the requirements of Rule 16b-3
promulgated under the Exchange Act and/or Section 422 of the Code, then such
terms or provisions shall be deemed inoperative to the extent they so conflict
with the requirements of Rule 16b-3 promulgated under the Exchange Act, and/or
with respect to Incentive Stock Options, Section 422 of the Code. The foregoing
sentence shall not apply with respect to the requirements of Rule 16b-3
promulgated under the Exchange Act if the Board has expressly declared that such
requirements shall not apply. With respect to Incentive Stock Options, if this
Plan does not contain any provision required to be included herein under Section
422 of the Code, such provision shall be deemed to be incorporated herein with
the same force and effect as if such provision had been set out at length
herein. To the extent any Option that is intended to qualify as an Incentive
Stock Option cannot so qualify, such Option, to that extent, shall be deemed to
be a Nonstatutory Stock Option for all purposes of this Plan.
26. Non-Exclusivity of this Plan. The adoption of this Plan by the
Board shall not be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding of
stock and cash otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
27. Governing Law. This Plan shall be governed by, and construed
in accordance with the laws of the State of New York.
17
<PAGE> 20
28. Cancellation of and Substitution for Nonstatutory Options. The
Company shall have the right to cancel any Nonstatutory Stock Option at any time
before it otherwise would have expired by its terms and to grant to the same
Optionee in substitution therefor a new Nonstatutory Stock Option stating an
option price which is lower (but not higher) than the option price stated in the
cancelled Option. Any such substituted option shall contain all the terms and
conditions of the cancelled Option; provided, however, that such substituted
Option shall not be exercisable after the expiration of ten (10) years and one
day from the date of grant of the cancelled Option.
29. Market Standoff. Unless the Board determines otherwise, each
Optionee or Purchaser shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the Securities Act;
provided, however, that such restriction shall apply only to the first two
registration statements of the Company to become effective under the Securities
Act which includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such 180-day period.
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<PAGE> 21
Exhibit 1
Form of Stock Option Agreement
<PAGE> 22
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered
into as of the date of grant set forth below (the "Date of Grant") by and
between BigStar Entertainment, Inc., a Delaware corporation (the "Company"), and
the optionee named below ("Optionee"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 1998 Stock Option &
Incentive Plan (the "Plan").
Optionee: ________________________________________
Social Security Number: ________________________________________
Address: ________________________________________
________________________________________
________________________________________
Total Option Shares: ________________________________________
Exercise Price Per Share: ________________________________________
Date of Grant: ________________________________________
First Vesting Date: ________________________________________
Expiration Date for Exercise of Options:_____________________________
Type of Stock Option: ________________________________________
(Check one): [ ] Incentive Stock Option ("ISO")
[ ] Non-Statutory Stock Option
1. Grant of Option. The Company hereby grants to Optionee an
option (the "Option") to purchase the total number of shares of Common Stock of
the Company set forth above (the "Shares") at the Exercise Price Per Share set
forth above (the "Exercise Price"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Only Employees of the Company shall receive ISOs.
<PAGE> 23
2. Exercise Price. The Exercise Price, is not less than the fair
market value per share of Common Stock on the date of grant, as determined by
the Board; provided, however, in the event Optionee is an Employee and owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its Parent or Subsidiary
corporations immediately before this Option is granted, said exercise price is
not less than one hundred ten percent (110%) of the fair market value per share
of Common Stock on the date of grant as determined by the Board.
3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Vesting
(a) This Option shall not become exercisable as
to any of the number of the Shares as follows (check one) :
[ ]: until the date that is one (1) year from the date of grant
of the Option (the "Anniversary Date"). On the Anniversary
Date, this Option may be exercised to the extent of 25% of the
Shares. Upon the expiration of each calendar month from the
Anniversary Date, this Option may be exercised to the extent
of the product of (a) the total number of Shares set forth at
the beginning of this Agreement and (b) the fraction the
numerator of which is one (1) and the denominator of which is
forty-eight (48) (the "Monthly Vesting Amount"), plus the
shares as to which the right to exercise the Option has
previously accrued but has not been exercised; provided,
however, that notwithstanding any of the above, the 25%
exercisable on the Anniversary Date and the Monthly Vesting
Amount with respect to any calendar month shall become
exercisable only if the Employee was an employee of the
Company or any Subsidiary of the Company as of the Anniversary
Date and the last day of such month, respectively.
[ ]: ____ % of the shares vesting over ____ months, pro rata for
each month of Optionee providing continued service to the
Company.
[ ]: _________________________________________________.
(b) This Option may not be exercised for a
fraction of a Share.
(c) In the event of Optionee's death, disability
or other termination of employment, the exercisability of the Option is governed
by Sections 7, 8 and 9 below, subject to the limitations contained in subsection
3(i)(d).
(d) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in Section
11 below.
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<PAGE> 24
(ii) Method of Exercise. This Option shall be exercisable by
written notice 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 Optionee and
shall be delivered in person or by certified mail to the President, Secretary or
Chief Financial Officer of the Company. The written notice shall be accompanied
by payment of 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.
(iii) Adjustments, Merger, etc. The number and class of the Shares
and/or the exercise price specified above are subject to appropriate adjustment
in the event of changes in the capital stock of the Company by reason of stock
dividends, split-ups or combinations of shares, reclassifications, mergers,
consolidations, reorganizations or liquidations. Subject to any required action
of the stockholders of the Company, if the Company shall be the surviving
corporation in any merger or consolidation, this Option (to the extent that it
is still outstanding) shall pertain to and apply to the securities to which a
holder of the same number of shares of Common Stock that are then subject to
this Option would have been entitled. A dissolution or liquidation of the
Company, or a merger or consolidation in which the Company is not the surviving
corporation, will cause this Option to terminate, unless the agreement or merger
or consolidation shall otherwise provide, provided that the Optionee shall, if
the Board expressly authorizes, in such event have the right immediately prior
to such dissolution or liquidation, or merger or consolidation, to exercise this
Option in whole or part. To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive. In
the event that (i) Optionee is an Employee, and (ii) the Company consummates a
merger resulting in a change in control of the Company, and (iii) the Employee
is terminated without cause, then any options remaining unvested hereunder shall
be deemed to automatically vest.
4. Optionee's Representations. By receipt of this Option, by its
execution, and by its exercise in whole or in part, Optionee represents to the
Company that Optionee understands that:
(i) both this Option and any Shares purchased upon its
exercise are securities, the issuance by the Company of which requires
compliance with federal and state securities laws;
(ii) these securities are made available to Optionee only
on the condition that Optionee makes the representations contained in this
Section 4 to the Company;
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<PAGE> 25
(iii) Optionee has made a reasonable investigation of the
affairs of the Company sufficient to be well informed as to the rights and the
value of these securities;
(iv) Optionee understands that the securities have not
been registered under the Securities Act of 1933, as amended (the "Act") in
reliance upon one or more specific exemptions contained in the Act, which may
include reliance on Rule 701 promulgated under the Act, if available, or which
may depend upon (a) Optionee's bona fide investment intention in acquiring these
securities; (b) Optionee's intention to hold these securities in compliance with
federal and state securities laws; (c) Optionee having no present intention of
selling or transferring any part thereof (recognizing that the Option is not
transferable) in violation of applicable federal and state securities laws; and
(d) there being certain restrictions on transfer of the Shares subject to the
Option;
(v) Optionee understands that the Shares subject to this
Option, in addition to other restrictions on transfer, must be held indefinitely
unless subsequently registered under the Act, or unless an exemption from
registration is available; that Rule 144, the usual exemption from registration,
is only available after the satisfaction of certain holding periods and in the
presence of a public market for the Shares; that there is no certainty that a
public market for the Shares will exist, and that otherwise it will be necessary
that the Shares be sold pursuant to another exemption from registration which
may be difficult to satisfy; and
(vi) Optionee understands that the certificate
representing the Shares will bear a legend prohibiting their transfer in the
absence of their registration or the opinion of counsel for the Company that
registration is not required, and a legend prohibiting their transfer in
compliance with applicable state securities laws unless otherwise exempted.
5. Method of Payment. Payment of the purchase price shall be made
by cash, check or, in the sole discretion of the Board at the time of exercise,
promissory notes or other Shares of Common Stock having a fair market value on
the date of surrender equal to the aggregate purchase price of the Shares being
purchased.
6. Restrictions on Exercise. This Option may not be exercised 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. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
7. Termination of Status as an Employee. In the event of
termination of Optionee's Continuous Status as an Employee for any reason other
than death or disability, Optionee may, but only within thirty (30) days after
the date of such termination (but in no event later than the date of expiration
of the term of this Option as set forth in Section 11 below), exercise this
Option to the extent that Optionee was entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise this
Option at the date of such termination,
4
<PAGE> 26
or if Optionee does not exercise this Option within the time specified herein,
this Option shall terminate.
8. Disability of Optionee. In the event of termination of
Optionee's Continuous Status as an Employee as a result of Optionee's
disability, Optionee may, but only within six (6) months from the date of
termination of employment or consulting relationship (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), exercise this Option to the extent Optionee was entitled to exercise it
at the date of such termination; provided, however that if the disability is not
total and permanent (as defined in Section 22(e)(3) of the Code) and the
Optionee exercises the option within the period provided above but more than
three months after the date of termination, this Option shall automatically be
deemed to be a Nonstatutory Stock Option and not an Incentive Stock Option; and
provided, further, that if the disability is total and permanent (as defined in
Section 22(e)(3) of the Code), then the Optionee may, but only within one (1)
year from the date of termination of employment or consulting relationship (but
in no event later than the date of expiration of the term of this Option as set
forth in Section 11 below), exercise this Option to the extent Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise this Option at the date of termination, or
if Optionee does not exercise such Option (which Optionee was entitled to
exercise) within the time periods specified herein, this Option shall terminate.
9. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option while an Employee of
the Company and having been in Continuous Status as an Employee since the date
of grant of this Option, this Option may be exercised, at any time within one
(1) year following the date of death (but, in the case of an Incentive Stock
Option, in no event later than the date of expiration of the term of this Option
as set forth in Section 11 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 of the right to exercise that had accrued at the time of death of the
Optionee. To the extent that such Employee was not entitled to exercise the
Option at the date of death, or if such Employee, estate or other person does
not exercise such Option (which such Employee, estate or person was entitled to
exercise) within the one (1) year time period specified herein, the Option shall
terminate; or
(ii) during the thirty (30) day period specified in
Section 7 or the one (1) year period specified in Section 8, after the
termination of Optionee's Continuous Status as an Employee, this Option may be
exercised, at any time within one (1) year following the date of death (but, in
the case of an Incentive Stock Option, in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise this Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination. To the extent that such Employee was not
entitled to exercise this Option at the date of death, or if such Employee,
estate or other person does not exercise such Option (which such Employee,
estate or person was entitled to exercise) within the one (1) year time period
specified herein, this Option shall terminate.
5
<PAGE> 27
10. 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 Optionee.
11. Term of Option. This Option may not be exercised more than
five (5) years from the date of grant of this Option, and may be exercised
during such term only in accordance with the Plan and terms of this Option;
provided, however, that the term of this option, if it is a Nonstatutory Stock
Option, may be extended for the period set forth in Section 9(i) or Section
9(ii) in the circumstances set forth in such Sections.
12. Early Disposition of Stock; Taxation Upon Exercise of Option.
If Optionee is an Employee and the Option qualifies as an ISO, Optionee
understands that, if Optionee disposes of any Shares received under this Option
within two (2) years after the date of this Agreement or within one (1) year
after such Shares were transferred to Optionee, Optionee will be treated for
federal income tax purposes as having received ordinary income at the time of
such disposition in any amount generally measured as the difference between the
price paid for the Shares and the lower of the fair market value of the Shares
at the date of exercise or the fair market value of the Shares at the of
disposition. Any gain recognized on such premature sale of the Shares in excess
of the amount treated as ordinary income will be characterized as capital gain.
Optionee hereby agrees to notify the Company in writing within thirty (30) days
after the date of any such disposition. Optionee understands that if Optionee
disposes of such Shares at any time after the expiration of such two-year and
one-year holding periods, any gain on such sale will be treated as long-term
capital gain laws subject to meeting various qualifications. If Optionee is a
Consultant or this is a Nonstatutory Stock Option, Optionee understands that,
upon exercise of this Option, Optionee will recognize income for tax purposes in
an amount equal to the excess of the then fair market value of the Shares over
the exercise price. Upon a resale of such shares by the Optionee, any difference
between the sale price and the fair market value of the Shares on the date of
exercise of the Option will be treated as capital gain or loss. Optionee
understands that the Company will be required to withhold tax from Optionee's
current compensation in some of the circumstances described above; to the extent
that Optionee's current compensation is insufficient to satisfy the withholding
tax liability, the Company may require the Optionee to make a cash payment to
cover such liability as a condition to exercise of this Option.
13. Tax Consequences. The Optionee understands that any of the
foregoing references to taxation are based on federal income tax laws and
regulations now in effect, and may not be applicable to the Optionee under
certain circumstances. The Optionee may also have adverse tax consequences under
state or local law. The Optionee has reviewed with the Optionee's own tax
advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Agreement. The Optionee is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. The Optionee understands that the Optionee (and not the Company)
shall be responsible for the Optionee's own tax liability that may arise as a
result of the transactions contemplated by this Agreement.
6
<PAGE> 28
14. Severability; Construction. In the event that any provision in
this Option shall be invalid or unenforceable, such provision shall be severable
from, and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Option. This Option shall be
construed as to its fair meaning and not for or against either party.
15. Damages. The parties agree that any violation of this Option
(other than a default in the payment of money) cannot be compensated for by
damages, and any aggrieved party shall have the right, and is hereby granted the
privilege, of obtaining specific performance of this Option in any court of
competent jurisdiction in the event of any breach hereunder.
16. Governing Law. This Option shall be deemed to be made under
and governed by and construed in accordance with the laws of the State of New
York Jurisdiction for any disputes hereunder shall be solely in New York, New
York.
17. Delay. No delay or failure on the part of the Company or the
Optionee in the exercise of any right, power or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise by any of them of any right,
power or remedy preclude other or further exercise thereof, or the exercise of
any other right, power or remedy.
18. Restrictions. Notwithstanding anything herein to the contrary,
Optionee understands and agrees that Optionee shall not dispose of any of the
Shares, whether by sale, exchange, assignment, transfer, gift, devise, bequest,
mortgage, pledge, encumbrance or otherwise, except in accordance with the terms
and conditions of this Section 18, and Optionee shall not take or omit any
action which will impair the absolute and unrestricted right, power, authority
and capacity of Optionee to sell Shares in accordance with the terms and
conditions hereof.
Any purported transfer of Shares by Optionee that violates any
provision of this Section 18 shall be wholly void and ineffectual and shall give
to the Company or its designee the right to purchase from Optionee all but not
less than all of the Shares then owned by Optionee for a period of 90 days from
the date the Company first learns of the purported transfer at the Agreement
Price and on the Agreement Terms (as those terms are defined in subsections
(b)(3) and (b)(4), respectively, of this Section 18). If the Shares are not
purchased by the Company or its designee, the purported transfer thereof shall
remain void and ineffectual and they shall continue to be subject to this
Agreement.
The Company shall not cause or permit the transfer of any
Shares to be made on its books except in accordance with the terms hereof.
(a)(1). Permitted Transfers.
(i) Optionee may sell, assign or transfer any Shares held
by the Optionee but only by complying with the provisions of subsection (b)(1)
of this Section 18.
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<PAGE> 29
(ii) Optionee may sell, assign or transfer any Shares held
by the Optionee without complying with the provisions of subsection (b)(1) by
obtaining the prior written consent of the Company's shareholders owning 50% of
the then issued and outstanding shares of the Company's Common Stock (determined
on a fully diluted basis) or a majority of the members of the Board of Directors
of the Company, provided that the transferee agrees in writing to be bound by
the provisions of this Option and the transfer is made in accordance with any
other restrictions or conditions contained in the written consent and in
accordance with applicable federal and state securities laws.
(iii) Upon the death of Optionee, Shares held by the
Optionee may be transferred to the personal representative of the Optionee's
estate without complying with the provisions of subsection (b)(1). Shares so
transferred shall be subject to the other provisions of this Option, including
in particular subsection (b)(2).
(a)(2). No Pledge. Unless a majority of the members of the Board of
Directors consent, Shares may not be pledged, mortgaged or otherwise encumbered
to secure indebtedness for money borrowed or any other obligation for which the
Optionee is primarily or secondarily liable.
(a)(3). Stock Certificate Legend. Each stock certificate for Shares
issued to the Optionee shall have conspicuously written, printed, typed or
stamped upon the face thereof, or upon the reverse thereof with a conspicuous
reference on the face thereof, one or both of the following legend:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT. SUCH SHARES
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN ANY MANNER
EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE TERMS OF THE STOCK OPTION
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
UNLESS A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS CONSENT, SUCH STOCK
OPTION AGREEMENT PROHIBITS ANY PLEDGE, MORTGAGE OR OTHER ENCUMBRANCE OF SUCH
SHARES TO SECURE ANY OBLIGATION OF THE HOLDER HEREOF. EVERY CREDITOR OF THE
HOLDER HEREOF AND ANY PERSON ACQUIRING OR PURPORTING TO ACQUIRE THIS CERTIFICATE
OR THE SHARES HEREBY EVIDENCED OR ANY INTEREST THEREIN IS HEREBY NOTIFIED OF THE
EXISTENCE OF SUCH STOCK OPTION AGREEMENT, AND ANY ACQUISITION OR PURPORTED
ACQUISITION OF THIS CERTIFICATE OR THE SHARES HEREBY EVIDENCED OR ANY INTEREST
THEREIN SHALL BE SUBJECT TO ALL RIGHTS AND OBLIGATIONS OF THE PARTIES TO SUCH
STOCK OPTION AGREEMENT AS THEREIN SET FORTH.
(ii) [any legend required by applicable state securities
laws]
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<PAGE> 30
(b)(1). Sales of Shares.
(i) Company's Right of First Refusal. In the event that
the Optionee shall desire to sell, assign or transfer any Shares held by the
Optionee to any other person (the "Offered Shares") and shall be in receipt of a
bona fide offer to purchase the Offered Shares ("Offer"), the following
procedure shall apply. The Optionee shall give to the Company written notice
containing the terms and conditions of the Offer, including, but not limited to
(a) the number of Offered Shares; (b) the price per Share; (c) the method of
payment; and (d) the name(s) of the proposed purchaser(s).
An offer shall not be deemed bona fide unless the Optionee has
informed the prospective purchaser of the Optionee's obligation under this
Option and the prospective purchaser has agreed to become a party hereunder and
to be bound hereby. The Company is entitled to take such steps as it reasonably
may deem necessary to determine the validity and bona fide nature of the Offer.
Until 30 days after such notice is given, the Company or its
designee shall have the right to purchase all of the Offered Shares at the price
offered by the prospective purchaser and specified in such notice. Such purchase
shall be on the Agreement Terms, as defined in subsection (b)(4).
(ii) Failure of Company or its Designee to Purchase
Offered Shares. If all of the Offered Shares are not purchased by the Company
and/or its designee within the 30-day period granted for such purchases, then
any remaining Offered Shares may be sold, assigned or transferred pursuant to
the Offer; provided, that the Offered Shares are so transferred within 30 days
of the expiration of the 30-day period to the person or persons named in, and
under the terms and conditions of, the bona fide Offer described in the notice
to the Company; and provided further, that such persons agree to execute and
deliver to the Company a written agreement, in form and content satisfactory to
the Company, agreeing to be bound by the terms and conditions of this Option.
(b)(2). Manner of Exercise.
Any right to purchase hereunder shall be exercised by giving
written notice of election to the Optionee, the Optionee's personal
representative or any other selling person, as the case may be, prior to the
expiration of such right to purchase.
(b)(3). Agreement Price.
The "Agreement Price" shall be the higher of (A) the fair
market value of the Shares to be purchased determined in good faith by the Board
of Directors of the Company and (B) the original exercise price of the Shares to
be purchased.
(b)(4). Agreement Terms. "Agreement Terms" shall mean and include the
following:
9
<PAGE> 31
(i) Delivery of Shares and Closing Date. At the closing,
the Optionee, the Optionee's personal representative or such other selling
person, as the case may be, shall deliver certificates representing the Shares,
properly endorsed for transfer, and with the necessary documentary and transfer
tax stamps, if any, affixed, to the purchaser of such Shares. Payment of the
purchase price therefor shall concurrently be made to the Optionee, the
Optionee's personal representative or such other selling person, as provided in
subsection (ii) of this subsection (b)(4). Such delivery and payment shall be
made at the principal office of the Company or at such other place as the
parties mutually agree.
(ii) Payment of Purchase Price. The Company shall pay the
purchase price to the Optionee at the closing.
(b)(5). Right to Purchase Upon Certain Other Events.
The Company or its designee shall have the right to purchase
all, but not less than all, of the Shares held by the Optionee at the Agreement
Price and on the Agreement Terms for a period of 90 days after any of the
following events:
(i) an attempt by a creditor to levy upon or sell any of
the Optionee's Shares;
(ii) the filing of a petition by the Optionee under the
U.S. Bankruptcy Code or any insolvency laws;
(iii) the filing of a petition against Optionee under any
insolvency or bankruptcy laws by any creditor of the Optionee if such petition
is not dismissed within 30 days of filing; or
(iv) the entry of a decree of divorce between the Optionee
and the Optionee's spouse.
The Optionee shall provide the Company written notice of the occurrence of any
such event within 30 days of such event.
(c)(1). Termination. The provisions of this Section 18 shall
terminate and all rights of each such party hereunder shall cease except for
those which shall have theretofore accrued upon the occurrence of any of the
following events:
(i) cessation of the Company's business;
(ii) bankruptcy, receivership or dissolution of the Company;
(iii) ownership of all of the issued and outstanding shares of
the Company by a single shareholder of the Company;
10
<PAGE> 32
(iv) written consent or agreement of the shareholders of the
Company holding 50% of the then issued and outstanding shares of the
Company (determined on a fully diluted basis);
(v) consent or agreement of a majority of the members of the
Board of Directors of the Company; or
(vi) registration of any class of equity securities of the
Company pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended.
(c)(2). Amendment. This Section 18 may be modified or amended in whole
or in part by a written instrument signed by shareholders of the Company holding
50% of the outstanding shares of Common Stock (determined on a fully diluted
basis) or a majority of the members of the Board of Directors of the Company.
19. Market Standoff. Unless the Board of Directors otherwise
consents, Optionee agrees hereby not to sell or otherwise transfer any Shares or
other securities of the Company during the 180-day period following the
effective date of a registration statement of the Company filed under the Act;
provided, however, that such restriction shall apply only to the first two
registration statements of the Company to become effective under the Act which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
20. Complete Agreement. This Agreement constitutes the entire
agreement between the parties with respect to its subject matter, and supersedes
all other prior or contemporaneous agreements and understandings both oral or
written; subject, however, that in the event of any conflict between this
Agreement and the Plan, the Plan shall govern. This Agreement may only be
amended in a writing signed by the Company and the Optionee.
21. Privileges of Stock Ownership. Participant shall not have any
of the rights of a shareholder with respect to any Shares until Optionee
exercises the Option and pay the Exercise Price.
22. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated above or to such other address as
such party may designate in writing from time to tome to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
11
<PAGE> 33
DATE OF GRANT:______________
BIGSTAR ENTERTAINMENT, INC.
By:______________________________
Name:
Title:
12
<PAGE> 34
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT 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 THIS OPTION, THE COMPANY'S PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan, represents that
Optionee 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 this Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board or
of the Committee upon any questions arising under the Plan.
Dated:______________
______________________________
Optionee
13
<PAGE> 35
Consent of Spouse
The undersigned spouse of the Optionee to the foregoing Stock
Option Agreement acknowledges on his or her own behalf that: I have read the
foregoing Stock Option Agreement and I know its contents. I hereby consent to
and approve of the provisions of the Stock Option Agreement, and agree that the
Shares issued upon exercise of the options covered thereby and my interest in
them are subject to the provisions of the Stock Option Agreement and that I will
take no action at any time to hinder operation of the Stock Option Agreement on
those Shares or my interest in them.
______________________________
Signature of Spouse
______________________________
Address
14
<PAGE> 1
Exhibit 99.2
BIGSTAR ENTERTAINMENT, INC.
AMENDED 1999 STOCK OPTION AND INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purposes of this Plan................................................ 1
2. Definitions.......................................................... 1
3. Stock Subject to this Plan........................................... 3
4. Administration of this Plan.......................................... 3
5. Eligibility.......................................................... 5
6. Term of Plan......................................................... 5
7. Exercise Price and Consideration..................................... 5
8. Options.............................................................. 6
9. Stock Purchase Rights................................................ 8
10. Stock Appreciation Rights............................................ 8
11. Restricted Shares.................................................... 9
12. Performance Units and Performance Shares............................. 10
13. Non-Transferability of Options and Stock Purchase Rights............. 11
14. Adjustments Upon Changes in Capitalization, Merger or Other Events... 11
15. Time of Grant........................................................ 11
16. Amendment and Termination............................................ 12
17. Conditions Upon Issuance of Shares................................... 12
18. Reservation of Shares................................................ 12
19. Option, Stock Purchase and Stock Bonus Agreements.................... 13
20. Shareholder Approval................................................. 13
21. Information to Optionees and Purchasers.............................. 13
22. Right of Company to Terminate Employment or Consulting Services...... 13
23. Rights of First Refusal and Repurchase............................... 13
24. Withholding.......................................................... 14
25. Separability......................................................... 14
26. Non-Exclusivity of this Plan......................................... 14
27. Governing Law........................................................ 14
28. Cancellation of and Substitution for Nonstatutory Options............ 14
29. Market Standoff...................................................... 15
</TABLE>
Exhibit 1 - Form of Stock Option Agreement
-i-
<PAGE> 3
BIGSTAR ENTERTAINMENT, INC.
AMENDED 1999 STOCK OPTION AND INCENTIVE PLAN
1. Purposes of this Plan. The general purpose of this Amended 1999
Stock Option and Incentive Plan is to promote the interests of the Company and
its shareholders by (i) providing certain Employees of and Consultants to the
Company with additional incentives to continue and increase their efforts with
respect to achieving success in the business of the Company, its Affiliates and
its Subsidiaries, and (ii) attracting and retaining the best available personnel
to participate in the ongoing business operations of the Company and its
Subsidiaries.
Options granted under this Plan may be either Incentive Stock
Options or Nonstatutory Stock Options, as determined at the discretion of the
Board and as reflected in the terms of the written option agreements. The Board
may also grant Stock Purchase Rights hereunder.
2. Definitions. As used in this Plan, the following definitions shall
apply:
"Affiliates" means any other entity directly or indirectly
controlling, controlled by, or under common control, with the Company.
"Affiliated SAR" means a SAR that is granted in connection with a
related Option, and which will be deemed to automatically be exercised
simultaneous with the exercise of the related Option.
"Award" means, individually or collectively, a grant under this
Plan, including any Nonqualified Stock Options, Incentive Stock Options, SARs,
Restricted Stock, Performance Units, or Performance Shares.
"Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions applicable
to Awards granted to Participants under the Plan.
"Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company, if no Committee is appointed.
"Board of Directors" means the full Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute or statutes thereto. Reference to any
particular Code section shall include any successor section.
"Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) of this Plan, if one is appointed, or
if no Committee is appointed, the Board of Directors.
"Common Stock" shall mean the Common Stock of the Company.
"Company" shall mean BigStar Entertainment, Inc., a Delaware
corporation.
<PAGE> 4
"Consultant" shall mean any person who is engaged by the
Company or by any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not.
"Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more than 90 days or reemployment upon
the expiration of such leave is guaranteed by contract or statute.
"Disinterested Person" shall mean a member of the Board of
Directors of the Company: (i) who was not during the one year prior to service
as an administrator of this Plan granted or awarded equity securities pursuant
to this Plan, or any other plan of the Company or any of its affiliates
entitling the participants therein to acquire equity securities of the Company
or any of its affiliates except as permitted by Rule 16b-3(c)(2)(i) promulgated
under the Exchange Act ("Rule 16b-3(c)(2)(i)"); or (ii) who is otherwise
considered to be a "disinterested person" in accordance with Rule
16b-3(c)(2)(i), or any other applicable rules, regulations or interpretations of
the Securities and Exchange Commission.
"Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company as
a common-law employee. The payment of a director's fee by the Company shall not
be sufficient to constitute "employment" by the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Freestanding SAR" means a SAR that is granted independently
of any Options.
"Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
"Major Event" shall be deemed to have occurred if (i) there
shall be consummated any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's common stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger generally have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger; (ii) there shall be consummated any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; (iii) proceedings or actions
for the liquidation or dissolution of the Company are initiated by the Company;
or (iv) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) (other than persons who beneficially own more than 30% of the capital stock
of the Company on a fully diluted and as converted basis outstanding as of the
date of adoption of this Plan by the Board of Directors) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 30% or more of the Company's outstanding capital stock on a fully
diluted and as converted basis at such time; provided, however, that a "Major
Event" shall not be deemed to have occurred solely by reason of the consummation
of a public offering by the Company of common stock registered under the
Securities Act.
"Nonstatutory Stock Option" shall mean an Option which is not
intended to qualify as an Incentive Stock Option.
"Option" shall mean a stock option granted pursuant to this
Plan.
"Optioned Stock" shall mean the Common Stock subject to an
Option.
2
<PAGE> 5
"Optionee" shall mean an Employee or Consultant who receives
an Option.
"Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
"Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
"Performance Unit" means an Award granted to an Employee
pursuant to Section 12.
"Performance Share" means an Award granted to an Employee,
pursuant to Section 12 herein.
"Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the occurrence of
other events as determined by the Committee, in its discretion), and the Shares
are subject to a substantial risk of forfeiture, as provided in Section 11.
"Plan" shall mean this 1998 Stock Option and Incentive Plan.
"Purchaser" shall mean an Employee or Consultant who exercises
a Stock Purchase Right.
"Restricted Stock" means an Award granted to a Participant
pursuant to Section 11.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 14 of this Plan.
"Stock Appreciation Right" or "SAR" means an Award, granted
alone or in connection with a related Option, designated as a SAR, pursuant to
the terms of Section 10.
"Stock Purchase Right" shall mean a right to purchase Common
Stock pursuant to this Plan or the right to receive a bonus of Common Stock for
past services.
"Subsidiary" shall mean a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
"Tandem SAR" means a SAR that is granted in connection with a
related Option, the exercise of which shall require forfeiture of the right to
purchase a Share under the related Option (and when a Share is purchased under
the Option, a SAR shall similarly be cancelled).
3. Stock Subject to this Plan. Subject to the provisions of Section 14
of this Plan, the maximum aggregate number of Shares under this Plan is
1,455,000 (this takes into account the Company's 4 for 1 stock split approved in
March 1999 and .485 for 1 reverse stock approved in July 1999). The Shares may
be authorized but unissued, or reacquired Common Stock, or both. If an Option or
Stock Purchase Right should expire, terminate, be cancelled or become
unexercisable for any reason without having been exercised in full, then the
unpurchased Shares which were subject thereto shall, unless this Plan shall have
been terminated, become available for future grant or sale under this Plan. In
addition, Shares issued under this Plan and later repurchased or otherwise
reacquired by the Company shall, unless this Plan shall have been terminated,
become available for future grant or sale under this Plan.
3
<PAGE> 6
4. Administration of this Plan.
(a) Procedure. This Plan shall be administered by the Board of
Directors of the Company unless and until the Board of Directors delegates
administration to a Committee, as provided in this Section 4(a).
(i) Subject to Section 4(a)(ii), the Board of Directors may
appoint a Committee consisting of not less than two persons (who need not be
members of the Board of Directors) to administer this Plan on behalf of the
Board of Directors, subject to such terms and conditions not inconsistent with
this Plan as the Board of Directors may prescribe. Once appointed, the Committee
shall continue to serve until otherwise directed by the Board of Directors.
Members of the Board who are either eligible for Options and/or Stock Purchase
Rights or have been granted Options and/or Stock Purchase Rights may vote on any
matters affecting the administration of this Plan or the grant of any Options
and/or Stock Purchase Rights pursuant to this Plan, except that no such member
shall act upon the granting of an option to such member, but any such member may
be counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting of Options and/or
Stock Purchase Rights to such member.
(ii) Notwithstanding the foregoing Section 4(a)(i), if the
Company registers any class of any equity security pursuant to Section 12 of the
Exchange Act, from the effective date of such registration until six months
after the termination of such registration, any grants of Options and/or Stock
Purchase Rights to directors or officers who are subject to Section 16 of the
Exchange Act shall be made only by a Committee consisting of two or more
persons, each of whom shall be a Disinterested Person (if necessary to meet the
requirements of Rule 16b-3 promulgated under the Exchange Act). The Board shall
otherwise comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act, as from time to time in effect, unless the Board expressly
declares that any such requirement shall not apply.
(iii) Subject to the foregoing Sections 4(a)(i) and 4(a)(ii),
from time to time the Board of Directors 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,
or remove all members of the Committee and thereafter directly administer this
Plan. Once appointed, the Committee shall continue to serve until otherwise
directed by the Board of Directors.
(b) Powers of the Board. Subject to the provisions of this Plan, the
Board shall have plenary authority, in its discretion and without limitation, to
do the following: (i) to grant Incentive Stock Options, Nonstatutory Stock
Options or Stock Purchase Rights; (ii) to determine, upon review of relevant
information and in accordance with Section 7 of this Plan, the fair market value
of the Common Stock; (iii) to determine the exercise price per share of Options
or Stock Purchase Rights to be granted, which exercise price shall be determined
in accordance with Section 7 hereof; (iv) to determine the Employees or
Consultants to whom, and the time or times at which, Options or Stock Purchase
Rights shall be granted and the number of Shares to be represented by each
Option or Stock Purchase Right; (v) to interpret this Plan; (vi) to prescribe,
amend and rescind rules and regulations relating to this Plan, and in the
exercise of this power, to correct any defect, omission or inconsistency in this
Plan or in any agreement relating to an Option or Stock Purchase Right, in a
manner and to the extent the Board shall deem necessary or expedient to make
this Plan fully effective; (vii) to determine the terms and provisions of each
Option or Stock Purchase Right granted (which need not be identical) and, with
the consent of the holder thereof, modify or amend each Option or Stock Purchase
Right; (viii) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option or Stock Purchase Right
previously granted by the Board; and (ix) to make all other determinations
deemed necessary or advisable for the administration of this Plan.
4
<PAGE> 7
(c) Board Determinations. In making determinations under this Plan,
the Board may take into account the nature of the services rendered by the
respective Employees, their present and potential contributions to the success
of the Company, or its Subsidiaries, as the case may be, and such other factors
as the Board in its discretion shall deem relevant. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees, Purchasers and any other holders of any Options and/or Stock
Purchase Rights granted under this Plan.
5. Eligibility.
(a) Options and Stock Purchase Rights may be granted to Employees,
provided that Incentive Stock Options may only be granted to Employees. An
Employee who has been granted an Option or Stock Purchase Right may, if such
Employee is otherwise eligible, be granted additional Option(s) or Stock
Purchase Right(s).
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other Incentive Stock Options granted to such Employee
by the Company or by any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 (or such different
amount as provided for under the Code requirements for Incentive Stock Options)
becoming first available for purchase upon exercise of one or more incentive
stock options during any calendar year.
(c) Section 5(b) of this Plan shall apply only to an Incentive Stock
Option evidenced by a stock option agreement which sets forth the intention of
the Company and the Optionee that such Option shall qualify as an Incentive
Stock Option. Section 5(b) of this Plan shall not apply to any Option evidenced
by a stock option agreement which sets forth the intention of the Company and
the Optionee that such Option shall be a Nonstatutory Stock Option.
(d) On and after the effective date of the registration of any class
of equity security of the Company pursuant to Section 12 of the Exchange Act, a
member of the Board of Directors who is not an Employee shall not be eligible
for the benefits of this Plan unless at the time an Option or Stock Purchase
Right is granted to such member, the Board expressly declares that such
exclusion will not apply.
6. Term of Plan. This Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by vote of the
holders of a majority of the outstanding shares of the Company entitled to vote
on the adoption of this Plan. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 16 of this Plan.
7. Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option or Stock Purchase Right shall be such price as
is determined by the Board, but shall be subject to the following provisions:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock 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.
5
<PAGE> 8
(B) granted to any Employee other than an Employee described
in Section 7(a)(i)(A), 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:
(A) granted to an Employee or Consultant who, at the time of
the 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 the grant.
(B) granted to any Employee or Consultant, other than an
Employee or Consultant described in Section 7(a)(ii)(A), the per share exercise
price shall be no less than 85% of the fair market value per share on the date
of grant.
(iii) In the case of a Stock Purchase Right granted to any
person, the per share exercise price shall be no less than 85% of the fair
market value per share on the date of grant; provided, however, that if such
person at the time of the grant of such Stock Purchase Right, 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 100% of the fair market value per share on the date of the
grant.
(b) Fair market value shall be determined by the Board in its
discretion; provided, however, that where there is an active public market for
the Common Stock, the fair market value per share shall be determined as
follows:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System, then the closing or last sale
price, respectively, on the date of grant, as reported in the Wall Street
Journal (or, if not so reported, as otherwise reported by the NASDAQ System).
(ii) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System but is traded in the over-the-counter
market, then the mean of the closing bid and asked prices on the date of grant
as reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the NASDAQ System).
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, including the method of payment,
shall be determined by the Board and may consist entirely of cash, check,
promissory note or other deferred payment arrangement, other Shares of Common
Stock having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option or Stock Purchase Right
shall be exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
8. Options.
(a) Term of Option. The term of each Option shall be ten (10) years
from the date of grant thereof or such shorter term as may be provided in the
stock option agreement relating to such Option; provided that the term of a
Nonstatutory Stock Option may, as provided in Section 8(b)(iv), be extended for
a period of up to six (6) months. However, in the case of an Option granted to
an Employee
6
<PAGE> 9
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 time as may be provided in the stock
option agreement relating to such Option.
(b) Exercise of Option.
(i) Procedure for Exercise; Rights as a Shareholder. Any Option
granted under this Plan shall be exercisable at such times and under such
conditions as determined by the Board, such as vesting conditions and/or
performance criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of this Plan. Notwithstanding anything
herein to the contrary, no Option granted hereunder shall have a vesting period
in excess of five (5) years.
An Option may, but need not, include a provision whereby at any
time prior to termination of the Optionee's Continuous Status as an Employee,
the Optionee may elect to exercise the Option as to all or any part of the
Shares subject to the Option prior to the stated vesting date of the Option or
of any vesting installment or installments specified in the Option. Any shares
so purchased from any unvested installment or Option may be subject to a
repurchase right in favor of the Company or to any restriction the Board
determines to be appropriate.
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. An Option may not be exercised for a fraction of a Share. Full payment
may, as authorized by the Board, consist of any consideration and method of
payment allowable under Section 7 of this 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 shareholder 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 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 11 of this 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
this Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Termination of Status as an Employee. In the event of
termination of an Optionee's Continuous Status as an Employee (as the case may
be), such Optionee may, but only within thirty (30) days after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent that such Employee was entitled to exercise it at the date of such
termination. To the extent that such Employee was not entitled to exercise the
Option at the date of such termination, or if such Employee does not exercise
such Option (which such Employee was entitled to exercise) within such thirty
(30) day time period, the Option shall terminate.
(iii) Disability of Optionee. Notwithstanding the provisions of
Section 8(b)(ii) above, in the event of termination of an Optionee's Continuous
Status as an Employee as a result of such Employee's disability, such Employee
may, but only within six (6) months from the date of such termination (but in no
event later than the date of expiration of the term of such option as set forth
in the Option Agreement), exercise the Option to the extent such Employee was
entitled to exercise it at the date of such termination; provided however, that
if the Option is an Incentive Stock Option and the disability is
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<PAGE> 10
not a total and permanent disability (as defined in Section 422(c)(6) of the
Code), then if the Optionee does not exercise the Option within three months
after such termination, such Option shall automatically convert into a
Nonstatutory Stock Option; and provided, further, that if the termination is as
a result of a total and permanent disability (as defined in Section 422(c)(6) of
the Code), such Employee may within one (1) year from the date of such
termination, but in no event later than the date of expiration of the term of
such option as set forth in the Option Agreement), exercise the Option to the
extent such Employee was entitled to exercise it at the date of such
termination. To the extent that such Employee was not entitled to exercise the
Option at the date of termination, or if such Employee does not exercise such
Option (which such Employee was entitled to exercise) within the time periods
specified above, as the case may be, the Option shall terminate.
(iv) Death of Optionee. In the event of the death of an
Optionee: (A) while the Optionee is an Employee or Consultant, (B) during the
thirty (30) day period described in Section 8(b)(ii), or (C) during the one (1)
year period described in Section 8(b)(iii), the Option may be exercised, at any
time within one (1) year following the date of death (but, in the case of an
Incentive Stock Option, in no event later than the date of expiration of the
term of such Incentive Stock 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 of the right to
exercise that had accrued at the time of death of the Optionee. To the extent
that such Employee or Consultant was not entitled to exercise the Option at the
date of death, or if such Employee or Consultant, estate or other person does
not exercise such Option (which such Employee or Consultant, estate or person
was entitled to exercise) within the one (1) year time period specified in this
Plan, the Option shall terminate.
9. Stock Purchase Rights.
(a) Rights to Purchase. After the Board determines that it will
offer an Employee or Consultant a Stock Purchase Right, it shall deliver to the
offeree a stock purchase agreement or stock bonus agreement, as the case may be,
setting forth the terms, conditions and restrictions relating to the offer,
including the number of Shares which such person shall be entitled to purchase,
and the time within which such person must accept such offer, which shall in no
event exceed six (6) months from the date upon which the Board made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a stock purchase agreement or stock bonus agreement in the form
approved by the Board.
(b) Issuance of Shares. Forthwith after payment therefor, the
Shares purchased shall be duly issued; provided, however, that the Board may
require that the Purchaser make adequate provision for any federal and state
withholding obligations of the Company as a condition to the Purchaser
purchasing such Shares.
(c) Other Provisions. The stock purchase agreement or stock bonus
agreement shall contain such other terms, provisions and conditions not
inconsistent with this Plan as may be determined by the Board, including rights
of first refusal as set forth in Section 20 hereof.
10. Stock Appreciation Rights.
(a) Grants of SARs. Tandem SARs may be awarded by the Committee in
connection with any Option granted under the Plan, either on the Date of Grant
of the Option or thereafter at any time prior to the exercise, termination or
expiration of the Option Nontandem SARs may also be granted by the Committee at
any time. On the Date of Grant of a Nontandem SAR, the Committee shall specify
the number of shares of Common Stock covered by such right and the base price of
shares of Common Stock to be used in connection with the calculation described
in Section 10(c) below. SARs
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<PAGE> 11
shall be subject to such terms and conditions not inconsistent with the other
provisions of this Plan as the Committee shall determine.
(b) Exercise of Tandem SARs. A Tandem SAR shall be exercisable only
to the extent that the related Option is exercisable and shall be exercisable
only for such period as the Committee may determine (which period may expire
prior to the expiration date of the related Option). Upon the exercise of all or
a portion of a Tandem SAR, the related Option shall be canceled with respect to
an equal number of shares of Common Stock. A Tandem SAR shall entitle the
Grantee to surrender to the Corporation unexercised the related Option, or any
portion thereof, and to receive from the Corporation in exchange therefor that
number of shares of Common Stock having an aggregate fair market value equal to
(A) the excess of (i) the fair market value of one (1) share of Common Stock as
of the date the Tandem SAR is exercised over (ii) the Option price per share
specified in such Option, multiplied by (B) the number of shares of Common Stock
subject to the Option, or portion thereof, which is surrendered. Cash shall be
delivered in lieu of any fractional shares.
(c) Exercise of Nontandem SARs. A Nontandem SAR shall be
exercisable during such period as the Committee shall determine prior to the
Date of Grant. The exercise of a Nontandem SAR shall entitle the Grantee to
receive from the Corporation that number of shares of Common Stock having an
aggregate fair market value equal to (A) the excess of (i) the fair market value
of one (1) share of Common Stock as of the date on which the Nontandem SAR is
exercised over (ii) the base price of the shares covered by the Nontandem SAR,
multiplied by (B) the number of shares of Common Stock covered by the Nontandem
SAR, or the portion thereof being exercised. Cash shall be delivered in lieu of
any fractional shares.
(d) Settlement of SARs. As soon as is reasonably practicable after
the exercise of a SAR, the Corporation shall (i) issue, in the name of the
Grantee, stock certificates representing the total number of full shares of
Common Stock to which the Grantee is entitled pursuant to Section 10(b) or 10(c)
hereof and cash in an amount equal to the fair market value, as of the date of
exercise, of any resulting fractional shares, and (ii) if the Committee causes
the Corporation to elect to settle all or part of its obligations arising out of
the exercise of the SAR in cash pursuant to Section 10(e), deliver to the
Grantee an amount in cash equal to the fair market value, as of the date of
exercise, of the shares of Common Stock it would otherwise be obligated to
deliver.
(e) Cash Settlement. The Committee, in its discretion, may cause
the Corporation to settle all or any part of its obligation arising out of the
exercise of a SAR by the payment of cash in lieu of all or part of the shares of
Common Stock it would otherwise be obligated to deliver in an amount equal to
the fair market value of such shares on the date of exercise.
11. Restricted Shares.
(a) Grant of Restricted Shares. The Committee may from time to time
cause the Corporation to issue Restricted Shares under the Plan, subject to such
restrictions, conditions and other terms as the Committee may determine in
addition to those set forth herein.
(b) Restrictions. At the time a grant of Restricted Shares is made,
the Committee shall establish a period of time (the "Restricted Period")
applicable to such Restricted Shares. Each grant of Restricted Shares may be
subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which shall be
applicable to all or any portion of the Restricted Shares. Except with respect
to grants of Restricted Shares intended to qualify as performance based
compensation for purposes of Section 162(m) of the Code, the Committee may also,
in its sole discretion, shorten or terminate the Restricted
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<PAGE> 12
Period or waive any other restrictions applicable to all or a portion of such
Restricted Shares. None of the Restricted Shares may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of prior to the date on
which such Restricted Shares vest in accordance with Section 11(c).
(c) Restricted Stock Certificates. The Corporation shall issue, in
the name of each Grantee, stock certificates with proper legends representing
the total number of Restricted Shares granted to the Grantee, as soon as
reasonably practicable after the Date of Grant. The Secretary of the Corporation
shall hold such certificates, properly endorsed for transfer, after the
Grantee's benefit until such time as the Restricted Shares are forfeited to the
Corporation or until the Restricted Shares vest. In lieu of the foregoing,
Restricted Shares awarded to a Grantee may be held under the Grantee's name in a
book entry account maintained by or on behalf of the Corporation.
(d) Rights of Holders of Restricted Shares. Except as otherwise
determined by the Committee either at the time Restricted Shares are awarded or
at any time thereafter prior to the lapse of the restrictions, holders of
Restricted Shares shall not have the right to vote such shares or the right to
receive any dividends with respect to such shares. All distributions, if any,
received by an employee or consultant with respect to Restricted Shares as a
result of any stock split-up, stock distribution, combination of shares, or
other similar transaction shall be subject to the restrictions of this Section
11.
(e) Termination of Employment Relationship. Any Restricted Shares
granted pursuant to the Plan shall be forfeited if the Grantee terminates
employment or consultant relationship with the Corporation or its subsidiaries
for reasons other than death or disability prior to the expiration or
termination of the Period of Restriction and the satisfaction of any other
conditions applicable to such Restricted Shares. Upon such forfeiture, the
Secretary of the Corporation shall either cancel or retain in its treasury the
Restricted Shares that are forfeited to the Corporation. Upon the death of a
Grantee prior to his termination of employment or service as a consultant, or
upon a Grantee's termination of employment as a result of disability, all
Restricted Shares previously awarded to such Grantee which have not previously
vested shall be forfeited unless the Committee in its sole discretion shall
determine otherwise.
(f) Delivery of Restricted Shares. Subject to the provisions of
this Section, at such time as the Grantee shall become vested in his Restricted
Shares, the restrictions applicable to the Restricted Shares shall lapse and a
stock certificate for the number of Restricted Shares with respect to which the
restrictions have lapsed shall be delivered, free of all such restrictions, to
the Grantee or the Grantee's beneficiary or estate, as the case may be.
12. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Subject to the terms of the
Plan, Performance Units and Performance Shares may be granted to eligible
Employees and Consultants at any time and from time to time, as shall be
determined by the Committee, in its sole discretion. The Committee shall have
complete discretion in determining the number of Performance Units and
Performance Shares granted to each Participant.
(b) Value of Performance Units/Shares. Each Performance Unit shall
have an initial value that is established by the Committee at the time of the
grant. Each Performance Share shall have an initial value equal to the Fair
Market Value of a Share on the date of grant. The Committee shall set
performance goals in its discretion which, depending on the extent to which they
are met, will determine the number and/or value of Performance Units/Shares that
will be paid out to the Participants. The time period during which the
performance goals must be met shall be called a "Performance Period."
Performance Periods of Awards granted to Insiders shall, in all cases, exceed
six (6) months in length.
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(c) Earning of Performance Units/Shares. After the applicable
Performance Period has ended, the holder of Performance Units/Shares shall be
entitled to receive a payout of the number of Performance Unit/Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance goals have been achieved.
Notwithstanding the preceding sentence, after the grant of a Performance
Unit/Share, the Committee, in its sole discretion, may waive the achievement of
any performance goals for such Performance Unit/Share.
(d) Form and Timing of Payment of Performance Units/Shares. Payment
of earned Performance Units/Shares shall be made in a single lump sum, within
forty-five (45) calendar days following the close of the applicable Performance
Period. The Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market
Value equal to the value of the earned Performance Units/Shares at the close of
the applicable Performance Period) or in combination thereof.
Prior to the beginning of each Performance Period, Participants
may, in the discretion of the Committee, elect to defer the receipt of any
Performance Unit/Share payout upon such terms as the Committee shall determine.
(e) Cancellation of Performance Units/Shares. Subject to the
applicable Award Agreement, upon the earlier of (a) the Participant's
termination of employment, or (b) the date set forth in the Award Agreement, all
remaining Performance Units/Shares shall be forfeited by the Participant to the
Company, the Shares subject thereto shall again be available for grant under the
Plan.
(f) Nontransferability. Performance Units/Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
13. 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 or Purchaser, only by the Optionee or Purchaser.
14. Adjustments Upon Changes in Capitalization, Merger or Other Events.
Subject to any required action by the shareholders of the Company, the number of
shares of Common Stock covered by each outstanding Option and Stock Purchase
Right, and the number of shares of Common Stock which have been authorized for
issuance under this Plan but as to which no Options or Stock Purchase Rights
have yet been granted or which have been returned to this Plan upon cancellation
or expiration of an Option or Stock Purchase Right, or repurchase of Shares from
a Purchaser or Optionee upon termination of employment or otherwise, 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 of the Company or the payment of a stock dividend with respect
to the Common Stock. 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
Rights.
In the event of the dissolution or liquidation of the Company, all
Options and Stock Purchase Rights will terminate immediately prior to the
consummation of such proposed action if not
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<PAGE> 14
previously exercised. The Board, at its option, may provide for one or more of
the following from time to time or in any stock option agreement or stock
purchase agreement that, in the event of a Major Event, then (A) all Options and
Stock Purchase Rights will be assumed or equivalent options or stock purchase
rights will be substituted by such surviving corporation (or other entity) or a
parent or subsidiary of such surviving corporation (or other entity), (B) all
Options and Stock Purchase Rights will continue in full force and effect, or (C)
all Options and Stock Purchase Rights will terminate if not exercised prior to
the consummation of the transaction.
The foregoing adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
The grant of an Option or Stock Purchase Right pursuant to this
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
15. Time of Grant. The date of grant of an Option or Stock Purchase
Right shall, for all purposes, be the date on which the Board makes the
determination granting such Option or Stock Purchase Right. 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.
16. Amendment and Termination.
(a) Amendment. The Board may amend this Plan from time to time in
such respects as the Board may deem advisable; provided that the shareholders of
the Company must approve the following amendments or revisions within 12 months
before or after the adoption of such revision or amendment:
(i) any increase in the number of Shares subject to this Plan,
other than in connection with an adjustment under Section 14 of this Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options (to the extent such modification requires
shareholder approval in order for the Plan to satisfy the requirements of
Section 422(b) of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act); or
(iii) any other revision or amendment if such revision or
amendment requires shareholder approval in order for this Plan to satisfy the
requirements of Section 422(b) of the Code or to comply with the requirements of
Rule 16b-3 promulgated under the Exchange Act if applicable to the Company.
(b) Shareholder Approval. If any amendment requiring shareholder
approval under Section 16(a) of this Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 20 of this Plan.
(c) Suspension and Termination. The Board may suspend or terminate
this Plan at any time. No Options or Stock Purchase Rights may be granted while
this Plan is suspended or after it is terminated.
(d) Effect of Amendment; Termination or Suspension. Any such
amendment, termination or suspension of this Plan shall not affect Options or
Stock Purchase Rights already granted
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<PAGE> 15
and such Options or Stock Purchase Rights shall remain in full force and effect
as if this Plan had not been amended, terminated or suspended, unless mutually
agreed otherwise between the Optionee or Purchaser (as the case may be) and the
Company, which agreement must be in writing and signed by the Optionee or
Purchaser (as the case may be) and the Company.
17. 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, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange or other stock trading system upon which the Shares may then be listed.
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 make such representations and warranties at the time of any
such exercise as the Company may at that time determine, including without
limitation, representations and warranties that (i) the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares in violation of applicable federal or state securities
laws, and (ii) such person is knowledgeable and experienced in financial and
business matters and is capable of evaluating the merits and the risks
associated with purchasing the Shares.
18. 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 this 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 under this
Plan, 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.
19. Option, Stock Purchase and Stock Bonus Agreements. Options shall be
evidenced by written stock option agreements in such form as the Board shall
approve. Upon the exercise of Stock Purchase Rights, the Purchaser shall sign a
stock purchase agreement or stock bonus agreement in such form as the Board
shall approve.
20. Shareholder Approval.
(a) The shareholders of the Company shall have approved this Plan
within 12 months before or after this Plan is adopted. Any shares purchased
before shareholder approval is obtained shall be rescinded if shareholder
approval is not obtained within 12 months before or after this Plan is adopted.
Such shares shall not be counted in determining whether such approval is
obtained.
(b) If the Company registers any class of equity securities
pursuant to Section 12 of the Exchange Act, any required approval of the
shareholders of the Company obtained after such registration shall be solicited
substantially in accordance with Section 14(a) of the Exchange Act and the rules
and regulations promulgated thereunder.
(c) If the Company registers any class of equity securities
pursuant to Section 12 of the Exchange Act and if prior to such time either (x)
the shareholders of the Company did not approve this Plan or (y) the Company did
not solicit shareholder approval substantially in accordance with Section 14(a)
of the Exchange Act and the rules and regulations promulgated thereunder, then
the Company shall take all necessary actions to qualify the Plan under Rule
16(b)(3) promulgated under the Exchange Act at or prior to the later of (A) the
first annual meeting of shareholders held subsequent to the first registration
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<PAGE> 16
of any class of equity securities of the Company under Section 12 of the
Exchange Act or (B) the granting of an Option hereunder to an officer or
director after such registration.
21. Information to Optionees and Purchasers. The Company shall provide
annually to each Optionee and Purchaser, during the period that such Optionee or
Purchaser has one or more Options or Stock Purchase Rights outstanding, copies
of the annual financial statements of the Company.
22. Right of Company to Terminate Employment or Consulting Services.
This Plan shall not confer upon any Optionee or holder of a Stock Purchase Right
any right with respect to continuation of employment by or the rendition of
consulting services to the Company, any of its Subsidiaries or its Parent, nor
shall it interfere in any way with his or her right or the Company's, any of its
Subsidiaries' or its Parent's right to terminate his or her employment or
services at any time, with or without cause.
23. Rights of First Refusal and Repurchase.
(a) The written agreements evidencing Options or Stock Purchase
Rights may contain such provisions as the Board shall determine (or pursuant to
a separate agreement) to the effect that if an Optionee or Purchaser elects to
sell all or any Shares that the Optionee or Purchaser acquired upon the exercise
of an Option or Stock Purchase Right, then any proposed sale of such Shares by
such Optionee or Purchaser shall be subject to a right of first refusal in favor
of the Company.
(b) The Board may require, at its option, that a stock purchase
agreement, stock option agreement, stock bonus agreement, or other agreement
pursuant to this Plan grant the Company a repurchase option exercisable upon the
voluntary or involuntary termination of the Purchaser's employment with the
Company for any reason (including death or disability). The repurchase price
shall be at the higher of the original purchase price or fair value of the
Shares on the date of termination of employment. If the Board so determines, the
purchase price for shares repurchased may be paid by cancellation of any
indebtedness of the Purchaser to the Company. The repurchase option must be
exercised by the Company within 90 days of termination of employment for cash or
cancellation of money indebtedness for the Shares and the right shall terminate
when the Company's Common Stock becomes publicly traded. The Board may require
such a repurchase right in other events.
(c) Certificates representing shares issued upon exercise of
Options or Stock Purchase Rights shall bear a restrictive legend to the effect
that the transferability of such shares is subject to the restrictions contained
in this Plan and the applicable written agreement between the Optionee or
Purchaser and the Company.
24. Withholding. The Company's obligation to deliver shares of Common
Stock under this Plan shall be subject to applicable federal, state and local
tax withholding requirements. To the extent provided by the terms of the stock
option agreement relating to an Option, the Optionee may satisfy any federal,
state or local tax withholding obligation relating to the exercise of such
Option by any or a combination of the following means: (i) cash payment or wage
withholding; (ii) authorizing the Company to withhold from the Shares otherwise
issuable to the Optionee upon exercise of the Option the number of Shares having
a fair market value less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company unencumbered shares of Common
Stock owned by the Optionee having a fair market value less than or equal to the
amount of the withholding tax obligation; provided, however, that with respect
to clauses (ii) and (iii) above the Board in its sole discretion may disapprove
such payment and require that such taxes be paid in cash.
25. Separability. At a time when the Company has a class of equity
securities registered pursuant to Section 12 of the Exchange Act, if any of the
terms or provisions of this Plan conflict with the requirements of Rule 16b-3
promulgated under the Exchange Act and/or Section 422 of the Code, then
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<PAGE> 17
such terms or provisions shall be deemed inoperative to the extent they so
conflict with the requirements of Rule 16b-3 promulgated under the Exchange Act,
and/or with respect to Incentive Stock Options, Section 422 of the Code. The
foregoing sentence shall not apply with respect to the requirements of Rule
16b-3 promulgated under the Exchange Act if the Board has expressly declared
that such requirements shall not apply. With respect to Incentive Stock Options,
if this Plan does not contain any provision required to be included herein under
Section 422 of the Code, such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had been set out at
length herein. To the extent any Option that is intended to qualify as an
Incentive Stock Option cannot so qualify, such Option, to that extent, shall be
deemed to be a Nonstatutory Stock Option for all purposes of this Plan.
26. Non-Exclusivity of this Plan. The adoption of this Plan by the
Board shall not be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding of
stock and cash otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
27. Governing Law. This Plan shall be governed by, and construed in
accordance with the laws of the State of New York.
28. Cancellation of and Substitution for Nonstatutory Options. The
Company shall have the right to cancel any Nonstatutory Stock Option at any time
before it otherwise would have expired by its terms and to grant to the same
Optionee in substitution therefor a new Nonstatutory Stock Option stating an
option price which is lower (but not higher) than the option price stated in the
cancelled Option. Any such substituted option shall contain all the terms and
conditions of the cancelled Option; provided, however, that such substituted
Option shall not be exercisable after the expiration of ten (10) years and one
day from the date of grant of the cancelled Option.
29. Market Standoff. Unless the Board determines otherwise, each
Optionee or Purchaser shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the Securities Act;
provided, however, that such restriction shall apply only to the first two
registration statements of the Company to become effective under the Securities
Act which includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such 180-day period.
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Exhibit 1
Form of Stock Option Agreement
<PAGE> 19
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered
into as of the date of grant set forth below (the "Date of Grant") by and
between BigStar Entertainment, Inc., a Delaware corporation (the "Company"), and
the optionee named below ("Optionee"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's Amended 1999 Stock
Option & Incentive Plan (the "Plan").
Optionee:
Social Security Number:
Address:
Total Option Shares:
Exercise Price Per Share:
Date of Grant:
Type of Stock Option: [ ] Incentive Stock Option ("ISO")
(Check one): [ ] Non-Statutory Stock Option
1. Grant of Option. The Company hereby grants to Optionee an
option (the "Option") to purchase the total number of shares of Common Stock of
the Company set forth above (the "Shares") at the Exercise Price Per Share set
forth above (the "Exercise Price"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Only Employees of the Company shall receive ISOs.
2. Exercise Price. The Exercise Price, is not less than the fair
market value per share of Common Stock on the date of grant, as determined by
the Board; provided, however, in the event Optionee is an Employee and owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its Parent or Subsidiary
corporations immediately before this Option is granted, said exercise price is
not less than one hundred ten percent (110%) of the fair market value per share
of Common Stock on the date of grant as determined by the Board.
3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Vesting
(a) This Option shall not become exercisable as to any of the
number of the Shares as follows (check one):
<PAGE> 20
[ ]: until the date that is one (1) year from the date of grant
of the Option (the "Anniversary Date"). On the Anniversary
Date, this Option may be exercised to the extent of 25% of the
Shares. Upon the expiration of each calendar month from the
Anniversary Date, this Option may be exercised to the extent
of the product of (a) the total number of Shares set forth at
the beginning of this Agreement and (b) the fraction the
numerator of which is one (1) and the denominator of which is
forty-eight (48) (the "Monthly Vesting Amount"), plus the
shares as to which the right to exercise the Option has
previously accrued but has not been exercised; provided,
however, that notwithstanding any of the above, the 25%
exercisable on the Anniversary Date and the Monthly Vesting
Amount with respect to any calendar month shall become
exercisable only if the Employee was an employee of the
Company or any Subsidiary of the Company as of the Anniversary
Date and the last day of such month, respectively.
[ ]: ____ % of the shares vesting over ____ months, pro rata for
each month of Optionee providing continued service to the
Company.
[ ]: ______________________________________________.
(b) This Option may not be exercised for a fraction of a
Share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 7, 8 and 9 below, subject to the limitations contained in subsection
3(i)(d).
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.
(ii) Method of Exercise. This Option shall be exercisable by
written notice 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 Optionee and
shall be delivered in person or by certified mail to the President, Secretary or
Chief Financial Officer of the Company. The written notice shall be accompanied
by payment of 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.
(iii) Adjustments, Merger, etc. The number and class of the Shares
and/or the exercise price specified above are subject to appropriate adjustment
in the event of changes in the capital stock of the Company by reason of stock
dividends, split-ups or combinations of shares, reclassifications, mergers,
consolidations, reorganizations or liquidations. Subject to any required action
of the stockholders of the Company, if the Company shall be the surviving
corporation in any merger or consolidation, this Option (to the extent that it
is still outstanding) shall pertain to and apply to the securities to which a
holder of the same number of shares of Common Stock that are then subject to
this Option would have been entitled. A dissolution or liquidation of the
Company, or a merger or consolidation in which the Company is not the surviving
corporation, will cause this Option to terminate, unless the agreement or merger
or consolidation shall otherwise provide, provided that the Optionee shall, if
the Board expressly authorizes, in such event have the right immediately prior
to such dissolution or liquidation, or merger or consolidation, to exercise this
Option in whole or part. To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive. In
the event that (i) Optionee is an Employee, and (ii) the Company consummates a
merger resulting in a change in control of the Company, and (iii) the Employee
is
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<PAGE> 21
terminated without cause, then any options remaining unvested hereunder shall be
deemed to automatically vest.
4. Optionee's Representations. By receipt of this Option, by its
execution, and by its exercise in whole or in part, Optionee represents to the
Company that Optionee understands that:
(i) both this Option and any Shares purchased upon its
exercise are securities, the issuance by the Company of which requires
compliance with federal and state securities laws;
(ii) these securities are made available to Optionee only on
the condition that Optionee makes the representations contained in this Section
4 to the Company;
(iii) Optionee has made a reasonable investigation of the
affairs of the Company sufficient to be well informed as to the rights and the
value of these securities;
(iv) Optionee understands that the securities have not been
registered under the Securities Act of 1933, as amended (the "Act") in reliance
upon one or more specific exemptions contained in the Act, which may include
reliance on Rule 701 promulgated under the Act, if available, or which may
depend upon (a) Optionee's bona fide investment intention in acquiring these
securities; (b) Optionee's intention to hold these securities in compliance with
federal and state securities laws; (c) Optionee having no present intention of
selling or transferring any part thereof (recognizing that the Option is not
transferable) in violation of applicable federal and state securities laws; and
(d) there being certain restrictions on transfer of the Shares subject to the
Option;
(v) Optionee understands that the Shares subject to this
Option, in addition to other restrictions on transfer, must be held indefinitely
unless subsequently registered under the Act, or unless an exemption from
registration is available; that Rule 144, the usual exemption from registration,
is only available after the satisfaction of certain holding periods and in the
presence of a public market for the Shares; that there is no certainty that a
public market for the Shares will exist, and that otherwise it will be necessary
that the Shares be sold pursuant to another exemption from registration which
may be difficult to satisfy; and
(vi) Optionee understands that the certificate representing
the Shares will bear a legend prohibiting their transfer in the absence of their
registration or the opinion of counsel for the Company that registration is not
required, and a legend prohibiting their transfer in compliance with applicable
state securities laws unless otherwise exempted.
5. Method of Payment. Payment of the purchase price shall be made by
cash, check or, in the sole discretion of the Board at the time of exercise,
promissory notes or other Shares of Common Stock having a fair market value on
the date of surrender equal to the aggregate purchase price of the Shares being
purchased.
6. Restrictions on Exercise. This Option may not be exercised 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. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
7. Termination of Status as an Employee. In the event of termination of
Optionee's Continuous Status as an Employee for any reason other than death or
disability, Optionee may, but only within thirty (30) days after the date of
such termination (but in no event later than the date of expiration of the term
of this Option as set forth in Section 11 below), exercise this Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. 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, this Option shall terminate.
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<PAGE> 22
8. Disability of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee as a result of Optionee's disability, Optionee
may, but only within six (6) months from the date of termination of employment
or consulting relationship (but in no event later than the date of expiration of
the term of this Option as set forth in Section 11 below), exercise this Option
to the extent Optionee was entitled to exercise it at the date of such
termination; provided, however that if the disability is not total and permanent
(as defined in Section 22(e)(3) of the Code) and the Optionee exercises the
option within the period provided above but more than three months after the
date of termination, this Option shall automatically be deemed to be a
Nonstatutory Stock Option and not an Incentive Stock Option; and provided,
further, that if the disability is total and permanent (as defined in Section
22(e)(3) of the Code), then the Optionee may, but only within one (1) year from
the date of termination of employment or consulting relationship (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 11 below), exercise this Option to the extent Optionee was entitled
to exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise this Option at the date of termination, or if Optionee
does not exercise such Option (which Optionee was entitled to exercise) within
the time periods specified herein, this Option shall terminate.
9. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option while an Employee of the
Company and having been in Continuous Status as an Employee since the date of
grant of this Option, this Option may be exercised, at any time within one (1)
year following the date of death (but, in the case of an Incentive Stock Option,
in no event later than the date of expiration of the term of this Option as set
forth in Section 11 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
of the right to exercise that had accrued at the time of death of the Optionee.
To the extent that such Employee was not entitled to exercise the Option at the
date of death, or if such Employee, estate or other person does not exercise
such Option (which such Employee, estate or person was entitled to exercise)
within the one (1) year time period specified herein, the Option shall
terminate; or
(ii) during the thirty (30) day period specified in Section 7
or the one (1) year period specified in Section 8, after the termination of
Optionee's Continuous Status as an Employee, this Option may be exercised, at
any time within one (1) year following the date of death (but, in the case of an
Incentive Stock Option, in no event later than the date of expiration of the
term of this Option as set forth in Section 11 below), by Optionee's estate or
by a person who acquired the right to exercise this Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the date of termination. To the extent that such Employee was not entitled to
exercise this Option at the date of death, or if such Employee, estate or other
person does not exercise such Option (which such Employee, estate or person was
entitled to exercise) within the one (1) year time period specified herein, this
Option shall terminate.
10. 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 Optionee.
11. Term of Option. Subject to the other terms of this Agreement, this
Option may not be exercised more than five (5) years from the date of grant of
this Option, and may be exercised during such term only in accordance with the
Plan and terms of this Option; provided, however, that the term of this option,
if it is a Nonstatutory Stock Option, may be extended for the period set forth
in Section 9(i) or Section 9(ii) in the circumstances set forth in such
Sections.
12. Early Disposition of Stock; Taxation Upon Exercise of Option. If
Optionee is an Employee and the Option qualifies as an ISO, Optionee understands
that, if Optionee disposes of any Shares received under this Option within two
(2) years after the date of this Agreement or within one (1) year after such
Shares were transferred to Optionee, Optionee will be treated for federal income
tax purposes as having received ordinary income at the time of such disposition
in any amount generally measured as the difference between the price paid for
the Shares and the lower of the fair market value of the Shares at the
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<PAGE> 23
date of exercise or the fair market value of the Shares at the of disposition.
Any gain recognized on such premature sale of the Shares in excess of the amount
treated as ordinary income will be characterized as capital gain. Optionee
hereby agrees to notify the Company in writing within thirty (30) days after the
date of any such disposition. Optionee understands that if Optionee disposes of
such Shares at any time after the expiration of such two-year and one-year
holding periods, any gain on such sale will be treated as long-term capital gain
laws subject to meeting various qualifications. If Optionee is a Consultant or
this is a Nonstatutory Stock Option, Optionee understands that, upon exercise of
this Option, Optionee will recognize income for tax purposes in an amount equal
to the excess of the then fair market value of the Shares over the exercise
price. Upon a resale of such shares by the Optionee, any difference between the
sale price and the fair market value of the Shares on the date of exercise of
the Option will be treated as capital gain or loss. Optionee understands that
the Company will be required to withhold tax from Optionee's current
compensation in some of the circumstances described above; to the extent that
Optionee's current compensation is insufficient to satisfy the withholding tax
liability, the Company may require the Optionee to make a cash payment to cover
such liability as a condition to exercise of this Option.
13. Tax Consequences. The Optionee understands that any of the
foregoing references to taxation are based on federal income tax laws and
regulations now in effect, and may not be applicable to the Optionee under
certain circumstances. The Optionee may also have adverse tax consequences under
state or local law. The Optionee has reviewed with the Optionee's own tax
advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Agreement. The Optionee is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. The Optionee understands that the Optionee (and not the Company)
shall be responsible for the Optionee's own tax liability that may arise as a
result of the transactions contemplated by this Agreement.
14. Severability; Construction. In the event that any provision in
this Option shall be invalid or unenforceable, such provision shall be severable
from, and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Option. This Option shall be
construed as to its fair meaning and not for or against either party.
15. Damages. The parties agree that any violation of this Option
(other than a default in the payment of money) cannot be compensated for by
damages, and any aggrieved party shall have the right, and is hereby granted the
privilege, of obtaining specific performance of this Option in any court of
competent jurisdiction in the event of any breach hereunder.
16. Governing Law. This Option shall be deemed to be made under
and governed by and construed in accordance with the laws of the State of New
York. Jurisdiction for any disputes hereunder shall be solely in New York, New
York.
17. Delay. No delay or failure on the part of the Company or the
Optionee in the exercise of any right, power or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise by any of them of any right,
power or remedy preclude other or further exercise thereof, or the exercise of
any other right, power or remedy.
18. Restrictions. Notwithstanding anything herein to the contrary,
Optionee understands and agrees that Optionee shall not dispose of any of the
Shares, whether by sale, exchange, assignment, transfer, gift, devise, bequest,
mortgage, pledge, encumbrance or otherwise, except in accordance with the terms
and conditions of this Section 18, and Optionee shall not take or omit any
action which will impair the absolute and unrestricted right, power, authority
and capacity of Optionee to sell Shares in accordance with the terms and
conditions hereof.
Any purported transfer of Shares by Optionee that violates any
provision of this Section 18 shall be wholly void and ineffectual and shall give
to the Company or its designee the right to purchase from Optionee all but not
less than all of the Shares then owned by Optionee for a period of 90 days from
the date the Company first learns of the purported transfer at the Agreement
Price and on the Agreement Terms (as those terms are defined in subsections
(b)(3) and (b)(4), respectively, of this
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<PAGE> 24
Section 18). If the Shares are not purchased by the Company or its designee, the
purported transfer thereof shall remain void and ineffectual and they shall
continue to be subject to this Agreement.
The Company shall not cause or permit the transfer of any Shares to be
made on its books except in accordance with the terms hereof.
(a)(1). Permitted Transfers.
(i) Optionee may sell, assign or transfer any Shares held by
the Optionee but only by complying with the provisions of subsection (b)(1) of
this Section 18.
(ii) Optionee may sell, assign or transfer any Shares held by
the Optionee without complying with the provisions of subsection (b)(1) by
obtaining the prior written consent of the Company's shareholders owning 50% of
the then issued and outstanding shares of the Company's Common Stock (determined
on a fully diluted basis) or a majority of the members of the Board of Directors
of the Company, provided that the transferee agrees in writing to be bound by
the provisions of this Option and the transfer is made in accordance with any
other restrictions or conditions contained in the written consent and in
accordance with applicable federal and state securities laws.
(iii) Upon the death of Optionee, Shares held by the Optionee
may be transferred to the personal representative of the Optionee's estate
without complying with the provisions of subsection (b)(1). Shares so
transferred shall be subject to the other provisions of this Option, including
in particular subsection (b)(2).
(a)(2). No Pledge. Unless a majority of the members of the Board of
Directors consent, Shares may not be pledged, mortgaged or otherwise encumbered
to secure indebtedness for money borrowed or any other obligation for which the
Optionee is primarily or secondarily liable.
(a)(3). Stock Certificate Legend. Each stock certificate for Shares
issued to the Optionee shall have conspicuously written, printed, typed or
stamped upon the face thereof, or upon the reverse thereof with a conspicuous
reference on the face thereof, one or both of the following legend:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT. SUCH SHARES
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN ANY MANNER
EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE TERMS OF THE STOCK OPTION
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
UNLESS A MAJORITY OF THE MEMBERS OF THE BOARD OF DIRECTORS CONSENT, SUCH STOCK
OPTION AGREEMENT PROHIBITS ANY PLEDGE, MORTGAGE OR OTHER ENCUMBRANCE OF SUCH
SHARES TO SECURE ANY OBLIGATION OF THE HOLDER HEREOF. EVERY CREDITOR OF THE
HOLDER HEREOF AND ANY PERSON ACQUIRING OR PURPORTING TO ACQUIRE THIS CERTIFICATE
OR THE SHARES HEREBY EVIDENCED OR ANY INTEREST THEREIN IS HEREBY NOTIFIED OF THE
EXISTENCE OF SUCH STOCK OPTION AGREEMENT, AND ANY ACQUISITION OR PURPORTED
ACQUISITION OF THIS CERTIFICATE OR THE SHARES HEREBY EVIDENCED OR ANY INTEREST
THEREIN SHALL BE SUBJECT TO ALL RIGHTS AND OBLIGATIONS OF THE PARTIES TO SUCH
STOCK OPTION AGREEMENT AS THEREIN SET FORTH.
(ii) [any legend required by applicable state securities laws]
(b)(1) Sales of Shares.
(i) Company's Right of First Refusal. In the event that the
Optionee shall desire to sell, assign or transfer any Shares held by the
Optionee to any other person (the "Offered Shares") and shall be in receipt of a
bona fide offer to purchase the Offered Shares ("Offer"), the following
procedure shall apply. The Optionee shall give to the Company written notice
containing the terms and conditions of
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<PAGE> 25
the Offer, including, but not limited to (a) the number of Offered Shares; (b)
the price per Share; (c) the method of payment; and (d) the name(s) of the
proposed purchaser(s).
An offer shall not be deemed bona fide unless the Optionee has
informed the prospective purchaser of the Optionee's obligation under this
Option and the prospective purchaser has agreed to become a party hereunder and
to be bound hereby. The Company is entitled to take such steps as it reasonably
may deem necessary to determine the validity and bona fide nature of the Offer.
Until 30 days after such notice is given, the Company or its
designee shall have the right to purchase all of the Offered Shares at the price
offered by the prospective purchaser and specified in such notice. Such purchase
shall be on the Agreement Terms, as defined in subsection (b)(4).
(ii) Failure of Company or its Designee to Purchase Offered Shares. If
all of the Offered Shares are not purchased by the Company and/or its designee
within the 30-day period granted for such purchases, then any remaining Offered
Shares may be sold, assigned or transferred pursuant to the Offer; provided,
that the Offered Shares are so transferred within 30 days of the expiration of
the 30-day period to the person or persons named in, and under the terms and
conditions of, the bona fide Offer described in the notice to the Company; and
provided further, that such persons agree to execute and deliver to the Company
a written agreement, in form and content satisfactory to the Company, agreeing
to be bound by the terms and conditions of this Option.
(b)(2) Manner of Exercise.
Any right to purchase hereunder shall be exercised by giving
written notice of election to the Optionee, the Optionee's personal
representative or any other selling person, as the case may be, prior to the
expiration of such right to purchase.
(b)(3) Agreement Price.
The "Agreement Price" shall be the higher of (A) the fair
market value of the Shares to be purchased determined in good faith by the Board
of Directors of the Company and (B) the original exercise price of the Shares to
be purchased.
(b)(4) Agreement Terms. "Agreement Terms" shall mean and include the
following:
(i) Delivery of Shares and Closing Date. At the closing, the
Optionee, the Optionee's personal representative or such other selling person,
as the case may be, shall deliver certificates representing the Shares, properly
endorsed for transfer, and with the necessary documentary and transfer tax
stamps, if any, affixed, to the purchaser of such Shares. Payment of the
purchase price therefor shall concurrently be made to the Optionee, the
Optionee's personal representative or such other selling person, as provided in
subsection (ii) of this subsection (b)(4). Such delivery and payment shall be
made at the principal office of the Company or at such other place as the
parties mutually agree.
(ii) Payment of Purchase Price. The Company shall pay the
purchase price to the Optionee at the closing.
(b)(5) Right to Purchase Upon Certain Other Events.
The Company or its designee shall have the right to purchase
all, but not less than all, of the Shares held by the Optionee at the Agreement
Price and on the Agreement Terms for a period of 90 days after any of the
following events:
(i) an attempt by a creditor to levy upon or sell any of the
Optionee's Shares;
(ii) the filing of a petition by the Optionee under the U.S.
Bankruptcy Code or any insolvency laws;
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<PAGE> 26
(iii) the filing of a petition against Optionee under any
insolvency or bankruptcy laws by any creditor of the Optionee if such petition
is not dismissed within 30 days of filing; or
(iv) the entry of a decree of divorce between the Optionee and
the Optionee's spouse.
The Optionee shall provide the Company written notice of the occurrence of any
such event within 30 days of such event.
(c)(1) Termination. The provisions of this Section 18 shall terminate
and all rights of each such party hereunder shall cease except for those which
shall have theretofore accrued upon the occurrence of any of the following
events:
(i) cessation of the Company's business;
(ii) bankruptcy, receivership or dissolution of the Company;
(iii) ownership of all of the issued and outstanding shares of
the Company by a single shareholder of the Company;
(iv) written consent or agreement of the shareholders of the
Company holding 50% of the then issued and outstanding shares of the
Company (determined on a fully diluted basis);
(v) consent or agreement of a majority of the members of the
Board of Directors of the Company; or
(vi) registration of any class of equity securities of the
Company pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended.
(c)(2). Amendment. This Section 18 may be modified or amended in whole
or in part by a written instrument signed by shareholders of the Company holding
50% of the outstanding shares of Common Stock (determined on a fully diluted
basis) or a majority of the members of the Board of Directors of the Company.
19. Market Standoff. Unless the Board of Directors otherwise consents,
Optionee agrees hereby not to sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the Act; provided,
however, that such restriction shall apply only to the first two registration
statements of the Company to become effective under the Act which includes
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the Act. The Company may impose stop-transfer instructions
with respect to securities subject to the foregoing restrictions until the end
of such 180-day period.
20. Complete Agreement. This Agreement constitutes the entire agreement
between the parties with respect to its subject matter, and supersedes all other
prior or contemporaneous agreements and understandings both oral or written;
subject, however, that in the event of any conflict between this Agreement and
the Plan, the Plan shall govern. This Agreement may only be amended in a writing
signed by the Company and the Optionee.
21. Privileges of Stock Ownership. Participant shall not have any of
the rights of a shareholder with respect to any Shares until Optionee exercises
the Option and pay the Exercise Price.
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<PAGE> 27
22. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated above or to such other address as
such party may designate in writing from time to tome to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
DATE OF GRANT:
BIGSTAR ENTERTAINMENT, INC.
By:
Name:
Title:
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT 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 THIS OPTION, THE COMPANY'S PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan, represents that
Optionee 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 this Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board or
of the Committee upon any questions arising under the Plan.
Dated:
Optionee
<PAGE> 28
Consent of Spouse
The undersigned spouse of the Optionee to the foregoing Stock
Option Agreement acknowledges on his or her own behalf that: I have read the
foregoing Stock Option Agreement and I know its contents. I hereby consent to
and approve of the provisions of the Stock Option Agreement, and agree that the
Shares issued upon exercise of the options covered thereby and my interest in
them are subject to the provisions of the Stock Option Agreement and that I will
take no action at any time to hinder operation of the Stock Option Agreement on
those Shares or my interest in them.
Signature of Spouse
Address
10
