<PAGE> 1
[POPSTAR LOGO]
POPSTAR COMMUNICATIONS, INC.
May 26, 2000
Dear Shareholders of POPstar Communications, Inc.:
I am pleased to invite you to the Annual Meeting of Shareholders of POPstar
Communications, Inc. ("POPstar" or the "Company"). The meeting will be at 10:00
a.m. (local time) on June 19, 2000 at Resort Semiahmoo, Victoria Room, 9565
Semiahmoo Parkway, Blaine, WA 98230-9326.
At the Annual Meeting, you will be asked to consider and vote on the following
matters:
1. To elect four (4) directors to the board of directors of POPstar for the
following year; and
2. To consider and vote on the Company's 1999 Stock Option Plan; and
3. To consider and vote on an amendment to the Company's 1999 Stock Option
Plan to increase the number of shares of Common Stock reserved for
issuance from 757,500 to 2,000,000 shares; and
To transact any other business properly presented at the meeting.
The Board of Directors believes that the 1999 Stock Option Plan and the
amendment to the 1999 Stock Option Plan will increase the ability of the Company
to award options to meritorious employees thereby allowing the Company and
subsidiaries to attract and retain people for key positions, to encourage and
assist our key employees, directors, advisers and contractors to acquire or
retain an appropriate stake in the Company 's future, to provide additional
incentives to such persons, to allow the Company to continue to rationalize the
capital held by its founders and key leaders, and to foster continued growth of
the Company.
You also will have the opportunity to hear what has happened in our business in
the past year and to ask questions. You will find other detailed information
about POPstar and our operations in the enclosed Annual Report on Form 10-KSB
and our audited financial statements.
We hope you can join us on June 19, 2000. Whether or not you can attend, please
read the enclosed Proxy Statement. When you have done so, please mark your votes
on the enclosed proxy, sign and date the proxy, and return it to us in the
enclosed envelope. Your vote is important to the Company, so please return your
proxy promptly.
Sincerely,
By /s/ John McDermott
- ---------------------
John McDermott
President, Chief Executive Officer and Director
- --------------------------------------------------------------------------------
POPstar Communications, Inc.
107 East 3rd Avenue, Vancouver, BC, Canada V5T 1c7
Tel: 604-872-6608 Fax: 604-872-6601 www.pop-star.net
<PAGE> 2
[POPSTAR LOGO]
POPSTAR COMMUNICATIONS, INC.
May 26, 2000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THE 19TH DAY OF JUNE, 2000
Dear Shareholders of POPstar Communications, Inc.:
On June 19, 2000, POPstar Communications, Inc. will hold its annual
meeting of shareholders at Resort Semiahmoo, Victoria Room, 9565 Semiahmoo
Parkway, Blaine, WA 98230-9326. The annual meeting will begin at 10:00 a.m.
(local time). Only shareholders who owned stock at the close of business on the
record date, May 18, 2000, can vote at this meeting or any adjournments of the
meeting that may take place. At the annual meeting we will ask you to:
Proposal 1: Elect four directors to our board of directors to serve for terms as
more fully described in the accompanying proxy statement;
Proposal 2: To consider and vote on the approval of the POPstar Communications,
Inc. 1999 Stock Option Plan (the "1999 Plan"), a copy of which is attached
hereto as EXHIBIT A, that authorized grants of options to purchase up to 757,500
shares of authorized but unissued Common Stock;
Proposal 3: To consider and vote on the approval of an amendment (the POPstar
Communications, Inc. Amended 1999 Stock Option Plan (the "Amended 1999 Plan"), a
copy of which is attached hereto as EXHIBIT B) to the 1999 Plan to increase the
total amount of Common Stock reserved for issuance under the 1999 Plan from
757,500 to 2,000,000 shares of Common Stock; and
To consider and vote on such matters as may be properly presented at the
meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSED SLATE
OF DIRECTORS DESCRIBED IN THIS PROXY STATEMENT AND FOR THE APPROVAL OF THE 1999
STOCK OPTION PLAN AND THE AMENDED 1999 STOCK OPTION PLAN.
At the meeting, we will also report on our 1999 business results and other
matters of interest to shareholders.
To assure your representation at the annual meeting, you are urged to complete,
sign, date, and return the enclosed proxy card as soon as possible in the
enclosed envelope. Your stock will be voted in accordance with the instructions
you give on your proxy card. You may, of course, attend the annual meeting and
vote in person even if you have previously returned your proxy card.
The approximate date of mailing for this proxy statement and accompanying
proxy card(s) is on or about May 26, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
By /s/ Don Lau
------------
Don Lau
SECRETARY AND TREASURER
Please note that attendance at our annual meeting will be limited to
shareholders as of the record date, or their authorized representatives, and
guests invited by the Company.
<PAGE> 3
POPstar Communications, Inc.
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The board of directors of POPstar Communications, Inc. (the "Corporation")
is sending you this proxy statement in connection with its solicitation of
proxies for use at POPstar's 2000 annual meeting of shareholders. The annual
meeting will be held at the Resort Semiahmoo, Victoria Room, 9565 Semiahmoo
Parkway, Blaine, WA 98230-9326 on June 19, 2000 at 10:00 a.m. (local time). We
intend to give or mail to shareholders definitive copies of this proxy statement
and accompanying proxy card(s) on or about May 26, 2000.
RECORD DATE AND OUTSTANDING SHARES
Only those shareholders who owned common stock at the close of business on
May 18, 2000, the record date for the annual meeting, can vote. At that date,
there were 21,887,500 issued and outstanding shares of common stock.
QUORUM
A quorum for the annual meeting is a majority of the outstanding shares of
common stock present, whether in person or by proxy, and entitled to vote, at
the annual meeting. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice.
REVOCABILITY OF PROXIES
If you give your proxy to us, you have the power to revoke it at any time
before it is exercised. Your proxy may be revoked by:
- notifying the Secretary of the Corporation in writing before the annual
meeting;
- delivering to the Secretary of the Corporation before the annual meeting
a signed proxy with a later date; or
- attending the annual meeting and voting in person.
SOLICITATION OF PROXIES
We will bear the cost of soliciting proxies from our shareholders. In
addition to solicitation by mail, our directors, officers and employees may
solicit proxies by telephone, facsimile or otherwise. Our directors, officers
and employees will not be additionally compensated for this solicitation but may
be reimbursed for out-of-pocket expenses they incur. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of common stock held of record by them will be
reimbursed for the reasonable expenses they incur in forwarding the material.
<PAGE> 4
2
VOTING
You are entitled to one vote for each share of common stock you hold.
For the election of directors, the directors who receive the greatest number of
affirmative votes cast by holders of common stock present, in person or by
proxy, and entitled to vote at the annual meeting, will be elected to the board.
You are not entitled to cumulate votes in the election of directors. Approval of
the 1999 Stock Option Plan and the amendment to the 1999 Stock Option Plan
requires that the votes cast in favor of each of the proposals exceed the votes
cast against each of the proposals.
If your shares are represented by proxy, they will be voted in
accordance with your directions. If your proxy is signed and returned without
any direction given, your shares will be voted in accordance with our
recommendation. We are not aware, as of the date of this proxy statement, of any
matters to be voted on at the annual meeting other than as stated in the proxy
statement and the accompanying notice of annual meeting of shareholders. If any
other matters are properly brought before the annual meeting, the enclosed proxy
gives discretionary authority to the persons named in it to vote the shares in
their best judgment.
Abstention and broker non-votes will have no effect on the proposals to
be voted on at the annual meeting since they will not represent votes cast at
the annual meeting for the purpose of voting on such proposals.
If the annual meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the annual meeting all proxies will be voted in the
same manner as the proxies would have been voted at the original convening of
the annual meeting, except for any proxies that have at that time effectively
been revoked or withdrawn, notwithstanding that they may have been effectively
voted on the same or any other matter at a previous meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
Four directors will be elected at the 2000 Annual Meeting and each director
will hold office until the next annual meeting of shareholders and until their
successor shall have been elected and qualified.
At each annual meeting of shareholders, successor directors will be elected
to replace those directors whose terms have expired.
Biographical information regarding each of the nominees for the board of
directors is set forth below. There are no family relationships among any of our
directors or executive officers. Unless otherwise instructed, the persons named
as proxies on the accompanying proxy card intend to vote shares represented by
properly executed proxies for such nominees. Although the board of directors
anticipates that the four nominees will be available to serve as our directors,
if any of them should be unwilling or unable to serve, the persons named as
proxies will vote for the election of such substitute nominee or nominees as may
be designated by the board of directors.
NOMINEES FOR ELECTION
THOMPSON CHU Chairman of the Board of Directors
Thompson Chu (42) has served as the Company's Chairman of the Board of Directors
since July 13, 1999. Prior to that date, Mr. Chu has been the
<PAGE> 5
3
Chairman and a Director of POPstar-BVI since its inception. Since 1989, Mr. Chu
has been the Chief Executive Officer of TGI Technologies Ltd., a high technology
manufacturing and research and development company. Mr. Chu has considerable
management experience in the trading and telecommunications industries in North
America, China and South East Asia. Mr. Chu has an MBA with distinction from
INSEAD in France, a MSc in Science-Business Administration from the University
of British Columbia, a Bachelors degree in Business Administration from Acadia
University in Nova Scotia, a diploma in International Business from the
Institute of Pacific Asian Management of the University of Hawaii and a diploma
in French from the Universite Sainte-Anne in Nova Scotia.
JOHN MCDERMOTT President and Director
John McDermott (63) has served as the Company's President and a member of its
Board of Directors since July 13, 1999. Since August 1989, Mr. McDermott has
been President of TGI Technologies Ltd. From 1978 to 1986, Mr. McDermott was an
Executive Vice President at Glenayre Electronics in Vancouver, a Radio Paging,
Radio Telephone and Voice Mail company. Prior to that, Mr. McDermott was Vice
President of Marketing at Rockwell Wescom in Chicago. Mr. McDermott also held an
engineering position with British Telecom and Alberta Government Telecom. He
holds an engineering degree from Liverpool UK and is registered as a
Professional Engineer in Canada since 1969.
WILLIAM WING YAN LO Director
William Wing Yan Lo, J.P., (39) joined the Company's Board of Directors on
February 15, 2000. Dr. William Wing Yan Lo, J.P., has served as the Chairman and
Chief Executive Officer of Netalone.com Ltd., a company listed on the Stock
Exchange of Hong Kong, since December 1999. Netalone.com Ltd. is an integrated
Internet investment, operation and service company. Before becoming the Chairman
and Chief Executive Officer of Netalone.com Ltd., Dr. Lo was the Chief Executive
Officer of Citibank's Global Consumer Banking business for Hong Kong, Macau and
China from October 1998 to October 1999. Prior to his appointment at Citibank,
Dr. Lo was with Hongkong Telecom since 1990. He was the Founder and became the
first Managing Director of Hongkong Telecom's wholly-owned interactive
multimedia subsidiary, Hongkong Telecom IMS Ltd. (HKTIMS) in 1995, and was
responsible for developing the world's first commercial broadband Interactive TV
(iTV) service and Netvigator - the leading internet access and portal service
provider in Hong Kong.
Dr. Lo is a prominent and respected person in Hong Kong and serves on a number
of public-sector and private-sector committees. Dr. Lo is a member of the Stock
Exchange of Hong Kong's Growth Enterprise Market Listing Committee. Dr. Lo was
selected as a "1999 Global Leader for the Tomorrow" by the global organization
World Economic Forum for his contributions in bringing multimedia technology and
services to the people of Asia. He was appointed as a Justice of the Peace of
the Hong Kong Special Administrative Region Government on July 1, 1999. Dr. Lo
started his business career as a management consultant with McKinsey and
Company, specializing in competitive strategy formulation, organization
effectiveness and mergers and acquisitions. Dr. Lo holds a M.Phil. Degree in
Molecular Pharmacology and a Ph.D. degree in Genetic Engineering, both from
Cambridge University.
YONG KIAT RICKIE TANG Director
Yong Kiat Rickie Tang (41) has served as a member of the Company's Board of
Directors since July 13, 1999. Prior to that date, Mr. Tang has been a
<PAGE> 6
4
director of POPstar-BVI since March 29, 1999. Since July 1992, Mr. Tang has been
the President and Chief Executive Officer of Kemayan Corporation Berhad, a
conglomerate listed on the Main Board of the Kuala Lumpur Stock Exchange in
Malaysia. Mr. Tang holds a Bachelor of Science degree with Honors in
EstateManagement from the National University of Singapore and a Graduate
Diploma in Marketing from the Marketing Institute of Singapore.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
INFORMATION ON COMPENSATION AND AUDIT COMMITTEES OF THE BOARD OF DIRECTORS AND
MEETINGS
To date, the Company has not established a compensation committee, nominating
committee or audit committee. The board of directors and/or senior management
made decisions relating to compensation, audit(s) and nominating. It is the
intention of the board of directors to organize and establish a compensation
committee and an audit committee as soon as practicable following the 2000
annual meeting.
The purpose of a compensation committee will be to establish and review the
compensation and benefits of executive officers, consider incentive compensation
plans for employees and carry out duties assigned to the committee under option
plans and employee stock purchase plan.
The purpose of an audit committee will be to make recommendations to the board
of directors regarding the selection and retention of independent auditors,
review the scope and results of the audit with the independent auditor and
management, and review and evaluate the audit and control functions.
During 1999, there were two meetings of the board of directors. Each of
POPstar's directors attended 100% of the total number of board meetings held in
1999 during that director's service on the board.
COMPENSATION OF DIRECTORS
During the 1999 fiscal period, no Directors received any compensation for
their services as Directors. We did reimburse our directors for all reasonable
expenses incurred in connection with their attendance at board meetings.
Commencing March 1, 2000, directors of the company who are not officers will
each receive a director's fee of $15,000 per annum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table summarizes certain information regarding the beneficial
ownership of our common stock as of May 18, 2000 for:
- each officer and director;
- all our directors and executive officers as a group; and
- each person or group that we know owns more than 5% of our common stock.
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the indicated
beneficial owner exercises voting and/or investment power. Shares of common
stock subject to options currently exercisable or exercisable within 60 days
<PAGE> 7
5
are deemed outstanding for computing the percentage ownership of the person
holding the options or warrants, but are not deemed outstanding for computing
the percentage ownership of any other person. Except as otherwise indicated, we
believe the beneficial owners of the common stock listed below, based on
information furnished by them, have sole voting and investment power with
respect to the shares listed opposite their names. Unless otherwise indicated,
the following officers, directors and shareholders can be reached at the
principal offices of POPstar Communications.
SHARES OF POPSTAR COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
Amount of
Title Beneficial Percent of
of Class Name and Address of Beneficial Owner Ownership Outstanding
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Thompson Chu
107 East 3rd Avenue 0 0%
Vancouver, BC CANADA V5T 1C7
Common Stock John McDermott
107 East 3rd Avenue 0 0%
Vancouver, BC CANADA V5T 1C7
Common Stock Don Lau
107 East 3rd Avenue 0 0%
Vancouver, BC CANADA V5T 1C7
Common Stock Yong Kiat Rickie Tang(1)
335 Bukit Timah Road, #10-02 2,000,000 9.14%
Singapore 259718
Common Stock William Wing Yan Lo(2)
68th Floor, The Centre 1,500,000 6.85%
99 Queen's Road Central
Hong Kong
Common Stock All Directors and Officers as a Group (5 in
total) 3,500,000 15.99%
Common Stock Pang Lin Choi(3)
2702-6 Lucky Commercial Centre 8,525,000 38.95%
103-9 Des Voeux Road West
Hong Kong
Common Stock Golden Harvest Overseas Limited
28 USJ 2/5K, 47600 Subang Jaya 1,500,000 6.85%
Selangor, Malaysia
Common Stock Stargate Trust
1, Osmanthus Road, Yau Yat Chuen 1,525,000 6.97%
Kowloon, Hong Kong
</TABLE>
(1) Denotes shares beneficially owned by Mr. Tang but held by Demayan E.C.
Hybrid Ltd. Mr. Tang is a principal of Kemayan E.C. Hybrid Ltd.
(2) Denotes shares held by Innovestor.com Limited (formerly Rich Income
International Limited). William Wing Yan Lo has sole or shared voting or
investment power over Innovestor.com Limited.
(3) Denotes shares held by Mr. Pang Lin Choi as trustee of the Thompson Chu
Family Trust and the John McDermott Family Trust. The Thompson Chu Family
Trust holds 6,525,000 shares of the Company's Common Stock. The John
McDermott Family Trust holds 2,000,000 shares of the Company's Common Stock.
<PAGE> 8
6
EXECUTIVE COMPENSATION
The following table provides information concerning the compensation
received for services rendered to POPstar Communications in all capacities for
the years ended December 31, 1999 and 1998 by our chief executive officer and
each of our executive officers in fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards ($) Options Payouts Compensation
Position Year ($) ($) ($) SARs (#) ($) ($)
- ------------------ ------ ----- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John McDermott 1999 83,333 -0- 5,600(1) -0- 250,000 -0- -0-
(President) 1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
Thompson Chu 1999 50,000 -0- -0- -0- -0- -0- -0-
(Chairman of the 1998 0 -0- -0- -0- -0- -0- -0-
Board) 1997 0 -0- -0- -0- -0- -0- -0-
Don Lau 1999 48,000 -0- -0- -0- 50,000 -0- -0-
(Secretary & 1998 0 -0- -0- -0- -0- -0- -0-
Treasurer) 1997 0 -0- -0- -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Denotes sums paid to Mr. McDermott pursuant to his employment agreement for
car allowance.
OPTION/SAR GRANTS IN 12-MONTH
PERIOD ENDED DECEMBER 31, 1999
(Individual Grants)
<TABLE>
<CAPTION>
Number of Securities Percent of Total
Underlying Options/SAR's Granted
Options/SAR's Granted to Employees In Exercise or Base
Name (#) Fiscal Year Price ($/Sh) Expiration Date
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John McDermott 250,000 33% $0.01 March 31, 2002
Thompson Chu 0 0 0 0
Don Lau 50,000 6.6% $1.00 June 30, 2002
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 12-MONTH
PERIOD ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1999 OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Options/SARs At In-The-Money Option/SARs
Shares Acquired On Value Realized December 31, 1999 (#) At December 31, 1999 ($)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John McDermott -0- -0- 0 / 250,000 247,500
Thompson Chu n/a n/a n/a n/a
Don Lau -0- -0- 0 / 50,000 -0-
</TABLE>
<PAGE> 9
7
Compensation of Directors
During the 1999 fiscal period, no Directors received any compensation for their
services as Directors. Commencing March 1, 2000, Directors of the Company who
are not officers will each receive a director's fee of $15,000 per annum.
Employment Contracts
On July 20, 1999, the Company entered into a three-year Employment Agreement
with John McDermott, the Company's President, whereby the Company will pay Mr.
McDermott an annual salary of $83,333 (reviewed annually). The Agreement also
requires the Company to provide, at its expense, complete health insurance
coverage for Mr. McDermott and his family and annual automobile allowance of
$5,600 for business use. With effect from January 1, 2000, Mr. McDermott's
annual salary was revised to $103,450.
On July 20, 1999, the Company entered into a two-year Employment Agreement with
Thompson Chu, the Company's Chairman of the Board, whereby the Company will pay
Mr. Chu an annual salary of $50,000 (reviewed annually) as compensation for his
duties as executive chairman of the Company. The Agreement also requires the
Company to provide, at its expense, complete health insurance coverage for Mr.
Chu and his family. With effect from January 1, 2000, Mr. Chu's annual salary
was revised to $103,450.
On July 20, 1999, the Company entered into a two-year Employment Agreement with
Don Lau, the Company's Secretary and Treasurer, whereby the Company will pay Mr.
Lau an annual salary of $48,000 (reviewed annually). The Agreement also requires
the Company to provide, at its expense, complete health insurance coverage for
Mr. Lau and his family. With effect from January 1, 2000, Mr. Lau's annual
salary was revised to $59,600.
Certain Relationships and Related Transactions
On January 11, 1999, the Company's wholly owned subsidiary, POPstar-BVI, entered
into a Licensing Agreement and a Services Agreement with TGI Technologies Ltd.,
for the licensing and service of the Internet Fax Technology. Mr. John McDermott
and Mr. Thompson Chu, officers of the Company are also officers of TGI. In
addition, Mr. McDermott, Mr. Chu and Mr. Yong Kiat Rickie Tang are directors of
TGI.
On March 30, 1999, the Company's wholly owned subsidiary, POPstar Global
Communications Inc ("POPstar-BVI"), entered into an unsecured promissory note
with TGI whereby POPstar-BVI agreed to lend TGI the sum of $1,000,000. The said
note provided interest terms of eight(8)percent per annum, compounded annually.
The principal and interest are due on either the earlier of a demand by the
Company or on March 30, 2001. Mr. John McDermott and Mr. Thompson Chu, officers
of the Company are also officers of TGI. In addition, Mr. McDermott, Mr. Chu and
Mr. Yong Kiat Rickie Tang are directors of TGI.
On July 20, 1999, the Company acquired all of the outstanding common and
preferred stock of POPstar-BVI in a business combination described as a
"recapitalization." For accounting purposes, the acquisition has been treated as
the acquisition of the Company by POPstar-BVI. Such shares include the shares
owned by officers and directors of the Company as set forth in the Section
"Security Ownership of Certain Beneficial Owners and Management" herein.
On March 15, 1999, the Company's wholly owned subsidiary, POPstar-Asia, entered
<PAGE> 10
8
into a month-to-month lease arrangement for the lease of approximately 1,000
square feet of executive offices located at Westlands Centre, Room 908, 20
Westlands Road, Quarry Bay, Hong Kong to serve as a sales, marketing, and
technical support facility for the Company's Asian operations at a rental rate
of $2,000 per month. The leased premises are owned by Easewell Management Ltd.,
a company beneficially owned by Mr. Thompson Chu, the Company's Chairman of the
Board.
On January 1, 2000, the Company's subsidiary, POPstar Communications Canada
Corp, entered into a month-to-month lease arrangement for the lease of
approximately 4,800 square feet of administrative space located at 107 East 3rd
Avenue, Vancouver, British Columbia, Canada to serve as the Company's temporary
headquarters at a rental rate of $4,000 per month. This arrangement was revised
on April 1, 2000 into a one-year lease of approximately 5,130 square feet of
administrative and office space at the same location at a rental rate of
CDN$4,489 per month. The leased premises are owned by Tradeglobe Consulting Ltd.
Mr. McDermott and Mr. Chu, officers and directors of the Company, are also
officers and directors of Tradeglobe Consulting Ltd.
On January 1, 2000, POPstar Communications Asia Pacific Limited entered into a
month-to-month lease for approximately 1,830 square feet of executive office
space at Room 405A, 11 Fu Cheng Men Wai Street, Xi Cheng District, Beijing to
serve as its representative office in Beijing, at a rental rate of $2,200 per
month. The owner of the office space is Mr. Thompson Chu, the Company's Chairman
of the Board.
On January 12, 1999, as amended by a supplemental agreement dated March 29, 1999
and an Investor Exchange Agreement dated July 13, 1999, the Company, through its
wholly owned subsidiary, POPstar-BVI, contracted to sell, and Kemayan E.C.
Hybrid Ltd. (a company beneficially owned by Mr. Yong Kiat Rickie Tang, a
director of the Company) contracted to purchase, 250,000 shares of the Company's
"restricted" Common Stock on or before March 31, 2000 at $0.833333 per share for
gross proceeds anticipated to be in the amount of $208,333.
On February 2, 2000, the Company entered into a Share Subscription Agreement
with Netalone.com(BVI) Ltd. for the subscription by Netalone.com(BVI) Ltd. of
1,500,000 shares of the Company's restricted Common Stock at $2.00 per share for
gross proceeds of $3,000,000. As further consideration for the Share
Subscription Agreement, the Company granted Netalone.com(BVI) Ltd. an option to
purchase an additional 1,500,000 shares of restricted Common Stock of the
Company at an exercise price of $2.00 per share at any time prior to the date
which is 3 months subsequent the date on which the Company's Common Stock are
relisted and/or quoted on the OTCBB. The Share Subscription Agreement was
subsequently assigned from Netalone.com(BVI) Ltd. to Rich Income International
Limited (which later changed its name to Innovestor.com Ltd.) pursuant to an
Assignment Agreement dated February 9, 2000. Dr. William Wing Yan Lo, who joined
the Company's Board of Director on February 15, 2000, is the Chairman and Chief
Executive Officer of Netalone.com Ltd., the parent company of Netalone.com(BVI)
Ltd. and Innovestor.com Ltd.
On February 2, 2000, the Company's wholly owned subsidiary, POPstar-BVI, entered
into a Set Off Agreement with TGI pursuant to which POPstar-BVI may set off
amounts owing to TGI pursuant to provisions of the Licensing Agreement dated
January 11, 1999 against any amounts owing by TGI to POPstar-BVI pursuant to
provisions of the promissory note owed by TGI to POPstar-BVI dated March 30,
1999. At December 31, 1999, no amounts were set off. Mr.
<PAGE> 11
9
McDermott and Mr. Chu, officers of the Company are also officers of TGI. In
addition, Mr. McDermott, Mr. Chu and Mr. Tang are directors of TGI.
On February 2, 2000, the Company entered into a Nominee Directors Agreement with
Kemayan E.C. Hybrid Ltd., Netalone.com(BVI) Ltd., trustee of the Thompson Chu
Family Trust and trustee of the John McDermott Family Trust giving them certain
entitlements regarding the appointment of their respective nominees to serve as
directors of the Company. Kemayan E.C. Hybrid Ltd. is a company beneficially
owned by Mr. Yong Kiat Rickie Tang, a director of the Company. Dr. William Lo, a
director of the Company, is the Chairman and Chief Executive Officer of the
parent company of Netalone.com(BVI) Ltd. Mr. Thompson Chu, a director of the
Company, is a beneficiary of the Thompson Chu Family Trust. Mr. John McDermott,
a director of the Company, is a beneficiary of the John McDermott Family Trust.
On February 2, 2000, the Company and POPstar-BVI entered into a Termination
Agreement with Kemayan E.C. Hybrid Ltd., Sunfield Industries Limited, Uprising
Overseas Limited, Golden Harvest Overseas Limited, trustee of the Thompson Chu
Family Trust and trustee of the John McDermott Family Trust pursuant to which
certain rights entitled to by Kemayan E.C. Hybrid Ltd., Sunfield Industries
Limited, Uprising Overseas Limited and Golden Harvest Overseas Limited were
terminated. Kemayan E.C. Hybrid Ltd. is a company beneficially owned by Mr. Yong
Kiat Rickie Tang, a director of the Company. Mr. Thompson Chu, a director of the
Company, is a beneficiary of the Thompson Chu Family Trust. Mr. John McDermott,
a director of the Company, is a beneficiary of the John McDermott Family Trust.
PROPOSAL 2: APPROVAL OF 1999 STOCK OPTION PLAN
The board of directors has unanimously adopted, subject to shareholder
approval, the 1999 Stock Option Plan.
Employee Stock Options Issuances:
On January 1, 1999, the Corporation granted to a group of employees and
contractors options to purchase 217,500 shares of the Corporation's common
stock, each with an exercise price of $0.01.
On January 1, 1999, the Corporation granted to John McDermott, President and
Chief Executive Officer of the Corporation, options to purchase in aggregate
250,000 shares of the Corporation's common stock, each with an exercise price of
$0.01.
Between March 12, 1999 and July 21, 1999, the Corporation granted to a group of
employees and contractors options to purchase in aggregate 290,000 shares of the
Corporation's common stock, each with an exercise price of $1.00.
Between February 18, 2000 and May 12, 2000, the Corporation granted to a group
of employees and contractors options to purchase 412,000 shares of the
Corporation's common stock, each with an exercise price of $2.00.
During the year, the Corporation adopted a stock option plan (the "1999 Stock
Option Plan") pursuant to which the Corporation may grant stock options to
management, employees and contractors. The Plan authorizes grants of options to
purchase up to 757,500 shares of authorized but unissued common stock.
<PAGE> 12
10
Stock options are granted with an exercise price equal to the stock's market
value at the date of the grant. The stock options have various periods to expiry
as noted in the tables below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1999 options Exercise 1998 options
outstanding price outstanding
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding,
beginning balance -- $ -- --
Granted 467,500 0.01 --
Granted 290,000 1.00 --
- --------------------------------------------------------------------------
Outstanding and exercisable,
December 31 757,500 $ 0.39 --
- --------------------------------------------------------------------------
</TABLE>
The fair value of options granted during 1999 averaged $0.10 per share,
calculated by applying the Black Scholes model.
The following table summarizes options outstanding and exercisable at December
31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Outstanding
--------------------------------
Weighted
Exercise average period Exercisable
prices Number remaining to expiry number
- ------------------------------------------------------------------------
(months)
<S> <C> <C> <C> <C>
$0.01 467,500 21.1 127,500
$1.00 290,000 28.0 40,000
- ------------------------------------------------------------------------
757,500 167,500
- ------------------------------------------------------------------------
</TABLE>
517,500 of the stock options were originally granted as options to acquire
common shares of POPstar Global Communications Inc. Upon acquisition of POPstar
Global Communications Inc. by the Corporation on July 20, 1999, the options were
converted into options to acquire common shares of the Corporation at the same
exercise price. The remaining 240,000 were granted by the Corporation subsequent
to the acquisition.
DESCRIPTION OF THE 1999 PLAN
PURPOSE. The 1999 Plan is an employee benefit program that allows
participants to buy or receive shares of common stock. The purpose of the 1999
Plan is to enhance the long-term shareholder value of POPstar by offering
opportunities to selected individuals to participate in POPstar's growth and
success. The 1999 Plan's purpose is also to attract and retain participants'
services and to encourage them to acquire and maintain stock ownership in
POPstar.
ADMINISTRATION. The 1999 Plan is to be administered by the compensation
committee of the board of directors, except to the extent the board of directors
appoints another committee or committees consisting of two or more members of
the board of directors. The chief executive officer or president of POPstar may
also make grants to employees of POPstar, subject to limits
<PAGE> 13
11
specifically prescribed by the board of directors. The plan administrator has
the full and exclusive power to interpret the 1999 Plan and to establish the
rules for its operation, including the power to select the individuals to be
granted awards and to determine the form, amount and other terms and conditions
of such awards.
TYPES OF AWARDS. The 1999 Plan permits us to grant both stock options and
awards of common stock, which may or may not be subject to certain restrictions.
ELIGIBILITY TO RECEIVE AWARDS. The 1999 Plan permits us to grant awards to
our employees, directors, officers, consultants, agents, advisors and
independent contractors. Incentive stock options may be granted to employees
only.
SHARES RESERVED. A total of 757,500 shares are issuable under the 1999
Plan.
Unless otherwise provided by the plan administrator, and to the extent
required by law for incentive stock options, options generally will expire on
the earliest of:
- ten years from the date of grant;
- one year after the optionee's retirement, death, disability or
termination without cause;
- notice to the optionee of termination for serious cause; and
- thirty days after other terminations.
Unless otherwise specified by the plan administrator, options vest one-third
after the first year from the date of grant and an additional one-third after
the second year from the date of the grant and the remaining one-third after the
third year so that options are fully vested 36 months from the date of grant.
The option exercise price may be paid in cash or by check, or, unless the
plan administrator determines otherwise, by tendering shares of common stock
that the optionee has owned for at least six months, by a broker-assisted
cashless exercise or by such other consideration as the plan administrator may
permit.
STOCK AWARDS. The plan administrator is authorized under the 1999 Plan to
issue shares of common stock to eligible participants with terms, conditions and
restrictions established by the plan administrator in its sole discretion.
Restrictions may be based on continuous service with POPstar or the achievement
of performance goals and may also include repurchase or forfeiture rights in
favor of POPstar. Holders of restricted stock are shareholders and have, subject
to established restrictions, all the rights of shareholders with respect to such
shares.
TRANSFERABILITY. Except as otherwise determined by the plan administrator,
no options or stock awards are assignable or otherwise transferable by the
holder other than by will or the laws of descent and distribution and, during
the holder's lifetime, may be exercised only by the holder.
ADJUSTMENTS. The plan administrator will make proportional adjustments in
(a) the maximum number and kind of securities subject to the 1999 Plan, (b) the
<PAGE> 14
12
maximum number and kind of securities that may be subject to awards to any
participant and (c) the number and kind of securities that are subject to any
outstanding awards and the per share price of such securities, without any
change in the aggregate exercise or purchase price.
CORPORATE TRANSACTIONS. Unless individual letter agreements provide
otherwise, in the event of certain corporate transactions, such as a merger or
sale of POPstar, each outstanding award will automatically accelerate and become
100% vested and exercisable immediately before the corporate transaction, unless
(a) the option is assumed, continued or replaced with a comparable award by the
successor corporation or the parent of the successor corporation or (b)
acceleration will render unavailable "pooling of interest" accounting for a
transaction that otherwise qualifies for this accounting treatment. Any option
that is assumed, continued or replaced with a comparable award in the corporate
transaction will accelerate if the holder's employment or services are
terminated by the successor corporation without cause or by the holder
voluntarily with good reason within two years of the corporate transaction.
AMENDMENT AND TERMINATION. The 1999 Plan may be modified, amended, or
terminated by the board of directors at any time, except that an amendment or
modification will not affect previously granted awards without a participant's
consent. Shareholder approval is required for any amendment that increases the
number of shares subject to the 1999 Plan, changes the persons eligible to
receive options, or which is otherwise subject to shareholder approval under any
applicable law or regulation.
FEDERAL INCOME TAX CONSEQUENCES
The material U.S. federal income tax consequences to POPstar and to any
person granted an option under the 1999 Plan who is subject to taxation in the
United States under existing applicable provisions of the Internal Revenue Code
and underlying Treasury Regulations are substantially as follows. The following
summary does not address state, local or foreign tax consequences and is based
on present law and regulations as in effect on the date of this proxy statement.
NONQUALIFIED STOCK OPTIONS. No income will be recognized by an optionee upon
the grant of a nonqualified stock option.
Upon the exercise of a nonqualified stock option, the optionee will
recognize taxable ordinary income in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price. Upon
a later sale of those shares, the optionee will have capital gain or loss equal
to the difference between the amount realized on such sale and the tax basis of
the shares sold. Furthermore, this capital gain or loss will be long-term
capital gain or loss if the shares are held for more than one year before they
are sold. If payment of the option price is made entirely in cash, the tax basis
of the shares will be equal to their fair market value on the exercise date (but
not less than the exercise price), and the shares' holding period will begin on
the day after the exercise date.
If the optionee uses already-owned shares to pay the exercise price of a
nonqualified stock option in whole or in part, the transaction will not be
considered to be a taxable disposition of the already-owned shares. The
optionee's tax basis and holding period of the already-owned shares will be
carried over to the equivalent number of shares received upon exercise. The tax
basis of the additional shares received upon exercise will be the fair market
<PAGE> 15
13
value of the shares on the exercise date (but not less than the amount of cash,
if any, used in payment), and the holding period for such additional shares will
begin on the day after the exercise date.
INCENTIVE STOCK OPTIONS. No income will be recognized by an optionee upon
the grant of an incentive stock option.
Upon the exercise of an incentive stock option during employment or within
30-days after the optionee's termination of employment (12 months in the case of
termination without cause, permanent and total disability, retirement or death),
the optionee will recognize no ordinary income at the time of exercise (although
the optionee will have income for alternative minimum income tax purposes at
that time equal to the excess of the fair market value of the shares over the
exercise price).
If the acquired shares are sold or exchanged after the later of (a) one year
from the date of exercise of the option and (b) two years from the date of grant
of the option, the difference between the amount realized by the optionee on
that sale or exchange and the option exercise price will be taxed to the
optionee as long-term capital gain or loss. If the shares are disposed of in an
arms' length sale before such holding period requirements are satisfied, then
the optionee will recognize taxable ordinary income in the year of disposition
in an amount equal to the excess of the fair market value of the shares received
on the exercise date over the exercise price (or, if less, the excess of the
amount realized on the sale of the shares over the exercise price), and the
optionee will have short-term or long-term capital gain or loss, as the case may
be, in an amount equal to the difference between (i) the amount realized by the
optionee upon that disposition of the shares and (ii) the exercise price paid by
the optionee increased by the amount of ordinary income, if any, so recognized
by the optionee.
The rules for the tax treatment of a nonqualified stock option also apply to
an incentive stock option that is exercised during employment or within 30-days
after the optionee's termination of employment (12 months in the case of
termination without cause, permanent and total disability, retirement or death,
as defined in the 1999 Plan).
STOCK AWARDS. Depending on the terms of the award, taxable ordinary income
may or may not be recognized by the participant upon the grant of the award.
For stock awards subject to vesting and other similar restrictions, the
participant will recognize ordinary income when the shares cease to be subject
to the restrictions in an amount equal to the excess of the fair market value of
the shares at that time over the amount paid for the shares. The participant may
elect, under Section 83(b) of the Code, to recognize ordinary income at the time
of the transfer in an amount equal to the excess of the fair market value of the
shares at that time over the amount paid for the shares. In that case, no
additional income is recognized upon lapse of restrictions on the shares, but if
the shares are subsequently forfeited, the participant may not deduct the income
recognized at the time of receipt of the shares, and will have a capital loss
equal to the amount paid for the shares.
For stock awards that are not subject to restrictions, other than
restrictions on transfer, the participant generally recognizes ordinary income
at the time of receipt. The holding period for the shares begins at the time
income is recognized under the rules, and the tax basis in the shares is the
amount of ordinary income so recognized plus the amount, if any, paid for the
shares.
<PAGE> 16
14
COMPANY DEDUCTION. In all the foregoing cases POPstar will be entitled to a
deduction at the same time and in the same amount as the participant recognizes
in ordinary income, subject to certain limitations. Among these limitations is
Section 162(m) of the Internal Revenue Code, under which certain compensation
payments in excess of $1 million are not deductible by POPstar. As discussed
above, the limitation on deductibility applies with respect to that portion of a
compensation payment for a taxable year in excess of $1 million paid to either
POPstar's chief executive officer or any one of the other four most highly
compensated executive officers. Certain performance-based compensation is not
subject to the limitation on deductibility. Stock options granted under the 1999
Plan are intended to qualify for this performance-based exception.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 1999 STOCK OPTION PLAN.
PROPOSAL 3: APPROVAL OF AMENDMENT TO THE 1999 STOCK OPTION PLAN
The board of directors has unanimously adopted, subject to shareholder
approval, an amendment to the 1999 Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance from 757,500 to 2,000,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE 1999 STOCK
OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE FROM 757,500 TO 2,000,000 SHARES.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires POPstar's
officers, directors and persons who own more than 10% of a registered class of
POPstar's equity securities to file reports of ownership and changes in
ownership with the Commission. Officers, directors and greater-than-10%
shareholders are required by Commission regulation to furnish POPstar with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms it received, or
written representations from certain reporting persons that no forms were
required for those persons, POPstar believes that during 1999 its officers,
directors and greater-than-10% beneficial owners complied with all applicable
filing requirements of Section 16(a).
INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has selected KPMG LLP to audit the financial
statements of POPstar for the fiscal year ending December 31, 2000. A
representative of KPMG LLP is expected to be present at the Annual General
Meeting.
Prior to the acquisition of POPstar Global Communications Inc. by the
Corporation on July 20, 1999, the Corporation engaged Barry L. Friedman, P.C.,
Certified Public Accountants ("Friedman"), to audit the Corporation's financial
statements for the fiscal years ended December 31, 1998 and 1997. Subsequent to
the acquisition of POPstar Global Communications Inc. by the Corporation on July
20, 1999, the Corporation's newly appointed Board of Directors elected to
dismiss Friedman and retained KPMG LLP as the Corporation's principal
<PAGE> 17
15
accountant to audit the Corporation's financial statements with effect from
August 1, 1999.
The principal accountant's report on the financial statements of the Corporation
for either of the past two years did not contain an adverse opinion or
disclaimer of opinion and was not modified as to uncertainty, audit type or
accounting principles. There have been no disagreements with the former
accountant, whether or not resolved, on any matter of accounting principles or
practices, financial disclosure, or audit scope or procedure.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Under the Securities and Exchange Commission's proxy rules, shareholder
proposals that meet certain conditions may be included in POPstar's proxy
statement and form of proxy for a particular annual meeting. Shareholders who
intend to present a proposal at POPstar's 2001 Annual Meeting must give notice
of the proposal to POPstar no later than March 20, 2001 to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
Shareholders who intend to present a proposal that will not be included in the
proxy statement and form of proxy must give notice of the proposal to POPstar no
fewer than 90 days and no more than 120 days prior to the date of the 2001
Annual Meeting. Receipt by POPstar of any such proposal from a qualified
shareholder in a timely manner will not guarantee its inclusion in POPstar's
proxy materials or its presentation at the 2001 Annual Meeting because there are
other requirements in the proxy rules.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as
amended, POPstar intends to retain discretionary authority to vote proxies with
respect to shareholder proposals for which the proponent does not seek inclusion
of the proposed matter in POPstar's proxy statement for our 2001 Annual Meeting,
except in circumstances where (i) POPstar receives notice of the proposed matter
no earlier than February 16, 2001 and no later than March 20, 2001, and (ii) the
proponent complies with the other requirements set forth in Rule 14a-4.
OTHER MATTERS
As of the date of this proxy statement, the board does not intend to
present, and has not been informed that any other person intends to present, any
matters for action at the annual meeting other than the matters specifically
referred to in this proxy statement. If other matters properly come before the
annual meeting, it is intended that the holders of the proxies will act with
respect thereto in accordance with their best judgment.
Copies of the POPstar 10-KSB are being mailed to shareholders, together with
this proxy statement, form of proxy and notice of annual meeting of
shareholders. Additional copies may be obtained from the Secretary of POPstar,
107 East 3rd Avenue, Vancouver, BC, CANADA V5T 1C7.
<PAGE> 18
16
POPSTAR'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS INCLUDED AS
THE 1999 ANNUAL REPORT TO SHAREHOLDERS.
BY ORDER OF THE BOARD OF DIRECTORS,
By /s/ Don Lau
--------------
Don Lau
TREASURER AND SECRETARY
Vancouver, BC
May 26, 2000
<PAGE> 19
APPENDIX A
1999 STOCK OPTION PLAN
<PAGE> 20
APPENDIX A
POPSTAR COMMUNICATIONS, INC.
1999 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the POPstar Communications, Inc. 1999 Stock Option Plan (the
"1999 Plan") is to enhance the long-term shareholder value of POPstar
Communications, Inc., a Nevada corporation (the "Company"), by offering
opportunities to selected persons to participate in the Company's growth and
success, and to encourage them to remain in the service of the Company and its
Subsidiaries (as defined in Section 2) and to acquire and maintain stock
ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
2.1 AWARD
"Award" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Options and Stock Awards, or any
combination of the foregoing.
2.2 BOARD
"Board" means the Board of Directors of the Company.
2.3 CAUSE
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
2.4 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.5 COMMON STOCK
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
2.6 CORPORATE TRANSACTION
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in which
the Company is not the continuing or surviving corporation, or pursuant to which
shares of the Common Stock are converted into cash, securities or other
property, if following such merger or consolidation the holders of the Company's
outstanding voting securities immediately prior to such merger or
<PAGE> 21
A-2
consolidation own less than 50% of the outstanding voting securities of the
surviving corporation;
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as the term "subsidiary corporation" is
defined in Section 8.3) of the Company;
(c) Approval by the holders of the Common Stock of any plan or proposal
for the liquidation or dissolution of the Company; or
(d) Acquisition by a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the
Exchange Act of a majority or more of the Company's outstanding voting
securities (whether directly or indirectly, beneficially or of record).
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
2.7 DISABILITY
"Disability," unless otherwise defined by the Plan Administrator, means a
mental or physical impairment of the Holder that is expected to result in death
or that has lasted or is expected to last for a continuous period of 12 months
or more and that causes the Holder to be unable, in the opinion of the Company,
to perform his or her duties for the Company or a Subsidiary and to be engaged
in any substantial gainful activity.
2.8 EARLY RETIREMENT
"Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
2.9 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.10 FAIR MARKET VALUE
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the NASDAQ National
Market, the closing sales price for the Common Stock as reported by the NASDAQ
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing sales
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
2.11 GOOD REASON
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice from the Holder:
<PAGE> 22
A-3
(a) a change in the Holder's status, title, position or responsibilities
(including reporting responsibilities) that, in the Holder's reasonable
judgment, represents a substantial reduction in the status, title, position or
responsibilities as in effect immediately prior thereto; the assignment to the
Holder of any duties or responsibilities that, in the Holder's reasonable
judgment, are materially inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure to reappoint or
reelect the Holder to any of such positions, except in connection with the
termination of the Holder's employment for Cause, for Disability or as a result
of his or her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary;
(c) the Successor Corporation's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Corporate Transaction;
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Holder was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Holder with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the
Corporate Transaction;
(e) any material breach by the Successor Corporation of its obligations
to the Holder under the Plan or any substantially equivalent plan of the
Successor Corporation; or
(f) any purported termination of the Holder's employment or service for
Cause by the Successor Corporation that does not comply with the terms of the
Plan or any substantially equivalent plan of the Successor Corporation.
2.12 GRANT DATE
"Grant Date" means the date the Plan Administrator completes the corporate
action relating to the grant of an Award and all conditions precedent to the
grant have been satisfied, provided that conditions to the exercisability or
vesting of Awards shall not defer the Grant Date.
2.13 HOLDER
"Holder" means: (a) the person to whom an Award is granted; (b) for a Holder
who has died, the personal representative of the Holder's estate, the
person(s)to whom the Holder's rights under the Award have passed by will or by
the applicable laws of descent and distribution, or the beneficiary designated
in accordance with Section 10; or (c) the person(s) to whom an Award has been
transferred in accordance with Section 10.
2.14 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
<PAGE> 23
A-4
2.15 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an Option to purchase Common Stock granted
under Section 7 other than an Incentive Stock Option.
2.16 OPTION
"Option" means the right to purchase Common Stock granted under Section 7.
2.17 OPTION TERM
"Option Term" has the meaning set forth in Section 7.3.
2.18 PLAN ADMINISTRATOR
"Plan Administrator" means the Board or any committee or committees
designated by the Board or any person to whom the Board has delegated authority
to administer the Plan under Section 3.1.
2.19 RETIREMENT
"Retirement" means retirement as of the individual's normal retirement date
under the Company's 401(k) Plan or other similar successor plan applicable to
salaried employees, unless otherwise defined by the Plan Administrator from time
to time for purposes of the Plan.
2.20 SECURITIES ACT
"Securities Act" means the Securities Act of 1933, as amended.
2.21 STOCK AWARD
"Stock Award" means shares of Common Stock or units denominated in Common
Stock granted under Section 9, the rights of ownership of which may be subject
to restrictions prescribed by the Plan Administrator.
2.22 SUBSIDIARY
"Subsidiary," except as provided in Section 8.3 in connection with Incentive
Stock Options, means any entity that is directly or indirectly controlled by the
Company or in which the Company has a significant ownership interest, as
determined by the Plan Administrator, and any entity that may become a direct or
indirect parent of the Company.
2.23 SUCCESSOR CORPORATION
"Successor Corporation" has the meaning set forth under Section 11.2.
2.24 TERMINATION DATE
"Termination Date" has the meaning set forth in Section 7.6.
<PAGE> 24
A-5
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board (a "Plan Administrator"). If and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board
shall consider in selecting the members of any committee acting as Plan
Administrator, with respect to any persons subject or likely to become subject
to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act.
Notwithstanding the foregoing, the Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible persons to
different committees consisting of two or more members of the Board, subject to
such limitations as the Board deems appropriate. Committee members shall serve
for such term as the Board may determine, subject to removal by the Board at any
time. To the extent consistent with applicable law, the Board may authorize the
Chief Executive Officer or President of the Company to grant Awards to employees
of the Company, within limits specifically prescribed by the Board.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and the terms of any instrument evidencing the Award and may
from time to time adopt, and change, rules and regulations of general
application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions taken
and determinations made by the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 11.1, the
maximum number of shares of Common Stock that shall be available for issuance
under the Plan shall be:
(a) 757,500 shares
Shares issued under the Plan shall be drawn from authorized and unissued
shares or shares subsequently acquired by the Company.
<PAGE> 25
A-6
4.2 LIMITATIONS
(a) Subject to adjustment from time to time as provided in Section 11.1,
not more than ten percent (10%) of the Company's issued and outstanding share
capital shall be available for issuance pursuant to the grant of Stock Awards
under the Plan.
(b) Subject to adjustment from time to time as provided in Section 11.1,
not more than twenty-five percent (25%) of Common Stock may be made subject to
options under the Plan to any one individual.
4.3 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares) shall again be
available for issuance in connection with future grants of Awards under the
Plan; provided, however, that for purposes of Section 4.2, any such shares shall
be counted in accordance with the requirements of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries; provided, however, that such individuals render bona fide services
that are not in connection with the offer and sale of the Company's securities
in a capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards may
include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options and Stock Awards. Awards may be granted singly or in combination.
6.2 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan Administrator
may grant Awards under the Plan in substitution for awards issued under other
plans, or assume under the Plan awards issued under other plans, if the other
plans are or were plans of other acquired entities ("Acquired Entities") (or the
parent of the Acquired Entity) and the new Award is substituted, or the old
award is assumed, by reason of a merger, consolidation, acquisition of property
or of stock, reorganization or liquidation (the "Acquisition Transaction"). In
the event that a written agreement pursuant to which the Acquisition Transaction
is completed is approved by the Board and said agreement sets forth the terms
and conditions of the substitution for or assumption of outstanding awards of
the Acquired Entity, said terms and conditions shall be deemed to be the action
of the Plan Administrator without any further action by the Plan Administrator,
except as may be required for compliance with Rule 16b-3 under the Exchange Act,
and the persons holding such Awards shall be deemed to be Holders.
<PAGE> 26
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SECTION 7. AWARDS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole discretion,
to issue Options as Incentive Stock Options or as Nonqualified Stock Options,
which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options.
For Incentive Stock Options granted to a more than 10% shareholder, the Option
exercise price shall be as specified in Section 8.2.
7.3 TERM OF OPTIONS
The term of each Option (the "Option Term") shall be as established by the
Plan Administrator or, if not so established, shall be 10 years from the Grant
Date. For Incentive Stock Options, the maximum Option Term shall be as specified
in Sections 8.2 and 8.4.
7.4 EXERCISE OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument that
evidences an Option the time at which or the installments in which the Option
shall vest and become exercisable, which provisions may be waived or modified by
the Plan Administrator at any time. If not so established in the instrument
evidencing the Option, the Option shall vest and become exercisable according to
the following schedule, which may be waived or modified by the Plan
Administrator at any time:
<TABLE>
<CAPTION>
PERIOD OF HOLDER'S CONTINUOUS EMPLOYMENT OR
SERVICE WITH THE COMPANY OR ITS SUBSIDIARIES PERCENT OF TOTAL OPTION
FROM THE OPTION GRANT DATE THAT VESTS AND IS EXERCISABLE
- ------------------------------------------------- -----------------------------
<S> <C>
After 1 year..................................... 33.33%
After each succeeding 12 months thereafter....... 33.33%
After 36 months.................................. 100%
</TABLE>
To the extent that an Option has vested and become exercisable, the Option
may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
such representations and agreements as may be required by the Plan
Administrator, accompanied by payment in full as described in Section 7.5. The
Plan Administrator may determine at any time that an Option may not be exercised
as to less than a reasonable number of shares at any one time, as determined by
the Plan Administrator.
7.5 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
<PAGE> 27
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must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
shares of Common Stock already owned by the Holder for at least six months (or
any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section 12(b)
or 12(g) of the Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage firm designated by
the Company to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
In addition, to assist a Holder (including a Holder who is an officer or a
director of the Company) in acquiring shares of Common Stock pursuant to an
Award granted under the Plan, the Plan Administrator, in its sole discretion,
may authorize, either at the Grant Date or at any time before the acquisition of
Common Stock pursuant to the Award, (i) the payment by a Holder of a
full-recourse promissory note, (ii) the payment by the Holder of the purchase
price, if any, of the Common Stock in installments, or (iii) the guarantee by
the Company of a loan obtained by the Holder from a third party. Subject to the
foregoing, the Plan Administrator shall in its sole discretion specify the terms
of any loans, installment payments or loan guarantees, including the interest
rate and terms of and security for repayment.
7.6 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument that
evidences an Option whether the Option shall continue to be exercisable, and the
terms and conditions of such exercise, if a Holder ceases to be employed by, or
to provide services to, the Company or its Subsidiaries, which provisions may be
waived or modified by the Plan Administrator at any time. If not so established
in the instrument evidencing the Option, the Option shall be exercisable
according to the following terms and conditions, which may be waived or modified
by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the
date of termination of the Holder's employment or service relationship (the
"Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Holder's Termination Date occurs for reasons other than
<PAGE> 28
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Cause, death, Disability, Early Retirement at the Company's request or
Retirement, the 30-day anniversary of such Termination Date; and
(iii) if the Holder's Termination Date occurs without cause, by
reason of death, Disability, Early Retirement at the Company's request or
Retirement, the one-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Holder dies after the Termination Date
while the Option is otherwise exercisable, the portion of the Option that is
vested and exercisable on such Termination Date shall expire upon the earlier to
occur of (y) the last day of the Option Term and (z) the first anniversary of
the date of death, unless the Plan Administrator determines otherwise.
Also notwithstanding the foregoing, in case of termination of the Holder's
employment or service relationship for Cause, the Option shall automatically
expire upon 30 days after the date of termination, unless the Plan Administrator
determines otherwise. If a Holder's employment or service relationship with the
Company is suspended pending an investigation of whether the Holder shall be
terminated for Cause, all the Holder's rights under any Option likewise shall be
suspended during the period of investigation. If the Company terminates the
Holder's employment for serious causes such as fraud, grand larceny or felony
against the Corporation, the Option is cancelled entirely.
A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services for
purposes of this Section 7. The effect of a Company-approved leave of absence on
the terms and conditions of an Option shall be determined by the Plan
Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Holder holds two or more such Options that become exercisable for the first
time in the same calendar year, such limitation shall be applied on the basis of
the order in which such Options are granted.
8.2 MORE THAN TEN PERCENT SHAREHOLDERS
If an individual owns more than 10% of the total voting power of all classes
of the Company's stock, then the exercise price per share of an Incentive Stock
Option shall be determined by the Board on the Grant Date and the Option Term
shall not exceed five years. The determination of more than 10% ownership shall
be made in accordance with Section 422 of the Code.
<PAGE> 29
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8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 TERM
Subject to Section 8.2, the Option Term shall not exceed 10 years.
8.5 EXERCISABILITY
An Option designated as an Incentive Stock Option shall cease to qualify for
favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than death or Disability, (b) more
than one year after the Termination Date by reason of Disability, or (c) after
the Holder has been on leave of absence for more than 90 days, unless the
Holder's reemployment rights are guaranteed by statute or contract.
For purposes of this Section 8.5, Disability shall mean "disability" as that
term is defined for purposes of Section 422 of the Code.
8.6 TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Holder must hold the shares issued upon the
exercise of an Incentive Stock Option for two years after the Grant Date of the
Incentive Stock Option and one year from the date of exercise. A Holder may be
subject to the alternative minimum tax at the time of exercise of an Incentive
Stock Option. The Holder shall give the Company prompt notice of any disposition
of shares acquired by the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
8.7 PROMISSORY NOTES
The amount of any promissory note delivered pursuant to Section 7.5 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator, but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. STOCK AWARDS
9.1 GRANT OF STOCK AWARDS
The Plan Administrator is authorized to make Awards of Common Stock or
Awards denominated in units of Common Stock on such terms and conditions and
subject to such restrictions, if any (which may be based on continuous service
with the Company or the achievement of performance goals where such goals may be
stated in absolute terms or relative to comparison companies), as the Plan
Administrator shall determine, in its sole discretion, which terms, conditions
and restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which shares
subject to Stock Awards are held during the periods they are subject to
<PAGE> 30
A-11
restrictions and the circumstances under which forfeiture of Stock Awards shall
occur by reason of termination of the Holder's services.
9.2 ISSUANCE OF SHARES
Upon the satisfaction of any terms, conditions and restrictions prescribed
in respect to a Stock Award, or upon the Holder's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, the appropriate number of
shares of Common Stock.
9.3 WAIVER OF RESTRICTIONS
Notwithstanding any other provisions of the Plan, the Plan Administrator
may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Stock Award under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate; provided, however, that the Plan Administrator may not adjust
performance goals for any Stock Award intended to be exempt under Section 162(m)
of the Code for the year in which the Stock Award is settled in such a manner as
would increase the amount of compensation otherwise payable to a Holder.
SECTION 10. ASSIGNABILITY
No Awards granted under the Plan may be assigned or transferred by the
Holder other than by will or by the applicable laws of descent and distribution,
and, during the Holder's lifetime, such Awards may be exercised only by the
Holder. Notwithstanding the foregoing, and to the extent permitted by Section
422 of the Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a Holder of such Awards
to designate a beneficiary who may exercise the Award or receive compensation
under the Award after the Holder's death; provided, however, that any Award so
assigned or transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award.
SECTION 11. ADJUSTMENTS
11.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend,
or other change in the Company's corporate or capital structure results in (a)
the outstanding shares, or any securities exchanged therefor or received in
their place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the
holders of shares of Common Stock of the Company, then the Plan Administrator
shall make proportional adjustments in (i) the maximum number and kind of
securities subject to the Plan as set forth in Section 4.1 and the maximum
number and kind of securities that may be made subject to Stock Awards and to
Awards to any individual as set forth in Section 4.2, and (ii) the number and
kind of securities that are subject to any outstanding Award and the per share
price of such securities, without any change in the aggregate price
<PAGE> 31
A-12
to be paid therefor. The determination by the Plan Administrator as to the terms
of any of the foregoing adjustments shall be conclusive and binding.
11.2 CORPORATE TRANSACTION
Except as otherwise provided in the instrument that evidences the Award, in
the event of any Corporate Transaction, each Award that is at the time
outstanding shall automatically accelerate so that each such Award shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested and exercisable, except that such acceleration shall not
occur if, in the opinion of the Company's outside accountants, it would render
unavailable "pooling of interest" accounting for a Corporate Transaction that
would otherwise qualify for such accounting treatment. Such Award shall not so
accelerate, however, if and to the extent that (a) such Award is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof (the "Successor Corporation") or to be replaced
with a comparable award for the purchase of shares of the capital stock of the
Successor Corporation or (b) such Award is to be replaced with a cash incentive
program of the Successor Corporation that preserves the spread existing at the
time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such Award. The
determination of Award comparability shall be made by the Plan Administrator,
and its determination shall be conclusive and binding. All such Awards shall
terminate and cease to remain outstanding immediately following the consummation
of the Corporate Transaction, except to the extent assumed by the Successor
Corporation. Any such Awards that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall be accelerated in
the event that the Holder's employment or services should subsequently terminate
within two years following such Corporate Transaction, unless such employment or
services are terminated by the Successor Corporation for Cause or by the Holder
voluntarily without Good Reason.
11.3 FURTHER ADJUSTMENT OF AWARDS
Subject to Section 11.2, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Holders, with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Plan
Administrator may take such actions with respect to all Holders, to certain
categories of Holders or only to individual Holders. The Plan Administrator may
take such action before or after granting Awards to which the action relates and
before or after any public announcement with respect to such sale, merger,
consolidation, reorganization, liquidation or change in control that is the
reason for such action.
11.4 LIMITATIONS
The grant of Awards shall in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
<PAGE> 32
A-13
SECTION 12. WITHHOLDING
The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant, vesting or exercise of any Award. Subject to the Plan and applicable law,
the Plan Administrator may, in its sole discretion, permit the Holder to satisfy
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock (up to the minimum required
federal tax withholding rate) or by transferring to the Company shares of Common
Stock (already owned by the Holder for the period necessary to avoid a charge to
the Company's earnings for financial reporting purposes), in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. The Company
shall have the right to withhold from any Award or any shares of Common Stock
issuable pursuant to an Award or from any cash amounts otherwise due or to
become due from the Company to the Holder an amount equal to such taxes. The
Company may also deduct from any Award any other amounts due from the Holder to
the Company or a Subsidiary.
SECTION 13. REPURCHASE RIGHTS
The Plan Administrator shall have the discretion to authorize the issuance
of unvested shares of Common Stock pursuant to the exercise of an Option. Should
the Holder cease to be employed by or provide services to the Company, then all
shares of Common Stock issued upon exercise of an Option which are unvested at
the time of cessation of employment or services shall be subject to repurchase
at the exercise price paid for such shares. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise) shall be established by the Plan Administrator and set forth in
the agreement evidencing such right.
All of the Company's outstanding repurchase rights under this Section 13
shall automatically terminate, and all shares subject to such terminated rights
shall immediately vest in full, upon the occurrence of a Corporate Transaction,
except to the extent: (a) any such repurchase right is expressly assigned to the
Successor Corporation in connection with the Corporate Transaction or (b) such
termination is precluded by other limitation imposed by the Plan Administrator
at the time the repurchase right is issued.
The Plan Administrator shall have the discretionary authority, exercisable
either before or after the Holder's cessation of employment or service, to
cancel the Company's outstanding repurchase rights with respect to one or more
shares purchased or purchasable by the Holder under an Option and thereby
accelerate the vesting of such shares in whole or in part at any time.
SECTION 14. MARKET STANDOFF
In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act, including the Company's initial public offering, a person
shall not sell, make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Award granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be in
effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period
<PAGE> 33
A-14
exceed 180 days. The limitations of this paragraph shall in all events terminate
two years after the effective date of the Company's initial public offering.
Holders of shares issued pursuant to an Award granted under the Plan shall be
subject to the market standoff provisions of this paragraph only if the officers
and directors of the Company are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 14, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 14, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
SECTION 15. AMENDMENT AND TERMINATION OF PLAN
15.1 AMENDMENT OF PLAN
The Plan may be amended only by the Board in such respects as it shall deem
advisable; however, to the extent required for compliance with Section 422 of
the Code or any applicable law or regulation, shareholder approval shall be
required for any amendment that will (a) increase the total number of shares as
to which Options may be granted under the Plan or that may be issued as Stock
Awards, (b) modify the class of persons eligible to receive Options, or (c)
otherwise require shareholder approval under any applicable law or regulation.
Any amendment made to the Plan that would constitute a "modification" to
Incentive Stock Options outstanding on the date of such amendment shall not,
without the consent of the Holder, be applicable to such outstanding Incentive
Stock Options but shall have prospective effect only.
15.2 TERMINATION OF PLAN
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated as provided herein, the Plan shall terminate on July 19, 2009.
15.3 CONSENT OF HOLDER
The amendment or termination of the Plan shall not, without the consent of
the Holder of any Award under the Plan, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the
consent of the Holder, be made in a manner so as to constitute a "modification"
that would cause such Incentive Stock Option to fail to continue to qualify as
an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made
pursuant to Section 11 shall not be subject to these restrictions.
SECTION 16. GENERAL
16.1 AWARD AGREEMENTS
Awards granted under the Plan shall be evidenced by a written agreement that
shall contain such terms, conditions, limitations and restrictions as the
<PAGE> 34
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Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
16.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS
None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to continue in the employ of, or to continue any other relationship with,
the Company or a Subsidiary or limit the Company's right to terminate a Holder's
employment or services at any time, with or without Cause.
16.3 REGISTRATION
The Company shall be under no obligation to any Holder to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an Option or any other receipt of Common
Stock pursuant to an Award under the Plan, the Company may require the Holder to
represent and warrant at the time of any such exercise or receipt that such
shares are being purchased or received only for the Holder's own account and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
relevant provision of the aforementioned laws. At the option of the Company, a
stop-transfer order against any such shares may be placed on the official stock
books and records of the Company, and a legend indicating that such shares may
not be pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Holder as may from time to
time be necessary to comply with the federal and state securities laws.
16.4 NO RIGHTS AS A SHAREHOLDER
No Option or Stock Award denominated in units shall entitle the Holder to
any cash dividend, voting or other right of a shareholder unless and until the
date of issuance under the Plan of the shares that are the subject of such
Award.
<PAGE> 35
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16.5 COMPLIANCE WITH LAWS AND REGULATIONS
Notwithstanding anything in the Plan to the contrary, the Board, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Holders who are officers or directors subject to
Section 16 of the Exchange Act without so restricting, limiting or conditioning
the Plan with respect to other Holders. Additionally, in interpreting and
applying the provisions of the Plan, any Option granted as an Incentive Stock
Option pursuant to the Plan shall, to the extent permitted by law, be construed
as an "incentive stock option" within the meaning of Section 422 of the Code.
16.6 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Holder, and no Holder shall
have any rights that are greater than those of a general unsecured creditor of
the Company.
16.7 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
16.8 HOLDERS IN FOREIGN COUNTRIES
The Plan Administrator shall have the authority to adopt such modifications,
procedures and subplans as may be necessary or desirable to comply with
provisions of the laws of foreign countries in which the Company or its
Subsidiaries may operate to assure the viability of the benefits from Awards
granted to Holders employed in such countries and to meet the objectives of the
Plan.
SECTION 17. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
ORIGINALLY ADOPTED BY THE BOARD ON JULY 20, 1999 AND TO BE APPROVED BY THE
COMPANY'S SHAREHOLDERS AT THE ANNUAL MEETING TO BE HELD ON JUNE 19, 2000.
<PAGE> 36
APPENDIX B
AMENDED 1999 STOCK OPTION PLAN
<PAGE> 37
APPENDIX B
POPSTAR COMMUNICATIONS, INC.
AMENDED 1999 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the POPstar Communications, Inc. Amended 1999 Stock Option
Plan (the "Amended 1999 Plan") is to enhance the long-term shareholder value of
POPstar Communications, Inc., a Nevada corporation (the "Company"), by offering
opportunities to selected persons to participate in the Company's growth and
success, and to encourage them to remain in the service of the Company and its
Subsidiaries (as defined in Section 2) and to acquire and maintain stock
ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
2.1 AWARD
"Award" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Options and Stock Awards, or any
combination of the foregoing.
2.2 BOARD
"Board" means the Board of Directors of the Company.
2.3 CAUSE
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
2.4 CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.5 COMMON STOCK
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
2.6 CORPORATE TRANSACTION
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in which
the Company is not the continuing or surviving corporation, or pursuant to which
shares of the Common Stock are converted into cash, securities or other
property, if following such merger or consolidation the holders of the
<PAGE> 38
B-2
Company's outstanding voting securities immediately prior to such merger or
consolidation own less than 50% of the outstanding voting securities of the
surviving corporation;
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as the term "subsidiary corporation" is
defined in Section 8.3) of the Company;
(c) Approval by the holders of the Common Stock of any plan or proposal
for the liquidation or dissolution of the Company; or
(d) Acquisition by a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the
Exchange Act of a majority or more of the Company's outstanding voting
securities (whether directly or indirectly, beneficially or of record).
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
2.7 DISABILITY
"Disability," unless otherwise defined by the Plan Administrator, means a
mental or physical impairment of the Holder that is expected to result in death
or that has lasted or is expected to last for a continuous period of 12 months
or more and that causes the Holder to be unable, in the opinion of the Company,
to perform his or her duties for the Company or a Subsidiary and to be engaged
in any substantial gainful activity.
2.8 EARLY RETIREMENT
"Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
2.9 EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.10 FAIR MARKET VALUE
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing sales price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock Exchange or the American Stock Exchange, the closing sales
price for the Common Stock as such price is officially quoted in the composite
tape of transactions on such exchange for a single trading day. If there is no
such reported price for the Common Stock for the date in question, then such
price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.
2.11 GOOD REASON
"Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice from the Holder:
<PAGE> 39
B-3
(a) a change in the Holder's status, title, position or responsibilities
(including reporting responsibilities) that, in the Holder's reasonable
judgment, represents a substantial reduction in the status, title, position or
responsibilities as in effect immediately prior thereto; the assignment to the
Holder of any duties or responsibilities that, in the Holder's reasonable
judgment, are materially inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure to reappoint or
reelect the Holder to any of such positions, except in connection with the
termination of the Holder's employment for Cause, for Disability or as a result
of his or her death, or by the Holder other than for Good Reason;
(b) a reduction in the Holder's annual base salary;
(c) the Successor Corporation's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Corporate Transaction;
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Holder was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Holder with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the
Corporate Transaction;
(e) any material breach by the Successor Corporation of its obligations
to the Holder under the Plan or any substantially equivalent plan of the
Successor Corporation; or
(f) any purported termination of the Holder's employment or service for
Cause by the Successor Corporation that does not comply with the terms of the
Plan or any substantially equivalent plan of the Successor Corporation.
2.12 GRANT DATE
"Grant Date" means the date the Plan Administrator completes the corporate
action relating to the grant of an Award and all conditions precedent to the
grant have been satisfied, provided that conditions to the exercisability or
vesting of Awards shall not defer the Grant Date.
2.13 HOLDER
"Holder" means: (a) the person to whom an Award is granted; (b) for a Holder
who has died, the personal representative of the Holder's estate, the
person(s)to whom the Holder's rights under the Award have passed by will or by
the applicable laws of descent and distribution, or the beneficiary designated
in accordance with Section 10; or (c) the person(s) to whom an Award has been
transferred in accordance with Section 10.
2.14 INCENTIVE STOCK OPTION
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
<PAGE> 40
B-4
2.15 NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an Option to purchase Common Stock granted
under Section 7 other than an Incentive Stock Option.
2.16 OPTION
"Option" means the right to purchase Common Stock granted under Section 7.
2.17 OPTION TERM
"Option Term" has the meaning set forth in Section 7.3.
2.18 PLAN ADMINISTRATOR
"Plan Administrator" means the Board or any committee or committees
designated by the Board or any person to whom the Board has delegated authority
to administer the Plan under Section 3.1.
2.19 RETIREMENT
"Retirement" means retirement as of the individual's normal retirement date
under the Company's 401(k) Plan or other similar successor plan applicable to
salaried employees, unless otherwise defined by the Plan Administrator from time
to time for purposes of the Plan.
2.20 SECURITIES ACT
"Securities Act" means the Securities Act of 1933, as amended.
2.21 STOCK AWARD
"Stock Award" means shares of Common Stock or units denominated in Common
Stock granted under Section 9, the rights of ownership of which may be subject
to restrictions prescribed by the Plan Administrator.
2.22 SUBSIDIARY
"Subsidiary," except as provided in Section 8.3 in connection with Incentive
Stock Options, means any entity that is directly or indirectly controlled by the
Company or in which the Company has a significant ownership interest, as
determined by the Plan Administrator, and any entity that may become a direct or
indirect parent of the Company.
2.23 SUCCESSOR CORPORATION
"Successor Corporation" has the meaning set forth under Section 11.2.
2.24 TERMINATION DATE
"Termination Date" has the meaning set forth in Section 7.6.
<PAGE> 41
B-5
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board (a "Plan Administrator"). If and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board
shall consider in selecting the members of any committee acting as Plan
Administrator, with respect to any persons subject or likely to become subject
to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act.
Notwithstanding the foregoing, the Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible persons to
different committees consisting of two or more members of the Board, subject to
such limitations as the Board deems appropriate. Committee members shall serve
for such term as the Board may determine, subject to removal by the Board at any
time. To the extent consistent with applicable law, the Board may authorize the
Chief Executive Officer or President of the Company to grant Awards to employees
of the Company, within limits specifically prescribed by the Board.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and the terms of any instrument evidencing the Award and may
from time to time adopt, and change, rules and regulations of general
application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions taken
and determinations made by the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 11.1, the
maximum number of shares of Common Stock that shall be available for issuance
under the Plan shall be:
(b) 2,000,000 shares
Shares issued under the Plan shall be drawn from authorized and unissued
shares or shares subsequently acquired by the Company.
<PAGE> 42
B-6
4.2 LIMITATIONS
(a) Subject to adjustment from time to time as provided in Section 11.1,
not more than ten percent (10%) of the Company's issued and outstanding share
capital shall be available for issuance pursuant to the grant of Stock Awards
under the Plan.
(b) Subject to adjustment from time to time as provided in Section 11.1,
not more than twenty-five percent (25%) of Common Stock may be made subject to
options under the Plan to any one individual.
4.3 REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares) shall again be
available for issuance in connection with future grants of Awards under the
Plan; provided, however, that for purposes of Section 4.2, any such shares shall
be counted in accordance with the requirements of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries; provided, however, that such individuals render bona fide services
that are not in connection with the offer and sale of the Company's securities
in a capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 FORM AND GRANT OF AWARDS
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards may
include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options and Stock Awards. Awards may be granted singly or in combination.
6.2 ACQUIRED COMPANY AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan Administrator
may grant Awards under the Plan in substitution for awards issued under other
plans, or assume under the Plan awards issued under other plans, if the other
plans are or were plans of other acquired entities ("Acquired Entities") (or the
parent of the Acquired Entity) and the new Award is substituted, or the old
award is assumed, by reason of a merger, consolidation, acquisition of property
or of stock, reorganization or liquidation (the "Acquisition Transaction"). In
the event that a written agreement pursuant to which the Acquisition Transaction
is completed is approved by the Board and said agreement sets forth the terms
and conditions of the substitution for or assumption of outstanding awards of
the Acquired Entity, said terms and conditions shall be deemed to be the action
of the Plan Administrator without any further action by the Plan Administrator,
except as may be required for compliance with Rule 16b-3 under the Exchange Act,
and the persons holding such Awards shall be deemed to be Holders.
<PAGE> 43
B-7
SECTION 7. AWARDS OF OPTIONS
7.1 GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole discretion,
to issue Options as Incentive Stock Options or as Nonqualified Stock Options,
which shall be appropriately designated.
7.2 OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options.
For Incentive Stock Options granted to a more than 10% shareholder, the Option
exercise price shall be as specified in Section 8.2.
7.3 TERM OF OPTIONS
The term of each Option (the "Option Term") shall be as established by the
Plan Administrator or, if not so established, shall be 10 years from the Grant
Date. For Incentive Stock Options, the maximum Option Term shall be as specified
in Sections 8.2 and 8.4.
7.4 EXERCISE OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument that
evidences an Option the time at which or the installments in which the Option
shall vest and become exercisable, which provisions may be waived or modified by
the Plan Administrator at any time. If not so established in the instrument
evidencing the Option, the Option shall vest and become exercisable according to
the following schedule, which may be waived or modified by the Plan
Administrator at any time:
<TABLE>
<CAPTION>
PERIOD OF HOLDER'S CONTINUOUS EMPLOYMENT OR
SERVICE WITH THE COMPANY OR ITS SUBSIDIARIES PERCENT OF TOTAL OPTION
FROM THE OPTION GRANT DATE THAT VESTS AND IS EXERCISABLE
- ------------------------------------------------- -----------------------------
<S> <C>
After 1 year..................................... 33.33%
After each succeeding 12 months thereafter....... 33.33%
After 36 months.................................. 100%
</TABLE>
To the extent that an Option has vested and become exercisable, the Option
may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
such representations and agreements as may be required by the Plan
Administrator, accompanied by payment in full as described in Section 7.5. The
Plan Administrator may determine at any time that an Option may not be exercised
as to less than a reasonable number of shares at any one time, as determined by
the Plan Administrator.
7.5 PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
<PAGE> 44
B-8
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
shares of Common Stock already owned by the Holder for at least six months (or
any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section 12(b)
or 12(g) of the Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage firm designated by
the Company to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
In addition, to assist a Holder (including a Holder who is an officer or a
director of the Company) in acquiring shares of Common Stock pursuant to an
Award granted under the Plan, the Plan Administrator, in its sole discretion,
may authorize, either at the Grant Date or at any time before the acquisition of
Common Stock pursuant to the Award, (i) the payment by a Holder of a
full-recourse promissory note, (ii) the payment by the Holder of the purchase
price, if any, of the Common Stock in installments, or (iii) the guarantee by
the Company of a loan obtained by the Holder from a third party. Subject to the
foregoing, the Plan Administrator shall in its sole discretion specify the terms
of any loans, installment payments or loan guarantees, including the interest
rate and terms of and security for repayment.
7.6 POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument that
evidences an Option whether the Option shall continue to be exercisable, and the
terms and conditions of such exercise, if a Holder ceases to be employed by, or
to provide services to, the Company or its Subsidiaries, which provisions may be
waived or modified by the Plan Administrator at any time. If not so established
in the instrument evidencing the Option, the Option shall be exercisable
according to the following terms and conditions, which may be waived or modified
by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the
date of termination of the Holder's employment or service relationship (the
"Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Holder's Termination Date occurs for reasons other than
<PAGE> 45
B-9
Cause, death, Disability, Early Retirement at the Company's request or
Retirement, the 30-day anniversary of such Termination Date; and
(iii) if the Holder's Termination Date occurs without cause, by
reason of death, Disability, Early Retirement at the Company's request or
Retirement, the one-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Holder dies after the Termination Date
while the Option is otherwise exercisable, the portion of the Option that is
vested and exercisable on such Termination Date shall expire upon the earlier to
occur of (y) the last day of the Option Term and (z) the first anniversary of
the date of death, unless the Plan Administrator determines otherwise.
Also notwithstanding the foregoing, in case of termination of the Holder's
employment or service relationship for Cause, the Option shall automatically
expire upon 30 days after the date of termination, unless the Plan Administrator
determines otherwise. If a Holder's employment or service relationship with the
Company is suspended pending an investigation of whether the Holder shall be
terminated for Cause, all the Holder's rights under any Option likewise shall be
suspended during the period of investigation. If the Company terminates the
Holder's employment for serious causes such as fraud, grand larceny or felony
against the Corporation, the Option is cancelled entirely.
A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services for
purposes of this Section 7. The effect of a Company-approved leave of absence on
the terms and conditions of an Option shall be determined by the Plan
Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
8.1 DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Holder holds two or more such Options that become exercisable for the first
time in the same calendar year, such limitation shall be applied on the basis of
the order in which such Options are granted.
8.2 MORE THAN TEN PERCENT SHAREHOLDERS
If an individual owns more than 10% of the total voting power of all classes
of the Company's stock, then the exercise price per share of an Incentive Stock
Option shall be determined by the Board on the Grant Date and the Option Term
shall not exceed five years. The determination of more than 10% ownership shall
be made in accordance with Section 422 of the Code.
<PAGE> 46
B-10
8.3 ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4 TERM
Subject to Section 8.2, the Option Term shall not exceed 10 years.
8.5 EXERCISABILITY
An Option designated as an Incentive Stock Option shall cease to qualify for
favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than death or Disability, (b) more
than one year after the Termination Date by reason of Disability, or (c) after
the Holder has been on leave of absence for more than 90 days, unless the
Holder's reemployment rights are guaranteed by statute or contract.
For purposes of this Section 8.5, Disability shall mean "disability" as that
term is defined for purposes of Section 422 of the Code.
8.6 TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Holder must hold the shares issued upon the
exercise of an Incentive Stock Option for two years after the Grant Date of the
Incentive Stock Option and one year from the date of exercise. A Holder may be
subject to the alternative minimum tax at the time of exercise of an Incentive
Stock Option. The Holder shall give the Company prompt notice of any disposition
of shares acquired by the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
8.7 PROMISSORY NOTES
The amount of any promissory note delivered pursuant to Section 7.5 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator, but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. STOCK AWARDS
9.1 GRANT OF STOCK AWARDS
The Plan Administrator is authorized to make Awards of Common Stock or
Awards denominated in units of Common Stock on such terms and conditions and
subject to such restrictions, if any (which may be based on continuous service
with the Company or the achievement of performance goals where such goals may be
stated in absolute terms or relative to comparison companies), as the Plan
Administrator shall determine, in its sole discretion, which terms, conditions
and restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which shares
subject to Stock Awards are held during the periods they are subject to
<PAGE> 47
B-11
restrictions and the circumstances under which forfeiture of Stock Awards shall
occur by reason of termination of the Holder's services.
9.2 ISSUANCE OF SHARES
Upon the satisfaction of any terms, conditions and restrictions prescribed
in respect to a Stock Award, or upon the Holder's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, the appropriate number of
shares of Common Stock.
9.3 WAIVER OF RESTRICTIONS
Notwithstanding any other provisions of the Plan, the Plan Administrator
may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Stock Award under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate; provided, however, that the Plan Administrator may not adjust
performance goals for any Stock Award intended to be exempt under Section 162(m)
of the Code for the year in which the Stock Award is settled in such a manner as
would increase the amount of compensation otherwise payable to a Holder.
SECTION 10. ASSIGNABILITY
No Awards granted under the Plan may be assigned or transferred by the
Holder other than by will or by the applicable laws of descent and distribution,
and, during the Holder's lifetime, such Awards may be exercised only by the
Holder. Notwithstanding the foregoing, and to the extent permitted by Section
422 of the Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a Holder of such Awards
to designate a beneficiary who may exercise the Award or receive compensation
under the Award after the Holder's death; provided, however, that any Award so
assigned or transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award.
SECTION 11. ADJUSTMENTS
11.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend,
or other change in the Company's corporate or capital structure results in (a)
the outstanding shares, or any securities exchanged therefor or received in
their place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the
holders of shares of Common Stock of the Company, then the Plan Administrator
shall make proportional adjustments in (i) the maximum number and kind of
securities subject to the Plan as set forth in Section 4.1 and the maximum
number and kind of securities that may be made subject to Stock Awards and to
Awards to any individual as set forth in Section 4.2, and (ii) the number and
kind of securities that are subject to any outstanding Award and the per share
price of such securities, without any change in the aggregate price
<PAGE> 48
B-12
to be paid therefor. The determination by the Plan Administrator as to the terms
of any of the foregoing adjustments shall be conclusive and binding.
11.2 CORPORATE TRANSACTION
Except as otherwise provided in the instrument that evidences the Award, in
the event of any Corporate Transaction, each Award that is at the time
outstanding shall automatically accelerate so that each such Award shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested and exercisable, except that such acceleration shall not
occur if, in the opinion of the Company's outside accountants, it would render
unavailable "pooling of interest" accounting for a Corporate Transaction that
would otherwise qualify for such accounting treatment. Such Award shall not so
accelerate, however, if and to the extent that (a) such Award is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof (the "Successor Corporation") or to be replaced
with a comparable award for the purchase of shares of the capital stock of the
Successor Corporation or (b) such Award is to be replaced with a cash incentive
program of the Successor Corporation that preserves the spread existing at the
time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such Award. The
determination of Award comparability shall be made by the Plan Administrator,
and its determination shall be conclusive and binding. All such Awards shall
terminate and cease to remain outstanding immediately following the consummation
of the Corporate Transaction, except to the extent assumed by the Successor
Corporation. Any such Awards that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall be accelerated in
the event that the Holder's employment or services should subsequently terminate
within two years following such Corporate Transaction, unless such employment or
services are terminated by the Successor Corporation for Cause or by the Holder
voluntarily without Good Reason.
11.3 FURTHER ADJUSTMENT OF AWARDS
Subject to Section 11.2, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Holders, with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Plan
Administrator may take such actions with respect to all Holders, to certain
categories of Holders or only to individual Holders. The Plan Administrator may
take such action before or after granting Awards to which the action relates and
before or after any public announcement with respect to such sale, merger,
consolidation, reorganization, liquidation or change in control that is the
reason for such action.
11.4 LIMITATIONS
The grant of Awards shall in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
<PAGE> 49
B-13
SECTION 12. WITHHOLDING
The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant, vesting or exercise of any Award. Subject to the Plan and applicable law,
the Plan Administrator may, in its sole discretion, permit the Holder to satisfy
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock (up to the minimum required
federal tax withholding rate) or by transferring to the Company shares of Common
Stock (already owned by the Holder for the period necessary to avoid a charge to
the Company's earnings for financial reporting purposes), in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. The Company
shall have the right to withhold from any Award or any shares of Common Stock
issuable pursuant to an Award or from any cash amounts otherwise due or to
become due from the Company to the Holder an amount equal to such taxes. The
Company may also deduct from any Award any other amounts due from the Holder to
the Company or a Subsidiary.
SECTION 13. REPURCHASE RIGHTS
The Plan Administrator shall have the discretion to authorize the issuance
of unvested shares of Common Stock pursuant to the exercise of an Option. Should
the Holder cease to be employed by or provide services to the Company, then all
shares of Common Stock issued upon exercise of an Option which are unvested at
the time of cessation of employment or services shall be subject to repurchase
at the exercise price paid for such shares. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise) shall be established by the Plan Administrator and set forth in
the agreement evidencing such right.
All of the Company's outstanding repurchase rights under this Section 13
shall automatically terminate, and all shares subject to such terminated rights
shall immediately vest in full, upon the occurrence of a Corporate Transaction,
except to the extent: (a) any such repurchase right is expressly assigned to the
Successor Corporation in connection with the Corporate Transaction or (b) such
termination is precluded by other limitation imposed by the Plan Administrator
at the time the repurchase right is issued.
The Plan Administrator shall have the discretionary authority, exercisable
either before or after the Holder's cessation of employment or service, to
cancel the Company's outstanding repurchase rights with respect to one or more
shares purchased or purchasable by the Holder under an Option and thereby
accelerate the vesting of such shares in whole or in part at any time.
SECTION 14. MARKET STANDOFF
In connection with any underwritten public offering by the Corporation of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company's initial public offering, a
person shall not sell, make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Award granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be in
effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events
<PAGE> 50
B-14
terminate two years after the effective date of the Company's initial public
offering. Holders of shares issued pursuant to an Award granted under the Plan
shall be subject to the market standoff provisions of this paragraph only if the
officers and directors of the Company are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 14, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 14, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
SECTION 15. AMENDMENT AND TERMINATION OF PLAN
15.1 AMENDMENT OF PLAN
The Plan may be amended only by the Board in such respects as it shall deem
advisable; however, to the extent required for compliance with Section 422 of
the Code or any applicable law or regulation, shareholder approval shall be
required for any amendment that will (a) increase the total number of shares as
to which Options may be granted under the Plan or that may be issued as Stock
Awards, (b) modify the class of persons eligible to receive Options, or (c)
otherwise require shareholder approval under any applicable law or regulation.
Any amendment made to the Plan that would constitute a "modification" to
Incentive Stock Options outstanding on the date of such amendment shall not,
without the consent of the Holder, be applicable to such outstanding Incentive
Stock Options but shall have prospective effect only.
15.2 TERMINATION OF PLAN
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated as provided herein, the Plan shall terminate on July 19, 2009.
15.3 CONSENT OF HOLDER
The amendment or termination of the Plan shall not, without the consent of
the Holder of any Award under the Plan, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the
consent of the Holder, be made in a manner so as to constitute a "modification"
that would cause such Incentive Stock Option to fail to continue to qualify as
an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made
pursuant to Section 11 shall not be subject to these restrictions.
SECTION 16. GENERAL
16.1 AWARD AGREEMENTS
Awards granted under the Plan shall be evidenced by a written agreement that
shall contain such terms, conditions, limitations and restrictions as the Plan
Administrator shall deem advisable and that are not inconsistent with the Plan.
<PAGE> 51
B-15
16.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS
None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to continue in the employ of, or to continue any other relationship with,
the Company or a Subsidiary or limit the Company's right to terminate a Holder's
employment or services at any time, with or without Cause.
16.3 REGISTRATION
The Company shall be under no obligation to any Holder to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an Option or any other receipt of Common
Stock pursuant to an Award under the Plan, the Company may require the Holder to
represent and warrant at the time of any such exercise or receipt that such
shares are being purchased or received only for the Holder's own account and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
relevant provision of the aforementioned laws. At the option of the Company, a
stop-transfer order against any such shares may be placed on the official stock
books and records of the Company, and a legend indicating that such shares may
not be pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Holder as may from time to
time be necessary to comply with the federal and state securities laws.
16.4 NO RIGHTS AS A SHAREHOLDER
No Option or Stock Award denominated in units shall entitle the Holder to
any cash dividend, voting or other right of a shareholder unless and until the
date of issuance under the Plan of the shares that are the subject of such
Award.
16.5 COMPLIANCE WITH LAWS AND REGULATIONS
Notwithstanding anything in the Plan to the contrary, the Board, in its sole
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Holders who are officers or directors subject to
Section 16 of the Exchange Act without so restricting, limiting or
<PAGE> 52
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conditioning the Plan with respect to other Holders. Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of Section
422 of the Code.
16.6 NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Holder, and no Holder shall
have any rights that are greater than those of a general unsecured creditor of
the Company.
16.7 SEVERABILITY
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
16.8 HOLDERS IN FOREIGN COUNTRIES
The Plan Administrator shall have the authority to adopt such modifications,
procedures and subplans as may be necessary or desirable to comply with
provisions of the laws of foreign countries in which the Company or its
Subsidiaries may operate to assure the viability of the benefits from Awards
granted to Holders employed in such countries and to meet the objectives of the
Plan.
SECTION 17. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
ORIGINALLY ADOPTED BY THE BOARD ON MARCH 1, 2000 AND TO BE APPROVED BY THE
COMPANY'S SHAREHOLDERS AT THE ANNUAL MEETING TO BE HELD ON JUNE 19, 2000.
<PAGE> 53
PROXY PROXY
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POPSTAR COMMUNICATIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints THOMPSON CHU and JOHN MCDERMOTT, and each or
either of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of common stock of POPSTAR COMMUNICATIONS, INC. held of record by the
undersigned on May 18, 2000, at the Annual Meeting of Shareholders to be held on
June 19, 2000, or any adjournment thereof.
THIS PROXY CARD CONTINUES AND MUST BE SIGNED ON THE RESERVE SIDE.
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Please mark your votes as indicated in /X/ this example.
PROPOSAL 1: ELECTION OF DIRECTORS.
/ / FOR ALL NOMINEES / / WITHHOLD AUTHORITY TO VOTE
/ / THOMPSON CHU
/ / JOHN MCDERMOTT
/ / WILLIAM WING YAN LO
/ / YONG KIAT RICKIE TANG
(INSTRUCTIONS: To withhold authority to vote for any individual strike a line
through the nominee's name above).
PROPOSAL 2: APPROVAL OF THE 1999 STOCK OPTION PLAN.
To approve and adopt the Company's 1999 Stock Option Plan (the
"1999 Plan").
/ / FOR / / AGAINST
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE 1999 STOCK OPTION PLAN.
To approve an amendment to the Company's 1999 Plan to increase
the number of shares of common stock reserved for issuance
under the 1999 Plan from 757,500 to 2,000,000 shares.
/ / FOR / / AGAINST
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. PROXY CARDS PROPERLY EXECUTED AND RETURNED WITHOUT
DIRECTION WILL BE VOTED FOR THE PROPOSALS. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come before the
meeting and any adjournment thereof.
<PAGE> 54
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature(s):__________________________________________________________________
Date________________________
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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