<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934, as amended.
Filed by the registrant /X/
Filed by a Party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Uproar Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
-------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
UPROAR INC.
240 West 35th Street
New York, New York 10001
Dear Fellow Stockholders:
On behalf of the Board of Directors of Uproar Inc., I cordially invite you
to attend the Annual Meeting of Stockholders which will be held on Friday, May
12, 2000, at 9:00 A.M. at 240 West 35th Street, 11th Floor, New York, New York.
At the Annual Meeting, we will vote on the election of eight directors,
the approval of the Uproar Ltd. 1999 Share Option/Share Issuance Plan and the
Uproar Inc. 2000 Stock Incentive Plan, and the ratification of the selection of
KPMG LLP as our independent auditors for the year 2000. In the pages that
follow, you will find the Notice of Meeting and the Proxy Statement which
describes these matters in detail.
You will also find enclosed a proxy form appointing proxies to vote your
shares at the Annual Meeting. Please sign, date and return your proxy form as
soon as possible so that your shares can be represented and voted in accordance
with your instructions even if you cannot attend the Annual Meeting in person.
Sincerely,
/s/ Kenneth D. Cron
Kenneth D. Cron
Chairman of the Board and
Chief Executive Officer
<PAGE>
UPROAR INC.
240 West 35th Street
New York, New York 10001
Notice of Annual Meeting of Stockholders
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Uproar Inc. will be held at 240 West
35th Street, 11th Floor, New York, New York, on May 12, 2000 at 9:00 a.m.,
Eastern Standard Time, for the following purposes:
(1) To elect eight Directors;
(2) To approve the Uproar Ltd. 1999 Share Option/Share Issuance Plan;
(3) To approve the Uproar Inc. 2000 Stock Incentive Plan;
(4) To ratify the selection of KPMG LLP as independent auditors of the
Company for the year 2000; and
(5) To transact such other business as may properly come before the Annual
Meeting.
These items are more fully described in the accompanying Proxy Statement.
Stockholders of record at the close of business on March 13, 2000, will be
entitled to notice of and to vote at the Annual Meeting. A list of stockholders
eligible to vote at the Annual Meeting will be available for inspection at the
Annual Meeting and for a period of ten days prior to the Annual Meeting during
regular business hours at the corporate headquarters of the Company at the
above address.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you do attend the Annual Meeting, your vote is
important. To assure your representation at the meeting, please complete, sign
and date the enclosed proxy form and return it promptly in the enclosed
envelope, which requires no additional postage if mailed in the United States.
If your shares are held in the name of a bank or a broker, please follow the
instructions on the form you receive from your bank or broker.
By Order of the Board of Directors
/s/ Robert D. Marafioti
Robert D. Marafioti
Executive Vice President, General Counsel
and Secretary
New York, New York
April 10, 2000
<PAGE>
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Uproar Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held on May 12, 2000 at 9:00 a.m., Eastern Standard
Time, at 240 West 35th Street, 11th Floor, New York, New York. Stockholders of
record at the close of business on March 13, 2000, will be entitled to notice
of and to vote at the Annual Meeting.
On March 13, 2000, there were 25,414,494 shares of the Company's common
stock, par value $0.01 per share, outstanding. No shares of the Company's
preferred stock, par value $0.01 per share, were outstanding on that date. Each
stockholder will be entitled to one vote at the Annual Meeting for each share
of common stock held by such stockholder. One-third of the shares entitled to
vote, present in person or represented by proxy, will constitute a quorum for
the transaction of business at the Annual Meeting. A list of stockholders
eligible to vote at the Annual Meeting will be available for inspection at the
Annual Meeting and for a period of ten days prior to the Annual Meeting during
regular business hours at the principal executive offices of the Company at the
address specified above.
Proxies
Shares cannot be voted at the Annual Meeting unless the holder of record
is present in person or represented by proxy. All properly executed and
unrevoked proxies that are filed with the Secretary of the Company prior to the
Annual Meeting will be voted at the Annual Meeting or any adjournment thereof
in accordance with instructions thereon or, if no instructions are given, will
be voted "FOR" the election of the named nominees as Directors of the Company,
"FOR" the approval of the Uproar Ltd. 1999 Share Option/Share Issuance Plan,
"FOR" the approval of the Uproar Inc. 2000 Stock Incentive Plan and "FOR" the
ratification of KPMG LLP as independent auditors of the Company for the year
2000, and will be voted in accordance with the best judgment of the persons
appointed as proxies with respect to any other matters which properly come
before the Annual Meeting. Any person giving a proxy may revoke it at any time
before its exercise by delivering to the Secretary of the Company an instrument
of revocation or a duly executed proxy bearing a later date. Although
attendance at the Annual Meeting will not in itself constitute revocation of a
proxy, a stockholder who attends the Annual Meeting may withdraw his or her
proxy and vote in person.
Voting
At the Annual Meeting, Directors will be elected by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote on the election of directors. In all other matters, the affirmative vote
of the majority of the shares present in person or represented by proxy and
entitled to vote on such matters will be the act of the stockholders.
Stockholders may cast their votes in favor of the election of directors or may
withhold authority to vote for one or more nominees. Stockholders withholding
authority will be deemed present at the Annual Meeting for the purpose of
determining whether a quorum has been constituted, but votes withheld will have
no effect on the outcome of the vote. Stockholders may cast their votes for or
against each other proposal presented at the Annual Meeting, or stockholders
may abstain from voting. Stockholders abstaining will be deemed present at the
Annual Meeting for the purpose of determining whether a quorum has been
constituted, but an abstention on any of such proposals will have the effect of
a negative vote because approval of any such proposal requires a majority of
votes cast to be cast affirmatively for the proposal. Broker non-votes will be
counted for the purpose of determining whether a quorum has been constituted
but will be disregarded for voting purposes and will have no effect on the
outcome of the vote on such matters.
2
<PAGE>
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of eight members, three of whom
are executive officers and employees of the Company. Each of the eight
Directors has been nominated for election at the Annual Meeting, to hold office
until the next annual meeting of stockholders and until the Director's
successor is elected and qualified, or until the Director's earlier death,
resignation or removal.
The nominees for election have agreed to serve if elected, and the Board
of Directors does not currently anticipate that any nominee will be unable to
be a candidate for election. If any nominee is unable to be a candidate when
the election takes place, the shares represented by valid proxies will be voted
for the election of such substitute nominee or nominees as the Board of
Directors may recommend.
Information with respect to each of the nominees is provided below.
Kenneth D. Cron, 43, joined the Company as Chief Executive Officer and as
a Director in September 1999. In December 1999, Mr. Cron was appointed the
Chairman of the Board of Directors. From September 1978 to June 1999, Mr. Cron
worked at CMP Media where, as the President of Publishing, he had
responsibility for the company's United States businesses, including its print
publications, trade shows/conferences and online services. He was also a
director of CMP Media. Mr. Cron earned a B.A. from the University of Colorado.
Christopher R. Hassett, 37, joined the Company as President, Chief
Operating Officer, and as a Director in July 1999, subsequent to the Company's
acquisition of PrizePoint Entertainment. Mr. Hassett was PrizePoint's
co-founder and Chief Executive Officer from March 1998 to June 1999. Prior to
that, Mr. Hassett founded Pointcast, serving as its Chairman and Chief
Executive Officer from November 1992 to October 1997. Mr. Hassett earned a B.S.
in electrical engineering from the University of Lowell.
Michael K. Simon, 35, is the founder of the Company. He was the Chairman
of the Board of Directors from July 1999 to December 1999 and served as Chief
Executive Officer from February 1995 to September 1999. Since November 1999,
Mr. Simon has served as Chief Financial Officer of the Company. Prior to
founding Uproar, Mr. Simon was the Managing Director of Ablaksoft Kft., a
Hungarian software company, from April 1993 to February 1995. He earned an
M.B.A. from Washington University in St. Louis and a B.S. in Electrical
Engineering from the University of Notre Dame.
Thompson B. Barnhardt, 36, joined the Board of Directors in February 1995.
Since November 1999, he has been President of BiznesPolska.pl, an Internet
publishing company. From June 1994 to October 1999, Mr. Barnhardt was President
of New World Publishing, Inc., a publisher of several English-language business
journals in Central Europe. Mr. Barnhardt earned an M.B.A. from the University
of Virginia Darden Graduate School of Business Administration and a B.A. in
economics from the University of Virginia.
Thomas E. Dooley, 43, joined the Board of Directors in March 2000. Mr.
Dooley is Deputy Chairman and Executive Vice President of Viacom Inc. and a
member of its board of directors. During his 20-year tenure with Viacom, Mr.
Dooley has held a variety of positions, including Executive Vice President,
Finance, and Vice President -- Finance and Treasurer, and also served as
President of Viacom's Interactive Television Division. He also serves on the
board of directors of the International Radio and Television Society, St.
Vincent's Services, the Friends Academy and La Branche & Company Inc., and on
the board of trustees of North Shore-Long Island Jewish Health System. Mr.
Dooley earned a B.S. from St. John's University and an M.B.A. from the New York
University Graduate School of Business.
Esther Dyson, 48, joined the Board of Directors in April 1997. Ms. Dyson
has been the Chairman of EDventure Holdings, publisher of the newsletter
Release 1.0, since 1983. She is the author of Release 2.0, an acclaimed book
about cyberspace. Ms. Dyson is a director of four software companies:
Graphisoft, Languageware.net, Scala Business Solutions and Thinking Tools. She
is also a director of WPP Group, a communications company, Medscape, a
healthcare Web site, and PRT Group, a systems integrator, as well as interim
Chairman of the Internet Corporation for Assigned Names and Numbers. Ms. Dyson
holds a B.A. from Harvard College.
3
<PAGE>
James J. Geddes, Jr., 49, joined the Board of Directors in February 2000.
Mr. Geddes is Senior Managing Director of Trans Cosmos USA, Inc. and a member
of its board of directors. He has worked for Trans Cosmos in a variety of
positions since 1994. Mr. Geddes earned a B.S.E.E. from the University of
Maryland.
Catherine V. Mackay, 32, joined the Board of Directors in September 1999.
Ms. Mackay is President of Pearson Television Enterprises, the division of
Pearson Television that operates all of its Internet, interactive television,
merchandising and music publishing activities. She has worked for Pearson
Television in various capacities since March 1995. Prior to joining Pearson
Television, Ms. Mackay worked for Cie Generale des Eaux, from January 1994 to
August 1995, and for Lazard Freres & Co. from September 1988 to December 1991.
Ms. Mackay earned an M.B.A. from INSEAD and a B.A. from Oxford University.
Committees of the Board
The Board of Directors has a standing Audit Committee and Compensation
Committee. It does not have a nominating committee or a committee performing
similar functions. The Audit Committee currently consists of Messrs. Barnhardt
and Dooley, and the Compensation Committee currently consists of Ms. Dyson, all
of whom are independent within the meaning of Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards.
The Audit Committee reviews the Company's annual financial statements and
auditors' reports; recommends the selection of the Company's independent
accountants; reviews and approves the scope of the annual audit by the
Company's independent accountants; reviews the performance of the Company's
independent accountants and their fees and other compensation; and reviews the
Company's systems of internal controls and other factors that pertain to the
accuracy, integrity and completeness of the Company's published financial
reports.
The Compensation Committee oversees the administration of the Company's
compensation policies and practices; establishes and administers the
compensation plans of members of senior management; administers the Company's
stock incentive plans and authorizes awards granted thereunder; and reports
annually to the stockholders of the Company on matters concerning the
compensation of executives of the Company.
The Board of Directors has not adopted a written charter for the Audit
Committee or the Compensation Committee but intends to adopt written charters
and appoint additional independent directors to each of the Audit Committee and
Compensation Committee, in compliance with the rules promulgated by the
Securities and Exchange Commission and The Nasdaq Stock Market, Inc.
Compensation Committee Interlocks and Insider Participation
No interlocking relationships exist between the Board of Directors or the
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. No member of the current Compensation Committee was an officer or
employee of the Company at any time during 1999. No executive officer of the
Company serves on the board of directors or compensation committee of any
entity which has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
Attendance at Board Meetings
During 1999, the Board of Directors held a total of six meetings. Each
Director attended all meetings of the Board of Directors, except for Ms. Dyson
who attended four of the meetings. No meetings of the Audit Committee or
Compensation Committee were held during 1999.
Compensation of Directors
In the past, the Company has compensated the Directors with stock options
from time to time. As of March 31, 2000, the Directors held options to purchase
165,000 shares as compensation for services
4
<PAGE>
Under the automatic option grant program of the Company's 2000 Stock
Incentive Plan, each individual who has served as a non-employee Board member
for at least 6 months and is to continue to serve as a non-employee member of
the Board of Directors will be granted an option each year, as of the date of
the annual meeting of stockholders for such year, to purchase 5,000 shares of
the Company's common stock at a price equal to the fair market value of such
shares on the date of grant. In addition, under the automatic option grant
program of the Company's 2000 Stock Incentive Plan, each individual who first
joins the Board of Directors as a non-employee member of the Board is granted
an option, as of the date of his or her commencement of service on the Board,
to purchase 30,000 shares of the Company's common stock at a price equal to the
fair market value of such shares on the date of grant.
Pursuant to the above policy, in February 2000, Mr. Barnhardt, Ms. Dyson
and Ms. Mackay were each granted an option to purchase 5,000 shares of the
Company's common stock and Mr. Geddes was granted an option to purchase 30,000
shares of the Company's common stock; and in March 2000, Mr. Dooley was granted
an option to purchase 30,000 shares of the Company's common stock.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE ABOVE NOMINEES
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
The following individuals were serving as executive officers of the Company
on March 31, 2000:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- ----- -------------------------
<S> <C> <C>
Kenneth D. Cron ................. 43 Chairman of the Board of Directors and Chief Executive Officer
Christopher R. Hassett .......... 37 President and Chief Operating Officer
Michael K. Simon ................ 35 Chief Financial Officer
Francis G. Blot ................. 37 Executive Vice President, Product Marketing
Shannon King .................... 43 Executive Vice President, Merchandising
Robert D. Marafioti ............. 52 Executive Vice President, General Counsel and Secretary
Jeffrey L. Strief ............... 44 Executive Vice President, Marketing and Sales
</TABLE>
Information Concerning Executive Officers Who Are Not Directors.
Francis G. Blot joined the Company as Executive Vice President, Product
Marketing, in July 1999, subsequent to the Company's acquisition of PrizePoint
Entertainment. Mr. Blot co-founded PrizePoint in March 1998 and served as its
Vice President of Marketing from March 1998 to June 1999. From June 1994 to
March 1998, Mr. Blot was Vice President of Business Development at Pointcast,
where he was responsible for, among other things, its electronic commerce
business. Prior to that, Mr. Blot worked in business and product development
positions for Prodigy for nearly seven years. Mr. Blot earned a B.S. in
electrical engineering from SUNY Utica.
Shannon King joined the Company as Executive Vice President of
Merchandising in August 1999. From April 1984 to August 1999, Ms. King served
as Executive Vice President of Merchandising for The Sharper Image, where she
was responsible for all merchandising for that company's 85-store retail chain,
catalog and wholesale business. Ms. King earned a Master's in international
business from the American Graduate School of International Management and a
B.A. in international business and politics from the University of Colorado.
Robert D. Marafioti joined the Company as Executive Vice President, General
Counsel and Secretary in October 1999. From October 1988 through June 1999, he
worked for CMP Media, where he served as Executive Vice President, General
Counsel and Secretary. Mr. Marafioti earned a B.A. from Yale University and a
J.D. from Columbia School of Law.
Jeffrey L. Strief joined the Company as Executive Vice President of
Marketing and Sales in October 1999. From May 1985 to June 1999, he worked for
CMP Media, where he served as Executive Vice President of the Business
Technology Group with responsibility for Information Week and other technology
publications and Internet services. Mr. Strief earned a B.A. in marketing from
California State University Fullerton.
6
<PAGE>
Summary Compensation Table
The following table sets forth for 1999 and 1998 all compensation awarded
to, earned by or paid to the Company's Chief Executive Officer and the other
most highly-compensated executive officers whose total annual salary and bonus
for services rendered to the Company in all capacities during 1999 exceeded
$100,000.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Long-Term
Compensation
Other Annual Awards
Compensation Securities
Name and Principal Position Fiscal Year Salary Bonus ($)(1) Underlying Options
- --------------------------- ----------- --------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Kenneth D. Cron(1) ............................ 1998 $ -- $ -- $ -- --
Chairman and Chief Executive Officer .......... 1999 -- -- -- 1,600,000
Christopher R. Hassett(2) ..................... 1998 $ -- $ -- $ -- --
President and Chief Operating Officer ......... 1999 162,950 -- -- 686,978
Michael K. Simon(3) ........................... 1998 122,495 $ -- $ -- 82,000
Chief Financial Officer ....................... 1999 150,000 -- 2,950 100,000
David A. Becker(4) ............................ 1998 108,717 32,800 $ -- --
1999 150,000 35,820 -- --
</TABLE>
- ------------
(1) Mr. Cron joined the Company as Chief Executive Officer in September 1999
and became Chairman of the Board of Directors in December 1999. Mr. Cron
is not entitled to receive an annual salary or bonus from the Company.
(2) Mr. Hassett joined the Company as Chief Operating Officer and as a Director
in July 1999. He currently also serves as President. Mr. Hassett is
currently not entitled to receive an annual salary or bonus from the
Company.
(3) Mr. Simon served as the Company's Chief Executive Officer until September
1999 and as Chairman until December 1999.
(4) Mr. Becker was the Company's President and Chief Operating Officer until
August 1999.
Option Grants in Last Fiscal Year
The following table sets forth grants of stock options for the year ended
December 31, 1999 to the Chief Executive Officer and to the most highly
compensated executive officers, other than our Chief Executive Officer, whose
salary and bonus for services rendered to the Company in all capacities in 1999
exceeded $100,000. The potential realizable value is calculated based on the
term of the option at its time of grant. It is calculated assuming that the fair
market value of common stock on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the appreciated
stock price. These numbers are calculated based on the requirements of the
Securities and Exchange Commission and do not reflect the Company's estimate of
future stock price growth. The percentage of total options granted to employees
in the last fiscal year is based on options to purchase an aggregate of 5.4
million shares of common stock granted by the Company. The Company has never
granted stock appreciation rights.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options Exercise Potential Realizable Value at
Underlying Granted to Price Per Assumed Rates of Stock Price
Options Employees Share Expiration Appreciation for Option Term
Name Granted In 1999 ($) Date 5% 10%
- ---- ------------ --------------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. Cron. ............. 1,600,000 29.8% 9.43 9/9/09 $9,483,731 $24,033,636
Christopher R. Hassett ....... 686,978 12.8 9.43 9/9/09 4,071,947 10,319,112
Michael K. Simon ............. 100,000 1.9 9.43 9/9/09 592,733 1,502,102
David A. Becker .............. -- -- -- -- -- --
</TABLE>
7
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning the value realized
upon exercise of stock options and the number and value of unexercised options
held as of December 31, 1999 by the Company's Chief Executive Officer and the
most highly compensated executive officers, other than our Chief Executive
Officer, whose salary and bonus for services rendered to the Company in all
capacities during 1999 exceeded $100,000. The values set forth below were
calculated based on the fair market value of the shares underlying the options
on the date of exercise, less the applicable exercise price per share,
multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Options at Value of Unexercised In-The-
December Money Options at December
31, 1999 31, 1999
------------------------------ -----------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. Cron ................ -- $-- 800,000 800,000 $10,439,106 $10,439,100
Christopher R. Hassett ......... -- -- 343,489 343,489 4,482,743 4,482,148
Michael K. Simon ............... -- -- 109,759 72,241 1,863,392 1,403,135
David A. Becker ................ -- -- 400,000 -- 8,105,553 --
</TABLE>
Employment Agreements
The Company is currently party to an employment agreement with each of
Messrs. Cron, Hassett and Simon.
The agreements with each of Messrs. Cron and Hassett provide for
compensation solely in the form of options to acquire shares of the Company's
common stock. Pursuant to the agreement with Mr. Cron, the Company has granted
him options to acquire 1,600,000 shares of common stock, of which options to
acquire 800,000 shares have vested and are currently exercisable, and options
to acquire the remaining 800,000 shares will have vested and become exercisable
by September 6, 2001. Pursuant to the agreement with Mr. Hassett, the Company
has granted him options to acquire 686,978 shares of common stock, of which
options to acquire 343,489 shares have vested and are currently exercisable,
and options to acquire the remaining 343,489 shares will have vested and become
exercisable by September 6, 2001. In the event of the termination of employment
of Mr. Cron or Mr. Hassett for any reason other than termination by the Company
for cause, or in the event of a change of control of the Company, all stock
options that have not been exercised will immediately vest. Messrs. Cron and
Hassett are also entitled to participate in all health and other benefit plans
provided by the Company to its executive employees. The employment of each
continues on an at-will basis. The employment agreement of each of the
executives prohibits him from competing with the Company for a period of one
year from the date of termination if the Company terminates his employment for
cause or if he resigns without good reason. The Company has agreed to indemnify
each of the executives for all liabilities relating to their status as officers
or Directors to the extent permitted by the laws of the State of Delaware.
The agreement with Mr. Simon provides for compensation in the form of an
annual salary and bonus. In addition, beginning on March 31, 2000, at the end
of each calendar quarter during the term of the agreement, the Company will
grant Mr. Simon options to acquire 30,000 shares of the Company's common stock,
which will vest and be exercisable upon termination of the agreement. Mr. Simon
is also entitled to participate in all health and other benefit plans provided
by the Company to its executive employees. Mr. Simon's employment under his
agreement will end on the earliest of (1) December 2001, (2) the date on which
an agreement between the Company and Pearson Television is modified so that the
termination of Mr. Simon's employment with the Company no longer triggers
Pearson's right to terminate such agreement, or (3) the termination of such
agreement between Pearson and the Company. In the event Mr. Simon's employment
is terminated by the Company without cause, or he chooses to terminate his
employment with the Company for good reason, all stock options previously
granted to him will accelerate and vest in full.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of the Company is
currently composed of an outside Director who is not a current or former
employee or officer of the Company and who receives no remuneration from the
Company in any capacity other than as a Director.
Compensation Policies
It is the policy of the Company to link the compensation of each of its
executive officers to the financial performance of the Company and to the
growth in the value of the Company's equity. The Company endeavors to attract,
motivate, retain and reward highly qualified personnel by providing competitive
total compensation opportunities based on performance. The Compensation
Committee believes that a significant portion of an executive officer's total
compensation should be at risk, contingent upon financial performance and upon
an increase in stockholder value. Some of the Company's executive officers are
compensated through both cash and equity-based programs, but the majority of
the Company's executive officers, including its Chief Executive Officer, are
currently compensated solely through equity-based programs. The Compensation
Committee believes that an emphasis on equity-based compensation helps align
the interests of the Company's executive officers with the interests of its
stockholders and encourages the executive officers to manage the Company's
business from the stockholders' perspective.
Cash Compensation
Cash compensation paid to those executive officers whose total compensation
packages include a cash component consists of a base salary and an annual
incentive bonus. In establishing the base salary of each of those executive
officers of the Company who receive cash compensation, the Compensation
Committee takes into consideration the executive's relative responsibilities,
level of experience and compensation paid for comparable positions by other
companies in relevant markets. The annual incentive bonus payable to each of
those executive officers of the Company who receive cash compensation is
designed to motivate the executive officer to achieve specific performance goals
which are established by the Company based on both objective and subjective
criteria, and payment of the annual incentive bonus is contingent upon the
achievement of such performance goals.
Equity-Based Compensation
The Company uses stock options as the principal means of compensating its
executive officers. A majority of the Company's executive officers are
currently compensated solely in the form of stock options, which means such
executives will receive no financial reward for their services to the Company
except to the extent that the fair market value of the Company's common stock
appreciates. With the exception of Mr. Simon, who founded the Company and who
was granted some of his currently outstanding options prior to 1999, all the
executive officers of the Company were granted their currently outstanding
options during 1999 pursuant to the Uproar Ltd. 1999 Share Option/Share
Issuance Plan. Such options were incorporated into the Uproar Inc. 2000 Stock
Incentive Plan at the time of its adoption by the Board of Directors in
February 2000. Please see Approval of Uproar Inc. 2000 Stock Incentive Plan,
below, for more detail. In establishing the option grants to each executive
officer in 1999, the Compensation Committee took into consideration the
executive's relative responsibilities, level of experience, existing stock
ownership and potential to contribute significantly to future growth in the
Company's value. The exercise price of all options granted to the executive
officers in 1999 was equal to the fair market value of the Company's common
stock as of the date of grant. All options were granted for a term of ten years
and vest over various periods determined by the Compensation Committee.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code provides, in relevant part,
that remuneration paid for any taxable year to the chief executive officer and
any of the other four highest compensated officers of a publicly held
corporation such as the Company is not deductible for federal income tax
purposes to the extent it exceeds $1,000,000, unless the remuneration is
contingent on the attainment of pre-established performance goals and meets
certain other conditions, one of which is that the material terms under which
the remuneration is to be paid are disclosed to and approved by the
stockholders. The Company's policy is to qualify such remuneration
9
<PAGE>
for tax-deductibility to the extent practicable, although the Compensation
Committee retains the discretion to provide compensation programs that may not
be fully deductible if it believes that to be in the best interests of the
Company and its stockholders. The Compensation Committee presently expects that
any remuneration in excess of $1,000,000 paid in 2000 will be exempt from the
deduction limit of Section 162(m) because it was paid pursuant to agreements
which existed before the Company became publicly held in the United States and
which have not been materially modified and because the information about such
agreements that was disclosed in the prospectus accompanying the Company's
public offering satisfied all applicable securities laws then in effect.
Compensation of Chief Executive Officer
Mr. Cron, the Chairman of the Board and Chief Executive Officer of the
Company, currently receives no cash compensation from the Company. In 1999, he
and the Company entered into an Employment Agreement approved by the Board of
Directors, which Employment Agreement provides for compensation solely in the
form of stock options. Pursuant to the Employment Agreement, Mr. Cron was
granted options to acquire 1,600,000 shares of the Company's common stock, of
which options to acquire 800,000 shares have vested and are currently
exercisable, and options to acquire the remaining 800,000 shares will have
vested and become exercisable by September 6, 2001. The per-share exercise
price of such options is equal to the fair market value of a share of the
Company's common stock as of the date on which the options were granted. Any
compensation that Mr. Cron receives for rendering services to the Company in
1999 will therefore be entirely a reflection of the appreciation, if any, in
the value of the Company's common stock between the date of grant and the date
of exercise. The Company expects that the full amount of Mr. Cron's
compensation under the Employment Agreement will be deductible by the Company
for tax purposes under Section 162(m) of the Internal Revenue Code because it
was paid pursuant to an agreement which existed before the Company became
publicly held in the United States. Please see Tax Deductibility of Executive
Compensation, above, for more detail.
Compensation Committee
Esther Dyson
10
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 5 MONTH CUMULATIVE TOTAL RETURN*
AMONG UPROAR, THE EASDAQ ALL SHARE INDEX
AND A PEER GROUP
[GRAPHIC OMITTED]
* $100 INVESTED ON 7/13/99 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 30.
(1) The peer group is comprised of 4Front Technologies Inc., Global
Telesystems Group Inc. and NTL Inc.
(2) For purposes of preparing this graph, the shares of Uproar common
stock and the EASDAQ All Shares Index were converted from Euros to
United States Dollars at the December 31, 1999 rate of 1.0068 United
States Dollars for one Euro.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of common stock as of March 31, 2000, for each person who is known to
the Company to be the beneficial owner of more than 5% of the Company's common
stock; each Director; each executive officer named in the Summary Compensation
Table above; and all Directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed
below is c/o Uproar Inc., 240 West 35th Street, New York, New York 10001.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Except as indicated by footnote, and subject to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares of common stock outstanding
used in calculating the percentage for each listed person includes the shares
of common stock underlying options held by such person that are exercisable
within 60 days after March 31, 2000, but excludes shares of common stock
underlying options held by any other person. Percentage of beneficial ownership
is based on 27,934,494 shares of common stock outstanding as of March 31, 2000.
Shares Beneficially
Owned
-----------------------
Name of Beneficial Owner Number Percent
------------------------ ------------ --------
Kenneth D. Cron (1) ................... 843,320 3.0%
Christopher R. Hassett (2) ............ 1,036,547 3.7
Michael K. Simon (3) .................. 1,218,156 4.4
David A. Becker (4) ................... 260,000 *
Thompson B. Barnhardt (5) ............. 27,125 *
Thomas E. Dooley (6) .................. 0 *
Esther Dyson (7) ...................... 159,365 *
James J. Geddes, Jr. (8) .............. 1,742,172 6.2
Catherine V. Mackay (9) ............... 2,001,125 7.2
Pearson Television, Inc. (10) ......... 2,000,000 7.2
Trans Cosmos USA, Inc. (11) ........... 1,742,172 6.2
All Directors and executive officers
as a group (12 persons) ............. 7,897,366 28.3
- ------------
* Indicates less than one percent of the common stock.
(1) Includes 800,000 shares issuable upon the exercise of currently exercisable
stock options.
(2) Includes (a) 343,489 shares issuable upon the exercise of currently
exercisable stock options and (b) 124,000 shares owned by Mr. Hassett's
spouse.
(3) Includes 125,036 shares issuable upon the exercise of currently exercisable
stock options.
(4) Includes 260,000 shares issuable upon the exercise of currently exercisable
stock options. Mr. Becker's address is 87 Remsen Street, #3, Brooklyn, NY
11201.
<PAGE>
(5) Includes 27,125 shares issuable upon the exercise of currently exercisable
stock options. Mr. Barnhardt's address is c/o Biznes Polska.pl Sp zoo., Ul.
Gornoslaska 7B, Warsaw 00-443.
(6) Mr. Dooley's address is c/o Viacom Inc., 1515 Broadway, New York, New York
10036.
(7) Includes 33,125 shares issuable upon the exercise of currently exercisable
stock options. Ms. Dyson's address is 104 Fifth Avenue, 20th Floor, New
York, New York 10011.
(8) All shares indicated as owned by Mr. Geddes are included because of Mr.
Geddes' affiliation with Trans Cosmos USA, Inc. Mr. Geddes disclaims
beneficial ownership of all shares owned by Trans Cosmos USA, Inc. Mr.
Geddes' address is c/o Trans Cosmos USA, Inc., 777 108th Avenue NE, Suite
2300, Bellevue, Washington 98004-5149.
(9) Includes 1,125 shares issuable upon the exercise of currently exercisable
stock options. Two million of the shares indicated as owned by Ms. Mackay
are included because of Ms. Mackay's affiliation with Pearson Television,
Inc. Ms. Mackay disclaims beneficial ownership of all shares owned by
Pearson Television, Inc. Ms. Mackay's address is c/o Pearson Television,
Inc., 1330 Avenue of the Americas, New York, New York 10019.
(10) The address of Pearson Television, Inc. is 1330 Avenue of the Americas, New
York, NY 10019.
(11) The address of Trans Cosmos USA, Inc. is 777 108th Avenue NE, Suite 2300,
Bellevue, Washington 98004-5149.
12
<PAGE>
RELATED PARTY TRANSACTIONS
Transaction with Trans Cosmos
In February 2000, the Company sold 1,265,372 shares of common stock to
Trans Cosmos USA, Inc. for approximately $25.0 million. As a result of this
transaction, Trans Cosmos now beneficially owns more than 5% of the Company's
stock. In addition, the Company and Trans Cosmos intend to form a Japanese
joint venture owned equally by the two parties, to produce a Japanese-localized
version of the Company's Web site, uproar.com. In connection with the
foregoing, the Company also appointed a Trans Cosmos representative, Mr.
Geddes, to the Board of Directors.
Transaction with Pearson Television
In January 1999, the Company entered into a strategic relationship with
Pearson Television that provides the Company with rights to create and produce
English-language versions of television game show formats owned by Pearson. In
connection with this arrangement, the Company issued 2,000,000 shares of its
common stock to Pearson. The Company also agreed to issue to Pearson an
additional 400,000 shares between September 1999 and August 2000 and 400,000
shares between September 2000 and August 2001, if Pearson meets certain
television distribution targets for its game shows in the United States. In
connection with the foregoing, the Company also appointed a Pearson
representative, Ms. Mackay, to the Board of Directors.
Transaction with PrizePoint
In June 1999, the Company completed the acquisition of PrizePoint
Entertainment Corporation, a provider of online single-player games. Under the
merger agreement with PrizePoint, in exchange for all of the outstanding shares
of common stock of PrizePoint the Company issued approximately 2,440,000 shares
of its common stock to PrizePoint stockholders, including Mr. Hassett, the
Company's current President and Chief Operating Officer, and his family
members. In addition, the Company appointed Mr. Hassett to the Board of
Directors. The following table sets out the number of PrizePoint shares that
the following officers and directors of PrizePoint purchased, the number of
Company shares into which they were converted, and the equivalent per share
price:
<TABLE>
<CAPTION>
Name PrizePoint Shares Uproar Shares Price Per Uproar Share
- ---- ----------------- ------------- ----------------------
<S> <C> <C> <C>
Christopher R. Hassett .......... 716,667 753,058 $ 0.84
Francis G. Blot ................. 218,500 229,560 $ 0.01
</TABLE>
The Uproar shares listed for Mr. Hassett include 184,400 shares then owned by
his spouse; the Uproar shares listed for Mr. Blot include 69,000 shares then
owned by his spouse.
13
<PAGE>
PROPOSAL 2: APPROVAL OF UPROAR LTD. 1999 SHARE OPTION/SHARE ISSUANCE PLAN
In 1999, the Board of Directors approved and adopted the Uproar Ltd. 1999
Share Option/Share Issuance Plan, the purpose of which was to provide eligible
persons in the service of the Company with the opportunity to acquire or
increase a proprietary interest in shares of the Company's common stock
("Shares"). In November 1999, the Board of Directors increased to 5,400,000 the
aggregate number of Shares reserved for issuance thereunder. As of February 23,
2000, 5,086,936 Shares were subject to outstanding options under the Uproar
Ltd. 1999 Share Option/Share Issuance Plan as amended and restated (the "1999
Plan"). To date, no options have been exercised, and no Shares have been
issued, under the 1999 Plan.
A summary of the 1999 Plan is provided below. The full text of the 1999
Plan is attached as Annex A and should be referred to for a complete statement
of the provisions of the 1999 Plan.
Summary of the 1999 Plan
The 1999 Plan contains two separate programs: the option grant program,
under which eligible persons may be granted options to purchase Shares, and the
share issuance program, under which eligible persons may be issued Shares
either for immediate purchase or as a bonus for services rendered to the
Company. The material features of the 1999 Plan are summarized below.
Administration. The Plan Administrator of the 1999 Plan is the Board of
Directors, or a committee of one or more members of the Board of Directors if
the Board of Directors delegates its administrative functions thereto. The Plan
Administrator has full power and authority to establish rules and regulations
for the administration of the 1999 Plan, to interpret the 1999 Plan and to
issue options and Shares under the 1999 Plan. The decisions of the Plan
Administrator are final and binding on all parties.
Eligibility. The persons eligible to participate in the 1999 Plan are
Company employees, non-employee Directors and consultants selected by the Plan
Administrator. As of February 23, 2000, approximately 180 employees and four
non-employee Directors were eligible to participate in the 1999 Plan. The
number of consultants eligible to participate in the 1999 Plan was
indeterminable but, as of February 23, 2000, no consultants had been granted
options under the 1999 Plan.
Option Grant Program.
o The Plan Administrator will determine (i) which eligible individuals will
receive option grants, (ii) the times when option grants are to be made,
(iii) the number of Shares subject to each option grant, (iv) the status
of any granted option as either an incentive stock option or a
non-statutory stock option, (v) the exercise price for each option
(except that the exercise price for incentive stock options may not be
less than 100% of their fair market value on the option grant date), (vi)
the vesting schedule to apply to each option grant, and (vii) the maximum
term for which any granted option is to remain outstanding, subject to
earlier termination following the optionee's cessation of service to the
Company.
o The exercise price for options may be paid in cash, in Shares valued at
fair market value on the exercise date or through a same-day sale program
without any cash outlay by the option holder.
o No option may have a term in excess of ten years from the option grant
date.
o If an optionee's services to the Company cease for any of the following
reasons, the option will be exercisable, to the extent vested, as
follows:
o if services cease for any reason other than death, permanent disability
or misconduct, the vested option will be exercisable for three months
following such cessation;
o if services cease by reason of the optionee's death or permanent
disability, the vested option will be exercisable for a period of
twelve months following such cessation;
o if services cease by reason of the optionee's misconduct, the option
will terminate and will not be exercisable.
14
<PAGE>
o The Plan Administrator has the discretion, exercisable either at the time
an option is granted or thereafter, to extend the period of time for
which an option will remain exercisable following an optionee's cessation
of services and/or to permit the option to be exercised following the
cessation of services with respect to additional Shares in which the
optionee would have vested had the optionee continued in the Company's
service.
o Incentive stock options may be granted only to employees of the Company.
The exercise price per Share may not be less than the fair market value
per Share on the option grant date. The aggregate fair market value of
the Shares for which options granted to any employee may become
exercisable as incentive stock options during any one calendar year shall
not exceed $100,000.
o In the event of a merger or consolidation in which there is a change of
control of 50% or more of the total voting power of the Company's
securities or in the event of the sale, transfer or other disposition of
all or substantially all of the Company's asserts in complete liquidation
or dissolution of the Company (a "Corporate Transaction"), the Shares
subject to each option then outstanding shall automatically vest in full
unless and to the extent such option is assumed by the successor
corporation or such option is replaced with a cash incentive program
which preserves the spread existing on the unvested option Shares and
provides for subsequent payout in accordance with the same vesting
schedule applicable to the unvested option Shares. The Plan Administrator
has the discretion, exercisable either at the time an option is granted
or thereafter, to provide for accelerated vesting in the event of a
Corporate Transaction, whether or not the option is to be assumed by the
successor corporation.
Share Issuance Program.
o The Plan Administrator will determine (i) which eligible individuals will
receive stock issuances, (ii) the times when stock issuances are to be
made, (iii) the number of Shares included in each stock issuance, (iv)
the purchase price for each stock issuance and (v) the vesting schedule
to apply to each stock issuance.
o The recipient has the right to vote Shares and receive any regular cash
dividends paid on Shares whether or not the recipient's interest in the
Shares is vested.
o If the recipient's services to the Company cease for any reason or if the
performance objectives are not attained with respect to any unvested
Shares, then those Shares must be immediately surrendered to the Company
for cancellation and, to the extent the Shares were previously issued to
the recipient for cash or cash-equivalent consideration, the Company will
repay to the recipient the consideration paid.
o The Plan Administrator has the discretion to waive the surrender and
cancellation of unvested Shares which would otherwise occur.
o In the event of a Corporate Transaction, all Shares subject to repurchase
rights will vest in full except to the extent that such repurchase rights
are assigned to the successor corporation. The Plan Administrator has the
discretion, exercisable either at the time the unvested Shares are issued
or thereafter, to provide for immediate vesting in the event the
recipient's service is involuntarily terminated within a designated
period (not more than 18 months) after a Corporate Transaction in which
such repurchase rights are assigned.
15
<PAGE>
Benefits Received Under the 1999 Plan
The following table sets forth the stock options that were granted in 1999
to the following persons or groups of persons under the 1999 Plan:
Plan Benefits
Uproar Ltd. 1999 Share Option/Share Issuance Plan
<TABLE>
<CAPTION>
Number of Option Weighted Average
Name Shares Exercise Price
---- ----------------- -----------------
<S> <C> <C>
Kenneth D. Cron, Chairman of the 1,600,000 $ 9.43
Board of Directors and Chief
Executive Officer
Christopher R. Hassett, President 686,978 9.43
and Chief Operating Officer
Michael K. Simon, Chief 100,000 9.43
Financial Officer
David Becker (1) 0 --
All executive officers as a group 4,010,338 9.84
All non-executive directors as a 0 --
group
All non-executive officer 1,015,070 11.23
employees as a group
</TABLE>
- ------------
(1) Mr. Becker was the Company's President and Chief Operating Officer until
August 1999.
As of February 23, 2000, options covering 5,086,936 shares of common stock
were outstanding under the 1999 Plan, and 313,064 shares remained available for
future option grant or direct issuance. No shares had been issued pursuant to
the exercise of outstanding options under the 1999 Plan.
Amendment and Termination. The Board of Directors has the power to amend
the 1999 Plan in all respects, provided that no amendment may adversely affect
the rights and obligations with respect to options then outstanding or issued
Shares then unvested. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations. The 1999 Plan will
terminate by its terms upon the earliest of (i) ten years after its adoption by
the Board of Directors, (ii) the date when all Shares available for issuance
under the 1999 Plan have been issued or (iii) the termination of all
outstanding options in connection with a Corporate Transaction.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF THE UPROAR LTD. 1999 SHARE OPTION/SHARE ISSUANCE PLAN.
16
<PAGE>
PROPOSAL 3: APPROVAL OF UPROAR INC. 2000 STOCK INCENTIVE PLAN
On February 23, 2000, the Board of Directors approved and adopted the
Uproar Inc. 2000 Stock Incentive Plan (the "SIP"), which is intended to serve as
the successor equity incentive program to the 1999 Plan. If the SIP is approved
by the stockholders, outstanding options under the 1999 Plan will be
incorporated into the SIP and no further option grants or Share issuances will
be made under the 1999 Plan. The incorporated options will continue to be
governed by their existing terms, unless the Plan Administrator of the SIP
extends one or more features of the SIP to those options. However, except as
noted below, the outstanding options under the 1999 Plan contain substantially
the same terms and conditions summarized below for the discretionary option
grant program under the SIP.
A summary of the SIP is provided below. The complete text of the SIP is
attached as Annex B and should be referred to for a complete statement of the
provisions of the SIP.
Summary of the SIP
The SIP contains three separate programs: the discretionary option grant
program, under which eligible persons may be granted incentive stock options or
non-statutory options to purchase Shares; the stock issuance program, under
which eligible persons may be issued Shares directly either for immediate
purchase or as a bonus for past services to the Company; and the automatic
option grant program, under which non-employee Directors will receive periodic
option grants. The material features of the SIP are summarized below.
Administration. The Compensation Committee of the Board of Directors will
be the Plan Administrator for the discretionary option grant program and the
stock issuance program, although administration may be delegated in part to a
secondary committee of one or more Directors which would have separate but
concurrent jurisdiction to make option grants and direct stock issuances under
the discretionary option grant program and the stock issuance program with
respect to all participants other than officers and Directors of the Company.
Neither the Compensation Committee nor the Board of Directors will exercise any
administrative discretion with respect to the automatic option grant program
for non-employee Directors. The Plan Administrator has full power and authority
to establish rules and regulations for the administration of the SIP, to
interpret the SIP and to issue options and Shares under the SIP. The decisions
of the Plan Administrator are final and binding on all parties.
Eligibility. The persons eligible to participate in the discretionary
option grant program and the share issuance program are Company employees,
non-employee Directors and consultants selected by the Plan Administrator.
Non-employee Directors are eligible to participate in the automatic option
grant program. As of March 31, 2000, approximately 215 employees were eligible
to participate in the discretionary option grant program, and five non-employee
Directors were eligible to participate in the discretionary option grant
program, the share issuance program and the automatic grant program. The number
of consultants eligible to participate in the SIP was indeterminable but, as of
February 23, 2000, no consultants had been granted options under the SIP.
Share Reserve. 6,750,000 Shares have been reserved for issuance under the
SIP, of which 5,086,936 shares were subject on February 23, 2000, to
outstanding options pursuant to previous grants under the 1999 Plan. The number
of Shares reserved for issuance under the SIP will automatically increase on
the first trading day of each calendar year, beginning with the year 2001, by a
number of Shares equal to one percent (1%) of the total number of Shares
outstanding on the last trading day of the immediately preceding calendar year,
but no annual increase will exceed 400,000 Shares. In no event may any one
participant in the SIP receive option grants or direct stock issuances for more
than 2,000,000 Shares in the aggregate per calendar year.
Term. The SIP will expire ten years after its adoption by the Board of
Directors. Options granted under the SIP will have a maximum term of ten years,
subject to earlier termination under circumstances specified by the SIP or the
Plan Administrator.
17
<PAGE>
Discretionary Option Grant Program.
o The Plan Administrator will determine (i) which eligible individuals will
receive option grants, (ii) the times when option grants are to be made,
(iii) the number of Shares subject to each option grant, (iv) the status of
any granted option as either an incentive stock option or a non-statutory
stock option, (v) the exercise price for each option (except that the
exercise price for incentive stock options may not be less than 100% of
their fair market value on the option grant date), (vi) the vesting
schedule to apply to each option grant, and (vii) the maximum term for
which any granted option is to remain outstanding, subject to earlier
termination following the optionee's cessation of service to the Company.
o The exercise price for options may be paid in cash, in Shares valued at
fair market value on the exercise date or through a same-day sale program
without any cash outlay by the option holder.
o The Plan Administrator will have discretion to accelerate the vesting of
outstanding options in connection with an option holder's cessation of
service to the Company. In the event of a Corporate Transaction, options
will automatically vest except to the extent they are assumed by the
successor company or replaced with a cash incentive program which preserves
the existing option spread and provides for subsequent payout in accordance
with the existing vesting schedule. The Plan Administrator may provide
that, even if an option is assumed or replaced, it will still accelerate if
the option holder's service with the successor company is involuntarily
terminated within a designated period (not to exceed 18 months) after the
Corporate Transaction. The Plan Administrator may also provide for the
automatic vesting of an option in connection with a change of control or
condition such vesting upon the involuntary termination of the option
holder's service within a designated period (not to exceed 18 months) after
such change of control.
o Executive officers subject to Section 16 of the U.S. Securities Exchange
Act of 1934 may be granted limited stock appreciation rights which will
allow them, in the event of a hostile takeover of the Company, to surrender
their vested options in exchange for a cash distribution from the Company
equal to the amount by which the takeover price exceeds the exercise price,
multiplied by the number of Shares subject to their vested options.
Stock Issuance Program.
o The Plan Administrator will determine (i) which eligible individuals will
receive stock issuances, (ii) the times when stock issuances are to be
made, (iii) the number of Shares included in each stock issuance, (iv) the
purchase price for each stock issuance and (v) the vesting schedule to
apply to each stock issuance.
o The Plan Administrator will have discretion to accelerate the vesting of
issued Shares in connection with a Share holder's cessation of service to
the Company. In the event of a Corporate Transaction, issued Shares will
automatically vest except to the extent that the Company's repurchase
rights are assumed by the successor company. The Plan Administrator may
provide that, even if repurchase rights are assumed, they will terminate if
the Share holder's service with the successor company is involuntarily
terminated within a designated period (not to exceed 18 months) after the
Corporate Transaction. The Plan Administrator may also provide for the
automatic vesting of Shares in connection with a change of control or
condition such vesting upon the involuntary termination of the optionee's
service within a designated period (not to exceed 18 months) after such
change of control.
Automatic Option Grant Program.
o Each individual who first joins the Company's Board of Directors as a
non-employee Director will be granted an option to purchase 30,000 Shares
upon the commencement of the Director's service on the Board. Each such
option will vest in a series of 3 equal annual installments upon the
Director's completion of each year of service over the 3-year period
measured from the grant date, subject to earlier termination following the
Director's cessation of service on the Board of Directors.
o As of February 4, 2000, and thereafter at each annual meeting of
stockholders beginning with the 2001 annual meeting, each individual who
has served as a non-employee Director for at least 6 months and is
18
<PAGE>
to continue to serve as such will be granted an option to purchase 5,000
Shares. Each such option will vest in a series of 4 equal quarterly
installments upon the Director's completion of each quarter of service over
the 1-year period measured from the grant date, subject to earlier
termination following the Director's cessation of service on the Board of
Directors.
o Each option under the automatic option grant program will have an exercise
price equal to the fair market value of a Share on the grant date.
o All options will automatically vest in the event of the Director's death or
permanent disability, an acquisition of the Company through a
stockholder-approved merger or asset sale, or a change in control.
o Directors will have the right, in the event of a hostile tender offer for
more than 50% of the outstanding Shares, to surrender their vested options
for a cash distribution from the Company in an amount equal to the excess
of the tender-offer price of the Shares subject to the surrendered options
over the aggregate price payable for such Shares.
Benefits Received Under the SIP
As noted above, if the SIP is approved by the stockholders, outstanding
options under the 1999 Plan will be incorporated into the SIP and no further
option grants or Share issuances will be made under the 1999 Plan. No
determination has been made with respect to future grants under the SIP except
for grants to non-executive Directors under the automatic grant option program
and the grant of 30,000 shares to Mr. Simon as of the last day of each calendar
quarter during the term of his Employment Agreement (please see Employment
Agreements, above, for more detail). For grants made to executive officers,
non-executive directors and employees of the Company in 1999, see Benefits
Received under the 1999 Plan and Compensation of Directors, above.
As of March 31, 2000, options covering 5,197,362 shares of common stock
were outstanding under the SIP and 1,552,638 shares remained available for
future option grant or direct issuance. No shares have been issued pursuant to
the exercise of outstanding option under the SIP.
Amendment and Termination. The Board of Directors has the power to amend
the SIP in all respects, provided that no amendment may adversely affect the
rights and obligations with respect to options then outstanding or issued
Shares then unvested. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations. The SIP will expire ten
years after its adoption by the Board.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF THE UPROAR INC. 2000 STOCK INCENTIVE PLAN.
19
<PAGE>
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP to serve as the Company's
independent public accountants and auditors for the year ending December 31,
2000, subject to the ratification of such selection by the stockholders at the
Annual Meeting. A representative of KPMG LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if such representative
desires to do so and is also expected to be available to respond to appropriate
questions.
The Company changed its independent accountants and auditors to KPMG
Hungaria Kft. from Coopers & Lybrand in Dublin, Ireland, on August 28, 1998.
The decision to change auditors from Coopers & Lybrand, Dublin, to KPMG
Hungaria Kft. was approved by the Company's Board of Directors and
stockholders.
The Company believes, and has been advised by PricewaterhouseCoopers LLP,
Dublin (the successor to Coopers & Lybrand, Dublin) that it concurs in such
belief, that, for the period from February 1995 (inception) through the date of
the change in auditors, Coopers & Lybrand, Dublin, did not have any
disagreement with the Company on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Coopers & Lybrand, Dublin,
would have caused it to make reference to the subject matter of the
disagreement in connection with its report on the Company's financial
statements. No report of Coopers & Lybrand, Dublin, on the financial statements
of the Company contained an adverse opinion or a disclaimer of opinion, or was
qualified or modified as to uncertainty, audit scope or accounting principles.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE SELECTION OF KPMG LLP AS INDEPENDENT AUDITORS
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STOCKHOLDER PROPOSALS
Stockholder proposals intended for presentation at the 2001 Annual Meeting
of Stockholders must be delivered to the Secretary of the Company no later than
the close of business on February 11, 2001 if such proposals are to be
considered for inclusion in the Company's Proxy Statement for such Annual
Meeting of Stockholders. Proposals must be in writing and sent via registered
or certified mail or by courier, addressed to the attention of the Secretary of
the Company at the Company's principal executive offices. The mailing address
of the principal executive offices of the Company is 240 West 35th Street, New
York, New York 10001.
OTHER MATTERS
The Board of Directors knows of no matters that are to be presented for
action at the Annual Meeting other than those set forth above. If any other
matters requiring a vote of the stockholders properly come before the Annual
Meeting, the persons named in the enclosed form of proxy will vote the shares
represented by proxies in accordance with their judgment.
SOLICITATION OF PROXIES
This Proxy Statement and the accompanying form of proxy are being mailed
to the stockholders of the Company on or about April 10, 2000, together with
the mailing of the Company's 1999 Annual Report. The cost of solicitation of
proxies by the Board of Directors will be borne by the Company. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries,
custodians and other persons holding shares in their names that are
beneficially owned by others so that the solicitation materials may be
forwarded to such beneficial owners. The Company will reimburse such persons
for their reasonable expenses in forwarding the solicitation materials to such
beneficial owners. Proxies will be solicited by mail and may also be solicited
in person or by telephone, facsimile or electronic mail by some regular
employees of the Company for no additional compensation. The Company may also
consider the engagement of a proxy solicitation firm.
By Order of the Board of Directors
/s/ Robert D. Marafioti
Robert D. Marafioti
Executive Vice President, General Counsel
and Secretary
New York, New York
April 10, 2000
21
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ANNEX A
UPROAR LTD.
1999 SHARE OPTION/SHARE ISSUANCE PLAN
(As Amended and Restated as of September 2, 1999)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1999 Share Option/Share Issuance Plan is intended to promote the
interests of Uproar Ltd., a Bermuda corporation, by providing eligible persons
in the Corporation's employ or service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to continue in such employ or service.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase
Shares, and
(ii) the Share Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued Shares directly, either
through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority (subject to
the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding options or Share issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any option or Share issuance
thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-employee members of
the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine, (i) with
respect to the grants made under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option
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as either an Incentive Option or a Non-Statutory Option, the time or times when
each option is to become exercisable, the vesting schedule (if any) applicable
to the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to Share issuances made under the Share
Issuance Program, which eligible persons are to receive Share issuances, the
time or times when those issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid by the Participant for such
shares.
C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Option Grant Program or to effect Share
issuances in accordance with the Share Issuance Program.
V. SHARES SUBJECT TO THE PLAN
A. The Share issuable under the Plan shall be shares of authorized but
unissued or reacquired Shares. The maximum number of Shares which may be issued
over the term of the Plan shall not exceed 2,200,000 shares.
B. Shares subject to outstanding options shall be available for subsequent
issuance under the Plan to the extent (i) the options expire or terminate for
any reason prior to exercise in full or (ii) the options are cancelled in
accordance with the cancellation-regrant provisions of Article Two. Unvested
shares issued under the Plan and subsequently repurchased by the Corporation,
at the option exercise or direct issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the
number of Shares reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
Share issuances under the Plan.
C. Should any change be made to the Shares by reason of any share split,
share dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Shares as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made
to (i) the maximum number and/or class of securities issuable under the Plan
and (ii) the number and/or class of securities and the exercise price per share
in effect under each outstanding option in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive. In no event shall any
such adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred shares into Shares.
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ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair
Market Value per Share on the option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article
Four and the documents evidencing the option, be payable in cash or check
made payable to the Corporation. Should the Shares be registered under
Section 12 of the 1934 Act at the time the option is exercised, then the
exercise price may also be paid as follows:
(i) in Shares held for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested shares, through
a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable instructions (a) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable income
and employment taxes required to be withheld by the Corporation by reason
of such exercise and (b) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, no option shall have a term in excess of ten (10)
years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or death:
(i) Should the Optionee cease to remain in Service for any reason
other than death, Permanent Disability or Misconduct, then the Optionee
shall have a period of three (3) months following the date of such
cessation of Service during which to exercise each outstanding option held
by such Optionee.
(ii) Should Optionee's Service terminate by reason of Permanent
Disability, then the Optionee shall have a period of twelve (12) months
following the date of such cessation of Service during which to exercise
each outstanding option held by such Optionee.
(iii) If the Optionee dies while holding an outstanding option, then
the personal representative of his or her estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or the
laws of inheritance shall have a twelve (12)-month period following the
date of the Optionee's death to exercise such option.
(iv) Under no circumstances, however, shall any such option be
exercisable after the specified expiration of the option term.
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(v) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period
or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be outstanding
with respect to any and all option shares for which the option is not
otherwise at the time exercisable or in which the Optionee is not otherwise
at that time vested.
(vi) Should Optionee's Service be terminated for Misconduct, then all
outstanding options held by the Optionee shall terminate immediately and
cease to remain outstanding.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option
remains outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
Shares for which such option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested under the option had
the Optionee continued in Service.
D. Shareholder Rights. The holder of an option shall have no Shareholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become the recordholder
of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested Shares. Should the Optionee
cease Service while holding such unvested shares, the Corporation shall have
the right to repurchase, at the exercise price paid per Share, any or all of
those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to
the extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime (i) as a gift to one or more members of the
Optionee's immediate family, to a trust in which Optionee and/or one or more
such family members hold more than fifty percent (50%) of the beneficial
interest or to an entity in which more than fifty percent (50%) of the voting
interests are owned by one or more such family members or (ii) pursuant to a
domestic relations order. The terms applicable to the assigned portion shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
G. Withholding. The Corporation's obligation to deliver Shares upon the
exercise of any options granted under the Plan shall be subject to the
satisfaction of all applicable income and employment tax withholding
requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options shall not be subject
to the terms of this Section II.
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A. Eligibility. Incentive Options may only be granted to Employees.
B. Exercise Price. The exercise price per Share shall not be less than one
hundred percent (100%) of the Fair Market Value per Share on the option grant
date.
C. Dollar Limitation. The aggregate Fair Market Value of the Shares
(determined as of the respective date or dates of grant) for which one or more
options granted to any Employee under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Shareholder. If any Employee to whom an Incentive Option is granted
is a 10% Shareholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per Share on the option
grant date and the option term shall not exceed five (5) years measured from
the option grant date.
III. CORPORATE TRANSACTION
A. The Shares subject to each option outstanding under the Plan at the
time of a Corporate Transaction shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the Shares at the time subject
to that option and may be exercised for any or all of those shares as
fully-vested Shares. However, the shares subject to an outstanding option shall
not vest on such an accelerated basis if and to the extent: (i) such option is
assumed by the successor corporation (or parent thereof) in the Corporate
Transaction and the Corporation's repurchase rights with respect to the
unvested option shares are concurrently assigned to such successor corporation
(or parent thereof) or (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those unvested option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant.
B. All outstanding repurchase rights shall also terminate automatically,
and the Shares subject to those terminated rights shall immediately vest in
full, in the event of any Corporate Transaction, except to the extent: (i)
those repurchase rights are assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator at
the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable
to the Optionee in consummation of such Corporate Transaction, had the option
been exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
E. The Plan Administrator shall have the discretion, exercisable either at
the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration (in whole or in part) of
one or more outstanding options (and the immediate termination of the
Corporation's repurchase rights with respect to the shares subject to those
options) upon the occurrence of a Corporate Transaction, whether or not those
options are to be assumed in the Corporate Transaction.
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F. The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to structure such option so that the shares subject
to that option will automatically vest on an accelerated basis should the
Optionee's Service terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which the option is assumed and the
repurchase rights applicable to those shares do not otherwise terminate. Any
option so accelerated shall remain exercisable for the fully-vested option
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may provide that
one or more of the Corporation's outstanding repurchase rights with respect to
shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate on an accelerated basis, and the shares subject to those
terminated rights shall accordingly vest at that time.
G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.
H. The grant of options under the Plan shall in no way affect the right of
the Corporation 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.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Option Grant Program
and to grant in substitution new options covering the same or different number
of Shares but with an exercise price per share based on the Fair Market Value
per Share on the new grant date.
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ARTICLE THREE
SHARE ISSUANCE PROGRAM
I. SHARE ISSUANCE TERMS
Shares may be issued under the Share Issuance Program through direct and
immediate issuances without any intervening option grants. Each such share
issuance shall be evidenced by a Share Issuance Agreement which complies with
the terms specified below.
A. Purchase Price.
1. The purchase price per Share shall be fixed by the Plan
Administrator and may be less than, equal to or greater than the Fair
Market Value Share on the issue date.
2. Subject to the provisions of Section I of Article Four, Shares may
be issued under the Share Issuance Program for any of the following items
of consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting Provisions.
1. Shares issued under the Share Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant's
period of Service or upon attainment of specified performance objectives.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested Shares by reason of any Share dividend, Share split,
recapitalization, combination of shares, exchange of shares or other change
affecting the issued Shares as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested Shares and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full shareholder rights with respect to
any Shares issued to the Participant under the Share Issuance Program,
whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and
to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one
or more unvested Shares issued under the Share Issuance Program or should
the performance objectives not be attained with respect to one or more such
unvested Shares, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested Shares (or other assets attributable
thereto) which would otherwise occur upon the non-completion of the vesting
schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the Shares as to which
the waiver applies. Such waiver may be effected at any time, whether before
or after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
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II. CORPORATE TRANSACTION
A. All of the outstanding repurchase rights under the Share Issuance
Program shall terminate automatically, and all the Shares subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are assigned to
the successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested Shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the Shares subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Option Grant Program or the purchase price for
shares issued under the Share Issuance program by delivering a full recourse,
interest bearing promissory note payable in one or more installments and
secured by the purchased shares. The terms of any such promissory note
(including the interest rate and the terms of repayment) shall be established
by the Plan Administrator in its sole discretion. In no event shall the maximum
credit available to the Optionee or Participant exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the purchased
shares plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's Shareholders.
If such Shareholder approval is not obtained within twelve (12) months after
the date of the Board's adoption of the Plan, then all options previously
granted under the Plan shall terminate and cease to be outstanding, and no
further options shall be granted and no shares shall be issued under the Plan.
Subject to such limitation, the Plan Administrator may grant options and issue
shares under the Plan at any time after the effective date of the Plan and
before the date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the expiration of the
ten (10)-year period measured from the date the Plan is adopted by the Board,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with an Corporate Transaction. All options
and unvested Share issuances outstanding at the time of a clause (i)
termination event shall continue to have full force and effect in accordance
with the provisions of the documents evidencing such options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect any rights and obligations with respect to
options or unvested Share issuances at the time outstanding under the Plan,
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require Shareholder approval
pursuant to applicable laws or regulations.
B. Options to purchase Shares may be granted under the Option Grant
Program and Shares may be issued under the Share Issuance Program which are in
each instance in excess of the number of Shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained Shareholder approval of an
amendment sufficiently increasing the number of Shares available for issuance
under the Plan. If such Shareholder approval is not obtained within twelve (12)
months after the date the first such excess grants or issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price
paid for any excess shares issued under the Plan and held in escrow, together
with interest (at the applicable Short-Term Federal Rate) for the period the
shares were held in escrow, and such shares shall thereupon be automatically
cancelled and cease to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of Shares
under the Plan shall be used for general corporate purposes.
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V. WITHHOLDING
The Corporation's obligation to deliver Shares upon the exercise of any
options or upon the issuance or vesting of any shares issued under the Plan
shall be subject to the satisfaction of all applicable income and employment
tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the Plan
and the issuance of any Shares (i) upon the exercise of any option or (ii)
under the Share Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the Shares
issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Code shall mean the Internal Revenue Code of 1986, as amended.
C. Committee shall mean a committee of one (1) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. Corporate Transaction shall mean either of the following
Shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
E. Corporation shall mean Uproar Ltd., a company incorporated in Bermuda,
and any successor corporation to all or substantially all of the assets or
voting shares of Uproar Ltd. which shall by appropriate action adopt the Plan.
F. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
G. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
H. Fair Market Value per Share on any relevant date shall be determined in
accordance with the following provisions:
(i) If the Shares are at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per Share on
the date in question, as such price is reported by the National Association
of Securities Dealers on the Nasdaq National Market. If there is no closing
selling price for the Shares on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Shares are at the time listed on any Stock Exchange, then
the Fair Market Value shall be the closing selling price per Share on the
date in question on the Stock Exchange determined by the Plan Administrator
to be the primary market for the Shares, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no
closing selling price for the Shares on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) If the Shares are at the time neither listed on any Stock Exchange
nor traded on the Nasdaq National Market, then the Fair Market Value shall
be determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.
I. Incentive Option shall mean an option which satisfies the requirements
of Code Section 422.
J. Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her duties and responsibilities or the level of management to which
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he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected without the individual's consent.
K. Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
L. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
M. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
N. Option Grant Program shall mean the option grant program in effect
under the Plan.
O. Optionee shall mean any person to whom an option is granted under the
Option Grant Program.
P. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, Shares possessing fifty percent (50%) or more of the
total combined voting power of all classes of Shares in one of the other
corporations in such chain.
Q. Participant shall mean any person who is issued Shares under the Share
Issuance Program.
R. Permanent Disability shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which is expected to
result in such person's death or to continue for a period of twelve (12)
consecutive months or more.
S. Plan shall mean the Corporation's 1999 Share Option/Share Issuance
Plan, as set forth in this document.
T. Plan Administrator shall mean either the Board or the Committee acting
in its capacity as administrator of the Plan.
U. Service shall mean the provision of services to the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or Share issuance.
V. Shares shall mean the ordinary shares in the capital of the Corporation
and "Share" and "Shareholder" shall be construed accordingly.
W. Stock Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.
X. Share Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of Shares under the
Share Issuance Program.
Y. Share Issuance Program shall mean the Share issuance program in effect
under the Plan.
Z. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at
the time of the determination, Share possessing fifty percent (50%) or more of
the total combined voting power of all classes of Share in one of the other
corporations in such chain.
AA. 10% Shareholder shall mean the owner of Share (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of Share of the Corporation (or any Parent
or Subsidiary).
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ANNEX B
UPROAR INC.
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the interests of
Uproar Inc., a Delaware corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation, as a reward for excellent performance in the
service of the Corporation and as a means of aligning their personal interests
more closely with the interests of the stockholders.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity incentive
programs:
(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of
such shares or as a bonus for services rendered the Corporation
(or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive options at
periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the Discretionary Option
Grant and Stock Issuance Programs shall be administered by the Board unless
otherwise determined by the Board. Beginning with the Section 12 Registration
Date, the following provisions shall govern the administration of the Plan:
(i) The Board shall have the authority to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section
16 Insiders but may delegate such authority in whole or in part to
the Primary Committee.
(ii) Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be
vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer those programs with
respect to all such persons. (iii) Administration of the Automatic
Option Grant Program shall be self-executing in accordance with
the terms of that program.
B. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full power and authority subject to the
provisions of the Plan:
(i) to establish such rules as it may deem appropriate for proper
administration of the Plan, to make all factual determinations, to
construe and interpret the provisions of the Plan and the awards
thereunder and to resolve any and all ambiguities thereunder;
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(ii) to determine, with respect to awards made under the Discretionary
Option Grant and Stock Issuance Programs, which eligible persons
are to receive such awards, the time or times when such awards are
to be made, the number of shares to be covered by each such award,
the vesting schedule (if any) applicable to the award, the status
of a granted option as either an Incentive Option or a
Non-Statutory Option and the maximum term for which the option is
to remain outstanding;
(iii) to amend, modify or cancel any outstanding award with the consent
of the holder or accelerate the vesting of such award; and
(iv) to take such other discretionary actions as permitted pursuant to
the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
C. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the
Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any options or stock issuances under the
Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).
B. Only non-employee Board members shall be eligible to participate in the
Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed Six
Million Seven Hundred Fifty Thousand (6,750,000) shares. Such reserve shall
consist of (i) the number of shares estimated to remain available for issuance,
as of the Section 12 Registration Date, under the Predecessor Plan, including
the shares subject to the outstanding options to be incorporated into the Plan
and the additional shares which would otherwise be available for future grant,
plus (ii) an increase of One Million Three Hundred Fifty Thousand (1,350,000)
shares authorized by the Board subject to stockholder approval prior to the
Section 12 Registration Date.
B. The number of shares of Common Stock available for issuance under the
Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with the calendar year
2001, by an amount equal to one percent (1%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall such annual increase exceed Four
Hundred Thousand (400,000) shares.
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C. No one person participating in the Plan may receive options, separately
exercisable stock appreciation rights and direct stock issuances for more than
Two Million (2,000,000) shares of Common Stock in the aggregate per calendar
year.
D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent those options
expire, terminate or are cancelled for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant
to the Corporation's repurchase rights under the Plan shall be added back to
the number of shares of Common Stock reserved for issuance under the Plan and
shall accordingly be available for reissuance through one or more subsequent
options or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, then the number of shares of Common Stock available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net number of
shares of Common Stock issued to the holder of such option or stock issuance.
Shares of Common Stock underlying one or more stock appreciation rights
exercised under the Plan shall not be available for subsequent issuance.
E. If any change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made
to (i) the maximum number and/or class of securities issuable under the Plan,
(ii) the number and/or class of securities by which the share reserve is to
increase each calendar year pursuant to the automatic share increase provisions
of the Plan, (iii) the number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan per calendar year, (iv) the number
and/or class of securities for which grants are subsequently to be made under
the Automatic Option Grant Program to new and continuing non-employee Board
members, (v) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan and (vi) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plan. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan Administrator
at the time of the option grant and may be less than, equal to or greater
than the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section II of Article Five
and the documents evidencing the option, be payable in one or more of the
following forms:
(i) cash or check made payable to the Corporation;
(ii) shares of Common Stock held for the requisite period necessary
to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such
exercise and (b) the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm in
order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. Cessation of Service.
1. The following provisions shall govern the exercise of any options
outstanding at the time of the Optionee's cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's cessation
of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the
option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at
the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on
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the date of the Optionee's cessation of Service. Upon the
expiration of the applicable post-Service exercise period or (if
earlier) upon the expiration of the option term, the option
shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of
Service, terminate and cease to be outstanding to the extent the
option is not otherwise at that time exercisable for vested
shares.
(iv) Should the Optionee's Service be terminated for Misconduct or
should the Optionee engage in Misconduct while his or her
options are outstanding, then all such options shall terminate
immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time an option is granted or at any time while the option
remains outstanding:
(i) to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service to
such period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option
term, and/or
(ii) to permit the option to be exercised, during the applicable
post-Service exercise period, for one or more additional
installments in which the Optionee would have vested had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of
record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any
or all of those unvested shares. The terms upon which such repurchase right
shall be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of
inheritance following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to
the extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime (i) as a gift to one or more members of the
Optionee's immediate family, to a trust in which Optionee and/or one or more
such family members hold more than fifty percent (50%) of the beneficial
interest or to an entity in which more than fifty percent (50%) of the voting
interests are owned by one or more such family members or (ii) pursuant to a
domestic relations order. The terms applicable to the assigned portion shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options,
and those options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's death
while holding those options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of the applicable
agreement evidencing each such transferred option, including (without
limitation) the limited time period during which the option may be exercised
following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Six shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under
the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
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B. Exercise Price. The exercise price per share shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option is granted
is a 10% Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date, and the option term shall not exceed five (5)
years measured from the option grant date.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control but not
otherwise fully-vested shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Change in
Control, assumed or otherwise continued in full force and effect by the
successor corporation (or parent thereof) pursuant to the terms of the Change
in Control, (ii) such option is replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Change in Control on the shares of Common Stock for which the option is not
otherwise at that time exercisable and provides for subsequent payout in
accordance with the same vesting schedule applicable to those option shares or
(iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. Each option
outstanding at the time of the Change in Control shall terminate as provided in
Section III.C. of this Article Two.
B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Change in Control, except to the
extent: (i) those repurchase rights are assigned to the successor corporation
(or parent thereof) or otherwise continue in full force and effect pursuant to
the terms of the Change in Control or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
C. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the
Change in Control.
D. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted, immediately after such Change in Control, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Change in Control had the option been
exercised immediately prior to such Change in Control. Appropriate adjustments
to reflect such Change in Control shall also be made to (i) the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same, (ii) the
maximum number and/or class of securities available for issuance over the
remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year. To the extent the actual holders of the Corporation's
outstanding Common Stock receive cash consideration for their Common Stock in
consummation of the Change in Control, the successor corporation may, in
connection with the assumption of the outstanding options, substitute one or
more shares of its own common stock with a fair market value equivalent to the
cash consideration paid per share of Common Stock in such Change in Control.
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E. The Plan Administrator may at any time provide that one or more options
will automatically accelerate in connection with a Change in Control, whether
or not those options are assumed or otherwise continued in full force and
effect pursuant to the terms of the Change in Control. Any such option shall
accordingly become exercisable, immediately prior to the effective date of such
Change in Control, for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. In addition, the Plan Administrator may at any time
provide that one or more of the Corporation's repurchase rights shall not be
assignable in connection with such Change in Control and shall terminate upon
the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one or more options
will automatically accelerate upon an Involuntary Termination of the Optionee's
Service within a designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control in which those options do
not otherwise accelerate. Any options so accelerated shall remain exercisable
for fully-vested shares until the earlier of (i) the expiration of the option
term or (ii) the expiration of the one (1) year period measured from the
effective date of the Involuntary Termination. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall immediately terminate upon such Involuntary
Termination.
G. The Plan Administrator may at any time provide that one or more options
will automatically accelerate in connection with a Hostile Take-Over. Any such
option shall become exercisable, immediately prior to the effective date of
such Hostile Take-Over, for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. In addition, the Plan Administrator may at
any time provide that one or more of the Corporation's repurchase rights shall
terminate automatically upon the consummation of such Hostile Take-Over.
Alternatively, the Plan Administrator may condition such automatic acceleration
and termination upon an Involuntary Termination of the Optionee's Service
within a designated period (not to exceed eighteen (18) months) following the
effective date of such Hostile Take-Over. Each option so accelerated shall
remain exercisable for fully-vested shares until the expiration or sooner
termination of the option term.
H. The portion of any Incentive Option accelerated in connection with a
Change in Control or Hostile Take Over shall remain exercisable as an Incentive
Option only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it may
determine, grant to selected Optionees stock appreciation rights which will
allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option
in exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Option Surrender Value of the number of shares for which the
option is surrendered over (b) the aggregate exercise price payable for such
shares. The distribution may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening options. Shares
of Common Stock may also be issued under the Stock Issuance Program pursuant to
share right awards which entitle the recipients to receive those shares upon
the attainment of designated performance goals or Service requirements. Each
such award shall be evidenced by one or more documents which comply with the
terms specified below.
A. Purchase Price.
1. The purchase price per share of Common Stock subject to direct
issuance shall be fixed by the Plan Administrator and may be less than,
equal to or greater than the Fair Market Value per share of Common Stock on
the issue date.
2. Subject to the provisions of Section II of Article Five, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting/Issuance Provisions.
1. The Plan Administrator may issue shares of Common Stock which are
fully and immediately vested upon issuance or which are to vest in one or
more installments over the Participant's period of Service or upon
attainment of specified performance objectives. Alternatively, the Plan
Administrator may issue share right awards which shall entitle the
recipient to receive a specified number of vested shares of Common Stock
upon the attainment of one or more performance goals or Service
requirements established by the Plan Administrator.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her
unvested shares of Common Stock by reason of any stock dividend, stock
split, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the
same vesting requirements applicable to the Participant's unvested shares
of Common Stock and (ii) such escrow arrangements as the Plan Administrator
shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to
the issued shares of Common Stock, whether or not the Participant's
interest in those shares is vested. Accordingly, the Participant shall have
the right to vote such shares and to receive any regular cash dividends
paid on such shares.
4. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock, or should the performance
objectives not be attained with respect to one or more such unvested shares
of Common Stock, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and
shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.
5. The Plan Administrator may waive the surrender and cancellation of
one or more unvested shares of Common Stock (or other assets attributable
thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares.
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<PAGE>
Such waiver shall result in the immediate vesting of the Participant's
interest in the shares of Common Stock as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of
the applicable performance objectives.
6. Outstanding share right awards shall automatically terminate, and no
shares of Common Stock shall actually be issued in satisfaction of those
awards, if the performance goals or Service requirements established for
such awards are not attained. The Plan Administrator, however, shall have
the authority to issue shares of Common Stock in satisfaction of one or
more outstanding share right awards as to which the designated performance
goals or Service requirements are not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights shall terminate
automatically, and all the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Change in Control,
except to the extent (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
B. The Plan Administrator may at any time provide for the automatic
termination of one or more of those outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary
Termination of the Participant's Service within a designated period (not to
exceed eighteen (18) months) following the effective date of any Change in
Control or Hostile Take-Over in which those repurchase rights are assigned to
the successor corporation (or parent thereof) or otherwise continue in full
force and effect.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
B-9
<PAGE>
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
II. OPTION TERMS
A. Grant Dates. Options shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a non-employee
Board member at any time after the Underwriting Date shall automatically be
granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase Thirty Thousand (30,000) shares of Common
Stock, provided that individual has not been in the employ of the
Corporation (or any Parent or Subsidiary) in the two (2) years immediately
preceding such election or appointment.
2. On the date of each Annual Stockholders Meeting beginning with the
2001 Annual Stockholder Meeting, each individual who is to continue to
serve as a non-employee Board member shall automatically be granted a
Non-Statutory Option to purchase Five Thousand (5,000) shares of Common
Stock, provided that individual has served as a non-employee Board member
for at least six (6) months.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to
the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years measured
from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any unvested shares
purchased under the option shall be subject to repurchase by the Corporation,
at the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each initial 30,000-share option
shall vest, and the Corporation's repurchase right shall lapse, in a series of
three (3) successive equal annual installments over the Optionee's period of
continued service as a Board member, with the first such installment to vest
upon the Optionee's completion of one (1) year of Board service measured from
the option grant date. Each annual 5,000-share option shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) successive
equal quarterly installments over the Optionee's period of continued service as
a Board member, with the first such installment to vest upon the Optionee's
completion of three (3) months of Board service measured from the option grant
date.
E. Cessation of Board Service. The following provisions shall govern the
exercise of any options outstanding at the time of the Optionee's cessation of
Board service:
(i) Any option outstanding at the time of the Optionee's cessation
of Board service for any reason shall remain exercisable for a
twelve (12)-month period following the date of such cessation of
Board service, but in no event shall such option be exercisable
after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at
the time of death may be subsequently exercised by his or her
Beneficiary.
(iii) Following the Optionee's cessation of Board service, the option
may not be exercised in the aggregate for more than the number
of shares for which the option was exercisable on the date of
such cessation of Board service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be
outstanding for any and all shares for which the option is not
otherwise at that time exercisable.
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<PAGE>
(iv) However, should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the
time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period
following such cessation of Board service, be exercised for all
or any portion of those shares as fully-vested shares of Common
Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over, the shares
of Common Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each such option may,
immediately prior to the effective date of such Change in Control or Hostile
Take-Over, became fully exercisable for all of the shares of Common Stock at
the time subject to such option and maybe exercised for all or any of those
shares as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof)
or otherwise continued in full force and effect pursuant to the terms of the
Change in Control. Each such option accelerated in connection with a Hostile
Take-Over shall remain exercisable until the expiration or sooner termination
of the option term.
B. All outstanding repurchase rights shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Change in Control or Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to
each surrendered option (whether or not the option is otherwise at the time
exercisable for those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation.
D. Each option which is assumed in connection with a Change in Control
shall be appropriately adjusted to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such Change
in Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments shall also be made to the exercise price
payable per share under each outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same. To the extent
the actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Change in Control.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for options made under
the Discretionary Option Grant Program.
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ARTICLE FIVE
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the Corporation 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.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering
a full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or
part of the Withholding Taxes incurred by such holders in connection with the
exercise of their options or the vesting of their shares. Such right may be
provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
Stock Delivery: The election to deliver to the Corporation, at the time
the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the
Withholding Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan Effective
Date. Options may be granted under the Discretionary Option Grant Program at
any time on or after the Plan Effective Date. However, no options granted under
the Plan may be exercised, and no shares shall be issued under the Plan, until
the Plan is approved by the Corporation's stockholders. If such stockholder
approval is not obtained within twelve (12) months after the Plan Effective
Date, then all options previously granted under this Plan shall terminate and
cease to be outstanding, and no further options shall be granted and no shares
shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan, and no
further options or direct stock issuances shall be made under the Predecessor
Plan after the Section 12 Registration Date. All options outstanding under the
Predecessor Plan on the Section 12 Registration Date shall be incorporated into
the Plan at that
B-12
<PAGE>
time and shall be treated as outstanding options under the Plan. However, each
outstanding option so incorporated shall continue to be governed solely by the
terms of the documents evidencing such option, and no provision of the Plan
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation) the
option/vesting acceleration provisions of Article Two relating to Changes in
Control, may, in the Plan Administrator's discretion, be extended to one or
more options incorporated from the Predecessor Plan which do not otherwise
contain such provisions.
D. The Plan shall terminate upon the earliest of (i) February 23, 2010,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding options and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs shall be held in escrow
until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise
of any granted option or (ii) under the Stock Issuance Program shall be subject
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or
B-13
<PAGE>
any Parent or Subsidiary employing or retaining such person) or of the Optionee
or the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
B-14
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Beneficiary shall mean, in the event the Plan Administrator implements a
beneficiary designation pro cedure, the person designated by an Optionee or
Participant, pursuant to such procedure, to succeed to such person's rights
under any outstanding awards held by him or her at the time of death. In the
absence of such designation or procedure, the Beneficiary shall be the personal
representative of the estate of the Optionee or Participant or the person or
persons to whom the award is transferred by will or the laws of inheritance.
C. Board shall mean the Corporation's Board of Directors.
D. Change in Control shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more
than fifty percent (50%) of the total combined voting power of the
voting securities of the successor corporation are immediately
thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who beneficially
owned the Corporation's outstanding voting securities immediately
prior to such transaction,
(ii) any stockholder-approved transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under
common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's
stockholders which the Board recommends such stockholders accept.
E. Code shall mean the Internal Revenue Code of 1986, as amended.
F. Common Stock shall mean the Corporation's common stock.
G. Corporation shall mean Uproar Inc., a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
Uproar Inc. which shall by appropriate action adopt the Plan.
H. Discretionary Option Grant Program shall mean the discretionary option
grant program in effect under the Plan.
I. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such
price is reported on the Nasdaq National Market or any successor
system and in The Wall Street Journal. If there is no closing
selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
B-15
<PAGE>
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange and reported
in The Wall Street Journal. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(iii) For purposes of any option grants made on the Underwriting Date,
the Fair Market Value shall be deemed to be equal to the price per
share at which the Common Stock is to be sold in the initial
public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any options made prior to the Underwriting Date,
the Fair Market Value shall be determined by the Plan
Administrator, after taking into account such factors as it deems
appropriate.
Hostile Take-Over shall mean: L.
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders
to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a
majority of the Board members described in clause (A) who were
still in office at the time the Board approved such election or
nomination.
M. Incentive Option shall mean an option which satisfies the requirements
of Code Section 422.
N. Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation or Parent or Subsidiary
employing the individual which materially reduces his or her
duties and responsibilities or the level of management to which he
or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target
bonus under any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation
of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation
is effected by the Corporation without the individual's consent.
O. Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any intentional wrongdoing by such person,
whether by omission or commission, which adversely affects the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material manner.
This shall not limit the grounds for the dismissal or discharge of any person in
the Service of the Corporation (or any Parent or Subsidiary).
P. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
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<PAGE>
Q. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
R. Option Surrender Value shall mean the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation or, in the
event of a Hostile Take-Over, effected through a tender offer, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over, if greater. However, if the surrendered option is an
Incentive Option, the Option Surrender Value shall not exceed the Fair Market
Value per share.
S. Optionee shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
T. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Participant shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
V. Permanent Disability or Permanently Disabled shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee
Board member to perform his or her usual duties as a Board member by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
W. Plan shall mean the Corporation's 2000 Stock Incentive Plan, as set
forth in this document.
X. Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction. However, the Primary Committee shall have
the plenary authority to make all factual determinations and to construe and
interpret any and all ambiguities under the Plan to the extent such authority is
not otherwise expressly delegated to any other Plan Administrator.
Y. Plan Effective Date shall mean February 23, 2000, the date on which the
Plan was adopted by the Board.
Z. Predecessor Plan shall mean the Corporation's pre-existing 1999 Share
Option/Share Issuance Plan in effect immediately prior to the Plan Effective
Date hereunder.
AA. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
BB. Secondary Committee shall mean a committee of one (1) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
CC. Section 12 Registration Date shall mean the date on which the Common
Stock is first registered under Section 12(g) of the 1934 Act.
DD. Section 16 Insider shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
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EE. a person in the capacity of an Employee, a non-employee member of the
board of directors or a consultant or independent advisor, except to the extent
otherwise specifically provided in the documents evidencing the option grant or
stock issuance.
FF. Stock Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.
GG. Stock Issuance Program shall mean the stock issuance program in effect
under the Plan.
HH. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
II. 10% Stockholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
JJ. Underwriting Agreement shall mean the agreement between the Corporation
and the underwriter or underwriters managing the initial public offering of the
Common Stock.
KK. Underwriting Date shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
LL. Withholding Taxes shall mean the Federal, state and local income and
employment withholding tax liabilities to which the holder of Non-Statutory
Options or unvested shares of Common Stock may become subject in connection with
the exercise of those options or the vesting of those shares.
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<PAGE>
(Form of Proxy)
UPROAR INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 12, 2000
(This Proxy is solicited by the Board of Directors of the Company)
The undersigned stockholder of Uproar Inc. hereby appoints Kenneth D. Cron,
Chief Executive Officer, and Robert D. Marafioti, Secretary, and each of them,
with full power of substitution in each, proxies to vote the shares of stock, in
accordance with the undersigned's specifications, which the undersigned could
vote if personally present at the Annual Meeting of Stockholders of Uproar Inc.
to be held at 240 West 35th Street, 11th Floor, New York, New York, on May 12,
2000, at 9:00 a.m., Eastern Standard Time, or any adjournment thereof.
<TABLE>
<CAPTION>
<S> <C>
1. ELECTION OF DIRECTORS
FOR all nominees below WITHHOLD AUTHORITY
|_| (except as marked to the contrary) |_| to vote for all nominees below
Thompson B. Barnhardt, Kenneth D. Cron, Thomas E. Dooley, Esther Dyson, James J. Geddes, Jr.,
Christopher R. Hassett, Catherine V. Mackay, and Michael K. Simon,
INSTRUCTION: To withhold authority to vote for an individual nominee, write the nominee's name in the
space provided below.
---------------------------------------------------------------------------------------------------------
2. APPROVAL OF THE UPROAR LTD. 1999 SHARE OPTION/SHARE ISSUANCE PLAN
FOR AGAINST ABSTAIN WITH RESPECT TO
|_| |_| |_|
proposal to approve the Uproar Ltd. 1999 Share Option/Share Issuance Plan, as described in the Proxy
Statement.
3. APPROVAL OF THE UPROAR INC. 2000 STOCK INCENTIVE PLAN
FOR AGAINST ABSTAIN WITH RESPECT TO
|_| |_| |_|
proposal to approve the Uproar Inc. 2000 Stock Incentive Plan, as described in the Proxy Statement.
4. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
FOR AGAINST ABSTAIN WITH RESPECT TO
|_| |_| |_|
proposal to ratify the selection of KPMG LLP as independent auditors of
the Company, as described in the Proxy Statement.
5. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
---
PERSONS NOMINATED AS DIRECTORS, "FOR" PROPOSAL 2, "FOR" PROPOSAL 3 AND "FOR" PROPOSAL 4.
--- --- ---
</TABLE>
Please date and sign exactly as your name appears on the envelope in which this
material was mailed. If shares are held jointly, each stockholder should sign.
Executors, administrators, trustees, etc. should use full title and, if more
than one, all should sign. If the stockholder is a corporation, please sign full
corporate name by an authorized officer. If the stockholder is a partnership,
please sign full partnership name by an authorized person.
____________________________
____________________________
Signature(s) of Stockholder
Dated:____________________
