YOUTHSTREAM MEDIA NETWORKS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Youthstream Media Networks, Inc., a Delaware corporation with its principal
office at 28 West 23rd Street, 6th Floor, New York, N.Y. 10010 (the "Company"),
hereby grants to Irwin Engelman, residing at 936 Fifth Avenue, New York, N.Y.
10021 (the "Executive"), pursuant to the employment agreement effective October
27, 2000 between the Company and the Executive (the "Employment Agreement"), an
option to purchase up to 100,000 shares of the Company's common stock, par value
$.01 per share, at the price of $1.875 per share, on the terms and conditions
set forth in this agreement.
The Company and the Executive intend this not to be an incentive stock
option within the meaning of section 422 of the Internal Revenue Code.
1. Vesting
(a) This option shall become exercisable (i.e., shall vest) in quarterly
installments of 12,500 shares per installment commencing on the first day of
each of February, May, August, and November, beginning February 1, 2001, except
that the last installment shall vest on October 31, 2002; provided that the
Executive is employed by the Company or any Affiliate on that date. To the
extent this option is not vested at the time of termination of the Executive's
employment by the Company and its Affiliates, upon termination of the
Executive's employment the option shall be non-exercisable and shall be
canceled. There shall be no proportionate or partial vesting in the periods
prior to each vesting date and all vesting shall occur only on the appropriate
vesting date. This option shall expire on, and may not be exercised after,
October 26, 2010 ("Termination Date").
(b) Notwithstanding the provisions of section 1(a), if the Executive's
employment is terminated by the Company prior to October 31, 2002 for any reason
other than for cause or as a result of the Executive's death or disability, or
if the Executive's employment is terminated by him prior to October 31, 2002 for
Good Reason (the terms "cause" and "Good Reason" being defined in the Employment
Agreement), the option shall be deemed fully vested as of the effective date of
termination and may be exercised on and after that date (until expiration of the
time for exercise of the option as provided in section 2(a)) for all of the
100,000 shares subject to the option.
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2. Exercise.
(a) This option shall be exercisable (to the extent vested) during the
continuance of the Executive's employment and shall be exercisable after
termination of the Executive's employment only as follows:
(i) if the Executive's employment by the Company and its Affiliates
terminates by reason of his disability, this option may be exercised by
him, to the extent that it was exercisable at the date of termination of
employment, within one year after the date of termination of employment,
but not later than the Termination Date;
(ii) if the Executive dies during his employment, this option may be
exercised (by the person or persons to whom his rights under this option
pass by his will or by the laws of descent and distribution) at any time
within one year after the date of his death, but not later than the
Termination Date, for that number of shares that the Executive was entitled
to purchase at the time of his death;
(iii) if the Executive's employment by the Company and its Affiliates
is terminated by the Company without cause or is terminated by the
Executive for Good Reason, this option may be exercised by him, to the
extent that it was exercisable at the date of termination of employment,
within ninety days after the date of termination of employment or within
two years after this date, whichever is later, but not later than the
Termination Date;
(iv) if the Executive's employment by the Company and its Affiliates
is voluntarily terminated by the Executive other than for Good Reason this
option may be exercised by him, to the extent that it was exercisable at
the date of termination of employment, within thirty days after the date of
termination of employment, but not later than the Termination Date; and
(v) if the Executive's employment is terminated by the Company for
cause, this option and all rights under it, to the extent those rights have
not been exercised, shall thereupon terminate. The determination by the
Company's board of directors of the reason for termination of the
Executive's employment shall be binding and conclusive on the Executive,
provided that the board acts unanimously (excluding the Executive if he is
then on the board) and in good faith.
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(b) This option may be exercised, in whole or in part, at any time or from
time to time prior to expiration of the time for exercise of the option as
provided in section 2(a). If a registration statement under the Securities Act
of 1933 is not then in effect with respect to the shares subject to this option,
upon exercise of the option the Executive must furnish the Company with such
representations and agreements as the Company may require to prevent disposition
of the shares in violation of the Securities Act of 1933; in that event, the
Company may place upon any stock certificate an appropriate legend referring to
the restriction on disposition under the Securities Act of 1933.
3. Method of Exercise. Subject to the provisions of sections 1 and 2 above,
this option may be exercised by written notice to the Company specifying the
number of shares as to which the option is exercised. Each such notice shall be
accompanied by payment in full of the purchase price for the shares to be
purchased, as follows: (i) by check, bank draft or money order payable to the
order of the Company; (ii) if the Company's common stock is then traded on a
national securities exchange, the Nasdaq Stock Market, Inc. or quoted on a
national quotation system sponsored by the National Association of Securities
Dealers, through a "cashless exercise" procedure whereby the Executive delivers
irrevocable instructions to a broker to deliver promptly to the Company an
amount equal to the purchase price; or (iii) on such other terms and conditions
as may be acceptable to the Company (including, but not limited to, the
relinquishment of stock options or by payment in full or in part in the form of
the Company's common stock owned by the Executive for a period of at least six
months (and for which the Executive has good title free and clear of any liens
and encumbrances) based on the fair market value of the Company's common stock
on the payment date as determined by the Company). No shares of the Company's
common stock shall be issued until payment has been made or provided for in
accordance with this provision.
4. Restriction on Transfer of Option. Except as otherwise provided below,
this option may not be transferred other than by will or by the laws of descent
and distribution and, during the lifetime of the Executive, may be exercised
only by him. In addition, this option may not be assigned, negotiated, pledged
or hypothecated in any way and shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, negotiate, pledge or
hypothecate the option or in the event of any levy upon the option by reason of
any execution, attachment or similar process contrary to the provisions of this
option agreement, the option shall immediately become null and void.
5. Changes in Common Stock.
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(a) The existence of this option shall not affect in any way the right or
power of the Company's board of directors or stockholders to make or authorize
any adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of the
Company or any Affiliate, any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Company's common stock or this
option, the dissolution or liquidation of the Company or any Affiliate, any sale
or transfer of all or part of the assets or business of the Company or any
Affiliate, or any other corporate act or proceeding.
(b) Subject to the provisions of section 5(d), if there is any change in
the capital structure or business of the Company by reason of any stock split,
reverse stock split, stock dividend, combination or reclassification of shares,
recapitalization or otherwise, merger, consolidation, spin-off, reorganization,
partial or complete liquidation, issuance of rights or warrants to purchase any
common stock or securities convertible into common stock, or any other corporate
transaction or event having a similar effect and effected without receipt of
consideration by the Company, the number and kind of shares or other property to
be issued upon exercise of this option and the purchase price shall be
appropriately adjusted consistent with such change in such manner as the
Company's board of directors may deem equitable to prevent substantial dilution
or enlargement of the Executive's rights under this agreement, and any such
adjustment determined by the board in good faith shall be final, binding and
conclusive on the Company and the Executive. The Company promptly shall notify
the Executive of any adjustment under this section 5.
(c) Fractional shares of the Company's common stock resulting from any
adjustment pursuant to Section 5(a) shall be aggregated until, and eliminated
at, the time of exercise by rounding-down for fractions less than one-half and
rounding-up for fractions equal to or greater than one-half. No cash settlements
shall be made with respect to fractional shares eliminated by rounding.
(d) In the event of a merger or consolidation in which the Company is not
the surviving entity or in the event of any transaction that results in the
acquisition of substantially all of the Company's outstanding common stock by a
single person or entity or by a group of persons or entities acting in concert,
or in the event of the sale or transfer of all or substantially all of the
Company's assets ("Acquisition Events"), the Company's board of directors may,
in its sole discretion, terminate this option, effective as of the date of the
Acquisition Event, by delivering notice of termination to the Executive at least
30 days prior to the date of consummation of the Acquisition Event; in that
event, during the period from the date on which such notice of termination is
delivered to the consummation of the Acquisition Event, the Executive shall have
the right to exercise this option for all of the shares then subject to the
option (without regard to any limitations on exercisability otherwise contained
in this
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agreement), but any such exercise shall be contingent upon and subject to the
occurrence of the Acquisition Event and, if for any reason the Acquisition Event
does not take place within a specified period after notice of the Acquisition
Event, any exercise of this option pursuant to that notice shall be void. If an
Acquisition Event occurs but the Company's board of directors does not terminate
this option pursuant to this section 5(d), the provisions of section 5(b) shall
apply.
6. Administration. This agreement shall be administered and interpreted by
the Company's board of directors. The determinations of the board with respect
to any matter relating to this agreement shall be final, conclusive and binding
on the Company and on the Executive and their respective executors,
administrators, successors and assigns.
7. Certain Rights Not Conferred by Option.
(a) Nothing in this agreement shall (i) give the Executive any right to
continue in the employ of the Company or any Affiliate or interfere in any way
with the right of the Company or any Affiliate to terminate the Executive's
employment at any time, (ii) limit the right of the Company's board of directors
to manage the Company's business and affairs (including the authorization of the
issuance of additional shares and the determination of the nature and amount of
liabilities and obligations incurred by the Company or its Affiliates) without
regard for the effect of any action upon the Executive or upon the value of the
shares subject to, or acquired upon exercise of, this option, or (iii) give the
Executive any claim against the Company or any of its officers or directors with
respect to any action or omission relating to the Company's business or affairs,
whether or not that action or omission affects the value of the shares subject
to, or acquired upon exercise of, this option.
(b) The Executive shall not, by virtue of holding this option, be entitled
to any rights of a stockholder in the Company. The Executive shall not be
considered a record holder of any shares purchased upon exercise of the option
until the date on which he is actually recorded as a holder of the shares upon
the Company's stock records.
8. Expenses. The Company shall pay all fees and expenses necessarily
incurred by the Company in connection with the issuance of the Company's shares
pursuant to this option. If the Company shall be required to withhold any
amounts by reason of any federal, state or local tax rules or regulations in
respect of the issuance of shares pursuant to the exercise of this option, the
Executive shall make available to the Company sufficient funds to meet the
withholding requirements and the Company shall
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be entitled to take and authorize any steps it deems advisable in order to have
those funds made available to the Company out of any funds or property due or to
become due to the Executive.
9. Notices. Any notice or other communication under this agreement shall be
in writing and shall be considered given when delivered personally or three days
after being mailed by registered mail, return receipt requested, to the parties
at their respective addresses set forth above (or at such address as a party may
specify by notice to the other). Any notice to the Company shall be addressed to
the attention of the Company's President.
10. Complete Agreement; Governing Law; Amendment. This agreement contains a
complete statement of all of the arrangements between the parties with respect
to the option provided for in this agreement. This agreement shall be governed
by and construed in accordance with the law of the State of New York applicable
to agreements made and to be performed in New York and cannot be changed or
terminated orally. To the extent possible, the parties to this agreement intend
that the agreement should be interpreted consistently with the terms and
conditions of the Company's 2000 Stock Incentive Plan.
11. Definition of "Affiliate." As used in this agreement, the term
"Affiliate" means each of the following: (i) any subsidiary corporation within
the meaning of section 424(f) of the Internal Revenue Code of 1986; (ii) any
parent corporation within the meaning of section 424(f) of the Internal Revenue
Code of 1986; (iii) any corporation, trade or business (including, but not
limited to, a partnership or limited liability company) that is directly or
indirectly controlled 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company or one of its
Affiliates; and (iv) any other entity in which the Company or any of its
Affiliates has a material equity interest and that is designated as an
"Affiliate" by the Company's board of directors.
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12. Headings. The headings in this agreement are solely for convenience of
reference and shall not affect its interpretation.
Youthstream Media Networks, Inc.
By: /s/ JAMES G. LUCCHESI
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James G. Lucchesi
President and Chief Executive Officer
AGREED:
/s/ IRWIN ENGELMAN
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Irwin Engelman
Date: 10/30/00
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