EXHIBIT 10.4
IMAGE ENTERTAINMENT, INC.
1994 ELIGIBLE DIRECTORS STOCK OPTION PLAN
1. THE PLAN
1.1 Purpose.
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The purpose of this Plan is to promote the success of the Corporation by
providing an additional means through the grant of Options to attract, motivate
and retain experienced and knowledgeable Eligible Directors. Capitalized terms
are defined in Article 4.
1.2 Administration.
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(a) Board Authority and Powers; Interpretation. This Plan shall be,
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to the maximum extent possible, self-effectuating. This Plan shall be
interpreted and, to the extent any determinations are required hereunder, shall
be administered by the Board. Subject to the express provisions of this Plan,
the Board shall have the authority to construe and interpret this Plan and any
agreements defining the rights and obligations of the Corporation and
Participants under this Plan.
(b) Binding Determinations. Any action taken by, or inaction of, the
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Corporation or the Board relating or pursuant to this Plan shall be within the
absolute discretion of that entity or body and shall be conclusive and binding
upon all persons. No member of the Board or officer of the Corporation shall be
liable for any such action or inaction, except in circumstances involving such
person's bad faith.
(c) Reliance on Experts. In making any determination or in taking or
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not taking any action under this Plan, the Board may obtain and may rely upon
the advice of experts, including professional advisors to the Corporation. No
director, officer or agent of the Corporation shall be liable for any such
action or determination taken or made or omitted in good faith.
(d) Delegation. The Board may delegate ministerial, non-discretionary
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functions to individuals who are officers or employees of the Corporation.
1.3 Shares Available for Options.
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Subject to the provisions of Section 3.4, the capital stock that may
be delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock.
(a) Number of Shares. The maximum number of shares of Common Stock
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that may be delivered pursuant to Options granted to Eligible Directors under
this Plan shall not exceed 275,000 shares, subject to adjustments contemplated
by Section 3.4.
(b) Calculation of Available Shares and Replenishment. The shares
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authorized under this Plan shall be reserved for issuance. If any
Option shall expire or be cancelled or terminated without having been exercised
in full, the undelivered shares subject thereto shall again be available for the
purposes of this Plan.
2. THE OPTIONS
2.1 Automatic Option Grants. Subject to adjustments contemplated by
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Section 3.4 and the limitations of Section 2.5,
(a) Initial Options. Subject to shareholder approval of this Plan:
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(1) each person who is an Eligible Director on July 12, 1994 shall be granted an
Option to purchase 15,000 shares of Common Stock; and (2) any person who is not
on July 12, 1994 an Eligible Director, but who thereafter becomes an Eligible
Director shall be granted automatically (without any further action by the
Board) an Option (the Option Date of which shall be the date such person becomes
an Eligible Director) to purchase 15,000 shares of Common Stock. No person
shall receive more than one Option under this Section 2.1(a).
(b) Subsequent Options. On the close of business on each July 12 (or
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if it is not a business day the first business day thereafter) during the term
of this Plan, commencing in 1995, there shall be granted automati cally
(without any further action by the Board) to each person who is then an Eligible
Director an Option to purchase 15,000 shares of Common Stock; provided, however,
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that if the director received a grant under Section 2.1(a) within six months of
such date, his or her participation in annual grants shall not commence until
the following year.
(c) Maximum Number of Shares. Any annual grants under Section 2.1(b)
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that would otherwise exceed the maximum number of shares under Section 1.3(a)
shall be prorated within such limitation among the number of Eligible Directors
entitled thereto.
(d) Option Price. The purchase price per share of the Common Stock
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covered by each Option granted pursuant to Section 2.1(a) shall be the Fair
Market Value of the Common Stock on the Option Date, plus $0.25, and by each
Option granted pursuant to Section 2.1(b) shall be the Fair Market Value of the
Common Stock on the Option Date.
(e) Option Period and Exercisability. Subject to shareholder approval
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of this Plan, each Option granted under this Plan shall become exercisable in
installments at the rate of 50% of the shares initially subject to such Option
on the date six months after the Option Date, and another 25% of such initial
number of shares at the end of each of the next two three month periods
thereafter.
(f) Non-Qualified Options. Each Option granted under this Plan is
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intended to be a non-qualified stock option (i.e., not an "incentive stock
option") under the Code and shall be so designated.
2.2 Payment of Exercise Price.
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The exercise price of any Option granted under this Plan shall be paid
in full at the time of each exercise in cash or by check or in shares of Common
Stock valued at their Fair Market Value on the date of exercise of the
Option, or partly in previously owned shares and partly in cash, provided that
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any shares used in payment shall have been owned by the Participant at least six
months prior to the date of exercise.
2.3 Option Period.
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Each Option granted under this Plan and all rights or obligations
thereunder shall expire ten years after the Option Date and shall be subject to
earlier termination under Article 3 hereof.
2.4 Limitations on Exercise and Vesting of Options.
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(a) Provisions for Exercise. No Option shall be exercisable or shall
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vest until at least six months after the initial Option Date, and once
exercisable an Option to such extent shall remain exercisable until the
expiration or earlier termination of the Option.
(b) Procedure. Any exercisable Option shall be deemed to be exercised
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when the Secretary of the Corporation receives written notice of such exercise
from the Participant, together with the required payment of the exercise price.
(c) Fractional Shares/Minimum Issue. Fractional share interests shall
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be disregarded, but shall be accumulated. No fewer than 100 shares may be
purchased on exercise of any Option at one time unless the number purchased is
the total number at the time available for purchase under the Option.
2.5 Individual Option Limits.
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The maximum number of shares of Common Stock subject to any and all
options that are or have been granted to any individual under this Plan and
under any other compensatory plan or authority (including individual grants
without reference to a plan) of the Corporation or any subsidiaries shall not
exceed 75,000 (subject to adjustment under Section 3.4), excluding shares
subject to options granted for special or unique services (other than services
as an employee, officer or director or services substantially comparable
thereto) or pursuant to antidilution or similar rights or adjustments in respect
of outstanding options.
3. OTHER PROVISIONS.
3.1 Rights of Participants and Beneficiaries.
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(a) No Service Commitment. Nothing contained in this Plan (or in any
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other documents related to this Plan or to any Option) shall confer upon any
Participant any right to continue to serve as a director of the Corporation nor
shall interfere in any way with the right of the Corporation to change director
compensation or other benefits or to terminate the director's service as a
director, with or without cause. Nothing contained in this Plan or any document
related hereto shall influence the construction or interpretation of the
Corporation's Articles of Incorporation or Bylaws regarding service on the Board
or adversely affect any independent contractual right of any Eligible Director
without his or her consent thereto.
(b) Plan Not Funded. Options payable under this Plan shall be
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payable in shares and (except as provided in Section 1.3(b)) no special or
separate reserve, fund or deposit shall be made to assure payment of such
Options. No Participant, Beneficiary or other person shall have any right, title
or interest in any fund or in any specific asset (including shares of Common
Stock) of the Corporation by reason of any Option hereunder. Neither the
provisions of this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Corporation and any Participant, Beneficiary or other
person. To the extent that a Participant, Beneficiary or other person acquires a
right to receive payment pursuant to any Option hereunder, such right shall be
no greater than (and will be subordinate to) the right of any unsecured general
creditor of the Corporation.
3.2 No Transferability.
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Options may be exercised only by, and shares issuable pursuant to an
Option shall be paid only to the Participant or, if the Participant has died,
the Participant's Beneficiary or, if the Participant has suffered a Disability,
the Participant's Personal Representative, if any, or if there is none, the
Participant. Other than by will or the laws of descent and distribution, no
right or benefit under this Plan or any Option shall be transferrable by the
Participant or shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void. The designation of a Beneficiary hereunder shall not
constitute a transfer for these purposes.
3.3 Termination of Directorship.
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If a Participant's services as a member of the Board terminate by
reason of death or Disability an Option granted pursuant to this Plan held by
such Participant shall, to the extent then exercisable, remain exercisable for
one year after the date of such termination or until the expiration of the
stated term of such Option, whichever first occurs. The portion of the Option
not then exercisable shall terminate. If a Participant's services as a member
of the Board terminate for any other reason, any portion of an Option granted
pursuant to this Plan which is not then exercisable shall terminate and any
portion of such Option which is then exercisable may be exercised for six months
after the date of such termination or until the expiration of the stated term
whichever first occurs, and shall then terminate.
3.4 Adjustments.
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If there shall occur any extraordinary distribution in respect of the
Common Stock (whether in the form of Common Stock, other securities, or other
property), or any recapitalization, stock split (including a stock split in the
form of a stock dividend), reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of Common Stock or
other securities of the Corporation, or there shall occur any other similar
corporate transaction or event in respect of the Common Stock, or a sale of
substantially all of the assets of the Corporation as an entirety, then the
Board shall, in such manner and to such extent (if any) as may be appropriate
and equitable, (1) proportionately adjust any or all of (a) the number and type
of shares of Common Stock (or other securities) which thereafter may be made the
subject of Options (including the specific limits and numbers of
shares set forth elsewhere in this Plan), (b) the number, amount and type of
shares of Common Stock (or other securities or property) subject to any or all
outstanding Options and the vesting provisions of the Options, (c) the grant,
purchase, or exercise price of any or all outstanding Options, or (d) the
securities, cash or other property deliverable upon exercise of any outstanding
Options, or (2) in the case of an extraordinary distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, make provision for a substitution or exchange of any or all
outstanding Options or for a change in the securities, cash or property
deliverable upon exercise of outstanding Options based upon the distribution or
consideration payable to holders of the Common Stock of the Corporation upon or
in respect of such event ; provided, however, that (i) such adjustment and the
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Board's actions in respect thereof are based on objective criteria, and (ii)
such adjustment (to the extent consistent with Section 3.11(c)) is consistent
with adjustments to comparable Options (if any) held by persons other than
directors of the Corporation.
3.5 Acceleration Upon a Change in Control Event; Early Termination on
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Certain Events.
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Upon the occurrence of a Change in Control Event, each Option shall
become immediately exercisable in full; provided, however, that no Option shall
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be so accelerated to a date less than six months after the Option Date of the
Option. To the extent that any Option granted under this Plan is not exercised
prior to (i) a dissolution of the Corporation or (ii) a merger or other
corporate event that the Corporation does not survive, and no provision is (or
consistent with the provisions of Section 3.4 can be) made for the assumption,
conversion, substitution or exchange of the Option, the Option shall terminate
upon the occurrence of such event.
3.6 Compliance with Laws.
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This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of shares of Common Stock, and/or of other securities or
property pursuant to Section 3.4, under this Plan or under Options granted
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal tax and
securities laws) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corpora tion as the Corporation may deem necessary or
desirable to assure such compliance.
3.7 Plan Amendment, Shareholder Approval and Suspension.
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(a) Board Authorization. The Board may, at any time, terminate or,
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from time to time, amend, modify or suspend this Plan, in whole or in part. No
Options may be granted during any suspension of this Plan or after termination
of this Plan, but the Board shall retain jurisdiction as to Options then
outstanding in accordance with the terms of this Plan.
(b) Shareholder Approval. To the extent required by law or the
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provisions of Rule 16b-3, any amendment to this Plan or any then outstanding
Option shall be subject to shareholder approval.
(c) Limitations on Amendments to Plan and Options. The provisions of
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this Plan shall not be amended more than once every six months (other than as
may be necessary to conform to any applicable changes in the Code or the rules
thereunder), unless such amendment would be consistent with the provisions of
Rule 16b-3(c)(2)(ii)(or any successor provision). No amendment, suspension or
termination of this Plan or change of or affecting any outstanding Option shall,
without written consent of the Participant, affect in any manner materially
adverse to the Participant any rights or benefits of the Participant or
obligations of the Corporation under any Option granted under this Plan prior to
the effective date of such change. Changes contemplated by Section 3.4 shall
not be deemed to constitute changes or amendments for purposes of this Section
3.7.
3.8 Privileges of Stock Ownership.
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Except as otherwise expressly authorized by this Plan, a Participant
shall not be entitled to any privilege of stock ownership as to any shares of
Common Stock subject to an Option granted under this Plan prior to the
satisfaction of all conditions to the valid exercise of the Option. No
adjustment will be made for dividends or other rights as a shareholders for
which a record date is prior to such date of delivery.
3.9 Effective Date of Plan.
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This Plan shall be effective as of July 12, 1994, but shall be subject
to approval of a majority of the shares represented and entitled to vote at the
shareholder meeting at which this Plan is first submitted for approval (referred
to herein as "shareholder approval").
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3.10 Term of Plan.
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No Option shall be granted more than ten years after the effective
date of this Plan (the "termination date"). Unless otherwise expressly provided
in this Plan or in an applicable Option Agreement, any Option theretofore
granted may extend beyond such date, and this Plan shall continue to apply
thereto.
3.11 Legal Issues.
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(a) Choice of Law. This Plan, the Options, all documents evidencing
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Options and all other related documents shall be governed by, and construed in
accordance with the laws of the state of incorporation of the Corporation.
(b) Severability. If any provision shall be held by a court of
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competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.
(c) Plan Construction. It is the intent of the Corporation that this
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Plan and Options hereunder satisfy the requirements of a formula plan under Rule
16b-3 and be interpreted in a manner that satisfies the applicable requirements
of Rule 16b-3 so that participants will be able to administer
other stock plans of the Corporation consistent with such Rule and be entitled
to the benefits of Rule 16b-3 (or other exemptive rules under Section 16 of the
Exchange Act) in respect of the option grants and certain other transactions in
respect thereof and will not be subjected to avoidable liability thereunder. If
any provision of this Plan or of any Option would otherwise frustrate or
conflict with the intent expressed above, that provision to the extent possible
shall be interpreted and deemed amended so as to avoid such conflict.
(d) Non-Exclusivity of Plan. Nothing in this Plan shall limit or be
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deemed to limit the authority of the Board to grant awards or authorize any
other compensation under any other plan or authority.
4. DEFINITIONS
4.1 Definitions.
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(a) "Beneficiary" shall mean the person, persons, trust or trusts
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designated by a Participant or, in the absence of a designation, entitled by
will or the laws of descent and distribution, to receive the benefits specified
in the Option Agreement and under this Plan in the event of a Participant's
death, and shall mean the Participant's executor or administrator if no other
Beneficiary is identified and able to act under the circumstances.
(b) "Board" shall mean the Board of Directors of the Corporation or,
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with respect to administrative matters (as distinguished from Plan amendments,
suspension, or termination), any duly authorized committee of members of the
Board designated to administer this Plan.
(c) "Change in Control Event" shall mean any of the following:
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(1) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation; or
(2) Approval by the shareholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or into
one or more entities that are not Subsidiaries or other affiliates, as a
result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are, or
will be, owned directly or indirectly by shareholders of the Corporation
immediately before such reorganization (assuming for purposes of such
determination that (A) there is no change in the record ownership of the
Corporation's securities from the record date for such approval until such
reorganization and (B) such record owners hold no securities of the other
parties to such reorganization, except that any securities of such other
parties that are held by affiliates of the Corporation shall be considered
owned by shareholders of the Corporation); or
(3) Approval by the shareholders of the Corporation of the sale
of substantially all of the Corporation's business and/or assets to a
person or entity which is not an affiliate; or
(4) Any person (as such term is used in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act, but excluding any person described in and
satisfying the conditions of Rule 13d-1(b)(1) thereunder) becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 45%
or more of the combined voting power of the Corporation's then outstanding
securities entitled to vote in the election of directors of the
Corporation; or
(5) During any period not longer than two consecutive years,
individuals who at the beginning of such period constituted the Board cease
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's share holders, of each new
Board member was approved by a vote of at least two-thirds of the Board
members then still in office who were Board members at the beginning of
such period (including for these purposes (but, in the case of a successor,
without duplication) any new members whose election or nomination was so
approved).
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
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from time to time.
(e) "Commission" shall mean the Securities and Exchange Commission.
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(f) "Common Stock" shall mean the Common Stock of the Corporation and
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such other securities or property as may become the subject of Options, or
become subject to Options, pursuant to an adjustment made under Section 3.4 of
this Plan.
(g) "Corporation" shall mean Image Entertainment, Inc., a California
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corporation, and its successors.
(h) "Disability" shall mean a "permanent and total disability" within
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the meaning of Section 22(e)(3) of the Code.
(i) "Eligible Director" shall mean a member of the Board who is not:
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(1) as of the applicable Option Date, an officer or employee of the Corporation
or any subsidiary, or (2) as of the applicable Option Date or during the prior
one year period, a person to whom equity securities (including options, stock
appreciation rights or other derivative securities) of the Corporation or an
affiliate are or have been granted or awarded (or for whose benefit any thereof
have been materially amended) under or pursuant to any discretionary equity
securities plan of the Corporation or an affiliate ("Other Stock Plan") (except
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under this Plan or any other formula or ongoing securities acquisition plan, the
participation in which does not compromise the disinterested administration of
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any Other Stock Plan under Rule 16b-3).
(j) "ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended from time to time.
(l) "Fair Market Value" on any specified date shall mean (i) if the
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stock is listed or admitted to trade on a national securities exchange,
the closing price of the stock on the Composite Tape, as published in the
Western Edition of The Wall Street Journal, of the principal national securities
exchange on which the stock is so listed or admitted to trade, on such date or,
if there is no trading of the stock on such date, then the closing price of the
stock as quoted on such Composite Tape on the next preceding date on which there
was trading in such shares (the "reference date"); (ii) if the stock is not
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listed or admitted to trade on a national securities exchange, the last price
for the stock on the reference date, as furnished through the NASDAQ National
Market Reporting System by the National Association of Securities Dealers, Inc.
("NASD") or a similar organization if the NASD is no longer reporting such
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information; (iii) if the stock is not listed or admitted to trade on a national
securities exchange and is not reported on the NASDAQ National Market Reporting
System, the mean between the bid and asked price for the stock on the reference
date, as furnished by the NASD or a similar organization; or (iv) if the NASD or
a similar organization does not furnish the mean between the bid and asked price
for the stock on the reference date, the valuation as of the reference date
furnished by an independent advisor or investment banker to the Corporation who
is recognized in valuations of this type.
(m) "Option" shall mean an option to purchase Common Stock authorized
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and granted under this Plan, and related rights.
(n) "Option Agreement" shall mean an agreement in the form of Exhibit
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A, completed in the manner required by this Plan and executed on behalf of the
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Corporation by an executive officer of the Corporation.
(o) "Option Date" shall mean the applicable date for automatic grant
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of Options set forth in Article 2.
(p) "Participant" shall mean an Eligible Director who has been granted
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an Option under the provisions of this Plan.
(q) "Personal Representative" shall mean the person or persons who,
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upon the disability or incompetence of a Participant, shall have acquired on
behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(r) "Plan" shall mean this Eligible Directors' Stock Option Plan.
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(s) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
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Commission pursuant to the Exchange Act, as amended from time to time.
EXHIBIT A to ELIGIBLE DIRECTOR PLAN
IMAGE ENTERTAINMENT, INC.
ELIGIBLE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the 12th day of July, 19__, between Image
Entertainment, Inc., a California corporation (the "Corporation"), and
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_________________ (the "Director").
W I T N E S S E T H
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WHEREAS, the Corporation has adopted [subject to shareholders
approval] a 1994 Eligible Directors Stock Option Plan (the "Plan").
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WHEREAS, pursuant to Section 2.1 of the Plan, the Corporation has
granted an option (the "Option") to the Director upon the terms and conditions
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evidenced hereby, as required by the Plan, which Option is not intended as and
shall not be deemed to be an incentive stock option within the meaning of
Section 422 of the Code.
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by the Director, the Corporation and the Director agree to the terms
and conditions set forth herein, as required by the terms of the Plan.
1. Option Grant. This Agreement evidences the grant to the
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Director, as of July 12, ____ (the "Option Date"), of an Option to purchase an
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aggregate of 15,000 shares of Common Stock (the "Shares") under Section
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2(______) of the Plan, subject to the terms and conditions and to adjustment as
set forth herein or in or pursuant to the Plan.
2. Exercise Price. The Option entitles the Director to purchase
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(subject to the terms of Sections 3 through 5 below), all or any part of the
Option shares at a price per share of $________.
3. Option Exercisability and Term. The Option shall first become
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and remain exercisable as to 7,500 shares on January 12, _____; and as to an
additional 3,750 shares on the following April 12 and July 12, subject to
shareholder approval of the Plan, to adjustments under Section 3.4 of the Plan
and to acceleration under Section 3.5 of the Plan. The Option shall terminate
on July 11, 20___, unless earlier terminated in accordance with the terms of
Section 4 below.
4. Service and Effect of Termination of Service or Other Event. The
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Director agrees to serve as a director in accordance with the provisions of the
Corporation's Articles of Incorporation, Bylaws and applicable law. If the
Director's services as a member of the Board shall terminate or in the other
circumstances addressed in Article 3 of the Plan, this Option shall terminate at
the times and to the extent set forth therein.
5. General Terms. The Option and this Agreement are subject
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to, and the Corporation and the Director agree to be bound by, the provisions
of the Plan that apply to the Option. Such provisions are incorporated herein by
this reference. The Director acknowledges receiving a copy of the Plan and
reading its applicable provisions. Capitalized terms not otherwise defined
herein shall have the meaning assigned to such terms in the Plan.
6. Nontransferability. The grant of the Option is intended to
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constitute an exempt transaction under Rule 16b-3. In furtherance thereof, and
for other reasons, the Option shall be non-transferable as provided in Section
3.2 of the Plan.
7. Shareholder Approval. This Option may not be exercised prior to
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shareholder approval of the Plan and in any event shall be rescinded if
shareholder approval of the Plan is not obtained by December 31, 1995.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
IMAGE ENTERTAINMENT, INC.
(a California corporation)
By ___________________________
Title _____________________
OPTIONEE DIRECTOR
_____________________________
(Signature)
_____________________________
(Print Name)
_____________________________
(Address)
_____________________________
(City, State, Zip Code)
_________________________________________
SPOUSAL CONSENT
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In consideration of the execution of the foregoing Stock Option
Agreement by Image Entertainment, Inc., I, ____________________________, the
spouse of the Director therein named, do hereby agree to be bound by all of the
terms and provisions thereof and of the Plan.
DATED: ______________, 19__.
_____________________________
Signature of Spouse