1997 STOCK OPTION PLAN
OF
TAM Restaurants, Inc.
1. Purpose
-------
TAM Restaurants, Inc. (the "Company") desires to attract and
retain the best available talent and encourage the highest level of performance
in order to continue to serve the best interests of the Company, and its
shareholder(s). By affording key personnel the opportunity to acquire
proprietary interests in the Company and by providing them incentives to put
forth maximum efforts for the success of the business, the 1997 Stock Option
Plan of TAM Restaurants, Inc. (the "1997 Plan") is expected to contribute to the
attainment of those objectives.
The word "Subsidiary" or "Subsidiaries" as used herein, shall
mean any corporation, fifty percent or more of the voting stock of which is
owned by the Company.
2. Scope and Duration
------------------
Options under the 1997 Plan may be granted in the form of
incentive stock options ("Incentive Options") as provided in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or in the form of
nonqualified stock options ("Non-Qualified Options"). (Unless otherwise
indicated, references in the 1997 Plan to "options" include Incentive Options
and Non-Qualified Options.) The maximum aggregate number of shares as to which
options may be granted from time to time under the 1997 Plan is 525,000 shares
of the Common Stock of the Company ("Common Stock"), which shares may be, in
whole or in part, authorized but unissued shares or shares reacquired by the
Company. The maximum number of shares with respect to which options may be
granted to any employee during the term of the Plan is 200,000. Except as
provided in paragraph 7(b) hereof, if an option shall expire, terminate or be
surrendered for cancellation for any reason without having been exercised in
full, the shares represented by the option or portion thereof not so exercised
shall (unless the 1997 Plan shall have been terminated) become available for
subsequent option grants under the 1997 Plan. As provided in paragraph 13, the
1997 Plan shall become effective on the date on which a registration statement
relating to an initial public offering of the Company's securities is declared
effective by the Securities and Exchange Commission (the "Effective Date"), and
unless terminated sooner pursuant to paragraph 14, the 1997 Plan shall terminate
on the tenth anniversary of the Effective Date, and no option shall be granted
hereunder after that date.
3. Administration
--------------
The 1997 Plan shall be administered by the Board of Directors
of the Company, or, at their discretion, by a committee which is appointed by
the Board of Directors to perform such function (the "Committee"). The Committee
shall consist of not less than two members of the Board of Directors, each of
whom shall serve at the pleasure of the Board of Directors and shall be a
"Non-Employee Director" as defined in Rule l6b-3 pursuant to the Securities
Exchange Act of 1934 (the "Act"). Vacancies occurring in the membership of the
Committee shall be filled by appointment by the Board of Directors.
The Board of Directors or the Committee, as the case may be,
shall have plenary authority in its discretion, subject to and not inconsistent
with the express provisions of the 1997 Plan, to grant options, to determine the
purchase price of the Common Stock covered by each option, the term of each
option, the persons to whom, and the time or times at which, options shall be
granted and the number of shares to be covered by each option; to designate
options as Incentive Options or Non-Qualified Options; to interpret the 1997
Plan; to prescribe, amend and rescind rules and regulations relating to the 1997
Plan; to determine the terms and provisions of the option agreements (which need
not be identical) entered into in connection with options under the 1997 Plan;
and to make all other determinations deemed necessary or advisable for the
administration of the 1997 Plan. The Board of Directors or the Committee, as the
case may be, may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Board of Directors
or the Committee, as the case may be, or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Board of Directors or the Committee, as the case may
be, or such person may have under the 1997 Plan.
4. Eligibility; Factors to be Considered in Granting
-------------------------------------------------
Options
-------
Incentive Options shall be limited to persons who are
employees of the Company or its present and future Subsidiaries and at the date
of grant of any option are in the employ of the Company or its present and
future Subsidiaries. In determining the employees to whom Incentive Options
shall be granted and the number of shares to be covered by each Incentive
Option, the Board of Directors or the Committee, as the case may be, shall take
into account the nature of employees' duties, their present and potential
contributions to the success of the Company and such other factors as it shall
deem relevant in connection with accomplishing the purposes of the 1997 Plan. An
employee who has
2
been granted an option or options under the 1997 Plan may be granted an
additional option or options, subject, in the case of Incentive Options, to such
limitations as may be imposed by the Code on such options. Except as provided
below, a Non-Qualified Option may be granted to any person, including, but not
limited to, employees, independent agents, consultants and attorneys, who the
Board of Directors or the Committee, as the case may be, believes has
contributed, or will contribute, to the success of the Company.
5. Option Price
------------
The purchase price of the Common Stock covered by each option
shall be determined by the Board of Directors or the Committee, as the case may
be, shall not be less than 100% of the Fair Market Value (as defined in
paragraph 15 below) of a share of the Common Stock on the date on which the
option is granted. Such price shall be subject to adjustment as provided in
paragraph 12 below. The Board of Directors or the Committee, as the case may be,
shall determine the date on which an option is granted; in the absence of such a
determination, the date on which the Board of Directors or the Committee, as the
case may be, adopts a resolution granting an option shall be considered the date
on which such option is granted.
6. Term of Options
---------------
The term of each option shall be not more then ten years from
the date of grant, as the Board of Directors or the Committee, as the case may
be, shall determine (subject to paragraph 8(b) below), subject to earlier
termination as provided in paragraphs 10 and 11 below.
7. Exercise of Options
-------------------
(a) Subject to the provisions of the 1997 Plan and unless
otherwise provided in the option agreement, options granted under the 1997 Plan
shall become exercisable as determined by the Board of Directors or Committee.
In its discretion, the Board of Directors or the Committee, as the case may be,
may, in any case or cases, prescribe that options granted under the 1997 Plan
become exercisable in installments or provide that an option may be exercisable
in full immediately upon the date of its grant. The Board of Directors or the
Committee, as the case may be, may, in its sole discretion, also provide that an
option granted pursuant to the 1997 Plan shall immediately become exercisable in
full upon the happening of any of the following events; (i) the first purchase
of shares of Common Stock pursuant to a tender offer or exchange offer (other
than an offer by the Company) for all, or any part of, the Common Stock, (ii)
the approval by the shareholder(s) of the Company of an agreement for a merger
in which the Company
3
will not survive as an independent, publicly owned corporation, a consolidation,
or a sale, exchange or other disposition of all or substantially all of the
Company's assets, (iii) with respect to an employee, on his 65th birthday, or
(iv) with respect to an employee, on the employee's involuntary termination from
employment, except as provided in Section 10 herein. In the event of a question
or controversy as to whether or not any of the events hereinabove described has
taken place, a determination by the Board of Directors or the Committee, as the
case may be, that such event has or has not occurred shall be conclusive and
binding upon the Company and participants in the 1997 Plan.
(b) Any option at any time granted under the 1997 Plan may
contain a provision to the effect that the optionee (or any persons entitled to
act under Paragraph 11 hereof) may, at any time at which Fair Market Value is in
excess of the exercise price and prior to exercising the option, in whole or in
part, request that the Company purchase all or any portion of the option as
shall then be exercisable at a price equal to the difference between (i) an
amount equal to the option price multiplied by the number of shares subject to
that portion of the option in respect of which such request shall be made and
(ii) an amount equal to such number of shares multiplied by the fair market
value of the Company's Common Stock (within the meaning of Section 422 of the
Code and the treasury regulations promulgated thereunder) on the date of
purchase. The Company shall have no obligation to make any purchase pursuant to
such request, but if it elects to do so, such portion of the option as to which
the request is made shall be surrendered to the Company. The purchase price for
the portion of the option to be so surrendered shall be paid by the Company,
less any applicable withholding tax obligations imposed upon the Company by
reason of the purchase, at the election of the Board of Directors or the
Committee, as the case may be, either in cash or in shares of Common Stock
(valued as of the date and in the manner provided in clause (ii) above), or in
any combination of cash and Common Stock, which may consist, in whole or in
part, of shares of authorized but unissued Common Stock or shares of Common
Stock held in the Company's treasury. No fractional share of Common Stock shall
be issued or transferred and any fractional share shall be disregarded. Shares
covered by that portion of any option purchased by the Company pursuant hereto
and surrendered to the Company shall not be available for the granting of
further options under the Plan. All determinations to be made by the Company
hereunder shall be made by the Board of Directors or the Committee, as the case
may be.
(c) An option may be exercised, at any time or from time to
time (subject, in the case of Incentive Options, to such restrictions as may be
imposed by the Code), as to any or all full shares as to which the option has
become exercisable until the
4
expiration of the period set forth in Paragraph 6 hereof, by the delivery to the
Company, at its principal place of business, of (i) written notice of exercise
in the form specified by the Board of Directors or the Committee, as the case
may be, specifying the number of shares of Common Stock with respect to which
the option is being exercised and signed by the person exercising the option as
provided herein, (ii) payment of the purchase price; and (iii) in the case of
Non-Qualified Options, payment in cash of all withholding tax obligations
imposed on the Company by reason of the exercise of the option. Upon acceptance
of such notice, receipt of payment in full, and receipt of payment of all
withholding tax obligations, the Company shall cause to be issued a certificate
representing the shares of Common Stock purchased. In the event the person
exercising the option delivers the items specified in (i) and (ii) of this
Subsection (c), but not the item specified in (iii) hereof, if applicable, the
option shall still be considered exercised upon acceptance by the Company for
the full number of shares of Common Stock specified in the notice of exercise
but the actual number of shares issued shall be reduced by the smallest number
of whole shares of Common Stock which, when multiplied by the Fair Market Value
of the Common Stock as of the date the option is exercised, is sufficient to
satisfy the required amount of withholding tax.
(d) The purchase price of the shares as to which an option is
exercised shall be paid in full at the time of exercise. Payment shall be made
in cash, which may be paid by check or other instrument acceptable to the
Company; provided, however, that, subject to compliance with applicable laws and
regulations and such conditions as the Board of Directors or the Committee, as
the case may be, may impose, the Board of Directors or the Committee, as the
case may be, in its sole discretion, may on a case-by-case basis elect to accept
payment in shares of Common Stock of the Company which are already owned by the
option holder, valued at the Fair Market Value thereof (as defined in paragraph
15 below) on the date of exercise; provided, however, that with respect to
Incentive Options, no such discretion may be exercised unless the option
agreement permits the payment of the purchase price in that manner.
(e) Except as provided in paragraphs 10 and 11 below, no
option granted to an employee may be exercised at any time by such employee
unless such employee is then an employee of the Company or a Subsidiary.
8. Incentive Options
-----------------
(a) With respect to Incentive Options granted, the aggregate
Fair Market Value (determined in accordance with the provisions of paragraph 15
at the time the Incentive Option is granted) of the Common Stock or any other
stock of the Company or
5
its current or future Subsidiaries with respect to which incentive stock
options, as defined in Section 422 of the Code, are exercisable for the first
time by any employee during any calendar year (under all incentive stock option
plans of the Company and its parent and subsidiary corporation's, as those terms
are defined in Section 424 of the Code) shall not exceed $100,000.
(b) No Incentive Option may be awarded to any employee who
immediately prior to the date of the granting of such Incentive Option owns more
than 10% of the combined voting power of all classes of stock of the Company or
any of its Subsidiaries unless the exercise price under the Incentive Option is
at least 110% of the Fair Market Value and the option expires within 5 years
from the date of grant.
(c) In the event of amendments to the Code or applicable
regulations relating to Incentive Options subsequent to the date hereof, the
Company may amend the provisions of the 1997 Plan, and the Company and the
employees holding options may agree to amend outstanding option agreements, to
conform to such amendments.
9. Non-Transferability of Options
------------------------------
Options granted under the 1997 Plan shall not be transferable
otherwise than by will or the laws of descent and distribution, and options may
be exercised during the lifetime of the optionee only by the optionee. No
transfer of an option by the optionee by will or by the laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy of the will and such
other evidence as the Company may deem necessary to establish the validity of
the transfer and the acceptance by the transferor or transferees of the terms
and conditions of such option.
10. Termination of Employment
-------------------------
In the event that the employment of an employee to whom an
option has been granted under the 1997 Plan shall be terminated (except as set
forth in paragraph 11 below), such option may be, subject to the provisions of
the 1997 Plan, exercised (to the extent that the employee was entitled to do so
at the termination of his employment) at any time within three (3) months after
such termination, but not later than the date on which the option terminates;
provided, however, that any option which is held by an employee whose employment
is terminated for cause or voluntarily without the consent of the Company shall,
to the extent not theretofore exercised, automatically terminate as of the date
of termination of employment. As used herein, "cause" shall mean conduct
amounting to fraud, dishonesty, negligence, or engaging in competition or
solicitations in competition with the Company and
6
breaches of any applicable employment agreement between the Company and the
optionee. Options granted to employees under the 1997 Plan shall not be affected
by any change of duties or position so long as the holder continues to be a
regular employee of the Company or any of its current or future Subsidiaries.
Any option agreement or any rules and regulations relating to the 1997 Plan may
contain such provisions as the Board of Directors or the Committee, as the case
may be, shall approve with reference to the determination of the date employment
terminates and the effect of leaves of absence. Nothing in the 1997 Plan or in
any option granted pursuant to the 1997 Plan shall confer upon any employee any
right to continue in the employ of the Company or any of its Subsidiaries or
parent or affiliated companies or interfere in any way with the right of the
Company or any such Subsidiary or parent or affiliated companies to terminate
such employment at any time.
11. Death or Disability of Employee
-------------------------------
If an employee to whom an option has been granted under the
1997 Plan shall die while employed by the Company or a Subsidiary or within one
(1) year after the termination of such employment (other than termination for
cause or voluntary termination without the consent of the Company), such option
may be exercised, to the extent exercisable by the employee on the date of
death, by a legatee or legatees of the employee under the employee's last will,
or by the employee's personal representative or distributees, at any time within
one year after the date of the employee's death, but not later than the date on
which the option terminates. In the event that the employment of an employee to
whom an option has been granted under the 1997 Plan shall be terminated as the
result of a disability, such option may be exercised, to the extent exercisable
by the employee on the date of such termination, at any time within one year
after the date of such termination, but not later than the date on which the
option terminates.
12. Adjustments Upon Changes in Capitalization, Etc.
-----------------------------------------------
Notwithstanding any other provision of the 1997 Plan, the
Board of Directors or the Committee, as the case may be, may, at any time, make
or provide for such adjustments to the 1997 Plan, to the number and class of
shares issuable thereunder or to any outstanding options as it shall deem
appropriate to prevent dilution or enlargement of rights, including adjustments
in the event of changes in the outstanding Common Stock by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations
or exchanges of shares, separations, reorganizations, liquidations and the like.
In the event of any offer to holders of Common Stock generally relating to the
acquisition of their shares, the Board of Directors or the Committee, as the
case may be, may
7
make such adjustment as it deems equitable in respect of outstanding options and
rights, including in its discretion revision of outstanding options and rights
so that they may be exercisable for the consideration payable in the acquisition
transaction. Any such determination by the Board of Directors or the Committee,
as the case may be, shall be conclusive. Any fractional shares resulting from
such adjustments shall be eliminated.
13. Effective Date
--------------
The 1997 Plan shall become effective on October 6, 1997, the
date of adoption by the Board of Directors of the Company, subject to approval
by the shareholder(s) of the Company on or before October 6, 1997.
14. Termination and Amendment
-------------------------
The Board of Directors of the Company may suspend, terminate,
modify or amend the 1997 Plan, provided that any amendment that would increase
the aggregate number of shares which may be issued under the 1997 Plan,
materially increase the benefits accruing to participants under the 1997 Plan,
or materially modify the requirements as to eligibility for participation in the
1997 Plan, shall be subject to the approval of the Company's shareholder(s),
except that any such increase or modification that may result from adjustments
authorized by paragraph 12 does not require such approval. No suspension,
termination, modification or amendment of the 1997 Plan may, without the consent
of the employee to whom an option shall theretofore have been granted, effect
the rights of such employee under such option.
15. Miscellaneous
-------------
As said term is used in the 1997 Plan, the "Fair Market Value"
of a share of Common Stock on any day means: (a) if the principal market for the
Common Stock is a national securities exchange or the National Association of
Securities Dealers Automated Quotations System ("NASDAQ), the closing sales
price of the Common Stock on such day as reported by such exchange or market
system, or on a consolidated tape reflecting transactions on such exchange or
market system, or (b) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on NASDAQ, the
mean between the highest bid and lowest asked prices for the Common Stock on
such day as reported by the National Quotation Bureau, Inc.; provided that if
clauses (a) and (b) of this paragraph are both inapplicable, or if no trades
have been made or no quotes are available for such day, the Fair Market Value of
the Common Stock shall be determined by the Board
8
of Directors or the Committee, as the case may be, shall be conclusive as to the
Fair Market Value of the Common Stock.
The Board of Directors or the Committee, as the case may be,
may require, as a condition to the exercise of any options granted under the
1997 Plan, that to the extent required at the time of exercise, (i) the shares
of Common Stock reserved for purposes of the 1997 Plan shall be duly listed,
upon official notice of issuance, upon stock exchange(s) on which the Common
Stock is listed, (ii) a Registration Statement under the Securities Act of 1933,
as amended, with respect to such shares shall be effective, and/or (iii) the
person exercising such option deliver to the Company such documents, agreements
and investment and other representations as the Board of Directors or the
Committee, as the case may be, shall determine to be in the best interests of
the Company.
During the term of the 1997 Plan, the Board of Directors or
the Committee, as the case may be, in its discretion, may offer one or more
option holders the opportunity to surrender any or all unexpired options for
cancellation or replacement. If any options are so surrendered, the Board of
Directors or the Committee, as the case may be, may then grant new Non-Qualified
or Incentive Options to such holders for the same or different numbers of shares
at higher or lower exercise prices than the surrendered options. Such new
options may have a different term and shall be subject to the provisions of the
1997 Plan the same as any other option.
Anything herein to the contrary notwithstanding, the Board of
Directors or the Committee, as the case may be, may, in their sole discretion,
impose more restrictive conditions on the exercise of an option granted pursuant
to the 1997 Plan; however, any and all such conditions shall be specified in the
option agreement limiting and defining such option.
16. Compliance with SEC Regulations.
-------------------------------
It is the Company's intent that the 1997 Plan comply in all
respects with Rule 16b-3 of the Act and any regulations promulgated thereunder.
If any provision of the 1997 Plan is later found not to be in compliance with
said Rule, the provisions shall be deemed null and void. All grants and
exercises of Incentive Options under the 1997 Plan shall be executed in
accordance with the requirements of Section 16 of the Act, as amended, and any
regulations promulgated thereunder.
9