1
AD-STAR SERVICES, INC.
1999 STOCK OPTION PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the Ad-Star Services, Inc. 1999 Stock Option Plan (the
"Plan") is to align the interests of officers, other key employees, consultants
and non-employee directors of Ad-Star Services, Inc. (the "Company") and its
subsidiaries with those of the shareholders of the Company, to afford an
incentive to such officers, employees, consultants and directors to continue as
such, to increase their efforts on behalf of the Company and to promote the
success of the Company's business. To further such purposes, the Committee, as
defined below, may grant options to purchase Common Shares. The provisions of
the Plan are intended to satisfy the requirements of Section 16(b) of the
Securities Exchange Act of 1934 and of Section 162(m) of the Internal Revenue
Code of 1986, as amended, and shall be interpreted in a manner consistent with
the requirements thereof, as now or hereafter construed, interpreted and applied
by regulations, rulings and cases.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated below:
(a) "Agreement" shall mean a written agreement
entered into between the Company and an Optionee in connection with an award
under the Plan.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Cause" when used in connection with the
termination of an Optionee's employment by the Company or the cessation of an
Optionee's service as a consultant or a member of the Board, shall mean (i) the
conviction of the Optionee for the commission of a felony, (ii) the willful and
continued failure by the Optionee substantially to perform his duties and
obligations to the Company or a Subsidiary (other than any such failure
resulting from his incapacity due to physical or mental illness), or (iii) the
willful engaging by the Optionee in misconduct that is demonstrably injurious to
the Company or a Subsidiary. For purposes of this Section 2(c), no act, or
failure to act, on an Optionee's part shall be considered "willful" unless done,
or omitted to be done, by the Optionee in bad faith and without reasonable
belief that his action or omission was in the best interest of the Company. The
Committee shall determine whether a termination of employment is for Cause for
purposes of the Plan.
2
(d) "Change in Control" shall mean the occurrence of
the event set forth in any of the following paragraphs:
(i) any Person (as defined below) is
or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act (as defined below)), directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or its
subsidiaries) representing 50% or more of the combined voting power of
the Company's then outstanding securities; or
(ii) the following individuals cease
for any reason to constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute the Board and
any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or
(iii) there is consummated a merger
or consolidation of the Company or a direct or indirect subsidiary
thereof with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, at least 50% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its subsidiaries)
representing 50% or more of the combined voting power of the Company's
then outstanding securities; or
(iv) the shareholders of the Company
approve a plan of complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets, other than
a sale or disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by Persons in
substantially the same proportions as their ownership of the Company
immediately prior to such sale.
2
3
For purposes of this Section 2(d), "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(e) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to
time.
(f) "Committee" shall mean a committee established by
the Board to administer the Plan.
(g) "Common Shares" shall mean the common shares,
without par value, of the Company.
(h) "Company" shall mean Ad-Star Services, Inc., a
corporation organized under the laws of the State of New York, or any successor
corporation.
(i) "Disability" shall mean an Optionee's inability
to perform his duties with the Company or on the Board by reason of any
medically determinable physical or mental impairment, as determined by a
physician selected by the Optionee and acceptable to the Company.
(j) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
(k) "Fair Market Value" per share as of a particular
date shall mean (i) if the Common Shares are then listed on a national
securities exchange, the closing sales price per Common Shares on the national
securities exchange on which the Common Shares are principally traded for the
last preceding date on which there was a sale of such Common Shares on such
exchange, or (ii) if the Common Shares are then traded in an over-the-counter
market, the closing bid price for the Common Shares in such over-the-counter
market for the last preceding date on which there was a sale of such Common
Shares in such market, or (iii) if the Common Shares are not then listed on a
national securities exchange or traded in an over-the-counter market, such value
as the Committee, in its sole discretion, shall determine.
(l) "Incentive Stock Option" shall mean any option
intended to be and designated as an incentive stock option within the meaning of
Section 422 of the Code.
(m) "Non-employee Director" shall mean a member of
the Board who is not an employee of the Company.
3
4
(n) "Nonqualified Option" shall mean an Option that
is not an Incentive Stock Option.
(o) "Option" shall mean the right, granted hereunder,
to purchase Common Shares. Options granted by the Committee pursuant to the Plan
may constitute either Incentive Stock Options or Nonqualified Stock Options.
(p) "Optionee" shall mean a person who receives a
grant of an Option.
(q) "Option Price" shall mean the exercise price of
the Common Shares covered by an Option.
(r) "Parent" shall mean any company (other than the
Company) in an unbroken chain of companies ending with the Company if, at the
time of granting an Option, each of the companies other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other companies in such chain.
(s) "Plan" shall mean this Ad-Star Services, Inc.
1999 Stock Option Plan.
(t) "Retirement" shall mean the retirement of an
Optionee in accordance with the terms of any tax-qualified retirement plan
maintained by the Company or a Subsidiary in which the Optionee participates. If
the Optionee is not a participant in such a plan, such term shall mean the
termination of the Optionee's employment or cessation of the Optionee's service
as a member of the Board, other than by reason of death, Disability or Cause on
or after attainment of the age of 65.
(u) "Rule 16b-3" shall mean Rule 16b-3, as from time
to time in effect, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, including any successor to such Rule.
(v) "Subsidiary" shall mean any company (other than
the Company) in an unbroken chain of companies beginning with the Company if, at
the time of granting an Option, each of the companies other than the last
company in the unbroken chain owns stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
companies in such chain.
(w) "Ten Percent Stockholder" shall mean an Optionee
who, at the time an Incentive Stock Option is granted, owns (or is deemed to own
pursuant to the attribution rules of Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary.
4
5
3. Administration.
The Plan shall be administered by the Committee, the members of which
shall, except as may otherwise be determined by the Board, be "non-employee
directors" under Rule 16b-3 and "outside directors" under Section 162(m) of the
Code.
The Committee shall have the authority in its discretion, subject to
and not inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically granted
to it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant Options; to
determine which Options shall constitute Incentive Stock Options and which
Options shall constitute Nonqualified Stock Options; to determine the purchase
price of the Common Shares covered by each Option; to determine the persons to
whom, and the time or times at which awards shall be granted; to determine the
number of shares to be covered by each award; to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the Agreements (which need not be
identical) and to cancel or suspend awards, as necessary; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, including
delegating to one or more of the Company's management employees the authority to
grant Options to employees who are not "insiders" for purposes of Section 16 of
the Exchange Act and who are not "covered employees" for purposes of Section
162(m) of the Code, and the Committee 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 Committee or such person may have under the Plan. The
Board shall have sole authority, unless expressly delegated to the Committee, to
grant Options to Non-employee Directors. All decisions, determination and
interpretations of the Committee shall be final and binding on all Optionees of
any awards under this Plan.
The Board shall have the authority to fill all vacancies, however
caused, in the Committee. The Board may from time to time appoint additional
members to the Committee, and may at any time remove one or more Committee
members. One member of the Committee shall be selected by the Board as chairman.
The Committee shall hold its meetings at such times and places as it shall deem
advisable. All determinations of the Committee shall be made by a majority of
its members either present in person or participating by conference telephone at
a meeting or by written consent. The Committee may appoint a secretary and make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
Anything to the contrary, notwithstanding the duties and
responsibilities of the Committee may be exercised by the Board.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any award
granted hereunder.
5
6
4. Eligibility.
Awards may be granted to officers and other key employees of and
consultants to the Company, and its Subsidiaries, including officers and
directors who are employees, and to Non-employee Directors. In determining the
persons to whom awards shall be granted and the number of shares to be covered
by each award, the Committee shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan.
5. Stock.
The maximum number of Common Shares reserved for the grant of awards
under the Plan shall be 500,000, subject to adjustment as provided in Section 8
hereof. Such shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be required by the Company.
If any outstanding award under the Plan should for any reason expire,
be canceled or be forfeited without having been exercised in full, the Common
Shares allocable to the unexercised, canceled or terminated portion of such
award shall (unless the Plan shall have been terminated) become available for
subsequent grants of awards under the Plan.
6. Terms and Conditions of Options.
Each Option granted pursuant to the Plan shall be evidenced by an
agreement (an "Option Agreement"), in such form and containing such terms and
conditions as the Committee shall from time to time approve, which Agreement
shall comply with and be subject to the following terms and conditions, unless
otherwise specifically provided in such Option Agreement:
(a) Number of Shares. Each Option Agreement shall state the
number of Common Shares to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically
state that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option.
(c) Option Price. Each Option Agreement shall state the Option
Price, which shall not be less than one hundred percent (100%) of the Fair
Market Value of the Common Shares covered by the Option on the date of grant
unless, with respect to Nonqualified Stock Options, otherwise determined by the
Committee. The Option Price shall be subject to adjustment as provided in
Section 8 hereof. The date as of which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which such Option is
granted, unless such resolution specifies a different date.
6
7
(d) Medium and Time of Payment. The Option Price shall be paid
in full, at the time of exercise, in cash or in Common Shares then owned by the
Optionee having a Fair Market Value equal to such Option Price or in a
combination of cash and Common Shares or, unless the Committee shall determine
otherwise, by a cashless exercise procedure through a broker-dealer.
(e) Exercise Schedule and Period of Options. Each Option
Agreement shall provide the exercise schedule for the Option as determined by
the Committee; provided, however, that, the Committee shall have the authority
to accelerate the exercisability of any outstanding Option at such time and
under such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be ten (10) years from the date of the grant of the Option
unless otherwise determined by the Committee; provided, however, that, in the
case of an Incentive Stock Option, such exercise period shall not exceed ten
(10) years from the date of grant of such Option. The exercise period shall be
subject to earlier termination as provided in Sections 6(f) and 6(g) hereof. An
Option may be exercised, as to any or all full Common Shares as to which the
Option has become exercisable, by written notice delivered in person or by mail
to the Secretary of the Company, specifying the number of shares of Common
Shares with respect to which the Option is being exercised. Notwithstanding any
other provision of this Plan, no Option granted hereunder may be exercised prior
to the consummation of an underwritten public offering of the Company's
securities where the gross proceeds from such offering are in excess of $5
million.
(f) Termination. Except as provided in this Section 6(f) and
in Section 6(g) hereof, an Option may not be exercised unless (i) with respect
to an Optionee who is an employee of the Company, the Optionee is then in the
employ of the Company or a Subsidiary (or a company or a Parent or Subsidiary
company of such company issuing or assuming the Option in a transaction to which
Section 424(a) of the Code applies), and unless the Optionee has remained
continuously so employed since the date of grant of the Option and (ii) with
respect to an Optionee who is a Non-employee Director, the Optionee is then
serving as a member of the Board or as a member of a board of directors of a
company or a Parent or Subsidiary company of such company issuing or assuming
the Option. In the event that the employment of an Optionee shall terminate or
the service of an Optionee as a member of the Board shall cease (other than by
reason of death, Disability, Retirement or Cause), all Options of such Optionee
that are exercisable at the time of such termination may, unless earlier
terminated in accordance with their terms, be exercised within ninety (90) days
after the date of such termination or service (or such different period as the
Committee shall prescribe).
(g) Death, Disability or Retirement of Optionee. If an
Optionee shall die while employed by the Company or a Subsidiary or serving as a
member of the Board, or within ninety (90) days after the date of termination of
such Optionee's employment or cessation of such Optionee's service (or within
such different period as the Committee may have provided pursuant to Section
6(f) hereof), or if the Optionee's employment shall terminate or service shall
cease by reason of Disability or Retirement, all Options theretofore granted to
such Optionee (to the extent otherwise exercisable) may, unless earlier
terminated in accordance with their terms, be exercised by the Optionee or by
his beneficiary, at any time
7
8
within one year after the death, Disability or Retirement of the Optionee (or
such different period as the Committee shall prescribe). In the event that an
Option granted hereunder shall be exercised by the legal representatives of a
deceased or former Optionee, written notice of such exercise shall be
accompanied by a certified copy of letters testamentary or equivalent proof of
the right of such legal representative to exercise such Option. Unless otherwise
determined by the Committee, Options not otherwise exercisable on the date of
termination of employment shall be forfeited as of such date.
(h) Other Provisions. The Option Agreements evidencing awards
under the Plan shall contain such other terms and conditions not inconsistent
with the Plan as the Committee may determine, including penalties for the
commission of competitive acts and a provision providing that no option may be
exercised prior to the consummation of an underwritten initial public offering
of the Company's securities pursuant to a registration statement filed pursuant
to the Securities Act of 1933, as amended.
7. Incentive Stock Options.
Options granted pursuant to this Section 7 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
6 hereof. An Incentive Stock Option may not be granted to a Non-employee
Director or a consultant to the Company.
(a) Value of Shares. The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of the Common
Shares with respect to which Incentive Stock Options granted under this Plan and
all other option plans of any subsidiary become exercisable for the first time
by each Optionee during any calendar year shall not exceed $100,000.
(b) Ten Percent Stockholder. In the case of an Incentive Stock
Option granted to a Ten Percent Stockholder, (i) the Option Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value of the Common
Shares on the date of grant of such Incentive Stock Option, and (ii) the
exercise period shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.
8. Effect of Certain Changes.
(a) In the event of any extraordinary dividend, stock
dividend, recapitalization, merger, consolidation, stock split, warrant or
rights issuance, or combination or exchange of such shares, or other similar
transactions, each of the number of Common Shares available for awards, the
number of such shares covered by outstanding awards, and the price per share of
Options, as appropriate, shall be equitably adjusted by the Committee to reflect
such event and preserve the value of such awards; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
8
9
(b) Upon the occurrence of a Change in Control, each Option
granted under the Plan and then outstanding but not yet exercisable shall
thereupon become fully exercisable.
(c) All options granted hereunder presuppose (i) a
reincorporation of the Company in Delaware and the issuance of 3,000,000 shares
of common stock of the Delaware Corporation in connection therewith and (ii) the
initial public offering of the stock of the Delaware Corporation (collectively
the "Recapitalization"). On or prior to the consummation of the
Recapitalization, the Company shall make appropriate provisions or cause
appropriate provisions to be made so that each Optionee shall have the right
thereafter to obtain upon exercise of the option the kind and amount of shares
of stock and other securities and property receivable upon the Recapitalization
by a holder of the number of common shares for which the option may be exercised
prior to the effective date of such Recapitalization.
9. Surrender and Exchange of Awards.
The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any option granted under any other plan,
program or arrangement of the Company or any Subsidiary ("Surrendered Option"),
to be conditioned upon the granting to the Optionee of a new Option for the same
number of Common Shares as the Surrendered Option, or may require such voluntary
surrender as a condition precedent to a grant of a new Option to such Optionee.
Subject to the provisions of the Plan, such new Option may be an Incentive Stock
Option or a Nonqualified Stock Option, and shall be exercisable at the price,
during such period and on such other terms and conditions as are specified by
the Committee at the time the new Option is granted.
10. Period During Which Awards May Be Granted.
Awards may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board, or the
date the Plan is approved by the shareholders of the Company, whichever is
earlier, unless the Board shall terminate the Plan at an earlier date.
11. Nontransferability of Awards.
Except as otherwise determined by the Committee, awards granted under
the Plan shall not be transferable otherwise than by will or by the laws of
descent and distribution, and awards may be exercised or otherwise realized,
during the lifetime of the Optionee, only by the Optionee or by his guardian or
legal representative.
12. Approval of Shareholders.
The Plan shall take effect upon its adoption by the Board and shall
terminate on the tenth anniversary of such date, but the Plan (and any grants of
awards made prior to the shareholder approval mentioned herein) shall be subject
to the approval of Company's
9
10
shareholders, which approval must occur within twelve months of the date the
Plan is adopted by the Board.
13. Agreement by Optionee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of exercise of a
Nonqualified Stock Option (a "Tax Event"), each Optionee who is not a
Non-employee Director shall agree that no later than the date of the Tax Event,
such Optionee will pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the Tax Event. Alternatively, the Committee
may provide that such an Optionee may elect, to the extent permitted or required
by law, to have the Company deduct federal, state and local taxes of any kind
required by law to be withheld upon the Tax Event from any payment of any kind
due the Optionee. The withholding obligation may be satisfied by the withholding
or delivery of Common Shares. Any decision made by the Committee under this
Section 13 shall be made in its sole discretion.
14. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that, unless otherwise determined
by the Board, an amendment that requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3, Section 162(m) of the Code or any
other law, regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of shareholders. Except as provided in
Section 8(a) hereof, no suspension, termination, modification or amendment of
the Plan may adversely affect any award previously granted, unless the written
consent of the Optionee is obtained.
15. Rights as a Shareholder.
An Optionee or a transferee of an award shall have no rights as a
shareholder with respect to any shares covered by the award until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 8(a) hereof.
16. No Rights to Employment or Service as a Director.
Nothing in the Plan or in any award granted or Agreement entered into
pursuant hereto shall confer upon any Optionee the right to continue in the
employ of the Company or any Subsidiary or as a member of the Board or to be
entitled to any remuneration or benefits not set forth in the Plan or such
Agreement or to interfere with or limit in any way the right of the Company or
any such Subsidiary to terminate such Optionee's employment or service. Awards
granted under the Plan shall not be affected by any change in duties or position
of an
10
11
employee Optionee as long as such Optionee continues to be employed by the
Company or any Subsidiary.
17. Beneficiary.
An Optionee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Optionee, the executor or administrator of the Optionee's estate
shall be deemed to be the Optionee's beneficiary.
18. Governing Law.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of New York.
11