1
EXHIBIT 10.2
LAUNCH MEDIA, INC.
1998 STOCK OPTION PLAN
SECTION 1
General
1.1. Purpose. LAUNCH Media, Inc. (the "Company") has established the
LAUNCH Media, Inc. 1998 Stock Option Plan (the "Plan") as set forth herein to
promote the long term interests of the Company by (i) attracting, motivating and
retaining key employees; and (ii) strengthening the Company's ability to attract
and retain the services of experienced and knowledgeable directors and providing
such directors with an opportunity to acquire an equity interest in the Company.
1.2. Effective Date and Duration. Subject to the approval of the
stockholders of the Company, the Plan shall be effective as of March 12, 1998;
provided, however, that to the extent any Options (as defined in Section 3) have
been granted under the Plan prior to receipt of such approval, such Options
shall be contingent on such approval being obtained and shall automatically
terminate and be of no further force or effect if such approval is not obtained.
The Plan shall be unlimited in duration and, in the event of Plan termination,
shall remain in effect as long as any Options granted under it are outstanding;
provided, however, that no Options (as defined in Section 3) may be granted
under the Plan on a date that is more than 10 years from the date the Plan is
adopted or, if earlier, the date the Plan is approved by the stockholders of the
Company.
1.3. Administration. The authority to manage and control the operation
and administration of the Plan shall be vested in the Company's Board of
Directors (the "Board") or a designated committee of the Board (the
"Committee"). The determination of the Board or the Committee on matters within
its authority shall be conclusive and binding upon the Company and all other
persons. Notwithstanding the foregoing, no member of the Board or the Committee
shall act or participate in any way with respect to the grant of an Option to
himself.
1.4. Shares Subject to the Plan. An aggregate of 2,000,000 shares of
common stock of the Company ("Stock") shall be available for issuance under the
Plan. Such shares shall be either authorized and unissued shares or treasury
shares of stock. If any Option under the Plan or portion thereof shall expire
unexercised, terminate, be surrendered, canceled or settled in such a manner
that all or some shares subject to the Option are not issued to the Participant,
such shares shall (unless the Plan shall have terminated) become available for
the grant of additional Options under the Plan, except shares withheld pursuant
to subsection 3.7.
1.5. Adjustments to Number of Shares Subject to the Plan. In the event
of any merger, consolidation, reorganization, recapitalization, spinoff, stock
dividend, stock split, reverse stock split, reclassification, exchange or other
change in corporate structure or capitalization affecting the Stock of the
Company, the aggregate number of shares of Stock with respect to which Options
may be granted under the Plan and the type and number of shares subject to any
1
2
outstanding Options under the Plan and the terms thereof shall be equitably
adjusted by the Board or the Committee in its sole discretion.
1.6. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
1.7. Right to Continue Service; Stockholder Status. The Plan does not
constitute a contract of employment or continued service, and participation in
the Plan will not give any employee or Participant the right to be retained in
the employ or service of the Company (or any parent corporation or subsidiary
corporation of the Company, as such terms are defined in Section 424(e) and (f)
of the Internal Revenue Code of 1986, as amended (the "Code")), or any right or
claim to any benefit under the Plan unless such right or claim has specifically
accrued under the terms of the Plan or any agreement evidencing the grant of the
Option. No Option under the Plan shall confer upon the holder thereof any right
as a stockholder of the Company prior to the issuance of Stock pursuant to the
exercise thereof.
SECTION 2
Participation
Subject to the terms and conditions of the Plan, the Board or the
Committee shall determine and designate from time to time the employees,
directors and consultants of the Company (or any parent corporation or
subsidiary corporation of the Company) who shall be "Participants" in the Plan.
In making this determination, the Board or the Committee shall take into account
the individual's contribution and potential contribution to the Company and any
other factors that the Board or the Committee determines to be relevant.
SECTION 3
Grants
3.1. Option Grants. Subject to the terms and conditions of the Plan,
each Participant designated by the Board or the Committee in accordance with
Section 2 shall be granted an option to purchase shares of Stock ("Options") and
the Board or the Committee shall determine the number, type and terms of the
Options to be granted to each of them. Each option shall entitle the Participant
to purchase shares of Stock upon the terms and conditions as the Board or the
Committee specifies and which are not inconsistent with the Plan and at the
Option Price (as defined in subsection 3.3) determined by the Board or the
Committee at the time the Option is granted, subject to the following provisions
of this Section 3. Any option granted under this Section 3 that is awarded to an
employee of the Company (or any parent or subsidiary corporation of the Company)
and that satisfies all of the requirements of section 422 of the Code, may be
designated by the Board or the Committee as an "Incentive Stock Option";
provided, however, that to the extent that the aggregate fair market value of
Stock with respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar
2
3
year (under the Plan and all other plans of the Company and its affiliates)
exceeds $100,000, such Options shall be treated as Non-Qualified Options.
"Non-Qualified Options" are Options that are not designated as Incentive Stock
Options or that do not satisfy the requirements of section 422 of the Code.
3.2. Option Agreement. Each grant of an Option under the Plan shall be
evidenced by an agreement between the Participant and the Company in a form
specified by the Board or the Committee containing such terms and conditions,
not inconsistent with the Plan, as the Board or the Committee may, in its sole
discretion, prescribe.
3.3. Option Price. The purchase price of each share of Stock under an
Option granted under this Section 3 (the "Option Price") shall be determined by
the Board or the Committee at the time of the grant of the Option; provided,
however, that in no event shall the Option Price be less than the Fair Market
Value (as defined below) of a share of Stock on the date the Option is granted
or, if greater, par value; and provided further that, in the case of a grant of
an Incentive Stock Option to a Participant who, as of the date of grant, is a 10
percent stockholder of the Company or any parent or subsidiary corporation of
the Company (determined in accordance with section 422 of the Code), the Option
Price shall not be less than 110 percent of the Fair Market Value of a share of
Stock as of the date of grant. For all purposes of the Plan, the term "Fair
Market Value" of a share of Stock as at any date shall mean the fair market
value of such share of Stock determined, in good faith, in accordance with
procedures established by the Board or the Committee or in accordance with
procedures established by the Board of the Committee.
3.4. Expiration of Options. All rights with respect to an Option granted
under the Plan, whether or not then exercisable, shall automatically terminate
as of the Option's Expiration Date. The "Expiration Date" with respect to an
Option or any portion thereof, granted to a Participant under the Plan shall be
the earliest of:
(a) the date which is 10 years after the date of which the Option
is granted (5 years in the case of an Incentive Stock Option which is granted to
an individual who, as of the date of grant, is a 10 percent stockholder of the
Company or any parent or subsidiary corporation of the Company);
(b) the date established by the Board or the Committee at the
time of the grant of the Option;
(c) the date which is one year, or such other longer or shorter
period of time (not less than six months) as established by the Board or the
Committee, after the date on which the Participant's employment with the Company
(or service as a director of the Company) is terminated by reason of his
becoming disabled (within the meaning of section 22(e)(3) of the Code) or his
death;
(d) the date which is three months, or such other longer or
shorter period of time (not less than thirty days) as established by the Board
or the Committee, after the date on which the Participant's employment with the
Company (or service as a director of the Company)
3
4
is terminated for any reason other than (i) disability, (ii) death, or (iii) for
Cause (as defined below); or
(e) the date on which the Participant's employment with the
Company (or service as a director of the Company) is terminated for Cause.
For purposes of the Plan, the term "Cause" shall mean (a) the willful and
continued failure by the Participant to substantially perform his duties for the
Company; (b) the willful engaging by the Participant in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
or (c) an illegal or negligent action of the Participant which substantially and
adversely affects the Company.
3.5. Exercise of Options. To the extent then exercisable, Options
awarded under the Plan shall be exercised, in whole or in part, by filing a
written notice with the Secretary of the Company at its corporate headquarters
prior to the Option's Expiration Date. Such notice shall specify the number of
shares of Stock which the Participant elects to purchase and shall be
accompanied by payment of the Option Price for such shares, plus any required
withholding taxes. The Option price of each share of Stock purchased upon the
exercise of any Option granted under this Section 3, and any required
withholding taxes, shall be paid in cash (including check, bank draft or money
order) or, to the extent provided by the Board or the Committee at the time of
grant, in shares of Stock (valued at Fair Market Value as of the date of
exercise, and including shares of Stock acquired pursuant to the exercise of the
Option) by the assignment of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a "Cashless Exercise"), by the Participant's promissory
note in a form approved by the Company, or in any combination thereof.
Notwithstanding the foregoing, the Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise. In addition, no promissory note shall be permitted
if the exercise of an Option using a promissory note would be a violation of any
law, and any permitted promissory note shall be on such terms as the Board or
the Committee shall determine at the time the Option is granted. If applicable,
in the discretion of the Board or the Committee, separate certificates
representing the shares purchased by exercise of Incentive Stock Option and by
exercise of Non-Qualified Option shall be delivered to the person entitled
thereto as soon as practicable after such exercise.
3.6. Compliance with Applicable Laws. Notwithstanding any other
provision of the Plan:
(a) The Company shall have no liability to issue any shares of
Stock under the Plan unless such issuance would comply with all applicable laws
and the applicable requirements of any securities exchange or similar entity.
(b) Prior to the issuance of any shares of Stock under the Plan,
the Company may require a written statement that the recipient is acquiring the
shares of Stock solely for
4
5
investment and not for the purpose or with the intention of distributing the
shares and will not dispose of such shares in violation of the Securities Act of
1933 or any applicable state securities registration law and any certificate
representing such shares shall bear a legend referring to such restrictions.
(c) If, at any time, the Company, in its sole discretion,
determines that the listing, registration or qualification (or any updating of
any such document) of the Stock is necessary on any securities exchange or under
any federal or state securities or blue sky law, or that the consent or approval
of any governmental regulatory body is necessary or desirable as a condition or,
or in connection with the issuance of Stock pursuant to the exercise of an
Option, the Stock shall not be issued, in whole or in part, unless such listing,
registration, qualification consent or approval shall have been affected or
obtained free of any condition not acceptable to the Company.
3.7. Withholding. All exercises of Options under the Plan are subject to
withholding of all applicable taxes, which withholding obligation shall be
satisfied by the payment of cash or check payable to the Company, or, to the
extent permitted by the Board or the Committee at the time of the grant of an
Option, through the surrender of shares of Stock which the Participant already
owns or the withholding of shares of Stock to which a Participant is otherwise
entitled upon exercise of the Option.
3.8. Nontransferability. No Option under the Plan, and no interest
therein, shall be transferable by the Participant except by will or by the laws
of descent and distribution and shall be exercisable during a Participant's
lifetime only by the Participant. After a Participant's death, Options shall be
exercisable, to the extent exercisable by the Participant on the date of his
death, by the executor or administrator of the Participant's estate or by the
person or persons who shall have acquired the Option from the Participant by
bequest or inheritance, subject to the terms of the Plan and the agreement
between the Company and the Participant evidencing such Option.
3.9. Provision of Information. At least annually, copies of the
Company's balance sheet and income statement for the just completed fiscal year
shall be made available to each Participant and purchaser of shares of Stock
upon the exercise of an Option. The Company shall not be required to provide
such information to persons whose duties in connection with the Company assure
them access to equivalent information.
SECTION 4
4.1. Termination or Amendment of Plan. The Board may terminate or amend
the Plan at any time. However, subject to changes in applicable law, regulations
or rules that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of subsection 1.5), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no other amendment of the Plan that
would require approval of the Company's stockholders under any applicable law,
regulation or rule. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option or any unexercised portion thereof,
without the consent of the Participant.
5
6
4.2. Stockholder Approval. The Plan or any increase in the maximum
number of shares of Stock issuable thereunder as provided in subsection 1.4 (the
"Maximum Shares") shall be approved by the stockholders of the Company within
twelve (12) months of the date of adoption thereof by the Board. Options granted
prior to stockholder approval of the Plan or in excess of the Maximum Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of the Plan or such increase in the Maximum
Shares, as the case may be.
6