CINEMASTAR LUXURY THEATERS, INC.
STOCK OPTION PLAN
CINEMASTAR LUXURY THEATERS, INC.
STOCK OPTION PLAN
TABLE OF CONTENTS
Page
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ARTICLE I ESTABLISHMENT. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Committee Structure. . . . . . . . . . . . . . . . . . . . 4
3.2 Committee Authority. . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV STOCK UNDERLYING OPTIONS . . . . . . . . . . . . . . . . . 6
4.1 Number of Shares . . . . . . . . . . . . . . . . . . . . . 6
4.2 Release of Shares. . . . . . . . . . . . . . . . . . . . . 6
4.3 Restrictions on Shares . . . . . . . . . . . . . . . . . . 6
4.4 Shareholder Rights . . . . . . . . . . . . . . . . . . . . 7
4.5 Anti-Dilution. . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Grant. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Terms and Conditions . . . . . . . . . . . . . . . . . . . 8
6.4 Exercisability . . . . . . . . . . . . . . . . . . . . . .10
6.5 Cashing Out of Option. . . . . . . . . . . . . . . . . . .11
ARTICLE VII PROVISIONS APPLICABLE TO STOCK ACQUIRED
UNDER OPTIONS . . . . . . . . . . . . . . . . . . . . 11
7.1 Transfer of Shares . . . . . . . . . . . . . . . . . . . .11
7.2 Limited Transfer During Offering . . . . . . . . . . . . .12
7.3 Committee Discretion . . . . . . . . . . . . . . . . . . .12
7.4 No Company Obligation. . . . . . . . . . . . . . . . . . .12
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ARTICLE VIII CHANGE IN CONTROL PROVISIONS . . . . . . . . . . . . . . .12
8.1 Impact of Event. . . . . . . . . . . . . . . . . . . . . .12
8.2 Definition of Change in Control. . . . . . . . . . . . . .13
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .13
9.1 Amendments and Termination . . . . . . . . . . . . . . . .13
9.2 Unfunded Status of Plan. . . . . . . . . . . . . . . . . .14
9.3 General Provisions . . . . . . . . . . . . . . . . . . . .14
9.4 Mitigation of Excise Tax . . . . . . . . . . . . . . . . .15
9.5 Rights with Respect to Continuance of
Employment . . . . . . . . . . . . . . . . . . . . . . .16
9.6 Withholding. . . . . . . . . . . . . . . . . . . . . . . .16
9.7 Delay. . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . .16
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . .16
9.10 Successors and Assigns . . . . . . . . . . . . . . . . . .16
9.11 Entire Option Agreement. . . . . . . . . . . . . . . . . .17
9.12 Other Company Plans. . . . . . . . . . . . . . . . . . . .17
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CINEMASTAR LUXURY THEATERS, INC.
STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT
The CinemaStar Luxury Theaters, Inc. Stock Option Plan is hereby
established by CinemaStar Luxury Theares, Inc. to promote its overall
financial objectives by allowing certain directors, officers, employees and
other persons to participate in its long-term growth. This Plan and the
grant of options hereunder is expressly conditioned upon the approval of this
Plan by the holders of a majority of the Company's common stock entitled to
vote on matters submitted to the Company's shareholders to the extent
required, and solely, to insure that any Incentive Stock Option granted
hereunder will qualify as such. This Plan is adopted by the Company effective
as of December 16, 1997.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms are defined as set forth
below:
"AFFILIATE" means, with respect to the Company, any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated association or other entity that (i) directly or indirectly is
controlled by, controls or is under common control with the Company or (ii)
from time to time is otherwise designated as an "Affiliate" for purposes
hereunder by the Committee.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means any act or omission that permits the Company or an
Affiliate to terminate a written agreement or arrangement between a
Participant and the Company or such Affiliate for "cause" as defined in such
agreement or arrangement, or if there is no such agreement or arrangement (or
"cause" is not defined therein), then Cause shall mean any act or omission
(i) that violates the Company's or an Affiliate's established practices,
policies or guidelines applicable to a Participant, (ii) that constitutes
willful misconduct, dishonesty or fraud, (iii) that constitutes competing
with the Company, either directly or indirectly, including accepting
employment with a competitor of the Company within three (3) months of
termination of Participant's employment with the Company for any reason or
(iv) that is materially detrimental to the best interests of the Company or
any Affiliate. The determination of Cause for purposes of this Plan shall be
made in the sole and absolute discretion of the Committee and shall not be
construed to be an admission of cause for any other purpose.
"CODE" means the Internal Revenue Code of 1986, as amended, final
Treasury Regulations thereunder and any subsequent Internal Revenue Code.
"COMMISSION" means the Securities and Exchange Commission or any
successor agency.
"COMMITTEE" means the person or persons appointed by the Board to
administer this Plan, as further described in SECTION 3.1 below.
"COMMON STOCK" means shares of the Company's Common Stock, whether
presently or hereafter issued, any other stock or security resulting from
adjustment thereof as described in SECTION 4.5 below or the common stock of
any successor to the Company that is designated by the Committee as "Common
Stock" for the purpose of this Plan.
"COMPANY" means CinemaStar Luxury Theaters, Inc., a California
corporation, any successor or assignee corporation or corporations into which
the Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; or any assignee
of or successor to substantially all of the assets of the Company.
"CAP ENTITIES" means CinemaStar Acquisition Partners, L.L.C., a Delaware
limited liability company, and any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company and its Affiliates) that (i) directly or
indirectly controls, is controlled by or is under common control with
CinemaStar Acquisition Partners, L.L.C. (other than the Company and its
direct Affiliates) or (ii) from time to time is otherwise designated as a
"CAP Entity" for purposes hereunder by the Committee.
"CAP INTEREST" means (i) the beneficial ownership (which, for purposes
of this Plan, shall have the meaning set forth in Rule 13d-3 promulgated
under the Exchange Act) of, or the pecuniary interest (within the meaning of
Rule 16a-1 promulgated under the Exchange Act) in, the outstanding voting
securities of the Company or an Affiliate, which securities are entitled to
vote generally in matters submitted to the Company's shareholders for a vote
held by the CAP Entities, or (ii) such other securities as may be otherwise
designated as a "CAP Interest" for purposes hereunder by the Committee.
"DISABILITY" means any situation that permits the Company or an
Affiliate to terminate a written agreement or arrangement between a
Participant and the Company or such Affiliate due to "disability" as defined
in such agreement or arrangement, or if there is no such agreement or
arrangement (or "disability" is not defined therein), then Disability shall
mean (i) a mental or physical illness that entitles the Participant to
receive benefits under any long term disability plan of the Company or any
Affiliate under which the Participant is covered or (ii) a mental or physical
illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan
if it is the result of (a) a willfully self-inflicted injury or willfully
self-induced sickness, or (b) an injury or disease contracted, suffered, or
incurred,
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while participating in a criminal offense. The determination of Disability
for purposes of this Plan shall be made in the sole and absolute discretion
of the Committee and shall not be construed to be an admission of disability
for any other purpose.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FAIR MARKET VALUE" means the value of the Common Stock, in each case
without regard as to whether the Common Stock is restricted, illiquid or
represents a minority interest (unless expressly provided otherwise in an
Option Agreement), determined, at the option of the Committee, as either 1)
the closing price of the Common Stock on the date of grant, as reported by
the NASDAQ SmallCap Market, or (2) the average of the closing price of the
Common Stock on each of the ten (10) days for which such quotations are
reported preceding the relevant date, as reported by the NASDAQ SmallCap
Market.
"INCENTIVE STOCK OPTION" means any Option intended to be and designated
as an "incentive stock option" within the meaning of Section 422 of the Code.
"NONQUALIFIED STOCK OPTION" means any Option other than an Incentive
Stock Option.
"OPTION" means an option granted under this Plan and an Option
Agreement, as more particularly described in ARTICLE VI below.
"OPTION AGREEMENT" means any and all agreement(s) entered into pursuant
to this Plan pursuant to which an Option is granted to a Participant.
"OPTION PERIOD" means the period during which the Option shall be or
become exercisable in accordance with an Option Agreement and/or ARTICLE VI
below.
"OPTION PRICE" means the price at which Common Stock may be purchased
upon the exercise of an Option as provided in an Option Agreement and subject
to SECTION 6.3 below.
"PARTICIPANT" means (i) a person who satisfies the eligibility
conditions of ARTICLE V below and to whom an Option has been granted by the
Committee under this Plan, (ii) an appointed Representative of a Participant,
(iii) a trust for the benefit of the Participant, the Participant's parents,
spouse or descendants, or (iv) a custodian under a uniform gifts to minors
act or similar statute for the benefit of the Participant's descendants, in
each case to the extent permitted by the Committee and consistent with Rule
16b-3. Notwithstanding the foregoing, the term "Termination of Employment"
shall mean the Termination of Employment of the original Participant and not
such Representative, trust or custodian.
"PLAN" means the CinemaStar Luxury Theaters, Inc. Stock Option Plan as
herein set forth and as may be amended from time to time.
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"PUBLIC OFFERING" means the initial public offering of shares of the
Company's common stock under the Securities Act.
"REPRESENTATIVE" means (i) the person or entity lawfully acting as the
executor or administrator of a Participant's estate, (ii) the person or
entity lawfully acting as the guardian or temporary guardian of a
Participant, (iii) the person or entity that is the beneficiary of a
Participant upon or following such Participant's death, or (iv) any person to
whom an Option has been transferred pursuant to a domestic relations order;
provided that only one of the foregoing shall be a Representative at any
point in time as determined under applicable law and as recognized by the
Committee in its sole and absolute discretion.
"RULE 16b-3" means Rule 16b-3, as promulgated under the Exchange Act, as
amended from time to time, or any successor thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"TERMINATION OF EMPLOYMENT" means the occurrence of any act or event,
whether pursuant to a written employment agreement or otherwise, that
actually or effectively causes or results in a person ceasing to be an
officer, independent contractor, director or employee of the Company or of
any Affiliate, or to be an officer, independent contractor, director or
employee of any entity that provides services to the Company or any
Affiliate, including, without limitation, death, Disability, dismissal with
or without Cause or resignation. In addition, Termination of Employment shall
be deemed to have occurred with respect to an employee of an Affiliate if
such Affiliate shall cease to be an Affiliate and the Participant shall not
immediately thereafter become an employee of the Company or another Affiliate.
ARTICLE III
ADMINISTRATION
3.1 COMMITTEE STRUCTURE. This Plan shall be administered by a
Committee comprised of three members of the Board (or such other number as
determined by the Board) and shall be comprised of such number of
"disinterested persons" as is necessary to meet the requirements of Rule
16b-3 and such number of "outside directors" as is necessary to meet the
requirements of Section 162(m) of the Code. A member of the Committee shall
not be eligible to receive any grant of an Option hereunder, or any grant or
award of any equity securities pursuant to any other plan of the Company or
any plan of an Affiliate, for one year prior to, during and for one year
following such member's service on the Committee, unless the grant of such
Option and the terms and conditions thereof shall be approved by a majority
of the members of the full Board meeting the criteria set forth in the
immediately preceding sentence. A member of the Committee shall not exercise
any discretion respecting awards to, or decisions affecting, himself or
herself under this Plan. At all meetings of the Committee, members entitled
to cast a majority of the votes of the entire Committee shall constitute a
quorum for the transaction of
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business and the act of members entitled to cast a majority of the votes
present at any meeting at which there is a quorum shall be the act of the
Committee. The Committee shall in all respects be subject to the provisions
of the Company's charter documents and bylaws pertaining to committees of the
Board. The Committee may be the Compensation Committee of the Board,
provided that such Compensation Committee otherwise meets the criteria set
forth for the Committee hereunder.
3.2 COMMITTEE AUTHORITY. Subject to SECTION 3.1 above and the other
terms of this Plan, the Committee shall have the authority, among other
things, to:
(i) select those persons to whom Options may be granted from time to
time;
(ii) determine whether and to what extent Options are to be granted
hereunder;
(iii) determine the amount of Common Stock underlying an Option;
(iv) determine the terms and conditions of any Option (including, but
not limited to, the Option Period, the amount, form and manner of payment of
the Option Price, any exercise restriction or limitation and any exercise
acceleration, forfeiture or waiver regarding any Option and the underlying
Common Stock);
(v) adjust the terms and conditions, at any time or from time to
time, of any Option or Option Agreement, subject to the limitations of
SECTION 9.1 below;
(vi) determine what securities law requirements are applicable to this
Plan, the Options and the issuance of Common Stock upon the exercise of an
Option and to require that appropriate action be taken by a Participant with
respect to such requirements;
(vii) cancel outstanding Options, with the consent of the Participant
or as otherwise provided in this Plan or an Option Agreement;
(viii) require as a condition of the exercise of an Option or the
issuance or transfer of underlying Common Stock, the withholding from a
Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction or as may be otherwise required by law;
(ix) determine whether and with what effect an individual has incurred
a Termination of Employment;
(x) determine whether the Company or any other person has a right or
obligation to purchase Common Stock or Options from a Participant and, if so,
the terms and conditions of such purchase;
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(xi) determine the restrictions or limitations on the transfer of
Common Stock issued upon exercise of an Option; and
(xii) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties hereunder.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it
shall, from time to time, deem advisable, to interpret the terms and
provisions of this Plan and any Option issued under this Plan (and any Option
Agreement) and to otherwise supervise the administration of this Plan. The
Committee's policies and procedures may differ with respect to Options
granted at different times.
Unless otherwise specifically provided herein, any determination made by
the Committee pursuant to the provisions of this Plan shall be made in its
sole and absolute discretion, and in the case of any determination relating
to an Option, may be made at the time of the grant of the Option or, unless
in contravention of any express term of this Plan or an Option Agreement, at
any time thereafter. All decisions made by the Committee pursuant to the
provisions of this Plan shall be final and binding on all persons, including
the Company, Affiliates and Participants. Any determination shall not be
subject to DE NOVO review if challenged in court.
ARTICLE IV
STOCK UNDERLYING OPTIONS
4.1 NUMBER OF SHARES. Subject to the adjustment under SECTION 4.5
below, the total amount of Common Stock reserved and available for
distribution upon the exercise of Options granted under this Plan shall be
Two Million Eight Hundred Eighty-Five Thousand Nine Hundred Sixty (2,885,960)
shares, which shares will have been authorized for issuance upon the approval
of this Plan by the Company's shareholders. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
4.2 RELEASE OF SHARES. If any Common Stock previously issuable upon
the exercise of an Option ceases to be subject to such Option, if any Common
Stock subject to any Option is forfeited or if any Option otherwise
terminates without the issuance of any Common Stock being made to a
Participant, then any and all such Common Stock, in the sole and absolute
discretion of the Committee, again may be made available for distribution
upon the exercise of Options granted under this Plan.
4.3 RESTRICTIONS ON SHARES. Common Stock issued upon exercise of an
Option shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its sole
and absolute discretion may determine or provide in the Option Agreement.
The Company shall not be required to issue or deliver any certificates for
Common Stock, cash or other property upon exercise of an Option unless (i) a
registration
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statement under the Securities Act is effective with respect to such issuance
or delivery or, in the opinion of counsel acceptable to the Committee, an
exemption under the Securities Act with respect thereto is available and (ii)
any applicable withholding obligation is satisfied in order for the Company
or an Affiliate to obtain a deduction with respect to the exercise of an
Option. The Company may cause any certificate representing Common Stock to
be properly marked with a legend or other notation reflecting the limitations
on transfer of such Common Stock as provided in this Plan or as the Committee
may otherwise require. The Committee may require any person exercising an
Option to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the
Common Stock in compliance with applicable law or otherwise. Fractional
shares shall not be delivered, but shall be rounded to the next lower whole
number of shares.
4.4 SHAREHOLDER RIGHTS. No person shall have any rights of a
shareholder as to Common Stock underlying an Option until such Common Stock
has been recorded on the Company's official shareholder records as having
been issued or transferred. Subject to SECTION 4.3 above, the Company will
issue Common Stock upon exercise of an Option within thirty (30) days
following such exercise and the Participant will not be treated as a
shareholder for any purpose whatsoever prior to such issuance. No adjustment
shall be made for cash dividends or other rights with respect to Common Stock
if the applicable record date is prior to the date such Common Stock is
recorded as issued or transferred in the Company's official shareholder
records, except as provided herein or in an Option Agreement.
4.5 ANTI-DILUTION. In the event of (i) any Company stock dividend,
stock split, combination or exchange of shares, recapitalization or other
change in the capital structure of the Company, corporate separation or
division of the Company (including, but not limited to, a split-up, spin-off,
split-off or distribution to Company shareholders other than a normal cash
dividend), (ii) the sale by the Company of all or a substantial portion of
its assets (measured on either a stand-alone or consolidated basis), (iii) a
reorganization, rights offering, partial or complete liquidation, or (iv) any
other corporate transaction, Company share offering or event involving the
Company and having an effect similar to any of the foregoing, the Committee
shall adjust or substitute, as the case may be, the Common Stock available
upon exercise of Options to be granted hereunder, the Common Stock underlying
outstanding Options, the Option Price of outstanding Options and any other
characteristics or terms of the Options as the Committee shall deem necessary
or appropriate to account equitably for the effects of such changes to the
Participants; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated by rounding to the next lower whole
number of shares with appropriate payment for such fractional share as shall
reasonably be determined by the Committee.
ARTICLE V
ELIGIBILITY
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Except as herein provided, officers, directors, employees, independent
contractors or other service providers of the Company or any Affiliate
including, without limitation, the officers, directors and employees of any
other entity which provides services to the Company or any Affiliate, who
shall be in a position, in the opinion of the Committee, to make
contributions to the growth, management, protection and success of the
Company and its Affiliates shall be eligible to participate in this Plan. In
making any selection of persons to be granted Options and in determining the
terms of the Options, the Committee may give consideration to the functions
and responsibilities of the person's contribution to the Company and its
Affiliates, the value of the individual's service to the Company and its
Affiliates and such other factors deemed relevant by the Committee. The
Committee, in its sole and absolute discretion, from time to time may
designate persons otherwise eligible to participate in this Plan as
ineligible to so participate.
ARTICLE VI
OPTIONS
6.1 GENERAL. The Committee may grant Options at any time and from
time to time, alone or in addition to other Options, as either Incentive
Stock Options or Nonqualified Stock Options. An Option shall entitle the
Participant to receive Common Stock upon exercise of such Option, subject to
the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with this Plan or an Option Agreement (the
terms and provisions of which may differ from other Option Agreements)
including without limitation, the form and manner of payment of the Option
Price.
6.2 GRANT. The grant of each Option shall be evidenced by an Option
Agreement in a form determined by the Committee, which shall embody the terms
and conditions of such Option and which shall be subject to the express terms
and conditions set forth in this Plan. Only a person who is a common-law
employee of the Company or a subsidiary of the Company (as such terms are
defined in Section 424 of the Code) on the date of grant shall be eligible to
be granted an Option which is intended to be and is an Incentive Stock
Option. Notwithstanding anything in this Plan to the contrary, no term of
this Plan relating to Incentive Stock Options shall be interpreted, amended
or altered, nor shall any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any Incentive
Stock Option under such Section 422. No Options shall be granted to a
Participant during any calendar year, if the Committee believes Section
162(m) of the Code may be applicable to such Participant and if the exercise
of such Options would result in a loss of deductions under Section 162(m) of
the Code.
6.3 TERMS AND CONDITIONS. Options shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:
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(i) OPTION PERIOD. The Option Period of each Option shall be
fixed by the Committee provided that no Nonqualified Stock Option shall be
exercisable for more than ten (10) years after the date the Option is granted.
In the case of an Incentive Stock Option, the Option Period shall not exceed
(10) years from the date of grant or, in the case of an individual who owns more
than ten percent (10%) of the combined voting power of all stock of the Company
or a corporation which is a parent corporation or any subsidiary of the Company
(each as defined in Section 424 of the Code), five (5) years from the date of
grant. No Option shall be granted more than ten (10) years from the effective
date of this Plan.
(ii) OPTION PRICE. The Option Price shall be determined by the
Committee. If such Option is intended to qualify as an Incentive Stock Option,
the Option Price per share shall be not less than the Fair Market Value per
share on the date the Option is granted, or where granted to an individual who
owns or who is deemed to own stock possessing more than ten percent (10%) of the
combined voting power of all stock of the Company or a corporation which is a
parent corporation or any subsidiary of the Company (each as defined in Section
424 of the Code), not less than one hundred ten percent (110%) of such Fair
Market Value per share.
(iii) EXERCISE. Subject to SECTION 6.4 and ARTICLE VIII below,
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. The Committee may at any
time accelerate the exercisability of any Option. Exercises of Options held by
Participants who are actually or potentially subject to Section 16(b) of the
Exchange Act shall comply with the "window period" provisions of Rule 16b-3, to
the extent applicable.
(iv) METHOD OF EXERCISE. Subject to the provisions of this
ARTICLE VI, a Participant may exercise Options, in whole or in part, at any time
during the Option Period by the delivery to the Company of written notice in the
form attached to such Participant's Option Agreement. Such notice shall be
accompanied by payment in full of the Option Price by cash or check or such
other form of payment as the Company may accept. If approved by the Committee,
payment in full or in part may also be made (a) by delivering Common Stock
already owned by the Participant having a total Fair Market Value on the date of
such delivery equal to the Option Price; (b) by the execution and delivery of a
note or other evidence of indebtedness (and any security agreement thereunder)
satisfactory to the Committee and permitted in accordance with SECTION 6.3(v)
below; (c) by authorizing the Company to retain Common Stock which would
otherwise be issuable upon exercise of the Option having a total Fair Market
Value on the date of delivery equal to the Option Price; (d) by the delivery of
cash by a broker-dealer to whom the Participant has submitted a notice of
exercise (in accordance with Part 220, Chapter II, Title 12 of the Code of
Federal Regulations, so-called "cashless exercise"); or (e) by any combination
of the foregoing. In the case of an Incentive Stock Option, the payment of the
Option Price in the form of already owned shares of Common Stock may be
authorized only at the time the Option is granted. No Common Stock shall be
issued until full payment therefor has been made.
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(v) COMPANY LOAN OR GUARANTEE. Upon the exercise of any Option
and subject to the pertinent Option Agreement and the sole and absolute
discretion of the Committee, the Company may at the request of the Participant:
(a) lend to the Participant, with recourse, an amount equal to such
portion of the Option Price as the Committee may determine; or
(b) guarantee a loan obtained by the Participant from a third-party for
the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term, interest
rate, and any security interest thereunder, shall be determined by the
Committee, except that no extension of credit or guarantee shall obligate the
Company for an amount to exceed the lesser of (x) the aggregate Fair Market
Value of the Common Stock on the date of exercise less the aggregate par value
of the Common Stock to be purchased upon the exercise of the Option, or (y) the
amount permitted under applicable laws or the regulations and rules of the
Federal Reserve Board and any other governmental agency.
(vi) NON-TRANSFERABILITY OF OPTIONS. Except as provided herein or
in an Option Agreement, no Option shall be transferable by the Participant other
than by will or by the laws of descent and distribution, and all Options shall
be exercisable during the Participant's lifetime only by the Participant. If
the Committee adopts Securities Exchange Act Release 34-28869 of the Commission,
the Committee may permit an Option to be transferred pursuant to a domestic
relations order which would be a "qualified domestic relations order" as defined
in Section 414 of the Code if such Section 414 applied to the Option, but only
to the extent consistent with an Option's intended status as an Incentive Stock
Option.
6.4 EXERCISABILITY.
(i) VESTING. Unless terminated or accelerated as set forth
herein or in an Option Agreement, Options shall be exercisable in accordance
with the following schedule:
Percentage of an Option
Grant Date Anniversary Exercisable
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On or after the first anniversary 33.33%
of the date of grant
On or after the second anniversary 66.67%
of the date of grant
On or after the third anniversary 100%
of the date of grant
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(ii) TERMINATION BY REASON OF DEATH. Unless otherwise provided in
an Option Agreement or determined by the Committee, if a Participant incurs a
Termination of Employment due to death, then any unexpired and unexercised
Option held by such Participant shall thereafter be exercisable (but only to the
extent such Option is otherwise exercisable on the date of death) only until the
earlier of (a) the first anniversary of the date of such death, or (b) the
expiration of the Option Period.
(iii) TERMINATION BY REASON OF DISABILITY. Unless otherwise
provided in an Option Agreement or determined by the Committee, if a Participant
incurs a Termination of Employment due to a Disability, then any unexpired and
unexercised Option held by such Participant shall thereafter be fully
exercisable (but only to the extent such Option is otherwise exercisable on the
date of determination of Disability) by the Participant only until the earlier
of (a) the first anniversary of the date of determination of Disability, or (b)
the expiration of the Option Period. A Participant's death at any time
following a Termination of Employment due to Disability shall not affect the
foregoing. If, upon Termination of Employment by reason of Disability, an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Option will thereafter
be treated as a Nonqualified Stock Option.
(iv) OTHER TERMINATION. Unless otherwise provided in an Option
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to dismissal of the Participant without Cause, then any
unexpired and unexercised Option held by such Participant shall thereafter be
fully exercisable (but only to the extent such Option is otherwise exercisable
on the date of determination of such Termination of Employment) by the
Participant only until the earlier of (a) the three month anniversary of the
date of Termination of Employment or (b) the expiration of the Option Period.
If the Participant incurs a Termination of Employment that is either voluntary
on the part of the Participant or is due to a dismissal of Participant with
Cause, the Option (whether vested or unvested) shall terminate immediately and,
to the extent not exercised prior to such Termination of Employment, shall no
longer be exercisable in whole or in part. The death or Disability of a
Participant after a Termination of Employment otherwise provided in this
subsection (iv) shall not extend the time otherwise permitted to exercise an
Option or affect the termination of an Option.
6.5 CASHING OUT OF OPTION. On receipt of written notice of exercise,
the Committee may elect to cash out all or any part the Option to be exercised
by paying the Participant an amount, in cash or Common Stock, equal to the
excess of the Fair Market Value of the Common Stock that is subject to the
exercise over the Option Price of such Common Stock. Cash outs relating to
Options held by Participants who are actually or potentially subject to Section
16(b) of the Exchange Act shall comply with the "window period" provisions of
Rule 16b-3, to the extent applicable.
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ARTICLE VII
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER OPTIONS
7.1 TRANSFER OF SHARES. The Common Stock received pursuant to an
Option shall at all times be subject to those transfer and repurchase
restrictions set forth in the Option Agreement and otherwise set forth herein;
provided that a Participant may at any time make a transfer of Common Stock
received pursuant to the exercise of an Option to his or her parents, spouse or
descendants or to any trust for the benefit of the foregoing or to a custodian
under a uniform gifts to minors act or similar statute for the benefit of any of
the Participant's descendants. Any transfer of Common Stock received pursuant
to the exercise of an Option shall not be permitted or valid unless and until
the transferee agrees to be bound by the provisions of this Plan, and any
provision respecting Common Stock under the Option Agreement, provided that
"Termination of Employment" shall continue to refer to the Termination of
Employment of the original Participant.
7.2 LIMITED TRANSFER DURING OFFERING. If there is an effective
registration statement under the Securities Act pursuant to which Common Stock
shall be offered for sale in an underwritten offering, a Participant shall not,
during the period requested by the underwriters managing the registered public
offering, effect any public sale or distribution of shares received directly or
indirectly pursuant to an exercise of an Option.
7.3 COMMITTEE DISCRETION. The Committee may in its sole and absolute
discretion include in any Option Agreement an obligation that the Company
purchase a Participant's Common Stock received upon the exercise of an Option
(including the purchase of any unexercised Options which have not expired), or
may obligate a Participant to sell Common Stock to the Company upon such terms
and conditions as the Committee may determine in its sole and absolute
discretion and set forth in an Option Agreement. The provisions of this ARTICLE
VII shall be construed by the Committee in its sole and absolute discretion, and
shall be subject to such other terms and conditions as the Committee may from
time to time determine. Notwithstanding any provision in this Plan to the
contrary, upon determination by the Committee, the Company may assign its right
to purchase Common Stock pursuant to this ARTICLE VII, whereupon the assignee of
such right shall have all the rights, duties and obligations of the Company with
respect to purchase of Common Stock.
7.4 NO COMPANY OBLIGATION. None of the Company, any Affiliate, any CAP
Entity or the Committee shall have any duty or obligation to affirmatively
disclose to a record or beneficial holder of Common Stock or an Option, and such
holder shall have no right to be advised of, any material information regarding
the Company, any Affiliate or any CAP Entity at any time prior to, upon or in
connection with receipt or the exercise of an Option or the Company's purchase
of Common Stock or an Option from such holder in accordance with the terms
hereof.
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ARTICLE VIII
CHANGE IN CONTROL PROVISIONS
8.1 IMPACT OF EVENT. Notwithstanding anything in this Plan to the
contrary, if a "Change in Control" (as defined in SECTION 8.2 below) shall
occur, any Options outstanding as of the date of such Change in Control and not
then exercisable shall become fully exercisable; provided that the Committee may
elect to cash out all or any portion of such outstanding Options by paying the
Participant an amount (in cash, Common Stock or such other property as the
Committee may deem appropriate) equal to the excess of the price per share (net
of expenses) being paid, or, in the case of a Corporate Transaction, available
for distribution to holders of the Common Stock determined on a fully diluted
basis, in connection with such Change in Control.
8.2 DEFINITION OF CHANGE IN CONTROL. For purposes of this Plan, a
"Change in Control" shall mean the happening of any of the following events:
(i) An acquisition (other than in a Public Offering) by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act (a "Person") of the beneficial ownership (within the meaning
of Rule 13(d)-3 promulgated under the Exchange Act) of the then outstanding
shares of common stock of the Company (the "Outstanding Company Common Stock")
or the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities") that would result in the CAP Entities
beneficially owning less than thirty percent (30%) of the Outstanding Company
Common Stock or less than thirty percent (30%) of the Outstanding Company Voting
Securities; or
(ii) the approval by the shareholders of the Company of a
reorganization, merger, consolidation, complete liquidation or dissolution of
the Company, the sale or disposition of all or substantially all of the assets
of the Company or similar corporate transaction (in each case, a "Corporate
Transaction") or, if consummation of such Corporate Transaction is subject, at
the time of such approval by shareholders, to the consent of any government or
governmental agency, the obtaining of such consent (either explicitly or
implicitly), excluding the following: (a) any consummation of a Corporate
Transaction with any subsidiary of the Company or by an employee benefit plan
(or related trust) sponsored or maintained by the Company or an Affiliate, (b)
any acquisition by or consummation of a Corporate Transaction with a CAP Entity,
(c) the consummation of a Corporate Transaction with any Person that directly or
indirectly beneficially owned, immediately prior to such Corporate Transaction,
twenty percent (20%) or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, and (d) any Corporate Transaction where
the majority of the voting securities of the entity resulting from such
Corporate Transaction is held by Persons holding in the aggregate the majority
of the Outstanding Company Voting Securities immediately prior to such Corporate
Transaction.
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ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENTS AND TERMINATION. The Board may amend, alter, or
discontinue this Plan at any time, but no amendment, alteration or
discontinuation shall be made that would (i) impair the rights of a Participant
under a Option theretofore granted without the Participant's consent, except to
the extent such an amendment would cause this Plan to qualify for the exemption
provided by Rule 16b-3 or (ii) disqualify this Plan from the exemption provided
by Rule 16b-3. In addition, no such amendment shall be made without the
approval of a majority of the Company's shareholders to the extent such approval
is required by law or agreement.
The Committee may amend this Plan at any time provided that (a) no
amendment shall impair the rights of any Participant under any Option
theretofore granted without the Participant's consent, (b) no amendment shall
disqualify this Plan from the exemption provided by Rule 16b-3, and (c) any
amendment shall be subject to the approval or rejection of the Board.
The Committee may amend the terms of any Option, provided that no such
amendment shall impair the rights of any Participant without the Participant's
consent, except an amendment made to cause this Plan or an Option to qualify for
the exemption provided by Rule 16b-3. The Committee may also substitute new
Options for previously granted Options, including previously granted Options
having higher Option Prices, but no such substitution shall be made that would
impair the rights of Participants under such Option theretofore granted without
the Participant's consent.
Subject to the above provisions, the Board shall have authority to amend
this Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Options which qualify for beneficial
treatment under such rules without shareholder approval.
9.2 UNFUNDED STATUS OF PLAN. It is intended that this Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under this Plan to deliver Common Stock or make payments; so long as
(unless the Committee otherwise determines) the existence of such trusts or
other arrangements is consistent with the "unfunded" status of this Plan.
9.3 GENERAL PROVISIONS.
(i) REPRESENTATION. The Committee may require each person
purchasing or receiving shares pursuant to an Option to represent to and agree
with the Company in writing that such person is acquiring the shares without a
view to the distribution or transfer thereof. The certificates for such shares
may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
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(ii) NO ADDITIONAL OBLIGATION. Nothing contained in this Plan
shall prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees, directors or other persons or
entities eligible to participate in this Plan.
(iii) WITHHOLDING. A Participant shall pay to the Company (or
other entity identified by the Committee), or make arrangements satisfactory to
the Company (or other entity identified by the Committee) regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company or an
Affiliate to obtain a current deduction, immediately upon the request of the
Company. Unless otherwise determined by the Committee, withholding obligations
may be settled with Common Stock, including Common Stock that is part of the
Option that gives rise to the withholding requirement provided that any
applicable requirements under Section 16 of the Exchange Act are satisfied. The
obligations of the Company under this Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant.
(iv) REPRESENTATION. The Committee shall establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts otherwise payable the Participant are to be
paid upon such Participant's death.
(v) CONTROLLING LAW. This Plan and all Options made and actions
taken hereunder and under any Option Agreement shall be governed by and
construed in accordance with the laws of the State of California (other than its
law respecting choice of law). This Plan shall be construed to comply with all
applicable law, and to avoid liability to the Company, any Affiliate, any CAP
Entity, any member of the Committee, any member of the Board or any Participant,
including, without limitation, liability under Section 16(b) of the Exchange
Act.
(vi) OFFSET. Any amounts owed to the Company or an Affiliate by
the Participant of whatever nature may be offset by the Company from the value
of any Common Stock, cash or other thing of value under this Plan or an Option
Agreement to be transferred to the Participant, and no Common Stock, cash or
other thing of value under this Plan or an Option Agreement shall be transferred
unless and until all disputes between the Company and the Participant have been
fully and finally resolved and the Participant has waived all claims to such
against the Company or an Affiliate.
9.4 MITIGATION OF EXCISE TAX. If any payment or right accruing to a
Participant under this Plan (without the application of this SECTION 9.4),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute payment" (as defined in Section 280G of the Code and regulations
thereunder), such payment or right shall be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under this Plan being subject to an excise tax under Section 4999 of
the Code or being disallowed as a deduction under Section 280G of the Code. The
determination of whether any reduction in the rights or
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payments under this Plan is to apply shall be made by the Committee in good
faith after consultation with the Participant, and such determination shall
be conclusive and binding on the Participant. The Participant shall
cooperate in good faith with the Committee in making such determination and
providing the necessary information for this purpose. The foregoing
provisions of this SECTION 9.4 shall apply with respect to any person only if
after reduction for any applicable federal excise tax imposed by Section 4999
of the Code and federal income tax imposed by the Code, the Total Payments
accruing to such person would be less than the amount of the Total Payments
as reduced, if applicable, under the foregoing provisions of this Plan and
after reduction for only federal income taxes.
9.5 RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT. Nothing
contained herein shall be deemed to alter the relationship, contractual or
otherwise, between the Company or an Affiliate and a Participant. Nothing
contained herein shall be construed to constitute a contract of employment
between the Company or an Affiliate and a Participant. Neither the Company nor
any Affiliate shall have any obligation to retain the Participant in its employ
or service as a result of this Plan. There shall be no inference as to the
length of employment or service hereby, and the Company or an Affiliate reserves
the same rights to terminate the Participant's employment or service as existed
prior to the individual becoming a Participant in this Plan.
9.6 WITHHOLDING. If the Participant disposes of Common Stock acquired
pursuant to an Incentive Stock Option in any transaction considered to be a
disqualifying transaction under the Code, the Participant must give written
notice of such transfer and the Company shall have the right to deduct any taxes
required by law to be withheld from any amounts otherwise payable to the
Participant.
9.7 DELAY. If at any time a Participant is subject to "short-swing"
liability under Section 16 of the Exchange Act, any time period provided for
under this Plan or an Option Agreement to the extent necessary to avoid the
imposition of liability shall be suspended and delayed during the period the
Participant would be subject to such liability, but not more than six (6) months
and one (1) day and not to exceed the Option Period. The Company shall have the
right to suspend or delay any time period described in this Plan or an Option
Agreement if the Committee shall determine that the action may constitute a
violation of any law or result in liability under any law to the Company, an
Affiliate or a shareholder of the Company until such time as the action required
or permitted shall not constitute a violation of law or result in liability to
the Company, an Affiliate or a shareholder of the Company. The Committee shall
have the discretion to suspend the application of the provisions of this Plan
required solely to comply with Rule 16b-3 if the Committee shall determine that
Rule 16b-3 does not apply to this Plan.
9.8 HEADINGS. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
9.9 SEVERABILITY. If any provision of this Plan shall for any reason
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not effect any other provision
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hereby, and this Plan shall be construed as if such invalid or unenforceable
provision were omitted.
9.10 SUCCESSORS AND ASSIGNS. This Plan shall inure to the benefit of
and be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
9.11 ENTIRE OPTION AGREEMENT. This Plan and the Option Agreement
constitute the entire agreement with respect to the subject matter hereof and
thereof, provided that in the event of any inconsistency between this Plan and
the Option Agreement, the terms and conditions of this Plan shall control.
9.12 OTHER COMPANY PLANS. Nothing contained herein shall prevent the
Company from establishing other incentive plans in which Participants in the
Plan may also participate. No Option granted under this Plan shall be considered
as compensation in calculating any insurance, pension or other benefit for which
a Participant is eligible unless any such insurance, pension or other benefit is
granted under a plan that expressly provides that compensation under this Plan
(and specifying the type of such compensation) shall be considered as
compensation under such plan, or except where the Board expressly determines
that inclusion of an Option or any portion of an Option should be made to
accurately reflect competitive compensation practices or to recognize that an
Option has been granted in lieu of a portion of competitive annual cash
compensation.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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In witness whereof, the undersigned has executed this Plan effective as of
December 16, 1997.
CINEMASTAR LUXURY THEATERS, INC.
By: /s/ Jack R. Crosby
-------------------------------------
Jack R. Crosby, Chairman
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