Exhibit 10.1
THE SINGING MACHINE COMPANY, INC.
AMENDED AND RESTATED
1994 MANAGEMENT STOCK OPTION PLAN
Section 1. Purpose.
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This Amended and Restated 1994 Stock Option Plan is intended to provide
incentives: (a) to the officers and other employees of The Singing Machine
Company, Inc. or any of its present or future subsidiaries by providing such
employees with opportunities to purchase stock in The Singing Machine Company,
Inc., pursuant to options granted hereunder that qualify as "incentive stock
options", under Section 422(b) of the Internal Revenue Code of 1986, as
amended;, and (b) to directors, officers, employees, advisors and consultants of
The Singing Machine Company, Inc. or any of its present or future subsidiaries
by providing such persons with opportunities to purchase stock in The Singing
Machine Company, Inc. pursuant to options granted hereunder which do not qualify
as "incentive stock options."
Section 2. Definitions.
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(a) "Agreement" shall have the meaning ascribed to the term as set
forth in Section 6 hereof.
(b) "Board of Directors" means the Board of Directors of the Company or
any Subsidiary.
(c) "Common Stock" means the common stock, $.01 par value per share, of
the Company.
(d) "Company" means The Singing Machine Company; Inc.. a Delaware
corporation.
(e) "Employee" means every individual performing services for the
Company or any Subsidiary if the relationship between him and the person for
whom he performs such services is the legal relationship of employer and
employee as determined in accordance with Section 3401(c) of Internal Revenue
Code and Treasury Regulations promulgated thereunder. A member of the Board of
Directors in his sole capacity as such is not an Employee.
(f) "Incentive Stock Option" means a right granted pursuant to this
Plan to purchase Common Stock that satisfies the requirements of Section 422 of
the Internal Revenue Code.
(g) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Non-Employee Director" means every member of the Board of
Directors who is not also an Employee of the Company or any Subsidiary.
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(i) "Nonqualified Stock Option" means a right granted pursuant to this
Plan to purchase Common Stock that does not satisfy the requirements of Section
422 of the Internal Revenue Code.
(j) "Option" means a right granted pursuant to this Plan to purchase
Common Stock which may be either an Incentive Stock Option or a Nonqualified
Stock Option as determined by the Board of Directors.
(k) "Optionee" means an individual who has received an Option under the
Plan.
(l) "Plan" means this stock option plan authorizing the granting of
stock Options.
(m) "Plan Administrators" shall have the meaning ascribed to the term
as set forth in section 5 hereof.
(n) "Reserved Shares" shall have the meaning ascribed to the term asset
forth in Section 3 hereof.
(o) "Subsidiary" means any corporation (other than the Company;) in an
unbroken chain of corporations beginning with the Company; if, at the time the
Option is granted, each of the corporations other than the last corporation in
the unbroken chain owns 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
Section 3. Shares Subject to the Plan.
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Subject to adjustments pursuant to Section 9 of the Plan, no more than
1,950,000 shares in the aggregate of the Company's Common Stock (the "Reserved
Shares") may be issued pursuant to the Plan to eligible participants. The number
of the Reserved Shares shall be reduced by the number of Options granted under
the Plan. The Reserved Shares may be made available from authorized but unissued
common stock of the Company, from common Stock of the Company held as treasury
stock, from any shares which may become available due to the expiration,
cancellation or other termination of any Option previously granted by the
Company, or from any combination of the foregoing.
Section 4. Eligibility.
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The individuals eligible to receive Options under this Plan shall be
such valued Employees, Non-Employee Directors, advisors or consultants of the
Company or any Subsidiary, as the Board of Directors may from time to time
determine and select. Non-Employee Directors, advisors and consultants shall
only be eligible to receive Nonqualified Stock Options. Employees shall be
eligible to receive both Incentive Stock Options and Nonqualified Stock Options.
An Optionee may hold more than one Option. No Employee of the Company or any
Subsidiary is eligible to receive any Incentive Stock Options if such Employee,
at the time the Option is granted, owns, beneficially or of record, in excess of
10% of the outstanding voting stock of the. Company or a Subsidiary;
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provided, however, that such Employee will be eligible to receive an Incentive
Stock Option if at the time such Option is granted the Option price is at least
110% of the fair market value (determined with regard to Section 422 (c) (7) of
the Internal Revenue Code) of the stock subject to the Option and such Option by
its terms is not exercisable after the expiration of five (5) years from the
date such Option is granted. Pursuant to Section 422(d) of the Internal Revenue
Code, no Option granted pursuant to this Plan shall be treated as an Incentive
Stock Option to the extent that the aggregate fair market value (determined at
the time the Option was granted), of Common Stock with respect to which Options
(that otherwise qualify as Incentive Stock Options) are exercisable for the
first time by an Employee during any calendar year (under all Plans of the
Company and its Subsidiaries) exceeds $100,000.
Section 5. Administration of the Plan.
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(a) The Plan shall be administered by the Board of Directors, or by a
committee appointed by the Board of Directors.
(b) The Plan Administrators shall have the power, subject to, and
within the limits of, the express provisions of the Plan:
(i) To determine from time to time which eligible persons
shall be granted Options under the Plan, and the time
when any Option shall, be granted to them;
(ii) To determine the number of Options to be granted to
any person;
(iii) To grant Incentive Stock Options, Nonqualified Stock
Options, or both, under the Plan to such persons;
(iv) To determine the duration and purposes of leaves of'
absence which may be granted to Optionees without
constituting a termination of their employment for
purposes of the Plan;
(v) To prescribe the terms and provisions of each Option
granted under the Plan (which need not be identical);
(vi) To determine the maximum period during which Options
may be exercised;
(vii) To construe and interpret the Plan and Options
granted under it, and to establish, amend, and revoke
rules and regulations for its administration; and
(viii) Generally, to exercise such powers and to perform
such acts as are deemed necessary or expedient to
promote the best interests of the Company with
respect to the Plan.
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(c) The Plan Administrators, in the exercise of these powers, may
correct any defect or supply any omission, or reconcile any inconsistency in the
Plan, or in any Option, in the manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective. All determinations of the Plan
Administrators shall be, made by majority vote. Subject to any applicable
provisions of the Company's By-laws, all decisions made by the Plan
Administrators pursuant to the provisions of the Plan and related orders or
resolutions of the Plan Administrators shall be final, conclusive and binding on
all persons, including the Company, stockholders of the Company, Employees and
Optionees.
(d) The Plan Administrators may designate the Secretary of the Company,
or other employees of the Company or competent professional advisors, to assist
in the administration of this Plan and may grant authority to such persons to
execute agreements or other documents on behalf of the Plan Administrators.
(e) The Plan Administrators may employ such legal counsel, consultants
and agents as they may deem desirable for the administration of this Plan and
may rely upon any opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. No present or former
Plan Administrator shall be liable for any action or determination made in good
faith with respect to this Plan or any Option granted hereunder. To the maximum
extent permitted by applicable law and the Company's Certificate of
Incorporation and By-laws, each present or former Plan Administrator shall be
indemnified and held harmless by the Company against any cost' or expenses
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission to
act in connection with this Plan unless arising out of such person's own fraud
or bad faith. Such indemnification shall be in addition to any rights of
indemnification the person may have as a director, officer or employee or under
the Certificate of incorporation of the Company, the By-laws of the Company or
otherwise. Expenses incurred by the Plan Administrators in the engagement of
such counsel, consultant or agent shall be paid by the Company.
Section 6. Option Terms and Conditions.
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The Options granted under the Plan shall be evidenced by written Option
Agreements (the "Agreements") consistent with the terms of the Plan which shall
be executed by the Company and the Optionee. The Agreements, in such form as the
Plan Administrators shall from time to time approve, shall, incorporate the
following terms and conditions: -
(a) Time of Exercise. Options shall be exercisable in accordance with
the terms of the Agreements as approved by the Plan Administrators from time to
time. Incentive Stock Options may be exercised only if, at all times during the
period that begins on the date of the granting of the Incentive Stock Option and
that ends on the day three (3) months before the date of such exercise, the
Optionee was an Employee of the Company or any Subsidiary; provided, however,
that if the
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Optionee is "disabled" within the meaning of Section 22 (e) of the Internal
Revenue Code, then the end of the preceding post-employment exercise period
shall be extended to one (1) year.
(b) Purchase Price. Except as otherwise provided in Section 4 hereof,
the purchase price per share of Common Stock deliverable upon the exercise of an
Incentive Stock Option shall not be less than the fair market value of the
Common Stock on the date the Option is granted. The purchase price per share of
Common Stock deliverable upon the exercise of a Nonqualified Stock Option shall
be determined by the Plan Administrators in their sole discretion.
(c) Method of Exercise. In order to exercise an Option in whole or in
part, the Optionee shall give written notice to the Company at its principal
place of business of such exercise, stating the number of shares with respect to
which the Option is being exercised. Such notice shall be accompanied by full
payment of the purchase price thereof either (I) in cash, or (ii) at the
discretion of the Plan Administrators, in whole shares, of Common stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Option, or (iii) at the discretion of the Plan Administrators, by
delivery of the Optionee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 7.274 (d) of the Internal Revenue Code, or (iv) any
combination of (I), (ii) and (iii) above if the Plan Administrators exercise
their discretion to permit payment of the exercise price of any Option by means
of the methods set forth in clauses (ii), (iii) or (iv) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the Option in question. The exercise date of the Option shall be the date the
Company receives such notice with any necessary accompaniments in satisfactory
order.
(d) Transferability. An Option shall not be transferable by the
Optionee other than at death and an Option granted to such Optionee is
exercisable, during his lifetime, only by such Optionee.
The Agreements may also contain such other terms, provisions, and
conditions consistent with the Plan and applicable provisions of the Internal
Revenue Code as the Plan Administrators may determine are necessary or proper.
Section 7. Rights of Stockholders and Optionee.
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An Optionee shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option,
unless and until: (a) the Option shall have been exercised pursuant to the terms
thereof; (b) the Company shall have issued and delivered the shares to the
Optionee; and (c) the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
voting and other ownership rights with respect to such shares.
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Section 8. Adjustments, in the Event of Chances in the Capital Structure
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Reorganization Anti-Dilution or Accounting Changes.
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(a) Changes in Capital Structure. In the event of a change in the
corporate structure or shares of the Company, the Plan Administrators (subject
to any required action by the stockholders) shall make such equitable
adjustments designed to protect against dilution as they may deem appropriate in
the number and kind of shares authorized by the Plan and, with respect to
outstanding Options in the number and kind of shares covered thereby and in the
exercise price of such Options on the dates granted. For the purpose of this
section, a change in the corporate structure or shares of the Company shall
include, but is not limited to, changes resulting from a recapitalization, stock
split, consolidation, rights offering, stock dividend, reorganization, or
liquidation.
(b) Reorganization-Continuation of the Plan. Upon the effective date of
the dissolution or liquidation of the Company, or a reorganization, merger or
consolidation of the Company with one or more corporations in which the Company
is not the surviving corporation, or of a transfer of substantially all of the
Company's property or more than 80% of the then outstanding shares of the
Company to another corporation not controlled by the Company's stockholders, the
Plan and any Option previously granted under the Plan shall terminate unless
provision be made in writing in connection with such transaction for the
continuation of the Plan and for the assumption of the Options previously
granted, or for the substitution of new, Options covering the shares of a
successor employer corporation, or a parent or Subsidiary thereof, with
appropriate adjustments (in accordance with the applicable provisions of the
Internal Revenue Code) as to the number and kind of shares and price per share,
in which event the Plan and the Options previously granted or new Options
substituted therefor shall continue in the manner and under the terms as
provided.
(c) Reorganization-Termination of the Plan. In the event of a
dissolution, liquidation, reorganization, merger, consolidation, transfer of
assets or transfer of shares, as provided in Section 9(b) above, and if
provision is not made in such transaction for the continuance of the Plan and
for the assumption of Options previously granted or the substitution of new
Options covering the shares of a successor employer corporation or a parent or
Subsidiary thereof, then an Optionee under the Plan shall be entitled to written
notice prior to the effective date of any such transactions stating that rights
under his Option must be exercised within thirty (30) days of the date of such
notice or they will be terminated.
Section 9. General Restrictions.
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Each, Option shall be subject to the requirement that, if at any time
the Plan Administrators shall determine, in their discretion, that the listing
or qualification of the shares or other securities subject to such Option upon
any securities exchange, or under any state or federal law or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with the granting thereof or the issue or
purchase of shares or payments of any amount thereunder, such Option may not be
exercised in whole or in part and no amounts may be received
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thereunder unless such listing, qualification, consent or approval shall have
been effected or obtained free of any conditions unacceptable to the Plan
Administrators.
Section 10. Employment.
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Nothing in this Plan shall be deemed to grant any right of continued
employment to a participating employee or to limit or waive any rights of the
Company or its Subsidiary to terminate such employment at any time, with or
without cause.
Section 11. Amendment.
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The Board of Directors of the Company shall have the power to amend or
revise the terms of this Plan or any part thereof without further action of the
stockholders; provided, however, that no such amendment shall impair any Option
or deprive any Optionee of shares that may have been granted to him under the
Plan without his consent; and provided, further, that no such amendment shall,
without stockholder approval:
(a) increase the aggregate number of the Reserved Shares for the
purpose of the Plan;
(b) change the class of individuals eligible to receive Options under
the Plan;
(c) extend the maximum period during which any Option may be granted or
exercised;
(d) reduce the Option price per share under any Option below fair
market value; or
(e) extend the term of the Plan.
Section 12. Effective Date and Termination of Plan.
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(a) The effective date of the Plan shall be the Effective Date of the
Merger of The Singing Machine Company, Inc., a California corporation, with and
into The Singing Machine Company, Inc., a Delaware corporation; provided,
however, in the event that the Plan is not approved by the voting stockholders
of the Company on or before July 31, 1994, the Plan and all Options granted and
to be granted hereunder shall be null and void and the Company shall have no
obligation of any nature whatsoever to any employee or other person arising out
of the Plan or any Options granted or to be granted hereunder;
(b) The Board of Directors of the Company may terminate the Plan at any
time with respect to any shares that are not subject to Options. Unless
terminated earlier by the Board of Directors, the Plan shall terminate on ten
(10) years from adoption of this Plan and no Options shall be granted under this
Plan after it has been terminated. Termination of this Plan shall not affect the
right and obligation of any Optionee with respect to Options granted prior to
termination.
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Section 13. Withholding Taxes.
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Whenever under the Plan shares are to be issued in satisfaction of
Options granted hereunder, the Company shall have the right to require the
recipient to make arrangements to remit to the Company an amount sufficient to
satisfy federal, state and local withholding tax requirements, if any, prior to
or following the delivery of any certificate or certificates for such shares.
Section 14. Qualification.
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This Plan is adopted pursuant to, and is intended to comply with, the
applicable provisions of the Internal Revenue Code and the regulations
thereunder Incentive Stock Options granted pursuant to this Plan are intended to
be "incentive stock Options" as that term is defined in Section 422 of the
Internal Revenue Code and the regulations thereunder. In the event this Plan or
any Incentive Stock Option granted pursuant to this Plan is in any way
inconsistent with the applicable legal requirements of the Internal Revenue Code
or any regulation thereunder, this Plan and any Incentive Stock Option granted
pursuant to this Plan shall be deemed automatically amended as of the date
hereof to conform to such legal requirements, if such conformity can be achieved
by amendment,.
Section 15. Notice to Company of Disqualifying Disposition.
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Each Employee who receives an Incentive Stock Option must agree to
notify the Company its writing immediately after the Employee makes a
disqualifying disposition of any Common Stock acquired pursuant to the exercise
of an Incentive Stock Option. For purposes of this Plan, a "disqualifying
disposition" is any disposition (including any sale) of such Common Stock before
the later of (i) two years after the date the Employee was granted the Incentive
Stock Option, or (ii) one year after the date the Employee acquired Common Stock
by exercising the Incentive Stock Option.
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