OVERSEAS FILMGROUP, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant program
under the Corporation's 1996 Basic Stock Option and Stock Appreciation Rights
Plan pursuant to which eligible non-employee members of the Corporation's Board
will automatically receive special option grants at designated intervals over
their period of Board service in order to provide each such individual with a
meaningful incentive to continue to serve as a member of the Board.
B. Optionee is an eligible non-employee Board member, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the automatic grant of a stock option to purchase shares of
the Corporation's Common Stock under the Plan.
C. The granted option is intended to be a non-statutory option which does
NOT meet the requirements of Section 422 of the Internal Revenue Code.
D. All capitalized terms in this Agreement, to the extent not otherwise
defined in the Agreement, shall have the meaning assigned to them in the
attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall not be transferable
by the Optionee either voluntarily or by operation of law, other than by will or
the laws of descent and distribution following Optionee's death, and may, during
the Optionee's lifetime, be exercised only by the Optionee.
4. EXERCISABILITY. This option shall become exercisable for all the
Option Shares upon the Optionee's completion of one (1)-year of Board service
measured from the Grant Date and shall remain so exercisable until the
Expiration Date or the sooner termination of the option term under Paragraph 5
or 6.
5. CESSATION OF BOARD SERVICE. Should Optionee cease to serve as a
Board member for any reason while holding this option, then the period for
exercising this option shall be reduced to a thirty-six (36)-month period
commencing with the date of such cessation of Board service, but in no event
shall this option be exercisable at any time after the Expiration Date. During
such limited period of exercisability, this option may not be exercised in the
aggregate for more than the number of shares of Common Stock for which this
option is exercisable at the time of Optionee's cessation of Board service.
Upon the EARLIER of (i) the expiration of such thirty-six (36)-month period or
(ii) the specified Expiration Date, the option shall terminate and cease to be
exercisable with respect to any Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee's cessation of
Board service, terminate and cease to be outstanding with respect to any Option
Shares for which this option is not otherwise at that time exercisable.
6. CORPORATE TRANSACTION.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that such option shall, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for all of the Option Shares
and may be exercised for any or all of those Option Shares as fully-vested
shares. Immediately following the consummation of the Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
this option is assumed by the successor corporation or its parent company.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
reclassification, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
number and/or class of securities subject to this option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution
2.
or enlargement of benefits hereunder; provided, however, that the aggregate
Exercise Price shall remain the same.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee or, in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be, must take the following actions:
(i) The Secretary of the Corporation shall be
provided with written notice of the option exercise (the "Exercise
Notice"), in substantially the form of Exhibit I attached hereto, in
which there is specified the number of Option Shares to be purchased
under the exercised option.
(ii) The Exercise Price for the purchased shares
shall be paid in one or more of the following alternative forms:
- cash or check made payable to the
Corporation's order;
- shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for a period
of at least six (6) months, and valued at Fair Market Value on
the Exercise Date; or
- to the extent such procedure is available at
the time the Option is exercised, through a special sale and
remittance procedure pursuant to which Optionee shall provide
irrevocable instructions (A) to a Corporation-designated
brokerage firm to effect the immediate sale of the shares
purchased under the option and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate Exercise Price payable for those
shares plus the applicable Federal, state and local income taxes
required to be withheld by the Corporation by reason of such
exercise and (B) to the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm in order
to complete the sale.
3.
(iii) Appropriate documentation evidencing the
right to exercise this option shall be furnished the Corporation if
the person or persons exercising the option is other than Optionee.
(iv) Appropriate arrangement must be made with the
Corporation for the satisfaction of all Federal, state and local
income tax withholding requirements applicable to the option exercise.
(b) Except to the extent the sale and remittance procedure
specified above is utilized, payment of the Exercise Price for the purchased
shares must accompany the Exercise Notice delivered to the Corporation in
connection with the option exercise.
(c) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
purchased Option Shares.
(d) In no event may this option be exercised for fractional
shares.
10. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the right
of the Corporation or the stockholders to remove Optionee from the Board at any
time in accordance with the provisions of applicable law.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market or
the Nasdaq Small Cap Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
However, the Corporation shall use its best efforts to obtain all such
applicable approvals.
4.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
13. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the automatic option grant
program in effect under the Plan and are in all respects limited by and subject
to the express terms and provisions of that program. The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
5.
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Overseas Filmgroup, Inc. (the "Corporation") that I
elect to purchase shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
pursuant to the automatic option grant program under the Corporation's 1996
Basic Stock Option and Stock Appreciation Rights Plan on ,
199 .
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise. To the
extent such procedure is available at the time the Option is exercised, I may
also utilize the special broker/dealer sale and remittance procedure specified
in my agreement to effect payment of the Exercise Price for any Purchased
Shares.
, 199
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Date
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Optionee
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Address:
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Print name in exact manner
it is to appear on the
stock certificate:
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Address to which certificate
is to be sent, if different
from address above:
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Social Security Number:
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Automatic Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to
a person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
E. CORPORATION shall mean Overseas Filmgroup, Inc., a Delaware
corporation.
F. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
G. EXERCISE PRICE shall mean the exercise price payable per share as
specified in the Grant Notice.
H. EXPIRATION DATE shall mean the date on which the option term expires
as specified in the Grant Notice.
I. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
- While the Common Stock is traded only on the OTC Bulletin
Board, the Fair Market Value per share shall be the average of the
highest bid and lowest asked prices of the Common Stock quoted on the
relevant date.
A-1.
- If the Common Stock should subsequently become traded on
the Nasdaq Small Cap Market, then the Fair Market Value per share
shall be the average of the highest bid and lowest asked prices of
the Common Stock quoted for the relevant date. However, for any date
in question under the Plan on which there is a closing selling price
quoted for the Common Stock on the Nasdaq Small Cap Market, such
closing selling price shall be deemed to be the Fair Market Value per
share of Common Stock on that date.
- Should the Common Stock be admitted for trading on the
Nasdaq National Market, the Fair Market Value per share of Common
Stock on any relevant date shall be the closing selling price per
share on that date as reported by the National Association of
Securities Dealers on the Nasdaq National Market.
- If the Common Stock becomes traded on any Stock Exchange,
then the Fair Market Value per share of Common Stock on any relevant
date shall be the closing selling price per share on that date on
such exchange, as reported in The Wall Street Journal.
X. XXXXX DATE shall mean the date of grant of the option as specified in
the Grant Notice.
X. XXXXX NOTICE shall mean the Notice of Grant of Automatic Stock Option
accompanying this Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
L. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
M. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
N. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
O. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
P. PLAN shall mean the Corporation's 1996 Basic Stock Option and Stock
Appreciation Rights Plan.
Q. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
A-2.
