Exhibit 10.4
SPATIALIGHT, INC.
TIME ACCELERATED RESTRICTED STOCK AWARD PLAN
("TARSAP")
TARSAP (this "AGREEMENT" or the "OPTION AGREEMENT") made as of the 7th day of
July, 2003 between SPATIALIGHT, INC., a New York corporation (the
"CORPORATION"), whose principal place of business is located at 0 Xxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, and Xxxxxxxx X. Xxxxxxx (the
"OPTIONEE") whose principal residence is located at 0000 Xxxxx Xxxxxx #000 , Xxx
Xxxxxxxxx, XX 00000
PREAMBLE
The Corporation and Optionee have entered into an Employment Agreement
effective as of the date of this Agreement (the "EFFECTIVE DATE") pursuant to
which Optionee will serve as the Corporation's Executive Vice President of
Strategic Planning upon the terms set forth therein (the "EMPLOYMENT
AGREEMENT"). As a material inducement for Optionee to become employed as the
Corporation's Executive Vice President of Strategic Planning, the Corporation
has agreed to grant Optionee options to purchase its Common Shares, $.01 par
value per share (the "SHARES") subject to the terms and conditions of this
Agreement.
1. GRANT OF OPTIONS.
(a) Upon the terms and subject to the conditions hereinafter set forth, the
Corporation hereby grants to the Optionee the right and option to purchase from
the Corporation a total of Eight Hundred Thousand (800,000) Shares of the
Corporation at an exercise (i.e., purchase) price determined by the provisions
of Section 6 hereof (the "OPTIONS"). The Options granted hereby shall be
exercisable as provided in Sections 2 and 3 hereof unless terminated at an
earlier date in accordance with the terms of this Agreement. If the Options
shall terminate for any reason without having been exercised in full, the
Corporation may use any then remaining unpurchased Shares reserved for the grant
of options to any other employee or party selected by the Board of Directors of
the Corporation (the "BOARD") or for any other appropriate corporate purpose, as
determined in the sole discretion of the Board. The Options shall become
exercisable immediately upon vesting.
(b) The Options granted by this Agreement are not, and shall not be deemed,
to have been granted under the Corporation's 1999 Stock Option Plan (the "1999
PLAN"), the Corporation's 1993 Non-Statutory Stock Option Plan (the "1993 PLAN")
or any other stock option plan of the Corporation in effect as of the date
hereof or hereafter adopted (the "OTHER PLANS"), and the number of Shares which
may be reserved for the Optionee's exercise of the Options granted hereunder
shall not reduce the number of Shares reserved under the 1999 Plan, the 1993
Plan or any Other Plans and, in the event the Options granted hereunder shall
terminate for any reason without having been exercised in full, none of any then
remaining unpurchased Shares subject to the Options shall increase the total
number of Shares then reserved for purchase under the 1999 Plan, the 1993 Plan
or any Other Plan of the Corporation.
(c) It is intended both by the Corporation and Optionee that the Options
granted hereby shall be Non-Statutory Stock Options.
2. EXERCISE OF OPTION.
(a) Subject to the limitations set forth in this Agreement, the Optionee
may exercise the Options, in whole or in part, to the extent then exercisable in
accordance with this Agreement, by forwarding to the Corporation written notice
stating the Optionee's election of such exercise right and specifying the number
of whole Shares to be purchased, accompanied by the Optionee's payment in full
of the aggregate option price of the Shares being purchased in cash, by check,
or, in the discretion of the
Board, by the delivery of Shares (such Shares to be credited against the option
price in an amount equal to their aggregate Fair Market Value as defined in
Section 13 hereof on the date of exercise) or any combination thereof ("NOTICE
OF EXERCISE"). The Optionee shall be responsible for and shall pay to the
Corporation all withholding and other similar taxes which may be payable by the
Optionee upon exercise of the Options, if applicable.
(b) As soon as practicable after receipt by the Corporation of the Notice
of Exercise and of full payment of the exercise price for all Shares with
respect to which the Options are being exercised, a certificate or certificates
representing the purchased Shares shall be registered in the records of the
Corporation in the name of the Optionee or his successor and shall be delivered
to the Optionee or his successor at the Optionee's address shown in the payroll
records of the Corporation or at such other address as may be designated in
writing by the Optionee in the Optionee's Notice of Exercise. Neither the
Optionee nor his successor or legal representative shall have any rights as a
shareholder of the Corporation in respect of any Shares issuable upon the
exercise of this Option prior to the record date as of which certificates for
such Shares shall have been issued by the Corporation as hereinabove provided.
(c) Unless the Options are terminated earlier in accordance with the terms
hereof, the Options and all rights thereunder shall expire on, and may no longer
be exercised after, the third (3rd) anniversary after each of the respective
dates upon which the percentages of the Options to purchase the number of Shares
designated herein have vested and become exercisable in accordance with the
provisions of Section 3.
3. VESTING AND EXERCISABILITY OF OPTIONS.
Options to purchase an aggregate of 800,000 Shares of the Corporation shall vest
and be exercisable upon the occurrence of the following events, satisfaction of
the following conditions and upon or by the following dates:
(a) Options to purchase 125,000 Shares shall vest and be exercisable on the
Effective Date;
(b) Options to purchase the remaining aggregate of up to 675,000 Shares
shall vest and be exercisable on such dates upon which the following performance
tests shall have been satisfied; provided, however, that the outside date for
the satisfaction of each such performance shall be the second (2nd) anniversary
of the Effective Date and no such performance test may be satisfied, in whole or
in part, after such second (2nd) anniversary of the Effective Date:
(i) Options to purchase an additional 175,000 Shares shall
vest and become exercisable if the Shares shall achieve and
maintain the Fair Market Value of $5 per Share for a minimum of
twenty (20) consecutive trading days thereafter (each such
period, a "FMV PERIOD");
(ii) Options to purchase an additional 225,000 Shares shall
vest and become exercisable if the Shares shall achieve and
maintain the Fair Market Value of $7.50 per Share for a minimum
of a FMV Period;
(iii) Options to purchase an additional 275,000 Shares shall
vest and become exercisable if the Shares shall achieve and
maintain the Fair Market Value of $12.50 per Share for a minimum
of a FMV Period;
PROVIDED, HOWEVER, that:
(A) In the event that the Shares achieve either of the Fair
Market Values set forth in Sections 3(b)(ii) or 3(b)(iii) above
before satisfying the Fair Market Value test under Section
3(b)(i) above, or in the event that the Shares achieve the Fair
Market Value test set forth in Section 3(b)(iii) above before
satisfying the Fair Market Value test under Section 3(b)(ii),
then the Options to purchase
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the total number of Shares shall vest cumulatively at the
respective exercise prices set forth in Sections 3(b)(i),
3(b)(ii) and/or 3(b)(iii), as the case may be; and
(B) As used in this Section 3(b), for purposes of determining the
twenty (20) trading days comprising the FMV Period, any business
day upon which there shall be no trading in the Shares of the
Corporation shall not be counted.
(c) In no event shall any of the Options granted hereunder vest and be
exercisable unless the Optionee is an Employee of the Corporation or any of its
Subsidiaries on any such vesting date; PROVIDED, HOWEVER, in the event the
Employee's employment is terminated by the Corporation or any of its
Subsidiaries without Cause pursuant to Section 2(b)(iv) of the Employment
Agreement, the Options shall vest and be exercisable to the extent any of the
performance tests set forth in Section 3(b)(i) through (iii), inclusive, are
satisfied during the ninety (90) day period immediately succeeding the date of
termination of his employment.
(d) Notwithstanding any of the provisions of Sections 3(a) or (b), none of
the Options granted hereunder, including any Options which have vested and
therefore become exercisable, may be exercised until the shareholders of the
Corporation shall, if required by New York law or the regulations of any
exchange or inter-dealer system upon which the Company's Shares will be listed
or in which such Shares shall be traded, approve the grant of the Options which
are the subject of this Agreement as provided in Section 15(a) of this
Agreement.
4. EXERCISE AFTER TERMINATION OF SERVICE.
After the Optionee ceases to be an Employee of the Corporation or any Subsidiary
of the Corporation, as the case may be, whether as a result of voluntary
termination, termination by the Corporation or such Subsidiary or by the normal
retirement, early retirement or disability (excluding Permanent Disability as
defined in Section 5 below) of the Optionee, only such Options that have vested
and become exercisable on or before the Date of Termination (as defined in the
Employment Agreement) may be exercised by the Optionee, his attorney-in-fact, or
his guardian, as appropriate, at any time after the date on which the Optionee
ceases to be an Employee but no later than the earlier of ninety (90) days after
the Optionee ceases to be employed by the Corporation or such Subsidiary or the
last day of the fixed term of the Option; PROVIDED, HOWEVER, that, in the event
that the employment of Optionee is terminated for Cause (as defined in the
Employment Agreement), any then outstanding Options held by Optionee, whether or
not vested and exercisable by Optionee as of the date of such termination of
employment for Cause, shall thereupon be canceled and terminated in their
entirety and be of no further force or effect and Optionee shall have no further
rights thereto or thereunder or under this Agreement.
5. EXERCISE IN CASE OF DEATH OR PERMANENT DISABILITY.
If the Optionee shall die or become permanently and totally disabled within the
meaning of relevant provisions of the Employment Agreement (hereinafter referred
to as "PERMANENTLY DISABLED" or a "PERMANENT DISABILITY") while an employee of
the Corporation or of a Subsidiary thereof, and Optionee, at the time of the
Optionee's death or Permanent Disability, shall have been entitled to exercise
all or any portion of the Options granted hereby, then the Options may be so
exercised by the Optionee or his legal representative, as the case may be, or by
his estate, or by a person who acquires the right to exercise the Options by
bequest or inheritance, at any time after the date of death or Permanent
Disability but no later than the earlier of (a) twelve (12) months after the
date of death, Permanent Disability of the Optionee or (b) the last day of the
fixed term of the Options.
6. EXERCISE PRICE OF OPTIONS.
The exercise price of the Options (subject to adjustment by reason of any of the
events set forth in Section 7 hereof), shall equal:
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(a) With respect to the Options described in Sections 3(a) of this
Agreement, the Fair Market Value of the Shares as of July 3, 2003 - - to wit,
Two Dollars and Fifty-five Cents ($2.55) per Share.
(b) With respect to the Options described in Sections 3(b)(i) of this
Agreement, Five Dollars ($5.00) per Share.
(c) With respect to the Options described in Sections 3(b)(ii) of this
Agreement, Seven Dollars and Fifty Cents ($7.50) per Share.
(d) With respect to the Options described in Sections 3(b)(iii) of this
Agreement, Twelve Dollars and Fifty Cents ($12.50) per Share.
7. ADJUSTMENTS UPON CHANGE OF SHARES.
(a) In the event of a reorganization, merger, consolidation,
reclassification, recapitalization, any combination or exchange of Shares, stock
split, stock dividend, rights offering or other event affecting the
capitalization of the Corporation, the number and class of Shares then subject
to the Options as of the effective date or record date of any such event, and
the price per Share payable upon exercise of the Options, shall be equitably
adjusted by the Board to reflect any such event.
(b) Upon the effective date of any merger, consolidation or reorganization
of the Corporation with one or more corporations or other legal entities in
which the Corporation is not the surviving corporation or entity, or upon the
effective date of any liquidation of the Corporation or of a transfer of
substantially all of the assets or transfer of more than fifty percent (50%) of
the then outstanding Shares of the Corporation to a theretofore unaffiliated
third party (hereinafter collectively referred to as the "TRANSACTION"), any
Options granted hereby which have not vested and become exercisable (prior to or
by reason of the Transaction) shall terminate unless provisions have been made
in writing in connection with any such Transaction for the assumption of such
unvested Options by such successor employer corporation or other entity or a
parent or subsidiary thereof or for the substitution of such unvested Options by
new options covering shares or other equity interests of such successor
corporation or other entity, with appropriate adjustments as to the number, kind
and prices of shares or other equity interests, in which event the unvested
Options or the new options substituted therefor, as the case may be, shall
continue to be exercisable in the manner and upon the terms set forth in this
Agreement. Prior to any such termination of any then unvested Options upon the
effective date of any such Transaction, the Board may, in its sole discretion,
grant to the Optionee the right immediately prior to the effective date of such
Transaction to exercise the Options, in whole or in part, provided that all
conditions precedent to the vesting thereof (prior to or by reason of the
Transaction) set forth herein, other than the passage of time, shall have been
satisfied. In any such event, the Corporation will mail or cause to be mailed to
the Optionee a notice (the "ACCELERATION NOTICE") specifying the date which is
to be fixed as of which all holders of record of the Shares shall be entitled to
exchange their Shares for securities, cash or other property issuable or
deliverable pursuant to such Transaction. The Acceleration Notice shall be
mailed at least fifteen (15) days prior to such specified date. In the event
that any then outstanding Options which have vested and become exercisable
(prior to or by reason of the Transaction) are not exercised in their entirety
on or before the date specified therefor in the Acceleration Notice, all such
Options and all rights thereunder shall terminate and be canceled as of said
date and any Options which have not so vested and become exercisable as of said
date shall also terminate and be canceled in their entirety.
(c) Upon any adjustment made pursuant to this Section 7, the Corporation
will, upon request, deliver to the Optionee or his successor a certificate or
the Corporation's Secretary or an Assistant Secretary setting forth the adjusted
Option price thereafter in effect and the number and kind of shares, other
securities or other property thereafter purchasable upon the exercise of the
Options.
(d) The determination of the Board with respect to any adjustments effected
pursuant to this Section 7 shall be conclusive and binding on the Optionee.
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8. NON-TRANSFERABILITY OF OPTIONS
This Option Agreement shall be binding upon and inure to the benefit of the
parties hereto and any successor to the business of the Corporation, but none of
the Options nor any rights granted to the Optionee hereunder shall be
transferable or assignable, in whole or in part, by the Optionee otherwise than
by will or by the laws of descent and distribution, and, during the lifetime of
the Optionee, the Options and rights granted to the Optionee hereunder may be
exercised only by his except as otherwise expressly provided for herein.
9. REGISTRATION OR QUALIFICATION OF SHARES.
The Options shall be subject to the requirement that, if at any time the Board
shall determine, in its sole discretion, that the listing, registration or
qualification of the Shares subject to the Options upon any securities exchange,
inter-dealer quotation market system or under any state or federal law,
including the Securities Act of 1933, as amended (the "SECURITIES ACT"), or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of the Options
or the issue or purchase of Shares hereunder, then the Options may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. The Corporation may, in its sole
discretion, at any time and from time to time, file (or maintain the
effectiveness of) a registration statement under the Securities Act, and list,
register or qualify under any other state or federal law, all or any portion of
the Options and the Shares issuable upon the exercise thereof, but nothing set
forth herein shall obligate the Corporation to file or effect any such
registration under the Securities Act or listing or qualification upon any
securities exchange, inter-dealer quotation market system or under any other
federal or state securities law.
10. COMPLIANCE WITH SECURITIES AND OTHER APPLICABLE LAW.
The grant of Options and the issuance of Shares upon the exercise of Options
shall be subject to compliance with all applicable requirements of federal,
state and foreign law with respect to such securities. Options may not be
exercised if the issuance of Shares upon exercise would constitute a violation
of any applicable federal, state or foreign securities laws or other law or
regulations or the requirements of any stock exchange or inter-dealer quotation
market system upon which the Shares may then be listed. In addition, no Options
may be exercised unless (a) a registration statement under the Securities Act
shall at the time or exercise of the Options be in effect with respect to the
Shares issuable upon exercise of the Options or (b) in the opinion of legal
counsel to the Corporation, the Shares issuable upon exercise of the Options may
be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the
Corporation to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Corporation's legal counsel to be necessary to
the lawful issuance and sale of any Shares hereunder shall relieve the
Corporation of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of any of the Options, the Corporation may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect hereto as may be requested by the
Corporation.
11. REPRESENTATIONS AT TIME OF EXERCISE: LEGEND.
The Board may require, as a condition to the exercise of the Options granted
pursuant to this Agreement, in whole or in part, that the Corporation receive
from Optionee or his successor, such representations, warranties and agreements,
at the time of any such exercise, to the effect that all Shares acquired upon
exercise of the Options, or any part thereof, shall be sold, transferred or
otherwise disposed of only upon compliance with the registration requirements of
the Securities Act or in reliance on an exemption therefrom which is the subject
of an opinion from the Corporation's legal counsel. The certificate issued to
evidence such Shares shall bear appropriate legends summarizing such
restrictions on the disposition thereof.
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12. RESERVATION OF SHARES.
The Corporation shall be under no obligation to reserve Shares to satisfy the
Options granted pursuant to this Agreement. The grant of Options to the Optionee
hereunder shall not be construed to constitute the establishment of a trust of
such Shares and no particular Shares shall be identified as optioned and
reserved for the Optionee hereunder. The Corporation shall be deemed to have
complied with the terms of this Agreement if, at the time of issuance and
delivery of the Shares pursuant to the exercise of an option, it has a
sufficient number of Shares authorized and unissued (or held in its treasury)
for purposes of this Agreement, irrespective of the date when such Shares were
authorized.
13. DEFINITIONS.
Except as otherwise defined in this Agreement, the following terms shall have
the following meanings:
(a) "CODE" means the US Internal Revenue Code of 1986 as amended to date.
(b) "BOARD" means the Board of Directors of the Corporation.
(c) "EMPLOYEE" means any person treated as an Employee (including an
officer or director of the Corporation) who is treated as an Employee on the
records of the Corporation and is deemed to be an Employee at Common Law and as
interpreted by the U.S. Internal Revenue Service under the Code.
(d) "FAIR MARKET VALUE" means as of any date the value of the Shares of the
Corporation as determined by the Board in its discretion, or by the Corporation
in its discretion, subject to the following:
If, on such date, the Shares are listed on a national
or regional securities exchange or quoted in a inter-dealer
quotation market system, the Fair Market Value of each Share
shall be the closing price of a Share (or the mean between
the closing bid and asked price of a Share if the Share is so
quoted instead) as quoted on the NASDAQ National Market, the
NASDAQ Small Cap Market or such other national or regional
securities exchange or inter-dealer quotation market system
constituting the primary market for the Shares as reported in
the Wall Street Journal or such other sources as the
Corporation deems reliable. If the relevant date does not
fall on a date on which the Shares have been traded on such
securities exchange or been quoted in such market system, the
date on which Fair Market Value shall be established shall be
the last date on which the Shares were so traded prior to the
relevant date, or such other appropriate date as shall be
determined by the Board in its sole discretion; and, if on
such date, there is no public market for the Shares, the Fair
Market Value of a Share shall be as determined by the Board
in good faith without regard to any restriction other than a
restriction which, by its terms, will never lapse.
(e) "NON-STATUTORY STOCK OPTION" means a stock option not intended to be,
or which does not qualify, as an Incentive Stock Option within the meaning of
Section 422 ET SEQ. of the Code.
(f) "SUBSIDIARY" or "SUBSIDIARIES" means any corporation or entity in which
the Corporation owns beneficially more than 50% of the voting equity interest
therein.
14. NOTICES.
All notices under this Agreement and the Plan shall be in writing, and, if to
the Corporation, shall be mailed to its principal office at 0 Xxxxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, Attn.: Secretary, and if to the Optionee,
shall be delivered personally or mailed to the Optionee at his address appearing
in the payroll records of the Corporation or its Subsidiary as of the date of
such notice. The address of any party may be changed at any time by written
notice to the other party given in accordance with this Section 14. All notices
and other written communications required hereunder shall be deemed to have been
given when personally delivered or mailed, postage prepaid, by registered or
certified mail
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15. MISCELLANEOUS.
(a) TERMINATION. Anything contained herein to the contrary notwithstanding,
in the event that the shareholders of the Corporation do not ratify and approve
the grant of the Options to the Optionee pursuant to this Agreement within
twelve (12) months after the Effective Date at the next Annual or Special
Meeting of Shareholders of the Corporation, unless shareholders approval of the
grant of the Options to Optionee under this Agreement is no longer required
under the New York Business Corporation Law or any other applicable New York or
California statute, law or regulation and/or by the record date of any such
Shareholders Meeting, subject, however, to the provisions of Section 162(m) of
the Code, then this Agreement and the Options granted hereby shall automatically
terminate, be canceled in their entirety and the Optionee shall forfeit all
rights with respect thereto or otherwise under this Agreement and be of no
further force of effect.
(b) ACKNOWLEDGMENT. The Options may not be exercised, to the extent vested
and exercisable, until the Optionee dates, signs and returns a copy of this
Agreement to the Corporation.
(c) NO RIGHT AS SHAREHOLDER. Neither the Optionee nor his successor shall
have any rights as a shareholder of the Corporation with respect to any Shares
subject to the Options before the date of issuance to the Optionee of a
certificate or certificates for such Shares in the name of the Optionee or such
successor.
(d) NO RIGHT TO CONTINUED EMPLOYMENT. The Options shall not confer upon the
Optionee any express or implied right with respect to continuance of employment
by the Corporation or any Subsidiary thereof, for any specific or minimum period
of time under the Employment Agreement or otherwise, nor shall the grant or
existence of such Options interfere in any way with the right of the Corporation
or such Subsidiary to terminate such employment at any time.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same instrument provided that each of
the parties hereto executes such counterpart.
(f) CHOICE OF LAW. This Agreement and the respective rights and obligations
of the Optionee and the Corporation hereunder shall be governed by the laws of
the State of New York with respect to agreements to be performed wholly in the
State of New York and without giving effect to the conflicts of law, statutes
and doctrines of New York (except for Section 5-1401 of the New York General
Obligations Law) or of any other jurisdiction.
* * * * * * *
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IN WITNESS WHEREOF, the parties have duly executed this Stock Option
Agreement as of the date first above written.
SPATIALIGHT, INC.
By:________________________________
Name: Xxxxxx X. Xxxxx
Title: Acting Chief Executive Officer
OPTIONEE
By:________________________________
Name: Xxxxxxxx X. Xxxxxxx
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